B-165050, NOVEMBER 21, 1968, 48 COMP. GEN. 349

B-165050: Nov 21, 1968

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BIDS - TWO-STEP PROCUREMENT - TECHNICAL PROPOSALS - DEFICIENCIES - NOTICE THE FAILURE BEFORE BIDS WERE INVITED ON THE SECOND STEP OF A TWO STEP FORMALLY ADVERTISED PROCUREMENT TO FURNISH A SEPARATE NOTICE TO A BIDDER OF THE TECHNICAL UNACCEPTABILITY OF A LOW ALTERNATE PROPOSAL SUBMITTED NOT AS A SEPARATE PACKAGE BUT INCIDENT TO THE CLARIFICATION OF AN UNACCEPTABLE ORIGINAL PROPOSAL DOES NOT CONSTITUTE ACCEPTANCE OF THE LOW ALTERNATE PROPOSAL. FOR NOTICE OF THE TECHNICAL UNACCEPTABILITY OF A PROPOSAL UNDER THE TWO-STEP ADVERTISED METHOD OF PROCUREMENT IS A PROCEDURAL RIGHT THAT DOES NOT GO TO THE ESSENCE OF THE AWARD. REJECTION OF THE ALTERNATE PROPOSAL WILL NOT BE QUESTIONED. ABSENT EVIDENCE THE DETERMINATION WAS ARBITRARY.

B-165050, NOVEMBER 21, 1968, 48 COMP. GEN. 349

BIDS - TWO-STEP PROCUREMENT - TECHNICAL PROPOSALS - DEFICIENCIES - NOTICE THE FAILURE BEFORE BIDS WERE INVITED ON THE SECOND STEP OF A TWO STEP FORMALLY ADVERTISED PROCUREMENT TO FURNISH A SEPARATE NOTICE TO A BIDDER OF THE TECHNICAL UNACCEPTABILITY OF A LOW ALTERNATE PROPOSAL SUBMITTED NOT AS A SEPARATE PACKAGE BUT INCIDENT TO THE CLARIFICATION OF AN UNACCEPTABLE ORIGINAL PROPOSAL DOES NOT CONSTITUTE ACCEPTANCE OF THE LOW ALTERNATE PROPOSAL. THE PROVISION IN SECTION 1-2.503-1 (B) (5) OF THE FEDERAL PROCUREMENT REGULATIONS, AS WELL AS IN THE ADMINISTRATIVE REGULATION, FOR NOTICE OF THE TECHNICAL UNACCEPTABILITY OF A PROPOSAL UNDER THE TWO-STEP ADVERTISED METHOD OF PROCUREMENT IS A PROCEDURAL RIGHT THAT DOES NOT GO TO THE ESSENCE OF THE AWARD, AND REJECTION OF THE ALTERNATE PROPOSAL WILL NOT BE QUESTIONED, ABSENT EVIDENCE THE DETERMINATION WAS ARBITRARY, CAPRICIOUS, OR MADE IN BAD FAITH.

TO SELLERS, CONNER AND CUNEO, NOVEMBER 21, 1968:

REFERENCE IS MADE TO A LETTER DATED AUGUST 9, 1968, WITH ENCLOSURES, FROM YOUR CLIENT COM TECH CORPORATION (COM TECH), PROTESTING AGAINST REJECTION OF ITS ALTERNATE PROPOSAL UNDER INVITATION FOR BIDS (IFB) NO. 572- 76625/337, ISSUED BY THE THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, GODDARD SPACE FLIGHT CENTER (GSFC).

