BNUMBER: B-278276.11; B-278276.12; B-278276.13; B-278276.14
DATE: September 22, 1998
TITLE: Patriot Contract Services, LLC; Keystone Shipping Services,,
B-278276.11; B-278276.12; B-278276.13; B-278276.14, September 22,
1998
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Matter of:Patriot Contract Services, LLC; Keystone Shipping Services,
Inc.; MTL Ship Management; V-Ships Marine, Ltd.
File: B-278276.11; B-278276.12; B-278276.13; B-278276.14
Date:September 22, 1998
Amy E. Sherburne, Esq., and Dennis J. Kelly, Esq., Kelly, Gill,
Sherburne & Herrera, for Patriot Contract Services, LLC; Ralph Hill,
Esq., for Keystone Shipping Services, Inc.; William A. Shook, Esq.,
and Kelley Doran, Esq., Preston Gates Ellis & Rouvelas Meeds, for MTL
Ship Management, Marine Transport Lines, Inc.; and Thomas L. Mills,
Esq., Robert A. Mangrum, Esq., Eric J. Marcotte, Esq., and Jason I.
Hewitt, Esq., Winston & Strawn, for V-Ships Marine Ltd., the
protesters.
Lars Anderson, Esq., J. Scott Hummer, III, Esq., Wm. Craig Dubishar,
Esq., and Paul N. Wengert, Esq., Venable, Baetjer and Howard, for Bay
Ship Management, Inc.; Martin P. Willard, Esq., Perkins Coie, for All
Marine Services, Ltd.; Laura K. Kennedy, Esq., and Kevin M. Kordziel,
Esq., Jenner & Block, for American Overseas Marine Corp.; Robert J.
Blackwell, Esq., and Marc J. Fink, Esq., Sher & Blackwell, for Apex
Marine Ship Management Co., LLC; James A. Kelley, Esq., Donald A.
Tobin, Esq., and Lori Ann Lange, Esq., Bastianelli, Brown & Kelley,
for Crowley American Transport, Inc. and Crowley Marine Services,
Inc.; Harold G. Bailey, Jr., Esq., Garvey, Schubert & Barer, for
Interocean Ugland Management Corp.; and Raymond S.E. Pushkar, Esq.,
McKenna & Cuneo, for Sea-Land Service, Inc., intervenors.
Janis Rodriguez, Esq., and Michael Rose, Esq., Department of
Transportation, for the agency.
Paul E. Jordan, Esq., Office of the General Counsel, GAO, participated
in the preparation of the decision.
DIGEST
Where agency improperly awarded contracts to an offeror in a manner
which was inconsistent with that offeror's qualified proposal and the
record shows that, in assessing the impact of that improper award, the
agency reasonably determined that the solicitation's price evaluation
scheme was unworkable and effectively prevented agency from accurately
determining best value in making multiple awards, agency reasonably
took corrective action in response to eight protests, including
rescinding awarded contracts, amending solicitation, reopening
negotiations, and requesting a second round of best and final offers,
notwithstanding the disclosure of limited information from the
awardees' proposals.
DECISION
Patriot Contract Services, LLC, Keystone Shipping Services, Inc., MTL
Ship Management, and V-Ships Marine, Ltd. protest the decision of the
Department of Transportation, Maritime Administration (MARAD) to
rescind contracts previously awarded under request for proposals (RFP)
No. DTMA-91-97-R-00002, amend the RFP, reopen negotiations, and
evaluate best and final offers (BAFO) submitted in response to the
amended RFP. MARAD's action arises from its conclusion that
corrective action was required to respond to eight protests which had
challenged the technical and price evaluations of several of the ten
awardees. After reviewing the protests and the procurement, MARAD
concluded that, under the circumstances, it could not determine
whether the original awards represented the best value to the
government. The protesters assert that more limited corrective
action, or none at all, would be more appropriate.
We deny the protests.
