B-167054 (1), JAN. 14, 1970

B-167054 (1), JAN. 14, 1970

BID PROTEST--BIDDER QUALIFICATION DECISION DENYING PROTEST OF MANAGEMENT ASSISTANCE CORPORATION AGAINST AWARD TO GENASYS CORPORATION FOR DESIGN AND INSTALLATION OF ACCOUNTING SYSTEM FOR NIH IN CONFORMANCE TO "UMBRELLA ACCOUNTING SYSTEM." WHERE AFTER SUBMISSION OF OFFER A SOLE-SOURCE PROCUREMENT WAS CANCELED AND THE PROCUREMENT OPENED TO COMPETITION THE FACT THAT AN EMPLOYEE OF THE SOLE-SOURCE OFFEROR BECAME PRESIDENT OF A NEW FIRM THAT BECAME THE SUCCESSFUL OFFEROR UNDER THE COMPETITIVE PROCUREMENT THERE WAS NO UNFAIR ADVANTAGE SINCE THE ORIGINAL OFFEROR HAD OPPORTUNITY TO REVISE ITS OFFER. WHETHER THE CHANGE IN THE PROCUREMENT THAT WAS MADE COMPETITIVE WAS SIGNIFICANT OR MINOR, DOES NOT AFFECT THE RIGHT TO CHANGE TO A COMPETITIVE PROCUREMENT. DETERMINATION THAT SUCCESSFUL OFFEROR HAD HIGHER POINT EVALUATION RATING THAN PROTESTANT AND IS QUALIFIED TO MEET NEEDS OF AGENCY IS MATTER FOR SOUND JUDGMENT AND DISCRETION OF CONTRACTING AGENCY.

TO MANAGEMENT ASSISTANCE CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 10, 1969, AND PRIOR CORRESPONDENCE, PROTESTING THE AWARD TO THE GENASYS CORPORATION ON MAY 5, 1969, OF A CONTRACT FOR SERVICES IN CONNECTION WITH THE DESIGN, DEVELOPMENT AND INSTALLATION OF AN ACCOUNTING SUBSYSTEM FOR THE NATIONAL INSTITUTES OF HEALTH (NIH) IN CONFORMANCE WITH THE REQUIREMENTS OF THE DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE (HEW) "UMBRELLA ACCOUNTING SYSTEM."

THE ORIGINAL REQUEST FOR PROPOSAL DATED DECEMBER 10, U968, COVERING THESE SERVICES, WAS RESTRICTED TO YOUR COMPANY. THE DETERMINATION TO RESTRICT THE REQUEST FOR PROPOSAL TO YOUR COMPANY WAS BASED UPON THE FACT THAT IT HAD EXPERIENCE IN DESIGNING AND IMPLEMENTING A SIMILAR ACCOUNTING SYSTEM FOR THE PUBLIC HEALTH SERVICE, AND THAT IT HAD INDICATED IN EXPLORATORY DISCUSSIONS THAT THE CONTRACT WOULD COST ABOUT $125,000, WHICH WAS ABOUT HALF THE COST OF THEN CURRENT CONTRACTS FOR WORK OF THE SAME SCOPE WITH THE CONSUMER PROTECTION AND ENVIRONMENTAL HEALTH SERVICE AND THE HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION. ALSO, IT APPEARED THAT NIH WOULD BE SUBJECT TO "PUNITIVE LEGISLATION" IF THE ACCOUNTING SUBSYSTEM WAS NOT IN EFFECT BY JULY 1, 1969, AND THAT ANY OTHER FIRM AGREEING TO PERFORM WITHIN THE TIGHT TIME FRAME WOULD HAVE TO EXPEND CONCENTRATED EFFORT WITH THE RESULT THAT THE COST WOULD BE PROHIBITIVE AND THE LIKELIHOOD OF MEETING THE OPERATIONAL DATE REMOTE. FURTHER, IT WAS DETERMINED THAT THE NIH FINANCIAL MANAGEMENT BRANCH STAFF WAS OVERBURDENED AND THE SELECTION OF YOUR COMPANY WOULD REDUCE THE TIME REQUIRED FOR INITIAL ORIENTATION.

