B-167473, NOVEMBER 13, 1969, 49 COMP. GEN. 295

B-167473: Nov 13, 1969

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

THE CONTRACTING OFFICER WAS NOT REQUIRED TO EVALUATE THE PROCUREMENT ON THE BASIS OF THE COST ANALYSIS PROVISIONS OF 10 U.S.C. 2306(F) AND PARAGRAPH 3-807.3 OF THE ARMED SERVICES PROCUREMENT REGULATION WHICH REQUIRE CONSIDERATION OF FACTORS OTHER THAN PRICE. IT IS UNREASONABLE TO EQUATE THE RFP PROVISION TO THE ASPR DEFINITION OF "COST ANALYSIS" TO IMPOSE ON THE CONTRACTING OFFICER A DUTY NOT CONTEMPLATED. IS HELD TO BE IN THE BEST INTEREST OF THE GOVERNMENT. THE RFP WAS ISSUED ON MARCH 27. 7 OF THOSE WERE FOUND TO BE IN THE FINAL "ZONE OF CONSIDERATION.". THE CONTRACTING OFFICER ADVISED THE 7 OFFERORS IN THE "ZONE OF CONSIDERATION" THAT THEY WERE "BEING CONSIDERED IN THE FINAL COMPETITIVE NEGOTIATIONS WHICH ARE BEING CONDUCTED.

B-167473, NOVEMBER 13, 1969, 49 COMP. GEN. 295

CONTRACTS -- NEGOTIATION -- EVALUATION FACTORS -- PROPRIETY OF EVALUATION WHERE THE REQUEST FOR PROPOSALS (RFP) CONTAINED A "STANDARDS FOR EVALUATION OF OFFERS" PROVISION AND ADEQUATE COMPETITION HAD BEEN OBTAINED, THE CONTRACTING OFFICER WAS NOT REQUIRED TO EVALUATE THE PROCUREMENT ON THE BASIS OF THE COST ANALYSIS PROVISIONS OF 10 U.S.C. 2306(F) AND PARAGRAPH 3-807.3 OF THE ARMED SERVICES PROCUREMENT REGULATION WHICH REQUIRE CONSIDERATION OF FACTORS OTHER THAN PRICE. UNDER THE CRITERIA ESTABLISHED BY THE STATUTE AND THE IMPLEMENTING REGULATION, SUBMISSION OF COST OR PRICING DATA AND CERTIFICATION THEREOF ARISES ONLY IN CONNECTION WITH CHANGES OR MODIFICATION TO THE INITIAL CONTRACT THAT EXCEED $100,000, AND IT IS UNREASONABLE TO EQUATE THE RFP PROVISION TO THE ASPR DEFINITION OF "COST ANALYSIS" TO IMPOSE ON THE CONTRACTING OFFICER A DUTY NOT CONTEMPLATED, AND THE AWARD TO THE LOW OFFEROR, DETERMINED TO BE A RESPONSIVE OFFEROR, IS HELD TO BE IN THE BEST INTEREST OF THE GOVERNMENT.

TO THE GULTON INDUSTRIES, INC., NOVEMBER 13, 1969:

WE REFER TO YOUR PROTEST BY LETTER DATED JULY 8, 1969, WITH ENCLOSURES, AND SUBSEQUENT CORRESPONDENCE, AGAINST THE AWARD OF A CONTRACT TO ATLANTIC RESEARCH CORPORATION (ARC) PURSUANT TO REQUEST FOR PROPOSALS (RFP) NO. DAAA26-69-R-0446, ISSUED BY THE PROCUREMENT AND PRODUCTION DIRECTORATE, PICATINNY ARSENAL, DOVER, NEW JERSEY.

