B-158686, SEP. 2, 1966

B-158686, SEP. 2, 1966

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A REPORT DATED JUNE 9, 1966, FROM YOUR DEPARTMENT, CONCERNING THE AWARD ON FEBRUARY 26, 1966, OF A CONTRACT TO SPACE GENERAL CORPORATION UNDER REQUEST FOR PROPOSALS NO. 42-007-66 77Q DATED NOVEMBER 8, 1965, FOR AN OCEAN SAMPLING SYSTEM FLOATING PLATFORM. THIS MATTER WAS THE SUBJECT OF A PROTEST BY OCEAN SCIENCE AND ENGINEERING, INCORPORATED.

WE HAVE ADVISED OCEAN SCIENCE BY LETTER OF TODAY, COPY ENCLOSED, THAT ITS PROTEST IS DENIED. WE FOUND THAT ITS CONTENTIONS WERE UNJUSTIFIED. THERE IS AN ASPECT OF THE AWARD PROCEDURE, HOWEVER, WHICH CAUSED US CONCERN.

THE CONTRACTING OFFICER DETERMINED THAT NEGOTIATIONS COULD BE CONDUCTED WITH ONLY ONE FIRM (SPACE GENERAL) BASED ON TECHNICAL EVALUATION OF THE PROPOSALS AND ON THE CRITICAL DELIVERY DATE REQUIRED BY THE REQUESTING AGENCY. AUTHORITY CITED FOR THIS DETERMINATION WAS ASPR 4-205.1/A) SELECTION OF SOURCES, WHICH STATES,"THROUGH ITS RESEARCH AND DEVELOPMENT PROGRAMS, THE DEPARTMENT OF DEFENSE MUST SEEK THE MOST ADVANCED SCIENTIFIC KNOWLEDGE ATTAINABLE AND THE BEST POSSIBLE EQUIPMENT, * * * THAT CAN BE DEVISED AND PRODUCED.' HE DETERMINED, IN ACCORDANCE WITH ASPR 4-205.4, THAT SPACE GENERAL CORPORATION WAS MORE CAPABLE OF PERFORMING THE CONTRACT OR SCHEDULE THAN ANY OTHER CONTRACTOR. (SEE LETTER OF MAY 18, 1966, TO THE COMMANDING GENERAL, U.S. ARMY TEST AND EVALUATION COMMAND, ABERDEEN PROVING GROUND, MARYLAND, UNDER EXHIBIT "A" TO THE REPORT.)

THE STAFF JUDGE ADVOCATE EXPLAINED THAT THE TECHNICAL PROPOSAL OF THE SUCCESSFUL CONTRACTOR WAS REGARDED AS DISTINCTLY SUPERIOR TO ALL OTHER PROPOSALS; AND THAT "WHILE IT MAY HAVE BEEN POSSIBLE TO UPGRADE SOME OF THE OTHER TECHNICAL PROPOSALS, PROCUREMENT TIME WAS LIMITED IN VIEW OF CRITICAL DELIVERY DATES.' THE JUDGE ADVOCATE NOTED THAT THE CONTRACT CALLED FOR RESEARCH AND DEVELOPMENT WORK (A-COST-PLUS INCENTIVE-FEE CONTRACT WAS SPECIFIED UNDER AUTHORITY OF 10 U.S.C. 2304/A) (11) (, AND CONCLUDED THAT "THE CONTRACTING OFFICER, IN LIMITING NEGOTIATIONS TO SPACE GENERAL, EXERCISED A PREROGATIVE PROPERLY WITHIN HIS DISCRETION.' (THESE STATEMENTS APPEAR ON PAGES 9 AND 10, LEGAL ANALYSIS, UNDER EXHIBIT "A" OF THE REPORT.)

