Link: GAO Opinion
Agency: Department of the Navy
Disposition: Protest denied.
Protest that agency improperly rejected protester’s fixed-price proposal in research and development procurement is denied where the record shows that the agency reasonably determined that award of a cost-type contract was required.
General Counsel P.C. Highlight:
Wartsila challenges the rejection of its proposal, arguing that the solicitation did not require submission of a cost-type proposal, but merely stated that the agency anticipated making a cost-type contract award, and that the agency properly could consider Wartsila’s fixed-price proposal. GAO states that a fixed-price proposal generally may be considered by an agency notwithstanding that the agency otherwise indicated a preference for a cost-type award. As explained in FAR sect. 16.103(a), the agency’s objective is to select a contract type that will result in reasonable contractor risk and provide the contractor with the greatest incentive for efficient and economical performance. Thus, while the FAR calls for the use of fixed-price contracts when the risk involved is minimal or can be predicted with an acceptable degree of certainty, it states that other contract types should be considered where a reasonable basis for firm pricing does not exist. Ultimately, selecting the appropriate contract type is the responsibility of the contracting officer, as informed by obtaining the recommendations of technical personnel. The contracting officer’s decision, as with any other exercise of discretion, must have a reasonable basis.
Here, GAO concludes that the contracting officer had a reasonable basis to conclude that the criteria set out in DFARS sect. 235.006(b)(ii) were not met and that a fixed-price contract therefore could not be awarded for this R&D procurement. During contract negotiations, the agency reminded Wartsila that the Office of Naval Research (ONR) anticipated awarding cost-type contracts under the solicitation, and explained that ONR considers sufficient uncertainties to be involved with any effort under this program to not allow for the use of a fixed-price contract. Further, the BAA for phase two describes a substantial development process leading up to at-sea demonstrations of a large-scale waterjet. The record also includes an affidavit supplied by the program officer that explains the uncertainties involved in the procurement as they relate to the choice of contract type. The program officer states that some of the costs to the companies under the phase two contract could not be reasonably quantified in advance. These costs include ship hull modifications to accommodate instrumentation, such as sensors, needed to measure the prototype’s at-sea performance. The program officer also states that he reviewed DFARS sect. 235.006(b)(ii) and concluded that the work needed to do detailed design, construction, delivery, and installation of a complete 21-22 megawatt large scale waterjet for at-sea testing on a candidate platform not yet constructed could not be realistically priced at the time. Use of a fixed-price contract by any company for this effort would not permit an equitable and sensible allocation of program risk between the contractor and the Government. The protest is denied.