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Accounting for Geographic Location of Offeror in Price Evaluation

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Question: Is there ever a situation (besides labor surplus, HUBzone, or disaster recovery) where the offeror's geographic location can be taken into consideration as part of the price evaluation? I've always heard that doing so would be a CICA violation but I can also see the other side of the argument that lowest price isn't always lowest cost.

Scenario: We have a FFP requirement to paint an airplane. The airplane will need to be flown by Government personnel to the successful offeror's facility for the painting and then flown back once the work is complete. Transportation cost will obviously be a very large part of the (actual) cost. If the plane is located in the western US and an offeror located on the east coast bids the lowest price and gets the award, it could easily end up costing the Government a lot more than awarding to a higher-priced offeror who is geographically located closer to the airplane.

Can we somehow factor in the actual cost, or can we only look at the price proposed without considering the physical location? If we can somehow figure out a formula for the offerors to use that would factor in the cost of transporting the plane to their facility, would that be appropriate? I'm guessing the answer is "no" and that we will probably end up spending more of our taxpayer's money in the name of "full and open competition" but wanted to make sure I wasn't missing something.

Thanks in advance.

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Yes, you can factor in transportation costs as a price-related factor in your evaluation. See Volume 1, Chapter 5, Section 5.4, of the Contract Pricing Reference Guides regarding the use of transportation costs as a price-related factor. The example is written for a supply contract, but it is easily adaptable to your situation.

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Precedent exists for the use of "Foreseeable Costs" which has been published in the Federal Register by the U.S. Department of Commerce for ship repair contracts, which are considered a non-commercial supply. This mechanism has been criticized, but I have personally used the mechanism successfully a number of times. Other methods like a "local area set-aside" are only available in extraordinary situations or by the publishing of a J&A to limit competition. The latter is a viable approach, but likely could be unapealing to the higher level at which the J&A would likely need to be approved. Here is an example of a similar J&A used by the Navy: https://www.fbo.gov/?s=opportunity&mode=form&id=f952b8da17e88f2af9e7e0a894de6839&tab=core&_cview=0

Two components necessary for the use of Foreseeable Costs:

Consider using this provision in Section K:

K.4 52.215-6 – PLACE OF PERFORMANCE (OCT 1997)

(a) The offeror or respondent, in the performance of any contract resulting from this solicitation, [_] intends, [_] does not intend [check applicable box] to use one or more plants or facilities located at a different address from the address of the offeror or respondent as indicated in this proposal or response to request for information.

( b ) If the offeror or respondent checks “intends” in paragraph (a) of this provision, it shall insert in the following spaces the required information:

Place of Performance(Street Address, City, State, County, Zip Code)

Name and Address of Owner and Operator of the Plant or Facility if Other Than Offeror or Respondent

(End of Provision)

And using provisions similar to these in Section M:

M.3 1352.271-74 FORESEEABLE COST FACTORS PERTAINING TO DIFFERENT SHIPYARD LOCATIONS (APR 2010)

(a) The Contracting Officer will evaluate certain foreseeable costs that will vary with the location of the commercial shipyard to be used by bidders/offerors under this solicitation. Costs will be calculated based on the bidder's/offeror's shipyard location and these costs will be added, for the purposes of evaluation only, to the bidder's/offeror's overall price.

( b ) These elements of foreseeable costs consist of the following:

(1) Vessel Transit: (i) Vessel delivery costs will be based on one round trip from the vessel's homeport of Norfolk, VA to the contractor's facility at a cruising speed of ten (10) knots. Distances will be based on the NOAA publication, Distance Between U.S. Ports, Attachment J.2-6.

(ii) Daily vessel operational cost to navigate the vessel between its homeport and the contractor's offered place of performance is $9,800 per day. The number of days to transit to the contractor's offered place of performance from the vessel's homeport will be multiplied by the per-day operational cost.

(iii) No operational costs will be applied if the ship can be delivered to the contractor's facility from its homeport within eight (8) hours port-to-port. If the delivery time exceeds eight (8) hours, but is less than 24 hours, it will be considered one full day. Any fraction of subsequent day(s) will be considered as a full day.

(2) Shore Leave Costs: If the contractor's facility is outside of a 50-mile radius of the vessel's homeport—

(i) An assessment of $1,387.40 for each 15-day period or portion thereof, beginning with the vessel's departure from the homeport and concluding with the vessel's return to homeport.

