TITLE:  Gulf Copper Ship Repair, Inc., B-293706.5, September 10, 2004
BNUMBER:  B-293706.5
DATE:  September 10, 2004
**********************************************************************
   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: Gulf Copper Ship Repair, Inc.

   File: B-293706.5

   Date: September 10, 2004

   Robert E. Korroch, Esq., Francis E. Purcell, Jr., Esq., Megan E. Burns,
Esq., and K. Lee Westnedge, Esq., Williams Mullen, for the protester.

   John R. Tolle, Esq., and William T. Welch, Esq., Barton, Baker, McMahon,
Hildebrant & Tolle, for Anteon Corporation, and Peter B. Jones, Esq., and
Brian J. Donovan, Esq., Jones & Donovan, for Southwest Marine, Inc., the
intervenors.

   Craig L. Kemmerer, Esq., and Rhonda L. Russ, Esq., Department of the Navy,
for the agency.

   Charles W. Morrow, Esq., John L. Formica, Esq., and David A. Ashen, Esq.,
Office of the General Counsel, GAO, participated in the preparation of the
decision.

   DIGEST

   Agency acted improperly when, in taking corrective action in response to a
prior protest, it conducted discussions only with one of the previously
selected awardees, rather than with all offerors whose proposals had been
in the competitive range and had been considered by the agency in
performing its best value analysis.

   DECISION

   Gulf Copper Ship Repair, Inc. protests the Department of the Navy's award
of separate contracts to Anteon Corporation and Southwest Marine, Inc.,
under request for proposals (RFP) No. N62678-03-R-0051, for the
maintenance and repair of mine countermeasures (MCM) and coastal
minehunter (MHC) class ships.  Gulf Copper protests, among other things,
that the agency improperly favored Anteon when, in taking corrective
action in response to a prior protest, it conducted discussions only with
Anteon.

   We sustain the protest.

   BACKGROUND

   The RFP provided for the award of two cost-plus-incentive-fee contracts
for material, services, and facilities, as required, to perform scheduled
maintenance, continuous maintenance and emergent repairs on 14 MCM and 12
MHC class ships over a 5-year period.[1]  Award was to be made to the two
offerors whose proposals represented the best value to the government,
considering the evaluation factors of technical, past performance, and
cost.  Proposals were to be evaluated under the technical factor on a
pass/fail basis, and under the past performance factor, which was
approximately equal to but more important than cost, on a qualitative
basis.[2] 

   The RFP provided that the past performance factor was comprised of the
following four subfactors:  technical performance, schedule control, cost
control and management.  Specifically, offerors' proposals were to be
evaluated under the past performance factor to determine the offeror's
"expected risk of successfully" performing the contract's technical
requirements, meeting the contract's schedule requirements, forecasting,
managing and controlling the contract's costs, and managing the contract. 
RFP at M-3, M-4.  Offerors were "encouraged" to furnish  "any information
regarding its past performance of contracts similar to the Government's
requirement that [the offeror] would like the Government to consider,"
including "information which the offeror considers essential" to the
agency's evaluation of proposals under the past performance factor, and 
"explanatory information of substandard or poor performance and the
corrective actions taken to prevent a recurrence."  RFP at L-10.  The RFP
cautioned that the information provided "must be in sufficient detail with
points of contact to enable the Government to do an evaluation in
accordance with the Past Performance subfactors."  RFP at L-10.  In
addition, the solicitation stated that the "Government intends to review
Contractor Performance Assessment Reporting System (CPARS) ratings and
other existing past performance ratings on relevant contracts," and "may
also review other relevant past performance information" in possession of
the contracting agency, other government agencies, and commercial
sources.  RFP at L-10.

   With regard to cost, the RFP provided that the agency would perform a
cost-realism analysis of offerors' proposals, to determine the probable
cost to the government, which would include:  a comparison of each "cost
proposal to the government estimate to ascertain if proposed costs are
reasonable"; a review of "[e]ach category and amount of labor . . . to
determine if they are realistic for the work promised in the technical
proposal"; and the review of "audit information in determining if indirect
costs have been accurately projected in the cost proposal."  RFP at M-4. 
The solicitation cautioned that a proposal that was unrealistic,
unreasonable, or unbalanced could be rejected. 

