B-150001, MAY 15, 1963

B-150001: May 15, 1963

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WHICH WAS ACKNOWLEDGED ON OCTOBER 3. AS YOU WILL RECALL. WE INFORMED YOU THAT IT WAS OUR UNDERSTANDING THAT PROPOSALS RECEIVED UNDER THE SOLICITATION INVOLVED FOR THE PROCUREMENT OF ENVIRONMENTAL CONTROL SYSTEMS WOULD BE SUBJECTED TO FORMAL SOURCE SELECTION PROCEDURES BY AN EVALUATION BOARD OF EXPERT PERSONNEL. WE NOW ARE ADMINISTRATIVELY INFORMED THAT THE SOURCE SELECTION BOARD DEVELOPED THE REQUEST FOR PROPOSAL AF 04-694-62-216 IN ACCORDANCE WITH AIR FORCE SYSTEMS COMMAND FOR AEROSPACE SYSTEMS. THE REQUEST ALSO STATED THAT IF A PROPOSAL WAS FAVORABLY CONSIDERED. WERE SOLICITED UNDER THIS PROCUREMENT. A PRE-PROPOSAL MEETING WAS CONVENED AT THE PROCURING ACTIVITY. WHICH MEETING PERSONNEL OF YOUR CORPORATION ARE REPORTED TO HAVE ATTENDED.

B-150001, MAY 15, 1963

TO KECO INDUSTRIES, INC.:

FURTHER REFERENCE I MADE TO YOUR TELEGRAM DATED SEPTEMBER 26, 1962, WHICH WAS ACKNOWLEDGED ON OCTOBER 3, AND SUBSEQUENT CORRESPONDENCE FROM AND CONFERENCES WITH YOUR ATTORNEY EUGENE L. STEWART IN CONNECTION WITH YOUR PROTEST AGAINST AN AWARD TO THE CARRIER CORPORATION BY THE DEPARTMENT OF THE AIR FORCE UNDER REQUEST FOR PROPOSAL NO. AF 04-694 62-216 COVERING PROCUREMENTS FOR MINUTEMAN WINGS III AND IV ENVIRONMENTAL CONTROL SYSTEMS.

AS YOU WILL RECALL, IN OUR LETTER DATED OCTOBER 18, 1962, IN RESPONSE TO YOUR PROTEST AGAINST THE CRITERIA ESTABLISHED FOR ELIGIBILITY FOR PARTICIPATION IN THE TWO-STEP PROCUREMENT OF ENVIRONMENTAL CONTROL SYSTEMS FOR MINUTEMAN WINGS III AND IV, WE INFORMED YOU THAT IT WAS OUR UNDERSTANDING THAT PROPOSALS RECEIVED UNDER THE SOLICITATION INVOLVED FOR THE PROCUREMENT OF ENVIRONMENTAL CONTROL SYSTEMS WOULD BE SUBJECTED TO FORMAL SOURCE SELECTION PROCEDURES BY AN EVALUATION BOARD OF EXPERT PERSONNEL; AND IN THAT EVALUATION CONSIDERATION WOULD BE GIVEN TO SUCH THINGS AS THE FIRM'S UNDERSTANDING OF THE TECHNICAL PROBLEMS FACED, THE DEVELOPMENT PLAN PRESENTED IN THE PROPOSAL, THE REALISM OF COST ESTIMATES INCLUDED THEREIN, THE ORGANIZATION AND FACILITIES OF THE CONTRACTOR WHICH HE REPRESENTED IN HIS PROPOSAL WOULD BE ALLOCATED TO THE TASK, THE NUMBER AND EXPERIENCE OF THE PEOPLE TO BE USED ON THE PROJECT, AND THE FIRM'S BACKGROUND AND EXPERIENCE IN THIS FIELD.

WE NOW ARE ADMINISTRATIVELY INFORMED THAT THE SOURCE SELECTION BOARD DEVELOPED THE REQUEST FOR PROPOSAL AF 04-694-62-216 IN ACCORDANCE WITH AIR FORCE SYSTEMS COMMAND FOR AEROSPACE SYSTEMS, DCAS REGULATION NO. 80-7, DATED APRIL 26, 1962, AND NO. 80-7A, DATED JUNE 1, 1962, BOTH ENTITLED ,RESEARCH AND DEVELOPMENT SOURCE SELECTION BOARD PROCEDURES.'

