TITLE:  Metro Machine Corporation, B-295744; B-295744.2, April 21, 2005
BNUMBER:  B-295744; B-295744.2
DATE:  April 21, 2005
**********************************************************************
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: Metro Machine Corporation

   File: B-295744; B-295744.2

   Date: April 21, 2005

   Rand L. Allen, Esq., Michael S. Caldwell, Esq., William J. Grimaldi, Esq.,
and Antonella Karlin, Esq., Wiley Rein & Fielding, for the protester.

   Thomas O. Mason, Esq., Robert E. Korroch, Esq., Francis E. Purcell, Jr.,
Esq., and Megan E. Burns, Esq., Williams Mullen, for Norfolk Shipbuilding
and Drydock Corp., an intervenor.

   Catherine Rubino, Esq., Craig L. Kemmerer, Esq., Janice M. Passo, Esq.,
and Rhonda L. Russ, Esq., Department of the Navy, for the agency.

   Louis A. Chiarella, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1.  Cost realism evaluation of offerors' proposals was unobjectionable
where record shows that agency reasonably considered the information
submitted in each offeror's proposal and that the agency's methodology and
rationale for its analysis were reasonable. 

   2.  Contracting agency's cost realism analysis of protester's proposal was
reasonably based on information reasonably available to it, even when it
did not inquire into the conclusions of a Defense Contract Audit Agency
audit report, where the agency instead sought additional information from
the offeror itself through discussions.

   3.  Contracting agency engaged in meaningful discussions concerning
proposed direct and subcontractor labor rates, such that the protester
should have known and understood the agency's concerns, where it
specifically requested during written discussions that offeror explain the
rationale for the rates being proposed.   

   4.  Protest of agency's past performance evaluation is denied where record
shows evaluation was reasonable and consistent with evaluation criteria;
mere disagreement with agency's evaluation is insufficient to show it was
unreasonable.

   5.  Protest that agency's source selection decision was improperly based
on a mechanical comparison of technical evaluation ratings is denied where
the record shows the allegation is without basis.

   DECISION

   Metro Machine Corporation protests the award of a contract to Norfolk
Shipbuilding & Drydock Corporation (Norshipco) under request for proposals
(RFP) No. N00024-04-R-4405, issued by the Naval Sea Systems Command
(NAVSEA), Department of the Navy, for the repair, maintenance, and
modernization of naval amphibious assault ships (i.e., LHA and LHD class
ships) homeported in Norfolk, Virginia.  Metro alleges that the agency
conducted inadequate discussions with it, and that the agency's cost
evaluation of Metro's and Norshipco's proposals, the agency's past
performance evaluation of Metro's and Norshipco's proposals, and the
source selection decision were improper.

   We deny the protests. 

   BACKGROUND

   LHA and LHD class ships represent the largest of all amphibious warfare
ships.  Each LHA and LHD ship resembles a small aircraft carrier, and is
capable of supporting various vertical, short takeoff, tiltrotor, and
rotary wing aircraft operations.

   The RFP, issued on May 13, 2004, contemplated the award of a
cost-plus-award-fee contract to provide all materials, services, and
facilities necessary to perform phased maintenance on seven LHA/LHD class
ships over a 5-year period.[1]  Phased maintenance is a strategy in which
maintenance is performed through a series of short, frequent phased
maintenance availabilities (PMA), in lieu of regular overhauls. The
solicitation also called for support to the Norfolk Naval Shipyard (NNSY)
in performance of drydock-phased maintenance availabilities (DPMA), which
involve putting a ship in drydock to perform repairs below the water line,
in addition to the repairs that would be performed in a PMA.  The
solicitation included a total of 13 availabilities, 10 PMAs and 3 DPMAs,
together with various planning and emergent requirements for each
availability.  RFP at 119-37.  Additionally, the RFP mandated a minimum 40
percent small business subcontracting requirement for each scheduled
availability.  Id. at 176.

   The solicitation instructed offerors to base their cost proposals on a
notional, or standardized, work package included with the solicitation. 
The notional work package contained 158 individual work items, which
constituted a standardized list of repairs and alterations necessary to
complete one PMA, as well as the required support to NNSY in furtherance
of one DPMA.  For each of these 158 work items, the RFP provided offerors
with a government estimate of the number of direct labor hours and
material costs to perform the item.  The RFP instructed offerors to use
the government labor hour and material cost estimates for each notional
work item in preparing their cost proposals.  While offerors were
permitted to propose deviations from the government estimates, the
solicitation then required the offeror to provide supporting cost data to
substantiate that an adjustment was warranted.

   The solicitation identified, in addition to evaluated cost, the following
technical evaluation factors, in descending order of importance: 
integrator and management capability; technical approach; resource
availability; past performance; and cost performance.[2]  RFP Section
M-2.  The RFP also expressed the relative importance of cost and technical
factors by stating that overall technical merit was considered more
important than evaluated cost; however, the importance of cost as an
evaluation factor would increase as the difference in overall technical
merit among competing proposals decreased.  RFP Section M-3.  Award was to
be made to the responsible offeror whose technically acceptable proposal
was determined to be the "best value" to the government, all factors
considered.  Id.

   Three offerors, including Metro and Norshipco, submitted proposals by the
July 12 closing date.  A Navy technical evaluation review panel (TERP)
evaluated offerors' technical proposals using an adjectival rating
system:  outstanding, very good, satisfactory, marginal, or unsatisfactory
for those technical factors other than past performance; and outstanding,
good, satisfactory, neutral, marginal, or unsatisfactory for past
performance.  Concurrent with the technical evaluation, a Navy cost
analysis panel (CAP) evaluated offerors' cost proposals and calculated an
overall evaluated cost to the government for each offeror.

   On September 22, after the agency's initial evaluation of both cost and
technical proposals, the NAVSEA contracting officer determined that all
three offerors should be included within the competitive range.  Agency
Report (AR), Tab 5, Competitive Range Memorandum.  The Navy then held
discussions with each offeror.  The agency received discussion responses
from offerors by October 4, and final proposal revisions (FPR) by the
October 18 closing date.

   On November 8, the TERP provided the agency's best value advisory council
(BVAC) with its final evaluation ratings of the offerors' technical
proposals, which were as follows:

   +------------------------------------------------------------------------+
|             |Factor              |Norshipco      |Metro      |Offeror C|
|------------------------------------------------------------------------|
|Integrator & Mgmt          |Very Good     |Very Good   |Satisfactory  | |
|Capability                 |              |            |              | |
|---------------------------+--------------+------------+--------------+-|
|Technical Approach         |Very Good     |Very Good   |Satisfactory  | |
|---------------------------+--------------+------------+--------------+-|
|Resource Availability      |Satisfactory  |Satisfactory|Satisfactory  | |
|---------------------------+--------------+------------+--------------+-|
|Past Performance           |Outstanding   |Good        |Outstanding   | |
|---------------------------+--------------+------------+--------------+-|
|Cost Performance           |Satisfactory  |Very Good   |Satisfactory  | |
|---------------------------+--------------+------------+--------------+-|
+------------------------------------------------------------------------+

   AR, Tab 13, TERP Final Report; Tab 17, TERP Amended Report.[3]

   Similarly, on November 24 the CAP provided the BVAC with the final
proposed and evaluated costs for each offeror's cost proposal as follows:

   +------------------------------------------------------------------------+
|       |                |Norshipco        |Metro          |Offeror C    |
|------------------------------------------------------------------------|
|Proposed Cost   |$224,565,429     |$188,022,212   |$236,463,594     |   |
|----------------+-----------------+---------------+-----------------+---|
|Evaluated Cost  |$243,428,122     |$248,793,414   |$258,367,957     |   |
|----------------+-----------------+---------------+-----------------+---|
+------------------------------------------------------------------------+

   AR, Tab 19, CAP Summary Report; Tab 20, CAP Addendum to Metro Cost
Analysis Report. [4]

   On December 16, the BVAC summarized the evaluation findings and
recommended the selection of Norshipco to the Navy source selection
authority (SSA).  AR, Tab 21, BVAC Report to the SSA.  The SSA
subsequently determined that Norshipco's proposal was both the highest
technically rated (having a "slight, but discernible, edge" over that of
Metro) and had the lowest evaluated cost to the Navy.  AR, Tab 22, Source
Selection Decision, at 3-4.  Based on an assessment of all evaluation
factors, the SSA determined that Norshipco's proposal represented the best
value to the government.  These protests followed.