   In this regard, offerors were required to complete a schedule comprised of
159 separate line items related to pre-production planning, advance
planning, phase-maintenance availability (PMA), drydock phased-maintenance
availability (DPMA), and various data requirements and other work "not
separately priced."  The solicitation provided that the offerors' proposed
costs for these line items were to be based on two notional work item
packages (one for the MCMs and one for the MHCs) provided by the agency,
and which consisted of work items related to a typical DPMA, as well as
some PMA non-drydocking work items.[3]  RFP at L-12; Supplemental Agency
Report, Aug. 4, 2004, at 2.  Offerors were requested to provide man-hour
and material estimates for each work item listed in the notional work item
packages.   Offerors were required to support their proposed costs by: 
(1) providing detailed cost estimating sheets/information supporting the
offeror's estimates for the work items listed in the notional work item
packages; and (2) "fully" explaining the estimating rationale on which the
proposal is based and the rationale for proposed direct and indirect
rates, including furnishing "[c]urrent forward pricing rate agreement
(FPRA) rates," historical labor, overhead, general and administrative and
other proposed rates for the last four corporate fiscal years (plus
year-to-date actuals), and an "[e]xplanation, quantification, and location
of any significant costs that are included somewhere other than in the
appropriate work item."  RFP at L-11, L-12. 

   The Navy received proposals from Gulf Copper, Anteon, Southwest, and a
fourth offeror.  After evaluating the initial proposals, the Navy
conducted extensive discussions to resolve numerous concerns raised by the
past performance and cost evaluations.  Among the matters raised by the
agency were questions regarding a number of "weaknesses" identified by the
agency with respect to Anteon's past performance proposal, as well as
numerous issues regarding Anteon's and Gulf Copper's proposed costs.  At
the conclusion of discussions, the agency requested final revised
proposals. The revised proposals were evaluated as follows:

   +------------------------------------------------------------------------+
|                 |Technical     |Past Performance    |Probable Cost     |
|-----------------+--------------+--------------------+------------------|
|Anteon           |Pass          |Satisfactory        |$58,159,029.44    |
|-----------------+--------------+--------------------+------------------|
|Southwest        |Pass          |Very Good           |$59,843,147.81    |
|-----------------+--------------+--------------------+------------------|
|Offeror Four     |Pass          |Very Good           |$62,469,582.36    |
|-----------------+--------------+--------------------+------------------|
|Gulf Copper      |Pass          |Exceptional         |$64,299,766.14    |
+------------------------------------------------------------------------+

   Memorandum for the Contracting Officer at 16-17.

   All proposals having received a "pass" rating for the technical factor,
the Navy's best value analysis, as required by the solicitation, focused
on offerors' past performance and cost.  The agency determined that the
higher cost of Gulf Copper's proposal was not "in the best interest of the
government to pay," given that  "[b]oth Anteon's and [Southwest]'s past
performance history demonstrate a probability that they will be able to
successfully perform the availability at a reasonable cost."  Id. at
16-17. 

   Upon learning of the resulting awards to Anteon and Southwest, and after
receiving a debriefing, Gulf Copper filed a protest with our Office.  At
the debriefing, the agency discussed, among other things, the indirect and
direct rates that Gulf Copper incorporated in its cost proposal.   Gulf
Copper learned that it was the agency's view that the requirement to
include current FPRA rates in explaining the estimating rationale did not
bind offerors to use their FPRA rates in their cost proposals.