THE RFP CONTEMPLATED A FIXED-PRICE CONTRACT FOR THE SUPPLY OF 72,035 UNITS (WITH A 200 PERCENT OPTION QUANTITY) OF THE XM22E4 CONTROL, POWER SUPPLY. THE RFP WAS ISSUED ON MARCH 27, 1969, TO 14 FIRMS, INCLUDING GULTON, PRIOR TO BEING SYNOPSIZED IN THE COMMERCE BUSINESS DAILY. THE SYNOPSIS RESULTED IN REQUESTS BY 29 ADDITIONAL FIRMS FOR COPIES OF THE RFP. FOURTEEN OF THE 43 FIRMS SUBMITTED OFFERS, AND 7 OF THOSE WERE FOUND TO BE IN THE FINAL "ZONE OF CONSIDERATION." AMENDMENT NO. 1 TO THE RFP, ISSUED APRIL 4, 1969, INCORPORATED TWO ENGINEERING ORDERS, BUT LEFT THE CLOSING DATE FOR SUBMISSION OF PROPOSALS UNCHANGED AT APRIL 28, 1969. TELEGRAM OF MAY 29, 1969, THE CONTRACTING OFFICER ADVISED THE 7 OFFERORS IN THE "ZONE OF CONSIDERATION" THAT THEY WERE "BEING CONSIDERED IN THE FINAL COMPETITIVE NEGOTIATIONS WHICH ARE BEING CONDUCTED. REQUEST YOU REVIEW YOUR OFFER AND ADVISE THIS ARSENAL OF YOUR BEST AND FINAL OFFER. ANY REVISION TO YOUR OFFER *** MUST BE SUBMITTED TO PICATINNY ARSENAL NO LATER THAN 2:00 P.M. EDST, 11 JUNE 1969 *** ." GULTON WAS THE LOW OFFEROR, AND ARC WAS SECOND LOW, AFTER THE ORIGINAL SUBMISSION OF OFFERS. WHILE GULTON CHOSE NOT TO REVISE ITS PRICE IN RESPONSE TO THE TELEGRAM OF MAY 29, 1969, ARC REDUCED ITS PRICE TO $0.025 PER UNIT BELOW THAT OF GULTON. THE CONTRACTING OFFICER THEN REQUESTED A PREAWARD SURVEY ON ARC.

THE PREAWARD SURVEY ON ARC, CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT DCASD), VAN NUYS, CALIFORNIA, RECOMMENDED ARC FOR "COMPLETE AWARD" OF THE CONTRACT. AN EVALUATION WAS THEN MADE OF THE SEVEN OFFERS AND THE CONTRACTING OFFICER CONCLUDED THAT AWARD TO ARC WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT. THE PROPOSED AWARD WAS REVIEWED AND UNANIMOUSLY APPROVED BY THE PICATINNY ARSENAL BOARD OF AWARDS ON JULY 1, 1969. TELEGRAPHIC NOTICE OF AWARD WAS SENT TO ARC DATED THAT DAY AND FORMAL AWARD WAS MADE ON JULY 10, 1969. YOU WERE NOTIFIED OF THE AWARD ON JULY 2, 1969, AND YOU SUBSEQUENTLY FILED YOUR PROTEST WITH THIS OFFICE.

THE SUBSTANCE OF YOUR PROTEST IS THAT ALTHOUGH ARC OFFERED THE LOWEST PRICE, THE CONTRACTING OFFICER FAILED TO CONSIDER SEVERAL ADVANTAGES OTHER THAN PRICE, INHERENT IN GULTON'S OFFER, WHICH SHOULD HAVE LED TO AWARD TO YOU. YOU CONTEND THAT THE BENEFITS WHICH THE GOVERNMENT WOULD DERIVE FROM THESE ADVANTAGES WOULD COMPENSATE FOR ANY MONETARY SAVING GAINED FROM CONTRACTING WITH ARC. THESE ADVANTAGES ARE SAID TO FLOW FROM YOUR PRESENT CONTRACT (DAAA21-67-C-0601) FOR THE INITIAL PRODUCTION RUN OF THE XM22E4 CONTROL POWER SUPPLY AND A SUBSEQUENTLY AWARDED RESEARCH CONTRACT (DAAA21- 69-C-0420) TO IMPROVE THE ITEM'S PERFORMANCE. YOU STATE THAT YOU HAVE A PROVEN TECHNICAL AND PRODUCTION CAPACITY FOR THE ITEM WHICH IS THE RESULT OF AN ESTABLISHED PRODUCTION LINE, SKILLED PRODUCTION EMPLOYEES, AND QUALIFIED VENDORS. YOU CONTEND THAT ARC, IN CONTRAST, HAS A PROBLEMATICAL PRODUCTION CAPACITY, ONLY TENTATIVE AND UNTRIED VENDORS, AND A DOUBTFUL ABILITY TO MEET DELIVERY REQUIREMENTS. ACCORDINGLY, YOU REQUEST THAT OUR OFFICE DETERMINE WHETHER THE CONTRACT WITH ARC IS IN THE BEST INTERESTS OF THE GOVERNMENT.

PAGE 10 OF THE RFP CONTAINED THE FOLLOWING "STANDARDS FOR EVALUATION OF OFFERS":

FACTORS OF EVALUATION PERTINENT TO THIS REQUIREMENT ARE THOSE WHICH ARE SET FORTH BELOW. HOWEVER, WHILE CERTAIN FACTORS ARE MORE APPLICABLE TO THIS REQUIREMENT THAN OTHERS, THE GOVERNMENT RESERVES THE RIGHT OF SUCH FLEXIBILITY IN EVALUATION AS IS NECESSARY TO ASSURE PLACEMENT OF THE CONTRACT IN THE BEST INTEREST OF THE GOVERNMENT.

