TITLE:  Sabreliner Corporation, B-284240.2; B-284240.6, March 22, 2000
BNUMBER:  B-284240.2; B-284240.6
DATE:  March 22, 2000
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Sabreliner Corporation, B-284240.2; B-284240.6, March 22, 2000

Decision

Matter of: Sabreliner Corporation

File: B-284240.2; B-284240.6

Date: March 22, 2000

Kenneth B. Weckstein, Esq., and Shlomo D. Katz, Esq., Epstein Becker &
Green, for the protester.

Ellen D. Washington, Esq., Rosalind J. Woolbright, Esq., and Daniel D.
Pangburn, Esq., Naval Air Systems Command, for the agency.

Glenn G. Wolcott, Esq., and Paul I. Lieberman, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Where protester's proposed price was approximately 25 percent lower than
that of the next low offeror, and was based on performing the basic contract
requirements using approximately [deleted] labor hours that the government
estimated would be required, the agency reasonably determined that
protester's proposed price was unrealistic and that award could not be made
on the basis of protester's initial proposal.

2. Agency is not required to conduct discussions with offerors where
solicitation advised offerors that the agency intended to award a contract
on the basis of initial proposals.

3. Agency's intent to obtain required Defense Security Cooperation Agency's
(DSCA) determination prior to issuing task orders for foreign military sales
customers, rather than prior to award of requirements contract, does not
provide a basis to sustain protest, where agency's approach is consistent
with the advice and direction of DSCA.

DECISION

Sabreliner Corporation protests the Department of the Navy's award of a
contract to Canadian Commercial Corporation (CCC) on behalf of IMP Group
Limited [1] under request for proposals No. N00019-98-R-0011 to provide
depot level maintenance services for various Navy and foreign military sales
(FMS) customers' helicopters. Sabreliner protests various aspects of the
procurement, focusing primarily on the Navy's determination that
Sabreliner's proposed price was unrealistic.

We deny the protest.

BACKGROUND

The solicitation, issued on April 22, 1999, sought depot level inspection
and maintenance services for U.S. Navy H-3 helicopters and FMS customers'
AS-61, MK-1, MK-2 and H-3 helicopters for a 1-year base period with four
1-year option periods. The RFP advised offerors that proposals would be
evaluated on the basis of technical capability, past performance and price,
with technical capability and past performance "significantly more important
than [p]rice," RFP sect. M-2, and that the Navy intended to award a contract on
the basis of initial proposals without conducting discussions. RFP
sect. L-12(f)(4), at 88.

Regarding price, the RFP contemplated award of a fixed-price requirements
type contract with certain cost reimbursement provisions. Under contract
line item (CLIN) 0X01 in RFP sect. B, [2] offerors were required to propose
fixed prices for performing "standard depot level maintenance" (SDLM), which
consisted of the basic work generally required for all helicopters. [3]
Offerors were also required to propose fixed hourly labor rates to perform
work that was considered to be "over and above" the SDLM requirements, and
which varied depending on the condition of each helicopter. RFP sect. B, CLIN
0X04. For evaluation purposes, the RFP published estimated quantities for
various types of "over and above" labor, which were multiplied by each
offeror's proposed labor rates. [4]

Regarding the evaluation of price proposals, the RFP stated:

Price proposals will be evaluated for price realism. This evaluation may
include a comparison of the proposed prices to those paid under [the] same
or similar DoD contracts. A price proposal which is determined to be
unrealistic will be assessed as having high proposal risk.

RFP sect. M-2(a).

Regarding technical capability, the RFP listed eight equally weighted
evaluation subfactors. [5] Offerors were advised that, in evaluating
technical capability, the agency would assign both a qualitative rating and
a proposal risk rating. [6] With regard to past performance, the RFP stated
that the agency would evaluate offerors' experience in reworking "the same
or similar rotary wing aircraft" and would assign a performance risk rating
based on that experience. Id.

