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: The Boeing Company

File: B-311344; B-311344.3; B-311344.4; B-311344.6; B-311344.7; B-311344.8; B-311344.10; B-311344.11

Date: June 18, 2008

DIGEST

1.      Protest is sustained, where the agency, in making the award decision, did not assess the relative merits of the proposals in accordance with the evaluation criteria identified in the solicitation, which provided for a relative order of importance for the various technical requirements, and where the agency did not take into account the fact that one of the proposals offered to satisfy more “trade space” technical requirements than the other proposal, even though the solicitation expressly requested offerors to satisfy as many of these technical requirements as possible.

2.      Protest is sustained, where the agency violated the solicitation’s evaluation provision that “no consideration will be provided for exceeding [key performance parameter] KPP objectives” when it recognized as a key discriminator the fact that the awardee proposed to exceed a KPP objective relating to aerial refueling to a greater degree than the protester.

3.      Protest is sustained, where the record does not demonstrate the reasonableness of the agency’s determination that the awardee’s proposed aerial refueling tanker could refuel all current Air Force fixed‑wing tanker‑compatible receiver aircraft in accordance with current Air Force procedures, as required by the solicitation.

4.      Protest is sustained, where the agency conducted misleading and unequal discussions with the protester, where the agency informed the protester that it had fully satisfied a KPP objective relating to operational utility, but later determined that the protester only partially met this objective, without advising the offeror of this change in its assessment and while continuing to conduct discussions with the awardee relating to its satisfaction of the same KPP objective.

5.      Protest is sustained, where the agency unreasonably determined that the awardee’s refusal to agree to the specific solicitation requirement that it plan and support the agency to achieve initial organic depot-level maintenance within 2 years after delivery of the first full-rate production aircraft was an “administrative oversight,” and improperly made award, despite this clear exception to a material solicitation requirement.

6.      Protest is sustained, where the agency’s evaluation of military construction costs in calculating the offerors’ most probable life cycle costs for their proposed aircraft was unreasonable, where the evaluation did not account for the offerors’ specific proposals, and where the calculation of military construction costs based on a notional (hypothetical) plan was not reasonably supported.

7.      Protest is sustained, where the agency improperly added costs to an element of cost (non-recurring engineering costs) in calculating the protester’s most probable life cycle costs to account for risk associated with the protester’s failure to satisfactorily explain the basis for how it priced this cost element, where the agency did not determine that the protester’s proposed costs for that element were unrealistically low.

8.      Protest is sustained, where the agency’s use of a “Monte Carlo” simulation model to determine the protester’s probable cost of non-recurring engineering associated with the system demonstration and development portion of the acquisition was unreasonable, where the model’s inputs concerned total weapons systems at an overall program level and there is no indication that this is a reliable predictor of anticipated growth of the protester’s non‑recurring engineering costs.

9.      Protester is not required to file a “defensive protest” when during the procurement it is apprised of an agency’s evaluation judgments with which it disagrees or where it believes the evaluation is inconsistent with the solicitation’s evaluation scheme, because GAO’s Bid Protest Regulations, 4 C.F.R. sect. 21.2(a)(2) (2008), require that where the protest involves a procurement conducted on the basis of competitive proposals under which a debriefing is requested and, when requested, is required, these protest grounds can only be raised after the offered debriefing.

10.  While an agency, in an appropriate case, may request under GAO’s Bid Protest Regulations, 4 C.F.R. sect. 21.3(d) (2008), that a protester provide specific relevant documents, of which the agency is aware and does not itself possess, this does not allow for “wide-open” document requests by an agency of broad categories of documents.

The Boeing Company protests the award of a contract to Northrop Grumman Systems Corporation under request for proposals (RFP) No. FA8625-07-R-6470, issued by the Department of the Air Force, for aerial refueling tankers.[1] Boeing challenges the Air Force’s technical and cost evaluations, conduct of discussions, and source selection decision.[2]

As explained below, we find that the agency’s selection of Northrop Grumman’s proposal as reflecting the best value to the government was undermined by a number of prejudicial errors that call into question the Air Force’s decision that Northrop Grumman’s proposal was technically acceptable and its judgment concerning the comparative technical advantages accorded Northrop Grumman’s proposal. In addition, we find a number of errors in the agency’s cost evaluation that result in Boeing displacing Northrop Grumman as the offeror with the lowest evaluated most probable life cycle costs to the government. Although we sustain Boeing’s protest on grounds related to these errors, we also deny many of Boeing’s challenges to the award.

Specifically, we sustain the protest, because we find that (1) the Air Force did not evaluate the offerors’ technical proposals under the key system requirements subfactor of the mission capability factor in accordance with the weighting established in the RFP’s evaluation criteria; (2) a key technical discriminator relied upon in the selection decision in favor of Northrop Grumman relating to the aerial refueling area of the key system requirements subfactor, was contrary to the RFP; (3) the Air Force did not reasonably evaluate the capability of Northrop Grumman’s proposed aircraft to refuel all current Air Force fixed-wing, tanker‑compatible aircraft using current Air Force procedures, as required by the RFP; (4) the Air Force conducted misleading and unequal discussions with Boeing with respect to whether it had satisfied an RFP objective under the operational utility area of the key system requirements subfactor; (5) Northrop Grumman’s proposal took exception to a material solicitation requirement related to the product support subfactor; (6) the Air Force did not reasonably evaluate military construction (MILCON) costs associated with the offerors’ proposed aircraft consistent with the RFP; and (7) the Air Force unreasonably evaluated Boeing’s estimated non‑recurring engineering costs associated with its proposed system development and demonstration (SDD).