A. PRICE EVALUATION FACTORS

1. QUOTED UNIT PRICES: CONSIDERATION OF BASIC UNIT PRICES WILL COVER COMPLETE ANALYSIS OF COSTS.

2. DISCOUNTS: CASH DISCOUNTS PROVIDING A MINIMUM TIME OF TEN (10) DAYS FOR PAYMENT WILL BE DEDUCTED FROM UNIT PRICES WHEN EVALUATING OFFERS.

B. NON-PRICE EVALUATION FACTORS--(ADMINISTRATIVE FACTORS TO BE CONSIDERED IN MAKING AN AWARD UNDER THIS SOLICITATION).

1. RECORD IN PERFORMING OTHER GOVERNMENT CONTRACTS.

2. AVAILABLE CAPACITY FOR PERFORMING THE PROPOSED AWARD AND ABILITY TO MEET THE DELIVERY SCHEDULE.

NOTE: NOTWITHSTANDING ANY OTHER PROVISIONS SET FORTH ABOVE IN THIS SOLICITATION, FACTORS IN EVALUATION OF OFFERS RECEIVED IN RESPONSE HERETO, SHALL BE EVALUATED IN ACCORDANCE WITH "STANDARDS FOR EVALUATION OF OFFERS."

IN REGARD TO THE "PRICE EVALUATION FACTORS" YOU OBJECT TO THE PRICE ANALYSIS CONDUCTED BY THE PROCURING ACTIVITY, IN LIEU OF A COST ANALYSIS WHICH YOU CLAIM WOULD HAVE CAST DOUBT UPON ARC'S ABILITY TO ESTIMATE PRODUCTION COSTS AND ABILITY TO MAKE TIMELY DELIVERY. THE RFP DOES NOT DEFINE "COMPLETE ANALYSIS OF COSTS" NOR DOES IT IDENTIFY THE ASPR 3-807.3, IN IMPLEMENTATION OF 10 U.S.C. 2306(F), PROVIDES FOR THE SUBMISSION OF WRITTEN COST OR PRICING DATA AND FOR CERTIFICATION OF THE ACCURACY, COMPLETENESS AND CURRENCY OF THAT DATA PRIOR TO:

(A) ***

(II) THE AWARD OF ANY FIRM FIXED-PRICE *** NEGOTIATED CONTRACT EXPECTED TO EXCEED $100,000 IN AMOUNT:

(III) ANY CONTRACT MODIFICATION EXPECTED TO EXCEED $100,000 IN TYPES OF DATA WHICH ARE RELEVANT TO THE ANALYSIS. YOU APPEAR TO EQUATE THE RFP PROVISION WITH "COST ANALYSIS" AS REQUIRED BY 10 U.S.C. 2306(F) AND ARMED SERVICES PROCUMENT REGULATION (ASPR) 3-807.2(C). IN THIS RESPECT, WE AGREE WITH THE ADMINISTRATIVE REPORT THAT THERE WAS "ADEQUATE PRICE COMPETITION," AS DEFINED IN ASPR 3-807.1(B)(1), IN THE INSTANT PROCUREMENT. ASPR 3-807.2 STATES:

SOME FORM OF PRICE OR COST ANALYSIS IS REQUIRED IN CONNECTION WITH EVERY NEGOTIATED PROCUREMENT ACTION. *** COST ANALYSIS SHALL BE PERFORMED IN ACCORDANCE WITH (C) BELOW WHEN COST OR PRICING DATA IS REQUIRED TO BE SUBMITTED UNDER THE CONDITIONS DESCRIBED IN 3-807.3 *** . PRICE ANALYSIS SHALL BE USED IN ALL OTHER INSTANCES TO DETERMINE THE REASONABLENESS OF THE PROPOSED CONTRACT PRICE. *** AMOUNT TO ANY FORMALLY ADVERTISED OR NEGOTIATED CONTRACT WHETHER OR NOT COST OR PRICING DATA WAS REQUIRED IN CONNECTION WITH THE INITIAL PRICING OF THE CONTRACT ***

