B-169913, MAR 26, 1971, 50 COMP GEN 670

B-169913: Mar 26, 1971

Additional Materials:

Contact:

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

 

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

CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - DEFECTIVE - PREDETERMINED RESOURCES FOR PERFORMANCE A REQUEST FOR PROPOSALS TO OPERATE AN AIR FORCE FACILITY OVERSEAS ISSUED PURSUANT TO THE AUTHORITY IN 10 U.S.C. 2304(A)(6) TO NEGOTIATE CONTRACTS FOR SERVICES OUTSIDE THE UNITED STATES THAT FAILED TO DISCLOSE PREDETERMINED MINIMUM RESOURCE LEVELS WAS DEFECTIVE AND CONTRIBUTED TO THE REJECTION OF ALL BUT THE HIGHEST PRICED OFFER AS TECHNICALLY UNACCEPTABLE ON THE BASIS THAT SUFFICIENT RESOURCES TO PERFORM WERE NOT DEMONSTRATED. ALTHOUGH THE CONTRACT AWARDED WAS CONTRARY TO THE "COMPETITIVE NEGOTIATION" REQUIREMENTS OF 10 U.S.C. 2304(G). IT WILL NOT BE DISTURBED. ALTHOUGH AN OFFEROR'S JUDGMENT OF RESOURCES NEEDED TO PERFORM IS A MAJOR FACTOR IN DETERMINING CAPACITY TO PERFORM AND MAY BE CONSIDERED IN DETERMINING A COMPETITIVE RANGE.

B-169913, MAR 26, 1971, 50 COMP GEN 670

CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - DEFECTIVE - PREDETERMINED RESOURCES FOR PERFORMANCE A REQUEST FOR PROPOSALS TO OPERATE AN AIR FORCE FACILITY OVERSEAS ISSUED PURSUANT TO THE AUTHORITY IN 10 U.S.C. 2304(A)(6) TO NEGOTIATE CONTRACTS FOR SERVICES OUTSIDE THE UNITED STATES THAT FAILED TO DISCLOSE PREDETERMINED MINIMUM RESOURCE LEVELS WAS DEFECTIVE AND CONTRIBUTED TO THE REJECTION OF ALL BUT THE HIGHEST PRICED OFFER AS TECHNICALLY UNACCEPTABLE ON THE BASIS THAT SUFFICIENT RESOURCES TO PERFORM WERE NOT DEMONSTRATED, AND ALTHOUGH THE CONTRACT AWARDED WAS CONTRARY TO THE "COMPETITIVE NEGOTIATION" REQUIREMENTS OF 10 U.S.C. 2304(G), BECAUSE OF THE ESSENTIALITY OF THE PROCUREMENT, IT WILL NOT BE DISTURBED. HOWEVER, ALTHOUGH AN OFFEROR'S JUDGMENT OF RESOURCES NEEDED TO PERFORM IS A MAJOR FACTOR IN DETERMINING CAPACITY TO PERFORM AND MAY BE CONSIDERED IN DETERMINING A COMPETITIVE RANGE, AN AGENCY MUST ALSO MEET ITS OBLIGATION BY DISCLOSING MINIMUM NEEDS TO INSURE MAXIMUM COMPETITION.

TO THE SECRETARY OF THE AIR FORCE, MARCH 26, 1971:

WE REFER TO A LETTER DATED SEPTEMBER 4, 1970, WITH ENCLOSURES, FROM THE CHIEF, CONTRACT PLACEMENT DIVISION, DIRECTORATE OF PROCUREMENT POLICY, DEPUTY CHIEF OF STAFF, SYSTEMS AND LOGISTICS, FURNISHING OUR OFFICE AND ADMINISTRATIVE REPORT ON THE PROTESTS OF UNIVERSAL AMERICAN ENTERPRISES, INC., AND PACIFIC ARCHITECTS & ENGINEERS, INC. (PAE), AGAINST THE AWARD OF A CONTRACT TO TRANS-ASIA ENGINEERING ASSOCIATES, INC., UNDER REQUEST FOR PROPOSALS NO. F62272-70-R-0027, ISSUED BY THE BANGKOK AREA PROCUREMENT OFFICE. THIS REPORT WAS SUPPLEMENTED BY LETTER, WITH ENCLOSURES, DATED NOVEMBER 9, 1970. PERTINENT PORTIONS OF THE ADMINISTRATIVE REPORT OF SEPTEMBER 4, 1970, WERE MADE AVAILABLE TO UNIVERSAL AND STEPTOE & JOHNSON, COUNSEL FOR TRANS-ASIA, FOR COMMENT; AND REPLIES WERE RECEIVED FROM EACH BY LETTERS DATED OCTOBER 24 AND 19, 1970, RESPECTIVELY.

