B-162465, FEBRUARY 14, 1968, 47 COMP. GEN. 448

B-162465, FEBRUARY 14, 1968, 47 COMP. GEN. 448

CONTRACTS - NEGOTIATION - EVALUATION FACTORS - DELIVERY SCHEDULES ALTHOUGH IT IS INAPPROPRIATE IN FORMALLY ADVERTISED PROCUREMENTS TO PERMIT BIDDERS TO SUBMIT ALTERNATE DELIVERY SCHEDULES, WHERE THE GOVERNMENT IN A REQUEST FOR PROPOSALS (RFP) INVITES ALTERNATE DELIVERY SCHEDULES ON THE BASIS OF FURNISHING OR WAIVING A FIRST ARTICLE REQUIREMENT AND PROVIDES FOR THE DISREGARD OF A 21 DAY OR LESS DELIVERY DIFFERENCE IN THE ALTERNATE SCHEDULES, FAILURE TO CONSIDER THE LOW OFFER BASED ON WAIVING THE FIRST ARTICLE REQUIREMENT IN FAVOR OF AN 18 DAY SHORTER DELIVERY SCHEDULE INVOLVING FURNISHING THE FIRST ARTICLE WAS INCONSISTENT WITH THE RFP AND THE PURPOSE OF "NEGOTIATION," PARAGRAPH 1- 1903 (A) OF THE ARMED SERVICES PROCUREMENT REGULATION NOT RESTRICTING THE EVALUATION OF DELIVERY DIFFERENCES BETWEEN ALTERNATE DELIVERY SCHEDULES THAT OFFER TO FURNISH OR TO WAIVE A FIRST ARTICLE REQUIREMENT. ALTHOUGH DUE TO THE EMERGENCY OF THE PROCUREMENT, THE AWARD WILL NOT BE DISTURBED, GUIDELINES TO PRECLUDE A RECURRENCE OF THE SITUATION ARE SUGGESTED.

TO THE SECRETARY OF THE ARMY, FEBRUARY 14, 1968:

REFERENCE IS MADE TO A LETTER DATED OCTOBER 20, 1967, FROM THE DIRECTOR OF PROCUREMENT AND PRODUCTION, HEADQUARTERS UNITED STATES ARMY MATERIEL COMMAND, FORWARDING A REPORT ON THE PROTEST OF THE JOY MANUFACTURING COMPANY AGAINST THE AWARD OF A CONTRACT TO DYNAMIC AIR ENGINEERING, INC., UNDER REQUEST FOR PROPOSALS (RFP) NO. DAAH01-67-R 2414, ISSUED BY THE REDSTONE ARSENAL.

THE RFP WAS ISSUED TO 20 FIRMS ON MAY 18, 1967, AND SOLICITED PROPOSALS ON A FIXED-PRICE BASIS FOR FURNISHING 123 ITEMS DESCRIBED AS FAN, BLOWER ASSEMBLY, APN 9096824, FOR USE IN THE HAWK MISSILE SYSTEM. IN ADDITION TO THE PRODUCTION QUANTITY, THE RFP REQUIRED ONE ITEM FOR FIRST ARTICLE TESTING BY THE GOVERNMENT. EMPHASIS WAS PLACED ON EARLY DELIVERY IN THE RFP AT PAGE 5, WHICH SPECIFIED THAT: "NOTE: THIS REQUIREMENT HAS BEEN ASSIGNED I.P.D. 06 FOR WHICH AN URGENT NEED HAS BEEN ESTABLISHED. THE PROPOSED DELIVERY WILL BE A PRIME FACTOR IN EVALUATION OF PROPOSALS. (SEE PAGE 6, ARTICLE I)"

THE RFP ON PAGES 6 AND 7 SET FORTH THE DELIVERY TERMS AND CONDITIONS AS FOLLOWS: "I. ELIVERY:

"1. REQUIRED DELIVERY SCHEDULE: (X) NO FIRST ARTICLE: 123 EACH ON OR BEFORE 300 CALENDAR DAYS AFTER DATE OF CONTRACT. (X) FIRST ARTICLE REQUIRED: FIRST ARTICLE 1 EACH ON OR BEFORE 120 CALENDAR DAYS AFTER DATE OF CONTRACT. PRODUCTION QUANTITY 123 EACH ON OR BEFORE 492 CALENDAR DAYS AFTER DATE OF CONTRACT.

