BNUMBER: B-270117
DATE: February 9, 1996
TITLE: Martin Marietta Defense Systems
**********************************************************************
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:Martin Marietta Defense Systems
File: B-270117
Date: February 9, 1996
Paul Shnitzer, Esq., Joan H. Moosally, Esq., and Michele T. St. Mary,
Esq., Crowell & Moring, for the protester.
Samuel Paige, Esq., Paige & Paige, for Kearfott Guidance & Navigation
Corporation, an intervenor.
Dean R. Berman, Esq., Department of the Navy, Strategic Systems
Program, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest against determination that proposed significant reduction in
historical level of effort (for production of part of guidance system
for strategic nuclear deterrent missile system) was unrealistic is
denied where proposed reduction was based on protester's undocumented
and unsupported summation of a hypothetical build of three equivalent
units, and the agency instead reasonably used as a baseline (against
which to evaluate proposed labor-saving initiatives) the reported data
on labor hours required to complete actual units over the course of
the most recent contract year.
DECISION
Martin Marietta Defense Systems (MMDS) protests the award of a
contract to Kearfott Guidance & Navigation Corporation under request
for proposals (RFP) No. N00030-95-R-0047, issued by the Department of
the Navy, Strategic Systems Program, for MK-6 Inertial Measurement
Units (IMU) for the Trident II missile. MMDS challenges the
evaluation of technical and cost/price proposals.
We deny the protest.
The IMU provides acceleration, attitude and stellar sensor data to the
guidance system for the Trident II missile, which is the United
States' sea-based strategic nuclear deterrent. In the past, the
Navy's requirement for Trident II IMUs has been equally divided
between MMDS and Kearfott, each producing new IMUs at a minimum rate
of 3 per month. A decrease in its requirement for new IMUs, however,
resulted in the agency's issuing this solicitation, which provided for
selection of a single source and, after an additional year of full
production, transition to a lower rate of production.
The solicitation contemplated award of a fixed-price-incentive
contract (cost-based, with a target price and an ultimate ceiling
price) for 5 years for: (1) IMU production, (2) IMU failure
verification, repair and recertification, and (3) IMU integrated
production capability maintenance hardware. The solicitation
generally provided for award to be made to the offeror whose proposal
represented the best value to the government, with technical merit to
be given more weight than evaluated cost. The RFP listed, in
descending order of importance, three technical merit evaluation
factors: (1) technical approach, (2) resources, and (3) past
performance.
The solicitation provided for the agency to perform a cost realism
evaluation, for purposes of which offerors were to furnish a detailed
cost proposal, including: (1) prior actual costs for production and
repair in fiscal years 1991, 1992, and 1993, broken down into direct
labor hours and major cost elements for each of the tasks listed in
the solicitation's work breakdown structure (WBS); and (2) a detailed
breakdown of the proposed labor hours and major cost elements by WBS
task. The solicitation generally required offerors to provide a basis
of estimate to support each WBS task; it specifically stated that the
proposal must "[i]dentify and explain any significant differences
between the historical WBS hours/cost and those offered, in sufficient
detail to allow the Contracting Officer to make a judgment as to the
reasonableness of the proposed increases/decreases."
The Navy received proposals from MMDS and Kearfott. Both proposals
were included in the competitive range. At the conclusion of
discussions, the Navy requested best and final offers (BAFO).
While MMDS's BAFO target price [deleted], as well as its ceiling (and
evaluated) price [deleted], were significantly lower than Kearfott's
target (and evaluated) price [deleted], the Navy determined that
MMDS's pricing was based on an unrealistically low level of effort
that represented a significant reduction in the historical level of
effort (when calculated on a per IMU basis) and was insufficient to
assure delivery of a quality, reliable product. Although the agency
had asked MMDS during discussions to justify and explain how its
initially proposed reduced level of effort (266,014 direct labor hours
for all items) would enable it to perform the required work, MMDS
nevertheless further reduced its proposed level of effort in its BAFO,
to an evaluated 243,254 hours. MMDS proposed major reductions in the
historical level of effort per IMU in almost every area of assembly,
inspection, and test.
The Navy found MMDS's explanation for its proposed significant
reduction in level of effort to be unpersuasive and determined that at
least 36,783 more hours would be required. For example, the agency
considered the proposed large reduction in inspection and test hours
to be unacceptable, especially in view of MMDS's proposal of an
overall reduction in the workforce, which was expected to make quality
more difficult to assure as fewer employees were required to bear more
and broader responsibilities for more diverse areas of production.
