BNUMBER:  B-262099
DATE:  November 17, 1995
TITLE:  Litton Systems, Inc., Data Systems Division

**********************************************************************

REDACTED DECISION
A protected decision was issued on the date below and was subject to a 
GAO Protective Order.  This version has been redacted or approved by 
the parties involved for public release.

Matter of:Litton Systems, Inc., Data Systems Division

File:     B-262099

Date:     November 17, 1995

David V. Anthony, Esq., Richard J. Vacura, Esq., and Daniel J. 
Moynihan, Esq., 
Piper & Marbury, for the protester.
Marcia G. Madsen, Esq., and David F. Dowd, Esq., Morgan, Lewis & 
Bockius, for Hughes Aircraft Company, Defense Systems Business Unit, 
an interested party.
Robert A. Russo, Esq., and Jeffrey I. Kessler, Esq., Department of the 
Army, for the agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest challenging the agency's evaluation of technical proposals 
is denied where the specific allegations lack factual support and/or 
amount to no more than a mere disagreement with the results of the 
evaluation, and there is no basis on which to find the evaluation 
unreasonable.

2.  Protest challenging the agency's conduct of discussions is denied 
where the record shows that the protester was on notice of the concern 
at issue and that the agency was not obligated to raise the matter 
further.

3.  Protest challenging the agency's cost realism evaluation of the 
awardee's proposal is denied where the specific allegations are 
insufficient to show that the evaluation was unreasonable or 
arbitrary. 

DECISION

Litton Systems, Inc., Data Systems Division, protests the award of a 
contract to Hughes Aircraft Company, Defense Systems Business Unit, 
under request for proposals (RFP) No. DAAB07-95-R-H302, issued by the 
Department of the Army for the development of the Land Warrior System.  
Litton primarily challenges the Army's technical and cost evaluations.  

We deny the protest.

BACKGROUND
  
The solicitation, issued February 3, 1995, contemplated award of a 
cost-plus-award-fee contract for the design, development, integration, 
fabrication, test, and support requirements for the Land Warrior 
System.  This System integrates various components and technologies to 
enhance the soldier's battlefield capabilities and will be comprised 
of four subsystems:  an individual soldier computer/radio subsystem 
with global positioning system (GPS) receiver; a protective clothing 
and individual equipment subsystem; an integrated helmet subsystem; 
and a modular weapons subsystem.  Offerors were required to describe 
how they would combine these subsystems into an integrated Land 
Warrior System through the use of nondevelopmental items and the 
development of new equipment and/or software.  In addition, offerors 
were to integrate certain items of government-furnished equipment that 
had been developed in conjunction with other Army programs.[1]  The 
RFP's specifications clearly identified both required and desired 
performance capabilities.  

Offerors were advised that award would be made to the offeror with the 
best overall proposal determined to be the most beneficial to the 
government, with appropriate consideration given to four evaluation 
factors--technical, integrated product and process development (IPPD), 
performance risk, and cost.  The technical factor was significantly 
more important than the other factors combined; the IPPD factor was as 
important as performance risk and cost combined; and the performance 
risk and cost factors were equally important.  The technical factor 
included the following subfactors:  system design and integration; 
computer/radio subsystem design, development, and integration; 
software design, development, and integration; integrated helmet 
subsystem design, development, and integration; weapon subsystem 
design, development, and integration; and protective clothing and 
individual equipment design, development, and integration.[2]  The 
IPPD factor, not at issue here, also included a number of subfactors.  
Proposals would be rated adjectivally under these factors and 
subfactors as outstanding, good, acceptable, or unacceptable.  

Offers would be given low, moderate, high, or unknown performance risk 
ratings based on an assessment of the risks associated with the 
offerors' past performance.  The Army would evaluate the realism of 
each offeror's proposed costs in relation to its specific technical 
approach to obtain a most probable cost; to the degree that this 
estimate exceeded the offeror's proposed cost, that cost would be 
adjusted upward for the purposes of evaluation only.

The Army received two proposals by the March 20 closing date, one from 
Litton and one from Hughes.  The Army conducted a technical and cost 
evaluation of these proposals, utilizing information from, among other 
sources, the Defense Contract Audit Agency (DCAA).  Following the 
competitive range determination, the contracting officer conducted 
three rounds of negotiations with the offerors through the use of 
written items for negotiation (IFN).  Both offerors' proposals were 
included in the second competitive range, and best and final offers 
(BAFO) were submitted and evaluated.