WE ARE NOT CONVINCED THAT IT WAS WITHIN THE CONTRACTING OFFICER'S PREROGATIVE TO RESTRICT NEGOTIATIONS TO THE ONE CONCERN. IN THIS CONNECTION, 10 U.S.C. 2304/G) PROVIDES THAT NEGOTIATIONS SHALL BE CONDUCTED AS FOLLOWS:

"/G) IN ALL NEGOTIATED PROCUREMENTS IN EXCESS OF $2,500 IN WHICH RATES OR PRICES ARE NOT FIXED BY LAW OR REGULATION AND IN WHICH TIME OF DELIVERY WILL PERMIT, PROPOSALS SHALL BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED AND WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED: PROVIDED, HOWEVER, THAT THE REQUIREMENTS OF THIS SUBSECTION WITH RESPECT TO WRITTEN OR ORAL DISCUSSIONS NEED NOT BE APPLIED TO PROCUREMENTS IN IMPLEMENTATION OF AUTHORIZED SET-ASIDE PROGRAMS OR TO PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT, THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES AND WHERE THE REQUEST FOR PROPOSALS NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION.' THUS THE ARMED SERVICES PROCUREMENT ACT PERMITS NEGOTIATED AWARDS TO BE MADE IN APPROPRIATE CASES WITHOUT WRITTEN OR ORAL DISCUSSIONS, BUT REQUIRES THAT IF NEGOTIATIONS (I.E., DISCUSSIONS) BE CONDUCTED WITH ONE OF THE OFFERORS, THEN NEGOTIATIONS SHALL ALSO BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED. PART 8 OF SECTION III, ASPR,"PRICE NEGOTIATION POLICIES AND TECHNIQUES," SPELLS OUT THE REQUIREMENTS IN GREATER DETAIL.

WE HAVE HELD THAT THE STATUTORY AND REGULATORY REQUIREMENT FOR NEGOTIATIONS WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT COMPETITIVE OFFERS IS EQUALLY APPLICABLE WHERE A RESEARCH AND DEVELOPMENT CONTRACT IS CONTEMPLATED. B-157150, JANUARY 19, 1966 (PUBLISHED AT 45 COMP. GEN.); B- 158042, MARCH 30, 1966 (LETTER TO THE ADMINISTRATOR, NATIONAL AERONAUTICS AND SPACE ADMINISTRATION), COPIES ENCLOSED. THE FACT THAT CONTRACT PRICE IS NOT THE CONTROLLING FACTOR IN THE AWARD DETERMINATION OR THAT THE AWARD IS TO BE MADE TO THE OFFEROR SUBMITTING THE MOST ADVANTAGEOUS PROPOSAL, DOES NOT, IN OUR OPINION, RELIEVE THE AGENCY FROM ITS PRIMARY STATUTORY DUTY TO CONDUCT NEGOTIATIONS WITH ALL RESPONSIBLE OFFERORS SUBMITTING COMPETITIVE PROPOSALS.

NO DOUBT EACH OF THE EIGHT PROPOSALS RECEIVED WAS THOROUGHLY REVIEWED. THE EVALUATION OF PROPOSALS WAS COMPLETED ON OR ABOUT DECEMBER 22, 1965. FROM THAT TIME UNTIL FEBRUARY 26, 1966, SOLE-SOURCE NEGOTIATIONS WERE CONDUCTED WITH SPACE GENERAL TO THE EXCLUSION OF ALL THE OTHER OFFERORS. SPACE GENERAL HAD PROPOSED ESTIMATED CONTRACT COSTS OF $486,290, BUT UPON COMPLETION OF THE NEGOTIATION THE ESTIMATED COSTS WERE FIXED AT $631,206, AN INCREASE OF $144,916. IT IS EXPLAINED BY YOUR DEPARTMENT THAT IT HAD UNDERESTIMATED THE MARINE TESTING, HARDWARE AND LABOR REQUIREMENTS AND THAT THE INCREASE IN ESTIMATES WOULD HAVE BEEN APPLICABLE TO ANY OF THE OTHER OFFERORS. ACTUALLY, PROPOSALS HAD BEEN EVALUATED FOR THE FUNDED PORTION OF THE WORK, WHICH WAS STATED TO INCLUDE ALL OF "EFFORT A" BUT ONLY THE STUDY PHASE OF "EFFORT B" (SPACE GENERAL ESTIMATED COST FOR THE FUNDED PORTION WAS $270,868). WE UNDERSTAND THAT MOST, IF NOT ALL, OF THE INCREASE IN ESTIMATED COST REACHED DURING THE NEGOTIATIONS WAS DUE TO THE FUNDED PORTION OF THE PROJECT. EVIDENTLY YOUR DEPARTMENT OFFICIALS UNDERESTIMATED OR DID NOT FULLY COMPREHEND WHAT WAS REQUIRED.

