BNUMBER:  B-271431; B-271431.3
DATE:  June 25, 1996
TITLE:  Quality Fabricators, Inc.

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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:Quality Fabricators, Inc.

File:     B-271431; B-271431.3

Date:June 25, 1996

Timothy S. Kerr, Esq., Elliott Reihner Siedzikowski & Egan, for the 
protester.
James J. McCullough, Esq., Joel R. Feidelman, Esq., and Anne B. Perry, 
Esq., Fried, Frank, Harris, Shriver & Jacobson, for Tri-Way 
Industries, Inc., an intervenor. 
Michael J. Cunningham, Jr., Esq., Department of the Navy, 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

Exclusion of the protester's proposal from the competitive range was 
reasonable where, based on the evaluation of its past performance, 
which included late deliveries, quality deficiency reports concerning 
manufacturing defects, and a refusal or inability to manufacture some 
of the same items under a previous contract, the agency reasonably 
concluded that the firm had no reasonable chance for award.

DECISION

Quality Fabricators, Inc. (QFI) protests the exclusion of its proposal 
from the competitive range under request for proposals (RFP) No. 
N00140-96-R-D110, issued by the Department of the Navy for various 
types of lockers for the Navy's habitability program.  QFI also 
protests the award to Tri-Way Industries, Inc. under the solicitation.  

We deny the protests.

BACKGROUND

The solicitation contemplated the award of an indefinite delivery, 
indefinite quantity contract for a base year with 3 option years.  
Award was to be made to the offeror whose proposal, conforming to the 
solicitation, was most advantageous to the government, considering two 
factors:  past performance and price.  The solicitation stated that 
past performance would be considered significantly more important than 
price and that the government could award to other than the 
lowest-priced offeror.

The solicitation stated that each offeror should describe its past 
performance on similar contracts it has held within the last 5 years.  
The solicitation also provided that the agency could obtain 
information on past performance from any source and stated that 
offerors lacking past performance history would receive a "neutral" 
rating for past performance.  

Six proposals were submitted, ranging in price from $12,211,065 to 
$15,994,780.24.  QFI's price was the second low, at $12,416,567.28, 
and Tri-Way's price was third low, at $12,698,624.  In assessing past 
performance, in addition to reviewing information provided in the 
proposals, agency officials solicited opinions from the Navy's Fleet 
Technical Support Center (FTSC), which has responsibility for the 
Navy's habitability program, government quality assurance 
representatives, and administrative and procuring contracting 
officers.  Agency officials also reviewed quality deficiency reports.  
The agency assigned one of the following past performance ratings to 
each of the proposals:

        "Neutral:  No relevant past performance available for 
        evaluation.  Proposal receives no merit or demerit for this 
        factor.

        "Exceptional:  Little or no potential exists for disruption of 
        schedule, increases in cost (for cost type contracts) or 
        degradation of performance based on the offeror's past 
        performance.

        "Satisfactory:  Some potential exists for disruption of 
        schedule, increases in cost (for cost type contracts) or 
        degradation of performance based on the offeror's past 
        performance.

        "Marginal:  Significant potential exists for disruption of 
        schedule, increases in cost (for cost type contracts) or 
        degradation of performance based on the offeror's past 
        performance."

The agency assigned past performance ratings of marginal to QFI and 
exceptional to Tri-Way.[1]

In rating QFI's past performance, the agency recognized that QFI is a 
new firm, but gave it credit for the performance of Hampton Roads 
Metal Systems on previous contracts since, as QFI's proposal 
explained, QFI will operate in the same facility with the same 
personnel and management team as Hampton Roads.  Using Hampton Roads's 
performance history as the basis for QFI's rating, the agency found 
that the firm has had significant delinquent deliveries.  The agency 
also noted that Hampton Roads has had problems with quality, including 
three quality deficiency reports on an earlier contract.

The contracting officer concluded that Tri-Way had experienced no 
significant delinquencies and its products were of uniformly high 
quality and conformed to specifications.  The contracting officer 
reported that the only deficiency report on file for Tri-Way involved 
improper packaging, not manufacturing defects.  According to the 
contracting officer, FTSC reported that Tri-Way is a very dependable 
vendor and has frequently demonstrated an ability to resolve complex 
technical problems and to adapt to demanding and changing 
requirements.

The contracting officer included only Tri-Way's proposal in the 
competitive range.  In doing so, the contracting officer noted that 
the RFP established past performance as significantly more important 
than price, and that Tri-Way's past performance was significantly 
superior to that of QFI and the firm submitting the lowest-priced 
proposal.  The contracting officer also concluded that, considering 
the differences in prices between the three lowest-priced proposals, 
neither QFI's proposal nor the lowest-priced proposal could overcome 
the superior past performance of Tri-Way and, therefore, neither QFI 
or the lowest-priced offeror had a reasonable chance for award.  After 
discussions with Tri-Way, the contract was awarded to that firm.  

