B-179193, APR 1, 1974

B-179193, APR 1, 1974

1. CONTRACTING AGENCY DID NOT GIVE UNDUE EMPHASIS TO LOW COST ESTIMATES OF SUCCESSFUL OFFERORS IN MAKING AWARDS WHERE TECHNICAL MERITS OF ALL PROPOSALS WERE DETERMINED TO BE NEARLY THE SAME. 2. OFFEROR HAS SHOWN NO BASIS FOR QUESTIONING PROPRIETY OF NEGOTIATIONS BY CLAIMING THAT IT WAS NOT ADVISED BY NEGOTIATOR THAT ITS PRICE WAS TOO HIGH SINCE ASPR 3-805.3(C) DOES NOT REQUIRE SUCH ADVICE. 3. ALTHOUGH ASPR 1-903.4 PROVIDES THAT ACCEPTABLE EVIDENCE OF AN OFFEROR'S ABILITY TO OBTAIN PERSONNEL SHALL NORMALLY BE A COMMITMENT FOR SUCH PERSONNEL, EXISTENCE OF POOL OF AVAILABLE LABOR FOR CONTRACT IN QUESTION, COUPLED WITH A 1-MONTH CONTRACT PHASE-IN PERIOD DURING WHICH EMPLOYEES COULD BE OBTAINED, PRESENTED ADEQUATE REASONS WHY SUCH COMMITMENTS WERE NOT NECESSARY IN ORDER TO FIND LOW OFFEROR RESPONSIBLE. 4. GAO CANNOT CONCLUDE THAT CONTRACTING OFFICER ARBITRARILY FOUND CONCERN TO BE FINANCIALLY RESPONSIBLE WHERE HE WAS GIVEN AUDIT ADVICE THAT "FIRM WAS GETTING STRONGER" AND HAD AVAILABLE LINE OF CREDIT.

TO FISCHER ENGINEERING & MAINTENANCE COMPANY, INC.; INTERNATIONAL INDUSTRIAL COMPANY, LTD.:

REQUESTS FOR PROPOSALS (RFP'S) DAJB03-73-R-5001 AND -5002 WERE ISSUED BY THE UNITED STATES ARMY KOREAN PROCUREMENT AGENCY ON MARCH 15, 1973, FOR FACILITY ENGINEERING SERVICES IN SPECIFIED GEOGRAPHICAL AREAS IN KOREA.

THE RFP'S, AS INITIALLY ISSUED, PROVIDED THAT ONLY THE PROPOSALS OF JOINT VENTURES CONSISTING OF UNITED STATES AND KOREAN FIRMS WOULD BE CONSIDERED FOR AWARD; THAT OFFERORS HAD TO SHOW THAT PROPOSED KEY PERSONNEL FOR THE WORK MET CERTAIN MINIMUM QUALIFICATIONS; AND THAT OFFERORS SHOULD BE PREPARED TO DEMONSTRATE ACTUAL COMMITMENTS FOR THEIR PROPOSED PERSONNEL. THE RFP'S FURTHER PROVIDED THAT AWARD WOULD BE BASED ON THE DEGREE TO WHICH PROPOSALS DEMONSTRATED MANAGERIAL AND TECHNICAL COMPETENCE. KEY PERSONNEL QUALIFICATIONS, EXPERIENCE, COSTS, AND FIXED FEE WERE ALSO LISTED AS AWARD FACTORS.

THE RFP'S SUBSEQUENTLY WERE AMENDED IN APRIL 1973. THE AMENDMENT PROVIDED, AMONG OTHER THINGS, THAT UNITED STATES FIRMS COULD SUBMIT PROPOSALS DIRECTLY WITHOUT THE NECESSITY OF FORMING JOINT VENTURE ARRANGEMENTS WITH KOREAN FIRMS AND THAT QUALIFICATIONS FOR PROPOSED PERSONNEL WERE SUGGESTED ONLY.

FOUR TIMELY PROPOSALS WERE RECEIVED UNDER THE RFP'S FROM ASSOCIATED AMERICAN ENGINEERS OVERSEAS, INC. (ASSOCIATED), UNIVERSAL AMERICAN ENTERPRISES, INC. (UNIVERSAL), FISCHER ENGINEERING & MAINTENANCE COMPANY, INC. - INTERNATIONAL INDUSTRIAL COMPANY, LTD. (FISCHER), A JOINT VENTURE, AND TELESCOPIC ENGINEERING & CONSTRUCTION CORPORATION - SANTA FE CONSTRUCTION ENGINEERS, INC. - HYUP WOO, INDUSTRIAL CO., LTD., A JOINT VENTURE.

