Matter of: Delta Data Systems Corporation File: B-260791 Date: July 21, 1995

Matter of: Delta Data Systems Corporation File: B-260791 Date: July 21, 1995

Protest alleging improper evaluation of price proposals is denied where the record shows that the evaluation methodology that the agency employed was consistent with the terms of the solicitation. Contracting agency may properly accept a proposal that includes an item priced below cost from a responsible offeror where there is no showing that the offeror's method of distributing costs to line items distorts its unit prices.

Attorneys

DECISION

Delta Data Systems Corporation protests the Maryland Procurement Office's evaluation of price proposals under request for proposals (RFP) No. MDA904-94-R-9063 and the resulting award to NAI Technologies. Delta contends that the evaluation was based on a formula that was inconsistent with the terms of the RFP.

We deny the protest.

The RFP contemplated the award of a 4-year indefinite delivery, indefinite quantity contract for Tempested Sun SPARC workstations, consisting of rackmountable processors, monitors, keyboards, mouse, and tempested peripherals. Offerors were instructed to submit separate technical and price proposals, which would be separately evaluated. The RFP, as amended, listed six items in its schedule; price proposals were to include a unit price for each item. In the evaluation and source selection, technical factors would account for 65 percent of the score, and cost would account for the remaining 35 percent. The RFP provided that award would not necessarily be made to the offeror proposing the lowest price, but would be based on a "best value" determination.

The RFP did not provide guaranteed minimum quantities as numbers of items that would be procured, but instead provided (in Section H.8) dollar amounts for each contract line item number (CLIN) to represent the minimum purchase that would be guaranteed under the contract. The RFP's proposal preparation instructions for price proposals referred offerors to that section in the RFP and instructed offerors to "propose unit prices and the associated quantity within the dollar limitation provided for CLINs 0001 through 0006." Offerors were advised that the number of units proposed for CLINs 0003, 0004, and 0005 should be proportional to the number of items proposed for CLIN 0001, and that the "ratio should be 4 to 1. (Four SPARC stations in the offered version for every one Tempested CD-ROM Drive, every one Tempested 150 Mbyte Tape Drive and every one Tempested 8mm Tape Drive.)"

The RFP provided an evaluation formula to demonstrate how price scores would be calculated. For each of the CLINs, the lowest unit price proposed would be divided by the price proposed by the offeror being scored, to arrive at a score reflecting the offeror's relative price position for that CLIN. For CLIN 0001 (the workstation), that number would then be multiplied by .75, and for each of the remaining CLINs, the number would then be multiplied by .05. Thus, the workstation price score would account for 75 percent of the total price score, and each of the remaining 5 CLIN scores would account for 5 percent.

Ten firms submitted initial proposals. After these were evaluated, discussions were held, and best and final offers (BAFOs) were requested and submitted. NAI's proposal received the highest technical and price scores and was selected as the best value. After learning that the contract had been awarded to NAI and being debriefed, Delta filed a protest with the agency, arguing that under the evaluation scheme established in the RFP, Delta's own proposal would have been lower in price. In addition, Delta argued that the price NAI offered for CLIN 0004 was below cost and allegedly violated Federal Acquisition Regulation (FAR) Sec. 52.215-26, which governs the integrity of unit prices. The agency denied Delta's protest, and this protest followed, based on the same allegations. [1]

In support of its agency-level protest that its proposed price is low under the RFP formula for calculating the price scores, Delta submitted a chart which allegedly demonstrates that its own prices would have permitted a greater quantity of CLINs to be purchased within the available fund limits listed in Section H of the RFP. [2] However, as the agency pointed out in denying Delta's agency-level protest, the unit prices Delta has inserted on this chart do not accurately reflect the prices it submitted in its BAFO. For one CLIN, Delta transposed its quantity with its unit price on the chart, so that the chart shows a price that is several hundred dollars lower than the actual BAFO unit price for that CLIN; for another, Delta omitted the price of the item (shown as $1350 in its BAFO) entirely from the chart. In addition, Delta submitted two different prices in its BAFO schedule for CLINs 0003, 0004, and 0005: a higher price for the "first drive" and a significantly lower price for "additional drives"; in its chart, however, it only inserted the lower of the two prices for each of the CLINs. When these corrections are made, Delta's price is higher than NAI's. In its protest submission to our Office, Delta does not refute the agency's position that the charts are not an accurate reflection of Delta's BAFO. Thus, there is no factual support for Delta's position that its proposed price was low.

