TITLE: L-3 Communications, KDI Precision Products, Inc.�, B-290091; B-290091.2; B-290091.3, June 14, 2002
BNUMBER: B-290091; B-290091.2; B-290091.3
DATE: June 14, 2002
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L-3 Communications, KDI Precision Products, Inc. , B-290091; B-290091.2;
B-290091.3, June 14, 2002
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: L-3 Communications, KDI Precision Products, Inc.
File: B-290091; B-290091.2; B-290091.3
Date: June 14, 2002
Louis D. Victorino, Esq., James J. McCullough, Esq., Jonathan S. Aronie,
Esq., and Abram J. Pafford, Esq., Fried, Frank, Harris, Shriver &
Jacobson, for the protester.
John S. Pachter, Esq., Jonathan D. Shaffer, Esq., S. Jun Jin, Esq., and W.
Stephen Dale, Esq., Smith, Pachter, McWhorter & Allen, for Alliant
Precision Fuze Company, an intervenor.
Warren D. Leishman, Esq., and Gregory H. Petkoff, Esq., Department of the
Air Force, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Agency reasonably determined that awardee's performance of certain prior
contracts was not relevant for purposes of evaluating past performance,
where contracts involved more complex and challenging technology than that
under the solicitation; agency reasonably relied instead principally on
awardee's performance on predecessor contract for the solicited work.
DECISION
L-3 Communications, KDI Precision Products, Inc. (KDI) protests the
Department of the Air Force's award of a contract to Alliant Precision
Fuze Company, under request for proposals No. F08635-01-R-0073, for
production of DSU-33 proximity sensors. KDI challenges the evaluation of
past performance and the agency's assessment of program risk based on
KDI's proposal of significant no‑cost-to‑the-government work.
We deny the protest.
The DSU-33 is a nose-mounted, radio frequency proximity sensor for general
purpose bombs and the Joint Direct Attack Munition. The sensor determines
where the ground is relative to the weapon system through receipt of the
return of a signal transmitted to the ground; at a predetermined height
(referred to as *height‑of‑burst*), normally 20 feet above the
ground, the sensor provides a fire pulse to a separate fuze, which in turn
initiates detonation. The RFP provided for award of a primarily
fixed-price contract for the production of up to 72,000 DSU-33 proximity
sensors, including a 12,000-unit maximum basic quantity, with five
12,000-unit maximum option quantities. The contemplated contract is a
follow-on contract to a production contract awarded to Alliant in 1998.
Offerors were allowed to propose to build either to the current DSU-33
technical data package (referred to as *baseline*) or to an alternate
design (referred to as *alternate baseline*).
Award was to be made to the offeror whose conforming proposal represented
the best value, and demonstrated that the offeror can accomplish the RFP
requirements in a manner most advantageous to the government. The RFP
provided for proposals to be evaluated under the following four equally
weighted factors: (1) past performance on current and relevant contracts;
(2) mission capability, including (in descending order of importance)
subfactors for form, fit and function, manufacturing capability, systems
engineering, testing, schedule, and small disadvantaged business
subcontracting; (3) proposal risk (to be assigned at the mission
capability subfactor level only); and (4) cost/price.
Four proposals from three offerors were received in response to the
RFP--Alliant and a third firm submitted baseline proposals, while KDI
submitted both a baseline and an alternate baseline proposal. All
offerors were included in the competitive range and, after discussions,
were requested to submit final proposal revisions.
Alliant's and KDI's final baseline proposals received the highest
technical and overall ratings. While the evaluated price ($[DELETED]) of
KDI's final baseline proposal was lower than Alliant's ($[DELETED]), the
source selection authority (SSA) noted that Alliant's proposal was
superior under the collectively more important non-price factors. In this
regard, Alliant was the incumbent contractor, and its proposal was rated
exceptional/high confidence in past performance, while KDI's was rated
only very good/significant confidence. In addition, while Alliant's
proposal received a satisfactory/low risk rating under all seven mission
capability subfactors, KDI's received a satisfactory/low risk rating under
only six of the subfactors. Under the second most important mission
capability subfactor, for manufacturing capability, KDI's baseline
proposal received a satisfactory/moderate risk rating based on the fact
that (1) KDI will be required to undertake a new production start and
production qualification effort, which usually requires special contractor
emphasis and close government monitoring, (2) it appeared from KDI's
proposal that there were only limited manufacturing process controls, and
(3) KDI's proposed approach to ensuring height‑of-burst across all
temperature ranges was only minimally acceptable, and entailed additional
risk. Proposal Analysis Report (PAR) at 10; Subfactor Summary; Analysis
Worksheet (Evaluators).
In explaining his finding of Alliant's overall superiority, the SSA noted
that Alliant offered
a strong record of highly relevant Past Performance along with
demonstrated and proposed technical expertise, experience, and a strong
management approach for producing DSU-33B/Bs. I have high confidence
that, as a proven producer of DSU‑33B/Bs, [Alliant] can produce and
deliver fully operational units to the warfighter on time and at cost.
