TITLE: B-297391.2; B-297391.3, East-West Industries, Inc., July 19, 2006
BNUMBER: B-297391.2; B-297391.3
DATE: July 19, 2006
*****************************************************************
B-297391.2; B-297391.3, East-West Industries, Inc., July 19, 2006

   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

   Decision

   Matter of: East-West Industries, Inc.

   File: B-297391.2; B-297391.3

   Date: July 19, 2006

   Philip M. Dearborn, Esq., Sandeep S. Kathuria, Esq., and Jennifer L.
   Andrews, Esq., Piliero, Mazza & Pargament, PLLC, for the protester.

   Robert A. Brunette, Esq., for Regent Manufacturing, Inc., an intervenor.

   Maj. Jeffrey Branstetter, Maj. Paul W. Knoth, James C. Caine, Esq., and
   Maj. LaChandra C. Richardson, Department of the Air Force, for the agency.

   Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Evaluation of protester's proposal under past performance evaluation
   factor was unobjectionable where agency reasonably concluded that only one
   of four prior contracts was of a magnitude and complexity essentially the
   same as the solicitation's, and thus met the solicitation's definition of
   very relevant; two of the remaining contracts were reasonably evaluated as
   only relevant and semi-relevant due to lesser magnitudes of effort, and
   the fourth contract was reasonably evaluated as not relevant because it
   was completely unrelated to the solicitation's work.

   2. Evaluation of awardee's past performance and risk was reasonable,
   notwithstanding protester's identification of alleged quality, safety, and
   delivery issues, where contracting officials did not have personal
   knowledge of majority of the issues, and fully considered those of which
   they were aware in finding no negative impact on awardee's past
   performance rating.

   DECISION

   East-West Industries, Inc. protests the award of a contract to Regent
   Manufacturing, Inc. under request for proposals (RFP) No.
   FA8518-04-R-70801, issued by the Department of the Air Force for
   multi-aircraft canopy cranes (MACC). East-West challenges the past
   performance and risk evaluations of its and Regent's proposals.

   We deny the protest.

   BACKGROUND

   MACCs are used to remove and install various components on numerous types
   of aircraft, including canopies, ejection seats, wings, stabilizers,
   rotors, and other components, with sufficient clearance to preclude
   contact with all primary aircraft structures, such as landing gears, fuel
   tanks, and maintenance stands.[1]

   The RFP, a total small business set-aside, contemplated the award of a
   requirements-type contract with a basic period to include two first
   articles and related materials, with four options, for a total of 360
   production units. Proposals were to be evaluated under four
   factors--technical, proposal risk, past performance, and price. Technical
   acceptability was to be determined based on whether the proposed design
   met the requirements for physical characteristics, system reliability, and
   system maintainability. Under the proposal risk factor, the agency was to
   assess the risk associated with the offeror's proposed approach as it
   related to disruption of schedule, increased cost, or degradation of
   performance.[2] Under the past performance factor, the agency was to
   consider the relevance of offerors' prior contracts to the proposed
   effort, together with the quality of performance of those contracts, in
   assessing its confidence in the offerors' ability to successfully
   accomplish the proposed effort.[3] Once a proposal was determined to be
   technically acceptable, award was to be made on a "best value" basis, with
   tradeoffs among the remaining factors. Under this procedure, risk and past
   performance were considered equal to each other and significantly more
   important than price.

   Six offerors, including East-West and Regent, submitted proposals by the
   original closing time in 2004. Based on the initial evaluation, all
   proposals were considered technically unacceptable and the agency issued
   evaluation notices (EN). All six offerors responded, but one was
   determined not to meet the small business size standard and its proposal
   was eliminated. After several rounds of final proposal revisions (FPR) and
   additional ENs, the proposals of East-West, Regent, and a third offeror
   (not relevant here) were included in the competitive range. The evaluators
   rated both East-West's and Regent's proposals as low risk and very
   good/significant confidence. Because the contracting officer, as source
   selection authority (SSA), found no significant difference between the
   offerors' past performance or risk, she determined that Regent should
   receive the award based on its low price. In October 2005, after receiving
   notice of the award and a debriefing, East-West challenged the award in a
   protest filed in our Office. Prior to responding to the protest in an
   agency report, the Air Force proposed corrective action. Specifically, the
   agency would establish a new evaluation team and reevaluate the three
   proposals in the competitive range; depending upon the reevaluation
   results, it might reopen discussions and obtain new FPRs before proceeding
   to make a new award decision. Based on this proposed corrective action, we
   dismissed the protest as academic (B-297391, Nov. 7, 2005).