   In the protest, Gulf Copper asserted that Anteon was ineligible for award
because of an organizational conflict of interest (OCI), which allegedly
had permitted Anteon to unfairly gain access to certain agency information
and Gulf Copper proprietary information.  In addition, Gulf Copper, based
in part upon its view that offerors were not permitted by the RFP to
deviate from their FPRA rates in preparing their cost proposals, also
challenged the agency's evaluation of the cost proposals.  Specifically,
according to the protester, the awardees had improperly deviated from
their FPRA rates in preparing their cost proposals, while Gulf Copper,
because it believed it was bound by its FPRA rates, proposed its FPRA
rates notwithstanding the fact that its overhead rate included quality
assurance, safety and other non-required or redundant personnel that were
already accounted for as direct costs as required by the solicitation, and
the fact that it could have justified an indirect rate for this contract
that was lower than its current FPRA rate.  The protester further argued
here that it was deprived of meaningful discussions, claiming that the
agency, during discussions, should have pointed out Gulf Copper's
erroneous belief regarding the use of FPRA rates, and should have, at a
minimum, questioned Gulf Copper as to its inclusion of costs for certain
personnel as both direct and indirect costs.  As for the past performance
evaluation, Gulf Copper argued that Anteon's "satisfactory" past
performance rating was unreasonable, asserting that Anteon's corporate
predecessor, South Texas Ship Repair, had "performed miserably" on two
recent Navy ship repair contracts for the USS HERON and the USS OSPREY,
both MHC class ships. 

   The Navy subsequently advised our Office and the parties that "[b]ased on
[the Navy's] investigation of the allegations in the protest, together
with [the Navy's] review of the administrative record in this procurement,
the [Navy has] decided to take corrective action to protect the integrity
of the procurement process."  Agency Corrective Action Letter, Apr. 12,
2004, at 1-2.  The agency explained that it would first investigate the
facts and then reach a determination regarding the merits of Gulf Copper's
OCI complaint.  The agency advised that "[i]f after fully investigating
the facts, the Contracting Officer determines that an OCI exists that
likely resulted in an unfair competitive advantage that jeopardizes the
integrity of the procurement process," the Navy's contract with Anteon
would be terminated and a new source selection decision would be made. 
The Navy further stated that if the Navy determined that Anteon need not
be disqualified on account of an OCI, the agency's past performance
evaluation team (PPET) would "reconvene to reevaluate Anteon's past
performance information in light of [Gulf Copper's] allegations concerning
Navy ship repair work performed by Anteon's subsidiary, South Texas Ship
Repair, on the USS HERON and USS OSPREY in 2001."  Id.  After being
advised of the planned corrective action, our Office dismissed Gulf
Copper's protests. 

   The record reflects that the Navy conducted an extensive investigation to
determine whether an OCI existed with regard to Anteon.  In this regard,
the Navy obtained information from Anteon regarding its corporate
operations, business groups, and reporting structures; took affidavits
from key Anteon employees that were the subject of Gulf Copper's OCI
allegation; and arranged for personnel from the Naval Criminal
Investigative Service to examine the computer hard drives of the subject
Anteon employees to determine whether they revealed any evidence of
attempts to access or transfer information contained in government
computer contract files.  Agency Materials Relating to OCI Investigation. 
As a result of the investigation, the Navy concluded that there was no
basis upon which to eliminate Anteon from the competition.

   With regard to Anteon's past performance, the agency explains that "in
taking corrective action, the Navy sought to ensure that a comprehensive
review was conducted of the circumstances surrounding [South Texas's]
performance to determine its validity as a predictor of Anteon's
performance for the instant contract."  Agency Report at 34.  The Navy
advises that in conducting its review, it "requested Anteon to submit any
data deemed relevant regarding [South Texas] and its relationship to
Anteon."  Agency Report at 34.  Anteon responded with a six-page
submission detailing its relationship with South Texas and the
circumstances regarding the repair work on the USS HERON and USS OSPREY. 

   The record reflects that Anteon's response was considered by the PPET in
reevaluating Anteon's proposal.  PPET Memorandum, Apr. 30, 2004, at 1. 
The PPET determined that "[a]lthough [it] considers Anteon to be
accountable for the performance of their subsidiary" during the
performance of the USS HERON and USS OSPREY contracts, due "to the manner
in which Anteon addressed the issues, including a wholesale change in
management, workforce and operating procedures, the relevance and weight
is significantly diminished for the purpose of this Past Performance
Evaluation."  Id. at 2.  The PPET concluded "that the original assigned
rating[] should remain unchanged."  Id.  The best value award committee's
(BVAC) recommendation for award relied on the PPET's determinations, as
did the SSA in determining that Anteon's and Southwest's proposals offered
the best value.  BVAC Memorandum for the Contracting Officer at 1-2;
Amended Source Selection Assessment at 1.  This protest from Gulf Copper
followed.

