B-187156, JANUARY 4, 1977

B-187156, JANUARY 4, 1977

PROTESTER'S CONTENTION THAT AGENCY INADEQUATELY DETERMINED REASONABLENESS OF LOW OFFEROR'S PRICING IS WITHOUT MERIT WHERE RECORD SHOWS THAT AGENCY COMPARED EACH OFFEROR'S MANHOUR AND MATERIAL COST ESTIMATES WITH ITS OWN ESTIMATES AND FOUND THAT, ON BASIS OF ITS OWN ESTIMATES, LOW OFFEROR'S TARGET COSTS WERE REASONABLE.

BETHLEHEM STEEL CORPORATION:

BETHLEHEM STEEL CORPORATION HAS PROTESTED THE AWARD OF A FIXED-PRICE INCENTIVE TYPE CONTRACT TO AVONDALE SHIPYARDS, INC. BY THE NAVAL SEA SYSTEMS COMMAND UNDER REQUEST FOR PROPOSALS (RFP) NO. N00024-76-R 2080(S), WHICH SOLICITED OFFERS FOR THE CONSTRUCTION OF TWO FLEET OILERS WITH AN OPTION QUANTITY OF TWO ADDITIONAL VESSELS.

BETHLEHEM INITIALLY CONTENDED THAT THE NAVY DID NOT CONDUCT ADEQUATE DISCUSSIONS WITH IT IN COMPARISON WITH THE DISCUSSION OPPORTUNITIES PROVIDED OTHER OFFERORS. HOWEVER, THE NAVY HAS APPARENTLY SATISFIED BETHLEHEM WITH RESPECT TO THAT ISSUE. THE MAIN THRUST OF BETHLEHEM'S PROTEST IS THAT AVONDALE'S PRICE WAS SO LOW THAT THE NAVY WAS REQUIRED TO CONDUCT DETAILED DISCUSSIONS WITH AVONDALE CONCERNING ITS PRICE AND/OR PERFORM A COST ANALYSIS OF AVONDALE'S PROPOSAL TO DETERMINE IF AVONDALE WAS ATTEMPTING A BUY-IN OR HAD MADE A MISTAKE WHICH WOULD RESULT IN A HIGHER COST TO THE GOVERNMENT. BETHLEHEM ALSO CHARGES THAT THE NAVY TOOK AN UNJUSTIFIABLY LONG TIME TO ANNOUNCE WHICH OFFEROR WOULD RECEIVE THE AWARD AND THEREBY PRECLUDED BETHLEHEM FROM SEEKING OTHER CONTRACTS.

OF THE FOUR COMPANIES WHICH SUBMITTED OFFERS, ONE WITHDREW AND THE OTHER THREE WERE GIVEN PRE-AWARD SURVEYS, THE RESULTS OF WHICH WERE GIVEN TO THE CONTRACTING OFFICER ON JULY 9. DURING THIS TIME ONLY LIMITED DISCUSSIONS WERE HELD WITH THE OFFERORS AND BEST AND FINAL OFFERS WERE REQUESTED FOR RECEIPT BY AUGUST 2. BY LETTERS DATED AUGUST 10, 1976, BETHLEHEM AND ANOTHER OFFEROR, INGALLS SHIPBUILDING DIVISION OF LITTON SYSTEMS, INC., WERE NOTIFIED THAT THE CONTRACT HAD BEEN AWARDED TO AVONDALE.

IN SUPPORT OF ITS POSITION THAT DETAILED DISCUSSIONS SHOULD HAVE BEEN HELD WITH AVONDALE OR A COST ANALYSIS SHOULD HAVE BEEN PERFORMED REGARDING ITS PRICES, BETHLEHEM SUBMITS THAT AVONDALE'S PRICE WAS 25 PERCENT LOWER THAN BETHLEHEM'S AND CONSIDERABLY LOWER THAN THE NAVY'S ESTIMATE.

