B-160221, FEB. 28, 1967

B-160221, FEB. 28, 1967

TO MR. R. D. SWEENEY:

WE REFER TO YOUR LETTER OF OCTOBER 4, 1966, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE METHOD OF PROCUREMENT PROPOSED IN REQUEST FOR PROPOSALS NO. 0349, ISSUED BY THE UNITED STATES NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA. OUR COMMENTS IN THIS DECISION ARE DIRECTED TO THE RFP SCHEDULE OF NOVEMBER 15, 1966.

A DETERMINATION AND FINDING UNDER THE EXCEPTION IN 10 U.S.C. 2304 (A) (10), AS IMPLEMENTED BY ARMED SERVICES PROCUREMENT REGULATION SEC. 3- 210.2, WAS ISSUED ON SEPTEMBER 26, 1966, AUTHORIZING NEGOTIATION OF THIS PROCUREMENT.

THE "SCOPE OF SERVICES" PROVISION FOR THE INSTANT PROCUREMENT WAS AS FOLLOWS:

"1.1.1 THE CONTRACTOR SHALL DESIGN AND DEVELOP PLANS, AND PLAN SCHEDULES AND SPECIFICATIONS NECESSARY TO ACCOMPLISH VARIOUS ALTERATIONS, REPAIRS AND IMPROVEMENTS TO NAVAL SHIPS, AS AND WHEN ORDERED BY WRITTEN WORK ASSIGNMENTS WHICH WILL BE ISSUED UNDER THE CONTRACT BY THE INDUSTRIAL MANAGER, USN, SAN DIEGO, CALIFORNIA.

"1.1.2 AS AND WHEN DIRECTED BY THE INDUSTRIAL MANAGER, SAN DIEGO, CALIFORNIA, THE CONTRACTOR SHALL FURNISH LIAISON WITH DESIGNATED COMMANDS, TYPE COMMANDERS, SHIP PERSONNEL AND/OR COMMERCIAL COMPANIES AS MAY BE DEEMED NECESSARY FOR THE PROMPT ACCOMPLISHMENT OF AN ASSIGNED TASK.'

PAGE 2 OF THE RFP PROVIDED A LIST OF THE TYPICAL ENGINEERING TASKS WHICH WOULD BE COVERED BY WRITTEN WORK ASSIGNMENTS ISSUED TO THE CONTRACTOR.

THE DEPARTMENT OF THE NAVY HAS ADVISED AS FOLLOWS REGARDING THE AUTHORITY FOR USING A COST-PLUS-AWARD-FEE TYPE OF CONTRACT:

"THE DEPARTMENT OF THE NAVY WAS GRANTED A DEVIATION UNDER ARMED SERVICES PROCUREMENT REGULATION, PARAGRAPH 3-407.2, BY THE ASPR COMMITTEE ON NOVEMBER 13, 1963, PERMITTING THE USE OF THE COST-PLUS AWARD-FEE TYPE OF CONTRACT. THE DEVIATION WAS GRANTED ON A TEST BASIS NOT TO EXCEED FIVE (5) CONTRACTS (LATER EXTENDED TO 10 ON MAY 8, 1964). ON JUNE 17, 1964, THE CEILING ON THE NUMBER OF CASES WAS REMOVED AND THE DEVIATION WAS AUTHORIZED THROUGH FISCAL YEAR 1965. SUBSEQUENT MODIFICATIONS HAVE PERMITTED USE OF THE DEVIATION BY THE DEPARTMENT OF THE ARMY AND THE AIR FORCE AND HAVE EXTENDED THE DEVIATION TO THE END OF CALENDAR YEAR 1966. IT IS CONTEMPLATED THAT THE NAVY WILL FURNISH THE ASPR COMMITTEE WITH A COMPLETE REPORT AND PRESENT A CASE BEFORE THE COMMITTEE SPONSORING THE ADOPTION OF THE COST-PLUS-AWARD-FEE AS A METHOD OF CONTRACTING.'

IN OUR VIEW THERE SEEM TO BE THREE MAIN POINTS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THIS PROCUREMENT. FIRST, WHETHER THE CONTRACT FOR THE INSTANT PROCUREMENT WILL FALL WITHIN THE COST-PLUS A-PERCENTAGE-OF-COST PROHIBITION. SECOND, YOUR INQUIRY REGARDING THE CONTRACTING OFFICER'S JUSTIFICATION FOR USING A COST-TYPE CONTRACT RATHER THAN A FIXED-PRICE CONTRACT. THIRD, WHETHER THE RFP SHOULD HAVE MADE THE PERSONNEL SPECIFIED IN SECTION 2.4.3, A MANDATORY REQUIREMENT.

