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