              In the United States Court of Federal Claims
                                          BID PROTEST
                                          No. 16-1684C
                (Filed Under Seal: January 31, 2017 | Reissued: February 15, 2017)*


                                                 )
    MUNILLA CONSTRUCTION                         )
    MANAGEMENT, LLC,                             )
                                                 )    Keywords: Bid Protest; 28 U.S.C.
                        Plaintiff,               )    § 1491(b); Standing; Interested Party;
                                                 )    Price Analysis; Price Reasonableness;
         v.                                      )    Contract Line Items; Unbalanced Pricing.
                                                 )
    THE UNITED STATES OF AMERICA,                )
                                                 )
                        Defendant,               )
                                                 )
         and                                     )
                                                 )
    SEAWARD SERVICES, INC.,                      )
                                                 )
                        Defendant-Intervenor.    )
                                                 )


Stephen Gregory Joy, Smith, Currie & Hancock LLP, Atlanta, GA, for Plaintiff. Karl Frederick
Dix, Smith, Currie & Hancock LLP, Atlanta, GA, and Alan I. Saltman, Smith, Currie & Hancock
LLP, Washington, DC, Of Counsel.

Amanda L. Tantum, Trial Attorney, Commercial Litigation Branch, Civil Division, U.S.
Department of Justice, Washington, DC, for Defendant, with whom were Douglas K. Mickle,
Assistant Director, Robert E. Kirschman, Jr., Director, and Benjamin C. Mizer, Principal Deputy
Assistant Attorney General. Joe D. Baker, Navy Supply Systems Command, Fleet Logistics
Center Jacksonville, Department of the Navy, Of Counsel.

Shlomo D. Katz, Brown Rudnick LLP, Washington, DC, for Defendant-Intervenor. Daniel B.
Abrahams, Brown Rudnick LLP, Washington, DC, and Tammy Hopkins, Brown Rudnick LLP,
Washington, DC, Of Counsel.


*
  This Opinion was originally issued under seal on January 31, 2017, and the parties were given
the opportunity to request redactions. The parties disagree about the extent of redactions
appropriate for this public decision, but the Court agrees with Plaintiff that its prices are
proprietary, competition-sensitive information and should not be disclosed. This Opinion is now
reissued with redactions.
                                   OPINION AND ORDER

KAPLAN, Judge.

       Plaintiff Munilla Construction Management, LLC (Munilla) is currently performing port
operations services at the United States Naval Base at Guantanamo Bay, Cuba, under a bridge
contract with the United States Navy. Munilla filed this post-award bid protest on December 22,
2016, to challenge the Navy’s award of a new contract to provide such services to Intervenor
Seaward Services, Inc. (Seaward). ECF No. 1. The Navy awarded the contract to Seaward after
finding that it had submitted the lowest-priced technically acceptable offer in response to the
Navy’s solicitation.

       Munilla’s protest centers around the validity of the Navy’s price evaluation, which it
claims did not comport with the requirements set forth in the solicitation. The government and
Seaward contend that Munilla lacks standing to press its claims because another offeror, Crowley
Government Services, Inc. (Crowley), was second in line to receive the award after Seaward.
They also contend, in the alternative, that Munilla’s claims lack merit and that, in any event,
Munilla was not substantially prejudiced by any of the errors it has identified.

        Currently before the Court are the parties’ cross-motions for judgment on the
administrative record. For the reasons discussed below, Munilla’s motion for judgment on the
administrative record is DENIED and the cross-motions for judgment on the administrative
record filed by the government and Seaward are GRANTED.

                                        BACKGROUND

I.     The Solicitation

         On June 8, 2016, the United States Navy issued RFP N68836-15-R-0003 (the “RFP” or
the “Solicitation”). Admin. R. (AR) Tab 25 at 320. The RFP sought offers to perform services
involving the “operation of multiple watercraft and boats, related maintenance services, port
operations, and waterfront administration” at the United States Naval Base, Guantanamo Bay,
Cuba. Id. at 367. Pursuant to the RFP, the contractor would be responsible for “the operation,
preventive, predictive, [and] corrective maintenance of various watercrafts, boats and
equipment[;] industrial marine repair services[;] and . . . port operations services.” Id. The
Solicitation provided that services would be supplied “on a ‘turn-key’ basis with the Contractor
providing all necessary management expertise, personnel, supplies, tools, equipment and
vehicles” except as otherwise specified in the contract. Id. It set forth fifteen “primary tasks”
illustrating the services the contractor would be required to perform, and specified that the
contractor would be required to “plan, schedule, coordinate and ensure effective completion of
all services described.” Id.

        The contract was to be a firm fixed-price contract. Id. at 477. Offerors were required to
submit prices for forty-five contract line items (CLINs) on a price schedule included with the
Solicitation. Id. at 478, 491; see also id. at 321–66 (listing CLINs). The CLINs represented the
required tasks for each year of the contract. See id. at 321–66. The Navy initially sought
proposals for a twelve-month base year and four option years, the first three of which were for
twelve months and the fourth for eleven. See id. at 491. It subsequently amended the Solicitation


                                                2
to alter the periods of performance to a “one month transition period, a 10 month base period[,]
and four (4) one-year option periods.” See id. Tab 123 at 3661–62.

        Pursuant to the Solicitation, offerors were to submit their proposals in two volumes:
1) “Non-Price Evaluation Factor – Technical Capability”; and 2) “Standard Form 33 & Price
Proposal.” Id. Tab 25 at 477–78. Section M of the Solicitation, entitled “Evaluation Factors for
Award,” provided that the contract would be awarded “to the responsible Offeror whose proposal
conforming to the solicitation [was] most advantageous to the Government, price and other
factors considered[,] and [was] the Lowest Price Technically Acceptable (LPTA) Offer.” Id. at
488. To make this determination, the Navy would evaluate proposals based on three factors:
technical capability, past performance, and price. Id. With respect to price, “[a]n Offeror’s
proposed prices [would] be determined by multiplying the quantities identified in the Schedule
by the proposed unit price for each [CLIN] to confirm the extended amount for each.” Id. at 490.
The government would then evaluate the prices submitted to determine completeness and
reasonableness. Id. at 490–91.

        Concerning completeness, the Solicitation stated, inter alia, that “[a]ll CLINs as stated in
the solicitation shall be priced except for Reimbursable CLINs 0015, 1015, 2015, 3015 and
4015.” Id. at 490. Offerors were required to structure their pricing “in accordance with the bid
schedule of the SF 33” and to “return fully executed CLINs to include a unit price and total
extended prices in accordance with the bid schedule provided in the solicitation and a total
amount showing the sum of all line items.” Id. at 491. In that regard, the Solicitation provided
that “[f]ailure to submit a price for any CLIN could result in the proposal being considered
unacceptable.” Id. The Navy further advised offerors with respect to the reimbursable CLINs that
“[e]valuation of the price proposal will include [the amount of $1,000,000] for all Reimbursable
CLINs,” and that “[n]o other price shall be submitted in the Offeror’s Price Proposal for the
[Reimbursable] CLIN[s].” Id. (emphasis omitted). It also stated that “[f]ailure to furnish the price
proposal in accordance with the instructions above shall render the proposal unacceptable.” Id.

       As for the evaluation of price reasonableness, the Solicitation read as follows:

               2. Reasonableness: [p]rice is fully justified and supported and is
               considered fair under current market conditions as well as
               reasonable to both the Offeror and the Government. Reasonableness
               may also be determined by comparing the proposed pricing with
               Government estimates and/or other offers received. Unbalanced
               pricing exists when, despite an acceptable total evaluated price, the
               price of one or more contract line items is significantly over or
               understated as indicated by the application of cost or price analysis
               techniques. An offer may be rejected if the Contracting Officer
               determines that the lack of balance proposes an unacceptable risk to
               the Government. In accordance with FAR 15.404-1(g)(2) a price




                                                 3
                  analysis will be conducted on the individual CLINs to determine
                  whether unbalanced pricing occurred.