THE DEPARTMENT REPORTS THAT ALL PROPOSALS RECEIVED WERE TECHNICALLY ACCEPTABLE; THAT NONE WAS OF SIGNIFICANTLY HIGHER TECHNICAL MERIT; AND THAT NEGOTIATIONS WERE THEREAFTER CONDUCTED WITH ALL THE OFFERORS. WITH RESPECT TO THE NEGOTIATIONS WITH FISCHER, THE DEPARTMENT REPORTS THAT THE COMPANY WAS TOLD, IN PART, BY THE GOVERNMENT NEGOTIATOR, THAT:

"*** YOUR AMERICAN SALARIES LOOK GOOD TO ME *** BUT RIGHT NOW THEY LOOK GOOD TO ME AS FAR AS A SALARY FOR THAT POSITION. BUT AGAIN YOU REALIZE YOU'RE IN COMPETITION WITH THE OTHER COMPANIES. WE DO NOT WANT EXTREMELY LOW SALARIES ON THESE CONTRACTS; HOWEVER, IT'S AN AREA YOU MUST CONSIDER WHEN YOU'RE IN COMPETITION WITH THE REST OF THE COMPANIES ***. I'M NOT SAYING THEY'RE TOO HIGH EITHER AS FAR AS OTHER PEOPLE ARE CONCERNED. *** BUT THAT'S ANOTHER AREA FOR YOUR CONSIDERATION."

AT THE CLOSE OF NEGOTIATIONS, THE LOWEST TOTAL ESTIMATED COSTS WERE THOSE PROPOSED BY ASSOCIATED UNDER RFP -5001 AND UNIVERSAL UNDER RFP 5002.

IN JUNE 1973, THE DEPARTMENT REQUESTED FINANCIAL AUDITS AND PARTIAL PREAWARD SURVEYS ON THE OFFERORS. THIS WAS DONE TO ASSIST THE CONTRACTING OFFICER IN DETERMINING WHETHER ASSOCIATED AND UNIVERSAL WERE RESPONSIBLE CONCERNS UNDER THE STANDARDS OF RESPONSIBILITY SET FORTH IN ASPR 1-903.

THE PREAWARD SURVEY TEAM RECOMMENDED THAT AWARD BE MADE TO UNIVERSAL UNDER RFP -5002 BECAUSE THE CONCERN HAD A SATISFACTORY PERFORMANCE RECORD AND HAD SUFFICIENT CURRENT EMPLOYEES TO DO THE WORK. THE DEPARTMENT FURTHER REPORTS THAT UNIVERSAL RECEIVED A FAVORABLE AUDIT REVIEW. BECAUSE OF THESE FAVORABLE REPORTS, THE DEPARTMENT STATES THAT THERE WAS NO QUESTION THAT UNIVERSAL SHOULD RECEIVE AWARD UNDER RFP 5002 BECAUSE IT WAS ALSO THE LOW OFFEROR.

THE PREAWARD SURVEY TEAM RECOMMENDED THAT AWARD NOT BE MADE TO ASSOCIATED UNDER RFP -5001 BECAUSE THE COMPANY HAD NOT PROVIDED DOCUMENTED PROOF OF THE AVAILABILITY OF ITS PROPOSED UNITED STATES EMPLOYEES. AT THE SAME TIME, THE SURVEY NOTED THAT ASSOCIATED'S PAST PERFORMANCE WAS CONSIDERED SATISFACTORY, NOTWITHSTANDING A "MARGINAL" RATING THE COMPANY RECEIVED FOR A PRIOR CONTRACT FOR CALIBRATION SERVICES WHICH INVOLVED RADICALLY DIFFERENT SERVICES THAN THOSE REQUIRED UNDER THE SUBJECT RFP ACCORDING TO THE SURVEY. THE DEPARTMENT ALSO REPORTS THAT ASSOCIATED RECEIVED A "QUESTIONABLE" FINANCIAL REVIEW.

NOTWITHSTANDING THE NEGATIVE RECOMMENDATION ON ASSOCIATED, THE CONTRACTING OFFICER, BY DECISION OF JUNE 28, 1973, FOUND THE COMPANY CAPABLE OF PERFORMING THE REQUIREMENTS UNDER RFP -5001, AS FOLLOWS:

"1. ON 28 JUNE 1973 A NEGATIVE PRE-AWARD SURVEY WAS RECEIVED ON AAEOI. NEGATIVE RESPONSE WAS BASED ON AAEOI'S INABILITY TO PRESENT PROOF OF PERSONNEL COMMITMENTS IN RESPONSE TO SOLICITATION NO. DAJB03 73-R-5001.

