PWC Logistics Services, Inc.
Highlights
PWC Logistics Services, Inc. protests the award of a contract to Science Applications International Corporation (SAIC) under request for proposals (RFP) No. SPM4A2-06-R-0001, issued by the Defense Logistics Agency (DLA) for the supply, storage and distribution of chemicals, packaged petroleum, oil and lubricating products for military activities. PWC maintains that the agency improperly applied an unstated evaluation criterion, misevaluated proposals, and failed to engage in meaningful discussions.
B-299820; B-299820.3, PWC Logistics Services, Inc., August 14, 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: PWC Logistics Services, Inc.
Michael R. Charness, Esq., Robert J. Rothwell, Esq., Suzanne D. Reifman, Esq., and Alexander O. Levine, Esq., Vinson & Elkins, LLP, for PWC Logistics Services, Inc.
Thomas P. Barletta, Esq., Daniel C. Sauls, Esq., Paul R. Hurst, Esq., and Ana Holmes Voss, Esq., Steptoe & Johnson, LLP, for Science Applications International Corporation, an intervenor.
Benjamin G. Perkins, Esq., Robert E. Sebold, Esq., and Ed Murray, Esq., Defense Logistics Agency, for the agency.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest that agency applied unstated environmental risk management plan factor in its evaluation of management proposals is denied where record shows that agency provided all offerors identical information during discussions that effectively amended the evaluation criteria of the solicitation.
2. Protest that agency failed to provide protester discussions relating to the adequacy of its environmental risk management plan is denied where record shows (1) agency only assigned protester's proposal a minor weakness in the area--and therefore was not required to discuss the matter--and (2) agency, in fact, afforded protester discussions relating to this aspect of its proposal.
3. Protest relating to reasonableness of the agency's evaluation of protester's and awardee's proposals in the area of environmental risk management plan is denied where record supports agency's conclusions that there were qualitative distinctions between the proposals in this area.
4. Protest relating to the agency's finding that awardee's proposal offered superior past performance is denied where record shows that agency had a reasonable basis for finding the awardee's past performance more relevant than that of other offerors', and the protester's assertions relating to awardee's past performance are based on factually incorrect assumptions.
5. Protest relating to the reasonableness of agency's price evaluation is denied where record shows that agency's evaluation was reasonable and consistent with the terms of the solicitation.
DECISION
PWC Logistics Services, Inc. protests the award of a contract to Science Applications International Corporation (SAIC) under request for proposals (RFP) No. SPM4A2-06-R-0001, issued by the Defense Logistics Agency (DLA) for the supply, storage and distribution of chemicals, packaged petroleum, oil and lubricating products for military activities. PWC maintains that the agency improperly applied an unstated evaluation criterion, misevaluated proposals, and failed to engage in meaningful discussions.[1]
BACKGROUND
DLA is responsible for the wholesale management of the Department of Defense's requirements for packaged petroleum products, oil, and lubricating products (referred to as POLs) under federal supply class (FSC) 9150, and chemical products under FSCs 6810, 6820, 6840 and 6850. To meet those requirements, the agency historically has maintained various field activities that were responsible for comprehensive inventory management (acquisition, storage, distribution and disposal) of the items. In 2005, the Base Realignment and Closure Commission recommended that DLA privatize the wholesale supply, storage and distribution of POLs. Pursuant to that recommendation, the agency engaged in market research, based on which it determined, among other things, to expand the current acquisition to include chemical products. In all, the RFP contemplates privatizing some 4,648 FSC items.
The RFP contemplates the award of an indefinite-delivery, indefinite-quantity contract for a base period of 5 years, with a 5-year option period, to provide comprehensive supply chain management for the described POLs and chemicals. Award was to be made on a best value basis considering four equally weighted considerations: technical proposal, management proposal, past performance, and price. The non-price considerations combined were significantly more important than price. RFP sect. M, at 1. There were numerous subfactors under the non-price factors. The technical proposal factor was comprised of four equally weighted subfactors: forecasting, purchasing, inventory management, and distribution.
Proposed prices were to be evaluated for realism, fairness and reasonableness. RFP sect. M, at 4. For pricing purposes, the RFP distinguished between material prices (unit prices for the various items being purchased) and fees for contract performance.
