BNUMBER: B-276186; B-276186.2
DATE: May 21, 1997
TITLE: GEC-Marconi Electronic Systems Corporation, B-276186; B-
276186.2, May 21, 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:GEC-Marconi Electronic Systems Corporation
File: B-276186; B-276186.2
Date:May 21, 1997
Paul Shnitzer, Esq., Jean-Pierre Swennen, Esq., and Todd Hutchen,
Esq., Crowell &
Moring, L.L.P., for the protester.
Alan R. Yuspeh, Esq., Jerone C. Cecelic, Esq., and Andrew Irwin, Esq.,
Howrey &
Simon, for Rockwell International Corp., the intervenor.
M. Steele Kenyon, Esq., Roger J. McAvoy, Esq., Marian E. Sullivan,
Esq., and
Gregory H. Petkoff, Esq., Department of the Air Force, for the agency.
John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the
General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Agency reasonably determined as the result of a price realism
evaluation
conducted in accordance with a solicitation providing for the award of
a firm,
fixed-priced contract that the protester's proposed prices were
unrealistically low
where the protester's proposed prices were far lower than historical
prices for the
same and similar products and the protester failed to provide adequate
justification
for the price differential.
2. Agency's assessment of the protester's past performance as posing
a moderate
risk is unobjectionable where the agency reasonably determined that
the protester's
past performance indicated a "track record" over the past 3 years of
the protester
failing to make timely deliveries.
DECISION
GEC-Marconi Electronic Systems Corporation protests the award of a
contract to
Rockwell International Corporation under request for proposals (RFP)
No. F19628-
96-R-0068, issued by the Department of the Air Force, for joint
tactical information
distribution system (JTIDS) class 2/2H terminals, related spares,
data, and services.
GEC contends that the agency's evaluation of its and Rockwell's
proposals, and the
selection of Rockwell's higher-priced proposal for award, were
unreasonable.
We deny the protest.
The JTIDS is a multinational, joint-service program to acquire a
secure, jam-
resistant, multiple-access digital voice data information distribution
system for the
transfer of tactical information between combat elements, data
collection elements,
and command and control centers within a tactical theater of
operations. The
JTIDS class 2/2H terminals were developed under a leader/follower
arrangement,
with GEC appointed as the leader and Rockwell as the follower. Under
the
leader/follower concept, the leader company is the developer or sole
producer of an
item or system. The leader furnishes manufacturing assistance and
expertise to the
follower, which enables the follower to become a source of supply for
the item.
Federal Acquisition Regulation (FAR) sec. 17.401-17.403 (FAC 90-42);
Kaman
Aerospace Corp., B-209220, June 20, 1983, 83-1 CPD para. 667 at 1. GEC
and Rockwell
have been awarded five and four low-rate initial production contracts,
respectively,
and each was awarded a full-rate production (FRP) contract in 1995.
The RFP, issued October 29, 1996, provided for the award of a firm,
fixed-price,
indefinite delivery, indefinite quantity FRP contract on a
"winner-take-all-down-
select" basis for various configurations of JTIDS class 2/2H
terminals,[1] related
spares, data, and services to be ordered during fiscal years 1997
through 1999. The RFP stated that award would be made to the offeror
submitting the proposal judged to be most advantageous to the
government, price and other factors considered, and that "cost/price"
was more important than technical merit.
The RFP listed Resource Management and Problem Resolution, and Parts
Obsolescence, as the two technical evaluation factors, and stated that
they were
equal in importance. The RFP added that technical proposals would be
evaluated
for technical merit under a color/adjectival rating scheme, as well as
for risk to
assess "the risks associated with the offeror's proposed approach and
the degree to
which the offeror's present and past performance on other relevant
contracts
provides the [g]overnment with confidence that the offeror will
successfully
accomplish the requirements of the current solicitation."
The RFP added here that "[i]n assessing risk, the [g]overnment will
consider not
only the offeror's proposal, but also relevant present and past
performance data,"
and that "in evaluating the offeror's present and past performance,
the [g]overnment
reserves the right to consider both data provided by the offeror and
data obtained
from other sources." In order to facilitate the evaluation of past
performance, the
RFP's proposal preparation instructions requested that proposals
contain a separate
"Current and Past Performance" volume providing "detailed current and
past
performance information . . . for up to ten (10) active or completed
[g]overnment
and/or commercial contracts which the offeror considers most relevant
to its ability
to perform the proposed effort." These instructions admonished
offerors that
"[o]nly contracts which are ongoing or have been completed within the
last three
(3) years will be considered."