   Metro's protests raise numerous issues that can be grouped into four
categories.  First, Metro alleges that the Navy's cost realism evaluation
of the offerors' proposals was improper.  Second, Metro contends that the
Navy failed to hold meaningful discussions with the protester regarding
its cost proposal.  Third, Metro alleges that the agency's evaluation of
offerors' past performance was unreasonable.  Lastly, Metro alleges that
the agency's source selection decision was improper because of its
mechanical reliance upon evaluation ratings.  Although we do not here
specifically address all of Metro's arguments about the evaluation of
proposals and source selection decision, we have fully considered all of
them and find that they afford no basis to question the agency's selection
decision here.

   EVALUATION OF COST PROPOSALS

   Metro first contends that the agency's evaluation of the offerors' cost
proposals was improper.  Specifically, Metro argues that the Navy's upward
adjustment of Metro's proposed direct labor rate, as well as its proposed
subcontractor labor rate, was unwarranted.  Metro also argues that Navy
improperly ignored reasonably available information when conducting the
evaluation of its cost proposal.  Metro contends that these adjustments
improperly added more than $28 million to Metro's total evaluated cost. 
Second, Metro alleges that the Navy's evaluation of Norshipco's cost
proposal was improper in certain regards.  The protester argues that had
the Navy properly evaluated the offerors' cost proposals, its proposal
would have been found to be lower cost than that of Norshipco.

   Evaluation of Metro's Cost Proposal

   The solicitation established that, with regard to the submission of cost
proposals, the burden of proof of cost credibility rested with the
offeror.  RFP at 243.  The RFP also stated that offerors should explain
fully the estimating rationale upon which their proposals were based,
including full supporting rationale for proposed labor and overhead rates,
and should address, as necessary, any inconsistency between their
proposals and their established estimating and accounting practices.  Id.
at 243-44.

   The RFP also informed offerors how the agency planned to evaluate cost
proposals:

   A detailed review of each Offeror's cost proposal will be made to assess
and evaluate the realism of the Offeror's estimated costs for performance
of the requirements of this solicitation.  The evaluation will consider
the Offeror's proposed labor hours, labor rates, material costs, burden
rates and other costs in light of information available to the Contracting
Officer, including the relationship of such proposed labor hours and costs
to the effort described in the Offeror's technical proposal, and
Government estimates . . . .

   RFP Section M.2.

   Prior to the solicitation here, Metro, a defense contractor which performs
almost all of its work for the Navy, AR, Tab 31, Defense Contract Audit
Agency (DCAA) Audit Report of Metro, at 8, had developed and utilized a
direct labor rate consisting of [DELETED] components:  [DELETED].  Metro's
Protest at 7, 13.  Metro had also established a forward pricing rate
agreement (FPRA) with the Navy that included a company direct labor rate
of $[DELETED] per hour.  AR, Tab 31, DCAA Audit Report of Metro, at 4. 
Metro's overall direct labor forward pricing rate was the byproduct of
labor rates for the component parts:  [DELETED].[5]  Id. at 3-4.

   At a hearing held by our office, Metro's cost estimator testified that as
part of its bidding strategy here, Metro determined that the RFP's 40
percent subcontracting requirement would affect the amount of work that
Metro normally performed itself and the amount of work that Metro normally
subcontracted.  Hearing Transcript (Tr.) at 257.  Specifically, Metro
determined that the work it would perform itself would [DELETED].[6]  Id.
at 257-58.  As a result, Metro formulated a new direct labor rate for the
solicitation here of $[DELETED] per hour, consisting of its [DELETED].[7] 
Id. at 258-59.  The rationale for why Metro's proposed direct labor rate
deviated from its forward pricing rate was not set forth in the offeror's
proposal.  Id. at 262-63, 289.  Also as part of its bidding strategy here,
Metro decided not to seek quotes from any of the subcontractors that it
intended to use.[8]  Instead, in determining its proposed subcontractor
labor rate, Metro used [DELETED] of $[DELETED] per hour for all 29 of the
subcontractors it proposed.  AR, Tab 19, CAP Summary Report, encl. 1,
Metro Cost Analysis Report, at 4, 17.

   The CAP began its evaluation of Metro's initial cost proposal after the
July 12 closing date.  As testified to by the contracting officer at the
hearing our Office conducted, the Navy had concerns about Metro's proposed
direct and subcontractor labor rates shortly after receipt of Metro's
proposal.  Id. at 23.  Specifically, the CAP believed that Metro's
proposed rates were not representative of what the Navy was then
experiencing, either with regard to Metro itself or with regard to
subcontractor rates in the Norfolk area.  Id. at 24-25.  The agency was
also aware that there was no differentiation in Metro's proposed
subcontractor rates; the direct labor rates and overhead rates did not
vary among the individual companies proposed.  Id. at 25.  Moreover, while
the agency understood how Metro had calculated its proposed direct and
subcontractor labor rates, it did not understand the rationale for why
Metro was using the labor rates that it had proposed.  Id. at 29-30,
54-56.

   Simultaneous with the CAP's evaluation here, the Navy asked DCAA to
perform an audit of Metro's initial cost proposal, including a review of
the offeror's proposed direct and subcontractor labor rates.  AR, Tab 31,
DCAA Audit Report of Metro, at 1.  As part of the DCAA audit, Metro orally
informed the DCAA auditor of why the company was proposing the direct
labor rate that it was--specifically, that the [DELETED] its direct labor
rate here because of the solicitation's subcontracting requirement.  Tr.
at 173-75, 265-69.  Metro also provided the DCAA auditor with additional
cost data in support of its decision to use [DELETED] as an estimating
technique for its proposed subcontractor labor rate.  Id. at 170.  Based
on understanding both how Metro had calculated its proposed labor rates
and why those rates had been used, DCAA did not take exception to Metro's
initial cost proposal.[9]  AR, Tab 31, DCAA Audit Report of Metro, at
2-5.  The DCAA audit report provided to the Navy set forth the auditing
agency's conclusions, but did not state why no exception was being taken. 
Id. at 4-5.  At no time after receipt of the DCAA report and before
contract award did the Navy ask the DCAA auditor who performed the audit
of Metro about the report's conclusions.[10]  Tr. at 56-57, 179.

   After completion of the CAP's initial cost evaluation and receipt of the
DCAA audit report, the Navy held discussions with Metro.  The agency's
discussion questions included various inquiries into Metro's proposed
direct and subcontractor labor rates.[11]  AR, Tab 6, Navy Discussions
with Metro.  With regard to its direct labor rate, Metro's response
described the cost and pricing data upon which the proposed rate was
based, but, as in its proposal, did not explain the rationale for the
deviation from its established forward pricing rate.  AR, Tab 62, Metro
Responses to Discussions, at 6.  Similarly, with regard to its proposed
subcontractor direct labor rate, Metro reiterated its belief that the
estimated rate it had derived from [DELETED] was more reliable than actual
subcontractor quotes.  Id. at 10.  Metro's subsequent final cost proposal
contained a proposed direct labor rate of $[DELETED] per hour as well as a
proposed subcontractor labor rate of $[DELETED] per hour.[12]

   In its evaluation of Metro's final cost proposal, the CAP concluded that
both Metro's proposed direct labor and subcontractor labor rates were
unrealistically low.  Specifically, the Navy determined that Metro's
proposed direct labor rate was not supported by the offeror's proposal,
and was substantially less than Metro's forward pricing rate, the rate
Metro was actually using on other Navy ship repair contracts, and the rate
proposed by Metro as a subcontractor to another offeror for the same
solicitation.  Tr. at 43-46; AR, Tab 20, CAP Addendum to Metro Cost
Analysis Report, at 1.  The CAP then revised Metro's direct labor rate to
the offeror's forward pricing rate of $[DELETED] per hour, plus
escalation.[13]  AR, Tab 20, CAP Addendum to Metro Cost Analysis Report,
at 1-2.  The CAP also determined that the proposed subcontractor labor
rate created by Metro, without obtaining any quotations, was not
sufficiently supported and not realistic.  Id. at 2.  The CAP then
utilized three different methods of analysis in determining realistic
subcontractor rates, and adopted the one most advantageous to Metro,
resulting in a projected subcontractor labor rate of $[DELETED] per hour,
with escalation.  Id. at 13-14.  The CAP's adjustments to Metro's proposed
direct and subcontractor labor rates, as well as other adjustments to
which Metro does not object, resulted in the protester's proposal having a
projected cost to the government of $243,215,626, higher than that of
Norshipco.  AR, attach. 3, Revised Cost Analysis, at 1-3.

