TITLE:  Matter of: Electronic Design, Inc.
BNUMBER:  B-279662.5
DATE:  May 25, 1999
**********************************************************************

Electronic Design, Inc., B-279662.5, May 25, 1999

 [Select for PDF file]



Decision

Matter of: Electronic Design, Inc.

File: B-279662.5

Date: May 25, 1999

Brian A. Bannon, Esq., Wayne A. Keup, Esq., Margaret A. Dillenburg, Esq.,
and Joseph S. Carlin, Esq., Dyer Ellis & Joseph, for the protester.

David S. Cohen, Esq., William F. Savarino, Esq., Alexis D. Konde, Esq.,
Victor G. Klingelhofer, Esq., Laurel A. Hockey, Esq., and John J. O'Brien,
Cohen Mohr, for Litton Integrated Systems Corporation, Guidance and Control
Systems Division, the intervenor.

Michael J. Glennon, Esq., John M. Davis, Esq., and Andrew C. Saunders, Esq.,
Department of the Navy, for the agency.

Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.


DIGEST

An offeror's access to ship configuration drawings under a solicitation for
ship alterations is not an unfair competitive advantage where the
solicitation sufficiently identifies requirements for preparing proposals
for all offerors and the offeror's access to the drawings is not the result
of unfair motives or actions on the part of the government.


DECISION

Electronic Design, Inc. protests an award to Litton Integrated Systems
Corporation, Guidance and Control Systems Division, under request for
proposals (RFP) No. N00024-98-R-4013, issued by the Department of the Navy,
Naval Sea Systems Command, for integrated ship control system upgrades for
CG 47 Ticonderoga class ships. Electronic Design contends that Litton had an
unfair competitive advantage.

The protest is denied.

The RFP, as amended, contemplated the award of a fixed-price contract, with
options, for upgrades on 27 CG 47 class ships through fiscal year 2004. RFP
amend. 011, at 2, 8-13; Agency Supplemental Report, Apr. 26, 1999, at 11.
The Navy received four proposals, including EDI's and Litton's, by the
closing date of February 27, 1998. Agency Supplemental Report at 14. After
conducting discussions and evaluations, the Navy awarded a $138,624,300
contract to Litton on May 14. Id. at 17. On May 22, EDI protested that award
and on May 27 the Navy issued a stop work order under Litton's contract. Id.

On August 31, our Office sustained EDI's protest, finding that the agency
had not considered price as a significant evaluation factor and had
unequally applied a stated page limitation to the proposals. Electronic
Design, Inc., B-279662.2 et al., Aug. 31, 1998, 98-2 CPD ï¿½ 69.

In response, the Navy reopened the competition to the four original offerors
and amended the RFP. Agency Report at 4; Agency Supplemental Report at 17.
The Navy received three revised proposals by the closing date of November
16, including Litton's and EDI's. [1] Agency Report at 4. Following
discussions, the Navy requested and received final proposal revisions by
January 21, 1999. Id. Litton's proposed price was $129,875,000 and EDI's was
$150,509,831. Id. The Navy again selected Litton's proposal for award and on
February 4 lifted the stop work order. Id. The present protest followed.

EDI's protest concerns an alleged unfair competitive advantage of Litton in
the recompetition arising from Litton's access to detailed current
configuration drawings of CG 47 class ships obtained from Ingalls
Shipbuilding, Inc.--a corporate affiliate of Litton, a subcontractor under
Litton's proposal, and the Navy's planning yard contractor for the CG 47
class ships. Protest at 8-10. In order to resolve this issue, it is
necessary to first discuss the Navy's repair and modernization contracts,
Ingalls' planning yard contract, and the CG 47 current configuration
information that Ingalls provided to Litton after EDI's initial protest.

After a ship is built for the Navy, there generally are three types of
contracts related to its repairs and modernization. Agency Supplemental
Report at 4. A planning yard contract provides for general engineering and
technical support for a class or classes of ships. Id. An availability
contract is generally to perform repairs and upgrades on a specific ship.
Id. A ship alteration (SHIPALT) contract is for the design and installation
of a new system and, though separate from the availability contract,
installation of the new system on a specific ship is often performed during
the same time as the availability contract for the ship. Id. The contract
awarded under the present RFP is a SHIPALT contract. Id. at 4, 11.