THIS REQUEST CONTEMPLATED THE NEGOTIATION OF A COST-PLUS-INCENTIVE FEE CONTRACT. IT PROVIDED FOR THE SUBMISSION OF PROPOSALS IN TWO PARTS, (1) TECHNICAL AND MANAGERIAL INFORMATION AND (2) COST INFORMATION. THE REQUEST FURTHER PROVIDED THAT PROPOSALS RECEIVED WOULD BE EVALUATED ON A POINT RATING SYSTEM BASED ON THE FACTORS SET FORTH IN THE REQUEST. THE GOVERNMENT SPECIFICALLY RESERVED THE RIGHT TO REJECT ANY AND ALL PROPOSALS OR TO NEGOTIATE SEPARATELY WITH ANY SOURCE. THE REQUEST ALSO STATED THAT IF A PROPOSAL WAS FAVORABLY CONSIDERED, A SURVEY TEAM MIGHT VISIT THE PROPOSER'S FACILITIES FOR THE PURPOSE OF VALIDATING THE PROPOSER'S CAPABILITY TO PERFORM.

SIXTEEN FIRMS, INCLUDING YOUR CORPORATION, WERE SOLICITED UNDER THIS PROCUREMENT. A PRE-PROPOSAL MEETING WAS CONVENED AT THE PROCURING ACTIVITY, WHICH MEETING PERSONNEL OF YOUR CORPORATION ARE REPORTED TO HAVE ATTENDED. THE FIVE PROPOSALS RECEIVED WERE EVALUATED BY THE SOURCE SELECTION BOARD AND THE WORKING GROUPS ASSIGNED TO IT, IN ACCORDANCE WITH THE PROCEDURES AND FACTORS SET FORTH IN THE REQUEST, AND THE MANUFACTURING FACILITIES OF EACH OF THE FIVE FIRMS SUBMITTING PROPOSALS WERE VISITED BY SOURCE SELECTION BOARD REPRESENTATIVES AS PROVIDED IN THE REQUEST. THE SOURCE SELECTION BOARD FOUND ONLY TWO OF THE PROPOSERS, THE AMERICAN FILTER COMPANY AND THE CARRIER CORPORATION, CAPABLE OF SUCCESSFULLY COMPLETING THE REQUIRED WORK. THESE TWO ORGANIZATIONS, WHOSE PROPOSALS WERE RATED HIGHEST AS TO MANAGERIAL AND TO TECHNICAL CAPACITY, WERE THEN REQUESTED TO SUBMIT A QUOTATION ON A FIXED-PRICE-INCENTIVE-FEE BASIS RATHER THAN ON THE COST-PLUS BASIS USED IN THE ORIGINAL PROPOSALS, AND THE PROPOSAL THUS RECEIVED FROM CARRIER CORPORATION WAS A FIXED PRICE BID OF $16,630, 679 WITH A CEILING PRICE OF $18,000,000.

THE SOURCE SELECTION BOARD THEN RECOMMENDED THE AWARD OF A CONTRACT TO THE CARRIER CORPORATION. THIS RECOMMENDATION WAS APPROVED BY THE DEPUTY COMMANDER OF BALLISTIC SYSTEMS DIVISION ON SEPTEMBER 21, 1962, AND THE AWARD WAS MADE TO CARRIER.

IN HIS BRIEF DATED JANUARY 25, 1863, SUBMITTED BY YOUR ATTORNEY, HE SUMMARIZED YOUR COMPLAINT AS FOLLOWS:

"1. THE SOURCE SELECTION BOARD PROCEDURE UPON WHICH THE INSTANT PROCUREMENT RFP WAS BASED IS INHERENTLY DISCRIMINATORY AGAINST SMALL BUSINESS.

"2. THE PROCEDURE AND THE FACTORS DESIGNATED FOR EVALUATION OF PROPOSALS RESULT IN USE IN THE SELECTION OF THE FIRM OFFERING THE LARGEST AMOUNT OF FACILITIES, TECHNICAL STAFF, AND MANPOWER, AND WITHOUT REGARD TO CONTRACT NEEDS, TO THE DETRIMENT OF SMALL ORGANIZATIONS WHOSE FACILITIES, STAFF, AND MANPOWER, THOUGH ADEQUATE FOR CONTRACT NEEDS, ARE SMALLER IN SIZE OR NUMBER THAN THOSE AVAILABLE TO THE LARGER FIRMS.