Hughes's proposal was rated good under both the technical and IPPD 
factors, and received an outstanding rating under the software 
subfactor, good ratings under the system design and integration and 
weapon subfactors, and acceptable ratings under the remaining 
technical subfactors.  In contrast, Litton's proposal was rated 
acceptable under both the technical and IPPD factors, and received a 
good rating under the computer/radio subfactor, and acceptable ratings 
under the remaining technical subfactors.  Both proposals received low 
performance risk ratings.  Hughes's evaluated cost was $50,993,596, 
and Litton's was $41,090,282.

The source selection authority (SSA) reviewed the reports of the 
source selection evaluation board (SSEB) and the source selection 
advisory council and made a detailed written determination that 
Hughes's proposal was of such significantly superior technical quality 
that it was worth paying the 24-percent cost premium.  In fact, the 
SSA stated, even if the cost difference had been $2 million greater, 
Hughes's proposal would still have been selected over Litton's.  Award 
was made to Hughes on July 11, and Litton filed this protest after its 
debriefing.

Litton challenges the Army's technical evaluation, and contends that 
the Army improperly failed to conduct meaningful discussions with the 
firm.  Litton also challenges the cost realism analysis of Hughes's 
proposal.[3]

ANALYSIS

Technical Evaluation

The evaluation of technical proposals is a matter within the 
discretion of the contracting agency because the agency is responsible 
for defining its needs and the best method of accommodating them.  
McDonnell Douglas Corp., B-259694.2; B-259694.3, June 16, 1995, 95-2 
CPD  51.  In reviewing an agency's evaluation, we will not reevaluate 
technical proposals, but will examine the record to determine whether 
the agency's judgment was reasonable and consistent with the stated 
evaluation criteria and applicable statutes and regulations.  ESCO, 
Inc., 66 Comp. Gen. 404 (1987), 87-1 CPD  450.  An offeror's mere 
disagreement with the agency's judgment does not show that the 
judgment was unreasonable.  McDonnell Douglas Corp., supra.

Litton has raised numerous allegations challenging the Army's 
evaluation of Hughes's technical proposal.  In response to Hughes's 
request, we summarily dismissed most of these allegations as untimely 
during the pendency of this protest.  Litton's initial protest 
ground--largely a sweeping challenge to the technical evaluation--was 
so broad that the Army was unable to respond save for its assertion 
that its evaluation was properly conducted and its provision of the 
evaluation documentation.  Litton's more detailed allegations were 
first raised in the firm's comments.  We required these later-raised 
allegations to independently meet our timeliness requirements because 
any agency response to them would constitute a de facto supplemental 
agency report, without the corresponding time accommodations allowed 
for by our regulations.  Litton Systems, Inc., Data System Division, 
B-262099, Oct. 11, 1995, 95-2 CPD     .  Since Litton's allegations 
were not filed within 10 working days after it knew or should have 
known of their bases, 4 C.F.R.  21.2(a)(2) (1995), we dismissed them 
as untimely.[4]    

We initially declined to summarily dismiss Litton's allegations 
concerning Hughes's [DELETED], [DELETED], and [DELETED] because we 
were not persuaded that these allegations were untimely.  However, 
further review of the entire record makes it clear that Litton had all 
of the information it needed to raise these allegations when it 
received the agency report on August 29.[5]  Since Litton did not 
raise these allegations within 10 working days of that date, the 
allegations are untimely and will not be considered.  4 C.F.R.  
21.2(a)(2); Global Plus, B-257431.9, Dec. 14, 1994, 95-1 CPD  77.

Litton's remaining allegations are similarly without merit.  The 
protester's substantial pleadings on this matter consist of 
allegations that both ignore and misinterpret relevant portions of the 
record.  As the following examples demonstrate, the most the protester 
has shown here is that it disagrees with the Army's evaluation of 
Hughes's proposal.
  
Litton argues that Hughes's proposed squad radio will not meet the 
requirement to provide [DELETED] compatible with the Single Channel 
Ground and Airborne Radio System (SINCGARS) family of radios 
[DELETED].[6]  The Army issued Hughes multiple IFNs requesting 
additional information to ensure that its squad radio will comply with 
this requirement, and Hughes confirmed that its radio could provide 
[DELETED] to the SINCGARS radio [DELETED] and submitted supporting 
data.  While the Army believed that the radio could meet requirements 
and therefore that Hughes's proposal was acceptable in this regard, 
the proposal was assessed as [DELETED] under the computer/radio 
subsystem subfactor due to the [DELETED] technical risk involved.  
Litton has not articulated any basis for us to conclude that this 
aspect of the evaluation was unreasonable.  

