B-169016, JUL. 10, 1970

B-169016: Jul 10, 1970

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ALTHOUGH DETERMINATION TO LEASE RADIO EQUIPMENT FROM ONE OF OFFERORS SUBMITTING PROPOSALS IN RESPONSE TO REQUEST FOR PURCHASE OF THE EQUIPMENT WITHOUT NOTICE TO THE OTHER OFFERORS DETERMINING OR WITHOUT WHETHER MORE FAVORABLE TERMS COULD BE OBTAINED WAS NOT PROPER. THE SUBJECT RFP WAS FOR THE PURCHASE (WITHOUT MAINTENANCE). FOUR PROPOSALS WERE SUBMITTED IN RESPONSE TO THE RFP AS SET OUT BELOW: COMPANY TOTAL PRICE DELIVERY SCHEDULE GALAXY ELECTRONICS $ 7. A LEASING ARRANGEMENT MIGHT PROVIDE GREATER FLEXIBILITY SINCE THE LENGTH OF TIME THE EQUIPMENT WOULD BE USED WAS UNCERTAIN. "3. BEFORE TECHNICAL EVALUATION OF THE FOUR PROPOSALS FOR PURCHASE OF THE SUBJECT RADIOS WAS BEGUN. THE CONTRACTING OFFICIALS WERE ADVISED BY NASA HEADQUARTERS THAT OFFICIAL NASA POLICY REQUIRED THE LEASE OF EQUIPMENT OF THE TYPE INVOLVED IN THIS PROCUREMENT.

B-169016, JUL. 10, 1970

CONTRACTS -- BID PROTEST -- NONCOMPETITIVE PROCUREMENT DECISION TO FEDERAL SIGN AND SIGNAL CORPORATION CONCERNING PROTEST AGAINST AWARD OF A CONTRACT TO MOTOROLA COMMUNICATIONS AND ELECTRONICS, INC. ON A LEASE RATHER THAN A PURCHASE BASIS AS CONTEMPLATED BY REQUEST FOR PROPOSALS ISSUED BY NASA, MANNED SPACECRAFT CENTER, HOUSTON, TEXAS. ALTHOUGH DETERMINATION TO LEASE RADIO EQUIPMENT FROM ONE OF OFFERORS SUBMITTING PROPOSALS IN RESPONSE TO REQUEST FOR PURCHASE OF THE EQUIPMENT WITHOUT NOTICE TO THE OTHER OFFERORS DETERMINING OR WITHOUT WHETHER MORE FAVORABLE TERMS COULD BE OBTAINED WAS NOT PROPER, IN VIEW OF SUBSTANTIAL ADDITIONAL EXPENSE WHICH WOULD BE INVOLVED IN TERMINATION OF THE LEASE AGREEMENT AND THE DISRUPTION TO THE ASTRONAUT TRAINING SCHEDULE THE LEASE NEED NOT BE DISTURBED.

TO FEDERAL SIGN AND SIGNAL CORPORATION:

YOUR LETTER DATED FEBRUARY 4, 1970, PROTESTED THE AWARD OF A CONTRACT TO MOTOROLA COMMUNICATIONS AND ELECTRONICS, INC., ON A LEASE, RATHER THAN ON A PURCHASE, BASIS AS CONTEMPLATED BY REQUEST FOR PROPOSALS (RFP) NO. BG921 -37-090P, ISSUED BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA), MANNED SPACECRAFT CENTER, HOUSTON, TEXAS.

THE SUBJECT RFP WAS FOR THE PURCHASE (WITHOUT MAINTENANCE), AS OPPOSED TO THE LEASE, OF "8 PERSONAL, SOPHISTICATED, TWO-WAY RADIOS AND ANCILLARY EQUIPMENT." FOUR PROPOSALS WERE SUBMITTED IN RESPONSE TO THE RFP AS SET OUT BELOW:

