B-170093, SEP 28, 1970, 50 COMP GEN 222

B-170093: Sep 28, 1970

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THE CONTRACTING OFFICER'S REFUSAL TO NEGOTIATE A PRICE REDUCTION WAS PROPER IN VIEW OF DISCUSSIONS CONSTITUTING NEGOTIATIONS DURING WHICH VITAL INFORMATION CONCERNING THE SUCCESSFUL OFFEROR'S PROPOSAL WAS ERRONEOUSLY BUT INNOCENTLY REVEALED. ALTHOUGH THE CONTRACT AWARDED IS NOT REQUIRED TO BE TERMINATED. IN VIEW OF THE PROCEDURAL DEFICIENCIES IN THE PROCUREMENT THE CONTRACT OPTION SHOULD NOT BE EXERCISED UNLESS IT IS IMPRACTICABLE TO REPROCURE THE SERVICES ON AN EQUAL COMPETITIVE BASIS. EQUIPMENT - AUTOMATIC DATA PROCESSING SYSTEMS - COMPUTER SERVICE - EVALUATION PROPRIETY A POINT SYSTEM EVALUATION OF PROPOSALS FOR COMPUTER TIME AND SERVICES UNDER WHICH THE NUMBER OF POINTS TO BE AWARDED FOR BASIC COSTS IS TO BE DETERMINED FROM AN OFFEROR'S "PRICING OUT.

B-170093, SEP 28, 1970, 50 COMP GEN 222

CONTRACTS - NEGOTIATION - DISCLOSURE OF PRICE, ETC. - AUCTION TECHNIQUE PROHIBITION WHILE THE GOVERNMENT'S FAILURE TO ESTABLISH A COMMON CUTOFF DATE UNDER A REQUEST FOR PROPOSALS FOR COMPUTER TIME AND SERVICES PREVENTED THE CLOSING OF NEGOTIATIONS, THE CONTRACTING OFFICER'S REFUSAL TO NEGOTIATE A PRICE REDUCTION WAS PROPER IN VIEW OF DISCUSSIONS CONSTITUTING NEGOTIATIONS DURING WHICH VITAL INFORMATION CONCERNING THE SUCCESSFUL OFFEROR'S PROPOSAL WAS ERRONEOUSLY BUT INNOCENTLY REVEALED, FOR TO PERMIT A PRICE REDUCTION UNDER THE CIRCUMSTANCES WOULD COMPROMISE THE FEDERAL PROCUREMENT SYSTEM BY ALLOWING THE AUCTION TECHNIQUE PRECLUDED BY SECTION 1-3.805-1(B) OF THE FEDERAL PROCUREMENT REGULATIONS. ALTHOUGH THE CONTRACT AWARDED IS NOT REQUIRED TO BE TERMINATED, IN VIEW OF THE PROCEDURAL DEFICIENCIES IN THE PROCUREMENT THE CONTRACT OPTION SHOULD NOT BE EXERCISED UNLESS IT IS IMPRACTICABLE TO REPROCURE THE SERVICES ON AN EQUAL COMPETITIVE BASIS. EQUIPMENT - AUTOMATIC DATA PROCESSING SYSTEMS - COMPUTER SERVICE - EVALUATION PROPRIETY A POINT SYSTEM EVALUATION OF PROPOSALS FOR COMPUTER TIME AND SERVICES UNDER WHICH THE NUMBER OF POINTS TO BE AWARDED FOR BASIC COSTS IS TO BE DETERMINED FROM AN OFFEROR'S "PRICING OUT," OR COST FOR THE REQUIREMENTS STATED IN THE SAMPLE PROBLEM INCLUDED IN THE SOLICITATION THAT IS NOT CONSIDERED INDICATIVE OF COST DIFFERENCES BETWEEN SUPPLIERS FOR EVERY PROPOSED COMPUTER APPLICATION CONTEMPLATED UNDER THE CONTRACT, BUT, RATHER, TYPICAL OF THE WORK TO BE PERFORMED, IS A PROPER METHOD OF EVALUATION, NOTWITHSTANDING THE AMOUNT OF MEMORY OR CORE SIZE WAS NOT FROZEN IN THE SAMPLE, AS THE FACTORS FROZEN ARE OF GREATER SIGNIFICANCE AS TO PRICE THAN THE VARIATIONS IN THE CORE SIZE OF THE SAMPLE.