BETHLEHEM BELIEVES THAT THE NAVY'S ACCEPTANCE OF THE AVONDALE PRICE WITHOUT RESORTING TO DETAILED DISCUSSIONS OR A COST ANALYSIS COULD HAVE RESULTED IN A CONTRACT UNDER WHICH THE NAVY WOULD NOT BE GETTING THE "LOWEST PRICE." IN RESPONSE, THE NAVY STATES THAT:

" * * * BSC'S (BETHLEHEM'S) CHARGE THAT THE NAVY'S PRICE ESTIMATE WAS AT CONSIDERABLE VARIANCE WITH THE AVONDALE PROPOSAL IS DIFFICULT TO UNDERSTAND SINCE THE NAVY'S BASIC SHIP CONSTRUCTION ESTIMATE HAS NEVER BEEN DISCLOSED TO BSC OR ANY OTHER OFFEROR EITHER BEFORE OR AFTER THE AWARD OF THE CONTRACT. AN ATTEMPT AT A 'BUY-IN' ON AVONDALE'S PART WAS DISCOUNTED BEFORE AWARD BY A COMPARISON OF EACH OFFEROR'S MANHOUR AND MATERIAL COST ESTIMATES TO THE CORRESPONDING ELEMENTS IN THE NAVY BASIC CONSTRUCTION ESTIMATE. THE COMPARISON WAS MADE SOLELY FOR THE PURPOSE OF ENSURING THAT EACH PROPOSAL DID NOT CONTAIN INDICATIONS OF SUBSTANTIAL ERRORS OR POSSIBLE MISUNDERSTANDING OF THE SPECIFICATION REQUIREMENTS. THE COMPARISON DID NOT YIELD ANY RESULTS THAT WOULD HAVE NECESSITATED A CALL FOR DETAILED COST OR PRICING DATA FROM ANY OR ALL OF THE OFFERORS, THEREFORE THE CONTRACT WAS AWARDED * * * ."

THE NAVY FURTHER ADVISES THAT IN FACT ITS ESTIMATE WAS SLIGHTLY BELOW AVONDALE'S TARGET COSTS.

UNDER THESE CIRCUMSTANCES, IT APPEARS THAT THE NAVY DID ANALYZE AVONDALE'S PROJECTED COSTS AND DETERMINED THAT THERE WAS NO INDICATION THAT THE FIRM HAD MISUNDERSTOOD THE GOVERNMENT'S REQUIREMENTS OR HAD MADE A MISTAKE IN ITS COST ESTIMATE. SINCE THE NAVY WAS THUS ABLE TO DETERMINE, ON THE BASIS OF COMPETITION, THAT AVONDALE'S PRICING WAS REASONABLE, THE NAVY WAS NOT OBLIGATED TO CONDUCT DETAILED DISCUSSIONS WITH AVONDALE OR PERFORM A FURTHER ANALYSIS OF AVONDALE'S PRICES. SEE 10 U.S.C. 2306(F)(1970), ARMED SERVICES PROCUREMENT REGULATION SEC. 3 807 (1975 ED.); UTL CORPORATION, B-185832, MARCH 30, 1976, 76-1 CPD 209.

WITH REGARD TO BETHLEHEM'S CHARGE THAT THE NAVY'S DEFERRAL OF ITS AWARD DECISION WAS IMPROPERLY PROLONGED AND SERIOUSLY INCONVENIENCED BETHLEHEM, THE NAVY REPORTS THAT THE AWARD WAS NOT BASED ON PRICE ALONE AND THAT THE PRE-AWARD SURVEYS OF OFFERORS TOOK UP A MAJORITY OF THE TIME EXPENDED PRIOR TO AWARD. WE FIND NO BASIS TO OBJECT TO THE NAVY'S AWARD PROCEDURE.

ACCORDINGLY, BETHLEHEM'S PROTEST IS DENIED.