COMPANY TOTAL PRICE DELIVERY SCHEDULE

GALAXY ELECTRONICS $ 7,440.90 90 DAYS

GENERAL ELECTRIC COMPANY 9,936.00 120 DAYS

FEDERAL SIGN AND SIGNAL CORP. 7,750.00 75 DAYS

MOTOROLA COMMUNICATIONS AND 10,558.20 90 DAYS

ELECTRONICS, INC. MOTOROLA ALSO SUBMITTED AN ALTERNATE PROPOSAL WHICH OFFERED TO SUPPLY THE REQUIRED EQUIPMENT ON A LEASE BASIS (INCLUDING MAINTENANCE) UNDER AN EXISTING AGREEMENT WITH THE AIR FORCE (CONTRACT NO. AF 34(601)23068), PROVIDING FOR THE LEASE OF THE SUBJECT EQUIPMENT WITH PURCHASE AND RECAPTURE RIGHTS ACCRUING TO THE GOVERNMENT.

UPON RECEIPT OF THE ALTERNATE MOTOROLA PROPOSAL, THE CONTRACTING OFFICER REPORTEDLY CONSIDERED LEASING THE EQUIPMENT IN THE LIGHT OF THE FOLLOWING "POSSIBLE ADVANTAGES" OF LEASING AS OPPOSED TO PURCHASE:

"1. EARLIER DELIVERY MIGHT BE OBTAINED BY LEASING UNDER A LEASING ARRANGEMENT.

"2. A LEASING ARRANGEMENT MIGHT PROVIDE GREATER FLEXIBILITY SINCE THE LENGTH OF TIME THE EQUIPMENT WOULD BE USED WAS UNCERTAIN.

"3. MAINTENANCE AND SERVICING WOULD BE READILY AVAILABLE UNDER A LEASING ARRANGEMENT."

ALSO, BEFORE TECHNICAL EVALUATION OF THE FOUR PROPOSALS FOR PURCHASE OF THE SUBJECT RADIOS WAS BEGUN, THE CONTRACTING OFFICIALS WERE ADVISED BY NASA HEADQUARTERS THAT OFFICIAL NASA POLICY REQUIRED THE LEASE OF EQUIPMENT OF THE TYPE INVOLVED IN THIS PROCUREMENT. THIS INFORMAL ADVICE WAS FOLLOWED UP BY A MEMORANDUM DATED JANUARY 14, 1970, FROM THE "TECHNICAL INITIATOR" TO THE BUYER DIRECTING THAT THE SUBJECT EQUIPMENT "SHOULD BE LEASED UNDER AF CONTRACT 23068, 1 OCTOBER 1965 AS MODIFIED THROUGH #10, 1 JULY 1969."

ACCORDINGLY, PURCHASE ORDER T-89122 WAS ISSUED ON JANUARY 30, 1970, FOR THE LEASE OF THE SUBJECT RADIOS FROM MOTOROLA UNDER THE CITED AIR FORCE CONTRACT RATHER THAN UNDER THE RFP IN RESPONSE TO WHICH YOUR FIRM HAD SUBMITTED ITS PROPOSAL. THE PURCHASE ORDER LISTED THE FIGURE OF $10,060 ON ITS FACE. HOWEVER, NASA ADVISES THAT THIS FIGURE "DID NOT REPRESENT A FIRM FIXED PRICE AWARD BUT WAS AN ALLOCATION OF FUNDS TO COVER LEASE AND MAINTENANCE CHARGES UNDER AN EXISTING AIR FORCE CONTRACT." ATTACHED TO THE PURCHASE ORDER WAS AN EXHIBIT SETTING OUT A MONTHLY RENTAL CHARGE OF $228.48 FOR THE EIGHT RADIOS AND ALSO LISTING CERTAIN NON-RECURRING CHARGES AND PURCHASE AND RECAPTURE TERMS.

