B-157978, MAR. 7, 1966

B-157978: Mar 7, 1966

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KLINE AND RIGBY ATTORNEYS AT LAW: FURTHER REFERENCE IS MADE TO LETTERS DATED NOVEMBER 4. THIS PROTEST WAS THE SUBJECT OF A CONFERENCE ON JANUARY 14. WAS MADE AVAILABLE TO YOU FOR COMMENT. YOUR LETTER OF JANUARY 26 RESTATES THE BASES OF THE PROTEST IN THE LIGHT OF THE DEPARTMENT'S REPORT AND CONCLUDES THAT THE AWARD MADE BY DRL TO STRAZA VIOLATED THE LETTER AND SPIRIT OF THE ARMED SERVICES PROCUREMENT REGULATION AND WAS CONTRARY TO THE BEST INTERESTS OF THE GOVERNMENT. WERE FULLY DISCUSSED IN THE DEPARTMENT'S REPORT AND WILL NOT BE RESTATED HERE. THIS WAS WHAT THE "PLAN OF ACTION" AS OUTLINED IN THE REPORT OF DECEMBER 23 WAS DESIGNED TO. THE DIRECTOR OF CONTRACTS OF THE BUREAU OF SHIPS DETERMINED THAT THE DEFICIENCIES WERE SUFFICIENTLY SIGNIFICANT TO JUSTIFY "...

B-157978, MAR. 7, 1966

TO MAYER, KLINE AND RIGBY ATTORNEYS AT LAW:

FURTHER REFERENCE IS MADE TO LETTERS DATED NOVEMBER 4, 5 AND 9, 1965, WITH ENCLOSURE, FROM GENERAL INSTRUMENT CORPORATION, HARRIS A. S. W. DIVISION (GIC) AND TO YOUR LETTER DATED JANUARY 26, 1966, WITH ENCLOSURES, PROTESTING AGAINST THE NEGOTIATION AND AWARD OF A SUBCONTRACT TO STRAZA INDUSTRIES BY THE DEFENSE RESEARCH LABORATORY (DRL), UNIVERSITY OF TEXAS-- - A DEPARTMENT OF THE NAVY PRIME CONTRACTOR--- UNDER REQUEST FOR PROPOSALS NO. 1377A, DATED APRIL 9, 1965.

THIS PROTEST WAS THE SUBJECT OF A CONFERENCE ON JANUARY 14, 1966, WITH A REPRESENTATIVE OF OUR OFFICE, WHEN A COPY OF THE DEPARTMENT'S REPORT DATED DECEMBER 23, 1965, WITH THE EXCEPTION OF CLASSIFIED ENCLOSURES, WAS MADE AVAILABLE TO YOU FOR COMMENT. YOUR LETTER OF JANUARY 26 RESTATES THE BASES OF THE PROTEST IN THE LIGHT OF THE DEPARTMENT'S REPORT AND CONCLUDES THAT THE AWARD MADE BY DRL TO STRAZA VIOLATED THE LETTER AND SPIRIT OF THE ARMED SERVICES PROCUREMENT REGULATION AND WAS CONTRARY TO THE BEST INTERESTS OF THE GOVERNMENT. THE HISTORY AND BACKGROUND OF THIS NEGOTIATED SUBCONTRACT AWARD, INCLUDING THE EVENTS LEADING UP TO THE CANCELLATION OF THE INITIAL REQUEST FOR QUOTATIONS (NO. 1377) AND THE ISSUANCE OF THE SUPERSEDING REQUEST FOR PROPOSALS (NO. 1377A), WERE FULLY DISCUSSED IN THE DEPARTMENT'S REPORT AND WILL NOT BE RESTATED HERE.