(ii) There will be an additional transportation cost for 14 vessel crew members for one (1) round trip(s) between the contractor's offered place of performance and the vessel's homeport at the cost of coach-type airfare.

(3) Travel and Per Diem Costs: If the contractor's facility is outside of a 50-mile radius of the vessel's homeport—

(i) There will be a transportation cost for one (1) Contracting Officer's Representative (COR) for Eight (8) round trip(s) between the contractor's offered place of performance and the COR's official duty station at the cost of coach-type airfare.

(ii) There will be a per diem expense for Forty (40) calendar days to support one (1) COR while in the city of the place of contract performance, to be determined in accordance with the Joint Federal Travel Regulations (JFTR). The cost of car rental for the estimated performance period will also be included.

(End of clause)

M.4 AWARD BASIS

A) The contract resulting from this solicitation will be awarded to that responsible offeror whose proposal, conforming to the solicitation instructions, represents the "best value" to the Government. "Best value" represents that proposal which is most advantageous to the Government, cost or price and other factors considered. Evaluation of the proposals is based on an integrated assessment of technical (non-price) factors and price.

B ) The technical evaluation factors, when taken as a whole, are considered to be less important than price in the evaluation. The degree of importance of the technical evaluation will increase with the degree of equality of the price proposals.

C) The Government reserves the right to make an award to other than the low priced offer or to the offeror with the highest technical rating if the source selection official determines that to do so would result in the best value to the Government.

D) A detailed review of each offeror's pricing proposal may be made to assess the reasonableness of the offeror's proposed prices. In order to determine whether a price proposal is reasonable, the government may perform a review and analysis of the pricing information submitted by each offeror, including information provided by the offeror in its proposal explaining the basis for the proposed cost and justifying the price proposal.

E) The price that will be considered for the purpose of determining the best value to the Government will be calculated by determining the cumulative sum price for all CLINs appearing on the pricing schedule and adding Foreseeable Costs evaluated in accordance with M.3.

(End of Provision)

I hope this helps!

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Looks like you already got some great answers. While not trying to state to obvious (and it cannot be that obvious since it never gets done enough), just make sure to document everything and support it all with solid rationale- all to be placed in the solicitation/contract folder. This is especially true for something atypical such as this.

While not everyone might agree with how you eventually end up considering for these particular costs, if you have sound rationale and it is adequately documented, you should be pretty solid.

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DAMB,

You asserted that ship repair contracts are considered "noncommercial supply." Who considers them noncommercial supply contracts and for what purpose? Before you answer, double-check whether you use an FSC code for supplies when you report ship repair actions to FPDS. Also, why is ship repair listed as a service at FAR 25.401? Read http://www.gao.gov/products/420843#mt=e-report. Here's an excerpt:

"It is most significant, in our view, that the Coast Guard makes no argument that the classification of such a repair contract as one for supplies is logical. We do not understand how it can be argued that as between the two categories-- supplies or services-- a contract for the repair of a vessel is classified as one for the vessel itself rather than for the repair services to be performed on that vessel. Since we think the solicitation was properly one for services, the protester's failure to complete the Small Business certification does not affect the responsiveness of the bid. BCI Contractors, Inc., B-232453, Nov. 7, 1988, 88-2 CPD Para. 451. We therefore conclude that the protester's low bid was improperly rejected and we sustain the protest."

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DAMB,

You asserted that ship repair contracts are considered "noncommercial supply." Who considers them noncommercial supply contracts and for what purpose? Before you answer, double-check whether you use an FSC code for supplies when you report ship repair actions to FPDS. Also, why is ship repair listed as a service at FAR 25.401? Read http://www.gao.gov/products/420843#mt=e-report. Here's an excerpt:

"It is most significant, in our view, that the Coast Guard makes no argument that the classification of such a repair contract as one for supplies is logical. We do not understand how it can be argued that as between the two categories-- supplies or services-- a contract for the repair of a vessel is classified as one for the vessel itself rather than for the repair services to be performed on that vessel. Since we think the solicitation was properly one for services, the protester's failure to complete the Small Business certification does not affect the responsiveness of the bid. BCI Contractors, Inc., B-232453, Nov. 7, 1988, 88-2 CPD Para. 451. We therefore conclude that the protester's low bid was improperly rejected and we sustain the protest."

