B-171127, MAR 10, 1971

B-171127, MAR 10, 1971

BID PROTEST - EVALUATION METHOD DECISION DENYING PROTEST AGAINST THE METHOD OF EVALUATING THE OVERALL COST OF RENTING A NUMBER OF MICROFILM READERS AND READER/PRINTERS IN A PROCUREMENT BY AIR FORCE LOGISTICS COMMAND AND AWARDS TO COMPUTER MICRO VIEWING COMPANY AND 3M BUSINESS PRODUCTS SALES, INC. SINCE PROTESTANT'S ARGUMENT RESTS ON THE SAVINGS THAT THE GOVERNMENT WOULD ALLEGEDLY REALIZE THROUGH THE SAVINGS OF A FEW SECONDS IN EACH MICROFILM LOOKUP AND THIS HAS NOT BEEN ADEQUATELY ESTABLISHED AS AN EVALUATION FACTOR, THE COMP. GEN. CANNOT CONCLUDE THAT THE RECORD PROVIDES THE FULL JUSTIFICATION REQUIRED BY PAST DECISIONS FOR AWARDS AT OTHER THAN THE LOWEST DELIVERED PRICES AVAILABLE UNDER THE MANDATORY FEDERAL SUPPLY SCHEDULE.

TO MICRO-DATA DIVISION, BELL & HOWELL COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF OCTOBER 26 AND DECEMBER 30, 1970, WITH ENCLOSURES, PROTESTING THE METHOD OF EVALUATING THE OVERALL COST OF RENTING (AND THE SUBSEQUENT PURCHASE) OF A NUMBER OF MICROFILM READERS AND READER/PRINTERS IN A PROCUREMENT BY HEADQUARTERS, AIR FORCE LOGISTICS COMMAND (AFLC), WRIGHT-PATTERSON AIR FORCE BASE, OHIO.

THE INITIAL REQUIREMENTS WERE FOR THE RENTAL (WITH OPTION TO PURCHASE) OF 541 CARTRIDGE TYPE MICROFILM READERS AND 230 MICROFILM READER/PRINTERS, FOR THE PERIOD FROM NOVEMBER 1, 1970, THROUGH JUNE 30, 1971. THE EQUIPMENT IS TO BE USED AT SIX LOCATIONS AS PART OF AN AFLC WIDE PROGRAM FOR THE DISSEMINATION OF COMPUTER GENERATED REPORTS, ETC., TO ALL INTERNAL ORGANIZATIONS, OTHER AIR MATERIEL AREAS, HEADQUARTERS OF AFLC AND OTHER MAJOR COMMANDS USING MICROFILMS INSTEAD OF HARD PAPER COPY. THE SOURCE APPLICABLE TO THE RENTAL OF MICROFILM EQUIPMENT IS SPECIAL ITEM 21-5 UNDER FEDERAL SUPPLY SCHEDULE (FSS), FSC GROUP 67, PART IV, SECTION B, WHICH IS A MANDATORY SOURCE FOR THE ITEMS HERE INVOLVED. THE FSC GROUP 67 LISTS MULTIPLE CONTRACTS WITH THE FOLLOWING FIRMS OFFERING CARTRIDGE TYPE EQUIPMENT FOR RENT:

STROMBERG DATAGRAPHIC, 3M BUSINESS PRODUCTS SALES, INC. (3M), BELL AND HOWELL COMPANY, EASTMAN KODAK COMPANY AND COMPUTER MICRO-VIEWING COMPANY (CMV). BECAUSE OF THE QUANTITY TO BE OBTAINED, PRIOR TO ISSUING PURCHASE ORDERS FOR THE EQUIPMENT, THE CONTRACTING OFFICER REQUESTED A WAIVER FROM THE MANDATORY USE OF FSS CONTRACTS, IN ORDER THAT THE REQUIREMENT COULD BE COMPETED ON THE OPEN MARKET. THIS REQUEST WAS DENIED BY GENERAL SERVICES ADMINISTRATION ON THE GROUNDS THAT THE INFORMATION FURNISHED DID NOT MEET THE CRITERIA PRESCRIBED IN FEDERAL PROPERTY MANAGEMENT REGULATIONS (FPMR) 101-26.401-3 FOR JUSTIFYING REQUESTS FOR WAIVER.

THE CITED REGULATION PROVIDES AS FOLLOWS:

"SECS 101-26.401-3 SIMILAR ITEMS

(A) AGENCIES REQUIRED TO USE FEDERAL SUPPLY SCHEDULE CONTRACTS SHALL OBTAIN NEEDED ITEMS FROM THIS SOURCE IN LIEU OF PROCURING SIMILAR ITEMS FROM OTHER SOURCES WHEN THE FEDERAL SUPPLY SCHEDULE ITEM WILL ADEQUATELY SERVE THE REQUIRED FUNCTIONAL PURPOSE.

(B) WHEN AN AGENCY DETERMINES THAT ITEMS AVAILABLE FROM FEDERAL SUPPLY SCHEDULE CONTRACTS WILL NOT SERVE THE REQUIRED FUNCTIONAL END-USE PURPOSE, REQUESTS TO WAIVE THE REQUIREMENT FOR USING SUCH FEDERAL SUPPLY SCHEDULE ITEMS SHALL BE SUBMITTED TO GSA IN A SIMILAR MANNER TO THAT SET FORTH IN SECS 101-26.301-1 FOR GSA STOCK ITEMS. HOWEVER, A WAIVER IS NOT REQUIRED WHERE A DESIRED SIMILAR ITEM WILL BE PROCURED FROM GSA STOCK IN ACCORDANCE WITH THE POLICY SET FORTH IN SECS 101 26.100-1 RELATING TO ACQUISITION OF THE LOWEST COST ITEM FROM GSA SOURCE."

