Matter of: Oregon Iron Works, Inc.; Lakeshore, Inc. File: B-250528; B-250528.2; B-250528.4 Date: January 29, 1993

Matter of: Oregon Iron Works, Inc.; Lakeshore, Inc. File: B-250528; B-250528.2; B-250528.4 Date: January 29, 1993

PROCUREMENT Competitive Negotiation Offers Competitive ranges Exclusion Administrative discretion PROCUREMENT Competitive Negotiation Offers Evaluation Technical acceptability Protest that agency improperly determined proposal to be technically unacceptable and eliminated it from competitive range is denied where record shows that agency evaluators reasonably concluded that the protester failed to show that it had the understanding and expertise necessary to satisfactorily complete the requirement. PROCUREMENT Competitive Negotiation Offers Evaluation errors Evaluation criteria Application Protest against the evaluation of technical proposals is denied where that evaluation was reasonable and consistent with the solicitation's evaluation criteria. PROCUREMENT Competitive Negotiation Contract awards Administrative discretion Cost/technical tradeoffs Technical superiority Award to technically superior, higher priced offeror is proper where award on that basis is consistent with the solicitation evaluation criteria and the agency reasonably determined that the superior technical merit of successful proposal was sufficiently significant to justify award at higher cost.

Attorneys

DECISION Oregon Iron Works, Inc. (OIW) and Lake Shore, Inc. (LSI) protest the award of a contract to Jered Brown Brothers, Inc. (JBB) under request for proposals No. N47408-92-R-25ll, issued by the Naval Facilities Engineering Command for the design and fabrication of a modular elevated causeway system ELCAS (M).

We deny the protests.

This solicitation was issued on April 27, 1992, on a firm, fixed-price basis and is a reprocurement of a defaulted contract which was awarded to Fairey Marine Ltd. in 1986 and terminated in 1989. This contract resulted in delivery of only a partial ELCAS (M) system. The procurement is for the design, fabrication, testing and delivery of a prototype 3,000-foot ELCAS (M) system. The purpose of the ELCAS (M) system is to provide a temporary causeway which will allow the Navy to off-load cargo containers from ships carrying equipment and supplies at locations that have no commercial or military docking facilities. The ELCAS (M) system comprises all hardware, documentation and support equipment required to assemble, install, operate, maintain and retrieve the ELCAS (M) facility. The system includes a pier assembled from modular pontoons, fixed on steel piles, extending beyond the surf zone and constructed in an elevated position above the water. The contractor would also fabricate, test, demonstrate, refurbish and provide interim contractor support for a 680 foot ELCAS (M) system.

The RFP package included, "FOR INFORMATION PURPOSES ONLY," unfinished design drawings drafted by the terminated contractor, Fairey Marine, and specifically stated that the agency made no warranty as to the design data and that use of the data would be at the offeror's own risk and discretion. The RFP stated that award would be made to the responsible offeror whose conforming offer will be most advantageous to the government, cost or price and other factors considered. The RFP informed offerors of the agency's intent to evaluate proposals and make award without conducting discussions with offerors unless the contracting officer determined the conduct of discussions to be necessary. In view of the agency's stated intent to award the contract without discussions, the RFP also advised that the initial offer should contain the offeror's best cost or price and technical terms and that the government may accept other than the lowest offer.

The evaluation factors listed in descending order of importance were technical and management proposal, price and the subcontracting plan. Offerors were advised that technical and management proposal and price were significantly more important than the subcontracting plan. The technical and management proposal was divided into two major elements, technical and management, with technical having the greater emphasis. The technical evaluation factor consisted of four sub-elements: technical program planning and control, system engineering and specialty integration, integrated logistics support, and systems design concept. The RFP provided that each of these four sub-elements were of equal weight. The management evaluation factor consisted of three sub-elements: company experience, facilities and equipment, and management and staffing capabilities. Of these three sub-elements, company experience and facilities and equipment were of equal importance and both were of greater importance than management and staffing. Each of these sub-elements were further divided into specific areas for evaluation.