YOUR COMPANY SUBMITTED A PROPOSAL IN THE AMOUNT OF $130,413 ON DECEMBER 23, 1968. HOWEVER, ON JANUARY 8, 1969, THE DIRECTOR, OFFICE OF FINANCIAL MANAGEMENT, REQUESTED THE HEAD OF THE NEGOTIATED CONTRACTS PROCUREMENT SECTION TO CANCEL THE PROPOSED PROCUREMENT FOR THE FOLLOWING REASONS:

"* * * THE CIRCUMSTANCES SURROUNDING THIS PROPOSED PROCUREMENT SUBSEQUENT TO THE RELEASE OF THE RFP DATED DECEMBER 10, 1968 HAVE CHANGED TO THE EXTENT THAT TO GO THROUGH WITH IT AT THIS TIME IS NOT DEEMED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT. MORE SPECIFICALLY, THERE NOW APPEARS TO BE A CONSIDERABLE AMOUNT OF DATA AVAILABLE TO US FROM THE DEPARTMENT, OFFICE OF EDUCATION, AND THE WORK PERFORMED FOR HS&MHA BY MAC WHICH WAS NOT COMPLETELY CLEAR BACK IN LATE NOVEMBER 1968, AND WHICH, WHEN COUPLED WITH CERTAIN BUT LIMITED IN-HOUSE CAPABILITES AND THE FACT THAT MAC HAS ALTERED THEIR DECISION. * * *"

BY LETTER OF JANUARY 14, 1969, THE HEAD OF THE NEGOTIATED CONTRACTS PROCUREMENT SECTION ADVISED YOUR COMPANY THAT A DECISION HAD BEEN MADE NOT TO PROCEED WITH CONTRACT NEGOTIATIONS AT THAT TIME, BUT INDICATED THE POSSIBILITY OF PROCUREMENT ACTION AT SOME LATER DATE.

SUBSEQUENTLY, ON FEBRUARY 20, 1969, A DETERMINATION WAS MADE TO PROCURE THE DESIRED SERVICES ON A COMPETITIVE NEGOTIATION BASIS WITH SEVERAL FIRMS HAVING SOME DEGREE OF FAMILIARITY WITH THE HEW "UMBRELLA ACCOUNTING SYSTEM." FIVE PROPOSALS WERE RECEIVED AND EVALUATED BY A THREE-MAN COMMITTEE ESTABLISHED FOR THAT PURPOSE. GENASYS, THE LOW OFFEROR IN THE AMOUNT OF $107,785, RECEIVED THE HIGHEST POINT SCORE ON ITS TECHNICAL PROPOSAL. YOUR COMPANY'S TECHNICAL PROPOSAL RATED THIRD. YOUR COST PROPOSAL WAS THE SECOND LOWEST SUBMITTED IN THE AMOUNT OF $126,033. THE REMAINING COST PROPOSALS WERE IN THE AMOUNTS OF $142,205, $338,608 AND $374,258. SINCE GENASYS SUBMITTED THE LOWEST PRICED OFFER AND HAD THE HIGHEST TECHNICAL RATING, THE CONTRACT WAS AWARDED TO IT ON MAY 5, 1969, FOR THE TOTAL FIXED PRICE OF $106,000.

BY LETTER OF MAY 22, 1969, YOUR COMPANY PROTESTED THE AWARD TO OUR OFFICE. OUR OFFICE SUBSEQUENTLY OBTAINED AN ADMINISTRATIVE REPORT AND A SUPPLEMENTAL REPORT ON THE PROTEST AS TO WHICH YOUR COMPANY WAS EXTENDED AN OPPORTUNITY TO EXAMINE AND COMMENT THEREUPON TO OUR OFFICE.