"2. THE HISTORY OF FE CONTRACTS IN KOREA HAS INDICATED THAT THERE IS A TURNOVER OF AMERICAN PERSONNEL FROM THE INCUMBENT TO THE NEW CONTRACTOR. THEREFORE ADEQUATE MANPOWER IS AVAILABLE TO MEET THE QUALIFICATIONS OF THE CONTRACT. A LACK OF WRITTEN COMMITMENT DOES NOT PRECLUDE THE AVAILABILITY OF PERSONNEL.

"3. THE INCUMBENT CONTRACTOR WILL BE EXTENDED WITH RETENTION OF NECESSARY PERSONNEL FOR A PERIOD OF ONE MONTH TO FACILITATE CLOSE OUT AND TURNOVER TO THE NEW CONTRACTOR. THIS WILL PROVIDE AMPLE TIME FOR AAEOI TO COMMIT AND STAFF THE CONTRACT WITHOUT A BREAK IN FE SERVICES.

"THEREFORE, BASED ON THE ABOVE THE CONTRACTING OFFICER OVERRIDES THE PRE- AWARD SURVEY AND FINDS AAEOI MANAGERIALLY CAPABLE OF PERFORMING CONTRACT NO. DAJB03-73-C-5003 FOR FACILITY ENGINEERING SERVICES, NORTHERN SECTOR, KOREA.

"1. THE DCAA REPORT ON THE FINANCIAL RESPONSIBILITY OF AAEOI WAS NONCONCLUSIVE. WHILE THE REPORT STATED THE GOVERNMENT MAY BE TAKING A RISK IF AWARD WAS MADE IT FURTHER STATED THE FIRM WAS GETTING STRONGER.

"2. THE CURRENT METHOD OF PAYMENT ON KPA FE CONTRACTS ALLOWS FOR PAYMENT ON A VOUCHER BEFORE ACTUAL PAYROLL IS MET. THERE ARE NO PLANS TO CHANGE THE METHOD OF PAYMENT. THEREFORE ADEQUATE FINANCIAL RESOURCES ARE AVAILABLE TO PAY ACCRUED COSTS.

"3. AAEOI HAS STATED VERBALLY THAT A $100,000 LINE OF CREDIT IS AVAILABLE.

"THEREFORE, ON THE BASIS OF THE ABOVE FINDINGS, THE CONTRACTING OFFICER HAS DETERMINED THAT AAEOI IS FINANCIALLY CAPABLE OF PERFORMING CONTRACT NO. DAJB03-73-C-5003 FOR FACILITY ENGINEERING SERVICES, NORTHERN SECTOR, KOREA."

SUBSEQUENTLY, THE PROPOSED CONTRACTS TO ASSOCIATED AND UNIVERSAL WERE SUBMITTED FOR APPROVAL OF THE DEPARTMENT'S BOARD OF AWARDS. ALL MEMBERS OF THE BOARD RECOMMENDED APPROVAL OF THE AWARDS TO ASSOCIATED AND UNIVERSAL. CONTRACTS WERE THEN AWARDED ON JUNE 29, 1973, TO ASSOCIATED UNDER RFP -5001 AND TO UNIVERSAL UNDER RFP -5002.

FISCHER MAINTAINS THAT AWARDS WERE PRIMARILY BASED ON THE LOW COST ESTIMATES OF ASSOCIATED AND UNIVERSAL CONTRARY TO ASPR 3-803(C); THAT DURING NEGOTIATIONS IT WAS NOT GIVEN ANY INDICATION THAT ITS COSTS WERE TOO HIGH EXCEPT IN FIXED FEE; THAT THE SUCCESSFUL OFFERORS DID NOT HAVE SUFFICIENT FINANCIAL RESOURCES TO BE CONSIDERED FINANCIALLY RESPONSIBLE; AND THAT THE SUCCESSFUL OFFERORS DID NOT SHOW THAT THEY HAD FIRM COMMITMENTS FOR THEIR PROPOSED KEY EMPLOYEES.

