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.