Proposals were received by the July 9 due date from five offerors, including
Sabreliner and CCC/IMP. Oral presentations and facility visits were
conducted between July 29 and August 11. Thereafter the offerors' proposals
were evaluated by a technical evaluation team (TET), a past performance
evaluation team (PPET) and a price evaluation team (PET). [7] The evaluation
by the individual teams resulted in the following ratings for the offerors:

 Offeror     Technical Capability     Past         Total
                                                   Evaluated
             Qualitative Proposal     Performance
                                                   Price
             Rating Risk              Risk

 CCC/IMP     Highly           Low     Very Low     $52,323,253
             Satisfactory

 Offeror A   Highly           Low     Very Low     $52,563,458
             Satisfactory

 Offeror B   Highly           Medium  Low          $53,725,147
             Satisfactory

 Sabreliner  Satisfactory     Medium  Unknown      $40,254,330

 Offeror C   Unsatisfactory   High    Very High    $53,303,191

Agency Report at 6.

On November 9, the agency's competitive award panel (CAP) convened, reviewed
the reports submitted by the individual evaluation teams, and discussed each
offeror's proposal.

The CAP noted that Sabreliner's price of $40,254,330 was substantially lower
than the government's estimate of $47,739,210, and approximately 25 percent
lower than all of the other offerors' proposed prices--which were within 3
percent of each other. In reviewing Sabreliner's proposal, the CAP found
that Sabreliner intended to perform the CLIN 0X01 SDLM requirements with
only [deleted] labor hours per aircraft for domestic aircraft, and only
[deleted] labor hours per aircraft for FMS aircraft. Agency Report at 6. The
agency had estimated that the CLIN 0X01 SDLM requirements would require more
than 3,200 hours per aircraft for domestic aircraft, and more than 3,500
hours per aircraft for FMS aircraft. [8] Id.

Based on all of the information presented, the CAP concluded that "award
could not be made to Sabreliner without [conducting] discussions because of
its unrealistic price." Agency Report, Tab 17B, Memorandum from CAP Chair to
Source Selection Authority 8 (Nov. 10, 1999).

In contrast, the CAP made the following determinations regarding CCC/IMP's
proposal:

IMP's technical proposal was rated Highly Satisfactory overall with a Low
proposal risk. The HS rating was assigned as a result of several noted
strengths: IMP has extensive experience on the H-3 [deleted]; IMP has
superior crew spaces; [deleted][;] IMP has extensive experience in
developing repair estimates, historical database for the H-3 [deleted]; IMP
can draw upon a very large artisan/engineering base, if needed; IMP has
extensive rotary wing engineering and artisan experience [deleted]. IMP's
response to the sample task was considered to be a strength as it showed how
it is able to apply its existing experience in performing upgrades
[deleted}.

. . . . .

IMP was assigned a Very Low performance risk rating. This was due to their
extensive and successful depot level experience with Canadian H-3's and with
reworking components. IMP has delivered numerous aircraft and thousands of
components on time, within cost, and with excellent quality. The few
problems encountered on the various programs were quickly resolved and
systemic improvements put into place to prevent future occurrences.
Essentially no doubt exists that IMP will successfully perform.

Id. at 3, 5.

After considering the above information, the CAP determined that award could
be made to CCC/IMP without discussions, and that "IMP's price is the lowest
realistic offer." Id. at 7. Further, based on all of the information
presented by the evaluation teams, the CAP concluded that "IMP's proposal
represents the best value to the Government and recommends that award of the
H-3 SDLM contract be made to IMP upon the basis of its initial offer." Id.
at 8.

Based on the CAP's recommendation, the source selection authority selected
CCC/IMP for contract award on November 15 without conducting discussions.
This protest followed.

DISCUSSION

Sabreliner primarily challenges the agency's determination that Sabreliner's
price was unrealistic. Sabreliner first complains that, to the extent the
agency's evaluation considered Sabreliner's price for CLIN 0X01 to be low,
the evaluation was unreasonable because Sabreliner's price for that CLIN was
higher than the price charged for a line item in the predecessor contract
which, Sabreliner believes, reflects the "same work" covered by CLIN 0X01.
Protest at 12. Sabreliner is factually mistaken.

