TITLE: B-296627, Coastal Maritime Stevedoring, LLC, September 22, 2005
BNUMBER: B-296627
DATE: September 22, 2005
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B-296627, Coastal Maritime Stevedoring, LLC, September 22, 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: Coastal Maritime Stevedoring, LLC

   File: B-296627

   Date: September 22, 2005

   Michael A. Gordon, Esq., and Donald C. Holmes, Esq., Holmes & Gordon, for
   the protester.

   Capt. Geraldine Chanel, Department of the Army, for the agency.

   Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
   of the General Counsel, GAO, participated in the preparation of the
   decision.

   DIGEST

   1. Source selection authority unreasonably rated as satisfactory an
   offeror's small business subcontracting plan that failed to address many
   of the required elements of Federal Acquisition Regulation sect. 19.704
   and that furnished conflicting information regarding offeror's overall
   objective for small business subcontracting.

   2. Price/technical tradeoff determination that failed to take into
   consideration several of the advantages of protester's higher-rated,
   higher-priced proposal was not reasonably based.

   DECISION

   Coastal Maritime Stevedoring, LLC protests the award of a contract to
   Marine Terminal Corporation East (MTCE) under request for proposals (RFP)
   No. W81GYE-05-R-0003, issued by the U.S. Army Surface Deployment and
   Distribution Command for stevedore and related terminal services at Blount
   Island Terminal in Jacksonville, Florida. The protester argues that the
   Army's evaluation of MTCE's proposal and the agency's "best value"
   determination were unreasonable.

   We sustain the protest.

   BACKGROUND

   Services to be furnished pursuant to the contract include the discharge
   and loading of ships, rail cars, and trucks and the drayage of containers
   between rail, truck, and ship staging areas. The solicitation requires
   that the contractor be capable of handling multiple and simultaneous
   vessel, rail, and truck operations on an around-the-clock basis. RFP
   Performance Work Statement at 10. The contractor is required to furnish
   all of the equipment needed to perform the services.

   The RFP, which was issued on January 19, 2005, contemplated the award of a
   4-year, fixed-price requirements contract to the offeror whose proposal
   represented the best value to the government. The solicitation provided
   for the evaluation of proposals on the basis of price and the following
   non-price factors, listed in descending order of importance: relevant
   experience, past performance, technical approach, management approach, and
   socio-economic commitment. Technical approach was to be evaluated on the
   basis of two equally-weighted subfactors--equipment and quality control.
   The solicitation further provided that the non-price factors, when
   combined, were approximately equal in weight to price.

   Four proposals were received by the February 24 closing date. The agency
   evaluated the proposals, conducted discussions, and solicited final
   revised proposals. The technical evaluation team (which evaluated relevant
   experience, technical approach, and management approach) identified
   [deleted] in Coastal's final proposal. The technical evaluators identified
   [deleted] in MTCE's final proposal. The socio-economic commitment team did
   not assign Coastal a rating because Coastal is a small business; [1] it
   rated MTCE's proposal as [deleted] under the factor. Agency Report, Tab
   23. As explained in greater detail below, after being advised by the
   program manager for the stevedore and related terminal services program,
   who served as chairperson of the technical evaluation team, that he
   thought that MTCE had [deleted] in its technical proposal, the source
   selection authority (SSA) [deleted] that had been assessed regarding that
   proposal. Negotiation Summary Memorandum, June 6, 2005, at 6. In addition,
   as also explained below, the SSA [deleted] of MTCE's proposal under the
   socio-economic commitment factor from [deleted].

   [Deleted]

   Prior to making her best value determination, the SSA again consulted with
   the program manager, asking him for estimates of the cost savings
   associated with the [deleted] identified in Coastal's proposal. The
   program manager responded that there was [deleted] identified in Coastal's
   proposal and that the cost savings associated with the remaining [deleted]
   would total approximately [deleted] over the life of the contract.

