BNUMBER:  B-276740; B-276740.2 
DATE:  July 23, 1997
TITLE: Precision Echo, Inc., B-276740; B-276740.2, July 23, 1997
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DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective 
Order.  This redacted version has been approved for public release.
Matter of:Precision Echo, Inc.

File:     B-276740; B-276740.2

Date:July 23, 1997

Donald G. Featherstun, Esq., and Mitchell H. Segal, Esq., Seyfarth, 
Shaw, Fairweather & Geraldson, for the protester.
Ronald K. Henry, Esq., Kaye, Scholer, Fierman, Hays & Handler, for 
TEAC America, Inc., an intervenor.
Daniel A. Laguaite, Esq., Department of the Navy, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest challenging evaluation and source selection is denied where 
agency reasonably determined that awardee's aircraft video fatigue 
data recorder demonstrated more user-friendly interface and 
consequently higher reliability; since awardee's proposal therefore 
was superior to protester's under the most important evaluation 
criteria, agency reasonably concluded that, despite its higher price, 
it represented better value than protester's.

DECISION

Precision Echo, Inc. protests the award of a contract to TEAC America, 
Inc. under request for proposals (RFP) No. N00163-96-R-0336, issued by 
the Department of the Navy, Naval Air Warfare Center, Indianapolis, 
Indiana, for HI-8mm video fatigue data recorders (VFDR) for the 
Harrier AV-8B aircraft.[1]  Precision Echo challenges the 
acceptability of TEAC's offer and the evaluation generally.

We deny the protest.

The solicitation provided for award of a fixed-price contract for a 
base quantity of 209 VFDRs (with an option for an additional 20 units) 
to the responsible offeror whose offer "provides the best value to the 
Government" under the following three criteria (listed in descending 
order of importance):  (1) statement of work (SOW), comprised of six 
subcriteria, including performance requirements, 
mean-time-between-failure (MTBF), mean-time-to-repair (MTTR), 
environmental survivability, safety assessment, and supportability; 
(2) past performance; and (3) price.  Past performance was "slightly 
less important" than SOW, while price was "the least important."

Four proposals from three offerors were received by the closing time 
on October 1, 1996.  TEAC submitted two proposals--one for entirely 
new VFDRs, and a "buy-back" proposal which offered a price reduction 
based upon the return and reuse of certain components from the 
agency's current VFDRs.  All proposals were included in the 
competitive range.  Following discussions with offerors, the Navy 
requested best and final offers (BAFO).  Based upon its evaluation of 
BAFOs, the agency determined that TEAC's buy-back proposal provided 
the best value to the government.  The evaluation results were as 
follows:

                      TEAC (New/Buy-back)      Precision Echo

SOW                                       

     Performance          Satisfactory Plus      Satisfactory Plus

     MTBF                 Highly Satisfactory      Satisfactory

     MTTR                 Highly Satisfactory      Highly Satisfactory

     Survivability        Satisfactory          Satisfactory

     Safety               Satisfactory          Satisfactory

     Supportability       Highly Satisfactory      Satisfactory

Past Performance          Highly Satisfactory      Satisfactory

Risk                      Low                   Moderate

OVERALL NON-PRICE         Highly Satisfactory      Satisfactory

PRICE                     $[DELETED](New)/
                          $1,143,855 (Buy-back)
                                                $[DELETED]
On December 20, the Navy made award to TEAC.

REUSE OF MATERIAL

TEAC offered a credit or price reduction of $[DELETED] per new VFDR 
when an existing VFDR was returned in working order within 60 days of 
receipt of the new replacement unit.  Precision Echo maintains that 
this constituted the use of government-furnished material (GFM), and 
that this arrangement resulted in an unfair competitive advantage for 
TEAC because the solicitation did not advise offerors that GFM would 
be available, as required by Federal Acquisition Regulation (FAR)  sec.  
45.303-2.  Precision Echo also argues that the agency improperly 
failed to fully evaluate the buy-back proposal, for example, by not 
considering the additional costs to the government in the event that 
existing VFDRs were not returned on time and in working order.

