BNUMBER: B-278929.2; B-278929.4; B-278929.5; B-278929.6
DATE: September 28, 1998
TITLE: Mar, Inc; WHECO Corporation; Jensco Marine, Inc., B-278929.2;
B-278929.4; B-278929.5; B-278929.6, September 28, 1998
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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:Mar, Inc; WHECO Corporation; Jensco Marine, Inc.
File: B-278929.2; B-278929.4; B-278929.5; B-278929.6
Date:September 28, 1998
Richard L. Hames, Esq., Davis Wright Tremaine, for WHECO Corporation;
Paul Shnitzer, Esq., Crowell & Moring, for MAR, Inc.; W. Bruce Shirk,
Esq., and Lorenzo F. Exposito, Esq., Powell, Goldstein, Frazer &
Murphy, for Jensco Marine, Inc., the protesters.
John A. Douglas, Esq., William A. Shook, Esq., and Kelley P. Doran,
Esq., Preston Gates Ellis & Rouvelas Meeds, for General Offshore
Corporation, an intervenor.
Arthur I. Rettinger, Esq., and William P. McGinnies, Esq., U.S.
Customs Service, for the agency.
Charles W. Morrow, Esq., and Jerold Cohen, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest of the evaluation of proposals as technically equal is
denied where the record shows that the agency's determination was
reasonable based on the similarity of competing proposals in terms of
personnel and experience, past performance, and overall quality.
2. Protest that cost evaluation was improper because the agency
failed to consider the realism of the awardee's proposed labor rates
is denied where the protester was not prejudiced by the agency's
failure to make certain upward adjustments to the awardee's rates.
3. Protester has not presented a basis to challenge the award where
the agency downgraded the protester's proposal because its newly
formed corporation failed to demonstrate corporate experience, but
nonetheless considered the proposal to be technically equal to the
other proposals and awarded the contract to a lower-priced offeror.
4. Award to successor in interest to the firm that submitted the
initial proposal is proper where the successor in interest acquired
the offeror's entire business.
DECISION
MAR, Inc., WHECO Corporation, and Jensco Marine, Inc. protest the
award of a contract to General Offshore Corporation under request for
proposals (RFP) No. CS-97-012, a small business set-aside issued by
the Department of the Treasury, U.S. Customs Service, for marine
vessel maintenance.
We deny the protests.
BACKGROUND
The RFP, issued on February 26, 1997, was to procure marine vessel
maintenance (preventive and corrective) and related services and
equipment in connection with a national marine maintenance program.[1]
RFP, Statement of Work, sec. C.1. The RFP contemplated the award of a
cost-plus-fixed-fee contract for a base period, with 4 option
periods. RFP sec. B.2.
The RFP provided for award on a best-value basis, in which technical
quality was more important than cost/price. The RFP advised, however,
that if the technical features of proposals were determined to be
essentially equivalent, cost/price might become the determining factor
for the award. RFP sec. M.5.2. Further, the RFP stated that for
purposes of the cost/price technical tradeoff analysis the agency
would perform a comparative analysis of the proposals' discriminating
features. RFP sec. M.5.1.
The technical evaluation factors and corresponding point values were
as follows:
(1) Experience and Past Performance60
(a) Key Personnel (40)
1 - Program Manager (20)
2 - Site Managers (15)
3 - Mechanics (5)
(b) Corporate (20)
1 - Experience (10)
2 - Past Performance(10)
(2) Management Approach 40
(a) Soundness of Approach (35)
1 - Overall Plan (10)
2 - Transition Plan (10)
3 - Property Control Inv.(10)
4 - Environmental Controls/
Waste Disposal (5)
(b) Reporting Procedures (5)
Cost/price was not point scored, but each offeror's proposed costs
were to be evaluated for realism and reasonableness, as well as the
offeror's ability to attract and retain a qualified staff and any risk
introduced by the offeror's cost/price proposal. RFP sec. M.4.
