BNUMBER: B-275830, B-275830.2, B-275830.3
DATE: April 7, 1997
TITLE: Ingalls Shipbuilding, Inc., B-275830, B-275830.2, B-275830.3,
April 7, 1997
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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:Ingalls Shipbuilding, Inc.
File: B-275830, B-275830.2, B-275830.3
Date:April 7, 1997
Gregory A. Smith, Esq., Richard P. Rector, Esq., Kevin P. Mullin,
Esq., and Chandra Emery, Esq., Piper & Marbury; Donald C. Holmes,
Esq., and Michael A. Gordon, Esq., Holmes, Schwartz & Gordon, for the
protester.
Caryl A. Potter, Esq., Joseph P. Hornyak, Esq., Elizabeth A. Ferrell,
Esq., Bruce H. Leshine, Esq., and Drew W. Marrocco, Esq., Sonnenschein
Nath & Rosenthal, for Avondale Industries, Inc., the intervenor.
Robinwyn D. Lewis, Esq., Janice M. Passo, Esq., Susan P. Raps, Esq.,
Robert E. Lieblich, Esq., Diane S. Schnittman, Esq., and Mary L. Oates
Walker, 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
1. Protest against agency evaluation of proposed information
system--offered to meet requirement for capability to concurrently
develop, capture, update and re-use data in electronic form in a
fashion that leads to data integrity, efficiency, and configuration
control throughout the life cycle of amphibious ships being
procured--is denied where agency reasonably determined that (1)
offeror would encounter significant difficulty in integrating, and
maintaining data consistency [DELETED] in its proposed information
system, and (2) if [DELETED], the design and construction process
would lose efficiency, leading to additional costs and delays.
2. Protest that agency improperly failed to quantify probable life
cycle cost (LCC) savings for each offer is denied where the
solicitation nowhere expressly stated that the agency would conduct a
traditional probable cost analysis, but instead provided that agency
would adjectivally rate proposed approaches to LCC reduction, and
record supports agency determination that awardee's proposed LCC
reduction approach provided the greatest probability of achieving the
greatest LCC savings.
DECISION
Ingalls Shipbuilding, Inc., the prime contractor of the Ingalls Full
Service Contractor team (Ingalls), protests the award of a contract to
Avondale Industries, Inc., the prime contractor of the Avondale
Alliance team, under request for proposals No. N00024-96-R-2101,
issued by the Department of the Navy, Naval Sea Systems Command
(NAVSEA), for the detail design, total ship systems integration,
construction, testing, logistics and life cycle support planning of
the lead ship (LPD 17) in the new San Antonio-class Amphibious
Transport Dock ships. Ingalls protests the evaluation of technical
and price proposals.
We deny the protest.
BACKGROUND
The LPD 17 will be the first of a new class of twelve 684-foot,
25,000-ton amphibious transport dock ships designed to transport and
land up to 720 Marines, their equipment and supplies by means of
embarked landing craft or amphibious vehicles augmented by
helicopters. The solicitation contemplated the award of a
cost-plus-award-fee contract for the LPD 17, with options for two
follow-on ships.
Award was to be made to the responsible offeror whose offer was most
advantageous to the government under four evaluation categories: (1)
detail design, total ship systems integration, testing, logistics and
life cycle support planning, (2) Integrated Product Data Environment
(IPDE), (3) ownership cost--that is, life cycle cost (LCC)--reduction
approach, and (4) price (cost). The nonprice categories were
"significantly more important" than the price category. In addition,
the solicitation provided that except in the event that the two
highest ranking technical proposals were found to be technically equal
after evaluating categories 2 and 3, category 1 would be rated for
acceptability/unacceptability only.[1] Of the remaining nonprice
categories, category 3 was more important than category 2. The
solicitation provided that categories 2 and 3 would be "evaluated and
assigned one of the following adjective ratings: (1) unacceptable, (2)
marginal, (3) acceptable, (4) outstanding." The solicitation went on
to state that "[t]his should result in award to the Offeror whose
proposal offers the highest likelihood of reducing life cycle
ownership costs, excluding propulsion drive train considerations,
without sacrificing ship performance and operational readiness. Life
cycle cost includes both acquisition and operation and support costs."
The solicitation added that "[t]he Government may be willing to pay a
premium, within budget constraints, and accept reasonable risk for the
technical approach that demonstrates the potential for greater life
cycle cost reductions."[2] Ingalls's protest primarily focuses on the
agency's evaluation of offerors' LCC and IPDE approaches.
Consistent with the stated evaluation criteria, the solicitation
generally mandated that "[r]educed ownership cost shall be emphasized
throughout the performance of this Contract," and specifically
provided that "[c]ommencing with detail design, the Contractor shall
incorporate supportability design criteria and characteristics, to
reduce ships' life cycle costs while achieving the goals of
reliability, maintainability, and availability." In support of this
goal, the statement of work (SOW) required the use of "[a]n Integrated
Product and Process Development (IPPD) team approach," defined as
"co-located Government/Contractor personnel . . . possessing the
appropriate disciplines, specialties and functions . . . [and]
delegated the responsibility, authority, and accountability for
decision-making and management actions necessary for successful
performance of the Contract." The contractor was required to "provide
the members of the IPPD team with visibility into the detail design,
ship systems integration, construction, testing, logistics and life
cycle support planning effort." In this regard, and more generally,
the SOW required the contractor to establish an IPDE, that is,
"an information system capability which implements, through
phases, the integration of a central product model database,
associated support data products such as drawings, technical
manuals, [government furnished information], training materials,
and program execution information such as plans, schedules, and
procedures in order to satisfy the data and usage requirements of
both the Government and Contractor. The IPDE includes the
capability to concurrently develop, capture, update and re-use
data in electronic form in a fashion that leads to data
integrity, efficiency, and configuration control throughout the
life cycle of the ship."