   In implementing the corrective action, the agency provided the offerors
   notice of the agency's relevance and confidence ratings, and permitted the
   firms to submit information that had not been previously considered.
   East-West and Regent responded to their ENs with additional information
   purporting to show that certain of their prior contracts should have been
   assigned higher relevance ratings. Under the new past performance
   evaluation, the evaluators assigned East-West's four contracts relevance
   ratings of very relevant, relevant, semi-relevant, and not relevant,
   resulting in an overall very good/significant confidence rating. The team
   rated one of Regent's contracts very relevant and three semi-relevant,
   also resulting in a very good/significant confidence rating. Since both
   proposals also were evaluated as technically acceptable with low risk, a
   new contracting officer, as SSA, determined that Regent's proposal
   represented the best value based on its low price. After receiving notice
   of the award, East-West filed this protest, supplementing it after
   receiving a debriefing.

   East-West challenges the award decision on numerous grounds. We have
   considered all of East-West's arguments, and find that none has merit.
   This decision addresses East-West's most significant arguments.

   EVALUATION OF EAST-WEST'S PAST PERFORMANCE

   East-West asserts that the agency unreasonably evaluated its past
   performance record as only very good/significant confidence. In the
   protester's view, three of its four past performance examples should have
   been rated at higher relevance levels, which would have resulted in a
   higher overall confidence rating.

   In reviewing a protest of an agency's proposal evaluation, our review is
   confined to determining whether the evaluation was reasonable and
   consistent with the terms of the solicitation and applicable statutes and
   regulations. United Def. LP, B-286925.3 et al., Apr. 9, 2001, 2001 CPD
   para. 75 at 10-11.

   This aspect of the evaluation was reasonable. Under the RFP, relevance was
   to reflect the degree to which past performance matched the magnitude of
   effort and complexities of the current RFP's requirements, which included
   a multi-year requirements contract with best estimated quantities of 360
   non-powered, air transportable, mobile cranes with a lifting capacity of
   at least 1,250 pounds. Thus, performance of a prior contract was
   considered very relevant if it involved essentially the same requirements,
   relevant if it involved most of the requirements, semi-relevant if it
   involved some of the requirements, and not relevant if performance did not
   involve any significant aspects of the current requirements. The agency
   rated East-West's performance of a contract for delivery of 57,
   1,500-pound Master Cranes in 18 months, valued at $3.9 million, as only
   relevant, because it involved a lesser magnitude of effort and complexity
   over a shorter performance period than that called for by the RFP, and was
   valued at considerably less than the RFP's $15 million anticipated value.
   Similarly, while the agency concluded that a contract for delivery of
   eight 1,500-pound Master Cranes in 14 months, valued at $559,000, was very
   relevant technically, it rated the contract only semi-relevant overall
   since it involved a significantly lesser magnitude of effort.

   East-West asserts that these contracts should have been rated very
   relevant and relevant, respectively, since they concerned the same crane
   sought by the RFP and the same crane for which the agency rated another
   contract very relevant. However, the agency's ratings were consistent with
   the RFP's definition of relevant, and therefore unobjectionable. The
   agency reasonably concluded that East-West's 57-unit contract involved a
   lesser magnitude of effort and complexity than the RFP effort due to the
   lesser quantity, shorter performance period, and lower value, and that its
   8-unit contract involved a much lesser magnitude of effort and complexity
   than the RFP effort based on similar considerations. These ratings also
   were entirely consistent with the rating assigned the one East-West
   contract deemed very relevant, which was for an unlimited quantity of
   cranes over a 5-year period, and was valued at $8 million.

