BNUMBER:  B-270755
DATE:  April 17, 1996
TITLE:  Loral Systems Company

**********************************************************************

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:Loral Systems Company

File:     B-270755

Date:April 17, 1996

James J. McCullough, Esq., Lawrence E. Ruggiero, Esq., and C. Anthony 
Trambley, Esq., Fried, Frank, Harris, Shriver & Jacobson, for the 
protester.
John M. Kinsey, Esq., Department of Transportation, for the agency.
John Van Schaik, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that agency improperly evaluated protester's proposal is 
denied where review of the agency's evaluation documentation shows 
that the ratings assigned to  the proposal were reasonable and related 
to the solicitation's stated evaluation criteria.

2.  Agency reasonably excluded protester's proposal from the 
competitive range where proposals in the competitive range were rated 
superior to protester's and protester's proposed cost was 
substantially higher than that of the competitive range proposals.

DECISION

Loral Systems Company protests the exclusion of its proposal from the 
competitive range under request for proposals (RFP) No. 
DTCG23-94-R-AVT001, issued by the Coast Guard for the design, 
installation, and maintenance of VTS (vessel traffic system) 2000, a 
vessel management and navigation safety system.  

We deny the protest.

BACKGROUND

VTS 2000 is to be an open system with sensors, communications links, 
and decision support tools that will allow the Coast Guard to monitor 
vessel traffic and disseminate information.  The project will consist 
of two phases.  Phase I, which may involve multiple fixed-priced 
contracts, will be a design effort.  At the conclusion of phase I, a 
single system integration contractor will be selected for award via 
exercise of a phase II option.  During phase II, the design will be 
completed and the system installed and maintained by the contractor at 
selected ports.  

The RFP contemplates the award of contracts to the offerors whose 
proposals, conforming to the requirements of the statement of work, 
are determined to be the most advantageous to the government, 
considering the following evaluation areas, listed in descending order 
of importance, and evaluation factors:

     1.  Corporate experience, past performance and                             
     management

               A.  Corporate experience
               B.  Past performance  
               C.  Management

     2.  Technical

               D.  System architecture
               E.  Design
               F.  Integrated support

     3.  Cost

Each of the evaluation factors includes subfactors.

The agency evaluated the initial proposals, assigning to each proposal 
ratings of "exceptional," "acceptable," "marginal," or "unacceptable" 
under each of the evaluation subfactors, factors and areas.  After the 
evaluation, the Coast Guard issued to Loral and other offerors 
numerous questions that the agency labeled "clarification requests."  
In Loral's case, the agency sent the firm five letters that contained 
a total of 65 questions.  Loral responded to those questions with 
approximately 400 proposal change pages.

By letter of December 1, 1995, the Coast Guard informed Loral that its 
proposal was excluded from the competitive range because, based on a 
comparison to the other proposals received, Loral's proposal was 
"determined not to have a reasonable chance of being selected for 
award."  That letter stated that the evaluation included consideration 
of Loral's clarification responses and that, in general, the proposal 
was excluded because it:

        "contained shortcomings (weaknesses or deficiencies) in the 
        Corporate Experience and Management factors.  These 
        shortcomings, in addition to significantly evaluated costs, 
        resulted in noncompetitive range assessment."

After Loral requested additional information, in a December 7 letter 
the Coast Guard provided Loral with a list of evaluated shortcomings 
in Loral's proposal under the Corporate experience and Management 
evaluation factors and again noted that the cost of Loral's proposal 
was an issue in the competitive range exclusion.  

PROTEST ALLEGATIONS

Loral maintains its proposal was unreasonably evaluated, and the 
competitive range determination was flawed because the agency 
improperly failed to evaluate the substantial advantages inherent in 
Loral's proposal.  Loral also argues that, while the agency conducted 
discussions with Loral before excluding its proposal from the 
competitive range, those discussions were not meaningful since they 
did not cover the weaknesses in the firm's proposal that prevented 
Loral from having a chance for award.  In addition, Loral contends 
that the alleged weaknesses and deficiencies that resulted in the 
exclusion of its proposal were mere informational deficiencies.

