TITLE: B-299145.5; B-299145.6, Lockheed Martin Systems Integration-Owego; Sikorsky Aircraft Company, August 30, 2007
BNUMBER: B-299145.5; B-299145.6
DATE: August 30, 2007
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B-299145.5; B-299145.6, Lockheed Martin Systems Integration-Owego; Sikorsky Aircraft Company, August 30, 2007

   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: Lockheed Martin Systems Integration-Owego; Sikorsky Aircraft
   Company

   File: B-299145.5; B-299145.6

   Date: August 30, 2007

   John W. Chierichella, Esq., Anne B. Perry, Esq., Jonathan S. Aronie, Esq.,
   Keith R. Szeliga, Esq., Jesse J. Williams, Esq., and George T. Coller,
   Esq., Sheppard Mullin, for Sikorsky Aircraft Company; Marcia G. Madsen,
   Esq., David F. Dowd, Esq., Michael E. Lackey, Jr., Esq., Roger D. Waldron,
   Esq., and Luke P. Levasseur, Esq., Mayer, Brown, Rowe & Maw, and Bucky P.
   Mansuy, Esq., for Lockheed Martin Systems Integration-Owego, the
   protesters.

   Paul F. Khoury, Esq., Scott M. McCaleb, Esq., William J. Colwell, Esq.,
   Nicole Owren-Wiest, Esq., and Kevin J. Plummer, Esq., Wiley Rein LLP, and
   Mark W. Reardon, Esq., for The Boeing Company, the intervenor.

   Bryan R. O'Boyle, Esq., Michael O'Farrell, Esq., Bridget E. Lyons, Esq.,
   Maj. Karen Douglas, Douglas Campbell, Esq., and Col. Thomas Doyon,
   Department of the Air Force, for the agency.

   David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest is sustained where agency amended solicitation after prior
   sustained protest to eliminate consideration of the unique aspects of the
   proposed helicopters (including maintenance requirements) in calculating
   certain aspects of the evaluated Most Probable Life Cycle Cost,
   substituting a subjective consideration of potential maintenance
   efficiencies for the prior direct impact upon evaluated cost, but
   nevertheless precluded offerors from generally revising their proposals;
   it is fundamental that, where an agency revises the criteria against which
   offers are to be evaluated or otherwise materially changes the
   solicitation's evaluation scheme, offerors must be given a reasonable
   opportunity to respond to the revised criteria or evaluation scheme.

   DECISION

   Lockheed Martin Systems Integration-Owego (LMSI) and Sikorsky Aircraft
   Company protest the corrective action undertaken by the Department of the
   Air Force in response to our decision, Sikorsky Aircraft Co.; Lockheed
   Martin Sys. Integration-Owego, B-299145 et al., Feb. 26, 2007, 2007 CPD
   para. 45, in which we sustained the protests of LMSI and Sikorsky against
   the Air Force's award of a contract to The Boeing Company under request
   for proposals (RFP) No. FA8629-06-R-2350, for the Combat Search and Rescue
   Replacement Vehicle (CSAR-X). [1] We sustained the protests on the basis
   that the Air Force's evaluation of operations and support (O&S) costs was
   inconsistent with the evaluation methodology set forth in the
   solicitation. We recommended that the Air Force amend the solicitation to
   clarify its intent with respect to the evaluation of O&S costs, reopen
   discussions with offerors consistent with our decision, and then request
   revised proposals. LMSI and Sikorsky principally allege that, although the
   amendment to the solicitation issued by the agency in response to our
   decision materially altered the stated evaluation methodology, it limits
   the extent to which offerors are permitted to revise their proposals; the
   protesters maintain that, given the change in the evaluation methodology,
   the limitation on revisions is unreasonable.

   We sustain the protests.

   INITIAL DECISION

   The solicitation provided for award, on a "best value" basis, of a
   contract for the development, demonstration, and production of the CSAR-X
   aircraft, which is intended to replace the HH-60 helicopter, the agency's
   current combat search and rescue aircraft. Boeing responded to the
   solicitation by proposing the twin-rotor HH-47 helicopter, LMSI proposed
   the single-rotor US101 helicopter, and Sikorsky proposed the single-rotor
   S-92 helicopter. Based on the evaluation of final proposal revisions
   (FPR), the source selection authority (SSA) determined that Boeing's
   proposal represented the best value.

