THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN ITS ENTIRETY ON MAY 23, 1995 ________________________________________________________ RESPONDENT'S AND INTERVENOR'S MOTIONS TO DISMISS DENIED: May 15, 1995 ________________________________________________________ GSBCA 13247-P UNISYS CORPORATION, Protester, v. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, Respondent, and JOHNSON CONTROLS ASSURANCE COMPANY, Intervenor. Richard J. Webber and William W. Goodrich, Jr. of Arent Fox Kintner Plotkin & Kahn, Washington, DC; and William A. Wotherspoon and Anne H. Warner of Unisys Corporation, McLean, VA, counsel for Protester. Vincent A. Salgado, Office of the General Counsel, National Aeronautics and Space Administration, Washington, DC; and Allison K. Lawrence, Office of the Chief Counsel, Goddard Space Flight Center, Greenbelt, MD, counsel for Respondent. Kenneth S. Kramer, Bruce J. Casino, Douglas E. Perry, and Anne B. Perry of Fried, Frank, Harris, Shriver & Jacobson, Washington, DC, counsel for Intervenor. Before Board Judges WILLIAMS, DeGRAFF, and GOODMAN. DeGRAFF, Board Judge. On August 19, 1994, the National Aeronautics and Space Administration (NASA) issued a request for proposals to provide quality assurance and engineering support services to the Goddard Space Flight Center (GSFC). Unisys Corporation (Unisys) and Johnson Controls Assurance Company (JCAC) submitted initial proposals on October 19, 1994, and best and final offers on February 8, 1995. Complaint 2, 6, 21. On April 7, 1995, NASA announced that it had selected JCAC for negotiations leading to contract award. Complaint 3, 24. Unisys filed its complaint in this protest on April 21, 1995. On May 8, 1995, NASA and JCAC filed motions to dismiss Counts III, IV-A, and VI of the complaint. For the reasons set forth below, the motions to dismiss are denied. Count III - Depreciation The solicitation requires offerors to complete a schedule titled "Overhead Expense Schedule Pool." One of the items included in this pool is depreciation. Exhibit 6 at 303.[foot #] 1 The notes to the schedule state: It is assumed that new General Purpose Equipment and the replacement of Government furnished General Purpose Equipment will be purchased and owned by the contractor (see the Repair and Replacement of Government Property clause). General Purpose Equipment is equipment such as personnel [sic] computers or simple off the shelf testing devices. It is also assumed that the cost to the Government of this equipment will be billed as depreciation in the form of overhead. The Government estimates that the annual replacement cost for General Purpose Equipment will be $200,000. This amount should be used in the calculation of the depreciation expense. Exhibit 6 at 284 (emphasis in original). In Count III, Unisys explains that it read the solicitation to mean that offerors were supposed to calculate the amount of depreciation attributable to $200,000 of general purpose equipment and include that amount per year in their overhead expense pools. Unisys alleges that NASA improperly evaluated Unisys' cost proposal because NASA adjusted the proposal so that Unisys' overhead expense pool included $200,000 per year for general purpose equipment depreciation. Complaint 48, 49. In their motions to dismiss, NASA and JCAC assert that the solicitation clearly requires offerors to include $200,000 per ----------- FOOTNOTE BEGINS --------- [foot #] 1 Exhibit 6 is included in the protest file submitted by NASA pursuant to Rule 4(a). ----------- FOOTNOTE ENDS ----------- year in their overhead expense pools to account for the depreciation of general purpose equipment. NASA and JCAC ask that we dismiss Count III because it seeks to challenge the terms of the solicitation and our rules require such a challenge to be made before initial proposals are submitted. Rule 5(b)(3)(i).[foot #] 2 In its opposition to the motions to dismiss, Unisys contends that it is challenging NASA's interpretation of the solicitation and not the terms of the solicitation itself. We agree with Unisys that its complaint seeks to challenge NASA's interpretation of the solicitation. Because Unisys does not challenge the terms of the solicitation, Unisys' allegations concerning the adjustment made by NASA to account for equipment depreciation were timely filed. We are not deciding that the language of the solicitation is ambiguous or that Unisys' reading of the solicitation's language is reasonable. Instead, we are simply deciding that Unisys filed a timely challenge to NASA's interpretation of the language. We urge Unisys to determine quickly whether this ground of protest has any legitimate basis. If not, we expect that Unisys will amend its complaint accordingly. We add this cautionary note because, in its motion to dismiss, JCAC alleges that NASA adjusted both Unisys' and JCAC's cost proposals to include $200,000 per year for general purpose equipment depreciation and that the adjustment did not result in any harm to Unisys. It should not be difficult for Unisys to determine whether JCAC is correct. Count III - Ceiling Rates Section M of the solicitation provides that one evaluation factor is cost/price and that this factor is used "to assess what each offeror's proposal will probably cost the Government should it be selected for negotiations leading to award." Exhibit 6 at 321. Section M explains that cost/price will be evaluated to establish the realism of the proposed cost/price, the probable cost to the Government, patent royalties, and, "[i]f ceiling limitations are involved, the maximum