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PRUDENTIAL-MARYLAND JOINT VENTURE CO. v. LEHMAN

June 5, 1984

PRUDENTIAL-MARYLAND JOINT VENTURE COMPANY, Plaintiff
v.
JOHN F. LEHMAN, JR., et al., Defendants, NATIONAL STEEL & SHIPBUILDING COMPANY, Intervenor-Defendant



The opinion of the court was delivered by: GREEN

 This matter is before the Court on the parties' cross-motions for summary judgment, oppositions thereto, replies to oppositions, oral argument on the motions, the administrative record filed with the Court, and the entire record herein. For the reasons set forth below, the Court finds that the defendants acted properly in the procurement of a hospital ship and accordingly grants defendants' and intervenor-defendant's motion for summary judgment and denies plaintiff's motion for summary judgment.

 Findings of Fact

 Plaintiff Prudential-Maryland Joint Venture Company ("Prudential -- Maryland"), a disappointed bidder, seeks to have the Court set aside an award of a contract by defendant Navy to intervenor-defendant National Steel & Shipbuilding Company ("NASSCO") and to award the contract to Prudential-Maryland. The specific award at issue is that of a contract for hospital ships (designated "T-AH(X)") for the Navy. The contract provides for the provision of one hospital ship and gives the Navy the option of ordering a second ship. The contract also gives the Navy the option of ordering certain additional "Design Features" on either ship. This option has been exercised by the Navy.

 The Hospital Ships and Their Mission

 The primary mission of a hospital ship is to provide as its primary mission, "a mobile, flexible, rapidly responsive afloat medical capability to provide acute medical and surgical care in support of amphibious task forces, Marine Corps, Army, and Air Force elements, forward deployed Navy elements of the fleet and fleet activities and RDF [Rapid Deployment Force] located in areas where hostilities may be imminent." Administrative Record, Tab 17 at 2 ("A.R., Tab"). As a secondary mission, the T-AH(X) is to "provide a full hospital service asset available for use by other government agencies involved in support of disaster relief operations worldwide." Id.

 Requests for Proposals

 In 1981, the Navy's Military Sealift Command ("MSC") was assigned responsibility for the acquisition of a hospital ship or ships. MSC proposed to acquire the hospital ship by means of competitive negotiation in two phases: (1) development, by contractors, of a contract design (Phase I), and (2) detail design and conversion or construction of the hospital ship (Phase II). A.R., Tab 2 at 1-2.

 On September 15, 1981, the contracting officer issued the MSC Request for Proposal ("RFP") N00033-81-R-0079, dated September 2, 1981, for Phase I contracts and announced that the accompanying Circular of Requirements ("COR") (the Navy's minimum technical requirements) for the hospital ships, dated July 31, 1981, was available to interested parties. Id.

 Subsequent to the issuance of the MSC RFP, the Secretary of the Navy transferred acquisition authority from MSC to the Naval Sea Systems Command ("NAVSEA") of the Department of the Navy. A.R., Tab 4.

 NAVSEA issued separate RFPs for Phase I and Phase II. Each phase of the hospital ship acquisition was conducted as a negotiated procurement pursuant to Title 10, United States Code, section 2304(a)(11), and a Determination and Findings ("D&F") was made for each phase of the procurement. A.R., Tab 6; Tab 8; Tab 16; Tab 21.

 Submission of Phase I Proposals

 The Phase I offerors, including Prudential Lines and Apex Marine Corporation, submitted initial proposals for Phase I contract on February 1, 1982. See A.R., Tab 8 at 1; Complaint at para. 11. The Best and Final proposals for the Phase I contract were submitted on May 14, 1982. See Complaint at para. 11.

 Prudential Lines proposed converting its lighter-aboard-ship ("LASH") vessels into hospital ships. The conversion was to be performed by Maryland Shipbuilding and Drydock Company. Apex Marine Corporation proposed converting its San Clemente class tankers into hospital ships. The conversion was to be performed by NASSCO. See Complaint at paras. 11, 12.

 The Award of the Phase I Contracts

 On July 6, 1982, pursuant to the NAVSEA Phase I RFP and COR, contracts were awarded to Prudential Lines, Inc. (teamed with Maryland Shipbuilding Company) and Apex Marine Corporation (teamed with National Steel and Shipbuilding Company) for hospital ship design development, each in the amount of $2 million (later modified to $2.4 million). A.R., Tab 10; Tab 12.

 The NAVSEA Phase II Request for Proposals

 The Navy's minimum hospital ship technical requirements for Phase II were contained in the COR dated October 21, 1982, and were issued to Prudential-Maryland and NASSCO on December 6, 1982. This COR was not subject to other than minor change between the date of issuance and the date of submission of Phase II best and final offers on June 10, 1983. A.R., Tab 17.