   When an agency evaluates proposals for the award of a cost reimbursement
contract, an offeror's proposed estimated cost of contract performance is
not considered controlling since, regardless of the costs proposed by an
offeror, the government is bound to pay the contractor its actual and
allowable costs.  Hanford Envtl. Health Found., B-292858.2, B-292858.5,
Apr. 7, 2004, 2004 CPD paragraph 164 at 9; PADCO, Inc.--Costs, B-289096.3,
May 3, 2002, 2002 CPD paragraph 135 at 5; see Federal Acquisition
Regulation (FAR) Section 16.301.  Consequently, a cost realism analysis
must be performed by the agency to determine the extent to which an
offeror's proposed costs represent what the contract costs are likely to
be under the offeror's technical approach, assuming reasonable economy and
efficiency.  FAR Sections 15.305(a)(1), 15.404-1(d)(1), (2); The Futures
Group Int'l, B-281274.2, Mar. 3, 1999, 2000 CPD paragraph 147 at 3.  A
cost realism analysis is the process of independently reviewing and
evaluating specific elements of each offeror's cost estimate to determine
whether the estimated proposed cost elements are realistic for the work to
be performed, reflect a clear understanding of the requirements, and are
consistent with the unique methods of performance and materials described
in the offeror's proposal.  FAR Section 15.404-1(d)(1); Advanced
Communications Sys., Inc., B-283650 et al., Dec. 16, 1999, 2000 CPD
paragraph 3

   at 5.  An offeror's proposed costs should be adjusted when appropriate
based on the results of the cost realism analysis.  FAR Section
15.404-1(d)(2)(ii).  Our review of an agency's cost realism evaluation is
limited to determining whether the cost analysis is reasonably based and
not arbitrary.  Jacobs COGEMA, LLC, B-290125.2,

   B-290125.3, Dec. 18, 2002, 2003 CPD paragraph 16 at 26.

   We find that the Navy's cost realism analysis of Metro's proposal,
including the adjustments to Metro's proposed direct and subcontractor
labor rates, was proper.  The record shows, and Metro now admits, that
although required by the RFP to do so, the protester failed to establish
in its proposal the realism of its proposed labor rates.  See Metro's
Post-Hearing Comments at 10.  While Metro's proposal explained "how" its
proposed direct labor rate had been calculated, it failed to explain "why"
the proposed rate was a realistic one.  In the absence of the required
supporting explanation, and given the deviation from Metro's established
forward pricing rate, the agency's analysis and upward adjustment were
reasonable.  Likewise, the Navy reasonably determined that Metro's common
subcontractor labor rate--constructed by Metro from its own cost data
because of the offeror's decision not to seek actual subcontractor
quotes--lacked cost credibility and realism.  While Metro may have
believed the assumptions upon which its proposed subcontractor labor rate
was based to have been valid (e.g., that it could better estimate costs
than its proposed subcontractors, that the [DELETED] overhead rate applied
was valid), there was nothing unreasonable about the Navy's decision not
to accept these assumptions as part of its cost realism analysis here.[14]

   Metro now argues that, even if its cost proposal did not explain the
underlying basis for its direct and subcontractor labor rates, the Navy's
cost realism analysis was improper because it was not based on information
reasonably available to the agency at the time of the evaluation. 
Specifically, Metro contends that the agency's burden to base its cost
realism analysis on information reasonably available to it required the
Navy to inquire of DCAA why it had not taken exception to Metro's proposed
labor rates, instead of, as occurred here, in effect ignoring the DCAA
audit report.  Metro argues that had the Navy performed this inquiry, then
DCAA could have readily provided reasonable explanations to the
contracting officer about the labor rates within Metro's proposal, based
on the oral information given by Metro to DCAA during the audit process. 
Metro also contends that the contracting officer's failure to obtain this
information from DCAA resulted in an uninformed and prejudicial cost
realism analysis of Metro's proposal.  We disagree.

   An agency's cost realism analysis need not achieve scientific certainty;
rather, the methodology employed must be reasonably adequate and provide
some measure of confidence that the rates proposed are reasonable and
realistic in view of other cost information reasonably available to the
agency as of the time of its evaluation.  See Science Applications Int'l
Corp., B-290971 et al., Oct. 16, 2002, 2002 CPD paragraph 184 at 17; The
Futures Group Int'l, B-281274.5 et al., Mar. 10, 2000, 2000 CPD paragraph
148 at 10.  Additionally, although a contracting agency can utilize the
services of DCAA when performing a cost realism analysis rather than
perform all aspects of the evaluation itself, the audit agency is but one
tool upon which the agency may elect to rely.  See Gentex Corp.--W.
Operations, B-291793 et al., Mar. 25, 2003, 2003 CPD paragraph 66 at 27. 
In fact, an agency's reliance upon the advice of DCAA when performing a
cost realism analysis does not insulate the agency from responsibility for
error on the part of DCAA, even where, at the time, the agency is unaware
that information it is given by DCAA is incorrect.  See L-3 Communications
Corp., Ocean Sys. Div., B-281784.3,
B-281784.4, Apr. 26, 1999, 99-1 CPD paragraph 81 at 11; American Mgmt.
Sys., Inc.; Department of the Army--Recon., B-241569.2, B-241569.3, May
21, 1991, 91-1 CPD

   paragraph 492 at 7-8.

   As set forth above, the agency had concerns about the DCAA audit report of
Metro shortly after its receipt--the Navy did not understand why DCAA had
failed to take exception to Metro's proposed labor rates, especially since
a separate DCAA audit report did not take exception to Metro's use of its
higher, forward pricing rate when the firm was proposed as a subcontractor
for the same solicitation.  Nevertheless, the Navy never made a concerted
attempt to find out why DCAA had not questioned Metro's proposed labor
rates at any time prior to its award decision.  In different
circumstances, we might find the contracting agency's failure improper. 
Here, however, we do not, because of what the Navy did do:  after its
receipt of the DCAA audit report the Navy held discussions with Metro and
asked the offeror itself about the proposed direct and subcontractor labor
rates.  The Navy thus made a direct inquiry of Metro instead of an
indirect inquiry of DCAA regarding that portion of Metro's proposal that
was questioned.

   A contracting agency has responsibility to perform a valid cost realism
analysis, and it cannot shift responsibility for that analysis to DCAA. 
Gentex Corp.--W. Operations, supra.  As part of the exercise of that
responsibility, an agency has the discretion, as happened here, to reject
DCAA advice believed to be in error.  Further, while a contracting
agency's cost realism analysis must evaluate whether an offeror's proposed
rates are reasonable and realistic in light of information reasonably
available, Science Applications Int'l Corp., supra, the Navy did no harm
to this rule when it elected not to ask DCAA about its audit report
conclusions but instead took the labor rate issue directly to the offeror
itself and provided Metro with the opportunity to remedy the deficiency
which existed between what it had proposed and what it had supported. 
Having failed in its responsibility to establish the realism of its
proposed labor rates within its proposal, and having also failed to
explain its rationale in discussions, Metro cannot now reasonably argue
that the burden was instead on the agency to attempt to determine the
rationale for its proposed costs through an inquiry to DCAA.  Accordingly,
we find the Navy's decision here not to inquire of DCAA regarding its
audit report to be an insufficient basis for determining that the agency's
cost realism evaluation was unreasonable or improper.

   Evaluation of Norshipco's Cost Proposal

   Metro also alleges that the agency's evaluation of Norshipco's cost
proposal was improper in certain regards.  The protester first contends
that the agency failed to follow the evaluation criteria and unreasonably
accepted Norshipco's proposed deviations from the government's labor hour
and material cost estimates in the absence of substantiating cost data. 
Metro argues that the Navy's decision to accept Norshipco's proposed
deviations without the submission of sufficient supporting cost data
resulted in a significant, but illusory, cost savings in Norshipco's
proposal.

   As set forth above, the solicitation provided offerors with government
labor hour and material cost estimates for each of the 158 notional work
items upon which offerors were to base their cost proposals.  The RFP
allowed offerors to propose deviations from the government estimates when
supported by "clear and compelling evidence."[15]  RFP at 245.  While it
did not define "clear and compelling evidence," the RFP set forth examples
of the cost data (e.g., standards, historical costs on similar tasks,
factors, vendor quotes) with which an offeror could support proposed
deviations from the government-provided estimates.[16]  Id. at 252-53.

