B-164717, DEC. 13, 1968

B-164717, DEC. 13, 1968

TO STELMA, INCORPORATED:

REFERENCE IS MADE TO YOUR TELEGRAM AND LETTERS DATED JUNE 27, 1968, AND TO ADDITIONAL CORRESPONDENCE, PROTESTING THE AWARD OF A CONTRACT TO ANOTHER OFFEROR UNDER REQUEST FOR PROPOSALS (RFP) F19628-68-R-0008, ISSUED BY THE UNITED STATES AIR FORCE, HEADQUARTERS, ELECTRONIC SYSTEMS DIVISION, L. G. HANSCOM FIELD, BEDFORD, MASSACHUSETTS.

THE SUBJECT RFP INVOLVED THE DEVELOPMENT AND PRODUCTION OF A SMALL QUANTITY OF TWO TYPES OF MODEM TERMINALS (MODEMS) FOR THE AEROSPACE INSTRUMENTATION PROGRAM OFFICE AT THE ELECTRONIC SYSTEMS DIVISION (ESD). THE RFP WAS ISSUED ON DECEMBER 18, 1967, AFTER PUBLICATION OF ADVANCE NOTICE OF THE PROCUREMENT IN THE COMMERCE BUSINESS DAILY TO INTERESTED POTENTIAL SUPPLIERS. BY MARCH 1, 1968, THE CLOSING DATE FOR SUBMISSION OF PROPOSALS, FOUR PROPOSALS HAD BEEN RECEIVED. AFTER AN INITIAL EVALUATION BY ESD, ONE OF THE FOUR PROPOSALS WAS REJECTED AS "UNFEASIBLE.' NEGOTIATIONS THEREAFTER WERE CONDUCTED WITH THE REMAINING THREE OFFERORS AND AFTER THE SUBMISSION OF REVISED PROPOSALS THE FOLLOWING PRICES WERE ABSTRACTED:

COLLINS RADIO $997,064

IBM 850,000

STELMA857,794

THE STELMA PRICE CONSISTED OF ITS BASIC PROPOSAL PRICE OF $849,994 PLUS AN ADDITIONAL $7,800 ADDED BY A TELEGRAPHIC MODIFICATION RECEIVED ON MAY 22, 1968, THE CLOSING DATE FOR PROPOSAL MODIFICATION. THE QUESTION WHETHER THIS MODIFICATION SHOULD HAVE SERVED TO INCREASE THE PRICE OF STELMA'S BASIC PROPOSAL IS ONE OF THE ELEMENTS OF YOUR PROTEST AND WILL BE DISCUSSED BELOW.

IN ADDITION TO THE INITIAL EVALUATION AND NEGOTIATIONS CONDUCTED BY ESD, IN ACCORDANCE WITH THE PROVISIONS OF THE RFP, A TECHNICAL EVALUATION OF THE THREE REMAINING PROPOSALS WAS CONDUCTED BY THE MITRE CORPORATION, A SYSTEM ENGINEERING CONTRACTOR OF THE AIR FORCE. THIS TECHNICAL CONSULTANT ASSISTANCE BY MITRE WAS PROVIDED FOR IN PARAGRAPH 20 OF THE RFP INSTRUCTIONS AND CONDITIONS. THE MITRE EVALUATION REPORTEDLY CONSISTED PRIMARILY OF A COMPUTER SIMULATION OF THE MODULATION TECHNIQUES OF THE COLLINS, IBM, AND STELMA PROPOSALS. FINALLY, AFTER COMPLETION OF THE MITRE EVALUATION, AN "OVERALL FINAL TECHNICAL EVALUATION" REPORT DATED MAY 31, 1968, WAS PREPARED BY ESD PERSONNEL.