The RFP, as amended through amendment No. 0011, sought proposals for
the operation and management of 89 vessels comprising the Ready
Reserve Force. To be eligible for award, offerors were required to
meet certain special standards including status as a United States
citizen, status as a current operator or owner/operator of a large dry
cargo ship and/or tanker, and possession of a document of compliance
issued under the provisions of the International Management Code for
Safe Operation of Ships and for Pollution Prevention (ISM Code)
adopted by the International Maritime Organization.
For purposes of proposal submission, evaluation, and award, the 89
ships were divided into 39 groups, each of which included 2 or 3 ships
of a given class or type. Offerors were allowed to submit electronic
price proposals on any number of ships, but, in accordance with
section M.6 of the amended RFP, MARAD reserved the right "to determine
the number of ships within the maximum of 12 any offeror can
effectively handle given the offeror's capabilities."
The RFP contemplated award of a separate contract for each group of
ships on a best value basis. Twenty-three offerors submitted initial
proposals by the October 27, 1997 closing date. Nineteen proposals
were included in the competitive range.
In preparing their price proposals, in addition to basic pricing
("section B"), offerors submitted alternative pricing through
economies of scale (EOS). RFP section L.11.2.2, amendment No. 0009.
This EOS pricing was based on "generic" ship group sets applied to any
ship groups and "preferred" group sets applied to ship groupings
desired and specified by the offeror. Attachment A of amendment No.
0009. In addition to specifying the number of ships to which the EOS
would apply, offerors identified whether the EOS applied to groups
from all coasts ("split coast") or only to ship groups on the east,
west, or Gulf coasts. Offerors could propose savings with the split
coast and additional savings on coast specific designations. Id. at sec.
1.2.4.
These prices were ultimately converted by the agency into average
annual "notional" prices based upon a schedule in section M.4 of the
RFP, and then subjected to various comparative price analyses. These
analyses included a comparison of the prices for each ship group based
on the offerors' section B prices and EOS prices. According to a
declaration from the source evaluation board (SEB) chairman, the
primary comparison was of the lowest generic split-coast EOS prices
for each ship group based on the maximum number of ships the
evaluators determined each offeror was capable of handling. The SEB
also compared the offerors' lowest EOS prices, preferred or generic,
to determine if a lower price was available under the preferred EOS
prices. The SEB also compared the offerors' lowest possible EOS
prices for each ship group without regard to the evaluators'
assessment of capability. The SEB used these comparisons in making
the price/technical tradeoff decisions on specific ship groups and in
the assignment of specific combinations of ship groups to offerors.
After review of the proposals, oral presentations, discussions,
revised cost proposals, and BAFOs, MARAD awarded the 39 contracts to
ten offerors. After receiving notice of the award and debriefings,
eight of the unsuccessful offerors filed bid protests with our
Office.[1]
The initial protesters challenged the technical evaluations, including
consideration of past performance of themselves and of the awardees.
Several protesters alleged that MARAD had waived or relaxed the
mandatory citizenship, ISM Code, and current owner/operator status
requirements. Some protesters alleged that MARAD had used undisclosed
evaluation criteria including the agency's assessment of the offerors'
capability to handle specific numbers of ships. Some of these
protesters also challenged the agency's failure to refer technical
capability evaluations to the Small Business Administration for
consideration under the certificate of competency procedures. Some
alleged a lack of meaningful discussions and unequal discussions.
Most of the protesters also challenged the price evaluations, the best
value determinations and the price/technical tradeoffs, including the
agency's consideration of the EOS prices.
After reviewing the protests, the agency informed our Office on July 2
that it intended to take corrective action. The agency's decision was
precipitated by its discovery that some of the awards were clearly
improper. Further, in reviewing the procurement, the agency concluded
that because of the complexity of the price evaluation scheme, it
could not determine with a reasonable degree of certainty that the
awarded contracts represented the best value to the government. The
proposed corrective action included rescission of the original awards
and amendment of the RFP to simplify and clarify the pricing
structure, evaluation provisions, and required information on
citizenship, ISM code, and owner/operator status. The agency also
intended to reopen negotiations, allow submission of revised technical
and price proposals based on the amendments, obtain new BAFOs, and
make new best value determinations. It is this corrective action that
triggered this second round of protests. The current protesters, all
of whom had been awarded contracts, contend that the corrective action
is unnecessary and improper because it is overbroad and will result in
an improper auction.