BACKGROUND

Aerial refueling is a key element supporting the effectiveness of the Department of Defense’s (DoD) air power in military operations and is, as such, an important component of national security. See AR, Tab 333, Capability Development Document, Dec. 27, 2006, at 2, 7; see also Air Force Refueling: The KC‑X Aircraft Acquisition Program, Congressional Research Service (CRS) Report for Congress, No. RL34398, Feb. 28, 2008, at 1. Currently, the Air Force uses two types of aircraft for aerial refueling: the KC-135, which is considered to be a medium-sized airplane, and the larger KC-10. The Air Force’s fleet of KC-135 aircraft currently has an average age of 46 years and is the oldest combat weapon system in the agency’s inventory;[3] for the newer KC-10 aircraft, the average age is over 20 years. Defense Acquisitions: Air Force Decision to Include a Passenger and Cargo Capability in Its Replacement Refueling Aircraft Was Made without Required Analyses, GAO-07-367R, Mar. 6, 2007, at 1.

To begin replacing the aging refueling tanker fleet, the Air Force established a three‑pronged approach under which it intended to first conduct a procurement to replace the older KC-135 tankers, while maintaining the remaining KC-135 and KC-10 tankers; the first procurement, which is the acquisition protested here, was identified by the Air Force as the KC-X procurement or program. See AR, Tab 4, Acquisition Strategy Plan Briefing, at 9-10. The Air Force intends to replace the remaining KC‑135 and KC-10 aircraft in later procurements under programs the agency identified as the KC-Y and KC-Z.

Solicitation

The RFP, issued January 30, 2007, provided for the award of a contract with cost reimbursement and fixed-price contract line items. In this regard, offerors were informed that, although the agency would procure up to 179 KC-X aircraft over a 15 to 20-year period, the initial contract would be for the SDD of the KC-X aircraft and the procurement of up to 80 aircraft, beginning with the delivery of four SDD aircraft and two low rate initial production (LRIP) aircraft.[4] Offerors were also informed that the agency contemplated receiving an existing commercial, Federal Aviation Administration (FAA) or equivalent certified transport aircraft modified to meet the agency’s requirements. RFP, Statement of Objectives (SOO) for KC-X SDD, at 1.

A detailed system requirements document (SRD) was provided in the RFP that presented the technical performance requirements for the KC-X aircraft. In this regard, the SRD stated that

[t]he primary mission of the KC-X is to provide world‑wide, day/night, adverse weather aerial refueling . . . on the same sortie to receiver capable United States (U.S.), allied, and coalition military aircraft (including unoccupied aircraft). [The KC‑X aircraft will] provide robust, sustained [aerial refueling] capability to support strategic operations, global attack, air-bridge, deployment, sustainment, employment, redeployment, homeland defense, theater operations, and special operations. Secondary missions for KC-X include emergency aerial refueling, airlift, communications gateway, aeromedical evacuation (AE), forward area refueling point (FARP), combat search and rescue, and treaty compliance.

RFP, SRD sect. 1.2.1. The SRD identified the minimum and desired performance/capability requirements for the aircraft. The minimum performance capabilities of the aircraft were identified in nine key performance parameters (KPP), which the Air Force summarized as follows:

KPP	Parameter	Required Performance
1	Tanker Air Refueling Capability	Air refueling of all current and programmed fixed wing receiver aircraft
2	Fuel Offload and Range	Fuel, offload, range chart equivalent to KC‑135
3	Communications, Navigation, Surveillance/Air Traffic Management	Worldwide flight operations at all times in all civil and military airspace
4	Airlift Capability	Carry passengers, palletized cargo, and/or aeromedical patients on entire main deck
5	Receiver Air Refueling Capability	Refueled in flight from any boom equipped tanker aircraft
6	Force Protection	Operate in chemical/biological environments
7	Net-Ready	Meet enterprise-level joint critical integrated architecture requirements
8	Survivability	Operate in hostile environments (night vision and imaging systems, electromagnetic pulse, defensive systems: infrared detect and counter, radio frequency detect, no counter)
9	Multi-point Refueling	Multi-point drogue[5] refueling

AR, Tab 46, Source Selection Evaluation Team (SSET) Final Briefing to Source Selection Advisory Council (SSAC) and Source Selection Authority (SSA), at 18.

The RFP provided for award on a “best value” basis and stated the following evaluation factors and subfactors:

Mission Capability
	Key System Requirements
	System Integration and Software
	Product Support
	Program Management
	Technology Maturity and Demonstration
Proposal Risk
Past Performance
Cost/Price
Integrated Fleet Aerial Refueling Assessment (IFARA)

Offerors were informed that the mission capability, proposal risk, and past performance factors were of equal importance and individually more important than the cost/price or IFARA factors, and that the cost/price and IFARA factors were of equal importance. The subfactors within the mission capability factor were stated to be of descending order of importance. RFP sect. M.2.1.

The RFP stated that the agency, in its evaluation of proposals under the mission capability subfactors, would assign one of the color ratings identified in the solicitation,[6] and one of the proposal risk ratings that were also identified.[7] RFP sections M.2.2, M.2.3. In this regard, offerors were informed that proposal risk would only be assessed at the mission capability subfactor level and for only the first four subfactors. RFP sect. M.2.3.