Planning yard functions are carried out in accordance with the Fleet
Modernization Program (FMP) Management and Operation Manual, which
designates the planning yard contractor as the "engineering design agent for
assigned specific classes of ships" and states its corresponding
responsibilities. Id. at 5; Agency Report, Tab 19. When the Navy undertakes
a modernization project on its ships, the planning yard contractor is
typically tasked with developing a ship alteration record (SAR) and ship
installation drawings (SID), and with performing shipchecks. Agency
Supplemental Report at 5. The SAR provides the basic criteria for the
development of design, installation drawings, other documentation, and a
record of the Navy's approval of the ship configuration change. Agency
Report at 5 n.5. SIDs include system drawings, structural drawings, ripout
drawings, and other drawings and information as required. Id. at 6 n.6;
Agency Supplemental Report at 5 n.5. A shipcheck is a walkthrough of a ship
to determine whether existing drawings are accurate and whether there are
items that might interfere with the installation of new equipment. Agency
Report at 6 n.7. A relevant difference between standard availability
contracts and SHIPALT contracts, for purposes of the planning yard
contractor developing the SAR and SIDs, is that, for an availability
contract, the design is established prior to the competition and the SAR and
SIDs are prepared and available to competitors during the competition,
whereas, for a SHIPALT contract, the Navy solicits proposals for the design
of the modernization work and, since the SAR and SIDs must capture the
winning design, the SAR and SIDs are not available until after the
competition. Agency Supplemental Report at 5.

Ingalls developed the detailed design for the CG 47 class ships, and built
19 of the 27 ships in this class. Agency Report at 5; Agency Supplemental
Report at 2, 6. In October 1995, Ingalls was awarded the planning yard
contract to support all of the maintenance and modernization processes for
this ship class. Agency Report at 5; Agency Supplemental Report at 6.
Ingalls' responsibilities also included maintaining the CG 47 Class Central
Data Repository, which includes computerized databases for storing and
retrieving drawings reflecting the configuration of each ship in the class.
[2] Agency Report at 5-6; Agency Supplemental Report at 3, 5.

Ingalls' planning yard contract contained an organizational conflict of
interest (OCI) provision, which stated that the only potential OCI
inhibiting Ingalls from competing on other contracts was related to certain
contract requirements to support the development of ship modernization and
repair specifications. Agency Supplemental Report at 6-7; Agency Letter,
Apr. 19, 1999, attach. f, Waiver of OCI Provisions, encl. 3, OCI clause. On
May 10, 1996, 6 months after the planning yard contract commenced, the Navy
instructed Ingalls to stop performing all work associated with the
development of modernization and repair specifications. Agency Supplemental
Report at 7.

By letter dated October 7, 1997, Ingalls advised the Navy that it wanted to
compete on the installation phase of planned conversions to the CG 47 class
ships. Agency Report, Tab 31. The letter stated that Ingalls does not
perform work associated with the development of specifications and that its
competing under the conversion solicitations should not present a conflict
of interest. Ingalls requested the Navy to confirm that Ingalls' performance
of the planning yard contract would not conflict with Ingalls being able to
compete on CG 47 class conversion solicitations. Id.

On December 24, 1997, the Navy granted a waiver to the OCI provisions
contained in Federal Acquisition Regulation (FAR) Subpart 9.5 (June 1997)
and permitted Ingalls to both perform the planning yard contract for CG 47
class ships and compete under solicitations for CG 47 conversions. Agency
Letter, Apr. 19, 1999, attach. f, Waiver of OCI Provisions. The waiver
identified provisions for mitigating any potential conflict and stated:

Inasmuch as there is a potential OCI, notwithstanding the mitigation
efforts, and it is imperative that Ingalls, the only source for this
[planning yard] Contract, continue to perform critical Planning Yard
efforts, . . . a waiver of FAR 9.505 is in the best interests of the
Government.

Id. at ï¿½ 7.



In January 1998, the Navy approved the cost justification for proceeding
with the SHIPALT for the integrated ship control upgrades for CG 47 class
ships. Agency Report at 5; Agency Report, Tab 20, Justification Cost Form.
The first installation was planned for July. Agency Report, Tab 20,
Justification Cost Form. In March, the Navy issued a task order under the
Ingalls' planning yard contract to prepare the SAR and SIDs for this
SHIPALT. Agency Letter, Apr. 19, 1999, attach. g, Technical Instruction No.
128. The statement of work (SOW) for this task stated that the planning yard
contractor "will review vendor installation drawings for first installation
and develop SIDs for follow-on installations." Id.

