B-157150, JAN. 19, 1966, 45 COMP. GEN. 417

B-157150: Jan 19, 1966

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- WHERE THE PRICE DIFFERENTIAL WAS NOT TAKEN INTO CONSIDERATION. THE AWARD WAS UPHELD UPON POST AWARD REEVALUATION. IS NOT WITHIN THE CONTEMPLATION OF PARAGRAPH 3-805.1 (A) (V) OF THE ARMED SERVICES PROCUREMENT REGULATION RELAXING THE MANDATORY REQUIREMENT FOR NEGOTIATION WITH ALL RESPONSIBLE OFFERORS WHEN ACCEPTANCE OF AN INITIAL OFFER RESULTS IN FAIR AND REASONABLE PRICES. NOTWITHSTANDING PARAGRAPH 4-205.5 THAT PRICE IS NOT CONTROLLING IN SELECTING A CONTRACTOR FOR RESEARCH AND DEVELOPMENT. THE MAXIMUM COMPETITION PRESCRIBED IN PARAGRAPH 3- 508 WAS NOT OBTAINED. THE AWARD MADE TO ITTFL UNDER THE REQUEST FOR PROPOSALS WAS THE SUBJECT OF AN INITIAL EVALUATION BY THE PROCUREMENT ACTIVITY.

B-157150, JAN. 19, 1966, 45 COMP. GEN. 417

CONTRACTS - NEGOTIATION - COMPETITION - AWARD UNDER INITIAL PROPOSALS THE AWARD UNDER 10 U.S.C. 2304 (A) (11), NEGOTIATION OF CONTRACTS FOR EXPERIMENTAL, DEVELOPMENT, OR RESEARCH WORK, ON THE BASIS OF INITIAL PROPOSALS, FOR A TRAINING DEVICE TO OTHER THAN THE LOWER OFFEROR--- A CONTRACTOR CURRENTLY PERFORMING OTHER PHASES OF THE WORK BUT NOT GIVEN AN OPPORTUNITY FOR NEGOTIATION AND CORRECTION OF TECHNICAL DEFICIENCIES--- WHERE THE PRICE DIFFERENTIAL WAS NOT TAKEN INTO CONSIDERATION, AND THE AWARD WAS UPHELD UPON POST AWARD REEVALUATION, IS NOT WITHIN THE CONTEMPLATION OF PARAGRAPH 3-805.1 (A) (V) OF THE ARMED SERVICES PROCUREMENT REGULATION RELAXING THE MANDATORY REQUIREMENT FOR NEGOTIATION WITH ALL RESPONSIBLE OFFERORS WHEN ACCEPTANCE OF AN INITIAL OFFER RESULTS IN FAIR AND REASONABLE PRICES, AND NOTWITHSTANDING PARAGRAPH 4-205.5 THAT PRICE IS NOT CONTROLLING IN SELECTING A CONTRACTOR FOR RESEARCH AND DEVELOPMENT, IN DISREGARDING THE SUBSTANTIAL PRICE DIFFERENTIAL IN THE PROPOSALS, AND IN CATEGORIZING THE TECHNICAL PROPOSAL OF THE CONTRACTOR PERFORMING RELATED WORK AS INFERIOR RATHER THAN UNACCEPTABLE, A DETERMINATION THAT WOULD REQUIRE NOTICE PURSUANT TO PARAGRAPH 3-508 TO AN UNSUCCESSFUL OFFEROR, THE MAXIMUM COMPETITION PRESCRIBED IN PARAGRAPH 3- 508 WAS NOT OBTAINED.

TO THE SECRETARY OF THE NAVY, JANUARY 19, 1966:

BY LETTER DATED OCTOBER 18, 1965, WITH ENCLOSURES, THE CHIEF OF NAVAL RESEARCH FURNISHED US WITH A BASIC AND SUPPLEMENTARY REPORT ON THE PROTEST OF AIRCRAFT ARMAMENTS, INC. (AAI), AGAINST THE AWARD OF A NEGOTIATED CONTRACT TO ITT FEDERAL LABORATORIES (ITTFL) PURSUANT TO REQUEST FOR PROPOSALS COVERING TASK 7723, SERIAL 088, ISSUED ON MARCH 9, 1965, BY THE UNITED STATES NAVAL TRAINING DEVICE CENTER (NTDC), FOR THE DESIGN, DEVELOPMENT AND CONSTRUCTION OF ATTACK CENTER 3, DEVICE X21A38/3.

THE AWARD MADE TO ITTFL UNDER THE REQUEST FOR PROPOSALS WAS THE SUBJECT OF AN INITIAL EVALUATION BY THE PROCUREMENT ACTIVITY. THE CONTRACT WORK WAS SUSPENDED AND A REVALUATION UNDERTAKEN AT THE DIRECTION OF THE ASSISTANT SECRETARY (INSTALLATIONS AND LOGISTICS). THE REPORT OF REEVALUATION OF THE AWARD WAS FURNISHED TO THE ASSISTANT SECRETARY ON OCTOBER 8, 1965. IT WAS STATED THEREIN, IN PERTINENT PART, THAT:

3. THE RESULTS OF THE RE-EVALUATION AFFIRMED THE SUBSTANTIAL SUPERIORITY OF THE ITT PROPOSAL OVER THAT PRESENTED BY AAI. AN ESTIMATE OF THE ADDITIONAL COSTS TO AAI TO INCLUDE FEATURES IN THE ATTACK CENTER WHICH ARE REQUIRED BUT NOT ADDRESSED IN THEIR PROPOSAL WAS MADE BY THE NTDC ENGINEERS. THESE ESTIMATES INDICATE THAT THE COSTS OF THE TWO PROPOSALS WOULD BE QUITE COMPARABLE.

4. UPON COMPLETION OF THE RE-EVALUATION AAI WAS INVITED TO MAKE ORAL PRESENTATIONS COVERING THE AREAS OF THEIR PROPOSAL WHICH WERE CONSIDERED TECHNICALLY DEFICIENT. WHILE ADDITIONAL INSIGHTS WERE PROVIDED CONCERNING THE PROPOSAL ORIGINALLY SUBMITTED, THE EVALUATORS WERE UNABLE TO CHANGE THEIR RATING SCORES.

ON OCTOBER 12, 1965, THE ASSISTANT SECRETARY CONFIRMED THE REPORT FINDINGS AND REINSTATED THE CONTRACT WITH ITTFL. WE HAVE CAREFULLY REVIEWED THIS PROCUREMENT IN THE LIGHT OF THE ENTIRE RECORD BEFORE US AND WE DO NOT BELIEVE THAT THE NEGOTIATION PROCEDURES EMPLOYED REASONABLY CONFORMED WITH THE LAW OR THE IMPLEMENTING REGULATIONS. ADDITIONALLY, WE HAVE FOUND SIGNIFICANT DISCREPANCIES IN THE REPORTED FACTS AND CIRCUMSTANCES INVOLVED IN THIS PROCUREMENT. YOU UNDERSTAND, OF COURSE, THAT IN REACHING OUR CONCLUSIONS IN CASES OF THIS NATURE AS TO THE PROPRIETY OF ADMINISTRATIVE ACTIONS TAKEN WE MUST--- IN THE ABSENCE OF AN INDEPENDENT INVESTIGATION CONDUCTED BY OUR OFFICE--- NECESSARILY RELY FULLY UPON THE ADMINISTRATIVE REPORT OF THE RELEVANT FACTS AND CIRCUMSTANCES. IT IS, THEREFORE, IMPERATIVE THAT WE BE FURNISHED WITH THE FULL AND CORRECT FACTS IN RESPONSE TO OUR WRITTEN REQUESTS FOR DOCUMENTED REPORTS RESPONSIVE TO PROTESTS. THESE AND OTHER MATTERS RESULTING FROM OUR REVIEW ARE BROUGHT TO YOUR ATTENTION IN ORDER TO PRECLUDE A REPETITION OF SIMILAR CASES INVOLVING NEGOTIATED AWARDS MADE UNDER THE MILITARY PROCUREMENT STATUTE AS IMPLEMENTED BY THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

THE PROTEST BY AAI WAS INITIATED BY A TELEGRAM TO OUR OFFICE DATED JUNE 30, 1965--- WITH A COPY TO THE PROCUREMENT ACTIVITY. ON JULY 2, 1965, WE WERE INFORMALLY ADVISED BY THE COUNSEL TO THE PROCUREMENT ACTIVITY THAT THE CONTRACTING OFFICER HAD DETERMINED NOT TO WITHHOLD AWARD AS THE ITEM WAS URGENTLY REQUIRED. THIS WAS CONFIRMED BY LETTER OF JULY 6, 1965, WHEREIN IT WAS STATED:

* * * PLEASE BE ADVISED THAT IN ACCORDANCE WITH THE APPLICABLE RULES AND REGULATIONS, THE CONTRACTING OFFICER WILL MAKE AWARD OF PROJECT 7723 TO ITT FEDERAL LABORATORIES.

FACTUALLY, THIS IS INCORRECT. CONTRACT NO. N61339-1864 (FBM) WAS AWARDED TO ITTFL ON JULY 2, 1965, AND IT FURTHER APPEARS THAT BOTH OUR OFFICE AND THE PROCUREMENT ACTIVITY WERE TIMELY ADVISED OF AAI'S PROTEST BEFORE AWARD. APPARENTLY, BOTH THE JULY 2 AND JULY 6 ADVICES WERE GIVEN PURSUANT TO ASPR 2-407.9 WHICH PRESCRIBES THE PROCEDURES TO BE FOLLOWED IN THE EVENT OF PROTESTS BEFORE AWARD. WHILE THE NOTIFICATIONS RELATED TO A PREAWARD PROTEST, THE AWARD ALREADY HAD BEEN ACCOMPLISHED AT THE TIME WHEN WE WERE ADVISED THAT THE CONTRACTING OFFICER "WILL MAKE AWARD" TO ITTFL. WE SEE NO REASON FOR RELYING ON THE REGULATION WHEN AN AWARD HAS BEEN ACCOMPLISHED NOTWITHSTANDING A PROTEST PRIOR THERETO. IT CLEARLY WOULD HAVE BEEN TO THE ADVANTAGE OF ALL CONCERNED HAD THE ACTUAL FACTS BEEN DISCLOSED TIMELY.

A RESUME OF THE BACKGROUND OF THE PROTESTED PROCUREMENT APPEARS NECESSARY IN VIEW OF THE STATEMENTS MADE BY AAI IN ITS "PROTEST AGAINST AWARD" DATED JULY 7, 1965. IN PARTICULAR, AAI CONCLUDED, AFTER SETTING OUT THE DETAILS OF ITS PROTEST, THAT:

THIS CONTRACTOR SUBMITS THAT THE CIRCUMSTANCES AS THEY PRESENTLY APPEAR, JUSTIFY AN INFERENCE OF BAD FAITH ON THE PART OF THOSE CHARGED WITH THE RESPONSIBILITY FOR INSURING THAT THE PROCUREMENT ACTION IN QUESTION WAS CONDUCTED IN A FASHION TO INSURE THAT IT SERVED THE BEST INTERESTS OF THE GOVERNMENT. THIS CONTRACTOR FURTHER SUBMITS THAT THERE IS A CLEAR ABUSE OF DISCRETION IN THE REFUSAL BY THE CONTRACTING OFFICER IN SPITE OF REPEATED REQUESTS TO DO SO, TO CONDUCT ANY AWARD ELSEWHERE AT A HIGHER PRICE DESPITE THE PROVEN COMPETENCE OF THIS CONTRACTOR. STILL FURTHER, IT WOULD APPEAR THAT THE CONTRACTING OFFICER ACTED IMPRUDENTLY BY FAILING TO CONSIDER THE ADVANTAGES TO BE GAINED BY AWARDING THE PROGRAM TO THE DESIGNER OF THE FUNDAMENTAL SYSTEM, IN VIEW OF THE OBVIOUS PROBABILITY THAT A STILL LOWER PRICE COULD BE NEGOTIATED UNDER THE CIRCUMSTANCES IF PROPER NEGOTIATION TECHNIQUES HAD BEEN UTILIZED.