* * ** * UNLESS, IN THE CASE OF (II), (III) *** , THE PRICE NEGOTIATED IS BASED ON ADEQUATE PRICE COMPETITION ***

UNDER THE CRITERIA OF 10 U.S.C. 2306(F) AND ASPR 3-807.3, SUBMISSION OF COST OR PRICING DATA AND CERTIFICATION THEREOF WAS NOT REQUIRED IN THE INSTANT PROCUREMENT. A REQUIREMENT FOR SUCH DATA AND CERTIFICATION WOULD ARISE ONLY IN CONNECTION WITH CHANGES OR MODIFICATION TO THE INITIAL CONTRACT WHEREIN THE PRICE ADJUSTMENT WOULD EXCEED $100,000. THIS IS PROPERLY REFLECTED IN THE ASPR 7-104.29(B), 7-104.4(B) AND 7 104.42(B) CLAUSES WHICH WERE EITHER RECITED IN FULL OR INCORPORATED BY REFERENCE IN THE RFP. SINCE THE STATUTE AND IMPLEMENTING REGULATIONS REFERENCED ABOVE DID NOT REQUIRE THE SUBMISSION OF COST OR PRICING DATA, THERE WAS NO REQUIREMENT THEREUNDER FOR THE CONTRACTING OFFICER TO CONDUCT A "COST ANALYSIS" AS DESCRIBED IN ASPR 3-807.2(C). THEREFORE, WE THINK IT UNREASONABLE TO EQUATE THE RFP PROVISION TO THE ASPR DEFINITION OF "COST ANALYSIS," AS THIS WOULD IMPOSE A DUTY UPON THE CONTRACTING OFFICER NOT CONTEMPLATED BY STATUTE OR REGULATION. ALTHOUGH IT MAY HAVE BEEN EXPRESSED MORE APTLY, WE REGARD A MORE REASONABLE INTERPRETATION OF THE RFP TO BE THAT AN APPROPRIATE COST OR PRICE ANALYSIS OR BOTH, AS PROVIDED BY LAW, WAS TO BE MADE OF THE PROPOSALS.

IN A RELATED ARGUMENT YOU STATE THAT IN VIEW OF CERTAIN CONCLUSIONS EXPRESSED IN OUR AUDIT REPORT (B-163874) OF JULY 15, 1969, ENTITLED "REASONABLENESS OF PRICES QUESTIONED FOR BOMB AND HAND GRENADE FUZES UNDER THREE NEGOTIATED CONTRACTS," A COST ANALYSIS OF PROPOSALS SHOULD HAVE BEEN CONDUCTED PURSUANT TO 10 U.S.C. 2306(F) AND ASPR 3-807. THAT REPORT CONCERNED THREE NONCOMPETITIVE NEGOTIATED CONTRACTS TO WHICH THE COST OR PRICING DATA PROVISIONS OF THE ABOVE-CITED STATUTE AND IMPLEMENTING REGULATIONS CLEARLY APPLIED. THE CONCLUSIONS WHICH WE EXPRESSED IN OUR REPORT OF JULY 15, 1969, ARE THUS INAPPLICABLE TO THE INSTANT PROCUREMENT.

YOU FURTHER CONTEND THAT PROPER CONSIDERATION OF THE RFP'S "NON-PRICE EVALUATION FACTORS," SET FORTH ABOVE, SHOULD HAVE RESULTED IN AWARD TO YOUR FIRM IN VIEW OF YOUR CURRENT SATISFACTORY PRODUCTION OF THE XM22E4 POWER SUPPLY. THE PREAWARD SURVEY ON ARC CONCLUDED THAT ITS PERFORMANCE RECORD, PRODUCTION CAPABILITY AND ABILITY TO MEET THE REQUIRED SCHEDULE WERE SATISFACTORY, AND "COMPLETE AWARD" TO ARC WAS RECOMMENDED. WHILE THE RECORD SHOWS THAT SEVERAL MEMBERS OF THE PREAWARD SURVEY TEAM EXPRESSED RESERVATIONS ABOUT ARC'S ABILITY TO MEET THE DELIVERY SCHEDULE, THIS DID NOT AFFECT THE POSITIVE RECOMMENDATION OF THE TEAM. IN ADDITION, THE PROPOSED AWARD TO ARC WAS REVIEWED AND APPROVED BY THE PICATINNY ARSENAL BOARD OF AWARDS.

