BNUMBER:  B-276186; B-276186.2 
DATE:  May 21, 1997
TITLE: GEC-Marconi Electronic Systems Corporation, B-276186; B-
276186.2, May 21, 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: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.