B-159504, OCTOBER 13, 1966, 46 COMP. GEN. 295

B-159504: Oct 13, 1966

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DISCONTINUING A TWO-STEP PROCUREMENT PROCEDURE PURSUANT TO PARAGRAPH 3- 210.2 (III) OF THE ARMED SERVICES PROCUREMENT REGULATION AND NEGOTIATING A CONTRACT WITH THE FIRM WHOSE SPECIFICATIONS FOR THE ONLY TECHNICALLY ACCEPTABLE EQUIPMENT OFFERED HAD BEEN USED TO DRAFT THE FIRST STEP OF THE PROCUREMENT TO DEFINE THE MINIMUM NEEDS OF THE GOVERNMENT WAS NOT IMPROPER. THE INTENT OF THE PROCEDURE WAS NOT TO ELIMINATE COMPETITION. NOTWITHSTANDING COMPETITION UNDER THE FIRST STEP MAY HAVE BEEN RESTRICTED TO SOME EXTENT. 1966: FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 20. A LETTER REQUEST FOR TECHNICAL PROPOSALS (LRFTP) WAS ISSUED AS THE FIRST STEP OF THE PROCUREMENT WHEREUNDER TECHNICAL PROPOSALS FOR THE ITEM TO BE PROCURED WERE SOLICITED FROM INTERESTED SOURCES OF SUPPLY.

B-159504, OCTOBER 13, 1966, 46 COMP. GEN. 295

BIDS - TWO-STEP PROCUREMENT - DISCONTINUED AND CONTRACT NEGOTIATED - PROPRIETY. DISCONTINUING A TWO-STEP PROCUREMENT PROCEDURE PURSUANT TO PARAGRAPH 3- 210.2 (III) OF THE ARMED SERVICES PROCUREMENT REGULATION AND NEGOTIATING A CONTRACT WITH THE FIRM WHOSE SPECIFICATIONS FOR THE ONLY TECHNICALLY ACCEPTABLE EQUIPMENT OFFERED HAD BEEN USED TO DRAFT THE FIRST STEP OF THE PROCUREMENT TO DEFINE THE MINIMUM NEEDS OF THE GOVERNMENT WAS NOT IMPROPER, THE ANTICIPATED PARTICIPATION OF MANUFACTURERS THAT COULD MATCH THE MAJOR ADVANCEMENTS MADE IN THE EQUIPMENT NOT HAVING RESULTED, AND ALTHOUGH THE FAILURE OF THE TWO-STEP ADVERTISING EFFORT GENERATED A SOLE- SOURCE PROCUREMENT, THE INTENT OF THE PROCEDURE WAS NOT TO ELIMINATE COMPETITION, NOTWITHSTANDING COMPETITION UNDER THE FIRST STEP MAY HAVE BEEN RESTRICTED TO SOME EXTENT, NOR TO CIRCUMVENT THE DIFFICULT TASK OF SOLE-SOURCE JUSTIFICATION.

TO COMCOR, INC; OCTOBER 13, 1966:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 20, 1966, PROTESTING AGAINST THE ALLEGED MISUSE OF TWO-STEP PROCUREMENT PROCEDURES BY THE DEPARTMENT OF THE AIR FORCE, AIR FORCE MISSILE DEVELOPMENT CENTER (AFMDC), HOLLOMAN AIR FORCE BASE, NEW MEXICO, IN CONNECTION WITH THE PURCHASE OF A HYBRID DIFFERENTIAL ANALYZER SYSTEM.

ON DECEMBER 16, 1965, A LETTER REQUEST FOR TECHNICAL PROPOSALS (LRFTP) WAS ISSUED AS THE FIRST STEP OF THE PROCUREMENT WHEREUNDER TECHNICAL PROPOSALS FOR THE ITEM TO BE PROCURED WERE SOLICITED FROM INTERESTED SOURCES OF SUPPLY. THE ANALYZER SYSTEM WAS REQUIRED TO BE CAPABLE OF HANDLING A VARIETY OF PROBLEMS CONNECTED WITH MISSILE TEST SYSTEMS ANALYSIS, AND THE SIMULATION OF AEROSPACE SYSTEMS AND HIGHSPEED ROCKET SLEDS. THE LRFTP CONTAINED A "STATEMENT OF WORK" WHICH GAVE A COMPLETE AND DETAILED DESCRIPTION OF THE EQUIPMENT REQUIRED BY THE GOVERNMENT. HOWEVER, OFFERORS WERE ENCOURAGED TO SUBMIT MULTIPLE TECHNICAL PROPOSALS PRESENTING DIFFERENT BASIC APPROACHES.

