BNUMBER: B-277051
DATE: August 22, 1997
TITLE: Voith Hydro, Inc., B-277051, August 22, 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:Voith Hydro, Inc.
File: B-277051
Date:August 22, 1997
Michael Fischer, Esq., Timothy J. Saviano, Esq., Foley & Lardner, for
the protester.
Sherry K. Kaswell, Esq., and Justin P. Patterson, Esq., Department of
the Interior, for the agency.
John Van Schaik, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest is sustained where, although offeror indicated its intent to
manufacture required items in a new plant, which the agency considered
would give rise to unacceptable risk and therefore constituted the
primary weakness in the firm's proposal, the agency failed to raise in
discussions its concerns about use of that plant.
DECISION
Voith Hydro, Inc. protests the exclusion of its proposal from the
competitive range under request for proposals (RFP) No.
1425-96-SP-10-13640, issued by the Department of the Interior for 18
hydraulic-turbine runners for the Grand Coulee Dam Powerplant.
We sustain the protest based on our conclusion that Interior failed to
conduct meaningful discussions.
As amended, the RFP required that each offeror's technical proposal be
submitted as a separate volume of the proposal and include "detailed
information of the proposed manufacturing method and facilities to be
used during the runner replacement and turbine rehabilitation work. .
. ." The technical volume of Voith's initial proposal did not state
the manufacturing facility the firm would use.
After receipt and evaluation of initial proposals, the agency created
a competitive range including Voith's proposal. By letter of February
12, the contracting officer informed Voith that its proposal was in
the competitive range and provided the firm with questions and
comments concerning the proposal, including: "Where will the runners
be manufactured? Please provide information on the manufacturing
capabilities of that location. This is a deficiency, and--as
such--will render your proposal unacceptable unless you provide the
requested information." (Emphasis omitted.)
The February 12 letter also scheduled an oral presentation/question
and answer session with Voith and asked the firm to respond to the
written questions and comments before the meeting.
In response to the above question, in a February 28 letter Voith
stated:
Voith Hydro companies have six (6) major hydro-turbine
manufacturing facilities throughout the world capable and
experienced in manufacturing and supplying runners to the
hydropower generation market. Voith would therefore recommend
for a long term project such as Grand Coulee, that our commitment
be that the runners will all be manufactured at a Voith
manufacturing facility. This would allow best management of
schedules and risks. However, if this is not acceptable, Voith
will commit, as indicated in the proposal, that nine (9) runners
would be manufactured in China, which more specifically would be
our SHEC (Shanghai Hydro-Power Equipment Company, Ltd.) facility
in Shanghai, China. The remaining nine (9) runners would be
manufactured at our Voith Hydro facility in York, Pennsylvania.
[Emphasis in original.]
Voith then made an oral presentation and participated in a question
and answer session. An agency memorandum dated March 5, under the
heading "Manufacturing methods and facilities," describes the two
options for manufacturing the runners which Voith proposed in its
February 28 letter. The memorandum then states "the proposed [SHEC]
fabrication facility was the primary weakness in the offeror's
proposal." According to the memorandum, this was because SHEC is a
start-up facility and will have a long learning curve before a high
quality product can be produced consistently. The memorandum also
states that due to the critical need for high efficiency and
uncompromised reliability from the Grand Coulee runners, the agency
cannot afford the risk of an unproven facility with an inexperienced
work force. In addition, the memorandum states:
The [contracting officer] informed the offeror that the
[evaluators] can only evaluate what is proposed and that given
several options they will have to assume the least favorable and
thus the proposal will be evaluated accordingly. There was an
indication that Voith will commit to one of the two options.
Regardless of the option selected it appears to the [evaluators]
that Voith has committed to a new plant in China and that the
runners will be manufactured in this new plant that does not have
a proven record. This is a deep concern to the [evaluators] . .
. .
Nonetheless, the agency left Voith's proposal in the competitive range
and requested a best and final offer (BAFO) from Voith along with the
other competitive range offerors. The BAFO request letter to Voith
included no questions or additional comments concerning the firm's
proposal.
Voith's BAFO stated that the firm would supply nine runners
manufactured at the SHEC plant. Based on their review of Voith's
BAFO, agency evaluators recommended that Voith's proposal be removed
from the competitive range "due to the proposed use of an unproven
manufacturing facility and an inexperienced workforce for nine of the
runners." In a letter excluding Voith's proposal from the revised
competitive range, the contracting officer explained that the SHEC
facility "was the primary weakness in [the firm's] proposal, and the
cause of your removal from the competitive range."
Voith argues that Interior failed to conduct meaningful discussions
because the agency failed to advise the firm that the SHEC facility
was the major weakness in the firm's proposal, even though Voith's
representatives specifically asked the contracting officer during
discussions whether the agency had concerns about that facility.