THE SUBJECT IFB WAS A TWO-STEP FORMALLY ADVERTISED PROCUREMENT FOR FIVE (5) 4/2 WIRE OPERATIONAL KEY SYSTEMS TO BE USED IN SUPPORT OF THE TRACKING AND DATA SYSTEMS DIRECTORATE AT GSFC. THE FIRST STEP OF THE PROCUREMENT WAS A REQUEST FOR UNPRICED TECHNICAL PROPOSALS, WHICH WAS SENT TO 65 COMPANIES. PHILCO-FORD CORPORATION, LOCKHEED ELECTRONICS COMPANY, ITT FEDERAL ELECTRIC CORPORATION AND COM TECH WERE THE ONLY COMPANIES WHO RESPONDED TO THE REQUEST. AFTER TECHNICAL EVALUATION OF THE PROPOSALS, IT WAS DETERMINED THAT ALL FOUR PROPOSERS APPEARED TO BE TECHNICALLY CAPABLE OF PROVIDING THE SYSTEM AND WHILE NONE OF THE PROPOSALS WERE TECHNICALLY ACCEPTABLE IN ALL RESPECTS, THEY COULD BE MADE TECHNICALLY ACCEPTABLE THROUGH REASONABLE EFFORTS ON THE PART OF THE GOVERNMENT. ACCORDINGLY, LETTERS WERE SENT TO THE FOUR PROPOSERS, INCLUDING COM TECH, WHICH REQUESTED CLARIFICATION OF SPECIFIED PORTIONS OF THEIR TECHNICAL PROPOSALS, AND ALSO SET OUT CLARIFYING MODIFICATIONS OF THE ORIGINAL RFP. ADDITIONAL DATA WAS SUBMITTED BY THE PROPOSERS AND ALL FOUR PROPOSALS WERE RAISED TO AN ACCEPTABLE TECHNICAL LEVEL. AT THIS POINT IT MUST BE NOTED THAT YOUR CLIENT, COM TECH, HAD INCLUDED, IN PARAGRAPH 2.3.2 OF ITS PROPOSAL, A SUGGESTED ALTERNATE INVOLVING A RECONFIGURATION OF THE CONFERENCE BRIDGE EQUIPMENT. GSFC DID NOT MENTION THIS ALTERNATE IN ITS LETTER TO COM TECH REQUESTING CLARIFICATION OF ITS TECHNICAL PROPOSAL, NOR DID COM TECH MENTION IT IN ITS REPLY ON JUNE 3, 1968 (WHICH CLARIFIED ITS ORIGINAL TECHNICAL PROPOSAL).

AT BID OPENING TIME ON AUGUST 5, 1968, COM TECH PRESENTED TO NASA TWO BID PACKAGES. WHEN THE BID PACKAGES WERE OPENED IT WAS DETERMINED THAT COM TECH'S ALTERNATE BID WAS LOW, WHILE LOCKHEED'S BID WAS SECOND LOW. HOWEVER, THE OPENING OFFICIAL DECLINED TO ACCEPT COM TECH'S ALTERNATE BID ON THE BASIS THAT NO ALTERNATE TECHNICAL PROPOSAL HAD BEEN SUBMITTED AS A SEPARATE PACKAGE AND THAT HE WAS UNAWARE OF AN ALTERNATE TECHNICAL APPROACH HAVING BEEN SUGGESTED. IT IS YOUR CONTENTION THAT COM TECH'S ALTERNATE BID, OFFERING THE LOWEST BID PRICE AND COMPLYING WITH NASA'S SPECIFICATIONS, WAS REJECTED SUMMARILY WITHOUT GOOD AND SUFFICIENT REASONS, AND THAT SAID REJECTION WAS ARBITRARY AND TOTALLY WITHOUT MERIT.

