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