Litton also alleges that the Army plans to provide Hughes with the 
SINCGARS-SIP radio in contravention of the RFP's requirement that the 
squad radio be contractor-furnished equipment.  Litton is mistaken.  
The Army did not state that it would provide the successful 
offeror--Hughes--with the radio, but only the necessary drawings and 
specifications for the radio, the rights to which the Army will 
acquire under a separate development contract.  Contrary to Litton's 
assertion otherwise, the Army evaluated Hughes's proposal in 
accordance with this plan, as Hughes's proposal clearly stated that 
the performance of its radio would comply with the SINCGARS-SIP 
requirements when they had been defined and made available.[7] 

Litton argues that Hughes did not provide for the [DELETED] to allow 
the [DELETED] to operate, or indicate how the [DELETED] would be 
accomplished.  However, the RFP required offerors' [DELETED] to 
provide [DELETED] capability in accordance with [DELETED] being 
developed under the SINCGARS-SIP, which is still in the process of 
definition and development.  Hughes's proposal clearly states that it 
will implement SINCGARS-SIP once it is defined, and its proposal, 
inclusive of IFN responses, discusses the [DELETED].  Litton's cursory 
objection to Hughes's proposal on this basis is insufficient to find 
the agency's evaluation unreasonable.   

Finally, Litton contends that the Army incorrectly credited Hughes 
with proposing an optional [DELETED] approach that it did not propose.  
However, as the Army points out, Hughes proposed a [DELETED] which 
contains several options for [DELETED], as well as several options for 
[DELETED].  Litton's argument that Hughes merely mentioned an option 
it did not propose misreads Hughes's proposal.  Litton's additional 
assertion that an evaluator believed Hughes's approach was "high risk" 
grossly mischaracterizes the record.  That evaluator merely commented 
that one of the [DELETED] options was not proven and needed to be 
tested.  Litton's apparent belief that Hughes's approach was "high 
risk" amounts to no more than a mere disagreement with the agency's 
judgment.  Id.  

Discussions

Litton argues that the Army improperly failed to discuss its concern 
that Litton's proposed soldier radio/GPS antenna [DELETED].

Contracting agencies are not required to conduct all-encompassing 
discussions or describe deficiencies in such detail that there could 
be no doubt as to their identity and nature, but only to reasonably 
lead offerors into the areas of their proposals which require 
amplification or correction.  Medland Controls, Inc., B-255204; 
B-255204.3, Feb. 17, 1994, 94-1 CPD  260.  The record shows that the 
Army's actions here were proper.  

Litton proposed to [DELETED].  The Army issued Litton an IFN which 
expressed concern that the [DELETED], and referred to a paragraph in 
the specifications which states, "[DELETED]."[8]

In response, Litton proposed to [DELETED].  Litton also included the 
[DELETED], as well as a chart listing the [DELETED] male and female 
soldiers.  This chart clearly indicates that the [DELETED].  In view 
of the RFP's prohibition of such [DELETED], and the IFN's reference to 
the above specification,  Litton's response shows that the firm 
recognized the deficiency; the Army was not obligated to raise the 
matter further.  Id.; see also DAE Corp., Ltd., B-257185, Sept. 6, 
1994, 94-2 CPD  95.

Cost Realism Analysis

Litton's challenge to the Army's cost realism analysis of Hughes's 
proposal consists of its contentions that the Army improperly 
disregarded DCAA's conclusion that [DELETED] Hughes's [DELETED] 
significantly understated its costs; failed to consider the 
significant risk of cost overruns based on problems with Hughes's 
[DELETED]; and failed to determine whether Hughes proposed realistic 
costs to meet the technical requirements of the solicitation.[9]

When agencies evaluate proposals for the award of a cost reimbursement 
contract, an offeror's proposed estimated costs are not dispositive 
because, regardless of the costs proposed, the government is bound to 
pay the contractor its actual and allowable costs.  Federal 
Acquisition Regulation (FAR)  15.605(d).  Consequently, a cost 
realism analysis must be performed by the agency to determine the 
extent to which an offeror's proposed costs represent what the 
contract should cost, assuming reasonable economy and efficiency.  
CACI, Inc.--Fed., 64 Comp. Gen. 71 (1984), 84-2 CPD  542.  Because 
the contracting agency is in the best position to make this cost 
realism determination, our review of an agency's exercise of judgment 
in this area is limited to determining whether the agency's cost 
evaluation was reasonably based and not arbitrary.  General Research 
Corp., 70 Comp. Gen. 279 (1991), 91-1 CPD  183, aff'd, American 
Management Sys., Inc.; Dept. of the Army--Recon., 70 Comp. Gen. 510 
(1991), 91-1 CPD  492; Grey Advertising, Inc., 55 Comp Gen. 1111 
(1976), 76-1 CPD  325.  

