B-167307, MARCH 30, 1970, 49 COMP. GEN. 625

B-167307: Mar 30, 1970

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WAS NOT IMPROPER BECAUSE THE MANNING LEVEL FOR THE DEWLINE WAS REVISED. OBJECTION TO THE AWARD IS NOT WARRANTED. THE PROCUREMENT WAS INSTITUTED BY THE ISSUANCE ON NOVEMBER 4. A SEPARATE CONTRACTING OFFICER WAS ASSIGNED TO EACH SYSTEM. THIS TWO-STEP PROCEDURE IS AUTHORIZED UNDER PARAGRAPH 3 805.1(C) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). THIS PROPOSAL AND SEVERAL REVISIONS THEREOF WERE DEEMED UNACCEPTABLE BY THE AIR FORCE. THE RCA PROPOSAL FOR DEWLINE WHICH WAS FINALLY APPROVED BY THE AIR FORCE CALLED FOR A MANNING LEVEL OF 1. RCA ASSERTS THAT: *** THE METHOD BY WHICH THE MANNING REQUIREMENTS WERE ESTABLISHED FORCED RCA TO CONCLUDE THAT THE FIGURE OF 1. 267 (THIS FIGURE INCLUDES TRAINEES) WAS NOT A GUIDELINE BUT A FIRM REQUIREMENT AS TO THE NUMBER OF PERSONS WHO MUST IN FACT BE USED IN RUNNING THE SYSTEM.

B-167307, MARCH 30, 1970, 49 COMP. GEN. 625

CONTRACTS -- NEGOTIATION -- TWO-STEP PROCUREMENT -- LETTER REQUESTS FOR PROPOSALS THE AWARD MADE OF MULTI-YEAR CONTRACTS FOR THE OPERATION AND MAINTENANCE OF THREE WARNING SYSTEMS--DEWLINE, WACS, AND BMEWS--UNDER LETTER REQUESTS CONTEMPLATING TWO STEPS TO ACCOMPLISH THE PROCUREMENT- TECHNICAL AND PRICE PROPOSALS--WAS NOT IMPROPER BECAUSE THE MANNING LEVEL FOR THE DEWLINE WAS REVISED, A FACTUAL QUESTION FOR TECHNICAL EVALUATION BY THE CONTRACTING AGENCY, OR BECAUSE OF THE FAILURE TO DISCUSS THE PHASE-OVER COSTS TO BE ADDED TO THE PRICE PROPOSED BY A NONINCUMBENT OFFEROR, A REASONABLE ADMINISTRATIVE DETERMINATION ON THE BASIS OF THE NONCOMPETITIVE NATURE OF THE PROCUREMENT. FURTHERMORE, DISCUSSIONS WITH THE PROTESTANT SATISFIED THE REQUIREMENTS OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-804 AND 3-805, AND EVEN THOUGH PERMITTING THE SUCCESSFUL OFFEROR ONLY TO REVISE PRICES AFTER THE CLOSE OF NEGOTIATIONS VIOLATED ASPR 3-805.1(B)--A PROCEDURE TO BE CORRECTED- NO SIGNIFICANT DETRIMENT HAVING RESULTED TO THE COMPETITIVE SYSTEM, OBJECTION TO THE AWARD IS NOT WARRANTED.

TO THE SECRETARY OF THE AIR FORCE, MARCH 30, 1970:

WE MAKE REFERENCE TO A LETTER (WITH ATTACHMENT) DATED AUGUST 26, 1969, FROM THE CHIEF OF THE PROCUREMENT OPERATIONS DIVISION, DIRECTORATE OF PROCUREMENT POLICY, DEPUTY CHIEF OF STAFF, SYSTEMS AND LOGISTICS, AND TO A LETTER (WITH ATTACHMENT) DATED OCTOBER 9, 1969, FROM THE CHIEF OF THE CONTRACTOR RELATIONS BRANCH, PROCUREMENT OPERATIONS DIVISION, REPORTING ON THE PROTEST BY THE RADIO CORPORATION OF AMERICA (RCA) AGAINST THE AWARD OF MULTI-YEAR CONTRACTS TO FEDERAL ELECTRIC CORPORATION (FEC) FOR THE OPERATION AND MAINTENANCE DURING FISCAL YEARS 1970, 1971, AND 1972 OF THE DISTANT EARLY WARNING LINE (DEWLINE), THE WHITE ALICE COMMUNICATIONS SYSTEM (WACS), AND THE BALLISTIC MISSILE EARLY WARNING SYSTEM (BMEWS).

THE PROCUREMENT WAS INSTITUTED BY THE ISSUANCE ON NOVEMBER 4, 1968, OF THREE LETTER REQUESTS FOR TECHNICAL PROPOSALS (LRTP'S), DENOMINATED F04606 -69-R-0130 (BMEWS), F04606-69-R-0131 (DEWLINE), AND F04606-69-R 0134 (WACS). DUE TO THE IMPORTANCE AND COMPLEXITY OF THE PROCUREMENT, A SEPARATE CONTRACTING OFFICER WAS ASSIGNED TO EACH SYSTEM. THE LRTP'S ADVISED PROSPECTIVE OFFERORS THAT THE CONTEMPLATED PROCUREMENT WOULD BE ACCOMPLISHED IN TWO STEPS: (1) SUBMISSION AND EVALUATION OF TECHNICAL PROPOSALS, WITHOUT PRICING INFORMATION, TO DETERMINE ACCEPTABILITY OF THE SERVICES OFFERED; AND (2) ISSUANCE OF REQUESTS FOR PRICE PROPOSALS (RPP'S) ONLY TO THOSE FIRMS HAVING SUBMITTED ACCEPTABLE TECHNICAL PROPOSALS. THIS TWO-STEP PROCEDURE IS AUTHORIZED UNDER PARAGRAPH 3 805.1(C) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

ONE OF THE GROUNDS OF RCA'S PROTEST CONCERNS THE MANNING LEVEL FOR DEWLINE. IN ITS FIRST TECHNICAL PROPOSAL FOR THAT SYSTEM, RCA OFFERED TO PROVIDE THE REQUIRED SERVICES UTILIZING 757 PERSONS. THIS PROPOSAL AND SEVERAL REVISIONS THEREOF WERE DEEMED UNACCEPTABLE BY THE AIR FORCE. THE RCA PROPOSAL FOR DEWLINE WHICH WAS FINALLY APPROVED BY THE AIR FORCE CALLED FOR A MANNING LEVEL OF 1,234, EXCLUSIVE OF TRAINEES.

RCA ASSERTS THAT:

*** THE METHOD BY WHICH THE MANNING REQUIREMENTS WERE ESTABLISHED FORCED RCA TO CONCLUDE THAT THE FIGURE OF 1,267 (THIS FIGURE INCLUDES TRAINEES) WAS NOT A GUIDELINE BUT A FIRM REQUIREMENT AS TO THE NUMBER OF PERSONS WHO MUST IN FACT BE USED IN RUNNING THE SYSTEM. THUS, RCA WAS FORCED TO INCREASE ITS MANNING REQUIREMENTS TO A LEVEL IMPOSED ON IT BY THE AIR FORCE IN SPITE OF THE FACT THAT IN ITS EXPERIENCED JUDGMENT SUCH A MANNING LEVEL WAS EXCESSIVELY HIGH, A JUDGMENT WHICH IT WAS PREPARED TO BACK WITH A FIRM FIXED PRICE. ***

RCA HAS ALSO STATED:

IT WAS IMPROPER PROCEDURE TO FORCE RCA TO ACCEPT A MANNING LEVEL IN ITS TECHNICAL PROPOSAL FOR DEWLINE WHICH WAS SUBSTANTIALLY HIGHER THAN THAT WHICH RCA IN ITS EXPERIENCED JUDGMENT FELT WOULD HAVE BEEN ADEQUATE. CAN ONLY BE ASSUMED (SINCE THE DETAILS OF THE PROPOSAL OF FEDERAL ELECTRIC CORPORATION HAVE QUITE PROPERLY NOT BEEN MADE AVAILABLE TO RCA) THAT RCA WAS IN EFFECT REQUIRED TO SUBMIT A PRICE PROPOSAL BASED ON MANNING LEVELS APPROXIMATING THOSE BEING MAINTAINED CURRENTLY OR BEING PROPOSED BY FEDERAL ELECTRIC CORPORATION. BEARING IN MIND THAT A FIRM FIXED-PRICE CONTRACT WAS CONTEMPLATED, THE EFFECT OF FORCING UPON RCA A HIGHER MANNING LEVEL THAN IT FELT WAS REQUIRED TO DO THE JOB WAS TO LIMIT IMPROPERLY THE COMPETITION BETWEEN THE COMPANIES. *** ONE OF RCA'S STRONGEST ASSETS IN PAST COMPETITION HAS BEEN ITS ABILITY TO ECONOMIZE THE MANNING REQUIREMENTS WITHOUT IMPAIRING PERFORMANCE. THIS ASSET WAS ARBITRARILY RULED OUT OF THE COMPETITIVE PROCUREMENT IN QUESTION BY THE MANNER IN WHICH THE TWO-STEP NEGOTIATION OF RCA'S TECHNICAL PROPOSAL FOR DEWLINE WAS HANDLED. WE BELIEVE THIS WAS AN IMPROPER RESTRICTION OF COMPETITION UNDER THE CIRCUMSTANCES. RCA FURTHER ASSERTS: "RCA'S JUDGMENT WAS AND REMAINS THAT IT COULD ADEQUATELY MAN DEWLINE TO MEET AIR FORCE REQUIREMENTS WITH 100 FEWER PERSONS."

