B-170682, MAR 19, 1971, 50 COMP GEN 637

B-170682: Mar 19, 1971

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THE APPLICATION OF A TRANSITION COST FACTOR TO THE OFFER OF THE ONLY CONTRACTOR WHO HAD NOT PREVIOUSLY PERFORMED THE SERVICES WITHOUT APPRISING OFFERORS THAT THIS FACTOR WOULD BE UTILIZED IN EFFECTING AWARD OF A CONTRACT THUS ELIMINATING THE CONTRACTOR WHO WAS THE LOWEST PRICED RESPONSIBLE OFFEROR FROM COMPETITION WAS UNWARRANTED AND THE ACTION WAS INCONSISTENT WITH SOUND PROCUREMENT POLICY WHICH DICTATES THAT OFFERORS BE INFORMED OF ALL EVALUATION FACTORS AND THE RELATIVE IMPORTANCE OF EACH FACTOR. NOR WAS THE WAIVER OF TRANSITION COSTS FOR THE SUCCESSFUL OFFEROR BECAUSE OF AVAILABLE QUALIFIED PERSONNEL JUSTIFIED. SINCE THE AWARD WAS PATENTLY ERRONEOUS AND WITHOUT REGARD TO THE ESTABLISHED PRINCIPLES OF COMPETITIVE NEGOTIATION.

B-170682, MAR 19, 1971, 50 COMP GEN 637

CONTRACTS - NEGOTIATION - EVALUATION FACTORS - COST OF CHANGING CONTRACTORS IN THE EVALUATION OF OFFERS UNDER A REQUEST FOR PROPOSALS TO FURNISH PROFESSIONAL ARCHITECTURAL AND ENGINEERING SERVICES, THE APPLICATION OF A TRANSITION COST FACTOR TO THE OFFER OF THE ONLY CONTRACTOR WHO HAD NOT PREVIOUSLY PERFORMED THE SERVICES WITHOUT APPRISING OFFERORS THAT THIS FACTOR WOULD BE UTILIZED IN EFFECTING AWARD OF A CONTRACT THUS ELIMINATING THE CONTRACTOR WHO WAS THE LOWEST PRICED RESPONSIBLE OFFEROR FROM COMPETITION WAS UNWARRANTED AND THE ACTION WAS INCONSISTENT WITH SOUND PROCUREMENT POLICY WHICH DICTATES THAT OFFERORS BE INFORMED OF ALL EVALUATION FACTORS AND THE RELATIVE IMPORTANCE OF EACH FACTOR, NOR WAS THE WAIVER OF TRANSITION COSTS FOR THE SUCCESSFUL OFFEROR BECAUSE OF AVAILABLE QUALIFIED PERSONNEL JUSTIFIED. THEREFORE, SINCE THE AWARD WAS PATENTLY ERRONEOUS AND WITHOUT REGARD TO THE ESTABLISHED PRINCIPLES OF COMPETITIVE NEGOTIATION, THE CONTRACT SHOULD BE TERMINATED.

TO THE POSTMASTER GENERAL, MARCH 19, 1971:

WE REFER TO A LETTER DATED JANUARY 26, 1971, FROM THE DIRECTOR, OFFICE OF PROCUREMENT, BUREAU OF FACILITIES, AND PRIOR CORRESPONDENCE, REPORTING ON THE PROTESTS OF H. L. YOH COMPANY (YOH), AND CONSULTANTS AND DESIGNERS, INC. (C&D), AGAINST THE AWARDS OF CONTRACTS TO UNIDEX SYSTEMS CORPORATION (UNIDEX) AND VOLLMER ASSOCIATES (VOLLMER), UNDER REQUEST FOR PROPOSALS (RFP) NO. NC-1-71, ISSUED BY THE BUREAU OF FACILITIES, PROCUREMENT DIVISION, SUPPLY BRANCH, WASHINGTON, D.C.