While the Navy denies that it acted improperly or unreasonably in 
accepting TEAC's alternate buy-back offer, the agency also asserts 
that, in any case, Precision Echo was not prejudiced since TEAC's 
other proposal--offering all new VFDRs--not Precision Echo's, was next 
in line for award by virtue of its superior ratings under the SOW and 
past performance evaluation factors.  In this regard, a protest will 
not be sustained unless the protester demonstrates a reasonable 
possibility that it was prejudiced by the agency's actions, that is, 
unless the protester demonstrates that, but for the agency's actions, 
it would have had a substantial chance of receiving the award.  
McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD  para.  54 at 3; see 
Statistica, Inc. v. Christopher, 102 F.3d 1577 (Fed. Cir. 1996).

As discussed in detail below, we find that the Navy reasonably 
determined that TEAC's proposal based on furnishing all new VFDRs was 
next in line for award.  As a result, Precision Echo was not 
competitively prejudiced by any alleged impropriety regarding the use 
of GFM in TEAC's buy-back proposal, and there is no basis for 
sustaining the protest on this ground.[2]

PAST PERFORMANCE

Offerors were required to furnish "a summary of recent relevant 
contracts which appropriately supports past and present positive 
performance or correction of past or present performance problems."  
For each relevant contract, offerors were to provide specified 
contract administration data, a description of the relevance of the 
contract, and a synopsis of contract performance, including 
information with respect to (1) product quality, (2) product 
performance, "with particular emphasis on reliability and 
maintainability," (3) delivery schedule performance, and (4) 
cost/price performance.  The RFP advised that past and present 
performance would be evaluated based on this information, as well as 
data in existing government databases or from contracting offices and 
on-site surveys.  As noted above, TEAC's past performance was rated 
highly satisfactory, and Precision Echo's only satisfactory.

Precision Echo essentially argues that the evaluation of TEAC's past 
performance failed to account for schedule problems that led the 
cognizant Defense Contract Management Center (DCMC) for the facility 
at which TEAC proposed to complete the VFDRs to recommend against 
award to TEAC.  In this regard, the DCMC reported that TEAC America 
had not previously manufactured VFDRs but, rather, had acted only as a 
distributor of VFDRs manufactured by other TEAC entities.  The DCMC 
found that, while TEAC possessed satisfactory organization and 
management, facilities, equipment, material and subcontracting 
systems, and personnel, such that TEAC "appears able to produce" the 
VFDRs, TEAC's current and past performance was unsatisfactory.  
Specifically, according to the pre-award survey report, the 
information available to the DCMC indicated that TEAC was responsible 
for delays on approximately 89 percent of its current contracts.  In 
contrast, the pre-award survey on Precision Echo reported that, while 
7 of its 29 current contracts (24 percent) were delinquent, Precision 
Echo was responsible for the delays on only 4 of the 7 contracts, for 
an effective delinquency rate of 14 percent.  Precision Echo argues 
that, given TEAC's record of unsatisfactory performance, the agency 
could not reasonably assign its proposal a higher past performance 
rating and a lower risk rating than Precision Echo's received.

In considering a protest against an agency's evaluation of proposals, 
we will examine the record to determine whether the agency's judgment 
was reasonable and consistent with stated evaluation criteria and 
applicable statutes and regulations.  ESCO, Inc., 66 Comp. Gen. 404, 
410 (1987), 87-1 CPD  para.  450 at 7.  The information available to the 
Navy at the time of the evaluation reasonably supported TEAC's 
superior past performance rating.  

Relevance

As noted, the RFP focused on "recent relevant contracts," specifically 
calling for an explanation of the relevance of the contract to the 
work contemplated here, that is, production of current generation 
HI-8mm VFDRs.  The record shows that the Navy discounted much of the 
DCMC's report on the basis of lack of relevance; as acknowledged by 
the DCMC itself, the performance information reviewed related only to 
TEAC's performance as a distributor, not as a manufacturer.  Further, 
TEAC explained to the Navy that all of the discrepancies cited by the 
DCMC related to spare parts and service/repair contracts for TEAC's 
oldest model video recorders, with none related to its current line of 
HI-8mm VFDRs.  Moreover, TEAC advised the Navy that DCMC's information 
(marginally relevant as it was) was inaccurate in significant 
respects; TEAC furnished the Navy with information indicating that 
significantly fewer of the cited contracts, on the order of 29 to 43 
percent, could be considered delinquent.  