YOU PROTEST THAT YOUR COMPANY SHOULD HAVE RECEIVED THE SOLE-SOURCE AWARD FROM NIH. YOU STATE THAT THE SECOND REQUEST FOR PROPOSALS WAS SUBSTANTIALLY THE SAME AS THE ORIGINAL AND THAT THE PRESIDENT OF GENASYS, WHO FORMERLY WAS AN EMPLOYEE OF YOUR COMPANY, PARTICIPATED IN EXPLORATORY DISCUSSIONS WITH NIH PERSONNEL LEADING TO THE ISSUANCE OF THE INITIAL REQUEST FOR PROPOSAL AND INFORMED NIH PERSONNEL DURING THOSE DISCUSSIONS OF YOUR COMPANY'S ESTIMATED COST AND WAS ADVISED IN RETURN WHAT IT WAS ESTIMATED OTHER CONCERNS WOULD CHARGE FOR THE REQUIRED SERVICES. AS A RESULT, YOU STATE THAT THE PRESIDENT OF GENASYS POSSESSED SIGNIFICANT PRICING INFORMATION AT THE SECOND OFFERING, WHICH FACT WAS KNOWN TO NIH PERSONNEL PRIOR TO ISSUANCE OF THAT OFFERING. FURTHER, YOU QUESTION THE RESPONSIBILITY OF GENASYS' TECHNICAL STAFF IN VIEW OF ITS ALLEGED POOR PERFORMANCE RECORD WITH OTHER CONTRACTING AGENCIES AND BECAUSE ITS EMPLOYEES HAVE A HISTORY OF LEAVING THEIR EMPLOYERS BEFORE COMPLETION OF THE CONTRACTS UPON WHICH THEY ARE EMPLOYED. ADDITIONALLY, YOU POINT OUT THAT GENASYS WAS A NEW COMPANY WHICH WAS FINANCIALLY WEAK AT THE TIME OF THE SECOND OFFERING, AND THAT SUCH FACT SHOULD HAVE GENERATED AN IN-DEPTH INVESTIGATION OF THE COMPANY BEFORE AWARD. YOU ALSO STATE THAT THE PRESIDENT OF GENASYS HAD AGREED IN HIS CONTRACT OF EMPLOYMENT WITH YOUR COMPANY NOT TO COMPETE IN THE EVENT OF THE TERMINATION OF HIS EMPLOYMENT CONTRACT AND THAT THE TERMINATION OF EMPLOYMENT AND THE BREACH OF THE CONVENANT WAS COMMUNICATED TO PROCUREMENT PERSONNEL PRIOR TO THE AWARD OF THE CONTRACT TO GENASYS. FINALLY, YOU MAINTAIN THAT THE POINT SCORE ASSIGNED TO GENASYS' PROPOSAL WAS ERRONEOUS. SPECIFICALLY, YOU QUESTION GENASYS' RATING OF 8.2 FOR "PERSONNEL" WHILE YOUR COMPANY RECEIVED 7.9, 9.3 (ACTUALLY 8.4) FOR "SCHEDULE" WHILE YOUR COMPANY RECEIVED 6.6, AND 8.8 FOR "FIRM" WHEN IT WAS A NEW COMPANY WITH NO SIGNIFICANT PERFORMANCE RECORD AND A SMALL STAFF.

THE FACT THAT AN AGENCY MAY INITIATE A PROCUREMENT ON A SOLE-SOURCE BASIS DOES NOT PRECLUDE IT THEREAFTER FROM CHANGING IT TO A COMPETITIVE BASIS. INFORMATION FURNISHED BY NIH INDICATES THAT THE DETERMINATION TO CANCEL THE SOLE-SOURCE PROCUREMENT IN ORDER TO OBTAIN COMPETITION WAS BASED UPON A CHANGE IN "IN-HOUSE" RESPONSIBILITIES AND THE ESTABLISHMENT OF GENASYS AS A COMPETITIVE SOURCE. ALTHOUGH YOU INDICATE THAT NIH WAS MADE AWARE OF THE EXISTENCE OF GENASYS BEFORE YOUR COMPANY SUBMITTED AN OFFER ON THE SOLE-SOURCE REQUEST FOR A PROPOSAL, SUCH FACT DOES NOT, IN OUR OPINION, RENDER IMPROPER ITS SUBSEQUENT DETERMINATION TO SEEK COMPETITION. FURTHER, WHILE YOU INDICATE THAT THE PRESIDENT OF GENASYS WAS INVOLVED IN THE EARLY DISCUSSIONS LEADING TO YOUR COMPANY'S SUBMISSION OF A SOLE- SOURCE PROPOSAL, AS STATED ABOVE, THE ORIGINAL REQUEST FOR PROPOSAL WAS CHANGED THEREAFTER TO A COMPETITIVE REQUEST FOR PROPOSALS WHEREIN CERTAIN FUNCTIONS WOULD BE PERFORMED BY "IN-HOUSE" LABOR.