THE RFP WAS ISSUED ON JUNE 30, 1970, PURSUANT TO A DETERMINATION AND FINDINGS UNDER 41 U.S.C. 252(C)(4), AS IMPLEMENTED BY FEDERAL PROCUREMENT REGULATIONS (FPR) I-3.204, WHICH AUTHORIZES THE NEGOTIATION OF CONTRACT FOR PERSONAL OR PROFESSIONAL SERVICES.

THE RFP REQUESTED OFFERS FOR FURNISHING PROFESSIONAL ARCHITECTURAL AND ENGINEERING SERVICES FOR THE PERIOD FROM SEPTEMBER 1, 1970, THROUGH JUNE 30, 1971, BY THE CLOSING DATE OF JULY 13, 1970. PREVIOUS CONTRACTS WITH VOLLMER, YOH, AND UNIDEX FOR FURNISHING THESE SERVICES WERE SCHEDULED TO EXPIRE ON AUGUST 31, 1970. VOLLMER WAS FURNISHING SUPPORT SERVICES FOR THE OFFICES OF CONSTRUCTION AND DESIGN. YOH WAS SUPPLYING SUPPORT SERVICES FOR ALL REGIONAL OFFICES EXCEPT CHICAGO AND WASHINGTON, D.C., WHILE UNIDEX WAS FURNISHING SUPPORT SERVICES FOR THE OFFICE OF DESIGN AND THE REGIONAL OFFICE IN WASHINGTON, D.C. UNDER ITEM I OF THE RFP, COVERING THE OFFICE OF DESIGN, OFFERORS WERE INVITED TO SUBMIT PRICES ON AN HOURLY RATE BASIS FOR FURNISHING AN ESTIMATED 126,000 MAN HOURS OF PROFESSIONAL EFFORT, TOGETHER WITH OVERTIME AND PREMIUM RATE PRICES. ITEM II, COVERING THE OFFICE OF CONSTRUCTION, INVOLVED 199,000 ESTIMATED MAN HOURS AND REQUESTED HOURLY PRICES AS TO THESE MAN HOURS, PLUS OVERTIME AND PREMIUM TIME. WE NOTE THAT AWARD OF THESE TWO ITEMS WAS MADE TO VOLLMER ON AUGUST 11, 1970, AS THE LOWEST OFFEROR AS TO THESE TWO ITEMS. UPON REVIEW, WE FIND NO LEGAL BASIS UPON WHICH TO QUESTION THIS AWARD.

OUR CONCERN IS DIRECTED TO THE CIRCUMSTANCES AND CONDITIONS UNDER WHICH THE AWARD OF ITEM III WAS MADE TO UNIDEX.

ITEM III COVERS PROFESSIONAL SERVICES FOR VARIOUS REGIONAL OFFICES EXCLUDING, INTER ALIA, CHICAGO AND WASHINGTON, D.C., INVOLVING 89,440 ESTIMATED MAN HOURS PLUS OVERTIME AND PREMIUM TIME. UNDER THIS ITEM, THE CONTRACTOR WAS REQUIRED TO "PROVIDE SUPPORT SERVICES BY TECHNICALLY QUALIFIED PERSONNEL." EXHIBIT "A" OF THE RFP LISTED THE NECESSARY POSITIONS TO BE FILLED BY THE SUCCESSFUL CONTRACTOR'S PERSONNEL (E.G. ARCHITECT, CIVIL ENGINEER, MECHANICAL ENGINEER, ETC.) ALONG WITH A ONE SENTENCE-DESCRIPTION OF THE WORK TO BE PERFORMED BY EACH PERSON. THE RFP'S "SCHEDULE OF WORK TO BE PERFORMED" DETAILED THE CONTRACTOR'S DUTIES IN HIS PERFORMANCE OF THE CONTRACT. THE FOLLOWING OFFERS WERE RECEIVED FROM SEVEN RESPONSIBLE OFFERORS:

VOLLMER $670,335.00

C&D 673,982.40

FAIRCHILD-HILLER 711,336.00

BLANDFORD 733,096.00

YOH 760,697.60

UNIDEX 778,481.60

TAD 862,935.00

EACH OF THE FOREGOING OFFERORS WAS GIVEN AN OPPORTUNITY TO SUBMIT A BEST AND FINAL OFFER BY AUGUST 5, 1970. THE OFFEROR'S PRICES AS REFLECTED IN THE MODIFICATIONS TO THEIR PROPOSALS WERE AS FOLLOWS:

VOLLMER $644,882.00

C&D (NO CHANGE) 673,982.40

FAIRCHILD-HILLER (NO CHANGE) 711,336.00

UNIDEX 714,969.55

BLANDFORD (NO CHANGE) 733,096.00

YOH (NO CHANGE) 760,697.60

TAD (NO CHANGE) 862,935.00

SINCE THE CONTRACT AWARDED TO VOLLMER FOR ITEMS I AND II REQUIRED A SUBSTANTIAL INCREASE OVER THE NUMBER OF MANHOURS UNDER ITS PREVIOUS CONTRACT, THE DEPARTMENT DID NOT BELIEVE THAT SUCH FIRM COULD EMPLOY A SUFFICIENT NUMBER OF PERSONNEL FOR THE REGIONAL OFFICES. THEREFORE, VOLLMER WAS ELIMINATED FROM CONSIDERATION IN MAKING AN AWARD UNDER ITEM III. BOTH THE SECOND AND THIRD LOW OFFERORS, C&D AND FAIRCHILD-HILLER, WERE CONSIDERED TO HAVE MET THE STANDARDS OF RESPONSIBLE PROSPECTIVE CONTRACTORS. WE ARE ADVISED THAT WHILE BOTH OF THESE FIRMS HAD SUCCESSFULLY PERFORMED CONTRACTS FOR PRIVATE CONCERNS, AS WELL AS STATE AND FEDERAL AGENCIES, NEITHER FIRM HAD PERFORMED CONTRACTS FOR SUPPLYING PROFESSIONAL AND SUPPORT SERVICES FOR THE DEPARTMENT. THEREFORE, AWARD OF THE CONTRACT UNDER ITEM III TO EITHER OF THESE OFFERORS WAS NOT CONSIDERED TO BE IN THE BEST INTERESTS OF THE DEPARTMENT BECAUSE OF THE LACK OF EXPERIENCED PERSONNEL AND THE TRAINING WHICH WOULD BE NECESSARY FOR NEW PERSONNEL. IN VIEW OF THE FOREGOING, UNIDEX, AS THE FOURTH LOW OFFEROR, WAS SELECTED FOR AWARD ON AUGUST 7, 1970, WHEREUPON FURTHER NEGOTIATIONS WITH THAT FIRM RESULTED IN A REDUCTION IN THEIR REVISED PRICE FROM $714,969.55 TO A CONTRACT PRICE OF $700,000.

THE RFP FAILED TO APPRISE OFFERORS OF THE SPECIFIC EVALUATION FACTORS TO BE UTILIZED BY THE PROCUREMENT OFFICIALS IN EFFECTING THE AWARDS OF THE CONTRACTS. IN 49 COMP. GEN. 229, 230 (1969), IN CONSONANCE WITH OUR DECISIONS WHEREIN WE STATED THAT SOUND PROCUREMENT POLICY DICTATES THAT OFFERORS BE INFORMED OF ALL EVALUATION FACTORS AND THE RELATIVE IMPORTANCE OF EACH FACTOR, WE STATED:

*** WE BELIEVE THAT NOTICE SHOULD BE GIVEN AS TO ANY MINIMUM STANDARDS WHICH WILL BE REQUIRED AS TO ANY PARTICULAR ELEMENT OF EVALUATION, AS WELL AS REASONABLY DEFINITE INFORMATION AS TO THE DEGREE OF IMPORTANCE TO BE ACCORDED TO PARTICULAR FACTORS IN RELATION TO EACH OTHER. ***

SEE B-170181, FEBRUARY 22, 1971, AND CASES CITED THEREIN; AND FPR 1 3.802(C), WHICH REQUIRES THAT PROPOSALS SHALL CONTAIN THE INFORMATION NECESSARY TO ENABLE A PROSPECTIVE OFFEROR TO PREPARE A QUOTATION PROPERLY.