The agency received four proposals, including PWC's and SAIC's. The agency evaluated the proposals and included three of the four in the competitive range. AR exh. 6. The agency then engaged in numerous rounds of discussions that led, ultimately, to the submission of final proposal revisions on
SAIC | PWC | |||
Overall Proposal Rating | Highly Acceptable | Low Risk | Highly Acceptable | Low Risk |
Overall Technical Rating | Highly Acceptable | Low Risk | Highly Acceptable | Low Risk |
Forecasting | Highly Acceptable | Highly Acceptable | ||
Purchasing | Highly Acceptable | Highly Acceptable | ||
Inventory Management | Highly Acceptable | Highly Acceptable | ||
Distribution | Highly Acceptable | Highly Acceptable | ||
Overall Management Rating | Acceptable | Low Risk | Highly Acceptable | Low Risk |
Organization | Highly Acceptable | Highly Acceptable | ||
Transition Plan | Highly Acceptable | Highly Acceptable | ||
Risk Management | Acceptable | Highly Acceptable | ||
Overall Past Performance Rating | Highly Acceptable | Low Risk | Highly Acceptable | Low Risk |
Substantially Similar Past Performance | Highly Acceptable | Highly Acceptable | ||
Compliance with Subcontracting Goals | Highly Acceptable | Acceptable | ||
Price, Best Case Scenario | $2.355 Billion | $2.346 Billion | ||
Price, Worst Case Scenario | $5.652 Billion | $5.667 Billion |
AR exh. 17 at 2.
The SSA used these evaluation results in making his award decision, but also made independent findings regarding the relative merits of the proposals in several specific areas. First, regarding the acceptable rating for SAIC's management proposal, the SSA concluded that, because of several features that he viewed as strengths, the proposal was just shy of receiving a highly acceptable rating. AR exh. 17 at 5. Regarding the highly acceptable rating assigned to PWC's management proposal, the SSA identified one feature as a weakness; he concluded that this weakness significantly detracted from the highly acceptable rating assigned by the SSAG, but did not warrant downgrading the rating to acceptable.
Based on these and other non-price evaluation findings, the SSA concluded that SAIC's proposal was the strongest overall in the non-price areas. AR exh. 17 at 14. The SSA went on to consider price, and concluded that, based on all considerations, award to SAIC represented the best value to the government. The agency therefore made award to SAIC. Following a debriefing, PWC filed this protest.
UNSTATED EVALUATION FACTOR
PWC asserts that the agency improperly applied an unstated consideration when evaluating proposals. According to the protester, the agency considered environmental risk management under the management factor, even though such a consideration was never mentioned in the solicitation. PWC directs our attention to RFP section L-2.3.3 (instructions to offerors), which describes the information to be included in proposals regarding offerors' risk management plans. That section enumerates eight risks to be addressed, but does not include environmental risk management. PWC also notes that section M-3.3 of the solicitation's evaluation factors provides only that proposals should include a comprehensive risk management plan resolving every conceivable risk; according to the protester, this general requirement was inadequate to put offerors on notice that the agency would give significant consideration to the offerors' environmental risk management plans.
This argument is without merit. Agencies are required to advise offerors of the basis for evaluation and then to evaluate proposals consistent with that stated basis. STEM Int'l, Inc., B-295471,
The final proposal revisions will be evaluated in accordance with Section M. Please note that included under paragraphs 2.4 [the RFP's technical evaluation subfactor for distribution] and 3.3 [the RFP's management subfactor for risk management], the government will address the offerors' capability to execute this contract's environmental requirements and the offerors' proposed management of environmental issues.
AR exhs. 10A at 26; 10B at 26. Thus, not only did the RFP highlight the need for offerors to address risk management generally, but the agency specifically advised offerors that it would consider the firms' environmental risk management plans under the risk management subfactor of the management factor. The evaluation in this area therefore was unobjectionable.[3]
ADEQUACY OF DISCUSSIONS
PWC asserts that the agency failed to engage in meaningful discussions with it in connection with its environmental risk management proposal. According to the protester, the agency identified its environmental risk proposal as a significant weakness in its management proposal, and ultimately used this as a discriminator in its source selection decision. PWC also notes that it was criticized during an environmental preaward survey, and that the agency's representative improperly failed to advise the firm of his concerns at that time. PWC maintains that the agency could not properly have downgraded its proposal in this area without advising it of this weakness during discussions.