THE CONTRACTING OFFICER'S 27 PAGE STATEMENT OF FACTS DATED AUGUST 1, 1969, IS LIBERALLY INTERSPERSED WITH LENGTHY RESPONSES TO THE RCA ALLEGATIONS CONCERNING MANNING LEVELS WHICH WE DO NOT RESTATE HERE. HOWEVER, THE QUESTION IS ESSENTIALLY ONE OF ADMINISTRATIVE JUDGMENT: RCA AVERS THAT IT COULD HAVE PERFORMED THE REQUIRED DEWLINE SERVICES WITH A PERSONNEL LEVEL OF 100 LESS THAN THE NUMBER THAT WAS DETERMINED ACCEPTABLE BY THE AIR FORCE, WHILE THE AGENCY PROCUREMENT OFFICIALS CONTEND THAT APPROVAL OF AN OFFER PROPOSING TO UTILIZE LESS THAN THE NUMBER OF PERSONNEL FINALLY APPROVED WOULD HAVE BEEN INADEQUATE TO ASSURE SATISFACTORY MISSION PERFORMANCE.

THIS DISPUTE PRESENTS A FACTUAL QUESTION REQUIRING A TECHNICALLY EXPERIENCED EVALUATION. WE ARE NOT DISPOSED TO QUESTION THE ADMINISTRATIVE JUDGMENT AS TO SUCH MATTERS EXCEPT ON A CLEAR SHOWING OF ARBITRARINESS. OUR REVIEW OF ALL THE RELEVANT FACTS OF RECORD DISCLOSES NO BASIS FOR CONCLUDING THAT THE AIR FORCE NEGOTIATED THE MANNING LEVELS IN AN ARBITRARY OR OTHERWISE IMPROPER MANNER. SEE B 164552(1), FEBRUARY 24, 1969, AND B-166705, JULY 30, 1969. SEE, ALSO, B-167374, OCTOBER 6, 1969, WHERE WE DECLINED TO QUESTION THE AWARD OF A SERVICE CONTRACT TO THE SECOND LOW OFFEROR BECAUSE THE LOW OFFEROR PROPOSED A MANNING LEVEL SAID TO BE "INSUFFICIENT TO MEET THE NEEDS OF THE ACTIVITY." WE WERE ADVISED BY THE PROCUREMENT ACTIVITY IN THAT CASE THAT AWARD TO THE LOW OFFEROR "WOULD RESULT IN INADEQUATE PERFORMANCE AND COMPROMISE THE HIGH STANDARDS OF FOOD SERVICE." FOR A SIMILAR RESULT, SEE B-167983, MARCH 11, 1970.

A SECOND ISSUE RAISED BY THE RCA PROTEST CONCERNS AN EVALUATION FACTOR. THIS FACTOR, SEPARATELY COMPUTED FOR EACH OF THE THREE SYSTEMS, WAS TO BE ADDED TO THE PRICE PROPOSAL OF EACH OFFEROR OTHER THAN THE INCUMBENT CONTRACTOR ON THE INDIVIDUAL SYSTEM TO WHICH THE PROPOSAL RELATED. SHOULD BE NOTED AT THIS JUNCTURE THAT OFFERORS WERE PERMITTED TO SUBMIT ALTERNATE PRICE PROPOSALS FOR EACH SYSTEM, THE ALTERNATE OFFERS BEING ON THE BASIS OF COMBINED AWARD FOR THE PARTICULAR SYSTEM TOGETHER WITH EITHER OR BOTH OF THE OTHER TWO SYSTEMS. RCA, AT THE TIME THIS PROCUREMENT WAS BEING CONDUCTED, WAS THE OPERATING CONTRACTOR FOR BMEWS AND WACS, WHILE FEC WAS THE DEWLINE INCUMBENT CONTRACTOR.

THE EVALUATION FACTOR APPEARS TO HAVE HAD A TWOFOLD PURPOSE. AN AWARD TO AN OFFEROR FOR THE OPERATION OF A SYSTEM ON WHICH THAT OFFEROR WAS NOT THE INCUMBENT CONTRACTOR WOULD INVOLVE PERFORMANCE FOR A PERIOD LESS THAN THE FULL 36 MONTHS--JULY 1, 1969, THROUGH JUNE 30, 1972- BECAUSE THE DISPLACED CONTRACTOR WOULD BE REQUIRED TO OPERATE THE SYSTEM DURING A "PHASE-OVER" INTERVAL. BY WAY OF ILLUSTRATION, AWARD TO A NONINCUMBENT ON BMEWS WOULD REQUIRE THE NEW CONTRACTOR TO PERFORM FOR 33 MONTHS OUT OF THE 3-YEAR PERIOD; SIMILARLY, A NONINCUMBENT ON WACS WOULD HAVE TO PERFORM FOR 34 MONTHS, AND AN NONINCUMBENT ON DEWLINE FOR 32 MONTHS. THE FACTOR, THEREFORE, WAS DESIGNED TO COMPENSATE FOR THESE DISCREPANCIES, THEREBY ASSURING THAT INCUMBENTS WOULD BE COMPARED TO NONINCUMBENTS ON AN EQUAL BASIS. SECONDLY, THE FACTOR WAS INTENDED TO PERMIT THE AIR FORCE TO ASSESS THE FULL COSTS TO THE GOVERNMENT OF THE EFFECT OF AN AWARD TO A GIVEN OFFEROR, THUS ALLOWING THE AIR FORCE TO DETERMINE WITH ACCURACY THE OFFER MOST ADVANTAGEOUS TO THE GOVERNMENT.

ACCORDINGLY, A COMPLEX FORMULA WAS DEVISED FOR COMPUTING THE EVALUATION FACTOR; THE FORMULA WAS SET FORTH IN THE LRTP'S AND RPP'S. IT TOOK INTO ACCOUNT, FOR EXAMPLE, ANY DISCOUNT OFFERED FOR PROMPT PAYMENT AND ALSO THE RENTAL CHARGES FOR USE BY AN INCUMBENT CONTRACTOR OF GOVERNMENT-OWNED FACILITIES. HOWEVER, THE MOST SIGNIFICANT PORTION OF THE EVALUATION FACTOR WAS THE "PHASE-OVER" COSTS TO BE ADDED TO THE PROPOSED PRICE OF A NONINCUMBENT OFFEROR. THE PHASE-OVER COSTS WERE DERIVED FROM THREE ELEMENTS: ADMINISTRATIVE COSTS, NONPRODUCTIVE COSTS, AND PRODUCTIVE COSTS. EACH OF THESE COSTS WAS DEFINED IN THE LRTP'S AND RPP'S. THE DEFINITIONS ARE AS FOLLOWS:

1. ADMINISTRATIVE COSTS ARE THOSE COSTS WHICH THE GOVERNMENT ESTIMATES IT WILL INCUR AS A RESULT OF A NEW CONTRACTOR BEING PHASED-IN AND THE GOVERNMENT BEING REQUIRED TO MOVE PERSONNEL AND PROPERTY TO A NEW LOCATION.

2. NON-PRODUCTIVE COSTS ARE THOSE COSTS WHICH THE GOVERNMENT ESTIMATES THE INCUMBENT CONTRACTOR MAY REASONABLY BE EXPECTED TO INCUR AS A RESULT OF BEING PHASED-OUT. SUCH NON-PRODUCTIVE COSTS SHALL CONSIST OF, BUT NOT BE LIMITED TO: SEVERANCE PAY, TERMINATION OF LEASED FACILITIES/EQUIPMENT, TRANSPORTATION OF PHASED-OUT PERSONNEL.

3. PRODUCTIVE COSTS ARE THOSE COSTS WHICH THE GOVERNMENT ESTIMATES AN INCUMBENT CONTRACTOR WILL INCUR FOR THE OPERATION AND MAINTENANCE EFFORT DURING THE PHASE-OUT PERIOD.

ADMINISTRATIVE COSTS AND NONPRODUCTIVE COSTS WERE STATED IN THE RPP'S AS FOLLOWS:

BMEWS WACS DEWLINE

ADMINISTRATIVE $31,700 15,100 102,420*

NONPRODUCTIVE 452,671 513,600 355,481

*PLUS $165 PER MILE TIMES THE NUMBER OF MILES A NONINCUMBENT CONTRACTOR ESTABLISHED ITS PROJECT HEADQUARTERS FROM PARAMUS, NEW JERSEY.

PRODUCTIVE COSTS WERE TO BE COMPUTED BY APPLICATION OF A STATED PERCENTAGE TO THE INCUMBENT CONTRACTOR'S INDEPENDENT PRICE PROPOSAL FOR THE FIRST YEAR EFFORT FOR THAT SYSTEM. FOR BMEWS, WACS AND DEWLINE, THE PERCENTAGES WERE 25 PERCENT, 18.83 PERCENT, AND 32.6 PERCENT, RESPECTIVELY. WE HAVE REVIEW DETAILED MEMORANDA PREPARED BY EACH CONTRACTING OFFICER SETTING FORTH THE MANNER IN WHICH THESE PERCENTAGES WERE DERIVED. WE FIND NO BASIS FOR ANY COMMENT ON THESE PERCENTAGES, EXCEPT THAT THE PERCENTAGES APPEAR TO BE REALISTIC AND SOUND.

