BNUMBER:  B-265663.2
DATE:  February 7, 1996
TITLE:  Lockheed Support Systems, Inc.

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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:Lockheed Support Systems, Inc.

File:     B-265663.2

Date:February 7, 1996

Stan Hinton, Esq., Baker & Botts, for the protester.
J.  Michael Cooper, Esq., Bryan Cave, for McDonnell Douglas Aerospace, 
an interested party.
Rosalind Woolbright, Esq., Anthony Sweeney, Esq., and J. Cole 
Cartledge, Esq., Department of the Navy, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

In a negotiated best value procurement for aircraft maintenance 
services, in which technical merit was more important than price, the 
source selection official reasonably considered the technical merit 
and value underlying the evaluation ratings of the protester's and 
awardee's proposals, as well as the cost savings in various 
streamlining proposals of the protester, and determined that the 
protester's higher-rated, higher-priced offer was not worth the 
substantial price premium associated with its proposal.

DECISION

Lockheed Support Systems, Inc. protests the award of a contract to 
McDonnell Douglas Aerospace (MDA) under request for proposals (RFP) 
No. N68520-95-R-0001, issued by the Department of the Navy for 
maintenance services for various fighter and strike aircraft in the 
agency's Naval Tactical Air Warfare program.[1]  Lockheed challenges 
the agency's evaluation of technical proposals and cost/technical 
tradeoff analysis.

We deny the protest.

The RFP contemplated the award of a firm, fixed-price contract[2] for 
organizational and selected intermediate level maintenance services 
for various fighter and strike aircraft in squadrons located at 
Fallon, Nevada; Yuma, Arizona; Miramar, California; and Key West, 
Florida, for 1 base year with 4 option years.  A detailed statement of 
work (SOW) was provided, which included site specific addenda for each 
squadron to be maintained.  

The SOW provided that the contracter must comply with the provisions 
of the Naval Aviation Maintenance Program, as set forth in the Chief 
of Naval Operations Instruction (OPNAVINST) 4790.2E, which identifies 
policies, procedures, and responsibilities for the conduct of 
maintenance throughout naval aviation.  The instruction identifies 
three levels of maintenance services:  "organizational" level 
maintenance, which is defined to be maintenance normally performed by 
an operating unit on a day-to-day basis in support of its own 
operation (e.g., flight line maintenance services); "depot" level 
maintenance, which is defined as maintenance generally performed at 
naval aviation industrial establishments to ensure continued flight 
integrity of airframes and air flight systems; and "intermediate" 
level maintenance, which is a level of maintenance in between 
organizational and depot level maintenance.

The RFP identified the numbers and types of aircraft to be supported 
at each squadron location, and requested fixed-price monthly rates for 
organizational and selected intermediate-level maintenance for the 
aircraft in the squadrons identified in the SOW.  In pertinent part, 
offerors were informed that the Naval Strike Warfare Center (commonly 
referred to as the "Strike U" squadron) was located at Naval Air 
Station (NAS) Fallon and that the Navy Fighter Weapons School (known 
as the "Top Gun" squadron) and the Fighter Reserve Composite Squadron 
One Three would be transferred from NAS Miramar to NAS Fallon.  A 
total of three squadrons are ultimately to be located at NAS 
Fallon.[3] 

The RFP provided that award would be made on a best value basis and 
stated that technical merit was more important than price in the 
overall evaluation of proposals.  The following technical evaluation 
factors and subfactors were stated:

        1.  Program requirements

          a.  Quality/safety
          b.   Maintenance and technical services
          c.  Support functions
          d.  Foreign object damage program
          e.  Tool control
          f.  Personnel
          g.   Maintenance plan

        2.   Management

          a.  Organizational responsibilities
          b.  Past performance
          c.   Management performance indicators
          d.  Phase-in/phase-out plan
          e.  Availability of resources
          f.  Physical security
          g.  Total quality management
          h.  Contract data requirements

Offerors were informed that program requirements and price were of 
equal weight and that management was of slightly less importance than 
either of the other two factors.  Within the program requirements 
factor, the quality/safety subfactor was stated to be of equal 
importance to the combined total of the other seven subfactors.  The 
subfactors of the management factor were stated to be of equal 
importance.  Offerors were also informed that the agency would assess 
the risk associated with their proposals.