EVEN ASSUMING, FOR THE PURPOSE OF ARGUMENT, THAT A REASONABLY COMPETENT AND IMPARTIAL EVALUATION OF THE AAI TECHNICAL PROPOSAL, TOGETHER WITH OTHERS SUBMITTED, DISCLOSED THAT THE PROPOSAL WAS SUBSTANTIALLY INFERIOR TO THAT OF THE CONTRACTOR TO WHOM THE AWARD WAS MADE, SURELY NO PROCUREMENT OFFICIAL ACTING IN A REASONABLE MANNER WOULD FOREGO THE SUBSTANTIAL ADVANTAGES INHERENT IN AWARD OF THE CONTRACT TO THE PRESENT CONTRACTOR, PARTICULARLY IN VIEW OF ITS HIGHLY SUCCESSFUL PERFORMANCE ON ATTACK CENTERS 1 AND 2 AND ITS CURRENT PERFORMANCE ON THE BQQ-2 SONAR SIMULATOR, BOTH BEING OBVIOUSLY INTIMATELY RELATED TO THE REQUIREMENTS OF ATTACK CENTER 3, WITHOUT FIRST ATTEMPTING TO DETERMINE WHETHER THE APPARENT DEFICIENCY WAS REAL, OR WHETHER IT COULD BE CORRECTED, OR AT LEAST TALKING TO THE PRESENT CONTRACTOR TO DETERMINE IF MISTAKE OR OVERSIGHT MIGHT BE INVOLVED. AT THE VERY LEAST, IF A DETERMINATION AS TO WHETHER TECHNICAL CONSIDERATIONS WILL OUTWEIGH A PRICE DIFFERENTIAL IS TO BE MADE, SOME ATTEMPT TO DISCOVER THE ACTUAL MAGNITUDE OF THE PRICE DIFFERENTIAL WOULD BE EXPECTED. NOT TO DO SO, ASSUMING THE FACTS TO BE PRESENTED, APPEARS TO BE INCAPABLE OF EXPLANATION WITHIN THE REASONABLE LIMITS OF DISCRETION AND STANDARDS OF PERFORMANCE EXPECTED AND IMPOSED ON THE CONTRACTING OFFICER.

THE BASIC REPORT TO OUR OFFICE CONTAINS THE PROCUREMENT HISTORY OF THESE TRAINING DEVICES. AAI WAS AWARDED CONTRACT NO. N61339-949 ON SEPTEMBER 29, 1960, UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (11) PROVIDING FOR THE NEGOTIATION OF CONTRACTS FOR EXPERIMENTAL, DEVELOPMENTAL, OR RESEARCH WORK. THE CONTRACT COVERED ATTACK CENTER 1 AND A PORTION OF ATTACK CENTER 2. IT IS REPORTED THAT AAI'S REQUEST TO PERFORM THE SONAR SIMULATION WORK IN-HOUSE AFTER NEGOTIATIONS WITH THE DESIGNATED SUBCONTRACTOR WERE UNSUCCESSFUL WAS DENIED BY NTDC BECAUSE AAI LACKED THE CAPABILITY TO PERFORM THIS WORK. THEREAFTER, THE SONAR SIMULATION WORK WAS SUBCONTRACTED BY AAI TO GENERAL APPLIED SCIENCE LABORATORIES WITH NTDC APPROVAL. THEREAFTER, ON JUNE 30, 1964, CONTRACT NO. N61339-1597 WAS AWARDED TO AAI UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (11) FOR THE DESIGN, DEVELOPMENT AND CONSTRUCTION OF ATTACK CENTER 2, CONSISTING OF THE BQQ-1 SONAR SIMULATOR TO BE INTEGRATED WITH ATTACK CENTER 1, INCLUDING RETROFITS TO THE CENTER. ITTFL WAS THE MAJOR SUBCONTRACTOR FOR THE SONAR PORTION OF THE SIMULATOR, AND OTHER FIRMS HAVE BEEN AWARDED SUBCONTRACTS FOR OTHER SUBSTANTIAL ITEMS, SUCH AS COMPUTERS AND SWITCHES, FOR THIS TRAINING DEVICE.

TURNING NOW TO ATTACK CENTER 3, WE NOTE THAT THIS REQUIREMENT AROSE IN JANUARY 1964 AND IT WAS CONTEMPLATED THAT ITS OPERATION WOULD BE IN CONJUNCTION WITH ATTACK CENTERS 1 AND 2, OR INDEPENDENTLY OF EITHER OF THEM. IN ACCORDANCE WITH ASPR 1-1003.4 AND 1-1003.9, AND ADVANCE RESEARCH AND DEVELOPMENT SYNOPSIS COVERING ATTACK CENTER 3 WAS PUBLICIZED ON SEPTEMBER 23, 1964. THE CAPABILITIES OF THE 13 FIRMS RESPONDING TO THE SYNOPSIS WERE EVALUATED ON THE BASIS OF WEIGHTED QUALIFICATION FACTORS. OUT OF A TOTAL POSSIBLE SCORE OF 100, AAI HAD THE HIGHEST QUALIFYING SCORE OF 82, FOLLOWED BY ITTFL AND THE RAYTHEON CORP., BOTH SCORING AT 80. THE PROJECT COORDINATOR DETERMINED ON NOVEMBER 6, 1964, THAT "THE TECHNICAL JUDGMENT OF THE UNDERSIGNED IS THAT THE FOLLOWING (5) RESPONDEES ARE SUFFICIENTLY QUALIFIED IN THE SPECIFIED AREAS TO BE CONSIDERED AS PROSPECTIVE CONTRACTORS AND SHOULD BE PLACED ON THE BIDDERS LIST.' THIS CONNECTION WE NOTE THAT AAI SCORED THE HIGHEST AS TO THE PERSONNEL EVALUATION FACTOR.

THEREAFTER, A CONTROVERSY AROSE BETWEEN AAI AND THE PROJECT COORDINATOR CONCERNING A SUBCONTRACT FOR A NEW CDC 924 DIGITAL COMPUTER FOR USE WITH ATTACK CENTER 2. AAI PROPOSED TO FURNISH A RECONDITIONED CDC 924 UNDER WARRANTY SINCE THERE HAD BEEN NO PRODUCTION OF THIS COMPUTER FOR THE PAST 2 1/2 YEARS. THE PROJECT COORDINATOR FELT, ON THE OTHER HAND, THAT A NEW COMPUTER OF EQUAL CAPABILITY SHOULD BE FURNISHED BY AAI AT INCREASED COST EVEN THOUGH THE CONTRACT NEGOTIATIONS WERE CONDUCTED ON THE BASIS OF USING THE OBSOLETE CDC 924. IN A MEMORANDUM OF FEBRUARY 16, 1965, THE PROJECT COORDINATOR REVIEWED THE COMPUTER PROBLEM AND STRONGLY TOOK ISSUE WITH AAI'S PROPOSED SOLUTION. WHILE WE ARE NOT IN A POSITION TO JUDGE THE RESPECTIVE MERITS OF THE TWO POSITIONS, THE ATTITUDE OF AAI APPARENTLY WAS SUCH AS TO CAUSE THE PROJECT COORDINATOR TO COMMENT ON AAI'S CAPABILITIES IN SUCH A MANNER AS TO REFLECT DISCREDIT ON AAI BECAUSE OF WHAT WOULD SEEM TO BE A ROUTINE CONTRACT ADMINISTRATION PROBLEM. THE PROJECT COORDINATOR STATED:

10. THE CONTRACTOR WILL BE REQUIRED TO PROVIDE ANOTHER COMPUTER OF EQUAL CAPABILITY AND PRICE. POSSIBLE COMPUTERS OF EQUAL CAPABILITY WOULD BE THE CDC 924A OR THE CDC 3100. COST OF THE 924A TO AAI WOULD BE $220,000 ACCORDING TO THE CDC CATALOG. THE WRITER DOES NOT HAVE ANY COST INFORMATION ON THE 3100.

11. FURTHER, UNLESS THIS CONTRACTOR CAN DEMONSTRATE THAT HE IS ACTING IN GOOD FAITH, A RECOMMENDATION WILL BE MADE TO ELIMINATE HIM FROM THE BIDDERS LIST FOR PROJECT 7723. UNLESS HE CAN COME THROUGH WITH THE CONSIDERATIONS ENUMERATED ABOVE, IT IS FELT THAT NEGOTIATIONS CANNOT BE CONDUCTED WITH HIM FOR THIS NEW PROGRAM, SHOULD HE BE THE SUCCESSFUL BIDDER, WITH THE EXPECTATION THAT HE WILL CARRY ON IN GOOD FAITH. THIS WRITER CAN POINT OUT CASE AFTER CASE WHERE THIS CONTRACTOR HAS TAKEN INTENT AND TWISTED IT COMPLETELY OUT OF CONTEXT.

THE REQUEST FOR PROPOSALS COVERING ATTACK CENTER 3 WAS ISSUED TO THE FIVE ELIGIBLE FIRMS ON MARCH 9, 1965, WITH ADVICE THAT THE GOVERNMENT RESERVED THE RIGHT TO MAKE AN AWARD WITHOUT FURTHER DISCUSSION OF THE PROPOSAL SUBMITTED SO THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM BOTH A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN PROPOSE TO THE GOVERNMENT. TWO PROPOSALS WERE RECEIVED ON APRIL 26, 1965, AND THE PRICES AS ORIGINALLY PROPOSED ON A COST-INCENTIVE BASIS WERE REPORTED TO US AS FOLLOWS:

CHART

TARGET PRICE CEILING PRICE

AAI $2,678,827 $2,923,447

ITTFL 3,324,379 3,471,101

WE WERE ADVISED IN THE BASIC REPORT THAT ITTFL'S PROPOSED TARGET PRICE OF $3,509,415 INCLUDED AMOUNTS FOR EQUIPMENT REPAIR PARTS AND STOCK REPAIR PARTS, AND THAT SINCE OFFERORS WERE TO PROVIDE MERELY A BUDGETARY ESTIMATE OF EQUIPMENT REPAIR PARTS TO BE QUOTED SEPARATELY FROM THE PROPOSED TARGET PRICE AND WERE NOT REQUESTED TO QUOTE PRICES FOR STOCK REPAIR PARTS, THE VALUE OF THESE PARTS (ITEM 13) WAS DEDUCTED FROM ITTFL'S COST PROPOSAL THEREBY REDUCING ITS TARGET PRICE FROM $3,509,415 TO $3,324,379.