BY ITS LETTER OF JANUARY 25, 1967, THE DEPARTMENT OF THE NAVY FORWARDED ITS POSITION IN REGARD TO THESE THREE MATTERS AS FOLLOWS:

"2. WHILE THE REQUEST FOR PROPOSAL DOES NOT SO STATE, THE FIXED FEE WHICH IS TO BE NEGOTIATED WITH THE SUCCESSFUL OFFEROR WILL BE A CERTAIN DOLLAR AMOUNT AND WILL NOT BE EXPRESSED IN TERMS OF PERCENTAGE. THE RESULTING CONTRACT WILL ESTABLISH AN ESTIMATED COST AND A FIXED FEE, BOTH IN DOLLAR FIGURES, AND THE FIXED FEE WILL REMAIN AT THE AGREED UPON FIGURE EVEN THOUGH THE ACTUAL COSTS MAY VARY FROM THE ESTIMATED COSTS SET FORTH IN THE CONTRACT.

"3. WITH RESPECT TO THE JUSTIFICATION FOR THE USE OF THE TYPE OF CONTRACT CONTEMPLATED IN THIS RFP IT SHOULD BE NOTED THAT GENERALLY SPEAKING THE TYPES OF SERVICES REQUIRED, THAT IS (,) THE MAKING OF SHIP CHECKS, THE DETERMINATION OF ENGINEERING SOLUTIONS TO PROBLEMS POSED BY SHIP ALTERATION AND REPAIR NEEDS, AND THE PREPARATION OF PLANS AND DRAWINGS TO PROVIDE FOR THE DESIRED ALTERATIONS AND REPAIRS, CAN BE FAIRLY ADEQUATELY DESCRIBED. THE EXTENT AND TYPES OF EFFORT WHICH WILL BE REQUIRED IN ANY INSTANCE, HOWEVER, CAN ONLY BE DETERMINED AS THE NECESSITY ARISES. IN A MAJORITY OF CASES THESE NEEDS MUST BE MET IN A TIME FRAME DICTATED BY SHIP OR REPAIR FACILITY AVAILABILITY OR MISSION SCHEDULES AND CONSEQUENTLY THE POSSIBILITY IS LACKING OF PREPARING DETAILED SPECIFICATIONS UPON WHICH PROSPECTIVE CONTRACTORS CAN SUBMIT BIDS ON A FIXED-PRICE BASIS. FREQUENTLY, ALSO, THE TASK REQUIREMENTS ARE SOMEWHAT FLUID INASMUCH AS ALTERATIONS AND REPAIRS WITH RESPECT TO ONE AREA OF THE SHIP MUST BE RELATED AND ARTICULATED WITH THE DEMANDS OF ANOTHER AREA. IN THE ABSENCE OF THE POSSIBILITY OF DETERMINING THE FULL NATURE AND EXTENT OF THE SERVICES WHICH MAY BE REQUIRED IN SPECIFIC CASES UPON WHICH FIXED-PRICE BIDS CAN BE CALCULATED, IT WOULD APPEAR TO BE IN THE BEST INTEREST OF THE GOVERNMENT TO UTILIZE EITHER A COST-REIMBURSEMENT OR A TIME AND MATERIALS TYPE CONTRACT. IN VIEW OF THE INCENTIVE FEATURE IN A COST PLUS-AWARD-FEE CONTRACT AND THE ABILITY TO EXERCISE SOME COST AND QUALITY CONTROL OVER THE CONTRACTOR BY MEANS OF GRANTING OR WITHHOLDING AWARD FEE IN SUCH AN ARRANGEMENT, IT WAS DEEMED DESIRABLE TO USE THIS FORM OF CONTRACT IN PREFERENCE TO A STRAIGHT CPFF CONTRACT OR A T AND M CONTRACT.