On May 15, the day following the initial award to Litton, that contractor
began providing its drawings to Ingalls for use by Ingalls in developing
SIDs pursuant to the planning yard task order. Intervenor Supplemental
Comments, Apr. 26, 1999 at 5-7. Ingalls' performance under the task order
was not affected by the Navy's May 27 stop work order to Litton following
the initial award under the RFP. Agency Report at 6. Ingalls began drafting
the SIDs required under the task order and, during July and August, provided
preliminary drawings to Litton. Intervenor Supplemental Comments, Apr. 26,
1999, at 9, exh. D, at 2; Protester Comments at 5; Intervenor Supplemental
Comments, May 6, 1999, at 8.

An Ingalls design supervisor states that Ingalls was aware of the stop work
order on Litton's contract and of EDI's then-pending protest of the award of
that contract. Intervenor Supplemental Comments, Apr. 26, 1999, exh. D, at
2. Ingalls provided the preliminary drawings to Litton in order for Litton
to verify that Ingalls had properly incorporated Litton's design information
into Ingalls' drawings. Id. Ingalls determined to proceed with developing
the SIDs based on Litton's design because of perceived time constraints and,
even if another offeror was ultimately awarded the contract then held by
Litton, Ingalls believed that subsequent modifications of the SIDs to
accommodate the new contractor's design would be quicker than preparation of
the SIDs from scratch. Id. at 2-3. If Ingalls had waited until conclusion of
the recompetition to begin developing the SIDs, it believed that it would
have been difficult or impossible to meet the Navy's performance schedule.
Id. Ingalls determined that providing the preliminary SIDs to Litton would
not provide Litton with assistance for proposal preparation because the SIDs
were based on Litton's own design information which Litton had previously
provided to Ingalls. Id. at 2.

Subsequent to EDI's first protest, EDI contacted Ingalls to determine
whether Ingalls would be willing to serve as EDI's installation
subcontractor. Protest at 8. EDI states that Ingalls confirmed that Ingalls
would be interested in performing as installation subcontractor for EDI, but
that it would not provide EDI with any detailed information on the current
configuration of the CG 47 class ships. Id., encl. 5. EDI states that
Ingalls advised EDI that Ingalls had developed drawings for the Navy and
could not release this information. Id. at 8-9, encl. 5.

Following the recompetition, EDI learned of Litton's price reduction from
its initial proposal and made inquiries to ascertain how Litton could have
lowered its price. Protest at 9, encl. 5. EDI states that a potential
subcontractor common to both EDI and Litton stated that Litton provided more
detailed information during the recompetition in the form of a revised SOW
with detailed configuration information. Id. From its other inquiries, EDI
learned of the Navy's task order issued to Ingalls to develop SIDs for this
SHIPALT. Id. at 9-10, encl. 5. EDI concluded that Litton had access to the
SIDs prepared by Ingalls. Id.

EDI specifically alleges that an unfair competitive advantage arose by
Ingalls acting improperly as engineering design agent for the government and
providing to Litton alone the SIDs prepared under the planning yard
contract. Protester Comments at 11; Protester Supplemental Comments, May 3,
1999, at 2-4, 10; Protester Supplemental Comments, May 7, 1999, at 1-3. EDI
also alleges that it had requested configuration information from the Navy
during the initial competition and was denied such information, and that the
Navy was required to equalize Litton's competitive advantage by providing
current configuration information to all offerors. Protest at 10-11;
Protester Comments at 3, 10-12. EDI alleges that prejudice resulted
essentially because Litton's access to more detailed and more current ship
configuration information allowed it to more precisely identify the work
effort, and refine its technical proposal, cost estimates and contingency
factors to a greater degree than other offerors, as evidenced in part by
Litton's higher technical rating and by its ability to obtain fixed-priced
offers from its subcontractors, which EDI was unable

to do. Protest at 8-10; Protester Comments at 4-5, 8-10; Protester
Supplemental Comments, May 3, 1999, at 4-9; Protester Supplemental Comments,
May 7, 1999, at 3-7.