"2. ALTERNATE DELIVERY SCHEDULE:

"A. IF THE OFFEROR CAN IMPROVE UPON THE REQUIRED DELIVERY SCHEDULE ABOVE, THE BEST DELIVERY SCHEDULE WITHIN THE OFFEROR'S CAPABILITY SHOULD BE SET FORTH BELOW: ( ( NO FIRST ARTICLE: ----- EACH ON OR BEFORE ----- CALENDAR DAYS AFTER DATE OF CONTRACT. ( ( FIRST ARTICLE REQUIRED: ----- EACH ON OR BEFORE ----- CALENDAR DAYS AFTER DATE OF CONTRACT. PRODUCTION QUANTITY -- --- EACH ON OR BEFORE ----- CALENDAR DAYS AFTER DATE OF CONTRACT.

"3. EVALUATION SHALL BE MADE AS FOLLOWS:

"A. IF NO EARLIER ALTERNATE DELIVERY SCHEDULE IS RECEIVED, AWARD WILL BE MADE TO THE LOWEST RESPONSIVE RESPONSIBLE OFFEROR WITHIN THE REQUIRED DELIVERY SCHEDULE.

"B. IF OFFERS WHICH PROPOSE DELIVERY EARLIER THAN THE REQUIRED DELIVERY SCHEDULE ARE RECEIVED, AWARD MAY BE MADE TO THE LOWEST RESPONSIVE RESPONSIBLE OFFEROR WITH THE BEST DELIVERY SCHEDULE, OR

"C.IF AN OFFER IS RECEIVED WHICH PROPOSES EARLIEST DELIVERY BUT AT A PRICE THAT IS NOT THE LOWEST, THE GOVERNMENT MAY ELECT TO MAKE AWARD BASED ON EARLIEST DELIVERY. * * *

"D. DIFFERENCE OF 21 DAYS OR LESS BETWEEN ALTERNATE DELIVERY SCHEDULES PROPOSED WILL NOT BE CONSIDERED IN EVALUATING FOR EARLY DELIVERY AWARD.

"E. NOTWITHSTANDING ANY OTHER PROVISIONS OF THE RFP, THE GOVERNMENT RESERVES THE RIGHT TO MAKE AWARD BASED UPON THE DELIVERY SCHEDULE WHICH BEST SERVES ITS INTEREST.'

THE FIRST ARTICLE APPROVAL PROVISION OF THE RFP PROVIDED THAT NOTICE SHALL BE GIVEN TO THE CONTRACTOR WITHIN 72 CALENDAR DAYS AFTER RECEIPT OF THE FIRST ARTICLE OF THE APPROVAL OR DISAPPROVAL OF THE FIRST ARTICLE AFTER GOVERNMENT TESTING.

FOUR RESPONSIVE OFFERS WERE RECEIVED AND SUBSEQUENT TO NEGOTIATION, THE PRICES AND DELIVERY TERMS WERE AS FOLLOWS:

OFFEROR QUANTITY UNIT PRICE TOTAL

------- -------- ---------- -- -- 1. DYNAMIC AIR ENGINEERING, INC. 124 $243.25 $30,163

FIRST ARTICLE WAIVER NOT GRANTED. 2. JOY MANUFACTURING COMPANY 123 $231.00 $28,413

FIRST ARTICLE WAIVED.

TOTAL EVALUATED OFFER: $28,413 3. IMC MAGNETICS CORP. 124 $175.50 $21,762

FIRST ARTICLE WAIVER NOT GRANTED. 4. SEMCO, INC. 124 $287.50 $35,650

FIRST ARTICLE WAIVER NOT GRANTED.

OFFEROR FIRST ARTICLE PROD. QTY.