ALTHOUGH THE RECORD SHOWS THAT SPACE GENERAL SUBMITTED THE BEST PROPOSAL, THE RECORD DOES NOT SUPPORT A CONCLUSION THAT IT ALONE SUBMITTED THE ONLY COMPETITIVE OR ACCEPTABLE PROPOSAL. THE POINT SPREAD BETWEEN PROPOSALS WAS NOT VERY GREAT; THE PRICES WERE NOT DETERMINATIVE AND THE STAFF JUDGE ADVOCATE ACKNOWLEDGES THAT SOME OF THE OTHER PROPOSALS WERE CAPABLE OF BEING UPGRADED. IN SHORT, THE RECORD DOES NOT SHOW THE "WIDE GAP BETWEEN THE FIRST RANKED PROPOSAL AND THE OTHERS" AS WAS STATED TO BE THE CASE BY THE STAFF JUDGE ADVOCATE. IF THE STATUTORY REQUIREMENT FOR NEGOTIATIONS IS TO BE GIVEN MEANINGFUL EFFECT, PROPOSAL EVALUATION MUST BE AIMED AT SELECTING ALL THE COMPETITIVE PROPOSALS FOR THE NEGOTIATION AS WELL AS THE HIGHEST RATED PROPOSAL. IT APPEARS THAT THE EVALUATION IN THIS CASE DID NOT ATTEMPT TO DETERMINE WHETHER THERE WERE OTHER COMPETITIVE PROPOSALS IN ADDITION TO THE TOP PROPOSAL. WE REALIZE THAT A CONTRACTING OFFICER HAS WIDE DISCRETION IN CHOOSING THE CONTRACTOR FOR A RESEARCH AND DEVELOPMENT CONTRACT. BUT THE LAW PRESCRIBES THAT HIS CHOICE BE MADE (1) AFTER OBTAINING MAXIMUM COMPETITION CONSISTENT WITH THE NEEDS OF THE PROCUREMENT, AND (2) AFTER DISCUSSIONS ARE CONDUCTED WITH ALL RESPONSIBLE OFFERORS SUBMITTING COMPETITIVE PROPOSALS, EXCEPT FOR CERTAIN SPECIFIED CASES. SEE ASPR 3-805.1/A). WE ARE SATISFIED THAT MAXIMUM COMPETITION WAS OBTAINED, BUT CANNOT SAY IN THIS CASE THAT DISCUSSIONS WERE PROPERLY RESTRICTED TO THE SINGLE CONCERN.

THE FACTOR OF URGENCY HARDLY EXPLAINS THE FAILURE TO NEGOTIATE WITH OTHER OFFERORS WHILE NEGOTIATIONS WERE BEING CONDUCTED WITH THE ONE OFFEROR. HOWEVER, THE AWARD HAS BEEN MADE, AND WE DO NOT BELIEVE THAT IT SHOULD BE DISTURBED. WE RECOMMEND THAT THE REQUIREMENTS OF 10 U.S.C. 2304/G) BE CALLED TO THE ATTENTION OF YOUR CONTRACTING OFFICIALS FOR THE PURPOSE OF ASSURING THAT FUTURE AWARD ACTIONS CONFORM FULLY WITH ITS REQUIREMENTS.