THE TECHNICAL EVALUATION

Loral maintains that the evaluation was irrational because the agency 
failed to evaluate properly the substantial advantages inherent in 
Loral's utilization of a subcontractor, STN Atlas Elektronik Gmbh, 
which has been responsible for installation of more than 40 percent of 
the world's currently operating VTS systems.  
The record shows that Coast Guard evaluators did give credit to Loral 
for proposing STN as a subcontractor.  In the Technical evaluation 
area, Loral's proposal received an overall rating of "excellent" based 
on ratings of "excellent" on the System architecture and Design 
factors and "acceptable" on the Integrated support factor.  These 
ratings were based in large part on the evaluators' favorable judgment 
concerning Loral's proposal of STN, a firm that has installed and is 
operating numerous VTS systems.  For example, under the System 
architecture factor, the evaluators noted Loral had proposed STN's 
system, "which is operational in 32 ports world wide as the VTS 
solution," and determined that, "from a technical point of view this 
system fully meets all requirements of [the System architecture 
factor] with significant benefits."  Under the Design evaluation 
factor, the evaluators concluded that Loral's proposal demonstrated "a 
thorough understanding of VTS systems," that the "design approach and 
technical solution proposed will readily meet VTS 2000 system 
requirements," and that the "[p]roposed system is highly flexible and 
adaptable without major changes in architecture or system design to 
meet evolving VTS requirements."

Nonetheless, Loral did not score as high in the Corporate experience, 
past performance and management evaluation area, receiving an overall 
rating of "acceptable."  That rating, at least in part, was a result 
of concerns with the lack of demonstrated experience of the proposed 
Loral-STN team on current or past contracts.  Under the Corporate 
experience factor, which included subfactors concerned with 
"integration experience" and "transition experience," the evaluators 
stated that, with two exceptions, Loral's examples of previous 
contracts "do not demonstrate experience transitioning systems to the 
customer as defined in the RFP.  For the balance of the experiences 
described, [Loral] has yet to fully transition the operation and 
maintenance of the system, or expects to retain maintenance and 
operational responsibility for the life of the program." 

Loral argues that it was irrational to rate Loral's proposal favorably 
for STN's expertise in the Technical evaluation area but to not also 
give Loral's proposal credit under the Corporate experience and 
Management evaluation factors.  Loral notes that the Coast Guard 
recognizes that STN's experience offers distinct advantages in the 
Technical evaluation area, and argues that such experience presents 
equally distinct advantages under the Corporate experience and 
Management evaluation factors.

In addition, Loral argues that the evaluators' conclusion that Loral's 
proposal failed to demonstrate experience of the proposed Loral-STN 
team on current or past contracts is contradicted by the record.  
Loral notes that its proposal states that Loral and STN worked 
together on various programs over the past 9 years, and they are 
currently working on the [deleted] and other [deleted] programs and 
also were teamed for the [deleted] program.  Loral also argues the 
agency has failed to explain how a corporation that has implemented 
VTS systems nearly identical to VTS 2000 in more than 30 ports 
worldwide has not demonstrated directly relevant experience or lacks 
management expertise to design and implement such a system.  Loral 
notes that its proposal discussed STN's experience implementing modern 
VTS systems for the Port of Shanghai, China and the Port of Melbourne, 
Australia--demonstrating substantial corporate and managerial 
experience in precisely the type of work called for by the 
solicitation.  Thus, according to Loral, the Coast Guard's rationale 
for discounting the corporate experience of the Loral-STN team--that 
is, that Loral's proposal failed to identify existing or past 
contracts involving the Loral-STN team--is factually erroneous and 
irrational.

In response, the Coast Guard states that the offeror here was Loral, 
not STN, and while it credited Loral with STN's extensive experience 
in the Technical area, it considers the most relevant experience under 
the Corporate experience, past performance and management area to be 
that of Loral, not STN.  The Coast Guard also argues that the two 
programs that Loral cites to show its long-term working relationship 
with STN are largely irrelevant [deleted] programs.