TO THE COMPUTER NETWORK CORPORATION, SEPTEMBER 28, 1970:

THIS IS IN REPLY TO YOUR TELEGRAM OF JUNE 18, 1970, AND TO COUNSEL'S SUPPORTING LETTERS OF JUNE 24 AND AUGUST 17, 1970, PROTESTING THE AWARD OF A CONTRACT TO U.S. TIME-SHARING, INC. (U.S. TIME), UNDER DEPARTMENT OF LABOR REQUEST FOR PROPOSALS NO. L/A70-8.

YOU HAVE REQUESTED OUR OFFICE TO INSTRUCT THE DEPARTMENT OF LABOR TO REFRAIN FROM EXERCISING ANY FURTHER OPTIONS AVAILABLE UNDER THE CONTRACT SINCE YOU BELIEVE THAT YOU WERE IMPROPERLY DENIED AN OPPORTUNITY TO NEGOTIATE, THAT THERE WAS AN INVALID COMPARISON OF PRICES OFFERED, AND THAT U.S. TIME'S PROPOSAL WAS IN EFFECT NONRESPONSIVE.

THE SOLICITATION CONTEMPLATED THE AWARD OF A CONTRACT FOR COMPUTER TIME AND SERVICES TO PROVIDE THE DEPARTMENT WITH TEMPORARY AVAILABILITY OF A SYSTEM WITH HARDWARE AND SOFTWARE CHARACTERISTICS, BOTH OF WHICH WOULD BE SIMILAR TO THOSE IN THE SYSTEM PRESENTLY BEING INSTALLED BY THE DEPARTMENT. THE SOLICITATION SPECIFIED THAT A MINIMUM HARDWARE CONFIGURATION AND MANDATORY SOFTWARE REQUIREMENTS WERE TO BE AVAILABLE IN THE OFFEROR'S SYSTEM. IT WAS CONTEMPLATED THAT THIS DUPLICATE HARDWARE AND SOFTWARE CAPABILITY WOULD EXPEDITE THE CONVERSION OF EXISTING SYSTEMS INTO THE DEPARTMENT'S NEW CENTRAL DATA PROCESSING SYSTEM.

THE SOLICITATION PROVIDED THAT PROPOSALS WOULD BE EVALUATED ON THE BASIS OF THE FOLLOWING POINT SYSTEM:

RANGE

TURNAROUND TIME (INCREASE IN COST FACTOR FOR LESS

THAN 2 HRS.) 0-15 POINTS

TURNAROUND TIME (INCREASE IN COST FACTOR FOR LESS

THAN 4 HRS.) 0-10 POINTS

EQUIPMENT AND OPERATING SYSTEM COMPATIBILITY 0-25 POINTS

BASIC COST (BASED ON LESS THAN 6 HRS. TURNAROUND) 0-20 POINTS

SYSTEMS ENGINEERING SUPPORT 0-15 POINTS

OPERATIONAL SUPPORT 0-10 POINTS

DISTANCE FROM DOL 0- 5 POINTS

TOTAL 0-100 POINTS

INASMUCH AS SUPPLIERS OF COMPUTER TIME CHARGE FOR SERVICES ACCORDING TO THEIR UNIQUELY DEVELOPED ALGORITHMS, IT IS DIFFICULT TO COMPARE COSTS. THE NUMBER OF POINTS TO BE AWARDED FOR BASIC COST WAS, THEREFORE, TO BE DETERMINED ON THE BASIS OF THE OFFEROR'S "PRICING OUT," OR COST FOR, THE REQUIREMENTS STATED IN A SAMPLE PROBLEM INCLUDED IN THE SOLICITATION. THE DEPARTMENT REPORTS THAT THE SAMPLE PROBLEM IS NOT INDICATIVE OF COST DIFFERENCES BETWEEN SUPPLIERS FOR EVERY PROPOSED COMPUTER APPLICATION CONTEMPLATED UNDER THE CONTRACT; RATHER, IT IS GENERALLY TYPICAL OF THE WORK CONTEMPLATED.