THE RESULTING EVALUATION OF THE RESPECTIVE OFFERS ON THE BASIS OF AWARD OF ALL THREE SYSTEMS TO ONE OFFEROR HAS BEEN SUMMARIZED BY THE CONTRACTING OFFICERS IN THIS MANNER:

RCA FEC

BMEWS

1.OFFERED PRICE $47,364,300 $42,350,517

2. PHASE-OVER 4,531,926

3. RENTAL CHARGES 76,975

$47,441,275 $46,882,443

WACS

1. OFFERED PRICE $33,148,032 $31,016,054

2. PHASE-OVER 2,420,844

3. RENTAL CHARGES 39,690

33,187,722 33,436,898

DEWLINE

1. OFFERED PRICE 59,349,164 67,155,354

2. PHASE-OVER 7,947,418

3. RENTAL CHARGES 62,969

67,296,582 67,218,323

TOTAL $147,925,579$147,537,664

WITH REGARD TO THE ADEQUACY OF THE FORMULA DEVISED FOR COMPUTING PRODUCTIVE COSTS INCURRED DURING THE PHASE-OVER PERIOD, RCA HAS STATED THE FOLLOWING:

THE GROUND RULES SET FORTH IN THE RFP AS EMPLOYED BY THE AIR FORCE FOR EVALUATING THE PRICE PROPOSALS ALSO WERE INHERENTLY DEFECTIVE. THE COMPETITORS COULD NOT IN THIS SITUATION HAVE SUBMITTED PROPOSALS ON A COMPARABLE BASIS DUE TO THE DIFFERENT OPERATING TIME PERIODS INVOLVED AS BETWEEN THE INCUMBENT AND THE NON-INCUMBENT FOR EACH SYSTEM. IN ORDER FOR A FIRM FIXED PRICE CONTRACT TO BE FEASIBLE, THEREFORE, IT WAS CONSIDERED NECESSARY TO ADD CERTAIN COSTS TO THE PRICES OF EACH NON INCUMBENT TO OFFSET THIS DISPARITY IN TIME PERIODS. WE REALIZE THAT THIS SITUATION PRESENTED A DIFFICULT TECHNICAL PROCUREMENT PROBLEM, ONE WITH WHICH THE AIR FORCE AND YOUR OFFICE HAS WRESTLED IN THE PAST. THIS DIFFICULTY WAS, OF COURSE, AGGRAVATED BY THE DECISION TO EMPLOY A FIRM FIXED-PRICE CONTRACT. HOWEVER, IN THE COMPUTATION OF THE PRODUCTIVE COST PORTION OF THE PHASE-OVER COSTS, THE DECISION TO APPLY A FIXED PERCENTAGE ESTABLISHED BY THE AIR FORCE AGAINST THE INCUMBENT'S PRICE SUBMITTED ON A SINGLE- SYSTEM BASIS AND TO ADD THE RESULTING AMOUNT TO THE NON-INCUMBENT'S PRICE CONTAINED AN INHERENT FLAW. THIS PROCEDURE INVITED THE SUBMISSION OF UNREALISTICALLY HIGH PRICES BY AN INCUMBENT IN HIS SINGLE-SYSTEM PROPOSAL SINCE IT WAS ALL BUT CERTAIN THAT THIS BID WOULD NOT BE CONSIDERED IN MAKING THE AWARD. PERHAPS MORE SIGNIFICANTLY, IN THE CASE OF DEWLINE, IT IMPOSED AN ADDITIONAL PENALTY ON RCA AS A RESULT OF THE HIGHER PRICE OF FEDERAL ELECTRIC CORPORATION'S DEWLINE PROPOSAL STEMMING FROM THE HIGHER MANNING LEVEL REFLECTED THEREIN IN CONTRAST TO THAT WITH WHICH RCA WAS PREPARED TO OPERATE THE SYSTEM. FINALLY, THIS PROCEDURE INJECTED FOR EVALUATION PURPOSES FIGURES FOR PHASE-OVER COSTS WHICH BORE NO REAL RELATIONSHIP TO WHAT THE ACTUAL COSTS WOULD BE IN THE EVENT OF AWARD TO A NON INCUMBENT, SINCE THE INCUMBENT WOULD BE UNDER NO OBLIGATION TO PERFORM PHASE-OVER SERVICES AT THE EVALUATION FIGURES.

RCA ALSO HAS POINTED OUT THAT AT THE SAME TIME THAT PRODUCTIVE PHASE OVER COSTS OF $5.94 MILLION HAD BEEN "ARTIFICIALLY" COMPUTED UNDER THE EVALUATION FORMULA FOR BMEWS AND WACS, THE AIR FORCE HAD RECEIVED RCA'S INITIAL PROPOSAL FOR PHASE-OUT OF BMEWS AND WACS IN THE APPROXIMATE AMOUNT OF $11 MILLION. RCA CONCLUDES THAT THIS SUBSTANTIAL DISPARITY SHOULD HAVE INDUCED THE AIR FORCE TO CONDUCT DISCUSSIONS CONCERNING THE REALISM OF THE FIGURE COMPUTED UNDER THE STATED FORMULA. THE CONTRACTING OFFICERS HAVE RESPONDED WITH THESE REMARKS:

THE PROTEST SUGGESTS THAT THE COMPUTATION OF THE PRODUCTIVE COST BASED UPON THE PRICE QUOTED BY AN INCUMBENT CONTRACTOR IN ITS SINGLE SYSTEM PROPOSAL WAS INCORRECT, AND SHOULD HAVE BEEN BASED ON ITS PROPOSAL FOR OPERATING ALL THREE SYSTEMS. THIS SUGGESTION IS INVALID AND SUCH PROCEDURE WOULD HAVE BEEN IMPROPER FOR THE FOLLOWING REASONS: A. AT THE TIME OF FORMULATING THE SOLICITATIONS, IT WAS UNKNOWN IF IN FACT THERE WOULD BE ANY OFFERS FOR COMBINED OPERATION. THEREFORE, IT WAS NECESSARY TO SPECIFY THAT THE PERCENTAGES WOULD BE APPLIED TO A PROPOSAL THAT WAS CERTAIN TO BE SUBMITTED SINCE THERE COULD BE NO COMBINATION OFFERS UNLESS THERE HAD BEEN A BASIC SINGLE SYSTEM OFFER.

B. OF MORE IMPORTANCE IS THE FACT THAT IF AN INCUMBENT CONTRACTOR WAS UNSUCCESSFUL IN RECEIVING AN AWARD OF A NEW PROCUREMENT AND THUS REQUIRED TO PHASE OUT, HE WOULD BE PERFORMING ON THE BASIS OF EACH SYSTEM OPERATION. THUS, THE PRODUCTIVE COST FOR SUCH AN OPERATION WOULD BE MORE APPROPRIATELY DETERMINED FROM HIS SINGLE SYSTEM OFFER THAN FROM AN OFFER ENCOMPASSING MORE THAN ONE SYSTEM. IT IS CORRECT THAT RCA'S PROPOSALS FOR PHASE OUT HAD BEEN REQUESTED BY THE AIR FORCE AND DID SHOW A LARGE VARIANCE WITH THE AMOUNT PRODUCED BY THE EVALUATION PROCESS. HOWEVER, RCA WAS ON NOTICE THAT PHASE OUT PROPOSALS SUBMITTED UNDER SOLE SOURCE CONDITIONS, WOULD NOT BE USED BY THE AIR FORCE FOR PROPOSAL EVALUATION PURPOSES. IN ADDITION, AT THE TIME OF EVALUATION OF THE COMPETITIVE PROPOSALS, THERE HAD BEEN NO AUDIT EXAMINATION OR TECHNICAL EVALUATION OF THE RCA PHASE OUT PROPOSALS. THE AIR FORCE DID RECOGNIZE SIGNIFICANT DIFFERENCES BUT WAS UNABLE TO ATTACH IMPORTANCE TO THE PHASE OUT PROPOSAL HAVING KNOWLEDGE OF THE TYPE OF PROPOSAL USUALLY SUBMITTED BY RCA UNDER SOLE SOURCE CONDITIONS. ***

THE CONTRACTING OFFICERS HAVE ALSO SUBMITTED SOME FIGURES FOR PRIOR SOLE- SOURCE CONTRACTS AWARDED TO RCA ON BMEWS AND WACS. THESE WERE INCLUDED:

*** TO SHOW THAT RCA SOLE SOURCE PROPOSALS ARE TRADITIONALLY INFLATED AND CANNOT BE ACCEPTED AT FACE VALUE. THEREFORE, THE FACT THAT RCA'S PHASE OUT PROPOSALS WERE IN THE POSSESSION OF THE AIR FORCE DID NOT RULE OUT THE VALIDITY OF THE AMOUNTS USED IN THE EVALUATION PROCESS. IN SPITE OF THE DISPARITY OF THE RCA PHASE OUT PROPOSAL, THE AIR FORCE WAS AT A LOSS TO UNDERSTAND HOW RCA COULD DEFEND THE NEED FOR SUCH EXORBITANT COSTS WHEN THE AIR FORCE ALSO POSSESSED THE COMPETITIVE PROPOSAL BY RCA IN WHICH THEIR COST OF OPERATION WAS VASTLY SMALLER. BOTH OFFERS WERE FOR THE PERFORMANCE OF THE SAME WORK; THE ONLY DIFFERENCE BEING THAT UNDER PHASE OUT, THE WORK WOULD BE PERFORMED FOR A SHORTER PERIOD OF TIME. THE FOREGOING RELATES TO THE PRODUCTIVE COST ONLY SINCE THE NONPRODUCTIVE COSTS WERE NOT A FACTOR IN THE RCA COMPETITIVE PROPOSAL. ***