The RFP stated that the agency would evaluate price by considering the
unit prices
proposed for the various products and services in conjunction with
certain weighted
factors. In this regard, the RFP included a price matrix which set
forth each
required product and various quantities of each of the products,
including a quantity
designated as the "best estimated quantity" (BEQ) for each product.
For example,
the RFP set forth quantities of 8 through 16 for JTIDS configuration
2, with 12 being
identified as the BEQ. Offerors were to insert their proposed prices
for each of the
listed quantities of products and to calculate a proposed average unit
price (AUP)
per item under each of the listed quantities by dividing their total
price for each
listed quantity by that quantity.
As indicated above, the price matrix also included for each listed
quantity a
weighted factor "based upon known and anticipated requirements for
terminals and
spares, with the heaviest weight given to units around the BEQ for
each
requirement." For example, for JTIDS configuration 2, the RFP
provided that for
price evaluation purposes a weight of 45 percent would be applied to
the BEQ of
12, a weight of 7.5 percent to the listed quantities of 10, 11, 13,
and 14, and a weight
of 6.25 percent to the listed quantities of 8, 9, 15, and 16. These
weights were
applied to each of the AUPs to form a weighted AUP (WAUP), and the
WAUPs for
each of the products were added to determine a total WAUP for the
entire contract. Each proposal's total WAUPs for fiscal years
1997-1999 were added to the
proposal's prices for certain services to calculate the proposal's
total price for
evaluation purposes.
The RFP stated that the agency would perform a "cost/price realism
assessment"
(CPRA) to "evaluate the realism of the offerors' proposed
costs/price." According to
the RFP, the CPRA would include an evaluation "of the extent to which
proposed
cost/prices and supporting data are consistent, indicate a clear
understanding of the
solicitation requirements, and reflect a sound approach to satisfying
those
requirements." The RFP informed offerors that historical data, in
addition to
solicited cost data, would be used to evaluate the cost/price realism
of the
proposals, and that any deviations from "actual cost data must be
explained in the
narrative portion of the cost/price proposal." The RFP added that:
"[i]f an offer is evaluated as unrealistically low based on the
anticipated costs of performance and the offeror has failed to
recognize and adequately explain the underestimated costs to the
[g]overnment, the corresponding risks and the offeror's apparent
lack
of understanding will be considered in evaluating the risks
associated
with the corresponding [t]echnical/[m]anagement factors."
In order to facilitate the CPRA, offerors were required to submit a
separate
cost/price volume, in which, among other things, they were to complete
the price
matrices described above and provide narratives explaining any
proposed cost
increases or decreases relative to historical costs; the escalation
rates used for
materials, equipment, subcontracts, direct labor and indirect
expenses, and why
they should be considered reasonable; and any cost reductions
attributed to
commonality with other programs, company-funded efforts, or
capitalization of
equipment. In short, offerors were required to provide cost/pricing
information
sufficient to support the "realism and reliability" of their proposed
prices.
The agency received proposals from GEC and Rockwell by the RFP's
closing date,
and included both proposals in the competitive range. The agency
conducted
written and face-to-face discussions with the offerors, and requested
and received
best and final offers (BAFO).
