TITLE:  Davies Rail & Mechanical Works Inc., B-283911.2, March 6, 2000
BNUMBER:  B-283911.2
DATE:  March 6, 2000
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Davies Rail & Mechanical Works Inc., B-283911.2, March 6, 2000

Decision

Matter of: Davies Rail & Mechanical Works Inc.

File: B-283911.2

Date: March 6, 2000

Angela Schnuerle for the protester.

Kenneth M. Homick, Esq., and Richard G. Welsh, Esq., Naval Facilities
Engineering Command, for the agency.

Wm. David Hasfurther, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protester's contention that the agency failed to conduct meaningful
discussions is denied where the record shows the agency posed questions in
the areas in which it was concerned that the proposal needed amplification
and improvement.

2. Agency's selection of the proposal of an offeror whose price was less
than 1 percent higher than the protester's, in view of that firm's better
past performance references, more extensive experience with applicable
quality control program, and in-house design and fabrication capability, was
reasonable where the solicitation provided for the award to the proposal
that represented the best value to the government.

DECISION

Davies Rail & Mechanical Works Inc. protests the award of a contract to
Ederer Inc. under request for proposals (RFP) No. N62472-98-R-1648, issued
by the Navy Crane Center (NCC), Naval Facilities Engineering Command, for
the purchase of four cranes and the refurbishment of another crane at the
submarine base in Bangor, Washington. Davies contends that as the low priced
offeror, it should have received the award, and that the decision that
Ederer's proposal offered the best value, notwithstanding its higher price,
was unreasonable.

We deny the protest.

The RFP was issued on April 6, 1999, and was amended five times. Contracting
Officer's Statement at 1. Under the RFP, the proposal offering the best
value to the government, as determined after proposals had been evaluated in
accordance with the RFP evaluation criteria, would receive the award. The
RFP also provided that award was not required to be made to the low-priced
offeror. RFP sect. M.1, at M-1. Proposals were to be evaluated on the basis of
two factors, price and technical, each of which was rated equally. RFP sect.
M.5.A, at M-2. The technical factor consisted of three subfactors: technical
approach, management plan, and offeror's capability/ relevant past
performance; each subfactor consisted of various elements and subelements.
RFP sect. M.5.C, at M-3 to M-7. The three technical subfactors and the elements
of these subfactors and their subelements were to be weighted equally with
respect to each other. RFP sect. M.5.A, at M-2. Price for evaluation purposes
was to include the prices of all items, including option items (unless
determined not to be in the best interest of the government). RFP sect. M.1, at
M-1.

Of relevance here, under the source selection procedures established for the
RFP and followed by the agency, the technical evaluation team (TET) was to
evaluate each offeror's technical proposal in accordance with the RFP
evaluation criteria and to assign one of the following adjectival ratings:
outstanding (O), acceptable (A), unacceptable/susceptible of being made
acceptable (US), or unacceptable (U). A "U" or "US" in any sub-factor would
render the rating for the entire factor "U" or "US." Agency Report, Tab 2,
Source Selection Plan, at 11-12.

Four proposals were received by the submission deadline. After the agency's
evaluation of the proposals, three proposals were included in the
competitive range. Agency Report, Tab 7, Memorandum for File. The initial
scoring, as relevant here, was as follows:

                          Ederer    Davies

 Technical Approach       US        US

 Management Plan          US        US

 Capability\Relevant      O         US
 Past Performance

 Overall Technical        US        US

Agency Report, Tab 5, TET Presentation to SSA, at 12 and 40.

On the elements scored under the subfactors, Ederer received an "O" for its
plan to access the building containing the 50-ton crane to be refurbished
from a "hatch" on the roof, and an "O" for its quality control program
because Ederer was not only compliant, as required by the RFP, with the
applicable quality assurance program (ISO 9001), but also was certified
under the program. It received an "O" on the capability/relevant past
performance subfactor because previous customers had responded to its work
extremely positively. Id. at 3-4. The TET found that Ederer's proposal
provided the most detailed technical approach of all the proposals, with a
good demonstration of its understanding of the specifications. Id. at 41.
The evaluators also rated Ederer "O" under one element of the management
plan subfactor because all of the design, fabrication, and installation work
would be done in-house, and the evaluators considered in-house performance
the most desirable method of delivering a quality product. Id. at 8-9.

Davies received a "US" rating on the capability/relevant past performance
subfactor because the past contracts it had submitted for evaluation did not
demonstrate a high level of design experience and fabrication capabilities.
The evaluators believed it was not clear whether a firm identified in the
proposal would be a subcontractor for fabrication of the cranes; the
evaluators also concluded that there was insufficient evidence of that
firm's experience working with Davies. The evaluators also noted that Davies
had not fully implemented its quality system to be ISO 9001 compliant.
Further, the evaluators noted that on a current contract with NCC, Davies
missed the design completion date and projections indicated that the design
release would be 75 days beyond the completion date in the contract. Id. at
38-39.

