BNUMBER:  B-261857.2
DATE:  November 9, 1995
TITLE:  Systems Planning and Analysis, Inc.

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Matter of:Systems Planning and Analysis, Inc.

File:     B-261857.2

Date:     November 9, 1995

Phillip E. Lantz for the protester.
David C. Rickard, Esq., Defense Nuclear Agency, for the agency.
Mary G. Curcio, Esq., and David A. Ashen, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest against elimination of proposal from the competitive range is 
denied where agency reasonably concluded that proposal to convert 
Ukrainian military shipyard to civilian use was based on unsupported 
assumptions that rendered success questionable and made project too 
risky to fund.

DECISION

Systems Planning and Analysis, Inc. (SPA) protests the elimination 
from the competitive range of the proposal it submitted in response to 
request for proposals (RFP) No. DNA001-94-R-0084, issued by the 
Defense Nuclear Agency.  

We deny the protest.

The solicitation was issued pursuant to the Cooperative Threat 
Reduction Program, under which efforts are to be made to assist the 
states that formerly comprised the Soviet Union in converting and 
privatizing defense-oriented enterprises from military manufacture to 
the manufacture of consumer products and infrastructure support.  
Offerors were required to propose a plan to assist one or more of 32 
listed facilities, located in the Ukraine, in the conversion process 
with monetary investment, training, and support.  The solicitation 
provided that offers would be evaluated based upon the following 
criteria:  (1) business and technical evaluation,    (2) leveraging 
(government vs. contractor investment), (3) proposed business entity, 
(4) impact of product, (5) long term growth and commitment, (6) 
conversion,      (7) speed and visibility, and (8) impact on U.S. and 
Ukrainian industry and economy. 

DNA received 18 proposals in response to the solicitation.  The 
proposals were evaluated and the nine top-ranked proposals, with 
scores between 83.9 and 70.0, were considered acceptable and included 
in the competitive range.  SPA's proposal, which received a score of 
41.4 and was ranked 16th, was excluded from the competitive range on 
the basis that it would require major revisions and a substantial 
rewrite for it to be made acceptable and have a reasonable chance for 
award.  SPA generally questions the evaluation of its proposal and 
argues that the agency did not consider cost in establishing the 
competitive range.

In establishing a competitive range, agencies are required to include 
only those firms whose proposals are determined to have a reasonable 
chance of receiving award.  Federal Acquisition Regulation (FAR)  
15.609.  Offerors have an affirmative obligation to submit an 
adequately written proposal, and agencies are not required to include 
a proposal in the competitive range where, in order to be acceptable, 
it would have to be revised to such an extent that it would be 
tantamount to a new proposal.  Cyber Digital, Inc., B-255225, Feb. 18, 
1994, 94-1 CPD  123; Jack Faucett Assocs., B-253329, Sept. 7, 1993, 
93-2 CPD  154, aff'd, Jack Faucett Assocs.--Recon.,  B-253329.2, Apr. 
12, 1994, 94-1 CPD  250.  Where a protester challenges the 
elimination of its proposal from the competitive range, our review is 
limited to considering whether the evaluation and competitive range 
determination were reasonable and in accordance with the terms of the 
RFP and applicable regulations and statutes.  Better Serv., 
B-256498.2, Jan. 9, 1995, 95-1 CPD  11.

Our review confirms that SPA's proposal contained deficiencies and 
weaknesses which provided a reasonable basis for excluding the firm's 
proposal from the competitive range. 