"3. THE ACTUAL CONDUCT OF THE PROCUREMENT ACTIONS WAS CONTRARY TO THE REQUIREMENTS OF THE STATUTE, 10 U.S.C. SECS. 2304 (G) AND 2310, IN THAT THE AIR FORCE FAILED TO CONDUCT WRITTEN OR ORAL DISCUSSIONS WITH ALL OF THE RESPONSIBLE OFFERORS WHO SUBMITTED PROPOSALS FOR THE PROJECT WITHIN A COMPETITIVE RANGE; IN FACT, THE PROCEDURE AND FACTORS AS ADMINISTERED FAILED TO RECOGNIZE A COMPETITIVE RANGE AND FOCUSED THE SELECTION OF A CONTRACTING PARTY ON A PREFERENTIAL BASIS WHICH EXCLUDED SUCH DISCUSSIONS.

"4. THE PROCUREMENT WAS HANDLED UNDER THE CRITERIA AND PROCEDURES SPECIFIED IN THE SOURCE SELECTION BOARD PROCEDURES IN A MANNER WHICH MINIMIZED PRICE COMPETITION TO AN EXTENT DETRIMENTAL TO THE PUBLIC INTEREST.

"5. THE ACTIONS AND FINDINGS OF THE SOURCE SELECTION BOARD AND THE CONTRACTING AGENCY IN ELIMINATING KECO INDUSTRIES FROM CONSIDERATION IN THE FINAL NEGOTIATING PHASE OF THE PROCUREMENT WAS ARBITRARY, CAPRICIOUS, AND SO GROSSLY ERRONEOUS AS TO AMOUNT TO BAD FAITH IN THAT THEY WERE NOT BASED UPON SUBSTANTIAL EVIDENCE OF RECORD AND WERE, IN FACT, IN DIRECT CONFLICT WITH KNOWN OR READILY ASCERTAINABLE FACTS.'

AS STATED ABOVE, THIS PROCUREMENT FOR MINUTEMAN WINGS III AND IV ENVIRONMENTAL CONTROL SYSTEMS WAS MADE IN ACCORDANCE WITH DCAS REGULATION NO. 80-7, DATED APRIL 26, 1962. PARAGRAPH 16 OF APPENDIX III, REQUEST FOR PROPOSAL, PROVIDES AS FOLLOWS:

"THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY AND ALL PROPOSALS RECEIVED BY REASON OF THIS REQUEST, OR TO NEGOTIATE SEPARATELY WITH ANY SOURCE WHATSOEVER IN ANY MANNER DEEMED NECESSARY TO SERVE THE BEST INTERESTS OF THE GOVERNMENT.'

PARAGRAPH 21 OF THE SAME APPENDIX FURTHER PROVIDES:

"YOUR PROPOSAL WILL BE EVALUATED IN A FAIR AND IMPARTIAL MANNER BY A BOARD OF EXPERT PERSONNEL, REPRESENTING INTERESTED GOVERNMENT ORGANIZATIONS. THE BOARD WILL USE A POINT RATING PROCEDURE PLUS ANY OTHER FACTORS IT CONSIDERS PERTINENT.

"FOR THIS PROCUREMENT, THE AIR FORCE IS SEEKING DESIGN, DEVELOPMENT, AND MANAGEMENT CAPABILITY WHICH WILL ASSURE THAT THE REQUIRED OBJECTIVE IS ACHIEVED WITHIN THE STATED TIME PERIOD AT REASONABLE COST. ACCORDINGLY, IN THE EVALUATION OF YOUR PROPOSAL, WE WILL CONSIDER SUCH THINGS AS YOUR UNDERSTANDING OF THE TECHNICAL PROBLEMS FACED, YOUR APPROACH TO THESE PROBLEMS, SOUNDNESS OF YOUR DEVELOPMENT PLAN, REALISM OF YOUR COST ESTIMATES, YOUR ORGANIZATION AND FACILITIES FOR ACCOMPLISHING THIS TASK, NUMBER AND EXPERIENCE OF THE PEOPLE YOU WILL USE ON THE PROJECT, AND YOUR BACKGROUND AND EXPERIENCE IN THIS FIELD. IN ADDITION TO THESE TECHNICAL CONSIDERATIONS, WE WILL ALSO CONSIDER THE TERMS AND TYPE OF CONTRACT WHICH YOU PROPOSE.'