THE SAMPLE PROBLEM ESTABLISHED AS CONSTANT THE TIME ALLOWED AND THE NUMBER OF INPUTS TO THE COMPUTER; HOWEVER, THE AMOUNT OF MEMORY OR CORE SIZE WAS NOT FROZEN AND WAS FOR DETERMINATION BY THE INDIVIDUAL OFFEROR. YOU CONTEND THAT UNLESS MEMORY IS FIXED AT A SET FIGURE, THE BASIS FOR COMPARING PRICES IS VITIATED. THE DEPARTMENT DISAGREES WITH YOUR POSITION AND STATES THAT THOSE FACTORS WHICH WERE FROZEN IN THE SAMPLE PROBLEM ARE OF FAR GREATER SIGNIFICANCE AS TO PRICE THAN VARIATIONS IN THE CORE SIZE, AND THAT CARE WAS TAKEN TO INSURE THAT DIFFERENCES IN CORE SIZE WOULD HAVE A RELATIVELY SMALL IMPACT UPON PRICE COMPUTATIONS.

THE DEPARTMENT'S REPORT TO THIS OFFICE ESTABLISHES THAT U.S. TIME'S PRICING OF THE SAMPLE PROBLEM IS LESS THAN YOURS, AND IT APPEARS THAT EVEN IF YOUR MEMORY VALUES WERE SUBSTITUTED IN U.S. TIME'S ALGORITHM WHERE VARIABLES WERE PERMITTED, THE NEW RESULTING COST FOR THE SAMPLE PROBLEM WOULD STILL BE LESS THAN YOUR PROPOSED COST. MOREOVER, IT APPEARS THAT THE VARIABILITY OF THE CORE SIZE HAD ONLY A SLIGHT IMPACT UPON PRICE SINCE VERY SMALL DIFFERENCES RESULTED FROM SUBSTITUTING BOTH U.S. TIME'S AND YOUR MEMORY VALUES IN THE OTHER'S ALGORITHM. SINCE THE ESTABLISHMENT OF FACTORS FOR EVALUATION OF PROPOSALS FOR COMPUTER TIME REQUIRES THE EXERCISE OF EXPERT TECHNICAL JUDGMENT BY THE AGENCY, AND SINCE THE EVALUATIONS WITH THE DIFFERENT CORE SIZES DID NOT SIGNIFICANTLY AFFECT YOUR COMPETITIVE POSITION, WE PERCEIVE NO COMPELLING REASON TO QUESTION THE METHOD OUTLINED IN THE SOLICITATION FOR COMPARING BASIC COSTS.

YOU ALSO ARGUE THAT IN ANY EVENT YOU ASSUMED THAT AT THE VERY MINIMUM OFFERORS WOULD BE REQUIRED TO PERFORM THE SAMPLE PROBLEM WITH AT LEAST THE CORE SIZES SET FORTH IN SECTION III OF THE SOLICITATION, REQUIRING AVAILABILITY OF CERTAIN MANDATORY PROGRAMS AND MINIMUM HARDWARE CONFIGURATION IN THE OFFEROR'S TOTAL SYSTEM. COUNSEL CONTENDS THAT U.S. TIME'S FAILURE TO ABIDE WITH SUCH CORE SIZES RENDERS ITS PROPOSAL NONRESPONSIVE. IT IS THE DEPARTMENT'S POSITION, AND OUR REVIEW SUBSTANTIATES SUCH POSITION, THAT THE SOLICITATION CONTAINED NO LANGUAGE TO THE EFFECT THAT THE MANDATORY PROGRAMS OR MINIMUM HARDWARE CONFIGURATION WERE REQUIRED TO BE UTILIZED TO THAT DEGREE IN THE SOLUTION OF THE SAMPLE PROBLEM. MOREOVER, IT IS REPORTED THAT IN PRICING OUT THE COMPILE STEP IN THE SAMPLE PROBLEM THE CORE SIZE UTILIZED BY YOU (120K) DID NOT MEASURE UP TO THE SOLICITATION'S MANDATORY AVAILABILITY LEVEL OF 150K. WE SEE NO BASIS FOR CONCLUDING THAT EITHER YOUR PROPOSAL OR THAT OF U.S. TIME SHOULD HAVE BEEN DETERMINED TO BE UNACCEPTABLE IN THIS RESPECT.

