TITLE:  Marine Hydraulics International, Inc., B-291594.3, October 3, 2003
BNUMBER:  B-291594.3
DATE:  October 3, 2003
**********************************************************************
Marine Hydraulics International, Inc., B-291594.3, October 3, 2003

   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.        

   Decision
    
Matter of:   Marine Hydraulics International, Inc.
    
File:            B-291594.3
    
Date:              October 3, 2003
    
Robert E. Korroch, Esq., and Michael J. Gardner, Esq., Williams Mullen,
for the protester.
Frederick W. Claybrook, Jr., Esq., Edward R. Murray, Esq., and Daniel R.
Forman, Esq., Crowell & Moring, for Metro Machine Corporation, an
intervenor.
Rhonda L. Russ, Esq., Katherine A. Andrias, Esq., and Stephen P. Anderson,
Esq., Department of the Navy, for the agency.
Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  Where solicitation for cost-reimbursement contract required offerors
to provide supporting rationale for proposed costs and protester failed to
provide credible  support for its proposed staffing levels, as confirmed
by hearing testimony provided by protester's personnel, agency reasonably
increased protester's proposed staffing levels, for cost evaluation
purposes, with regard to tasks the agency considered understaffed.
    
2.  Agency conducted meaningful discussions with protester where it
identified every work item the agency believed to be understaffed and
sought additional information from the protester regarding the bases for
its staffing calculations.
    
3.  Where solicitation for cost-reimbursement contract to perform ship
repairs advised offerors that prior contracts involving drydocking and
contracts performed on a cost-reimbursement basis would be more relevant
for purposes of evaluating past performance, agency properly considered
those factors in determining the
relative relevance of offerors' prior contracts, and protester's assertion
that it was
entitled to past performance rating of *excellent* rather than [deleted]
constitutes mere disagreement with the agency's
judgment.________________________________                                                                                                                                      
                   
DECISION
    
Marine Hydraulics International, Inc. (MHI) protests the Department of the
Navy's award of a contract to Metro Machine Corporation pursuant to
request for proposals (RFP) No. N62678-02-R-0031 for maintenance of
specified Navy ships.  MHI's protest  challenges various aspects of the
agency's source selection decision, including assertions that the agency
failed to perform a proper cost realism analysis, failed to properly
evaluate the offerors' past performance, and failed to engage in
meaningful discussions.   
    
We deny the protest.
    
BACKGROUND
    
The solicitation at issue here was published on April 15, 2002, seeking
proposals to perform various tasks associated with the ongoing maintenance
of FFG class ships (frigates) homeported in Norfolk, Virginia.  The
solicitation contemplated award of a cost-plus-incentive-fee contract for
performance of *selected restricted availabilities* (SRAs) and *drydocking
selected restricted availabilities* (DSRAs) on certain ships,[1] along
with associated advance planning and procurement of required materials for
each availability. 
    
Each offeror was required to submit a three-part proposal consisting of a
technical proposal,[2] a past performance proposal, and a cost proposal. 
Section M of the solicitation advised offerors that, for proposals
evaluated as technically acceptable, the agency would perform a trade-off
between evaluated cost and past performance and that, although these
factors would be *approximately equal,* past performance would be *more
important.*  Agency Report, Tab 1, at M-2.  In evaluating past
performance, the solicitation established four equally weighted
subfactors:  technical performance, schedule control, cost control, and
management.[3] 
    
With regard to cost proposals, the solicitation contained multiple work
items, representing the tasks to be performed during a typical DSRA.[4] 
Offerors were required to propose staffing levels and material costs for
each work item, along with applicable direct and indirect rates, and to
submit cost data supporting their proposed costs.[5]  The RFP also
provided that, in evaluating cost, the agency would perform a cost realism
analysis and, if the agency determined that an offeror's proposed costs
were understated, the agency would establish a *probable cost* to be used
for evaluation purposes.  Agency Report, Tab 1, at M-4.  Finally, the
solicitation instructed offerors not to propose discounts for projected
*learning* during contract performance because *the nature and extent of
work similarity between availabilities will vary to an unpredictable
extent.*  Agency Report, Tab 1, at L-10. 
    
