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DIGEST: Protest is sustained where agency's determination that prices offered by protester for rates were not fair and reasonable was unsupported by record and where evaluation criteria were applied to offerors inconsistently. Which was issued December 5. 1990 and was considered the second cycle of the RFP. Each six month period is termed a "cycle.". The transportation services were divided geographically by trade route and subdivided. Cargo NOS (Not Otherwise Specified) were requested. Responsible carriers who submitted offers which are fair and reasonable. Multiple awards were possible. The letter also notified Lykes that certain line haul/drayage rates offered were considered so high as to be outiside the competitive range and were.

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B-236834.4, Jul 23, 1990

DIGEST: Protest is sustained where agency's determination that prices offered by protester for rates were not fair and reasonable was unsupported by record and where evaluation criteria were applied to offerors inconsistently.

Attorneys

Lykes Bros. Steamship Co., Inc.:

Lykes Bros. Steamship Co., Inc. protests the rejection of various transportation rates it offered in response to request for proposals (RFP) N00033-89-R-2300, issued by the Military Sealift Command (MSC). Lykes argues that MSC failed to offer a rational explanation for rejecting certain rates offered by APL.

We sustain the protest.

The RFP, which was issued December 5, 1989, sought prices from U.S. flag ocean carriers for ocean transportation and intermodal transportation services for the period from April 1, 1990 to September 30, 1990 and was considered the second cycle of the RFP. Each six month period is termed a "cycle." The RFP requested rates for transportation for containerized and breakbulk (non-containerized) cargo, dincluded overseas. MSC states that container rates include "port-to-port" rates for the ocean transportation portion as well as hundreds of rates for line-haul (overland) transportation in both the United States and overseas. Breakbuld transportation includes rates for a port-to-port service which may include rates solicited on a "free in-and-out" basis government loads and discharges cargo, "liner term" basis carrier loads and discharges cargo, or a combination basis.

For the ocean rates, the transportation services were divided geographically by trade route and subdivided, in certain instances, into zones. Inbound and outbound rates for transporting containers carrying three types of cargo: vehicles, refrigerated cargo, and cargo NOS (Not Otherwise Specified) were requested. With respect to breakbulk cargo, the RFP listed 10 categories, including cargo NOS, refrigerated cargo, wheeled or tracked vehicles, and hazardous cargo.

The RFP provided that container and shipping agreements would be awarded to all technically acceptable, responsible carriers who submitted offers which are fair and reasonable. Thus, multiple awards were possible. The protester states that it submitted approximately 3400 rates and that MSC rejected more than 900. Lykes states that it offered prices for virtually every category under the RFP.

The RFP also contained a "Cargo Booking Policy" provision which explained that cargo would be booked by individual rate category for each lot of cargo to the next low cost carrier.

In the event the low cost carrier could not provide acceptable space and an acceptable delivery schedule, then cargo would be booked to the next low cost carrier and so on, until a carrier could be found who could provide acceptable space and an acceptable delivery schedule.

On January 8, 1990, Lykes submitted its initial offer in response to the RFP. By letter dated February 1, 1990, the contracting officer notified Lykes that none of its rates had been accepted based on its initial offer. The letter also notified Lykes that certain line haul/drayage rates offered were considered so high as to be outiside the competitive range and were, therefore, rejected on initial offers. /1/ The agency states that negotiations took place on February 5, and on February 14, MSC issued a request for best and final offers. On February 24, MSC requested a second best and final offer from carriers offering service on route 5. Discussions were held on February 24 and 25.

By letter dated March 5, the contracting officer informed Lykes of the rates which rates were accepted, conditionally accpted, and rejected. March 19, Lykes filed its protest with our Office against the rejection of its rates. /2/

Section M set forth the evaluation factors for award. As stated, award would be made to all carriers who submitted rates which were fair and reasonable. Section M-2 stated that the contracting officer is required to make an affirmative determination that all prices (rates) are fair and reasonable. The RFP stated that each rate would be evaluated on its own merit. The RFP provided further that in determining whether carriers' rates are fair and reasonable, the contracting officer would conduct an analysis in which one or more of the following criteria will be used:

"1. A determination of adequate price competition resulting from a comparison of a carrier's offered rates with the offers of its competitors.