WHILE IT WAS NASA'S INTENT TO CANCEL THE SUBJECT RFP IN VIEW OF ITS CONCLUSION TO PROCEED UNDER THE AIR FORCE CONTRACT, UNFORTUNATELY THIS INTENT WAS NOT COMMUNICATED TO YOUR FIRM OR TO THE OTHER OFFERORS UNDER THE RFP. RATHER, OFFERORS WERE ADVISED BY LETTER DATED JANUARY 30, 1970, THAT AWARD HAD BEEN MADE TO MOTOROLA UNDER RFP NO. BG921-37-0-90P IN THE TOTAL AMOUNT OF $10,060. ALSO, IT DEVELOPED AFTER SUCH AWARD THAT IT WAS NOT NASA POLICY TO REQUIRE THE LEASE OF EQUIPMENT SUCH AS IS HERE INVOLVED, BUT THAT RATHER, IN ACCORDANCE WITH NASA PROCUREMENT REGULATION 1.317, LEASE VERSUS PURCHASE DETERMINATIONS ARE TO BE MADE ON A CASE-BY- CASE BASIS PURSUANT TO THE GUIDELINES STATED IN THAT REGULATION. THESE GUIDELINES ARE DISCUSSED BELOW.

YOU PROTEST THAT THE AWARD SHOULD NOT HAVE BEEN MADE TO MOTOROLA ON A LEASE BASIS WITHOUT AMENDING THE RFP TO GIVE OTHER OFFERORS THE SAME OPPORTUNITY, OR, IN THE ALTERNATIVE, THAT AWARD SHOULD HAVE BEEN MADE IN ACCORDANCE WITH THE RFP TERMS.

NASA CONCEDES THAT THE PROCUREMENT WAS "PROCEDURALLY DEFECTIVE." IN THIS REGARD, WE HAVE BEEN ADVISED BY NASA THAT:

"IT IS OBVIOUS FROM THE CIRCUMSTANCES DESCRIBED ABOVE THAT THE PROCUREMENT WAS PROCEDURALLY DEFECTIVE AND THAT MR. COOK HAS A VALID BASIS FOR COMPLAINT. WE SINCERELY REGRET THAT MORE CAREFUL ATTENTION WAS NOT GIVEN TO APPLICABLE NASA PROCUREMENT PROCEDURES DURING THE PROCESSING OF THIS PROCUREMENT. RESPONSIBLE PROCUREMENT OFFICIALS AT MSC HAVE ASSURED US THAT APPROPRIATE STEPS WILL BE TAKEN TO AVOID A RECURRENCE OF SIMILAR SITUATIONS IN THE FUTURE." FOR REASONS SET OUT BELOW, WE AGREE THAT THE INSTANT AWARD WAS PROCEDURALLY DEFECTIVE.

IN THE FIRST PLACE, THERE IS NO INDICATION IN THE RECORD THAT THE CONTRACTING OFFICER FOLLOWED THE CRITERIA SET OUT IN THE ABOVE-QUOTED REGULATION IN MAKING HIS DETERMINATION TO LEASE RATHER THAN PURCHASE. ALTHOUGH HE REPORTEDLY DID INFORMALLY WEIGH THE POSSIBLE ADVANTAGES OF LEASE AS OPPOSED TO PURCHASE UPON RECEIPT OF THE MOTOROLA ALTERNATE PROPOSAL, THE FILE REFLECTS THAT HIS DETERMINATION WAS MADE ON THE BASIS OF THE JANUARY 14, 1970, MEMORANDUM FROM THE "TECHNICAL INITIATOR" ERRONEOUSLY ADVISING THAT NASA POLICY REQUIRED LEASING. VARIABLES UNKNOWN AT THIS TIME, SUCH AS THE LENGTH OF THE LEASE TERM AND WHETHER OR NOT THE LEASE PURCHASE AND/OR RECAPTURE PROVISIONS WILL BE EXERCISED, PRECLUDE A REASONABLE PREDICTION OF TOTAL COST UNDER THE LEASE AGREEMENT. ALSO, THE INCLUSION OF MAINTENANCE COSTS IN THE LEASE AGREEMENT MAKES AN ACCURATE COMPARISON OF LEASE VERSUS PURCHASE TOTAL COST DIFFICULT. IT IS NOT CLEAR, THEREFORE, AT THIS DATE THAT THE MOTOROLA LEASE ARRANGEMENT WILL ULTIMATELY PROVIDE THE GOVERNMENT WITH LOWER COSTS THAN WOULD HAVE BEEN INCURRED THROUGH OUTRIGHT PURCHASE. HOWEVER, NASA ADVISES THAT, IN ITS OPINION, THE COST DIFFERENCE IS NOT SUBSTANTIAL.