The agency report shows that the work required under the line item of the
predecessor contract on which Sabreliner relies did not encompass certain
tasks required under CLIN 0X01. Specifically, the agency explains that CLIN
0X01 of the protested contract "includes aircraft stripping and painting,
rigging of engines and flight controls, calibrating equipment, and increased
inspection requirements"-activities that were either not performed under the
predecessor contract or performed under line items other than the line item
on which Sabreliner relies. Agency Report at 9-10. [9]

Sabreliner next complains that the agency "did not analyze what Sabreliner's
costs would be" and "did not assess whether Sabreliner could perform the
work at the prices proposed." Protester's Comments, January 24, 2000, at 4.
We find these complaints without merit.

Although price realism is not ordinarily considered in the evaluation of
proposals for the award of a fixed-price contract, an agency may provide, as
here, for the use of a price realism analysis in a solicitation for the
award of a fixed-price contract for the purpose of assessing the risk
inherent in an offeror's proposal. PHP Healthcare Corp., B-251933, May 13,
1993, 93-1 CPD para. 381 at 5. The risk of poor performance when a contractor is
forced to provide services with an inadequate or undercompensated workforce
is a legitimate concern in the evaluation of proposals. Trauma Serv. Group,
B-242902.2, June 17, 1991, 91-1 CPD para. 573 at 4. We will review an agency's
price evaluation to determine whether it was reasonable, consistent with the
RFP evaluation criteria, and compliant with the Federal Acquisition
Regulation (FAR). Id.

Here, as discussed above, the record shows that the agency did consider
whether Sabreliner's proposal demonstrated that it could perform the work at
the prices it had proposed. The agency compared Sabreliner's price of
$40,254,330 to the government estimate of $47,739,210 and to the prices
offered by other offerors-- prices which ranged from $52,323,253 to
$53,725,147, a spread of less than 3 percent. The agency then reviewed the
underlying bases for Sabreliner's substantially lower price, and ascertained
that Sabreliner expected to perform the basic SDLM contract requirements for
each domestic aircraft with only [deleted] labor hours and for each FMS
aircraft with only [deleted] labor hours--while the government's estimate
for performing these requirements was more than 3,200 hours each for
domestic aircraft and more than 3,500 hours each for FMS aircraft. [10]

Finally, the agency noted that another of the offerors had proposed as much
as 4,101 hours to perform SDLM on domestic aircraft and 4,369 hours to
perform SDLM on FMS aircraft, and that Sabreliner had no experience in
performing depot level maintenance on rotary wing aircraft. Based on all of
this information, we find nothing unreasonable in the agency's determination
that Sabreliner's price was unrealistic. [11]

Sabreliner also asserts that the agency's price realism analysis "deviated
from the evaluation criteria." Protest at 12. Although Sabreliner
acknowledges that section M of the RFP stated: "Price proposals will be
evaluated for price realism" and that "This evaluation may include a
comparison of the proposed prices to those paid under [the] same or similar
DoD contracts," RFP sect. M-2, Sabreliner, nonetheless complains:

Instead of comparing proposed prices to historical costs, the Navy's price
realism analysis was "performed by comparing each offeror's total evaluated
price to one another and by comparing them to the Government estimate."
Exhibit 5, at 3. Had the Navy compared Sabreliner'[s] price to historical
data from "under [the] same contract," as required by section M-2, the Navy
would not have found Sabreliner's price to be unrealistic.

Protest at 12-13.

As discussed above, the agency did, in fact, consider historical costs of
the predecessor contract as part of its price realism determination--and the
record shows that Sabreliner, not the agency, erred in interpreting those
costs. In any event, Sabreliner's argument fails to recognize that the
solicitation provides that the price realism evaluation "may" include a
comparison of historical costs, and that this provision neither mandates
such a comparison, nor precludes consideration of additional
information-including consideration of other offerors' prices and the
agency's estimate regarding levels of effort required. In this regard, the
FAR specifically provides that, in evaluating proposed prices, an agency may
use various techniques, including: "[c]omparison of proposed prices
received," and "[c]omparison of proposed prices with independent Government
cost estimates." FAR sect. 15.404-1(b)(2)(i), (v).