ALSO, YOU CONTEND THAT THE TASKS ASSUMED BY NIH IN THE SECOND REQUEST FOR PROPOSALS DID NOT CHANGE THE PROCUREMENT SIGNIFICANTLY AND THAT GENASYS WAS IN AN ADVANTAGEOUS POSITION BECAUSE OF THE INFORMATION IT GAINED REGARDING YOUR COMPANY'S PROPOSAL DURING THE PRELIMINARIES. WHETHER THE CHANGE WAS IN FACT SIGNIFICANT, OR, FOR THAT MATTER, SOMEWHAT MINOR, WAS NOT THE OVERRIDING CONSIDERATION BUT, RATHER, THAT COMPETITION -- WHICH IS FAVORED -- WAS AVAILABLE. EVEN IF THE PRESIDENT OF GENASYS GAINED ANY SPECIAL INFORMATION CONCERNING YOUR OFFER BECAUSE OF HIS EARLIER ASSOCIATION, THERE WAS NO ASSURANCE THAT YOUR COMPANY WOULD OFFER IDENTICAL TERMS AND PRICES. MOREOVER, YOUR COMPANY HAD AN OPPORTUNITY TO REVISE ITS OFFER ANY WAY IT SAW FIT WHEN THE PROCUREMENT WAS LET TO COMPETITION. IN THAT REGARD, IT WAS HELD IN B-160675, MARCH 10, 1967, THAT WHERE A COMPANY'S OFFER WAS ALLEGEDLY DISCLOSED TO ITS COMPETITORS, THERE WAS NO UNFAIR ADVANTAGE CONFERRED ON THE COMPETITOR, SINCE THE COMPANY WHOSE OFFER WAS ALLEGEDLY DISCLOSED HAD BEEN PROVIDED WITH AN OPPORTUNITY TO REVISE ITS OFFER.

NIH HAS INDICATED THAT THE DETERMINATION THAT GENASYS WAS A RESPONSIBLE CONCERN TO PERFORM THE CONTRACT WAS BASED UPON THE FACT THAT MEMBERS OF THE GENASYS TECHNICAL STAFF HAD EXPERIENCE WITH THE HEW "UMBRELLA SYSTEM" WHEN THEY WERE EMPLOYED BY YOUR COMPANY. ALTHOUGH YOU CONTEND THAT SUCH EMPLOYEES DID NOT PERFORM WELL UNDER CONTRACTS WITH OTHER GOVERNMENT AGENCIES AND THAT THEY MOVE AROUND FROM EMPLOYER TO EMPLOYER, NIH PROCUREMENT PERSONNEL REACHED A DIFFERENT CONCLUSION ON THE BASIS OF INFORMATION AVAILABLE TO THEM ESPECIALLY WITH REFERENCE TO THEIR EXPERIENCE WITH THE "UMBRELLA SYSTEM." FURTHER, WHILE YOU STATE THAT GENASYS WAS WEAK FINANCIALLY, THE RECORD SHOWS THAT AN ANALYSIS WAS MADE OF INFORMATION FURNISHED BY THE COMPANY AS TO ITS FINANCIAL CAPABILITY AND IT WAS DETERMINED THAT IT HAD ADEQUATE CAPITAL TO PERFORM THE CONTRACT.

