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
**********************************************************************

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-ï¿½-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-ï¿½-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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