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  • By Mar-Vic Cagurangan

Navy’s Guam contract award is based on outdated specs

DZSP 21’s current employees facing pay cuts under Fluor’s personnel budget

The Navy’s award of a $500-million plus base operations contract to Fluor Federal Solutions is based on “hopelessly outdated” specifications that have been outstripped by the current ground requirements of the Joint Region Marianas, according to DZSP 21.

At the same time, DZSP 21 warned of a possible workforce meltdown that would result from Fluor’s plan to implement pay cuts for DZSP 21’s current employees who would be absorbed into the new base operations contract.

In a lawsuit filed Jan. 17, DZSP 21 is asking the Court of Federal Claims to put the brakes on the Navy’s contract with Fluor and order the issuance of a revised solicitation “that adequately reflects the Navy’s actual requirements.”

DZSP 21 noted that the Navy’s award to Fluor is based on specifications that were drafted in 2013, which are “now hopelessly outdated.”

“When the solicitation was issued, no one could have anticipated that performance on the new contract still would not have commenced more than four years later,” DZSP 21 states in the lawsuit.

The base operations contract has been marred by a series of protests since it was first awarded to DZSP 21 for a renewal in 2013. DZSP 21 prevailed three times, but in October last year it lost to Fluor’s fourth protest. On Jan. 10, the Government Accountability Office—acting on DZSP 21’s subsequent counter protest — upheld the Navy’s award to Fluor.

DZSP 21 argued that “the situation on the ground at JRM Guam — and the attendant national security threats — have changed in ways the parties could not possibly have imagined when they submitted their proposals.”

It cited, for example, North Korea’s “dramatic progress in its nuclear program over the last several years and even just the last few months,” and China’s increasing aggression in the Pacific region that will make operational readiness on Guam "become more significant and important to the U.S.’s strategic interests."

But throughout the protest, DZSP 21 said there was no opportunity for both bidders to revise their proposals to consider these changes.

“The last time either made a change to their proposal was in July of 2016, in response to two narrow discussion questions from the Navy related to specific staffing issues. The last time Fluor and DZSP submitted complete revised proposals was in the summer of 2015,” the lawsuit states.

DZSP 21, which has been the base operations contractor since 2005, noted that the Navy’s actual requirements at JRM have changed in the past five years and that the volume of assets DZSP currently supports is, in some cases, exponentially higher than contemplated by the solicitation.

“Given the passage of time and the changed circumstances in Guam, the most prudent course for the Navy is to issue a new solicitation for the Guam BOS contract that accurately reflects the current needs of JRM Guam, and to reasonably and fairly evaluate proposals submitted in response to that new solicitation,” the lawsuit states.

If DZSP 21’s recent lawsuit gets struck down, the transition would begin in April.


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Fluor has agreed to absorb 95 percent of DZSP 21’s incumbent employees — at rates lower than what they are currently receiving and exempt from collective bargaining. A source told the Pacific Island Times that Fluor will fill key management positions with its own recruits.

DZSP 21, which currently employs 900 people, took the Navy to task for failing to consider the “performance risk” associated with Fluor’s low-proposed rates, and its inability to retain the incumbent workforce.

“The Navy’s Technical Evaluation Team concluded that such rates were too low and ‘could cause problems with employee morale and lead to retention issues,’ such that Fluor’s proposed retention plan would ‘be challenging at the salaries proposed,’” DZSP 21 says in the lawsuit. “But without explanation, the Navy’s Cost Evaluation Team dismissed these concerns.”

Yet, DZSP 21 complained, the Navy accepted Fluor’s personnel salary rates, which it said is not consistent with its earlier requirement to bump up the labor costs.

“As a result of the Navy’s upward adjustment, for the first time in the five-year history of this procurement, DZSP’s total evaluated price was higher than Fluor’s. And, for the first time in the five-year history of this procurement, the Navy determined that Fluor’s now (supposedly) lower-priced proposal represented the best-value to the government,” DZSP 21 states.

DZP 21’s bid was originally priced $532,284,944 against Fluor’s $572,077,165.

But during each award protest, DZSP said, Fluor had the chance to “reverse-engineer” its proposal, allowing it to revise its bid to cut the nearly $40 million gap between its and DZSP’s initial proposal submissions to less than in the proposals submitted after the second GAO protest.

DZSP 21 is asking the court to “declare the Navy’s award of the contract to Fluor to be arbitrary, capricious, or otherwise an abuse of discretion, and not in accordance with procurement law.”


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