THE RECORD SHOWS THAT THE ENTIRE HISTORY OF THE PROCUREMENT SET FORTH IN THE ADMINISTRATIVE REPORT OF DECEMBER 23 CONVINCED THE BUREAU OF SHIPS THAT ITS INTERESTS WOULD BEST BE SERVED IF THE DRL REQUEST FOR PROPOSALS CORRECTED THE STATED DEFICIENCIES AND SPECIFIED A DEFINITE, EXPLICIT STATEMENT OF THE EQUIPMENT REQUIRED AND THE METHOD OF AWARD OF CONTRACT. THIS WAS WHAT THE "PLAN OF ACTION" AS OUTLINED IN THE REPORT OF DECEMBER 23 WAS DESIGNED TO, AND DID, ACCOMPLISH. THE RECORD SHOWS THAT GIC DID NOT OBJECT TO THIS PLAN OF ACTION WHEN PROPOSED. THE DIRECTOR OF CONTRACTS OF THE BUREAU OF SHIPS DETERMINED THAT THE DEFICIENCIES WERE SUFFICIENTLY SIGNIFICANT TO JUSTIFY "... A DECISION TO ... OTHERWISE MODIFY THE ... STATEMENT OF REQUIREMENTS ...' WITHIN THE MEANING OF ASPR 3-805.1/E), AND THAT IN KEEPING WITH THE CONCEPTS IMPLEMENTED BY THE POLICY STATED IN ASPR 3-805.1/E) AND 3 805.1/A) (V), CORRECTION OF THESE DEFICIENCIES WAS NECESSARY. MODIFICATION IV ISSUED UNDER THE PLAN OF ACTION, SPECIFICALLY IDENTIFIED THE GOVERNMENT'S REQUIREMENTS AS TWO (2) SONAR SYSTEMS WITH SOLID STATE FMO AND 800 HOURS MTBF, WHEREAS SUCH SPECIFIC IDENTIFICATION WAS MISSING FROM MODIFICATION III. FURTHER, MODIFICATION IV MADE IT EXPLICITLY CLEAR THAT AWARD WOULD BE BASED UPON THE LOWEST PRICE OFFERED FOR THE TWO SPECIFIED SYSTEMS, WHEREAS UNDER MODIFICATION III THERE WAS NO EXPLICIT, OR OTHER, BASIS STATED UNDER WHICH SELECTION WOULD BE MADE AS BETWEEN THE VARIOUS ALTERNATES FOR WHICH PRICES WERE SOLICITED. THESE CORRECTIONS IN THE CONDUCT OF THE PROCUREMENT ARE CLEARLY SO SIGNIFICANT AND OF SUCH SCOPE AS TO JUSTIFY THE CONTRACTING OFFICER'S DECISION TO RESTATE THE REQUIREMENTS OF THE PROCUREMENT.

WITH RESPECT TO THE QUESTIONS SET FORTH IN YOUR JANUARY 26 LETTER, BEGINNING WITH QUESTION (1) ON PAGE 5 THEREOF, STRAZA STATED IN ITS TELEGRAM OF JULY 19, 1965:

"UPON REVIEWING YOUR SPECIFICATION WHICH DOES NOT SPELL OUT THE EXACT DELIVERY REQUIREMENTS OF THE SECOND SONAR UNIT I QUESTIONED THE COSTS ON ITEMS 3 AND 4 PAGE 2 OF OUR REFERENCED PROPOSAL. OUR TECHNICAL PERSONNEL INTERPRETED YOUR RFQ AND PRICED OUR PROPOSAL AS THE SECOND SYSTEM BEING ORDERED AND/OR DELIVERED AT A LATER DATE THAN EITHER ITEM ONE OR TWO. THIS IS NOT SO AND THE SECOND UNIT IS ORDERED AT THE SAME TIME AS ITEM ONE OR TWO THE PRICE OF A SECOND MODEL OF AN/SQQ-16 SONAR, MEANING THE INDICATED NUMBER OF MTBF HOURS. BUT WITHOUT THE RELIABILITY TESTS (NOT INCLUDING SPARE PARTS) IS AS FOLLOWS: 250 MTBF HOURS $98,732; 500 MTBF HOURS, $100,523; 800 MTBF HOURS $102,711. SIMILARLY IF THE SPARE PARTS (ITEM 3) ARE ORDERED WITH ITEM ONE OR TWO, THEIR COST WILL BE REDUCED TO $33,411. IF ANY FURTHER INFORMATION OR CLARIFICATION IS NEEDED, PLEASE DO NOT HESITATE TO CONTACT US.'