Delta also submitted a chart on which it attempted to demonstrate that if prices are analyzed using a four-to-one ratio (four workstations, or CLINs 0001 and 0002, for every one of the remaining CLINs), its own price would have been low. However, Delta has apparently misread the solicitation; the RFP simply does not state that price proposal scores will be calculated in this manner. The RFP gives the exact formulas that are to be applied to each CLIN in calculating the price scores, as stated above; these do not allow for the analysis Delta is advocating. Our review of the record shows that the price scoring methodology that the agency employed was entirely consistent with the RFP. Furthermore, Delta's transfer of figures from its BAFO is again inaccurate; even using the suggested analysis, when Delta's actual BAFO prices are used in the calculations, Delta's price is higher than NAI's.

Delta also protests that NAI's pricing for CLIN 0004 is below cost and therefore violates FAR Sec. 52.215-26. This provision requires that offerors distribute costs within contracts on a basis that ensures that unit prices are in proportion to the item's base costs and, therefore, prohibits methods of distributing costs to line items that distort unit prices. As the agency notes, by its terms this provision does not apply to procurements of commercial products. FAR Sec. 52.215-26(b). The agency states that the items at issue are commercial products, and the protester does not dispute this assertion.

In any event, to set aside an award of a contract under FAR Sec. 52.215- 26, the protester must demonstrate that it was prejudiced by the awardee's pricing methods. Integrated Protection Sys., Inc., B-229985, Jan. 29, 1988, 88-1 CPD Para. 92. Delta has made no attempt to demonstrate how the awardee's pricing could have resulted in its obtaining any unfair competitive advantage, or could have been prejudicial to other offerors, nor is such a result apparent to us in these circumstances. [3] Accordingly, we find the deviation, if any, without significance. Id. Moreover, to the extent Delta is arguing that NAI's offer for this line item is below cost, there is nothing legally objectionable about a contracting agency accepting a below-cost proposal from a responsible offeror. Environmental Technology Corp., B-225479.3, June 18, 1987, 87-1 CPD Para. 610. So long as the contracting agency has a bona fide belief that the offeror will be able to perform under the contract, it is free to accept a below-cost offer. Id.

Delta also contends that the agency report revealed that the agency engaged in ex parte communications with NAI when it participated in a telephone conference on January 4, 1995. The record shows that after initial proposals were evaluated, the agency determined that it would be necessary to conduct discussions with the offerors in the competitive range. Written discussion questions were sent to these offerors, including NAI and Delta, on December 15 and December 23. Because NAI had a number of questions concerning the agency's request for additional information, the agency arranged a telephone conference between agency and Delta personnel on January 4. On January 9, the agency requested BAFOs from each offeror. These were submitted on January 11.

When discussions are held in a negotiated procurement, offerors must be given an equal opportunity to revise their proposals. The content and extent of discussions are matters within the discretion of the contracting officer, however, and discussions with each offeror need not be identical; rather, a procuring agency should tailor its discussions to each offeror since the need for clarification or revision will vary with the proposals. AmerInd, Inc., B-253751, Oct. 19, 1993, 93-2 CPD Para. 240.

Here, Delta does not provide any specific grounds to support its allegation that the telephone conference was improper. Discussions were held with all competitive range offerors, who were then given an opportunity to submit BAFOs. Furthermore, it is clear that even if there were some level of inequality in the discussions that were held, no competitive prejudice resulted, since the relative standing of technical proposals did not change when BAFOs were evaluated. NAI's technical proposal had the highest score throughout the procurement.

The protest is denied.

1. After filing its initial protest on March 17, Delta submitted additional protest issues on April 6, challenging various portions of the RFP and its amendments. This submission is untimely filed. Under our Bid Protest Regulations, protests based upon alleged improprieties in a solicitation which are apparent prior to bid opening or the time set for receipt of initial proposals must be filed prior to bid opening or the time set for receipt of initial proposals. In procurements where proposals are requested, alleged improprieties which do not exist in the initial solicitation but which are subsequently incorporated into the solicitation must be protested not later than the next closing date for receipt of proposals following the incorporation. 4 C.F.R. Sec. 21.2(a)(1) (1995).

2. We do not fully understand the basis of Delta's chart; it appears to be based on a price analysis that is inconsistent with the terms of the RFP. However, since we find the chart does not support Delta's conclusions in any event, as discussed below, we need not consider its basis further.

3. In fact, it appears that Delta itself prepared its proposal without regard to the language of the provision, since it submitted a price of $0.00 for CLIN 0006.