With respect to the key system requirements subfactor, the most important mission capability subfactor, offerors were informed that the agency would assess the offerors’ understanding of, and substantiation of their ability to meet, the requirements of the SRD (with the exception of the logistics requirements that were to be evaluated under the product support subfactor). The RFP provided that the offerors’ approaches to meeting the SRD requirements would be evaluated under the key system requirements subfactor in the following five areas: aerial refueling, airlift, operational utility, survivability, and “other system requirements.” RFP sect. M.2.2.1.2.

In order for a proposal to be found acceptable under this subfactor (and overall), an offeror was required to meet the various identified minimum, mandatory KPP “thresholds” identified in the SRD for each of the nine KPPs. The SRD also identified KPP “objectives” relating to some, but not all of, the identified KPP thresholds. In this regard, the RFP stated that

[a]ll KPP thresholds [relating to the aerial refueling, airlift, operational utility, and survivability areas] must be met. Depending on substantiating rationale, positive consideration will be provided for performance above the stated KPP thresholds up to the KPP objective level. No consideration will be provided for exceeding KPP objectives. If there is no stated objective and, depending on substantiating rationale, positive consideration will be provided when the specified capability above the KPP threshold is viewed as advantageous to the Government.

RFP sect. M.2.2.1.1.a.

Among the minimum requirements identified in the SRD was a KPP No. 1 threshold that required the offeror’s proposed aircraft to be “capable of aerial refueling all current [Air Force] tanker compatible fixed wing receiver aircraft using current [Air Force] procedures . . . .” RFP, SRD sect. 3.2.10.1.1.9. Another minimum requirement was a KPP No. 2 threshold that required the offeror’s aircraft to be capable of satisfying the fuel offload versus unrefueled radius range as depicted in a linear graph contained in the RFP; this threshold charted the minimum pounds of fuel an aircraft must be capable of offloading to a receiver aircraft at a given distance of unrefueled flight by the tanker.[8] See RFP, SRD sect. 3.2.1.1.1.1. Also identified under KPP No. 2, as an objective, was that the “aircraft should be capable of exceeding the fuel offload versus unrefueled radius range as depicted in” this chart. RFP, SRD sect. 3.2.1.1.1.2.

In addition, the SRD identified numerous key system attributes (KSA) for the aerial refueling, airlift, operational utility, survivability, and “other system requirements” areas, as well as numerous other “non‑KPP/KSA requirements” for these areas that were desired but not required.[9] The RFP provided that these “requirements” did not have to be satisfied by the offerors, but were desired and considered part of the offerors’ “design trade space.”[10] RFP sect. M.2.2.1.1.b. With respect to these aspects of the evaluation of the key system requirements subfactor, offerors were informed that

[f]or non-KPP requirements, the Government may give consideration for alternate proposed solutions or capabilities below the stated SRD requirement, depending on substantiating rationale. The Government may give additional consideration if the offeror proposes to meet (or exceed if there is an objective) the SRD threshold or requirement, depending on substantiating rationale.

RFP sect. M.2.2.1.1.b. The RFP further stated that the Air Force sought an affordable KC‑X system that not only met all of the KPP threshold requirements, but as many KSA and other SRD requirements as possible. RFP, SOO for KC-X SDD, at 2.

Finally, with regard to the overall evaluation of the key system requirements subfactor, the RFP stated that “evaluation of the offeror’s proposed capabilities and approaches against the SRD requirements will be made in the following descending order of relative importance: KPPs, KSAs, and all other non‑KPP/KSA requirements.” RFP sect. M.2.2.1.1.c.

With respect to the aerial refueling area of the key system requirements subfactor, offerors were informed that the agency’s evaluation would include “tanker aerial refueling, receiver aerial refueling, fuel offload versus radius range, drogue refueling systems (including simultaneous multi-point refueling), the operationally effective size of the boom envelope, the aerial refueling operator station and aircraft fuel efficiency.” RFP sect. M.2.2.1.2.a. With respect to airlift area, the RFP provided that the agency’s evaluation would include “airlift efficiency, cargo, passengers, aero-medical evacuation, ground turn time, and cargo bay re-configuration.” RFP sect. M.2.2.1.2.b. Offerors were instructed with regard to this area to provide an airlift efficiency calculation, based upon a calculation procedure stated in the solicitation, that would result in a “payload pounds - nautical miles per pound fuel used” calculation (in other words, the weight of cargo per pound of fuel burned). RFP sect. L.4.2.2.4.1. Under the operational utility area, the agency’s evaluation would include “aircraft maneuverability, worldwide airspace operations, communications/information systems (including Net-Ready capability), treaty compliance support, formation flight, intercontinental range, 7,000-foot runway operations, bare base airfield operations, and growth provisions for upgrades.” RFP sect. M.2.2.1.2.c. The survivability area evaluation would include “situational awareness, defensive systems against threats, chemical/biological capability, [electromagnetic pulse] protection, fuel tank fire/explosion protection, and night vision capability.” RFP sect. M.2.2.1.2.d. The remaining “other system requirements” area evaluated SRD requirements were not included in any of the other areas. RFP sect. M.2.2.1.2.e.

Under the system integration and software subfactor, the evaluation was to consider the offeror’s ability to implement a systems engineering approach and software development capability to satisfy the KC-X performance requirements, considering a number of listed attributes. RFP sect. M.2.2.2.