Id. at 490–91.1

        To determine the lowest-priced offeror, the Navy would “add[] the total price for all
options to the total price for the basic requirement,” along with the price for the “potential six
month[] option period available under FAR 52.217-8.” See id. at 491. If the option prices were
“significantly unbalanced,” the Navy warned offerors, it could “determine that [the] offer is
unacceptable.” Id.

        After the Navy issued the RFP, potential offerors were permitted to submit questions. See
id. Tab 43. SoBran, Inc. (SoBran) submitted an inquiry concerning whether the Navy might
consider performing a price realism analysis as part of its evaluation. Id. at 741. In that inquiry it
noted that, in its experience, “Lowest Price Technically Acceptable [contracts] may be awarded
to ‘technically acceptable’ bidders” even where “the winning price demonstrates that the bidder
does not have a clear understanding of the contract requirements.” Id. It observed that
“[p]roposed prices significantly lower than all competitive bids received may demonstrate a low
bidder’s inability to compr[e]hend the magnitude of the contract.” Id. Therefore, SoBran asked,
“[w]ill the Government consider performing [a] Price Realism Analysis in addition to the Price
Reasonableness evaluation?” Id. The Navy responded to SoBran’s question with a statement that
“[t]he Government shall conduct a Price Reasonableness evaluation in accordance with Section
M.” See id. Tab 45 at 760.

II.    The Offers

        Five offerors submitted proposals in response to the Solicitation: 1) Crowley; 2) Metson
Marine Services, Inc. (Metson); 3) Munilla; 4) Seaward; and 5) SoBran. See id. Tabs 104–13.
Each offeror’s total price, including all option years and reimbursable CLINs as required by the
Solicitation, was as follows:




1
  FAR 15.404-1(g)(2) provides, in pertinent part, that “[a]ll offers with separately priced line
items or subline items shall be analyzed to determine if the prices are unbalanced.” Id. It further
states that “[i]f cost or price analysis techniques indicate that an offer is unbalanced, the
contracting officer shall— (i) [c]onsider the risks to the Government associated with the
unbalanced pricing in determining the competitive range and in making the source selection
decision; and (ii) [c]onsider whether award of the contract will result in paying unreasonably
high prices for contract performance.” Id. “An offer may be rejected if the contracting officer
determines that the lack of balance poses an unacceptable risk to the Government.” Id. § 15.404-
1(g)(3).



                                                  4
                     Offeror                                            Total Price
                                                                    2
    Seaward                                           $20,475,969
    Crowley                                           [***]
    Munilla                                           [***]
    SoBran                                            [***]
    Metson                                            [***]

See id. Tab 104 at 2655 (Crowley); id. Tab 106 at 2852 (Metson); id. Tab 108 at 2998 (Munilla);
id. Tab 110 at 3207 (Seaward); id. Tab 112 at 3387 (SoBran); see also id. Tab 123 at 3683.

III.     The Navy’s Evaluation and Award Decision

        The Navy convened a technical evaluation board to conduct a review of each offeror’s
technical capability. See id. Tab 116. The board evaluated each proposal using an adjectival
rating system of “acceptable” or “unacceptable.” See id. at 3508–19. It rated the proposals
submitted by Crowley, Seaward, Munilla, and Metson as acceptable. Id.; see also id. Tab 123 at
3670–81. It rated SoBran’s proposal unacceptable. Id. Tab 116 at 3516–19; see also id. Tab 123
at 3679–81, 3684.

         To assist it in conducting and explaining its price evaluation, the Navy prepared a six-
page abstract of the proposals. See id. Tab 122. The first page of the abstract contains a table that
lists each offeror’s base price, option year prices, and total price, from lowest total price to
highest (including SoBran’s prices). Id. at 3603. The remaining five pages consist of a more
detailed table that sets forth the quantity, unit price, and line item total price for each CLIN for
each offeror for the base period and each option year. Id. at 3604–08.

       On September 28, 2016, Contract Specialist Elaine Florence3 prepared an “Approved
Business Clearance” memorandum to request approval to award a firm fixed-price contract to
Seaward as the lowest-priced technically acceptable offeror. See id. Tab 123 at 3657.4

       Section VI of the memorandum, entitled “Proposal Analysis,” see id. at 3669, included in
subsections A and B a summary chart of the technical evaluation board’s ratings, with which the


2
  Seaward initially submitted its offer with a total price of $20,475,921, but after being informed
of “minor mathematical errors” relating to rounding (see below), it provided a correction
resulting in the price listed above. AR Tab 110 at 3207; id. Tab 121 at 3551–55.
3
 Although Ms. Florence was not the contracting officer responsible for evaluating the proposals,
her memorandum sets forth the contracting officer’s reasoning. The contracting officer was
Darryl Nelson. See AR Tab 123 at 3609.
4
 Ms. Florence noted in the memorandum that Munilla was currently performing the port
services under a bridge contract originally awarded June 1, 2015, and which at that time had
extension options through November 30, 2016. AR Tab 123 at 3660.



                                                  5
contracting officer concurred, as well as a supporting narrative describing the technical panel’s
conclusions regarding each offeror’s technical capability and past performance. Id. at 3670–79.
As noted above, all but one of the offerors, SoBran, was rated technically acceptable. Id. at 3670.

       Subsections C and D of Section VI of the memorandum (captioned “Price Proposal” and
“Price Analysis,” respectively) included a detailed discussion of the offerors’ price proposals and
the contracting officer’s evaluation of them. Id. at 3681–86. Because the adequacy of these price
evaluations is at the heart of Munilla’s bid protest, the Court now sets forth in some detail the
contents of that discussion.

        Subsection C contains a restatement of the price evaluation criteria set forth in the
Solicitation and two summary abstracts of all of the price proposals received, from lowest to
highest. Id. at 3681–83 (Tables 2 and 3). Table 2 is an abstract of the actual figures contained in
the price proposals of each of the offerors. Id. at 3683. As the memorandum explains, however,
there were certain discrepancies and minor errors in the pricing proposals from Crowley and
Seaward, which required adjustment of the pricing for evaluation purposes, reflected in Table 3.
Id.

        Thus, as noted above, the Solicitation had instructed offerors that the “Government ha[d]
provided the . . . amount of $1 Million for each reimbursable CLIN.” Id. Tab 25 at 478.
Crowley’s total proposed price, however, “did not include pricing for the [reimbursable]
CLINs.” Id. Tab 123 at 3683. According to the memorandum, the Contracting Officer found it
unnecessary to seek clarifications from Crowley in light of the fact that it had stated in its price
proposal that it understood the reimbursable CLINs would be added back in for evaluation
purposes. Id. The contracting officer therefore “added $5 Million ($1 Million for each
[reimbursable] CLIN)” to Crowley’s price “for abstract . . . [and] evaluation purposes only.” Id.
This resulted in an increase in Crowley’s overall price from [***] (as set forth in Table 2) to
[***] (as set forth in Table 3). Id.

        In addition, Seaward’s pricing proposal required an adjustment because it “contained
multiple rounding calculation inconsistencies.” Id. The contracting officer sought clarifications
from Seaward, and Seaward submitted a corrected proposal with adjusted calculations. Id. As a
result of those corrections, Seaward’s price proposal increased by $48 from $20,475,921 (as set
forth in Table 2) to $20,475,969 (set forth in Table 3). Id. Thus, as adjusted, the offerors’
proposals reflected in Table 3 were as follows:




Id.