THE FOLLOWING FACTS SUPPORTED BY THE RECORD ARE PERTINENT TO OUR CONSIDERATION. THE SOLICITATION WAS ISSUED ON MARCH 12, 1970, TO 12 SOURCES PURSUANT TO THE AUTHORITY IN 10 U.S.C. 2304(A)(6) TO NEGOTIATE CONTRACTS FOR "SERVICES TO BE PROCURED AND USED OUTSIDE THE UNITED STATES AND THE TERRITORIES, COMMONWEALTHS, AND POSSESSIONS." THREE ADDITIONAL SOURCES, ONE OF WHICH WAS UNIVERSAL, REQUESTED AND RECEIVED SOLICITATIONS A FEW DAYS AFTER ISSUANCE. THE SOLICITATION, AS AMENDED, REQUESTED FIRM FIXED PRICES ON A 1-YEAR AND ON A 3-YEAR BASIS FOR FURNISHING OPERATION AND MAINTENANCE SERVICES AT SPECIFIED AIR FORCE FACILITIES IN THAILAND. FIVE PROPOSALS WERE RECEIVED BY THE APRIL 11, 1970, CLOSING DATE. EXAMINATION OF THE ABSTRACT OF PROPOSALS INDICATES THAT THE FOLLOWING PRICES WERE SUBMITTED:

1-YEAR 3-YEAR

PAE $1,832,856 $5,317,704

UNIVERSAL 1,877,424 5,632,272

TRANS WORLD AIRLINES 2,179,284 6,216,408

TUMPANE CO. INC. 2,344,468.00 6,932,507.00

TRANS-ASIA 2,452,010.38 7,369,199.80

UPON TECHNICAL EVALUATION, TRANS-ASIA WAS SELECTED AS THE ONLY ACCEPTABLE SOURCE. ALL OTHER PROPOSALS WERE REJECTED AS TECHNICALLY UNACCEPTABLE, AND BY LETTERS DATED MAY 2, 1970, EACH UNACCEPTABLE OFFEROR WAS SO ADVISED BY THE CONTRACTING OFFICER. ON MAY 9, 1970, NEGOTIATIONS WERE CONDUCTED AND CONCLUDED WITH TRANS-ASIA. BY TELEGRAM OF MAY 24, 1970, UNIVERSAL PROTESTED THE MATTER TO OUR OFFICE; ON JUNE 10, 1970, WE WERE ADVISED, IN ACCORDANCE WITH PARAGRAPH 2-407.8(B)(2) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), THAT AWARD HAD TO BE MADE BECAUSE OF THE URGENCY OF THE PROCUREMENT. AWARD WAS MADE TO TRANS-ASIA ON JUNE 13, 1970, FOR $2,413,308 AND COVERS A PERIOD OF 1 YEAR (JULY 1, 1970, THROUGH JUNE 30, 1971), WITH OPTIONS TO RENEW FOR 2 ADDITIONAL YEARS.

THE BASIC QUESTION PRESENTED BY BOTH PROTESTS IS WHETHER THE CONTRACTING OFFICER'S DECISION TO CONDUCT NEGOTIATIONS SOLELY WITH TRANS-ASIA WAS CONTRARY TO THE "COMPETITIVE NEGOTIATION" REQUIREMENTS OF SECTION 2304(G) OF TITLE 10, U.S.C. AS IMPLEMENTED IN ASPR 3-805. FROM OUR REVIEW OF THE RECORD, WE MUST CONCLUDE THAT THE PROTESTS ARE MERITORIOUS. SINCE WE ARE ADVISED THAT UNINTERRUPTED PERFORMANCE OF THE WORK UNDER THIS CONTRACT IS ESSENTIAL TO THE CRITICAL MISSIONS OF ALL AIR FORCE BASES IN THAILAND IN SUPPORT OF THE SOUTHEAST ASIA CONFLICT, IT WOULD NOT BE IN THE BEST INTEREST OF THE UNITED STATES TO DISTURB THE AWARD. BUT FOR THIS JUSTIFICATION OUR OFFICE WOULD NOT HAVE HESITATED IN DIRECTING TERMINATION OF THE CONTRACT AWARDED TO TRANS-ASIA. THE SUPPLEMENTAL REPORT OF NOVEMBER 9, 1970, STATES THAT DUE TO A CHANGE IN REQUIREMENTS, IT IS NOT INTENDED TO EXERCISE THE OPTIONS TO TRANS-ASIA'S CONTRACT. WE MUST ADD, AS UNIVERSAL URGES, THAT SHOULD THE REQUIREMENTS AGAIN CHANGE, ANY ATTEMPT TO EXERCISE THE CONTRACT OPTIONS WOULD BE OBJECTED TO BY OUR OFFICE.