Generally, the evaluation of technical proposals is a matter within 
the contracting agency's discretion since the agency is responsible 
for defining its needs and the best method of accommodating them.  
Science Sys. and Applications, Inc., B-240311; B-240311.2, Nov. 9, 
1990, 90-2 CPD  para.  381.  In reviewing an agency's technical evaluation, 
we will not reevaluate the proposal, but will examine the record of 
the evaluation to ensure that it was reasonable and in accord with 
stated evaluation criteria, and not in violation of procurement laws 
and regulations.  Information Sys. & Networks Corp., 69 Comp. Gen. 284 
(1990), 90-1 CPD  para.  203.  Here, we have no basis to disagree with the 
evaluation and the ratings assigned to Loral's proposal.  
Loral argues that it was not given sufficient credit for proposing STN 
as a subcontractor, because while agency evaluators gave Loral's 
proposal an overall rating of "excellent" in the Technical evaluation 
area, largely due to the proposal of STN, they did not do so in the 
Corporate experience, past performance and management area.  Loral 
argues that STN itself has the relevant corporate experience and 
management expertise and that Loral's proposal should have been given 
an "excellent" instead of an "acceptable" rating on that basis.  
According to Loral, agencies generally are permitted to base the 
evaluation of corporate experience on the experience of a 
subcontractor when the subcontractor is to do the work to which the 
experience is applicable.  See Seair Transport Servs., Inc., 
B-252266, June 14, 1993, 93-1 CPD  para.  458.  Nonetheless, while agencies 
often are permitted to consider the experience of a subcontractor in 
the evaluation of corporate experience, the significance of, and the 
weight to be assigned to, a subcontractor's corporate experience is a 
matter of contracting agency discretion.  See Calspan Corp., B-258441, 
Jan. 19, 1995, 95-1 CPD  para.  28.  Moreover, the solicitation repeatedly 
stated in the Corporate experience, past performance and management 
area that proposals would be evaluated to assess "the Offeror's" 
corporate experience, past performance and management.  In that area, 
the evaluators focused on the experience of Loral itself and the 
Loral-STN team on contracts similar to VTS 2000 and concluded that, 
while STN had extensive experience in this area, Loral the prime 
contractor did not.  We see nothing unreasonable with this evaluation 
approach. 
 
Loral also argues that it should have been given credit in the 
Corporate experience, past performance and management evaluation area 
for the experience of the Loral/STN team on the [deleted] programs.  
Nonetheless, as the agency points out, neither Loral's proposal nor 
its submissions to this Office provided information on the value, 
size, scope, schedule, and key personnel of those 
programs--information that would be useful to judge the relevance of 
those contracts to the VTS 2000 program.  Thus, Loral has provided 
insufficient information to justify a higher rating for Corporate 
experience.  

Finally, Loral also notes that, under the Corporate experience factor, 
the Coast Guard identified Loral's corporate integration experience as 
a weakness and discounted Loral's prior integration experience with 
the [deleted].  Loral points out, however, that in the evaluation 
record, the evaluators conceded that the [deleted] program:

     ". . . most closely resembles the scope and complexity of the VTS 
     2000 program in terms of subcontract content, integration 
     requirements, approximate value and period of performance, and 
     employed the same subcontract management methodology, plans and 
     control as for the VTS 2000. . . ." (Emphasis added.)

According to Loral, this quotation demonstrates the irrationality of 
assigning a weakness to Loral's proposal based on lack of corporate 
integration experience.  Loral argues that its proposal amply 
demonstrated the integration experience required by the RFP in the 
[deleted] program.  Also, according to Loral, in terms of scope and 
complexity, the [deleted] program closely resembles the VTS 2000 
program and therefore there was no factual basis for assigning a 
weakness to Loral's proposal for integration experience.

The above quotation from the evaluation record is not complete.  The 
evaluators also noted, "however, [deleted] is not a command and 
control system, but an air crew training system; similarity appears to 
be indirect."  While it may be, as Loral argues, that the [deleted] 
program demonstrates Loral's integration experience, the evaluators 
discounted that experience in the context of the evaluation under the 
VTS program due to dissimilarities between the two programs.  We have 
no basis to disagree with that judgment.[1]

THE COMPETITIVE RANGE EXCLUSION

We next address Loral's contention that its proposal should have been 
included in the competitive range.  In establishing a competitive 
range, agencies are required to include only those firms whose 
proposals are determined to have a reasonable chance of receiving 
award.  Federal Acquisition Regulation (FAR)  sec.  15.609; Better Serv., 
B-256498.2, Jan. 9, 1995, 95-1 CPD  para.  11.  Where a protester challenges 
an agency's elimination of its proposal from the competitive range, 
our review is limited to considering whether the competitive range 
determination was reasonable and in accordance with the terms of the 
RFP and applicable regulations and statutes.  Cyber Digital, Inc., 
B-255225, Feb. 18, 1994, 94-1 CPD  para.  123.