   The SSA concluded that MTCE's proposal represented the best value to the
   government, reasoning as follows:

   Although Coastal achieved an [deleted] rating technically, it is [deleted]
   than the [independent government cost estimate] and [deleted] than MTCE.
   The Program manager was contacted to review the [deleted] identified in
   Coastal's proposal. There were a total of [deleted] identified within
   Coastal's proposal. Of those [deleted], the Program Manager indicated that
   only [deleted] would be worth an additional cost to the Government:
   [deleted].[2] The cost benefit to the Government associated with the above
   advantages is roughly [deleted] over the life of the contract. To
   determine the effect this [deleted] would have on the outcome of the
   source selection decision, Coastal's bid was adjusted [deleted]. Adjusting
   Coastal['s] bid by the anticipated cost [deleted] still resulted in a
   delta of slightly [deleted] between Coastal and MTCE's proposed prices. A
   determination is therefore made that Coastal's proposal is [deleted] to
   the Government. The advantages are not worth the additional cost of
   [deleted].

   Id. at 14.

   By letter dated June 8, the contracting officer notified the protester
   that MTCE had been selected for award. In response to the protester's
   timely request, the contracting officer furnished it with a written
   debriefing by letter dated June 10. On June 15, Coastal protested to our
   Office.

   ANALYSIS

   The protester challenges the Army's evaluation of the awardee's proposal
   in two evaluation areas and asserts that the price/technical tradeoff was
   flawed. As explained in detail below, we find unreasonable the agency's
   evaluation of the awardee's proposal in one of the challenged areas, the
   socio-economic commitment factor, [3] and we conclude that the
   price/technical tradeoff was improper because the SSA failed to consider
   all the [deleted] identified in the protester's [deleted], as well as the
   protester's and MCTE's ratings in the area of performance risk.

   Socio-economic commitment factor

   The protester argues that the SSA's rating of MTCE's proposal as [deleted]
   under the socio-economic commitment factor was unreasonable. Coastal
   contends that its competitor's proposal merited a rating of [deleted]
   under the factor. We agree with the protester.

   The RFP required each large business offeror to submit a subcontracting
   plan in accordance with the requirements outlined in Federal Acquisition
   Regulation (FAR) sect. 19.704(a).[4] The solicitation defined the
   government's desired objective for small business subcontracting as 10
   percent of the total contract value. Offerors were instructed to allocate
   the proposed objective among the subcategories of small disadvantaged
   businesses, women-owned small businesses, service-disabled veteran-owned
   small businesses, and Historically Underutilized Business Zone (HUBZone)
   small businesses and to furnish past performance information regarding
   subcontracting goals and achievement across these subcategories for the
   past 5 years. The RFP also required offerors to provide a rationale for
   each objective that did not meet the government's desired objective.

   The RFP advised offerors that their subcontracting plans would be
   evaluated to determine the extent to which they complied with and
   addressed the elements of FAR sect. 19.704 and FAR sect. 52.219-9.[5] The
   RFP further advised that the agency would evaluate the past performance
   information on subcontracting goals and achievements to determine the
   extent to which offerors had established realistic goals and succeeded in
   achieving them. The solicitation provided that the rating would also take
   into consideration the rationale provided by each offeror as to why its
   proposed subcontracting goal was less than the government's desired goal.

   In its initial proposal, MTCE defined its desired objective for
   subcontracting to small businesses as [deleted] and indicated that this
   amount would be used [deleted]. The socio-economic commitment evaluation
   team noted that MTCE's plan [deleted]; accordingly, the evaluators rated
   MTCE's subcontracting plan as unsatisfactory. The team further noted that
   the offeror had [deleted].

   The contracting officer apprised MTCE of the insufficiencies in its
   subcontracting plan during discussions. The contracting officer further
   informed MTCE that the [deleted].

   MTCE revised its subcontracting plan in its final revised proposal. MTCE
   redefined its desired objective for subcontracting to small businesses as
   [deleted] and listed a variety of [deleted] that it could potentially
   obtain from small businesses [deleted]. MTCE noted that [deleted] of its
   cost derived from union labor, supervision and MTCE equipment, and that
   while it [deleted] MTCE Final Proposal at 112. The proposal further
   indicated that based on historical data, MTCE estimated that it would
   spend [deleted] for fuel and oil, [deleted] for maintenance of equipment,
   [deleted] for gear, [deleted] for office supplies and office services,
   [deleted] for travel and hotel expenses, and [deleted] for out-of-pocket
   expenses (such as tires and crane lighting). MTCE furnished a list of
   small business vendors, identifying the socio-economic status of the
   vendor and the type of service to be furnished.