WITH REGARD TO THE MITRE EVALUATION THIS REPORT STATED,"THE RESULTS OF THE SIMULATION HAVE SHOWN THAT THE COLLINS, IBM OR STELMA TECHNIQUE, IF IMPLEMENTED PROFESSIONALLY, WILL PROVIDE AN ACCEPTABLE SYSTEM.' THE REPORT RATED THE COLLINS PROPOSAL AS THE BEST FROM A TECHNICAL STANDPOINT, WITH IBM SECOND AND STELMA THIRD. CONCERNING THE STELMA PROPOSAL, THE REPORT STATED AS FOLLOWS:

"ALTHOUGH THE SIMULATION SHOWS THAT THE STELMA TECHNIQUE MAY NOT REQUIRE EQUALIZATION TO MEET THE SPECIFICATION, STELMA IN THEIR PROPOSAL DID NOT RECOGNIZE NOR SHOW ANY ANALYSIS TO THIS EFFECT. WITH THE RESULTS OF THE SIMULATION, THIS OFFICE NOW FEELS THAT THE SYSTEM PROPOSED BY STELMA COMES ALMOST WITHIN THE SAME DEGREE OF ACCEPTABILITY AS COLLINS AND IBM. HOWEVER, THE STELMA PROPOSAL DID NOT JUSTIFY THE SELECTION OF THE SYSTEM (E.G., MODULATION OR EQUALIZATION METHOD). THIS INABILITY TO IDENTIFY AND JUSTIFY AN APPROACH INCREASES ENGINEERING RISK. THEREFORE, AN AWARD TO STELMA IS WARRANTED ONLY IF THE DIFFERENCE IN BID PRICE JUSTIFIES THE ADDED RISK.'

SINCE THE IBM PRICE WAS EVALUATED AS THE LOWEST RECEIVED AND WAS SIGNIFICANTLY LOWER THAN THAT PROPOSED BY COLLINS, AND SINCE THE IBM TECHNICAL APPROACH, ALTHOUGH NOT AS DESIRABLE AS THAT PROPOSED BY COLLINS, WAS DETERMINED TO BE ACCEPTABLE, IT WAS DETERMINED THAT THE AWARD SHOULD BE MADE TO IBM. AN AWARD ACCORDINGLY WAS MADE TO IBM ON JUNE 24, 1968. WE FIND NO LEGAL BASIS TO QUESTION THIS AWARD.

BY TELEGRAM DATED JUNE 21, 1968, ADDRESSED TO THE CONTRACTING OFFICER, YOU ADVISED OF YOUR INTENT TO SUBMIT A PROTEST TO OUR OFFICE. THIS TELEGRAM, HOWEVER, WAS NOT RECEIVED BY THE CONTRACTING OFFICER UNTIL AFTER THE AWARD HAD BEEN MADE TO IBM. WHILE YOU MAINTAIN THAT YOU HAD ORALLY ADVISED THE CONTRACTING OFFICER OF YOUR INTENT TO SUBMIT A PROTEST BEFORE AWARD WAS MADE, RECEIPT OF SUCH ORAL ADVICE IS DENIED BY THAT OFFICIAL. IN ANY EVENT, HAD THE CONTRACTING OFFICER BEEN INFORMED OF YOUR INTENT TO SUBMIT A PROTEST TO OUR OFFICE BEFORE AWARD WAS MADE, HE WAS NOT REQUIRED TO WITHHOLD AWARD IN ANTICIPATION OF YOUR ACTUAL PROTEST.