THE PROCUREMENT OFFICIALS INTRODUCED, SUBSEQUENT TO THE CLOSE OF NEGOTIATIONS, A TRANSITION COST FACTOR INTO THE EVALUATION PROCESS. THIS FACTOR WHEN APPLIED TO THE OFFER SUBMITTED BY C&D, RESULTED IN THE AWARD OF ITEM III TO UNIDEX. PRIOR TO THE INTRODUCTION OF THIS COST FACTOR, C&D, AS THE LOWEST RESPONSIBLE OFFEROR, WAS IN LINE FOR AWARD. SINCE THE PROPRIETY OF INTRODUCING THE TRANSITION COST FACTOR INTO THE EVALUATION PROCESS IS THE PRIMARY ISSUE RAISED BY BOTH PROTESTANTS, IT IS NECESSARY TO CONSIDER THE JUSTIFICATION ADVANCED BY YOUR DEPARTMENT FOR USE OF THIS FACTOR.

IT IS REPORTED THAT THE RECRUITMENT, RELOCATION, AND TRAINING OF NEW PERSONNEL IN POST OFFICE STANDARDS AND PROCEDURES FOR THE PROFESSIONAL AND SUPPORT SERVICES DESIRED WOULD INVOLVE A MINIMUM OF 3 MONTHS. DUE TO THE FACT THAT CURRENT PROJECTS ARE IN VARYING STAGES OF COMPLETION, THE TRANSFER OF RESPONSIBILITIES FOR THESE PROJECTS FROM EXPERIENCED TO INEXPERIENCED PERSONNEL WAS NOT CONSIDERED TO BE PRUDENT. IT WAS RECOGNIZED, HOWEVER, THAT THE DEPARTMENT WOULD RECEIVE SOME BENEFITS FROM SERVICES OF A FIRM NOT THOROUGHLY FAMILIAR WITH POST OFFICE STANDARDS AND PROCEDURES DURING THE INITIAL TRAINING PERIOD. THEREFORE, AN ESTIMATED TRANSITION COST FACTOR OF "IN EXCESS OF $150,000" WAS ADDED TO THE LOW OFFER OF C&D. TRANSITION COSTS WERE NOT CONSIDERED APPLICABLE IN THE CASE OF UNIDEX AND YOH SINCE THOSE FIRMS HAD SUPPLIED PROFESSIONAL AND SUPPORT SERVICES TO THE DEPARTMENT FOR SEVERAL YEARS AND HAD EXPERIENCED EMPLOYEES WHO WERE AVAILABLE FOR ASSIGNMENT TO DEPARTMENTAL PROJECTS UNDER THE RFP.

C&D ARGUES THAT THE USE OF THIS FACTOR, WHICH WAS THE ONLY BASIS UPON WHICH THE POST OFFICE REFUSED TO AWARD THE CONTRACT TO THE FIRM, WAS UNREALISTIC, SINCE "THE FACTS OF RECORD SHOWED THAT NEITHER C&D NOR UNIDEX HAD MEN IN THE REGIONAL OFFICES AT THE TIME OF THE AWARD." YOH, THE THEN INCUMBENT CONTRACTOR AT THE REGIONAL OFFICES INVOLVED IN THE PROCUREMENT, ASSERTS THAT THE "POST OFFICE SHOULD LOGICALLY HAVE CONSIDERED A TRAINING PERIOD FOR UNIDEX."