QFI protested that the marginal rating assigned to its proposal was 
based upon erroneous delivery information.  QFI maintained that there 
were no significant quality or other performance issues in the firm's 
history and that the contracting officer had relied upon incorrect 
information.

The contracting officer then reviewed the FTSC data base which had 
been relied upon to determine the extent of QFI's delinquent 
deliveries.  The contracting officer determined that the data base 
represented the dates on which the Navy had taken items into delivery, 
in spite of the fact that some of the contracts listed in the data 
base were FOB origin.  As a result, the contracting officer explains 
that "for the FOB Origin contracts, the late deliveries shown in the 
data base did not necessarily represent a delinquent delivery under 
the contract."  Consequently, the contracting officer reassessed that 
data and reevaluated QFI's past performance.

Based on the reevaluation, the contracting officer again concluded 
that QFI/Hampton Roads had a significant delivery problem.  As the 
contracting officer explained, there were 1,590 requisitions on file 
for Hampton Roads in the FTSC data base.  Of those 1,590 requisitions, 
183 indicated deliveries more than 30 days late; the contracting 
officer assumed that where the delivery was listed as more than 30 
days late, an actual late delivery was indicated, regardless of 
whether the order was FOB origin or FOB destination.  Of the 183, the 
contracting officer reviewed 99 of the 183 requisitions on which 
deliveries were made more than 30 days late and found 69 late 
requisitions, with an average delinquency of 70 days.  According to 
the contracting officer, these 69 late requisitions represented 1,758 
items.

The Navy also found that QFI/Hampton Roads failed to manufacture 
lockers called for under contract No. N00189-93-D-0138.  According to 
the agency, the firm "requested a deviation, that was subsequently 
conditionally approved, to change  1/64 inch dimensional tolerances to 
read 1/32 inch, claiming that 1/64 inch tolerances could not be held 
on production runs."  The deviation apparently was not ultimately 
approved; Hampton Roads never produced the lockers; and the agency 
deleted the lockers from the contract.  The Navy notes that the 
protested solicitation requires these same lockers, still with 1/64 
inch dimensional tolerances.

The contracting officer noted that she also considered three quality 
deficiency reports on a Hampton Roads contract for the same or similar 
lockers as called for here.  Those reports indicated problems with 
cracked welds, paint defects, fit problems, bent corners, scraped 
doors, units out of square, missing rivets, poor fit, crooked name 
plate holders, a missing subbase, and minor deficiencies due to 
deviations from drawings.  The contracting officer noted that an 
official of FTSC characterized Hampton Roads as a poor performer whose 
performance included problems of delivery and quality as well as an 
undesirable record of customer satisfaction.  Based on this 
reassessment, the contracting officer affirmed the marginal past 
performance rating assigned to QFI.

The contracting officer also reviewed the information on which 
Tri-Way's past performance rating was based and noted that the FTSC 
data base included information on 898 requisitions for Tri-Way; of 
that 898, the data base indicated    93 requisitions more than 30 days 
late.  The contracting officer stated that she reviewed those 93 
requisitions and found 31 with deliveries actually more than      30 
days late, with an average delinquency of only 31.9 days.  These 31 
delinquencies represented only 115 items.  The contracting officer 
also noted that a report from FTSC rated Tri-Way as a highly 
satisfactory performer; that four other contracting officers rated 
Tri-Way as an outstanding performer; and that there have been no 
quality deficiency reports for manufacturing defects on Tri-Way's 
products.  According to the contracting officer, based on the 
reassessment, there was no reason to change the exceptional past 
performance rating on Tri-Way and no reason to include QFI's proposal 
in the competitive range.

PROTEST ALLEGATIONS

QFI challenges the reassessment of its past performance.  QFI argues 
that there are remaining flaws in the data relied upon in the 
reassessment.  QFI also states that the three quality deficiency 
reports issued on Hampton Roads's contracts describe only 33 out of 
some 25,000 items fabricated and delivered by QFI/Hampton Roads over a 
5-year period; that all of the reports were issued in the early stages 
of the firm's fabrication efforts; and that no reports have been 
issued since May 1993.  

According to QFI, the decision to eliminate its proposal from the 
competitive range was based on flawed information and was simply 
wrong, particularly in light of the firm's competitive pricing.  QFI 
argues that the Navy should be directed to reconsider QFI's past 
performance, hold discussions with the firm, and request a best and 
final offer.