IN SUPPORT OF YOUR CONTENTIONS YOU REFER TO THE FOLLOWING PROVISIONS OF THE RFP: IN THE FIRST STEP OF THIS TWO-STEP PROCUREMENT, OFFERORS ARE AUTHORIZED AND ENCOURAGED TO SUBMIT MULTIPLE TECHNICAL PROPOSALS PRESENTING DIFFERENT BASIC APPROACHES. EACH TECHNICAL PROPOSAL SUBMITTED WILL BE SEPARATELY EVALUATED AND THE OFFEROR WILL BE NOTIFIED AS TO ITS ACCEPTABILITY. OFFERORS SUBMITTING UNACCEPTABLE TECHNICAL PROPOSALS WILL BE NOTIFIED UPON COMPLETION OF THE TECHNICAL EVALUATION. IN THE SECOND STEP OF THIS PROCUREMENT, ONLY BIDS BASED UPON TECHNICAL PROPOSALS DETERMINED TO BE ACCEPTABLE, EITHER INITIALLY OR AS A RESULT OF DISCUSSIONS, WILL BE CONSIDERED FOR AWARD AND EACH BID IN THE SECOND STEP MUST BE SUBMITTED AND BASED ON THE BIDDER'S OWN TECHNICAL PROPOSAL. FAILURE TO BID ACCORDINGLY WILL RESULT IN REJECTION OF BID AS NONRESPONSIVE.

ADDITIONALLY YOU REFER TO THE FOLLOWING PROVISION IN THE IFB: BIDS WILL BE ACCEPTED AND CONSIDERED ONLY FROM THOSE FIRMS WHO HAVE SUBMITTED ACCEPTABLE TECHNICAL PROPOSALS PURSUANT TO THE FIRST STEP OR SUCH PROCEDURES, AS INITIATED BY REQUEST FOR TECHNICAL PROPOSAL 572 76625/337 ISSUED MARCH 9, 1968. ANY BIDDER WHO HAS SUBMITTED MULTIPLE TECHNICAL PROPOSALS IN THE FIRST STEP OF THIS TWO-STEP PROCUREMENT MAY SUBMIT A SEPARATE BID COVERING EACH TECHNICAL PROPOSAL WHICH HAS BEEN DETERMINED AS ACCEPTABLE BY THE GOVERNMENT. IT IS YOUR POSITION THAT THE PROCURING ACTIVITY HAD A DUTY TO NOTIFY COMTECH IF IT WAS DETERMINED THAT THE ALTERNATE PROPOSAL WAS UNACCEPTABLE, AND THAT FAILURE TO SPEAK OUT AMOUNTED TO ACCEPTANCE.

ACCORDING TO THE ADMINISTRATIVE REPORT, DURING THE PERIOD WHEN THE PROPOSALS WERE BEING TECHNICALLY EVALUATED, THE ALTERNATIVE SUGGESTION INCORPORATED AS 2.3.2 OF COM TECH'S PROPOSAL WAS STUDIED BY COGNIZANT TECHNICAL PERSONNEL AND DETERMINED TO BE TECHNICALLY UNACCEPTABLE. THE REPORT GOES ON TO EXPLAIN THAT THE TECHNICAL PERSONNEL DID NOT CONSIDER THE SUGGESTED ALTERNATE IN PARAGRAPH 2.3.2 AS AN ALTERNATE PROPOSAL WHICH REQUIRED FORMAL NOTICE OF UNACCEPTABILITY, AND THUS DID NOT PREPARE A FORMAL WRITTEN DETERMINATION OF UNACCEPTABILITY. WE ARE ADVISED THAT OTHER PROPOSERS HAD SUGGESTED CERTAIN MINOR CHANGES AND OPTIONS WHICH IF THEY HAD NOT BEEN REJECTED WOULD HAVE BEEN CONSIDERED AS MINOR DEVIATIONS HAVING NO SIGNIFICANT EFFECT ON THE SYSTEM. HOWEVER, COM TECH'S ALTERNATE TECHNICAL APPROACH SUGGESTED IN PARAGRAPH 2.3.2 DIFFERED FROM THESE SUGGESTED CHANGES AND OPTIONS IN THAT IT AMOUNTED TO A MAJOR CHANGE OF THE SYSTEM AND WAS SUBSEQUENTLY TREATED, BY COM TECH, AS A BASIS FOR AN ALTERNATE BID. HOWEVER, AT THE TIME EVALUATIONS WERE BEING MADE IT WAS CONSIDERED A SUGGESTED CHANGE OR OPTION WHICH IF ACCEPTED WOULD AMOUNT TO A MAJOR DEVIATION; CONSEQUENTLY, IT WAS REJECTED.