Under the product support subfactor, the evaluation was to consider the offeror’s product support approach that includes logistics planning and analysis; interim contractor support; transition to organic two-level maintenance support; approach and rationale for proposed operational availability, reliability and maintainability and mission capable rates; logistics footprint; site activation/beddown; and training. RFP sect. M.2.2.3.

With respect to the program management subfactor, offerors were informed that the agency would assess whether “the offeror’s proposal demonstrates a capability to effectively and efficiently implement and manage the KC-X Program.” RFP sect. M.2.2.4. Included in this evaluation was whether the offeror demonstrated a “sound approach to achieving FAA Certification/Validation” and a “feasible, effective, low risk manufacturing and quality assurance approach to integrating military capability into the commercial baseline aircraft and transition to full rate production.” RFP sections M.2.2.4.C, M.2.2.4.F.

With respect to the past performance factor, the RFP informed offerors that the agency’s performance confidence assessment group (PCAG) would conduct an in‑depth review and evaluation of all performance data to determine how closely the work performed under those efforts related to the effort solicited under the RFP. The RFP provided that for this factor the agency would assess the degree of confidence that the agency had in an offeror’s ability to perform the tanker contract, based upon an assessment of the offeror’s demonstrated record of performance, and focusing on performance in five areas: the four mission capability subfactors and the cost/price factor.[11] RFP sect. 2.4.1. In this regard, the RFP stated that the agency would consider each offeror’s, and its major/critical subcontractor’s, demonstrated record of performance. Offerors were also informed that, in assessing an offeror’s past performance, the agency would consider the relevance of an offeror’s (and its subcontractor’s, joint venture’s, and teaming partner’s) present and past performance, and that “[m]ore recent and more relevant performance by the same division/organization may have a greater impact on the performance confidence assessment than less recent or less relevant effort.” Id. sect. M.2.4.5.3. With respect to an offeror’s performance problems, the RFP stated:

Where relevant performance records indicate performance problems, the Government will consider the number and severity of the problems and the appropriateness and effectiveness of any corrective actions taken (not just planned or promised). The Government may review more recent contracts or performance evaluations to ensure corrective actions have been implemented and to evaluate their effectiveness.

RFP sect. M.2.4.4.

With respect to the IFARA evaluation factor, the RFP provided that the agency would assess the utility and flexibility of a fleet of the offeror’s proposed aircraft “by evaluating the number of aircraft required to fulfill the peak demand of the aerial refueling elements evaluated in the 2005 Mobility Capabilities Study.”[12] Specifically, offerors were informed that the Air Force would analyze offeror‑provided data in the evaluation scenario “primarily using the Combined Mating and Ranging Planning System (CMARPS) modeling and simulation tool” to calculate a “fleet effectiveness value,” and would report this finding to the source selection authority (SSA), along with “any major insights and observations gleaned from the evaluation.”[13] To calculate the fleet effectiveness value, the agency, using the CMARPS modeling tool, would calculate the number of KC-135R aircraft and the number of the offeror’s proposed aircraft needed to satisfy the scenario, and then divide the number of KC‑135R aircraft required by the number of the offeror’s aircraft. The RFP stated that, with respect to this ratio, a fleet effectiveness value of 1.0 would be equal in effectiveness to the KC-135R, while a value in excess of 1.0 would be viewed as more advantageous to the agency. RFP sect. M.2.6.

Under the cost/price factor, the RFP provided that offerors’ proposed costs and prices would be evaluated for realism and reasonableness, respectively. RFP sect. M.2.5. Offerors were also informed that the agency would calculate a most probable life cycle cost (MPLCC) estimate for each offeror, which was described by the solicitation to be “an independent government estimate, adjusted for technical, cost, and schedule risk, to include all contract, budgetary and other government costs associated with all phases of the entire weapon system life cycle (SDD, [Production and Deployment], and Operations and Support (O&S)).” RFP sect. 2.5.2. The RFP provided that, as part of the “other government costs,” the agency would evaluate anticipated MILCON costs associated with the offerors’ proposed aircraft. RFP sect. 2.5.2.4. The RFP also provided that the agency would assess “technical, cost, and schedule risk for the entire most probable life cycle cost estimate based upon the offeror’s proposed approach,” and that the “impact of technical, schedule, and/or cost risk will be quantified (dollarized), where applicable, and included in the MPLCC.” RFP sect. M.2.5.2.5.

The RFP instructed the offerors to provide detailed cost information supported by a basis of estimate. Offerors were informed that the basis of estimate must

completely describe the cost element content . . . philosophy, and methodology used to develop the estimate including appropriate references to any historical supporting cost date.

RFP sect. L.6.4.7. The basis of estimate was required to include a “narrative with supporting data explaining how the proposed cost estimates (SDD, [production and deployment], O&S) were created.” RFP sect. L.6.2. With respect to proposed O&S costs, which include fuel costs, offerors were informed that they should assume a 25‑year system life from the date each aircraft is delivered and “calculate their O&S costs for 2 years beyond the date of their final production delivery”; to support their O&S cost projections, offerors were required to provide all “assumptions, ground rules, methodology, and supporting data.”[14] RFP sections L.6.1.1.13, L.6.4.9. In this regard, the offerors were informed that if the historical data did not support the proposed prices, the cost documentation would be considered adequate only if the agency could understand the technical content, estimating methodology, and the “build-up” of the offerors’ costs. RFP sect. L.6.4.7.