Proposals were submitted by four offerors, including MHI and Metro, by the
June 18, 2002 closing date.  On September 30, a contract was awarded to an
offeror other than MHI or Metro.  That award led to submission of various
protests which, upon review, led the agency to determine that corrective
action was appropriate; the September 30 contract was subsequently
terminated. 
    
Thereafter, the agency issued further RFP amendments making various
changes to the solicitation requirements; these changes included the
establishment of separate work item numbers for supervision, quality
assurance, rigger services, crane services and fire watch;[6] as
ultimately amended, the RFP also included work items for diesel generator
installation and desalinization upgrade--tasks which the parties agree
constitute a significant portion of overall contract performance.  Revised
proposals were submitted in December 2002, and the agency subsequently
reviewed and evaluated those proposals, performing a cost realism analysis
for each specified work item.  Discussions were thereafter conducted with
each offeror. 
    
In evaluating MHI's proposal the agency determined that MHI's overall
proposed staffing reflected approximately [deleted] percent of the overall
staffing requirements estimated by the government.  Agency Report, Tab 20,
at 12.  By discussion letter to MHI dated January 22, 2003, the agency
identified multiple work items the agency considered understaffed,
specifically advising MHI that its proposed staffing levels for these work
items were *considerably lower than the Government's estimate.* [7] 
Agency Report, Tab 35, at 1.  The work items identified as understaffed
included those for diesel generator installation, desalinization upgrade,
supervision, quality assurance, rigger services and crane services.  For
these work items, MHI proposed  a total of [deleted] staff hours; the
agency's total estimate for these work items was [deleted] staff hours. 
Agency Report, Tab 20, at 9-12. 
    
The agency's discussion letter to MHI requested that it *[p]lease review
your proposed total manhour estimates for these specification items and
either revise them or provide clarification.*  Agency Report, Tab 35, at
1.  In addition, with regard to MHI's calculation of staffing for
supervision and quality assurance, the agency asked, *What percentage did
you use for man‑hours . . . ?*  Agency Report, Tab 35, at 3.  
    
By letter dated January 28, MHI provided its response to the agency's
discussion letter.  Agency Report, Tab 36.  In that response, MHI noted
that it had moved staff hours for supervision, quality assurance, crane
services and rigger services from the general work items for diesel engine
installation and desalinization upgrade to the more specific work items
for those tasks.  However, MHI offered no further explanation regarding
the basis for the staffing levels it had proposed nor how it intended to
successfully accomplish these work items.  With regard to the agency's
specific questions regarding its calculation of staffing for supervision
and quality assurance, MHI stated:  *MHI did not use a percentage to
calculate manhours[,] but analyzed the work package to come up with a
specific estimate for [these] item[s].*  Agency Report, Tab 36, at 2. 
Again, MHI offered no further explanation regarding the basis for its
*specific estimate.*
    
On April 28, MHI and the other offerors submitted their final proposal
revisions (FPRs).  In its FPR, MHI neither increased its proposed staffing
levels for the work items discussed above, nor offered any substantive
information regarding its proposed approach to performing these items.[8] 
Accordingly, in evaluating MHI's proposal for cost realism, the agency
increased MHI's proposed manning levels to the government's estimates. 
The agency's final evaluation of all offerors' FPRs are reflected in the
following table.[9]    
    

   +------------------------------------------------------------------------+
|                              |MHI      |Metro      |Offeror A|Offeror B|
|------------------------------+---------+-----------+---------+---------|
|Past Performance              |[deleted]|Exceptional|[deleted]|[deleted]|
|------------------------------+---------+-----------+---------+---------|
| |Past Performance Subfactors |         |           |         |         |
| |         Technical          |[deleted]|[deleted]  |[deleted]|[deleted]|
| |Performance                 |         |           |         |         |
|------------------------------+---------+-----------+---------+---------|
|         Schedule Control     |[deleted]|[deleted]  |[deleted]|[deleted]|
|------------------------------+---------+-----------+---------+---------|
|         Cost Control         |[deleted]|[deleted]  |[deleted]|[deleted]|
|------------------------------+---------+-----------+---------+---------|
|         Management           |[deleted]|[deleted]  |[deleted]|[deleted]|
|------------------------------+---------+-----------+---------+---------|
|Proposed Cost                 |[deleted]|$42,591,393|[deleted]|[deleted]|
|------------------------------+---------+-----------+---------+---------|
|Evaluated Cost                |[deleted]|$42,904,575|[deleted]|[deleted]|
|------------------------------+---------+-----------+---------+---------|
+------------------------------------------------------------------------+