 The hospital ship detail design and conversion Phase II RFP N00024-83-R-2094(S) was issued by NAVSEA on January 27, 1983, to both Prudential-Maryland and NASSCO and required that initial technical proposals be submitted by offerors by April 6, 1983. A.R., Tab 16 at 1. A $400 million ceiling for the hospital ship program was set forth in Section M of the Phase II RFP. Id. at 121. The Phase II RFP provided for the conversion of one hospital ship and contained an option for a conversion of a second hospital ship. Id. at 3, 66. It also contained provisions for the Navy to order optional Proposed Design Features to enhance the operational capabilities of the ships. Id. at 71c.

 Section M of the Phase II RFP set forth the following evaluation factors for determining award of the Phase II contract: Paragraph 1 of Section M of the Phase II RFP stated that the Phase II contract "will be awarded to that responsible offeror whose offer, conforming to the solicitation, will be most advantageous to the Government, price and other factors considered." Id. at 121; Paragraph 2 of Section M stated that "it is the intent of the Government that the contract resulting from the solicitation shall not exceed $400,000,000, including options." Id.; Paragraph 3 of Section M specified certain minimum requirements that each offeror's proposal must meet and stated that failure to meet any of these requirements would render a proposal "technically unacceptable." Id. The specified items included "patient reception and offload requirements (both aircraft and small craft)" set forth in sections 3.2 and 3.3 of the COR *fn1" and meeting "ABS classification and USCG certification requirements" set forth in section 6.1 of the COR *fn2" Id.; and Paragraph 4 of Section M of the Phase II RFP stated that it was the intent of the Government to award the Phase II contract "to that responsible offeror meeting the minimum requirements of the COR and this RFP who proposes the lowest total price for the basic and option quantities (exclusive of Proposed Design Feature Options) combined." Id.

 Prudential-Maryland's Protests of Alleged Changes in Evaluation Factors for the Phase II RFP

 Prudential-Maryland filed a protest of an alleged change in the evaluation scheme contained in the Phase II RFP to Mr. Anthony R. DiTrapani, Director of Shipbuilding, Office of the Assistant Secretary of the Navy (Shipbuilding and Logistics), on March 8, 1983. Complaint at para. 19C. Prudential-Maryland complained that, by issuing the Phase II RFP, the Navy changed the evaluation factors for award of the Phase II contract. See id. at para. 17. Plaintiff claimed that from the inception of this procurement, it was understood that only Phase I evaluation factors would be considered. Those evaluation factors were "technical, cost, schedule and management (in descending order)." Id. at para. 19b.

 Plaintiff's protest was denied by letter from Mr. DiTrapani on March 16, 1983. A.R., Tab 20. The letter explained that the Phase II RFP would be awarded in accordance with the evaluation criteria set forth in Section M of the RFP and that it was appropriate to make price the primary selection factor for Phase II because of the Navy's need to control the cost of the program. Id.

 Prudential-Maryland never filed a General Accounting Office ("GAO") protest concerning the evaluation criteria or any other aspect of the hospital ship acquisition.

 Prudential-Maryland did not file any protest concerning the adequacy of the Phase II RFP's technical specifications.

 Prudential-Maryland requested that the Navy extend the time allowed for responding to the RFP due date. The Phase II RFP allowed 10 weeks from the time of its issuance for offerors to submit proposals and Prudential-Maryland was informed that the Navy thought the time provided was adequate. Complaint at para. 19a; see also A.R., Tab 16 at 112, para. 42(E).

 The Phase II RFP requested proposals based upon the ships' "earliest projected date of availability" and offerors were to propose delivery dates for the hospital ships in their proposal. Complaint at para. 20; A.R., Tab 16 at 7. The Phase II RFP did not provide for evaluation of proposed delivery dates of the hospital ships, see A.R., Tab 16 at 121, although both Prudential-Maryland and NASSCO's proposed delivery dates were evaluated in Phase I. Prudential-Maryland did not file a protest challenging the absence of a delivery date in the RFP for Phase II.

 The Phase II RFP provided that proposals were to be submitted in base year (September 1982) dollars, and no escalation was to be proposed. Id. at 21, 26, 118-19. Escalation was not an evaluation factor for award of the Phase II RFP. Id. at 119, 121. Prudential-Maryland did not protest to the Navy that escalation should be proposed or evaluated until after the hospital ship contract was awarded to NASSCO.