An offeror may not have an unfair competitive advantage over other
competitors and, in order to protect the integrity of the procurement
system, an agency may go so far as to exclude an offeror from the
competition because of the likelihood that it has obtained an unfair
competitive advantage. See Compliance Corp., B-239252, Aug. 15, 1990, 90-2
CPD ï¿½ 126 at 5; Holmes and Narver Servs., Inc./Morrison-Knudson Servs.,
Inc., a joint venture; Pan Am World Servs., Inc., B-235906, B-235906.2, Oct.
26, 1989, 89-2 CPD ï¿½ 379 at 8. In seeking competition, however, an agency is
not required to construct its procurements in a manner that neutralizes the
competitive advantage that some potential offerors may have over others by
virtue of their own particular circumstances, such as prior or current
government contracts, where the advantages did not result from unfair
motives or action on the part of the government. See MCA Research Corp.,
B-276865, July 29, 1997, 97-2 CPD ï¿½ 33 at 2-3; Optimum Tech. Inc.,
B-266399.2, Apr. 16, 1996, 96-1 CPD ï¿½ 188 at 7; Validity Corp., B-233832,
Apr. 19, 1989, 89-1 CPD ï¿½ 389 at 6; Ross Bicycles, Inc., B-217179, B-217547,
June 26, 1985, 85-1 CPD ï¿½ 722 at 3. EDI has failed to establish that an
unfair competitive advantage existed here.

First, although EDI alleged that the Navy did not provide requested
configuration information, EDI does not allege that the RFP did not contain
sufficient information for it to understand the requirements and to prepare
an acceptable proposal. See Protester Supplemental Comments, May 3, 1999, at
10. The RFP contained a detailed SOW, and the Navy made available a
supplemental information package for a fee and provided offerors with an
opportunity to examine a CG 47 class ship of substantially the same
configuration that the contractor would confront at installation. Agency
Supplemental Report at 11-13. The Navy did not provide additional
configuration information to any offeror, including Litton. [3] Id. at 13.

Second, it was Ingalls, not the Navy, that transferred the preliminary SIDs
to Litton. EDI does not allege, nor does the record indicate, that the Navy
had knowledge (prior to the filing of the protest) of that transfer by
Ingalls. [4] Thus, even if the transfer gave Litton an advantage, that did
not result from action on the part of the government.[5]

Third, the record does not establish that the preliminary SIDs were
improperly provided to Litton. The SOW for the planning yard contract task
order provided for Ingalls to review the vendor's installation drawings and
to develop SIDs. Agency Letter, Apr. 19, 1999, attach. g, Technical
Instruction No. 128. The SOW for the instant RFP provides for the SHIPALT
contractor "to conduct direct and timely technical liaison with the planning
yard, including providing upgrade documentation to support develoment and
[Navy] approval of the SIDs." Agency Report, Tab 35, at 65-66; Agency
Supplemental Report at 11. This process was started by Ingalls after Litton
had been awarded the contract and prior to the stop work order being imposed
under Litton's contract. Ingalls' contract performance was not stayed,
however, and given the tight timeframe for Ingalls' contract work to be
completed, we find nothing improper in its request to Litton to review the
accuracy of Litton's design information in the preliminary SIDs prepared by
Ingalls. [6] Since we find no impropriety in the action of Ingalls as the
Navy engineering design agent, there is no basis to impute improper action
to the Navy under that relationship. [7]

Fourth, the record shows that the competitive advantage here is basically
attributable to Litton's and/or Ingalls' contract experience with the CG 47
class vessels and application of that experience to proposal preparation
largely before Ingalls was even tasked to develop the SIDs in question. This
competitive advantage first arose with Litton's preparation of its initial
proposal. Litton made a business decision to begin, at its own expense,
designing the system it would propose even before the RFP was issued.
Intervenor Supplemental Comments, Apr. 26, 1999, at 2. Part of its efforts
included drafting an installation SOW, and subsequent revisions. Litton
states that it prepared its SOWs from information in the RFP, its own
drawings of the control systems that it manufactures, and CG 47 class ship
drawings previously obtained during the construction of the ships. Id. at 4.
This SOW, including all revisions, was examined by counsel for the protester
under a protective order. Id. at 3; Protester Comments at 8-9. The revision
provided to Litton's prospective subcontractor on October 26, 1997, well
before Ingalls' task order, was described by protester's counsel as:

[A] 64 page document identifying 137 "as-built" CG 47 Class drawings, a list
of cables to be deleted from eight of the systems, a detailed, revised
estimate of 49,300 feet of cable to be installed and 28 drawings related to
the configuration of the Litton-proposed system.

Protester Comments at 9.

Litton's final revised SOW totaled 110 pages, contained additional
information, and was given to the potential subcontractor on June 10, 1998,
which was before Ingalls provided the preliminary SIDs to Litton in July and
August. Id. As EDI alleged, it was this detailed information in Litton's
SOWs that created a competitive advantage. Protest at 8-9, encl. 5. Thus, we
find that the competitive advantage possessed by Litton arose from its
extensive information gained under other contracts and from preparing a
detailed design and proposal. This is an advantage derived from Litton's
experience, and thus is not unfair and need not be neutralized by the agency
(through the provision of additional information in the RFP or otherwise).
[8]

Finally, we note that EDI does not protest the propriety of Ingalls
participating in this competition while it performs as planning yard
contractor. If Ingalls can compete while it holds the apparent competitive
advantage accruing from its current performance as the planning yard
contractor, we fail to see why it is objectionable for Ingalls to share its
competitive advantage in a prime contractor/subcontractor relationship. [9]
See Signal Corp., B-241849 et al., Feb. 26, 1991, 91-1 CPD ï¿½ 218 at 7.