According to the Source Selection Advisory Council (SSAC),
"[MMDS's] proposal suffered from minimal resource commitments and
an imbalance in their application to the various program
elements. The approach they proposed for executing a stand alone
repair capability is questionable. Their plan required an
inordinately high dependency on other contracts to provide an
engineering pool. The minimization of total manpower, usage of a
significant amount of on-call resources not supported by this
contract, a weak approach to critical skills maintenance and a
marginally adequate overall support plan resulted in the
potential for a high risk in the successful execution of this
contract and to the quality and reliability of the product.
. . . . .
"[The proposed cost] reductions are significantly better than
their currently demonstrated performance. The potential for an
overrun is high, but more important is the potential for
degradation to the quality of the systems they either process or
build as a result of executing to plan. If cost increased, the
potential risk would increase as efforts were made to constrain
cost growth."
In contrast, Kearfott's proposal, based on a proposed level of effort
of 452,851 hours, was evaluated as offering a low risk approach to
satisfying the solicitation requirements for IMU production and repair
and maintaining a labor force with the required critical skills. The
SSAC determined that the technical superiority of Kearfott's low risk
proposal, which received a significantly higher technical score (7.328
out of a possible 9.8 points) than MMDS's (5.894 points), was worth
its additional price. According to the SSAC,
"[t]he criticality of the IMU to the Trident Weapon System is
such that our need to maintain technical competence at our
contractor and confidence of product quality and reliability of
our deployed systems far outweighs the potential cost savings.
The clearly superior approach proposed by [Kearfott] provides an
affordable product that will not jeopardize our weapon system
performance."
Upon learning of the resulting award to Kearfott, MMDS filed this
protest with our Office.
Although MMDS challenges several aspects of the evaluation, resolution
of MMDS's protest turns on whether the agency reasonably determined
MMDS's proposed reductions in level of effort per IMU to be
unrealistic. If the agency reasonably determined that MMDS's proposed
level of effort was insufficient to assure delivery of quality,
reliable IMUs, then clearly the agency was not required to entrust
production and support of such a vital component of the guidance
system for the United States' sea-based strategic nuclear deterrent to
MMDS. In this regard, MMDS primarily argues that the Navy failed to
base its evaluation on the most recent contract performance data that
was included in its proposal.
The evaluation of technical proposals is primarily the responsibility
of the contracting agency, since the agency is responsible for
defining its needs and the best method of accommodating them, and must
bear the consequences of any difficulties resulting from a defective
evaluation. Therefore, our Office will not engage in an independent
evaluation of technical proposals and make an independent
determination of their relative merits. Litton Sys., Inc., B-239123,
Aug. 7, 1990, 90-2 CPD para. 114. Rather, we will review the agency's
evaluation only to ensure that it was reasonable and consistent with
applicable statutes and regulations, as well as the terms of the RFP.
Polar Power, Inc., B-257373, Sept. 2, 1994, 94-2 CPD para. 92.
The agency reasonably determined that MMDS's proposal offered a high
risk approach based on an unrealistically low level of effort. Our
conclusion is best discussed in terms of an example. While MMDS
submitted data with its proposal showing that its total direct touch
labor hours per manufactured IMU was 2,173 hours in fiscal year
1993, which already represented a 24 percent reduction from the fiscal
year 1991 level (2,862 hours), MMDS proposed 1,500 hours of direct
touch labor per IMU for fiscal year 1995, that is, an additional 31
percent below the 1993 level. MMDS's proposed level of effort in this
regard was based on (1) its claim of having achieved a reported
average 1994 level of effort of 2,017 direct touch hours per IMU and a
level of effort of 1,736 direct touch hours per IMU for the last three
equivalent 1994 IMUs, and (2) reduction of the required effort a
further 13.6 percent to 1,500 hours through a number of labor-saving
initiatives.[1] (In contrast, Kearfott, which reported 2,476 direct
touch labor hours per IMU in 1993 (but only 2,287 hours in 1991),
proposed 2,199 hours in 1995, an 11.2 percent reduction.)
The Navy concluded that MMDS's claim of 1,736 direct touch hours per
IMU for the last three equivalent 1994 IMUs did not represent a
reliable baseline against which to evaluate MMDS's proposed
labor-saving initiatives. In reaching this conclusion, the Navy noted
MMDS's explanation during discussions that the number of hours for the
last three IMUs referenced in its proposal were not the hours spent to
complete three actual units but, rather, MMDS's hypothetical summation
using the latest data available on the hours needed to build the
various parts and subassemblies of the IMU. Indeed, MMDS explained
during discussions that the hours used for the various parts and
subassemblies might not even represent actual reported hours;
according to MMDS, "[t]he average actuals will be modified for any
unique circumstances."