Voith notes that during discussions, instead of informing Voith of the
agency's concerns about the SHEC plant, the contracting officer simply
requested a firm commitment as to the facilities where Voith would
manufacture the runners and Voith argues that it cured this
deficiency. Finally, Voith states, had the agency identified the SHEC
facility as a major weakness in Voith's proposal, the firm would have
proposed to manufacture the runners at one of its other five plants.
In negotiated procurements, contracting officers generally are
required to conduct discussions with all offerors whose proposals are
included in the competitive range. Federal Acquisition Regulation
(FAR) sec. 15.610. Although discussions need not be all-encompassing,
discussions are required to be meaningful; that is, the agency must
lead offerors into the areas of their proposals which require
amplification or correction. Serv-Air, Inc.; Kay and Assocs., Inc.,
B-258243 et al., Dec. 28, 1994, 96-1 CPD para. 267 at 6. In this regard,
the agency is required to point out weaknesses, excesses, or
deficiencies in a proposal unless doing so would result in technical
transfusion or leveling. FAR sec. 15.610(c), (d) and (e); Innovative
Training Sys., B-251225.3, Oct. 19, 1993, 93-2 CPD para. 232 at 3.
Discussions are not meaningful where the agency does not inform an
offeror of the central deficiency in its proposal. E.L. Hamm &
Assocs., Inc., B-250932, Feb. 19, 1993, 93-1 CPD para. 156 at 3-5. In
short, discussions cannot be meaningful unless they lead an offeror
into those aspects of its proposal that must be addressed in order for
it to have a reasonable chance of being selected for award. Global
Indus., Inc., B-270592.2 et al., Mar. 29, 1996, 96-2 CPD para. 85 at 4-5.
Under this standard, Interior should have advised Voith of the
agency's concerns with the SHEC facility so that Voith would have an
opportunity to decide whether to continue to propose that facility.
Interior does not argue that it raised this matter in discussions or
that it otherwise placed Voith on notice of the agency's concerns
regarding the SHEC plant. On the contrary, the agency specifically
states that it did not raise this issue during discussions because
Voith's initial technical proposal did not commit the firm to
manufacture runners at the SHEC facility, so agency officials were not
aware of this possible deficiency in order to raise it in discussions.
Thus, Interior argues that due to Voith's failure to provide the
requested information in its initial proposal, Voith's proposal did
not have the weakness until after it submitted its BAFO. According to
the agency, by seeking to keep its options open and by not providing
the information required by the RFP--and specifically requested by the
contracting officer--Voith effectively hid the weakness until it was
forced to commit to a specific manufacturing facility, which it
finally did in its BAFO.
While we agree that Interior could reasonably conclude that Voith's
initial proposal did not contain a contractually binding commitment to
manufacture runners at the SHEC facility, during discussions and
before BAFOs were requested, the agency had sufficient understanding
that Voith planned to use the SHEC facility to raise the matter in
discussions.[1] Voith's February 28 letter clearly indicated Voith's
commitment to production of nine of the runners at the SHEC facility.
As explained above, although Voith recommended in that letter that it
be permitted the option of manufacturing the runners at any Voith
manufacturing facility, the letter also stated "if this is not
acceptable, Voith will commit, as indicated in the proposal, that nine
(9) runners would be manufactured in China, which more specifically
would be our SHEC . . . facility in Shanghai, China." Since the lack
of a commitment to specific facilities in fact was not acceptable to
the agency, we think a reasonable reading of that letter should have
led (and, in fact, did lead) agency officials to understand that Voith
planned to produce runners at the SHEC facility. Accordingly, the
agency was required to raise that major weakness in discussions with
Voith.
In any event, the record shows that agency officials understood,
before receipt of Voith's BAFO, that the firm was proposing to
manufacture some of the runners at the SHEC facility. As explained
above, the agency's March 5 memorandum (written before BAFO's were
received) stated that, given the options offered by Voith, the agency
would "assume the least favorable" one. The memorandum also stated
"[r]egardless of the option selected it appears to the [evaluators]
that Voith has committed to a new plant in China and that the runners
will be manufactured in this new plant that does not have a proven
record." Finally the memorandum stated that the SHEC facility "was
the primary weakness in the offeror's proposal." Thus, although
Interior now argues that at the time of discussions, Voith's proposal
did not include the weakness at issue here, the contemporaneous record
shows that, based on the February 28 letter, the agency's evaluators
did understand during discussions that Voith's proposal included the
plan to manufacture the runners at the SHEC facility.[2]
In addition to arguing that it was not aware of the weakness in
Voith's proposal, Interior argues that it was not permitted to discuss
with Voith the firm's plan to use the SHEC facility. According to the
agency, the contracting officer concluded that determining which
facility to propose was a business decision properly left to Voith and
that, had he discussed how the evaluators would rate the SHEC facility
before Voith "committed" to using that facility, he would have engaged
in "impermissible coaching," or technical leveling. In this respect,
the agency argues that it was each offeror's responsibility to decide
where it would manufacture the runners and it would have been improper
to seek to improve Voith's technically acceptable proposal through
repeated rounds of discussions which coached the firm concerning the
agency's view that Voith's particular proposed "approach" was not the
desired way of meeting the agency's needs.