AN OFFERER'S PRIOR PERFORMANCE RECORD, CAPACITY TO PERFORM A CONTRACT, AND ABILITY TO MAKE TIMELY DELIVERIES ALL ARE COMPONENTS OF A FIRM'S RESPONSIBILITY. IN REGARD TO THE CONTRACTING OFFICER'S DUTY TO DETERMINE AN OFFERER'S RESPONSIBILITY, IN OUR DECISION B-163859, APRIL 17, 1968, WE STATED:

OUR OFFICE HAS CONSISTENTLY HELD THAT THE DETERMINATION OF A BIDDER'S OVERALL RESPONSIBILITY IS PRIMARILY THE FUNCTION OF THE CONTRACTING AGENCY AND NOT OF THE GENERAL ACCOUNTING OFFICE, 38 COMP. GEN. 131; 33 ID. 549. WHETHER A BIDDER IS OR IS NOT, CAPABLE OF PRODUCING IN ACCORDANCE WITH CONTRACT REQUIREMENTS IS A QUESTION OF FACT, AND ABSENT EVIDENCE THAT THE DETERMINATION OF A BIDDER'S CAPABILITIES WAS BASED ON ERROR, FRAUD OR FAVORITISM, OUR OFFICE WILL ACCEPT THE FINDINGS OF THE CONTRACTING AGENCY. 40 COMP. GEN. 294. WE HAVE ALSO STATED THAT THE PROJECTION OF A BIDDER'S ABILITY TO PERFORM IF AWARDED A CONTRACT IS OF NECESSITY A MATTER OF JUDGMENT, WHICH, WHILE IT SHOULD BE BASED ON FACT AND ARRIVED AT IN GOOD FAITH, MUST PROPERLY BE LEFT LARGELY TO THE SOUND ADMINISTRATIVE DISCRETION OF THE OFFICERS INVOLVED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS RESPONSIBILITY, THEY MUST BEAR THE MAJOR BRUNT OF ANY DIFFICULTIES EXPERIENCED BY REASON OF THE CONTRACTOR'S LACK OF ABILITY, AND THEY MUST MAINTAIN THE DAY-TO-DAY RELATIONS WITH THE CONTRACTOR ON BEHALF OF THE GOVERNMENT. FOR THESE REASONS, WE HAVE HELD THAT IT WOULD BE UNREASONABLE TO SUPERIMPOSE THE JUDGMENT OF OUR OFFICE OR ANY OTHER AGENCY OR GROUP ON THAT OF THE CONTRACTING OFFICIALS. 39 COMP. GEN 705,711.

SINCE OUR REVIEW REVEALS NO REASON TO CONCLUDE THAT THERE WAS NOT AN ADEQUATE FACTUAL BASIS FOR THE ADMINISTRATIVE DETERMINATION THAT ARC WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR, THIS DETERMINATION WILL NOT BE QUESTIONED BY OUR OFFICE.

FINALLY, YOU REFER TO CERTAIN COST SAVINGS WHICH GULTON WAS IN A POSITION TO PASS ON TO THE GOVERNMENT AS A RESULT OF YOUR RESEARCH CONTRACT. YOUR LETTER OF JULY 18, 1969, YOU STATE "THIS WAS TO BE DISCUSSED DURING THE NEGOTIATIONS; HOWEVER, THE (OPOPRTUNITY) TO NEGOTIATE WAS NOT EXTENDED." THERE IS NOTHING IN THE RECORD INDICATING THAT ANY REQUEST BY GULTON TO NEGOTIATE CONCERNING SUCH SAVINGS WAS DENIED. YOU RECEIVED A COPY OF THE RFP ON MARCH 27, 1969, AND SUBMITTED A DETAILED PROPOSAL ON APRIL 25. ON MAY 31, YOU RECEIVED THE TELEGRAPHIC REQUEST TO REVIEW YOUR ORIGINAL OFFER AND TO SUBMIT YOUR BEST AND FINAL OFFER, WHICH YOU DID ON JUNE 11, 1969. IT WOULD THEREFORE APPEAR THAT THERE WAS AMPLE OPPORTUNITY FOR YOU TO DISCUSS WITH THE GOVERNMENT THE COST IMPACT OF YOUR RESEARCH CONTRACT.

IN VIEW OF THE FOREGOING WE MUST CONCLUDE THAT THE AWARD WAS MADE IN GOOD FAITH TO PROCURE AN ITEM ASSIGNED AN "02" ISSUE PRIORITY DESIGNATOR, AND THAT A VALID AND BINDING CONTRACTUAL AGREEMENT RESULTED, WHICH WILL NOT BE DISTURBED BY OUR OFFICE.

HOWEVER, WE ARE CONCERNED WITH THE LACK OF A CLEAR EXPRESSION IN THE RFP OF STANDARDS FOR EVALUATION OF OFFERS, AND ARE BY LETTER OF TODAY, SUGGESTING TO THE SECRETARY OF THE ARMY THAT IN FUTURE PROCUREMENTS APPLICABLE EVALUATION STANDARDS SHOULD BE SPECIFICALLY STATED AND OFFERORS SHOULD BE INFORMED OF THE RELATIVE WEIGHTS ASSIGNED TO EACH FACTOR.