Proposals

The Air Force received proposals from Boeing and Northrop Grumman in response to the RFP. Boeing proposed as its KC-X aircraft the KC-767 Advanced Tanker, a derivative of its commercial 767-200 LRF (long range freighter) aircraft.[15] The KC-767 was composed of elements of a number of Boeing commercial aircraft, including the 767-200ER, 767-300F, 767-400 ER, 737, and 777 models. AR, Tab 61, Boeing Initial Technical Proposal, Executive Summary, at V1-ES-1. Boeing’s proposed production plan for its SDD and production KC-X aircraft was to build the 767-200 LRF baseline aircraft at the Everett, Washington facility of its commercial division, Boeing Commercial Airplanes (BCA), and then fly the aircraft to its Wichita, Kansas facility for installation of military equipment and software by its military division, Integrated Defense Systems (IDS). Id. at V1-ES-2.

Northrop Grumman proposed the KC-30 aircraft, which was a derivative of the Airbus A330‑200 commercial aircraft.[16] AR, Tab 140, Northrop Grumman Initial Technical Proposal, Executive Summary, at I-1. Northrop Grumman proposed a production plan that provided for a number of changed locations for the production, assembly, and modification of its SDD and LRIP aircraft. For the first SDD aircraft, Northrop Grumman proposed to build the commercial A330 aircraft in sections in various European locations, then assemble the aircraft in Toulouse, France, add the cargo door in Dresden, Germany, and complete militarization of the aircraft in Madrid, Spain. For the second and third SDD aircraft, Northrop Grumman proposed using its own Melbourne, Florida facility, in place of EADS’s Madrid facility, to complete militarization. For the last SDD aircraft, Northrop Grumman proposed replacing its Melbourne facility with a new facility it proposed to build in Mobile, Alabama. For the first LRIP aircraft, Northrop Grumman proposed to have the Toulouse facility not only assemble the commercial baseline aircraft but also install the cargo door, and the Mobile facility would complete the militarization of the aircraft. Beginning with the second LRIP aircraft, and thereafter through the production phase, Northrop Grumman proposed to build the A330 baseline aircraft in sections at various locations in Europe and then ship those sections to the Mobile facility, which would assemble the aircraft, install the cargo door, and complete militarization of the aircraft. Id. at I-6; see also Hearing Testimony (HT) at 1343-52.[17]

SSET Evaluation

The proposals were evaluated by the agency’s SSET, which initiated discussions with the offerors by issuing evaluation notices (EN).[18] After evaluating the offerors’ EN responses, the SSET provided a “mid-term” evaluation briefing to the SSAC and SSA. Because there were “concerns regarding how to properly show that all SRD requirements had been evaluated,” the SSET prepared and provided another briefing to the SSA that detailed how each offeror’s proposal was evaluated against each SRD requirement. COS at 24. Following the SSA’s approval of the mid-term briefing, the SSET provided mid‑term briefings to Boeing and Northrop Grumman, at which each offeror was provided with the agency’s evaluation ratings of their respective proposals.[19] AR, Tabs 129, 130, Boeing’s Mid‑Term Briefings; Tabs, 199, 200, Northrop Grumman’s Mid-Term Briefings.

Following the offerors’ mid-term briefings, the SSET provided a MPLCC/schedule risk assessment briefing to the SSAC and SSA, and subsequently the SSET provided MPLCC/schedule risk assessment briefings to the offerors. AR, Tab 133, Boeing’s MPLCC/Schedule Risk Assessment Briefing; Tab 203, Northrop Grumman’s MPLCC/Schedule Risk Assessment Briefing.

Extensive discussions were conducted with each offeror, after which a “pre-final proposal revision” briefing was provided to the SSAC and SSA by the SSET that presented updated evaluation ratings of Boeing’s and Northrop Grumman’s proposals and discussion responses. Following approval of this briefing by the SSA, the SSET again provided to each offeror the agency’s evaluation ratings of their respective proposals. AR, Tab 135, Boeing’s Pre-Final Proposal Revision Briefing; Tab 205, Northrop Grumman’s Pre-Final Proposal Revision Briefing.

“Final revised proposals” were received from the offerors. Although intended by the agency to be the final proposal revisions, shortly after receipt of these proposals, the Air Force reopened discussions with the offerors in response to the enactment of the National Defense Authorization Act for Fiscal Year 2008, Pub. L. No. 110-181, 122 Stat. 3, 208-12, 222-24 (2008).[20] As a part of these discussions, the Air Force provided offerors with additional information concerning the firms’ respective IFARA evaluations and with a “clarified chart on Airlift Efficiency.” COS at 25. Subsequently, the agency received the firms’ final proposal revisions.

The protester’s and awardee’s final proposal revisions were evaluated by the SSET as follows:

		Boeing	Northrop Grumman
Mission Capability/Proposal Risk
	Key System Requirements	Blue/Low	Blue/Low
	System Integration/Software	Green/Moderate	Green/Moderate
	Product Support	Blue/Low	Blue/Low
	Program Management	Green/Low	Green/Low
	Technology Maturity/Demonstration	Green	Green
Past Performance		Satisfactory Confidence	Satisfactory Confidence
Cost/Price (MPLCC)		$108.044 Billion	$108.010 Billion
	Cost Risk SDD Phase/Production & Deployment Phase	Moderate/Low	Low/Low
IFARA Fleet Effectiveness Value		1.79	1.9

AR, Tab 46, SSET Final Briefing to SSAC and SSA, at 508, 532.