LATER ON IN THEIR REPORT, THE CONTRACTING OFFICERS OBSERVED:

*** IT MUST BE POINTED OUT THAT RCA WAS ON NOTICE THAT THEIR PHASE OUT PROPOSALS WOULD NOT BE USED IN EVALUATING THE PROPOSALS AND HAD ENTERED NO OBJECTIONS THERETO. *** THE CREDIBILITY OF THE RCA PHASE OUT PROPOSALS REMAINS QUESTIONABLE. OUR INITIAL DOUBTS AS TO THEIR VALIDITY ARE SUPPORTED BY ACTIONS THAT HAVE OCCURRED SINCE RECEIPT OF THE RCA PHASE OUT PROPOSALS. INDEPENDENT FIELD ANALYSIS BY AUDIT AND TECHNICAL PERSONNEL OF THE PHASE OUT PROPOSALS, CONDUCTED WITHOUT KNOWLEDGE OF OUR ESTIMATES OF PHASE OUT COSTS, HAVE SUPPORTED THE ACCURACY OF THE EVALUATION ESTIMATES EXTREMELY WELL. *** IN ADDITION, THE REPORT CONTAINS THE FOLLOWING:

*** THE COMPUTATION OF THE PRODUCTIVE COST AS A FACTOR OF THE INCUMBENT'S SINGLE SYSTEM OFFER IS THE ONLY VALID WAY TO DETERMINE THIS COST. IT IS NOT AGREED THAT THIS PROCEDURE WOULD INVITE THE SUBMISSION OF UNREALISTICALLY HIGH PRICES BY AN INCUMBENT IN HIS SINGLE SYSTEM PROPOSAL, SINCE THERE WAS NO CERTAINTY THAT THE SINGLE SYSTEM PROPOSAL WOULD NOT BE CONSIDERED IN MAKING AN AWARD. THE SOLICITATIONS REQUIRED SINGLE SYSTEM OFFERS AND PROVIDED FOR SUBMISSION OF COMBINATION OFFERS (TWO OR MORE SYSTEMS), IF AN OFFEROR WISHED TO DO SO. AN INCUMBENT WHO MIGHT BE TEMPTED TO SUBMIT AN UNREALISTICALLY HIGH SINGLE SYSTEM OFFER IN ORDER TO GAIN A COMPETITIVE ADVANTAGE AS SUGGESTED BY RCA WOULD HAVE TO WEIGH THIS AGAINST THE UNKNOWN POSSIBILITY THAT COMBINATION PROPOSALS MIGHT NOT BE SUBMITTED BY A COMPETITOR. BY BIDDING HIGH, IT IS TRUE THAT AN INCUMBENT COULD FORCE HIGHER EVALUATION COSTS ON HIS COMPETITOR'S PROPOSAL, BUT IN DOING SO HE COULD PRICE HIMSELF OUT OF THE COMPETITION. IF A NON-INCUMBENT SUBMITTED ONLY A SINGLE SYSTEM OFFER, THE ACTION SUGGESTED BY RCA WOULD WORK TO THE INCUMBENT'S DISADVANTAGE AND CAUSE SUCH A PROPOSAL TO BE HIGHER THAN NECESSARY, RESULTING IN THE POSSIBLE LOSS OF THE AWARD ON A SINGLE SYSTEM EVALUATION.

IN ADDITION, THE SUBMISSION OF UNREALISTICALLY HIGH PRICES IN AN INCUMBENT'S SINGLE SYSTEM OFFER WAS UNLIKELY SINCE HE WAS REQUIRED TO SHOW IN DETAIL THE MANNER IN WHICH THE MANPOWER WAS REFLECTED IN THE PRICES OFFERED. THIS WAS A REQUIREMENT IN THE CASE OF A SINGLE SYSTEM OFFER AND ALSO IN THE CASE OF ANY COMBINATION OFFER. ***

UPON FULL CONSIDERATION OF THE MATTER, WE ARE UNABLE TO CONCLUDE THAT THE AIR FORCE PROCUREMENT OFFICIALS WERE IN ERROR IN FAILING TO CONDUCT DISCUSSIONS AS TO THE APPROPRIATENESS OF THE $5.94 MILLION FIGURE REPRESENTING PRODUCTIVE PHASE-OVER COSTS FOR BMEWS AND WACS. RECOGNITION MUST HERE BE GIVEN TO THE FUNDAMENTAL PRINCIPLE THAT THE HALLMARK OF NEGOTIATED PROCUREMENT IS THE FLEXIBILITY AND INFORMALITY WHICH PROPERLY PERMITS ACTIONS WHICH WOULD NOT BE LEGALLY PROPER IN A FORMALLY ADVERTISED PROCUREMENT. 47 COMP. GEN. 279 AT 284 (1967). BY THE SAME TOKEN, THE FREEDOM OF THE CONTRACTING OFFICER IN THE SETTING OF A NEGOTIATED PROCUREMENT HAS ITS LIMITS:

GOVERNMENT PROCUREMENT BY NEGOTIATION, LIKE PROCUREMENT BY FORMAL ADVERTISING, REQUIRES THAT CONTRACTING OFFICERS OBSERVE ELEMENTAL IMPARTIALITY TOWARD ALL OFFERORS. WHILE NEGOTIATED PROCEDURES ARE MORE FLEXIBLE THAN ADVERTISED PROCEDURES, SUCH FLEXIBILITY DEMANDS A GREATER DEGREE OF CARE ON THE PART OF THE CONTRACTING OFFICER TO INSURE THAT ALL COMPETITIVE OFFERORS ARE TREATED EQUALLY. *** 48 COMP. GEN. 583, AT 592 (1969).

THIS BASIC APPROACH WAS RECENTLY APPLIED IN B-167389, FEBRUARY 12, 1970. IN THAT CASE THE ALLEGATION WAS MADE THAT THE PROTESTANT HAD BEEN PROVIDED TOO SHORT A TIME FOR THE SUBMISSION OF A "BEST AND FINAL" OFFER. SEE ASPR 3-805.1(B). WE RESPONDED IN THIS MANNER:

*** WE DO NOT BELIEVE THAT SOUND PROCUREMENT POLICY DICTATES THE ESTABLISHMENT OF A MINIMUM TIME FOR THE SUBMISSION OF PRICE REVISIONS. RATHER, IT WOULD APPEAR TO BE CLEARLY PREFERABLE TO LEAVE IT TO THE SOUND DISCRETION OF THE PROCUREMENT OFFICIALS TO AFFORD WHATEVER PERIOD IS CONSIDERED NECESSARY, IN VIEW OF THE PERTINENT FACTORS, INCLUDING TIME, INVOLVED IN THE INDIVIDUAL CASE. SUCH A VIEW IS IN ACCORD WITH THE GENERAL PRINCIPLE THAT NEGOTIATED PROCUREMENTS ARE TO BE CHARACTERIZED BY "FLEXIBLE AND INFORMAL" PROCEDURES WHICH "PROPERLY PERMIT THE CONTRACTING OFFICER TO DO THINGS IN THE AWARDING OF A NEGOTIATED CONTRACT THAT WOULD BE A RADICAL VIOLATION OF THE LAW IF THE PROCUREMENT WERE BEING ACCOMPLISHED BY FORMAL ADVERTISING." 47 COMP. GEN. 279, AT 284 (1967).

WE THEN ELABORATED AS FOLLOWS:

WE DO NOT MEAN TO IMPLY THAT THERE IS NO STANDARD FOR REVIEW OF SUCH MATTERS BY OUR OFFICE, NOR DO WE BELIEVE THAT THERE CAN BE NO CIRCUMSTANCES IN WHICH WE WOULD OBJECT TO A NEGOTIATED AWARD WHERE A PROTEST IS BASED ON AN INADEQUATE OPPORTUNITY TO SUBMIT A REVISED PROPOSAL. THE APPLICABLE STANDARD FOR REVIEW IS ONE OF REASONABLENESS UNDER THE CIRCUMSTANCES, AND OUR INQUIRY NECESSARILY WOULD BE WHETHER, AS A MATTER OF LAW, THE PERIOD OF TIME AFFORDED WAS UNREASONABLE AND PREJUDICIAL TO A COMPETITIVELY SITUATED OFFEROR. ***

OUR DECISION B-167389 INVOLVED A QUESTION OF TIME, I.E., THE DURATION OF NEGOTIATIONS. THE PRESENT SITUATION CONCERNS THE SCOPE OF THE SUBJECT MATTER TO BE DISCUSSED.