Addressing the question of the integrity or consistency of the data in
the IPDE, the solicitation specifically required that "any duplicate
data elements are addressable by the system as the same data element.
As a result, any changes to any data element shall change all
duplicate elements throughout. Duplicate data elements shall always
contain identical data."
The SOW further defined the required IPDE as consisting of three
levels: Level I, comprised of product model data--"[t]he integrated
set of data and data relationships, including three-dimensional
geometry and associated product attribute information (i.e., material,
weight, specification, [expanded ship work breakdown structure], cost
data, [Mean Time Between Failures], Vendor Drawing Number, [Total Ship
Information Management Specifications/Program Integrated Design
Environment] necessary to support the design, manufacture and life
cycle support of a product"; Level II, comprised of support
data--information that supports or expands upon the core data element
description of a ship, including technical documentation such as
drawings, technical manuals, engineering analysis, purchase orders,
and certifications; and Level III, comprised of program execution
data, which includes plans, schedules, procedures, reports, and
minutes.
The SOW required the contractor to develop a configuration management
program using the IPDE which has "the capability to manage and control
the physical, functional, and data requirements of each ship
throughout its life cycle." The product model was to "serve as the
configuration source for each ship throughout its life cycle," with
the ship's configuration baseline (in the product model) including
"any drawings or documents, set forth or referenced in the ship's
specifications and the Statement of Work." As noted in the
solicitation, "[t]he principle objective of the LPD 17 IPDE is to
reduce life cycle costs through the integration of data and data
products."
Two proposals--from Ingalls and Avondale--were received by the closing
time on June 28, 1996. Both were included in the competitive range.
Following written and oral discussions with both, the Navy requested
best and final offers (BAFO).
NAVSEA determined that Avondale had submitted the most advantageous
BAFO. Both proposals were found acceptable under category 1 (detail
design, total ship systems integration, testing, logistics and life
cycle support planning). The SSAC noted that Ingalls's proposal was
evaluated as containing "numerous serious weaknesses" in this area
such that the SSAC had come "very close to determining that Ingalls
was unacceptable." The SSAC expected that the weaknesses "would
impact the effectiveness of the Offeror's performance and its success
in achieving certain goals integral to this solicitation, including an
integrated approach to management, a concurrent engineering approach
to ship detail design, total ship systems integration, construction,
testing, logistics, and life cycle support planning, and an integrated
data approach designed to produce increased life cycle savings."
However, "because of the 'Go/No Go' nature of the category, and given
Ingalls's and its team members' proven ability to design and build
ships of comparable size and complexity," the SSAC nevertheless
recommended an acceptable rating for Ingalls under category 1.
Under category 2, NAVSEA evaluated Avondale's IPDE approach as
outstanding, but rated Ingalls's approach as only marginal. The SSEB
noted that Avondale proposed to [DELETED]. The SSAC determined that
"[Avondale's] proposed IPDE approach convincingly demonstrated
that the ship configuration data will be available to all IPPD
members on a real time basis and easily updated to reflect
current status of key design and programmatic data. [DELETED]
Streamlined configuration management of data is one of the keys
to reduced life cycle costs. The Avondale approach is expected
to result in substantial benefit to the Government in terms of
efficient program management and reduced design and engineering
change processing time. Avondale's IPDE approach will also
facilitate an improved ship detail design, necessitating fewer
expensive changes during the construction and life cycle support
process. In practical terms this means that the correct type and
number of spares are ordered, changes in ship equipment are more
timely reflected in technical manuals, and the fleet can make
maintenance decisions based on virtually instantaneous access to
ship configuration and equipment maintenance information."
In contrast, the SSEB interpreted Ingalls's IPDE approach as using
"the [DELETED] to form the IPDE. The [DELETED] will provide the
various [integrated product teams] an overall program view . . .
and provide the linkage between [DELETED]."
Noting that Ingalls's proposal stated that [DELETED] into its proposed
IPDE, the SSEB concluded that Ingalls's "proposed IPDE implementation,
based on [DELETED], raises significant doubt regarding the Offeror's
ability to provide timely access to an integrated data set. The
[DELETED] can be expected to degrade overall system performance and
reliability and increase IPDE life cycle costs." Further, the SSEB
determined that Ingalls's
"IPDE system architecture, based on [DELETED], to achieve its
configuration management, control, and status accounting
objectives . . . conflicts with RFP requirements for an
[DELETED]. . . . The Ingalls's . . . IPDE solution will not
result in a [DELETED]. This proposed approach will result in
[DELETED], which will require additional resources to manage and
maintain and will likely not support many of the Ingalls . . .
Team's proposed life cycle cost savings initiatives.