AN UNDATED "NARRATION OF PROCUREMENT ACTION," SIGNED BY THE CONTRACTING OFFICER AND THE BUYER, ADVANCES TWO REASONS FOR THE DETERMINATIONS OF UNACCEPTABILITY: FIRST, THE NARRATION CITES "INADEQUATELY STATED SALARY RATES," WHICH IT IS SAID WOULD PRECLUDE OBTAINING AND RETAINING THE HIGHLY QUALIFIED PERSONNEL NECESSARY FOR PERFORMANCE OF THE CONTRACT; SECOND, GREAT EMPHASIS IS PLACED ON THE FAILURE OF EACH OF THE PROTESTERS TO COMPLY WITH PREDETERMINED MINIMUM RESOURCE LEVELS (MEN, VEHICLES AND RADIOS) ESTABLISHED IN A 30-PAGE DOCUMENT ENTITLED "TECHNICAL EVALUATION STANDARDS, THAILAND UTILITIES O&M CONTRACT (RFP F62272-70-R-0027)," WHICH WAS NOT MADE A PART OF THE SOLICITATION. WITH RESPECT TO THE DEFICIENCIES IN THE RESOURCE LEVELS, THE TENDER OF INSUFFICIENT PERSONNEL IS MOST HEAVILY RELIED ON. THE CONTRACTING OFFICER AND THE CHIEF, CONTRACT PLACEMENT DIVISION, HAVE RELIED ON THESE DEFECTS TO SUPPORT A CONCLUSION THAT THE PROPOSALS WERE NOT, AS STATED IN THE SUPPLEMENTAL REPORT OF NOVEMBER 9, "WITHIN A COMPETITIVE RANGE FROM A TECHNICAL POINT OF VIEW." WE ALSO NOTE THAT IN OTHER PORTIONS OF THE RECORD THE PROPOSALS ARE LABELED "TECHNICALLY NON-RESPONSIVE." FURTHER, IN AN UNDATED DOCUMENT ENTITLED "FACTS & FINDINGS," THE CONTRACTING OFFICER QUOTES A DIGEST OF OUR DECISIONS B 168190 (1) AND (2) OF FEBRUARY 24, 1970, IN SUPPORT OF THIS PROPOSITION, AND WE ARE ASKED TO CONCLUDE THAT THESE DEFECTS DEMONSTRATE A LACK OF UNDERSTANDING OF THE WORK.

THE CITED CASES INVOLVED PROTESTS FROM TWO OFFERORS WHICH WERE NOT WITHIN A COMPETITIVE RANGE BECAUSE THEIR PROPOSALS WERE "TECHNICALLY UNACCEPTABLE." ADMITTEDLY, AFTER A REVIEW OF THE RECORD, WE CONCLUDED THAT THE REJECTION WAS NOT AN ABUSE OF DISCRETION; HOWEVER, TWO SIGNIFICANT DIFFERENCES BETWEEN THE CITED CASES AND THE INSTANT CASE ARE WORTHY OF MENTION: FIRST, FOUR FIRMS WERE DETERMINED TO BE WITHIN THE COMPETITIVE RANGE; SECOND, RESOLUTION OF THE PROTESTS INVOLVED THE DISPOSITION OF DISPUTED TECHNICAL QUESTIONS. HERE, THE QUESTION FOR RESOLUTION IS NOT WHETHER THE FOUR REJECTED PROPOSALS WERE SO TECHNICALLY INSUFFICIENT AS TO PRECLUDE MEANINGFUL NEGOTIATIONS, BUT WHETHER THE SOLICITATION WAS SO STRUCTURED AS TO RENDER THE SUBMISSION OF ACCEPTABLE INITIAL PROPOSALS EXTREMELY DOUBTFUL. THE ANSWER TO THIS QUESTION DOES NOT INVOLVE COMPLEX FACTUAL ISSUES WHICH REQUIRE A SPECIAL EXPERTISE TO UNRAVEL.