CONCERNING AAI'S PRICES, THE BASIC REPORT STATED THAT AAI'S ORIGINAL TARGET PRICE OF $2,629,354 "WAS NOT CONSIDERED FOR AWARD BECAUSE IT DID NOT PROVIDE CHANGE PAGES TO DEVICE X21A38/2 PUBLICATIONS AS REQUIRED BY THE RFP.' A REVIEW OF AAI'S COST PROPOSAL REVEALS THAT IT FURNISHED COST ESTIMATES FROM ITEMS 17, 18 AND 20, THE ITEMS OF THE REQUEST FOR PROPOSALS INVOLVED IN THIS MATTER OF "CHANGE PAGES.' ITS TOTAL COST ESTIMATE FOR THESE THREE ITEMS TOTALED $175,907. WE NOTE THAT AAI'S SUMMARY COST SHEET SHOWS THAT ITS BASIC TARGET PRICE PROPOSAL (LESS ITEM 13) AMOUNTED TO $2,629,354, AND THAT ITS ALTERNATE TARGET PRICE (LESS ITEM 13) IN THE AMOUNT OF $2,678,827 INCLUDED CHANGE PAGES FOR THE AN/BQQ-2 SONAR SIMULATOR AS EXPLAINED IN ITS PUBLICATIONS PROPOSAL AS FOLLOWS: AAI RECOGNIZES THAT THE ADDITION OF ATTACK CENTER 3 WILL REQUIRE CHANGES WITHIN THE AN/BQQ-2 SONAR SIMULATOR MAINTENANCE HANDBOOK. THEREFORE, AAI IS SUBMITTING PRICING DATA AS AN ALTERNATE PROPOSAL WHICH INCLUDES THE COST OF UPDATING THE AN-B8Q-2 MAINTENANCE HANDBOOK TO REFLECT THE IMPACT OF ATTACK CENTER 3 ON THAT MANUAL.

AN EXAMINATION OF ITTFL'S COST PROPOSAL REVEALS THAT ITS PRICING FORMAT FOR ITEMS 17, 18 AND 20 WAS IDENTICAL TO AAI'S ORIGINAL COST PROPOSAL AND IF ITTFL'S COST PROPOSAL MET THE REQUIREMENT FOR CHANGE PAGES, AAI'S DID ALSO. WE FIND NOTHING IN AAI'S PROPOSAL WHICH COULD BE CONSTRUED AS OFFERING OTHER THAN COMPLETE COMPLIANCE WITH THE REQUIREMENTS OF ITEMS 17, 18 AND 20. TO HOLD OTHERWISE WOULD REQUIRE THE CONCLUSION THAT ITTFL'S COST PROPOSAL LIKEWISE WAS NONRESPONSIVE TO THESE REQUIREMENTS. THEREFORE, WE BELIEVE THAT THE STATEMENT IN THE BASIC REPORT QUOTED ABOVE IS NOT SUPPORTED BY THE RECORD. IN THAT CONNECTION, IT IS PERTINENT TO POINT OUT THAT THE REQUEST FOR FOR PROPOSALS DID NOT CALL FOR CHANGES PAGES FOR THE AN/BQQ-2 SONAR SIMULATOR BUT ONLY FOR CHANGE PAGES FOR THE MAINTENANCE HANDBOOK, THE OPERATOR'S GUIDE AND PARTS CATALOG FOR THE SYSTEM. IN ANY EVENT, ANY DOUBT THAT MAY HAVE ARISEN AS TO WHETHER AAI'S ORIGINAL COST PROPOSAL INCLUDED THE REQUIRED CHANGE PAGES PROPERLY SHOULD HAVE BEEN RESOLVED BY THE CONTRACTING OFFICER AS CONTEMPLATED BY ASPR 3- 804 AND 3-805.1 (A) (V).

A TECHNICAL EVALUATION WAS CONDUCTED BY NTDC ENGINEERING PERSONNEL OF BOTH TECHNICAL PROPOSALS. THE INDIVIDUAL SCORES DEVELOPED AS TO THE VARIOUS ASPECTS OF THE PROCUREMENT WERE THEN ASSEMBLED BY THE PROJECT COORDINATOR AND AVERAGE RATINGS WERE DEVELOPED BASED ON PREASSIGNED WEIGHING FACTORS WITH THE FOLLOWING RESULTS:

TABLE

WEIGHING

ITEMS FACTORS AAI ITTFL 1. UNDERSTANDING PROBLEM 12.50 9.30 11.75 2. DESIGN APPROACH 30.90 22.24 26.95 3. CONSTRUCTION 5.85 5.65 5.85 4. PERSONNEL

29.75 11.85 20.90 5. FACILITIES 5.75 5.37

5.756. SCHEDULING 4.50 4.50 4.50 7. MATERIAL AND MAN POWER 5.75 5.37 5.75 8. RELIABILITY 5.00 3.50

4.50

TOTAL 100.00 67.78 85.95

ON THE BASIS OF THE FOREGOING RATINGS, IT WAS DETERMINED THAT THE PROPOSAL SUBMITTED BY ITTFL WAS "SUBSTANTIALLY SUPERIOR TO AAI'S IN THAT IT OFFERED THE GREATEST VALUE TO THE GOVERNMENT IN TERMS OF PERFORMANCE.' THIS DETERMINATION TO NEGOTIATE SOLELY WITH ITTFL WAS APPROVED BY THE CONTRACTING OFFICER AND THE DIRECTOR OF NTDC ON OR ABOUT MAY 27, 1965. PRENEGOTIATION BUSINESS CLEARANCE MEMORANDUM, REPORTED TO BE DATED JUNE 8, 1965, WAS FORWARDED TO THE OFFICE OF NAVAL MATERIAL REQUESTING APPROVAL OF NTDC'S INTENT TO NEGOTIATE SOLELY WITH ITTFL. IN MAKING THIS RECOMMENDATION AND REPORTING ON THE RESULTS OF THE EVALUATION OF THE TWO PROPOSALS, THE CONTRACTING OFFICER ADVISED, IN PART, THAT:

5. TECHNICAL EVALUATION--- THE TECHNICAL RATINGS WERE BASED UPON THE EVALUATION OF MAJOR AREAS OF SIMULATION SUCH AS ECM AND RADAR, SONAR, DIGITAL COMPUTER AND INTERFACE, PROJECTION SYSTEM, PROGRAM OPERATOR'S STATIONS, POWER SUPPLY AND WEAPONS. AS A RESULT OF THE TECHNICAL EVALUATION, IT WAS DETERMINED THAT THE PROPOSAL OF ITT FEDERAL LABORATORIES REPRESENTED THE SUPERIOR TECHNICAL APPROACH. A SUMMARY OF THE TECHNICAL EVALUATION OF EACH PROPOSAL FOLLOWS:

A. ECM AND RADAR--- ITT'S PROPOSAL INDICATED SUFFICIENT EXPERIENCE AND PERSONNEL TO PERFORM THIS PORTION OF THE REQUIRED SIMULATION. AAI DESCRIBED ITS UNDERSTANDING OF THE PROBLEM IN A NEBULOUS MANNER. FOR EXAMPLE, THERE WAS NO MENTION OF THE AN/WLR-1 FUNCTIONS AND A NUMBER OF THE STATEMENTS MADE BY THIS OFFEROR APPEARED IRRELEVANT TO THE PROBLEM. IN THE AAI PROPOSED LAYOUT DIAGRAM, THE IP-480 INDICATOR UNIT WAS EXCLUDED. AAI DID NOT PROVIDE ANY BACKGROUND INFORMATION REGARDING PERSONNEL EXPERIENCE WITH ECM.

B. SONAR--- THE SONAR SIMULATION TO BE PERFORMED INCLUDES THAT REQUIRED FOR ATTACK CENTER 3 AS WELL AS THE RETROFITS FOR ATTACK CENTERS 1 AND 2. THE FOLLOWING SONAR SETS WILL BE INSTALLED IN ATTACK CENTER 3:

(1) AN/BQS-4 ACTIVE WITH AN/BQR-2 PASSIVE

(2) AN/BQR-7 PASSIVE CONFORMAL ARRAY

(3) AN/DUUG-1 SONAR INTERCEPT RECEIVER

(4) AN/BQH-1 BATHYTHERMOGRAPH

(5) AN/UQC-1 SONAR COMMUNICATIONS SET

(6) AN/UQN-1 SONAR SOUNDING SET

IN ADDITION, THE SONAR SETS IN ATTACK CENTERS 1 AND 2 WILL BE RETROFITTED TO ENABLE THE SIGHTING OF ATTACK CENTER 3 AND ITS 4 WEAPONS AS TARGETS. IT IS ESSENTIAL THAT THE CONTRACTOR HAVE A THOROUGH SONAR UNDERSTANDING AND DESIGN CAPABILITY IN THIS AREA, AS IT IS CONSIDERED THE MAJOR EFFORT IN THE PROPOSED EXPANSION OF THE TRAINING FACILITY. THE ITT PROPOSAL IN THE AREA OF AN/BQR-7 REPRESENTS A SATISFACTORY RESPONSE TO THE SPECIFICATION, INDICATING A COMPLETE UNDERSTANDING OF THE PROBLEM AS EVIDENCED BY THE DETAILS PRESENTED. THE ITT DESIGN APPROACH INDICATES THAT THIS OFFEROR WILL PERFORM CERTAIN FEASIBILITY TESTS UPON RECEIPT OF GFE TO DETERMINE WHETHER BETTER DESIGN APPROACHES ARE POSSIBLE. ITT PROPOSES TO HAVE THE INVERSE COMPENSATING SWITCHES FABRICATED BY MECHANICAL SYSTEMS INC., WHO ARE NOTED SPECIALISTS IN THIS FIELD.

REGARDING THE AN/BQS-4, ITT PROPOSES TO TEAM WITH GENERAL APPLIED SCIENCE LABORATORIES WHICH WAS SUBCONTRACTOR TO AAI IN THE SONAR SIMULATION PORTION OF THE PRESENT ATTACK CENTER 1 OF DEVICE X21A38 WHICH WAS DEVELOPED UNDER CONTRACT N61339-949. AAI PROPOSES TO DO THE ENTIRE SONAR SIMULATION ITSELF, DESPITE THE FACT THAT AAI HAS NEVER DONE ANY SONAR SIMULATION. ITS EXPERIENCE IN SONAR SIMULATION HAS BEEN SOLELY IN A MANAGERIAL CAPACITY. AS NOTED ABOVE, GASL WAS THE SONAR SUBCONTRACTOR FOR AAI FOR ATTACK CENTER 1.

