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ESCO Marine, Inc., B-401438, September 4, 2009

  • By GCPC GovCon Legal Team
  • December 8, 2009
  • Financial ResponsibilityTask Orders

Link: GAO Opinion

Agency: Department of the Navy

Disposition: Protest sustained in part and denied in part.

Keywords: Financial responsibility; Task order jurisdiction

—————————————————————————————————————————–

ESCO Marine, Inc (ESCO) protested the issuance of a task order to International Shipbreaking Limited LLC (ISL), under a request for proposals (RFP) issued by the Department of the Navy, Naval Sea Systems Command, Supervisor of Shipbuilding, Conversion & Repair, for the towing and dismantling of three decommissioned Navy ships. ESCO claimed that the Navy’s evaluation of offerors’ proposals and resulting award determination were unreasonable. The RFP set out five evaluation criteria, but established that price was significantly more important than the other factors and that task orders would be issued to those that represented the “best value” to the government. Also, the underlying contracts stated that any scrap or reusable equipment removed by the contractor from the ships were to be sold or disposed of as provided for within the contract, and that estimated proceeds from the sales should be factored into the contractors’ proposed prices. The Navy evaluated the proposals that they received and subsequently determined that ISL’s proposal was the best value to the government, since, all other aspects being equal, ISL’s proposed price was $.06 while ESCO’s proposed price was $4,679,726.

ESCO challenged the Navy’s evaluation on several grounds, but primarily was concerned with the reasonableness of the Navy’s evaluation of ISL’s financial ability to perform the task at its proposed price. The other issues and arguments, while considered in the protest, were not detailed in the GAO’s final decision.

Before addressing the substantive portion of ESCO’s protest, the GAO dealt with the jurisdictional matter raised by the Navy as grounds for dismissing the protest. The Navy claimed that jurisdiction was lacking because GAO’s jurisdiction to review task order protests is limited to those valued in excess of $10 million and that the task order in question in this protest was valued at $.06. In response, the GAO stated that its jurisdiction turns on the meaning of the term “valued” as used in the National Defense Authorization Act of Fiscal Year 2008. Following a lengthy discussion of what should be included in the term “valued” the GAO determined that the price of the task order does not represent the task order’s entire value, and that consideration must be given to the value of the estimated scrap materials that would result from the disassembly as well. When the amounts for the scrap were included the value of the task orders were well above the $10 million mark, and thus, the GAO retained jurisdiction.

In particular, ESCO argues that the Navy’s cash-flow analysis was improperly premised on the assumption that ISL would generally work on only one ship at a time (and thereby incur the estimated upfront costs of performance sequentially), although ISL’s own proposed schedule stated otherwise. GAO sustained ESCO’s challenge to the Navy’s determination that ISL was sufficiently financially responsible. To that point, GAO stated that it will generally not consider a protest that challenges an affirmative determination of financial responsibility, except under limited circumstances – where it is alleged that definitive responsibility criteria in the solicitation were not met or that there are serious concerns raised about a CO unreasonably failing to consider available relevant information. In this protest, the Navy did not take into account specific schedule information provided by ISL, but instead based its determination of financial responsibility on information contradictory to the information contained in ISL’s proposal.

In light of this determination, the GAO recommended that the Navy make a new assessment of ISL’s responsibility and that ESCO be reimbursed its costs of filing and pursuing the protest.

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