Detailed instructions were provided for the preparation of the 
offerors' proposals.  Among other things, offerors were encouraged to 
submit acquisition streamlining recommendations for contract 
performance.  The RFP stated that offerors' "baseline" proposals (that 
is, proposals excluding any streamlining suggestions) would be 
evaluated for acceptability; the agency would then consider 
streamlining suggestions from the offerors whose baseline proposals 
were determined to be technical acceptable.  Offerors were instructed 
that:

 "The government, at its sole discretion, will accept those 
 acquisition streamlining suggestions (if any) it considers desirable.  
 The resulting proposal will then be evaluated in accordance with the 
 criteria specified in Section M [of the RFP].

 "The government may then award the contract based on evaluation of 
 the offeror's 'baseline' proposal as modified by the accepted 
 acquisition streamlining suggestion(s) (if any) without requesting 
 best and final offers [BAFO]."[4]

Proposals were received from three offerors, including Lockheed (the 
incumbent contractor for these services) and MDA, and evaluated by the 
agency's technical evaluation team (TET) and cost evaluation team 
(CET).   The evaluation teams' findings were provided to a procurement 
review board (PRB), which briefed the source selection official (SSO).  
The SSO determined that discussions with the offerors were necessary, 
and that only Lockheed's and MDA's proposals should be included in the 
competitive range.  After discussions were conducted, BAFOs were 
evaluated as follows:[5]

                     Lockheed             MDA

                     Rating/Risk          Rating/Risk

Program requirements O/L                  H/M

 Management          O/L                  H/L

Price/cost[6]        $119.6 million       $105.8 million
Lockheed's outstanding, low risk BAFO rating reflected the TET's 
judgment that Lockheed's proposal exceeded the RFP requirements in a 
number of areas.  MDA's highly acceptable, medium risk BAFO rating 
reflected the TET's judgment that MDA's proposal more than satisfied 
the RFP requirements, but had not demonstrated specifically relevant 
past experience and that approximately 10 percent of MDA's key 
personnel resumes (three resumes) did not demonstrate the experience 
specified in the RFP.  MDA's substantial price advantage basically 
reflected that firm's offer to consolidate maintenance functions for 
the three squadrons to be based at NAS Fallon, whereas Lockheed's 
higher-priced baseline proposal offered a separate maintenance 
organization for each squadron at each NAS.  Hearing Transcript (Tr.) 
at 342.[7]

The TET's and CET's evaluation findings were briefed to the PRB, which 
also received briefing charts from each team.  The technical briefing 
charts provided for each offeror the TET's adjectival rating for each 
factor and subfactor, and included a narrative statement of the 
strengths and/or weaknesses upon which each adjectival rating was 
based.  The TET and CET briefing charts also highlighted the TET's and 
CET's evaluation of each of Lockheed's 12 offered streamlining 
recommendations.  The PRB recommended that award be made to MDA, as 
the offeror whose proposal was most advantageous to the government.  

The TET and CET briefing charts were provided to the SSO, who was also 
briefed by the PRB chair.  Tr. at 277-78.  The SSO determined that the 
technical merit evaluated in Lockheed's proposal did not justify the 
payment of a substantial price premium.  In making this determination, 
the SSO also reviewed the ratings for each evaluation subfactor and 
determined that there was not "a great distinction between the 
technical merit of the two offerors."  Tr. at 280.   The SSO also 
considered the price reductions offered in a number of Lockheed's 
streamlining recommendations, which reduced MDA's price advantage to 
approximately $6 million; the SSO, however, determined that the 
evaluated technical merit of Lockheed's proposal only justified the 
payment of a price premium of approximately $2 million to $3 million.  
Tr. at 297, 301-06, 328.   Accordingly, the SSO decided that MDA's 
substantially lower-priced proposal offered the best value to the 
government.  

