The latest decision, dated Nov. 16, dismisses Colt's protest of the Army's interpretation of the M4 technical data package licensing agreement. This is a complicated issue, but the dismissal should clear the way for Remington to resume work on the Army to re-award the M4 contract, likely to Remington. This is a qualified statement because there is a chance Colt underbid Remington in the amended solicitation, though this seems unlikely given Colt's latest protest of the contract terms.
Though, and this could be the Memento moment of the whole drama, Colt's protests may have been part of a strategy to smoke out the competitors pricing info and lay bare the Army's plans for the royalty pricing schedule. There is a chance Colt actually used the protest process to its advantage and put in a bid lower than Remington's in the amended solicitation.
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Also, it should be noted that the GAO says it "will not resolve a dispute involving interpretation of a license agreement ... because this involves a matter of contract administration not subject to GAO's review." This allows Colt to take the matter before a government contract appeals board or the Court of Federal Claims.
Colt hasn't responded to our email.
"The Army intends to complete the source selection process and promptly issue a contract award in accordance with the amended solicitation," said Don Jarosz, TACOM's deputy public affairs officer. "No contract award has been made yet and we are not aware of any appeals made by Colt."
Remington spokesperson Teddy Novin didn't have much to say Wednesday tonight. "We are awaiting next steps and remain confident that the Army will make the right decision for its personnel and the American taxpayer." No doubt, Remington is holding its breath as they await word that the Army has cleared the docket of any other protests and that their award still stands.
While we reported on the first protest decision, from July 24, we were working from extracts provided by the GAO. With both decisions now in hand, we can shed some light on the basis of Colt's protests as well as issues surrounding the award.
QUICK RECAP: In spring, 2012 the source selection report presented to the source selection authority determined Remington represented the best value to the government. The decision was based on four criteria: Remington presented the best production capability approach, utilized small business appropriately, showed satisfactory past performance of government contract work, and had the lowest price.
- Aug. 19, 2011: Army issues a solicitation for up to 120k M4/M4A1 carbines.
- April 20: Army awards contract to Remington.
- April 26: Colt protests the following:
- The way the Army performed its price evaluation.
- Army's evaluation of Remington's past performance.
- Army's evaluation of Remington's production capability.
- July 24: GAO sustains Colt's price evaluation protest. Dismisses others.
- Sept. 12: Army issues updated solicitation. Submission deadline is Oct. 9.
- Around Sept. 20: Colt files protest of adjusted royalty terms with Army.
- Sept. 28: Army dismisses protest.
- Oct. 9: Colt files protest of adjusted royalty terms with GAO.
- Nov. 16: GAO dismisses Colt's protest.
According to the GAO's July 24 decision, Colt was unimpressed with the way the Army evaluated Remington's production capability and its past performance. Both are criterion in the source selection authority's determination of the manufacturer's suitability for the contract. Colt also raised issues with the way the Army calculated the royalties that would have to be paid by any offeror that didn't have rights to the M4's technical data package -- essentially any company other than Colt.
PRODUCTION CAPABILITY: As far as the Army's evaluation of Remington's production capability, Colt says it should have been rated higher than Remington since Colt has the facilities, machinery and tooling already in place to build the guns; Remington does not. The GAO agreed with the Army's stance that Remington has "more than ample facilities to meet the requirement with no additional facilities required. ... Remington has some, but not all the required key tooling and equipment in place, but its proposal provided a very detailed plan for key tooling and equipment."
The GAO concluded that the Army is capable of making this determination and denied Colt's protest.
PAST PERFORMANCE: The next issue dealt with the way the Army evaluated Remington's past contracting performance. The Army determined that Remington only had two contracts on which it could base its rating for past performance. Initially, the source selection board (SSB) decided that the two contracts didn't offer a enough information on which to base a "meaningful performance risk prediction." The board assigned a rating of "unknown confidence" for the past performance criterion.
Later, the source selection advisory council, to whom the SSB reported, judged those two contracts enough to raise the rating from "unknown confidence" up to "satisfactory confidence."
According to the decision, the GAO finds "nothing unreasonable about the agency's assignment of a satisfactory confidence rating to Remington's past performance and we find that the conclusion is supported by the underlying record."
PRICE EVALUATION: The GAO upheld Colt's initial protest about the way the Army applied the royalty fees to the offerors price but denied the second.
The solicitation's language suggested that the Army would simply tack 5 percent on to any offeror's price if it didn't own or have license to use technology or technical data that belongs to Colt. Here's the actual language:
"The royalty rate is 5%. If an offeror does not indicate that it is the owner or a licensee of the technology/technical data, its offer will be evaluated by adding an amount equal to the royalty to its proposed prices."
Instead of applying a flat rate, the Army went through the carbine submissions part-by-part to determine just how much of the current M4 design was still subject to the 1997 M4 Carbine Addendum to Technical Data Sales and Patent License Agreement. The Army broke the gun down into its components to arrive at an aggregate percentage representing the Colt proprietary parts and applied the 5 percent surcharge to the cost of only those parts.
This is key because Colt likely relied on the solicitation's blanket 5 percent guide when gaming its price. If Remington's gun cost $1,000, then it would be subject to a $50 royalty adjustment. Colt no doubt used this math as a basis to estimate its competitors' prices. When the Army used a different formula, the playing field was no longer level, Colt contended.
At issue is the wording, "an amount equal to the royalty." Colt argued this meant 5 percent as it stated in the sentence preceding it. The Army said it meant the amount would be calculated based on the 5 percent royalty but didn't elaborate further, leaving room for ambiguity.
In short, the GAO agreed and sustained this portion of Colt's protest. The Army responded by putting out an amended solicitation laying out just how this calculation would be done and invited offerors to resubmit their proposals.
That brings us to the latest Colt protest and the second GAO decision, dated Nov. 16, also based on royalty calculations.
PRICE EVALUATION II: The amended solicitation went out with an attachment laying out how the royalty would be calculated. The solicitation also listed weapon configurations and the appropriate royalty percentage to be applied to each.
Colt had a look at the amended solicitation and protested with the Army. The Army denied the protest, then Colt protested with the GAO.
The basis for Colt's second price evaluation protest was based on the fact that Colt and the Army haven't agreed on the royalty schedule at the heart of this M4 contract. Colt says that since it hasn't come to an agreement on the actual royalties it is due, then there is no way the Army can accurately calculate the royalty rate.
The GAO applied logic and determined that since the basis for the Army's calculation was laid plainly out for all the offerors, then things were fair. Whether it was based on estimates or real numbers is irrelevant. GAO denied this protest.
NOW WHAT: It's up to the Army to again award the contract -- or in the case that Remington Defense is still the winner, effectively lift the stop order and let Remington get to making the guns under the terms of the amended contract.
That is, unless Colt Defense loses its bid and takes its case to a DoD contracting board of appeals or files a case in federal court.