"4. THERE IS NO FUNCTIONAL OR ORGANIZATIONAL FORMULA WHICH ESTABLISHES ANY FIXED RELATIONSHIP BETWEEN THE NUMBER OF KEY PERSONNEL CALLED FOR BY THE REQUEST FOR PROPOSAL (S) AND THE ULTIMATE NUMBER REQUIRED FOR THE PERFORMANCE OF THE TASKS TO BE ISSUED UNDER THIS CONTRACT. THE PREPONDERANCE OF CONTRACTOR PERSONNEL WILL BE OF THE JUNIOR ENGINEER, DRAFTSMAN AND DRAFTING TECHNICIAN TYPES, AND THESE TOGETHER WITH THE ELEVEN KEY PEOPLE DESCRIBED IN THE REQUEST FOR PROPOSAL (S) ARE ESTIMATED TO COME TO A TOTAL OF 41 PERSONS FOR THE YEAR. THE MARINE ENGINEERS AND NAVAL ARCHITECTS WILL BE RESPONSIBLE FOR ANALYZING THE PROBLEMS INVOLVED IN THE TASKS ASSIGNED TO THE CONTRACTOR; FOR FORMULATING ENGINEERING SOLUTIONS TO SUCH PROBLEMS, AND FOR PASSING ON THE RESULTING INFORMATION TO THE STAFFING PERSONNEL WHO WILL THEN BE RESPONSIBLE FOR PREPARING THE NECESSARY PLANS TO GIVE EFFECT TO THE SOLUTIONS PROMULGATED BY THE ENGINEERS. BUT, THERE IS NO ORGANIZATIONAL OR FUNCTIONAL REQUIREMENT OUTSIDE OF THAT INDICATED IN THE REQUEST FOR PROPOSAL WHICH ESTABLISHES A SPECIFIC NUMBER OF JUNIOR ENGINEERS OR DRAFTSMEN PERSONNEL FOR EACH OF THE KEY PEOPLE. CONSEQUENTLY, ANY STATEMENT TO THE EFFECT THAT BASED UPON THE STATED REQUIREMENTS FOR THESE KEY PERSONNEL A PROJECTION OF THE TOTAL NUMBER OF PERSONNEL CAN BE ACCURATELY ESTABLISHED IS ERRONEOUS. IT MIGHT NOT BE AMISS TO POINT OUT THAT THE SPECIFIC REQUIREMENT FOR THESE KEY ENGINEERS AND ARCHITECTS IS INTENDED TO PROVIDE A LEVEL OF SKILLS AND A MIX OF DISCIPLINES WHICH WILL ENABLE THE CONTRACTOR WITHOUT THE INTERCESSION OR ASSISTANCE OF GOVERNMENT PERSONNEL TO HANDLE EVERY ASPECT OF A TASK FROM ANALYSIS OF THE UNDERLYING PROBLEMS TO THE DELIVERY OF FINAL PLANS AND DRAWINGS UPON WHICH THE ALTERATION AND REPAIR WORK CAN BE RELIABLY UNDERTAKEN.'

SINCE THE ASPR COMMITTEE GAVE THE DEPARTMENT OF THE NAVY PERMISSION TO USE THE COST-PLUS-AWARD-FEE TYPE OF CONTRACT, THERE APPEARS TO BE NO BASIS UPON WHICH THIS OFFICE COULD QUESTION THE CONTRACTING OFFICER'S AUTHORITY TO ENTER INTO SUCH A CONTRACT AS NOT BEING, OR AS BEING IN CONFLICT WITH, A TYPE OF CONTRACT PERMITTED FOR USE IN THE ASPR. CF. B-159245, NOVEMBER 29, 1966.

IT IS ALSO THE LONG-STANDING RULE OF THIS OFFICE THAT IT IS PRIMARILY THE PROVINCE OF ADMINISTRATIVE OFFICERS TO DETERMINE THE NEEDS OF THE GOVERNMENT AND THE TERMS AND CONDITIONS BY WHICH THOSE NEEDS ARE TO BE MET. SEE B-159245, NOVEMBER 29, 1966. PURSUANT TO OUR REVIEW WE FIND NO BASIS TO QUESTION THE ADMINISTRATIVE DETERMINATION HERE INVOLVED.

IT MAY BE FOUND IN THE FUTURE THAT SOME OF THE FEATURES OF THIS PROCUREMENT ARE UNDESIRABLE AND NOT IN THE BEST INTEREST OF THE GOVERNMENT. IN SUCH EVENT WE CAN ONLY ASSUME THAT THE UNDESIRABLE ELEMENTS WILL BE CHANGED.