   The ensuing award to Boeing was challenged in protests filed in our Office
   by LMSI and Sikorsky. We sustained the protests, finding that the Air
   Force's evaluation of O&S costs was inconsistent with the RFP. In this
   regard, the solicitation provided that, for evaluation purposes,
   cost/price would be calculated on the basis of the Most Probable Life
   Cycle Cost (MPLCC) for the aircraft through fiscal year 2029, including
   (among other costs) O&S costs. Offerors were to provide detailed
   information on their O&S costs for their proposed aircraft in several
   categories. The costs under three O&S categories--Unit Mission Personnel,
   Training Munitions, and Indirect Support--were to be calculated by the
   agency. During the evaluation, in calculating Unit Mission Personnel and
   Indirect Support costs, the agency used the same estimated cost for all
   proposals, irrespective of the aircraft offered. In their protests,
   Sikorsky and LMSI argued, among other things, that the agency's
   methodology in this regard unreasonably failed to account for the reduced
   maintenance required by their generally newer design, smaller helicopters
   and was inconsistent with the RFP.

   We agreed with the protesters that the RFP, read as a whole, provided
   that, in calculating the Unit Mission Personnel and Indirect Support
   costs, the agency would take into account the unique aspects of the
   proposed aircraft (including maintenance requirements), as identified in
   the required information submitted by the offerors. This conclusion was
   based in part on a statement in the RFP that it was the agency's intent to
   "capture all relevant CSAR-X Operating and Support (O&S) costs." We
   further agreed that the agency's methodology for calculating O&S costs did
   not reasonably account for each offeror's unique technical approach,
   including very different proposed helicopters; instead, the agency's
   calculation applied to all offerors reflected the staffing and maintenance
   concepts for the current HH-60 helicopter (the Manpower Estimate Report
   (MER) staffing), which, we recognized, has very high maintenance
   requirements. We sustained the protests "on the basis that the Air Force,
   by ignoring differences among the proposed aircraft that could have a
   material impact on likely O&S costs, departed from its stated evaluation
   approach." Decision at 11. We recommended that the Air Force amend the
   solicitation to clarify its intent with respect to the evaluation of O&S
   costs, reopen discussions consistent with our conclusions, and request
   revised proposals. Id.

   AMENDMENT 4

   Changed Evaluation Methodology

   Amendment 4, issued in response to our decision, and questions and answers
   subsequently published by the agency, made a number of changes to, and
   established new ground rules regarding, the evaluation of O&S costs.
   First, of particular importance here, while the amended solicitation
   continued to include O&S costs as part of the MPLCC, it altered the
   language of the RFP statement (noted above) that it was the agency's
   intent to "capture all relevant CSAR-X Operating and Support (O&S) costs."
   The amendment deleted the "all relevant" language and provided that Unit
   Mission Personnel and Indirect Support costs would be based on the
   March 2006 MER, and "shall not be adjusted based on proposed platform."
   Amended RFP sect. M.13.2. Instead, the amended RFP provides for offerors
   to enter the maintenance tasks for their proposed aircraft in RFP
   attachment 23, addendum 1, the "primary purpose" of which is "to capture
   potential CSAR-X Maintenance Manpower." Attach. 23, add. 1. Offerors are
   generally directed to "document the level of required support and
   maintenance manpower required based on the unique
   efficiencies/effectiveness, and Reliability/Maintainability
   characteristics of their proposed CSAR-X aircraft within the structure of
   the Air Force's maintenance [Concept of Operations] as described" in
   attachment 23. Attach. 23 at 1. Offerors are specifically instructed to
   identify in attachment 23, addendum 1: the maintenance tasks and
   associated maintenance tasks required for the proposed aircraft; how often
   the task must be performed, specifying the MTBF for unscheduled tasks and
   Inspection/Servicing Intervals for scheduled tasks; the Air Force
   Specialty Codes (AFSC), that is, job categories, required to perform the
   task; the minimum crew size required to perform each task; and how long it
   takes to perform each task. Attach. 23; Attach. 23, add. 1.

   The attachment also sets forth the "groundrules and assumptions" governing
   the calculation of the potential maintenance requirements associated with
   each proposed aircraft. For example, the attachment 23 calculation of
   maintenance crew cost is to be based upon a steady state, full-time
   maintenance staff defined by the maximum maintenance staffing in each AFSC
   required to perform the most labor intensive maintenance task. Thus,
   according to the attachment:

     The maintenance task which requires the most personnel in that AFSC
     becomes the minimum required for that AFSC per shift. For example, if
     there is an AFSC that has 20 maintenance tasks and 19 maintenance tasks
     require two specialists and the remaining one maintenance task requires
     3 specialists, the 3 specialists establishes the minimum required
     personnel for that AFSC per shift.