Seven proposals were received in response to the RFP by the July 31,
1997 closing date. A technical evaluation team (TET) then assigned
point scores, and adjectival ratings based on the scores, to the
proposals,[2] and a cost team evaluated the cost proposals.
Eventually, five offerors' proposals were included in the competitive
range: those of WHECO, MAR, Jensco, General Offshore, and Seaward
Services, Inc.[3] With the exception of Jensco, whose proposal
received a total point score of 90, all proposals received a total
point score of 100.[4] Jensco's proposal was downgraded 10 points
under the corporate factor because Jensco's newly formed company
lacked a record of corporate experience. Discussions primarily
relating to the cost proposals were held with offerors between January
21 and 26, 1998 and best and final offers (BAFO) were received on
February 3. Customs reports that each offeror was informed during
discussions that the technical scores were essentially technically
equal and that cost/price would be the determining factor for the
award. The final evaluation was as follows:
Offeror Score BAFO Most Probable Cost
Adjustment
General Offshore100 $20,056,742 $21,012,335
Jensco 90 $20,976,079 $21,046,696
MAR 100 $22,725,805 $23,553,909
Seaward 100 $21,790,769 $22,223,299
WHECO 100 $22,651,067 $23,234,098
Based upon the final evaluation, the TET found the proposals to be
technically equal and did not find any discriminators among the
technical proposals. Chairman's May 28 memo to the contracting
officer. For instance, the TET noted that many of the same key
personnel were proposed by the offerors and that where differences
existed the proposed personnel were highly qualified for the
positions. Further, the TET found that all offerors were highly
qualified under the corporate factor, with the exception of Jensco,
who was marked down (10 points) in this area but was still believed to
be capable of performing the contract. Also, the TET found that all
offerors were "outstanding" under the soundness of approach criterion.
Id.
The source selection official independently reviewed the evaluation,
concurred in the TET's assessment, and determined that General
Offshore's proposal represented the best value on the basis of its
lower evaluated cost/price. Final Source Selection Decision at 9-10,
20. In doing so, the source selection official performed a cost and
technical tradeoff analysis between General Offshore's proposal and
each of the other competitive range offerors' proposals, in which the
official concluded that General Offshore's proposal offered
substantially less performance and operational risk at the best value.
Customs made award to General Offshore on June 12. These protests, on
various bases, followed.[5]
MAR'S PROTEST
MAR protests the evaluation of its proposal and the source selection
decision.[6] MAR argues that the determination that its proposal was
technically equal to General Offshore's was arbitrary and capricious;
the firm asserts that Customs should have found the proposal superior
in the areas of key personnel and past performance, given that MAR is
the incumbent, and that General Offshore should have been downgraded
due to a weak performance record under the preceding contract.[7] MAR
alleges that Customs did not make a best-value determination as
prescribed by the RFP but actually improperly made award on the basis
of the lowest-cost, technically acceptable offer, since all proposals
were rated essentially equal despite allegedly obvious technical
distinctions.
A hearing was conducted to receive testimony from the chairman of the
TET, the source selection official (contracting officer), the Director
of the National Marine Support Center, and two officials from MAR,
regarding the agency's technical and cost evaluations. The record
reflects that for purposes of the technical evaluation the proposals
were evaluated by a three-member TET in which each proposal was
examined individually by the evaluators under the various technical
evaluation factors, resulting in an individual narrative and point
score for each proposal.[8] The chairman testified that, after the
members discussed the information presented in each proposal, it was
determined that each proposal in the competitive range with the
exception of Jensco's was entitled to a perfect score. Tr. at
227-230, 243. The chairman testified that during the course of the
process at least three references from each offeror were contacted to
verify and evaluate each offeror's past performance record. Tr. at
227-228, 233, 261. In addition, he testified that he was familiar
with the performances of General Offshore and MAR under their prior
contracts and that he considered their records to be equal. Tr. at
236. The chairman testified that it was determined that the proposals
were entitled to similar scores because all the offerors had proposed
to staff the contract with a majority of the personnel from the
incumbent contract. Tr. at 237-238, 249-253.