GEC's proposal was rated as green/acceptable with moderate to high
risk under
the Resource Management and Problem Resolution evaluation factor, and
green/acceptable with low risk under the Parts Obsolescence evaluation
factor,
at an evaluated price of $14,491,400. Rockwell's proposal was rated
as
green/acceptable with low risk under both the Parts Obsolescence and
Resource
Management and Problem Resolution evaluation factors, at an evaluated
price of
$17,826,300.[2]
The source selection authority (SSA), while recognizing that
Rockwell's proposal
was "approximately 23 percent higher in evaluated cost/price,"
determined that the
"significantly lower risks in regard to timely, quality performance
justify paying the
cost/price premium associated with the Rockwell proposal." In
reaching this
conclusion, the SSA, consistent with the findings of the source
selection evaluation
team, noted that GEC's proposal "offered prices that the offeror
concedes would
result in a $4.8 [million] loss to the company at the [BEQ]," and that
GEC's losses
may be even greater should certain proposed cost-cutting initiatives
fail to be fully
realized. The SSA concluded that GEC's "unrealistically low prices"
considered in
conjunction with its evaluated "record of performance on relevant past
and present
contracts [which] indicates a pattern of late deliveries" equated to
"substantial risk
as to GEC's future abilities and commitment to make timely, quality
deliveries"
should it be awarded the contract. The SSA subsequently directed that
the contract
be awarded to Rockwell as the offeror submitting the proposal
representing the
best overall value to the government.
This protest followed. GEC's protest centers on the agency's
determination that
GEC's proposal represented moderate to high risk under the Resource
Management
and Problem Resolution evaluation factor and its role in the award
selection,
although GEC also protests Rockwell's evaluation.
GEC first argues in this regard that its proposed prices were based
upon
[DELETED], and because of this, it had "not offer[ed] to perform [the
contract] at a
loss" as determined by the agency. GEC contends that, contrary to the
agency's
determination, GEC's "profitability would be substantially enhanced by
the award,"
and the agency's conclusion that GEC's low prices created a
performance risk was
thus unreasonable.
"Realism" ordinarily is not considered in the evaluation of proposals
for the award
of a fixed-price contract because the government's liability is fixed
and the risk of
cost escalation is borne by the contractor. Human Resources Sys.,
Inc.; Health
Staffers, Inc., B-262254.3 et al., Dec. 21, 1995, 96-1 CPD para. 35 at 5.
However,
because the risk of poor performance when a contractor is forced to
provide
products or services at little or no profit is a legitimate concern in
evaluating
proposals, an agency at its discretion may, as here, provide for a
price realism analysis in the solicitation of fixed-price proposals.
Cardinal Scientific, Inc., B-270309, Feb. 12, 1996, 96-1 CPD para. 70 at
4; PHP Healthcare Corp.; Sisters of
Charity of the Incarnate Word, B-251799 et al., May 4, 1993, 93-1 CPD para.
366 at 5.
The nature and extent of an agency's price realism analysis is a
matter within the
sound exercise of the agency's discretion. Cardinal Scientific, Inc.,
supra at 4. The
FAR provides a number of price analysis techniques that may be used,
including a
comparison of current proposed prices with prior proposed and contract
prices for
the same or similar items or with the government estimate. FAR sec.
15.805-2. An
in-depth cost analysis is generally not required. PHP Healthcare
Corp., B-251933,
May 13, 1993, 93-1 CPD para. 381 at 5.
In conducting its CPRA of GEC's proposal, the agency found, among
other things,
that although the proposal stated that "[i]n order for GEC to provide
the best value
to the [g]overnment, we have chosen a 'middle of the road' approach
which
precludes either an excessive profit or a substantial loss," the price
matrix
submitted by GEC provided for a $[DELETED] loss at the BEQ for 1997.
The
agency also found that GEC's price matrix showed that GEC had priced
all but one
of the JTIDS configurations at a loss.
The agency thus requested that GEC provide its "proposed profit/loss
projections at the BEQ" for 1998 and 1999, and was informed by GEC in
a response to a
clarification request that based upon its proposed prices it expected
to incur
"losses" of $[DELETED] and $[DELETED] at the BEQ in 1998 and 1999,
respectively. GEC reduced its projection of its 3-year losses at the
BEQ from
$[DELETED] to $[DELETED] in its BAFO. According to the agency, GEC
explained
that this projected reduction in the loss it would incur at the BEQ
was because of
[DELETED].
The agency also found that GEC's proposed prices for certain materials
and
services were significantly less than the prices derived from the cost
data
previously obtained from the offerors.[3] The agency reviewed each of
these
deviations from the historical cost data, which totaled $[DELETED] at
the BEQ, in
detail and considered them either "substantiated" or "unsubstantiated"
based upon
the agency's review of GEC's proposal and GEC's responses to the
agency's written
and oral discussion questions.