THE REPORT FURTHER STATES THAT THE CONTRACT NEGOTIATOR, MR. JASNOW, PROMISED THE TECHNICAL OFFICE THAT HE WOULD "TAKE CARE OF THE PROBLEM" BY GIVING NOTICE IN STEP TWO OF THE IFB THAT ALTERNATE PROPOSALS WERE NOT DESIRED AND WOULD NOT BE ACCEPTED. HOWEVER, MR. JASNOW TRANSFERRED TO ANOTHER AGENCY WITHOUT NOTIFYING HIS SUCCESSOR OF HIS INTENTIONS. CONSEQUENTLY, STEP TWO OF THE IFB DID NOT INCLUDE ADVICE TO THE ACCEPTABLE PROPOSERS THAT ALTERNATE BIDS WOULD NOT BE ACCEPTED.

CONCEDING, AS DOES THE PROCURING ACTIVITY, THAT THE ALTERNATE INCORPORATED IN PARAGRAPH 2.3.2 OF COM TECH'S TECHNICAL PROPOSAL WAS AN ALTERNATE PROPOSAL (ALTHOUGH COM TECH DID NOT INDICATE CLEARLY THAT IT INTENDED PARAGRAPH 2.3.2 TO BE AN ALTERNATE PROPOSAL) WE MUST DETERMINE WHETHER FAILURE TO GIVE NOTICE OF TECHNICAL UNACCEPTABILITY MUST BE CONSTRUED AS REQUIRING ACCEPTANCE OF COM TECH'S LOW BID ON THE ALTERNATE. BOTH FEDERAL PROCUREMENT REGULATIONS (FPR) 1-2.503-1 (B) (5) AND NASA PROCUREMENT REGULATIONS (PR) 2.503-1 (D) REQUIRE THAT UNDER THE TWO-STEP ADVERTISED METHOD OF PROCUREMENT, NOTICE OF TECHNICAL UNACCEPTABILITY MUST BE GIVEN TO ANY PROPOSER WHO SUBMITS A PROPOSAL DETERMINED TO BE UNACCEPTABLE. HOWEVER, WITH RESPECT TO A CORRESPONDING PROVISION OF THE ARMED SERVICES PROCUREMENT REGULATION WE STATED IN A DECISION DATED AUGUST 12, 1968, Z-164776, DENYING A PROTEST BY A PROPOSER WHO HAD NOT RECEIVED NOTICE OF THE REJECTION OF ITS TECHNICAL PROPOSAL:

INASMUCH AS THE ONLY RIGHT CREATED BY ASPR 2-503.1 (A) (IX), THAT OF NOTICE, IS PROCEDURAL AND DOES NOT GO TO THE LEGAL ESSENCE OF THE AWARD, YOUR PROTEST MUST BE DENIED.

IN ANY EVENT, WE DO NOT BELIEVE THAT THE PROCURING AGENCY'S INADVERTENT FAILURE TO ADVISE COM TECH OF THE NONACCEPTABILITY OF ITS ALTERNATE PROPOSAL BEFORE THE ISSUANCE OF THE INVITATIONS FOR BIDS PRECLUDES THE REJECTION OF THE BID BASED THEREON. IN 45 COMP. GEN. 487 WE HELD THAT A BID ON A TWO-STEP PROCUREMENT SHOULD BE REJECTED UPON A DETERMINATION, AFTER OPENING OF THE SECOND-STEP BIDS, THAT THE LOW BIDDER'S OFFER DID NOT IN FACT MEET THE ORIGINAL REQUIREMENTS, EVEN THOUGH IT HAD BEEN FOUND ACCEPTABLE UPON EVALUATION OF THE TECHNICAL PROPOSALS. THE POSITION OF COM TECH IN THE PRESENT CASE IS MUCH WEAKER.