SPA proposed to convert the small ship line of the Black Sea Ship Yard 
(BSSY) into a shipyard producing medium size commercial vessels.  DNA 
eliminated SPA's proposal from the competitive range because the 
agency found it was based on a number of unsupported assumptions which 
the agency believed made the project too risky for the government to 
fund.  For example, the solicitation called for the offeror to enter 
into a business venture with the Ukrainian facility that it proposed 
to convert from military to civilian use; the solicitation 
specifically advised offerors that DNA would evaluate the business 
entity that was being proposed and whether the proposal "include[s] 
some agreement with the Ukrainian partner on the project and their 
business relationship."  Despite this requirement, SPA's proposal 
provided only a "Declaration of Intentions," which it characterized as 
a letter of intent to form a joint venture with BSSY; this 
declaration, viewed by the agency as being "very vague about any 
future cooperation" and lacking in detail, merely expressed the fact 
that the parties had considered the possibility of conducting a joint 
commercial business activity and that "SPA will submit to BSSY a 
package of its proposals concerning the matter."  SPA did not furnish 
any additional documentation to show that BSSY was committed to going 
forward with the project.  DNA was concerned that it was being 
requested to accept the risk that BSSY and SPA would be unable to 
reach a joint venture agreement that was mutually acceptable, and 
without which the business venture could not go forward.  DNA's 
concern in this regard was intensified by the fact that BSSY currently 
had a large commercial order for ships; since the shipyard appeared to 
be operating at full capacity, the agency believed that BSSY might 
lack a significant incentive to enter into the joint venture.  

DNA also expressed concern at SPA's proposal to obtain working capital 
for the venture by turning over to the joint venture "up to five" 
existing BSSY ships that would either be sold or used as collateral to 
obtain a loan.  Since these five ships were necessary to provide the 
working capital for the entire business venture, the agency viewed the 
ships as central to the success of the project.  In its proposal, 
however, SPA referenced only an oral agreement with BSSY to provide 
the ships to the joint venture.  In addition, SPA did not provide any 
details on the ships such as the basis on which they were valued, 
their current operating condition or how the joint venture would be 
able to obtain title to the ships from the Ukrainian government.  The 
agency believed that given the importance of these ships to the 
success of the project, the lack of a firm written commitment by BSSY 
to provide them, and the lack of details concerning the ships, raised 
substantial doubts as to the potential success of the proposed 
project.  

Further, DNA concluded that SPA's proposal failed to clearly establish 
that it would further the stated purpose of the program to convert 
military facilities to civilian use.  SPA proposed to employ people 
and equipment from the small ship line at BSSY.  This line, however, 
produces both fishing vessels and specialty ships for the  Soviet 
Navy.  The agency found that SPA's proposal lacked detail about 
whether the equipment, resources and personnel that would be 
redirected to the civilian enterprise were military assets.  Without 
such details, the agency was concerned that any funding it provided 
would be used to strengthen the existing civilian line, rather than to 
convert the military base.

Although SPA generally challenges the evaluation, it has not shown 
that the agency's specific concerns as discussed above were 
unreasonable.  Instead, SPA primarily asserts that the agency did not 
consider cost in eliminating its proposal from the competitive range.  
In our view, however, the three aspects of SPA's proposal discussed 
above were directly relevant to the potential success of SPA's 
proposed venture.  SPA's failure to furnish sufficient detail in these 
areas to assure the agency that SPA's proposed venture would be 
successful in furthering the purpose of the program to convert 
military facilities to civilian use provided a reasonable basis for 
DNA to evaluate SPA's proposal as technically unacceptable and 
requiring a major rewrite in order to be acceptable.   Since SPA's 
proposal was technically unacceptable, DNA could properly eliminate 
the proposal from the competitive range without considering its 
proposed cost.  See EMSA Ltd. Partnership, B-254900.4, July 26, 1994, 
94-2 CPD  43.  Further, a procuring agency has no duty to hold 
discussions with an offeror whose proposal is properly eliminated from 
the competitive range.  Novel Pharmaceutical, Inc., B-255374, 
Feb. 24, 1994, 94-1 CPD  149.[1] 

The protest is denied.

Comptroller General
of the United States

1. In addition, SPA generally protests that the agency's procurement 
practices as they relate to the overall Cooperative Threat Reduction 
Program are fundamentally flawed.  Broad issues such as these, which 
do not relate directly to the procurement at issue, are outside the 
scope of our bid protest function.  Cajar Defense Support Co., 
B-240477, Aug. 3, 1990, 90-2 CPD  100.