ITT IS IMPLEMENTING THE SONAR SIMULATION FOR AN/BQS-6, AN/BQR-7 (EXCEPT FOR COMPENSATING SWITCHES) AND AN/BQG (PUFFS) IN ATTACK CENTER 2 OF DEVICE X21A38. RESPECTING THE AN/BQR-7, THE AAI PROPOSAL IS NOT AS THOROUGH AS THAT OF ITT. AAI'S LIMITED UNDERSTANDING OF THE PROBLEM IS EVIDENT AS A RESULT OF LITTLE EXPERIENCE IN THE OCEANOGRAPHIC FIELD. ITS DESIGN APPROACH, THOUGH ADEQUATE, IS LIKEWISE NOT AS COMPLETE AS THAT OF ITT'S AND DOES NOT TAKE INTO ACCOUNT THE POSSIBILITY OF ALTERNATE APPROACHES. ALTHOUGH AAI HAS INDICATED THAT IT HAS NO PREVIOUS EXPERIENCE IN FABRICATION OF THE INVERSE COMPENSATING SWITCHES, ITS PROPOSAL INDICATES THAT THESE SWITCHES WILL BE FABRICATED IN-HOUSE. IN CONNECTION WITH THE AN/BQG (PUFFS), THE AAI PROPOSAL WAS DETERMINED UNSATISFACTORY ON THE BASIS THAT IT DOES NOT PROVIDE A REALISTIC UP-DATE RATE. AAI PROPOSED AN UP-DATE RATE OF 1 PER SECOND AS OPPOSED TO ITT'S UP-DATE RATE OF 10 PER SECOND. THE ITT ANALYSIS OF PUFFS IS CONSIDERED EXCELLENT. THE ITT PROPOSAL REFLECTS THE SONAR AND SONAR SIMULATION EXPERIENCE OF ITS PERSONNEL AND IS RATED SUBSTANTIALLY SUPERIOR.

RESPECTING THE AN/BQS-6B, THE AAI PROPOSAL REFLECTS ONLY SUPERFICIAL KNOWLEDGE. IN THIS CONNECTION, ALTHOUGH AAI IS THE PRIME CONTRACTOR FOR ATTACK CENTER 2, CURRENTLY UNDER CONTRACT N61339-1597, ITT AS SUBCONTRACTOR THEREUNDER IS PROVIDING THE COMPLETE DESIGN AND HARDWARE IN THIS AREA. THE ITT PROPOSAL DISTINCTLY INDICATES SUPERIORITY IN THIS AREA OF SONAR SIMULATION.

BOTH OFFERORS WERE RATED SATISFACTORY IN THE SONAR AREAS OF THE AN/BQH-1, AN/DUUG-1, AN/UGQN-1 AND AN/UQC-1.

C. DIGITAL COMPUTER AND INTERFACE--- EACH OFFEROR SUBMITTED SATISFACTORY PROPOSALS COVERING THIS AREA.

D. PROJECTION SYSTEM--- AAI PROPOSED A NORTRONICS DISPLAY SYSTEM. DETAILS WERE PROVIDED AS TO THE CAPABILITY OF THE PROPOSED SYSTEM EXCEPT FOR A STATEMENT TO THE EFFECT THAT IT WOULD BE 4 TIMES AS FAST AS THE ORIGINAL KOLLSMAN SYSTEM INSTALLED IN ATTACK CENTERS 1 AND 2. ITT ALSO PROPOSED AN UP-DATED VERSION OF THE PRESENT SYSTEM AT PEARL HARBOR, STATING THAT THE PROPOSED SYSTEM WOULD BE CONSIDERABLY MORE RELIABLE THAN THE PRESENT SYSTEM. HOWEVER, MORE DETAIL IS REQUIRED RESPECTING THIS AREA AND WILL BE ACQUIRED AT NEGOTIATIONS.

E. PROGRAM OPERATOR'S STATIONS--- BOTH OFFERORS PROVIDED SATISFACTORY PROPOSALS IN THIS AREA.

F. POWER SUPPLY--- AAI PROPOSED TO UTILIZE AVAILABLE POWER AT PEARL HARBOR. ITT HAS PROPOSED TO PROVIDE AN ADDITIONAL 36 KVA, 60 CPS, 208 VOLT, 3 PHASE POWER SUPPLY. IN ADDITION, ITT PROPOSED TO PROVIDE AN 8 KVA, 400 CPS, 208 VOLT, 3 PHASE MOTOR GENERATOR. ACCORDING TO PRESENT INTELLIGENCE, SUFFICIENT POWER IN EACH CATEGORY IS AVAILABLE AT THE FACILITY AND THEREFORE, THE ITT PROPOSAL IS CONSIDERED EXCESSIVE IN THIS AREA.

G. WEAPONS--- THE ITT PROPOSAL WAS RATED SATISFACTORY. AAI PROPOSED TO PROVIDE A HI AND LO CAPABILITY FOR THE MK 37-0 AND MK 37-1 WEAPONS. HOWEVER, ACCORDING TO NAVWEPS OP 3139 VOL. 3, TABLE 3-2 ON PAGE 3-13, THERE IS NEITHER HI NOR LO CAPABILITY INCLUDED FOR THESE TWO WEAPONS ON THE WEAPON MONITOR PANEL MARKED MK 19 MOD. 1.

ON THE BASIS OF HIS EVALUATION, THE PROJECT ENGINEER RATED THE ITT PROPOSAL 85.95 PERCENT AND THE AAI PROPOSAL 67.78 PERCENT. IN VIEW OF THE TECHNICAL SUPERIORITY REFLECTED IN THE ITT PROPOSAL, ESPECIALLY IN ESSENTIAL AREAS OF ECM AND SONAR SIMULATION, SELECTION OF ITT FOR THIS TASK IS RECOMMENDED.

THE RECOMMENDATION WAS SUPPLEMENTED ON JUNE 14, 1965, BY COST DATA COVERING PURCHASED PARTS, PROPOSED SUBCONTRACTING AND ITTFL'S MAKE-OR BUY PROGRAM. THEREAFTER, THE CONTRACTING OFFICER ISSUED A DETERMINATION AND FINDINGS AFTER RECEIVING APPROVAL TO NEGOTIATE SOLELY WITH ITTFL WHICH READ IN PART:

PURSUANT TO THE AUTHORITY DELEGATED UNDER THE PROVISIONS OF 10 U.S.C. 2311 AND UPON THE BASIS OF THE FOLLOWING FINDINGS AND DETERMINATION WHICH I HEREBY MAKE AS CONTRACTING OFFICER, U.S. NAVAL TRAINING DEVICE CENTER, PURSUANT TO THE PROVISIONS OF 10 U.S.C. 2310, THE PROPOSED CONTRACT MAY BE ENTERED INTO ON A FIXED-PRICE INCENTIVE TYPE BASIS, PURSUANT TO THE AUTHORITY OF SECTION 2306 OF SAID ACT, FOR THE DESIGN, DEVELOPMENT AND CONSTRUCTION OF ATTACK CENTER 3, DESIGNATED DEVICE X21A38/3, WHICH WILL BE INTEGRATED INTO THE SUBMARINE ASW TACTICAL TRAINING FACILITY AT PEARL HARBOR, HAWAII, RETROFITS TO ATTACK CENTERS 1 AND 2, AND SUPPORTING ARTICLES AND SERVICES, WITH ITT FEDERAL LABORATORIES, NUTLEY, NEW JERSEY.

AS FINALLY NEGOTIATED, THE TOTAL CONTRACT AMOUNT WAS REDUCED FROM $3,003,883 TO $2,937,500, OR $308,146 IN EXCESS OF AAI'S COST PROPOSAL. THEREAFTER, THE CONTRACT WITH ITTFL WAS CONSUMMATED ON JUNE 2, 1965.

AS A RESULT OF AAI'S PROTEST AGAINST THE FAILURE OF NTDC TO CONDUCT NEGOTIATIONS WITH IT AND AGAINST THE AWARD TO ITTFL AT HIGHER COST, THE WORK ON THE ITTFL CONTRACT WAS SUSPENDED ON AUGUST 25, 1965, TO PERMIT A COMPLETE REEVALUATION OF THE PROCEDURES INVOLVED IN THE CONTRACT AWARD, INCLUDING A REEVALUATION OF THE TECHNICAL PROPOSALS WHICH HAD BEEN TENDERED BY THE TWO OFFERORS. THE SUPPLEMENTAL REPORT OF OCTOBER 18, 1965, STATES IN THIS CONNECTION AS FOLLOWS:

A RE-EVALUATION OF THE ORIGINAL AAI AND ITT (FL) PROPOSALS WAS PERFORMED BY THREE NTDC SENIOR TECHNICAL SUPERVISORS WHO WERE ALL FAMILIAR WITH THE REQUIREMENTS OF THE PROJECT. AMONG OTHER CRITERIA ESTABLISHED FOR THE RE- EVALUATION, IT WAS DETERMINED THAT IT WOULD BE CONCENTRATED IN THOSE AREAS IN WHICH SIGNIFICANT DIFFERENCES EXISTED BETWEEN THE SCORES GIVEN TO THE TWO COMPETING PROPOSALS IN THE ORIGINAL EVALUATION.

UPON COMPLETION OF THE TECHNICAL RE-EVALUATION BY THE THREE SENIOR TECHNICAL SUPERVISORS REFERRED TO ABOVE, AND BEFORE THEY REACHED ANY FINAL CONCLUSIONS, AAI WAS INVITED TO MAKE ORAL PRESENTATIONS COVERING THE AREAS IN WHICH ITS PROPOSAL WAS CONSIDERED TECHNICALLY DEFICIENT. WHILE THE ADDITIONAL INFORMATION OR EXPLANATION PROVIDED BY AAI PERSONNEL WAS HELPFUL IN CONFIRMING THE UNDERSTANDINGS OF THE PROPOSAL ORIGINALLY SUBMITTED, IT WAS OF NO HELP INSOFAR AS THE DEFICIENCIES WERE CONCERNED AND, ACCORDINGLY, HAD NO APPRECIABLE EFFECT UPON THE RATING SCORES ASSESSED BY THESE TECHNICAL SUPERVISORS. ACCORDING TO THE SUMMARY PROPOSAL ANALYSIS * * * OF THESE TECHNICAL EVALUATORS, THERE WERE A NUMBER OF AREAS IN WHICH AAI WAS NOT SURE OF ITSELF AND HENCE RESORTED TO A CERTAIN AMOUNT OF GENERALIZING; THIS WAS EVIDENCED BY THE LACK OF SUFFICIENTLY DETAILED AND, IN SOME CASES, COMPLETE ABSENCE OF, SCHEMATICS AND DRAWINGS IN THE AAI PROPOSAL. ADDITIONALLY, IN A NUMBER OF OTHER AREAS, INCORRECT STATEMENTS LEADING TO UNCLEAR OR ERRONEOUS TECHNICAL CONCLUSIONS ALSO CONTRIBUTED TO THE DEFICIENCIES IN THE PROPOSAL AND THEIR LOW SCORING. SIMILARLY, AAI EVIDENCED EITHER A LACK OF UNDERSTANDING OF THE SIMULATION PROBLEM OR PROVIDED WRONG DEFINITIONS OF SPECIFIC REQUIREMENTS; IN SOME INSTANCES, IT MERELY INDICATED THAT IT PLANNED TO ACCOMPLISH CERTAIN FUNCTIONS IN THE SAME MANNER IN WHICH THEY WERE BEING ACCOMPLISHED UNDER AN EARLIER CONTRACT (N61339-1597), DESPITE THE FACT THAT THIS CONTRACT HAS ONLY PROGRESSED TO THE STAGE OF ACCEPTANCE OF THE PRELIMINARY DESIGN DATA REPORT, WITH DIRECTIONS BY NTDC TO PROCEED ALONG CERTAIN LINES, AND THE WORK HAS YET TO BE ACCOMPLISHED. IN ALL, THE RE- EVALUATION DISCLOSED A TOTAL OF SOME 50 SPECIFIC DEFECTS IN THE AAI PROPOSAL WITH THE RESULT THAT THESE THREE TECHNICAL EVALUATORS NECESSARILY CONCLUDED THE AAI PROPOSAL WAS UNACCEPTABLE. ADDITIONALLY, IT HAS BEEN ESTIMATED BY NTDC THAT FOR AAI TO CORRECT OR TO REMOVE THE DEFICIENCIES IN ITS PROPOSAL SO AS TO BRING IT TO A LEVEL OF ACCEPTABILITY WOULD COST APPROXIMATELY $250,000. IN SUMMARY, THE COMPLETE RE-EVALUATION OF THE TECHNICAL PROPOSALS OF AAI AND ITT (FL), INCLUDING CONSIDERATION OF ALL THE ADDITIONAL INFORMATION OR EXPLANATION FURNISHED BY AAI PERSONNEL AT THE INVITATION OF NTDC, HAS DEMONSTRATED THE SUBSTANTIAL SUPERIORITY OF THE ITT (FL) PROPOSAL OVER THAT OF AAI AND CONFIRMED THE PROPRIETY OF THE AWARD TO THE FORMER. WHILE WE ARE NOT COMPETENT TO EVALUATE OR REEVALUATE THE TECHNICAL ASPECTS OF AAI'S PROPOSAL, WE FEEL THAT THE RECORD BEFORE US AFFORDS A SUFFICIENT BASIS TO QUESTION THE EXCLUSION OF AAI FROM ANY NEGOTIATION OPPORTUNITY. ASPR 3-805.1 WHICH PRESCRIBES THE NEGOTIATION PROCEDURES TO BE APPLIED IN THE SELECTION OF OFFERORS FOR NEGOTIATION AND AWARD IS AN IMPLEMENTATION OF 10 U.S.C. 2304 (G). THAT PROVISION OF LAW READS 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.