While agencies are required to engage in meaningful discussions--that is, point out significant weaknesses and deficiencies that, unless corrected, would prevent an offeror from having a reasonable chance of receiving award--agencies are not required to afford offerors all-encompassing discussions, or to point out every aspect of a proposal that offers a relatively less desirable approach. Volmer Constr., Inc., B-270364, B-270364.2,
The discussions here were unobjectionable. The record shows that each evaluator individually rated PWC's risk management proposal either highly acceptable or acceptable, AR exh. 15A, at BATES 407, 417, 432, 449, 471, and that the SSAG rated it--as well as its management proposal overall--highly acceptable. AR exh. 16A, at BATES 85, 88. The record also includes an environmental preaward survey recommending no award to PWC, primarily based on a conclusion that, while PWC's environmental subcontractor had experience in handling waste management at Department of Energy (DOE) facilities (where the primary work relates to the handling and disposition of nuclear waste), it had little experience handling hazardous materials in the context of a supply chain-type requirement such as the one here. AR exh. 11A, at BATES 17-18. The survey also observed that PWC was only now trying to get systems and procedures in place for the management of hazardous materials.
PWC proposes to use a subcontractor, Cornerstone/Weskem Services (CWS), to manage environmental, safety and health (ES&H) risks. The proposal suggests that CWS will establish ES&H processes at each PWC distribution site only after contract award. PWC identified CWS's facility in, as an appropriate site to visit for the pre-award survey. The survey resulted in a 'no award' recommendation, because CWS has no existing experience managing hazardous materials like those involved in this effort; its experience at Oak Ridge relates to nuclear materials, which are not governed by the same regulatory bodies. While this is not sufficient to downgrade PWC's overall Management rating to the 'Acceptable' level, it significantly detracts from the 'Highly Acceptable' rating PWC's management proposal earned. Oak Ridge ,Tennessee
AR exh. 17 at 11. The SSA ultimately concluded that PWC's and SAIC's management proposals were essentially equal.
The record thus shows that, despite the criticisms relating to PWC's environmental risk management proposal and the results of the environmental preaward survey, the firm's management proposal ultimately was viewed by the SSAG and the SSA as highly acceptable (albeit, ranked at the low end of the highly acceptable spectrum), and as essentially equal to the awardee's. In these circumstances, the agency was under no obligation to have discussions with PWC relating to its environmental risk management proposal.
In any event, the agency did, in fact, ask PWC several questions relating to its environmental management proposal that adequately led PWC into, and thus provided PWC an opportunity to improve, this area of its proposal. On November 30, 2006, after evaluating PWC's initial proposal, the agency presented discussion questions relating to several areas, including four questions relating to PWC's environmental management proposal, which asked PWC to: (1) identify its (and its subcontractor's) management personnel responsible for compliance with environmental rules and regulations identified in the SOW, including restrictions on storage and transportation of hazardous materials, occupational safety and health requirements and hazardous materials release response, AR exh. 10A, at BATES 26; (2) describe its team, at the prime and subcontractor level, that would be responsible for managing these requirements, id.; (3) identify and explain any notice of any major environmental non-compliance incident within the last 10 years, id.; and (4) respond to several environmental scenarios.
ENVIRONMENTAL RISK MANAGEMENT EVALUATION
PWC asserts that the evaluation of its and SAIC's proposals in the area of environmental risk management was unreasonable. According to the protester, the agency unreasonably downgraded its proposal for offering CWS, a newly-created entity, to manage its environmental risk effort, and for proposing to establish environmental safety and health ES&H procedures only after award. The protester maintains that CWS existed prior to the source selection decision and that it had ES&H procedures at its disposal prior to award that it was prepared to use. PWC further maintains that the agency unfairly downgraded its proposal on the basis that its environmental risk management experience was primarily only in handling nuclear materials when, in fact, it also has ample experience in handling other hazardous materials. The protester also asserts that the agency unreasonably failed to take cognizance of the fact that SAIC proposed to provide environmental risk management through the use of a team comprised of [deleted] that would only enter into subcontracts after award of the prime contract, and that it would be more difficult to integrate these [deleted] team members than it would be to integrate the functions of CWS.