Contracting officials in negotiated procurements have broad discretion
to take corrective action where the agency determines that such action
is necessary to ensure fair and impartial competition. Rockville
Mailing Serv., Inc., B-270161.2, Apr. 10, 1996, 96-1 CPD para. 184 at 4;
Oshkosh Truck Corp.; Idaho Norland Corp., B-237058.2, B-237058.3, Feb.
14, 1990, 90-1 CPD para. 274 at 4. It is not necessary for an agency to
conclude that the protest is certain to be sustained before it may
take corrective action; where the agency has reasonable concern that
there were errors in the procurement, even if the protest could be
denied, we view it as within the agency's discretion to take
corrective action. Main Bldg. Maintenance, Inc., B-279191.3, Aug. 5,
1998, 98-2 CPD para. at 3. An agency may amend a solicitation, and
request and evaluate a second round of BAFOs where the record shows
that the agency made the decision to take this action in good faith,
without the specific intent of changing a particular offeror's
technical ranking or avoiding an award to a particular offeror. See
PRC, Inc., B-233561.8, B-233561.9, Sept. 29, 1992, 92-2 CPD para. 215 at
3-4; Burns & Roe Servs. Corp., B-248394, Aug. 25, 1992, 92-2 CPD para. 124
at 5; Unisys Corp., B-230019.2, July 12, 1988, 88-2 CPD para. 35 at 5. We
will not object to an agency's proposed corrective action where the
agency concludes that the award, because of perceived flaws in the
procurement process, was not necessarily made on a basis most
advantageous to the government, so long as the corrective action taken
is appropriate to remedy the impropriety. Rockville Mailing Serv.,
Inc., supra.
There is no evidence in the record that suggests the agency is acting
other than in good faith. On the contrary, while the protesters
contend that the agency has not supported its determination to take
the corrective action proposed, the record supports that the agency's
corrective action is appropriate and not overbroad.
In this regard, there is no legitimate dispute that the agency made
improper awards to one of the offerors.[2] As part of a price
revision, that offeror qualified its proposal by explicitly setting
forth the minimum number of ships it was willing to accept. The
agency advises that it overlooked this qualification letter and did
not consider it in making the awards. Based upon its determination of
this offeror's capability, the agency awarded the offeror contracts
encompassing fewer ships than the proposed minimum. Having failed to
consider this matter prior to award, the agency correctly concluded
that these awards were improper and should be rescinded.[3] See
Barents Group, L.L.C., B-276082, B-276082.2, May 9, 1997, 97-1 CPD para.
164 at 10; The Orkand Corp., B-224541, Dec. 31, 1986, 86-2 CPD para. 723
at 8; Computer Network Corp. et al.--Recon., B-186858, June 13, 1977,
77-1 CPD para. 422 at 6 (contract awarded may not materially vary terms of
offer).
To determine the appropriate corrective action, the contracting
officer consulted with the chairman of the SEB to learn whether
appropriate treatment of the offeror's qualification would have
affected the best value selections recommended to the source selection
official. The SEB chairman reviewed the selections with other members
of the SEB and ran various pricing scenarios. Based on this review,
he concluded that any attempt to correct the original erroneous awards
would affect the selection decisions for a minimum of two awardees and
potentially affect four or more offerors.
The protesters suggest that a reevaluation or recompetition need only
involve those original offerors, successful and unsuccessful, who
submitted proposals on the ship groups encompassed by the improper
awards. We disagree. It is evident from this record that more than
those groups would be affected. For example, under a limited
reevaluation which simply excluded the improper awardee, it is
possible that the "best value" offeror for award of those contracts
may already have the maximum number of ships, requiring a reallocation
of its original awards. Reallocation of these awards may affect
offerors which did not submit proposals on the improperly awarded
groups. Thus, the entire award determination potentially would be
affected. A similar cascade effect would be likely if there were a
recompetition which allowed the improper award recipient to
participate. If it demonstrated its capability to handle more ships,
most, if not all, original awardees could be affected. Since any
changes to the ship groups selected for one awardee would affect the
selection decisions made for other offerors, and potentially affect
the overall best value decision, the agency reasonably concluded that
resolving the improper awards would require reevaluations affecting
more than the original offerors for the affected ship groups.