In sum, since there is no evidence of impropriety or of unfair government
motives or actions, the record does not support a finding that an unfair
competitive advantage existed here.

The protest is denied.

Comptroller General

of the United States




Notes

1. The EDI proposal represented an alliance between EDI and the Raytheon
Alliance, which was one of the four original offerors. Protest at 2. The
Raytheon Alliance was comprised of Raytheon Naval and Maritime Systems, CAE
Electronics Inc. and other firms. Agency Letter, Apr. 19, 1999, attach. a,
Raytheon Alliance Proposal, at 3.

2. The government routinely grants contractors access to such databases.
Agency Supplemental Report at 3.

3. The Navy states that current configuration drawings were available to
offerors by accessing various databases. Agency Supplemental Report at
13-14.

4. Although EDI initially suspected that the Navy provided the drawings to
Litton after Ingalls had provided them to the Navy, Protest at 10, EDI
abandoned this allegation. The record showed that the Navy had received only
one drawing from Ingalls prior to the Navy's second source selection
decision, and that drawing was issued on January 21, 1999, the closing date
for final proposal revisions. Agency Report at 6.

5. Moreover, even if the Navy had known that Ingalls provided the
preliminary drawings to Litton, the Navy could not have released them to
competing offerors, because they contained the proprietary design proposed
by Litton in this competition. See Mortara Instrument, Inc., B-272461, Oct.
18, 1996, 96-2 CPD ï¿½ 212 at 5 n.6.

6. EDI does not allege that Ingalls should not be permitted to participate
in this competition due to an OCI. Protester Supplemental Comment, May 3,
1999, at 2-3. (Our Office did address the OCI issue for Ingalls, and upheld
the legality of the Navy's OCI waiver, in a protest under a different CG 47
class procurement. See Knights' Piping Inc.; World Wide Marine & Indus.
Servs., B-280398.2, B-280398.3, Oct. 9, 1998, 98-2 CPD ï¿½ 91.) EDI does claim
that Ingalls' supplying Litton with the preliminary SIDs was inconsistent
with a statement in the Navy's OCI waiver under Ingalls' planning yard
contract that, in an effort to mitigate potential OCI's, after SIDs are
developed and submitted to the government for review and approval, and after
the government has approved them, the drawings will be available to
potential offerors. Protester Supplemental Comments, May 3, 1999, at 3;
Agency Letter, Apr. 19, 1999, attach. f, Waiver of OCI Provisions. EDI
alleges that, since the drawings were not yet submitted to the Navy for
review and approval, Ingalls, in its capacity as the Navy's engineering
design agent, acted in violation of the OCI waiver in making the preliminary
SIDs available to Litton. Protester Supplemental Comments, May 3, 1999, at
3-4; Protester Supplemental Comments, May 7, 1999, at 2. We disagree. The
statement in the waiver referenced by EDI refers to SIDs for availability
contracts and cannot be applicable to the present circumstances, which
require the planning yard to develop SIDs based on the awardee's design. See
Agency Supplemental Report at 5.

7. Although EDI references the designation of Ingalls as "engineering design
agent," the record does not show that the Navy bestowed any traditional
procurement functions upon Ingalls under this designation, such as
responsibility for distributing solicitation information to potential
offerors.

8. In contrast, EDI provided this same prospective subcontractor a two-page
work statement. Although EDI initially denied that it had access to
configuration information, the Navy provided evidence that EDI's alliance
members worked on a CG 47 class contract in cooperation with Ingalls during
the competition and had access to the CG 47 class database. Agency
Supplemental Report at 23. EDI has not provided any persuasive explanation
as to why EDI did not, or could not have, used this to prepare a more
detailed SOW with configuration information.

9. To the extent Ingalls was a competitor, there can be no doubt it was not
acting as the government's design agent. Thus, to the extent EDI is
protesting that Ingalls, as a potential subcontractor, was treating
potential prime contractors unequally, EDI's complaint rests with a private
party, not the contracting agency or the federal procurement system.