   The socio-economic commitment evaluation team again rated the proposal as
   unsatisfactory under that factor, noting that MTCE did not meet the
   requirements of FAR sect. 19.704. Agency Report, Tab 23.

   The SSA contacted MTCE to clarify whether it intended to subcontract to
   small business concerns [deleted] (as stated at one point in its final
   proposal) or a lesser sum [deleted] arrived at by totaling the amounts in
   its itemized listing. The SSA also noted that the agency could not
   [deleted] furnished by MTCE in its proposal with the intended services to
   be subcontracted out; thus, she requested that MTCE [deleted] E-mail from
   SSA to MTCE, May 19, 2005. MTCE's representative responded as follows:

   The total should be [deleted], it appears that Equipment Lease/purchase
   was left out of the listing. Frankly, I can't make the [deleted] due to
   the fact that [names omitted] are all unavailable this morning. However,
   in order to meet [deleted]. We are in the process of doing this in all
   areas where we operate.

   E-mail from MTCE to SSA, May 19, 2005.

   The SSA changed MTCE's rating on the socio-economic commitment factor from
   [deleted], noting that the offeror's revised proposal had addressed the
   issues raised in discussions and that MTCE's objective for small business
   subcontracting, as revised, [deleted] with the government's desired
   objective.

   We think that the SSA's rating of MTCE's proposal as [deleted] under the
   socio-economic commitment factor was [deleted]. First, contrary to the
   SSA's assertion, [deleted]. While we recognize that the source selection
   plan did not require that a subcontracting plan meet every requirement of
   FAR sect. 19.704 to be rated as satisfactory, we nonetheless do not see
   how the agency could reasonably have [deleted].

   Second, given the [deleted] in MTCE's proposal, we do not see how the SSA
   could reasonably have [deleted] for small business subcontracting of 10
   percent of the total contract amount. In this regard, while MTCE
   represented at one point in its final proposal that it would attempt to
   purchase supplies and gear worth [deleted] (or about [deleted] of the
   total contract amount) from small business vendors over the life of the
   contract, MTCE Final Proposal at 111, it represented elsewhere in its
   final proposal that only [deleted] of the contract amount would be
   allocated to the category of contract overhead, from which expenditures
   for supplies and gear are to be made, id. at 112, and still elsewhere that
   specified cost categories (i.e., union labor or supervision, supervision,
   material handling equipment purchase, contract overhead, corporate
   overhead, and profit) "make up [deleted] of our total estimated cost and
   cannot be supplied by small business." Id. at 111.

   Equipment subfactor

   The protester argues that MTCE's proposal should have been assigned a
   deficiency and rated as unsatisfactory under the equipment subfactor of
   the technical approach factor because [deleted].[6]

   The technical evaluation team rated MTCE's initial proposal as [deleted]
   under the equipment subfactor, noting [deleted] that [deleted] Technical
   Evaluation Summary, Mar. 4, 2005, at 11. The evaluators noted that
   [deleted] Id. MTCE was notified that the agency viewed its [deleted].

   In its final revised proposal, MTCE [deleted]. MTCE also added the
   following representation to its equipment listing:

   [Deleted]

   MTCE Final Revised Proposal at 73. Each of the technical evaluators,
   including the chairman of the evaluation team, [deleted]; the following
   language from the evaluation worksheet of the evaluation team chairman was
   repeated verbatim in the addendum to the technical evaluation report
   recording the results of the evaluation of revised proposals:

   [Deleted]

   Addendum to Technical Evaluation Report, May 13, 2005, at 4.[7] Despite
   this [deleted] with regard to the equipment subfactor.

   As previously noted, the SSA contacted the chairman of the technical
   evaluation committee during her review of the evaluation report and
   received from him an e-mail captioned [deleted] that stated as follows:

   [Deleted]

   E-mail from Chairman of the Technical Evaluation Team to the SSA, May 26,
   2005. Relying upon this comment, the SSA determined that MTCE [deleted].