   Attach. 23 at 2. In addition, the attachment includes the following
   "groundrules and assumptions" governing the calculation of maintenance
   crew cost : (1) a permanent 2-shift operation, 7 days per week, to
   represent "wartime" staffing, which effectively doubles the maintenance
   requirement calculated above; (2) "[m]aintenance manpower levels remain
   constant whether deployed or at home station"; (3) cross-utilization
   training between AFSCs will not be considered for purposes of determining
   required maintenance staffing (such that personnel in one AFSC who are not
   required to perform on a full-time basis maintenance requiring that AFSC
   will not be considered available to perform maintenance requiring a
   different AFSC); and (4) the maintenance cost calculation will be based
   upon whole staffing numbers, with any proposed fractional staffing
   requirements (based, for example, upon an infrequently required repair)
   rounded up to next highest whole staffing number. Attach. 23 at 2, 4;
   Agency Response to Questions, May 29, 2007, Questions Regarding Attach.
   23, Nos. 4, 20.

   Following calculation of the "potential maintenance manpower efficiencies"
   for offerors "based on the unique aspects of their CSAR-X aircraft as
   submitted in the [FPR] dated 18 Sep[tember] 06," in accordance with
   attachment 23, the agency will calculate a "maintenance manpower baseline
   cost," with

     [t]he difference between the platform unique total adjusted maintenance
     manpower cost and the Government maintenance manpower baseline cost [to]
     be evaluated separately from the [MPLCC], presented to the SSA, and
     considered in making the best value award decision.

   RFP sect. M.13.9. The Unit Mission Personnel and Indirect Support
   component of the MPLCC calculation, separate from this "maintenance
   manpower baseline cost," will be based upon the (HH-60 derived) MER
   staffing, without adjustment for the offerors' proposed aircraft.

   The amendment directs offerors to submit only the information requested in
   connection with attachment 23, and warns that the "Government will not
   consider any additional information submitted by the offerors in response
   to Amendment 4 relating to the Mission Capability, Proposal Risk, Past
   Performance, or any other portion of the Price/Cost Factors." RFP sections
   L.1.2, M.13.2. Finally, the amended solicitation provides that, by
   responding to the amendment, offerors "are hereby agreeing to accept a
   contract award . . . based on their [FPR] submissions of 18 Sep[tember]
   2006 as supplemented in strict accordance with" the amendment 04
   requirement for attachment 23 information. RFP sect. L.1.2.

   The protesters assert that the evaluation scheme changes implemented by
   amendment 4 are significant and will affect their overall approach to
   preparing their proposals. They conclude that offerors should be permitted
   to submit unlimited proposal revisions.

   The details of implementing recommendations of our Office are within the
   sound discretion and judgment of the contracting agency. Partnership for
   Response and Recovery, B-298443.4, Dec. 18, 2006, 2006 CPD para. 3 at 3.
   An agency's discretion in the area of corrective action extends to
   deciding the scope of proposal revisions, and there are circumstances
   where an agency reasonably may decide to limit the revisions offerors may
   make to their proposals. See, e.g., Computer Assocs. Int'l, B-292077.2,
   Sept. 4, 2003, 2003 CPD para. 157 at 5. However, where, as here, an agency
   amends a solicitation and permits offerors to revise their proposals in
   response, we think that offerors should be permitted to revise any aspect
   of their proposals, including those that were not the subject of the
   amendment, unless the agency offers evidence that the amendment could not
   reasonably have any effect on other aspects of proposals, or that allowing
   such revisions would have a detrimental impact on the competitive process.
   Cooperativa Muratori Riuniti, B-294980.5, July 27, 2005, 2005 CPD
   para. 144 at 7. Unlike in prior cases where we found that agencies could
   limit the extent to which proposals may be revised, see, e.g., Rel-Tek
   Sys. & Design, Inc.-Modification of Remedy, B-280463.7, July 1, 1999, 99-2
   CPD para. 1 at 3, the agency has not made such a showing here.