Under the current wartime situation, maintaining a production capability
in order to deliver units to the field is critical. [Alliant] proposed a
proven low risk manufacturing capability with the systems engineering and
test assets available, to ensure proven products are delivered on
schedule.
Source Selection Decision (SSD) at 3. The SSA further found an *inherent
program risk* in KDI's proposal based on KDI's proposal to absorb certain
[DELETED] costs (exceeding $[DELETED]), including those relating to
[DELETED]. Id. The SSA concluded that Alliant's superiority in the
non-price factors outweighed KDI's lower price, and that Alliant's
baseline proposal therefore represented the best value to the government.
Upon learning of the resulting award to Alliant, and after being debriefed
by the agency, KDI filed this protest.
PAST PERFORMANCE
KDI challenges Alliant's rating of exceptional/high confidence under the
past performance factor. In this regard, the RFP provided for the agency
to assign an overall confidence assessment rating for past performance
*considering the offeror's relevant performance record,* and specifically
indicated that *[t]he currency and relevancy of the information, source of
the information, context of the data, and the general trends in your
performance will be evaluated.* RFP S: M1(c)(1). *Currency and
relevancy* was defined as *work performed within the last 5 years and
relevant to the production, manufacturing and design of proximity
sensors.* RFP S: M1(c)(1)(b). The agency's Performance Risk Assessment
Group rated prior contracts as either: highly relevant, where the work
was similar in magnitude and complexity; relevant, where there were some
dissimilarities in magnitude and/or complexity, but the contract included
most of what the solicitation required; somewhat relevant, where the
dissimilarities were greater but the contract included some of what the
solicitation required; or not relevant. PAR at 14.
Alliant and KDI both proposed nine contracts for consideration. Six of
KDI's contracts, all of which were related to fuzes, were found to be
sufficiently relevant to be included in the past performance evaluation.
Three of Alliant's contracts were found to be sufficiently relevant to be
included in the past performance evaluation, including the predecessor
DSU‑33 proximity sensor contract, a contract for production of the
FZU-39 proximity sensor, and a contract for development and production of
the MK419 multifunction fuze (which includes a height-of-burst capability
and proximity sensing). Alliant's overall exceptional/high confidence
past performance rating was based on an exceptional past performance
rating for the highly relevant DSU‑33 proximity sensor contract, a
very good rating for the relevant MK419 multifunction fuze, and a
satisfactory rating for the relevant FZU-39 proximity sensor contract.
KDI maintains that the Air Force improperly failed to take into account in
its rating of Alliant's past performance two contracts listed by Alliant
in its proposal: (1) a contract for the development of the hard-target
smart fuze, which has not yet reached production, and for which Alliant
received an overall marginal performance rating; and (2) a contract for
development of the next-generation multiple-event hard-target fuze, for
which Alliant received an overall satisfactory performance rating.
According to the protester, Alliant's past performance rating would have
been lower had the agency taken Alliant's performance under these two
contracts into account.
The evaluation of past performance is a matter within the discretion of
the contracting agency, which our Office will review only to ensure that
it was reasonable and consistent with the stated evaluation criteria and
with procurement statutes and regulations. Sterling Servs., Inc.,
B‑286326, Dec. 11, 2000, 2000 CPD P: 208 at 2-3. Where the
solicitation provides that the past performance evaluation will take into
consideration the similarity of offerors' contracts to the contract to be
awarded, the agency's consideration should be meaningful. Beneco Enters.,
Inc., B‑283512.3, July 10, 2000, 2000 CPD P: 176 at 7‑8 n.4;
Chem‑Services of Indiana, Inc., B-253905, Oct. 28, 1993, 93-2 CPD P:
262 at 3-4. We think the Air Force reasonably determined that Alliant's
contracts for development of the hard-target smart fuze and the
multiple-event hard-target fuze were not sufficiently relevant to be
included in the past performance evaluation.
The agency reports that the hard-target fuze technology associated with
the two contracts is vastly different from the technology associated with
proximity sensors. The proximity sensor, incorporating Doppler radar
technology, determines where the ground is relative to the weapon system
through receipt of the return of a radio frequency signal transmitted to
the ground; at a predetermined height‑of-burst, the sensor provides
a fire pulse to a separate fuze, which in turn initiates detonation.
Basic proximity sensor technology has been in existence for many years.
In contrast, a hard-target fuze uses completely different technology
designed to permit deep penetration of hard targets before detonation; the
hard-target fuze relies on an mechanical accelerometer receiving shock
signals generated by the weapon system decelerating as it hits the surface
of the ground and penetrates various layers of medium and voids, rather
than on the Doppler radio frequency sensors used in the proximity sensor.
The hard-target fuze programs require the development of software
algorithms to read the impulses generated by the accelerometer, so as to
distinguish between the various layers of medium and voids, and these
algorithms must be performed sufficiently fast as to detonate the weapon
effectively. The hard‑target fuze must be shock‑hardened in
order to survive and continue to function notwithstanding penetrating
multiple layers of hardened concrete, compacted soil, etc. In addition,
the hard-target fuze, because it (unlike the DSU-33 proximity sensor) is
in the direct firing sequence and includes the explosives which ignite the
weapon, must satisfy a *Fuze, Safe and Arm* requirement. Finally, unlike
proximity sensor technology, hard-target fuze technology has not yet been
successfully developed.