THE PERTINENT PROVISIONS OF PART 8--- PRICE NEGOTIATION POLICIES AND TECHNIQUES--- OF SECTION III, ASPR, WHICH ARE PARTICULARLY FOR CONSIDERATION HERE ARE AS FOLLOWS:

3-804 CONDUCT OF NEGOTIATIONS. EVALUATION OF OFFERORS' OR CONTRACTORS' PROPOSALS, INCLUDING PRICE REVISION PROPOSALS, BY ALL PERSONNEL CONCERNED, WITH THE PROCUREMENT, AS WELL AS SUBSEQUENT NEGOTIATIONS WITH THE OFFEROR OR CONTRACTOR, SHALL BE COMPLETED EXPEDITIOUSLY. COMPLETE AGREEMENT OF THE PARTIES ON ALL BASIC ISSUES SHALL BE THE OBJECTIVE OF THE CONTRACT NEGOTIATIONS. ORAL DISCUSSIONS OR WRITTEN COMMUNICATIONS SHALL BE CONDUCTED WITH OFFERORS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID. * * *

3-805.1 GENERAL.

(A) AFTER RECEIPT OF INITIAL PROPOSALS, WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED, EXCEPT THAT THIS REQUIREMENT NEED NOT NECESSARILY BE APPLIED TO:

(V) PROCUREMENTS IN WHICH IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT OR SERVICE THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE. (PROVIDED, HOWEVER, THAT IN SUCH PROCUREMENTS, THE REQUEST FOR PROPOSALS SHALL NOTIFY ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED AND HENCE, THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT. ANY CASE WHERE THERE IS UNCERTAINTY AS TO THE PRICING OR TECHNICAL ASPECTS OF ANY PROPOSALS, THE CONTRACTING OFFICER SHALL NOT MAKE AWARD WITHOUT FURTHER EXPLORATION AND DISCUSSION PRIOR TO AWARD. * * *

(D) THE PROCEDURES SET FORTH IN (A), (B) AND (C) ABOVE MAY NOT BE APPLICABLE IN APPROPRIATE CASES WHEN PROCURING RESEARCH AND DEVELOPMENT, OR SPECIAL SERVICES (SUCH AS ARCHITECT-ENGINEER SERVICES) OR WHEN COST- REIMBURSEMENT TYPE CONTRACTING IS ANTICIPATED. AWARD OF A CONTRACT MAY BE PROPERLY INFLUENCED BY THE PROPOSAL WHICH PROMISES THE GREATEST VALUE TO THE GOVERNMENT IN TERMS OF POSSIBLE PERFORMANCE, ULTIMATE PRODUCIBILITY, GROWTH POTENTIAL AND OTHER FACTORS RATHER THAN THE PROPOSAL OFFERING THE LOWEST PRICE OR PROBABLE COST AND FIXED FEE.

IT APPEARS TO US THAT THE CLEAR INTENT OF THE STATUTE AND ASPR 3 805.1 (A) (V) IS TO RELAX THE MANDATORY REQUIREMENT THAT NEGOTIATION IS REQUIRED TO BE CONDUCTED WITH ALL RESPONSIBLE OFFERS WHO SUBMIT COMPETITIVE OFFERS, ONLY IN THOSE SITUATIONS WHEREIN IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE COST EXPERIENCE THAT ACCEPTANCE OF AN INITIAL OFFER WITHOUT NEGOTIATION WOULD RESULT IN FAIR AND REASONABLE PRICES. IN OUR VIEW, THE EXCEPTION SPECIFIED CLEARLY WAS NOT APPLICABLE TO THE SITUATION INVOLVED IN THIS PROCUREMENT. HOWEVER, IT IS THE POSITION OF NTDC THAT THE LACK OF NEGOTIATIONS WITH AAI WAS JUSTIFIED UNDER ASPR 3 805.1 (D), ABOVE, IN VIEW OF THE FACT THAT RESEARCH AND DEVELOPMENT CONTRACTING WAS CONTEMPLATED. WE BELIEVE THAT APPLICATION OF THIS PROVISION, WHICH IS PERMISSIVE IN NATURE, CANNOT JUSTIFY THE FAILURE TO EXTEND NEGOTIATION OPPORTUNITY TO AAI WHICH WAS, AND STILL IS, A CURRENT RESEARCH AND DEVELOPMENT CONTRACTOR SATISFACTORILY PERFORMING TASKS THAT ARE INTEGRATED PARTS OF THE TASK AWARDED TO ITTFL. WITHOUT SUBSTITUTING OUR JUDGMENT FOR THAT OF NTDC IN THE TECHNICAL EVALUATION AREA, WE FIND AMPLE JUSTIFICATION IN THE RECORD FOR CONCLUDING THAT, IN THE ABSENCE OF NEGOTIATION WITH AAI, THERE WAS A LACK OF COMPETITION BOTH AS TO PRICE AND THE TECHNICAL ASPECTS OF TASK 7723. WE FIND IT DIFFICULT TO UNDERSTAND HOW A CURRENT CONTRACTOR MAY HAVE ITS TECHNICAL PROPOSAL ON A TASK SPECIFICALLY RELATED TO ITS CURRENT CONTRACT MISSIONS CATEGORIZED, NOT AS UNACCEPTABLE BUT AS INFERIOR, FOR A PERIOD OF OVER 2 MONTHS WITHOUT AFFORDING SUCH AN OFFEROR AT LEAST AN OPPORTUNITY OF DISCUSSION AND EXPLANATION, ESPECIALLY WHEN ITS COST PROPOSAL REPRESENTED SIGNIFICANT SAVINGS TO THE GOVERNMENT. IT IS PROVIDED IN ASPR, WHICH HAS THE FORCE AND EFFECT OF LAW, AT PARAGRAPH 3-101 THAT WHEN PROCUREMENTS ARE UNDERTAKEN PURSUANT TO NEGOTIATION, MAXIMUM COMPETITION SHOULD BE OBTAINED TO THE END THAT THE PROCUREMENT WILL BE MADE TO THE "BEST ADVANTAGE OF THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.' IT IS FURTHER PROVIDED THAT IN THE CONDUCT OF NEGOTIATIONS, THE FOLLOWING FACTORS SHOULD BE AMONG THOSE GIVEN DUE ATTENTION:

(I) COMPARISON OF PRICES QUOTED, AND CONSIDERATION OF OTHER PRICES FOR THE SAME OR SIMILAR SUPPLIES OR SERVICES, * * *;

(II) COMPARISON OF BUSINESS REPUTATIONS, CAPABILITIES, AND RESPONSIBILITIES OF THE * * * FIRMS WHO SUBMIT QUOTATIONS * * *;

(III) CONSIDERATION OF THE QUALITY OF THE SUPPLIES OR SERVICES OFFERED, OR OF THE SAME OR SIMILAR SUPPLIES OR SERVICES PREVIOUSLY FURNISHED, WITH DUE REGARD TO THE SATISFACTION OF TECHNICAL REQUIREMENTS;

THE TERM "NEGOTIATION" GENERALLY IMPLIES A SERIES OF OFFERS AND COUNTEROFFERS UNTIL A MUTUALLY SATISFACTORY AGREEMENT IS CONCLUDED BY THE PARTIES. 10 U.S.C. 2304 (G) IMPLEMENTS AND CLARIFIES THE DEFINITION OF "NEGOTIATE" IN 10 U.S.C. 2302 (2) AND IT IS OUR VIEW THAT THE TERM "NEGOTIATE" MUST BE READ IN CONJUNCTION WITH 10 U.S.C. 2304 (G) TO INCLUDE THE SOLICITATION OF PROPOSALS AND THE CONDUCT OF WRITTEN OR ORAL DISCUSSIONS, WHEN REQUIRED, AS WELL AS THE MAKING AND ENTERING INTO A CONTRACT. SEE PAGE 5 OF H.REPT. NO. 1638, ON H.R. 5532, 87TH CONG., WHICH WAS ENACTED AS PUBLIC LAW 87-653, ADDING THE NEW SUBSECTION (G) TO 10 U.S.C. 2304.

IN THIS CONTEXT, WE BELIEVE THAT AN OBLIGATION TO NEGOTIATE WITH AAI EXISTED NOTWITHSTANDING THAT ITTFL'S PROPOSAL WAS DETERMINED TO BE TECHNICALLY SUPERIOR TO AAI-S. WE FIND NOTHING IN THE RECORD WHICH WOULD INDICATE THAT AAI'S PROPOSAL WAS SO TECHNICALLY INFERIOR AS TO PRECLUDE ANY POSSIBILITY OF MEANINGFUL NEGOTIATION WITH SUCH OFFEROR. THIS IS WHAT BOTH THE LAW AND THE ASPR REQUIRE IN ORDER TO ASSURE THE COMPETITION CONTEMPLATED.

THERE IS ALSO FOR CONSIDERATION WHETHER THE NEGOTIATION PROCEDURES FOLLOWED HERE WERE GENERALLY IN ACCORDANCE WITH SECTION IV, PART 2, ASPR, WHICH IS CONCERNED WITH THE PROCUREMENT OF RESEARCH AND DEVELOPMENT SERVICES PURSUANT TO THE NEGOTIATION AUTHORITY OF 10 U.S.C. 2304 (A) (11). THE PERTINENT PROVISIONS OF SECTION IV ARE AS FOLLOWS:

4-205.3 CONDUCT OF NEGOTIATIONS. SEE 3-804. THE CONTRACTING OFFICER SHOULD MAKE CERTAIN THAT EACH PROSPECTIVE CONTRACTOR FULLY UNDERSTANDS THE DETAILS OF THE VARIOUS PHASES OF THE GOVERNMENT'S REQUIREMENT, ESPECIALLY THE STATEMENT OF WORK. THIS MAY BE BEST ACCOMPLISHED BY CONFERENCES BETWEEN A PROSPECTIVE CONTRACTOR, THE CONTRACTING OFFICER, AND APPROPRIATE TECHNICAL PERSONNEL, PARTICULARLY WHERE THERE IS DOUBT THAT A WORK STATEMENT IS UNDERSTOOD OR WILL BE INTERPRETED CORRECTLY BY PROSPECTIVE CONTRACTORS.