Six offers were received by the closing date of June 26, 1992. The proposals were evaluated by the source selection evaluation board (SSEB). A technical evaluator reviewed each specific sub-element in all proposals. Each evaluator prepared a proposal evaluation summary, strengths and deficiency reports, and a risk assessment evaluation for each deficiency report. A narrative summary was prepared for each element by that evaluator. The SSEB Chairman took these initial reviews, and after discussions with the entire SSEB, rated each proposal for technical, management and risk. The SSEB Chairman prepared a technical handbook which included the narrative evaluations for each sub-element from each individual evaluator and a summary assessment of each offeror's proposal.

After the initial evaluation, the SSEB recommended four offerors, including JBB and LSI, for inclusion in the competitive range. Of the competitive range offerors, JBB submitted the second highest price at $27,298,771 and received an acceptable technical rating with a low risk assessment. LSI submitted a price of $25,324,703 and received a marginal rating with a moderate risk assessment. LSI was found weak in virtually all the sub-elements under the technical and management elements. The agency found significant weaknesses in system engineering and a key design feature. OIW was the low priced offeror at $24,888,300, but its offer was determined to be technically unacceptable with a high risk rating. The SSEB considered OIW's proposal weaknesses as showing a lack of understanding of the overall process that is required for ELCAS (M). The SSEB found that OIW lacked required systems engineering experience and had based its proposal on the design of the incumbent under the previous canceled contract, even though some of the requirements of the previous contract did not apply to this procurement, and the design was potentially deficient in satisfying the specifications. The source selection advisory council (SSAC) concurred in the SSEB's evaluation of these three offerors.

The results of the proposal evaluation were presented to the source selection authority (SSA). The SSA found that the JBB provided the best value to the government based on its technically superior proposal. The SSA stated that JBB's proposal demonstrated strengths in areas where it allocated significantly more resources than the other offerors and that JBB showed significantly greater strengths in the areas of system integration, engineering and design compared to the proposal of LSI, the proposal next in line for award. The SSA found that JBB's specific strengths improved the probability of successful and timely completion of the project and that its weaknesses were minor and posed low risk to successful performance. JBB was awarded the contract on September 17. On September 25, OIW and LSI filed their respective protests. On October 5, OIW filed a supplement to its protest.

OIW and LSI essentially object to the award to JBB at a higher price. The protesters maintain that in evaluating proposals the Navy ignored both the order and importance of the evaluation factors. The protesters argue that although the solicitation provided that relative weights are to be assigned to each of the subfactors, no such relative weights were actually assigned during the evaluation. The protesters question the use of a single adjectival rating in the final evaluation of proposals. OIW also challenges the agency's evaluation which concluded that its proposal was technically unacceptable.

In reviewing protests against allegedly improper evaluations, we will examine the record to determine whether the agency's judgment was reasonable and in accord with the evaluation criteria listed in the RFP. Scheduled Airlines Traffic Offices, Inc., B-248448; B-248448.2, Oct. 1, 1992, 92-2 CPD Para. 304. The record shows that the SSEB rated OIW's proposal unacceptable with a high risk of nonperformance because of the significant number of deficiencies and weaknesses that OIW had in each of the four technical sub-elements and in two of the three management sub- elements. The SSEB found that the proposal had one significant strength in that OIW had available all of the facilities and equipment necessary to complete the ELCAS (M) project. However, because OIW's facilities are small and OIW did not state whether the proposed facilities would be dedicated exclusively to ELCAS or would be concurrently used for other projects, even under this sub-element, the record shows that the SSEB was concerned about risk of performance.

The SSEB found OIW's proposal weak in the areas of company experience on projects of similar size and complexity and on projects involving systems engineering and complete design responsibilities. OIW failed to address preproduction sample testing/first article testing or configuration management, as required by the solicitation and OIW's experience in the area of integrated logistics was considered inadequate. Further, while OIW proposed to use subcontractors to perform significant functions under the contract such as integrated logistics support, training, and design, OIW did not describe how these subcontractors would be organizationally integrated with the OIW project team as required by the solicitation. Based on the resumnders furnished by OIW for key personnel, the SSEB found that the proposed project manager, quality assurance manager, configuration manager and contracts administrator each had little or no experience performing in their proposed capacities. In the area of systems engineering and specialty integration, the SSEB found that OIW's proposal relied too heavily on the Fairey Marine design data and drawings included in the solicitation for informational purposes only. The SSEB was concerned that OIW had underestimated the design effort required to successfully perform this contract.