ON THE MERITS, COM TECH CONTENDS THAT THERE ARE SEVERAL ADVANTAGES TO BE GAINED BY USING ITS ALTERNATE TECHNICAL APPROACH. HOWEVER, AS PREVIOUSLY POINTED OUT, COGNIZANT TECHNICAL PERSONNEL DID STUDY THE PROPOSAL AND FOUND IT UNACCEPTABLE. IT WAS CONCLUDED THAT IT WOULD BE UNECONOMICAL AND IMPRACTICAL FOR GSFC TO ACCEPT COM TECH'S ALTERNATE PROPOSAL, FOR THE FOLLOWING REASONS:

ONE OF THE BASIC REASONS FOR THIS REQUIREMENT IS THE REPLACEMENT OF NON- UNIFORM COMMUNICATIONS SYSTEMS PRESENTLY EXISTING AT THE VARIOUS SITES. THESE SYSTEMS ARE NO LONGER CAPABLE OF SATISFYING THE COMMUNICATION NEEDS AT THE SITES. THE EXISTING SYSTEMS CAN NO LONGER BE EXPANDED AND HAVE CREATED A MAJOR SERIES OF PROBLEMS. THE PROBLEMS RESULT FROM THE DIFFERENCES IN DESIGN OF THE SYSTEMS AND THE INCIDENTAL LOGISTIC PROBLEMS OF SUPPORTING A NUMBER OF NON-UNIFORM SYSTEMS. RECOGNIZING THE PROBLEM, GSFC ENTERED INTO A PROTOTYPE SYSTEM CONTRACT TO DEVELOP A UNIFORM SYSTEM WHICH WOULD BE CAPABLE OF HANDLING THE PRESENT COMMUNICATION NEEDS OF THE STATIONS AND BE CAPABLE OF BEING EXPANDED TO HANDLE THE INCREASED COMMUNICATION NEEDS OF THE FUTURE. THE SYSTEM, AS A BASIC CRITERIA, WILL HAVE TO HAVE A HIGH RELIABILITY SINCE IT WILL BE LOCATED AT ISOLATED AND REMOTE SITES THROUGHOUT THE WORLD. THE PROTOTYPE SYSTEM WAS REQUIRED TO PROVE OUT THE ABILITY OF A COMMUNICATION SYSTEM TO PERFORM AND MEET NOT ONLY THE SPECIFIC NEEDS OF THE ONE STATION, BUT THE GENERAL NEEDS OF THE REMAINING STATIONS IN THE NETWORK. $75K WAS SPENT FOR THIS PROTOTYPE SYSTEM. THE CURRENT PROCUREMENT IS FOR THE UPDATING OF THE REMAINING STATIONS IN THE NETWORK WITH THE EXCEPTION OF ROSMAN, MOJAVE AND JOHANNESBURG. NETWORK ACTIVITY AT THE MOJAVE AND JOHANNESBURG SITES DICTATES THAT IT IS NOT ECONOMICAL TO UPGRADE THESE SITES. THE SITE COMMUNICATIONS AT ROSMAN ARE CURRENTLY BEING FURNISHED BY THE LOCAL TELEPHONE COMPANY; AND IT HAS NOT BEEN RESOLVED AT THIS POINT WHETHER THE LOCAL TELEPHONE COMPANY IS WILLING TO CONTINUE WITH THIS SERVICE UPGRADED TO MEET THE NEEDS OF THE SITE OR WHETHER WE WILL HAVE TO OBTAIN THE EQUIPMENT TO SATISFY THE NEEDS OF THIS SITE. WERE WE TO AWARD THIS PROCUREMENT TO COM TECH ON THE BASIS OF THEIR ALTERNATE PROPOSAL, WE WOULD HAVE TO REPLACE THE EXISTING SYSTEM AT FAIRBANKS, ALASKA (THE PROTOTYPE SYSTEM TO THIS REQUIREMENT) WITH A COM TECH SYSTEM. THIS REPLACEMENT WOULD NOT BE NECESSARY WERE WE TO PROCURE A SYSTEM MEETING OUR SPECIFICATIONS AND DRAWINGS AS WE HAVE CALLED FOR. THIS REPLACEMENT WOULD BE NECESSARY FOR PURPOSES OF UNIFORMITY IN CONTROLLING THE SYSTEMS MODIFICATIONS WHICH WILL OCCUR THROUGHOUT THE LIFE OF THE SYSTEMS AND TO ELIMINATE A DUAL LOGISTICS SYSTEM WHICH WOULD OTHER WISE BE REQUIRED. THE COST OF REPLACING THE EXISTING SYSTEM AT FAIRBANKS WOULD BE APPROXIMATELY $60K AND WOULD TEND TO IMPLY THAT THE $75K ALREADY SPENT FOR THE PROTOTYPE SYSTEM WAS WASTED. IN ADDITION, WE WOULD HAVE SYSTEMS WHICH WOULD NOT BE PROVEN AND WHICH WOULD CONTAIN NON-STANDARD PARTS AND COMPONENTS. THE CRITICAL NON-STANDARD PARTS WOULD BE THE BRIDGES WHICH ARE PRESENTLY NOT AVAILABLE COMMERCIALLY. SURVEY REVEALS THE BRIDGES WOULD NOT BE COMMERCIALLY AVAILABLE IN THE FUTURE EXCEPT FOR ORDERS OF SIGNIFICANT MAGNITUDE TO BE ECONOMICAL (MUCH GREATER THAN NORMAL LOGISTICS REQUIREMENTS). THE COST OF MAINTAINING DUAL SYSTEMS IN THE NETWORK INVOLVING DUAL TECHNICAL RECORDS AND DUAL LOGISTIC SYSTEMS CANNOT BE READILY ESTIMATED. IT IS, HOWEVER, THE OPINION THAT OVER THE LIFE OF THE SYSTEMS, THIS COST WOULD EXCEED THE COST OF REPLACING THE PROTOTYPE SYSTEM AT FAIRBANKS.