THE SUBSTANCE OF YOUR PROTEST IS THAT ONLY THE TECHNICAL APPROACH OFFERED BY STELMA FULLY SATISFIED THE RFP SPECIFICATIONS AND THAT ACCEPTANCE OF ANY OTHER APPROACH WITHOUT RELAXATION OF THE SPECIFICATIONS WAS IMPROPER. SPECIFICALLY, IN A LETTER DATED MAY 22, 1968, WHICH BECAME A PART OF THE STELMA PROPOSAL, THE FOLLOWING STATEMENT WAS MADE: "BECAUSE OF THE ERROR RATE VS. SIGNAL-TO-NOISE RATIO REQUIREMENTS FORALL DATA RATES, STELMA'S DESIGN EMPLOYS 4-LEVEL VS BAND FOR SIGNAL-TO-NOISE RATIO AND A DATA BUFFER FOR NON-DISCRETE RATES TO ENSURE MEETING AIR FORCE SPECIFICATION REQUIREMENTS. STELMA'S INVESTIGATION DISCLOSES THAT ANY OTHER MODULATION TECHNIQUE AND LACK OF DATA BUFFER WILL RESULT IN DEGRADATION OF ERROR RATE PERFORMANCE FOR THE SOURCE DATA RATE MODE. THIS DEGRADATION COULD BE AS BAD AS AN ORDER OF MAGNITUDE WORSE THAN THE ERROR RATE REQUIREMENTS.' SIMILARLY, A LETTER DATED JUNE 19, 1968, AFTER THE FINAL DATE FOR PROPOSAL MODIFICATIONS, STATED:

"IN THE ATTACHED ENCLOSURES, WE ARE PROVIDING IRREFUTABLE PROOF THAT (A) IF A VSB SYSTEM IS USED, ONLY A 4 LEVEL VSB DESIGN CAN MEET THE RFP REQUIREMENTS AND (B) AN 8 LEVEL VSB SYSTEM WILL NOT MEET THE TECHNICAL REQUIREMENTS OF THE GOVERNMENT'S BID REQUEST.

"WE BELIEVE IT IS IN THE BEST INTEREST OF THE AIR FORCE AND EQUITABLE PROCUREMENT PRACTICE TO CALL THIS FACT TO YOUR ATTENTION.'

THE JUNE 19 LETTER ALSO REQUESTED A MEETING TO DISCUSS STELMA'S CONTENTIONS WITH REGARD TO TECHNICAL APPROACH. FINALLY, A LETTER OF ENDORSEMENT OF THE STELMA APPROACH FROM PROFESSOR W. R. BENNETT, A RECOGNIZED AUTHORITY IN THE DATA TRANSMISSION FIELD, WAS SUBMITTED ON JUNE 24, 1968.

IN ADDITION TO YOUR ARGUMENTS THAT ONLY THE STELMA APPROACH COULD MEET THE SPECIFICATIONS, YOU ALSO CONTEND THAT YOUR TELEGRAM OF MAY 22, 1968, INCREASING YOUR PRICE BY $7,800, WAS NOT DIRECTED TO YOUR BASIC PROPOSAL BUT BY ITS TERMS WAS CLEARLY MEANT TO APPLY TO THE PRICE QUOTED FOR OPTIONAL ITEMS CONTAINED IN YOUR PROPOSAL. YOU THEREFORE CONTEND THAT THE STELMA PRICE SHOULD HAVE BEEN $849,994, OR $6 LOWER THAN THAT OFFERED BY IBM, AND THAT AWARD SHOULD HAVE BEEN MADE TO STELMA AS THE LOWEST QUALIFIED OFFEROR.

WITH REGARD TO YOUR CONTENTIONS CONCERNING THE APPROACH REQUIRED TO MEET THE RFP SPECIFICATIONS AND THE ENDORSEMENT OF THE STELMA APPROACH BY PROFESSOR BENNETT, THE REPORT SUBMITTED TO OUR OFFICE BY THE AIR FORCE STATES AS FOLLOWS:

"WE NOTE THAT THE AIR FORCE (ESD) AND MITRE WERE AWARE OF PROFESSOR BENNETT'S ANALYSIS DURING THE NEGOTIATIONS. THE MITRE ANALYSIS ADDRESSED THE QUESTION OF THE 7 LEVEL VERSUS THE 4 LEVEL CODE. THIS ANALYSIS CONFIRMS PROFESSOR BENNETT'S POINT THAT THE 4 LEVEL CODE HAS A 3 DB ADVANTAGE OVER THE 7 LEVEL CODE AND THAT HIS ANALYSIS IS CORRECT FOR THE THEORETICAL PROBLEM AS HE FORMULATED IT. HOWEVER, AS SHOWN IN THE ATTACHED PAPERS, STELMA, INC. NEGLECTED TO ACCOUNT FOR THE DIFFERENCE BETWEEN THE DEFINITIONS FOR SIGNAL TO NOISE RATIO AND THE ENERGY PER BIT TO NOISE SPECTRAL DENSITY RATIO (EO/NO). SINCE THESE TWO QUANTITIES ARE, IN GENERAL, NOT EQUAL, FAILURE OF STELMA TO ADHERE TO THE DEFINITIONS PROVIDED IN THE GOVERNMENT SPECIFICATIONS RESULTED IN AN ERRONEOUS CONCLUSION ON THEIR PART. * * *.