IT IS ALSO YOUR POSITION THAT THE CONTRACTING OFFICER IMPROPERLY DENIED YOUR FIRM AN OPPORTUNITY TO DISCUSS YOUR OFFER OF A REDUCTION IN PRICE, WHICH YOU STATE IS EVIDENT FROM THE SEQUENCE OF EVENTS LEADING UP TO THE AWARD AS OUTLINED IN THE ADMINISTRATIVE REPORT. YOU STATE THAT THE REFUSAL TO NEGOTIATE WAS CONTRARY TO FEDERAL PROCUREMENT REGULATIONS (FPR) 1-3.101(D) WHICH REQUIRES NEGOTIATED PROCUREMENTS TO BE CONDUCTED ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICAL EXTENT.

THE ADMINISTRATIVE REPORT SHOWS THAT THE FOUR PROPOSALS RECEIVED IN RESPONSE TO THE SOLICITATION WERE OPENED BY THE CONTRACTING OFFICER ON MAY 7, 1970. THEREAFTER, THEY WERE FORWARDED TO THE COMPUTER SYSTEM DIVISION OF THE DEPARTMENTAL DATA PROCESSING CENTER FOR EVALUATION. DURING TECHNICAL EVALUATION OF YOUR PROPOSAL, A DISCREPANCY WAS NOTED IN THE APPLICATION OF YOUR ALGORITHM TO THE SAMPLE PROBLEM AND DISCUSSIONS WERE CONDUCTED, WHEREUPON YOU CHANGED YOUR ALGORITHM AND YOUR PROPOSAL WAS EVALUATED ON THE BASIS OF A LOWER PRICE THAN YOU HAD ORIGINALLY OFFERED. THEREAFTER, TECHNICAL DISCUSSIONS WERE AGAIN HELD TO ELIMINATE ADDITIONAL DISCREPANCIES IN YOUR PROPOSAL. WHILE YOUR COUNSEL CONTENDS THAT THESE DISCUSSIONS DID NOT CONSTITUTE NEGOTIATIONS SINCE THEY WERE HELD WITH TECHNICAL PERSONNEL WITHIN THE DEPARTMENT, WE NOTE THAT YOUR PROPOSAL WAS IN FACT EVALUATED BY THE CONTRACTING OFFICER AS REVISED BY THESE DISCUSSIONS.

AS A RESULT OF THE TECHNICAL EVALUATION OF PROPOSALS, TWO OF THE FOUR OFFERORS WERE ELIMINATED FROM FURTHER CONSIDERATION. AT THE TIME THE EVALUATIONS WERE FORWARDED TO THE CONTRACTING OFFICER YOU HAD BEEN GIVEN A POINT SCORE OF 79.6 WHILE U.S. TIME HAD OBTAINED A SCORE OF 78. REVIEWING THE TECHNICAL EVALUATION OF PROPOSALS THE CONTRACTING OFFICER NOTED THAT THE SCORE GIVEN TO U.S. TIME AFFORDED NO CONSIDERATION TO THE STATEMENT IN ITS PROPOSAL THAT NO PREMIUM WOULD BE CHARGED FOR LESS THAN 6 HOURS TURNAROUND TIME. SINCE THE COMPANY INCLUDED ITS STANDARD COMMERCIAL RATES IN ITS PROPOSAL, WHICH CONFLICTED WITH THE ABOVE OFFER OF NO PREMIUM FOR LESS THAN 6 HOURS' TURNAROUND TIME, THE CONTRACTING OFFICER DECIDED TO REQUEST CLARIFICATION. U.S. TIME ADVISED HIM THAT IT DID NOT INTEND TO CHARGE SUCH A PREMIUM NOTWITHSTANDING THE CONTRARY IMPLICATION FROM ITS COMMERCIAL RATES. AFTER ASSIGNING CORRECTED POINT VALUES TO REFLECT THIS CLARIFICATION, U.S. TIME WAS RANKED HIGHEST WITH 91 POINTS TO COMET'S 79.6 (U.S. TIME'S SCORE WAS SUBSEQUENTLY REDUCED TO 88 UPON A CHANGE IN PROPOSED LOCATION OF FACILITY FROM ROSSLYN TO RESTON, BOTH IN VIRGINIA).