FOUR TECHNICAL PROPOSALS WERE RECEIVED ON JANUARY 18, 1966, AND WERE FORWARDED TO THE USING ACTIVITY (AIR FORCE MISSILE DEVELOPMENT CENTER) FOR EVALUATION TO DETERMINE COMPLIANCE WITH SPECIFICATION REQUIREMENTS. WAS THEREAFTER DETERMINED THAT ONLY THE PROPOSAL OF ELECTRONIC ASSOCIATES, INC. (EAI), WAS TECHNICALLY ACCEPTABLE. UPON NOTIFICATION THAT THE REMAINING PROPOSALS WERE TECHNICALLY UNACCEPTABLE, YOUR FIRM AND THE TWO OTHER COMPANIES COMPLAINED THAT THE EVALUATION FAVORED EAI. AS A RESULT THEREOF, THE CONTRACTING OFFICER ON APRIL 6, 1966, NOTIFIED YOUR FIRM AND THE OTHER COMPANIES THAT THEIR PROPOSALS WOULD BE GIVEN FURTHER CONSIDERATION IF, BY AMENDMENT, SUCH PROPOSALS WOULD COMPLY WITH BUT FIVE FUNDAMENTAL PERFORMANCE REQUIREMENTS OF THE SPECIFICATIONS. IT IS REPORTED THAT ONLY YOUR FIRM SUBMITTED AN AMENDMENT WHICH YOU BELIEVED WOULD MAKE YOUR PROPOSAL COMPLY WITH THE FIVE FUNDAMENTAL REQUIREMENTS AS OUTLINED BY THE CONTRACTING OFFICER. THE PROPOSAL OF YOUR FIRM, AS AMENDED, WAS AGAIN EVALUATED BY AIR FORCE TECHNICAL PERSONNEL AND IT WAS DETERMINED THAT YOUR PROPOSAL, AS AMENDED, STILL DID NOT MEET THE AIR FORCE REQUIREMENTS. YOUR FIRM WAS ADVISED THAT YOUR PROPOSAL, AS AMENDED, WAS NOT TECHNICALLY ACCEPTABLE AND THAT IT WOULD NOT BE CONSIDERED FURTHER. SINCE ONLY ONE TECHNICAL PROPOSAL, THAT OF EAI, WAS FOUND TO BE TECHNICALLY ACCEPTABLE, THE CONTRACTING OFFICER, IN ACCORDANCE WITH PARAGRAPH 3-210.2/III), ARMED SERVICES PROCUREMENT REGULATION, DISCONTINUED THE TWO-STEP PROCUREMENT AND PROCEEDED TO NEGOTIATE A CONTRACT FOR THE EQUIPMENT WITH THAT FIRM. AS A RESULT OF THE NEGOTIATIONS, CONTRACT NO. AF29/600/-5740, IN THE AMOUNT OF $234,384, WAS AWARDED TO EAI ON JUNE 17, 1966. IT IS REPORTED THAT AS OF AUGUST 29, 1966, EAI HAD COMPLETED APPROXIMATELY ONE-HALF OF THE CONTRACT WORK.

YOU PROTEST AGAINST THE ACTION TAKEN IN THIS PROCUREMENT ON THE BASIS THAT AFMDC INTENDED TO PURCHASE THE EQUIPMENT FROM EAI AND THAT IT MERELY EMPLOYED THE TWO-STEP PROCUREMENT PROCEDURE TO ELIMINATE COMPETITION AND TO CIRCUMVENT THE DIFFICULT TASK OF SOLE SOURCE JUSTIFICATION. IN SUPPORT OF YOUR CONTENTION, YOUR FIRM CONTENDS THAT THE SPECIFICATIONS IN THE LRFTP WERE COPIED ALMOST ENTIRELY FROM THE SPECIFICATIONS AND LITERATURE PUBLISHED AND DISTRIBUTED BY EAI.

THE DEPARTMENT OF THE AIR FORCE HAS ADVISED US THAT THE AFMDC SPECIFICATIONS FOR THE HYBRID DIFFERENTIAL ANALYZER SYSTEM WERE BASED SUBSTANTIALLY ON A SET OF SPECIFICATIONS FURNISHED BY EAI IN JANUARY 1965, DESCRIBING ITS MODEL 8800 SCIENTIFIC COMPUTING SYSTEM. IT IS REPORTED THAT THE DECISION TO FOLLOW EAI'S SPECIFICATIONS WAS BASED ON A DETERMINATION BY AIR FORCE TECHNICAL PERSONNEL THAT THE EQUIPMENT OFFERED BY EAI WOULD BEST MEET THE NEEDS OF THE GOVERNMENT. IT ALSO IS REPORTED THAT SUCH DECISION WAS NOT MADE UNTIL THE LITERATURE OF FOUR OTHER MANUFACTURERS HAD BEEN STUDIED CAREFULLY.