                                                 6
        In addition to Table 3, which was actually reproduced in the body of the memorandum,
the memorandum referenced and included as an attachment the six-page “detailed abstract”
described above, which had been prepared by the contract specialist. See id. at 3659, 3683; see
also id. Tab 122. That detailed abstract, as discussed, set forth the comparative CLIN unit and
CLIN total prices contained in each offerors’ proposal for the ten-month base period and for each
of the four option periods. See id. Tab 122.

        Subsection D set forth the Navy’s price analysis. Id. Tab 123 at 3684–86. There, the
Navy noted that the contracting officer had conducted a price analysis “utilizing FAR 15.404-
1(b)(2)(i), comparison of proposed prices received in response to the solicitation.” Id. at 3684.
That provision states that the government “may use various price analysis techniques and
procedures to ensure a fair and reasonable price.” FAR 15.404-1(b)(2). It further states that
“[e]xamples of such techniques include, but are not limited to . . . [c]omparison of proposed
prices received in response to the solicitation,” noting that “[n]ormally, adequate price
competition establishes a fair and reasonable price.” Id. § 15.404-1(b)(2)(i). The Navy further
explained that “[c]ertified cost and pricing data [was] prohibited from this analysis in accordance
with FAR 15.403-1(b)(1)(3)” because “adequate competition [was] present” and because “these
[we]re commercial services.” AR Tab 123 at 3684.

        The Navy’s price analysis identified Seaward as the lowest-priced technically acceptable
offeror. Id. Its status as such was reflected in Table 4 of the memorandum, which listed the base
year, option year, and total contract prices for each technically acceptable offeror, as well as in
Table 5, which included the six-month extension option. Id. (Tables 4 and 5).

        The Navy also stated in the memorandum that “the Contracting Officer evaluated the
Contractors’ proposed prices for Base Year and Option[] I through Option IV to determine
whether unbalanced pricing occurred in accordance with FAR 15.404-1(g)(2).” Id. Table 6 then
compared each offeror’s price in the base period with their price for the first option year and
reflected overall price increases between the periods as follows:




Id. at 3685.

        The Navy’s analysis then identified the reasons for these increases, noting that the period
of performance for the base year was ten months, while the period of performance for the first
option year was twelve months. Id. Additionally, the Navy observed that the base period did not
require any “docking regular overhauls (DROHs),” but that the option year required two, “one
off-island and one on-island.” Id. In light of these facts, the contracting officer concluded that
“the price increases from the Base Period to Option I for all Offerors are acceptable.” Id. He also
found that “no unbalanced pricing exists between the Base Period and Option I.” Id.




                                                 7
       A comparison chart for Options I and II was contained at Table 7:




Id. In the memorandum, the Navy also set forth its conclusions regarding the reasons for these
minor decreases in price as to each offeror: it noted that during Option II, the contract only
required one docking overhaul which would be off-island (as compared to Option I, when there
were two overhauls, one off-island and one on-island). Id. The Navy further noted that “[a]
review of each Offeror’s Price Proposal indicates that their proposed price for the DROH off-
island for Option II is in line with their proposed price for the DROH off-island for Option I.” Id.
It observed that each contractor’s price decreased by [***]% or less, and that “therefore there is
no evidence of significantly understated pricing.” Id. “Based on the nominal price decreases,” the
contracting officer concluded, as he had with respect to the increases between the base period
and the first option year, that “all Offerors’ proposed prices for Option II are acceptable and no
unbalanced pricing exists between Option I and Option II.” Id.

       For Options II and III, a comparison chart was set forth at Table 8:




Id. In evaluating the price decreases for Option III, the Navy noted that “[t]he Contractor is only
required to perform one (1) DROH on-island during the third Option Year, which explains the
significant price decrease for all offerors except Metson.” Id. It further explained that “[a]s
illustrated in the detailed abstract of proposals, Metson’s proposed price for the DROH on-island
is significantly higher than the other three Offeror[]s[’] proposed prices.” Id. at 3685–86. For
these reasons, the contracting officer concluded that “all Offerors’ proposed prices for Option III
are acceptable and no unbalanced pricing exi[s]ts between Option II and Option III.” Id. at 3686.

       Finally, the Navy included a comparison of the third and fourth option years at Table 9:




Id. It noted that for the fourth option year, the contractor would be required to perform only one
docking regular overhaul, on-island, and that “[a] review of each Offeror’s Price Proposal
indicates that their proposed price for the DROH on-island for Option IV is in line with their


                                                 8
proposed price for the DROH on-island for Option III.” Id. The Navy further observed in the
memorandum that “[a]ll Offerors’ prices increased by [***]% or less with the exception of
Crowley,” whose price had decreased by [***]%. Id. Observing that “[u]nbalanced pricing exists
when, despite an acceptable total evaluated price, the price of one or more contract items is
significantly over or understated,” the Navy noted that the contracting officer found “no evidence
of significantly understated or overstated pricing.” Id. “[T]herefore,” the contracting officer
concluded that “all Offerors’ proposed prices for Option IV are acceptable and no unbalanced
pricing exists.” Id.

        Section VIII of the memorandum, entitled “Decision to Proceed,” then reflected the
contracting officer’s conclusion that “[t]his solicitation has provided adequate competition with
four (4) technically acceptable proposals received[,] and Seaward Services, Inc. is the lowest
priced technically acceptable Offeror.” Id. at 3687. In particular, the Navy stated that “[p]rice
analysis has been performed and the awardee’s price has been determined fair and reasonable by
the Contracting Officer based on adequate price competition in accordance with FAR 15.404-
1(b)(2)(i).” Id. at 3688–89. Accordingly, the contracting officer recommended the award of
“Firm-Fixed Price Contract N68836-17-C0001 to Seaward Services, Inc.” Id. at 3689.

       On October 27, 2016, the Navy awarded the contract to Seaward. Id. Tab 124 at 3690.

IV.    GAO Protests

        On October 27, 2016, Munilla requested a debriefing. Id. Tab 129 at 3873. During the
debriefing, which took place November 1, 2016, the Navy provided Munilla with Seaward’s
CLIN pricing. See id. at 3868–72. On October 28, 2016, both Crowley and SoBran also
requested debriefings. Id. Tab 127 at 3863; id. Tab 130 at 3877. Crowley’s debriefing occurred
November 2, 2016, while it appears that SoBran’s occurred via telephone on October 31, 2016.
See id. Tab 127 at 3861; id. Tab 130 at 3875. Finally, Metson requested a debriefing on
November 1, 2016. Id. Tab 128 at 3867. The Navy provided a written debriefing that day. Id. at
3866.

        On November 7, 2016, Metson filed a bid protest with the Government Accountability
Office (GAO). Id. Tab 132 at 3897. On November 17, 2016, however, Metson withdrew its
protest and GAO closed the matter. See id. at 3895.

        In the meantime, Munilla filed its own protest with GAO on November 3, 2016. Id. Tab
131 at 3881–82. It noted that “[t]hough the words ‘cost realism’ were not used in the solicitation,
the evaluation criteria does require that the ‘price [be] fully justified and supported and [be]
considered fair under current market conditions as well as reasonable to both the Offeror and the
Government.’” Id. at 3888. It further observed that “[t]he Awardee’s pricing for the base period
is substantially lower than the pricing for the incumbent contractor, [Munilla],” and that “[t]he
Contract Line Item pricing substantially varies from reasonable pricing.” Id. Seaward’s pricing,
Munilla contended, “demonstrate[d] a fundamental misunderstanding of the requirement[s] and
the circumstances at Guantanamo Bay.” Id. at 3887. In short, according to Munilla, the price
evaluation “fail[ed] to conform with the requirements contained in the solicitation.” Id. at 3888.