   East-West asserts that the agency's evaluation ignored the information
   submitted with its EN response. East-West's response noted that under its
   57-unit contract it had delivered 56 of the cranes early--in
   12 months--which, it asserted, essentially matched the 60-crane-per-year
   production requirement under the RFP. Its response further noted that this
   was accomplished at the same time that East-West was producing additional
   cranes under other contracts, resulting in a total of 130 delivered cranes
   over several years. The agency considered this information, but reached a
   different conclusion. The agency found that East-West's matching the RFP's
   first year production level and producing some 130 cranes in the relevant
   timeframe did not make the contract sufficiently equivalent to the RFP
   effort to warrant a very relevant rating.[4] In this regard, the total
   best estimated quantity (BEQ) under the RFP (360 cranes) is more than
   twice the quantity under the protester's combined contractual effort.
   Further, while East-West's combined contract effort may have matched the
   RFP's first year production level, only the first and last production
   years have BEQs of 60 cranes; the second and third years have BEQs of 120
   cranes each.[5] The protester's combined contract effort did not approach
   this quantity. We conclude that the agency reasonably determined that
   East-West's 57-unit contract did not warrant a higher relevance rating.

   East-West asserts that the agency failed to consider its customers'
   satisfaction with its performance. Noting that the majority of customer
   ratings were exceptional and that no significant weaknesses were noted,
   East-West maintains that its proposal should have received the highest
   confidence rating of exceptional. This argument is without merit. The
   agency states that it considered all of the protester's customer ratings
   before evaluating its proposal as very good/significant confidence. In
   this regard, as discussed, only three of the four listed contracts were
   considered relevant, and only two of the customers--for the contracts
   considered relevant and semi-relevant--rated the firm's performance as
   exceptional overall; the customer under the third contract--rated very
   relevant--assessed East-West's performance as only successful and
   satisfactory. Under the RFP's evaluation scheme, the highest confidence
   rating was to be assigned where the agency concluded that there was
   essentially no doubt as to the offeror's successful performance. Since
   only one contract was rated very relevant and the protester received
   exceptional performance ratings under only two of its three relevant
   contracts, we think the agency reasonably concluded that East-West's
   performance record warranted assigning the firm a very good/significant
   confidence rating based on there being little doubt--rather than no
   doubt--as to its successful performance.

   EVALUATION OF REGENT'S PAST PERFORMANCE

   East-West argues that the agency unreasonably evaluated Regent's past
   performance as very good/significant confidence--the same level as the
   protester's--asserting that this rating cannot reflect Regent's problems
   with welded joints, meeting delivery deadlines, and safety under prior
   contracts. In light of these problems, East-West asserts, the agency
   should have rated Regent's proposal as no more than
   satisfactory/confidence, reflecting some doubt, as opposed to little
   doubt, as to successful performance.

   The evaluation of Regent's past performance was reasonable. In reviewing
   Regent's four contracts, the agency found one--for delivery of 323,
   1,500-pound portable floor cranes, valued at $3.7 million--to be very
   relevant, and three to be semi-relevant based on their not matching the
   complexities and magnitude of the RFP's requirement. The evaluators also
   reviewed Regent's past performance as reflected in customer
   questionnaires, available quality deficiency reports (QDR), contractor
   performance assessment reports (CPARS), the past performance information
   retrieval system (PPIRS), and contract administration services (MOCAS)
   records. Customers rated Regent's past performance from satisfactory to
   exceptional, with the majority of ratings being satisfactory and very
   good. The PPIRS showed an overall on-time delivery rate of 56 percent and
   an on-time delivery rate of 77 percent for federal supply classification
   3950 (winches, hoists, cranes and derricks). Performance Confidence
   Assessment Group (PCAG) Report at 17. While there was some negative
   information from the PPIRS concerning past problems with delivery, the
   agency notes that Regent's proposal acknowledged these problems and
   explained the corrective action it had taken to change processes to
   eliminate the delinquencies. Regent Past Performance Proposal, FACTS
   Sheets, at 3-4. In addition, while MOCAS showed a delinquency rate of
   25 percent--based on 1 purchase order out of 4 active contracts--MOCAS
   also showed only an 11 percent delinquency rate on completed contracts
   over the past year, with a Defense Contract Management Agency validation
   of those records noting a 90.24 percent on-time delivery with no quality
   issues. PCAG Report at 17. Since there was no indication of safety issues
   from QDRs or customer reports on the firm's cranes, the agency did not
   further research Air Force safety records. Finally, according to the
   contracting officer, while there was one incident involving cracked welds,
   this was found to have resulted from the crane's use in non-specified
   environments, rather than bad welds. Contracting Officer's Statement (COS)
   at 13. Although Regent's past performance record was not perfect, the RFP
   stated that it did not anticipate perfection but, rather, sought evidence
   of the offeror's ability to isolate the root causes of problems and
   descriptions of programs or actions taken to eliminate those causes. RFP
   at 39. In light of the absence of any negative information on Regent's
   performance or safety record other than delinquent deliveries, and
   Regent's acknowledgment of those delivery problems and explanation of the
   steps taken to correct them, the agency reasonably rated Regent's past
   performance as very good/significant confidence.