"Throughout the Offeror's proposal, many of the proposed cost
savings initiatives are predicated on a fully functional IPDE
capability. The IPDE is the principle tool that is proposed to
achieve production and future operational and support cost
savings. If the IPDE is a fully functional tool, opportunities
for achieving cost savings are increased. If information within
the IPDE is not manageable and up to date, then the proposed
savings associated with its implementation will not be completely
realized."
According to the SSEB, Ingalls's "approach relies too heavily on
[DELETED] to achieve an integrated environment. This approach
requires significant effort to implement and maintain and will inhibit
overall system reliability."
The SSAC agreed with the SSEB's concern in this regard, finding that a
"major weakness" existed in Ingalls's IPDE approach "in that Ingalls
still proposes [DELETED] to implement its IPDE approach." According
to the SSAC,
"Ingalls's proposal to use [DELETED] raises issues regarding data
integrity, interoperability, and efficiency. When [DELETED]
there is no guarantee that they will all be viewing the same
information. There is risk associated with achieving effective
communication [DELETED]. Moreover, the SSAC finds that the
Ingalls IPDE approach increases the likelihood of [DELETED],
erroneous data as well as increases system maintenance,
management, and integration costs."
Further, the SSAC found that
"Ingalls's proposal to [DELETED], conflicts with the RFP
requirement to [DELETED] and will not result in [DELETED]
capability [DELETED], as required by the RFP. It raises
significant doubt regarding Ingalls's ability to provide timely
access to an integrated data set."
The SSAC concluded that the deficiencies in Ingalls's proposed
approach "raised significant concerns regarding the attainability of
the expected benefits of a fully integrated information environment."
Both proposals were found acceptable under category 3, ownership or
LCC cost reduction. The SSAC found "offsetting strengths and
weaknesses" in the proposals, noting that
"[t]he two biggest contributors to the cost of ship ownership are
manning and maintenance, in that order. Avondale was stronger in
its approach to reducing manning and Ingalls was stronger in its
approach to reducing maintenance related life cycle costs.
Although in some areas Ingalls's Category 3 proposal was judged
to be more innovative technically than Avondale's, it was also
considered to contain more significant weaknesses, and from a
risk perspective, there is a higher risk that Ingalls will have
difficulty in achieving its proposed life cycle cost savings.
Further, the SSAC believes that the outstanding IPDE approach
detailed by Avondale in its Category 2 proposal greatly increases
the probability that it will successfully implement related
Category 3 life cycle cost reductions. Ingalls's ability to
realize the proposed life cycle cost reductions will be
significantly impacted by its marginal IPDE approach."
Although Avondale's cost ($1,531,187,843 evaluated; [DELETED]
proposed) under category 4 was somewhat higher than Ingalls's
($1,507,093,151 evaluated; [DELETED] proposed), the SSAC did not view
the approximately $24 million (or 1.6 percent difference) in evaluated
cost as significant.[3] The SSAC found that
"the wide disparity in Category 2 [IPDE] adjective ratings
represents a meaningful difference between the two technical
proposals and more than offsets the evaluated difference in
price. Because the creation of an "Outstanding" Integrated
Product Data Environment directly impacts the likelihood of
successful contract performance and achievement of the
solicitation's highest goal of life cycle cost reduction, the
SSAC believes it justifies payment of a premium in Total
Evaluated Price for award to Avondale."
(Moreover, the SSAC considered the $24 million difference in evaluated
cost to be overstated since it (1) was based on only a [DELETED]
percent decrease in manhours for Avondale realized as a result of
potential efficiencies from the required IPPD/IPDE approaches, which
the SSAC considered to be conservative given the strength of
Avondale's IPPD/IPDE approach (Ingalls was credited with a decrease in
excess of [DELETED] percent for potential efficiencies from
IPPD/IPDE), and (2) did not reflect the cost impact of several
weaknesses in Ingalls's proposal that defied quantification.) The
SSAC concluded that Avondale's proposal "represents the best value to
the Government and the SSAC has greater confidence that it will
deliver a technically superior solution during contract performance.
Therefore, the SSAC considers Avondale's proposal to be the one that
offers the highest likelihood of reducing life cycle ownership costs."
The SSA accepted the SSAC's recommendation and determined that
Avondale's proposal offered the best value to the government. Upon
learning of the resulting award to Avondale, Ingalls filed this
protest with our Office.
Where an evaluation is challenged, we will examine the agency's
evaluation to ensure that it was reasonable and consistent with the
stated evaluation factors and applicable statutes and regulations.
Professional Software Engineering, Inc., B-272820, October 30, 1996,
96-2 CPD para. 193 at 4; Orion Research, Inc., B-253786, Oct. 21, 1993,
93-2 CPD para. 242 at 3. Based on the record here, we conclude that the
evaluation was reasonable and otherwise unobjectionable. We discuss
Ingalls's primary arguments below.
IPDE
Ingalls challenges the evaluation of offerors' approaches to meeting
the IPDE requirement. As developed through the submissions of the
parties and a hearing conducted by our Office, the primary dispute in
this area concerns whether there existed a significant difference
between the proposed IPDE approaches; Ingalls claims it proposed an
architecture substantially similar to that proposed by Avondale.
Ingalls concludes that its IPDE should not have been rated inferior to
Avondale's.