As indicated by the nearly identical evaluation ratings received by both firms’ technical proposals and the nearly identical evaluated MPLCCs, the competition was very close, and, as evaluated, both firms’ proposals were found to be advantageous to the government. Ultimately, the SSAC concluded, however, that Northrop Grumman’s proposal was more advantageous to the agency than Boeing’s under the mission capability, past performance, cost/price, and IFARA factors; the two firms were found to be essentially equal under the proposal risk factor. AR, Tab 55, Proposal Analysis Report (PAR), at 46-48.

SSAC’s Mission Capability Factor Evaluation

Northrop Grumman’s evaluated advantage under the mission capability factor was largely based upon the firm’s perceived superiority under the key system requirements and program management subfactors; the two firms were found essentially equal under the remaining three subfactors. Id. at 46-47.

The SSAC assigned both firms’ proposals, under the key system requirements subfactor (the most important mission capability subfactor), blue, low risk ratings, noting:

Both Offerors proposed to meet all KPP Thresholds. Both Offerors proposed capability beyond KPP Thresholds and offered significant trade space KSA capability. Additionally, both offered numerous non-KPP/KSA trade space capabilities deemed beneficial to the Government.

Id. at 12. This assessment was documented in the SSAC’s PAR, which identified evaluated “major discriminators,” “discriminators offering less benefit” and weaknesses in each offeror’s proposal in the aerial refueling, airlift, operational utility, survivability, and “other system requirements” areas of this subfactor.[21] Id. at 13-28.

In the aerial refueling area, the SSAC noted “major discriminators” in favor of Boeing under several KPP No. 1 objectives, including its capability to [Deleted] and [Deleted], and for a “noteworthy non‑KPP/KSA capability to [Deleted]. Id. at 13.

The SSAC also noted a number of “major discriminators” in favor of Northrop Grumman in the aerial refueling area, including one under the KPP No. 2 objective for Northrop Grumman’s proposal to exceed the RFP’s fuel offload versus unrefueled radius range (Boeing’s aircraft was also evaluated as exceeding this KPP objective but to a lesser degree),[22] and for a number of non-KPP/KSA requirements, including the proposal of a better aerial refueling efficiency (more pounds of fuel offload per pound of fuel used) than Boeing’s; a “boom envelope” that was [Deleted] times greater than that defined by the Allied Technical Publication (ATP)-56[23] (Boeing proposed a boom envelope that was [Deleted] times greater than that defined by the publication); and a higher offload and receive fuel rate than Boeing. Id. at 13-14.

In the aerial refueling area, the SSAC also identified five “discriminators offering less benefit” for Boeing that were assessed under 14 different SRD requirements and one such discriminator for Northrop Grumman that was assessed under 2 SRD requirements. Id. at 15-16.

The SSAC found that Boeing’s proposal had no weaknesses in the aerial refueling area, but identified the following two weaknesses in Northrop Grumman’s proposal:

The first weakness is related to the specified lighting around the fuel receptacle of the KC-30. The specified lighting for refueling as a receiver may provide [Deleted]. The second weakness is related to Northrop Grumman’s boom approach. The [Deleted].

Id. at 16. The concern that Northrop Grumman’s [Deleted] was assessed under a KPP No. 1 threshold; the other weaknesses were assessed under non-KPP/KSA requirements. No schedule or cost risk was assigned by the SSET or SSAC for either of Northrop Grumman’s evaluated weaknesses. See AR, Tab 46, SSET Final Briefing to SSAC and SSA, at 196, 198; Tab 55, PAR, at 16.

In the airlift area, the SSAC found that both offerors met all threshold requirements for the airlift KPP (there was only one KPP in this area), and that both offerors exceeded the threshold requirement for efficiently transporting equipment and personnel. AR, Tab 55, PAR, at 16. There were no KPP objectives identified by the SRD in the airlift area.

The SSAC identified one “major discriminator” in favor of Boeing in the airlift area: Boeing satisfied the non‑KPP/KSA requirement for the capability to [Deleted]. Id. at 17. With respect to Northrop Grumman, the SSAC identified a number of “major discriminators” in the airlift area. That is, with respect to carrying cargo, the SSAC found that Northrop Grumman had a better airlift efficiency capability than Boeing, showing an improvement of [Deleted] percent over that of the KC‑135R, while Boeing’s airlift efficiency showed only a [Deleted]-percent improvement over the KC‑135R.[24] The SSAC noted that the KC-30 could carry more 463L pallets[25] than Boeing,[26] and that Northrop Grumman offered the capability to carry 463L pallets on both the main cargo deck and a lower cargo compartment, while Boeing only offered the single cargo deck. The SSAC also identified “major discriminators” in Northrop Grumman’s proposal for passenger carriage ([Deleted] passengers to Boeing’s [Deleted] passengers) and for aeromedical evacuation capability (Northrop Grumman could carry more litters and ambulatory patients). Id. at 18-19.

Three “discriminators offering less benefit” were identified for Boeing in the airlift area and one such discriminator identified for Northrop Grumman. No proposal weaknesses were identified for either offeror in the airlift area. Id. at 19-20.

