TITLE: B-311321; B-311321.2, Guam Shipyard, June 9, 2008
BNUMBER: B-311321; B-311321.2
DATE: June 9, 2008
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B-311321; B-311321.2, Guam Shipyard, June 9, 2008

   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: Guam Shipyard

   File: B-311321; B-311321.2

   Date: June 9, 2008

   David J. Taylor, Esq., William J. Spriggs, Esq., Katherine A. Allen, Esq.,
   and Rachel W. McGuane, Esq., Spriggs & Hollingsworth, for the protester.
   Robert E. Korroch, Esq., Francis E. Purcell, Jr., Esq., and Khaliah Wrenn,
   Esq., Williams Mullen, for Gulf Copper Ship Repair, Inc., the intervenor.

   Jeff Mansfield, Esq., and Bruce Potocki, Esq., Department of the Navy, for
   the agency.

   Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest of agency's evaluation and award decision is denied where record
   shows they were reasonable and consistent with the terms of the
   solicitation and applicable procurement rules.

   DECISION

   Guam Shipyard protests the evaluation of proposals and the award of a
   contract to Gulf Copper Ship Repair, Inc. under request for proposals
   (RFP) No. N55236-08-R-0006, issued by the Department of the Navy,
   Southwest Regional Maintenance Center, for alterations to sanitary spaces
   (low maintenance, sensor-operated washroom facilities) on Barge YRBM-25 in
   Guam. The protester challenges the reasonableness of the agency's
   evaluation of proposals and determination to make the award to Gulf
   Copper, which received a higher past performance rating and offered a
   higher price than the protester.

   We deny the protest.

   The RFP, set aside for small businesses, anticipated the award of a
   fixed-price contract to the firm that submitted the technically acceptable
   proposal deemed to offer the best value to the agency considering two
   evaluation factors approximately equal in importance, price reasonableness
   and performance risk. RFP at 45, 48. The performance risk factor was
   comprised of two subfactors also of approximately equal importance, past
   performance (including technical quality, schedule, and management) and
   price realism. Id. The RFP advised that the evaluation of past performance
   would be subjective and based mainly on performance evaluations available
   in the agency's automated Past Performance Information Retrieval System
   (PPIRS), information obtained from the offeror's past performance
   references, and information available in local files. Id. Each offeror was
   to submit past performance reference information for relevant contracts
   (ongoing or completed within the last 3 years) that the firm wanted to be
   considered. The RFP advised that the agency might not contact all of the
   references, and emphasized that the offeror was to ensure that references
   could be readily contacted, would be cooperative, and would provide
   performance information for evaluation. Id. at 44.

   For the price realism subfactor of the performance risk evaluation factor,
   offerors were advised that their proposed prices would be compared to the
   other prices proposed and the independent government estimate (IGE), that
   low prices could increase the firm's overall performance risk, and that a
   "contract price is realistic if it is high enough to preclude the
   [c]ontractor from enduring a significant financial loss in performing the
   requirements of the contract." Id. at 49. The RFP noted that
   unrealistically low prices increase an agency's risk of performance,
   since, in an effort to cut losses, a contractor may "cut corners" on
   quality, deliver late, or default, often requiring additional agency
   involvement as well as reprocurements which consequently may increase the
   agency's cost of performance. The source selection was to be based on the
   difference in performance risk and price between proposals; if one
   offeror's proposal presented lower performance risk but a higher price,
   then the agency was to decide whether the difference in performance risk
   was worth the difference in price, and if so, then the higher-priced offer
   was to be deemed the best value for award. Id.

   Four proposals were received by the scheduled closing time. Discussions
   were conducted and revised proposals were submitted and evaluated. The
   protester's revised proposal was the lowest-priced offer received, it was
   found to be reasonably priced, and its technical proposal was found
   acceptable. Its performance risk, however, was rated as very high overall.
   Under the price realism subfactor, the protester's proposed price of
   $969,334.03 was considered unrealistically low (and evaluated as being
   approximately 23 percent below the IGE). Under the past performance
   subfactor, the firm's proposal was evaluated as marginal based on an
   unfavorable Contract Performance Assessment Report (CPAR) in the agency's
   automated PPIRS regarding the firm's recent performance of similar work
   for the agency.[1] The CPAR was the only performance report available in
   the PPIRS, and the only past performance information considered by the
   evaluators for the firm since the contract reference Guam had provided for
   two other contracts failed to respond to the agency's email request for
   past performance information.