                                                 9
        On December 14, 2016, GAO dismissed Munilla’s protest. Id. Tab 145 at 4012. It found
no merit to Munilla’s argument “that [Seaward’s] price is too low for it to perform the
requirement,” noting that “[a]n agency’s concern in making a price reasonableness determination
is whether the offered prices are too high, rather than too low.” Id. It explained that “[a]rguments
that the agency did not perform an appropriate analysis to determine whether prices are too low,
such that there may be a risk of poor performance, concern price realism not price
reasonableness,” and that “price realism is not required to be evaluated by the agency unless the
solicitation provides for such an analysis,” which this one did not. Id. at 4012–13.

V.     This Action

        Munilla filed its complaint in this Court on December 22, 2016. ECF No. 1.5 In its
original complaint, Munilla alleged that both Seaward’s and SoBran’s prices were “unreasonable
to the Offeror and/or the Government” and “significantly understated and unbalanced.” Compl.
¶ 28. Accordingly, Munilla argued that the Navy failed to engage in the proper price analysis to
determine price reasonableness as required by the Solicitation and the FAR. See id. ¶ 40. It
requested a temporary restraining order as well as preliminary and permanent injunctive relief.
See id. at 16–18.

        The Court held oral argument on Munilla’s request for a temporary restraining order on
December 23, 2016. See Order, ECF No. 12. On the same day, it issued orders denying that
request and establishing an expedited briefing schedule for deciding the case on cross-motions
for judgment on the administrative record. See Orders, ECF Nos. 25 & 26.

         On December 30, 2016, Munilla filed an amended complaint. ECF No. 31. Its amended
complaint challenges the Navy’s evaluation of both Seaward’s and Crowley’s proposals. See
Am. Compl. ¶ 4. Munilla continues to seek preliminary and permanent injunctive relief on the
grounds that the Navy failed to perform a price reasonableness analysis and failed to conduct a
CLIN-by-CLIN comparison “to determine if [the CLINs] were understated or overstated.” Id.
¶¶ 57–58. Munilla also still asserts that Seaward’s pricing is “significantly understated” such that
its “total proposal price [is] unreasonably low, not fully justified and supported, not fair under
current market conditions, and not reasonable to both the Offeror and the Government.” Id. ¶ 59.
It now also alleges that Crowley’s pricing was “improperly incomplete” and that “the Navy
improperly modified Crowley’s pricing.” Id. ¶ 64.

       The Court heard oral argument on the parties’ pending cross-motions on January 23,
2017. See Order, ECF No. 25.




5
  Several days before this action was filed, on December 19, 2016, the Navy issued Amendment
P00001 to its contract with Seaward. AR Tab 147 at 4015. Through the amendment, the Navy
revised the periods of performance. Id. As amended, the contract requires Seaward to work with
Munilla for a transitional period from January 1, 2017 through January 31, 2017, and to begin
full performance on February 1, 2017. See id. at 4016.



                                                10
                                          DISCUSSION

I.     Subject Matter Jurisdiction

        The Court of Federal Claims has jurisdiction over bid protests in accordance with the
Tucker Act, 28 U.S.C. § 1491, as amended by the Administrative Dispute Resolution Act of
1996, Pub. L. No. 104-320, § 12, 110 Stat. 3870, 3874 (1996) (codified at 28 U.S.C. § 1491(b)).
Specifically, the Court has the authority “to render judgment on an action by an interested party
objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to
a proposed award or the award of a contract or any alleged violation of statute or regulation in
connection with a procurement or a proposed procurement.” 28 U.S.C. § 1491(b)(1); see also
Sys. Application & Techs., Inc. v. United States, 691 F.3d 1374, 1380–81 (Fed. Cir. 2012)
(observing that §1491(b)(1) “grants jurisdiction over objections to a solicitation, objections to a
proposed award, objections to an award, and objections related to a statutory or regulatory
violation so long as these objections are in connection with a procurement or proposed
procurement”).

        To possess standing to bring a bid protest, a plaintiff must be an “interested party”—i.e.,
an actual or prospective bidder (or offeror) who possesses a direct economic interest in the
procurement. Sys. Application & Techs., Inc., 691 F.3d at 1382 (citing Weeks Marine, Inc. v.
United States, 575 F.3d 1352, 1359 (Fed. Cir. 2009)); see also Orion Tech., Inc. v. United States,
704 F.3d 1344, 1348 (Fed. Cir. 2013). An offeror has a direct economic interest if it suffered a
competitive injury or prejudice as a result of an alleged error in the procurement process. Myers
Investigative & Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1370 (Fed. Cir. 2002) (holding
that “prejudice (or injury) is a necessary element of standing”); see also Weeks Marine, Inc., 575
F.3d at 1359.

        In post-award protests, like this one, a plaintiff may demonstrate competitive injury or
prejudice by showing that it would have had a “substantial chance” of winning the award “but
for the alleged error in the procurement process.” Weeks Marine, Inc., 575 F.3d at 1359–62
(quoting Info. Tech. & Applications Corp. v. United States, 316 F.3d 1312, 1319 (Fed. Cir.
2003)). “In other words, the protestor’s chance of securing the award must not have been
insubstantial.” Info Tech. & Applications Corp., 316 F.3d at 1319. The Court assumes well-pled
allegations of error in the complaint to be true when making the standing determination. Square
One Armoring Serv., Inc. v. United States, 123 Fed. Cl. 309, 323 (2015) (citing Digitalis Educ.
Sols., Inc. v. United States, 97 Fed. Cl. 89, 94 (2011), aff’d, 664 F.3d 1380 (Fed. Cir. 2012)); see
also Salmon Spawning & Recovery All. v. U.S. Customs & Border Prot., 550 F.3d 1121, 1131–
32, 1131 n.9 (Fed. Cir. 2008) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992))
(noting that at motion to dismiss stage, analysis is whether plaintiffs have sufficiently alleged
elements of standing, not whether they will ultimately prevail on merits); Linc Gov’t Servs.,
LLC v. United States, 96 Fed. Cl. 672, 694–95 (2010) (noting that the showing of prejudice as an
element of standing “turns entirely on the impact that the alleged procurement errors had on a
plaintiff’s prospects for award, taking the allegations as true,” and distinguishing “allegational
prejudice” required to establish standing from the “prejudicial error” required to prevail on the
merits).




                                                11
        In this case, Munilla alleges that the Navy “fail[ed] to evaluate properly Seaward’s
proposal and the proposal of [Crowley].” Am. Compl. ¶ 4. More specifically, it alleges that the
“Navy did not perform the price analyses required by the RFP and the FAR” and that “the Navy
did not perform a price analysis to determine whether the pricing was fully justified and
supported, or was fair under current market conditions as well as reasonable to both the Offeror
and the Government.” Id. ¶ 40. Munilla also alleges that the Navy violated the terms of the
Solicitation and the FAR by “not perform[ing] a line item price analysis to determine whether
Seaward’s or Crowley’s prices were significantly over or understated.” Id. ¶ 41. It further claims
that “[a]n analysis of Seaward’s price proposal reveals that it was not fully justified and
supported, fair under current market conditions, or reasonable to both the Offeror and the
Government,” and that both Seward’s and Crowley’s proposed prices were unbalanced. Id.
¶¶ 42–45. In addition, Munilla alleges that the Navy should have found Crowley’s proposal
unacceptable because “Crowley did not provide a price for each CLIN as required by the RFP.”
Id. ¶ 44. As a result of all of these alleged errors, Munilla claims, it was “depriv[ed] . . . of award
of the contract as the offeror with the lowest reasonably priced proposal that is not understated or
overstated or unbalanced and that is technically acceptable.” Id. ¶ 49.6

         The government and Seaward dispute Munilla’s standing to challenge the award to
Seaward. They argue that Munilla’s claims regarding the evaluation of Crowley’s proposal lack
merit, and point out that Crowley was next in line to receive the award because its offer was the
next lowest-priced technically acceptable offer. Therefore, according to the government and
Seaward, Munilla has not demonstrated that it would have a substantial chance of receiving the
award, because even if the award to Seaward were set aside, it would go to Crowley, not
Munilla. See Intervenor’s Mem. in Supp. of Its Cross-Mot. for J. on the Admin. R. and in Resp.
to Pl.’s Mot. for J. on the Admin. R. (Intervenor’s Mem.) at 15, ECF No. 40; Def.’s Mot. to
Dismiss, Mot. for J. on the Admin. R., and Opp’n to Pl.’s Mot. for J. on the Admin. R. (Def.’s
Mot.) at 11–14, ECF No. 41.

