Valentec Systems, Inc.

Valentec Systems, Inc. BNUMBER: B-270880; B-270880.2 DATE: May 16, 1996 TITLE: Valentec Systems, Inc. ********************************************************************** Matter of:Valentec Systems, Inc. File: B-270880; B-270880.2 Date: May 16, 1996 Timothy B. Mills, Esq., Michael J. Schaengold, Esq., and Christy L. Gherlein, Esq., Patton, Boggs, L.L.P., for the protester. Thomas J. Madden, Esq., John J. Pavlick, Jr., Esq., Fernand A. Lavallee, Esq., Carla D. Craft, Esq., and Paul A. Debolt, Esq., Venable, Baetjer, Howard & Civiletti, for Lockheed Martin Ordnance Systems, an intervenor. Bradley J. Crosson, Esq., and Jeffrey I. Kessler, Esq., Department of the Army, for the agency. Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST 1. Protest that contracting agency improperly allowed a directed source subcontractor that was also competing as a prime contractor to obtain an unfair competitive advantage is denied where the record shows that the contracting agency met its responsibility in such situations to ensure that all offerors are competing on an equal basis, and where any prejudice that the protester may have suffered was a result of its decision to ignore the solicitation's explicit instructions for preparing its price. 2. Contracting agency was not required to conduct a cost analysis of offerors' proposals even though offerors were required to submit cost and pricing data where the contracting officer reasonably determined that there was adequate price competition, and where the solicitation specifically advised that award of the fixed-price contract would be on a "price-only" basis, with the only cost analysis to occur after award, pursuant to a reopener provision. 3. Protest that the contracting agency and the directed source subcontractor knew that the solicitation's surrogate price for the directed subcontract was unreasonably high is dismissed as untimely where the protester was provided information prior to submitting its best and final offer that triggered its duty to raise this issue at that time. DECISION Valentec Systems, Inc. protests the award of a contract to Lockheed Martin Ordnance Systems (LMOS) under request for proposals (RFP) No. DAAA09-95-R-0100, issued by the Department of the Army for the production of 120mm high-explosive cartridge M933 mortar rounds. Valentec primarily argues that the Army improperly allowed LMOS to obtain an unfair competitive advantage in this procurement. We deny the protests in part and dismiss them in part. The RFP, issued as a letter solicitation on June 29, 1995, used the terms and conditions, with significant modifications, of a previously issued solicitation that included requirements for these rounds. Pursuant to 10 U.S.C. sec. 2304(c)(1) (1994), the competition was restricted to Martin Marietta Ordnance Systems and Valentec, both of which have previously produced these rounds.[1] The solicitation anticipated award of a firm, fixed-price modification to either of the contracts currently held by these firms. Award would be made "on price evaluation only" to the lowest-priced responsive and responsible offeror. To protect the Army's base of critical producers, the RFP provided that the load, assemble, and pack (LAP) of the cartridge would be accomplished by LMOS, the operator of the Milan Army Ammunition Plant. Hence, LMOS would perform the LAP effort as the prime contractor if it were the awardee, or as Valentec's directed subcontractor if Valentec were the awardee. To eliminate any possible competitive advantage that LMOS might have over Valentec as a result of its status as a directed subcontractor and operator of the plant, the RFP included a surrogate pricing clause for the LAP effort. Pursuant to this clause, offerors were to propose two sets of pricing. First, each offeror was to construct a "proposed/offered" price utilizing a government-provided surrogate price for the LAP effort. Offerors were to support this price with cost and pricing data, which would be used to establish the costs and rates which constituted the baseline portion of the price--all elements of the price save the surrogate-priced directed subcontract. The proposed/offered price was the price that would be evaluated for purposes of award. Second, each offeror was to submit a "not-to-exceed (NTE)" price utilizing an LMOS-provided NTE LAP price which was fully supported on a standard form (SF) 1411. This NTE LAP price would be used to determine the contract award price by substituting it for the surrogate LAP price in the offeror's proposed/offered pricing model.