   DISCUSSION

   Gulf Copper's protest here raises essentially the same issues as did its
prior protest to our Office.  That is, Gulf Copper again challenges the
adequacy of discussions, the past performance evaluation of Anteon,
particularly relating to the performance of South Texas, the cost
evaluation, the best-value decision, and the eligibility of Anteon for
award due to its alleged OCI.  Gulf Copper also asserts, with regard to
the corrective action taken by the agency in response to Gulf Copper's
prior protest, that the Navy's request that Anteon provide documents
regarding its relationship to South Texas and the performance of the USS
HERON and USS OSPREY contracts, and Anteon's memorandum in response to
this request, constituted discussions.  The protester contends that the
Navy, in conducting discussions only with Anteon, denied Gulf Copper the
same opportunity to address the agency's concerns with respect to its own
proposal. 

   Discussions occur when the government communicates with an offeror for the
purpose of obtaining information essential to determine the acceptability
of a proposal or provides the offeror with an opportunity to revise or
modify its proposal.  In contrast, clarifications are merely inquiries for
the purpose of eliminating minor uncertainties or irregularities in a
proposal and do not give an offeror the opportunity to revise or modify
its proposal.  If a procuring agency holds discussions with one offeror,
it must hold discussions with all offerors whose proposals are in the
competitive range, whereas clarifications may be requested from just one
offeror.  See Federal Acquisition Regulation (FAR) Sections 15.306(a),
(d); Priority One Servs., Inc., B-288836, B-288836.2, Dec. 17, 2001, 2002
CPD paragraph 79 at 4; Global Assocs. Ltd., B-271693, B-271693.2, Aug. 2,
1996, 96-2 CPD paragraph 100 at 4.  It is the actions of the parties that
determine whether discussions have been held and not merely the
characterization of the communications by the agency.  The acid test for
deciding whether discussions have been held is whether it can be said that
an offeror was provided the opportunity to revise or modify its proposal. 
Priority One Servs., Inc., supra, at 4.  As explained below, we find that
the Navy's exchanges with Anteon regarding past performance, undertaken in
response to Gulf Copper's protest, constituted discussions.

   The record reflects that the agency had determined, based upon its review
of Gulf Copper's protest and its prior evaluation of Anteon's past
performance, that it needed to reevaluate Anteon's proposal under the past
performance factor, specifically considering Anteon's relationship with
South Texas Ship Repair, and the work performed by South Texas on the USS
HERON and USS OSPREY.  Corrective Action Letter, Apr. 12, 2004, at 1-2. 
In this regard, the record indicates that Anteon's initial past
performance rating of "satisfactory" was based largely on its performance
of only one relevant contract, which was evaluated by the agency as
including numerous "past performance weaknesses" due to instances of
"marginal," "below average," or "less-than-satisfactory" performance. 
BVAC Initial Memorandum for the Contracting Officer at 5-7.  In performing
this reevaluation, and apparently because Anteon's proposal, according to
the agency, had only "alluded to difficulties that their subsidiary, South
Texas Ship Repair . . . experienced . . . on the USS OSPREY and USS HERON
shortly after being acquired by Anteon," the agency first orally requested
additional information and then sent the following correspondence to
Anteon:

   The Contracting Officer has become aware of two contracts performed by
South Texas Ship Repair on the USS Heron and USS Osprey in 2001. . . .

   Your attorney provided minimal documentation on the relevance of the USS
Heron and USS Osprey projects, but also provided other input
telephonically.  You are hereby requested to submit or resubmit any
documents that you have that bear on the relevance of the USS Heron or USS
Osprey projects to the past performance of Anteon Corporation.  These
documents would most likely address:  (1) Anteon's purchase of Sherikon,
Inc. (and thus also South Texas Ship Repair) and how Anteon managed South
Texas Ship Repair after the purchase; (2) Anteon's role in attempting to
assist South Texas Ship Repair in performing the USS Heron or USS Osprey
projects; and (3) Anteon's alleged shut down of South Texas Ship repair
and its subsequent start up of Anteon's Ingleside ship repair division
(this would include the common links or lack thereof between Anteon and
South Texas Ship Repair in terms of management, manpower, equipment and
facilities).