   Norshipco's initial and final cost proposals each proposed deviations from
the government labor hour and material cost estimates for various work
items.  The CAP determined that Norshipco's final cost proposal proposed
19 deviations from the government labor hour estimates, and 103 deviations
from the government material cost estimates.[17]  AR, Tab 19, CAP Summary
Report, at 3.  Norshipco also submitted various types of cost data in
support of its proposed deviations.  AR, Tab 44, Norshipco Initial Cost
Proposal, Vol. I, Part II.F; Tab 45, Norshipco Discussion Question
Responses; Tab 46, Norshipco Final Cost Proposal.  In performing its
evaluation the CAP accepted the supporting documentation as provided by
Norshipco for the 19 proposed labor hour deviations, and for 12 of the 103
proposed material cost deviations.  AR, Tab 19, CAP Summary Report, at
3-4, encl. 4, CAP Final Report Norshipco, at 3-9.  The Norshipco-proposed
deviations which the Navy accepted resulted in the awardee's total
projected cost being $14,174,725 less than it would have been, had the
deviations been rejected.[18]

   In reviewing protests relating to the propriety of an agency's evaluation,
our Office does not reevaluate proposals; our review is limited to
considering whether the agency's evaluation was reasonable and consistent
with the solicitation's evaluation scheme, as well as applicable statutes
and regulations.  L-3 Communications Westwood Corp., B-295126, Jan. 19,
2005, 2005 CPD paragraph 30 at 5.   A protester's mere disagreement with
the agency's judgment is not sufficient to establish that the agency acted
unreasonably.  Command Mgmt. Servs., Inc., B-292893.2, June 30, 2004, 2004
CPD paragraph 168 at 3.  In negotiated procurements, unless specifically
prohibited by the solicitation, offerors generally are not precluded from
proposing to meet an agency's requirements with staffing levels and/or
materials different from the government's estimates.  See Crestmont
Cleaning Serv. & Supply Co., Inc., et al.,
B-254486 et al., Dec. 22, 1993, 93-2 CPD paragraph 336 at 4.  Here, the
RFP notified offerors that the government estimates did not necessarily
represent the exact quantities required to be used when costing the
notional work items.  Instead, proposed deviations to the labor hours and
material cost estimates based on supporting cost data would be acceptable,
if justified.

   Metro does not dispute that Norshipco was permitted to propose deviations
from the Navy's labor hour and material cost estimates.  Rather, Metro
argues that the agency failed to comply with the RFP by improperly
accepting deviations proposed by Norshipco in the absence of "clear and
compelling evidence."  Metro contends that Norshipco's supporting cost
data consisted only of nonbinding vendor quotations, "cherry-picked"
historical evidence, and unsupported assertions, rather than the "clear
and compelling evidence" required by the solicitation.  Our review finds
the Navy's evaluation here to be unobjectionable.

   The record demonstrates that for the notional work items where it proposed
deviations, Norshipco's cost proposal included, as supporting data, the
offeror's understanding of the requirement, statements of the technical
approach, "make-or-buy" analyses, statements regarding historical
experience, and subcontractor and/or vendor quotations.  AR, Tab 44,
Norshipco Initial Cost Proposal, Vol. I, Part II.F.  Norshipco's responses
to the Navy's discussion questions often resulted in the submission of
additional information supporting its proposed deviations.  AR, Tab 45,
Norshipco Discussion Question Responses.  The CAP separately examined each
of Norshipco's proposed deviations.  AR, Tab 19, CAP Summary Report, encl.
4, CAP Final Report Norshipco.  In some instances the Navy found that the
evidence provided by Norshipco was sufficient and accepted the offeror's
proposed deviations; in other instances the CAP determined that the
evidence provided by Norshipco was insufficient.  Id.  Although we do not
here specifically address each Norshipco deviation accepted by the Navy
and challenged by the protester, we have fully considered all of them and
find the agency's determinations were both reasonable and consistent with
the solicitation.

   For example, with regard to notional work item 993-11-011, Rigging, Crane
and Transportation Services, the agency provided offerors with estimates
of 7,400 labor hours and $46,500 in material costs for each PMA. 
Norshipco's final cost proposal proposed to perform the work item here
with [DELETED] labor hours and $[DELETED] in material costs for each PMA. 
In support of its proposed deviations, Norshipco stated:

   Norshipco assumes that the Government material estimate of $46,500 is
based on [DELETED] for a PMA.  The PMA is to be accomplished [DELETED]. 
Our material estimate of $[DELETED] is for [DELETED].  The Government
estimate of 7,400 labor hours is considered excessive.  Through proper
planning, [DELETED].  Norshipco's estimate is based on [DELETED], equaling
[DELETED] labor hours.  A dedicated [DELETED] has been added at [DELETED]
equaling [DELETED] labor hours, which brings the total estimate for this
item to [DELETED] labor hours.  Data has been provided to warrant a
deviation from the Government's estimate.

   AR, Tab 45, Norshipco Discussion Question Responses, at 5; see also AR,
Tab 44, Norshipco Initial Cost Proposal, Vol. I, Part II.F.(e),
Specification 993-11-0001.  In performing its review here, the CAP found
that Norshipco had provided a detailed breakdown supporting how it had
calculated the proposed labor hour estimate, and with regard to material
costs, how the contractor's [DELETED] reduced its anticipated cost.  AR,
Tab 19, CAP Summary Report, encl. 4, CAP Final Report Norshipco, at 6. 
While Metro argues that Norshipco failed to demonstrate actual performance
at the labor hour levels proposed, Metro's Supplemental Protest at 24, we
find that the agency's determination that Norshipco had provided
sufficient evidence to support the proposed deviations to be reasonable.

   Similarly, with regard to other instances where the Navy accepted
Norshipco's proposed deviations, Metro also contends that the proof and
supporting justifications provided by the awardee were insufficient. 
Metro essentially argues that the agency's standard regarding what
constituted "clear and compelling evidence" was too lenient.  To the
extent that Metro believes that the Navy's judgment of what constituted
sufficient evidence to be improper, in our view, this amounts to mere
disagreement with the agency's evaluation, which does not render it
unreasonable.[19]  See Continental RPVs, B-292768.2, B-292768.3, Dec. 11,
2003, 2004 CPD paragraph 56 at 7.

   Metro also argues that the agency's evaluation of Norshipco's cost
proposal was improper with regard to the treatment of certain material
costs.  Specifically, Norshipco's proposal indicated that while on certain
occasions Norshipco itself would incur the costs of the required
materials, in most instances Norshipco's subcontractors would be
purchasing the necessary materials.  Metro contends that in performing its
cost realism analysis, the Navy improperly "rewrote" Norshipco's proposal
and artificially treated all of Norshipco's material costs as if purchased
by the prime contractor.  Metro argues that the agency's treatment of
Norshipco's material costs resulted in the improper removal of associated
subcontractor overhead (i.e., G&A) and profit burdens from Norshipco's
proposal.

   As detailed above, the RFP required offerors to use the government labor
hour and material cost estimates unless a proposed deviation was
sufficiently supported.  In the absence of sufficient cost data to support
a proposed deviation, the solicitation stated that the agency would use
the government estimates.  Also, at the hearing our Office conducted, a
CAP member acknowledged that although not explicitly stated in the
RFP,[20] the Navy's material cost estimates were intended to be inclusive
of all subcontractor burden costs (i.e., G&A and profit), and that the
only costs that offerors were to add to the government material estimates
were relevant prime contractor burden costs.[21]  Tr. at 216-18; see also
Agency's Supplemental Report
at 14; Agency's Post-Hearing Comments at 16.

   Norshipco's initial and final cost proposals detailed whether the labor
and material expenses would be incurred by Norshipco itself or by a
proposed subcontractor.  In its final cost proposal, Norshipco proposed
prime contractor material costs totaling $15,012,611 and subcontractor
material costs totaling $53,880,248.  AR, Tab 46, Norshipco Final Cost
Proposal, Vol. 1, Part II, Exh. G-3.  In many instances Norshipco's
subcontractors added G&A and profit burdens to their material cost
estimates, such that the material costs as proposed by Norshipco for
various notional work items exceeded the Navy's material cost
estimates.[22]  Norshipco's upward deviations from the government material
cost estimates were inadvertent, as it was unaware that the Navy's
estimates here included subcontractor burden costs.[23]  Additionally,
Norshipco's upward deviations from the government material estimates did
not include any supporting cost data.

   In performing its evaluation of Norshipco's cost proposal, the CAP
determined that Norshipco's upward deviations from the government material
estimates were not supported by clear and compelling evidence, and
therefore, adjusted downward to the government estimates those instances
where the material costs as proposed by Norshipco exceeded the government
estimates.[24]  AR, Tab 19, CAP Summary Report, encl. 4, CAP Final Report
Norshipco, at 3-6.  The CAP summary report of Norshipco's projected costs
then accumulated all evaluated material costs under the prime contractor. 
AR, Tab 19, CAP Summary Report, encl. 3, Norshipco Cost Analysis Report,
at 16.  Metro's cost consultant calculated that the CAP's removal of the
subcontractor G&A and profit burdens from the material costs within
Norshipco's proposal resulted in a total reduction of $6,606,847 to
Norshipco's evaluated costs.[25]  Metro's Supplemental Protest at 28,
Declaration of Metro Cost Analyst, at 13-14.