The record also reflects that prior to determining that the proposals
were technically equal the source selection official met with the
chairman of the TET to discuss the perfect scores assigned to the
various proposals. Tr. at 248. The chairman affirmed the propriety
of the scores, and advised the official that all the proposals were
technically equal notwithstanding the one different point score.
Tr. at 248-253; see chairman's May 28 memo. The selection official
testified that she independently reviewed the proposals after
consulting with the chairman, and agreed that the proposals each
warranted the score that had been assigned by the TET, and were
technically equal. Tr. 308-312.
MAR disputes that General Offshore should have been rated so highly
because the agency's evaluation of General Offshore's past performance
record did not include consideration of the firm's most recent
experience involving the preceding contract for these exact services.
The record does confirm that Customs failed to evaluate this most
recent experience of General Offshore, which should have been
considered. See International Bus. Sys., Inc., B-275554, Mar. 3,
1997, 97-1 CPD para. 114 at 5. However, the source selection official
testified that, prior to making the award, she contacted the Director
of the Marine Support Center, who had knowledge of General Offshore's
most recent past performance, in connection with her responsibility
determination, and that he reported positively on General Offshore's
past performance.[9] Tr. at 329-330. On the record before us, we
cannot reasonably find that the evaluation of MAR's past performance
vis-�-vis General Offshore's would have been different had the agency
evaluated the most recent performance of General Offshore during the
evaluation process. Both the chairman of the TET, and the Director
with direct experience with both General Offshore's and MAR's past
performance, testified that the performance record of each contractor
was essentially equal and that each was competent to perform the
contract. Tr. at 16, 236.
Save for past performance, MAR has not pointed to any other technical
distinction between its proposal and General Offshore's that should
have distinguished MAR's proposal as technically superior. As noted
above, each offeror's technical approach involved utilizing a majority
of the key personnel currently performing vessel maintenance for the
agency, and each has a variety of vessel maintenance experience.
Thus, we find no basis to question the agency's conclusion that the
proposals were technically equal.
Finally, MAR asserts that Customs improperly penalized it for
developing its cost proposal based upon the instructions in RFP sec. L.7.
That section required offerors to utilize the agency estimate of
staff-hours for certain labor categories and of costs for parts and
subcontract services in preparing their cost proposals for unscheduled
corrective maintenance. MAR complains that as a result of its
following sec. L.7's direction Customs, in analyzing the firm's proposal,
incorrectly concluded that MAR proposed to staff the contract with
employees working on a part-time basis, made upward cost adjustments,
and erroneously determined that there were operational and financial
risks with MAR's approach.
The record shows that Customs did increase the hours in MAR's proposal
to reflect full-time site managers, resulting in a most probable cost
adjustment of $502,958 to the firm's proposed cost, Price Negotiation
Memorandum at 7, and concluded for purposes of the tradeoff analysis
that there were operational and financial risks associated with the
offer. Final Source Selection Decision at 18-19. MAR, however, was
not prejudiced even if this was not justified. The source selection
was made from among technically equal proposals, and MAR's proposed
costs, without any cost adjustments, were more than General
Offshore's. Since MAR has not challenged the cost evaluation of
General Offshore's proposal, even accepting MAR's argument the source
selection would have remained the same.
WHECO'S PROTEST
WHECO protests the cost realism evaluation of General Offshore's
proposal. The proposal indicates that the offeror proposed to retain
most of the incumbent's personnel but at pay levels lower than they
were currently being paid. WHECO argues that Customs did not perform
a cost realism analysis of General Offshore's labor rates and that it
did not judge whether General Offshore actually would be able to
attract and retain a qualified staff.
When agencies evaluate proposals for the award of a cost-reimbursement
contract, an offeror's proposed estimated costs are not controlling
because, regardless of the costs proposed, the government is bound to
pay the contractor its actual and allowable costs. Consequently, a
cost realism analysis must be performed by the agency to determine the
extent to which an offeror's proposed costs represent what the
contract should cost, assuming reasonable economy and efficiency. The
agency is in the best position to make that assessment; our Office
therefore will review such a determination only to ascertain whether
it had a reasonable basis. Computer Prods., Inc., B-271920, Aug. 9,
1996, 97-1 CPD para. 97 at 4-5.
