Court cancels Navy’s contract with Fluor Federal Solutions
The Court of Federal Claims on Friday put the brakes on the Navy’s half-a-billion-dollar contract with Fluor Federal Solutions for base operations support, granting DZSP 21’s request for injunctive relief.
In a brief written order following the oral arguments on March 9, the court declared that “the Navy’s contractual award to Fluor is set aside, and the Navy is enjoined to perform a new evaluation of DZSP’s and Fluor’s proposals or to conduct an entirely new solicitation, whichever it chooses.”
The court’s order halted the base op transition process, which was originally scheduled to begin on April 1. Prior to the court’s decision, DZSP 21’s employees were expected to receive their worker adjustment and retraining notification in preparation for either job transition or contract termination by April 30. DZSP 21 had 900 employees. “There was so much demoralization due to the protest,” a source said. “Some of the employees have moved on and have found jobs elsewhere.”
“We are aware of the recent federal court decision against the Department of the Navy in the award of the base operation support contract for Joint Region Marianas. This will not impact current operations in Joint Region Marianas,” said Lt. Ian M. McConnaughey, public affairs officer for JRM.
Based on the court’s decision, the Navy has 60 days to appeal. It wasn’t clear, however, if DZSP 21 would get a bridge contract pending new evaluation of the bids.
DZSP 21 President and CEO Wayne Cornell said it was “hard to say at this point” to determine the next step for DZSP 21. “We will react to government direction. The Navy may appeal the court’s decision.”
On Jan. 31, NAVFAC published a Request for Information on establishing a bridge contract of up to 10 months for base operations support.
“Our current bridge contract ends 30 April 2018. Therefore, we expect NAVFAC Pacific to negotiate another bridge contract to give the Navy an opportunity to respond to the court’s decision," Cornell said.
He assured DZSP 21 employees that they remain employed as long as the company has a contract with the Navy. "Our employees do not have employee contracts per se (there are employee agreements). Many of our employees have received contingent offers from Fluor. Those offers will be jeopardized by the court’s decision," Cornell said.
Spokespersons for Fluor Federal Solutions had yet to return the Times’ email as of press time. Fluor is based in Greensville, South Carolina.
According to DZSP 21’s lawsuit, the Navy’s award of the base operations contract to Fluor Federal Solutions was based on “hopelessly outdated” specifications that have been outstripped by the current ground requirements of the Joint Region Marianas.
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 and sealed the next day, DZSP 21 asked the Court of Federal Claims to 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.
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 planned to fill key management positions with its own recruits.
DZSP 21 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 21’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.
DZSP 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 asked 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.”
(Updated on March 24 at 8:44 am with comments from Wayne Cornell)