BNUMBER: B-271682
DATE: July 17, 1996
TITLE: Defense Technology, 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:Defense Technology, Inc.
File: B-271682
Date:July 17, 1996
F. Stuart Hodgson, for the protester.
Susan K. Luther, Esq., Department of the Navy, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest that agency failed to evaluate the increased technical risk
which allegedly would result from awardee's proposal to reduce
compensation for its incumbent technical instructors is denied where
agency reasonably concluded that the proposed reduction would not
adversely affect the quality of performance, because (1) the
instructors would still be compensated at above-market rates
(exceeding those at which the protester's instructors were to be
paid); (2) the awardee's proposal indicated an ability readily to
replace its proposed instructors; and (3) any risks associated with
substitutions would be minimal since the solicitation contemplated
award of a fixed-price contract and provided that any replacement
personnel required the prior approval of the contracting officer and
had to possess qualifications equal to or higher than the
qualifications of the personnel being replaced.
DECISION
Defense Technology, Inc. (DTI) protests the award of a contract to
VSE, Inc. under request for proposals (RFP) No. N00164-95-R-0008,
issued by the Naval Surface Warfare Center, Naval Ordnance Station
(NAVORDSTA), Louisville, Kentucky, for training program support for
the Mark 15 Close-In Weapons System (CIWS). DTI challenges the
evaluation of technical and price proposals.
We deny the protest.
The solicitation contemplated the award of an indefinite delivery,
indefinite quantity labor-hour contract to furnish CIWS training and
instruction support to NAVORDSTA for a 1-year base period, with four
1-year option periods. The solicitation listed 10 courses on the Mark
15 CIWS, ranging in length from 1 to 12 weeks, that were to be taught
by the contractor. The RFP stated that "[t]wo instructors will be
required simultaneously to perform in accordance with the Statement of
Work," and estimated the agency's annual requirement at 4,174 regular
and 120 overtime technical instructor hours.
The solicitation listed three technical evaluation factors: (1)
personnel qualifications, which was described as having four times the
weight of (2) corporate experience--including subfactors for
experience in similar or related fields and record of past
performance--and (3) management/organization combined. In addition,
the solicitation provided for evaluation of the realism of the
offerors' estimated prices, cautioning that unrealistic personnel
compensation rates would not only be considered in the cost realism
evaluation, but could also reduce the technical score. Award was to
be made to the offeror whose conforming proposal was determined to be
most advantageous to the government; the solicitation specified that
the proposal offering the best value "will be selected using a
weighted methodology where the technical score is assigned more weight
than price, but where each additional point of technical superiority
diminishes at an increasing rate." The solicitation stated that the
government was "willing to pay a Premium Amount, equal to 30% . . . to
move from the lowest evaluated price of a minimally technically
acceptable proposal (score of 70) to the highest achievable technical
proposal (score of 100)." (The RFP set forth a mathematical
(polynomial) formula by which the premium factor the government was
willing to pay could be determined for any given difference in
technical score between acceptable proposals. See General Offshore
Corp.-Riedel Co., a Joint Venture, B-271144.2; B-271144.3, July 2,
1996, 96-2 CPD para. ___.
The Navy received three offers, including those of VSE (the incumbent
contractor) and DTI. Although the composite technical score of DTI's
initial proposal warranted an adjectival rating of "good," and
application of the agency's mathematical formula to DTI's technical
score and low price indicated that DTI's initial proposal was the most
advantageous, the agency determined that DTI's proposal was
unacceptable. Specifically, agency evaluators questioned DTI's
proposal to divide the instruction duties among eight different
instructors; noting that the solicitation provided that "[t]wo
Instructors will be required simultaneously to perform," the agency
concluded that using eight instructors overall (instead of fewer)
would make it virtually impossible to have two instructors available
for the duration of each class, resulting in a loss of continuity and
seriously undermining the level of instruction. Given DTI's
unacceptable approach to performance, the Navy determined that
negotiations with all offerors were necessary to afford it (as well as
another offeror whose proposal had been found to be unacceptable) an
opportunity for award. (VSE's initial proposal was found to be
acceptable.) Following discussions with all offerors, the agency
requested best and final offers (BAFO).