DCAA's audit report on the initial cost proposal submitted by 
[DELETED] Hughes's [DELETED] stated that the proposal was [DELETED] 
because it "significantly understate[d] the amount required to 
complete the proposed effort."  At issue here,[10] DCAA acknowledged 
that its evaluation of proposed direct labor hours was a technical 
issue beyond its area of expertise, but stated that it was concerned 
by the firm's [DELETED] labor estimates [DELETED].  Specifically, the 
firm stated that its proposal's estimate rationale sheets for labor 
were based on its [DELETED].  However, since the firm was [DELETED] on 
the Land Warrior program, the firm [DELETED]. 

Far from "ignoring" DCAA's opinion, the Army issued Hughes an IFN 
outlining DCAA's concerns and asking for a response.  [DELETED] 
elaborated upon its earlier statement by explaining its belief that 
[DELETED] would result in a lower overall cost to the government.  Due 
to the firm's [DELETED] which would strongly affect [DELETED].  In the 
interim SSEB report, the Army stated that the response set forth a 
detailed rationale and explained how the effort was not understated.   

Thus, the record shows that the Army did consider DCAA's opinion and 
obtained a response which satisfied its concerns.  Litton's view that 
the response did not add new information to the original proposal is 
contrary to fact--the response clearly further explained the rationale 
behind [DELETED] to the Army's satisfaction.  Litton's disagreement 
with the Army's judgment provides us no basis to find that judgment 
unreasonable, particularly since DCAA itself admitted its lack of 
expertise to evaluate this matter.  An agency cannot blindly rely on 
DCAA's advice where there is reason to doubt the validity of the 
information.  See General Research Corp., supra.

Hughes's proposal stated that it [DELETED] estimate.  Litton points to 
a table in Hughes's proposal which lists each subsystem, along with 
[DELETED] proposed cost for each subsystem.  For one subsystem, the 
[DELETED].  Relying upon this single line from this single table, 
Litton theorizes that Hughes's proposed costs are not based upon its 
actual estimated costs of performance, but upon [DELETED] the Army 
wanted to see.  Litton alleges that this tactic will lead to cost 
overruns.

Litton's argument ignores Hughes's detailed explanation of how it 
[DELETED] its estimated costs subsystem-by-subsystem.  Further, the 
table as a whole shows that the [DELETED] the other six subsystems, 
and the proposed costs for these [DELETED].  Litton's selective use of 
Hughes's proposal does not in any way show that Hughes's [DELETED] 
would result in cost overruns, particularly given Hughes's extensive 
explanation of how it arrived at its proposed costs.  Moreover, there 
is no support in the record for Litton's insinuation that Hughes's 
[DELETED] was otherwise improper.  

Litton also argues that the Army improperly failed to determine 
whether Hughes proposed realistic costs to meet the RFP's technical 
requirements.  Since we previously dismissed as untimely Litton's 
allegations that Hughes failed to meet the RFP's technical 
requirements as to the [DELETED], the [DELETED], and the provision of 
[DELETED], we will not address Litton's arguments, raised in the 
context of the cost evaluation, that the Army failed to consider the 
costs of Hughes striving to meet these requirements.  Litton's 
arguments in this regard are premised upon its conclusion that Hughes 
did not meet these requirements, a conclusion that we did not, and 
will not, decide on the merits.  In the absence of such a decision, 
Litton's cost arguments are no more than speculative and cannot form a 
sufficient protest basis.[11]  See Mirada Assocs., B-245974, Jan. 30, 
1992, 92-1 CPD  142.  In a related matter, Litton's allegations that 
the Army improperly failed to account for the costs of Hughes meeting 
the [DELETED] requirements and the [DELETED] requirements are untimely 
because they were not raised until the firm's October 26 submission, 
more than 1 month after Litton came into possession of all of the 
technical and cost documents at issue here.  4 C.F.R.  21.2(a)(2).