   The Navy argues that its treatment of Norshipco's material costs here was
entirely proper, as it was consistent with the stated terms of the
solicitation.  The agency asserts that the CAP properly adjusted (here,
downward) those Norshipco material cost deviations for which the offeror
failed to provide a sufficient basis of support.  The Navy also contends
that its treatment of Norshipco's material costs here was appropriate even
if offerors did not understand that the agency's material cost estimates
were inclusive of subcontractor burden costs.

   Metro argues that the Navy's failure to take into account Norshipco's
actual materials strategy (i.e., that approximately 75 percent of
Norshipco's material costs would be incurred by its subcontractors) in its
cost evaluation created an "illusory" cost savings of the subcontractor
G&A and profit burdens that the offeror would actually incur.  Metro also
argues, after learning at the hearing our Office conducted what costs the
government material estimates represented, that the agency ignored the
distinct aspects of the offerors' proposals regarding material costs and
failed to treat offerors equally; i.e., any downward adjustment to
Norshipco's proposal to eliminate a double subcontractor G&A and profit
burden should have been, and was not, accompanied by a similar adjustment
to Metro's proposal.

   We need not resolve this issue because we find that Metro has not
demonstrated that it was prejudiced by the Navy's treatment of Norshipco's
material costs here.  Our Office will not sustain a protest unless the
protester demonstrates a reasonable possibility of prejudice, that is,
unless the protester demonstrates that, but for the agency's actions, it
would have had a substantial chance of receiving the award.  Parmatic
Filter Corp., B-285288.3, B-285288.4, Mar. 30, 2001, 2001 CPD paragraph 71
at 11; see Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir.
1996).  Here, Metro contends that the CAP's improper removal of the
subcontractor cost burdens from Norshipco's proposal resulted in a total
reduction of $6,606,847 to Norshipco's projected costs.  By contrast, the
total evaluated cost difference between the proposals of Norshipco and
Metro was at least $7,128,355.  See AR at 14 n.6, attach. 3, Revised Cost
Analysis; Agency's Supplemental Report at 21.  Under these circumstances,
we conclude that Metro could not have been prejudiced since, even assuming
the agency's evaluation of Norshipco's proposed costs in this regard was
improper and those costs should not have been adjusted downward as alleged
by Metro, Norshipco's higher-rated proposal would remain lower priced.[26]

   AGENCY DISCUSSIONS WITH METRO

   Metro alleges that the Navy failed to conduct meaningful discussions with
it regarding its cost proposal.  In particular, the protester contends
that the agency failed to adequately inform Metro of its concerns
regarding the firm's proposed direct labor rate and subcontractor direct
labor rate.  Metro contends that while the agency's discussion questions
inquired into other aspects of Metro's cost proposal, the discussions
failed to inform Metro of the Navy's specific concerns regarding the
proposed labor rates.  Metro argues that had the Navy asked the proper
questions, Metro could have explained how the agency's concerns were
unfounded and/or addressed the concerns in its final proposal revision.

   Although discussions must address deficiencies and significant weaknesses
identified in proposals, the precise content of discussions is largely a
matter of the contracting officer's judgment.  See FAR Section
15.306(d)(3); American States Utils. Servs., Inc., B-291307.3, June 30,
2004, 2004 CPD paragraph 150 at 6.  We review the adequacy of discussions
to ensure that agencies point out weaknesses that, unless corrected, would
prevent an offeror from having a reasonable chance for award.  Northrop
Grumman Info. Tech., Inc., B-290080 et al., June 10, 2002, 2002 CPD
paragraph 136 at 6.  When an agency engages in discussions with an
offeror, the discussions must be meaningful.  Hanford Envtl. Health
Found., B-292858.2, B-292858.5, Apr. 7, 2004,

   2004 CPD paragraph 164 at 8.  However, this requirement does not obligate
an agency to spoon-feed an offeror, Marine Hydraulics Int'l, Inc.,
B-291594.3, Oct. 3, 2003,

   2003 CPD paragraph 220 at 8, 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
paragraph 38 at 7.  Rather, for discussions to be meaningful, they must
reasonably lead an offeror into the areas of its proposal requiring
correction or amplification.  See American States Utils. Servs., Inc.,
supra; TRI-COR Indus., Inc., B-259034.2, Mar. 14, 1995, 95-1 CPD paragraph
143 at 5.

   Here, the Navy held discussions with all three offerors after completing
its initial evaluation of technical and cost proposals.  AR, Tab 5,
Competitive Range Memorandum.  With regard to technical proposals, the
Navy's discussions consisted of providing each offeror with a complete
copy of the agency's initial technical evaluation report, including
ratings and identified strengths and weaknesses and evaluation comments. 
With regard to cost proposals, the Navy's discussions consisted of
specific written questions.

   The Navy provided Metro with a total of 24 discussion questions regarding
the offeror's cost proposal, including questions regarding Metro's
proposed direct labor rates and subcontractor labor rates.  One specific
discussion question stated, 

   On Breakdown Number Three [Offeror's Projected Prime Direct Labor Rate and
Indirect Rates], the projected labor hour rates (fully burden labor
dollars) are as follows:  FY-05--$[DELETED]; FY-06--$[DELETED];
FY-07--$[DELETED]; FY-08--$[DELETED]; FY-09--$[DELETED] without
[facilities capital cost of money] FCCOM.  However, the current forward
pricing rate (fully burden labor dollars) for Metro is $[DELETED] without
FCCOM.  Please explain the rationale of Metro's projected labor hour rate
decreases from the current forward pricing rate of $[DELETED] for FY-05
(-$[DELETED]), FY-06 (-$[DELETED]), FY-07 (-$[DELETED]), FY-08
(-$[DELETED]), FY-09 (-$[DELETED]).  Historically, labor hour rates in the
Tidewater area increase each year.

   AR, Tab 6, Agency Discussion Questions for Metro, Encl. 3, at 3.  Several
other discussion questions inquired into Metro's proposed subcontractor
labor rates and costs.[27]

   Metro does not dispute that the Navy provided it with these discussion
questions.  Rather, Metro contends that the agency's inquiry regarding its
proposed direct labor rates related only to out-year decreases in its
fully burdened costs.  Similarly, Metro contends that the agency
discussion questions regarding its proposed subcontractor costs requested
only additional information and did not sufficiently identify the agency's
concerns regarding its proposed labor rates.  Metro essentially argues
that none of the discussion questions explicitly apprised it of the Navy's
concerns that Metro's proposed direct and subcontractor labor rates were
unacceptable, unreasonable, or unrealistically low.

   In reviewing whether there has been sufficient disclosure of perceived
deficiencies, our focus is not on whether the agency describes the
deficiencies in such detail that there could be no doubt as to their
identity and nature, but whether the information was sufficient in the
context of the procurement to afford the offeror a fair and reasonable
opportunity to identify and correct deficiencies in its proposal.  MTP
(JV), B-276903, July 31, 1997, 97-2 CPD paragraph 38 at 5; TRI-COR Indus.,
Inc., supra. 

   Under the circumstances here, we cannot conclude that a reasonably prudent
offeror, reviewing the agency's question in conjunction with the material
that the offeror had submitted with its proposal, could have failed to
recognize the agency's concerns regarding both the proposed direct labor
rates and subcontractor labor rates.  See MTP (JV), supra.  Contrary to
the protester's characterization, the Navy's discussions reasonably
provided Metro with notice of the agency's concern that the proposed
direct labor rate differed from its forward pricing rate.  Moreover,
Metro's response to the discussion question indicated that the firm
recognized the scope of the agency's concern.[28]  Likewise, the
discussions reasonably provided Metro with notice of the agency's concerns
regarding its proposed subcontractor rates, including the complete absence
of subcontractor quotations.  The fact that an offeror's responses did not
satisfy the evaluators provides no basis to conclude that the discussions
were inadequate.  See ViaSat, Inc., B-291152, B-291152.2, Nov. 26, 2002,
2002 CPD paragraph 211 at 8.  Given this conclusion--that Metro received
sufficient notice that its proposed direct labor rates and subcontractor
labor rates were viewed as unsupported--we see no basis to conclude that
the Navy failed to hold meaningful discussions with Metro.

