TITLE: B-298588, Sealift, Inc., October 13, 2006
BNUMBER: B-298588
DATE: October 13, 2006
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B-298588, Sealift, Inc., October 13, 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

   Matter of: Sealift, Inc.

   File: B-298588

   Date: October 13, 2006

   Constantine G. Papavizas, Esq., Winston & Strawn LLP, and Timothy B. Shea,
   Esq., Nemirow Hu & Shea, for the protester.

   Brian A. Bannon, Esq., and Andrew W. Dyer, Jr., Esq., Blank Rome LLP, for
   TransAtlantic Lines, LLC, an intervenor.

   Robert M. Elwell, Esq., and Daniel W. Wentzell, Esq., Military Sealift
   Command, for the agency.

   Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest that awardee's warranted fuel consumption rate is understated does
   not provide a basis for questioning award where fixed-price contract is to
   be awarded and contract provides mechanism for government to recover any
   increased costs due to failure of contractor to perform at warranted rate.

   DECISION

   Sealift, Inc. protests the award of a contract to TransAtlantic Lines, LLC
   (TAL) under request for proposals (RFP) No. N00033-06-R-5409, issued by
   the Department of the Navy, Military Sealift Command (MSC), for charter of
   a tank vessel. Sealift principally complains that TAL understated its
   vessel's fuel consumption rate.

   We deny the protest.

   The RFP provided for award of a fixed-price contract to the offeror who
   submitted the lowest-priced, technically acceptable proposal. With respect
   to price, offerors were required to propose a charter hire rate and a
   warranted fuel consumption rate (at specified speeds). The total evaluated
   price was to take into consideration both the charter rate and the cost of
   fuel, based on the warranted fuel consumption and speed information.
   Following receipt and evaluation of proposals, TAL was selected for award
   as the low-priced, technically acceptable offeror.

   Sealift maintains that the award is improper because TAL warranted a fuel
   consumption rate that is lower than the actual rate for its offered
   vessel, which resulted in TAL's price being evaluated as lower than
   Sealift's.

   MSC responds that, whether or not TAL's warranted rate is accurate, since
   the solicitation contemplated the award of a fixed-price contract, TAL
   will only be paid at its warranted rate. In this regard, the Navy points
   out that the solicitation specifically addressed the government's redress
   should the offeror's ship fail to perform at the warranted fuel
   consumption rate; under the heading "Contract Terms and Conditions," the
   solicitation provides that, if the contractor breaches its fuel or speed
   warranties, "... the hire [payment] may be equitably decreased, the
   Charter may be terminated, or the Vessel may be placed off-hire, at
   Charterer's option so as to indemnify the Charterer to the extent of such
   failure." RFP at II-7. MSC concludes that TAL's stated fuel consumption
   rate was the proper basis for evaluating its price.

   We agree with MSC. As the agency asserts, the contract is fixed-price in
   that--in light of the provisions that enable the agency to recover from
   the contractor any increased operation costs due to breaches of the
   warranted fuel and speed warranties--the contractor will only be entitled
   to payment based on its warranted fuel consumption rate. Thus, the
   accuracy of TAL's warranties is irrelevant. This conclusion is consistent
   with our decision in United States Lines, Inc., B-197894, Oct. 20, 1980,
   80-2 CPD para. 299 at 2 (ability of awardee to perform at warranted rate
   of consumption is irrelevant, since contract provisions protect the
   government if the warranty is breached). The foundation for this analysis
   is our long-standing view that a below-cost bid or offer is permissible in
   a fixed-price environment, since contract payment will be based on the
   offered price, which is not subject to adjustment during performance
   barring unforeseen circumstances. See GTSI Corp., B-286979, Mar. 22, 2001,
   2001 CPD para. 55 at 5.

   Sealift also asserts that TAL misrepresented that it would provide a crew
   in the manner required by the solicitation. In this regard, the
   solicitation provided that "[t}he Master, Officers and crew of this Vessel
   shall be appointed or hired by the Owner . . . ." RFP at III-3. According
   to Sealift, TAL will use a vessel manager or crewing agent to hire the
   crew, in violation of the solicitation requirement that the owner do
   so.[1] However, this solicitation provision concerns a performance
   requirement--that is, a requirement that the contractor must adhere to
   during contract performance--rather than a proposal requirement. In this
   regard, the solicitation does not require the offeror to provide the names
   of crew members or otherwise address how it will meet the need for a crew
   in its proposal. Rather, the RFP requires the owner to provide the crew
   list no later than 96 hours prior to the time the ship is to be delivered
   to the load or delivery port. RFP at I-9. As such, whether TAL complies
   with it is a matter of contract administration for consideration by MSC,
   not by our Office. Fritz Cos., Inc., B-246736 et al., May 13, 1992, 92-1
   CPD para. 443 at 7.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1]Sealift filed its protest in our Office on August 7, 2006, based on
   information obtained during a July 27 debriefing. In comments filed on
   August 18, Sealift argued for the first time that, if the owner
   subcontracts for its crew, the owner will violate the small business
   subcontracting requirement that an offeror incur at least 50 percent of
   the cost of contract labor with its own employees. Sealift knew of this
   basis for protest based on the July 27 debriefing, where it learned,
   allegedly, that TAL planned to subcontract for its crew. Since Sealift did
   not raise this allegation within 10 days of the debriefing, that is, by
   August 7, it is untimely and will not be considered. 4 C.F.R. sect.
   21.2(a)(2) (2006). In any case, this argument assumes that the crew will
   be employed directly by the subcontractor or crewing agent. This is not
   established in the record, and TAL disputes it.