WE DO NOT REACH IN THE PRESENT CIRCUMSTANCES THE QUESTION OF PREJUDICE TO A COMPETITIVELY SITUATED OFFEROR (SEE THE SECOND QUOTATION FROM B-167389 ABOVE) SINCE OUR ABOVE-STATED CONCLUSION RESTS UPON OUR DETERMINATION THAT FAILURE TO CONDUCT DISCUSSIONS ON THE SUBJECT OF THE PRODUCTIVE PHASE-OVER COSTS FOR BMEWS AND WACS WAS REASONABLE UNDER THE CIRCUMSTANCES. IN THIS REGARD, THERE IS ONE CONSIDERATION OF PRINCIPAL IMPORTANCE. IT IS THE DISTINCTION THAT MUST BE MADE BETWEEN SUBMITTING AN OFFER IN COMPETITION WITH OTHER OFFERORS AND SUBMITTING AN OFFER IN A NONCOMPETITIVE ATMOSPHERE. THIS POINT HAS BEEN AMPLY DETAILED IN THE QUOTED PORTIONS OF THE ADMINISTRATIVE REPORT.

IN ADDITION TO THE COMMENTS CONTAINED THEREIN, WE THINK EMPHASIS MUST BE GIVEN TO THE FACT THAT THE $5.94 MILLION FIGURE WAS EXTRAPOLATED AT THE END OF A LENGTHY PROCESS OF NEGOTIATION, CONDUCTED IN CONNECTION WITH A HIGHLY DESIRABLE MULTI-YEAR PROCUREMENT WHICH HAD BEEN FOR MANY MONTHS THE SUBJECT OF CONTINUOUS SCRUTINY BY THE AIR FORCE. THE CONTRACTING OFFICERS WERE ABLE TO ASSESS THE RCA PHASE-OUT OFFER OF $11 MILLION IN THE LIGHT OF THEIR ACCUMULATED KNOWLEDGE OF THE OPERATIONS AND MAINTENANCE OF BMEWS AND WACS. THIS $11 MILLION OFFER BY RCA WAS AN INITIAL PROPOSAL, SUBMITTED AT THE COMMENCEMENT OF A NEGOTIATION PROCESS WHICH WAS YET TO TAKE PLACE. OBVIOUSLY THERE COULD BE NO COMPETITION REGARDING ACTUAL PHASE-OUT PROPOSALS. YET THE PHASE-OUT SERVICES TO BE PERFORMED BY RCA WERE THE SAME AS THOSE REPRESENTED BY THE FIGURE OF $5.94 MILLION. WE BELIEVE THAT THE DIFFERENCE MAY BE ADEQUATELY EXPLAINED ON THE BASIS OF THE NONCOMPETITIVE NATURE OF THE $11 MILLION PROPOSAL AND THAT, IN ANY EVENT, THIS CONSIDERATION, IN CONJUNCTION WITH THE OTHERS MENTIONED BY THE CONTRACTING OFFICERS, SUPPORTS THE DECISION NOT TO CONDUCT DISCUSSIONS ON THIS SUBJECT. IN THIS CONNECTION, CONTRAST 49 COMP. GEN. 98, AUGUST 12, 1969, WHERE PRIOR TO THE DATE SET FOR RECEIPT OF REVISED PROPOSALS, AN OFFEROR EXPRESSED THE OPINION THAT A STATED EVALUATION FACTOR WAS GROSSLY OVERESTIMATED AND INDICATED WILLINGNESS TO DISCUSS THE MATTER DURING NEGOTIATIONS. WE RECOGNIZED THAT THE DETERMINATION OF THE EVALUATION FACTOR WAS A MATTER OF ADMINISTRATIVE RESPONSIBILITY. NONETHELESS, WE HELD:

*** HOWEVER, IN OUR OPINION, THE PRESENCE OR ABSENCE OF AN EVALUATION FACTOR AND THE AMOUNT THEREOF CAN HAVE AN IMPACT UPON THE PRICES OFFERED AND IN THAT SENSE CAN AFFECT ONE OF THE ESSENTIAL TERMS (PRICE) OF THE CONTRACT. WE BELIEVE THAT ANY PROSPECTIVE OFFEROR OR BIDDER WHO REQUESTS AN OPPORTUNITY TO DISCUSS THE BASIS FOR A PARTICULAR EVALUATION FACTOR ORDINARILY SHOULD BE ACCORDED SUCH AN OPPORTUNITY. THEREFORE, WE CONCLUDE THAT THE NEW SOURCE WHO REQUESTED AN OPPORTUNITY TO DISCUSS THE $40,000 EVALUATION FACTOR BEFORE SUBMITTING ITS REVISED PROPOSAL SHOULD HAVE BEEN GRANTED THAT OPPORTUNITY AT THAT TIME. *** ON THE FACTS OF RECORD AS DISCUSSED ABOVE, THE ABOVE-CITED DECISION IS CLEARLY DISTINGUISHABLE.

A FURTHER CONTENTION HAS BEEN MADE BY RCA, NAMELY, THAT NO WRITTEN OR ORAL DISCUSSION WAS CONDUCTED WITH RCA AS TO ITS PRICE PROPOSALS, WHEREAS SEVERAL ASPECTS OF FEC'S PRICE OFFERS WERE THE SUBJECT OF DISCUSSIONS. RELIANCE IS PLACED ON 10 U.S.C. 2304(G) AND ITS IMPLEMENTATION IN ASPR, BOTH OF WHICH REQUIRE, WITH CERTAIN SPECIFIED EXCEPTIONS, THAT IN A NEGOTIATED PROCUREMENT, AFTER THE RECEIPT OF INITIAL PROPOSALS, WRITTEN OR ORAL DISCUSSIONS MUST BE CONDUCTED WITH ALL OFFERORS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED. RCA HAS SUGGESTED THAT TWO MATTERS AS TO WHICH FRUITFUL DISCUSSIONS COULD HAVE BEEN UNDERTAKEN ARE THE MANNING LEVEL FOR DEWLINE, AND THE DISPARITY BETWEEN THE AIR FORCE PHASE-OVER COSTS FOR BMEWS AND WACS AND RCA'S SEPARATE PRICE PROPOSAL FOR PHASE-OVER OF THESE LATTER TWO SYSTEMS.

WE HAVE PREVIOUSLY ADVERTED TO THE EXTENSIVE NEGOTIATION OF THE DEWLINE MANNING QUESTION DURING THE FIRST STEP OF THIS PROCUREMENT. IN LIGHT OF THESE PRIOR DISCUSSIONS BETWEEN THE AIR FORCE AND RCA, WE BELIEVE THAT LITTLE BENEFIT COULD HAVE BEEN ACHIEVED BY REOPENING THE MANNING REQUIREMENTS DURING THE PRICE PROPOSAL PHASE OF THE PROCUREMENT. WE HAVE ALSO INDICATED THAT THE DIFFERENCE IN PRODUCTIVE COST FIGURES FOR THE PHASE-OVER OF BMEWS AND WACS WAS, UNDER THE CIRCUMSTANCES, A SUBJECT WHICH THE CONTRACTING OFFICERS, IN THEIR DISCRETION, PROPERLY DECIDED WAS NOT NECESSARY TO DISCUSS.

HOWEVER, THE RECORDS OF NEGOTIATIONS (WHICH ARE SET OUT BELOW) DEMONSTRATE THAT DURING THE PRICE PROPOSAL STAGE, SUBSTANTIAL DISCUSSIONS AS TO SEVERAL MATTERS WERE CONDUCTED WITH FEC. ON THE OTHER HAND, ONLY ONE MATTER WAS DISCUSSED WITH RCA AT THIS STAGE OF THE PROCUREMENT. THE NEGOTIATION MEMORANDUM FOR DEWLINE DISCLOSES, IN PART, AS FOLLOWS:

RCA'S PROPOSAL WAS RESPONSIVE TO THE RFP, HOWEVER, DUE TO THE WIDE VARIANCE IN PRICES FOR ITEM 13 MANDAY RATE FOR CAMP SUPPORT--RCA $45.42 V $5.00 FOR FEC, IT WAS FELT THERE WAS A MISUNDERSTANDING OF THE REQUIREMENT. A TELEPHONE CALL WAS MADE TO THE ACO DET 1 FIRST AIR FORCE FOR A CLARIFICATION OF THE REQUIREMENT. IT WAS DETERMINED THAT CAMP SUPPORT WAS FOR FOOD AND LODGING ONLY IN SUPPORT OF THIRD PARTIES AND NOT "CAMP SUPPORT EXCEPT FOOD AND LODGING TO THIRD PARTIES" AS STATED IN THE RFP. THE WORD "EXCEPT" WAS THEREFORE DELETED AND EACH CONTRACTOR WAS REQUESTED TO TAKE ANOTHER LOOK AT THE REQUIREMENT AND ADVISE IF THERE WOULD BE A CHANGE IN THEIR PROPOSAL. AS A RESULT RCA REDUCED THEIR PRICE TO $2.00 PER MANDAY AND FEC TO $3.00 PER MANDAY. THERE WAS NO OTHER CHANGE TO RCA'S PROPOSAL. $2,299,098 TOTAL DECREASE. THE NEGOTIATION MEMORANDA FOR BMEWS AND WACS ARE VIRTUALLY IDENTICAL TO DEWLINE ON THIS POINT. IN ADDITION, IN A MEMORANDUM EXECUTED AT 11 A.M., MAY 27, 1969, CONCERNING THE CLOSING OF NEGOTIATIONS ON BMEWS, WACS, AND DEWLINE IT WAS STATED:

A MEETING WAS HELD WITH THE REPRESENTATIVES OF RCAS TO DISCUSS THEIR PROPOSAL. RCAS WAS INFORMED THAT THEIR PROPOSAL, AS AMENDED, NOW FULFILLED THE REQUIREMENTS OF THE SOLICITATION. THEY WERE ALSO NOTIFIED THAT THE AIR FORCE FELT THAT FURTHER NEGOTIATIONS WERE NOT REQUIRED. HOWEVER, THEY WERE ADVISED THAT IF THEY DESIRED TO MAKE ANY FURTHER REVISIONS TO THEIR PROPOSAL, SUCH REVISION WOULD BE ACCEPTED UP TO THE CLOSE OF BUSINESS (1615 HOURS) THIS DATE; OTHERWISE, NEGOTIATIONS WOULD BE CONSIDERED OFFICIALLY CLOSED AT THE CLOSE OF BUSINESS TODAY AND ANY CHANGE SUBMITTED SUBSEQUENT TO THAT HOUR WOULD BE TREATED PURSUANT TO THE CLAUSE OF THE SOLICITATIONS TITLED "LATE OFFERS AND MODIFICATIONS OR OF THE SOLICITATIONS TITLED "LATE OFFERS AND MODIFICATIONS OR WITHDRAWALS."