In sum, the agency's price realism determination was reasonable, consistent
with the RFP's evaluation factors, and compliant with the FAR, and provided
a reasonable basis for the agency's conclusion that Sabreliner's initial
proposal presented an unacceptable level of risk. Accordingly, there is no
basis to question the agency's determination that Sabreliner's price was
unrealistic and that award could not be made on the basis of Sabreliner's
initial proposal. [12] Further, where, as here, an agency states its
intention to award on the basis of initial proposals, there is no
requirement to conduct discussions in order to remedy defects in an
otherwise unacceptable proposal. FAR sect. 15.306(a); Kahn Instruments, Inc.,
supra.

Sabreliner also objects that the agency has failed to comply with certain
provisions of the Arms Export Control Act (AECA). [13] Specifically,
Sabreliner references a portion of the AECA which provides that "[f]unds
made available under this Chapter may be used for procurement outside the
United Sates only if the President determines that such procurement will not
result in adverse effects upon the economy of the United States or the
industrial mobilization base." [14] 22 U.S.C. sect. 2791(c). Sabreliner
complains that the determination is required prior to the agency's award to
a Canadian company, but has not yet been made.

The agency responds that Sabreliner's protest on this issue is misplaced,
because the determination required by the AECA need only be made prior to
issuance of task orders for FMS work. [15] The agency states that,
consistent with the directions of the DSCA, the Navy "fully intends to
comply with [the AECA] in connection with any task orders issued against the
contract using AECA funds," and will obtain the required determinations
prior to issuing any FMS task orders. Agency Memorandum in Support of
Request for Partial Summary Dismissal, Jan. 5, 2000, at 2.

The Navy's position on the required timing of the determination is supported
by the DSCA. In a letter provided by the Navy as part of the protest record,
DSCA directly addresses the issue, stating:

In the case of the requirements contract to Canadian Commercial Corporation
of Ottawa, Ontario, Canada for H-3 helicopter depot level inspection and
maintenance services for the U.S. Navy and other FMS customers, including
the Government of Egypt, the waiver must be in

place before FMF funds may be obligated for task orders under the contract.
In the case of a requirements contract, however, the waiver does not have to
be obtained prior to the award of the contract.

Letter from DSCA General Counsel to Department of the Navy (Dec. 29, 1999).

Based on the statutory language regarding the DSCA determination, along with
DSCA's own unambiguous statement regarding the point in time at which DSCA's
determination must be obtained, Sabreliner's assertion that the Navy was
required to obtain the DSCA determination prior to awarding CCC/IMP the
requirements contract provides no basis for sustaining the protest. Cf.
Matter of Accounting for Reports of Discrepancy under Foreign Military Sales
Program, B-222666, Jan. 11, 1988.

Finally, in a supplemental protest following Sabreliner's receipt of the
agency report, Sabreliner argues that the agency improperly assigned
technical strengths to other offerors' technical proposals and/or failed to
properly accord certain strengths to Sabreliner's technical proposal. [16]

In light of our determination that the agency reasonably determined that
Sabreliner's unrealistic price precluded award to Sabreliner on the basis of
its initial proposal, there is no potential prejudice to Sabreliner flowing
from its allegations regarding the agency's evaluation of technical
strengths. Specifically, even if Sabreliner's proposal should have been
rated as offering various technical strengths and/or other offerors'
proposals should not have been rated as offering such strengths, additional
strengths attributed to Sabreliner's proposal could not have made it
eligible for award, and elimination of technical strengths from the
evaluated rating of CCC/IMP's proposal could not have rendered it ineligible
for award. Prejudice is an essential element of every viable protest and our
Office will not sustain a protest if there is no reasonable possibility that
the protester was prejudiced by the agency's actions. McDonald-Bradley,
B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see Statistica, Inc. v.
Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996).

The protest is denied.

Comptroller General
of the United States

Notes

1. Pursuant to the Defense Federal Acquisition Regulation Supplement
(DFARS), sect. 225.870-3 (DAC 91-3), contracts with Canadian firms generally are
to be made with the CCC, which then subcontracts performance of the contract
to a specific firm. In this case, CCC's proposed subcontractor is IMP Group
Limited.

2. The RFP explained that "use of an ‘X' in the second position [of a
CLIN] . . . signifies that CLIN for all years of the contract (base and
options)." RFP sect. B, at 17.