For example, with regard to labor costs, the agency determined that
$[DELETED]
of the difference between the prices indicated by the historical cost
data and GEC's
proposed price at the BEQ were the result of GEC's projected [DELETED]
decrease
in labor hours. The agency concluded, based upon GEC's
representations, that this
reduction was "[a]ggressive, yet attainable," and thus considered it
substantiated.
With regard to material costs, of the 30 material cost deviations
identified in GEC's
proposal, the agency considered 17 of the deviations to be
substantiated and
13 unsubstantiated. For example, the agency accepted GEC's
explanations with
regard to certain items that the reduction in material costs was due
to a "[n]ew
source of supply" or an increase in quantity to be ordered under the
RFP from that
which was ordered under the previous contracts, and rejected as
unsubstantiated
those reductions that GEC stated were due merely to an "audit" of or
"correction" to
the "pricing bill of material" without further explanation. In all,
the agency
considered $[DELETED] of the price reductions reflected in GEC's
proposal to be
substantiated, and $[DELETED], all related to material costs, to be
unsubstantiated.
The agency, in its final CPRA, determined that GEC's probable loss at
the BEQ
totaled $[DELETED]. The agency arrived at this figure by adding the
$[DELETED]
loss projected by GEC, the $[DELETED] in material cost reductions,
described
above, which the agency determined were unsubstantiated, and
$[DELETED]
because GEC had calculated its price for non-warranty repair,
engineering
services/installation support [DELETED]. The agency then deducted
$[DELETED]
from this total because of recently concluded negotiations with GEC
regarding
certain indirect rates. The agency also calculated GEC's proposed
losses, based
upon similar quantifications, should 111 JTIDS terminals be ordered,
and should the
maximum quantity of 230 terminals be ordered, and determined that
GEC's losses at
these quantities would total $[DELETED] and $[DELETED],
respectively.[4]
GEC argues that its proposal was based upon [DELETED], and thus,
contrary to the
agency's CPRA, "GEC did not offer to perform at a loss." GEC explains
that
[DELETED]. GEC adds that [DELETED]. GEC has submitted detailed
analyses of
its costs and pricing, which purports to demonstrate that GEC would
make a profit
at the BEQ set forth in the RFP, as well as at the quantities of 111
and 230
evaluated by the agency. GEC concludes that "it would be much better
off
financially with the contract than without it," and that the agency
thus acted
unreasonably in determining that GEC's pricing created, in part, a
risk of poor
performance.
GEC's detailed analysis prepared during the course of this protest in
support of its
position on this issue does not render the agency's conclusions
unreasonable. In
this regard, we first note that the position taken by GEC in this
protest--that
contrary to the agency's evaluation, it had not offered to perform the
contract at a
loss because of its [DELETED]--is inconsistent with the
representations made by
GEC during the conduct of this procurement. As mentioned previously,
in the
pricing matrix included by GEC in its proposal, and in its responses
during written
and oral discussions, GEC represented that its pricing reflected a
loss at the BEQ.
We further note that GEC's detailed analysis and assertions concerning
the
[DELETED] it allegedly employed in developing its price proposal and
the effect
that the contract would have on GEC's overall profitability appeared
for the first
time in GEC's comments on the agency report. That is, although GEC
mentioned
during the procurement process that its proposal was based upon
[DELETED] and
claimed that overall it would be better off with the contract than
without it, the
statements made, prior to the conduct of this protest, were lacking in
detail or
analysis. Because an agency's evaluation is dependent upon the
information
furnished in a proposal, it is the offeror's burden to submit an
adequately written
proposal for the agency to evaluate. DATEX, Inc., B-270268.2, Apr.
15, 1996, 96-1
CPD para. 240 at 6; Infotec Dev., Inc., B-258198 et al., Dec. 27, 1994,
95-1 CPD para. 52 at 6. Here, in light of GEC's failure to fulfill its
obligation in this regard, we see no basis
to criticize the agency's evaluation of this aspect of GEC's proposal
as
unreasonable.
In any case, the record reflects that the agency understood the
concepts and goals
of GEC's [DELETED] as a strategy that can improve profitability, and
recognized
that GEC may be better off as a company with this contract than
without it.