RESPECTING QUESTION (2) THE FINDINGS UPON WHICH THE "INDEPENDENT ENGINEERING EVALUATION" MADE BY BUSHIPS WAS PREDICATED WERE THOSE DEFICIENCIES WHICH WERE NOTED IN BOTH GIC'S AND STRAZA'S PROPOSALS OF WHICH BOTH COMPANIES WERE NOTIFIED. THE CONCLUSION WAS THAT THE DIRECTOR OF CONTRACTS WAS CONVINCED THAT THE DEFICIENCIES WERE SUFFICIENTLY SIGNIFICANT TO WARRANT CLARIFICATION OR SUPPLEMENTING OF THE TECHNICAL PROPOSALS IN THE INDICATED RESPECTS. WITH RESPECT TO QUESTION (3) IT IS CONSIDERED THAT NO SUBSTANTIAL PURPOSE WOULD BE SERVED BY A DETAILED COMPARISON AND TECHNICAL ANALYSIS OF THE TWO PROPOSALS, AS YOU REQUEST, SINCE THE PROCUREMENT IS FOR EQUIPMENT OF A HIGHLY SPECIALIZED SCIENTIFIC NATURE AND THE DETERMINATIONS MUST BE BASED ON EXPERT TECHNICAL OPINION. WITH RESPECT TO QUESTION (4) CONCERNING THE LENGTH OF TIME REQUIRED BY THE BUREAU OF SHIPS TO RESPOND CONCERNING THE LENGTH OF TIME REQUIRED BY THE BUREAU OF SHIPS TO RESPOND TO YOUR PROTEST, THE RECORD SHOWS THAT FIRST NOTIFICATION WENT TO THE COUNSEL FOR BUREAU OF SHIPS ON NOVEMBER 8, 1965. THE BUREAU'S REPORT WAS SUBMITTED ON DECEMBER 23, 1965. THE INTERVAL OF SLIGHTLY MORE THAN ONE MONTH IS CONSIDERED A REASONABLE TIME IN THE PRESS OF DAILY BUSINESS FOR THE BUREAU OF SHIPS TO GATHER AND ANALYZE THE PERTINENT INFORMATION AND TO PREPARE A WRITTEN REPORT OF 7 PAGES, WITH 11 ENCLOSURES THERETO. WITH RESPECT TO QUESTION (5) ON PAGE 5 OF YOUR LETTER OF JANUARY 26, 1966, REGARDING OBSERVANCE OF THE PROPER FORMALITIES OF THE DRL-STRAZA SUBCONTRACT, THE BUREAU ADVISED THAT ALL REQUIRED FORMALITIES WERE COMPLIED WITH AND THAT ADMIRAL CURTZE PERSONALLY EXPLICITLY AUTHORIZED THE ACTIONS TAKEN BY THE BUREAU. FURTHER DETAILED CONSIDERATION OF THE QUESTIONS CONTAINED ON PAGES 6, 7 AND 8 OF YOUR LETTER INVOLVES, ESSENTIALLY, REPETITION OF MATTERS CONSIDERED IN THE ADMINISTRATIVE REPORT OF DECEMBER 23, 1965, PREVIOUSLY FURNISHED TO YOU, AND YOUR SPECULATION AS TO THE REASONS WHY STRAZA REDUCED ITS OFFERED PRICE BY AN AMOUNT SUBSTANTIALLY GREATER THAN DID GIC.

UNDER THE CIRCUMSTANCES, THERE ARE TWO QUESTIONS FOR OUR CONSIDERATION CONCERNING THE NEGOTIATION PROCEDURES UTILIZED BY THE DEPARTMENT OF THE NAVY. THE FIRST QUESTION CONCERNS THE PROPRIETY OF AMENDING REQUEST FOR PROPOSALS NO. 1377A TO REFLECT THE CONTINUING STUDY BY BUREAU OF SHIPS OF ITS REQUIREMENTS AS AUTHORIZED BY ASPR 3 805.1/E). SECOND, WAS AN AUCTION TECHNIQUE UTILIZED IN VIOLATION OF THE PROHIBITION AGAINST USE OF SUCH TECHNIQUES CONTAINED IN ASPR 3 805.1/B/?

ASPR 3-805.1/E) PROVIDES, IN PERTINENT PART, AS FOLLOWS:

"/E) WHEN, DURING NEGOTIATIONS, A SUBSTANTIAL CHANGE OCCURS IN THE GOVERNMENT'S REQUIREMENTS OR A DECISION IS REACHED TO RELAX, INCREASE OR OTHERWISE MODIFY THE SCOPE OF THE WORK OR STATEMENT OF REQUIREMENTS, SUCH CHANGE OR MODIFICATION SHALL BE MADE IN WRITING AS AN AMENDMENT TO THE REQUEST FOR PROPOSAL OR REQUEST FOR QUOTATIONS AND A COPY SHALL BE FURNISHED TO EACH PROSPECTIVE CONTRACTOR * * *.'

