Protest by rivals leads GAO to order review of contract award

By Jacob Geiger

NORFOLK

Two weeks after Naval Sea Systems Command embarked on a multi-ship refurbishment program that could cost as much as $288 million, the Government Accountability Office recommended that the command review the contract awarded to Norfolk-based Metro Machine Corp.

The contract, awarded in January, calls for the Berkley ship repair yard to perform midlife modernizations on six dock landing ships in the LSD 41/49 classes, which haul landing craft, helicopters and Marines on amphibious assault missions.

Two weeks after the contract was awarded, a joint venture of local companies - Colonna's Shipyards Inc., Marine Hydraulics International Inc. and Tecnico Corp. - filed a protest with the GAO, a federal watchdog agency. The protest argued that Metro's bid was substantially more expensive.

During its review, the GAO found that Metro may have submitted an unrealistically low estimate of how much it would cost the company to do the repairs. This finding was based in part on the discovery that the company's proposed indirect cost rates - what it charges for administrative expenses that aren't directly related to the contract - were well below its current rates on other projects.

Naval Sea Systems Command, known as NAVSEA, responded to the GAO finding with a plan to reopen discussions with both Metro Machine and the joint venture. Rather than asking for new bids and cost estimates, however, NAVSEA decided to address only the flaws discussed by the GAO.

That led to another protest from the joint venture.

"We think the Navy should re-conduct solicitations and open it up fully," said Tom Epley, president and chief executive officer of Marine Hydraulic.

Epley said NAVSEA considered the joint venture a medium-risk bid because of concerns about Colonna's dry dock, which has a small margin of error when it comes to lifting the LSDs. But Epley and other members of the joint venture argue that Metro should also have been considered a medium-risk bid because the low expense rates submitted by Metro would put a strain on the company's finances.

The Defense Contracting Auditing Agency reviewed Metro's attempts to cut rate costs and was unable to determine what effect - if any - the lower expense rates would have on the company's financial condition.

Work began this month at Metro's Elizabeth River dry dock on the Gunston Hall, the first LSD up for refurbishment. The extensive upgrades - scheduled to take nine months - are designed to substantially reduce maintenance costs and replace obsolete equipment.

Work on the Gunston Hall is scheduled to be completed in March, and work on another LSD is expected to begin later next year.

John Strem, president of Metro, said the company did not expect the protest to affect work on the Gunston Hall.

"Who knows what will happen with the rest of them?"

Jacob Geiger, (757) 446-2643, jacob.geiger@pilotonline.com