   While we find the content of the chairman's e-mail troubling, given
   [deleted], we nonetheless see no basis to question the reasonableness of
   the SSA's rating of MTCE's proposal as [deleted] under the equipment
   subfactor. In this regard, while the SSA [deleted] noted by the
   evaluators, she did not change the rating [deleted] that they had assigned
   the proposal under the subfactor. Given the expertise of the technical
   evaluators, we see no basis [deleted] their judgment that the number of
   toplifters, tuggers, and forklifts offered by MTCE represented a weakness,
   but did not rise [deleted] in its proposal. Accordingly, we see no basis
   to question their rating of the proposal [deleted] under the equipment
   subfactor.[8]

   Price/Technical Tradeoff Determination

   The protester argues that the source selection authority's price/technical
   tradeoff determination was [deleted] because it took into account only the
   advantages in Coastal's proposal that resulted in quantifiable cost
   savings to the government.

   In a best-value procurement, it is the function of the source selection
   authority to perform a price/non-price factor(s) tradeoff, that is, to
   determine whether one proposal's superiority under the non-price factor or
   factors is worth a higher price. A.G. Cullen Constr., Inc., B-284049.2,
   Feb. 22, 2000, 2000 CPD para. 45 at 4. We will review the selection
   decision to ensure that it was reasonable and consistent with the
   evaluation scheme set forth in the solicitation. Id.

   Based on our review of the record here, we agree with the protester that
   the SSA's tradeoff analysis was unreasonable. The SSA concluded that
   Coastal's proposal was not worth the cost differential of approximately
   [deleted] that separated it from MTCE's proposal based on information
   furnished to her by the program manager regarding the [deleted] identified
   in Coastal's technical proposal. The SSA mischaracterizes the information
   furnished to her by the program manager, however. Contrary to the SSA's
   statement in the Negotiation Summary Memorandum at 14, quoted above, the
   program manager's analysis did not indicate that only some of the
   [deleted] identified by the technical evaluators "would be worth an
   additional cost to the government"; instead, he identified those [deleted]
   that would result in a cost benefit (i.e., cost savings) to the
   government.[9] The distinction is far more than a semantic one, since an
   advantage in an offeror's technical proposal need not result in cost
   savings to the government to be of value to the government. In our view,
   the SSA had an obligation to consider all of the advantages of Coastal's
   proposal in her tradeoff determination, and not simply those that would
   effectively reduce the cost of Coastal's proposal. That is, the SSA had an
   obligation to consider whether the [deleted] advantages that, according to
   the Program Manager, would not result in cost savings to the government
   nonetheless furnished sufficient additional value to the government to
   make Coastal's proposal a better value overall than MTCE's, despite
   [deleted]. Because the SSA failed to perform such an analysis, we think
   that her determination lacked a reasonable basis.

   The SSA's analysis was further unreasonable in that it failed to take into
   account the difference in the ratings of the two proposals with regard to
   performance risk, instead, as noted above, focusing exclusively on the
   [deleted].[10] Where a price/technical tradeoff is made, the source
   selection decision must be documented, and the documentation must include
   the rationale for any tradeoffs made. FAR sect. 15.308; Blue Rock
   Structures, Inc., B-293134, Feb. 6, 2004, 2004 CPD para. 63 at 5. A
   tradeoff determination in favor of a lower-rated, lower-priced proposal
   that fails to acknowledge significant strengths of the higher-rated
   proposal and furnish an explanation as to why they are not worth a price
   premium is not, in our view, a sufficiently documented tradeoff
   determination. See Blue Rock Structures, Inc., supra, at 6.

   RECOMMENDATION

   Because we find that the agency's evaluation of MTCE's proposal under the
   socio-economic commitment factor and the agency's tradeoff determination
   were unreasonable, we sustain the protest. We recommend that the agency
   make a new source selection decision (preceded, if deemed appropriate, by
   further discussions and submission of final revised proposals) consistent
   with the findings in our decision. If the agency determines that a
   proposal other than MTCE's represents the best value to the government, we
   recommend that the agency terminate the award to MTCE and make award to
   the offeror selected. We also recommend that the agency reimburse the
   protester the costs of filing and pursuing the protest, including
   attorneys' fees. Bid Protest Regulations, 4 C.F.R. sect. 21.8(d)(1)
   (2005). In accordance with section 21.8(f) of our Regulations, Coastal's
   claim for such costs, detailing the time expended and the costs incurred,
   must be submitted directly to the agency within 60 days after receipt of
   the decision.