AND THE FOLLOWING PARAGRAPH NUMBERED 22 STATES THAT:

"FAILURE OF YOUR PROPOSAL TO BE ACCEPTED FOR AWARD WILL NOT NECESSARILY REFLECT ANY DEFICIENCIES, BUT ONLY THAT ANOTHER PROPOSAL WAS CONSIDERED TO BE MORE ADVANTAGEOUS TO THE GOVERNMENT. THERE WILL BE NO EXPLANATION AS TO WHY YOU DIDN-T GET THE CONTRACT. A DEBRIEFING IS NOT PLANNED.'

A SUMMARY OF THE ABOVE-MENTIONED FACILITY VISIT IS QUOTED BELOW:

"KECO INDUSTRIES IS A COMPANY LIMITED IN SIZE WITH BACKGROUND AND EXPERIENCE IN THE BUILDING OF RELATIVELY SMALL PACKAGED MOBILE AIR CONDITIONING UNITS. KECO ASSEMBLES EQUIPMENT FROM COMMERCIALLY AVAILABLE COMPONENTS, AND MANUFACTURES ONLY THE PACKAGING THAT INTEGRATES AND CONTAINS THE UNITS. THE TOTAL OUTPUT OF KECO IS DEVOTED TO GOVERNMENT WORK. THEIR PROPOSAL IS A STATEMENT OF THEIR ABILITY RATHER THAN A CANDID PRESENTATION OF TECHNICAL AND MANAGERIAL APPROACH TO TASKS REQUIRED. NOTHING CONTAINED IN THE PROPOSAL INDICATES THE REMOTEST UNDERSTANDING OF THE TECHNICAL OR THE PROGRAM MANAGEMENT PROBLEMS INVOLVED IN THIS PROCUREMENT. THE TEAM VISIT TO THE KECO FACILITY BROUGHT OUT THE FACT THAT THEIR ENGINEERING STAFF IS TOTALLY INADEQUATE. KECO PLANS TO HIRE A CONSULTANT GROUP HEADED BY A CHEMICAL ENGINEER TO PERFORM THEIR ENGINEERING FUNCTIONS FOR THEM. THE CONSULTANT HIMSELF IS NOT ADEQUATELY STAFFED. HE PLANS TO HIRE THOSE ENGINEERS AND DRAFTSMEN CURRENTLY LAID OFF BY LARGER FIRMS IN THE AREA. THERE IS NO GUARANTEE THAT SUCH PERSONNEL WILL BE AVAILABLE. IT MUST BE CONCLUDED THAT INADEQUATE ENGINEERING TALENT IS AVAILABLE AT KECO FOR THIS JOB.

"FROM THE STANDPOINT OF PRODUCTION FACILITIES, THE COMPANY PRESIDENT STATED THAT HE FELT MINUTEMAN WINGS III AND IV WOULD UTILIZE 60 TO 70 PERCENT OF HIS PRODUCTION CAPABILITY. IT WAS THE OPINION OF THE TEAM THAT HE HAS GROSSLY UNDERESTIMATED THE JOB AND THAT MINUTEMAN WOULD REQUIRE AT LEAST TWICE HIS AVAILABLE CAPACITY.

"IN CONCLUSION IT WOULD SUFFICE TO SAY THAT KECO DEFINITELY CANNOT HANDLE THIS JOB. CONCLUSION IS BASED ON THE INADEQUATE MANAGEMENT STAFF, THE ALMOST NON-EXISTENT ENGINEERING STAFF, AND LIMITED FACILITIES AVAILABLE AT KECO.'

THE RECORD BEFORE US INDICATES THAT IN EACH OF THE AREAS CONSIDERED, CARRIER CORPORATION AND THE AMERICAN AIR FILTER COMPANY OFFERED THE BEST PROPOSALS, AND IN THE EVALUATION OF THE TECHNICAL AND MANAGERIAL FACTORS THE SCORES OF THESE TWO FIRMS WERE CONSIDERED ESSENTIALLY EQUAL. ON THE OTHER HAND, HOWEVER, THE PROPOSAL SUBMITTED BY YOUR FIRM WAS EVALUATED FIFTH IN THIS AREA. WITH RESPECT TO COST INFORMATION, WHICH INCLUDED PROBABLE EXPENDITURES AND EFFECT OF PROPOSED FEE PATTERN, SUPPORT FOR SPECIFIC ELEMENTS OF COST, AND FINANCIAL RATING, THE TOTAL NUMBER OF POINTS ASSIGNED TO YOUR CORPORATION AND THE GARRETT CORPORATION WERE THE SAME AND RANKED AFTER THE ABOVE TWO FIRMS.