In reviewing protests challenging proposal evaluations and source selection decisions, it is not our role to reevaluate proposals; rather, we will examine the record to determine whether the agency's judgment was reasonable and in accord with the stated evaluation criteria and applicable procurement laws and regulations. See Abt Assocs., Inc., B-237060.2,
With respect to the establishment of CWS, the protester is correct that it was established on
The record also supports the agency's conclusion that CWS apparently did not have existing ES&H policies and procedures in place, and that they would be establishing these policies and procedures after award. For example, in responding to the agency's discussion question asking PWC to provide a detailed description of its organizational team responsible for managing compliance with environmental rules and regulations, PWC stated:
[deleted]
AR exh. 10A, Discussion Responses,
In addition, the record shows that the agency reasonably concluded that CWS (predominantly Weskem Services) had experience principally in handling nuclear materials as opposed to managing chemicals and petroleum products in the context of a supply chain management contract. This conclusion was based primarily on the results of the environmental preaward survey conducted at DOE's facility at
Finally, with respect to PWC's allegation that the agency failed to recognize that SAIC would need to integrate its team of contractors, nothing in the record shows that SAIC was dependent upon any of its teaming partners to develop and implement its ES&H policies and procedures, as was the case with the protester. Rather, the record shows that SAIC had pre-established, well-developed ES&H policies and procedures that it intended to use upon award. AR exh. 10B, at BATES 167-176. The fact that SAIC was partnering with other concerns was not relevant to the agency's conclusion that SAIC proposed the best environmental risk management proposal; in contrast, as concluded above, the agency was legitimately concerned that PWC's approach would require a newly-established entity to develop and implement an environmental risk management plan that did not exist. In sum, there was no basis for the agency to downgrade SAIC's proposal in this area simply because the firm was teaming with several contractors.
PAST PERFORMANCE EVALUATION
PWC maintains that the agency unreasonably determined that SAIC's past performance was more relevant than its own. In this regard, PWC's protest focuses on SAIC's six regional maintenance repair and overhaul (MRO) prime vendor contracts given as past performance examples. According to the protester, the agency erroneously concluded that these contracts were substantially similar to the current requirement. In this respect, the protester maintains that SAIC's MRO contracts do not have a critical element required under the current contract, namely, a requirement to handle vendor managed inventory (VMI). According to the protester, VMI contracts are unique in that they require the contractor to invest in inventory by purchasing goods in advance and selling them as orders are received. Protester's Comments,
This argument is without merit. The protester is incorrect regarding both what constitutes VMI supply chain management services, and the services performed by SAIC under its MRO contracts. The RFP does not describe VMI as vendor'purchased-and-managed inventory. According to the RFP, Vendor Managed Inventory (VMI) refers to DLA owned material stored at or managed through a vendor location based on contractual arrangements (see Section 3.1.4). RFP sect. C, at 9. Section 3.1.4 of the SOW in turn describes how and when DLA-owned inventory will be transferred from government depots to the contractor's facilities to be sold as VMI. RFP sect. C, at 10-11.
As for SAIC's MRO contracts, the record shows that they are essentially identical to the current requirement in that they require precisely what the protester maintains are VMI services, as well as VMI services as described in the RFP. SAIC's proposal describes these contracts as:
Supply chain management, purchasing and distribution of facilities maintenance products (plumbing, electrical, heating/ventilating/air conditioning, tools, paints, containers, prefabricated structures, lumber, hardware and assorted industrial materials) for more than [deleted] ordering activities at federal installations in five geographic regions CONUS [continental United States] and one OCONUS [outside the continental United States] . . . .