NAVSEA disagrees, maintaining that "the key difference between the two
proposals consists in the composition of the Level I product model
within the IPDE and the use and functionality of the databases in
Ingalls's Level I." NAVSEA reports that Avondale proposed
"[DELETED]." In contrast to Avondale's [DELETED], Ingalls proposed "a
product model database created through the use of [DELETED]";
according to the agency, Ingalls's proposed [DELETED] would be
constructed by [DELETED]. NAVSEA reports that the result would be the
[DELETED], stating that "[o]ne important characteristic of this sort
of product model . . . was the presence of [DELETED]."
NAVSEA maintains that the differences in IPDE approach would have
significant consequences for the performance of the contract:
"The differences in the product models result in real and
significant differences in their ability to [DELETED]. [DELETED]
is a complex, expensive and time-consuming task, with significant
associated risk that it may not be fully accomplished . . . . If
the product model cannot [DELETED]. The design and construction
process loses efficiency, and costs and delays result. The whole
purpose of having an integrated ship configuration within the
Level I product model database is defeated."
NAVSEA concludes that Ingalls's use of [DELETED] "greatly increases
the difficulties and risks associated with keeping different data
items consistent." In addition, the agency maintains that it
reasonably read Ingalls's proposal as providing that Ingalls's
[DELETED], and thus noncompliant with the solicitation requirement
that "[t]he product model . . . serve as the configuration source for
each ship throughout its life cycle."
In disputing NAVSEA's position that there was a significant difference
between the proposals, Ingalls notes that the agency stated in its
report that "[b]oth offerors included existing databases as the source
of some Level I data to be used in creating their proposed IPDEs."
Further, Ingalls argues that NAVSEA erroneously concluded that
[DELETED]. Ingalls denies that [DELETED]. Ingalls maintains that its
proposed IPDE approach complied with the solicitation requirement that
[DELETED], asserting that it proposed that [DELETED]. These
assertions are, however, inconsistent with the proposal submitted to
NAVSEA.
We find that NAVSEA reasonably determined that there were fundamental
differences in the proposed IPDE architectures, which rendered
Ingalls's proposed IPDE significantly less advantageous. In large
measure, these appear to have resulted from Ingalls's decision, as
stated in its proposal, to propose [DELETED]. According to Ingalls's
proposal, "[DELETED]."
The record supports the agency's position that Avondale essentially
proposed [DELETED]. In contrast, although "quite" ambiguous in parts,
as conceded by Ingalls's own consultant, Hearing Transcript (Tr.) at
782, 785-786, 794, 799, Ingalls's proposal provided that its IPDE
would include [DELETED].[4] In response to NAVSEA's request that it
furnish "more detailed information on the proposed approach to
integrating design, construction and service life support data
including descriptions of how [DELETED]," Ingalls advised the agency
[DELETED]. An Ingalls witness involved in preparing its IPDE approach
testified that the proposed databases [DELETED], Tr. at 72-73, and
Ingalls only states in its post-hearing brief that [DELETED]. While
Avondale's IPDE [DELETED], NAVSEA reasonably read the [DELETED] in its
proposed IPDE to be significantly less.
Whatever Ingalls may now contend, its proposal supports NAVSEA's
determinations that [DELETED]. For example, Ingalls advised the
agency that "[DELETED]." (Emphasis added.) Given the [DELETED], the
only reasonable conclusion from this statement is that [DELETED].
In addition, Ingalls stated in a number of places in its proposal an
intention to [DELETED]. In several charts in its proposal, Ingalls's
proposed [DELETED] were depicted as [DELETED]. Likewise, Ingalls's
proposal provided that its IPDE included [DELETED]. Specifically, the
proposal stated that
"[DELETED]." (Emphasis added.)
The proposal further stated that
"[DELETED]." (Emphasis added.)
These quotes from Ingalls's proposal are consistent with written
statements made by the Ingalls witness involved in preparing its IPDE
approach in which he referred to Ingalls's [DELETED]. According to
the Ingalls witness, "[DELETED]." (Emphasis added.) Taken together,
these references support the agency's position that [DELETED].
Although Ingalls's proposal elsewhere stated that [DELETED], we agree
with NAVSEA that Ingalls's proposal, read as a whole, clearly provided
for an IPDE in which [DELETED].
Further, we find reasonable NAVSEA's overall determination that given
the difficulty Ingalls would face in integrating, and maintaining data
consistency among, the [DELETED], in its proposed IPDE, Ingalls's IPDE
approach was significantly less advantageous than Avondale's.[5]
Although Ingalls's own consultant challenged NAVSEA's interpretation
of Ingalls's proposed IPDE, he conceded that, having arrived at that
interpretation, agency evaluators "then, in a logically correct
manner, based on the flawed assumption deduced all kinds of things
that I certainly as a Navy evaluator would not have wanted in an
IPDE." Tr. at 752-753, 768-769, 790-791. Since Ingalls's proposal
was reasonably interpreted by the agency evaluators, there is no basis
to question the reasonableness of the agency's resulting concerns. We
thus find that the agency's evaluation of offerors' approaches to the
IPDE requirement was reasonable.[6]
LCC REDUCTION
Ingalls challenges NAVSEA's evaluation of offerors' approaches to
ownership cost or LCC reduction. As noted above, both proposals were
found acceptable under category 3, with "offsetting strengths and
weaknesses." In particular, with respect to manning and maintenance,
the two primary (non-acquisition) contributors to the cost of ship
ownership, Avondale's proposal was evaluated as stronger in its
approach to reducing manning while Ingalls's was evaluated as stronger
in its approach to reducing maintenance-related LCC. Ingalls's
category 3 proposal was evaluated as containing more significant
weaknesses and posing a higher risk that it would be unable to achieve
its proposed LCC savings. In this regard, again, NAVSEA determined
that while Avondale's evaluated outstanding IPDE approach would
greatly increase the probability that it would successfully implement
LCC reductions, Ingalls' ability to realize proposed LCC reductions
would be "significantly impacted by its marginal IPDE approach."