However, based on its detailed review and analyses of GEC's
submissions and
explanations, the agency reasonably found that GEC's [DELETED] were
based on a
variety of optimistic or unsupported assumptions, and that there was a
significant
risk that GEC's performance under the contract may be so unprofitable
that
performance would be adversely affected, particularly given GEC's
history of failing
to make timely deliveries under JTIDS contracts (discussed below).
GEC also protests the agency's determination that its proposed
material costs were
unrealistic and understated. According to GEC, the agency acted
unreasonably by
assertedly relying "exclusively" on the historical data obtained from
the offerors in
August 1996, and rejecting the explanation provided by GEC in its
responses to the
agency's written and oral discussions.
As indicated, in performing its CPRA, the agency identified 30
instances in which
GEC's proposed costs for materials were significantly lower than the
costs indicated
by the historical data the agency had obtained from the offerors.
Because the
agency had been assured by GEC at the time of its visit to GEC's
facility that the
data were "actuals," and not estimates, the agency requested during
discussions that
GEC "provide an analysis of June actuals vs proposed materials costs
by [line
replaceable unit/shop replaceable unit] LRU/SRU."
GEC responded that the material requirements planning (MRP) bill of
materials
(BOM) from which the data were obtained "was not fully reviewed as a
priced BOM
would be to support a major quoting activity due to time and manpower
limitations," while the BOM on which GEC's proposed prices were based
had been
"reviewed in great detail." GEC also provided as an attachment to
this response a
page from its initial proposal which set forth its "material pricing
methodology," and
a chart depicting "a top-level comparison between its proposed
material costs and
the November 1996 actuals."[5]
The agency determined that GEC's response failed to adequately address
the
agency's question regarding the differences between GEC's proposed
material costs
and the data the agency had obtained from GEC in August 1996, and
because of
this, the agency raised a number of further questions during oral
discussions with
GEC concerning these differences. According to the record, GEC stated
that it was
no longer in possession of the data it had provided to the agency in
August 1996,
and thus could not respond to these questions.
The agency also asked GEC during oral discussions certain questions
about the
"top-level comparison" chart it had submitted; specifically, the
agency asked GEC to
identify the contract under which "November 1996 actuals" were
incurred, and what
a certain notation on the chart comparing the November 1996 actuals
with the data
obtained from GEC in August 1996 meant. GEC responded that the
November 1996
"actuals predate the . . . material costs collected by the
[g]overnment in Aug[ust]
1996," and that the notation in question "is a financial accounting
add-on module" to
its materials requirements planning (MRP) system. GEC added that its
MRP system
is "not a certified accounting system," and that it is "not completely
comfortable
using the system for proposal purpose[s]." At the conclusion of these
discussions,
the agency provided GEC with a copy of the data obtained in August
1996, and
requested that GEC submit written responses to the questions GEC had
been unable
to answer.
In its written response, GEC stated that, among other things, the
"June 1996
'[a]ctuals' provided to [the agency] in August 1996 were in fact an
estimate of
material." GEC added that "[f]or the . . . proposal, significant
reductions in LRU
material cost estimates were realized from the August 1996 [e]stimate
of [m]aterials
as a result of an in-depth audit by GEC." GEC's response contained a
number of
attachments which identified particular JTIDS components in question,
and
explained the difference between the data obtained by the agency in
August 1996
and that set forth in GEC's proposal.
The agency's review of this material resulted in its acceptance of a
number of the
differences as substantiated, and its determination that a number
remained
unsubstantiated. Essentially, the agency rejected the cost estimates
as
unsubstantiated where the only explanation provided by GEC was that
the
reduction was due to, for example, an "audit of the [p]ricing [b]ill
of [m]aterial."
Overall, as indicated previously, the agency determined as a result of
its analysis of
GEC's proposed material costs that of the $[DELETED] in material cost
reductions
proposed by GEC, $[DELETED] were substantiated and $[DELETED] were
unsubstantiated.
As indicated above, the agency, despite the protester's contrary view,
did not rely
exclusively on the data it obtained in August 1996 to determine
whether GEC's
proposed prices were realistic. Rather, the record evidences that the
agency
conducted a detailed analysis of GEC's proposal and provided GEC with
ample
opportunity to explain why certain of its proposed costs deviated from
the
historical data and thus appeared underestimated. The record
demonstrates that
the agency considered GEC's submissions, as well as the historical
data obtained in
August 1996, in reaching its conclusions regarding the realism of
GEC's cost/price
proposal.