ANALYSIS

The Federal Acquisition Regulation (FAR) provides that the competitive 
range must include all proposals that have a reasonable chance of 
being selected for award and that any doubt as to whether a proposal 
is in the competitive range should be resolved by inclusion.  FAR  sec.  
15.609(a) (FAC 90-31).  While the determination of whether a proposal 
is in the competitive range is principally a matter within the 
reasonable exercise of discretion of the procuring agency, we closely 
scrutinize any evaluation that results in only one proposal being 
included in the competitive range, in view of the importance of 
achieving full and open competition in government procurement.  
Coopers & Lybrand, 66 Comp. Gen. 216 (1987), 87-1 CPD  para.  100; Besserman 
Corp., 69 Comp. Gen. 252 (1990), 90-1 CPD  para.  191.

QFI maintains that there are numerous errors in the agency's analysis 
of QFI's performance history and argues that the firm has not 
delivered items late as often as the Navy has represented.  For 
instance, according to QFI, the contracting officer's reanalysis did 
not take into account accelerated deliveries and contract 
modifications.  Our review of the record confirms this contention.  
For example, while the agency's record of the delivery history under 
Hampton Roads's contract No. N00189-94-M-MK62 shows 13 deliveries 
required to be made on June 1, 1995, a contract modification provided 
by QFI shows that, due to an error in the description of the items to 
be delivered, the required delivery date was extended to June 9.  In 
addition, as QFI notes, the modification was not signed until June 13, 
the date on which the items actually were delivered.

QFI also notes that for most of the delivery orders which the agency 
represents as late, there are unexplained discrepancies between the 
receipt dates listed in the agency's record of the protester's 
delivery history and the Material Inspection and Receiving Reports (DD 
Form 250s) for those delivery orders.  For instance, for the 13 
delivery orders described above under Hampton Roads's contract No. 
N00189-94-M-MK62, the agency's record represents that those orders 
were delivered on      June 21, 1995; however, the DD Form 250s list 
an "ACCEPTANCE" date of June 13, 1995.  Taking into consideration both 
the modified delivery date, as described above, and the discrepancy 
concerning the actual delivery dates, instead of each of these 
deliveries being made 20 days late, as the agency has represented, QFI 
has shown that each of these deliveries was on time.

QFI argues that the cumulative effect of these and other discrepancies 
in the evaluation is that its delivery history is not as bad as the 
agency has characterized it.  According to QFI, the effect of the 
errors in the agency's analysis is that, for the delivery orders 
listed by the agency, the actual late delivery average is 18 days, not 
34 days, as the agency calculated.  QFI explains that this average 
does not include the effect of accelerated deliveries and informal 
modifications under the contract.

Based on the record in this case, we think it is questionable that 
under its previous contracts QFI/Hampton Roads delivered items late as 
often as the Navy represents.  Nonetheless, we conclude that the 
record otherwise reasonably supports the decision to exclude QFI's 
proposal from the competitive range.

As explained above, aside from late deliveries, the determination of 
QFI's past performance rating also included consideration of three 
quality deficiency reports on Hampton Roads's contracts for the same 
or similar lockers as called for under this contract.  Those reports 
indicated problems with cracked welds, paint defects, fit problems, 
bent corners, scraped doors, units out of square, missing rivets, poor 
fit, crooked name plate holders, a missing subbase, and minor 
deficiencies due to deviations from drawings.  QFI's rating also 
included consideration of the view of an FTSC official that Hampton 
Roads's performance included problems of quality as well as an 
undesirable record of customer satisfaction.

QFI argues that we should discount the quality deficiency reports 
issued on Hampton Roads's contracts.  QFI explains that those reports 
describe only 33 items out of 25,000 items delivered by QFI/Hampton 
Roads over 5 years.  QFI also notes that it promptly repaired and 
corrected the problems raised in those reports and that two of the 
three reports were issued for "informational" purposes only.  Finally, 
QFI notes that the quality deficiency reports were issued at the 
beginning of the firm's efforts to manufacture the items and no 
reports have been issued since    May 1993.

Although QFI attempts to minimize the quality deficiency reports 
because they were issued in 1993, the protester does not dispute that 
those reports were issued due to poor product quality.  In our view, 
they are not "stale" and remain part of QFI's recent contract 
performance history.  Further, the record shows that agency officials 
found that during 1995, QFI/Hampton Roads refused or was unable to 
manufacture items under contract No. N00189-93-D-0138.  QFI maintains 
it did not refuse to manufacture the lockers in question and that the 
Navy unilaterally deleted them from the contract.  Nonetheless, QFI 
has not rebutted the Navy's explanation that the items in question had 
to be deleted because QFI could not, or would not, meet the drawing 
requirements.  Nothing in the record indicates that QFI attempted to 
establish that the Navy's drawing was defective or the reason it could 
not manufacture the lockers.  We think the firm's failure to 
manufacture the items is significant both because it is recent--within 
the past year--and because it involved items which are called for 
under the protested solicitation.