In determining that these broader reevaluations could not be made
based on the existing proposals, the agency also considered the
allegations of the original protesters regarding some awardees'
compliance with the citizenship, ISM Code, and owner/operator status
requirements, compliance with the Service Contract Act (SCA), and the
evaluation of maximum ship capability. Since there was some question
whether all original awardees met these requirements, it became
necessary to obtain additional information, thereby necessitating
reopened negotiations with all offerors.
The agency also considered the impact of its complex pricing structure
on the original competition. While MARAD anticipated that use of
electronic price proposals with comparisons conducted by computer
would permit it to optimize the price/technical tradeoffs to achieve
the best value, upon review of the original selections the SEB
chairman concluded that he could not reasonably determine the overall
best value under the existing evaluation scheme. In this regard,
given 39 ship groups, each of which contains 2 or 3 ships, the agency
states that each offeror could submit up to 7 million generic EOS
proposals. In fact, of the offerors submitting EOS proposals, the
range submitted included 10 to 64 generic EOS proposals and 2 to 573
preferred EOS proposals per offeror.[4] According to the SEB
chairman, because the awarded prices depend upon group configurations
and coast, "there was almost no way to compare the equivalent of an
'awarded' price for the other [unsuccessful] offerors." Declaration
of SEB Chairman, Attachment 2, para. 4 at 3. Due to the inability to
accurately compare these prices, the SEB chair now concludes that the
original pricing scheme adversely affected the best value decisions.
We agree with the SEB chairman's assessment that the original
evaluation scheme prevented the agency from accurately and reasonably
determining the overall best value. This is especially true in view
of the sheer volume of proposed pricing among 19 offerors and the
numerous combinations involved in comparing their basic and EOS
prices. Further, the original price/technical tradeoff decisions were
not always based on the actual awarded price. Some 22 of the 39
awarded contracts were awarded at prices higher than those in the
generic split-coast price comparison.[5] It is not clear whether
these awards complied with the RFP's provision that awards made on the
basis of offerors' EOS proposals would have their section B revised to
reflect the ship groups and EOS prices on which they were awarded.
See RFP sec. M.7.4.1. Likewise, it is not clear that the evaluated
combination of prices and technical merit represented a reasonable
determination of best value.
Notwithstanding the protesters' observation that no one timely
challenged the pricing structure and evaluation scheme, where, as
here, the evaluation as performed was so complex and unworkable as to
prevent the agency from accurately and reasonably determining the
overall best value, it is appropriate for the agency to take
corrective action.[6] Such action reasonably includes revision and
simplification of the pricing structure offerors may propose and the
solicitation of revised offers to allow the agency to reasonably and
accurately determine the best value in a price/technical tradeoff.
See Rockville Mailing Serv., Inc., supra. In sum, the agency
reasonably concluded that corrective action, including reopened
negotiations and submission of new price proposals, is necessary to
resolve the improper awards and the serious doubts about the validity
of the best value determination.
The protesters also contend that, because offerors were informed of
the awardees' prices during the agency's debriefings, rescinding the
original awards and reopening the competition will foster an improper
auction. Where, as here, the corrective action proposed by the agency
is not improper, the prior disclosure of information in an offeror's
proposal does not preclude the corrective action, and the reopening of
discussions and request for BAFOs does not constitute an improper
auction. Unisys Corp., supra; Sperry Corp., B-222317, July 9, 1986,
86-2 CPD para. 48 at 4. The possibility that the contracts may not have
been awarded based on a true determination of the best value has a
more harmful effect on the integrity of the competitive procurement
system than the fear of an auction; the statutory requirements for
competition take priority over the regulatory constraints on auction
techniques. See Unisys Corp., supra. In any event, the provisions of
amendment No. 0012 will require significant restructuring of price
proposals, thereby mitigating any possible auction effects. For
example, certain ship groups now must be awarded together, requiring
offerors to submit proposals on all of those ships, or none.[7] In
addition, a wage determination issued after contract award is being
reevaluated by the Department of Labor and offerors will be required
to submit revised price proposals and collective bargaining agreements
which comply with both the SCA and the wage determination. Further,
all offerors will have to restructure their pricing to comply with the
simplified EOS alternatives. Taken in combination, these changes will
render much of the disclosed pricing meaningless.[8] Accordingly, the
corrective action taken by the agency is unobjectionable.