The record reveals that Customs evaluated the cost proposals for
realism and reasonableness by analyzing the individual cost elements
in each offeror's proposal. These elements included direct labor,
overhead, other direct costs, general and administrative (G&A),
travel, G&A on travel, and profit. Price Negotiation Memorandum at 6.
In addition, Customs examined each offeror's proposed labor rates for
each labor category required to perform the contract and compared the
offerors' individual labor rates. Tr. at 321. Cost adjustments were
made where deemed appropriate to derive a most probable cost for each
offeror's proposal. No cost adjustments were made to General
Offshore's proposed labor rates as part of the cost evaluation, but
the source selection official who examined the labor rates recognized
the lower rates associated with the proposal before making the award.
For example, in the Final Source Selection Document the official noted
(at 11):
Although [General Offshore] proposes the lowest labor rates,
[General Offshore's] key personnel proposed are either currently
or were previously employed by [General Offshore] at or below the
current rates proposed. Also, the labor rates proposed by
[General Offshore] are not considered to be so much lower than
those rates proposed by other contractors as to pose a risk of
not being able to attract and retain a qualified staff. In fact,
[General Offshore] submitted with its proposal, commitment
letters for each key personnel named in its proposal.
There is no evidence in the record that the agency directly considered
General Offshore's ability to attract and retain a qualified staff
from the perspective of the firm's proposal to pay employees at levels
below the current contract rates. (As noted above, General Offshore
proposed to retain most of the current employees under the
contract.)[10] However, the source selection official testified that
she believed that General Offshore could attract and retain staff and
that the rates were realistic because they were not below those in the
applicable Department of Labor wage rate determination. Tr. at
321-323. The official also testified that she believed that General
Offshore had the ability to attract and retain a qualified staff
because the firm submitted letters of intent for all employees it
proposed for the contract, Tr. at 326; the official characterized the
letters as commitment letters. She further testified that given her
knowledge of the marketplace she felt confident that General Offshore
could attract and retain a qualified staff. Tr. at 332.
Irrespective of the limited evaluation as evidenced by the selection
official's testimony, and whether in evaluating General Offshore's
proposal Customs in fact should have viewed the firm's rates vis-�-vis
those currently being paid more critically, there was no technical
evaluation factor in the RFP that required downgrading the proposal on
the basis argued by WHECO. Rather, Customs at most should have
upwardly adjusted General Offshore's proposal to account for the
discrepancy in labor rates. As the agency reports, however, an
adjustment to account for the lower wage rates would have been
approximately $500,000--consequently, adjustment would not have
affected WHECO's standing relative to General Offshore. See CHP
Int'l, Inc., B-266053.2, Apr. 29, 1962, 96-2 CPD para. 142 at 6.
JENSCO'S PROTEST
Jensco protests that Customs unreasonably evaluated its proposal under
the corporate factor by deducting 10 points for lack of experience and
past performance. Jensco argues that Customs failed to properly rate
the experience of its president and vice president (the site
manager), proposed as key personnel, who Jensco argues possessed
relevant experience that the agency should have considered as
corporate experience. Jensco argues that it should have received a
point score equal to the other competitive range offerors under this
factor, particularly since the vice president had worked in a key
position on the previous contract for these services.
While the agency did downgrade the proposal on this basis, the record
indicates that Customs specifically noted that the combined
experiences of Jensco's corporate officer's made the firm capable of
managing the contract, and Customs specifically considered Jensco's
proposal to be technically equal to the other offerors, ultimately
making award on the basis of price. Final Source Selection Decision
at 8, 10. Since Jensco has not asserted that its proposal was
technically superior to General Offshore's lower-priced proposal, the
downgrading of the proposal under the corporate factor provides no
basis for challenging the award.