 Life-cycle costs were not an evaluation factor for award of the Phase II RFP, although they were evaluated in Phase I and were determined to be reasonable for both proposed ship conversions. A.R., Tab 8 at 56-59; Tab 16 at 118, 121; see also Cameron Deposition Transcript at 152-53, 174. In Phase I, NASSCO's proposed life-cycle costs were less than Prudential-Maryland's proposed life-cycle costs. Plaintiff did not protest to the Navy that life-cycle costs should be proposed or evaluated for Phase II.

 The Phase II RFP did not require the submission or certification of cost or pricing data. On March 15, 1983, the requirement for submission of cost or pricing data as required by DD Form 633 was deleted from the Phase II RFP. See id. at 11, 118. Prudential-Maryland did not protest to the Navy that the absence of cost or pricing data or its certification was inappropriate until after the hospital ship contract was awarded to NASSCO.

 The Phase II Source Selection Plan

 In order to provide a rational basis for selecting the proposal which best meets the Navy's requirements for the hospital ships, the Source Selection Authority, on February 8, 1983, approved the Phase II Source Selection Plan ("SSP"). A.R., Tab 19 at 1. This plan was an internal NAVSEA document governing the conduct of the Phase II source selection process. Id. The SSP was structured in three tiers: the Technical Evaluation Review Panel, the Source Selection Review Board, and the Source Selection Authority. Id. at 2.

 The Technical Evaluation Review Panel ("TERP") comprised the first tier of the source selection process. Id. The TERP had three constituent technical evaluation teams: the Medical Facility Evaluation Team, the Ship Characteristics Evaluation Team, and the Schedule/Management/Resources Evaluation Team. See id. at 2, 36. Each of the three technical evaluation teams was to evaluate each offeror's proposal against the technical and operational requirements established in the RFP and the COR. Id. at 15. Section 4.6 of the Phase II SSP set forth evaluation factors to be used by the technical evaluation teams, with detailed questions to guide them, in determining whether a proposal met the requirements of the RFP and the COR. Id. at 15-32.

 The TERP was to provide guidance and instructions to the technical evaluation teams, review and aggregate the teams' evaluations, prepare a source selection evaluation report, identify items for discussions with offerors, and brief the Source Selection Review Board and the Source Selection Authority concerning the results of the TERP's evaluation. Id. at 4, 12-13.

 The Source Selection Review Board ("SSRB") comprised the second tier of the source selection process. The SSRB was to supervise and provide guidance to the TERP, review and consider the source selection evaluation report prepared by the TERP, make a source selection recommendation to the Source Selection Authority, and document the justification for the source selection decision. Id. at 4.

 The Source Selection Authority ("SSA") comprised the third tier of the source selection process. The SSA was to ensure that the entire source selection process was properly and efficiently conducted and to make the final source selection decision. Id. at 3.

 The Phase II SSP provided that the Phase II contract for the acquisition of the hospital ships would be awarded to the responsible offeror whose proposal meets the minimum requirements of the RFP and the COR and provides the lower price. Id. at 11.

 Submission and Discussion of Initial Technical Proposals for Phase II by Prudential-Maryland and NASSCO

 On April 6, 1983, Prudential-Maryland and NASSCO timely submitted their initial technical proposals for the Phase II contract. Complaint at para. 21.

 On April 14, 1983, NAVSEA sent to Prudential-Maryland and to NASSCO identical transmittal letters stating that a preliminary review of the initial Phase II technical proposals had occurred and that, based on the review, certain clarifications of the initial proposals should be provided to NAVSEA by April 20, 1983. A.R., Tab 22. The particular items to be clarified by each offeror were specified in a separate enclosure to that offeror's transmittal letter. Id.

 The April 29, 1983 NAVSEA transmittal letters requested each offeror to meet with NAVSEA on May 5, 1983. Id. Each of the offerors submitted responses to the April 29, 1983 clarification questions and requirement positions.

 On May 18, 1983, the TERP submitted its Preliminary Report to the SSRB. Tab 24, Preliminary TERP Report (May 18, 1983). The report included sets of additional clarification questions and requirement questions directed to the offerors, which were intended as proposed questions to be used by NAVSEA in its negotiations with the offerors. Id. The report also included reports from the three technical evaluation teams about each offeror's initial Phase II technical proposal. Id.

 The TERP Preliminary Report stated that the initial technical proposals of both offerors had significant deficiencies compared to the Navy's requirements. Id. at 1. The report recommended that the proposed clarification questions and requirement questions be sent to each offeror and that Best and Final submissions be requested from the offerors in order to allow the offerors to rectify the deficiencies. Id.

 The SSRB met on May 18 and 19, 1983, to review the TERP Preliminary Report and the proposed negotiation questions. At the meeting, the SSRB reviewed the proposed negotiation questions and decided unanimously to call for the offerors to submit Best and ...


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