    
As shown, Metro's proposal reflected the highest rating for past
performance and the lowest evaluated cost.[10]  Accordingly, Metro's
proposal was selected for contract award.  Thereafter, MHI was notified of
Metro's selection; this protest followed.
DISCUSSION
    
MHI first protests the agency's cost realism adjustments to MHI's
proposal, focusing specifically on the work items for diesel engine
installation, desalinization upgrade, supervision, quality assurance,
rigger services and crane services.  MHI asserts that  the agency's upward
adjustment of its proposed staffing *failed to take into consideration
MHI's particular approach.*  Protest at 5.  More specifically, MHI first
complains that the agency failed to recognize that it had moved staff
hours for performing supervision, quality assurance, rigger services and
crane services from the general work items for diesel engine installation
and desalinization upgrade to the more specific work items applicable for
supervision, quality assurance, rigger services and crane services;
therefore, MHI asserts that the agency's upward adjustment of the general
work items constituted *double counting.*  MHI Post‑Hearing Brief at
12.
    
At the hearing conducted by GAO in connection with this protest, MHI's own
witnesses provided contradictory testimony regarding this issue.[11] 
Specifically,  MHI's president asserted that MHI's proposed staff hours
were, or *should have been,* moved from the general accounts to the more
specific accounts on an *hour-for-hour* basis--thus leading to his
conclusion that the agency's upward adjustment constituted double
counting.  Hearing Transcript (Tr.) at 255-56.  In contrast, MHI's
proposal manager acknowledged that, in connection with moving the hours,
MHI reduced them *[by] a quarter to a third.*  Tr. at 294. 
    
Further, the face of MHI's protest establishes that MHI proposed its lower
staffing levels on the basis of an assumption that was expressly
prohibited by the solicitation.  Specifically, MHI's protest challenges
the agency's cost realism as being flawed for failing to consider *[MHI's]
[r]eduction of labor costs [that] can be expected from learning curve
savings.*  Protest at 6.  As noted above, the solicitation expressly
directed offerors that proposed staffing reductions based on projected
learning curve savings were impermissible, stating:
    
So that all offerors may be evaluated on a fair and consistent basis, and
notwithstanding anything in the RFP that might be interpreted differently,
offerors are notified that learning shall not be proposed in the cost
proposals.  Because the nature and extent of work similarity between
availabilities will vary to an unpredictable extent, learning will not be
used in evaluating cost.
Agency Report, Tab 1, at L-10. 
    
Finally, with regard to MHI's proposed staffing for supervision, MHI
asserts that the agency's cost realism analysis failed to reflect MHI's
representation, made to the agency during discussions, that MHI had
*analyzed the work package to come up with a specific estimate for this
item.*  Agency Report, Tab 36, at 2.  However, in testifying during the
GAO hearing, MHI's president acknowledged a somewhat different approach. 
Specifically, he testified as follows:
    
GAO:  With regard to supervision, I think you said you calculated . . .
[deleted] hours [in your proposal].  I'm assuming that . . . you [did]
some calculation to come up with . . . that number, [deleted].
MHI President:  You know how we really do that?  I figure out how many
jobs I've got and how many supervisors I have available and they can only
work so many hours and that's how it's calculated.
GAO:  Could you repeat that? . . . .
MHI President:  If I have eight supervisors and I have three ships [on
which MHI is working], they [the supervisors] can only work so many hours
and be in so many places.   
Tr. at 272-73. 
    
In short, MHI's president testified that, contrary to its representation
during discussions that it *analyzed the work package,* MHI's proposed
level of supervision was apparently a function of the number of
*available* MHI supervisors, divided between the ships on which MHI would
be working.  On the basis of the entire record here, including the hearing
testimony, we find no credible basis to question the reasonableness of the
agency's upward adjustment of MHI's proposed staffing. 
    
MHI next protests that the agency failed to conduct meaningful
discussions.  More specifically, MHI maintains that, when MHI's responses
to the agency's discussion questions were considered insufficient to
support MHI's proposed staffing levels, the agency was obligated to follow
up with further discussions.  For example, MHI specifically asserts that
the agency's discussion questions regarding supervision were
inadequate.   
    