An agency's evaluation of past performance may be based upon the 
procuring agency's reasonable perception of inadequate prior 
performance, regardless of whether the contractor disputes the 
agency's interpretation of the facts.  See Firm Otto Einhaupl, 
B-241553 et al., Feb. 20, 1991, 91-1 CPD  para.  192.  This record affords 
us no basis upon which to object to the Navy's conclusion regarding 
QFI/Hampton Roads's past performance--that it produced some items of 
poor quality under prior contracts and could not, or would not, 
manufacture certain items which are the subject of this solicitation.  
While QFI offers explanations and interpretations of the record that 
provide a more favorable picture of its performance history than drawn 
by the agency, this does not alter the fact that there was sufficient 
evidence for the agency to conclude that the firm had a series of 
performance problems under its prior contracts.   

We also conclude that QFI's proposal was reasonably excluded from the 
competitive range.  Under the solicitation, past performance was 
considered significantly more important than price and the agency was 
permitted to award to other than the lowest-priced offeror.  Under 
this evaluation scheme, which placed paramount importance on past 
performance, it was a reasonable exercise of the agency's discretion 
to decide that a firm with an exceptional performance history (based 
on very favorable references and no deficiency reports) and a 
relatively low price would be the only firm with a reasonable chance 
for award when all other offerors had significantly higher prices 
and/or less attractive performance histories.  This is particularly 
true since the agency's assessment of Tri-Way's past performance as 
exceptional is unchallenged.  Since the agency reasonably concluded 
that QFI had no reasonable chance for award, the exclusion of its 
proposal from the competitive range is not legally objectionable.  
See, e.g., Counter Technology Inc., B-260853, July 20, 1995, 95-2 CPD  para.  
39; Engineering & Computation, Inc., B-258728, Jan. 31, 1995, 95-1 CPD  para.  
155. 

In a supplemental protest, QFI argues that Tri-Way's proposal was not 
eligible for award and should have been rejected.  The record shows 
that, in spite of the solicitation requirement for past performance 
information, Tri-Way failed to include this information in its initial 
proposal.  Also, while the solicitation required offerors to provide 
unit prices for all line items, Tri-Way's initial proposal did not 
include a unit price for line item 0001, the largest line item in the 
solicitation.  QFI argues that due to the failure to include the past 
performance information and the price, Tri-Way's proposal was 
unacceptable as submitted and was required to be excluded from the 
competitive range because it required major revisions to become 
acceptable.

As the agency explains, line item 0001, which Tri-Way failed to price 
in its initial proposal, was a composite line item made up of one each 
of 18 different types of lockers which were priced elsewhere in the 
proposal as part of other line items.  As a result, the agency was 
able to determine a price for that line item from Tri-Way's initial 
proposal.  Concerning the past performance information omitted from 
Tri-Way's proposal, the agency explains that the RFP permitted it to 
obtain past performance information from any other source and that by 
contacting FTSC and other sources, such as administrative contracting 
officers, the agency was able to obtain appropriate information and 
determine that Tri-Way deserved an exceptional rating for past 
performance.  During discussions, Tri-Way was requested to submit a 
price for line item 0001 and to submit past performance data; Tri-Way 
did so in its best and final offer.

The agency's explanation is supported by the record--the missing price 
was simply determinable from other pricing in the proposal and the RFP 
did permit the agency to obtain past performance data irrespective of 
information contained in a proposal.  Therefore, we see no merit to 
the protester's argument that Tri-Way's proposal should have been 
rejected based on informational deficiencies.

The protester, citing our decisions holding that agencies have the 
discretion to eliminate from the competitive range proposals which do 
not include information required by the solicitation, e.g., Panasonic 
Communications & Sys. Co., B-239917, Oct. 10, 1990, 90-2 CPD  para.  279, 
suggests that agencies are required to eliminate such proposals from 
the competitive range.  We disagree.  The fact that an agency 
reasonably may eliminate a proposal from the competitive range for 
failure to include within the proposal information required by the 
solicitation does not mean the agency would be acting improperly if it 
included that proposal in the competitive range.  Intermagnetics Gen. 
Corp.--Recon., 73 Comp. Gen. 333 (1994), 94-2 CPD  para.  119.

The protests are denied.

Comptroller General
of the United States

1. The lowest-priced proposal received a rating of marginal and the 
three higher- priced proposals received ratings of satisfactory, 
exceptional, and marginal.