Don,

I'm so glad that you have asked.

I point primarily toward the use of the Walsh-Healey Public Contracts Act, which is prescribed for use on non-commercial supplies.

The NAVSEA FSC Dictionary (Chg 1) issued out on 1/24/2007 states the use of J999, Maintenance Repair & Overhaul/Non-nuclear Ship Repair (West Coast), is required. However, the comments also states:

"Use for all contracted services for maintenance, repair & overhaul (MRO) on all non-nuclear ship repair on the West Coast. Individual equipment MRO will be reported under J020. Although ship MRO is coded with a "services" FSC, it is not subject to the Service Contract Act. Per 10 U.S.C. 7299, ship repair/overhaul is subject to the Walsh Healy Act (41 U.S.C. 35 et seq) which applies to contracts for supplies and equipment. Contracts subject to the Walsh Healy Act are not subject to the Service Contract Act (41 U.S.C. 356(2): FAR 22.1003-3(B)). The use of OCC 257 is also consistent since OCC 257 is for operation, maintenance, repair and storage of equipment."

That's my warmup, but I'm trying to gauge just what type of ambush I am walking into.

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DAMB,

You had a reference, which is good. However, you'll notice that the reference doesn't say that ship repair is a supply--it just says that it is subject to the Walsh-Healy PCA. Having said that, the statement is not in accord with the GAO decision:

"Per 10 U.S.C. 7299, ship repair/overhaul is subject to the Walsh Healy Act (41 U.S.C. 35 et seq) which applies to contracts for supplies and equipment."

Here's what the GAO had to say about that:

"First, 10 U.S.C. Sec. 7299 does not refer to ship repair and the Coast Guard does not explain why a ship repair contract should be considered to fall under 10 U.S.C. Sec. 7299. Further, the purpose of that legislation was to make clear the view of Congress that contracts for the construction or alteration of vessels are subject to the Walsh Healey Act. See 42 Comp.Gen. 467, at 477, supra. The legislation does not relate to whether ship repair contracts are to be considered service or supply contracts. Also, in 42 Comp.Gen. 467, supra, we addressed the question of whether a contract for the alteration of a vessel should be governed by that portion of the Buy American Act pertaining to public works or to that section pertaining to supplies. The decision did not consider whether a ship repair contract is to be considered one for services or supplies."

The current version of 10 U.S.C. 7299 reads:

Each contract for the construction, alteration, furnishing, or equipping of a naval vessel is subject to chapter 65 of title 41 unless the President determines that this requirement is not in the interest of national defense.

Apparently, the Navy has not accepted the GAO's interpretation of 10 U.S.C. 7299 and continues to apply Walsh-Healy to ship repair. Fair enough. However, that does not mean that naval ship repair is a supply. In fact, the repair of supplies, systems, or equipment is listed as an example of a "service contract" at FAR 37.101. 10 U.S.C. 7299 exists because the Navy doesn't want to deal with Davis-Bacon, which applies to repair of other than naval vessels.

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DAMB,

You had a reference, which is good. However, you'll notice that the reference doesn't say that ship repair is a supply--it just says that it is subject to the Walsh-Healy PCA. Having said that, the statement is not in accord with the GAO decision:

Here's what the GAO had to say about that:

The current version of 10 U.S.C. 7299 reads:

Apparently, the Navy has not accepted the GAO's interpretation of 10 U.S.C. 7299 and continues to apply Walsh-Healy to ship repair. Fair enough. However, that does not mean that naval ship repair is a supply. In fact, the repair of supplies, systems, or equipment is listed as an example of a "service contract" at FAR 37.101. 10 U.S.C. 7299 exists because the Navy doesn't want to deal with Davis-Bacon, which applies to repair of other than naval vessels.

Don,

Fair enough, all good points on the years long discussion on this subject.

That still leaves DoD ships to be treated as supply contracts due to the inclusion of the legislatively required Walsh-Healey. I don't necessarily believe that a wage determination should drive the entire body of the contract, although I have seen time and again that it does drive CLIN structuring and clause inclusion, which in turn drives the Government's method for administering the contract as well as the administration of the contract. One instance that made no sense to me, for illustrative purposes, was a demolition contract which forced the use of PBSA due to the SCA being applicable when the contract should have very well been a FAR Part 36 contract with SCA in lieu of Davis-Bacon. The acquisition strategy and ultimate contract was nothing short of an abomination. In the ship repair world, at least treating the body of work as a supply allows for a congruent and enforceable contract.