By letters of June 29, Ederer and Davies were advised to submit by July 9
written changes to their proposals in response to attached lists of
deficiencies or weaknesses in their proposals. Agency Report, Tab 9, Letter
from Contracting Officer to Ederer 2 (June 29, 1999) and Tab 10, Letter from
Contracting Officer to Protester 2 (June 29, 1999).

The revised proposals were evaluated by the TET, with the following results:

                           Ederer  Davies

 Technical Approach        A       US

 Management Plan           A       US

 Capability\Relevant       O       A
 Past Performance

 Overall Technical         A       US

Agency Report, Tab 13, Addendum to TET Presentation to SSA, Aug. 30, 1999,
at 12, 32.

The TET again noted the favorable qualities of Ederer's proposal that had
been identified in the initial evaluation, and also noted Ederer's
innovative crane design philosophy, which would increase the firm's
certified fabrication capacity, promote compliance with safety requirements,
and provide commonality of components.
Id. at 2. The evaluators found that Ederer had used its ISO 9001 certified
quality control system on prior NCC or NCC-monitored projects with
exceptional success. Id. at 4. Ederer's rating on the technical approach
subfactor was raised to an "A."
Id. at 6. Ederer's rating on the management plan subfactor was also raised
to an "A," with Ederer's submission of required, but previously missing,
resumes. Id. at 8-9.

Davies's rating on the capability/relevant past performance subfactor was
raised to
an "A," although Davies's proposal was considered marginal under this
subfactor.
Id. at 31-32. Davies's rating under the technical approach subfactor for
drawings remained "US" because Davies remained deficient in its ability to
furnish detailed drawing for the work. The firm's management plan subfactor
rating also remained "US" because the evaluators were concerned that the
schedule requirements would not be met for one crane. The evaluators were
concerned that Davies was not clear whether its design team members were
in-house employees, and whether Davies would be subcontracting work. The
evaluators also were concerned that Davies's open-air facilities with only a
corrugated metal roof might adversely affect the work since components would
be exposed to the weather. Id. at 26-29. The evaluators also were concerned
that Davies had difficulty meeting its design completion date on its current
NCC contract, that its ISO 9001 quality assurance program was still subject
to certain required revisions, and that Davies's past performance references
primarily addressed Davies's repair capabilities and that only one reference
showed fabrication and management capabilities that were equal to or greater
than those required for this procurement. Id. at 31. The evaluators were
greatly concerned in view of Davies's proposal that an exceptional level of
effort would be required to ensure that Davies would be capable of
completing a project of this magnitude and complexity on schedule. Id. at
34.

The reports of the TET and the price evaluation team (PET) were provided to
the source selection board (SSB). The SSB reviewed the TET and PET findings
and sent its report to the source selection authority (SSA). The SSA
recommended that further discussions be conducted. The SSA specifically
recommended that Davies be asked how and where its cranes would be
manufactured because the agency was still not sure whether Davies or its
subcontractor would be performing this work. Agency Report, Tab 15,
Memorandum for File, Aug. 27, 1999. By letters of September 3, Ederer and
Davies were requested to submit revised proposals, responding to changes in
the RFP made by amendment No. 5 and to any attached deficiencies and/or
omissions, and to submit a final price by September 14. Agency Report, Tab
18, Letter from Contracting Officer to Protester 1-2 (Sept. 3, 1999), and
Letter from Contracting Officer to Ederer 1-2 (Sept. 3, 1999).

The revised proposals were evaluated by the TET, with the following results:

                          Ederer    Davies

 Technical Approach       A         A

 Management Plan          A         A

 Capability\Relevant      O         A
 Past Performance

 Overall Technical        A         A

Agency Report, Tab 21, TET Presentation to the SSA, Revised Sept. 23, 1999,
at 12, 31.