THE STATEMENT IN ASPR 3-803(C) THAT ESTIMATED COSTS OF CONTRACT PERFORMANCE SHOULD NOT BE CONSIDERED AS CONTROLLING DOES NOT MEAN THAT COST IS NOT TO BE CONSIDERED IN NEGOTIATED PROCUREMENTS. INDEED, ASPR 3- 805.2(A) SPECIFICALLY DIRECTS THAT OFFERORS' PRICES BE CONSIDERED IN DETERMINING THE COMPETITIVE RANGE IN NEGOTIATED PROCUREMENTS. AND WE CANNOT HOLD THAT THE DEPARTMENT IMPROPERLY GAVE UNDUE WEIGHT TO LOW ESTIMATED COSTS IN SELECTING THE PROPOSALS OF ASSOCIATED AND UNIVERSAL GIVEN THE DETERMINATION THAT ALL OFFERS WERE OF SIMILAR TECHNICAL MERIT.

THE DEPARTMENT ALSO SAYS THAT IT DID NOT MISLEAD FISCHER DURING COST NEGOTIATIONS WITH THE COMPANY, AND THAT IT COULD NOT STATE HOW ONE OFFEROR'S COSTS WERE IN RELATION TO THOSE OF OTHER OFFERORS. IT FURTHER STATES THAT THROUGHOUT THE NEGOTIATIONS THE NEGOTIATOR CLEARLY ADVISED FISCHER THAT AMERICAN SALARIES WERE AN ELEMENT OF COST; THAT THE COMPANY WAS IN A COST COMPETITION; AND THAT THE COST WAS A MATTER FOR THE COMPANY'S DECISION.

ASPR 3-805.3(C) SPECIFICALLY PROHIBITS TELLING AN OFFEROR HIS PRICE IS NOT LOW IN RELATION TO THAT OF ANOTHER OFFEROR. MOREOVER, THERE IS NO REQUIREMENT IN THE REGULATION, AS FISCHER SEEMS TO CONTEND, THAT AN OFFEROR BE TOLD THAT HIS PRICE IS TOO HIGH. FURTHER, THE CONTRACTING OFFICER DENIES THAT HE TOLD FISCHER "THAT THE ONLY ITEM OF COST WHICH SHOULD BE REDUCED WAS THE FIXED FEE." CONSEQUENTLY, WE SEE NO BASIS IN THE PRESENT RECORD FOR CONCLUDING THAT THE NEGOTIATIONS CONDUCTED WITH THE COMPANY WERE CONTRARY TO APPLICABLE REGULATIONS OR THAT THE COMPANY WAS MISLED ABOUT THE IMPORTANCE OF COST AS AN EVALUATION FACTOR.

FISCHER'S ALLEGATION THAT THE SUCCESSFUL OFFERORS LACKED SUFFICIENT FINANCIAL RESOURCES AND FIRM LABOR COMMITMENTS RELATE TO THE RESPONSIBILITY OF THE COMPANIES. IT IS WELL SETTLED THAT RESPONSIBILITY DETERMINATIONS INVOLVE THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION AND THAT GAO WILL NOT QUESTION THESE DETERMINATIONS UNLESS THEY ARE ARBITRARILY MADE. SEE 37 COMP. GEN. 430 (1957).

BASED ON OUR REVIEW OF THE INFORMATION CONTAINED IN THE CONTRACTING OFFICER'S DETERMINATION, WE CANNOT CONCLUDE THAT THE CONTRACTING OFFICER ARBITRARILY FOUND ASSOCIATED TO BE FINANCIALLY RESPONSIBLE FOR THE CONTRACT SINCE HE WAS GIVEN AUDIT ADVICE THAT "THE FIRM WAS GETTING STRONGER," AND ASSOCIATED HAD STATED VERBALLY THAT A LINE OF CREDIT WAS AVAILABLE. ALTHOUGH FISCHER MAY HAVE BEEN ADVISED THAT IT WAS REQUIRED TO SHOW THAT IT HAD FINANCIAL RESOURCES IN EXCESS OF THE LINE OF CREDIT POSSESSED BY ASSOCIATED IN ORDER TO BE CONSIDERED FINANCIALLY RESPONSIBLE, WE CANNOT CONCLUDE THAT THIS ADVICE NECESSARILY INVALIDATES THE DETERMINATION ON ASSOCIATED IN VIEW OF THE CONTRACTING OFFICER'S BROAD DISCRETION IN THESE MATTERS AND THE DIFFERENT FINANCIAL CONDITIONS OF THE COMPANIES.

