BNUMBER: B-270703
DATE: April 11, 1996
TITLE: Morrison Knudsen Corporation
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DOCUMENT FOR PUBLIC RELEASE
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:Morrison Knudsen Corporation
File: B-270703
Date:April 11, 1996
E. Sanderson Hoe, Esq., and Melvina C. Ford, Esq., McKenna & Cuneo,
for the protester.
Rochelle L. White, Esq., Brown & Root, Inc., an intervenor.
David C. Rickard, Esq., Defense Nuclear Agency, for the agency.
Sylvia Schatz, Esq., 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 award to offeror whose proposal received a lower
technical score from the source selection evaluation board than
protester's and only offered a slightly lower evaluated cost is
sustained where a primary basis for the source selection authority's
decision to disregard the evaluation scores was not supported by the
record.
DECISION
Morrison Knudsen Corporation (MK) protests the award of a contract to
Brown & Root (B&R) under request for proposals (RFP) No.
DNA001-95-R-0026, issued by the Defense Nuclear Agency (DNA) for the
dismantlement and elimination of intercontinental ballistic missile
(ICBM) silos at four sites in the Republic of Kazakhstan. MK argues
that the source selection decision was based on a misreading of the
proposals.
We sustain the protest.
The RFP contemplated the award of a 39-month cost-plus-fixed-fee
contract for elimination of the missile and launch control complexes,
supporting structures, and underground facilities, burial or removal
of the debris and removal of salvageable materials, and general
restoration of the sites to their original topography so as to
facilitate civilian use. The RFP stated that the contractor could
either buy new equipment that would become the property of the U.S.
government or use contractor-owned or leased equipment.
The solicitation provided for award to the offeror submitting the most
advantageous proposal, to be determined primarily on the basis of
technical/management superiority, with cost being "carefully
considered." The technical/management area consisted of three
subfactors (in descending order of importance): (1) technical
approach; (2) experience, record of performance and personnel; and (3)
support capabilities. The technical approach subfactor consisted of
nine elements, including management of subcontractors. The
solicitation also provided for past performance to be evaluated as a
general consideration as it related to the above subfactors.
Among the proposals received were MK's and B&R's; both were included
in the competitive range. Following site visits and written and oral
discussions, the agency requested and received best and final offers
(BAFO). The source selection evaluation board (SSEB) evaluated BAFOs
as follows:
TECHNICAL
SCORE/RATING PROPOSED COST EVALUATED COST
MK 87.6 /100
very good $29,854,118 $31,624,000
B&R 81.7
very good $31,531,912 $31,531,912
Both MK and B&R proposed to use Kazakhstani subcontractors to provide
required equipment and logistics support. The SSEB found that this
approach represented an unacceptable risk for the "equipment intensive
project" contemplated by the statement of work because (1) generally,
"in-country equipment" in the successor states to the former Soviet
Union is usually either broken or cannibalized for spare parts, and
(2) specifically, Kazakhstani subcontractors could not necessarily be
relied on to furnish promised equipment since they have previously
made "exaggerated claims of the numbers, types and availability of
equipment and supplies, spare parts and consumables." The SSEB
therefore recommended award to one of the higher-cost offerors
proposing to import equipment into Kazakhstan.
The SSA rejected the SSEB's recommendation, concluding that the lower
risk associated with these latter proposals did not warrant their
substantially higher cost. DNA reports that the SSA then selected
B&R's proposal over MK's higher-scored proposal on the basis of
several considerations, including two which were "crucial aspects of
MK's proposal" which "weighed more heavily in the final selection":
(1) B&R's superior subcontractor approach; and (2) the fact that MK
had incurred a 133-percent cost overrun under a prior DNA contract for
services in the Ukraine similar to those required here, "[t]he primary
cause" of the cost growth being, according to DNA, the "disparity
between prices quoted by Ukrainian subcontractors and actual
negotiated prices." In addition, the SSA questioned MK's proposal
for the program manager to work in a program office in Ohio rather
than on-site in Kazakhstan, and noted that MK's cost estimate for silo
elimination was significantly lower than other offerors' and the
independent government estimate. Upon learning of the resulting award
to B&R, MK filed this protest.