   As discussed, we found that, under the original methodology, the Unit
   Mission Personnel and Indirect Support costs were to be calculated taking
   into account the unique aspects of the proposed aircraft (including
   maintenance requirements), and were to be included in the MPLCC
   calculation. Thus, this calculation would have a direct impact on
   offerors' evaluated costs. The amendment eliminates consideration of the
   unique aspects of the proposed aircraft (including maintenance
   requirements) in calculating the Unit Mission Personnel and Indirect
   Support costs included in the MPLCC, and substitutes a calculation of the
   potential maintenance efficiencies associated with a particular aircraft,
   which will be "evaluated separately from the [MPLCC]" and "presented to"
   the SSA for him to "consider[] in making the best value award decision."
   RFP sect. M.13.9. Thus, under the amendment, these cost calculations no
   longer will have a direct impact on offerors' evaluated costs; rather,
   they will be considered by the SSA in essentially a subjective manner.

   The protesters maintain that, under the new evaluation methodology, they
   would consider materially altering their proposal approach to enhance the
   competitiveness of the proposals in other areas if given the opportunity
   to do so. LMSI Protest at 22, exh. E; Sikorsky Protest at 38. For example,
   Lockheed Martin states that had it known when preparing its proposal that
   the agency would evaluate proposals in a manner likely to reduce its
   competitive advantage arising from the fact that its aircraft is easier to
   maintain, it would have [REDACTED]. LMSI Protest at 22, exh. E. Likewise,
   Sikorsky has indicated that had it known when preparing its proposal that
   the agency would evaluate proposals in a manner likely to reduce
   Sikorsky's significant maintenance-related competitive advantage,
   [REDACTED]. Sikorsky Comments, July 3, 2007, at 62. The Air Force has
   offered no persuasive response to these assertions. On this record, we
   conclude that this change in the evaluation methodology is material in
   that it could have affected the manner in which offerors prepared their
   proposals well beyond the O&S cost calculation, including such areas as
   technical approach, schedule, and pricing.

   It is fundamental that, where an agency materially changes the
   solicitation's evaluation scheme, offerors must be given a reasonable
   opportunity to respond to the revised scheme; otherwise, the statutory
   requirement to notify offerors of the criteria upon which their offers
   will be evaluated is meaningless. Dept. of Commerce--Request for
   Modification of Recommendation, B-283137.7, Feb.14, 2000, 2000 CPD para.
   27 at 3. In these circumstances, we conclude that the Air Force, having
   materially altered the methodology for evaluating O&S costs, was therefore
   required to permit offerors to revise both the cost/price and
   non-cost/price aspects of their proposals in response to the new
   evaluation scheme.[2]

   Groundrules and Assumptions

   The protesters assert that the "groundrules and assumptions" that will
   govern the calculations under attachment 23 which will be furnished to the
   SSA for consideration as part of his source selection decision,
   overestimate required maintenance, and thereby tend to minimize the
   differences in required maintenance staffing among different aircraft. The
   protesters conclude that the "groundrules and assumptions" are improper
   because they are not reasonably calculated to evaluate the actual O&S
   costs of each aircraft. According to the protesters, the agency's
   methodology of basing its calculation of potential maintenance
   efficiencies on the maximum staffing required under each evaluated AFSC at
   any one time, and disregarding normal maintenance requirements, as well as
   the failure to consider such factors as potential cross-utilization
   training, fails to reasonably account for the times when aircraft
   maintenance requires fewer of a particular AFSC than are available, thus
   freeing the surplus available staffing to perform other militarily useful
   work. In this regard, they note that the SSA, an Air Force lieutenant
   general, testified during the hearing in this matter that a maintainer who
   was not otherwise performing his assigned maintenance task would be
   performing other military duties. Transcript at 111.

   Thus, this dispute essentially reflects two approaches to accounting for
   the potential maintenance efficiencies, and thus the potential cost risk,
   associated with the unique maintenance requirements of the proposed
   aircraft. The agency seeks to evaluate the maintenance requirements of
   each aircraft for purposes of assessing cost risk based upon the maximum
   number of maintenance staff required at any one time, irrespective of
   whether the aircraft is deployed or at a home station, whether during
   wartime or otherwise. In contrast, the protesters, who assume that
   maintenance staff can be cross-trained and otherwise profitably employed
   when not performing their normal maintenance duties, maintain that the
   focus instead should be on the total number of maintenance staff hours
   required for each aircraft.