The record also evidences that the agency reasonably determined that
the
$[DELETED] in cost reductions proposed by GEC were unsubstantiated and
certain
of the prices proposed by GEC were thus unrealistic. That is, the
record
demonstrates that the agency carefully reviewed GEC's cost/price
proposal,
identified where the proposal deviated from the historical data
obtained in August 1996, requested that GEC provide information
supporting the realism of GEC's reduced prices, and ultimately
accepted nearly half of GEC's proposed cost
reductions as substantiated, and rejected only those for which GEC
stated, without
explanation or supporting documentation, that the reductions were due
to an
"audit." We simply cannot find that the agency unreasonably concluded
that GEC
had underestimated its material costs in its proposal at the BEQ,
where the costs
were $[DELETED] less than the costs indicated by the historical data
provided to
the agency in August 1996, and GEC's only explanation is that the
reductions were
due to internal audits without any supporting documentation. While
the protester
complains that the agency should have accepted its explanations
concerning all of
the cost reductions it proposed, the protester's arguments constitute,
at best, mere
disagreement with the agency's determinations and therefore do not
provide a basis
to sustain the protest. See Human Resources Sys., Inc.; Health
Staffers, Inc.,
supra at 6.[6]
In sum, the agency reasonably determined that GEC's proposal presented
a risk
because its proposed prices were unrealistically low inasmuch as they
were far
lower than historical prices for the same items and GEC did not
provide an
adequate justification for the price differential.
The protester next argues that the agency should have found Rockwell's
prices
unrealistic, and that its assessment of Rockwell's proposal under the
Resource
Management and Problem Resolution evaluation factor as having "low"
risk was
thus unreasonable.
The agency found in conducting its CPRA of Rockwell's proposal that
Rockwell's
prices were based in part upon its strategy of [DELETED]. Rockwell
explained in
its proposal that this strategy was based upon its marketing
assessment that
[DELETED]. The proposal also included an explanation of the
methodology used to
arrive at its proposed prices for materials based upon this
acquisition strategy.
The agency requested during discussions that Rockwell, with regard to
its proposed
approach of [DELETED], explain "the degree of risk Rockwell is taking
with this
approach and what, if any, [DELETED] will be made [DELETED] to
mitigate risks
in the event that [DELETED]. The agency also asked Rockwell if it had
"an
alternate plan [DELETED].
Rockwell responded by repeating that its marketing forecast indicated
a strong
requirement for JTIDS terminals in excess [DELETED]. Rockwell added
that its
plan included [DELETED]. Rockwell further explained that [DELETED].
Rockwell
also explained that [DELETED].
During oral discussions, Rockwell reiterated its position that its
"marketing research
indicates that there may be [DELETED]. As an example of the
credibility of its
marketing assessment, Rockwell pointed out that [DELETED]. Rockwell
again
explained how [DELETED]. Rockwell concluded that [DELETED].
The agency determined that despite Rockwell's representations
regarding its
marketing assessments [DELETED], "it is likely that Rockwell will
incur
[DELETED]," which were not included in Rockwell's proposal. The
agency
determined that [DELETED], as well as Rockwell's ability to [DELETED],
"could
minimize the cost impact and risk [DELETED]. In sum, the agency,
based upon its
assessment of the cost risk assumed by Rockwell, including its
assessment of
[DELETED], determined that Rockwell's proposal was underestimated with
regard
to material costs by [DELETED].[7] The agency concluded that Rockwell
would still
be able to perform the contract to be awarded under this RFP at a
profit (albeit a
smaller one), and thus did not find that Rockwell's underestimated
costs created
any risk with regard to Rockwell's proposal.
GEC argues that the agency's CPRA "grossly underestimates the risk
inherent in
Rockwell's [DELETED] decision," and argues that "Rockwell's decision
to
[DELETED]. GEC argues that the agency should have verified Rockwell's
claim
that it could [DELETED]. GEC also provides a detailed analysis as to
why, in its
view, Rockwell's plan to [DELETED] "does not eliminate the risk
[DELETED]."