cost to the Government for the proposed effort." Exhibit 6 at 328-29. Section B of the solicitation imposes ceiling limitations upon indirect cost rates and employee-related phase-out costs. Exhibit 6 at 9. In Count III, Unisys alleges that NASA improperly used ceiling rates to evaluate Unisys' probable cost. Unisys contends that its probable cost should have been evaluated based upon its actual rates because it is an experienced contractor with a long record of achieving the rates that it includes in its proposals. Unisys also contends that it was appropriate for NASA to use ----------- FOOTNOTE BEGINS --------- [foot #] 2 48 CFR 6101.5(b)(3)(i) (1994). ----------- FOOTNOTE ENDS ----------- ceiling rates to evaluate JCAC's probable cost because JCAC is a new company. Complaint 51. In their motions to dismiss, NASA and JCAC assert that the solicitation states that NASA would use ceiling rates to evaluate probable cost. NASA and JCAC ask that we dismiss Count III because it seeks to challenge the terms of the solicitation and our rules require such a challenge to be made before initial proposals are submitted. Rule 5(b)(3)(i). In its opposition to the motions to dismiss, Unisys contends that it is not challenging the terms of the solicitation. Instead, Unisys explains that it is challenging NASA's decision to use only ceiling rates to evaluate Unisys' cost/price in order to assess what Unisys' proposal would probably cost NASA. If Unisys wished to argue that NASA could not make any use of ceiling rates when evaluating cost/price, such an argument would be untimely because the solicitation clearly permits NASA to consider ceiling rates in its evaluation of cost/price. Unisys, however, states that it wishes to argue that NASA misapplied the terms of the solicitation by using ceiling rates as the sole basis for evaluating Unisys' cost/price. Because Unisys challenges the interpretation of the terms of the solicitation by NASA, Unisys timely filed this ground of protest. Count IV-A Section M of the solicitation explains that one evaluation factor is relevant experience and past performance. Exhibit 6 at 321. In Count IV-A, Unisys alleges that NASA's rating of JCAC for this factor is inconsistent with NASA's evaluation of JCAC's experience and performance, ignores the fact that JCAC is a new company, and is inappropriately based upon a favorable evaluation of Loral Corporation (Loral), which will perform part of the work required by the contract if award is made to JCAC. Complaint 67, 69. In their motions to dismiss, NASA and JCAC assert that Count IV-A should be dismissed because it fails to state a valid ground of protest. NASA and JCAC read the complaint as if Count IV-A were based solely upon JCAC's status as a new company. Unisys, however, challenges the manner in which NASA evaluated and rated JCAC and this constitutes a valid ground of protest. Count VI Section H.2 of the solicitation reads: H.2 POTENTIAL CONFLICT OF INTEREST - PERFORMING SERVICES The Contractor or its partner, owner (if purchased), subsidiary, or other affiliated or successor entity shall not, for the life of this contract, have or obtain a prime contract or subcontract for the delivery of flight hardware, software or mission integration to the Goddard Space Flight Center. The successful offeror may have or engage a GSFC prime contractor or subcontractor for flight hardware, software or mission integration as a subcontractor under this contract. However, the subcontractor shall not provide quality assurance or product assurance support to the Office of Flight Assurance for the subcontractor's other contracts with the GSFC. Prohibited support includes inspection services, audits, documentation review and requirements generation. Further, the subcontractor shall not obtain a prime contract or subcontract for flight hardware, software or mission integration to the GSFC for which the subcontractor has supported the Office of Flight Assurance in the generation of assurance requirements. Exhibit 6 at 35. In Count VI, Unisys alleges that JCAC proposed Loral as a subcontractor to perform part of the work required by the contract, and that JCAC's use of Loral will violate section H.2 of the solicitation because Loral performs contracts at GSFC.[foot #] 3 Complaint 22, 80. In their motions to dismiss, NASA and JCAC assert that Count VI should be dismissed because it is an untimely challenge to the terms of section H.2. We disagree. The complaint alleges that JCAC does not meet the requirements imposed by section H.2, and this does not amount to an untimely challenge to the terms of the solicitation. In their motions, NASA and JCAC assert that Count VI should be dismissed because JCAC's ability to meet the requirements of section H.2 concerns a matter of contract administration and is therefore outside our jurisdiction. Whether JCAC met the requirements of section H.2 at the time it was selected for negotiations is not a matter of contract administration and is not outside our jurisdiction. Decision The motions to dismiss Counts III, IV-A, and VI are DENIED. ----------- FOOTNOTE BEGINS --------- [foot #] 3 In its opposition to the motions to dismiss, Unisys suggests that perhaps Loral is a partner of JCAC instead of a subcontractor. This is contrary to the allegations contained in the complaint. ----------- FOOTNOTE ENDS ----------- ______________________________ MARTHA H. DeGRAFF Board Judge We concur: _______________________________ _______________________________ MARY ELLEN COSTER WILLIAMS ALLAN H. GOODMAN Board Judge Board Judge