THIS DOCUMENT WAS SIGNED BY MR. C. FRED BROWN, CHIEF OF THE OPERATION & MAINTENANCE SECTION, COMMODITIES PROCUREMENT DIVISION, DIRECTORATE OF PROCUREMENT & PRODUCTION. AN IDENTICAL MEMORANDUM, EXECUTED AT 9:50 A.M. THE SAME DAY, RELATES TO THE CLOSING OF NEGOTIATIONS WITH FEC. BOTH MEMORANDA DISCLOSE THAT ALL THREE CONTRACTING OFFICERS ATTENDED MEETINGS WITH RCA AND FEC.

AN AFFIDAVIT, SUBMITTED BY THE RCA NEGOTIATOR PRIMARILY INVOLVED IN THESE PROCUREMENTS, RELATES IN PART AS FOLLOWS:

THE DISCUSSIONS HELD FROM MAY 21-27, 1969 WITH RESPECT TO THE MOST RECENT PROCUREMENTS FOR BMEWS, WHITE ALICE AND DEWLINE DEALT PRIMARILY WITH ASSURING THE AIR FORCE THAT THE NUMBER OF PERSONNEL IN THE QUALIFIED TECHNICAL PROPOSAL HAD BEEN ACCOUNTED FOR IN THE PRICE PROPOSAL. CORRECTIONS OF OBVIOUS ERRORS WERE MADE. IN ADDITION, RCA REDUCED ITS DEWLINE PRICE PROPOSAL WHEN AN ELEMENT OF COST (CAMP SUPPORT) WAS CHANGED BY THE AIR FORCE BY THE DELETION OF THE WORD "EXCEPT" FROM THE ITEM DESCRIPTION IN THE REQUEST FOR COST PROPOSAL.

AT NO TIME DID THE AIR FORCE ENTER INTO OR INVITE DISCUSSIONS OF THE VARIOUS ELEMENTS OF RCA'S PRICE PROPOSALS OR THE OTHER COST ELEMENTS USED IN EVALUATING THE PROPOSALS. PREVIOUS NEGOTIATIONS OF THE BMEWS AND WHITE ALICE CONTRACTS WITH THE SAME AIR FORCE REPRESENTATIVES INVOLVED LENGTHY AND DETAILED DISCUSSIONS OF EACH ELEMENT OF COST. ACCORDINGLY, THESE PROCUREMENTS DID NOT INVOLVE AT ALL THE TYPE OF PRICE NEGOTIATIONS OR DISCUSSIONS I HAVE BEEN ACCUSTOMED TO AND HAVE EXPERIENCED IN THE PAST.

WE ARE UNABLE TO AGREE WITH RCA'S ASSERTION THAT THERE WERE NO PRICE DISCUSSIONS WITH RCA WITHIN THE MEANING OF THE STATUTE AND REGULATIONS. THE STATUTE ITSELF DOES NO MORE THAN IMPOSE A REQUIREMENT THAT, IN THE CIRCUMSTANCES DESCRIBED, "WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED." THE REGULATORY FRAMEWORK WITHIN WHICH THIS STATUTORY MANDATE IS CARRIED OUT IS ASPR 3-804 AND 3- 805. SECTION 3-804 PROVIDES, IN PART:

*** COMPLETE AGREEMENT OF THE PARTIES ON ALL BASIC ISSUES SHALL BE THE OBJECTIVE OF THE CONTRACT NEGOTIATIONS. ORAL DISCUSSIONS OR WRITTEN COMMUNICATIONS SHALL BE CONDUCTED WITH OFFERORS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID.

IT IS EVIDENT THAT THE GOVERNMENT OFFICERS RESPONSIBLE FOR THESE PROCUREMENTS DID NOT DISCUSS THE RCA PRICE PROPOSALS AS EXTENSIVELY AS THE PRICE PROPOSALS OF FEC. IN FACT, WITH THE EXCEPTION OF THE CAMP SUPPORT ITEM IN THE DEWLINE RPP, IT SEEMS THAT NO SPECIFIC MATTER WAS DISCUSSED WITH RCA DURING THE SECOND STAGE OF THIS TWO-STEP NEGOTIATED PROCUREMENT. BUT THE OBLIGATION OF THE PROCUREMENT OFFICIALS IS TO "RESOLVE UNCERTAINTIES," AND IT IS CLEAR THAT IN THE OPINION OF THESE OFFICIALS THERE WAS UNCERTAINTY IN RCA'S OFFER ONLY AS TO DEWLINE CAMP SUPPORT. REPEATING OUR EARLIER OBSERVATION, THE QUESTIONS CONCERNING THE APPROPRIATE DEWLINE MANNING LEVEL AND THE DISPARITY BETWEEN THE OFFERED AND THE AIR FORCE PRODUCTIVE PHASE-OVER COSTS NEED NOT HAVE BEEN THE SUBJECT OF DISCUSSIONS. THEREFORE, WE BELIEVE THAT THE APPLICABLE LEGAL REQUIREMENTS WERE MET BY THE DISCUSSION OF CAMP SUPPORT, FOLLOWED BY THE EXTENSION TO RCA OF AN OPPORTUNITY TO SUBMIT PRICE REVISIONS AS TO ANY OR ALL OF THE THREE SYSTEMS. CF. 48 COMP. GEN. 449 (1968).

THE FINAL ISSUE INVOLVED IN THIS PROTEST WAS NOT RAISED AS ONE OF THE ORIGINAL GROUNDS FOR THE PROTEST. BY LETTER OF OCTOBER 23, 1969, RCA NOTED THAT THE RECORD OF NEGOTIATIONS (SUBMITTED TO OUR OFFICE WITH THE OCTOBER 9 LETTER REFERENCED ABOVE) INDICATED THAT FEC HAD BEEN PERMITTED TO SUBMIT REVISIONS SUBSEQUENT TO THE MAY 27 DEADLINE IN VIOLATION OF ASPR 3-805.1(B), WHICH PROVIDES IN PART:

*** WHENEVER NEGOTIATIONS ARE CONDUCTED WITH SEVERAL OFFERORS, WHILE SUCH NEGOTIATIONS MAY BE CONDUCTED SUCCESSIVELY, ALL OFFERORS SELECTED TO PARTICIPATE IN SUCH NEGOTIATIONS (SEE (A) ABOVE) SHALL BE OFFERED AN EQUITABLE OPPORTUNITY TO SUBMIT SUCH PRICE, TECHNICAL, OR OTHER REVISIONS IN THEIR PROPOSALS AS MAY RESULT FROM THE NEGOTIATIONS. ALL SUCH OFFERORS SHALL BE INFORMED OF THE SPECIFIED DATE (AND TIME IF DESIRED) OF THE CLOSING OF NEGOTIATIONS AND THAT ANY REVISIONS TO THEIR PROPOSALS MUST BE SUBMITTED BY THAT DATE. ALL SUCH OFFERORS SHALL BE INFORMED THAT ANY REVISION RECEIVED AFTER SUCH DATE SHALL BE TREATED AS A LATE PROPOSAL IN ACCORDANCE WITH THE "LATE PROPOSALS" PROVISIONS OF THE REQUEST FOR PROPOSALS. (IN THE EXCEPTIONAL CIRCUMSTANCES WHERE THE SECRETARY CONCERNED AUTHORIZES CONSIDERATION OF SUCH A LATE PROPOSAL, RESOLICITATION SHALL BE LIMITED TO THE SELECTED OFFERORS WITH WHOM NEGOTIATIONS HAVE BEEN CONDUCTED.) IN ADDITION, ALL SUCH OFFERORS SHALL ALSO BE INFORMED THAT AFTER THE SPECIFIED DATE FOR THE CLOSING OF NEGOTIATION NO INFORMATION OTHER THAN NOTICE OF UNACCEPTABILITY OF PROPOSAL, IF APPLICABLE (SEE 3- 508), WILL BE FURNISHED TO ANY OFFEROR UNTIL AWARD HAS BEEN MADE.