THE FINAL DETERMINATION OF THE GOVERNMENT'S NEEDS IN THE PRESENT CASE, AND THE ACCEPTABILITY OF OFFERED EQUIPMENT, IS A COMPLEX QUESTION, INVOLVING THE KNOWLEDGE OF COMPLICATED TECHNICAL EQUIPMENT AND THE INTERRELATIONSHIPS OF A NUMBER OF INSTALLATIONS. FOR TECHNICAL DETERMINATIONS OF THIS NATURE, WE MUST ORDINARILY RELY ON THE JUDGMENT AND EXPERTISE OF THE ENGINEERING PERSONNEL OF THE PROCURING AGENCY. ON THE BASIS OF THE RECORD, WE CANNOT SAY THAT THE PROCURING ACTIVITY'S REJECTION OF COM TECH'S ALTERNATE PROPOSAL WAS ARBITRARY, CAPRICIOUS OR IN BAD FAITH. CONSEQUENTLY THIS OFFICE WILL NOT QUESTION THIS ACTION. SEE 38 COMP. GEN. 71, 75; 36 COMP. GEN. 251, 252; B-155394, MARCH 31, 1965; B- 152996, APRIL 8, 1964, AND B 139830, AUGUST 19, 1959.

FOR THE ABOVE REASONS YOUR PROTEST MUST BE DENIED. HOWEVER, WE HAVE BEEN ASSURED BY GSFC THAT IN THE FUTURE MORE CAREFUL ATTENTION WILL BE PAID TO THE APPLICABLE REGULATIONS WHEN THE TWO-STEP PROCUREMENT METHOD IS USED.