   EVALUATION OF OFFERORS' PAST PERFORMANCE

   Metro protests that the Navy's evaluation of the offerors' past
performance was improper.  Metro first contends that the agency's
evaluation of its past performance was unreasonable and inconsistent with
the treatment accorded other offerors.  Metro also contends that the
Navy's evaluation of Norshipco's past performance was unreasonable because
it ignored highly relevant negative past performance information for
Norshipco.  Metro argues that had the Navy properly evaluated the
offerors' past performance, then Metro would have received a higher
evaluation rating (outstanding, instead of good), while Norshipco would
have received a lower evaluation rating (at most, good, instead of
outstanding). 

   Where a solicitation requires the evaluation of offerors' past
performance, we will examine an agency's evaluation to ensure that it was
reasonable and consistent with the solicitation's evaluation criteria,
since determining the relative merits of offerors' past performance
information is primarily a matter within the contracting agency's
discretion.  Hanley Indus., Inc., B-295318, Feb. 2, 2005, 2005 CPD
paragraph 20 at 4.  A protester's mere disagreement with the agency's
judgment is not sufficient to establish that the agency acted
unreasonably.  Birdwell Bros. Painting & Refinishing, B-285035, July 5,
2000, 2000 CPD paragraph 129 at 5. Our review of the record leads us to
conclude that the agency's evaluation of the offerors' past performance
here was both reasonable and consistent with the RFP's evaluation terms.

   Past Performance Evaluation of Metro

   The RFP instructed each offeror to provide "any information regarding its
past performance, or that of its subcontractors performing significant
work under the contract, on contracts similar to the Government's
requirement."  RFP at 241.  With regard to the evaluation of past
performance, the solicitation set forth the agency's intent to review
contractor performance assessment reporting system (CPARS) ratings and
other existing past performance information on relevant contracts. 
Id. at 269.  The Navy also reserved the right to consider subcontractors'
past performance to the extent it considered the subcontractor
participation to be significant to performance under the contract here. 
Id. 

   While the TERP assigned evaluation ratings to Metro's initial proposal
under the other technical factors, the TERP did not rate the offeror's
proposal under the past performance factor because of a lack of
subcontractor past performance information.  AR, Tab 4, Initial TERP
Report for Metro.  As part of its subsequent discussions with Metro, the
Navy provided the offeror with a complete copy of the initial TERP
report.[29]  AR, Tab 6, Navy Discussions with Metro.  The Navy also
furnished Metro with a "subcontractor past performance questionnaire" and
directed that Metro provide the questionnaire to its proposed
subcontractors with instructions that the businesses which had utilized
the subcontractor services, relevant in scope in the effort here, complete
and return the questionnaires to the agency.  Id. at 1, encl. 2.

   In its response to the Navy's discussions questions, Metro addressed
subcontractor past performance by providing the agency with its own
ratings for its proposed subcontractors:  universally "exceptional and
directly relevant to the [subject] contract."  AR, Tab 58, Metro Technical
Proposal Responses, at 216.  In support of its subcontractor past
performance ratings Metro explained,  

   Given that the Metro organizational approach to managing subcontracted
work is unique to Metro, the only relevant subcontractor past performance
is that which was performed as a Metro subcontractor.  Subcontractor
performance as a prime contractor or as a subcontractor to a prime
contractor other than Metro is not relevant.  Further, each
subcontractor's performance on each individual availability it has worked
for Metro is indistinguishable from Metro's and assumed equal to Metro's .
. . . 

   Id.

   When evaluating Metro's final proposal revision, the TERP determined that
although Metro had provided some additional information regarding
subcontractor performance, the agency still had no past performance data
available for review for various subcontractors that collectively were
proposed to accomplish approximately 20 percent of the work effort.  AR,
Tab 13, TERP Final Report of Metro, at 65.  The TERP concluded that, based
on the performance data it had regarding Metro and its proposed
subcontractors, the offeror merited an overall past performance rating of
good.  Id.

   Metro protests that the Navy's past performance evaluation of its proposal
was unreasonable.  Specifically, Metro argues that the agency's evaluation
rests upon the erroneous determination that it lacked performance
information on various Metro subcontractors, when Metro had in fact
provided the agency with adequate past performance information for its
proposed subcontractors.  We find the agency's decision not to rely upon
Metro's own evaluation of its proposed subcontractors was neither
unreasonable nor inconsistent with the solicitation.

   It is the offeror's responsibility to provide sufficient information in
its proposal regarding the quality and relevance of its past performance
so that the agency will be able to conduct a meaningful review of that
past performance.  Franz Rubenbauer Raumausstatter; Malerbetrieb
Anastassios Georgiadis, B-290317.3 et al., July 16, 2002, 2002 CPD
paragraph 124 at 5.  Additionally, in determining the quality and
relevance of an offeror's past performance information, an agency may
reasonably consider the credibility of the information's source.  See
Hughes Missile Sys. Co., B-259255.4, May 12, 1995, 95-1 CPD paragraph 283
at 14-15 (agency performance risk assessment which included consideration
of the credibility of the information source was proper).

   Here, the RFP advised offerors of the Navy's intent to evaluate past
performance by reviewing performance data from independent sources (i.e.,
CPARS, regional maintenance center files, other government and
non-government sources).  The Navy's subsequent discussions with Metro
then expressly directed the offeror to provide the agency with
subcontractor past performance questionnaires to be completed by the
entity which utilized the subcontractor's services (e.g., the government
customer).  Metro instead decided to develop its own past performance
ratings regarding its proposed subcontractors and provide those to the
Navy.  An offeror in a negotiated procurement acts at its peril when its
proposal does not provide specific information requested by the agency's
instructions.  See Forest Regeneration Servs. LLC, B-290998, Oct. 30,
2002, 2002 CPD paragraph 187 at 5.  The Navy determined that while the
data provided by Metro indicated what previous PMAs the subcontractors had
performed, it failed to provide any meaningful and independent information
regarding performance, level of effort, or type of work the subcontractors
had performed.  AR, Tab 13, TERP Final Report for Metro, at 65.  We find
nothing improper about the agency's decision to take Metro's failure to
provide independent past performance information for its proposed
subcontractors, as requested by the agency's instructions, into account in
its evaluation of the offeror's proposal here.

   Metro also argues that the Navy's evaluation of past performance failed to
treat offerors equally with regard to instances where subcontractor
performance information was not provided.  Metro contends that the
agency's evaluation of Norshipco also indicated many instances where past
performance information on proposed subcontractors was not available and
for which the agency assigned the subcontractors neutral performance
ratings; nonetheless, Norshipco received an overall rating of outstanding
while Metro received an overall rating of good.

   In our view, Metro's argument is mistakenly premised upon an improper
"apples-to-oranges" comparison of the offerors' proposal.  In performing
its evaluation of Norshipco's past performance, the TERP determined that
the awardee had provided adequate past performance information on all
subcontractors proposed to perform the notional work items.[30]  AR, Tab
13, TERP Final Report of Norshipco, at 61-69.  By contrast, in performing
its evaluation of Metro's past performance, the TERP determined that the
offeror had not provided adequate past performance information on all
subcontractors proposed to perform the notional work items.  AR, Tab 13,
TERP Final Report of Metro, at 64-73.  While the TERP was able to assess
the performance quality and relevance of all relevant Norshipco
subcontractors, it was unable to do the same for Metro, and the agency's
overall past performance ratings for Norshipco and Metro reflected this
distinction.  In sum, the difference in the past performance ratings of
Metro and Norshipco was not the result of unequal treatment by the agency
of identical underlying facts, but instead resulted from the agency's
recognition of different underlying facts. 

   Past Performance Evaluation of Norshipco

   Metro also protests that the agency's evaluation of Norshipco's past
performance was improper.  Specifically, Metro argues that the Navy
ignored highly relevant negative past performance information for
Norshipco and its subcontractor, [DELETED], when performing its evaluation
here.  Metro points to various instances in the CPARS reports for both
Norshipco and [DELETED] where the performance assessments identified
weaknesses and shortcomings.  Metro contends that had the Navy conducted a
proper evaluation of the awardee's past performance, then Norshipco would
have been rated no higher than good. 

   We find Metro's assertion here to be without merit.  The record indicates
that in evaluating the past performance of Norshipco and its
subcontractors, the TERP considered all CPARS reports that it
possessed--those containing unfavorable comments and identified weaknesses
to which Metro refers, as well as the vast majority of reports containing
favorable comments and assessment ratings, which Metro does not mention. 
After considering individual prior contract efforts, trends in
performance, and performance as a whole, the TERP concluded that, "with
one exception, all CPARS data available for review of [Norshipco] and six
subcontractors was positive in nature."  AR, Tab 13, TERP Final Report of
Norshipco, at 61.  The existence of isolated instances of poor
performance, or isolated weaknesses in otherwise favorable performance
assessments, does not preclude a favorable evaluation of past performance
overall.  See CH2M Hill, Ltd., B-259511 et al.,

   Apr. 6, 1995, 95-1 CPD paragraph 203 at 5-6.  Under the circumstances, we
have no basis to find the agency's evaluation unreasonable.