Here, Loral's proposal was excluded from the competitive range 
because, based on the technical merit in the Loral proposal and the 
cost of that proposal, compared to the proposals included in the 
competitive range--each of which was higher rated technically and had 
significantly lower costs--the agency concluded that Loral's proposal 
did not have a reasonable chance for award.  As we have explained, we 
have no reason to believe that the ratings assigned to Loral's 
proposal were flawed.  Concerning cost, Loral proposed to perform the 
contract at a cost of approximately [deleted] million, compared to 
proposals of approximately [deleted] for the three proposals included 
in the competitive range.  In addition, the agency evaluated the cost 
proposals in order to determine "if proposed costs are commensurate 
with the tasks to be performed."  Based on that evaluation, the agency 
concluded that the most probable cost (MPC) of Loral's proposal was 
approximately [deleted], compared to MPCs of approximately [deleted] 
for the competitive range proposals.

A proposal may be excluded from the competitive range if, based upon 
the array of technical ratings actually obtained by the proposals and 
consideration of cost, the proposal does not stand a real chance of 
being selected for award.  The Cadmus Group, Inc., B-241372.3, Sept. 
25, 1991, 91-2 CPD  para.  271.  In addition, cost not only is a proper 
factor for consideration, but may emerge as the dominant factor in 
determining whether a proposal falls within the competitive range.  
Motorola, Inc., B-247937.2, Sept. 9, 1992, 92-2 CPD  para.  334.  This is 
true even where, as here, cost is the least important evaluation 
factor.  See id.

In this case, we think the Coast Guard reasonably concluded that 
primarily because of its high cost Loral's proposal did not have a 
real chance for award and excluded the proposal from the competitive 
range on that basis.  Although Loral generally states that it could 
have reduced its proposed costs if cost discussions had been conducted 
with it, the protester has not explained how it could have reduced its 
costs sufficiently for its proposal to become competitive from a cost 
standpoint with the competitive range proposals, two of which offered 
[deleted] the cost of Loral's proposal.  In addition, although Loral 
has had access to the three competitive range proposals and the 
evaluation record concerning those proposals, Loral has not challenged 
the realism of the cost of the competitive range proposals, even 
though those proposals all include costs substantially less than that 
proposed by Loral.[2]  Under these circumstances, we have no reason to 
believe that Loral's proposal could have become significantly more 
competitive from a cost or a technical standpoint as a result of 
discussions.[3]  

DISCUSSIONS

Loral also argues that before excluding its proposal from the 
competitive range, the Coast Guard conducted discussions--but not 
meaningful discussions--concerning Loral's proposal.  In this respect, 
although the agency's letters to Loral characterized its questions as 
"clarification requests," Loral maintains that those inquiries were in 
fact discussions because they sought elaboration upon substantive 
areas of Loral's proposal and invited Loral to expand in detail upon 
its substantive approach to satisfying the solicitation's 
requirements.  In addition, Loral notes that it responded to these 
inquiries by providing almost 400 proposal change pages that addressed 
the Coast Guard's extensive questions in a wide range of substantive 
areas.  Loral also maintains that, although discussions were held with 
it, the Coast Guard violated FAR  sec. 15.610 and the Competition in 
Contracting Act of 1984, 
10 U.S.C.  sec.  2305(b)(4)(A)(i) (1994), because those discussions were 
not meaningful since virtually none of the 65 "clarification requests" 
issued to Loral identified any of the alleged weaknesses or 
deficiencies in the Corporate experience, past performance and 
management area or the Cost area of Loral's proposal, which formed the 
basis of Loral's exclusion from the competitive range. 