IT IS NOT THE FUNCTION OF OUR OFFICE TO DETERMINE WHETHER OR NOT PARTICULAR OFFERORS ARE IN FACT RESPONSIBLE. THAT DETERMINATION IS A MATTER OF JUDGMENT WITHIN THE DISCRETION OF THE PROCUREMENT ADMINISTRATION THEREOF. 39 COMP. GEN. 705, 711 (1960). IT HAS BEEN ACTIVITY WHICH IS RESPONSIBLE FOR LETTING CONTRACTS AND FOR THE HELD THAT THE FINAL SELECTION OF A CONTRACTOR INVOLVES DISCRETION THAT IS NOT ORDINARILY SUBJECT TO REVIEW. FRIEND V. LEE, 221 F. 2D 96 (1955). IN THAT CASE, THE COURT INDICATED THAT CONDUCT TANTAMOUNT TO FRAUD MUST BE PROVED AS A CONDITION TO REVIEWING THE DETERMINATION OF RESPONSIBILITY. FROM THE RECORD BEFORE US, IT DOES NOT APPEAR THAT THE CONTRACTING OFFICER ACTED ARBITRARILY WITHOUT REGARD TO THE INFORMATION HE HAD BEFORE HIM FOR CONSIDERATION.

PROCUREMENT PERSONNEL HAVE DENIED HAVING ANY KNOWLEDGE PRIOR TO THE AWARD TO GENASYS THAT THE PRESIDENT OF THE COMPANY WAS VIOLATING ANY AGREEMENT WITH YOUR COMPANY NOT TO COMPETE WITH IT. BUT EVEN IF SUCH INFORMATION WAS COMMUNICATED TO THEM PRIOR TO AWARD, THE BREACH OF SUCH AN AGREEMENT BETWEEN AN EMPLOYER AND FORMER EMPLOYEE WOULD BE A MATTER FOR RESOLUTION BETWEEN THOSE PARTIES AND NOT FOR CONSIDERATION BY THE GOVERNMENT.

THE TECHNICAL PROPOSALS SUBMITTED FOR COMPETITION WERE EVALUATED BY A SOURCE EVALUATION COMMITTEE. THE REPORT OF THE COMMITTEE INDICATES THAT GENASYS WAS RATED HIGHER IN "PERSONNEL" BECAUSE OF RECOMMENDATIONS FROM OTHER HEW AGENCIES AND BECAUSE THE COMMITTEE CONSIDERED IT HAD BETTER COMPUTER BASED BACKGROUND. IT IS INDICATED THAT YOUR COMPANY RATED LOW ON "SCHEDULE" BECAUSE YOUR STAFF MEMBERS WERE DEEPLY INVOLVED IN THE HEALTH SERVICES AND MENTAL HEALTH ADMINISTRATION CONTRACT AND THERE WAS CONCERN THAT THEY WOULD NOT BE ABLE TO DEVOTE THE FULL TIME THAT THE NIH CONTRACT WOULD REQUIRE. THE REPORT FURTHER INDICATES THAT WHILE GENASYS WAS A NEW COMPANY, IN EVALUATING IT AS A "FIRM," THE EVALUATION WAS NOT MADE ON THE BASIS OF THE FIRM'S LONGEVITY, BUT RATHER UPON THE LENGTH AND TYPE OF EXPERIENCE OF THE PERSONNEL. IN THAT REGARD, IN 36 COMP. GEN. 673 (1957) OUR OFFICE HELD THAT IN EVALUATING A NEWLY FORMED CORPORATION THE EXPERIENCE OF THE PRINCIPAL OFFICERS COULD BE CONSIDERED. FURTHER, IN B- 164165, AUGUST 13, 1968, WE HELD THAT THE DETERMINATION WHETHER AN OFFEROR'S TECHNICAL PROPOSAL IS ACCEPTABLE, AND WHETHER THE PROPOSAL INDICATES THAT THE OFFEROR UNDERSTANDS THE NEEDS OF THE AGENCY AND IS QUALIFIED TO SUPPLY SUCH NEEDS, IS A MATTER WHICH OUR OFFICE HAS CONSISTENTLY HELD MUST BE LEFT TO THE SOUND JUDGMENT AND DISCRETION OF THE CONTRACTING AGENCY. WHERE SUCH DETERMINATIONS WERE BASED UPON A POINT SYSTEM OF EVALUATING THE PROPOSALS BY A SOURCE EVALUATION COMMITTEE, IT HAS BEEN OUR POSITION THAT THE AWARDS BASED UPON SUCH EVALUATION GENERALLY WILL NOT BE QUESTIONED.