Quantification of LCC Savings
Ingalls argues that NAVSEA improperly failed to quantify probable LCC
savings for each offer. Noting that the solicitation advised that the
agency might be willing to pay a premium for the "approach that
demonstrates the potential for greater life cycle cost reductions,"
Ingalls argues that NAVSEA "could not determine whether (or how much)
to pay as a premium for a potentially greater life cycle cost saving,
unless it had first determined how much potential saving was present
in each offeror's proposed approach." NAVSEA explains that it was not
possible to quantify the most likely LCC savings and the resulting
most probable LCC for each proposal, given the early stage of the LPD
17 program and the information available to the agency.
Ingalls's argument is without merit. Ingalls's position fails to
account for provisions of the solicitation providing that the agency
would evaluate offerors' approaches to LCC cost reduction without
actually quantifying LCC savings and the resulting most probable LCC
for each proposal. In this regard, under the solicitation's statement
of evaluation criteria, category 3 is entitled "Ownership Cost
Reduction Approach," and category 3 proposals were to be "evaluated
and assigned one of the following adjective ratings: (1)
unacceptable, (2) marginal, (3) acceptable, (4) outstanding." At the
same time, the RFP nowhere expressly stated that the agency would
conduct a traditional most probable cost analysis with respect to LCC.
Further, the solicitation's instructions for the preparation of
proposals provided that:
"Cost analyses required to support the Ship Propulsion Drive
Train and Diesel Engines portion of the Offeror's proposal shall
be the only portion of the Non-Price Proposal where dollars must
be used.
"The Offeror shall fully explain how it derives and establishes
the baseline against which all savings are measured. All savings
shall be shown with percentages only and not with dollars."
The direction not to address LCC in dollars, which is apparent from
the above provisions of the solicitation's instructions to offerors,
and to instead focus on adjectivally-rated approaches to LCC
reduction, was reemphasized during discussions in NAVSEA's response to
Ingalls's request that the agency "confirm that for purposes of the
nonprice category 3 evaluation, total life cycle cost includes, as
part of your evaluation, acquisition costs for all 12 ships in the LPD
17 Class." The agency responded that
"[w]hile total life cycle cost for the LPD 17 Class does include
acquisition costs for all 12 ships, the assumption upon which the
question is based is incorrect; the Navy is not making a
projection of the acquisition costs from each competitor for
ships 4-12. The focus of the Navy's evaluation in Non-Price
Category 3 is not dollars, it is the likelihood of success of an
offeror's proposed approach to life cycle cost reduction. In
fact, offerors are instructed in Section L that: 'All savings
shall be shown with percentages only and not with dollars.' The
offeror projecting the largest savings in Non-Price Category 3
will not necessarily receive a high score in that category, if it
is deemed that the proposed approach to achieving those savings
is unlikely to succeed or poses risk in some aspect." (Emphasis
added.)
In our view, the solicitation supports NAVSEA's position that it was
not required to quantify the most probable LCC reductions for each
proposal and resulting most probable cost. Indeed, we believe that it
was clear from the very use in the solicitation of such abstract
language as "the highest likelihood" of reducing LCC and "the
potential for" greater LCC reduction that the agency was not going to
quantify the most probable LCC reductions and resulting most probable
cost for each proposal.[7]
We conclude that the agency could comply with the evaluation
provisions of the RFP by evaluating the reasonableness of offerors'
approaches to LCC reduction. In this regard, again, the SSA accepted
the SSAC's finding that Avondale's proposal "offers the highest
likelihood of reducing life cycle ownership costs." The SSA (as well
as the lead evaluator for category 3) testified at the hearing that
although the agency did not quantify the LCC savings expected under
each proposal, he concluded based on offerors' approaches to LCC
reduction (including the likelihood of success associated with their
respective IPDE approaches), and taking into account both the extent
of the savings predicted by offerors and the probability of achieving
those savings, that "Avondale's approach provides us a greater
probability of achieving the greatest life cycle savings." Tr. at
399-401, 412-416, 564-571. As discussed below, Ingalls has not shown
that this determination was unreasonable.
Manning
Ingalls argues that the agency improperly failed to afford it
evaluation credit for a more detailed approach to reducing LCC
generally and, specifically, for a detailed proposed billet-by-billet
reduction in manning the ships.
Avondale proposed a [DELETED]-percent reduction in manning as
calculated from the 450-person manning baseline established by the
solicitation, for a resulting ship's complement of [DELETED]
personnel, and a [DELETED]. Although Avondale did not identify
specific billets for elimination or reduction, it explained its
approach to achieving a manning reduction, and the agency found it to
be a reasonable approach warranting assignment of a strength.