THE AUGUST 1, 1969, STATEMENT BY THE CONTRACTING OFFICERS INCLUDES THESE RELEVANT COMMENTS:

*** NEGOTIATIONS NECESSARY TO INSURE COMPLETE RESPONSIVENESS WERE CONDUCTED WITH BOTH RCA AND FEC. THESE DISCUSSIONS OCCURRED DURING THE PERIOD 21 MAY THROUGH 27 MAY AND RESULTED IN PRICING CHANGES BY BOTH FIRMS. ***

*** IF EITHER FEC OR RCA HAD OFFERED REVISED PRICING WHEN THE AIR FORCE OFFERED THEM THE FINAL OPPORTUNITY TO DO SO ON 27 MAY 1969 *** THE TWO MEMORANDA OF MAY 27, 1969, SIGNED BY MR. BROWN, WHICH PURPORTED TO EFFECT A CLOSING OF NEGOTIATIONS, WERE ATTACHED AS PART OF THE INITIAL ADMINISTRATIVE REPORT.

IN RESPONSE TO A SPECIFIC REQUEST BY OUR OFFICE, THE PRICE NEGOTIATION MEMORANDA, REQUIRED BY ASPR 3-811(A) TO BE INCLUDED IN THE CONTRACT FILE "FOR THE USE OF ANY REVIEWING AUTHORITIES," WERE MADE AVAILABLE TO US WITH THE LETTER OF OCTOBER 9, 1969.

THE MEMORANDUM RELATING TO BMEWS AND SIGNED ON JUNE 5, 1969, BY THE CONTRACTING OFFICER INDIVIDUALLY RESPONSIBLE FOR THAT SYSTEM, CONTAINS THE FOLLOWING PERTINENT COMMENTS:

DATES AND PLACE OF FACT FINDING, PRE-NEGOTIATION REVIEW AND NEGOTIATION: 19 THROUGH 27 MAY 1969. ***

THERE BEING NO OTHER AREAS THAT REQUIRED FURTHER NEGOTIATIONS AND BECAUSE OF THE CLOSENESS OF THEIR PROPOSALS IT WAS DETERMINED THAT FURTHER NEGOTIATIONS WERE NOT NECESSARY. THEREFORE, BOTH FIRMS WERE VERBALLY NOTIFIED THAT NEGOTIATIONS WERE CLOSED AS OF 27 MAY 1969.

THE CONTRACTING OFFICER FOR DEWLINE SIGNED A MEMORANDUM OF NEGOTIATIONS ON JUNE 4, 1969. THAT DOCUMENT INCLUDES THESE OBSERVATIONS:

DATE OF NEGOTIATIONS: 21 MAY--29 MAY 1969.

* * * * * OF THE CLOSENESS OF THEIR PROPOSALS IT WAS DETERMINED THAT FURTHER

THERE BEING NO OTHER AREAS THAT REQUIRED FURTHER NEGOTIATIONS AND BECAUSE NEGOTIATIONS WERE NOT NECESSARY. THEREFORE, BOTH FIRMS WERE VERBALLY NOTIFIED THAT NEGOTIATIONS WERE CLOSED AS OF 27 MAY 1969.

THE WACS NEGOTIATION MEMORANDUM WAS SIGNED BY THE INDIVIDUAL CONTRACTING OFFICER ON JUNE 6, 1969; RELEVANT PORTIONS ARE AS FOLLOWS:

DISCUSSIONS TOOK PLACE WITH BOTH PROPOSERS DURING THE PERIOD 19 THROUGH 29 MAY 1969 TO CLARIFY THEIR PROPOSALS. ***

THERE BEING NO OTHER AREAS THAT REQUIRED FURTHER NEGOTIATIONS AND BECAUSE OF THE CLOSENESS OF THEIR PROPOSALS IT WAS DETERMINED THAT FURTHER NEGOTIATIONS WERE NOT NECESSARY. THEREFORE, RCA WAS VERBALLY NOTIFIED ON 27 MAY 1969 AND FEC ON 29 MAY 1969 THAT NEGOTIATIONS WERE CLOSED.

IT IS WORTHY OF NOTE THAT EACH MEMORANDUM STATES THAT THE GOVERNMENT WAS REPRESENTED DURING NEGOTIATIONS BY THE THREE CONTRACTING OFFICERS AND BY MR. C. FRED BROWN AND MR. EARL LAVINE, CHIEF OF THE ELECTRONICS BRANCH, COMMODITIES PROCUREMENT DIVISION, DIRECTORATE OF PROCUREMENT & PRODUCTION. MR. LAVINE ALSO APPROVED AND SIGNED THE NEGOTIATION MEMORANDA FOR DEWLINE AND WACS.

ATTACHED TO A NOVEMBER 18, 1969, LETTER TO AIR FORCE HEADQUARTERS FROM THE DIRECTOR OF PROCUREMENT MANAGEMENT, AERO SPACE DEFENSE COMMAND, IS A MEMORANDUM FROM THE DEWLINE CONTRACTING OFFICER. IT STATES IN PART:

*** NEGOTIATIONS WITH RCA AND FEC FOR THE OPERATION AND MAINTENANCE OF THE DEW LINE, BMEWS AND WHITE ALICE WERE ACTUALLY CONCLUDED ON 27 MAY 1969. ***

THE RECORD FURTHER SHOWS THAT A LETTER DATED MAY 26, 1969, FROM FEC TO THE CONTRACTING ACTIVITY, TO THE ATTENTION OF MR. LAVINE, EFFECTED CERTAIN MODIFICATIONS IN FEC'S PRICE PROPOSALS. THE LETTER READS AS FOLLOWS, EXCEPT FOR THE SPECIFIC PRICE CHANGES:

FEC WOULD LIKE TO TAKE THIS OPPORTUNITY TO CLARIFY OUR COMBINATION PROPOSALS WHICH REFLECT PERSONNEL REDUCTIONS. PLEASE DELETE THE SECOND PARAGRAPH OF THE SUPPORTING PRICE INFORMATION AND THOSE ATTACHMENTS WHICH REFLECT PROPOSED REDUCTIONS IN PERSONNEL COMPLEMENTS FOR THE COMBINATIONS OF DEWLINE, BMEWS AND WHITE ALICE IN EACH OF OUR ALTERNATE PROPOSALS.

REDUCTIONS IN REVISED COMBINATION PRICES HAVE TAKEN INTO ACCOUNT PROFIT AND GENERAL AND ADMINISTRATIVE AREAS WHERE PRICE REDUCTIONS CAN BE AFFORDED THE GOVERNMENT BY COMBINING THESE PROGRAMS.

IN CLARIFICATION OF THE ABOVE WHICH REPRESENTS OUR INDIVIDUAL TECHNICAL PROPOSALS AND A SAVINGS IS REFLECTED TO THE GOVERNMENT FROM THE SEPARATE AND INDIVIDUAL BIDS IN THE G & A AND PROFIT AREAS RESULTING FROM THE COMBINATION OF THE PROGRAMS.

PRICE SUMMARIES HAVE BEEN INCLUDED WHICH SHOW THE APPLICABLE G & A AND PROFIT.

THE PRICE HEREIN REFLECTS THE REDUCTION IN PRICING APPLICABLE TO THE DEWLINE PORTION OF ALL COMBINATIONS RESULTING FROM INADVERTENTLY USING REVISION 3, SERVICE CONTRACT ACT DETERMINATION, INSTEAD OF REVISION 2 DETERMINATION. THIS EQUATES TO $371,000 AS EXPLAINED IN OUR PREVIOUS LETTER DATED 1969 MAY 23.

IN ADDITION TO THE ABOVE PLEASE DELETE PARAGRAPH FIVE OF THE SUPPORTING PRICE INFORMATION WITH RESPECT TO RIGHT OF ASSIGNMENT TO ANY SUBSIDIARY.

THE PRICE FOR THE COMBINATION BIDS IS THEREFORE CHANGED BY ITEM NUMBERS UNDER EACH COMBINATION AS FOLLOWS:

PRICE SUMMARIES REFLECTING THE G & A AND PROFIT FOR THE ABOVE ARE AS FOLLOWS:

WITH REGARD TO OUR BASIC BMEWS PROPOSAL PLEASE CHANGE ITEM NO. 1 TO READ $1,318,130 AND ITEM NO. 2 TO READ $500. THIS LETTER IS DATE STAMPED "28 MAY 1969." IT IS NOT CLEAR BY WHOM THIS LETTER WAS STAMPED.

THE FILE INCLUDES A LETTER DATED MAY 28, 1969, FROM FEC TO THE CONTRACTING ACTIVITY, ATTENTION OF THE WACS CONTRACTING OFFICER. THE LETTER STATES:

IN ACCORDANCE WITH AGREEMENTS REACHED DURING THE RECENT DISCUSSIONS WITH OUR REPRESENTATIVES, FEC IS PLEASED TO SUBMIT THE ATTACHED CLARIFICATIONS TO OUR WHITE ALICE COST PROPOSAL DATED 16 MAY 1969 IN RESPONSE TO RFP NR. F04606-69-R-0134. THE REVISED PAGES CORRECT INADVERTENT ERRORS IN THE RATE ASSOCIATED WITH THE PROJECT MANAGER AND THE RATE PROPOSED FOR THE FIELD ENGINEERS OF THE TECHNICAL ASSISTANCE TEAM.

IN ADDITION, WE HAVE PREPARED A REVISED SCHEDULE TO COVER THE FULL EXTENT OF THE PERIOD OF PERFORMANCE ASSOCIATED WITH THE ALEUTIAN EXTENSION STATIONS.