In terms of non-DoD ships, recall the previous conversation regarding Davis Bacon; in summary, how can Davis Bacon be invoked where the repair location is unknown and how can a wage determination be selected for inclusion in the RFP. And recall what the DoL manual said about those cases. So where does that leave non-DoD agencies in terms of which type of labor law to enter into the contract?

Recall though, to support the notion of ship repair as services, is GAO Decision B-234196 http://www.gao.gov/products/420843#mt=e-report, which says a lot on this subject then states as its conclusion:

"Since the Coast Guard considered the contract here to be one for supplies, the solicitation included clauses and certifications appropriate to a supply contract rather than those for a service-type contract. recommend that the contract awarded to Stevens be terminated for the convenience of the government and the requirement resolicited as a service contract with the clauses and certifications appropriate to a service contract. In addition, we find G. Marine entitled to recover the reasonable costs of preparing and submitting its bid and the costs of filing and pursuing the protest, including attorneys' fees. Bid Protest Regulations, 4 C.F.R. Sec. 21.6(d) (1988). G. Marine should submit its claim for such costs directly to the Coast Guard."

Regarding efforts that the National Oceanic and Atmospheric Administration had made to be subject to the same legislative authority that the Navy has to use PCA for ship repair; the voluminous records that I have show that a vigorous effort was made leading up to a point in 1989 where the following legislation was introduced, but died in committee:

http://thomas.loc.gov/cgi-bin/query/z?c101:H.R.896.IH:

HR 896 IH

101st CONGRESS 1st Session H. R. 896

To provide that contracts for the construction or repair of vessels of the National Oceanic and Atmospheric Administration are subject to the provisions of the Walsh-Healey Act.

IN THE HOUSE OF REPRESENTATIVES February 7, 1989

Mr. JONES of North Carolina introduced the following bill; which was referred to the Committee on Merchant Marine and Fisheries

A BILL

To provide that contracts for the construction or repair of vessels of the National Oceanic and Atmospheric Administration are subject to the provisions of the Walsh-Healey Act.

  • Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Act of August 6, 1947 (33 U.S.C. 883a-i), is amended--
    • (1) by redesignating sections 9 and 10 as sections 10 and 11, respectively; and
    • (2) by inserting after section 8 the following:
  • `SEC. 9. Each contract for the construction, alteration, furnishing, or equipping of a vessel owned or operated by the National Oceanic and Atmospheric Administration is subject to the Act entitled `An Act to provide conditions for the purchase of supplies and the making of contracts by the United States, and for other purposes', approved June 30, 1936 (commonly referred to as the `Walsh-Healey Act'), unless the President determines that this requirement is not in the interest of national defense.'.

END

The agency has proceeded with ship repair contracts using PCA as if this had passed ever since.

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DAMB,

Just because the Navy applies Walsh-Healy to its ship repair contracts doesn't mean that they treat those contracts as supply contracts for all purposes. As I stated before, the Navy reports ship repair contracts to FPDS as service contracts.

You asked:

In terms of non-DoD ships, recall the previous conversation regarding Davis Bacon; in summary, how can Davis Bacon be invoked where the repair location is unknown and how can a wage determination be selected for inclusion in the RFP. And recall what the DoL manual said about those cases. So where does that leave non-DoD agencies in terms of which type of labor law to enter into the contract?

According to the DoL Field Operations Handbook (Chapter 15, 15d11):

Shipbuilding, alteration, repair, and maintenance.

The building, alteration, and/or repair of ships under Government contract is work performed upon "public works" within the meaning of the Davis-Bacon Act. Wage determinations for shipbuilding under the D-B Act are issued only if the location of contract performance is known when bids are solicited. However, a Government contract which calls for the construction, alteration, furnishing, or equipping of a "naval vessel" (U.S. Navy and U.S. Coast Guard vessels) is subject to PCA. A contract which calls for maintenance and/or cleaning, rather than alteration or repair, of a ship or naval vessel is a service contract within the meaning of the SCA. (See FOH 13b11 and 14c06.)

Interesting stuff about NOAA. Thanks for sharing.