4-205.4 EVALUATION FOR AWARD.

(A) GENERALLY, RESEARCH AND DEVELOPMENT CONTRACTS SHOULD BE AWARDED TO THOSE ORGANIZATIONS, INCLUDING EDUCATIONAL ORGANIZATIONS, WHICH HAVE THE HIGHEST COMPETENCE IN THE SPECIFIC FIELD OF SCIENCE OR TECHNOLOGY INVOLVED. HOWEVER, AWARDS SHOULD NOT BE MADE FOR RESEARCH OR DEVELOPMENT CAPABILITIES THAT EXCEED THOSE NEEDED FOR THE SUCCESSFUL PERFORMANCE OF THE WORK.

(B) BEFORE DETERMINING THE TECHNICAL COMPETENCE OF PROSPECTIVE CONTRACTORS, AND RECOMMENDING TO THE CONTRACTING OFFICER THE CONCERN OR CONCERNS THAT THEY CONSIDER MOST TECHNICALLY COMPETENT, COGNIZANT TECHNICAL PERSONNEL SHALL CONSIDER THE FOLLOWING:

(I) THE CONTRACTOR'S UNDERSTANDING OF THE SCOPE OF THE WORK AS SHOWN BY THE SCIENTIFIC OR TECHNICAL APPROACH PROPOSED;

(II) AVAILABILITY AND COMPETENCE OF EXPERIENCE ENGINEERING, SCIENTIFIC, OR OTHER TECHNICAL PERSONNEL;

(III) AVAILABILITY, FROM ANY SOURCE, OF NECESSARY RESEARCH, TEST, AND PRODUCTION FACILITIES;

(IV) EXPERIENCE OR PERTINENT NOVEL IDEAS IN THE SPECIFIC BRANCH OF SCIENCE OR TECHNOLOGY INVOLVED; AND

(V) THE CONTRACTOR'S WILLINGNESS TO DEVOTE HIS RESOURCES TO THE PROPOSED WORK WITH APPROPRIATE DILIGENCE.

(C) IN DETERMINING TO WHOM THE CONTRACT SHALL BE AWARDED, THE CONTRACTING OFFICER SHALL CONSIDER NOT ONLY TECHNICAL COMPETENCE, BUT ALSO ALL OTHER PERTINENT FACTORS INCLUDING MANAGEMENT CAPABILITIES, COST CONTROLS INCLUDING THE NATURE AND EFFECTIVENESS OF ANY COST REDUCTION PROGRAM (SEE 3-101 (VIII) (, AND PAST PERFORMANCE IN ADHERING TO CONTRACT REQUIREMENTS, WEIGHING EACH FACTOR IN ACCORDANCE WITH THE REQUIREMENTS OF THE PARTICULAR PROCUREMENT (SEE 1-903). THE CONTRACTING OFFICER SHALL NOTIFY THOSE SOURCES WHOSE PROPOSALS OR OFFERS HAVE BEEN DETERMINED TO BE UNACCEPTABLE OF THAT DECISION IN ACCORDANCE WITH 3-508.

4-205.5 EVALUATION OF PRICE AND COSTS.

(A) WHILE COST OR PRICE SHOULD NOT BE THE CONTROLLING FACTOR IN SELECTING A CONTRACTOR FOR A RESEARCH OR DEVELOPMENT CONTRACT, COST OR PRICE SHOULD NOT BE DISREGARDED IN THE CHOICE OF THE CONTRACTOR. IT IS IMPORTANT TO EVALUATE A PROPOSED CONTRACTOR'S COST OR PRICE ESTIMATE, NOT ONLY TO DETERMINE WHETHER THE ESTIMATE IS REASONABLE, BUT ALSO TO DETERMINE HIS UNDERSTANDING OF THE PROJECT AND ABILITY TO ORGANIZE AND PERFORM THE CONTRACT. THE MOST USEFUL TOOLS FOR THIS PURPOSE ARE PRICE ANALYSIS AND COST ANALYSIS (SEE 3-807).

WE DOUBT WHETHER, AS INDICATED IN THE BASIC REPORT, THE EVALUATION OF AAI'S PROPOSAL BY NTDC MET THE INTENT OF THE ABOVE PROVISIONS. IT IS QUITE EVIDENT THAT ACROSS-THE-TABLE NEGOTIATIONS ARE REQUIRED IN THE CASE OF EACH PROSPECTIVE CONTRACTOR WHO, PRIMA FACIE, IS QUALIFIED TO PERFORM THE WORK. SEE ASPR 4-205.3, SUPRA. WE ALSO DISAGREE THAT COST WAS NOT A CONSIDERATION IN THE AWARD BECAUSE THE PROCUREMENT WAS NOT BASED ON PRICE COMPETITION. ASPR 4-205.5 (A), SUPRA, MAKES IT AMPLY CLEAR THAT, WHILE COST IS NOT THE CONTROLLING FACTOR, IT SHOULD NOT BE DISREGARDED IN THE CHOICE OF A CONTRACTOR. IN THIS REGARD, WE BELIEVE THAT THE SUBSTANTIAL DIFFERENCE BETWEEN THE TWO COST PROPOSALS WAS AN IMPORTANT FACTOR TO BE CONSIDERED IN DETERMINING WHETHER NEGOTIATION OPPORTUNITY SHOULD NOT HAVE BEEN EXTENDED ALSO TO AAI.

THE RECORD DOES NOT INDICATE THAT A PREAWARD NOTICE OF "UNACCEPTABLE OFFER" OR A POST-AWARD NOTICE OF "UNACCEPTED OFFER" WAS GIVEN TO AAI AS REQUIRED BY ASPR 3-508. THAT PROVISION READS:

3-508 INFORMATION TO UNSUCCESSFUL OFFERORS.

(A) PRE-AWARD NOTICE OF UNACCEPTABLE OFFERS. IN ANY PROCUREMENT IN EXCESS OF $10,000 IN WHICH IT APPEARS THAT THE PERIOD OF EVALUATION OF PROPOSALS IS LIKELY TO EXCEED 30 DAYS OR IN WHICH A LIMITED NUMBER OF SUPPLIERS HAVE BEEN SELECTED FOR ADDITIONAL NEGOTIATION (SEE 3-805.1), THE CONTRACTING OFFICER, UPON DETERMINATION THAT A PROPOSAL IS UNACCEPTABLE, SHALL PROVIDE PROMPT NOTICE OF THAT FACT TO THE SOURCE SUBMITTING THE PROPOSAL. SUCH NOTICE NEED NOT BE GIVEN WHERE DISCLOSURE WILL IN SOME WAY PREJUDICE THE GOVERNMENT'S INTEREST OR WHERE THE PROPOSED CONTRACT S:

(I) FOR SUBSISTENCE;

(II) NEGOTIATED PURSUANT TO 10 U.S.C. 2304 (A) (4), (5), OR (6) (SEE 3- 204, 3-205, OR 3-206);

(III) NEGOTIATED WITH A FOREIGN SUPPLIER WHEN ONLY FOREIGN SOURCES OF SUPPLIES OR SERVICES HAVE BEEN SOLICITED; OR (IV) TO BE AWARDED WITHIN A FEW DAYS AND NOTICE PURSUANT TO (B)

IN ADDITION TO STATING THAT THE PROPOSAL HAS BEEN DETERMINED UNACCEPTABLE, NOTICE TO THE OFFEROR SHALL INDICATE, IN GENERAL TERMS, THE BASIS FOR SUCH DETERMINATION AND SHALL ADVISE THAT, SINCE FURTHER NEGOTIATION WITH HIM CONCERNING THIS PROCUREMENT IS NOT CONTEMPLATED, A REVISION OF HIS PROPOSAL WILL NOT BE CONSIDERED.

(B) POST-AWARD NOTICE OF UNACCEPTED OFFERS.

(1) PROMPTLY AFTER MAKING ALL AWARDS IN ANY PROCUREMENT IN EXCESS OF $10,000, THE CONTRACTING OFFICER SHALL GIVE WRITTEN NOTICE TO THE UNSUCCESSFUL OFFERORS THAT THEIR PROPOSALS WERE NOT ACCEPTED, EXCEPT THAT SUCH NOTICE NEED NOT BE GIVEN WHERE NOTICE HAS BEEN PROVIDED PURSUANT TO (A) ABOVE OR THE CONTRACT IS FOR SUBSISTENCE, OR IS NEGOTIATED PURSUANT TO 10 U.S.C. 2304 (A) (4), (5), OR (6) (SEE 3-204, 3-205, OR 3-206); OR IS NEGOTIATED WITH A FOREIGN SUPPLIER WHEN ONLY FOREIGN SOURCES OF SUPPLIES OR SERVICES HAVE BEEN SOLICITED. SUCH NOTICE SHALL ALSO INCLUDE:

(I) THE NUMBER OF PROSPECTIVE CONTRACTORS SOLICITED;

(II) THE NUMBER OF PROPOSALS RECEIVED;

(III) THE NAME AND ADDRESS OF EACH OFFEROR RECEIVING AN AWARD;

(IV) THE ITEMS, QUANTITIES, AND UNIT PRICES OF EACH AWARD; PROVIDED THAT, WHERE THE NUMBER OF ITEMS OR OTHER FACTORS MAKES THE LISTING OF UNIT PRICES IMPRACTICABLE, ONLY THE TOTAL CONTRACT PRICE NEED BE FURNISHED; AND

(V) IN GENERAL TERMS, THE REASONS WHY THE OFFEROR'S PROPOSAL WAS NOT ACCEPTED, EXCEPT WHERE THE PRICE INFORMATION IN (IV) ABOVE READILY REVEALS SUCH REASON, BUT IN NO EVENT WILL AN OFFEROR'S COST BREAKDOWN, PROFIT, OVERHEAD RATES, TRADE SECRETS, MANUFACTURING PROCESSES AND TECHNIQUES, OR OTHER CONFIDENTIAL BUSINESS INFORMATION BE DISCLOSED TO ANY OTHER OFFEROR.

ADDITIONAL INFORMATION AS TO WHY AN OFFEROR'S PROPOSAL WAS NOT ACCEPTED SHOULD BE PROVIDED TO THE OFFEROR UPON HIS REQUEST TO THE CONTRACTING OFFICER, SUBJECT TO THE LIMITATION IN (V) ABOVE.