Ederer's technical proposal remained the highest ranked for basically the
same reasons already noted in the previous TET evaluations. Id. at 32. While
Davies's ratings for the technical approach and the management plan
subfactors were raised to an "A," Id. at 25, 29, the TET found Davies's
technical approach to be only minimally acceptable. The TET remained
concerned as to whether Davies, or its subcontractor for fabrication, would
be responsible for the design drawings, whether the subcontractor had a
quality assurance program that was ISO 9001 compliant (it was noted that
Davies's quality assurance program was now ISO 9001 compliant), whether the
subcontractor would construct the cranes in accordance with RFP
specifications and with components meeting those specifications, whether
Davies or the subcontractor would be responsible for the certification
reports required during fabrication, and whether the relationship existing
between Davies and its subcontractor--which the TET believed had not been
adequately explained by Davies--would create a risk that the government
might not obtain an acceptable product and would require extensive oversight
by the government during contract performance to ensure contract compliance.
Id. at 25, 27, 29, 30. The TET noted again that Davies has minimal
fabrication capability and also concluded that the drawings submitted did
not demonstrate as high a level of detail as those submitted by the other
offerors, a deficiency that could require a significant level of effort to
correct. Id. at 33. The TET's concerns, primarily relating to the lack of a
detailed explanation of Davies's relationship with its subcontractor,
resulted in Davies's proposal receiving only a marginally acceptable rating
on the capability/relevant past performance subfactor. Id. at 30. The TET
expressed concern that the references did not show that Davies had a high
level of design experience and fabrication capability. Id. at 33.

Ederer's final price was $1,820,150; Davies's final price was $1,816,776.
Agency Report, Tab 22, Price Evaluation Summary to the SSB, Sept. 27, 1999,
at 1. Based on the TET and the PET evaluations, the SSB recommended to the
SSA that award be made to Ederer. In support of this recommendation, the SSB
noted that Ederer submitted the most detailed proposal, that its proposal
demonstrated a very good understanding of the specifications, that Ederer's
proposal to design and manufacture the cranes in-house gave Ederer
100-percent control of the quality process, that Ederer's ISO 9001
certification provided a quality control program that exceeded the RFP
requirements in a way beneficial to the government by ensuring a quality
product, and that Ederer had an outstanding record of past performance with
little or no reengineering or design problems and good to excellent work in
compliance with the specifications.

In contrast, the SSB concluded that Davies's drawings would require a
significant level of effort to provide an equally high level of detail; the
Davies/subcontractor relationship would require increased government
oversight to ensure successful contract completion; Davies, while ISO 9001
compliant, did not have sufficient experience using this quality control
system; Davies's references did not show a high level of design experience
and fabrication capabilities; and, additionally, Davies had not timely
completed design drawings for its current NCC contract.

The SSA basically adopted these evaluation findings in her determination.
She noted that Ederer's price was "less than 1% higher" than that of Davies.
She concluded that "that the technical competence, superior performance
record and enhanced quality program of Ederer, Inc. far outweighs the
minimal differential in price." Agency Report, Tab 24, Memorandum for File,
Sept. 29, 1999, at 1-2. The agency awarded a contract to Ederer on
September 30. Contracting Officers Statement at 6. Davies received a
debriefing from the agency on October 7.

Davies contends that because both the Davies and Ederer proposals were rated
acceptable overall, it should have received the award based on its lower
price. Davies argues that the agency failed to conduct meaningful
discussions and thus Davies did not have the opportunity to address areas in
which it could have improved its proposal. Protester's Supplemental Comments
at 1, 7. Davies also argues that the agency misevaluated Ederer's proposal,
and questions the benefits that the evaluators found in Ederer's proposal.
Id. at 1, 5.

We find without merit Davies's allegation that meaningful discussions were
not conducted with the firm. Davies specifically contends that an NCC
employee provided evaluators with misleading and untrue information
regarding Davies's performance, in particular, that Davies had missed a
design completion date and that Davies was late in furnishing a quality
assurance manual being developed under its current NCC contract. Davies also
complains that the NCC employee allegedly questioned Davies's capabilities,
including its design and engineering staff. Davies asserts it was not asked
to address these matters during discussions. Id. at 8-10.

The Federal Acquisition Regulation (FAR) requires that contracting officers
discuss with each offeror being considered for award "significant
weaknesses, deficiencies, and other aspects of its proposal . . . that
could, in the opinion of the contracting officer, be altered or explained to
enhance materially the proposal's potential for award." FAR sect. 15.306(d)(3).
The statutory and regulatory requirement for discussions with all
competitive range offerors, 10 U.S.C. sect. 2305(b)(4)(A)(i) (1994); FAR sect.
13.306(d)(1), means that such discussions must be meaningful, equitable, and
not misleading. For discussions to be meaningful, they must lead offerors
into the areas of their proposals requiring amplification or revision. The
Communities Group, B-283147, Oct. 12, 1999, 99-2 CPD para. at 4.

The record shows that the protester was led into the areas in which the
agency was concerned that its proposal needed amplification and improvement.
For example, in the contracting officer's June 29 letter requesting Davies
to submit a revised proposal and to address the attached list of
deficiencies, required clarifications, and/or omissions, Davies was asked to
address how it would overcome the anticipated missing of the design
completion date and asked to address the fact that it did not have an
approved qualified assurance plan under its current NCC contract. Agency
Report, Tab 10, Letter from Contracting Officer to Protester 2 (June 29,
1999). The record shows that Davies responded to this question by stating
that NCC had issued a change order, that two review meetings had occurred,
and Davies did not believe that "any other problematic design issues could
cause delay." Agency Report, Tab 12, Davies Revised Proposal, July 8, 1999,
at 8. Davies also responded to the concern regarding the quality assurance
plan stating that the plan had been in the appropriate agency's "hands for
some time, and we have received ‘verbal' approval contingent on the
[July 30th] audit . . . ." Id. at 9. Thus, Davies had an opportunity to
address both of these matters and, in fact, did address them.