   SOURCE SELECTION DECISION

   Lastly, Metro protests that the agency's source selection decision was
improper.  Specifically, the protester contends that the Navy's
determination that Norshipco's proposal was technically superior to that
submitted by Metro was flawed because the agency's approach was based
solely on a comparison of the offerors' evaluation ratings.  Metro alleges
that the only basis articulated by the SSA for Norshipco's slight
technical edge over Metro resulted from the SSA's observation that
Norshipco had one more "very good" subfactor rating than did Metro under
the integrator and management capability factor.  Metro argues that the
SSA's reliance upon a mere mechanical counting of evaluation ratings,
without any analysis of the actual qualitative differences between the two
offerors' proposals, does not constitute a reasonable basis for the SSA's
determination regarding Norshipco's technical superiority. 

   In reviewing an agency's source selection decision, we will examine the
supporting record to determine whether the decision was reasonable,
consistent with the stated evaluation criteria, and adequately
documented.  Johnson Controls World Servs., Inc., B-289942, B-289942.2,
May 24, 2002, 2002 CPD paragraph 88 at 6.  As part of the source selection
process, the evaluation ratings of offerors' proposals, whether numeric,
color or adjectival, are but guides to, and not substitutes for,
intelligent decisionmaking.  See SAMS El Segundo, LLC, B-291620,
B-291620.2, Feb. 3, 2003, 2003 CPD paragraph 44 at 17.  They are tools to
assist source selection officials in evaluating proposals; they do not
mandate automatic selection of a particular proposal.  Jacobs COGEMA, LLC,
B-290125.2, B-290125.3, Dec. 18, 2002, 2003 CPD paragraph 16 at 31. 
Similarly, an agency's source selection decision cannot be based on a
mechanical comparison of the offerors' technical scores or ratings per se,
but must rest upon a qualitative assessment of the underlying technical
differences among the competing proposals.  See The MIL Corp., B-294836,
Dec. 30, 2004, 2005 CPD paragraph 29 at 8; Chapman Law Firm, LPA,
B-293105.6 et al., Nov. 15, 2004, 2004 CPD paragraph 233 at 5.

   Here, the SSA premised his selection decision upon acceptance of the
evaluation findings, ratings, and recommendations regarding the offerors'
proposals as contained in the TERP, CAP, and BVAC reports.  AR, Tab 22,
Source Selection Decision, at 2.  In comparing the technical proposals of
Norshipco and Metro, the SSA first examined the offerors' overall ratings,
the individual evaluation factor ratings, and, with regard to the
integrator and management capability factor, the subfactor ratings.  The
SSA then considered the offerors' relative strengths under the integrator
and management capability factor and determined that, here, Norshipco had
a "slight, but discernible, edge over Metro [notwithstanding] their common
overall technical rating of Very Good."  Id.  The SSA concluded that
Norshipco's highest technically rated, lowest evaluated cost proposal
represented the best value to the government.  Id. at 3-4.

   Contrary to the protester's assertions, the record demonstrates that the
SSA's comparison of proposals and award decision was based, not on a
mechanical application of the evaluation ratings, but on the underlying
qualitative merits of the offerors' proposals.  Under most of the RFP's
technical evaluation factors, the SSA reasonably determined that the
evaluation ratings accurately reflected the essential equivalency between
the Norshipco and Metro proposals.  As to the integrator and management
capability factor, the SSA properly looked behind the adjectival ratings
to determine what technical differences existed such that Norshipco's
proposal was technically superior to Metro's.  The SSA reasonably
concluded that the strengths identified in Norshipco's proposal by the
evaluators--and upon which Norshipco's evaluation ratings under the
foremost technical factor and subfactors were based--provided the offeror
with a "slight, but discernible, edge" over Metro's proposal.  As the SSA
reasonably found that Norshipco's proposal was both technically superior
and lower cost than that of Metro (as well as Offeror C), we find no basis
to disturb the agency's determination that Norshipco's proposal
represented the best value to the government.

   The protests are denied.

   Anthony H. Gamboa
General Counsel

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

   [1] The LHA/LHD ships in question, all homeported in the Norfolk, Virginia
area, are the USS Saipan, USS Nassau, USS Wasp, USS Kearsarge, USS Bataan,
USS Iwo Jima, and a seventh, unnamed ship to be determined.  RFP at
119-37.

   [2] The solicitation also set forth various evaluation subfactors, of
equal importance within each technical evaluation factor.  RFP Section
M-2.

   [3] In addition to the adjectival evaluation ratings, the TERP report to
the BVAC also ranked offerors' technical proposals as follows:  (1)
Norshipco; (2) Metro; and
(3) Offeror C.  AR, Tab 13, TERP Report.  The BVAC later developed overall
technical ratings for each offeror's proposal:  very good for Norshipco;
very good for Metro; and satisfactory for Offeror C.  AR, Tab 21, BVAC
Report to SSA.

   [4] Subsequent to the filing of Metro's protest, the Navy determined that,
for all three offerors, it had incorrectly calculated the overhead
applicable to the overtime and new work requirements, thereby duplicating
certain costs.  AR at 14 n.6, attach. 3, Revised Cost Analysis.  As
recalculated, the Navy's projected costs to the government for the three
offerors are $236,087,271 for Norshipco, $243,215,626 for Metro, and
$248,449,106 for Offeror C, thereby increasing the difference in evaluated
cost between the proposals of Norshipco and Metro from $5,365,292 to
$7,128,355 (not $7,508,312 as reported by the Navy).  The protester does
not take exception to the agency's recalculation here.  See Metro's
Comments at 19; Metro's Supplemental Comments.  Additionally, in a
supplemental report on the protests, the Navy asserted that because of an
"error in transposition," Norshipco's final evaluated cost was overstated
by an additional $8,027,682--the result of material cost deviations that
NAVSEA had accepted but failed to incorporate into Norshipco's evaluated
cost summary.  Agency's Supplemental Report at 21.  Metro argues that it
did not have a fair opportunity to respond to the alleged "error in
transposition," and contests the validity of the underlying Norshipco
material cost deviations.  Metro's Supplemental Post-Hearing Comments at
1-2.  We need not decide whether Norshipco's evaluated cost should be
adjusted to reflect the agency's asserted $8 million mathematical error
since, as discussed fully below, even without this additional reduction,
Norshipco's evaluated costs remain lower than Metro's.

   [5] Metro's [DELETED] labor rate of $[DELETED] per hour was in turn
derived from the company's [DELETED], as well as general and
administrative expense (G&A) and profit rates of [DELETED] percent
([DELETED]).  See AR, Tab 19, CAP Summary Report, encl. 1, Metro Cost
Analysis Report, at 4.

   [6] Metro also planned that [DELETED].  Id. at 262.

   [7] While Metro changed its proposed direct labor rate as part of its
final proposal (from $[DELETED] per hour to $[DELETED] per hour), the
adjustment resulted entirely from Metro's determination that the change in
work requirements altered the relative weightings of the [DELETED]
components, and did not result from a change to Metro's underlying
methodology.  Metro's Protest at 15-16.

   [8] Metro decided to accept the government labor hour and material cost
estimates for all notional work items when preparing its proposal.  Id. at
256.  Accordingly, Metro needed to determine only its subcontractors'
labor rates in order to determine its proposed subcontractor labor costs. 
Id. at 269-70.  Metro believed that, for a variety of reasons, it was
better able to estimate its subcontractors' labor rates and costs than the
subcontractors themselves could.  Id. at 272-74; AR, Tab 19, CAP Summary
Report, encl. 2, CAP Final Report Metro, at 10-11.

   [9] It is unclear whether DCAA believed that Metro's chosen rate
methodology here was nondiscretionary, as the audit report stated, "The
solicitation specified the format for direct labor and subcontract labor
to be proposed.  Metro was required to deviate from [its] FPRA and propose
prime direct labor and a [sic] separate subcontract direct labor rates." 
AR, Tab 31, DCAA Report of Metro, at 4.

   [10] As testified to by the contracting officer, the Navy had concerns
about the DCAA report immediately upon its receipt, and did not understand
why DCAA had not taken exception to Metro's proposed rates, especially
since a separate DCAA audit report of Metro as a subcontractor for the
same solicitation did not question a proposed direct labor rate of
$[DELETED] per hour.  Tr. at 54, 81; AR, Tab 31, DCAA Report of Metro, at
3-5, Tab 31, DCAA Report of Metro as Subcontractor, at 2-4.  