THE FILE CONTAINS AN EXHIBIT 16 WHICH IS A LETTER SENT BY NTDC TO AAI ON JULY 2, 1965, CONTAINING ADVICE THAT AWARD WAS MADE TO ITTFL AT A TOTAL CONTRACT PRICE OF $2,937,500. THE BASIC REPORT STATES THAT SINCE "THE AAI PROPOSAL WAS NOT AND NEVER HAS BEEN DETERMINED TO BE UNACCEPTABLE" THE NOTICE REQUIRED BY THE REGULATION WAS NOT FURNISHED TO AAI. A FURTHER REASON FOR SUCH LACK OF ADVICE WAS THAT "IN THE EVENT SATISFACTORY CONTRACTURAL ARRANGEMENTS COULD NOT BE REACHED WITH ITTFL IT WOULD HAVE BEEN NECESSARY TO REQUEST AUTHORITY TO NEGOTIATE WITH AAI.' THESE STATEMENTS DO NOT, IN OUR OPINION, JUSTIFY THE FAILURE TO COMPLY WITH THE REGULATION. IT IS INCONSISTENT TO SAY ON THE ONE HAND THAT AAI'S PROPOSAL WAS "TECHNICALLY INFERIOR" SO AS TO JUSTIFY NONCOMPLIANCE WITH THE REGULATION AS TO NOTICE OF AN "UNACCEPTABLE" OFFER AND ON THE OTHER HAND TREAT THAT PROPOSAL AS UNACCEPTABLE SO AS TO DENY NEGOTIATION OPPORTUNITY. AAI'S PROPOSAL, IF UNACCEPTABLE, SHOULD HAVE BEEN TREATED AS SUCH UNDER THE ASPR, BUT IF TECHNICALLY INFERIOR TO ITTFL, THE CONCEPT OF NEGOTIATED PROCUREMENT REQUIRED THAT AAI BE AFFORDED AN OPPORTUNITY OF DISCUSSION. THIS, WE FEEL, IS WHAT THE LAW AND ASPR CLEARLY REQUIRED.

IN OUR REVIEW OF THIS PROTEST WE HAVE CAREFULLY ANALYZED THE DEPARTMENTAL REPORTS IN THE LIGHT OF THE MANY ALLEGATIONS RAISED BY AAI. WHILE THE RESPONSES TO THESE ALLEGATIONS REST ON TECHNICAL GROUNDS AS TO WHICH WE DEFER TO THE PROCUREMENT ACTIVITY'S COMPETENCE, WE HAVE FOUND THAT SUCH RESPONSES ARE NOT ENTIRELY RESPONSIVE TO THE ALLEGATIONS. A SUMMARY PROPOSAL ANALYSIS OF AAI'S TECHNICAL PROPOSAL WAS MADE DURING THE PERIOD PERFORMANCE UNDER THE ITTFL CONTRACT WAS SUSPENDED. SINCE THIS ANALYSIS IS GERMANE TO THIS PORTION OF OUR DECISION, IT IS QUOTED BELOW AS AN AID TO OUR DISCUSSION:

THE INFORMATION PRESENTED BELOW BY THE THREE ASSIGNED REEVALUATORS REPRESENTS A SUMMARY ANALYSIS OF FIVE AREAS OF THE PROPOSALS SUBMITTED BY AAI AND ITT, IN THE PROCUREMENT FOR DEVICE X21A38/3, PROJECT 7723, ATTACK CENTER NO. 3 AND RETROFITS, PEARL HARBOR ASW FACILITY. IN ADDITION TO THE AAI PROPOSAL, THE ANALYSIS HAS ALSO TAKEN INTO ACCOUNT THE AAI LETTERS OF PROTEST AND THE SEPTEMBER 22, 1965, PRESENTATION BY AAI PERSONNEL AT U.S. NTDC IN ORDER TO ASSURE A GOOD UNDERSTANDING AND CONSIDERATION OF THE MERITS OF THE AAI PROPOSAL.

IT IS RECALLED THAT IN THE TECHNICAL PROPOSAL REQUIREMENTS, AMONG OTHER ITEMS, THE CONTRACTORS WERE REQUESTED TO: 1) STATE THE UNDERSTANDING OF THE PROBLEM IN THEIR OWN WORDS; 2) PROVIDE PROPOSED TECHNICAL SOLUTIONS; 3) GIVE A DESIGN APPROACH; 4) PROVIDE UNIQUE IDEAS AND NOVEL TECHNIQUES; 5) GIVE SCHEMATICS AND BLOCK DIAGRAMS; 6) PROVIDE METHODS OF ACTIVATING INSTRUMENTS/DISPLAYS; AND 7) PROVIDE A LIST OF ENGINEERING AND TECHNICAL PERSONNEL TO BE ASSIGNED AND TERM OF ASSIGNMENT. THESE WERE THE AREAS WEIGHTED MOST HEAVILY THAT WERE RESPONDED TO SO POORLY BY AAI.

AS INDICATED IN THE INDIVIDUAL ANALYSES OF THE REEVALUATORS, IN A NUMBER OF AREAS THE ABSENCE OF DETAILS OR A DETAILED EXPLANATION OF IMPORTANT AREAS CONVINCED THE REVIEWERS THAT AAI WAS NOT SURE OF ITSELF AND HENCE WAS GENERALIZING. THIS CONVICTION OF THE REVIEWERS WAS FURTHER EMPHASIZED BY THE LACK OF SUFFICIENTLY DETAILED AND IN SOME CASES COMPLETE ABSENCE OF SCHEMATICS AND DRAWINGS IN AAI'S PROPOSAL. SUCH IS THE CASE IN THE MATTER OF ABSENCE OF ECM SIMULATION SCHEMATICS.

IN A NUMBER OF OTHER AREAS OF AAI'S RESPONSE, INCORRECT STATEMENTS LEADING INTO UNCLEAR OR ERRONEOUS CONCLUSIONS ALSO CAUSED A DOWNGRADING OF SCORES. ELSEWHERE, AAI ALSO SHOWED EITHER A LACK OF UNDERSTANDING OF THE SIMULATION PROBLEM OR PROVIDED WRONG DEFINITIONS OF SPECIFICATION REQUIREMENTS.

ON A NUMBER OF OCCASIONS, AAI SAW FIT TO INDICATE THAT IT PLANNED TO ACCOMPLISH CERTAIN FUNCTIONS ALONG THE SAME LINES ACCOMPLISHED UNDER THE SECOND CONTRACT N61339-1597--- WITHOUT ANY FURTHER CLARIFICATION. IT IS A FACT THAT CONTRACT N61339-1597 HAS JUST RECENTLY PASSED THE STAGE OF ACCEPTANCE OF THE PRELIMINARY DESIGN DATA REPORT WITH A DIRECTION BY U.S. NTDC TO PROCEED ALONG CERTAIN LINES. IT IS A FACT, FURTHER, THAT AAI PROVIDED THESE HAZY REFERENCES TO "DOING IT LIKE CONTRACT N61339-1597" MAINLY IN AREAS WHICH AAI WAS DIRECTED BY CONTRACT TO SUBCONTRACT TO ITT.

A PARTICULARLY POOR AREA OF RESPONSE, BY AAI, WAS IN ITS SUBMISSION OF PERSONNEL INFORMATION. THEY OMITTED RESUMES, ASSIGNMENT PERIODS AND INCLUDED RESUMES OF PEOPLE NOT ASSIGNED TO THE PROJECT TO SUCH AN EXTENT THAT THIS AREA CAN ONLY BE CONSIDERED COMPLETELY UNSATISFACTORY.

CERTAIN MAJOR AREAS SUCH AS TARGET AVAILABILITY FOR THE ECM PHASE AND PUFFS UPDATE RATE ARE CARRY-OVER PROBLEMS FROM THE SECOND CONTRACT THAT HAVE BEEN REVIEWED ON NUMEROUS OCCASIONS WITH AAI.

ON THE MATTER OF ANOTHER MAJOR AREA, THAT OF THE FABRICATION OF THE INVERSE COMPENSATING SWITCHES FOR THE AN/BQS-6, AAI DID NOT PRESENT A PLANNED DISTRIBUTION OF WORK.

ON THE MATTER OF AN/BQR-7 COMPENSATING SWITCHES, AAI INDICATES THAT IT WILL DO A GOOD DEAL OF THE WORK ITSELF AND THUS CONTRADICTS ITS OWN PHILOSOPHY AS STATED ON PAGE 2.03 OF THE ADMINISTRATIVE PORTION OF THEIR PROPOSAL AS TO THE QUALIFICATIONS REQUIRED OF A MANUFACTURER, NAMELY, TO HAVE A HISTORICAL BACKGROUND OF EFFORT IN THE FIELD OF INTEREST. AAI HAS NOT DEMONSTRATED PERFORMANCE BACKGROUND IN THE FIELD OF COMPENSATING SWITCH DESIGN OR FABRICATION.

IN CONTRAST, ITT'S PROPOSAL HAS BEEN COMPLETELY RESPONSIVE. ITT FULLY UNDERSTANDS AND APPRECIATES THE TARGET AVAILABILITY REQUIREMENTS FOR ECM: HAS STATED THAT IT WILL PROVIDE THE NECESSARY PUFFS UPDATE RATE, DEFINES CLEARLY WHAT IT WILL DO AND WHAT IT WILL SUBCONTRACT IN THE INVERSE COMPENSATING SWITCHES, PRESENTS ITS PROPOSAL IN GOOD DETAIL, WITH CLEAR UNAMBIGUOUS LANGUAGE AND PROVIDES A ROSTER OF PERSONNEL WITH FINE BACKGROUNDS AND TERMS OF ASSIGNMENT IN ALL AREAS OF IMPORTANCE TO THIS REVIEW.

IT IS FURTHER NOTED THAT THE ITT/GASL TEAM ARE AN EXPERIENCED TEAM IN SONAR SIMULATION, ESPECIALLY IN CONNECTION WITH THE PEARL HARBOR ASW FACILITY WITH RESPECT TO THE AN/BQS-4, AN/BQR-7, AN/BQS-6, AND PUFFS SONARS WHEREIN THE SIMULATION EITHER HAS ALREADY BEEN PROVIDED, AN/BQS-4 BY GASL FOR AC NO. 1, OR WHERE DEVELOPMENT IS CURRENTLY UNDERWAY, PUFFS, AN/BQR-7, AN/BQS-6 BY ITT FOR AC NO. 2.

IT IS OF INTEREST TO NOTE AT THIS POINT THAT THE REEVALUATORS HAVE COME UP WITH A TOTAL OF SOME FIFTY (50) DEFECTS, IN THE AAI PROPOSAL, "SUMMATION OF ERRORS OR OMISSIONS OF THE AAI PROPOSAL FOR 21A38/3 IN THE AREAS OF THE SECOND EVALUATION 17 SEPTEMBER 1965," INVOLVING OMISSIONS, ERRORS, VAGUE STATEMENTS AND THE LIKE. THESE DEFECTS ARE DISTRIBUTED OVER ALL AREAS REVIEWED: AN/WLR-1, (ECM); AN/BQG ( (,(PUFFS); AN/BQR-7B; AN/BQS -6; AN/BQS-4.

IT HAS BEEN CALCULATED THAT IN ORDER FOR AAI'S PROPOSAL TO BE BROUGHT UP TO THE STANDARDS OF ACCEPTABILITY IN SOME OF THE MAJOR AREAS OF DEFECTS, THE ADDITIONAL COST TO THE GOVERNMENT WOULD BE APPROXIMATELY $250,000. THIS SUM CAN BE BROKEN DOWN INTO THE FOLLOWING FACTORS:

1) FOR ECM, THERE IS THE LACK OF NECESSARY HARDWARE THAT WOULD PERMIT A PROGRAM OPERATOR STATION MONITORING CAPABILITY ------- $2,500.