In response to the agency's discussion questions, DTI in its BAFO
reduced the number of proposed instructors from eight to three.
Although the Navy found DTI's revised offer to be acceptable, awarding
it a composite technical score of 88.72 points and an
adjectival rating of "good," the agency found VSE's BAFO to be most
advantageous. Not only did VSE's offer remain the highest ranked
technically, with a score of 95.41 points and an adjectival rating of
"excellent," but, as a result of a reduction in proposed labor rates
and overall price, VSE's BAFO price ($1,358,945) was now slightly
lower than DTI's ($1,367,195). Upon learning of the resulting award
to VSE, DTI filed this protest with our Office.
As an initial matter, DTI challenges the Navy's decision to conduct
discussions rather than make award to it on the basis of its initial
proposal. The RFP incorporated the clause at Federal Acquisition
Regulation (FAR) sec. 52.215-16(c) (Alternate III) (Aug. 1991), which
states in pertinent part:
"The Government intends to evaluate proposals and award a
contract without discussions with offerors. Therefore, each
initial offer should contain the offeror's best terms from a
cost or price and technical standpoint. However, the
Government reserves the right to conduct discussions if later
determined by the Contracting Officer to be necessary."
Since the RFP advised that discussions would be conducted if
"necessary," and the agency determined that discussions were in fact
necessary--due to the problems with both DTI's and the third offeror's
proposal--there was nothing improper in the agency's decision not to
proceed with award on the basis of initial proposals. There is
nothing in the FAR language above that compels agencies to make award
based on initial proposals. See Milcom Sys. Corp., B-255448.2, May 3,
1994, 94-1 CPD para. 339; Perez Hous. Maintenance, B-249309, Nov. 12,
1992, 92-2 CPD para. 341.
DTI argues that the Navy failed to evaluate the increased technical
risk and impact on the quality of performance which it believes will
result from VSE's BAFO price reduction. In this regard, VSE's BAFO
significantly reduced the proposed base year compensation for its two
instructors--by more than [deleted] percent from the rates initially
proposed and by [deleted] percent from the rates at which the
employees were paid in the second quarter of 1995. DTI believes this
reduction in compensation will have a negative impact on staff
retention and morale, and thus will increase performance risk.
In reviewing protests against proposal evaluations, we will consider
only whether the evaluation was reasonable and consistent with the
RFP. Information Spectrum, Inc., B-256609.3, B-256609.5, Sept. 1,
1994, 94-2 CPD para. 251, aff'd, B-256609.6, Sept. 28, 1995, 95-2 CPD para.
150.
The record shows that the agency reasonably determined that VSE's
compensation reduction would have a minimal negative effect on
contract performance. Although the proposed salaries would be lower
than the instructors previously had received, the agency noted that
the salaries remained above the market rate. In this regard, VSE's
proposed base year compensation was between [deleted] percent higher
than DTI's proposed compensation for its two primary instructors (and
[deleted] percent higher than DTI's overall blended rate for its three
instructors) and also exceeded the compensation proposed by the third
offeror. While the difference in compensation proposed by DTI and VSE
diminished somewhat over the potential 5-year term of the contemplated
contract, VSE's proposed compensation would exceed the compensation of
DTI's two primary instructors throughout the potential contract term.
The agency further noted that VSE's proposed compensation was
[deleted] higher than the government's minimum rates for personnel
performing the same function.
In addition, the agency determined that VSE's proposal indicated an
ability to replace its proposed instructors if necessary. In this
regard, VSE explained in its proposal that it maintains a staff of
[deleted] full-time personnel recruiters, pays all of its staff
bonuses for recruiting new employees, recruits among former military
members and civilian employees of the Department of Defense (DOD)
affected by DOD's ongoing downsizing, and has available for use on the
contract three prospective employees who are experienced CIWS
trainers/instructors. The Navy also specifically concluded that any
risks associated with substitutions would be minimal, since
replacement personnel had to be approved by the contracting officer
and had to possess qualifications equal to or higher than the
qualifications of the personnel being replaced, and the fixed-price
character of the contemplated contract transferred the financial risk
of obtaining qualified replacements to the contractor.