THEREAFTER, IT APPEARS THAT YOU REQUESTED A MEETING WITH THE CONTRACTING OFFICER, APPARENTLY UPON THE ADVICE THAT YOU WERE NO LONGER IN LINE FOR AWARD. THE AGENCY REPORTS THAT EXTENSIVE AND FREQUENT MEETINGS WERE HELD WITH YOU DURING THE LATER PART OF MAY THROUGH JUNE 5, 1970. ON MAY 27, 1970, YOU REQUESTED AN OPPORTUNITY TO DISCUSS A REDUCTION IN YOUR PRICE; HOWEVER, THE CONTRACTING OFFICER DECLINED TO DISCUSS ANY PRICE MODIFICATION IN YOUR PROPOSAL ON THE BASIS THAT YOU HAD OBTAINED CERTAIN "INSIDE" INFORMATION DURING THE MEETINGS THAT WOULD HAVE BEEN MORE APPROPRIATE FOR DEBRIEFING, AND WHICH HAD BEEN MADE AVAILABLE TO YOU WITH THE IMPLICIT UNDERSTANDING THAT NEGOTIATIONS WERE AT AN END. IT IS FURTHER REPORTED THAT PRIOR TO YOUR REQUEST TO MODIFY YOUR PRICE, SUFFICIENT INFORMATION WAS ERRONEOUSLY, BUT INNOCENTLY, RELEASED TO YOU AT THE END OF MAY WHICH WOULD HAVE ENABLED YOU TO ACCURATELY DETERMINE THE EXTENT OF REDUCTION IN PRICING OUT THE SAMPLE PROBLEM AND/OR REDUCTION IN PREMIUM FOR QUICK TURN-AROUND TIME THAT YOU WOULD BE REQUIRED TO MAKE IN ORDER TO YIELD A POINT VALUE THAT WOULD WIN THE AWARD.

OBVIOUSLY, HAD THE CONTRACTING OFFICER ESTABLISHED A COMMON CUTOFF DATE PRIOR TO HIS REVELATORY ACTION, AS PROVIDED FOR IN FPR 1-3.805 1(B), THERE WOULD BE NO BASIS FOR PROTESTING ANY REFUSAL THEREAFTER TO NEGOTIATE. HAVE TAKEN THE POSITION THAT UNTIL A COMMON CUTOFF DATE FOR FURTHER MODIFICATION OF PROPOSALS IS ESTABLISHED FOR ALL OFFERORS, IT CANNOT BE SAID THAT NEGOTIATIONS ARE CLOSED OR THAT MODIFICATIONS MADE EITHER VOLUNTARILY OR AS A RESULT OF GOVERNMENT REQUEST SHOULD NOT BE CONSIDERED. 48 COMP. GEN. 536 (1969). WHILE IN THE PRESENT CASE NEGOTIATIONS WERE NEVER PROPERLY CLOSED THROUGH THE ESTABLISHMENT OF A COMMON CUTOFF DATE, WE BELIEVE THAT AT THE TIME YOU REQUESTED AN OPPORTUNITY TO MODIFY YOUR PRICE THE CONTRACTING OFFICER COULD NOT HAVE ENTERTAINED ANY FURTHER MODIFICATIONS BY YOU FOR THE PURPOSE OF BETTERING THE OFFER SUBMITTED BY U.S. TIME, SINCE VITAL INFORMATION CONCERNING U.S. TIME'S PROPOSAL HAD BEEN REVEALED TO YOU. TO HAVE PERMITTED SUCH MODIFICATIONS IN THOSE CIRCUMSTANCES WOULD HAVE COMPROMISED THE INTEGRITY OF THE FEDERAL PROCUREMENT SYSTEM BY ALLOWING THAT TYPE OF AUCTION TECHNIQUE WHICH THE PROCUREMENT REGULATIONS REQUIRED THE CONTRACTING OFFICER TO AVOID. SEE FPR 1-3.805-1(B).

FOR THE REASONS STATED ABOVE, WE ARE UNABLE TO CONCLUDE THAT THE CONTRACT AWARDED TO U.S. TIME SHOULD BE TERMINATED. THERE IS ENCLOSED FOR YOUR INFORMATION, HOWEVER, A COPY OF OUR LETTER OF TODAY TO THE SECRETARY OF LABOR WHEREIN WE POINT OUT THE DEFICIENCIES IN THE PROCEDURES FOLLOWED IN THIS CASE, AND ADVISE AGAINST EXERCISE OF THE OPTION UNDER THE CONTRACT UNLESS IT IS DETERMINED THAT IT IS IMPRACTICABLE TO REPROCURE SUCH SERVICES ON AN EQUAL COMPETITIVE BASIS.