OUR OFFICE HAS HAD OCCASION TO CONSIDER A PROCUREMENT WHEREIN THERE WAS UTILIZED A TRANSITION COST EVALUATION FACTOR WHICH HAD NOT BEEN SET FORTH IN THE SOLICITATION. IN B-167249, JANUARY 19, 1970, WE MADE THE FOLLOWING PERTINENT REMARKS:

WE MUST AGREE WITH THE CONTRACTING OFFICER THAT HE COULD NOT HAVE COMPUTED THE PROPOSALS OF CONTRACTORS OTHER THAN EAI BY ADDING A COST FACTOR FOR THE CHANGEOVER OF CONTRACTORS - AN EVALUATION FACTOR WHICH WAS NOT SET OUT IN THE SOLICITATION. TO HOLD OTHERWISE WOULD NOT ONLY ALLOW A PROCURING ACTIVITY TO CHOOSE ANY AMOUNT IT FELT WOULD COMPENSATE FOR THE CHANGEOVER IN CONTRACTORS, BUT WOULD DIRECTLY CONFLICT WITH THE DECISIONS OF THIS OFFICE THAT ALL EVALUATION FACTORS MUST BE CLEARLY SPELLED OUT IN THE INVITATION. SEE 49 COMP. GEN. 295 (B-167473, NOVEMBER 12, 1969; 49 COMP. GEN. 229 (B-167175, OCTOBER 13, 1969); B-166213, JULY 18, 1969. COMPLY WITH THESE DECISIONS, IF IT IS CONSIDERED FINANCIALLY ADVANTAGEOUS TO MAINTAIN AN INCUMBENT CONTRACTOR, A SPECIFIC DOLLAR AMOUNT SHOULD BE SPELLED OUT IN THE SOLICITATION SO THAT THE INCUMBENT CONTRACTOR COMPETITORS WOULD BE INFORMED OF THE FINANCIAL VALUE TO THE GOVERNMENT OF NOT CHANGING CONTRACTORS.

THE RECORD STRONGLY SUGGESTS THAT THE TRANSITION COST FACTOR HAS NEVER BEEN REGARDED BY THE COGNIZANT PROCUREMENT OFFICIALS AS A REASONABLY RELIABLE ESTIMATE OF COSTS ASSOCIATED WITH THE CHANGEOVER OF CONTRACTORS. IN THIS REGARD, WE QUOTE FROM A DEPARTMENTAL REPORT OF SEPTEMBER 24, 1970:

ALTHOUGH WE ARE SATISFIED THAT THERE ARE TRANSITION COSTS, WE HAVE DOUBTS THAT THEY ARE AS HIGH AS ORIGINALLY ESTIMATED.

