BNUMBER: B-281342
DATE: January 26, 1999
TITLE: Lance Ordnance, Inc., B-281342, January 26, 1999
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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:Lance Ordnance, Inc.
File: B-281342
Date:January 26, 1999
Nancy M. Camardo, Esq., and Joseph A. Camardo, Jr., Esq., Joseph A.
Camardo Law Office, for the protester.
Richard P. Castiglia, Jr., Esq., Patrick K. O'Keefe, Esq., and Thomas
C. Papson, Esq., McKenna & Cuneo, for Fireworks by Grucci, an
intervenor.
Craig E. Hodge, Esq., and Terese M. Harrison, Esq., Department of the
Army, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protester's contention that awardee received an unfair competitive
advantage over other offerors because the awardee leases facilities at
the Radford Army Ammunition Plant pursuant to the Armament Retooling
and Manufacturing Support Initiative is denied where the record shows
that the awardee: leases the facilities not from the government, but
from a prime contractor; pays fair market rental value for the
facilities; and has not received an unfair advantage from Army
expenditures necessary to make the facility habitable for the life of
the awardee's 10-year lease, which began before this solicitation was
issued, and will extend beyond performance of this contract.
DECISION
Lance Ordnance, Inc. protests the award of a contract to Fireworks by
Grucci by the Department of the Army, pursuant to request for
proposals (RFP) No. DAAA09-98-R-0068, for the manufacture and delivery
of 420,400 ground burst projectile simulators and 212,600 hand grenade
simulators. Lance argues that Grucci received an unfair competitive
advantage through its proposed use of government facilities at the
Radford Army Ammunition Plant, in Radford, Virginia, and that the Army
conducted an unreasonable evaluation of Grucci's past performance.
We deny the protest.
The RFP, issued April 2, 1998, anticipated award of a fixed-price
contract to the offeror whose proposal represented the best value to
the government. The RFP identified two evaluation factors--past
performance and price, and advised that past performance would be
slightly more important than price. RFP, Amend. 0001, sec. M-1. This
procurement was reserved for small business participation only.
The Army received six proposals in response to the RFP, with prices
and past performance ratings[1] as set forth below:
OFFEROR PRICE PAST PERFORMANCE
RATING
Offeror A $ 4.7 million Neutral
Offeror B $ 4.8 million Unsatisfactory
Fireworks by Grucci $ 5.0 million Excellent
Lance Ordnance $ 5.4 million Excellent
Offeror C $ 5.6 million Excellent
Offeror D $ 7.9 million Good
Source Selection Statement, Sept. 10, 1998, at first and second
unnumbered pages. Based on the past performance ratings of the two
lowest-priced offerors, the contracting officer concluded that the
proposal submitted by Grucci offered the best value to the government.
Id. at third unnumbered page. Lance's protest followed.
Lance argues that Grucci received an unfair price advantage because
Grucci proposed to use facilities at the Radford Ammunition Plant,
which were not made available to other offerors. According to Lance,
the Army should have either adjusted Grucci's price to compensate for
the competitive advantage, or advised other offerors of the
availability of space at the arsenal.
As Lance contends, it is a fundamental principal of government
procurement that competition must be conducted on an equal basis; that
is, offerors must be treated equally and be provided with a common
basis for the preparation of their proposals. Meridian Management
Corp.; Consolidated Eng'g Servs., Inc., B-271557 et al., July 29,
1996, 96-2 CPD para. 64 at 5. Based on our review of the record, however,
we do not agree that Grucci has received an unfair advantage over
other offerors by virtue of its lease at the Radford Ammunition Plant.
Grucci leases space at the Radford Ammunition Plant pursuant to the
Armament Retooling and Manufacturing Support (ARMS) Initiative,
authorized by the ARMS Act of 1992, 10 U.S.C.A. sec. 2501 (West Supp.
1998) (Notes). From fiscal year 1993 through 1998, this Act
authorized the Army to enter into prime contracts for the operation
and management of unused or underused Army ammunition production
facilities. Id. sec. 194(a)(1). The prime contractor was permitted to
negotiate and enter into multiyear leases with other contractors for
the commercial use of the facilities. Id. sec. 194(a)(2).
Grucci learned of the availability of space at the Radford Ammunition
Plant in early 1995 from advertisements and notices widely distributed
to industry. Affidavit of Felix J. Grucci, Dec. 9, 1998, paras. 3-6.
After contacting the Army's prime contractor, Alliant Techsystems,
Inc., about leasing space at the underutilized facility, Grucci and
Alliant jointly prepared a proposal to the Army for Grucci's
commercial use of certain Radford buildings. The proposal estimated
that improvements and repairs of approximately $1.5 million would be
necessary to render the buildings habitable for commercial use.
Concept Proposal, June 2, 1995, at 2. On September 30, 1995, the Army
approved the proposal, and agreed to make the requested improvements.
On March 1, 1997, Grucci and Alliant entered into a facility use
agreement for a period of 10 years, under which Grucci is to pay
Alliant a total of $950,000 (which, the parties agree, equals $3.90
per square foot), plus utilities, security costs and general
maintenance expenses. Grucci is one of 20 ARMS Initiative tenants at
Radford.