ALSO, IN ACCORDANCE WITH OUR DISCUSSIONS, WE HAVE RE-EXAMINED THE EXPECTED COSTS OF PURCHASED SERVICES FOR THE WHITE ALICE COMMUNICATIONS SYSTEM AND WE CONFIRM THAT OUR PROPOSED ESTIMATE IS ADEQUATE.

WE TRUST THAT YOU WILL FIND OUR SUBMISSION COMPLETE AND SATISFACTORY. SHOULD YOU HAVE ANY QUESTIONS REGARDING THE REVISIONS, PLEASE CONTACT US.

A SECOND LETTER OF THE SAME DATE, TO THE ATTENTION OF THE DEWLINE CONTRACTING OFFICER, READS AS FOLLOWS:

IN ACCORDANCE WITH RECENT DISCUSSIONS BETWEEN YOURSELF AND REPRESENTATIVES OF FEC, ATTACHED ARE FOUR REVISED SUMMARY PAGES AND FOUR REVISED SCHEDULE PAGES APPLICABLE TO THE ONE YEAR PROPOSAL AND THE MULTI- YEAR PROPOSAL SUBMITTED BY FEC ON 19 MAY 1969 IN RESPONSE TO RFP NR. F04606-69-R-0131.

THESE REVISIONS COVER ALASKAN NON-EXEMPT LABOR AND THEY REFLECT THE RATES SET FORTH IN THE SERVICE CONTRACT ACT WAGE DETERMINATION DATED 1 MARCH 1969, 67-28 (REVISION 2). AS REVISED, THE SCHEDULES REFLECT THE ADJUSTMENT SET FORTH IN OUR MAY 23, 1969 LETTER.

IN ADDITION, WE ALSO WISH TO ADVISE YOU THAT THE FOREIGN EXCHANGE RATE SET FORTH IN FEC'S SUBMISSION OF 19 MAY 1969 SHOULD BE 7.5% IN LIEU OF THE RATE OF 7.15% INDICATED. THE CREDIT REFLECTED FOR FOREIGN EXCHANGE IS CORRECT AS THE TYPOGRAPHICAL ERROR IS RESTRICTED TO THE RATE.

WE TRUST YOU WILL FIND THIS SUBMISSION SATISFACTORY. SHOULD YOU HAVE ANY QUESTIONS REGARDING IT, PLEASE CONTACT US. A SIMILAR LETTER, DATED MAY 29, 1969, AMENDED THE FEC LETTER OF MAY 26. IT STATED:

FEDERAL ELECTRIC CORPORATION WISHES TO FURTHER CLARIFY THE ABOVE PRICE PROPOSALS IN THE AREA OF REIMBURSABLES. PLEASE REPLACE PAGE 2 AND PAGE 3 OF THE SUBJECT LETTER, WITH THE ATTACHED PAGES, DATED 69 MAY 29 (REVISED). THESE REVISED PAGES REFLECT THE PRICING FOR ALL COMBINATIONS INVOLVING THE DEWLINE. ITEM NO. 1 OF OUR BASIC "3 YEAR" DEWLINE PRICE PROPOSAL IS $1,745,722. ITEM NO. 1 OF THE "1 YEAR" DEWLINE PRICE PROPOSAL IS $1,709,495. REVISED SUPPORTING PRICE BACKUP PAGES FOR DEWLINE ARE ATTACHED. INCLUDED HEREIN ARE THE DELETIONS TO DEWLINE RFP'S, PAGES 6 AND 7 OF SUPPORTING PRICE INFORMATION, PARAGRAPH MISCELLANEOUS:

B. RECREATION AND MORALE SUPPLIES, INCLUDING MOVIES

D. COMMERCIAL EQUIPMENT MAINTENANCE

E. COMMERCIAL CALIBRATION SERVICES

F. SUBSCRIPTIONS

G. STATIONERY AND OFFICE SUPPLIES

H. STREATOR AND WINNIPEG HANGAR LEASES

I. LAUNDRY AND DRY CLEANING

ALSO, ATTACHED ARE PAGE 2 OF SUMMARY CONTRACT ITEM 1, AND PAGE 2 OF CONTRACT ITEM 1--OTHER COSTS FOR THE DEWLINE RFP'S FOR "1 YEAR" AND "3 YEARS."

RFP F04606-69-R-0134, SUPPORTING PRICE INFORMATION, ATTACHMENT D, PAGE 21 OF 27, RENT, HOUSING AND FURNITURE, DELETE WORDS: " ... WITH THE EXCEPTION OF PHOTOGRAPH EQUIPMENT AND REPRODUCTION EQUIPMENT," AND MATERIALS AND SUPPLIES COSTS, DELETE WORDS: " ... MOVIES AND RECREATIONAL SUPPLIES." THE LETTERS OF MAY 28 AND 29 ARE NOT DATE STAMPED.

RCA'S POSITION IS THAT THE ACTUAL DATE FOR THE CLOSING OF NEGOTIATIONS WAS MAY 27 AND THAT THE REVISIONS TO FEC'S PRICE PROPOSALS RECEIVED AFTER THAT DATE SHOULD HAVE BEEN DISREGARDED PURSUANT TO THE TERMS OF THE "LATE OFFERS AND MODIFICATIONS OR WITHDRAWALS" CLAUSE.

THE INCONSISTENCY BETWEEN THE MEMORANDA OF MR. BROWN AND THE MEMORANDA OF THE RESPECTIVE CONTRACTING OFFICERS PRESENTS A CRITICAL FACTUAL UNCERTAINTY: WHAT WERE THE DATE OR DATES WHEN NEGOTIATIONS WERE CLOSED? WHILE WE GENERALLY REFRAIN FROM RESOLVING SUCH QUESTIONS, WE BELIEVE THAT MAY 27 WAS THE CLOSING DATE FOR NEGOTIATIONS ON ALL THREE PROCUREMENTS. DIFFERENT CONCLUSION WOULD BE CONTRARY TO THE CLEAR PREPONDERANCE OF THE RECORD, AND WOULD REQUIRE US TO HOLD THAT THERE WAS A PATENT FAILURE TO SET A COMMON CUTOFF DATE, AT LEAST WITH RESPECT TO WACS.

ACCORDINGLY, THE REVISIONS TO FEC'S PRICES RECEIVED AFTER MAY 27 SHOULD HAVE BEEN REJECTED UNDER ASPR 3-805.1(B) AND THE APPLICABLE RPP CLAUSES CONCERNING LATE MODIFICATIONS. ALTHOUGH THE MOST RECENT MEMORANDUM OF THE DEWLINE CONTRACTING OFFICER INDICATES THAT CERTAIN REVISIONS WERE "CONFIRMING" INFORMATION VERBALLY GIVEN TO THE AIR FORCE ON OR BEFORE MAY 27, IT IS ADMITTED BY HIM THAT NOT ALL THE REVISIONS WERE MERELY CONFIRMATORY.

THE MEMORANDUM AFFIRMATIVELY STATES THAT "THERE WAS NO FURTHER DISCUSSION WITH EITHER CONTRACTOR AFTER 27 MAY 1969." THE RECORD APPEARS TO SUPPORT THIS STATEMENT, FOR ALL THE REVISIONS BY FEC SEEM TO HAVE BEEN MADE IN RESPONSE TO POINTS RAISED DURING DISCUSSIONS PRIOR TO THE CLOSE OF BUSINESS ON MAY 27. THE REVISIONS, MOREOVER, DID NOT RESULT IN A CHANGE IN THE RELATIVE STANDING OF THE TWO OFFERORS AS EVALUATED ON THE BASIS OF A COMBINATION AWARD OF ALL THREE SYSTEMS TO ONE OF THEM. NOR WAS ANY NEW MATTER DISCUSSED WITH FEC AFTER MAY 27. CONTRAST, ON THIS POINT, 49 COMP. GEN. 402, DECEMBER 22, 1969, WHICH ALSO IMPLICITLY SUGGESTS THAT THERE MAY BE CHANGES TO A PROPOSAL AFTER CLOSING OF DISCUSSIONS THAT MAY NOT BE "SUBSTANTIAL" ENOUGH TO CONSTITUTE A REOPENING OF NEGOTIATIONS.

WHILE FROM RCA'S VIEWPOINT THERE COULD HAVE BEEN NO GREATER PREJUDICE TO IT THAN THE FAILURE TO EXCLUDE ITS SOLE COMPETITOR FROM THE PROCUREMENT, THE DETRIMENT TO THE INTEGRITY OF THE SYSTEM OF COMPETITIVE PROCUREMENT IS NOT SUBSTANTIAL ENOUGH TO WARRANT OUR OFFICE TO OBJECT TO THE AWARDS AT THIS TIME. PHASE-OVER HAS BEEN COMPLETED AND FEC IS IN FULL OPERATION OF ALL THREE SYSTEMS. IN THIS CONTEXT, THE DEFICIENCY IN PROCEDURE (RECEIPT OF REVISIONS AFTER CLOSING DATE) IS NOT SUFFICIENTLY SIGNIFICANT TO REQUIRE THE GOVERNMENT TO TAKE ANY ACTION ADVERSE TO THE AWARDS AS MADE. HOWEVER, WE BY NO MEANS CONDONE THE VIOLATION OF ASPR 3-805.1(B) AND WE URGE THAT EFFECTIVE ACTION BE TAKEN TO ASSURE THAT SUCH VIOLATIONS DO NOT RECUR.