ASPR 3-805.1, IMPLEMENTING 10 U.S.C. 2304(G), REQUIRES THAT WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED. NUMEROUS DECISIONS OF OUR OFFICE RECOGNIZE THAT THE CONTRACTING OFFICER HAS BROAD DISCRETION IN DETERMINING WHICH OFFERORS ARE IN A COMPETITIVE RANGE. THIS DISCRETION IS NOT, HOWEVER, WITHOUT LIMITS. A PROPOSAL IS TO BE CONSIDERED WITHIN A COMPETITIVE RANGE UNLESS IT IS SO HIGH IN COST OR SO INFERIOR TECHNICALLY THAT THE POSSIBILITY OF MEANINGFUL NEGOTIATIONS IS PRECLUDED. 47 COMP. GEN. 252 (1967); 45 ID. 417 (1966). THE DECISION TO REJECT A PARTICULAR PROPOSAL QUITE CLEARLY CANNOT BE DIVORCED FROM A CONSIDERATION OF THE FACTUAL CONTEXT OF THE PARTICULAR CASE. AS A GENERAL APPROACH, HOWEVER, WE HAVE EXPRESSED THE VIEW THAT WHEN THE APPLICATION OF A MANDATORY REQUIREMENT OF A SOLICITATION RESULTS IN THE ELIMINATION OF ALL BUT ONE PROPOSER, AND ITS PRICE IS, INITIALLY, SUBSTANTIALLY IN EXCESS OF THE PRICE OF ANOTHER PROPOSER, THE SPIRIT AND INTENT OF 10 U.S.C. 2304(G) WOULD NOT BE SERVED WITHOUT FURTHER DISCUSSION TO DETERMINE WHETHER THE OTHER PROPOSAL, OR PROPOSALS AS THE CASE MAY BE, CAN BE IMPROVED TO MEET THE REQUIREMENT. 47 COMP. GEN. 29, 53 (1967). MOREOVER, WE BELIEVE THAT WHERE, AS HERE, INADEQUACIES IN THE SOLICITATION CONTRIBUTE TO THE ELIMINATION OF ALL BUT ONE PROPOSAL FROM THE COMPETITIVE RANGE, FURTHER DISCUSSIONS ARE ESSENTIAL. CF. 48 COMP. GEN. 314 (1968). IN THIS REGARD, INSTEAD OF DIRECTLY DISCLOSING IN THE SOLICITATION THE PREDETERMINED RESOURCE LEVELS, A MORE OBLIQUE APPROACH WAS CHOSEN.

THE CHIEF, CONTRACT PLACEMENT DIVISION, DRAWS ATTENTION TO PART I, SECTION "D," AND ATTACHMENT 2 OF THE SOLICITATION, WHICH PROVIDE IN PART AS FOLLOWS:

"PART I SECTION D TECHNICAL PROPOSAL SPECIFICATIONS

"(1) THIS PROPOSAL ENCOMPASSES THE OPERATION AND MAINTENANCE OF CRITICAL UTILITY PLANTS AND SYSTEMS VITAL TO THE SUPPORT OF THE USAF MISSION, HEALTH AND WELFARE OF USAF PERSONNEL AND SAFETY OF AIRCRAFT OPERATION THROUGHOUT THAILAND.

"(2) SUCCESSFUL FULFILLMENT OF THE REQUIREMENTS OF THIS CONTRACT IS CONTINGENT UPON THE CONTRACTOR'S ABILITY TO MOBILIZE, BY 1 JULY 1970, AND MAINTAIN A COMPETENT AND DEDICATED WORKFORCE TO SATISFY LONG RANGE LOGISTICS PLANNING, PRECISE DAY TO DAY OPERATION AND MAINTENANCE, AND THE ABILITY TO RESPOND TO UNEXPECTED FAILURES.

"ATTACHMENT 2 - MAINTENANCE POWER PLANTS/EQUIPMENT.

"2. OTHER REQUIREMENTS.

"A. THE CONTRACTOR SHALL MAINTAIN A DEDICATED WORK FORCE AT EACH DESIGNATED BASE, AT ALL TIMES, CAPABLE OF ACCOMPLISHING ALL PREVENTIVE MAINTENANCE, PERIODIC INSPECTIONS, REPAIRS, OVERHAULS, RECORDS MAINTENANCE AND MATERIAL CONTROL IN SUPPORT OF ALL POWER PLANTS AND GENERATORS DESIGNATED BY PARAGRAPH II OF THE STATEMENT OF WORK AS A FUNCTION OF THE BASE."