According to the SSAC, Avondale's proposal
"demonstrated a proficient understanding of Navy manpower
requirements, the Navy manpower determination process, manpower
analysis methods, and shipboard operations in the Manning
sub-category. The Offeror acknowledged that reductions in
manning must be accomplished using a two-fold approach: first,
by targeting and influencing Navy policy and doctrinal changes to
support more streamlined and efficient shipboard operations; and
second, by leveraging new technology to perform necessary
shipboard functions, thereby reducing workload across all
departmental organizations . . . Although some of the proposed
manning initiatives required policy changes, the SSAC deems the
required policy changes to be achievable. . . ."
In contrast, the SSEB determined that Ingalls's more detailed,
proposed billet-by-billet reduction, which specified a
[DELETED]-percent reduction in manning from a baseline of 507 persons
(rather than the required 450-person manning baseline) to a crew of
[DELETED], was
". . . weak in some very significant respects. Many of the
Offeror's assumptions regarding the total number of manpower
reductions are not possible without sweeping changes in Navy
policy and operational doctrine. Additionally, many of the
proposed manning reductions move crew members off the ship but do
not take them off the Navy payroll. While the Offeror proposes
acceptable plans to incorporate new technologies to support
manpower reduction initiatives, and the Offeror demonstrates
exceptional analytical capability, responses to discussion
questions did not convince the evaluators that the ship's
manpower cost reduction plans and goals were realistic."
Likewise, the SSAC assigned a major weakness to Ingalls's manning
approach on the basis of Ingalls's "inability to establish reasonable
baselines from which to measure ownership cost savings, and the
resultant inflated cost savings claims" and its unrealistic proposed
reduction in crew size to [DELETED] persons. Specifically, the SSAC
concluded that: "[l]ike [Avondale], Ingalls's proposed manning
initiatives require policy changes. However, unlike those proposed by
Avondale, many of the Ingalls required policy changes are considered
to be implausible."
We find no basis to question this aspect of the evaluation. The fact
that Ingalls submitted a more detailed, billet-by-billet manning
reduction proposal did not warrant additional evaluation credit given
the agency's determination, based on a review of each proposed billet
reduction, that the proposed reduction to a crew of [DELETED] persons
was not realistic. Tr. at 587, 608-609. With the exception of its
proposed reduction in the number of gunners mates from seven to
[DELETED], Ingalls has not specifically addressed the discussion in
the contemporaneous evaluation record of specific examples of
Ingalls's flawed manning analysis. As for the proposed reduction in
gunners mates, which was to be primarily based on [DELETED], NAVSEA
concluded that more than [DELETED] gunners mates were necessary in
order to perform required specialized maintenance on the gunnery
systems. Tr. at 596-598. Ingalls has not shown that this conclusion
was incorrect or unreasonable.
Ingalls asserts that there is no meaningful difference in the
proposals with respect to the role of Navy policy in determining
manning.[8] However, based on our review of the proposals in this
area, we believe that the agency reasonably discerned a fine, but
potentially significant distinction in the offerors' approaches to
achieving manning reductions. As noted by the agency, Ingalls's
proposal focused on achieving manning reductions through technology
insertion (attributing [DELETED] percent of its proposed reductions to
technology insertion alone), and addressed policy considerations by
simply providing that "additional manning reduction opportunities
through changes in procedures and doctrine can be considered" once the
Integrated Product Teams are formed. In contrast, Avondale's proposal
reflected a more sophisticated understanding of the necessity of, and
a willingness to take responsibility for, proposing and "sell[ing]"
required doctrinal changes (as well as the need for insertion of
manpower-reducing technology), as shown by the following statements in
its proposal:
"[DELETED]."
We conclude that NAVSEA reasonably found Avondale's approach to
achieving manning reductions superior to Ingalls's.
Effect of IPDE on LCC
Ingalls argues that the agency overestimated the influence of
Ingalls's IPDE on the achievability of its proposed LCC reduction,
claiming that "less than [DELETED] percent of the cost reductions
estimated in the Category 3 proposal depend in any way on the success
of IPDE." This argument is not credible, since it is inconsistent
with both the fundamental role the solicitation stated IPDE would play
in LCC reduction--e.g., "[t]he principle objective of the LPD 17 IPDE
is to reduce life cycle costs through the integration of data and data
products."--and with the emphasis in Ingalls's own proposal on using
the IPDE to reduce LCC--e.g., "[o]ur integrated, simulation-based
Product Model and [DELETED] drives our ownership cost reduction
approach," and "[o]ur Integrated Product Data Environment (IPDE)
allows for successful implementation of our operations cost savings
approach." Given the emphasis in both the solicitation and Ingalls's
own proposal on using the IPDE to reduce LCC, we believe that it was
reasonable for the agency to consider the likely effectiveness of an
offeror's proposed IPDE to be a significant factor in assessing the
achievability of its proposed LCC reduction.
We conclude that Ingalls has failed to demonstrate that the evaluation
of proposed approaches to LCC reduction in general, and reducing
manning costs in particular, was unreasonable such that award to
Ingalls offered "the highest likelihood of reducing life cycle
ownership costs."
ACQUISITION COST
Ingalls challenges NAVSEA's evaluation under category 4, i.e., the
cost of acquiring the first three ships.