AS STATED IN OUR LETTER OF OCTOBER 18, 1962, REFERRED TO ABOVE, IT IS OUR POSITION THAT THE DETERMINATION OF THE RESPONSIBILITY OR CAPABILITY OF BIDDERS IS PRIMARILY THE FUNCTION OF THE ADMINISTRATIVE OFFICIALS OF THE PROCURING AGENCIES OF THE GOVERNMENT, AND THIS OFFICE WILL NOT SUBSTITUTE ITS JUDGMENT FOR THAT OF THE CONTRACTING AGENCY UNLESS THERE IS CLEAR AND CONVINCING EVIDENCE THAT THE AGENCY OPINION IS IN ERROR. FURTHERMORE, THE CONTRACTING AUTHORITIES ARE NECESSARILY VESTED WITH A CERTAIN AMOUNT OF DISCRETION IN SUCH MATTERS, AND IN THE ABSENCE OF A SHOWING OF FAVORITISM, BAD FAITH OR A COMPLETE DISREGARD OF THE FACTS, WE WOULD NOT BE WARRANTED IN HOLDING THAT THE ADMINISTRATIVE ACTION WAS ILLEGAL. THIS IS PARTICULARLY TRUE IN THE INSTANT CASE SINCE THE RECORDS BEFORE US INDICATE THAT THERE WAS SUBSTANTIAL EVIDENCE TO SUPPORT THE BOARD'S FINDINGS, AND WE WERE UNABLE TO FIND ANY BASIS FOR CHARGING IT WITH FAVORITISM, OR ARBITRARY OR CAPRICIOUS ACTION AS SUGGESTED BY YOUR ATTORNEY.

IN SUMMARY, THEREFORE, BASED UPON OUR REVIEW OF THE ENTIRE RECORD FURNISHED US BY THE DEPARTMENT OF THE AIR FORCE, IT IS CLEAR THAT THE PROCEDURES SET FORTH IN DCAS REGULATION NO. 80-7, WHICH INFORMATION WAS MADE KNOWN TO THE PROSPECTIVE BIDDERS, WAS STRICTLY FOLLOWED BY THE BOARD IN ITS WORK PERTAINING TO THE PROCUREMENT OF THE AFOREMENTIONED ENVIRONMENTAL CONTROL SYSTEMS; AND IT ALSO IS APPARENT THAT THE UNANIMOUS ACTION OF THE BOARD, SUPPORTED BY ITS TECHNICAL AND MANAGEMENT WORKING GROUPS, WAS FAIR AND IMPARTIAL. THE ABOVE-QUOTED PARAGRAPHS FROM THE REQUEST FOR PROPOSAL CLEARLY ADVISED ALL PROSPECTIVE BIDDERS THAT THE GOVERNMENT RESERVED THE RIGHT TO NEGOTIATE SEPARATELY WITH ANY SOURCE WHATSOEVER IN ANY MANNER DEEMED NECESSARY TO SERVE THE BEST INTERESTS OF THE GOVERNMENT; THAT THE BOARD WOULD USE A POINT RATING PROCEDURE PLUS ANY OTHER FACTORS IT CONSIDERED PERTINENT AND THAT, AMONG OTHER THINGS, IT WOULD CONSIDER THE TERMS AND TYPE OF CONTRACT PROPOSED BY THE RESPECTIVE BIDDERS. IN THIS CONNECTION, IT MIGHT BE POINTED OUT THAT ON OTHER OCCASIONS WE HAVE HELD THAT THE USE OF A POINT EVALUATION SYSTEM BY THE ADMINISTRATIVE AUTHORITY FOR THE PURPOSE OF SELECTING THE SOURCES FOR A NEGOTIATED TYPE CONTRACT WAS NOT FOUND TO BE CONTRARY TO STATUTE OR REGULATION, B-147394, SEPTEMBER 4, 1962; AND, ALSO, WE HAVE EXPRESSED THE VIEW THAT POINT EVALUATION AS AN AWARD SYSTEM FOR NEGOTIATED PROCUREMENT IN AND OF ITSELF NEITHER FAVORS NOR DISCOURAGES SMALL BUSINESS PARTICIPATION. B-132596, DECEMBER 26, 1962.

ACCORDINGLY, IN THE LIGHT OF THE FOREGOING, WE PERCEIVE NO BASIS FOR HOLDING THAT THE AWARD AS MADE WAS ILLEGAL OR IMPROPER.