   Gulf Copper was found to have proposed a reasonable and realistic price of
   $1,374,537.50 (which was evaluated as only 2 percent above the IGE). Its
   proposal, which was rated satisfactory under the past performance
   subfactor based on its ratings of very good from two references and a
   rating of satisfactory from the third reference, was rated moderate
   overall for performance risk. Finding that the $405,200.47 price premium
   associated with an award on the basis of Gulf Copper's higher-rated past
   performance and lower performance risk was warranted, the contracting
   officer determined that Gulf Copper's proposal presented the best value to
   the government and made award to that firm. This protest followed.

   Guam protests the agency's evaluation of its past performance as marginal,
   contending that it has received accolades for performance of similar work
   in the past. The protester contends that if the agency had received
   information regarding its past performance from the reference Guam
   identified in its proposal, the information would have been favorable; in
   this regard, the protester questions the adequacy of the agency's attempt
   to contact the reference by email, since the agency has not demonstrated
   that the email message was in fact received by the reference. The
   protester also challenges the agency's reliance on the adverse CPAR
   regarding an ongoing Guam contract with the Navy for similar work. Guam
   has not refuted the substance of the performance problems described in
   that CPAR, either in its protest or when it had the opportunity to comment
   on the CPAR findings before the report became final in the PPIR. Rather,
   the firm only generally suggests that the agency's consideration of the
   CPAR was improper because Guam had not realized that the CPAR had been
   posted on the PPIR even though the contract is not fully performed yet.

   Our Office will examine an agency's past performance evaluation only to
   ensure that it was reasonable and consistent with the stated evaluation
   criteria and applicable statutes and regulations, since determining the
   relative merit of an offeror's past performance is primarily a matter
   within the contracting agency's discretion. See Pacific Ship Repair and
   Fabrication, Inc., B-279793, July 23, 1998, 98-2 CPD para. 29 at 3-4. In
   conducting a past performance evaluation, an agency has discretion to
   determine the scope of the offerors' performance histories to be
   considered, provided all proposals are evaluated on the same basis and
   consistent with the solicitation requirements. Federal Envtl. Servs.,
   Inc., B-250135.4, May 24, 1993, 93-1 CPD para. 398 at 12. An agency is
   only required to use reasonable effort to contact an offeror's references,
   and is not required to make multiple attempts to contact a firm's past
   performance references. See OSI Collection Servs., Inc.; C.B. Accounts,
   Inc., B-286597.3 et al., June 12, 2001, 2001 CPD para. 103 at 9.

   Here, the agency points out that the past performance reference listed by
   the protester failed to respond to the agency's email inquiry for relevant
   survey information. While Guam suggests that proof of the reference's
   receipt of the email message is necessary to show a reasonable attempt at
   contacting the reference, the firm provides no support for its contention.
   Rather, in light of the RFP's emphasis on the importance of the offeror
   providing reliable contact information (including, as was used here, email
   addresses) and ensuring cooperation from its references, we think the
   agency's email inquiry was an adequate effort to contact the reference;
   the failure of the reference to respond does not show that the agency's
   effort was inadequate (particularly in view of Guam's apparent failure to
   ensure, or, at a minimum, encourage its reference to cooperate) or that
   the past performance evaluation was improper.

   As stated above, the agency, consistent with the terms of the RFP,
   considered a comprehensive, recent, and relevant CPAR that rated the
   firm's past performance as marginal and showed that Guam had problems with
   following procedures, safety issues, accidents, obtaining material,
   scheduling, manpower, and management. Guam had an earlier opportunity to
   respond to the information reported in the CPAR and, despite seeking an
   extension of time to do so, never refuted the CPAR, which then became a
   final report in the PPIR and, in accordance with the terms of the RFP, was
   properly considered as part of the firm's past performance evaluation. The
   protester has provided no basis to question the reasonableness of the
   agency's findings that such unfavorable recent performance of similar work
   suggests that similar instances of "re-work" or flawed performance could
   be anticipated under this contract, and that there is also a greater
   potential for agency involvement in monitoring performance, which may
   increase the ultimate cost of performance for the agency. Lastly, while
   Guam generally suggests that accolades for good past performance have been
   given to the firm in the past, as the agency points out, the firm did not
   include such information in its proposal, nor was it in the CPAR, and
   thus, we have no basis to object to the agency's failure to credit the
   firm with such information.