HIS LETTER OF NOVEMBER 9, 1970, ADVISES THAT "DEDICATED," AS THAT TERM IS USED IN THE SOLICITATION, MEANS PERSONNEL PERMANENTLY ASSIGNED TO A POSITION. IT IS URGED THAT THE USE OF THIS TERM VIEWED IN THE CONTEXT OF THE SOLICITATION'S SCOPE OF WORK REQUIREMENT FOR CONTINUOUS OPERATION OR 99-PERCENT RELIABILITY AT THE VARIOUS INSTALLATIONS WOULD MAKE THE RESOURCE REQUIREMENTS OBVIOUS.

THE "TECHNICAL EVALUATION STANDARDS," HOWEVER, CONTAIN TWO AND ONE HALF TO ARRIVE AT THE RESOURCE LEVELS; THAT IS, TO GIVE SPECIFIC MEANING TO THE TERMS "DEDICATED, CONTINUOUS OPERATION AND 99% RELIABILITY." BECAUSE OF THE FAILURE TO SET OUT THE EVALUATION CRITERIA CONTAINED IN THE "TECHNICAL EVALUATION STANDARDS," IT IS OUR VIEW THAT THE FAILURE OF FOUR OF THE OFFERORS TO DISCOVER THE PREDETERMINED RESOURCE LEVELS MAY AS EASILY BE ATTRIBUTED TO VAGUENESS AND AMBIGUITIES IN THE SOLICITATION AS TO A LACK OF UNDERSTANDING OF THE WORK.

WE HAVE RECOGNIZED IN CASES OF THIS NATURE THAT, WHILE PERFORMANCE OF THE SERVICES REQUESTED - NOT THE TOTAL NUMBER OF RESOURCES PROVIDED - IS THE BASIS FOR THE RESULTING CONTRACT, AN OFFEROR'S JUDGMENT OF THE RESOURCES NECESSARY IS A MAJOR FACTOR IN DETERMINING THE CAPACITY OF A FIRM TO PERFORM. SEE, E.G., B-166705, JULY 30, 1969. IT IS AN "OTHER FACTOR" WHICH MAY BE CONSIDERED IN DETERMINING THE EXISTENCE OF A COMPETITIVE RANGE. OBVIOUSLY, A DETERMINATION OF THE RESOURCES NECESSARY TO PERFORM THE WORK REQUIRES DISCERNING JUDGMENT. BECAUSE OF VARIABLES, SUCH AS THE TYPE AND CALIBER OF THE PERSONNEL PROPOSED, JUDGMENTS MAY LEGITIMATELY DIFFER. THIS IS TRUE WHETHER IT IS THE OFFEROR OR THE GOVERNMENT MAKING THE JUDGMENT. WHILE IT IS APPROPRIATE TO TEST AN OFFEROR'S UNDERSTANDING OF THE WORK BY REQUESTING ITS JUDGMENT, WE SEE NO REASON WHY THE GOVERNMENT SHOULD NOT DISCLOSE ITS POSITION TO ASSIST OFFERORS IN THE PREPARATION OF PROPOSALS. THIS DISCLOSURE MAY PROPERLY TAKE THE FORM OF REALISTIC ESTIMATES, WHICH MAY INCLUDE AN INDICATION OF MAXIMUM AND MINIMUM LEVELS. HOWEVER, WHERE, AS HERE, THE CONTRACTING AGENCY TREATS THE FAILURE OF AN OFFEROR TO MEET PREDETERMINED LEVELS AS A MATTER OF "RESPONSIVENESS," IT IS INCUMBENT ON THE CONTRACTING AGENCY TO CLEARLY DISCLOSE IN THE SOLICITATION ITS DETERMINATION OF WHAT IS REQUIRED. THIS CONTEXT, SUCH DISCLOSURE IS, IN OUR VIEW, AN INTEGRAL PART OF THE GOVERNMENT'S OBLIGATION TO STATE ITS MINIMUM NEEDS.

WE STRONGLY URGE THAT ACTION BE TAKEN TO AVOID RECURRENCE OF THE FOREGOING CIRCUMSTANCES AND TO INSURE THAT MAXIMUM COMPETITION IS OBTAINED IN FUTURE PROCUREMENTS OF SERVICES OF THIS NATURE.