SAIC Proposal, vol. 4, at 1-1. That same description goes on to state:
SAIC is performing CMS [chemical management services] for chemicals, POLs, aerosols, paints, epoxies, cleaners and sealants, including NSNs [national stock numbers] covered under the Chemicals/POLs contract (e.g. acetone, methyl ethyl ketone and solid film aerosol lubricant). We established chemical/HAZMAT storefront operations at [deleted], and transitioned chemical/HAZMAT management functions from the government to SAIC, which included the physical transfer of government-owned inventory to SAIC. We use SAIC's [deleted] system to perform forecasting, purchasing, inventory management, and distribution of chemicals/POLs to points-of-use (POU) lockers strategically located at production areas. [deleted] ensures adequate inventory levels are maintained to prevent stockouts. SAIC also inputs receipts into the [deleted], providing information to end-user's environment and safety departments for local, state, federal, EPA reporting, shelf-life management, reporting on government inventory levels and value, and compliance with depot environment and safety regulations.
PRICE EVALUATION
PWC objects to the agency's price analysis, specifically, its calculation of the offerors' material prices, maintaining that it provided an irrational basis for the award decision. The agency calculated the offerors' material prices by first establishing estimated total material prices without adjusting those prices to account for potential price increases due to application of the RFP's economic price adjustment (EPA) clauses. Those calculations showed that PWC's total evaluated price, including fees (unadjusted) was $1,717,367,601.59, while SAIC's was $1,730,958,436.84. [6] AR exh. 13 at 16. The agency then calculated prices using what it referred to as best case and worst case EPA scenarios. In calculating the best case scenarios, the agency applied an increase to the prices equal to the average historical increase in prices over the last 10 years for the commodities in question; for chemical prices, the agency applied an annual price increase of 3.5 percent, and for POLs 12.3 percent.
SAIC | PWC | |
Price | Price | |
BCC/BCP | $2.355B | $2.346B |
WCC/BCP | $2.601B | $2.600B |
BCC/WCP | $5.404B | $5.414B |
WCC/WCP | $5.652B | $5.667B |
Average | $4.003B | 4.007B |
PWC asserts that its evaluated price was lower than SAIC's when calculated without adjustment for the EPA scenarios, and that the agency ignored its pricing advantage by employing the EPA scenarios. The protester also asserts that the agency unreasonably determined that the BCC/BCP scenario was the least likely to occur, and actually should have concluded that it was the most likely because it took into consideration price changes over a 10-year period. PWC argues additionally that the agency's worst case EPA scenarios were unrealistic, because they employed the highest historical rate of price increase for each of 10 years, a scenario that the protester maintains is not likely to occur. Finally, PWC asserts that the agency's conclusion that SAIC had a razor thin price advantage was irrational because it was based on consideration of the fifth, averaged, calculation; the protester maintains that, in fact, it was a dead heat between the two offerors, with each having lower evaluated prices in two of the four scenarios that were not averaged.
We have no basis to object to the price evaluation. First, the RFP specifically advised offerors that the evaluation would be based on these calculations, stating as follows:
Material Prices. Material prices will be evaluated by multiplying proposed price times average demand quantities (ADQ) times 10 to arrive at an estimated material contract value unadjusted by EPA. The SSA will be provided with various EPA scenarios to more fully appreciate the effect that EPA adjustments will have on material prices and the relative difference between offers.
RFP sect. M, at 4. In other words, the agency's actions were entirely consistent with the terms of the solicitation. It follows that, had the agency evaluated prices as PWC suggests--unadjusted for EPA scenarios--it would have failed to evaluate proposals in accordance with the RFP.
Second, while the protester speculates that the BCC/BCP scenario is the most likely because it is based on 10 years of historical data, there was no reason for the agency to conclude that any particular scenario was necessarily more or less likely to occur during performance than any other scenario; as a practical matter, the agency will only know after contract performance which of the various EPA scenarios most closely reflects the actual performance of these pricing indexes over the next 10 years.[8] In any case, as noted, the RFP expressly indicated that the agency would calculate various EPA scenarios in order to more fully appreciate the effects EPA adjustments would have on material prices, and the agency's use here of various EPA scenarios enabled it to consider the potential cost to the government of differing rates of cost increase. This was both consistent with the terms of the solicitation, as well as reasonable in light of the fact that the government will bear the financial liability of price increases over time.