THIS SAME REPORT CITES A FIGURE "IN EXCESS OF $150,000," WHILE THE MEMORANDUM OF AWARD APPEARS TO SUPPORT A DIFFERENT FIGURE FOR EVALUATION WHICH IS NOT READILY ASCERTAINABLE FROM THAT MEMORANDUM. MOREOVER, THE MEMORANDUM OF AWARD STATES THAT "THE ULTIMATE EFFECTS ON THE CONSTRUCTION AND MECHANIZATION PROGRAMS OF THE DEPARTMENT WHICH COULD RESULT FROM CONTRACTING WITH NEW FIRMS CANNOT BE MEASURED IN THE TERMS OF DOLLARS." WE HAVE HELD THAT COSTS WHICH MAY BE DIFFICULT TO DEFINITIZE SHOULD NOT BE USED IN EVALUATION EXCEPT AFTER A THOROUGH STUDY OF THE PROS AND CONS OFFERED BY INTERESTED PARTIES, ESTABLISHMENT OF PROPER CRITERIA FOR THE USE OF THE FACTOR, AND SPECIFIC NOTICE THEREOF IN THE SOLICITATION. SEE 45 COMP. GEN. 434, 435 (1966). IN THIS REGARD, WE HAVE EMPHASIZED THE NECESSITY FOR EXACTITUDE IN THE ESTABLISHMENT OF A SPECIFIC COST EVALUATION FACTOR, 49 ID. 98, 101 (1969). ADDITIONALLY, IT APPEARS FROM THE RECORD THAT THERE WAS AN UNEQUAL APPLICATION OF THE TRANSITION COST FACTOR WHICH ULTIMATELY RESULTED IN THE AWARD TO UNIDEX. WE ARE ADVISED THAT "NO CONSIDERATION WAS GIVEN TO TRANSITION COSTS WITH RESPECT TO UNIDEX." IT IS TRUE, AS THE PROTESTANTS ARGUE, THAT UNIDEX WAS NOT THE INCUMBENT CONTRACTOR IN THE REGIONAL OFFICES TO BE STAFFED UNDER ITEM III. HOWEVER, THE PROCUREMENT OFFICIALS URGE THAT THE FAILURE TO ASSESS SOME AMOUNT OF TRANSITION COSTS AGAINST UNIDEX WAS DUE TO THE FACT THAT UNIDEX HAD A SUFFICIENT NUMBER OF QUALIFIED AND EXPERIENCED EMPLOYEES AVAILABLE FOR IMMEDIATE ASSIGNMENT. ON THE ONE HAND, IN RESPONSE TO THE ARGUMENT OF YOH, THE THEN INCUMBENT AND HIGHER PRICED OFFEROR THAN UNIDEX, THAT TRANSITION COSTS SHOULD HAVE BEEN APPLIED AGAINST UNIDEX, THE CONTRACTING OFFICIALS ARGUE THAT UNIDEX HIRED 76 PERCENT OF YOH'S EMPLOYEES IN PERFORMING THE CONTRACT. YET, IN RESPONSE TO THE ARGUMENT OF C&D, THE THEN LOWEST PRICED RESPONSIBLE OFFEROR, THAT IT HAD OFFERED TO UTILIZE THE INCUMBENT YOH'S EMPLOYEES IN ITS REVISED PROPOSAL, THOSE SAME OFFICIALS STATED THAT THERE WAS NO ASSURANCE THAT C&D COULD HAVE HIRED YOH'S EMPLOYEES TO PERFORM ITEM III SERVICES. THIS LINE OF REASONING APPEARS TO BE WHOLLY UNWARRANTED AND INCONSISTENT UNDER THE CIRCUMSTANCES. THE FACT THAT UNIDEX HAD THE QUALIFIED PERSONNEL AVAILABLE FOR POSSIBLE ASSIGNMENT DID NOT JUSTIFY THE WAIVER OF TRANSITION COSTS INSOFAR AS UNIDEX WAS CONCERNED, PARTICULARLY WHEN IT IS CONCEDED THAT UNIDEX WOULD HAVE HAD SOME MINIMAL TRANSITION PERIOD. MOREOVER, IT APPEARS FROM THE RECORD THAT UNIDEX HIRED A MAJOR PORTION OF THE INCUMBENT'S PERSONNEL SUBSEQUENT TO THE AWARD OF THE CONTRACT. IT IS CLEAR THAT, AT THE VERY LEAST, RELOCATION FOR UNIDEX PERSONNEL COULD HAVE BEEN EXPECTED, AS WELL AS A PERIOD OF FAMILIARIZATION WITH THE PROJECTS IN PROGRESS AT THE REGIONAL OFFICES. THEREFORE, IT MAY BE CONCLUDED THAT THE FAILURE TO APPLY A TRANSITION COST FACTOR TO THE OFFER OF UNIDEX PLACED UNIDEX IN A FAVORED COMPETITIVE POSITION VIS-A VIS THE OTHER COMPETITIVE OFFERORS.