The protests are denied.
Comptroller General
of the United States
1. These protests were filed by All Marine Services, Ltd, Bay Ship
Management, Inc., Patriot Contract Services, LLC, Stapp Towing Co.,
Inc., American Overseas Marine Corp., Crowley Marine Services, Inc.,
Crowley American Transport, Inc., and Osprey-Acomarit Ship Management,
Inc. After receiving notice of the agency's decision to take
corrective action, our Office dismissed these protests as academic.
2. Since the identity of this offeror and the precise qualification of
its offer are considered proprietary information, this decision will
not disclose that information.
3. In taking corrective action on the improper awards, the agency also
correctly concluded that it could not simply request the offeror to
remove the qualification, thereby changing its price, without engaging
in discussions with that offeror. If negotiations are reopened with
that offeror, they must be reopened with all offerors in the
competitive range. See SmithKline Beecham Pharamaceuticals, N.A.,
B-252226.2, Aug. 4, 1993, 93-2 CPD para. 79 at 4.
4. For example, one offeror submitted 30 different EOS proposals
resulting in 33 different prices for one ship group alone.
5. In this regard, of the 10 offerors awarded contracts, 8, including
3 of the protesters, received contracts at higher prices than the
evaluated prices.
6. One protester argues that a similar evaluation scheme was
successfully used, without protest, in a prior MARAD procurement
involving more ships. It is not clear that the last "similar"
procurement involved the multitude of alternative pricing proposals
involved here. In any event, each procurement action is a separate
transaction, and the action taken under one is not relevant to the
propriety of the action taken under another procurement for purposes
of a bid protest. Digital Sys. Group, Inc., B-258262.2, Jan. 20,
1995, 95-1 CPD para. 30 at 3; Aguirre Architects, Inc.--Recon.,
B-230256.2, May 19, 1988, 88-1 CPD para. 478 at 2.
7. This clarification reflects another basis for reopening the
competition. It appears that the agency always intended that certain
ship groups be awarded to the same offerors. In fact, each of the
combinations of ship groups now identified were awarded in those same
configurations. However, the original RFP did not reveal this
intention or notify offerors that failure to submit an offer on all
ships in the combined groups would effectively prevent their receiving
an award for any of those ships. Offerors must be advised of the
basis upon which their proposals will be evaluated, and where a
solicitation does not set forth a common basis for evaluating offers
which ensures that all firms are on notice of the factors for award
and can compete on an equal basis, the solicitation is materially
defective. Unisys Corp., supra, at 4.
8. Contrary to the request of some of the protesters, the agency has
not released pricing information on the unsuccessful offerors which is
comparable to the award price information released on the successful
offerors. While it is sometimes appropriate to release pricing
information from unsuccessful offerors in order to equalize the
competition (See Sperry Corp., supra, at 5), under the circumstances
of this case, we believe the agency has reasonably chosen to withhold
pricing information of the unsuccessful offerors. In this regard, the
agency explains that disclosure of all unsuccessful offerors'
evaluated prices would prejudice all offerors, including the original
awardees, since they were unsuccessful offerors on some of the ship
groups on which they submitted offers. According to the agency, given
the volume of pricing information submitted and the number of
different evaluations using the section B and generic and preferred
EOS pricing, it is not possible to provide an equivalent price to that
denominated "amount awarded"; that price was dependent upon the actual
ship groups awarded. Since even the original awardees were
"unsuccessful" on some ships, release of all "unsuccessful" pricing
would reveal all offerors' pricing strategy and proposal strategy by
identifying all ships on which each offeror submitted proposals.