REGARDING ITS USE OF THE TWO-STEP PROCEDURE ON THIS PROCUREMENT, THE DEPARTMENT OF THE AIR FORCE STATES AS FOLLOWS:

THE SPECIFICATIONS FOR SUBJECT INVITATION FOR PROPOSAL WERE THE RESULTS OF A DETERMINATION OF THE EQUIPMENT NEEDS OF THIS ORGANIZATION AND A SURVEY OF THE STATE OF THE ART BASED ON EQUIPMENT DESCRIPTIVE LITERATURE OF VARIOUS APPLICABLE MAJOR MANUFACTURERS. THE RESULT OF THIS SURVEY WAS THAT THE ELECTRONIC ASSOCIATES MODEL 8800 SYSTEM REPRESENTED THE MOST ADVANCED EQUIPMENT AND OFFERED MANY NEW FEATURES WHICH WERE CONSIDERED PARTICULARLY ADVANTAGEOUS FOR THE TYPE OF WORK ANTICIPATED TO BE CARRIED OUT ON THE NEW ANALYZER. * * *

THE QUESTION WAS CONSIDERED IF THIS PROCUREMENT SHOULD NOT BE HANDLED AS SOLE SOURCE PROCUREMENT. HOWEVER, SINCE PRODUCTION OF THIS TYPE OF EQUIPMENT IS A HIGHLY COMPETITIVE FIELD IT WAS CONSIDERED POSSIBLE THAT OTHER MANUFACTURERS WOULD ALSO COME UP WITH NEW DESIGNS OF EQUAL OR SUPERIOR FEATURES. THEREFORE, 2 STEP PROCUREMENT WAS CONSIDERED MOST DESIRABLE.

THE SPECIFICATIONS WERE WRITTEN SO THAT THEY WOULD REFLECT THE LATEST STATE OF THE ART BUT ALSO LEAVING IN MIND, THAT AT LEAST ONE MANUFACTURER COULD MEET THE REQUIREMENTS. * * * AS IN THE INVITATION FOR PROPOSALS MANUFACTURERS WERE SPECIFICALLY ASKED TO SUMBIT ALTERNATE PROPOSALS, THE EVALUATION WAS BASED ON THE GUIDELINE THAT OF ALTERNATE PROPOSALS ALL THOSE ITEMS WERE ACCEPTABLE WHICH MET THE SAME OBJECTIVES AS INDICATED BY THE SPECIFICATIONS WITH RESPECT TO OVERALL PERFORMANCE, SPEED, BANDWIDTH, CONVENIENCE OF OPERATION, PRECISION, RELIABILITY, LOAD CAPACITY AND TO OTHER ASPECTS OUTLINED IN THE GENERAL EQUIPMENT CHARACTERISTICS, PARAGRAPH 1.2 OF THE SPECIFICATIONS. * * *

THIS OFFICE HAS SANCTIONED THE USE OF THE TWO-STEP PROCUREMENT PROCEDURE. 40 COMP. GEN. 35. PART 5, SECTION II, OF ASPR SETS FORTH THE CONDITIONS AND PROCEDURES FOR ITS USE. SUBSECTION 502/A) PROVIDES:

(A) TWO-STEP FORMAL ADVERTISING SHALL BE USED IN PREFERENCE TO NEGOTIATION WHEN ALL OF THE FOLLOWING CONDITIONS ARE PRESENT, UNLESS OTHER FACTORS REQUIRE THE USE OF NEGOTIATION, E.G; 3-213;

(I) AVAILABLE SPECIFICATIONS OR PURCHASE DESCRIPTIONS ARE NOT SUFFICIENTLY DEFINITE OR COMPLETE OR MAY BE TOO RESTRICTIVE, AND THE LISTING OF THE SALIENT CHARACTERISTICS IN A "BRAND NAME OR EQUAL" DESCRIPTION WOULD LIKEWISE BE TOO RESTRICTIVE, TO PERMIT FULL AND FREE COMPETITION WITHOUT TECHNICAL EVALUATION, AND ANY NECESSARY DISCUSSION, OF THE TECHNICAL ASPECTS OF THE REQUIREMENT TO INSURE MUTUAL UNDERSTANDING BETWEEN EACH SOURCE AND THE GOVERNMENT;

(II) DEFINITE CRITERIA EXIST FOR EVALUATING TECHNICAL PROPOSALS, SUCH AS DESIGN, MANUFACTURING, TESTING, AND PERFORMANCE REQUIREMENTS, AND SPECIAL REQUIREMENTS FOR OPERATIONAL SUITABILITY AND EASE OF MAINTENANCE;

(III) MORE THAN ONE TECHNICALLY QUALIFIED SOURCE IS EXPECTED TO BE AVAILABLE;

(IV) SUFFICIENT TIME WILL BE AVAILABLE FOR USE OF THE TWO-STEP METHOD; AND

(V) A FIRM FIXED-PRICE CONTRACT OR A FIXED-PRIEC CONTRACT WITH ESCALATION WILL BE USED.