As discussed above, the agency identified each and every work item,
including supervision, that it viewed as being *considerably*
understaffed.  Specifically, with regard to supervision, the agency
further requested that MHI identify the percentage of its proposed
staffing that would be supervisory.  Agency Report, Tab 35, at 3.  In
response to the agency's identification of the multiple work items that
were understaffed, MHI offered no substantive explanation regarding how it
intended to successfully perform the required work items.[12]  With regard
to the specific question seeking the basis for MHI's calculation of
proposed supervision, MHI responded, *MHI did not use a percentage to
calculate manhours but analyzed the work package to come up with a
specific estimate for this item.*  Agency Report, Tab 36, at 3.  MHI now
maintains that, if this response was insufficient, the agency was
obligated to follow up with more questions probing the substance of MHI's
purported *analy[sis].*  We disagree. 
    
When an agency engages in discussions with an offeror, the discussions
must be meaningful. Training and Mgmt. Res., Inc., B- 234710, June 29,
1989, 89-2 CPD P: 12. However, this requirement does not obligate an
agency to spoon-feed an offeror,  ITT Fed. Sys. Int'l Corp., B-285176.4,
B-285176.5, Jan. 9, 2001, 2001 CPD P: 45 at 7, nor does it create an
obligation for agencies to conduct successive rounds of discussions until
all proposal defects have been corrected.  OMV Med., Inc., B-281490, Feb.
16, 1999, 99-1 CPD P: 38 at 7.  Rather, an agency's discussion questions
must simply lead an offeror into the areas of its proposal that require
correction or amplification.  Creative Mgmt. Tech., Inc., B-266299, Feb.
9, 1996, 96-1 CPD P: 61 at 4.
    
Here, the agency's discussions with MHI identified each and every work
item that the agency believed to be understaffed.  Further, the agency 
sought additional specific information regarding the basis for MHI's
calculation of its proposed supervisory staff.  On this record, the
agency's discussions more than met the required standard; MHI's complaints
to the contrary are entirely without merit.
    
Finally, MHI challenges the agency's evaluation of past performance.  MHI
first complains that it was improper for the agency to treat prior
performance of cost-reimbursement contracts as more relevant than
fixed-price contracts and, similarly, that the agency improperly
considered performance of a contract involving drydocking as more relevant
than performance of a ship repair contract that did not involve
drydocking.  MHI Post-Hearing Brief at 16-17. 
    
As noted above, the solicitation expressly identified various attributes
of a prior contract that would render the contract *more relevant,*
including contracts that involved drydocking and contracts performed on a
cost reimbursement basis.  Agency Report, Tab 1, at M-3.  Since MHI did
not challenge those provisions of the solicitation prior to submitting its
proposal, we will not now consider its assertion that the agency's
application of those solicitation provisions was improper.[13]  4 C.F.R.
S: 21.2(a)(1) (2003).
    
Finally, MHI asserts that the *[t]he Government's rating of MHI's past
performance as [deleted] overlooked numerous outstanding features of MHI's
past performance,* arguing that the agency unreasonably failed to give
MHI's proposal *the 'Exceptional' rating it that merited.*  Protest at 8. 
As support for this assertion, MHI maintains that the contractor
performance assessment rating system (CPARS) data, on which the agency
relied in evaluating past performance, contained more *complimentary
comments* applicable to MHI's past performance than it contained regarding
Metro's past performance.  MHI Post-Hearing Brief, at 20-21.
    
In reviewing a protest against an agency's evaluation of proposals, our
Office will not reevaluate proposals, but instead will examine the record
to determine
whether the agency's judgment was reasonable and consistent with the
stated evaluation criteria and applicable procurement statutes and
regulations.  See Shumaker Trucking & Excavating Contractors, Inc.,
B-290732, Sept. 25, 2002, 2002 CPD P: 169 at 3; Hydraulics Int'l, Inc.,
B-284684, B-284684.2, May 24, 2000, 2000 CPD P: 149 at 14.  A protester's
mere disagreement with the agency's judgment does not establish that the
evaluation was unreasonable.  C. Lawrence Constr. Co., Inc.,
B‑287066, Mar. 30, 2001, 2001 CPD P: 70 at 4.
    