In the operational utility area, the SSAC found that both offerors satisfied the three KPP thresholds identified in this area, and partially met the one KPP objective identified.[27] The SSAC also found that both offerors met the KSA thresholds and objectives in this area. Id. at 20. Two “major discriminators” were identified for Boeing in this area: (1) [Deleted] and (2) [Deleted]. Id. at 21. Two “major discriminators” were also identified for Northrop Grumman: (1) the KC‑30 could operate from a 7,000-foot runway carrying approximately [Deleted] percent more fuel than the KC-767,[28] and (2) the KC-30 provided a ferry range of [Deleted] nautical miles as compared to the KC-767’s ferry range of [Deleted] nautical miles.[29] Id. at 21‑22. Numerous “discriminators offering less benefit” were identified for both Boeing and Northrop Grumman. Among such discriminators identified for Boeing was the KC‑767’s smaller ground footprint, which the SSAC found would enable the KC-767 to operate from bare base airfields with confined ramp space.[30] Id. at 22. No proposal weaknesses were identified for either offeror in this area.

Ultimately, the SSAC concluded, largely based upon Northrop Grumman’s evaluated advantages in the aerial refueling and airlift areas, that Northrop Grumman’s proposal was superior to Boeing’s under the key system requirements subfactor.[31] Specifically, the SSAC noted:

While [the] KC-767 offers significant capabilities, the overall tanker/airlift mission is best supported by the KC-30. [The] KC-30 solution is superior in the core capabilities of fuel capacity/offload, airlift efficiency, and cargo/passenger/aeromedical carriage. These advantages in core capabilities outweigh the flexibility advantages of the attributes which Boeing offered (e.g. [Deleted], etc.)

Id. at 29.

Under the program management subfactor, the SSAC assigned both offerors green, low risk ratings, identifying no strengths, deficiencies, or uncertainties in either firm’s proposal. Id. at 34. Nevertheless, the SSAC concluded that Northrop Grumman’s program management approach was superior to that of Boeing, finding:

Northrop Grumman’s approach of providing four “green” aircraft for use early in SDD, by leveraging the existing A330 commercial production line, is deemed to be of benefit to the Government by reducing program risk. Northrop Grumman’s approach adds value for the Government through increased confidence in overall program management.

Id. at 46-47.

Past Performance Factor Evaluation

The SSAC found that both offerors had equal confidence ratings in four of the five past performance areas; the only difference in ratings was with respect to the program management area, under which Northrop Grumman’s past performance was assessed as “satisfactory confidence” but Boeing’s proposal was assessed as “little confidence.”[32] Id. at 36. Boeing’s little confidence rating for the program management area was based upon the Air Force’s assessment of Boeing’s past performance of the [Deleted] contract with [Deleted], of the [Deleted] contract with the [Deleted], and of the [Deleted] with the [Deleted]. The Air Force evaluated as marginal Boeing’s past performance of these contracts, which were assessed as “very relevant.” Id. at 37-38.

IFARA Factor Evaluation

The SSET also calculated a fleet effectiveness value for each proposed aircraft based upon offeror-provided data, which was analyzed under a variety of scenarios using the CMARPS modeling and simulation tool.[33] As noted above, the fleet effectiveness value reflected the quantity of an offeror’s aircraft that would be required to perform the scenarios in relation to the number of KC-135R aircraft that would have been required. See RFP sect. M.2.6. The agency concluded that, whereas [Deleted] KC-135R aircraft would be required to perform the identified scenarios, the offerors’ aircraft could perform the scenarios with fewer aircraft, that is, [Deleted] KC-30 aircraft and [Deleted] KC-767 aircraft. AR, Tab 55, PAR, at 45. The SSET calculated a fleet effectiveness value of 1.79 for the KC-767, and a higher (superior) value of 1.90 for the KC-30. Id. at 44.

The SSAC also noted a number of insights and observations concerning the IFARA evaluation of the offerors’ aircraft. With respect to Boeing’s proposed aircraft, the agency stated that, as compared to the KC-135R in the peak demand scenario:

[the] KC-767 used [Deleted]% more ramp space (without requiring additional bases), burned [Deleted]% more fuel and was able to accomplish the scenarios with [Deleted] fewer aircraft when taking the aerial refueling receptacle into account. Additional aircraft were needed if every runway in the scenario were interdicted to 7,000 feet. In the base denial scenarios, when a base was closed, [Deleted]% of the Air Tasking Order (ATO) could be completed by basing KC-767s within the remaining bases’ ramp space. Within the scenarios, [the] KC-767 offloaded between [Deleted]% and [Deleted]% of its fuel.

Id. at 45. With respect to Northrop Grumman’s aircraft, the agency stated:

[the] KC-30 used [Deleted]% more ramp space (needing some additional bases), burned [Deleted]% more fuel and was able to accomplish the scenarios with [Deleted] fewer aircraft when taking the aerial refueling receptacle into account. In the base denial sensitivity assessment, in some cases when a base was closed, the [Deleted]. [The] KC-30 has exceptional short field capability if the runway is interdicted to 7,000 feet (as noted in Subfactor 1.1). Within the scenarios, [the] KC-30 offloaded between [Deleted]% and [Deleted]% of its fuel.

Id.

Cost/Price Evaluation

The Air Force calculated a MPLCC for each offeror, which, as noted above, was intended to be an independent government estimate of each proposal, adjusted for technical, cost and schedule risk and including all contract, budgetary and other government costs associated with all phases of the aircraft’s entire life cycle (SDD, production and deployment, and O&S). See RFP sect. 2.5.2; COS at 124.