Concerning the integrated logistics support area, OIW based its proposal on the canceled solicitation which had different requirements than the current solicitation. The proposal as submitted did not comply with the solicitation requirements and was given a high risk factor for this weakness. Under the system design concept, OIW failed to address certain major events, components and support equipment. OIW referenced a "P4OR pontoon" with which the SSEB was not familiar and which OIW did not adequately describe. OIW did not address some significant attributes of its proposed pontoon system. OIW did not adequately address how sailors would haul and store the proposed large, 165 pound pontoon connectors needed to erect the proposed pontoon causeway, the size and weight of which could become crucial during erection of the causeway in war conditions and heavy seas.

Based on the evaluation of the sub-elements, the SSEB concluded that the multitude of weaknesses indicated a lack of understanding of the overall process because of a lack of demonstrated engineering experience and systems engineering experience. The evaluators found that OIW's reliance on the prior contract design without any analysis to determine if it met solicitation requirements was a critical problem. The SSEB found that the design contained potential deficiencies concerning the pontoon connectors and their portability. The SSEB also found no updating of this design to meet the clarifications in the current solicitation. The SSAC and the SSA reviewed the SSEB results and concurred with the determination that OIW's proposal was technically unacceptable.

Concerning LSI's evaluation, the record shows that LSI's proposals received an overall rating of marginal with a moderate risk of non- performance. The SSEB found that the proposal had one significant strength in that LSI had currently available facilities and equipment to complete the project. In the technical evaluation factor, which was given the highest emphasis in the stated evaluation criteria, LSI had weaknesses in three of the four subfactors. For example, under the design concept subfactor, the SSEB found that the connector system LSI proposed for linking the pontoons was not well suited to field application because it required a tight alignment between the pontoons before the connector pin could be inserted and assigned the weakness a moderate risk.

In the management evaluation factor, the SSEB found weaknesses in LSI's proposal under two of the three subfactors. Under company experience, LSI's proposal was considered weak in four of the areas specified. The SSEB found that LSI lacked experience in projects of similar size and complexity and had not demonstrated adequate experience in systems engineering, integrated logistics support, and configuration management. The SSEB assigned a moderate risk to these weaknesses.

The SSEB also found that LSI was weak in the less important management subfactor--management and staffing. Specifically, the resume for the proposed integrated logistics support manager did not demonstrate adequate background in the integrated logistics support area, and the employment status of the proposed configuration manager was not clear. This weakness was assigned a moderate risk.

Initially, both OIW and LSI argue that the evaluation was improper because the agency did not evaluate the four technical evaluation factors as equal as required by the solicitation, but instead two of the four sub- elements received substantially greater emphasis and weight than the other two sub-elements.

The record shows that the evaluation was conducted in accordance with the RFP. As stated above, the evaluators conducted a detailed review of each proposal and assigned strengths and weaknesses to each evaluation element and sub-element. The report of strengths and weaknesses shows that the more important technical areas were identified in the evaluation report consistent with the RFP evaluation scheme. The record shows that OIW's proposals contained significant weaknesses in all the technical and management evaluation areas except one, facilities and equipment under the management factor. LSI's proposal was found weak in all areas except facilities, which was found to be a strength. Given the evaluator's low rating of both of these proposals in virtually all non-price areas of evaluation, we do not think the weighting of evaluation elements had any impact on the selection decision. The protesters have not shown otherwise.

OIW, in its comments to the agency report, argues that the Navy improperly rejected its proposal based on OIW's proposed use of the Fairey Marine connector design and that the Navy failed to communicate to OIW prior to the receipt of proposals any concerns regarding the Fairey Marine design, which was the only design included in the solicitation.