DELIVERY DELIVERY

DYNAMIC 90 DADC 180 DADC

JOY 90 DADC 288 DADC

IMC 120 DADC 492 DADC

SEMCO 120 DADC 280 DADC

(DADC - DAYS AFTER DATE OF CONTRACT)

SINCE IT WAS ADMINISTRATIVELY DETERMINED THAT DYNAMIC OFFERED THE EARLIEST DELIVERY AND BECAUSE OF THE URGENT REQUIREMENT FOR THE ITEM, THE CONTRACT WAS AWARDED TO DYNAMIC ON JUNE 27, 1967, IN THE AMOUNT OF $29,919.75, PLUS $243.25 FOR THE FIRST ARTICLE. UPON REVIEW OF THE RECORD BEFORE US, WE MUST CONCLUDE THAT THE OFFER OF JOY, AS MODIFIED DURING NEGOTIATIONS, WAS NOT PROPERLY EVALUATED UNDER THE CRITERIA SET FORTH IN THE RFP.

WE UNDERSTAND THAT NEGOTIATIONS WERE CONDUCTED DURING THE PERIOD JUNE 16 THROUGH 21, 1967, AND THAT ALL OFFERORS WERE INFORMED THAT AWARD MIGHT BE MADE ON THE BASIS OF THE EARLIEST PROPOSED DELIVERY SCHEDULE. WE FURTHER UNDERSTAND THAT NEGOTIATIONS WERE CONDUCTED WITH JOY AND THAT IT REDUCED ITS UNIT PRICE TO $231 AND ALSO REDUCED ITS DELIVERY SCHEDULE, WITH NO FIRST ARTICLE REQUIRED, FROM 210 DAYS TO 198 DAYS, AND REDUCED ITS DELIVERY SCHEDULE, WITH FIRST ARTICLE REQUIRED, TO 288 DAYS WITH 90 DAYS FOR THE FIRST ARTICLE DELIVERY. HOWEVER, JOY'S PROPOSAL REFLECTING ITS REVISED DELIVERY SCHEDULE WAS EVALUATED AND COMPARED TO DYNAMIC'S DELIVERY SCHEDULE ON THE BASIS OF THE ALTERNATE SCHEDULES PROVIDING FOR THE FURNISHING OF THE FIRST ARTICLE. THAT IS, JOY'S ALTERNATE SCHEDULE OF 90 DAYS FOR DELIVERY OF THE FIRST ARTICLE AND 288 DAYS FOR PRODUCTION DELIVERY WAS COMPARED TO DYNAMIC'S ALTERNATE SCHEDULE OF 90 DAYS FOR THE FIRST ARTICLE DELIVERY AND 180 DAYS FOR PRODUCTION DELIVERY.

THE DELIVERY TERMS AND CONDITIONS OF THE RFP WERE STATED IN THE LIGHT OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1903 (A) WHICH PROVIDES, IN PART:

"/A) * * * TO PERMIT PROPER EVALUATION OF BIDS OR OFFERS WHERE ONE OR MORE BIDDERS OR OFFERORS MAY BE ELIGIBLE TO HAVE FIRST ARTICLE APPROVAL TESTS WAIVED, THE SOLICITATION SHALL PERMIT THE SUBMISSION OF ALTERNATIVE BIDS OR OFFERS -- ONE INCLUDING FIRST ARTICLE APPROVAL TESTS AND THE OTHER EXCLUDING SUCH TESTS; SHALL STATE CLEARLY THE RELATIONSHIP OF THE FIRST ARTICLE TO THE CONTRACT QUANTITY (SEE PARAGRAPH (E) OF THE CONTRACT CLAUSES IN 1-1906), AND SHALL PROVIDE FOR:

"/I) DELIVERY SCHEDULES FOR THE PRODUCTION QUANTITY IN ACCORDANCE WITH 1- 305; AS APPROPRIATE, THE DELIVERY SCHEDULES --

"/B) MAY PROVIDE FOR A SHORTER DELIVERY SCHEDULE WHERE THE FIRST ARTICLE APPROVAL IS WAIVED AND EARLIER DELIVERY IS IN THE INTEREST OF THE GOVERNMENT, PROVIDED THAT IN THE LATTER CASE ANY DIFFERENCE IN DELIVERY SCHEDULES RESULTING FROM A WAIVER OF FIRST ARTICLE APPROVAL SHALL NOT BE A FACTOR IN EVALUATION FOR AWARD. * * *"

THE LEGAL ANALYSIS ATTACHED TO THE OCTOBER 20, 1967, REPORT OFFERED THE FOLLOWING COMMENTS ON THIS ASPR EVALUATION RESTRICTION:

"ANOTHER ERROR MADE BY THE PCO (PROCUREMENT CONTRACTING OFFICER) ACCORDING TO JOY MANUFACTURING IS THAT HE (PCO) DID NOT PROPERLY APPLY PARAGRAPH I.3.D. ON PAGE 7 OF THE RFP WHICH READS AS FOLLOWS: DIFFERENCE OF 21 DAYS OR LESS BETWEEN ALTERNATE DELIVERY SCHEDULES PROPOSED WILL NOT BE CONSIDERED IN EVALUATING FOR EARLY DELIVERY AWARD. AS PREVIOUSLY NOTED A FIRST ARTICLE WAS REQUIRED FOR THIS PROCUREMENT. LIKEWISE, IT IS NOTED THAT THE 4 OFFERORS SUBMITTED PROPOSALS ON THE PRODUCTION QUANTITY WITH FIRST ARTICLE AS WELL AS THE PRODUCTION QUANTITY WITHOUT FIRST ARTICLE. FIRST ARTICLE WAS WAIVED FOR JOY MANUFACTURING COMPANY BUT WAS NOT WAIVED FOR DYNAMIC AIR ENGINEERING. IN EVALUATING PROPOSALS, AS IN THIS CASE ON EARLIEST DELIVERY, THE CONTRACTING OFFICER IS NOT PERMITTED TO ACCEPT AND APPLY ONLY ONE ISOLATED PROVISION OF A RFP IF, IN FACT, OTHER PROCUREMENT REGULATIONS ARE APPLICABLE TO THE SAME ISSUE. ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1903 (A) (I) (B) MUST BE APPLIED IN CONJUNCTION WITH THE RFP PROVISION I.3.D. ABOVE MENTIONED. * * * IT IS NOT DENIED THAT ASPR 1-1903 (A) (I) DEALS WITH THE DELIVERY SCHEDULES AS ESTABLISHED BY THE GOVERNMENT IN ITS SOLICITATIONS AS THE REQUIRED DELIVERY SCHEDULES. HOWEVER, IT IS ILLOGICAL TO ASSUME THAT THIS REGULATION IS NOT LIKEWISE APPLICABLE TO AN EARLIER ALTERNATE DELIVERY SCHEDULE AS EXISTS IN THE SUBJECT RFP. THEREFORE, IN READING THE ABOVE CITED ASPR PROVISION IN CONJUNCTION WITH THE RFP PROVISION (I.3.D.) ON PAGE 7, JOY MANUFACTURING COMPANY'S DELIVERY SCHEDULE WITH FIRST ARTICLE MUST BE COMPARED WITH DYNAMIC AIR ENGINEERING'S DELIVERY SCHEDULE WITH FIRST ARTICLE. THE CONTRACTING OFFICER WOULD HAVE VIOLATED ASPR 1-1903 (A) (I) DYNAMIC'S ALTERNATE DELIVERY WITH FIRST ARTICLE. THEREFORE, SINCE THERE IS A DIFFERENCE OF 108 DAYS BETWEEN JOY'S ALTERNATE DELIVERY HAD HE COMPARED JOY'S ALTERNATE DELIVERY WITHOUT FIRST ARTICLE TO THAT OF AND DYNAMIC'S ALTERNATE DELIVERY, THE PROVISION ON PAGE 7 OF THE RFP RELATIVE TO 21 DAYS DIFFERENCE IS NOT APPLICABLE.'