Jensco also challenges the award to General Offshore because General
Offshore was acquired by another business prior to award. Jensco
asserts that General Offshore did not properly notify the agency of
this material change in its status; the protester objects to the
"casual manner" in which General Offshore informed Customs of its new
situation, and the agency's "acceptance with no due diligence
whatsoever."
Customs reports that General Offshore did notify the agency on March 9
(the contract was awarded on June 12) that substantially all of its
assets had been acquired by General Offshore Specialized Services
(GOSS), and that GOSS is a successor in interest which had acquired
all of General Offshore's right, title and interest to the proposal.
In addition, Customs advises that GOSS became the complete successor
in interest with respect to the entire portion of the business
embraced by the proposal, as well as other substantial General
Offshore business interests. Accordingly, and since there is no
evidence of a sham transaction regarding the value of assets
transferred other than the proposal (i.e., that nothing of real value
apart from the proposal was transferred), we find no reason to object
to the award on this basis. See J. I. Case Co., B-239178, Aug. 6,
1990, 90-2 CPD para. 108 at 3-5.
CONCLUSION
We find that the record reflects that Customs properly made award to
General Offshore in accordance with the evaluation scheme set out in
the RFP. The protests are denied.
Comptroller General
of the United States
1. As part of the Marine Enforcement Program, the primary mission of
which is to prevent the entry of drugs into the United States, Customs
has a fleet of marine vessels located at offices throughout the United
States and Puerto Rico engaged in drug interdiction and other law
enforcement activities.
2. The ratings were excellent 95-100, very good 85-94, good 65-84,
fair 35-64, and poor 0-34. Technical Evaluation Plan at 4.
3. WHECO initially was excluded on the basis of a high cost/price but,
after WHECO filed a protest at this Office, Customs decided to include
the firm's proposal in the competitive range.
4. The technical evaluation plan described a 95-100 excellent rating
to be warranted when the "offeror's response meets or exceeds each
component of the evaluation standard. In addressing the evaluation
subfactor/element, it is complete, comprehensive and in clearly
defined detail. It demonstrates exceptional merit." Technical
Evaluation Plan at 4.
5. Seaward, MAR, and Jensco each also filed a size protest with the
contracting officer, alleging that General Offshore was other than a
small business. The protests were referred to the Small Business
Administration (SBA), which has conclusive authority to determine
matters of small business size status for federal procurement. See 15
U.S.C. sec. 637(b)(6) (1994). The SBA denied the protests; the matter is
under appeal.
6. MAR also protests that Customs failed to give it advance notice of
the proposed award as required by Federal Acquisition Regulation (FAR) sec.
15.503(a)(2), which is designed to give unsuccessful offerors the
opportunity to challenge the small business status of the proposed
awardee. Since MAR nevertheless still was able to do so, the purpose
of the provision was realized and MAR was not prejudiced.
7. General Offshore held the contract preceding MAR's, and MAR alleges
that Customs was aware of several problems associated with General
Offshore's transition to the follow-on contract, such as missing
inventory, computer files, and deletions to major portions of the
on-site database.
8. The source selection official testified that the individual scoring
sheets and narratives were destroyed prior to the award, but the
substance of the information contained in these documents was
incorporated into the final source selection document. Hearing
Transcript (Tr.) 314-315. Since a procuring agency has the
responsibility to adequately document its source selection decision in
order to demonstrate that it is not arbitrary, it is premature for an
agency to destroy source selection documents prior to the award. See
Dimension Int'l/QSOFT, Inc., B-270966, B-270966.2, May 28, 1996, 96-1
CPD para. 257 at 4.
9. The officials from MAR testified that this same Director, in a
post-award meeting, expressed a contrary view of General Offshore's
recent past performance and that there were significant problems
associated with the transition of the contract.
Tr. at 87-131, 191-202. However, the Director disputed the substance
of the conversation and testified that the problems associated with
the transition were as much the fault of Customs as of General
Offshore, that the problems were minimal, and that he considered the
transition to constitute the least significant aspect of General
Offshore's performance. Tr. at 24-28, 44, 72-74 .
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