   E-mail from Navy to Anteon, Apr. 22, 2004.  As mentioned previously, this
correspondence resulted in Anteon's submittal of a detailed six-page
submission describing Anteon's relationship with South Texas and the
circumstances involving the repair work on the USS HERON and USS OSPREY.

   The record further reflects that Anteon's response to the Navy's request
for information was considered by the PPET, as well as by the BVAC and the
SSA, in making their respective decisions regarding the reevaluation of
Anteon's proposal under the past performance factor and the source
selection.  BVAC Memorandum for the Contracting Officer at 1-2; Amended
Source Selection Assessment at 1.  For example, six of the seven specific
reasons cited by the PPET to justify its reevaluation of Anteon's proposal
as "satisfactory" under the past performance factor, notwithstanding the
performance of South Texas on the USS HERON and USS OSPREY contracts, are
found in Anteon's response to the agency's request for information and
nowhere else in the record.  Specifically, in finding Anteon's past
performance to be "satisfactory," the agency relied on the following
reasons cited by Anteon in its response:  (1) that South Texas operated
autonomously; (2) that Anteon was not involved in the day-to-day
operations of South Texas during the USS HERON and USS OSPREY contracts
and was not immediately aware of the performance issues; (3) that after
becoming aware of the problems Anteon sent a 12 employee team to support
the work effort; (4) that Anteon restructured the entire South Texas
organization by terminating management and supervisory personnel; (5) that
Anteon laid off the employees that had not voluntarily left and completely
shut down South Texas in 2001; and (6) that Anteon formed a new
organization with different management, workforce and work procedures. 
PPET Memorandum at 2; Anteon's Response at 1-3.  Indeed, the agency, in
its report responding to this protest, relies on the very reasons cited in
Anteon's submission when responding to the protester's assertion that the
agency unreasonably rated Anteon's past performance as "satisfactory" on
reevaluation.  Agency Report at 33-38. 

   It is thus apparent that Anteon was afforded the opportunity to revise the
past performance portion of its final proposal, which had only "alluded"
to South Texas's difficulties in performing the USS OSPREY and USS HERON
contracts and its relationship to Anteon, and furnish information which
the agency had indicated to Anteon was necessary to the reevaluation of
Anteon's past performance and which, in fact, formed the basis for the
agency's reevaluation of Anteon's past performance as "satisfactory."  In
these circumstances, we conclude that the communications between the Navy
and Anteon constituted discussions.[4]  Again, where a procuring agency
holds discussions with one offeror, it must hold discussions with all
offerors whose proposals are in the competitive range.  FAR Section
15.306(d); Priority One Servs., Inc., supra, at 4.

   Even if the communications between the agency and Anteon were viewed as
clarifications, rather than discussions, we would still find the agency's
communicating only with Anteon improper.  In conducting exchanges with
offerors, including clarifications as well as discussions, agency
personnel "shall not engage in conduct that . . . favors one offeror over
another."  FAR Section 15.306(e)(1); Martin Elecs., Inc., B-290846.3,
B-290846.4, Dec. 23, 2002, 2003 CPD paragraph 6 at 9; cf. Landoll Corp.,
B-291381 et al., Dec. 22, 2002, 2003 CPD paragraph 40 at 8 (recognizing
that a situation may arise in which it would be unfair to request
clarification from one offeror but not another).

   Here, in addition to the concerns regarding Anteon's alleged OCI and the
propriety of its evaluation of Anteon's past performance, the agency was
also aware at the time it undertook corrective action in response to Gulf
Copper's protest that Gulf Copper had claimed in its protest that it had
believed that it was required by the RFP to use its FPRA rates in
formulating its proposed costs even though it could have justified lower
indirect rates, and also that because it used its FPRA rates, certain
personnel costs were double-counted (as a result of being included both as
direct and indirect costs).[5]  Protest (B-293706) at 10-13. 
Nevertheless, the agency engaged in exchanges only with Anteon (regarding
Anteon's past performance and the alleged OCI), and did not engage in
similar exchanges with Gulf Copper regarding its proposed costs.  In our
view, this constituted conduct that improperly favored Anteon and as such
violated the provisions of FAR Section 15.306(e)(1).