WE NOTE THAT DYNAMIC OFFERED AN ALTERNATE DELIVERY SCHEDULE IN ITS PROPOSAL OF 90 DAYS FOR THE FIRST ARTICLE DELIVERY AND 150 DAYS FOR PRODUCTION DELIVERY. DURING NEGOTIATIONS, DYNAMIC WAS ADVISED THAT ITS ALTERNATE DELIVERY SCHEDULE WAS UNREALISTIC SINCE 72 DAYS WOULD BE REQUIRED FOR NOTIFICATION OF THE FIRST ARTICLE APPROVAL. THEREAFTER, DYNAMIC REVISED ITS DELIVERY TIME, WITH THE FIRST ARTICLE REQUIRED, TO 180 DAYS FOR PRODUCTION DELIVERY; THE FIRST ARTICLE DELIVERY REMAINED THE SAME. THESE NEGOTIATIONS WITH DYNAMIC, AS WELL AS THOSE WITH JOY, ESTABLISH THAT IMPROVEMENT OF THE REQUIRED DELIVERY SCHEDULE WAS CONSIDERED TO BE DESIRABLE AND IN THE GOVERNMENT'S INTEREST. WE FIND NOTHING IN THE RECORD, OTHER THAN RELIANCE UPON ASPR 1-1903 (A), TO EXPLAIN THE BASIS FOR THE CONTRACTING OFFICER'S DETERMINATION THAT DYNAMIC'S REVISED DELIVERY SCHEDULE WHICH INVOLVED THE FURNISHING OF A FIRST ARTICLE WITH THE POSSIBILITY THAT ADDITIONAL TIME WOULD BE CONSUMED IN GOVERNMENT TESTING OF ABOUT 72 DAYS WAS MORE IN THE GOVERNMENT'S INTEREST THAN THE REVISED SCHEDULE OFFERED BY JOY OF 198 DAYS WITHOUT THE FIRST ARTICLE DELIVERY.

THE EXTRACT FROM THE LEGAL ANALYSIS, QUOTED ABOVE, INDICATES, IN OUR OPINION, A MISCONCEPTION OF THE EVALUATION RESTRICTION CONTAINED IN ASPR 1 -1903 (A), IN THAT IT SEEMS TO CONSTRUE THE RESTRICTION AS ABSOLUTELY PRECLUDING THE EVALUATION OF ANY DIFFERENCE BETWEEN JOY'S ALTERNATE DELIVERY SCHEDULE WITHOUT THE FIRST ARTICLE AND DYNAMIC'S ALTERNATE SCHEDULE WITH THE FIRST ARTICLE. THIS PROVISION (ASPR 1-1903 (A) (I) (B) ( HAS REFERENCE TO A SITUATION WHEREIN THE SOLICITATION ITSELF CONTAINS BOTH A "REQUIRED" AND AN "ALTERNATE" OR SHORTER DELIVERY SCHEDULE WHEN A FIRST ARTICLE REQUIREMENT IS WAIVED. SINCE THE INCLUSION OF DUAL DELIVERY SCHEDULES NECESSARILY RESULTS IN A DELIBERATE "DIFFERENCE" AS TO WHICH OFFERORS OR BIDDERS ARE ON NOTICE, SUCH DIFFERENCE CLEARLY MAY NOT BE WEIGHED AS BETWEEN COMPETING OFFERORS OR BIDDERS. THAT IS TO SAY, IT WOULD BE ILLOGICAL TO "EVALUATE" THE TIME DIFFERENCES IN DUAL DELIVERY SCHEDULES IMPOSED BY THE GOVERNMENT TO EQUALIZE THE ADVANTAGE DERIVED FROM THE FIRST ARTICLE WAIVER AND RESPONDED TO IN ACCORDANCE WITH THEIR TERMS BY COMPETING OFFERORS OR BIDDERS.

WE HAVE HELD THAT IT IS INAPPROPRIATE IN FORMALLY ADVERTISED PROCUREMENTS TO PERMIT BIDDERS TO OFFER THEIR OWN ALTERNATE DELIVERY SCHEDULES SINCE THE RESULTING BID EVALUATION WOULD BE BASED ON FACTORS DETERMINED AFTER BID OPENING. 41 COMP. GEN. 599. HOWEVER, WHERE, AS HERE, THE GOVERNMENT SPECIFICALLY REQUESTS THAT OFFERORS UNDER A NEGOTIATED PROCUREMENT TENDER THEIR OWN SHORTER DELIVERY SCHEDULES ON THE BASIS OF FURNISHING THE FIRST ARTICLE AND PRODUCTION ITEMS AND ALSO ON THE BASIS THAT NO FIRST ARTICLE WILL BE FURNISHED BECAUSE OF WAIVER THEREOF, WE BELIEVE THAT NEGOTIATION PROCEDURES REQUIRE THAT THE ALTERNATE DELIVERY SCHEDULES BE CONSIDERED AND EVALUATED AS ONE OF THE MORE IMPORTANT ELEMENTS OF THE PROCUREMENT. WOULD BE INCONSISTENT WITH THE PURPOSE OF "NEGOTIATION" TO ENCOURAGE THE SUBMISSION OF ALTERNATE DELIVERY SCHEDULES AND THEN REFUSE TO CONSIDER SUCH ALTERNATE SCHEDULES BECAUSE OF THE GENERAL ASPR RESTRICTION AGAINST THE EVALUATION OF DIFFERENCES BETWEEN DELIVERY SCHEDULES RESULTING FROM THE FIRST ARTICLE WAIVER.