Award was made to MDA, and this protest followed.  Subsequently, the 
SSO again reviewed the TET's evaluation determinations, and for the 
first time read Lockheed's and MDA's proposals.  The SSO testified 
that he:

 "did the same type of cost/technical tradeoff that [he] had initially 
 performed.  It was a mental exercise to look for merit, to look for 
 value, and to make appropriate tradeoffs between technical, price and 
 management and merits of the two competitors."   Tr. at 283-84, 343. 

Based on this new review, the SSO ratified his earlier selection of 
MDA's proposal based upon his determination that the technical merit 
evidenced in Lockheed's proposal was not worth more than a $1 million 
or $2 million price premium.  Tr. at 328.

Lockheed's first challenge to the selection of MDA's proposal for 
award is grounded upon the protester's assertion that the RFP and 
OPNAVINST 4790.2E require separate maintenance organizations for each 
squadron.  As noted above, Lockheed offered in its baseline proposal a 
separate maintenance organization for each squadron, while MDA offered 
a consolidated maintenance organization for the three squadrons at NAS 
Fallon.  Accordingly, Lockheed argues that MDA's proposal was 
unacceptable.

The Navy and MDA respond that the RFP and OPNAVINST 4790.2E do not 
specify whether maintenance functions for the squadrons must be 
performed by either separate or consolidated organizations.  We 
agree.[8]  While Lockheed argues that the SOW's separate site specific 
addenda for each squadron indicate that a separate maintenance 
organization is required for each squadron, we find from our reading 
of these addenda, as well as the SOW and the RFP as a whole, that the 
addenda merely supplement the basic SOW requirements on a 
site-specific and squadron-specific basis; we do not find anything in 
the addenda or the SOW that requires that the contractor have a 
separate organization supporting each squadron.[9]  Regarding 
OPNAVINST 4790.2E, Lockheed admits that the instruction is "silent" as 
to whether a consolidated maintenance approach is acceptable, see Tr. 
at 83, but argues that the instruction's overall structure and 
objectives indicate that separate maintenance organizations are 
required.  However, from our review of the six volumes comprising 
OPNAVINST 4790.2E, we find that the instruction states the Navy's 
overall policies, procedures, and responsibilities for conducting 
naval aviation maintenance programs, but does not specify that 
contractor-provided maintenance must be in the form of a separate 
organization per squadron.[10]

Lockheed also protests that Lockheed's and MDA's proposals were not 
evaluated on a common basis.[11]  Specifically, Lockheed complains 
that the Navy accepted MDA's offer in its baseline proposal to provide 
a consolidated maintenance organization to perform maintenance 
services for three squadrons at NAS Fallon, while Lockheed's offers in 
its streamlining recommendations to provide varying levels of 
consolidated maintenance at NAS Fallon were rejected.  

The record does not show that the offerors were treated unequally in 
the agency's evaluation.  As noted above, the RFP allowed an offeror 
to elect whether it would perform the required maintenance services 
for a squadron using either a separate or consolidated maintenance 
organization.  Both Lockheed and MDA proposed, as their baseline 
approach, separate maintenance organizations at Key West, Yuma, and 
Miramar.  For NAS Fallon, Lockheed's baseline proposal was to provide 
separate maintenance organizations for each of the three squadrons, 
while MDA's baseline proposal was to provide one consolidated 
organization to perform maintenance services for the three squadrons.  
In addition, Lockheed offered in its streamlining recommendations 
numbered two, three, and four varying degrees of consolidation in the 
maintenance function for NAS Fallon; Lockheed's streamlining 
recommendation number four, which proposed to provide a consolidated 
maintenance organization for two of the three squadrons, offered the 
greatest amount of consolidation of maintenance services at NAS 
Fallon.