Third, as for the protester's assertion that the agency's worst case scenarios are unrealistic, the agency notes, correctly, that it is liable for price increases of up to 40 percent per year for chemicals and up to 150 percent per year for POLs. RFP sect. B, at 6. The agency's calculations of the worst case scenarios used annual increases of 10 percent for chemicals and 38 percent for POLs, figures well within the government's potential liability under the contract. We conclude that the agency reasonably calculated its worst case scenarios in a manner that would reflect some (but not all) of its potential liability in its effort to estimate the most probable cost to the government in light of possible price increases that are fully supported by historical examples.[9]
Finally, as to the protester's assertion that the agency unreasonably concluded that SAIC had a razor thin price advantage, its objection is premised upon the assertion that use of the average scenario was improper. As noted above, however, we find that the agency reasonably could have used all of the various EPA scenarios in its analysis of price. In any event, the record shows that the SSA appreciated the closeness of the two firms' prices, and recognized where PWC was found to have a price advantage over SAIC under the BCC/BCP scenario; in that circumstance, he made a cost/technical tradeoff, finding that SAIC's technical superiority was worth the slight cost premium associated with its proposal. The SSA stated:
In Price, SAIC and PWC are extremely close, with SAIC's and PWC's pricing 0.5 percent or less apart under all five escalation scenarios. SAIC has a slight edge overall due to its better pricing in three of the five scenarios, including the average scenario price. Further, even considering that PWC may be as much as 0.4 percent less than SAIC in one case (BCC/BCP), SAIC's past performance provides greater assurance of successful performance under this contract that is worth more than that slight difference in price in that one pricing scenario.
AR exh. 17 at 17. Since the record thus shows that the SSA selected SAIC over PWC where PWC enjoyed a price advantage under the scenario that it maintains is the most likely, it follows that his decision would have been no different had the firms been found to have arrived at a 'dead heat' in terms of price, as asserted by the protester.
The protest is denied.
Gary L. Kepplinger
General Counsel
[1] In response to the agency's report, PWC filed a supplemental protest asserting that SAIC's proposal failed to conform to two material solicitation requirements. Supplemental Protest,
[2] The agency also identified numerous elements under each of the subfactors in rating proposals to arrive at its subfactor ratings. Agency Report (AR) exhs. 7, 15.
[3] PWC suggests that the agency could not properly revise the solicitation through discussions rather than through a formal amendment. Where, as here, an agency provides identical language or information to all offerors during discussions, its actions are tantamount to amending the RFP, even though no formal amendment has independently been issued. Phenix Research Prods., B-292184.2,
[4] PWC suggests that the individual that conducted the preaward survey was obligated during the survey to convey his reservations to the firm at that time in order for the agency to have discharged its obligation to engage in discussions. However, since the agency was conducting a preaward survey--as opposed to engaging in oral discussions--the individual in question was under no such obligation.
[5] The agency report also contains materials gathered during the PWC preaward survey. Those materials include a proposal dated
[6] For purposes of establishing material prices, the RFP distinguished between cost-driver and non-cost-driver items. Offerors were required to propose unit prices for the cost driver items, while the government established the unit prices for the non-cost-driver items. These unit prices then were multiplied by anticipated demand quantities established by the agency, and then multiplied again by 10 (the number of years of contract performance) to arrive at an estimated material contract value, unadjusted by the RFP's EPA clauses. RFP sect. M, at 4.
[7] For POLs, the agency actually used the second highest, rather than the highest annual increase (49.92 percent) during the last 10 years, reasoning that, due to volatility, this would be more realistic. AR exh. 19, at BATES 67.
[8] In an affidavit submitted with its comments on the agency report, the protester's consultant asserts that the agency calculated the average scenario used in the agency's price evaluation using a weighted average, assigning a 10 percent probability to the BCC/BCP scenario, a 20 percent probability to the WCC/BCP scenario, a 30 percent probability to the WCC/WCP scenario and a 40 percent probability to the BCC/WCP scenario. Protester's Comments,
[9] We point out that the agency did not even use the highest historical increase in POL prices in making its calculations. That figure--49.92 percent--also is within the parameters of the government's liability under the EPA clause.