"2. A comparison of the offered rates with all applicable commercial tariff rates for the same or similar services, including ... service contract rates... . This may involve a comparison with commercial tariff rates for a representative market basket of commodities historically shipped by the Department of Defense and the contracting officer's assessment as to whether the commercial rate represents a competitive market rate.

"3. A comparison of proposed rates with prior proposed and contract rates for the same or similar service.

"4. For container cargo only, a comparison of rates offered for containers under 32 feet with rates offered for containers over 32 feet.

"5. A comparison of rates offered, where appropriate, with the level of market rates overseas for the same or similar services. /2/

The RFP also contained a statement that the contracting officer will make an assessment of market conditions, including consideration of trade route serviced, supply and demand, the rate of foreign exchange, balance of trade, and the general international economic environment. The agency states that an assessment of market conditions was used as supporting data for the determinations of rate fairness and reasonableness made on other bases and was not used independently to reject a rate.

Lykes argues that MSC has failed to articulate any reasoned explanation for its rejection of its rates despite its many opportunities to do so. It also asserts that MSC misapplied the evaluation criteria. We agree that the record does not support the agency's evaluation decisions. /3/

Evaluation and award are required to be made in accordance with the terms of the solicitation. Environmental Technologies Group, Inc., B-235623, Aug 31, 1989, 89-2 CPD Para. 202. The Competition in Contracting Act of 1984 provides that the head of any agency shall evaluate sealed bids and competitive proposals based soley of the factors specified in the solicitation. 10 U.S.C. Sec. 2305(b)(1) (1988). In reviewing protests like the one here against allegedly improper evaluations, our Office will not substitute its judgment for that of the contracting agency, but will examine the record to determine whether the agency's judgment was reasonable and in accord with the evaluation criteria listed in the solicitation. Space Applications Corporations, B-233143.3, Sept. 21, 1989, 89-2 CPD Para. 255.

We have recognized that such judgments by their nature are often subjective; nonetheless, the exercise of these judgments in the evaluation of proposals must be reasonable and bear a rational relationship to the announced evaluation criteria upon which competing offers are to be selected. See Wadell Eng'g Corp., 60 Comp.Gen. 11 (1980) 80-2 CPD Para. 269. Implicit in the foregoing is that these judgments must be documented in sufficient detail to show that they are not arbitrary.

With the exception of the rates indicated below, we cannot conclude, based on the record before us, that MSC's rejection of Lykes' rates was reasonable. /4/ The agency's report and comments fail to address with any specificity valid reasons for rejecting Lykes' rates. /5/ Rather, MSC defended its position with generalities and conclusory statements. Where the record provided any insight into the agency's decision making process, it shows that the agency misapplied the evaluation criteria or applied them inconsistently.

The majority of the rates which were rejected were determined by the agency not to be fair and reasonable based on a comparison of Lykes' rates to those of its competitors. We have reviewed the contracting officer's workpapers and worksheets which purport to justify those decisions. Those documents reveal that the only explanation for the rejection of Lykes' rates is the hand-written comment, "comparison to competitors." While we recognize that this comparison is a stated evaluation criterion, we find that this factor was not reasonably and consistently applied.

With respect to the containerized rates, the record shows that MSC accepted rates which exceeded the low rate for a particular rate and zone by 34, 41, and 53 percent. /6/ The record also shows that MSC rejected rates on the sole basis of comparison to competitors' rates, where Lykes' rates exceeded the low rate for a particular route or zone by substantially smaller percentages. For example, on route 43, United States Gulf Coast to Panama, inbound cargo in containers under 32 feet, Lykes submitted a price of $96.02, an increase of $5 from its previously accepted rate. The low rate for this requirement was $85.29. Based on this 13 percent disparity, MSC rejected the rate. The record shows that the agency frequently accepted rates which exceeded the low rate by greater margins and, as noted above, in one instance accepted a rate which was 53 percent higher than the low rate. Ordinarily, there would be nothing improper with the rejection of a proposed rate because it is too high compared to a competitor's rate. However, where as here, based on the virtually identical percentage difference, the agency accepts some rates, and rejects others, it must justify this inconsistent action based on one of the other RFP rate evaluation criteria.