        These contentions are unpersuasive. As noted above, the determination of standing is
dependent on the allegations in the complaint. While the government points out that the Court
may consider evidence challenging “jurisdictional facts” when addressing Munilla’s standing,
Def.’s Reply in Supp. of Its Mot. to Dismiss & Reply in Supp. of Its Mot. for J. on Admin. R. at
2, ECF No. 46 (citation omitted), its objections here (and those of Seaward) do not depend upon
factual evidence. Rather, they are predicated upon the merits of Munilla’s legal allegations. For
example, Munilla has alleged that the Navy should have found Crowley’s proposal unacceptable
because, Munilla argues, Crowley’s pricing proposal did not comply with the RFP’s
requirements with respect to the reimbursable CLINs. If this argument were meritorious as a
matter of law (as the Court must assume for purposes of determining standing), then Munilla’s

6
  In its amended complaint, Munilla also claimed that the Navy’s award decision was based on
an alleged “bait and switch” or material misrepresentation. See Am. Compl. ¶¶ 51–55, 60, 65. It
observed that Seaward identified seven individuals as key personnel in its proposal, but alleged
that, as a matter of fact, Seaward is “now attempt[ing] to hire [Munilla]’s key employees.” Pl.’s
Mem. of Law in Supp. of Its Mot. for J. on the Admin. R. (Pl.’s Mem.) at 28–29, ECF No. 32.
Munilla abandoned this claim at oral argument. Oral Argument of January 23, 2017 at 26:52.
Accordingly, the Court will not address it either for purposes of standing or on the merits.



                                                  12
proposal would move to second in line, thereby neutralizing the standing objections posed by the
government and Seaward.

         Similarly, if Munilla is correct that the Navy’s evaluation of Seaward’s and Crowley’s
price proposals was flawed, then the Navy would be required to re-evaluate the proposals
consistent with the Solicitation’s criteria (or, if it chose, re-solicit new proposals). The Court
cannot determine how the price proposals would be ranked if they were re-evaluated consistent
with what Munilla claims are the appropriate standards. Thus, based upon Munilla’s allegations,
it is an interested party and has standing to bring this protest. See Per Aarsleff A/S v. United
States, 121 Fed. Cl. 603, 622–23 (2015) (holding that highest-priced offeror in lowest-price
technically acceptable solicitation had standing where it challenged pricing evaluation process
and alleged flaws in lower-priced offerors’ proposals), rev’d on other grounds, 829 F.3d 1303
(Fed. Cir. 2016); Sci. & Mgmt. Res., Inc. v. United States, 117 Fed. Cl. 54, 61–62 (2014)
(finding plaintiff had standing where it alleged “systemic defects” in evaluation process and it
was “not entirely clear which of the bidders would be next in line” if the evaluation process had
to be redone).

II.    Standards of Review

       A.      Motions for Judgment on the Administrative Record

         Parties may move for judgment on the administrative record pursuant to Rules of the
Court of Federal Claims (RCFC) 52.1. Pursuant to RCFC 52.1, the Court reviews an agency’s
procurement decision based on the administrative record. Bannum, Inc. v. United States, 404
F.3d 1346, 1353–54 (Fed. Cir. 2005). The court makes “factual findings under RCFC [52.1]
from the record evidence as if it were conducting a trial on the record.” Id. at 1357. Thus,
“resolution of a motion respecting the administrative record is akin to an expedited trial on the
paper record, and the Court must make fact findings where necessary.” Baird v. United States, 77
Fed. Cl. 114, 116 (2007). The Court’s inquiry is “whether, given all the disputed and undisputed
facts, a party has met its burden of proof based on the evidence in the record.” A&D Fire Prot.,
Inc. v. United States, 72 Fed. Cl. 126, 131 (2006). Unlike a summary judgment proceeding,
genuine issues of material fact will not foreclose judgment on the administrative record.
Bannum, Inc., 404 F.3d at 1356.

       B.      Bid Protest Cases

       The Court reviews challenges to procurement decisions under the same standards used to
evaluate agency actions under the Administrative Procedure Act, 5 U.S.C. § 706. See 28 U.S.C.
§ 1491(b)(4) (stating that “[i]n any action under this subsection, the courts shall review the
agency’s decision pursuant to the standards set forth in section 706 of title 5”). Thus, to
successfully challenge an agency’s procurement decision, a plaintiff must show that the agency’s
decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law.” 5 U.S.C. § 706(2)(A); see also Bannum, Inc., 404 F.3d at 1351.

       This “highly deferential” standard of review “requires a reviewing court to sustain an
agency action evincing rational reasoning and consideration of relevant factors.” Advanced Data
Concepts, Inc. v. United States, 216 F.3d 1054, 1058 (Fed. Cir. 2000) (citing Bowman Transp.,



                                                13
Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 285 (1974)). Thus, the Court cannot
substitute its judgment for that of the agency. See Honeywell, Inc. v. United States, 870 F.2d
644, 648 (Fed. Cir. 1989) (holding that as long as there is “a reasonable basis for the agency’s
action, the court should stay its hand even though it might, as an original proposition, have
reached a different conclusion” (quoting M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301
(D.C. Cir. 1971))). Instead, the Court’s function is limited to “determin[ing] whether ‘the
contracting agency provided a coherent and reasonable explanation of its exercise of
discretion.’” Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,
1332–33 (Fed. Cir. 2001) (quoting Latecoere Int’l, Inc. v. U.S. Dep’t of Navy, 19 F.3d 1342,
1356 (11th Cir. 1994)); see also Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983) (court should review agency action to determine if the agency has
“examine[d] the relevant data and articulate[d] a satisfactory explanation for its action”). A
disappointed offeror “bears a heavy burden” in attempting to show that a procuring agency’s
decision lacked a rational basis. Impresa Construzioni Geom., 238 F.3d at 1338.

III.   Munilla’s Motion to Supplement the Administrative Record

        Before turning to the merits of Munilla’s protest, the Court must determine whether to
consider certain extra-record material upon which Munilla relies in support of its legal
arguments. Thus, during the course of this case, Munilla has filed the declarations of two of its
employees ([***] and [***]), and two of its subcontractors’ employees ([***] and [***]). Pl.’s
Mem. Ex. 1 at ¶ 1; Pl.’s Reply Mem. in Supp. of Its Mot. for J. on the Admin. R., & Resp. to
Def.’s Mot. (Pl.’s Reply) Ex. 2 at ¶ 1, ECF No. 45; Pl.’s Reply Ex. 1 at ¶¶ 1, 3; Mot. for TRO,
Prelim. Inj., & Permanent Inj. (TRO Mot.) Ex. 3 at ¶¶ 1–2, ECF No. 5. The [***] and [***]
declarations were submitted in conjunction with both Munilla’s initial motion for a temporary
restraining order and its motion for judgment on the administrative record. TRO Mot. Exs. 1–2;
Pl.’s Mem. Ex. 1; Pl.’s Reply Ex. 2. The [***] declaration was submitted with the former
motion, TRO Mot. Ex. 3, while the [***] declaration was submitted with the latter, Pl.’s Reply
Ex. 1.