Ingalls's initial proposed cost ($[DELETED]) was substantially below
the agency's evaluated cost ($[DELETED]) for its proposal. NAVSEA
advised Ingalls during discussions that its proposed cost was
considered unrealistically low and its proposed manpower and material
resources inadequate effectively to implement its proposed technical
approach; the agency also furnished Ingalls with a copy of the
evaluation of its proposal. NAVSEA warned Ingalls that "continued
underestimation of the material and manpower resources required to
perform this contract may result in a rating of unacceptability under
Category 1 . . . and the removal of the Ingalls proposal from further
consideration." As shown below, Ingalls responded during discussions
by accepting the agency's position on several cost factors and
significantly increasing its proposed cost (by 59.2 percent) as well
as its proposed man-hours (by [DELETED] percent). In its BAFO,
however, Ingalls essentially reiterated its initial position on a
number of the issues raised by the agency and reduced its proposed
cost by 9.3 percent and its man-hours by [DELETED] percent, leading
the agency to make upward evaluation adjustments of $[DELETED] and
[DELETED] percent in man-hours.
Initial
(Man-hours
/Cost) October 1996
(Man-hours
/Cost) BAFO
(Man-hours
/Cost) Evaluated
(Man-hours
/Cost)
Ingalls [DELETED] [DELETED] [DELETED] [DELETED]
/$1,507
million
Avondale [DELETED] [DELETED] [DELETED] [DELETED]
/$1,531
million
Ingalls challenges a number of aspects of the cost evaluation,
concluding that the evaluated cost of its proposal should have been
$104 million lower than Avondale's, not $24 million, as estimated at
the time of award (nor $25.1 million, as currently estimated). Based
on our review of the record, we find Ingalls has failed to demonstrate
any deficiency in the cost evaluation sufficient to offset Avondale's
marked superiority under the IPDE evaluation factor which, together
with the other nonprice factors, was significantly more important than
price under the stated evaluation criteria.
For example, Ingalls challenges NAVSEA's determination to use a
[DELETED]-percent learning curve, rather than the [DELETED]-percent
learning curve in Ingalls's BAFO, to calculate the result of the
increase in efficiency to be expected when constructing subsequent
ships.[9] Ingalls derived its estimate of the base production
manhours for the LPD 17 primarily from its construction of the
[DELETED]. NAVSEA accepted Ingalls's use of the [DELETED] as the
baseline for the LPD 17, thereby crediting Ingalls with the
efficiencies inherent in the use of a ship based on a stable, mature
design, and also credited Ingalls with a further [DELETED]-percent
reduction in production man-hours to account for cost saving
initiatives, including IPPD and IPDE. However, NAVSEA concluded that
a [DELETED]-percent learning curve was more realistic than the
[DELETED]-percent curve Ingalls proposed. During discussions, Ingalls
acknowledged that NAVSEA had "proposed a very conservative
[DELETED]-percent Learning Curve for the follow ships reasoning that
the efficiencies included in the first ship (IPPD/IPDE) should
minimize the ship to ship reductions normally associated with
learning," and advised the agency that it "takes no exception to the
Government position on learning and has utilized the [DELETED]-percent
Learning Curve." As noted above, however, Ingalls (which claimed
historical learning curves of [DELETED] percent for the LHD program,
[DELETED] percent for the DDG (destroyer) program and [DELETED]
percent for the CG (cruiser) program) nevertheless proposed in its
BAFO a [DELETED]-percent learning curve.
Ingalls argues that the agency's assumption of a [DELETED]-percent
learning curve results in more man-hours being required than would
have been expected under Ingalls's historical learning curves without
the benefit of the man-hour savings expected from IPPD or IPDE. As
shown in the following chart prepared by NAVSEA, Ingalls's claim is
demonstrably false.
[DELETED]
The top curve in the above chart depicts an [DELETED]-percent learning
curve as applied to the first and succeeding ships of a 12-ship class
and reflects a traditional approach in which construction commences
before design is complete; the second curve shows the man-hours for
the first ship in the series as based on the hours for the [DELETED]
ship under Ingalls's traditional approach (with a [DELETED]-percent
learning curve), reflecting the LPD 17 approach of finalizing the
design before commencing construction; the third curve reflects the
agency's additional [DELETED]-percent reduction in man-hours to
account for a variety of cost saving initiatives, including IPPD and
IPDE (in contrast, Avondale only proposed, and received, a [DELETED]
percent reduction in man-hours from its baseline to account for IPPD-
and IPDE-based initiatives); and the bottom curve depicts the learning
curve Ingalls proposed in its BAFO.
In sum, Ingalls essentially was given credit for an approximately
[DELETED] percent efficiency relative to its historical record of
constructing the first ship in a series, that is, for being able to
construct the LPD 17 with only [DELETED] percent of the effort that
would be required by Ingalls under its historical shipbuilding
approach. Having received credit for such efficiency with respect to
the first ship, we think it was reasonable for the agency to conclude
that the follow-on ships would include substantially less learning,
and that the resulting learning curve therefore would be substantially
shallower. Ingalls does not dispute the agency's position that
implementation of IPPD/IPDE should minimize the inefficiencies
traditionally associated with lead ships, but it does dispute the
extent of the consequent reduction in the slope of the learning curve
with respect to the subsequent ships. However, Ingalls did not cite
in its proposal any example where it performed better on the first
ship in a series than given credit for by the agency, and its mere
disagreement does not demonstrate that the agency's exercise of its
judgment in this regard was unreasonable. Certainly, the [DELETED]
percent historical learning curves cited in its proposal did not
establish the reasonableness of the proposed [DELETED]-percent
learning curve, since those were based on lead ships in a series, and
thus included significant future learning potential.[10] In these
circumstances, there is no basis to question the agency's learning
curve assessment.