   East-West maintains that, even if the agency was unaware of the various
   alleged problems with Regent's cranes, information regarding these
   problems was available and was too "close at hand" for the agency to
   ignore. Protester's Initial Comments at 7 n.6. East-West states that it
   alerted the agency to the problems with Regent's cranes and that the
   agency's technical engineer admitted that he knew about alleged weld
   problems with Regent's wheels. Protester's Final Comments at 6. East-West
   also has submitted a printout of safety incidents purportedly regarding
   Regent's cranes, a service bulletin concerning foreign matter in the winch
   disc brake assembly, and several Air Force personnel e-mails describing
   cracked welds, dislodged cable issues, a boom collapse, aircraft interface
   and damage issues, and a tow bar separation.

   We have recognized that in certain limited circumstances an agency
   evaluating an offeror's proposal has an obligation (as opposed to the
   discretion) to consider "outside information" bearing on the offeror's
   proposal, where the information in question was "simply too close at hand
   to require offerors to shoulder the inequities that spring from an
   agency's failure to obtain, and consider this information." International
   Bus. Sys., Inc., B-275554, Mar. 3, 1997, 97-1 CPD para. 114 at 5; see GTS
   Duratek, Inc., B-280511.2, B-280511.3, Oct. 19, 1998, 98-2 CPD para. 130
   at 14. In those narrow instances where we have applied the "too close at
   hand" principle, we have required the protester to demonstrate that the
   outside information bearing on the offeror's proposal was not just known
   by the agency generally but, rather, was known to the agency employees
   involved in the source selection process. For example, in GTS Duratek, we
   held that the agency was required to consider information about the
   protester's past performance where the protester demonstrated that the
   contracting officer's technical representative under the protester's
   contract had personal knowledge of the protester's performance and was a
   member of the technical evaluation team for the subject solicitation.

   The "too close at hand" principle does not apply here. Apart from some
   knowledge about weld issues (discussed above), there is no evidence that
   the contracting officials in this procurement possessed first-hand
   knowledge of the identified issues with Regent's cranes. In this regard,
   the engineer who initially evaluated the offerors' proposals was
   unfamiliar with the service bulletin, the issuance of QDRs on any of the
   issues, and most of the incidents in the e-mails. Supplemental COS at
   1.[6] Moreover, as observed by the agency, not only was the safety
   incident printout not before the evaluators, but the printout does not
   identify the crane manufacturer, the cause of the incident, or the final
   decision of the investigating officer. COS at 11. Under these
   circumstances, the agency contracting officials' failure to obtain or
   consider the information presented by the protester does not provide a
   basis for questioning the evaluation.

   East-West asserts that Regent improperly failed to report these incidents
   in its proposal. The RFP required offerors to summarize contract issues
   relative to the number and severity of quality deficiencies, discrepancy
   reports, and latent defects. RFP at 42. Regent reported its late
   deliveries and provided an explanation of the steps it took to remedy
   them, and takes the position that there were no latent defects or quality
   deficiencies to be reported. We agree with Regent. Regent has provided a
   detailed explanation of the incidents identified by East-West that
   supports the agency's position that it reasonably found no impact on
   Regent's past performance. For example, rather than quality deficiencies
   or latent defects, Regent explains that the boom collapse was due to
   improper use leading to unusual stress damage to the mast lock lugs.
   Regent Engineer's Declaration, para. 5. Regent also explains that the tow
   bar separation was not due to a latent defect in its cranes but, rather,
   was due to a one-time welding error, which it quickly investigated and
   repaired. Id. East-West has provided no evidence showing that Regent's
   explanations are inaccurate. Accordingly, there is no basis for concluding
   that these incidents represented latent defects or quality deficiencies
   that Regent was required to report or, indeed, that they were indicative
   of poor performance or lack of technical acceptability.