FURTHER, WHILE THE AIR FORCE CONTRACT IS AVAILABLE FOR USE BY NASA WHERE A DETERMINATION TO LEASE RADIO EQUIPMENT OF THE TYPE HERE INVOLVED IS MADE, ITS AVAILABILITY DOES NOT RELIEVE THE ORDERING AGENCY OF ITS OBLIGATION TO OBTAIN MAXIMUM PRACTICABLE COMPETITION IN ACCORDANCE WITH GOVERNING STATUTES AND REGULATIONS. IN OTHER WORDS, A PROPER DETERMINATION TO LEASE RATHER THAN PURCHASE IN THIS INSTANCE WOULD NOT HAVE BEEN SUFFICIENT TO JUSTIFY A NONCOMPETITIVE ORDER UNDER THE AIR FORCE LEASE CONTRACT UNLESS AND UNTIL IT HAD BEEN DETERMINED THAT MORE FAVORABLE TERMS COULD NOT BE OBTAINED FROM OTHER COMPETENT SUPPLIERS, INCLUDING THE OFFERORS UNDER THE RFP. ACCORDINGLY, WE CONCLUDE THAT NONCOMPETITIVE AWARD TO MOTOROLA UNDER THE AIR FORCE CONTRACT WAS IMPROPER.

NOTWITHSTANDING THE PROCEDURAL DEFECTS INVOLVED HERE, IT IS THE POSITION OF NASA THAT THE AWARD TO MOTOROLA ON A LEASE BASIS UNDER THE AIR FORCE CONTRACT SHOULD NOT BE DISTURBED. IN THIS REGARD, NASA HAS ADVANCED THE FOLLOWING PRACTICAL ARGUMENTS AGAINST TERMINATION OF THE AIR FORCE LEASE AGREEMENT:

"TERMINATION

"(A) MSC REPORTS THAT ALL EQUIPMENT ORDERED WAS DELIVERED IN APRIL 1970 AND IS NOW BEING USED TO TRAIN APOLLO 14 CREWS.

"(B)IF MSC WERE TO TERMINATE THE ORDER AT THIS TIME, THE GOVERNMENT WOULD BE LIABLE FOR $8,317.41 IN TERMINATION CHARGES ON THE LEASED EQUIPMENT, PLUS AN UNDETERMINED AMOUNT INCLUDED IN THE SUM OF $797.20 FOR PURCHASED SUPPLIES. THIS WOULD APPROXIMATE A TOTAL COST OF $9,100 FOR TWO OR THREE MONTHS' USE OF THE EQUIPMENT.

"(C) IF THE ORDER IS TERMINATED AND THE REQUIREMENT RESOLICITED, EITHER ON A RENTAL OR PURCHASE BASIS, THE GOVERNMENT IN EFFECT WILL BE PAYING DOUBLE THE COST OF THE EQUIPMENT (CONSIDERING TERMINATION CHARGES, PLUS THE PRICE RESULTING FROM RECOMPETITION).

"(D) TERMINATION AND RESOLICITATION WOULD RESULT IN APOLLO 14 CREWS TRAINING WITH OLD UNSATISFACTORY EQUIPMENT. A NEW SOLICITATION WOULD REQUIRE A TOTAL PROCUREMENT TIME CYCLE OF APPROXIMATELY 5-6 MONTHS."

IT IS REGRETTABLE THAT PROPER PROCUREMENT PROCEDURES WERE NOT FOLLOWED IN THIS INSTANCE, BUT WE NOTE WITH APPROVAL THAT NASA HAS TAKEN APPROPRIATE MEASURES TO PRECLUDE FUTURE SIMILAR SITUATIONS. HOWEVER, IN VIEW OF THE SUBSTANTIAL ADDITIONAL EXPENSE WHICH WOULD BE INVOLVED IN TERMINATION OF THE PURCHASE ORDER UNDER THE LEASE AGREEMENT AND REPROCUREMENT, AND THE DISRUPTION IN THE ASTRONAUT TRAINING SCHEDULE, WE CONCLUDE THAT THE LEASE AGREEMENT WITH MOTOROLA SHOULD NOT BE DISTURBED.