The essence of Lance's complaint is that Grucci is receiving an unfair
competitive advantage over other offerors by its tenancy at the
Radford Ammunition Plant. Based on our review of the record here, we
conclude that Lance's assertions are not supported by the results of
the competition, and that Lance has misunderstood the facts
surrounding Grucci's lease. First, Lance's claims of unfair price
advantage are undercut by the proposed prices received. Grucci did
not submit the lowest proposed price for the explosive simulators
here, and, in fact, its proposed price was squarely in the middle of
the range of submitted prices.
Second, Grucci's lease of these facilities was not tied to this
solicitation. Grucci leased the facilities approximately 18 months
prior to the date this solicitation was issued, and its lease extends
for a total of 10 years--well beyond the performance period of this
contract. In addition, Grucci's lease is not from the government but
from a prime contractor for the government. The prime contractor
established its lease prices based on an appraisal intended to discern
the fair market rental value of the property. Thus, on its face,
Grucci is receiving no more benefit from the Army than it would
receive if it rented space in an entirely commercial industrial park.
In its comments on the agency report, Lance argues that our Office
should overturn the Army's selection of Grucci because there is no
contemporaneous evidence in the record that the Army considered
whether Grucci received an unfair advantage here.[2] In addition,
Lance argues that the appraisal used by the prime contractor fails to
establish a fair market value for the Grucci-leased property, and that
Grucci was unfairly benefitted by improvements made to the property in
anticipation of its occupancy.
The contracting officer's statement provided with the agency report
explains that the Army did not conduct an analysis of whether there
was an unfair advantage to Grucci because the lease was a matter
between Grucci and the prime contractor implementing the ARMS
Initiative. Since, as discussed below, there is no evidence of an
unfair advantage from the Army, there was no requirement for the Army
to look beyond the terms of the lease, as Lance contends.
With respect to Lance's challenges to the appraisal, and its
contentions that the improvements made to the property were solely for
Grucci's benefit and provided Grucci an unfair advantage, we reviewed
each of Lance's arguments and conclude that there is no evidence in
the record of an unfair competitive advantage.
For example, Lance argues that the appraisal was flawed because of
disclaimers regarding the unique nature of the Radford Ammunition
Plant properties which could have a positive or negative affect on the
appraisal's assessments. Real Estate Market Survey, Transmittal
Letter, July 13, 1995, at 1. Among other things, the appraisal notes
the possibility of explosion hazards at the site, id., presumably as a
basis for distinguishing between the Radford Ammunition Plant
buildings and other more traditional commercial sites. While Lance is
correct about the presence of the disclaimer, and is correct in
observing that the facts requiring inclusion of the disclaimer could
have consequences on the appraisal values reached, the disclaimers
appear to be a reasonable caveat for a commercial appraiser to add to
a report about unique properties such as these. Simply put, there may
be no clear commercial counterpart for properties such as these
located within the midst of an aging and underutilized ammunition
plant. In our view, given the unique circumstances of leasing
property within an ammunition plant, we find nothing inherently flawed
about the commercial appraisal used by Alliant to set the rental rates
for Grucci's lease.
A second example of Lance's challenges involves the nature of the
improvements made to these buildings before Grucci moved in. As
stated above, the Army agreed to spend approximately $1.5 million to
prepare these buildings for occupation, as they were in various states
of disrepair. Despite Lance's contention to the contrary, there is
little evidence of work done to Grucci's sole benefit; instead, the
work identified appears necessary to make the facilities habitable,
and to relocate Army equipment. For example, the work includes
general repairs to windows, doors, and walls; removing and relocating
several types of excess equipment; and installation of meters and
additional perimeter fencing.[3] Although one item on the worklist
arguably supports Lance's claim--installation of contractor
equipment--there is no evidence that this work represents a
significant effort, and all the other items appear to be necessary for
any lessee to use the premises. Accordingly, we see no basis to
conclude that Grucci was given an unfair advantage in this procurement
by virtue of the improvements made to its Radford Ammunition Plant
space at the start of its 10-year lease.
The protest is denied.
Comptroller General
of the United States
1. The past performance ratings shown in this decision are derived
from separate ratings assigned for each of two past performance
subfactors; the evaluation materials did not include a combined
rating. Ultimately, the past performance ratings are not relevant to
Lance's protest because although the Army report addressed in detail
the agency's decision to rate Grucci's past performance as excellent,
Lance elected, in its comments, not to reply to the agency's
explanation. Accordingly, Lance has provided our Office with no basis
to reject the agency's past performance rating for Grucci.
Appalachian Council, Inc., B-256179, May 20, 1994, 94-1 CPD para. 319 at 8
n.8.
2. This argument differs from Lance's initial contention that the
Army's evaluation violated Federal Acquisition Regulation (FAR) sec.
45.201, which requires agencies to quantify the advantage accruing to
any offeror possessing government-furnished equipment or government
property, in order to allow offerors to compete on a common basis.
Suncoast Scientific Inc., B-240689, Dec. 10, 1990, 90-2 CPD para. 468 at
6. However, as the Army pointed out in its response to the protest,
FAR Part 45, on its face, does not apply to property provided pursuant
to statutory leasing authority. FAR sec. 45.000. Since the ARMS
Initiative is clearly a statutorily-based leasing program, FAR Part 45
does not govern this situation. Nonetheless, the inapplicability of
FAR Part 45 does not bar a protester's general claim of unfair
advantage.
3. The worklist of repairs to be financed by the Army is set forth in
paragraph 8 of a Mandatory Checklist included within Alliant's Concept
Proposal submitted to the Army.