Another example of MSC's inconsistent application of the RFP evaluation factors, which was discussed by MSC counsel, was Lykes' rate for outbound cargo on route 43 for 20-foot containers carrying cargo NOS. The primary reason given by the agency for the rejection was comparison to competitors' rates. The record shows that Lykes' rate was approximately 16 percent higher than the low rate, a price difference that MSC had elsewhere found to be acceptable. Thus, we conclude that the agency could not reasonably reject container rates which exceeded the rate by less than 53 percent, since rates 53 percent higher were accepted elsewhere and there is no explanation for the different treatment. /7/ Here, too, the inconsistent rejections were not supported by references to another RFP rate evaluation criteria.

With respect to the breakbulk cargo, the record shows that MSC accepted rates which exceeded the low rate on a particular rate or zone by as much as 64, 92, or 100 percent. /8/ Thus, where the agency rejected breakbulk rates which were less than double the low breakbulk rate, we are unable to conclude that such a rejection was reasonable. While there may appear to be significant price disparities between certain Lykes rates and the low- priced rates, the agency has failed to explain why price differences of 90 or 100 percent are acceptable in some instances, but not in others. Since the evaluation factor was applied inconsistently, we find that these rates were improperly rejected on this basis.

Many of the rates which fall into the categories described above also are rates that were in the same range as those accepted in the prior cycle. The agency fails to provide a rational explanation as to why those rates were unreasonable 6 months later. We find that MSC improperly rejected rates submitted by Lykes which are approximately the same as, identical to, or lower than previously accepted rates.

The agency argues that the prior acceptance of a rate does not bar rejection of such rates under the current procurement since "each procurement stands alone." Here, however, the RFP specifically defined price reasonableness by reference to previous rates. Therefore, under the terms of the solicitation, the agency was obligated to consider, as an evaluation factor, prior proposed and prior contract prices and, in our view, at least explain why these rates are no longer reasonable after only 6 months.

For example, on route 6A, outbound containers carrying vehicles, Lykes increased its rate from $103 per ton to $105, which was accepted in the previous cycle. The current Lykes rate was 24% higher than the lowest rate offered by a carrier for this requirement. As discussed, a difference of 24% or more was not considered by the agency to warrant rejection in evaluating other rates. In addition, however, the rate compares favorably to its previously accepted rate, which was a stated basis for evaluating whether a rate is fair and reasonable. For many rates which were rejected this cycle, Lykes offered a price which was identical or even lower than a rate which was previously accepted. For at least one rate, MSC rejected a Lykes rate where Lykes was the only carrier who submitted a rate for the requirement and Lykes offered a rate which was 16% lower than its previously accepted rate. /9/

Another example of an unreasonable rejection of rates is the evaluation of Lykes'breakbulk hazardous cargo rates on route 24, interarea. The only explanation of the rejection of these rates is comparison to competitors. The record shows, however, that there was no other competitor who submitted a rate on that route. Moreover, the record shows that Lykes lowered its price 33 percent from its rate which was accepted in the previous cycle. The rate rejected was also 25% lower than the low priced rate accepted in the previous cycle. On other routes, the agency rejected rates based on a comparison to competitors where there were no competitors. /10/ Thus, the stated reason simply does not apply, and therefore find the rejections to be patently unreasonable. Another group of breakbulk rates was rejected based on a comparison of breakbulk rates with container rates for the same route and zone. The contracting officer made hanwdritten notations indicating that the agency should not pay more for breakbulk cargo than for containerized cargo since breakbulk cargo is unprotected. This reason served as the basis for rejection of Lykes breakbulk rates on routes 11, 32A, 10A,C,D, 19A-E, 24A,C.The evaluation factors did not include a comparison of containerized cargo rates to breakbulk rates. Rather, the RFP specifically stated that rates would be evaluated on their own merit. Because these rates were evaluated and rejected on the basis of an unstated evaluation criterion, we find the rejection to be improper.