   The agency maintains that because Anteon's rating under the past
performance factor remained the same, the relative competitive position of
the offerors did not change as a result of the Navy's actions, and Gulf
Copper was thus not prejudiced.  Supplemental Report, Aug. 4, 2004, at 9
n.9.  This argument, however, ignores the fundamental purpose of
discussions, which is to afford offerors the opportunity to improve their
proposals "to maximize the Government's ability to obtain best value,
based on the requirement and the evaluation factors set forth in the
solicitation."  FAR Section 15.306 (d).  In our view, the record reflects
that had the agency afforded Gulf Copper discussions regarding its
proposed costs, in the same manner that it did with Anteon regarding its
past performance, Gulf Copper's proposal may have become more competitive,
such that there would be a reasonable possibility that the agency would
have selected Gulf Copper for award.

   We sustain the protest on the basis that the agency's action in engaging
in discussions only with Anteon was improper, and improperly favored
Anteon over Gulf Copper.  We recommend that the agency reopen discussions
with all offerors whose proposals are within the competitive range, obtain
revised proposals, evaluate the revised proposals in a manner consistent
with the solicitation requirements, and make a new source selection
decision.  In the event that the Navy determines that an offeror or
offerors other than Anteon and Southwest have submitted the best value
proposals, the agency should terminate the contract(s) of the offeror(s)
no longer in line for award.  We also recommend that the agency reimburse
the protester its cost of pursuing this protest, including reasonable
attorney's fees.  4 C.F.R Section21.8(d) (2004).  The protester should
submit its certified claim for costs, detailing the time expended and the
costs incurred, directly to the contracting agency within 60 days of
receipt of this decision.  4 C.F.R. Section 21.6(f)(1).

   The protest is sustained.

   Anthony H. Gamboa

   General Counsel

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

   [1] The RFP advised that "[w]ithin any given Government fiscal year, each
of the two contract awardees will be entitled to receive forty percent
(40%) of the scheduled repair availabilities for which options are
actually exercised in that fiscal year."  RFP at H-13.

   [2] The RFP stated with regard to the technical factor that to receive a
rating of "pass" an offeror must hold, or meet the eligibility
requirements to hold, an agreement for boat repair, and have a facility
capable of berthing the MCM/MHC vessels.  Offerors were informed that a
proposal that failed to receive a "pass" rating would not be considered
for award.  RFP at M-2.  With regard to past performance, the source
selection plan provided that proposals were to be evaluated as
exceptional, very good, satisfactory, marginal, unsatisfactory, or
neutral.  Source Selection Plan at 11-12.

   [3] As explained by the agency, having offerors prepare their cost
proposals against a common baseline as reflected in the items in the
notional work packages was necessary because the specific maintenance and
repair required for any particular vessel were unknown at the time the RFP
was issued.  Supplemental Agency Report, Aug. 4, 2004, at 2.  Offerors
were informed "that the Government intends to use the manhours and
material as proposed in your notional spreadsheets . . . including
appropriate adjustments when necessary, for purposes of determining
probable cost to be used in making the award decision."  Agency Letters to
Gulf Copper and Anteon, Sept. 25, 2003. 

   [4] We recognize that the FAR provides that exchanges to address adverse
past performance information to which an offeror has not had a prior
opportunity to respond do not constitute discussions where such exchanges
occur in the context of an award without discussions, or prior to the
establishment of the competitive range.  FAR Sections 15.306 (a) and (b). 
However, the FAR also indicates that where, as here, exchanges to address
adverse past performance information to which an offeror has not had a
prior opportunity to respond occur after establishment of the competitive
range, they constitute discussions.  See FAR Section 15.306(d).

   [5] In this regard, the agency notes that it "was astounded to learn
during [Gulf Copper's] debriefing that the company was under the
impression that it was required to propose FPRA rates without
adjustment."  Agency Report at 9.