We conclude that the Navy reasonably determined that VSE's proposed
reduction in compensation would not significantly increase performance
risk. Although it is not possible to say with certainty that the
reduction in their compensation will not adversely effect the
performance of VSE's incumbent instructors, we believe that the fact
that the instructors will still be paid at above-market rates supports
the agency's determination that a significant adverse impact on the
instructors' performance is unlikely. Moreover, given the evidence of
VSE's ability to replace its incumbent instructors--that is, the
availability of identified, experienced replacements and the existence
of an extensive recruiting organization--and the requirement for any
replacements to possess equal or higher qualifications and meet with
the contracting officer's approval, the agency could reasonably
conclude that if replacement of instructors becomes necessary, this
could be accomplished without significant adverse impact on contract
performance.[1]
DTI questions why the composite technical evaluation score of its BAFO
increased only insignificantly relative to the score of its initial
proposal (from 87.78 to 88.72 points), when its previously
unacceptable proposal had become acceptable. The Navy explains,
however, that DTI's breakdown of the number of hours proposed per
instructor was not included in DTI's initial technical proposal, but
instead was furnished as part of its price/cost proposal. DTI's
initial proposal score therefore did not reflect the negative impact
of this deficiency (i.e., it was inflated), giving the incorrect
impression that DTI's BAFO did not increase DTI's score very
substantially. Our review of the record provides no basis to question
this explanation.
DTI challenges other aspects of the evaluation and conduct of
discussions, but the record provides no basis to question the agency's
overall determination that VSE's proposal was most advantageous to the
government. In this regard, competitive prejudice is an essential
element of a viable protest, and where no competitive prejudice is
shown or is otherwise evident, our Office will not sustain a protest
even if a deficiency in the procurement is evident. See Latins Am.,
Inc., 71 Comp. Gen. 436 (1992), 92-1 CPD para. 519. It is clear that the
allegedly improper agency actions did not result in competitive
prejudice to the protester. For example, DTI challenges the
evaluation of its proposal under the subfactor (under the corporate
experience factor) for record of past performance on the basis that
the agency's failure to contact contracting officials familiar with
DTI's prior contracts made it impossible to evaluate the quality and
effectiveness of DTI's past performance. However, even the maximum
score under this subfactor would increase DTI's overall composite
technical score only from 88.72 to 89.57 points, still well below
VSE's score of 95.41 points. Likewise, although DTI argues that the
Navy failed to advise it during discussions that individual evaluators
had concluded that resumes submitted with DTI's initial proposal did
not demonstrate that its instructors possessed hydraulics/pneumatics
experience or the ability to comply with administrative policy, the
effect of these concerns on DTI's overall score was at most
insignificant; DTI's score would have remained well below VSE's even
if DTI had been permitted to address any evaluator concern in this
regard.
DTI generally alleges that the agency's actions, taken together,
evidence a pattern of bad faith on the agency's part. A finding of
bad faith requires evidence that contracting officials intended to
injure the protester, Marquette Elecs., Inc., B-262016.2; B-262016.3,
Feb. 15, 1996, 96-1 CPD para. 98; Oliver Prods. Co., B-245762.2, Apr. 28,
1992, 92-1 CPD para. 501; prejudicial motives will not be attributed to
contracting officials on the basis of unsupported allegations,
inference, or supposition. Stabro Labs., Inc., B-256921, Aug. 8,
1994, 94-2 CPD para. 66. DTI's allegation consists solely of the
protester's speculation as to the agency's motives--for example, that
failure to contact contracting officials familiar with DTI's past
performance was motivated by an intention to favor VSE. This
speculation is not supported by any evidence. This allegation
therefore provides no basis for overturning the award to VSE.
The protest is denied.
Comptroller General
of the United States
1. Although DTI also claims that the agency failed to account for the
impact on VSE's instructors of VSE's proposal not to charge the
government for any overtime hours, we note that its position is based
on a misunderstanding of VSE's proposal.[deleted]