The Navy considered the contracts for TEAC's HI-8mm VFDRs to be most 
relevant for the past performance evaluation.  In this regard, TEAC's 
proposal discussed 12 contracts (in 8 contracting programs) for its 
HI-8mm VFDRs, on all of which it reported successful performance.  In 
addition, in a letter to the DCMC, a copy of which was furnished to 
the agency, TEAC cited an additional 15 contracts for its HI-8mm 
VFDRs.  (In contrast, while Precision Echo also referred in its 
proposal to successful past performance on contracts for HI-8mm VFDRs, 
it cited only three contracts, only one of which--albeit the 
largest--was for installation in high performance jet aircraft, the 
application in this contract.)  This information led the agency to 
conclude that TEAC's relevant past delivery schedule performance had 
been "excellent."  We find nothing unreasonable in the agency's 
reaching this conclusion, based on the contracts most similar to the 
effort under this RFP.  

Quality and Reliability

In any case, the record shows that it was the quality and reliability 
of the VFDRs that was the most significant discriminator in the past 
performance area.  Two of the four specific areas proposals were to 
address in describing the quality of performance under the listed 
contracts were product quality and product performance, "with 
particular emphasis on reliability and maintainability."  The 
available data led the Navy to conclude that the overall product 
quality of the TEAC VFDR was "much more desirable" than that of 
Precision Echo's.  Specifically, TEAC's VFDR was rated "extremely 
reliable," and "much more reliable" than Precision Echo's, with a 
demonstrated MTBF of at least 1,900 hours.  In contrast, although 
Precision Echo estimated the MTBF of its VFDRs as between 3,300 and 
6,534 hours, the available past performance data showed a 
significantly lower MTBF, with its latest line of VFDRs demonstrating 
an MTBF of approximately 801 hours (earlier models showed an even 
lower MTBF).[3]

Precision Echo challenges the evaluated MTBF numbers.  According to 
the protester, most of the failures attributed to its VFDR were caused 
by user misuse, such as attempting to remove a tape when the aircraft 
power had been turned off and before the tape had been completely 
unthreaded.  Precision Echo asserts that when MTBF is properly 
calculated to exclude user-caused failures, the TEAC and Precision 
Echo MTBFs are the same.  In support of its position regarding user 
misuse, Precision Echo cites an electronic mail message dated June 19, 
1997 (after this protest was filed), from an officer apparently 
serving on the aircraft carrier USS Nimitz, which states as follows:

     Operator induced failures continue to be a big problem.  The 
     recorder is not a milspec sailor-proof box.  If an attempt is 
     made to remove a tape that is not completely unthreaded, the 
     recorder drive will be damaged and require replacement.  
     Different squadrons exhibit wide ranges of MTBFs which appear to 
     correlate to their understanding of the system.  As an example, 
     one squadron deployed aboard the [aircraft carrier USS] Roosevelt 
     reported over an [1800-hour] MTBF while another squadron aboard 
     the same carrier was getting about [a] [100-hour] MTBF.  The 
     demand from the squadron with the high failure rate effectively 
     dried up spares for lower priority (ashore and on workups) 
     squadrons.

The protester's argument is without merit.  The technical evaluation 
team (TET) was well aware that users played a role in Precision Echo's 
lower MTBF.  However, after conducting a "hands-on review," the TET 
attributed significant responsibility for Precision Echo's VFDR's 
higher failure rate to product design.  According to the TET report, 
"[i]t is clear that human interface problems exist with the [Precision 
Echo] recorder" and "[h]uman interface problems are viewed as quality 
problems."  In this regard, the Navy reports that examination of the 
actual VFDRs indicated that the TEAC unit was "more ruggedized" and 
possessed "a more friendly user interface such that the unit was less 
likely to be inadvertently damaged by Navy or Marine personnel."  For 
example, the agency reports that the TEAC VFDR has a mechanical 
ejection system connected to the door, which raises the flight tape 
out of the chassis, thereby reducing the likelihood of inadvertent 
damage to the VFDR.  In contrast, reports the agency, Precision Echo's 
tape ejection requires an additional step--a lever located inside the 
front panel must be manually released by the user, who usually is 
wearing gloves.  As another example, the Navy reports that vendor data 
indicates that the tape transport mechanism for the TEAC VFDR has a 
lower repair rate than Precision Echo's.  Further, since TEAC's tape 
transport mechanism, unlike Precision Echo's, is constructed of 
separate subcomponents, it often can be repaired without replacing the 
entire mechanism.  