With respect to Boeing’s proposal, the Air Force made a number of adjustments in Boeing’s proposed costs in calculating its MPLCC. For example, the agency added an additional $[Deleted] million to Boeing’s proposed costs of $[Deleted] billion for SDD because the agency concluded that the firm had not adequately supported its basis of estimate for these costs, despite repeated discussions on this issue. Most of this adjustment ($[Deleted] million) was associated with a moderate risk rating that was assigned to Boeing’s cost proposal to account for the agency’s concern that Boeing had not adequately supported its proposed $[Deleted] billion for non‑recurring engineering costs that Boeing estimated it would incur in the development of its proposed aircraft. As another example, the Air Force added $[Deleted] billion to Boeing’s proposed costs for the production and deployment lots 6 through 13 (the budgetary aircraft) because the agency concluded that Boeing had not substantiated an approximately [Deleted]‑percent decrease in proposed costs for these lots following the fixed-price production lots (lots 1 through 5). The Air Force also upwardly adjusted Boeing’s MPLCC by $[Deleted] billion for “other government costs,” the bulk of which ($[Deleted] billion) reflected additional O&S repair costs because the Air Force did not accept Boeing’s estimating methodology of these costs. The agency also added additional costs to Boeing’s MPLCC to account for the agency’s estimated MILCON costs of $[Deleted] billion. AR, Tab 46, SSET Final Briefing to SSAC and SSA, at 451-76; Tab 55, PAR, at 40-42.

The Air Force also made a number of adjustments in Northrop Grumman’s proposed costs, including upwardly adjusting the proposed SDD costs by $[Deleted] million and the firm’s estimated costs for lots 6 through 13 (budgetary aircraft) by $[Deleted] million. In addition, the Air Force added additional costs to Northrop Grumman’s MPLCC to account for the agency’s estimated MILCON costs of $[Deleted] billion. AR, Tab 46, SSET Final Briefing to SSAC and SSA, at 479-502; Tab 55, PAR, at 42-43.

The Air Force calculated a MPLCC for Boeing of $108.044 billion and a MPLCC for Northrop Grumman of $108.010 billion.

In comparing the firms’ evaluated costs, the SSAC noted that Northrop Grumman had a lower evaluated MPLCC, but that the firms’ evaluated MPLCCs were within $34 million of each other (approximately a .03-percent difference). The SSAC noted, however, that Boeing’s slightly higher evaluated MPLCC was “driven” primarily by the firm’s much higher SDD costs, “which reflected Boeing’s more complex design, development, and integration activities.” AR, Tab 55, PAR, at 43. In addition, the SSAC accepted the SSET’s evaluation that Boeing’s proposal presented a moderate cost risk for SDD. Northrop Grumman’s proposal was assessed as a low cost risk for SDD costs. The SSAC viewed this difference in cost risk for the SDD phase to be the discriminator under this factor. Id. at 44.

SSAC Recommendation

Ultimately, the SSAC recommended to the SSA that [the SSA] select Northrop Grumman’s proposal for award, because the SSAC concluded that Northrop Grumman’s proposal was more advantageous under the mission capability, past performance, cost/price, and IFARA evaluation factors. With respect to cost/price, the SSAC noted that, although the difference between the two proposals’ MPLCC was “negligible,” Northrop Grumman’s risk rating under this factor (low risk) for the SDD phase was lower than that assigned to Boeing’s proposal (moderate cost/price risk) for the SDD phase. Id. at 46-48.

Selection Decision

As noted above, the SSA was presented with the SSET’s evaluation results in a number of briefings at various stages in the procurement. In addition, the SSA was briefed by the SSAC with respect to that council’s recommendation for award and was presented with the SSAC’s detailed PAR, which documented the SSAC’s weighing of the offerors’ respective strengths and weaknesses and the SSAC’s award recommendation.

The SSA agreed with the SSAC’s recommendation that Northrop Grumman’s proposal reflected the best value to the agency, and [the SSA] identified Northrop Grumman’s evaluated superiority under the mission capability, past performance, cost/price, and IFARA factors as supporting this conclusion; [the SSA] also concluded that neither offeror had an advantage under the proposal risk factor. With respect to the mission capability factor, the SSA emphasized that Northrop Grumman’s evaluated superiority in the aerial refueling and airlift areas of the key system requirements subfactor were key factors in [the SSA’s] decision.[34] AR, Tab 54, Source Selection Decision, at 9. Although not key to [the SSA’s] determination that Northrop Grumman’s proposal was more advantageous than Boeing’s under the key system requirements subfactor, the SSA noted Boeing’s evaluated superiority in the survivability area; [the SSA] also noted that neither offeror had an advantage in the operational utility area. Id. at 8-9.

With respect to the aerial refueling area, the SSA noted that Northrop Grumman exceeded the KPP objective for fuel offload capability for the unrefueled radius range to a greater degree than did Boeing; this, the SSA found, demonstrated that a “single KC-30 can refuel more receivers or provide more fuel per receiver than a single KC-767.” AR, Tab 54, Source Selection Decision, at 5-6. In addition, the SSA noted that Northrop Grumman offered a larger boom envelope than Boeing, and proposed a superior fuel offload and receive rate than Boeing. Id. at 6. Although Northrop Grumman had weaknesses in the aerial refueling area, and Boeing did not, the SSA agreed with the SSAC that the weaknesses (associated with receiver lighting and the firm’s boom design) would have no impact on program cost and schedule. Id. at 6-7.

With respect to the airlift area, the SSA noted Northrop Grumman’s superior airlift efficiency, dual cargo deck configuration, and ability to carry more passengers and aeromedical litters and patients. The SSA concluded that the KC-30’s airlift capability was “compelling to