As previously stated, the Fairey Marine design data was included in the solicitation for informational purposes only. The agency made no warranty as to the design data and warned offerors that the use of the data was at the offeror's own risk and discretion. The agency reports that it found the OIW proposal weak in design because OIW did not show in its proposal that OIW intended to perform a review of the Fairey Marine design and data, complete the design and thoroughly test it. The agency found that the Fairey Marine design contained possible deficiencies regarding the weight of the connector and its handling characteristics and the requirement to provide drains which would affect the causeway design. OIW, in its proposal, failed to address possible design deficiencies.

The protester was aware that the Fairey Marine contract was terminated for default and that Fairey Marine had not completed its design effort. OIW assumed the risk that the Fairey Marine design would not satisfy the agency's requirement. We find reasonable the agency's conclusion that OIW's use of the Fairey Marine design without any analysis of the design's acceptability for the contract showed OIW's lack of understanding of the contract requirements.

Further, notwithstanding the problems associated with OIW's proposed use of the Fairey Marine connectors, the record shows that OIW's proposal contained a number of significant weaknesses in virtually all of the evaluation sub-elements. The agency in its report in great detail has described and explained the weaknesses in OIW's proposal that resulted in the determination of unacceptability. Except with respect to the use of the Fairey Marine connectors, an erroneous reference to a particular type of pontoon, and its inadvertent use of the requirements from the canceled solicitation, OIW has not disputed the Army's position concerning the technical acceptability of its proposal. For example, OIW has not challenged the evaluators' findings that OIW lacked relevant company experience for this type of project, did not address how its proposed subcontractors who would perform critical functions were integrated into the project team, failed to address first article testing and configuration management and failed to offer key personnel who possessed required experience. Based on the record, we find that the agency reasonably determined OIW to be technically unacceptable based on the numerous weaknesses in its proposal.

Since we have concluded that the Navy's finding that OIW's proposal was technically unacceptable was reasonable, OIW is not an interested party to challenge the award to JBB at a higher price since OIW would not be in line for award if its allegation was sustained. See ISC Defense Sys., Inc. --Recon., B-236597.3, Apr. 5, 1990, 90-1 CPD Para. 360.

LSI, in its comments to the agency report, does not dispute the agency's evaluation of its proposal. Our review of the record shows that the agency reasonably evaluated LSI's proposal as marginally acceptable and weak in the areas discussed above.

In a negotiated procurement, there is no requirement that award be made on the basis of lowest cost unless the RFP so specifies. Spectra Technology, Inc.; Westinghouse Elec. Corp., B-232565; B-232565.2, Jan. 10, 1989, 89-1 CPD Para. 23. Cost/technical tradeoffs may be made, and the extent to which one may be sacrificed for the other is governed only by the test of rationality and consistency with the established evaluation factors. Grey Advertising, Inc., 55 Comp.Gen. 1111 (1976), 76-1 CPD Para. 325. Awards to offerors with higher technical scores and higher costs are proper so long as the result is consistent with the evaluation criteria and the procuring agency has determined that the technical difference is sufficiently significant to outweigh the cost difference. University of Dayton Research Inst., B-227115, Aug. 19, 1987, 87-2 CPD Para. 178.

Here, the SSAC compared the technical proposals of JBB and LSI and reasonably concluded that JBB's proposal was superior. As discussed previously, JBB's weaknesses were all considered minor and resulted in only minimal risk of nonperformance; in contrast, the proposal of LSI had significant weaknesses described above. The SSAC analyzed the difference between LSI's price of $25,324,703 and JBB's price of $27,298,771. The agency found that LSI may have omitted a significant cost element from their price proposal in that LSI had not included any manhours for one of their subcontractors in the labor hour matrix.

The RFP provided that technical and management factors were more important than price, and the record shows that the agency had a reasonable basis to find JBB's proposal technically superior to LSI's. While LSI disagrees with the agency's choice, it has not shown that the cost/technical tradeoff was unreasonable or inconsistent with the RFP's evaluation criteria.

The protests are denied.