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DAMB,

Just because the Navy applies Walsh-Healy to its ship repair contracts doesn't mean that they treat those contracts as supply contracts for all purposes. As I stated before, the Navy reports ship repair contracts to FPDS as service contracts.

You asked:

According to the DoL Field Operations Handbook (Chapter 15, 15d11):

Interesting stuff about NOAA. Thanks for sharing.

So doesn't it seem a bit flippant for the DoL to just simply state that if the civilian agency knows where the repair location will be it should use D-B, but if they don't know, then just use SCA. Especially when you have the GAO saying that any such contract should be solictied "as a service contract with the clauses and certifications appropriate to a service contract". That's a profound distinction. Because you could certainly infer from this statement that the wage determination should be allowed to decide the contract's other terms and conditions; this is well beyond the scope of what a wage determination should do.

This is a slippery slope Don, and I've resisted being drawn down it by people that should know better on numerous occaisions.

So if the solicitation and resulting contract use D-B then what, use FAR Part 36 and the clauses associated with construction? It just doesn't fit into a clean way for the civilian agency to perform the acquisition management function. The flippancy introduces risks to the Government either way; FAR Part 36 clauses are probably the better fit, but could be a little much and certainly D-B wages will sweep funds from the already austere coffers, while FAR Part 37 clauses combined with 52.246-x, Inspection of Services, provides no real protection for the Government when considering the type of work being done.

And here's where the slope gets away from an acquisition manager who just treats acquisition planning like a flowchart exercise: 'We can just do ship repair as a commercial service. We will include 52.212-4 and that pretty well covers things'. It is at that point that anyone with any sort scruples blows a gasket; whereas I have learned to proceed with great caution at the very mention of the question as to 'why is ship repair a supply?'

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DAMB,

That's not what the DoL guide says. The part about issuing a WD only if the place of performance is known applies to shipbuilding, not ship repair. For other than naval vessels, shipbuilding, alteration, and repair are covered by DBA. Ship maintenance is covered by SCA.

As far as what clauses to use, I don't know what civilian agency practice is. DoD must not have thought the clauses in the FAR were adequate for ship repair, which is why we have the clauses prescribed at DFARS 217.7104.

I don't have a problem with NAVSEA taking the position that they will treat their ship repair contracts as supply contracts as a matter of policy. What I have a problem with is the argument that ship repair, by its nature, is a supply rather than a service. The attorneys at NAVSEA used to insult my intelligence with such arguments as "Ship repair is a supply because the contractor is delivering a repaired ship to the Government." (Following that logic, the repair of anything would be a supply). As the GAO stated, it's illogical.

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Sure, except the clauses at DFARS 217.7104 don't actually appear in ship repair contracts because they are only prescribed for use in a Master Agreement under that section of the DFARS. That's not to say that they are not useful clauses, because they are. Frankly, I'm a little surpised that they are not in the contracts.

In any event, this only actually furthers my point that ship repair is a unique niched contracting realm that's made to artificially fit into one type of contract or another when that is not really how it should be.

And really, at its most basic level, the question that any of us should ask ourselves is "what is the nature of the work being done, and what labor category on either SCA or DBA is the most appropriate fit". That is what should decide the labor law that should be applied. And for most depot level or intermediate level work that the ship's force cannot accomplish on its own, Davis Bacon wage categories are likely the best fit. That being said, I will reiterate this again: 1) Why go to the unnecesary expense and administrative burden to go that route if it is not legaly required? and 2) Why allow a wage determination to drive the entire structure of the contract clauses as was so very clearly and specifically asserted by GAO in B-234196?

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Assuming that the Government will pay for transportation costs to and from the successful offerors' facility and the cost to operate the aircraft is known, i would use 52.247-47-Evaluation-F.o.b Origin (or something like it) to determine the Government's transportation cost that should be applied against the offer.

Cost to fly aircraft per mile- $100

Offeror A- proposes $100,000 to complete the work - 1000 miles (roundtrip) from the location of the Government Aircraft

Offeror B- proposes $70,000 to complete the work-2000 miles (roundtrip) from the location of the Government Aircraft

Offeror A- evaluated total $200,000

Offeror B- evaluated total $270,000

Offeror A has the overall cheaper evaluate price, therefore receives the award.

In the solicitation, I would provide the starting and ending location of the Aircraft (if allowed) and the cost to operate the aircraft.

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