   Cost or price to the government must be included in every RFP as an
   evaluation factor, and agencies must consider cost or price to the
   government in evaluating competitive proposals. 10 U.S.C. sect.
   2305(a)(3)(A)(ii) (2000). It is up to the agency to decide upon the
   appropriate method for evaluation of cost or price in a given procurement,
   although the agency must use an evaluation method that provides a basis
   for a reasonable assessment of the cost of performance under the competing
   proposals. S.J. Thomas Co., Inc., B-283192, Oct. 20, 1999, 99-2 CPD para.
   73 at 3. Here, given the uncertainties necessarily attendant upon
   attempting to evaluate the O&S costs through fiscal year 2039 of new,
   modified versions of existing aircraft, and the agency's stated need to
   staff its CSAR-X squadrons to support a maximum, wartime level of
   operations, we cannot conclude that it was unreasonable for the agency to
   focus upon the maximum potential maintenance requirements of each proposed
   aircraft when assessing maintenance-related cost risk.[3] In summary,
   having considered all of the protesters' arguments in this regard, we find
   the agency's methodology for evaluating O&S costs to be unobjectionable.

   RECOMMENDATION

   We sustain the protests on the basis that, in light of the material change
   in the Air Force's evaluation methodology, amendment 4 unreasonably limits
   proposal revisions to those related to O&S costs. Accordingly, we
   recommend that the Air Force permit offerors to revise both the cost/price
   and non-cost/price aspects of their proposals in response to the new
   evaluation scheme. We recognize that this represents a significant change
   in the Air Force's intended conduct of this procurement as reflected in
   amendment 4, and that the result could delay the acquisition. Nonetheless,
   in view of the fact that the record shows that the Air Force's change to
   its evaluation methodology could have affected the manner in which
   offerors prepared their proposals well beyond the O&S cost calculation,
   offerors should have the opportunity to revise their proposals in
   response. If the evaluation of revised proposals results in a
   determination that Boeing's proposal no longer represents the best value
   to the government, the agency should terminate its contract. We also
   recommend that LMSI and Sikorsky be reimbursed the costs of filing and
   pursuing their protests, including reasonable attorneys' fees. 4 C.F.R.
   sect. 21.8(d)(1). In accordance with 4 C.F.R. sect. 21.8(f)(1), the
   protesters' certified claims for such costs, detailing the time expended
   and costs incurred, must be submitted directly to the agency within 60
   days after receipt of this decision.

   The protests are sustained.

   Gary L. Kepplinger
   General Counsel

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

   [1] See also Sikorsky Aircraft Co.; Lockheed Martin Sys.
   Integration-Owego--Request for Reconsideration, B-299145.4, Mar. 29, 2007,
   2007 CPD para. 78, in which we found that additional protest grounds
   regarding areas other than the operations and support evaluation were
   without merit.

   [2] The protesters further point to a number of purportedly significant
   changes in the circumstances of the procurement occurring in the months
   after the submission of FPRs in September 2006, which they maintain
   require that offerors be afforded an opportunity to revise their
   proposals. However, since we have no reason to believe on this record that
   amendment 4 does not represent the Air Force's desired acquisition
   approach, and given our conclusion above that amendment 4 materially
   changed the stated evaluation methodology such as to require affording
   offerors an opportunity to fully revise their proposals, we need not
   determine whether reopening also was required on account of other material
   changes in the circumstances of the procurement.

   [3] The protesters also assert that the agency's methodology for
   evaluating O&S costs improperly fails to fully account for likely fuel
   costs in that it: (1) does not consider the likely increase in the number
   of flying hours during wartime, which the protesters maintain is
   inconsistent with the fact that the MER, from which the number of Unit
   Mission Personnel is derived, and the agency's groundrules for calculating
   potential maintenance efficiencies, were both based upon the staffing
   required for a wartime level of operations; and (2) assumes as the cost of
   fuel the price paid by the Defense Energy Support Center, without
   consideration for the much higher fully burdened cost of fuel (including
   the cost of transportation, storage, etc.). As noted by the agency, since
   the agency's approach in this regard was apparent from the September 15,
   2005 CSAR-X System Requirements Document (SRD) included in the
   solicitation, which specified a single, 50-hour per month utilization
   rate, SRD sect. 3.1.4.1.2, from the groundrules set forth in the original
   attachment 13, and from the agency's actual prior O&S cost evaluation in
   this procurement, MPLCC_CSAR O&S Reports for Lockheed and Sikorsky, these
   protest bases are untimely. 4 C.F.R. sect. 21. 2(a) (2007).