"* * * WE CONCUR THAT THERE WOULD BE MULTIPLE ERROR PROPAGATION IN 7 LEVEL CODE TECHNIQUE FOR THE CODE SHOWN IN THE BENNETT ANALYSIS. HOWEVER, THIS PROBLEM HAS BEEN ELIMINATED BY IBM USING A DIFFERENT TECHNIQUE. THIS IS SHOWN IN IBM ATTACHMENT I, SECTION III, QUESTION 9. FURTHER, WE ASSUME THAT THIS NEW APPROACH WAS UNKNOWN TO STELMA, INC. DURING THE COURSE OF NEGOTIATIONS.'

THE DRAFTING OF SPECIFICATIONS TO MEET THE MINIMUM NEEDS OF THE GOVERNMENT IS PRIMARILY A FUNCTION OF THE ADMINISTRATIVE AGENCY AS THAT AGENCY IS UNIQUELY KNOWLEDGEABLE AS TO WHAT WILL SERVE THE GOVERNMENT'S MINIMUM NEEDS IN A GIVEN INSTANCE. SIMILARLY, THE DETERMINATION OF WHETHER A GIVEN TECHNICAL APPROACH MEETS THE GOVERNMENT'S SPECIFICATIONS IS PRIMARILY WITHIN THE DISCRETION VESTED IN THE CONTRACTING OFFICER AND WILL NOT ORDINARILY BE QUESTIONED BY OUR OFFICE. IN THIS REGARD, THE FOLLOWING STATEMENT WAS MADE IN B 139830, AUGUST 19, 1959: "THIS OFFICE HAS NEITHER AN ENGINEERING STAFF NOR A TESTING LABORATORY TO EVALUATE THE TECHNICAL ASPECTS OF SPECIFICATIONS. MOREOVER, IN DISPUTES OF FACT BETWEEN A PROTESTANT AND A GOVERNMENT AGENCY, WE USUALLY ARE REQUIRED TO ACCEPT THE ADMINISTRATIVE REPORT AS CORRECT. WHETHER A PARTICULAR BID IS RESPONSIVE TO THE TECHNICAL DETAILS OF THE SPECIFICATIONS IS NOT A MATTER, ORDINARILY, FOR OUR DETERMINATION. * * *.'

ACCORDINGLY, WE MUST CONCLUDE THAT THE DETERMINATION THAT THE IBM PROPOSAL NOT ONLY MET THE RFP SPECIFICATIONS BUT THAT IT WAS ACTUALLY MORE DESIRABLE THAN THE STELMA PROPOSAL IS NOT SUBJECT TO QUESTION BY OUR OFFICE.

ON THE MATTER OF THE STELMA TELEGRAPHIC PRICE MODIFICATION, WE LIKEWISE CONCLUDE THAT THE AIR FORCE INTERPRETATION WAS CORRECT. AS AN OPTION TO ITS PROPOSAL AS ORIGINALLY SUBMITTED, STELMA OFFERED "ORDER WIRE SIGNALLING" AND INCLUDED IN THIS FEATURE AN ADDITIONAL OPTIONAL CAPABILITY DESCRIBED AS A "REMOTE CAPABILITY.' DURING NEGOTIATIONS, IT WAS DETERMINED THAT "ORDER WIRE SIGNALLING" WAS REQUIRED IN ANY RESULTING CONTRACT, AND ALL OFFERORS, INCLUDING STELMA, AMENDED THEIR PROPOSALS TO INCLUDE THIS CAPABILITY. THE "REMOTE CAPABILITY," HOWEVER, WAS NOT INCLUDED IN THE AMENDMENT. THE PERTINENT PART OF THE DISPUTED TELEGRAM, RECEIVED ON THE LAST DAY FOR THE MODIFICATION OF PROPOSALS, IS SET OUT BELOW: "PLEASE MODIFY STELMA BID RESPONSE TO REFERENCED RFP AS FOLLOWS:

"SUB-ITEM INCREASE IN PRICE BY

1AA $3900

1AC3900 "THIS INCREASE IS BASED ON PROVIDING VOICE ORDER WIRE SIGNALLING AS DESCRIBED IN THE OPTION IN OUR TECHNICAL PROPOSAL. "CONFIRMING LETTER FOLLOWS"

IT IS YOUR CONTENTION THAT THIS TELEGRAM CLEARLY REFERS TO THE OPTIONAL "REMOTE CAPABILITY" BECAUSE IT REFERS TO THE "VOICE ORDER WIRE SIGNALLING" DESCRIBED IN THE OPTION TO YOUR TECHNICAL PROPOSAL RATHER THAN TO THE "ORDER WIRE SIGNALLING" TO BE SUPPLIED IN ACCORDANCE WITH YOUR AMENDED PROPOSAL. IT IS ALSO YOUR CONTENTION THAT THE AIR FORCE WAS UNDER AN OBLIGATION TO AWAIT CONFIRMATION OF YOUR PRICE MODIFICATION BECAUSE YOUR TELEGRAM STATED THAT A CONFIRMING LETTER FOLLOWED.

SINCE THE TERM "ORDER WIRE SIGNALLING" HAD BEEN USED BY BOTH THE AIR FORCE AND BY STELMA TO MEAN SOMETHING OTHER THAN "REMOTE CAPABILITY" AND SINCE STELMA HAD INITIALLY OFFERED "ORDER WIRE SIGNALLING" AS AN OPTIONAL ITEM, WE ARE OF THE OPINION THAT THE STELMA TELEGRAM, REFERRING AS IT DID TO "ORDER WIRE SIGNALLING" RATHER THAN TO "REMOTE CAPABILITY," WAS PROPERLY INTERPRETED AS APPLYING TO THE BASIC PROPOSAL AS AMENDED AND NOT TO OPTIONAL ITEMS. AT BEST, THE TELEGRAM WAS AMBIGUOUS AND AS SUCH WAS SUBJECT TO THE INTERPRETATION ATTACHED TO IT BY THE AIR FORCE. ADDITIONALLY, WE MUST CONCLUDE THAT THE FACT THAT THE TELEGRAM STATED THAT A CONFIRMING LETTER WOULD FOLLOW PLACED NO DUTY ON THE AIR FORCE TO EXTEND ITS FINAL DATE FOR MODIFICATION OF PROPOSALS TO AWAIT RECEIPT OF THE CONFIRMING LETTER WHICH, INCIDENTALLY, WAS NOT RECEIVED UNTIL APPROXIMATELY 1 MONTH AFTER RECEIPT OF THE TELEGRAM. FINALLY, IN VIEW OF THE RECOMMENDATION OF THE EVALUATION BOARD THAT AWARD BE MADE TO STELMA "ONLY IF THE DIFFERENCE IN BID PRICE JUSTIFIES THE ADDED RISK," IT WOULD NOT APPEAR THAT AWARD TO STELMA WOULD HAVE BEEN REQUIRED EVEN IF THE DISPUTED TELEGRAM HAD BEEN DISREGARDED IN VIEW OF THE FACT THAT THE UNMODIFIED STELMA PRICE WAS ONLY $6 UNDER THAT OF IBM.

IN ACCORDANCE WITH THE ABOVE CONSIDERATIONS, YOUR PROTEST MUST BE DENIED.