SIMILARLY, WE CANNOT QUESTION THE CONTRACTING OFFICER'S FINDING THAT ASSOCIATED'S INABILITY TO PRESENT PROOF OF EMPLOYEE COMMITMENTS DID NOT PRECLUDE IT FROM OBTAINING AMERICAN EMPLOYEES FOR THE WORK GIVEN THE PRIOR HISTORY OF CONTRACTS FOR THE SERVICES IN KOREA THAT SHOWS THERE WAS A TURNOVER OF AMERICAN PERSONNEL FROM THE INCUMBENT TO THE NEW CONTRACTOR. ALTHOUGH ASPR 1-903.4 STATES THAT "*** ACCEPTABLE EVIDENCE OF HIS 'ABILITY TO OBTAIN' SUCH THINGS AS *** PERSONNEL *** SHALL NORMALLY BE A COMMITMENT *** FOR *** ACQUISITION OF SUCH ***PERSONNEL," WE AGREE WITH THE DEPARTMENT'S VIEW THAT THE EXISTENCE OF A POOL OF AVAILABLE LABOR, COUPLED WITH A 1-MONTH CONTRACT PHASE-IN PERIOD DURING WHICH EMPLOYEES COULD BE OBTAINED, PRESENTED ADEQUATE REASONS WHY FIRM COMMITMENTS WERE NOT NECESSARY IN ORDER TO FIND ASSOCIATED RESPONSIBLE. WE FURTHER AGREE WITH THE OBSERVATION THAT THIS ASSESSMENT WAS SHOWN TO BE CORRECT BY THE FACT THAT ASSOCIATED WAS FULLY COMMITTED WITH AMERICAN EMPLOYEES ON JULY 2, 1973. NOR CAN WE CONCLUDE THAT THIS ANALYSIS NECESSARILY DEVIATED FROM THE EMPLOYEE COMMITMENT REQUIREMENT IN THE RFP SINCE IT ONLY STATED THAT OFFERORS "SHOULD (RATHER THAN MUST) BE PREPARED TO DEMONSTRATE ACTUAL COMMITMENTS FOR THEIR PROPOSED EMPLOYEES."

FURTHER WE CANNOT QUESTION UNIVERSAL'S CAPABILITY. THE AUDIT REPORT STATED THAT THE COMPANY HAD SUFFICIENT FINANCIAL RESOURCES TO PERFORM THE CONTRACT. ALSO, THE PREAWARD SURVEY FOUND THAT UNIVERSAL HAD A SATISFACTORY PRIOR PERFORMANCE RECORD AND HAD SUFFICIENT CURRENT EMPLOYEES WHO WOULD BE AVAILABLE TO SATISFY PERSONNEL NEEDS UNDER THE CONTRACT.

FISCHER ALSO CONTENDS THAT PERMITTING UNITED STATES FIRMS TO SUBMIT OFFERS AS SINGLE ENTITIES RATHER THAN AS JOINT VENTURE PARTNERS WITH KOREAN FIRMS GAVE THE SUCCESSFUL OFFERORS AN UNFAIR COMPETITIVE ADVANTAGE. THE DEPARTMENT CONSIDERS THIS ALLEGATION TO BE PURELY SPECULATIVE AND INCORRECT FOR THE FOLLOWING REASONS:

"*** THE COSTS IN THIS CONTRACT FALL IN FOUR CATEGORIES (1) KOREAN SALARIES (2) AMERICAN SALARIES, (3) G&A AND (4) FEE. KOREAN SALARY RATES ARE SET FORTH IN EA CPR 690-1 WHICH ALL OFFERORS MUST FOLLOW. G&A IS PAID ONLY FOR THE U.S. FIRM. AMERICAN SALARIES AND FEES ARE DETERMINED BY THE OFFERORS AND MARKET CONDITIONS. A REVIEW OF THE NEGOTIATION MEMORANDA *** SHOWS THAT THE LOWEST G&A AND FEE WERE OFFERED BY A JOINT VENTURE AS OPPOSED TO A U.S. FIRM OFFERING ALONE. WITH RESPECT TO SALARIES, THERE WOULD APPEAR TO BE NO SPECIAL ADVANTAGE TO BEING A U.S. FIRM AS OPPOSED TO A JOINT VENTURE. AMERICAN EMPLOYEES ARE GIVEN THE SAME PRIVILEGES WHETHER EMPLOYED BY AN AMERICAN FIRM OR AN AMERICAN PARTNER OF A JOINT VENTURE. KOREAN EMPLOYEES ARE ALSO IN THE SAME POSITION REGARDLESS OF THE NATURE OF THE EMPLOYER, I.E., JOINT VENTURE OR NOT. ***"

IN VIEW OF THE FOREGOING STATEMENT, WE FIND NO MERIT TO FISCHER'S COST CONTENTION.

FOR THE ABOVE REASONS, THE PROTEST IS DENIED.