The Navy found that both offerors' baseline organizational approaches 
to performing the maintenance services at NAS Fallon were acceptable.  
The Navy also considered Lockheed's streamlining recommendations for 
consolidation.  While the evaluators recommended not accepting 
Lockheed's streamlining recommendations, the SSO testified that, in 
performing his cost/technical tradeoff analysis and making his source 
selection, he gave positive consideration to Lockheed's streamlining 
recommendations numbered two and three, and the consequent price 
savings offered by these recommendations.  Tr. at 303-06, 359-60.  The 
SSO also testified that he did not consider Lockheed's streamlining 
recommendation number four because Lockheed's proposal conditioned 
acceptance of this recommendation upon the Navy's agreement that the 
agency would only have one contracting officer's representative and 
one maintenance monitoring team for those squadrons; the SSO states 
that this is an unacceptable condition to the agency.  Tr. at 302-03.  
Thus, we find that, contrary to Lockheed's contentions, the Navy 
reasonably considered Lockheed's streamlining offers of consolidated 
maintenance at NAS Fallon.

Lockheed also challenges the SSO's cost/technical tradeoff that 
resulted in the selection of MDA's proposal for award.  

Source selection officials have broad discretion to determine the 
manner and extent to which they will make use of the technical and 
cost evaluation results in negotiated procurements.  Grey Advertising, 
Inc., 55 Comp. Gen. 1111 (1976), 76-1 CPD  para.  325.  In deciding between 
competing proposals, cost/technical tradeoffs may be made, the 
propriety of which turns not on the difference in technical scores or 
ratings, per se, but on whether the selection official's judgment 
concerning the significance of that difference was reasonable and 
adequately justified in light of the RFP evaluation scheme.  Wyle 
Labs., Inc.; Latecoere Int'l, Inc., 69 Comp. Gen. 648 (1990), 90-2 CPD  para.  
107.  Accordingly, where, as here, cost is secondary to technical 
considerations, selection of a lower-priced, lower-rated proposal over 
a higher-rated proposal requires a showing that the agency reasonably 
concluded that the higher technical score did not reflect actual 
technical superiority, see Dayton T. Brown, Inc., B-229664,  Mar. 30, 
1988, 88-1 CPD  para.  321, or that the agency reasonably concluded that the 
higher-rated proposal's technical superiority was not worth the cost 
premium.  See Wyle Labs., Inc.; Latecoere Int'l, Inc., supra.

The record shows that the SSO reviewed Lockheed's and MDA's proposal 
ratings under each factor and subfactor to judge whether there was 
"real technical merit" and "value" reflected in Lockheed's superior 
technical rating.  For each subfactor, the SSO sought some value or 
benefit to the government for a proposal's particular rating.  In this 
regard, the SSO testified that he found value:

 "where I see a real benefit to the government, either in efficiencies 
 or over into a manufacturing environment.  If I would see things that 
 were going to really preclude rework or provide better reliability, 
 those types of--I go looking for benefit.  I believe that if we are 
 going to pay [a] price premium we certainly have to be able to put 
 our hands around and defend what the benefit is we are going to get 
 for that price premium."  Tr. at 314-15

Based on his review, the SSO determined that there was not "a great 
distinction between the technical merit of the two offerors," which 
would justify the payment of a very substantial price premium.  Tr. at 
280.  