Davies also complains that it was not given the opportunity to address
concerns regarding its design and engineering staff. However, in the
contracting officer's June 29 letter, Davies was asked if it "staff[ed]
in-house design personnel" who would perform the design tasks, and whether
three specifically named persons were "full-time employees" and where they
would be located during performance. Agency Report, Tab 10, Letter from
Contracting Officer to Protester attach. 1, at 2 (June 29, 1999). Davies
replied that it employed in-house design personnel, referred to resumes
submitted with its proposal, noting that two of the three listed persons
were full-time Davies employees and that one was a professional engineer
under a contract to Davies. Agency Report, Tab 12, Letter from Protester to
Contracting Officer 6 (July 8, 1999). Thus, Davies had the opportunity to,
and did, address this issue.

Therefore, our review of the record shows that, during discussions, Davies
was asked to address the very areas Davies now alleges were not discussed.
Further, the record shows that the agency evaluators raised Davies's
proposal to an acceptable rating based on the discussion responses. Agency
Report, Tab 21, TET Presentation to the SSA, Revised Sept. 23, 1999, at 12,
31.

Davies also challenges the agency's determination that Ederer's proposal
represented the best value to the government, notwithstanding its higher
price. Source selection officials are vested with a very broad degree of
discretion to determine the manner and extent to which they will make use of
evaluation results. Resource Management Int'l, Inc., B-278108, Dec. 22,
1997, 98-1 CPD para. 29 at 4; PRC, Inc., B-274698.2, B-274698.3, Jan. 23, 1997,
97-1 CPD para. 115 at 7. In a negotiated procurement, whether the ratings of
proposals indicate a significant superiority of one proposal over another
depends upon the facts and circumstances of each procurement and is
primarily a matter within the discretion of the procuring agency. Resource
Management Int'l, Inc., supra, at 4. Thus, the determination of which
proposal represents the best value is not necessarily controlled by price,
but is made on the basis of the evaluation factors as set forth in the RFP
with the source selection official often required to make a price/technical
tradeoff to determine if the technical superiority of one proposal is worth
the higher price that may be associated with that proposal. Nomura Enter.,
Inc., B-277768, Nov. 19, 1997, 97-2 CPD para. 148 at 4.

The SSA's determination that Ederer's proposal represented the best value to
the government was reasonable. Here, both the Davies and Ederer proposals
were found acceptable overall; however, the SSA found that Ederer's proposal
offered better value. The SSA noted that Ederer's experience included
considerably more contracts that were valued in the range of the one being
awarded here and that showed performance of the full range of services being
obtained here. In contrast, Davies's references showed much less design
experience and included its current NCC contract for which the firm's
difficulties in meeting a design completion date were never satisfactorily
addressed. Additionally, the SSA found that Ederer had been ISO 9001
certified since 1996, and Ederer's prior use of the applicable quality
control program was reflected in the superior past performance ratings
received by Ederer. Davies only became ISO 9001 compliant (but not yet
certified) during discussions on this procurement. Finally, Ederer's
approach called for the design and manufacture of cranes in-house. On the
other hand, Davies proposed the use of a subcontractor that raised contract
management issues that Davies did not address fully. Agency Report, Tab 24,
Source Selection Memorandum. In our view, the SSA reasonably could conclude
that these advantages justified the slight price premium. [1]

The protest is denied.

Comptroller General
of the United States

Notes

1. Davies challenges some of the other benefits that the TEP identified in
Ederer's proposal. Thus, Davies objects to the TEP's favorable consideration
of Ederer's proposal to gain access to the crane that needed to be
refurbished through an opening in the roof, and its conclusion that this
approach was better than Davies's approach, which did not use the roof
access. Davies also questions why the evaluators credited Ederer with an
"innovative crane design." Protester's Supplemental Comments at 6. As
discussed above, the SSA decision to award to Ederer was based on other
factors; neither roof access nor innovative design was a factor in that
decision. Agency Report, Tab 24, Source Selection Memorandum. Under these
circumstances, we need not resolve Davies's challenge to these agency's
findings since the tradeoff decision was not based on these findings and, as
we conclude above, was reasonable. As discussed above, while Davies's
proposal was acceptable, it was not equal to Ederer's in the areas
identified by the SSA.