The Navy's conclusions were reasonable.  The Navy was aware of the 
possibility that many of the failures of Precision Echo's VFDRs were 
due to user error, but specifically determined that these errors 
likely were attributable, at least in significant part, to design 
features.  It appears that the features cited by the agency, including 
those discussed above, reasonably could account for failures, and a 
resultant lower MTBF, and Precision Echo has not shown otherwise.  
Although one squadron on the Roosevelt reportedly attained an MTBF of 
more than 1,800 hours using the Precision Echo VFDR (a fact not known 
to the evaluators at the time of source selection), this fact alone, 
even if it had been available at the time of the evaluation, would not 
preclude the agency from considering the countervailing fact that 
another squadron on the same ship attained a significantly lower MTBF 
(no more than 100 hours, which corresponds to the experience of the 
squadrons aboard the Nimitz), and the reports of Precision Echo's 
significantly lower overall MTBF on F/A-18 aircraft relative to the 
TEAC VFDRs similarly deployed; the agency reasonably concluded that, 
on average, the Precision Echo VFDR was more difficult to use or learn 
to use properly than the TEAC unit.  We conclude that the Navy 
reasonably viewed the past performance data as indicating that TEAC's 
VFDR was more ruggedized and had a more user-friendly interface such 
that it was likely to be more reliable in future use.  It follows that 
the Navy reasonably rated TEAC's overall past performance superior to 
Precision Echo's.

PRICE/TECHNICAL TRADEOFF

TEAC's proposal was evaluated as superior to Precision Echo's under 
both the most important SOW criterion and the next most important past 
performance criterion.  Although TEAC's proposal for all new VFDRs was 
somewhat higher priced ([DELETED] percent) than Precision Echo's, 
price was the least important criterion.  In these circumstances, the 
Navy reasonably concluded that the technical advantages of TEAC's 
proposal were worth the associated price premium and that TEAC's 
proposal represented the best value. 

The protest is denied.

Comptroller General
of the United States

1. The VFDRs record the pilot's view of the heads-up display 
information (or instrument readings) projected onto the inside of the 
cockpit windshield for subsequent use in mission evaluation.  

2. Precision Echo also argues that TEAC's proposal was ineligible for 
award because TEAC did not complete a certification included in the 
solicitation and set forth at the then-current FAR  sec.  52.222-48, 
entitled "Exemption from Application of Service Contract Act 
Provisions for Contracts for Maintenance, Calibration, and/or Repair 
of Certain ADP, Scientific and Medical, and/or Office Business 
Equipment--Contractor Certification (OCT 1995)."  However, the Navy 
reports that this clause was included in the solicitation 
inadvertently and was not applicable, since the purpose of the 
procurement was not to obtain the maintenance, calibration, or repair 
of the types of equipment covered by the certification.  Indeed, the 
solicitation indicated that the procurement was not subject to the 
Service Contract Act.  In these circumstances, TEAC's failure to 
complete the clause did not preclude award to it.

3. This data was consistent with a May 1996 report (from the aircraft 
carrier USS Nimitz) TEAC submitted with its proposal concerning the 
performance of Precision Echo's HI-8mm VFDRs on the carrier's F/A-18 
squadrons during a 6-month deployment beginning in December 1995.  The 
report termed Precision Echo's VFDRs a "high failure item" requiring 
an "unsatisfactory" level of manpower to maintain.  TEAC's analysis of 
the performance data indicated an MTBF of less than 100 hours.