IN ADDITION TO THE FOREGOING, IT WOULD SEEM THAT THE TRANSITION COST FACTOR ITSELF WAS PREJUDICIAL TO THE COMPETITIVE POSITION OF OFFERORS WHO WERE UNAWARE OF THE EXISTENCE OF SUCH FACTOR OR THAT THE FACTOR WOULD BE A DETERMINATIVE ELEMENT IN THE NEGOTIATION PROCESS. IN 49 COMP. GEN., SUPRA, A SOLE-SOURCE SECRETARIAL DETERMINATION AND FINDINGS WAS BROADENED TO PERMIT THE SUBMISSION OF A PROPOSAL BY ANOTHER INTERESTED FIRM; HOWEVER, "AN EVALUATION FACTOR WAS PROVIDED WITH RESPECT TO ANY PROPOSAL FROM THE NEW SOURCE TO COVER ADDITIONAL COSTS RESULTING FROM THE FURNISHING OF UNITS DIFFERENT THAN THE SOLE-SOURCE DESIGN." SUBSEQUENTLY, BUT BEFORE THE DATE FIXED FOR RECEIPT OF PROPOSALS, INTERESTED FIRMS WERE ADVISED THAT THE AMOUNT OF THE EVALUATION FACTOR WOULD BE $40,000. A FIRM INTERESTED IN SUBMITTING A PROPOSAL AS A NEW SOURCE OF SUPPLY REQUESTED INFORMATION AS TO THE METHOD OF COMPUTING THIS $40,000 COST EVALUATION FACTOR. THE REQUEST WAS DENIED BY THE PROCUREMENT ACTIVITY. THEREAFTER, IN SUBMITTING A REVISED PRICE PROPOSAL, THIS FIRM RECOGNIZED THAT CERTAIN COSTS WOULD BE APPLICABLE, BUT "EXPRESSED THE VIEW THAT THE FACTOR UTILIZED WAS GROSSLY OVERESTIMATED AND INDICATED A WILLINGNESS TO DISCUSS THE MATTER DURING NEGOTIATION." THE CONTRACTING OFFICIALS REQUESTED A DECISION FROM OUR OFFICE AS TO WHETHER AN AWARD MIGHT BE MADE WITHOUT FURTHER DISCUSSION OR NEGOTIATION. WE CONCLUDED THAT "SINCE THE OBJECTIVE OF THE PROCUREMENT STATUTE AND IMPLEMENTING REGULATIONS IS TO ASSURE THAT THE AWARD OF A NEGOTIATED CONTRACT WILL BE MADE TO THAT RESPONSIBLE OFFEROR WHOSE OFFER IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED, WE DO NOT BELIEVE THAT AN OTHERWISE ELIGIBLE OFFEROR SHOULD BE DENIED THE OPPORTUNITY TO DISCUSS THE ELEMENTS OF AN EVALUATION FACTOR WHICH IS DIRECTLY PREJUDICIAL TO ITS COMPETITIVE POSITION."

UNLIKE THE INSTANT PROCUREMENT, HOWEVER, THE OFFERORS INVOLVED IN THE CITED DECISION WERE FULLY INFORMED AS TO THE EXISTENCE OF A COST EVALUATION FACTOR PRIOR TO THE SUBMISSION OF THEIR OFFERS. ALTHOUGH WE RECOGNIZED IN THAT DECISION THAT THE DETERMINATION OF EVALUATION FACTORS IS AN ADMINISTRATIVE RESPONSIBILITY, WE OBSERVED THAT:

*** 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 ***

IN THE CIRCUMSTANCES OF THIS PROCUREMENT, THE ADDITION OF A TRANSITION COST FACTOR TO THE PRICE OFFERED BY C&D BUT NOT AGAINST THE UNIDEX OFFERED PRICE OPERATED TO THE COMPETITIVE DISADVANTAGE OF C&D WHO HAD ITS PRICE INCREASED BY APPROXIMATELY 22 PERCENT AND TO THE COMPETITIVE ADVANTAGE OF UNIDEX WHOSE PRICE WAS NOT AFFECTED THEREBY. KEEPING IN MIND C&D'S ASSERTION THAT THE TRANSITION COST FACTOR IS, IN ESSENCE, A FICTION, AND YOH'S CLAIM THAT UNIDEX SHOULD HAVE BEEN ASSESSED SOME MEASURE OF TRANSITION COSTS, THE FOLLOWING OBSERVATION FROM OUR ABOVE-CITED DECISION IS PERTINENT:

*** WE RECOGNIZE THAT OPPORTUNITY FOR SUCH DISCUSSION MIGHT NOT HAVE RESULTED IN ANY CHANGE IN THE AMOUNT OF THE EVALUATION FACTOR, BUT THE OFFEROR, AT LEAST, MIGHT HAVE SATISFIED ITSELF, BEFORE SUBMITTING A REVISED OFFER, OF THE CORRECTNESS OF THE ADMINISTRATIVE POSITION OR, IN THE ABSENCE THEREOF, WOULD HAVE HAD AN OPPORTUNITY TO SHOW THE PROCUREMENT ACTIVITY WHEREIN IT MAY HAVE ERRED. ***