THE TOTAL ACCOUNT OF THE PROCUREMENT DISCLOSES THAT A POSITIVE EFFORT WAS MADE TO ASSURE EQUAL, FAIR TREATMENT OF THE OFFERORS FOR THE SUBCONTRACT. THE "PLAN OF ACTION" WAS FORMULATED TO AVOID THE RECURRENCE OF THE UNCERTAINTIES AND THE INDEFINITENESS THAT HAD MARKED THE EARLIER CONDUCT OF THE PROCUREMENT.

IT MUST BE CONCLUDED ON THE BASIS OF THE SUBMITTED CHRONOLOGY THAT THE BUREAU OF SHIPS DECISION TO AMEND THE REQUEST FOR PROPOSALS APPEARS AUTHORIZED UNDER ASPR 3-805.1/E), THE ACTIONS TAKEN BEING EXPRESSLY PROVIDED FOR THEREIN.

WITH REGARD TO THE QUESTION WHETHER AUCTION TECHNIQUES WERE EMPLOYED, IT MAY BE POINTED OUT THAT WHERE THE GOVERNMENT BUYS BY NEGOTIATION THE RIGID AND FORMAL REQUIREMENTS APPLICABLE TO PROCUREMENT BY ADVERTISING NEED NOT BE OBSERVED. WHILE AWARD MAY BE MADE AS A RESULT OF COMPETITIVE NEGOTIATION WITHOUT BARGAINING BY ACCEPTING THE MOST FAVORABLE OFFER RECEIVED IF THE CONTRACTING OFFICER REGARDS IT TO BE FAIRLY AND REASONABLY PRICED, THE CONTRACTING OFFICER MAY ALSO NEGOTIATE A CONTRACT WITH THAT SUPPLIER WHOSE OFFER IS MOST ADVANTAGEOUS TO THE GOVERNMENT. IT IS FOR THIS REASON THAT OFFERORS MAY BE ALLOWED TO MAKE REVISIONS TO THEIR QUOTATIONS UP TO THE TIME THE PROCUREMENT IS OFFICIALLY CLOSED. ALSO, THE FACT REMAINS THAT GIC HAD AVAILABLE TO IT, AND EXERCISED, THE VERY SAME OPPORTUNITY AS STRAZA TO MODIFY ITS OFFERED PRICE FOLLOWING RESUBMISSION OF THE CORRECTED TECHNICAL PROPOSALS. THE PROVISIONS OF ASPR 3-805.1/B), AS YOU KNOW, PROHIBIT THE DISCLOSURE OF PRICES DURING THE NEGOTIATION PERIOD. SEE, ALSO, ASPR 3-804 WHICH STATES THAT "COST AND PROFIT FIGURES OF ONE OFFEROR OR CONTRACTOR SHALL NOT BE REVEALED TO OTHER OFFERORS OR CONTRACTORS.' FROM THE FACTS, IT IS CLEAR THAT THE BUREAU OF SHIPS IN NO WAY INVITED OR SUGGESTED PRICE REDUCTIONS AND NEITHER CREATED NOR FOSTERED AN AUCTION ATMOSPHERE.

THERE IS NO UNFAIR ADVANTAGE CONFERRED WHEN BOTH OFFERORS ARE AFFORDED EQUAL OPPORTUNITY TO SUBMIT NEW TECHNICAL PROPOSALS AND TO REQUOTE PRICES ON THE BASIS OF THE NEW PROPOSALS. THE POSTPONEMENT OF NEGOTIATIONS WITH GIC UNDER REQUEST NO. 1377A WAS NOT IRREGULAR, NOR WAS THE INTERRUPTION AND TERMINATION OF NEGOTIATIONS, WITH STRAZA, UNDER THE ORIGINAL REQUEST NO. 1377 OF NOVEMBER 3, 1964. IN BOTH CASES THE DEFERRAL OF NEGOTIATIONS BY DRL WITH THE OFFEROR WHO HAD SUBMITTED THE LOWEST PRICED, ACCEPTABLE TECHNICAL PROPOSAL WAS IN RESPONSE TO CHANGED GOVERNMENT REQUIREMENTS UNDER THE PRIME CONTRACT.

SINCE THE REPORTED FACTS INDICATE THAT THERE WAS A REASONABLE BASIS FOR THE BUREAU OF SHIPS' ACTIONS AND THAT THERE WAS COMPLIANCE WITH APPLICABLE PROVISIONS OF STATUTE AND REGULATION, WE FIND NO BASIS FOR DISTURBING THE AWARD AS MADE AND YOUR PROTEST MUST BE DENIED.