   Guam also challenges the agency's evaluation of its proposal under the
   price realism subfactor of the performance risk factor, and the finding
   that its price was unrealistically low.[2] The protester only generally
   asserts that because it used its currently approved labor rates in
   formulating its price, its price must be considered realistic; similarly,
   Guam contends that the higher-priced IGE must be flawed because it exceeds
   Guam's labor rates. As the agency points out, however, Guam's proposed
   price was not found to be unrealistically low based only on its lower
   labor rates; rather, Guam's low price also reflected lower prices for
   materials than those proposed by the other offerors and included in the
   IGE. Additionally, the protester's failure to identify any profit added to
   the agency's concerns about whether the firm's substantially lower-priced
   proposal would affect performance of the contract, since, as indicated in
   the RFP, financial loss, including a lack of or little profit, may cause a
   contractor to "cut corners" in the performance of the required work.[3]

   The depth of an agency's price realism analysis is a matter within the
   sound exercise of the agency's discretion. Comparison of proposed prices
   with each other and an IGE are recognized price analysis techniques for a
   price realism review. See Quality Elevator Co., Inc., B-276750, July 23,
   1997, 97-2 CPD para. 28 at 7. Here, the agency compared the protester's
   proposed price to the other offerors' prices and concluded that, as the
   lowest-priced offer, with a price substantially lower than Gulf Copper's
   next low price, there is some degree of performance risk associated with
   the protester's lower price; Guam's price also was evaluated as
   approximately 23 percent lower than the IGE. Given the reasonableness of
   the agency's concern regarding quality of performance in light of Guam's
   low price, we have no reason to question the determination that the
   proposed price is unrealistically low and, consistent with the definition
   of unrealistic pricing in the RFP, could result in financial loss for the
   contractor in performance of the contract. In light of the reasonableness
   of the performance risk assessment here, including the recent marginal
   past performance by the firm, we find no basis to question the agency's
   determination that the potential savings offered by Guam's very high risk
   proposal is not worth the increased risk to the government.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] Under the evaluation scheme used here, a rating of very high
   performance risk, as was received by the protester's proposal, was to
   apply to a proposal rated as unsatisfactory for past performance and
   having a realistic price, or an unrealistically priced proposal rated
   satisfactory, marginal or unsatisfactory for past performance. Source
   Selection Plan at attach. 2. A rating of marginal under the past
   performance subfactor, as Guam's proposal received, was to apply to a
   proposal that failed to meet some contract requirements, and showed a
   serious problem for which corrective measures have not yet been
   identified. Id. at attach. 3.

   [2] Guam challenges that the price realism evaluation of Gulf Copper's
   proposal, contending that substantial travel costs should be imputed to
   the firm's performance of the contract because, according to Guam, the
   awardee lacks a sufficient local presence, in terms of local facility,
   employees, and possessing the required agency agreement for ship repair
   services. As the agency and intervenor point out, Gulf Copper specifically
   reported to the agency that it intends to perform the contract with a
   sufficient number of local employees, thereby eliminating any travel
   costs; that it currently leases an appropriate facility for the work; and
   that it holds the noted agency ship repair agreement. As such, we see no
   basis in the record to question Gulf Copper's status as a local firm, and,
   consequently, there was no need to factor in travel costs applicable to
   non-local firms, as Guam contends, as part of the price realism analysis
   of its proposal.

   [3] While Guam generally challenges the agency IGE used for evaluation of
   the price proposals, the firm provides insufficient argument or facts to
   question the comprehensive explanation of the multitude of pricing
   considerations adopted by the agency's estimator. We see no basis to
   review the challenge further.