       On January 12, 2017, the government moved to strike all “extra-record material relied
on” by Munilla. Def.’s Mot. to Strike Extra-R. Material Relied on in Pl.’s Mot. for J. on the
Admin. R., ECF No. 38. On January 17, 2017, Munilla filed its opposition to the government’s
motion to strike, along with a motion to supplement the administrative record with the
declarations. ECF Nos. 44 & 44-1.

        It is well established that, in a bid protest case, the Court of Federal Claims is to “apply
the appropriate APA standard of review . . . to the agency decision based on the record the
agency presents” to it. See Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374, 1379 (Fed.
Cir. 2009) (emphasis in original). Therefore, “the focal point for judicial review should be the
administrative record already in existence, not some new record made initially in the reviewing
court.” Id. (quoting Camp v. Pitts, 411 U.S. 138, 142 (1973)). This limitation guards against the
possibility that the court’s scope of review will be transformed from an examination of the
reasonableness of the agency’s determination under APA standards “into effectively de novo
review.” Id. at 1380 (quoting Murakami v. United States, 46 Fed. Cl. 731, 735 (2000), aff’d, 398
F.3d 1342 (Fed. Cir. 2005)).



                                                 14
        In light of these principles and concerns, the court of appeals has held that in bid protests,
“supplementation of the record should be limited to cases in which the omission of extra-record
evidence precludes effective judicial review.” Id. (quotation omitted). There are no hard and fast
rules about when extra-record evidence is necessary to permit effective judicial review. But
examples of such circumstances include cases in which a party seeks to introduce evidence of
“tacit knowledge possessed by offeror and agency personnel of a highly technical and complex
nature, requiring explication via affidavits or expert testimony”; where it is necessary for the
court to consider “information intentionally left out of the record, such as evidence of bias or bad
faith”; and where there exists “relevant information, contained in the procurement files or
generally known in an industry or discipline, which was inappropriately ignored by an agency.”
E. W., Inc. v. United States, 100 Fed. Cl. 53, 57 (2011) (citations omitted) (rejecting plaintiff’s
motion to supplement administrative record with declaration of plaintiff’s corporate officer).

         The declarations with which Munilla seeks to supplement the administrative record do
not fall into any of these categories. And the Court concludes that their consideration is not
otherwise necessary for it to conduct effective review of the Navy’s decision.

        The general subject matter of the declarations includes, among other things, Munilla’s
past performance history, characterizations of communications between Munilla and the Navy
during the debriefing process, and comparisons of Munilla’s prices with those of Seaward
(including opinions regarding the reasonableness of Seaward’s prices for particular line items,
whether prices were below cost, and whether particular line items were significantly overstated
or understated). All of the declarations were prepared subsequent to the initiation of litigation;
none were considered by the Navy in reaching its award decision.

        Portions of the declarations might be appropriate to consider in conjunction with
Munilla’s arguments regarding the propriety of prospective injunctive relief in this case if the
Court were to find the protest meritorious (which, as discussed below, it does not). See
PlanetSpace, Inc. v. United States, 90 Fed. Cl. 1, 5 (2009) (distinguishing between admissible
evidentiary submissions that go to prospective relief sought in the court and evidence whose
admission is sought to address the reasonableness of the agency decision under review). But they
may not be admitted as supplements to the administrative record because they are offered as a
basis for rebutting or casting doubt upon the agency’s conclusions—based on the record before
it—that the price proposals of Seaward (and/or Crowley) were reasonable and not unbalanced.
The principles outlined in Axiom do not allow the Court to consider declarations prepared after
the fact for purposes of persuading it to substitute its judgment for that of the agency with respect
to the agency’s evaluation of the offerors’ proposals. See Axiom Res. Mgmt., Inc., 564 F.3d at
1379–80. For these reasons, Munilla’s motion to supplement the administrative record must be
DENIED; the government’s motion to strike the declarations submitted in support of Munilla’s
motion for judgment on the administrative record is GRANTED.

IV.    Merits

       A.       Price Reasonableness

       Munilla’s first allegation of error concerning the contract award to Seaward is that the
Navy failed to comply with the RFP’s requirement that the Navy determine whether the offerors’


                                                 15
prices were “fully justified and supported and . . . considered fair under current market
conditions as well as reasonable to both the Offeror and the Government.” Pl.’s Mem. at 24–25
(quoting the Solicitation). According to Munilla, the requirement that the Navy determine
whether the price proposal was “reasonable to both the Offeror and the Government” meant that
the Navy was obligated to determine not only whether Seaward’s prices were too high, but also
whether they were too low. Id. at 25. Because the Navy failed to make the latter determination,
Munilla argues, its evaluation of Seaward’s price proposal did not comport with the RFP. See id.
at 25–26.

        Munilla’s argument lacks merit. As FAR 15.404-1(b)(2) provides, the “Government may
use various price analysis techniques and procedures to ensure a fair and reasonable price.” One
such technique or procedure is to compare the “proposed prices received in response to the
solicitation,” as “[n]ormally, adequate price competition establishes a fair and reasonable price.”
Id. § 15.404-1(b)(2)(i).7 In fact, such a comparison is one of the FAR’s two “preferred
techniques” for determining whether a price proposal is fair and reasonable. Id. § 15.404-1(b)(3).

       The RFP in this case adopted the price reasonableness approach set out in the FAR.
Contrary to Munilla’s argument, the RFP did not require the Navy to base its price
reasonableness decision on a determination that the offerors’ prices were “fully justified and
supported and . . . considered fair under current market conditions as well as reasonable to both
the Offeror and the Government.” In fact, the Solicitation did not even permit offerors to submit
the kind of cost and other data that would have allowed for such an analysis. See AR Tab 25 at
477–79.

        Rather, consistent with the FAR, the RFP provided that “[r]easonableness may also be
determined by comparing the proposed pricing with Government estimates and/or other offers
received.” Id. at 490–91 (emphasis added). Contrary to Munilla’s assertions, and as described in
some detail above, the Navy followed this directive and determined reasonableness by
comparing prices received in response to the Solicitation. Id. Tab 123 at 3684. Thus, the
Approved Business Clearance memorandum contains a finding that “[t]his solicitation has
provided adequate competition” and concludes that “[p]rice analysis has been performed and
[Seaward’s] price has been determined fair and reasonable by the Contracting Officer based on
adequate price competition in accordance with FAR 15.404-1(b)(2)(i).” Id. at 3688–89 (emphasis
added).

       There is similarly no merit to Munilla’s argument that, in determining price
reasonableness, the Navy was also required to make a finding as to whether the offerors’ prices
were “too low.” As GAO observed in rejecting Munilla’s protest, “[a]n agency’s concern in
making a price reasonableness determination is whether the offered prices are too high, rather
than too low.” Id. Tab 45 at 4012. A determination of whether an offeror’s prices are too low is

7
  In noting that adequate price competition normally establishes a fair and reasonable price, FAR
15.404-1(b)(2)(i) refers to FAR 15.403-1(c)(1)(i). That provision states, in pertinent part, that
“[a] price is based on adequate price competition if . . . two or more responsible offerors,
competing independently, submit priced offers that satisfy the Government’s expressed
requirement.” Id. § 15.403-1(c)(1)(i).