The Navy also noted that the claimed hours per IMU for the last three
equivalent 1994 IMUs represented an unlikely departure from the
historical trend of a slowing in the decrease of touch labor hours;
while MMDS's total touch labor hours decreased 17.1 percent from 1991
to 1992 (from 2,862 to 2,373 hours), 8.4 percent from 1992 to 1993
(from 2,373 to 2,173 hours), and 7.2 percent from 1993 to 1994 (from
2,173 to 2,017 reported hours), MMDS claimed a 20.1 percent decrease
from 1993 for the last three equivalent units (and projected a 25.6
percent decrease from the reported 1994 average to the 1995 estimate
(from 2,017 hours to 1,500 hours)). The agency attributed the
historical slowing of the rate of decrease in touch labor hours to the
fact that MMDS had been building Mk-6 IMUs for 8 years, with the
result that the opportunity for further efficiencies was slowly
decreasing; the agency considered a continuation of this historical
trend to be more likely than MMDS's claimed sudden, significant
acceleration in efficiency. In addition, the Navy viewed the
significant discrepancy between the hours reported for the last three
equivalent 1994 IMUs (1,736 hours) and the overall average 1994 level
of effort (2,017 hours) as further supporting its determination that
the claimed hours per IMU for the last three equivalent 1994 IMUs did
not represent a reliable baseline against which to evaluate MMDS's
proposed labor-saving initiatives; noting that most of the work had
been accomplished under the fiscal year 1994 production contract by
the time of BAFO submission, the agency considered it unlikely that
MMDS could have built an IMU with 1,736 hours of touch labor when it
required an average of 2,017 hours for the year as a whole.
The agency concluded that the data on touch labor hours over the
course of a year as a whole, in this case MMDS's reported data for
completed IMU's in 1994, would be a much more accurate reflection of
MMDS's current abilities than the claimed hours per IMU for the last
three equivalent 1994 IMUs. On this basis, the agency concluded that
MMDS's proposed overall level of effort for production of IMUs, even
after taking into account the proposed saving initiatives considered
acceptable and likely-to-succeed labor, was inadequate.
The Navy's position was reasonable. The agency was presented with a
choice between: (1) an undocumented and unsupported hypothetical
summation of the hours needed to build the various parts and
subassemblies of the IMU (rather than actual complete units), which
was significantly at variance with both the historical labor trend of
a slowing of the rate of decrease in touch labor hours per IMU and the
reported touch labor hours required for completion of a significant
number of actual units; and (2) the reported data on labor hours
required to complete actual units over the course of the better part
of the most recent contract year. In our view, the agency could
reasonably select as its baseline against which to evaluate MMDS's
proposed labor-saving initiatives the most recent data on the average
time required to construct a significant number of IMUs.
Having reviewed MMDS's challenges to the evaluation and concluded that
the Navy could reasonably determine MMDS's proposed level of effort to
be unrealistically low, we further find reasonable and consistent with
the stated evaluation criteria the agency's determination that the
advantage of MMDS's lower price (which was based on that
unrealistically low level of effort) was outweighed by the lower risk
associated with Kearfott's technically superior proposal. Information
Sys. & Networks Corp., B-258684.2; B-258684.3, Apr. 4, 1995, 95-1 CPD para.
255. In this regard, we note that the solicitation provided that
technical merit would be given more weight than evaluated cost.
The protest is denied.
Comptroller General
of the United States
1. Although MMDS claims that the average 1994 touch labor hours per
IMU at the time of BAFO submission was in fact 1,930 hours, its BAFO
reported the number as the 2,017 hours referenced above and used by
the Navy in its evaluation. While MMDS argues that the Navy should
have known that 2,017 hours was no longer an accurate number--since it
was the same number used in MMDS's initial proposal submitted earlier
in the year and the BAFO reported a decrease in the number of hours
for the last three equivalent units (from 1,801 hours)--the fact
remains that MMDS represented to the agency in its proposal that 2,017
hours was accurate, and the agency, unaware that the number was
inaccurate, relied on that representation in its evaluation. To the
extent that MMDS's misrepresentation may have affected the evaluation
to its detriment, MMDS must bear the consequences, since it was
responsible for submitting an adequately written, accurate proposal.
See L&S Diesel Serv., Inc., B-261672, Aug. 25, 1995, 95-2 CPD para. 88;
Stewart Title of Orange County, Inc., B-261164, Aug. 21, 1995, 95-2
CPD para. 75.