In our view, GEC's arguments reflect its mere disagreement with the
agency's CPRA
of Rockwell's proposal. In this regard, the record demonstrates that
the agency
made reasonable inquiries as to the risks associated with Rockwell's
proposed
material acquisition plan and carefully considered Rockwell's
responses. As
indicated above, the agency was not completely satisfied that
Rockwell's price
proposal adequately accounted for all material costs and determined
that because
Rockwell's proposed prices did not account for any increase in costs
for materials
as the result of termination expenses and quantity reductions, its
costs were
underestimated by [DELETED]. Agencies have broad discretion in
conducting price
realism analyses, and while GEC obviously believes that Rockwell's
costs of
termination and excess inventory are greater than that determined by
the
agency, we are not persuaded that the agency's assessment was
unreasonable.
EC Corp., B-266165.2, Feb. 20, 1996, 96-1 CPD para. 153 at 4.
GEC next argues that the agency's evaluation of its past performance
was
unreasonable. GEC concedes that, consistent with the agency's
evaluation, "it has
had some problems with timely deliveries in the past," but contends
that "[c]urrent
GEC performance demonstrates that it unquestionably can" achieve the
performance schedule contemplated by the RFP, and that to "[p]enalize
GEC in the
evaluation process for past performance problems--regardless of where
the fault
lay--in the face of demonstrated current timely performance makes no
sense."
The evaluation of proposals is primarily a matter within the
contracting agency's
discretion. Where an evaluation is challenged, we will examine the
evaluation to
ensure that it was reasonable and consistent with the evaluation
criteria. Macon
Apparel Corp., B-272162, Sept. 4, 1996, 96-2 CPD para. 95 at 3.
As mentioned previously, the RFP expressly stated that proposals would
be
evaluated to assess "the risks associated with the offeror's proposed
approach and
the degree to which the offeror's present and past performance on
other relevant
contracts provides the [g]overnment with confidence that the offeror
will
successfully accomplish the requirements of the current solicitation."
With regard to GEC, the agency identified a total of 14 past and
present contracts
for initial review. Questionnaires were distributed and received
concerning each of
these contracts. The agency determined that GEC's performance on
three of the
contracts would not be considered because either sufficient
information was not
available or the contract was determined to be irrelevant to this
effort. The agency
found in reviewing the remaining 11 responses that, while in some
areas the
responses were positive, there was [DELETED]. For example, GEC was
found to
be [DELETED], which the agency believed [DELETED].
Although GEC points out that it has performed well on some current
contracts, and
has instituted a number of "corrective actions to avoid future
delivery problems,"
the record evidences that the agency specifically considered this
recent
performance in its overall assessment of GEC's past performance and
determined
that, as a whole, GEC's proposal represented "moderate" risk under the
Resource
Management and Problem Resolution evaluation factor because of the
"inability of
GEC to meet contractual requirements regarding schedule . . . for the
majority of
program contracts reviewed." Because the RFP clearly stated that the
offerors'
proposals would be assessed for risk and that this assessment would
include the
consideration of the offerors' performance on contracts within the
past 3 years, and
our review of the record confirms the reasonableness of the agency's
determination
as to GEC's past, and under one contract, current performance
difficulties (and
GEC in fact concedes that it has had these problems), we cannot find
that the
agency acted unreasonably in assessing GEC's proposal as having
"moderate" rather
than "low" risk under the Resource Management and Problem Resolution
evaluation
factor.
GEC also argues that the agency's evaluation of Rockwell's past
performance was
unreasonable. Specifically, GEC contends that Rockwell's proposal
should have
been evaluated as having "moderate" rather than "low" risk under the
Resource
Management and Problem Resolution evaluation factor because the
questionnaires
received by the agency concerning Rockwell's past performance
indicated that
Rockwell has failed to meet the delivery schedules of two contracts.
The agency points out that with regard to one of the contracts,
Rockwell had
[DELETED]. With regard to the other instance [DELETED] referenced by
the
protester, the agency responds that [DELETED]. The agency argues that
because
neither of these instances of late delivery had any direct impact on
Rockwell's
customers or the relevant programs, and because these were the only
instances of
late delivery for which Rockwell was at fault, Rockwell's performance
risk rating of
"low" was reasonable.