2) FOR ECM, THERE IS THE LACK OF NECESSARY HARDWARE AND COMPUTER FUNCTION LINKAGE THAT WOULD PERMIT AN OVERRIDE FUNCTION FOR THE MASTER PROGRAM OPERATOR STATION ------------------------------- $5,000.

3) FOR ECM, THERE ARE THE LACK OF ANTENNA BEAM PATTERN PRESENTATIONS FOR THE VARIOUS SIMULATED TARGET RADAR EMISSIONS. THIS ITEM INVOLVES SEVERAL DIFFERENT BEAM PATTERNS AS FUNCTIONS OF DIFFERENT TYPES OF ANTENNAS USED IN EITHER SURFACE SHIPS, SURFACED SUBMARINES OR AN AIRCRAFT TARGET, INVOLVES COMPUTER PROGRAMMING SWITCHING, AND INTERFACE HARDWARE ---------- -------------------------- ---------------- $60,000.

4) FOR ECM, THERE IS THE LACK OF TARGET FLEXIBILITY WHEREBY ONCE SIX TARGETS ARE ASSIGNED AS ,SONAR TARGETS," IT IS THEN NO LONGER POSSIBLE TO UTILIZE THE SIX REMAINING TARGETS FOR ECM DETECTION ------- -------------- ----------------------------- $100,000.

5) FOR AN/BQG-) (, PUFFS, THE UPDATE RATE PROPOSED IS BELOW THE RATE REQUIRED FOR REALISM. WHENEVER AAI HAS IN THE PAST OFFERED WHAT U.S. NTDC HAS CONSIDERED A SUITABLE UPDATE RATE, IT HAS ALWAYS BEEN WITH A PRICE TAG --- MEANING THAT AAI HAS NEVER CONSIDERED U.S. NTDC'S DESIRED UPDATE RATE AS PART OF THE CENTER'S BASIC REQUIREMENTS ------- ----------------------- ------------------- $6,000.

6) AN/BQR-7, INDIRECT PATH SIMULATION IS OMITTED ALTHOUGH THE SIMULATION IS SUPPOSED TO PARALLEL WHAT IS BEING DEVELOPED FOR AC NO. 2; AND WHERE THIS FUNCTION, DESCRIBED PROPERLY IN THE PRELIMINARY DESIGN DATA REPORT FOR ATTACK CENTER NO. 2 HAS ALREADY BEEN ACCEPTED - ---------------------- ------------------------ $75,000.

IN ADDITION TO THESE COSTS, ARE OTHER PROBABLE COSTS THAT CANNOT BE DEFINED CLEARLY BUT WHICH CAN BE OF A LARGE MAGNITUDE SINCE THEY ARE CONCERNED WITH THE FACTORS OF PERSONNEL ASSIGNED (OR NOT ASSIGNED) TO THE VARIOUS PHASES, COMPENSATING SWITCHES, AND THE GENERAL LACK OF NECESSARY DETAIL TOGETHER WITH VAGUENESS BOTH IN THE WRITTEN WORD AND IN SCHEMATIC AND DRAWING REPRESENTATIONS.

BASED ON THE ABOVE, THE REEVALUATORS CONSIDER ITT'S PROPOSAL AS BEING FAR SUPERIOR TO AAI'S SHOWING NOT ONLY A GREATER UNDERSTANDING OF THE PROBLEMS INVOLVED, BUT ALSO DEMONSTRATING EFFECTIVELY IN ALL REQUIRED AREAS HOW THIS UNDERSTANDING IS TO BE CONVERTED INTO A WORKING DEVICE THAT IN ESSENCE WILL MEET THE REQUIREMENTS AND NEEDS OF THE U.S. NAVY.

IN CONCLUSION, THE REEVALUATORS FIND ITT'S PROPOSAL TO BE ACCEPTABLE AND AAI'S PROPOSAL TO BE UNACCEPTABLE.

THE FOREGOING CONSTITUTES A POST-AWARD EVALUATION AND APPRAISAL OF THE AAI TECHNICAL PROPOSAL WHICH, WHEN INITIALLY EVALUATED BY NTDC, WAS TECHNICALLY INFERIOR TO THE REQUIREMENTS OF THE SPECIFICATIONS BUT WHICH AT THE SAME TIME "WAS NOT AND NEVER HAS BEEN DETERMINED TO BE UNACCEPTABLE.' HOWEVER, THE SUMMARY ANALYSIS NOW CATEGORIZES THE AAI TECHNICAL PROPOSAL AS ,UNACCEPTABLE.' IT SEEMS TO US THAT THE REFUSAL TO NEGOTIATE WITH AAI WAS NOT ON THE BASIS THAT ITS TECHNICAL PROPOSAL WAS UNACCEPTABLE BUT BECAUSE IT WAS DEFICIENT IN TECHNICAL DETAIL. IN THIS CONNECTION, WE CANNOT AVOID THE IMPLICATION THAT ARISES AS TO THE SUPERIOR COMPETENCE OF AAI IN THE AREA OF PERSONNEL ADMINISTRATIVELY DETERMINED IN NOVEMBER 1964 BUT SUBSTANTIALLY DOWNGRADED IN MAY 1965. WE THUS HAVE THE ANOMALOUS SITUATION OF AN ACCEPTABLE PROPOSAL--- ALTHOUGH TECHNICALLY INFERIOR--- PRIOR TO AWARD, BEING DETERMINED SUBSEQUENTLY TO BE UNACCEPTABLE AFTER AWARD HAS BEEN ACCOMPLISHED AND PERFORMANCE BEGUN BY ANOTHER. IT IS AT LEAST INCONSISTENT AND CONFUSING TO COMPARE THE SUMMARY ANALYSIS WITH THE PRENEGOTIATION BUSINESS CLEARANCE MEMORANDUM (EXHIBIT 12). THERE IT WAS REPORTED THAT THE TECHNICAL RATINGS WERE BASED ON THE EVALUATION OF THE MAJOR AREA OF SIMULATION, SUCH AS ECM AND RADAR, SONAR, DIGITAL COMPUTER AND INTERFACE, PROJECTION SYSTEM, PROGRAM OPERATOR'S STATIONS, POWER SUPPLY AND WEAPONS. WITH REFERENCE TO THESE AREAS, IT WAS STATED IN THAT MEMORANDUM THAT AS "A RESULT OF THE TECHNICAL EVALUATION, IT WAS DETERMINED THAT THE PROPOSAL OF ITT FEDERAL LABORATORIES REPRESENTED THE SUPERIOR TECHNICAL APPROACH.' THERE IS NO CONNOTATION OF "UNACCEPTABILITY" IN THAT STATEMENT.

AN ANALYSIS OF EXHIBIT 12 SHOWS THAT THE TECHNICAL EVALUATION WAS RESOLVED IN FAVOR OF ITTFL BECAUSE THE AAI PROPOSAL DISCLOSED THAT:

1. AAI'S DESIGN APPROACH TO SONAR SIMULATION THOUGH ADEQUATE WAS NOT AS COMPLETE AS ITTFL'S AND THAT THE ITT ANALYSIS OF PUFFS WAS EXCELLENT AND WAS SIGNIFICANTLY SUPERIOR. 2. AS TO AN/BQS-6B RADAR, THE AAI PROPOSAL REFLECTED ONLY SUPERFICIAL KNOWLEDGE, AND ALTHOUGH AAI WAS PRIME CONTRACTOR FOR ATTACK CENTER 2, ITT AS SUBCONTRACTOR WAS PROVIDING THE COMPLETE DESIGN AND HARDWARE. THUS, THE ITT PROPOSAL INDICATES SUPERIORITY IN THIS AREA OF SONAR SIMULATION. HOWEVER, BOTH AAI AND ITTFL WERE RATED SATISFACTORY IN SONAR AREAS OF AN/BQH-1, AN/DUUG-1, AN/UQN-1 AND AN/UQC-1.

3. BOTH AAI AND ITTFL SUBMITTED SATISFACTORY PROPOSALS IN THE AREAS OF DIGITAL COMPUTER AND INTERFACE.

4. RESPECTING THE PROJECTION SYSTEM, THE AAI SUBMITTAL LACKED DETAIL BUT IT PROPOSED A ,NORTRONICS DISPLAY SYSTEM.' ITT PROPOSED AN UP-DATED REVISION OF THE PRESENT SYSTEM. THE MEMORANDUM ADVISED THAT THIS AREA WOULD REQUIRE THE NEGOTIATION OF DETAILS.

5. AS TO PROGRAM OPERATOR'S STATIONS, BOTH AAI AND ITTFL PROVIDED SATISFACTORY APPROACHES.

6. THE MEMORANDUM ADVISED AS TO POWER SUPPLY THAT AAI'S PROPOSAL WAS ADEQUATE BUT ITTFL'S WAS EXCESSIVE.

7. ITTFL'S PROPOSAL AS TO WEAPONS WAS REGARDED AS SATISFACTORY; AAI'S PROVIDED FOR A CAPABILITY NOT INCLUDED IN THE SYSTEM.

THE BUSINESS CLEARANCE MEMORANDUM CONCLUDED BY STATING:

* * * IN VIEW OF THE TECHNICAL SUPERIORITY REFLECTED IN THE ITT PROPOSAL, ESPECIALLY IN ESSENTIAL AREAS OF ECM AND SONAR SIMULATION, SELECTION OF ITT FOR THIS TASK IS RECOMMENDED.

BASED UPON THESE EVALUATIONS, WE ARE UNAWARE OF ANY PERSUASIVE REASONS FOR REFUSING TO NEGOTIATE WITH AAI ESPECIALLY AS TO THE NOTED PROBLEM AREAS SO AS TO PRESERVE AND MAINTAIN THE REQUIRED COMPETITIVE CHARACTER OF THE PROCUREMENT. CONSIDERING THE VERY SUBSTANTIAL AMOUNT OF SUBCONTRACTING CONTEMPLATED BY BOTH PROPOSALS IN THE AREAS OF ECM AND SONAR SIMULATION, IT WOULD APPEAR REASONABLE TO CONCLUDE THAT MOST OF THE TECHNICAL DEFICIENCIES OF THE AAI PROPOSAL RELATED TO SUBCONTRACT ITEMS WHICH DEPENDED, TO A LARGE EXTENT, ON THE CAPABILITIES OF THE PROPOSED SUBCONTRACTORS. THIS APPEARS TO US TO BE A PROPER AND NECESSARY FACTOR WHICH IS PARTICULARLY AMENABLE TO NEGOTIATION PROCEDURES. IN OUR OPINION, AND IN VIEW OF THE LACK OF PRICE COMPETITION, WE MUST CONCLUDE THAT AAI WAS IMPROPERLY DENIED THE OPPORTUNITY TO EFFECTIVELY COMPETE FOR THIS PROCUREMENT TO THE DISADVANTAGE OF THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

THEREFORE, WHILE PRACTICAL CONSIDERATIONS PRECLUDE OUR DISTURBING THE AWARD MADE TO ITTFL, WE STRONGLY RECOMMEND THAT ALL PROPER AND NECESSARY ACTIONS BE TAKEN TO PRECLUDE A RECURRENCE OF THIS SITUATION AND TO ASSURE THAT THE MAXIMUM COMPETITION ENVISAGED BOTH BY LAW AND REGULATION WILL BE OBTAINED.