   East-West asserts that there was inherent doubt in Regent's proposal of a
   crane that [deleted]  and that this warranted reducing Regent's confidence
   rating. However, the agency explains that Regent's winning design
   [deleted]. The proposed design was found technically acceptable because it
   satisfied the technical requirement of the purchase description based on
   its physical characteristics, system reliability, and system
   maintainability. East-West has not shown that the agency's evaluation in
   this area was unreasonable; accordingly, this argument provides no basis
   to question Regent's confidence rating.

   RISK EVALUATION OF REGENT'S PROPOSAL

   East-West asserts that the agency's risk evaluation for Regent's proposal
   was flawed. Specifically, East-West asserts that Regent's [deleted]
   design, and prior delivery and safety/quality problems, indicate a
   moderate to high risk of increased costs, degradation of performance, and
   schedule disruption. With regard to Regent's design, delivery, and
   performance issues, for the same reasons we found the agency's past
   performance evaluation reasonable despite the alleged problems in these
   areas (see above), we believe the agency reasonably could conclude that
   these issues did not warrant downgrading Regent's risk rating.

   East-West also asserts--on information and belief--that Regent cannot
   perform the contract without infringing on the protester's patented crane
   design, and that it informed the agency of this prior to award. In
   East-West's view, since it may be entitled to royalties or an injunction
   against production of Regent's crane, the agency unreasonably failed to
   consider the potential for patent infringement in its risk evaluation.
   This argument is without merit. East-West has presented no evidence that
   Regent's design has been determined to infringe on an East-West patent or
   that East-West has commenced any patent litigation. Further, the agency
   explains that the RFP did not direct any specific design and that it has
   no reason to believe that the RFP can only be satisfied with East-West's
   design. COS at 13. Under these circumstances, there was no requirement
   that the agency anticipate a patent infringement and weigh the potential
   impact on Regent's performance of the contract.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] Aircraft include the A-10, HH-60 helicopter, F-15, F-16, F-22, F-117,
   T-38, and Joint Strike Fighters.

   [2] Risk was rated as high (likely to cause significant disruption),
   moderate (can potentially cause some disruption), and low (little
   potential to cause disruption).

   [3] The confidence ratings were: exceptional/high confidence (no doubt of
   success); very good/ significant confidence (little doubt of success);
   satisfactory/confidence (some doubt of success); neutral/unknown
   confidence (no performance record); marginal/little confidence
   (substantial doubt of success); and unsatisfactory/no confidence (extreme
   doubt of success).

   [4] The protester asserts that the new evaluation is suspect, citing the
   fact that the original evaluation team initially evaluated this contract
   as relevant, but then changed its rating to very relevant based on its
   having been completed. However, the mere fact that the new evaluation team
   arrived at a different rating for the contract than the first team does
   not establish an impropriety in the evaluation; the protester has provided
   nothing to indicate that the new evaluation was unreasonable or
   inconsistent with the RFP's relevance definitions.

   [5] East-West also challenges the agency's rating of one of its
   contracts--for design and production of 156 attenuating troop seats system
   (ATSS) retrofit kits, valued at $2.5 million--as not relevant. The
   protester asserts that this contract should have been rated semi-relevant
   based on its demonstration of abilities to perform design and production
   functions, and argues that this rating is inconsistent with the agency's
   rating of a Regent contract for jacks as semi-relevant. This argument is
   without merit. East-West's ATSS contract did not involve the production of
   a crane or equipment otherwise related to removal/replacement of aircraft
   components and had a relatively low dollar value. In contrast, the jack
   Regent furnished under its contract has a lifting capacity comparable to
   the RFP's crane and is used for removing and replacing aircraft
   components. We find nothing unreasonable or inconsistent in the agency's
   ratings of the two contracts.

   [6] While the engineer was aware of an issue concerning setting screws, it
   was his position that the problem was the result of the user's failing to
   follow Air Force standards. Similarly, while he was aware of aircraft
   interface issues, he did not consider them latent crane defects, since the
   crane had passed the necessary compatibility tests. Supplemental COS at 1.