UPON REVIEW OF THE RECORD BEFORE US, WE FIND NO BASIS TO QUESTION THE USE OF TWO-STEP ADVERTISING PROCEDURES IN THIS SITUATION. IN REGARD TO YOUR CONTENTION THAT THE CONTRACTING OFFICER WAS PROMPTED TO USE TWO-STEP PROCUREMENT PROCEDURES IN ORDER TO ELIMINATE COMPETITION, WE BELIEVE THAT THE RECORDS SHOW THAT THE INTENT OF THAT OFFICIAL WAS TO THE CONTRARY. THE CONTRACTING OFFICER'S INTENT TO OBTAIN COMPETITION IS EVIDENCED BY THE FACT THAT AFTER THE CONCLUSION OF THE ORIGINAL EVALUATION, THE CONTRACTING OFFICER ADVISED THE THREE COMPANIES WHICH HAD FILED UNACCEPTABLE PROPOSALS, WHICH INCLUDED YOUR FIRM, THAT ALL THE COMPANIES HAD TO DO TO OBTAIN FURTHER CONSIDERATION OF THEIR PROPOSALS WAS TO MAKE THE PROPOSALS CONFORM TO ONLY FIVE OF THE PERFORMANCE REQUIREMENTS OF THE SPECIFICATIONS. THIS FACT GAVE SUCH PROPOSERS FURTHER NOTICE THAT THEY COULD DEVIATE FROM NONESSENTIAL DETAILS OF THE SPECIFICATIONS AND USE ANY APPROACH THEY DESIRED, PROVIDED THE EQUIPMENT THEY OFFERED MET THE FIVE FUNDAMENTAL PERFORMANCE REQUIREMENTS OF THE SPECIFICATIONS. THE RECORD INDICATES THAT YOUR FIRM BELIEVED THAT IT COULD MEET THESE REQUIREMENTS BUT FAILED TO MEET THESE BASIC TECHNICAL REQUIREMENTS UPON FURTHER AMENDMENT OF ITS PROPOSAL.

WHILE IT IS THE DUTY OF OUR OFFICE TO DETERMINE WHETHER ADVERTISED SPECIFICATIONS ARE UNDULY RESTRICTIVE OF COMPETITION, IT IS APPARENT THAT THE AIR FORCE WAS JUSTIFIED IN SPECIFYING THE MINIMUM REQUIREMENTS WHICH YOUR PROPOSAL HAD TO MEET. 40 COMP. GEN. 40. AS STATED IN 36 COMP. GEN. 251, THERE IS NO REQUIREMENT THAT THE UNITED STATES PURCHASE EQUIPMENT WITHOUT INTELLIGENT REFERENCE TO THE PARTICULAR NEEDS TO BE SERVED; NOR IS THE GOVERNMENT TO BE PLACED IN THE POSITION OF ALLOWING BIDDERS TO DICTATE SPECIFICATIONS WHICH WILL PERMIT ACCEPTANCE OF EQUIPMENT WHICH DOES NOT, IN THE CONSIDERED JUDGMENT OF THE CONTRACTING AGENCY, REASONABLY MEET THE AGENCY'S NEEDS.

IT WOULD APPEAR THAT THE FIRST STEP OF THE PROCUREMENT WAS DRAFTED MAINLY AROUND THE TECHNICAL DETAILS OF THE EAI PRODUCT AND THAT IT MAY HAVE RESTRICTED TO SOME EXTENT THE OPPORTUNITY OF INTERESTED OFFERORS TO SUBMIT TECHNICALLY RESPONSIVE PROPOSALS. HOWEVER, THE TECHNICAL EXPERTS OF THE AIR FORCE HAVE REPORTED THAT THE INCLUSION OF THE PERFORMANCE FEATURES OF THE EAI EQUIPMENT IN THE FIRST STEP WAS NECESSARY TO CLEARLY DEFINE THE MINIMUM REQUIREMENTS OF THE GOVERNMENT BUT THEY ALSO BELIEVED THAT OTHER QUALIFIED MANUFACTURERS COULD MATCH ALL THE MAJOR ADVANCEMENTS IN THE STATE OF THE ART AS REPRESENTED BY THE EAI EQUIPMENT. FOR THAT REASON, THE AIR FORCE BELIEVED THAT A BASIS FOR COMPETITION EXISTED. WHILE THE TWO-STEP ADVERTISING EFFORT FAILED AND BY REASON THEREOF GENERATED A SOLE- SOURCE PROCUREMENT, WE CANNOT SAY THAT THE ACTIONS TAKEN WERE PATENTLY IMPROPER OR CONTRARY TO THE PERTINENT PROVISIONS OF LAW OR REGULATION.