WE BELIEVE THAT ONCE THE CONTRACTING OFFICIALS DETERMINED THAT A TRANSITION COST FACTOR WAS ESSENTIAL TO THE EVALUATION OF OFFERS, ALL OFFERORS WITHIN A COMPETITIVE RANGE SHOULD HAVE BEEN ADVISED OF THE INTRODUCTION OF SUCH FACTOR INTO THE EVALUATION PROCESS, TOGETHER WITH ADVICE AS TO ITS AMOUNT AND THE METHOD WHEREBY IT WAS COMPUTED. SUCH BEING THE CASE, IT IS OUR OPINION, IN CONSONANCE WITH FPR 1.3-805.1, THAT DISCUSSIONS RELATING TO THE COMPOSITION, APPLICABILITY AND IMPACT OF THE TRANSITION COST FACTOR SHOULD HAVE BEEN CONDUCTED WITH ALL COMPETITIVELY SITUATED OFFERORS. HAD OFFERORS BEEN AFFORDED AN OPPORTUNITY TO SUBMIT PRICE REVISIONS AFTER DISCUSSIONS CONDUCTED IN THE SPIRIT OF THE REGULATIONS, THE SUCCESSFUL OFFEROR UNDER ITEM III MIGHT WELL HAVE BEEN AN OFFEROR OTHER THAN UNIDEX.

THE FOREGOING DEFECTS IN THE NEGOTIATION PROCESS REPRESENT, IN OUR OPINION, SERIOUS AND SUBSTANTIAL DEVIATIONS FROM THE REGULATORY REQUIREMENTS REGARDING THE COMPETITIVE NEGOTIATION OF CONTRACTS. THE USE AND APPLICATION OF THE TRANSITION COST FACTOR ON A UNILATERAL BASIS EFFECTIVELY REMOVED C&D, THE LOW RESPONSIBLE OFFEROR, FROM CONTENTION FOR AWARD. AS FOR YOH, THE FAILURE TO ASSESS ANY TRANSITION COSTS IN THE CASE OF UNIDEX WORKED TO ITS COMPETITIVE DISADVANTAGE BY MAKING UNIDEX'S OFFER THE LOWEST EVALUATED OFFER.

WE THEREFORE CONCLUDE THAT THE AWARD OF ITEM III TO UNIDEX WAS PATENTLY ERRONEOUS AND WITHOUT REGARD TO THE ESTABLISHED PRINCIPLES OF COMPETITIVE NEGOTIATION. WE STRONGLY RECOMMEND THAT SUCH CONTRACT BE TERMINATED WITHOUT DELAY. WE NOTE IN THIS REGARD THAT "THE DEPARTMENT WOULD NOT CONTEMPLATE AWARD OF ANY CONTRACT IN THE EVENT CANCELLATION IS DIRECTED" DUE TO THE FACT "THAT IN THE INTEREST OF EFFICIENCY AND ECONOMY, WE WOULD ACCELERATE OUR PROGRAM TO DEVELOP FULL IN-HOUSE CAPACITY IN THIS AREA."

BOTH PROTESTANTS HAVE MADE ALLEGATIONS CONCERNING THE POSSIBLE IMPROPER CONDUCT OF A FORMER POST OFFICE DEPARTMENT OFFICIAL WITH REGARD TO THIS PROCUREMENT. WE HAVE EXAMINED THE REPORT OF THE BUREAU OF THE CHIEF POSTAL INSPECTOR IN THIS REGARD AND WE HAVE NO COMMENTS TO OFFER WITH RESPECT THERETO INSOFAR AS OUR REVIEW OF THIS PROCUREMENT IS CONCERNED.

ENCLOSED IS A COPY OF OUR DECISION OF TODAY TO THE ATTORNEYS FOR C&D, WHEREIN WE HOLD THAT THE AWARD OF ITEMS I AND II OF THE RFP TO VOLLMER NEED NOT BE DISTURBED.