                                                16
made when an agency conducts a cost or price realism analysis. See FAR 15.404-1(d) (“Cost
realism analysis is the process of independently reviewing and evaluating specific elements of
each offeror’s proposed cost estimate to determine whether the estimated proposed cost elements
are realistic for the work to be performed . . . .”); see also i4 Now Sols., Inc., B-412369, 2016
WL 537216 (Comp. Gen. Jan. 27, 2016) (stating that “[a]rguments that the agency did not
perform an appropriate analysis to determine whether prices are too low, such that there may be
a risk of poor performance, concern price realism not price reasonableness; price realism is not
required to be evaluated by the agency unless the solicitation provides for such an analysis”).8

         The FAR “does not mandate that the agency conduct a price realism analysis” in a fixed-
price contract setting. ViON Corp. v. United States, 122 Fed. Cl. 559, 573 (2015) (citing
FAR 15.402(a)). And, a cost realism analysis was not required by the RFP. See AR Tab 25 at
490–91. In fact, as described above, in its response to questions received, the Navy made clear
that it would be assessing only reasonableness, not price realism. Thus, when SoBran noted the
potential utility of determining whether an offeror’s price proposal was too low and asked
whether the Navy would consider performing a “Price Realism Analysis in addition to the Price
Reasonableness evaluation,” AR Tab 43 at 741, the Navy responded in the negative, stating that
it would “conduct a Price Reasonableness evaluation in accordance with Section M,” id. Tab 45
at 760.

         Munilla’s reliance on ViON as a basis for requiring the Navy to make a determination as
to whether Seaward’s prices were too low is misplaced. See Pl.’s Mem. at 25. The court in ViON
noted that although a price realism analysis was not a mandatory requirement for firm fixed-price
contracts, an agency could commit itself to performing one if the solicitation “provides that
unrealistically low offers may be considered unacceptable and rejected on that basis.” 122 Fed.
Cl. at 573 (quotations omitted). There, the court found the agency committed itself to a price
realism analysis because the solicitation stated that the government could “reject any proposal
that is . . . unreasonably high or low in price when compared to Government estimates, such that
the proposal is deemed to reflect an inherent lack of competence [or] failure to comprehend the
complexity and risk of the program.” Id. (emphasis omitted, omission in original, brackets
added).

       There is no similar language in this RFP. Nothing in the Solicitation indicates the Navy
would assess price as a proxy for determining an offeror’s understanding of contract
requirements and nothing otherwise committed the Navy to a realism analysis. Indeed, as noted,
the Navy rejected the suggestion that it conduct a price realism analysis. AR Tab 45 at 760.
Accordingly, there is no merit to Munilla’s argument that the Navy failed to conduct a price
reasonableness analysis that was consistent with the RFP when it found the price proposals
reasonable based on adequate price competition.


8
 Although GAO opinions are not binding on the Court of Federal Claims, the Court “may draw
on GAO’s opinions for its application of [its] expertise.” See Allied Tech. Grp., Inc. v. United
States, 649 F.3d. 1320, 1331 n.1 (Fed. Cir. 2011); see also Univ. Research Co., LLC v. United
States, 65 Fed. Cl. 500, 503 (2005) (noting that GAO decisions are not binding on the court but
“are persuasive”).



                                               17
       B.      Unbalanced Pricing Analysis

        Munilla’s second challenge to the Navy’s price evaluation is predicated on an argument
that the Navy failed to comply with the RFP provisions requiring the Navy to evaluate the price
proposals for lack of balance. The RFP stated that unbalanced pricing “exists when, despite an
acceptable total evaluated price, the price of one or more contract line items is significantly over
or understated as indicated by the application of cost or price analysis techniques.” Id. Tab 25 at
491; see also FAR 15.404-1(g)(1). It further provided that, “[i]n accordance with FAR 15.404-
1(g)(2)[,] a price analysis will be conducted on the individual CLINs to determine whether
unbalanced pricing occurred.” AR Tab 25 at 491. According to Munilla, the Navy failed to
conduct such a price analysis on the individual CLINs, but only analyzed whether the offerors’
proposals were unbalanced on a total price basis. Pl.’s Mem. at 22. For the reasons set forth
below, Munilla’s arguments are unpersuasive.

       1.      The Risks of Unbalanced Pricing

       As one procurement law expert has explained, “[u]nbalancing in bids generally is
associated with uncertainty about the amount of work that the Government will actually call
upon the contractor to perform.” Daniel I. Gordon, Unbalanced Bids, 24 Pub. Cont. L.J. 1, 2
(1994). Thus:

               Unbalanced bids arise in two quite different contexts: in solicitations
               covering a base period and option periods and in solicitations for
               multiple-line-item requirements contracts. In option-period
               solicitations, the unbalanced bid offers relatively high prices for the
               base period and relatively low prices for the later option periods. In
               requirements-contract solicitations, the unbalanced bid includes
               high prices for some items and low prices for others.

Id. at 2–3 (footnotes omitted).

        With respect to option-period solicitations, like the present one, “the solicitation typically
states that the Government will evaluate bids on the basis of the prices for the base period and all
options; thus, the Government assumes, in calculating the total amount of each bid, that it will
actually exercise all options.” Id. at 3. “Determining which bid is low is thus predicated . . . on a
prediction about future Government purchases under the contract.” Id. An unbalanced offer in
this context is one that proposes relatively high prices for the base period but relatively low
prices for the later option periods, with the risk that the overall price paid will be too high and the
contractor will receive a windfall if all of the option years are not exercised. See id. at 3–5; see
also Ralph C. Nash & John Cibinic, Unbalanced Bids and Proposals: Trying to Beat the System,
5 No. 4 Nash & Cibinic Rep. ¶ 21 (1991) (commenting on use of a “front-end loading ploy” in
which money from the earlier billings “will more than make up for the underpricing” in the later
years; such a “ploy” is used in the hope that the base year will finance later option-year work or
that the options will not be exercised).9 In addition, an overpriced base year is of concern

9
 On the other hand, with respect to an IDIQ contract, the government is predicting “that it will
order the various line items in the quantities estimated in the solicitation.” Gordon, supra, at 3.


                                                  18
because it may result in the provision of an impermissible advanced payment to the contractor.
See Ultimate Concrete, LLC v. United States, 127 Fed. Cl. 77, 83–85 (2016).

       2.      The Navy’s Evaluation

        In this case, the record reflects that the Navy conducted a pricing analysis to detect
unbalanced pricing consistent with the principles set forth above and with the RFP’s
requirements. Specifically—and contrary to Munilla’s assertions—the record confirms that the
Navy did conduct a “price analysis . . . on the individual CLINs to determine whether
unbalanced pricing occurred.” See AR Tab 25 at 491. Indeed, the record is replete with evidence
of the Navy’s consideration of individual CLINs in its discussion of whether the offerors’ prices
were unbalanced as between each of the performance periods set forth in the contract.

        First, as described above, the Navy created the six-page detailed abstract of proposals,
which consisted of a table listing side-by-side each offeror’s prices for each CLIN for the base
year and each potential option year. Id. Tab 122 at 3604–08. This table, in turn, was designated
as Attachment 5 and referenced in the Approved Business Clearance memorandum. Id. Tab 123
at 3683. It serves as a useful reference to the Navy’s narrative discussion of individual CLINs in
its evaluation of whether the offerors’ pricing proposals were unbalanced. See id.10

        Second, the Approved Business Clearance memorandum represents that the “Contracting
Officer evaluated the Contractors’ proposed prices for Base Year and Option[] I through Option
IV to determine whether unbalanced pricing occurred.” Id. at 3684. Further, after each chart and
analysis regarding the year-to-year prices contained in each offer, the contracting officer
concluded that “no unbalanced pricing exist[ed]” with respect to each pair of performance
periods. Id. at 3685–86. As described above, unbalanced pricing exists when “the price of one or
more contract line items is significantly over or understated.” Id. Tab 25 at 491. In representing
that the contracting officer evaluated the “proposed prices . . . to determine whether unbalanced
pricing occurred,” and that “no unbalanced pricing exist[ed],” the Navy was necessarily
representing that the contracting officer evaluated the individual CLINs and determined that they
were not significantly overstated or understated. See id. Tab 123 at 3684–86.