   The protest is sustained.

   Anthony H. Gamboa

   General Counsel

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

   [1] The RFP provided that firms meeting the criteria for certification as
   a small business would be rated as neutral under the socio-economic
   commitment subfactor. RFP amend. 2, at 14.

   [2] As noted above, the program manager in fact identified [deleted] that
   would result in cost savings. In addition to the [deleted] noted by the
   SSA, the program manager identified [deleted].

   [3] While the socio-economic commitment factor was the least important of
   the non-price evaluation factors, it played [deleted]. In this regard, the
   proposals of both offerors were [deleted]. Id. at 2, 7, 14.

   [4] FAR sect. 19.704(a) defines the required elements of a subcontracting
   plan. These include:

   --Separate percentage goals for using small business, veteran-owned small
   business, service-disabled veteran owned small business, HUBZone small
   business, small disadvantaged business, and women-owned small business
   concerns;
   --A statement of the total dollars planned to be subcontracted and a
   statement of the total dollars planned to be subcontracted to each of the
   five subcategories of small businesses;
   --A description of the principal types of supplies and services to be
   subcontracted and an identification of the types planned for
   subcontracting to each subcategory;
   --A description of the method used to develop the subcontracting goals;
   --A description of the method used to identify potential sources;
   --Information as to whether the offeror included indirect costs in
   establishing subcontracting goals;
   --The name and a description of the duties of the individual administering
   the subcontracting plan;
   --A description of the efforts the offeror will make to make sure that the
   various subcategories of SBs will have an equitable opportunity to compete
   for subcontracts;
   --Assurances the offeror will include the clause at FAR sect. 52.219-8 in
   all subcontracts offering further subcontracting opportunities; and
   --Assurances that the offeror will furnish required reports to the
   government.

   [5] FAR sect. 52.219-9 also defines the required elements of a
   subcontracting plan. The elements defined are essentially the same as
   those defined in FAR sect. 19.704.

   [6] The Performance Work Statement (PWS) required the contractor to use a
   top handler when lifting any container 20 feet or larger. PWS sect.
   6.5.1.7. According to the protester, this covers "literally every
   container coming off a ship." Protester's Comments, July 28, 2005, at 4.

   [7] The other two evaluators noted as follows on their individual
   evaluation worksheets:

   Evaluator 1:

   [Deleted]

   Evaluator 2:

   [Deleted]

   Agency Report, Tab 21, at 23, 32.

   [8] The protester also argues that the agency failed to perform a
   meaningful analysis of MTCE's estimated productivity levels, which, in the
   protester's view, were [deleted]. The protester is in essence arguing that
   the agency should have performed an analysis of MTCE's commodity rates,
   i.e., its rates for loading and unloading various-sized vehicles and
   containers on and off of ships, rail cars, and trucks. The solicitation
   required offerors to submit fixed rates for the performance of these
   tasks, however, and an agency is not required to conduct a realism
   analysis of fixed prices. This is so because a fixed-price (as opposed to
   a cost-type) contract places the risk and responsibility for loss on the
   contractor. Duncan Sec. Consultants, Inc., B-290574, Aug. 8, 2002, 2002
   CPD para. 144 at 3-4.

   [9] The program manager entered the notation "No cost benefit" after each
   of [deleted] advantages. He entered the following notations after the
   remaining [deleted] advantages:

   [Deleted]
   --See #6 Above [referring to second advantage above].
   --See #4 Above [referring to first advantage above].
   [Deleted]

   Coastal Maritime Stevedoring--Analysis of Dollar Cost Benefits for
   Advantages, at 1-2.

   [10] Based on the past performance information received, the SSA rated
   Coastal's proposal as low risk and MTCE's as low to moderate risk.