MK argues that the reasons for selecting B&R are not supported by the
record, and that the award therefore was improper.
In reviewing an evaluation and source selection decision, we will
consider whether the evaluation was reasonable and consistent with the
stated solicitation evaluation factors. Main Bldg. Maintenance, Inc.,
B-260945.4, Sept. 29, 1995, 95-2 CPD para. 214. We find that the SSA's
selection of B&R's proposal over MK's was based in significant part on
an unreasonable comparison between the proposals such that the award
decision lacked a reasonable basis.
In his September 29, 1995, source selection decision, the SSA--after
discounting the possibility of selecting an "imported" equipment
approach--largely focused on the perceived contrast between B&R's and
MK's proposed approaches to subcontracting. Although, as noted above,
MK and B&R both proposed to provide the required construction
equipment through Kazakhstani subcontractors, the SSA determined that
B&R's subcontractor approach was superior to MK's because only B&R:
(1) stated in its BAFO that it intended to use three
subcontractors--Montazhspetsstroy, Katep, and the National Nuclear
Center--whose performance the SSA considered excellent under prior DNA
contracts for similar services, and (2) identified the specific
equipment available to its proposed subcontractors.
The record shows that, in fact, the two proposals were not
fundamentally different in their proposed subcontractor approach.
First, notwithstanding the SSA's impression as to B&R's approach, B&R
did not commit to using specific subcontractors; B&R's BAFO did
reference five potential subcontractors, but it stated that "[b]esides
the subcontract quotations discussed above, we have received other
subcontract offers for discrete portions of the work," and that "[a]s
stated in our original proposal, our intention, in the event of
contract award, is to recompete these contracts to multiple
subcontractors on a competitive basis." This is the same approach
proposed by MK; its BAFO listed 15 potential subcontractors, stated
that it had "interviewed additional companies," and indicated that MK
intended "to place all the construction work with Kazakhstani
subcontractors who will be selected based on a competitive bidding
process." Further, MK's BAFO identified as potential subcontractors
to be selected through this competition the same three Kazakhstani
subcontractors the SSA cited as the basis for preferring B&R's
approach. B&R's BAFO, unlike MK's, included written estimates from
the three potential subcontractors, but we fail to see how this could
be a legitimate technical discriminator given that their selection as
subcontractors was contingent on their winning the proposed
competition.
The SSA's reliance on B&R's identification of equipment available to
its subcontractors--while MK's proposal failed to do so--in
distinguishing between the proposals also was unreasonable. Since
B&R's subcontractor approach was based on the competitive selection of
subcontractors, the value of a subcontractor equipment list for
evaluation purposes appears to be illusory. Thus, specifically,
although B&R's BAFO included a list of the equipment available to one
potential subcontractor, Montazhspetsstroy, it is not clear how
meaningful weight could be given this list, since Montazhspetsstroy
might or might not ultimately be selected as a subcontractor.
Further, the SSEB found that "[n]either of the bidders [MK or B&R] had
physically verified that the quantities of equipment needed for this
project actually existed in-country and were available for use on the
first day of this contract, stating that verification would take place
after contract award." In light of this finding, and the absence of
any evidence of a contrary finding by the SSA, it is not apparent how
significant weight could be assigned to B&R's identification of
subcontractor equipment.
In any case, if DNA viewed MK's failure to list equipment available to
its potential subcontractors as a significant weakness in its
proposal, it was required to advise MK of its concern in this regard
during discussions. In this regard, procuring agencies are generally
required to conduct meaningful discussions with all offerors in the
competitive range, CBIS Fed. Inc., 71 Comp. Gen. 319 (1992), 92-1 CPD para.