THE RFP PROVIDED THAT IF AN OFFER IS RECEIVED WHICH PROPOSES DELIVERY EARLIER THAN THE REQUIRED DELIVERY SCHEDULE, AWARD MAY BE MADE TO THE LOWEST RESPONSIBLE OFFEROR WITH THE BEST DELIVERY SCHEDULE. JOY OFFERED TO DELIVER THE PRODUCTION QUANTITY WITHOUT THE FIRST ARTICLE WITHIN 198 DAYS AFTER DATE OF CONTRACT AT A PRICE LOWER THAN DYNAMIC-S. WE FIND NO BASIS, EITHER UNDER THE ASPR OR THE RFP, WHICH WOULD HAVE PRECLUDED THE COMPARISON OF JOY'S 198-DAY DELIVERY OFFER WITH DYNAMIC'S 180-DAY DELIVERY OFFER. ON THE CONTRARY, WE BELIEVE THAT THE 18-DAY DIFFERENCE BETWEEN THESE ALTERNATE OFFERS SHOULD HAVE BEEN ELIMINATED FROM THE EVALUATION BY APPLICATION OF THE RFP PROVISION THAT A DIFFERENCE "OF 21 DAYS OR LESS BETWEEN ALTERNATE DELIVERY SCHEDULES PROPOSED WILL NOT BE CONSIDERED IN EVALUATING FOR EARLY DELIVERY AWARD.' IN OUR VIEW, IT WAS IMPROPER TO SPECIFICALLY INVITE EARLIER ALTERNATE DELIVERY SCHEDULES AND THEN REFUSE TO APPLY THE EQUALIZING FACTOR OF 21 DAYS OR LESS TO THESE SCHEDULES TO DETERMINE THE MOST ADVANTAGEOUS OFFER, PRICE AND OTHER FACTORS CONSIDERED. JOY MANUFACTURING COMPANY ALSO QUESTIONED THE PROPRIETY OF ASSIGNING A SOUTHEAST ASIA (SEA) ZERO BALANCE TO THIS PROCUREMENT. HOWEVER, THE RECORD BEFORE US INDICATES THAT SUCH A CONDITION DID EXIST AT THE TIME THE CONTRACT WAS AWARDED TO DYNAMIC AIR ENGINEERING, INC. MOREOVER, JOY CONTENDS THAT, IF IN FACT THE ITEMS WERE IN ZERO BALANCE STATUS, SUCH STATUS WOULD BE ELIMINATED BY THE FULFILLMENT OF A PRIOR CONTRACT (DAAH01-67-C-0609) BETWEEN JOY MANUFACTURING COMPANY AND THE GOVERNMENT FOR 56 IDENTICAL ITEMS. CONTRACT DAAH01-67-C-0609 WAS IN FACT IN FORCE ON THE DATE THE SUBJECT CONTRACT WAS EXECUTED AND CALLED FOR THE SUPPLYING BY JOY MANUFACTURING COMPANY OF 56 IDENTICAL UNITS TO BE DELIVERED ON AUGUST 11, 1967. HOWEVER, THE FILE REFLECTS THAT THE TIMELY RECEIPT OF THE 56 UNITS FROM JOY MANUFACTURING COMPANY UNDER CONTRACT DAAH01-67-C-0609 WOULD NOT HAVE CURED THE ZERO BALANCE STATUS.

ALTHOUGH WE CONCLUDE THAT THE EVALUATION OF JOY'S NEGOTIABLE OFFER WAS NOT IN ACCORD WITH SOUND PROCUREMENT PRACTICES, WE ARE NOT DISPOSED TO QUESTION THE AWARD MADE TO DYNAMIC IN VIEW OF THE URGENCY OF THE PROCUREMENT. HOWEVER, WE SUGGEST THAT APPROPRIATE GUIDELINES BE ISSUED TO PROCUREMENT PERSONNEL TO PRECLUDE A RECURRENCE OF THIS SITUATION.