With regard to the linehaul/drayage rates for point to point in the United States and overseas, the contracting officer's workpapers merely assigned an "X" next to the numerous Lykes rates rejected. The workpapers do not state the reason for the rejections. The agency's report, prepared by counsel, does not specifically address the rejection of linehaul rates, but states that the rejection resulted from an unfavorable comparison to competitor's rates and/or the commercially available market. We are reluctant to accept the representations as to the reasons for rejection as stated in the counsel's report. First, there are no commercial rates cited and thus no basis to review the reasonableness of the rejection on that ground. Second, while Lykes' rates are generally higher than competitors, the percentage difference for each route varies significantly, and the record shows that some of the rates are tha same or in line with rates previously accepted.

Therefore, we find no basis on this record to support MSC's rejection of these rates.

With respect to shipment on flat racks, we also sustain the protest on the basis that the record does not support the agency's decision to reject the rates. While conclusory and self serving statements by the agency appear in the record concerning various rates, we are unable to find a rational basis in the record for the rejections.

We find, however, that in certain instances, rates were properly rejected, and therefore we decline to disturb the agency's decision with respect to those rates. MSC adequately explained its rejection of Lykes' rate on route 32A outbound breakbulk cargo for wheeled or tracked vehicles (unboxed) exceeding 10,000 lbs. per unit (FIO). The record shows that Lykes rate of $295 was the only one submitted for this requirement, which involved shipment from the United States East Coast to Norway. The contracting officer stated that a competitor submitted a rate of $60.00 per ton for the same requirement, except that the shipment was to Sweden, rather than Norway. We find that this was a sufficient reason to reject the rate under the evaluation factor, comparison to competitors.

We have no basis to object to the rejection of Lykes' breakbulk rates which were more than 100% higher than the low rate accepted for the requirement and the agency stated that the reason for rejection was comparison to competitors. /11/ Similarly, we have no basis to object to MSC's rejection, based on a comparison to competitors, of Lykes container rates which were more than 53% higher than the low rate accepted for the requirement. /12/ In addition, we also find that the agency reasonably rejected Lykes rates where Lykes submitted the only rate for a particular requirement and Lykes' price is more than 100% higher than its previously offered price. /13/

In the absence of any rational explanation for the rejection of the Lykes rates protested, we find that the agency should have accepted Lykes rates, since breakbulk cargo is unprotected. This reason served as the basis for rejection of Lykes breakbulk rates on routes 11, 32A, 10A,C,D, 19A-E, 24A,C. The evaluation factors did not include a comparison of containerized cargo rates to breakbulk rates. Rather, the RFP specifically stated that rates would be evaluated on their own merit. Because these rates were evaluated and rejected on the basis of an unstated evaluation criterion, we find the rejection to be improper.

With regard to the linehaul/drayage rates for point to point in the United States and overseas, the contracting officer's workpapers merely assigned an "X" next to the numerous Lykes rates rejected. The workpapers do not state the reason for the rejections. The agency's report, prepared by counsel, does not specifically address the rejection of linehaul rates, but states that the rejection resulted from an unfavorable comparison to competitor's rates and/or the commercially available market. We are reluctant to accept the representations as to the reasons for rejection as stated in the counsel's report. First, there are no commercial rates cited and thus no basis to review the reasonableness of the rejection on that ground. Second, while Lykes' rates are generally higher than competitors, the percentage difference for each route varies significantly, and the record shows that some of the rates are tha same or in line with rates previously accepted. Therefore, we find no basis on this record to support MSC's rejection of these rates.

With respect to shipment on flat racks, we also sustain the protest on the basis that the record does not support the agency's decision to reject the rates. While conclusory and self serving statements by the agency appear in the record concerning various rates, we are unable to find a rational basis in the record for the rejections.