GEC did not substantively respond to the agency's explanation, but
rather, in its
comments, pointed out one other contract on which Rockwell had,
according to
GEC, "performance problems." Under this contract, Rockwell is to
build and test
two Common Signal Processor replacement kits. The agency states that
in its view,
GEC was the cause of the problems on this contract because GEC had
"failed to
deliver the required data and drawing packages" for Rockwell's effort.
GEC
responded to this assertion by stating that the agency, rather than
GEC, was "the
primary cause for the delay." Because under either GEC's or the
agency's version
of the events Rockwell is not to blame for any "performance problems"
associated
with this contract, we fail to see why these "performance problems"
are relevant to
the agency's risk assessment of Rockwell's proposal.
Under these circumstances, where in two instances Rockwell's late
deliveries
appear to be relatively minor in nature, and the third instance of a
"performance
problem" identified by the protester was caused by either GEC or the
agency, but
not Rockwell, we have no basis on which to object to the agency's
assessment that
Rockwell's record of past performance indicated a "low" performance
risk.
Finally, GEC challenges the agency's price/technical tradeoff
determination as
unreasonable based upon its contentions that its proposal was
unreasonably
evaluated as having a moderate to high risk under the Resource
Management and
Problem Resolution evaluation factor. As explained in the analysis
above, we have
no basis to question the agency's judgment that GEC's proposal
represented a
"moderate to high risk" under the Resource Management and Problem
Resolution
factor.[8] Since the agency in its award selection document
reasonably explained
why the risks inherent in GEC's proposal offset GEC's evaluated price
advantage,
GEC's contentions here provide no basis for overturning the award
determination.
Hughes Georgia, Inc., B-272526, Oct. 21, 1996, 96-2 CPD para. 151 at 8.
The protest is denied.
Comptroller General
of the United States
1. There are currently 10 configurations of class 2/2H terminals.
2. The agency recognized that the methodology, by which it determined
total evaluated prices for each offeror, "was an attempt to capture
the best possible prices across a range of indefinite quantities" and
did "not correspond in any way to the expected costs to the
[g]overnment for this effort." For example, the agency determined
that if it were to order the BEQ of JTIDS terminals, spares and
services set forth in the RFP, GEC's and Rockwell's price to the
government for such an order would total $[DELETED] and $[DELETED],
respectively.
3. The agency, in preparing for the conduct of this procurement, made
a "fact-finding visit" to the facilities of both GEC and Rockwell to
collect material and labor cost data from prior JTIDS contracts. The
data, which were obtained by the agency in August 1996, consisted of
the contractors' cost data for JTIDS contracts through June 1996, and
were used by the agency in its CPRA of the offerors' proposals.
4. The agency calculated GEC's losses should 111 terminals be ordered
because GEC stated in its proposal that this was the quantity it had
determined through its own marketing assessment would most likely be
ordered, and thus was the [DELETED].
5. The top-level comparison indicates that overall GEC's proposed
prices were 9 percent lower than the November 1996 actual prices.
6. GEC also argues that the agency acted unreasonably because it
"calculated the 'loss' that GEC would allegedly incur at different
quantities without any regard to the probability that these quantities
would be ordered"; the protester points out that, according to the
weights assigned to the quantities set forth in the price matrix which
were used to determine the proposals' total evaluated price, the
probability that the agency would order the maximum quantity of 230
JTIDS terminals and spares was extremely low. The record contradicts
this argument, reflecting that the agency's primary concern was the
realism of the prices proposed by the offerors at the BEQ, and that
the agency gave very little weight to the realism of the prices it
calculated for the offerors should the agency order the maximum
quantity of 230 terminals.
7. The agency has submitted a detailed affidavit explaining how it
calculated the [DELETED] figure. Because the accuracy of the agency's
assessment has not been challenged with regard to these calculations,
the details of this aspect of the agency's analysis need not be
repeated here.
8. GEC has made a number of other related contentions during the
course of this protest having to do with the agency's evaluation of
the offerors' past performance and the realism of their price
proposals. Although not all these contentions are specifically
addressed in this decision, each was carefully considered by our
Office and found to be either insignificant in view of our other
findings, or invalid based upon the record as a whole.