Litton finally argues that Hughes and one of its subcontractors 
proposed [DELETED] than it accounted for in its cost proposal, and 
that Hughes's spreadsheet computations contain mistakes.  Litton 
estimates that correction of these alleged errors would result in an 
upward adjustment in Hughes's cost proposal of between $800,000 and 
$900,000.  We need not address these issues because the SSA 
specifically stated that the award decision would have been the same 
even if the cost difference had been increased by $2 million.  Thus, 
even if we were to agree with Litton that Hughes's evaluated cost 
should have been increased by $900,000, Litton would not have been 
prejudiced by these errors.  Prejudice is an essential element of a 
viable protest.[12]  See Lithos Restoration, Ltd., 71 Comp. Gen. 367 
(1992), 92-1 CPD  379.

Given our conclusions with respect to the Army's technical and cost 
evaluations, we need not reach Litton's derivative allegations 
concerning the cost/technical tradeoff analysis and source selection 
decision.

The protest is denied.

Comptroller General
of the United States

1. The Land Warrior System acquisition strategy integrates these 
separate programs with the Land Warrior equipment to form a fully 
integrated soldier system to be fielded by the turn of the century.  A 
separate effort, the GEN II Soldier Advanced Technology 
Demonstration--a part of the 21st Century Land Warrior (21 CLW) 
Top-Level Demonstration--has been initiated to develop less mature 
technologies to meet longer-term soldier deficiencies.  The GEN II 
contract was awarded in 1994.  

2. System design and integration was significantly more important than 
the computer/radio, software, and integrated helmet subfactors 
individually, and these subfactors were equally important and 
individually equal in importance to the weapon and protective clothing 
subfactors combined, which are of equal importance. 

3. Litton also alleges that Hughes received an unfair competitive 
advantage in this procurement through its performance of the 21 CLW 
contract, under which Hughes is a subcontractor.  However, a 
contracting agency is not required to attempt to eliminate a 
competitive advantage that an offeror might have by virtue of 
incumbency, see Signal Corp., B-241849 et al., Feb. 26, 1991, 91-1 CPD  
218, and Litton has not shown that any competitive advantage enjoyed 
by Hughes here as a result of the 21 CLW contract was improperly 
obtained. 

4. While Litton had been granted an extension of time in which to file 
its comments, such an extension does not toll our timeliness 
requirements.  See Coulter Corp., et al., B-258713, B-258714, Feb. 13, 
1995, 95-1 CPD  70.

5. The evaluator concerns relied upon by Litton concerning the first 
two allegations were included in both the initial and interim SSEB 
reports, and the ratings and proposal contents relied upon by Litton 
concerning the final allegation were found in the final proposal 
evaluation briefing, the technical proposals, and the IFN responses.  
Litton's reliance on later-provided individual evaluator sheets is not 
determinative where, as here, the information is contained in the 
decision-level documentation.  A firm may not delay filing a protest 
until it is certain that it is in a position to detail all of the 
possible separate grounds of its protest.  See Blue Cross-Blue Shield 
of Tennessee, B-210227, May 23, 1983, 83-1 CPD  555. 

6. The SINCGARS radio is scheduled to evolve, via the System 
Improvement Plan (SIP), by 1999.  Thus, full SINCGARS-SIP 
compatibility is not required until that time.

7. Since this allegation is without basis, we will not consider 
Litton's contention, raised in the context of its cost realism 
challenge, that the Army failed to consider the costs involved in its 
"plan" to have Hughes deviate from its proposed approach by giving it 
the radio.

8. The "[DELETED]" refers to a segment of the soldier population taken 
from a data compendium of military [DELETED].

9. As Litton acknowledges, we previously dismissed as untimely its 
allegation that the Army improperly failed to consider the impact of 
its [DELETED].  Likewise, Litton's allegation concerning Hughes's 
[DELETED], first raised in its September 25 comments, was premised 
upon information in its possession no later than August 29--the final 
SSEB report.  Since the allegation was raised more than 10 working 
days after Litton's receipt of the final SSEB report, it is untimely 
and will not be considered.  4 C.F.R.  21.2(a)(2). 

10. Litton's mere reference to another of DCAA's concerns is 
insufficient to constitute a basis of protest, and the protester's 
exploration of the matter in its October 26 submission, filed nearly 6 
weeks after its receipt of all agency documents generated in this 
protest, is untimely.  4 C.F.R.  21.2(a)(2).

11. In any event, the record shows that Hughes's proposal did meet 
these technical requirements, and that Litton's arguments to the 
contrary are premised, as is so much of its protest, upon a misreading 
of the RFP, Hughes's proposal, and the evaluation documents.  

12. For the same reason, we need not address Litton's allegation that 
one of Hughes's subcontractors proposed [DELETED] hours in the 
technical proposal which are not accounted for in the cost proposal.  
Even if this allegation were true, a compensatory cost adjustment 
would clearly be de minimus.