308; in satisfying this obligation, they generally must point out
weaknesses that, unless corrected, would prevent an offeror from
having a reasonable chance for award. Pressure Technology, Inc.,
B-265793, Dec. 29, 1995, 95-2 CPD para. 288. The obligation for
meaningful discussions is not satisfied where discussions are
misleading or prejudicially unequal. CBIS Fed. Inc., supra. Here,
the record indicates that the agency did not adequately bring its
concern with respect to MK's failure to list the equipment available
to its subcontractors to MK's attention during discussions. Rather,
the agency only asked MK during discussions to "[p]lease provide a
detailed discussion of what procedures will be implemented to
maintain, transport, and provide training for all of the equipment to
be provided for this contract." In contrast, the SSEB's discussion
question to B&R specifically pointed out the perceived weakness in its
proposal with respect to the identification of subcontractor
equipment: "[p]lease list the equipment being provided by
subcontractors." By failing to treat the offerors equally in
notifying them of this weakness, the agency improperly denied MK the
opportunity to make its proposal more competitive in this regard.
Where an agency clearly violates procurement requirements, we will
resolve any doubts concerning the prejudicial effect of the agency's
action in favor of the protester, The Jonathan Corp.; Metro Mach.
Corp., B-251698.3; B-251698.4,
May 17, 1993, 93-2 CPD para. 174; United Int'l Eng'g, Inc.; Morrison
Knudsen-Dynamics Research; PRC Inc.; and Science Applications Int'l
Corp., 71 Comp. Gen. 177 (1992), 92-1 CPD para. 122, and a reasonable
possibility of prejudice is a sufficient basis for sustaining the
protest. Intermetrics, Inc., B-259254.2, Apr. 3, 1995, 95-1 CPD para.
215; Foundation Health Fed. Servs., Inc.; QualMed Inc., B-254397.4 et
al., Dec. 20, 1993, 94-1 CPD para. 3.
In this case, the "crucial," significant reason--B&R's evaluated
superior subcontract approach--relied on by the SSA for disregarding
MK's higher evaluation score and selecting B&R's proposal for award is
not supported by the record, which shows that, in fact, the two
proposals were not fundamentally different in their proposed
subcontractor approach. Although the SSA found other aspects of MK's
proposal to be areas of concern, the September 29 source selection
decision largely focused on B&R's superior subcontract approach.
Indeed, while DNA reports that the cost overruns on MK's Ukrainian
contract were also a crucial factor in the SSA's decision, and the
contemporaneous evaluation record indicates the existence of agency
concern in this regard, we note that the SSA in the source selection
decision does not specifically refer to this as a significant concern
with respect to MK. DNA does not indicate, and it is not clear from
the record, that considerations other than subcontractor approach
would have been sufficient by themselves to support disregarding MK's
higher evaluation score and selecting B&R for award. Further, we
decline to speculate on what would have been the results if proposals
were properly evaluated and discussions properly conducted;
speculation concerning the results of such an analysis and discussions
is no substitute for the required analysis and discussions. See Moon
Eng'g Co., Inc.--Recon., B-251698.6, Oct. 19, 1993, 93-2 CPD para. 233.
In these circumstances, we conclude that MK could have been in line
for award, and thus was prejudiced by the agency's unsupported
selection rationale and by the failure to conduct proper discussions.
We recommend that DNA reevaluate proposals in light of the discussion
above. In the event the agency determines that award should be made
to an offeror other than B&R, the agency should terminate B&R's
contract. We also recommend that the protester be reimbursed the
costs of filing and pursuing its protest, including reasonable
attorneys' fees. Bid Protest Regulations, section 21.8(d)(1), 60 Fed.
Reg. 40,737, 40,743 (Aug. 10, 1995) (to be codified at 4 C.F.R. sec.
21.8). The protester should submit its certified claim for costs to
the contracting agency within 90 days of receiving this decision.
Section 21.8(f)(1), 60 Fed. Reg. supra (to be codified at 4 C.F.R. sec.
21.8(f)(1)).
The protest is sustained.
Comptroller General
of the United States