Here, it is clear that, while most of the past performance data for both
MHI and Metro reflected positive past performance experiences, the agency
evaluators viewed Metro's past performance as slightly superior to MHI's
due, in part, to the greater relevance of Metro's prior contracts.  As
noted above, the agency's determinations regarding the relative relevance
of Metro's and MHI's prior contracts were consistent with the
solicitation's provisions.  We have reviewed the entire
record and find MHI's assertions that it should have been rated
*exceptional* rather than [deleted] to constitute mere disagreements with
the agency's judgment.   As such, MHI's disagreements do not provide a
basis for sustaining its protest.
    
The protest is denied.[14]    
    
Anthony H. Gamboa
General Counsel
    
    
    

   ------------------------

   [1] SRAs are relatively short, labor-intensive availabilities for the
accomplishment of repairs and alterations, generally scheduled at specific
times throughout a ship's operating cycle.  A DSRA is an SRA extended to
include drydocking of the ship.  Agency Report at 2. 
[2] The solicitation provided that the technical proposal would be
evaluated only as acceptable/unacceptable.  Within this portion of their
proposals, offerors were required to establish possession of a master ship
repair agreement and the availability of acceptable pier and drydocking
facilities.  Both MHI's and Metro's technical proposals were rated as
acceptable.
[3] The solicitation explained (in bold type) that, in evaluating past
performance, the agency would assess the expected risk associated with
each subfactor, based on past performance of relevant contracts, and
identified attributes of a prior contract that would make it *more
relevant,* including contracts that involved drydocking and contracts that
had been performed on a cost-reimbursement basis.  Agency Report, Tab 1,
at M-3, M-4.  The solicitation further advised offerors that if past
performance information was not available, *either for past performance as
a whole or for one of the subfactors . . . a neutral rating will be
assigned.*  Id. 
[4] Because the exact tasks are unknown in advance, the solicitation
contained a *notional* work package reflecting work items typically
required for a DSRA.  Agency Report at 5. 
[5] In directing offerors to submit *full supporting rationale* for their
proposed costs, the solicitation identified specific types of support that
were to be provided *as a minimum,* including:  *Historical labor,
overhead, G&A [general & administrative] and other proposed rates for the
last four corporate fiscal years,* *a breakdown of labor hours [and] rates
. . . by trade,* and *[an] explanation, quantification, and location of
any significant costs that are included somewhere other than in the
appropriate work item (i.e. in overhead pool, etc.).*  Agency Report, Tab
1, at L‑11, L‑12.
[6] These work items replaced an aggregate work item--administration and
support services--which was deleted when the individual items listed above
were added.
[7] The letter also identified multiple line items for which MHI's
proposed material costs were *considerably lower than the government
estimate.*  Agency Report, Tab 35, at 2. 
[8] In response to another agency discussion question concerning the level
of MHI's proposed labor rates, MHI stated that it was able to lower its
proposed rates by instituting a *new program* using students from the
local community college as *skilled workers.*  Agency Report, Tab 41.  MHI
did not discuss the impact of student workers on the level of staff hours
it proposed, nor does it appear that this explanation provides any basis
for decreasing proposed staff hours.     
[9] As provided in the solicitation, the agency applied an adjectival
rating scheme using the terms exceptional, very good, satisfactory,
marginal and unsatisfactory.  
[10] All four proposals were rated *pass* under the pass/fail technical
evaluation factor.
[11] In resolving this protest GAO conducted a hearing during which
testimony was provided by the agency's contracting officer, cost
evaluation panel chair, past performance panel chair, MHI's president, and
MHI's proposal manager.  All witnesses were sequestered during preceding
witnesses' testimony.
[12] During its pursuit of this protest, MHI and/or its counsel have
offered various explanations purporting to support the proposed staffing
levels; this information was not provided to the agency at any time during
the procurement process.
[13] Similarly, MHI's comments on the agency report, submitted on August
15, assert for the first time that the agency improperly rated MHI's
proposal [deleted] under the cost control subfactor, due to the fact that
MHI has not performed cost-reimbursement contracts.  It is undisputed that
the agency advised MHI of its [deleted] rating, and the basis for that
rating, during MHI's debriefing that occurred more than 10 days prior to
August 15.  Accordingly, this aspect of MHI's protest is untimely filed
and not for consideration.  4 C.F.R. S: 21.2(a)(2).    
[14] We have considered other arguments that MHI presented and find them
to be without merit.