3. SDLM essentially included all "unconditional" requirements to be
performed on each aircraft. The RFP provided detailed guidance regarding the
costs and activities covered by SDLM, stating: "The offeror shall include
all labor, burdens, profit, COM and indirect material in the fixed-unit
price for the inspection and unconditional depot maintenance (see Attachment
(1) SOW for definition of ‘unconditional') requirements to be
performed under this CLIN." RFP sect. B, at 16.

4. For example, the RFP estimated 30,000 hours of on-site labor, per
contract period, for "over and above" work on Navy helicopters, and 72,000
hours of on-site labor, per contract period, for "over and above" work on
FMS customers' helicopters. RFP sect. B, at 3, 6, 9, 12, 15.

5. The subfactors were: understanding of the work to be performed; proposed
facilities and equipment; qualifications of the personnel; ability to meet
the 40-day requirement for a complete teardown, inspection, evaluation, and
estimation of the required "over-and-aboves"; reporting requirements;
facility certification requirements; contractual delivery requirements; and
response to sample task. RFP sect. M-2, at 96.

6. The RFP also advised that assessment of offerors' technical capabilities
would be based on the offerors' oral presentations and facility visits. RFP
sect.sect. L-13(c)(2), M-2. More specifically, the RFP provided that each offeror
would have 3 hours and 45 minutes for its oral presentation, an additional
15 minutes for providing a solution to a sample task, 1 hour for agency
questions and answers, and 3 hours for a facility visit. RFP amend. 8, at
2.

7. The TET and PPET did not have access to the offerors' price proposals.
Agency Report at 4.

8. Sabreliner's proposal also showed that it had [deleted] and, therefore
was assigned a past performance risk rating of "unknown."

9. Sabreliner's comments on the agency report do not respond to the agency's
explanation regarding Sabreliner's mistaken interpretation of the
predecessor contract.

10. The record shows that the agency created its estimate for the basic SDLM
requirements by beginning with the number of hours required to perform some
of the similar work performed under the predecessor contract--that is, the
line item on which Sabreliner erroneously relied for its comparison--then
added additional hours for the additional tasks contemplated under CLIN
0X01. Specifically the Navy's estimate for domestic aircraft was as follows:

Work Manhours Per AirCraft
CLIN 401 of prior contract 2,119
Aircraft stripping 180
Aircraft painting 416
Rigging engine and flight controls 120
Calibrating equipment 250
Increased inspection requirements 120
Total hours for CLIN 0X01 3,205

Agency Report, Tab 6, Basis for Cost Estimate.

11. As noted above, the arguments presented by Sabreliner in pursuing this
protest indicate that it did not fully understand the basic tasking
requirements.

12. Sabreliner also complains that the agency's price realism determination
"[did] not address whether Sabreliner has sufficient assets to perform the
contract at a loss." Protester's Comments, Jan. 24, 2000, at 8. Sabreliner's
criticism of the agency evaluation in this regard suggests that Sabreliner
submitted its proposal intending to perform the contract at a loss; however
nothing in its proposal addressed this proposed approach in any way. Since
the solicitation advised offerors that the agency intended to make award
without discussions, Sabreliner could not presume that it would be given an
opportunity during discussion to explain its approach to below-cost
performance. The burden was on Sabreliner to present sufficient information
in its initial proposal regarding this approach--if, indeed, that was its
intent. See Kahn Instruments, Inc., B-277973, Dec. 15, 1997, 98-1 CPD para. 11
at 8.

13. The AECA authorizes the President to sell defense articles and defense
services to eligible foreign countries. 22 U.S.C. sect. 2761 (1994).

14. The parties agree that the authority to make the required determination
has been delegated to the Director of the Defense Security Cooperation
Agency (DSCA).

15. The agency further explains that determination of the type of funding
that will be used for FMS task orders--which triggers the statutory
requirement--was not established at the time the contract was awarded.
Agency Memorandum in Support of Request for Partial Summary Dismissal, Jan.
5, 2000, at 2 n.8.

16. The TET defined a technical strength as "an enhancing feature that
benefits the Government or a proposed feature that exceeds the requirements
of the RFP." Agency Report, Tab 17C, Memorandum from the TET Chair to the
CAP Chair (Nov. 9, 1999).