While there may be some general similarities between the hard-target fuze
contracts and the contemplated DSU-33 contract effort--e.g., conforming to
schedule and managing the contract effort--we think the agency has
reasonably established that hard-target fuze technology is significantly
more complex and challenging than proximity sensor technology. The
protester has not refuted the agency's explanation as to the differences
in the technologies and their stages of development. Based on these
material differences, it was reasonable for the agency to conclude that
Alliant's performance on the hard-target fuze development contracts was a
poor predictor of performance under the solicited effort, and that these
contracts therefore were not relevant to the past performance evaluation.
Conversely, we think the agency reasonably gave significant weight to
Alliant's exceptional past performance on its predecessor DSU‑33
proximity sensor contract, under which it produced over 15,000 units
without a single lot failure; this contract clearly was a much stronger
predictor of performance under the solicited DSU‑33 production
effort than performance on other contracts, be they for hard-target fuze
development or even for other proximity sensors. We conclude that there
is no basis for questioning the agency's rating of Alliant's overall past
performance as exceptional/high confidence; the record certainly supports
the agency's finding that Alliant's past performance was significantly
superior to KDI's, since KDI had not performed a proximity sensor contract
and had received no overall performance rating higher than very good for
any of its six evaluated contracts.
PROPOSAL RISK
KDI asserts that the Air Force improperly downgraded its proposal for not
charging the government for work under contract line items for [DELETED],
and instead absorbing [DELETED] costs exceeding $[DELETED]. The SSA
stated in his SSD that *there is an inherent program risk due to [KDI]
assuming significant expenditures that would normally be borne by the
Government*; according to the SSA, *history shows [that] inadequate
funding usually results in inadequate contract performance.* SSD at 3-4.
KDI argues that the SSA's consideration of its
no‑charge‑to‑the‑government pricing approach
amounted to the improper introduction of an unstated evaluation factor
into the evaluation.
Price realism is not ordinarily considered in the evaluation of proposals
for the award of a fixed-price contract, because these contracts place the
risk of loss upon the contractor. However, an agency may provide for a
price realism analysis in such cases for the purpose of assessing an
offeror's understanding of the requirements
and the risk inherent in an offeror's proposal. See Wackenhut Servs.,
Inc., B-286037, B‑286037.2, Nov. 14, 2000, 2001 CPD P: 114 at 3. In
this regard, the risk of poor performance when a contractor is forced to
provide services at little or no profit is a
legitimate concern in evaluating proposals. Molina Eng'g, Ltd./Tri-J
Indus., Inc. Joint Venture, May 22, 2000 B-284895, 2000 CPD P: 86 at 4;
see generally Acepex Mgmt. Corp., B-279173.5, July 22, 1998, 98-2 CPD
P: 128 at 6 (although a fixed-price offer that is below cost is legally
unobjectionable and cannot be rated lower or downgraded in the price
evaluation for source selection by virtue of its low price, the risk of
poor performance when a contractor is forced to provide services at little
or no profit is of legitimate concern).
Here, the RFP put offerors on notice that the agency would view with
concern unrealistically low prices, stating as follows:
Proposals unrealistic in terms of technical, cost/price, or schedule
commitments will be deemed indicative of an inherent lack of comprehension
of the complexity and risks of the requirements and may be rejected. . . .
No advantage will accrue to an offeror who submits an unrealistically low
cost/price proposal. Such a proposal may be viewed as indicative of a
lack of understanding of the Government's needs.
RFP S: M1(a). Given this language, the SSA's concern that KDI was
proposing not to charge the government for certain required work was
consistent with the RFP.[1] Although KDI maintains that there was no
basis in fact for this concern--since there is no evidence to indicate
that in fact its pricing will result in future performance problems--we
think the SSA nevertheless could reasonably be concerned that KDI's
proposal to absorb significant performance costs created some risk of
future performance problems; again, the risk of poor performance when a
contractor is forced to provide services at little or no profit is a
legitimate concern in evaluating proposals. See Molina Eng'g, Ltd./Tri-J
Indus., Inc. Joint Venture, supra, at 4; Volmar Constr., Inc., B-272188.2,
Sept. 18, 1996, 96-2 CPD P: 119 at 5.
KDI challenges the reasonableness of the price/technical tradeoff.
However, given our conclusions above that the past performance and program
risk aspects of the evaluation were reasonable, and given KDI's failure to
challenge the agency's determination of KDI's higher proposal risk with
respect to manufacturing capability, we find no basis to question the
tradeoff and the resulting determination that Alliant's proposal
represented the best value to the government.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] The agency actually asserts that the SSA's concern that there was an
inherent program risk did not amount to a price realism analysis.
Contracting Officer's Statement, 10-11. However, no matter how the
determination is characterized, the fact remains that KDI's
no-charge-to-the-government pricing for these contract line items was
below-cost and unrealistically low, and that the SSA's concern as to the
risk of inadequate contract performance was consistent with the RFP.