As a further example, Ingalls challenges NAVSEA's evaluation of the
man-hours required for Bath Iron Works (BIW), a member of the Avondale
team, to construct the third ship (LPD 19) of the three ships here.
(The first two are to be constructed by Avondale.) BIW explained in
its proposal that it had developed its estimate for LPD 19 from its
detailed [DELETED] actual cost returns for constructing the [DELETED].
The resulting baseline was then reduced to take into account the
differences in [DELETED], and further reduced to account for expected
improvements from technology transfer between Avondale and BIW, IPDE,
IPPD, and other efficiency-enhancing programs. [DELETED] Given the
differences between the ships and the expected improvements from
technology transfer, IPDE, IPPD and other measures, the agency
determined that BIW's overall expectation of improvement, and its
resulting manhour estimate, was reasonable. NAVSEA considered this
conclusion strengthened by the fact that BIW was proposing [DELETED].
We find nothing unreasonable in NAVSEA's evaluation approach--NAVSEA
used the same fundamental approach in evaluating portions of Ingalls's
initial cost proposal which were based on other than weight-based
CERs. Further, although Ingalls challenges the validity some of the
improvements expected by BIW and some of the assumptions made by the
agency, Ingalls has not demonstrated that BIW's overall manhour
estimate was significantly understated.
In summary, Ingalls has failed to demonstrate that its proposal
offered "the highest likelihood of reducing life cycle ownership
costs." Further, Ingalls has failed to demonstrate any deficiency
with respect to acquisition cost sufficient to offset Avondale's
marked superiority under the IPDE evaluation factor which, together
with the other nonprice factors, was significantly more important than
price under the stated evaluation criteria. We conclude that NAVSEA
reasonably determined Avondale's proposal to be most advantageous.
The protest is denied.
Comptroller General
of the United States
1. In the event the Source Selection Authority (SSA) determined the
two highest ranking technical proposals to be technically equal after
evaluating categories 2 and 3, the government "reserved the right to
consider the strengths, weaknesses and risks assigned in Category 1 of
those two respective proposals in making its best value determination.
2. Pursuant to its Source Selection Plan for the LPD 17 program,
NAVSEA established a source selection organization consisting of the
Source Selection Evaluation Board (SSEB) and Price Analysis Team,
which evaluated proposals and reported the results of the evaluation
to the Source Selection Advisory Council (SSAC), which then made a
source selection recommendation to the Source Selection Authority
(SSA), who was responsible for selecting the offeror whose offer was
most advantageous to the government.
3. In the course of responding to Ingalls's protest, NAVSEA has
discovered several discrepancies in its calculations which it believes
reduces the evaluated cost of Ingalls's proposal by approximately $1.1
million. The SSA has reconsidered his source selection decision in
light of the increase in Ingalls's evaluated cost advantage to
approximately $25.1 million, and has determined that the change does
not alter his determination that Avondale's proposal represented the
best value to the government.
4. We note that [DELETED].
5. Data consistency is likely to be difficult to implement where there
are [DELETED], as in the Ingalls IPDE, where the [DELETED].
6. Our conclusion that NAVSEA reasonably evaluated offerors' proposed
IPDE approaches is not altered by the fact that, as noted by Ingalls,
one of nine past performance references for Avondale's proposed
supplier of a CAD system reported significant problems in using the
system. As noted by the agency, the past performance evaluation
concerned an earlier version of the CAD system, and the record
indicates that a subsequent version has been "very extensively" used
by the Navy in the design of ships without any reported significant
problems. Moreover, there is no convincing evidence that Ingalls's
proposed CAD system would be likely to perform significantly better.
Tr. at 626, 647-666, 677-678.
7. The solicitation also states that LCC "shall also reflect the time
value of money through net present value analyses." Given the
solicitation requirement to express savings as percentages, we do not
view this as requiring a quantification of probable cost. Rather, as
maintained by NAVSEA, the reference to a net present value analysis
can be read as referring to the cost of the engines, which the
solicitation stated was "the only portion of the Non-Price Proposal
where dollars must be used."
8. Ingalls also challenges the quantification of Avondale's proposed
[DELETED]. However, NAVSEA offered testimony that this approach was a
reasonable one which is consistent with ongoing Navy efforts. Tr. at
825-828. Although it is unclear from the record whether a [DELETED]
percent reduction is achievable, given that Avondale's approach is
consistent with current Navy efforts, there is no basis to question
the reasonableness of the agency's position that significant cost
savings are possible.
9. Learning curve theory states that a fixed percentage reduction in
manhours will be experienced every time the number of units produced
doubles. For example, using a [DELETED]-percent learning curve, the
second ship constructed is expected to require [DELETED] percent of
the production manhours required for the first, the fourth ship is
expected to require [DELETED] percent of the manhours required for the
second ship, and so on.
10. NAVSEA reports that when the learning curve is computed from a
ship of a class that reflects a mature, stable design, such as DDG 59
and CG 50, Ingalls's historical learning curve flattens to [DELETED]
percent.