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
**********************************************************************

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.