Irrespective of whether discussions actually were held and, if they 
were, whether they were meaningful, Loral was not prejudiced by the 
Coast Guard's actions.  As explained above, Loral's proposal was rated 
lower than the competitive range proposals in part because the 
evaluators declined to give Loral the credit Loral believes its 
proposal deserved for the experience and expertise of STN, Loral's 
subcontractor, in the Corporate experience, past performance and 
management evaluation area.  Although Loral argues that the agency's 
concerns here were simply informational--and therefore should have 
been discussed--the problem was fundamental to Loral's proposed 
approach and therefore was not required to be discussed.  See Polar 
Products, B-242079, Mar. 27, 1991, 91-1 CPD  para.  331.  More importantly, 
Loral's proposal was excluded from the competitive range because, 
based on the proposal's technical merit and cost, compared to the 
proposals included in the competitive range--each of which was higher 
rated technically and had significantly lower costs--the agency 
reasonably concluded that Loral's proposal did not have a reasonable 
chance for award.  As explained above, we have concluded that the 
ratings assigned to Loral's proposal were reasonable and Loral has not 
explained how it would have reduced its costs sufficiently for its 
proposal to become competitive from a cost standpoint with the 
competitive range proposals, two of which have proposed and evaluated 
costs [deleted] the cost of Loral's proposal.  In these circumstances, 
we do not see how Loral was prejudiced by the agency's failure to 
discuss with it deficiencies when such discussions would not have 
placed the firm in a position to have a real chance for award.  See IT 
Corp.,     B-258636 et al., Feb. 10, 1995, 95-1 CPD  para.  78.[4]  

The protest is denied

Comptroller General 
of the United States

1. Loral also notes the evaluators criticized its proposal because its 
"specific approach to managing the VTS project is not indicated as 
having been used," and argues this alleged weakness is contradicted by 
the record.  Loral notes that its proposal identified seven prior 
contracts in which its proposed management approach was successfully 
utilized.  According to Loral, the "acceptable" rating assigned to its 
proposal in this area is based on a proposal weakness that does not 
exist.  From our review of the record, including the Coast Guard's 
response to this issue, it is unclear why this issue resulted in an 
evaluated weakness in Loral's proposal.   Nonetheless, we do not agree 
with Loral that the elimination of this single weakness would improve 
Loral's "acceptable" rating in the Corporate experience, past 
performance and management evaluation area.  First, the evaluation 
record includes two other weaknesses--that Loral does not 
challenge--under the Management approach evaluation subfactor; so it 
is not likely that Loral's rating on that subfactor would improve from 
"acceptable" to "exceptional."  Second, Management approach was one of 
five subfactors under the Management evaluation factor and the 
Corporate experience, past performance and management evaluation area 
included two other evaluation factors, each with subfactors.  Loral 
received numerous ratings of "marginal," and "acceptable" on the other 
factors and subfactors that make up the Corporate experience, past 
performance and management evaluation area; we do not see how the 
removal of this single weakness would improve Loral's overall 
"acceptable" rating in this area.

2. After receipt of the agency report on its initial protest, Loral 
filed a supplemental protest in which it argued that the Coast Guard 
had improperly relaxed specification requirements for the three 
competitive range firms, thereby allowing those firms to propose costs 
significantly below that proposed by Loral.  After its review of the 
agency's report filed in response to the supplemental protest, Loral 
withdrew that protest.

3. Loral notes that the agency's competitive range determination 
document states that Loral "could conceivably have [its] evaluated . . 
. rating assessments improve and [its] costs lowered as a result of 
discussions/BAFOs [best and final offers]."  According to Loral, this 
statement demonstrates that its proposal could have become more 
competitive based on discussions and therefore the exclusion of 
Loral's proposal from the competitive range was improper.  Read in 
context, we do not agree that this statement indicates a belief on the 
part of agency personnel that Loral's proposal could have become 
competitive with the proposals included in the competitive range.  
After the above quotation, the competitive range determination 
document states:

            "However, any degree of positive impact for [Loral] that 
            may result from a discussion/BAFO environment would have 
            to be viewed in the context of a best value analysis with 
            the three currently identified best value proposals, who 
            themselves will have higher evaluated ratings and lowered 
            costs in a discussion/BAFO environment.  In consideration 
            of the current evaluated factor ratings, subfactor 
            ratings, and evaluated costs, it is not expected that, 
            even with improvements in their proposal ratings and lower 
            costs, [Loral] would have a reasonable chance of being 
            selected for award." 

4. Although we do not decide whether the questions asked of Loral and 
Loral's responses constituted clarifications or discussions, it is 
unclear to us what purpose was served by asking Loral the questions 
and inviting a response from the firm.  The questions, numerous and 
calling for voluminous responses, did not--by the Coast Guard's own 
admission--address the agency's concerns that subsequently led to the 
exclusion of Loral's proposal from the competitive range.  While we 
have concluded that the exclusion was reasonable because Loral did not 
have a real chance of receiving award--even if discussions were held 
with the firm concerning cost and the Corporate experience, past 
performance and management area--we question the appropriateness of 
the agency's asking questions that could not have improved Loral's 
chances for award.