   [11] Metro also protests the adequacy of the agency's discussions; we
separately review this protest issue below.

   [12] While Metro's proposed direct labor rate did not include any measure
of labor rate escalation, its proposed subcontractor labor rate did
incorporate a rate escalation to take into account the 5-year contract
performance period.  AR, Tab 19, CAP Summary Report, encl. 1, Metro Cost
Analysis Report, at 4; Tab 20, Addendum to Metro Cost Analysis Report, at
1.

   [13] Metro does not challenge the rate escalation portion of the Navy's
adjustment here.  Tr. at 352.

   [14] We also find that the cost estimation methodologies used by the Navy
to adjust Metro's proposed direct and subcontractor labor rates were
reasonably based and not arbitrary.  While an agency must independently
analyze the realism of an offeror's proposed costs based upon its
particular approach, personnel, and other circumstances, and a cost
estimation method which mechanically adjusts proposed labor rates fails to
satisfy the requirement for an independent analysis of an offeror's
proposed costs, see The Jonathan Corp.; Metro Machine Corp., B-251698.3,
B-251698.4, May 17, 1993, 93-2 CPD paragraph 174 at 11, here the
estimation methodologies used by Navy were reasonable in light of the lack
of actual cost information provided by Metro regarding its proposed direct
and subcontractor labor rates.

   [15] Specifically, if "an offeror provides clear and compelling evidence
that an adjustment is warranted, the Government will adjust that Offeror's
labor hour and/or material dollar estimates for the individual work
item(s) addressed, to the extent it is determined that the proposed
rationale support such an adjustment."  RFP at 245.

   [16] The RFP also established that when an offeror's proposed deviations
were not supported by clear and compelling evidence, then the government
estimate would be used to calculate the evaluated cost to the government
for that work item.  RFP at 245.

   [17] As explained below in detail, in many instances Norshipco's proposed
deviations from the Navy's material cost estimates were upward,
unintended, and unsupported ones, resulting from the offeror's inclusion
of subcontractor G&A and profit burdens to the government-provided
material cost estimates, while the Navy considered its material cost
estimates to already include G&A and profit burdens other than those for
the prime contractor.

   [18] The proposed labor hour deviations which the CAP accepted resulted in
Norshipco's projected cost being based upon a total direct labor estimate
of 3,804,210 labor hours, a difference of 205,184 from the government's
total labor hour estimate of 4,009,394 (as reflected in the evaluation of
an offeror which did not propose deviations).  AR, Tab 19, CAP Summary
Report, encl. 3, Norshipco Cost Analysis Report, at 3, 16, encl. 1, Metro
Cost Analysis Report, at 17.  Metro's cost analyst quantified Norshipco's
cost for the accepted labor hour deviations at $8,737,795.  Metro's
Supplemental Protest, Declaration of Metro Cost Consultant, at 8. 
Similarly, the CAP's acceptance of Norshipco's proposed material cost
deviations resulted in a determination that Norshipco's final projected
material cost totaled $76,399,142, a difference of $5,436,930 from the
government's total material cost estimate of $81,836,072 (again as
reflected in the evaluation of an offeror which did not propose
deviations).  AR, Tab 19, CAP Summary Report, encl. 3, Norshipco Cost
Analysis Report, at 16, encl. 1, Metro Cost Analysis Report, at 18.

   [19] Metro argues, in the alternative, that to the extent that the
information submitted by Norshipco constituted "clear and compelling
evidence," then the Navy provided offerors with unreliable estimates. 
Metro's Supplemental Protest at 26.  The fact that the agency determined
the cost information submitted by Norshipco sufficient to support proposed
deviations in certain instances provides no basis to support Metro's claim
that the government estimates were faulty.

   [20] The RFP informed offerors that when setting forth their proposed
labor hour and material estimates for each work item, "these estimates
should be exclusive of G&A (other than for prime labor) . . . and
Profit/Fee."  RFP at 245.  While the RFP instructed offerors to separately
propose their G&A and profit burdens, it did not indicate, as the Navy has
argued, that the government material estimates included all subcontractor
cost burdens.

   [21] In support of such treatment, the CAP member explained that the
Navy's material cost estimates were based upon historical data and prior
contract efforts which reflected all aspects of a contractor's costs for
materials to the government, including vendor and subcontractor G&A and
profit burdens.  Tr. at 219-37.

   [22] It is unclear of the extent to which Norshipco's proposed downward
deviations from the government material cost estimates were inadvertently
offset by the offeror's inclusion of subcontractor cost burdens to its
proposed material costs.

   [23] For example, in its response to the Navy's discussion question
regarding its material cost deviations, Norshipco stated,

   The remaining 86 [work] items represent those that were assigned to our
three major team members . . .:  [e]ach of the members took their
respective items, used the Government estimate as directed by Norshipco,
and applied their respective burdens and fees to calculate the direct and
end cost to Norshipco to utilize in our proposal. . . .  However, the
application of burdens and fees by our team members for materials appears
to be misleading the Government to believe that Norshipco was proposing a
deviation that really does not exist.

   AR, Tab 19, CAP Summary Report, encl. 4, CAP Final Report Norshipco, at
3.  Metro was also apparently unaware that the Navy's material estimates
included subcontractor burden costs:  although Metro planned that it, as
the prime contractor, would provide all material necessary to perform the
contract, AR, Tab 19, CAP Summary Report, encl. 1, Metro Cost Analysis
Report, at 18; Tr. at 340, the offeror did not seek any downward
deviations from the government's material cost estimates.

   [24] In light of the Navy's failure (in the RFP or elsewhere) to disclose
to offerors that subcontractor cost burdens were already included within
the government material cost estimates, we do not believe that it was
reasonable for the Navy to assume, as it did, that Norshipco had
"knowingly disregarded the instructions of the RFP" and had illogically
proposed upward deviations from the government material cost estimates. 
AR, Tab 19, CAP Summary Report, encl. 4, CAP Final Report Norshipco, at
2.  

   [25] Metro's cost analyst calculated that the reductions for Norshipco
subcontractors [DELETED] and [DELETED] were $3,468,268 and $406,630,
respectively.  The analyst also estimated a [DELETED] percent burden rate
for all remaining Norshipco subcontractors in the absence of evidence
indicating the actual extent to which these companies had included G&A and
profit burdens, thereby resulting in additional reductions of $2,364,451. 
Together with the resulting elimination of Norshipco G&A costs of
$367,498, the total calculated reduction was $6,606,847.  Metro's
Supplemental Protest, Declaration of Metro Cost Consultant, at 12-15.

   [26] Likewise, while Metro contends, in the alternative, that the Navy
should have eliminated the duplicative subcontractor G&A and profit
burdens from its proposal as well as that of Norshipco, the protester has
not quantified what these costs are nor demonstrated that it was
prejudiced by the alleged improper agency action.  See Metro's
Post-Hearing Comments at 19-20.

   [27] The agency discussion questions regarding Metro's proposed
subcontractor rates stated:

   No subcontracting plan was provided in your proposal even though all of
the notional work package estimates indicated hundreds of subcontracted
labor hours.  Please provide a list of all potential subcontractors and
vendor quotes or letters of commitment. . . .  Also, please provide, or
have each subcontractor provide, a cost proposal for their portion of the
notional work package. . . .,

   Please provide a cost breakdown of the $[DELETED] subcontract direct labor
costs for CLIN 009.  Please list individual subcontractors, labor hours
per subcontractor, as well as the labor rates for each subcontractor. . .
., and

   In Attachment III, Cost Proposal . . ., you included a cost of $8,181,693
as "subcontractor overhead."  Is "subcontractor overhead" a standard Metro
indirect cost?  Has the [overhead] rate applied ([DELETED]%) been recently
reviewed and approved by DCAA?  If so, please provide DCAA approval
letters.

   Id. at 2, 4.

   [28] Specifically, Metro's response to the Navy discussion question
included a detailed narrative explanation about what information it had
relied upon and how it had derived the calculation for its proposed direct
labor rate.

   [29] The agency's discussions also stated the reason why the Navy had not
assigned a rating to Metro's proposal under the past performance factor: 
Metro had proposed a substantial amount of subcontracting for this
contract but had provided little past performance information on the
subcontractors it planned to use.  AR, Tab 6, Navy Discussions with Metro,
at 1.

   [30] The TERP assigned a rating of neutral to proposed Norshipco
subcontractors when it determined that, although adequate information had
been submitted, the prior performance was of low relevance to the contract
effort here.  AR, Tab 13, TERP Report for Norshipco, at 61-69.