For example, the SSO reviewed the offerors' proposal ratings under the 
most important quality/safety subfactor (under which Lockheed's 
proposal was rated outstanding and MDA's highly satisfactory) and 
found that the identified strengths for Lockheed's proposal did not 
demonstrate any significant technical superiority over MDA's proposal.  
Tr. at 308-09.  Specifically, the TET's rating of outstanding for 
Lockheed's proposal under this subfactor was based upon Lockheed's 
reported 146,000 accident-free flight hours under a similar contract, 
receipt of Chief of Naval Operations safety awards, and low personal 
injury rates.  The SSO believed that the TET had given Lockheed 
excessive credit under this subfactor for the accident-free flight 
hours and safety awards because accident-free flight hours are based 
on a number of factors, including some that have nothing to do with 
good maintenance services, e.g., good pilots, mission planning, 
communications, and weather, and because safety awards are based upon 
having accident-free flight hours.  Tr. at 309-10.  In reviewing MDA's 
rating under this subfactor, the SSO noted MDA's corporate commitment 
to oversight of quality and safety.  Tr. at 310.  In the SSO's 
judgment, there was not a great deal of difference in the performance 
Lockheed and MDA would provide under this subfactor.  Id.

The SSO also compared the firms' ratings under the personnel 
subfactor, for which Lockheed's proposal was rated as outstanding 
while MDA's was rated as satisfactory.  The SSO believed that 
Lockheed's proposal advantage under this subfactor largely represented 
an incumbent's advantage, whereas MDA's lower rating reflected the 
fact that three of  MDA's key personnel resumes did not demonstrate 
the specified experience.  Tr. at 315.  The SSO concluded from the 
resources available to MDA that the firm could cure any deficiency in 
its key personnel.  Tr. at 316.  The SSO credited Lockheed's proposal 
for its proposed personnel but concluded that Lockheed's advantage 
under this subfactor did not justify the payment of a substantial 
price premium.  Based on review, we cannot find this judgment was 
unreasonable.
 
As another example, the SSO reviewed the firms' ratings under the past 
performance subfactor, for which Lockheed's proposal was rated as 
outstanding while MDA's was rated as satisfactory.  Lockheed's 
outstanding rating was based upon the firm's specific experience as 
the incumbent, while MDA's rating reflected the evaluators' views that 
while MDA had specific and strong experience with the F/A-18 
aircraft--one of the aircraft to be maintained and for which MDA was 
the original equipment manufacturer--MDA otherwise did not demonstrate 
direct relevant experience.  The SSO credited Lockheed for its 
experience as the incumbent, but believed that MDA's rating should 
have been more than merely satisfactory.  Tr. at 321-22.  
Specifically, the SSO was aware that MDA had performed "a lot of 
[similar] aircraft maintenance, aircraft logistics, aircraft overhaul 
type of work for the Navy,"  Tr. at 322, although not with the 
majority of the specific aircraft to be maintained under this 
contract.  Tr. at 323.  In other words, the SSO essentially provided 
greater credit to MDA's proposal under the past performance subfactor 
than did the evaluators and Lockheed has not shown this to be 
unreasonable.

In sum, we find that the SSO properly considered Lockheed's superior 
technical rating, assessing the extent to which the ratings reflected 
actual technical superiority and then weighing that assessment against 
the price premium associated with Lockheed's proposals.  As noted 
above, the SSO, in performing his cost/technical tradeoff, also 
credited Lockheed with the substantial price savings reflected in 
Lockheed's acceptable streamlining suggestions, which reduced MDA's 
price advantage to approximately $6 million, but still concluded that 
Lockheed's higher technical rating did not justify the payment of so 
large a price premium.  While Lockheed asserts that the SSO did not 
consider the evaluators' views that separate maintenance organizations 
were superior to a consolidated organization,[12] the record shows 
that the SSO was aware of the evaluators' views concerning this issue, 
but himself believed that a consolidated maintenance organization 
offered advantages of flexibility and efficiency over a separate 
maintenance organization.  Tr. at 290-91.  Lockheed's disagreement 
with the SSO's judgment concerning the respective merit of the two 
firms' proposals does not show that the SSO's determination to select 
the MDA's lower-priced proposal, notwithstanding Lockheed's proposal 
evaluated technical superiority, was unreasonable.     

The protest is denied.

Comptroller General
of the United States

1. This program is part of the Navy's training provided to Navy 
fighter (aircraft that attack other aircraft or missiles) and strike 
(aircraft that attack ground targets) pilots.