       Further, the narrative evaluation of the price proposals contains references to those
individual CLINs that the Navy apparently considered most relevant to the balanced pricing


The risk of unbalanced pricing in this context is realized when the government ends up ordering
more of the higher-priced line items and fewer of the lower-priced items than it originally
predicted. See id. at 3–5.
10
  The Court finds unpersuasive Munilla’s effort to downplay the significance of the creation of
the detailed comparison table by stating that the table “merely array[ed], by contract year, each
offeror’s unit price and sum[med] them into a total for the year.” Pl.’s Reply at 12. The table,
which (as noted) was included as an attachment to the Approved Business Clearance
memorandum and referenced therein, contains precisely the information that Munilla alleges the
Navy did not consider, organized in a fashion that facilitates the comparison among individual
CLINs that Munilla urges was required but not conducted.



                                                19
analysis. For instance, in assessing the reasons for the slight decline in price for all offerors
between the first and second option years, the Navy took note of the fact that the contractor
would only be “required to perform one (1) DROH [docking regular overhaul] off-island during
the second Option Year,” whereas two “DROHs (one-off island and one on-island) will be
performed during the first Option Year.” Id. at 3685. It also compared the CLIN prices for the
DROH work in those two option years, and observed that “[a] review of each Offeror’s Price
Proposal indicates that their proposed price for the DROH off-island for Option II is in line with
their proposed price for the DROH off-island for Option I.” Id.

        The memorandum includes a similar discussion with respect to option years II and III, in
which it also explicitly references Attachment 5, the detailed abstract breaking down the
offerors’ proposals on a CLIN by CLIN basis. It noted that a difference in DROH requirements
explained the price decreases except for Metson, with respect to which the contracting officer
stated that “[a]s illustrated in the detailed abstract of proposals, Metson’s proposed price for the
DROH on-island is significantly higher than the other three Offeror[]s[’] proposed prices.” Id. at
3685–86 (emphasis added). And again, when evaluating option years III and IV, the contracting
officer noted that a “review of each Offeror’s Price Proposal indicates that their proposed price
for the DROH on-island for Option IV is in line with their proposed price for the DROH on-
island for Option III.” Id. at 3686.

       3.      Munilla’s Arguments

        Notwithstanding the foregoing, Munilla contends that the Navy did not perform an
adequate analysis of the individual CLINs as evidenced by its failure to specifically discuss
certain other CLINs for which it claims there were disparities between Seaward’s prices and
those of Munilla. According to Munilla, these disparities show that Seaward’s pricing was
overstated with respect to certain CLINs, and understated with respect to others. See Pl.’s Mem.
at 26–28. But a protester cannot demonstrate unbalanced pricing “merely by showing that [the
awardee’s prices] were lower than [its] prices.” Avtel Servs., Inc. v. United States, 70 Fed. Cl.
173, 225 (2005). Further, neither the Solicitation nor the FAR requires the Navy to discuss each
individual CLIN and explain why it concluded that any particular price differentials between
offerors’ proposals as to that CLIN did not evince material unbalancing. See, e.g., AR Tab 25.

         Indeed, in addressing the adequacy of the agency’s discussion it is important to keep in
mind that the FAR does not require agencies to reject every price proposal that is unbalanced,
but permits them to reject those that present an unacceptable risk to the government, as described
above. Id. at 490–91; 48 C.F.R. § 15.404-1(g)(3); see also Al Ghanim Combined Grp. v. United
States, 56 Fed. Cl. 502, 515 n.17 (2003) (observing that “[a] distinction exists between materially
and mathematically unbalanced proposals” and that “[a] material imbalance occurs if an award
fails to represent the lowest ultimate cost to the Government or the imbalance is such that it will
adversely affect the integrity of the bidding system” (quotation omitted)). To the extent that the
Navy did or did not discuss particular individual CLINs, its approach was consistent with the
understanding that, in the context of a firm fixed-price contract, the risk to the government of
unbalanced prices does not hinge upon whether specific line items are overpriced or underpriced




                                                 20
within a single performance period.11 Instead, the risk depends upon whether there is “front
loading”: unbalanced pricing between the initial years and subsequent option years. See Part
IV.B.1, supra.

        A discussion of the prices of individual CLINs for purposes of the Solicitation, therefore,
was of most relevance in connection with a comparison between the prices charged for each
performance period. And it is that context in which the Navy included a discussion of its
evaluation of individual CLINs. See Survival Sys., USA, Inc. v. United States, 102 Fed. Cl. 255,
270 n.14, 272 (2011) (distinguishing detailed CLIN-by-CLIN analysis required in procurement
for an IDIQ contract from unbalanced pricing analysis in procurement for fixed-price services
contract).12

       In short, the record establishes that the Navy adhered to the RFP’s requirements both
with respect to its evaluation of the reasonableness of the price proposals and of whether the
proposals evinced unbalanced pricing.13 Accordingly, Munilla’s challenge to the Navy’s
evaluation of Seaward’s price proposal lacks merit.




11
   With a firm fixed-price contract like the present one, the price “is not subject to any
adjustment on the basis of the contractor’s cost experience,” so that the contractor bears
“maximum risk and full responsibility for all costs and resulting profit or loss.” FAR 16.202-1;
see also First Enter. v. United States, 61 Fed. Cl. 109, 125 (2004) (noting that “[b]ecause this
protest involves a fixed-price contract—not, for example, a cost reimbursement or indefinite
delivery/indefinite quantity contract—[the contractor] would be unable to alter the contract price
after award and, therefore, unable to recoup losses from the government” (footnote omitted)).
12
  Munilla cites Al Ghanim Combined Group in support of its argument that the Navy failed to
conduct an adequate analysis of the individual CLINs to determine whether Seaward’s price
proposal was unbalanced. Pl.’s Mem. at 23–24. But that case involved an indefinite
delivery/indefinite quantity contract and the agency acknowledged that it only looked at each
offeror’s total price and “performed no cost analysis whatsoever.” Al Ghanim Combined Grp.,
56 Fed. Cl. at 503, 506, 512–14. This case involves a fixed-price contract and the Court has
found that the Navy did in fact perform a price analysis, which included a review of individual
CLINs to determine whether the offerors’ price proposals were unbalanced. Al Ghanim
Combined Group is therefore distinguishable from this case.
13
   In light of its conclusion that the Navy’s evaluation of Seaward’s price proposal was consistent
with the RFP, it is unnecessary for the Court to address Munilla’s argument that the Navy should
have found Crowley’s price proposal unacceptable for failure to properly fill in the price lines for
the reimbursable CLINs. It also need not address Munilla’s argument that it was prejudiced by
the Navy’s alleged failure to comply with the RFP’s evaluation requirements because what it
calls a “proper CLIN-by-CLIN analysis would have revealed that Seaward’s pricing was
unreasonably understated in some line items and unreasonably overstated on others.” Pl.’s Reply
at 17.



                                                21
                                   CONCLUSION

        Based on the foregoing, Munilla’s motion for judgment on the administrative record is
DENIED and the government’s and Seaward’s cross-motions for judgment on the administrative
record are GRANTED. In addition, Munilla’s motion to supplement the administrative record is
DENIED and the government’s motion to strike the declarations submitted in support of
Munilla’s motion for judgment on the administrative record is hereby GRANTED. The Clerk is
directed to enter judgment accordingly. Each side shall bear its own costs.

       IT IS SO ORDERED.




                                                  s/ Elaine D. Kaplan
                                                  ELAINE D. KAPLAN
                                                  Judge




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