There is no merit to this argument, which would, in effect, foreclose
the government from obtaining the best offers for needed goods and
services. Technical leveling--which is often referred to as improper
coaching--occurs when an agency, through successive rounds of
discussions, helps to bring a proposal up to the level of another
proposal by pointing out weaknesses that remain in the proposal due to
an offeror's lack of diligence, competence, or inventiveness, after
having been given an opportunity to correct them. FAR sec. 15.610(d);
CBIS Fed. Inc., 71 Comp. Gen. 319, 324-328 (1992), 92-1 CPD para. 308 at
7-9. As we concluded above, the weakness remained in Voith's proposal
simply because agency officials never pointed out that they considered
the SHEC facility to be a weakness, not because of a lack of
diligence, competence, or inventiveness on Voith's part.[3]
Finally, Voith challenges Interior's evaluation that the firm's
proposed use of the SHEC facility entailed unacceptable risk. We will
question an agency's evaluation of proposals only if the record
demonstrates that it was unreasonable or inconsistent with the RFP's
evaluation criteria. Microwave Solutions, Inc., B-245963, Feb. 10,
1992, 92-1 CPD para. 169 at 2. Here, there has been no such showing.
Voith has not argued that the evaluation was inconsistent with the
evaluation criteria and we have no basis to challenge the evaluators'
concern that, due to the critical need for efficiency and reliability
from the runners, the agency cannot afford the risk of an unproven
facility. Nonetheless, as we explain above, had the agency identified
the SHEC facility as a major weakness in Voith's proposal, it appears
likely that the firm would have proposed one of its other five
facilities for manufacturing the runners.
We recommend that the agency provide Voith the opportunity to amend
its proposal to substitute another plant for the SHEC facility. If
Voith does so, we recommend that the agency then reassess whether the
revised proposal should be included in the competitive range and
considered for award. We also recommend that the protester be
reimbursed its costs of filing and pursuing its protest, including
reasonable attorneys' fees. Bid Protest Regulations, 4 C.F.R. sec.
21.8(d)(1) (1997). The protester should submit its certified claim
for costs to the contracting agency within 60 days of receiving this
decision. 4 C.F.R. sec. 21.8(f)(1).
The protest is sustained.
Comptroller General
of the United States
1. Voith argues that two references in Voith's initial proposal
reasonably should have placed agency officials on notice that the firm
planned to manufacture some of the runners at that facility. First,
under the heading "Listing of Possible Sub-Contractors," the proposal,
in a volume other than the technical volume, listed the SHEC facility
in Shanghai, China for "Runner Fabrication." Second, also not in the
technical volume, Voith's proposal included the standard "Buy American
Act--Trade Agreements--Balance of Payments Program Certificate" filled
out to indicate that Voith would supply items manufactured in China to
meet the requirements of line item number five of the RFP. That line
item is for designing and furnishing nine of the runners required
under the contract. As we explain below, we conclude that Voith's
February 28 letter should have led the agency to raise in discussions
its concerns about the SHEC facility. Consequently, we need not
decide whether the references in Voith's initial proposal should have
led the agency to raise this matter in discussions.
2. Interior is correct that the RFP called for offerors to provide
detailed information on the proposed manufacturing facilities and
Voith's initial proposal failed to provide that information.
Nonetheless, this does not excuse Interior from its obligation under
the FAR to conduct meaningful discussions once the agency included
Voith's proposal in the competitive range, received Voith's February
28 letter, and proceeded to conduct a face-to-face session with Voith
in early March.
3. Interior also appears to believe that it would have constituted
technical transfusion to have discussed with Voith "the desirability
of using a proven manufacturing facility as its competitors had
proposed." Disclosure of one offeror's approach to another is unfair
and is prohibited as technical transfusion. See FAR sec. 15.610(e); CBIS
Fed. Inc., supra, at 8. Here, however, to have advised Voith that the
agency had serious concerns about the SHEC facility would have told
Voith nothing about its competitors' proposals and therefore would not
have constituted technical transfusion.