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]