We find, however, that in certain instances, rates were properly rejected, and therefore we decline to disturb the agency's decision with respect to those rates. MSC adequately explained its rejection of Lykes' rate on route 32A outbound breakbulk cargo for wheeled or tracked vehicles (unboxed) exceeding 10,000 lbs. per unit (FIO). The record shows that Lykes rate of $295 was the only one submitted for this requirement, which involved shipment from the United States East Coast to Norway. The contracting officer stated that a competitor submitted a rate of $60.00 per ton for the same requirement, except that the shipment was to Sweden, rather than Norway. We find that this was a sufficient reason to reject the rate under the evaluation factor, comparison to competitors.

We have no basis to object to the rejection of Lykes' breakbulk rates which were more than 100% higher than the low rate accepted for the requirement and the agency stated that the reason for rejection was comparison to competitors. Similarly, we have no basis to object to MSC's rejection, based on a comparison to competitors, of Lykes container rates which were more than 53% higher than the low rate accepted for the requirement. In addition, we also find that the agency reasonably rejected Lykes rates where Lykes submitted the only rate for a particular requirement and Lykes' price is more than 100% higher than its previously offered price.

In the absence of any rational explanation for the rejection of the Lykes rates protested, we find that the agency should have accepted Lykes rates.

/1/ We will not consider the propriety of the rejection of the rates identified in MSC's February 1 letter. In order to be considered timely under our Bid Protest Regulations, Lykes was required to file its protest against the rejection of those rates within 10 working days of when it received notice of the February 1 rejection. Since it did not file this protest until March 19, more than a month after negotiations and submission of best anf final offers (BAFO), its protest against the rejection of those rates is untimely. See 4 C.F.R. Sec. 21.2 (1990).

/2/ The parties apparently agree that "overseas" was a typographical error; the contracting officer stated at a pre-proposal conference that the RFP should have read "overland."

/3/ We sustained American President Lines, Ltd.'s protest against the rejection of its rates under the same solicitation. American President Lines, Ltd., B-236834.3, July 20, 1990, 90-2 CPD Para. ***.

/4/ The protester has withdrawn its protest for those rates for which there is no longer a requirement for service. These include rates offered for 20-foot containers on routes 19A through 19E, routes 7, 13, 14, 27, 49, 50, as well as breakbulk rates under route 44A. Also, line-haul rates outside the continental United States for mileage above 375 will not be acquired under the container agreement and thus we are not considering the rejection of Lykes' rates for this service.

/5/ MSC's initial report on this protest contained the contracting officer's hand-written workpapers which allegedly support the determination to reject the Lykes' rates at issue. These workpapers contained notations, references to tariffs, and many calculations, which, for the most part, were indecipherable and not identified to particular rates. We requested that the agency organize these notes and provide some explanation as to how these calculations supported the rate rejection. The workpapers were reorganized with a cover sheet explaining the notations. However, since it was still difficult to review the analysis, we asked the agency to provide examples, using the worksheets, to show why the contracting officer rejected these rates. For the reasons discussed in the decision, the explanations offered by counsel did not show that the agency acted reasonably.

/6/ Route 5, inbound vehicles, route 43, outbound vehicles, route 39, inbound vehicles, respectively.

/7/ This includes, among others, rates on routes 10, 32, and 43.

/8/ Route 6 inbound, route 6 outbound, and route 39, outbound, respectively.

/9/ Route 10A, inbound and outbound, HVEH.

/10/ Route 19, hazardous breakbulk cargo, interport rates.

/11/ Route 20B, interport, HZD, route 24B, interarea, HVEH. LVEH, route 32B, outbound and inbound, HVEH, LVEH, HZD.

/12/ Route 10C inbound and outbound containers carrying vehicles and NOS, route 32B, inbound 40-foot container carrying vehicles, and route 32C, inbound and outbound containers carrying vehicles and cargo NOS.

/13/ Route 10C, inbound and outbound LVEH, routes 10A through 10D, hazardous breakbulk cargo, inbound, route 32C, inbound and outbound, LVEH.

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