2. The contract also contained some cost reimbursement elements, which 
are not relevant to this protest.

3. Another squadron already based at NAS Fallon is scheduled to be 
disestablished early in the base year.

4. The RFP incorporated by reference Federal Acquisition Regulation 
(FAR)  sec.  52.215-16, Alternate III, which provides that the government 
intends to make award without conducting discussions but reserves the 
right to conduct discussions if necessary.

5. Proposals were evaluated under each evaluation factor and subfactor 
as either outstanding (O), highly satisfactory (H), satisfactory (S), 
marginal ( M), or unsatisfactory (U) and were assessed for proposal 
risk as either high risk (H), moderate risk ( M), or low risk (L).

6. Base year prices plus option year prices for the baseline 
proposals.

7. A hearing was held in this protest pursuant to 4 C.F.R.  sec.  21.5 
(1995), at which a number of government and Lockheed witnesses, 
including the SSO and the TET chair, testified.  

8. There was inconclusive testimony about whether the TET chairman 
orally advised Lockheed prior to the submission of initial proposals 
that a consolidated approach was acceptable or not acceptable.  See 
Tr. at 92-92, 95-97, 100, 127, 129-30.  However, as indicated, the RFP 
did not mandate either approach. 

9. Lockheed argues that some TET members shared Lockheed's 
interpretation that the RFP and OPNAVINST 4790.2E require separate 
maintenance organizations for each squadron.  The TET chair testified, 
however, that none of the TET members believed that the offer of a 
consolidated maintenance organization would not be in compliance with 
the RFP.  Tr. at 154.  From our review of the individual evaluators' 
worksheets, as well as the TET chair's testimony, it does not appear 
that any of the evaluators found that the offer of a consolidated 
maintenance organization was contrary to the requirements of the RFP 
or the instruction.  Rather, the record merely establishes that many 
members of the TET believed that separate maintenance organizations 
were more desirable than a consolidated maintenance approach.  Tr. at 
155-56.  The SSO was aware of the evaluators' preferences for separate 
maintenance organizations, but believed himself that a consolidated 
maintenance approach was more advantageous.  Tr. at 290-91.

10. The Navy is accorded deference in the interpretation of its own 
instruction.  See Commercial Energies, Inc., 70 Comp. Gen. 44 (1990), 
90-2 CPD  para.  319.  Here, we have consistent testimony from the SSO and 
the TET chair and legal argument that plainly states the Navy's 
interpretation that OPNAVINST 4790.2E does not mandate separate 
maintenance organizations for each squadron.

In addition, much argument and testimony has been provided regarding 
the performance of Lockheed's prior contract, under which Lockheed 
initially provided maintenance services at NAS Fallon with a separate 
maintenance organization for each squadron and then changed to a 
consolidated approach.  The record shows that Lockheed changed its 
approach at the Navy's request and that Lockheed's contract was 
amended to reflect this change.  This does not demonstrate, however, 
that the OPNAVINST 4790.2E requires separate contractor maintenance 
organizations for each squadron, as Lockheed asserts; it shows only 
that Lockheed's contract allowed it to perform using separate 
organizations and that the contract was modified at the Navy's request 
to provide for a consolidated approach.  There was no request for a 
waiver or deviation from OPNAVINST 4790.2E, as would be expected if 
the consolidated approach were not allowed by that instruction.  

11. Lockheed also complains that it should have been specifically 
informed during discussions that a consolidated maintenance 
organization was acceptable.  However, the Navy reasonably responds 
that Lockheed's baseline offer of separate maintenance organizations 
was acceptable and it was unaware of Lockheed's restrictive RFP 
interpretation.  

12. The record shows that the majority of the evaluators believed that 
separate maintenance organizations were superior.  Tr. at 263-264.  
The record also evidences that no significant evaluation credit or 
discredit was given to MDA for proposing a consolidated maintenance 
organization at NAS Fallon or to Lockheed for proposing separate 
maintenance organizations.  Tr. at 265-267.