IT IS REPORTED THAT PARAGRAPH 3 OF THE SPECIAL PROVISIONS OF FSS, FSC GROUP 67, PART IV, SECTION B, STATES THAT IN THE CASE OF FSS MULTIPLE AWARDS:

"WHERE ORDERS ARE PLACED AT OTHER THAN THE LOWEST DELIVERED PRICE AVAILABLE FOR THE TYPE OF ARTICLE OR SERVICE REQUIRED, THE ORDERING AGENCY SHOULD BE IN A POSITION TO JUSTIFY SUCH ORDERS AS PROVIDED IN THE FEDERAL PROPERTY MANAGEMENT REGULATIONS (41 CFR 101-26.408).

41 CFR 101-26.408-2 PROVIDES:

"EACH PURCHASE MADE FROM A MULTIPLE-AWARD SCHEDULE BY AGENCIES REQUIRED TO USE SUCH SCHEDULES SHALL BE MADE AT THE LOWEST DELIVERED PRICE AVAILABLE UNDER THAT SCHEDULE, UNLESS THE ORDERING AGENCY FULLY JUSTIFIES THE PURCHASE OF A HIGHER PRICED ITEM. OTHER AGENCIES USING THE SCHEDULES ARE APPRISED OF THE ADVISABILITY OF FULLY JUSTIFYING ANY ORDERS PLACED WITH OTHER THAN THE CONTRACTOR OFFERING THE LOWEST DELIVERED PRICE." CFR 101-26.408-3 REQUIRES THAT JUSTIFICATIONS OF PURCHASES AT OTHER THAN THE LOWEST DELIVERED PRICE AVAILABLE BE BASED ON SPECIFIC OR DEFINITE NEEDS WHICH ARE CLEARLY ASSOCIATED WITH THE ACHIEVEMENT OF PROGRAM OBJECTIVES.

IN THE INSTANT CASE THE OVERALL COST TO THE GOVERNMENT IS REPORTED TO HAVE BEEN COMPUTED USING THE COST OF ACQUIRING TITLE TO THE EQUIPMENT UNDER THE CONTRACTORS' OPTION PURCHASE TERMS, THE COST OF RENTAL, THE COST OF AN ESTIMATED QUANTITY OF FILM CARTRIDGES, AND THE COST OF AN ESTIMATED QUANTITY OF HARD COPIES OVER A THREE YEAR PERIOD. THE EVALUATION PERIOD OF THREE YEARS WAS USED TO COINCIDE WITH THE RENTAL PERIOD NECESSARY TO OBTAIN THE MAXIMUM PURCHASE OPTION RENTAL CREDIT.

ANOTHER FACTOR IN THE EVALUATION WAS THE REQUIREMENT THAT THE FILM CARTRIDGES BE INTERCHANGEABLE BETWEEN THE READERS AND THE READER/PRINTERS. THREE OF THE FIVE LISTED CONTRACTORS HAVE CARTRIDGES WHICH COULD BE USED IN THEIR EQUIPMENT ONLY, MAKING IT NECESSARY TO EVALUATE THOSE FIRMS ON AN ALL-OR-NONE BASIS. THESE FIRMS ARE BELL AND HOWELL, EASTMAN KODAK AND STROMBERG DATAGRAPHIC. BOTH 3M AND CMV USE A 3M CARTRIDGE.

THE EVALUATION EMPLOYED RESULTED IN THE FOLLOWING COMPARATIVE STANDINGS:

CONTRACTOR OVERALL COST REMARKS

1. CMV $1,277,011 CARTRIDGE 3M TYPE

2. 3M 1,780,536 CARTRIDGE 3M TYPE

3. BELL & HOWELL 1,944,066 NONINTERCHANGEABLE

CARTRIDGE

4. STROMBERG DATAGRAPHIC 2,057,649 NONINTERCHANGEABLE

CARTRIDGE

5. EASTMAN KODAK 3,288,147 NONINTERCHANGEABLE

CARTRIDGE

CMV COULD NOT DELIVER READER/PRINTERS, THEREFORE, FURTHER EVALUATION RESULTED IN A SPLIT SELECTION BASED ON THE FOLLOWING:

3M CMV CMV AND 3M

READERS $1,064,294 $668,953 $668,953

READER/PRINTERS 716,242 NO DELIVERY 716,242

PURSUANT TO THE ABOVE EVALUATION, THE FOLLOWING AWARDS WERE ISSUED ON OCTOBER 1, 1970:

(1) DELIVERY ORDER: F33600-71-F-0847

CONTRACTOR: CMV

ITEM: RENTAL OF 541 READERS FOR

A TOTAL OF 2,885.5 MONTHS

UNIT PRICE: $31.67 EACH PER MONTH

TOTAL AMOUNT OF ORDER: $91,383.79

(2) DELIVERY ORDER: F33600-71-F-0846

CONTRACTOR: 3M

ITEM: RENTAL OF 230 READER/PRINTERS

FOR A TOTAL OF 1,199 MONTHS

UNIT PRICE: $64.00 EACH PER MONTH

TOTAL ORDER: $76,736.00

A COMPARISON OF THE TOTAL RENTAL COSTS, AS AWARDED, WITH YOUR FSS CONTRACT RENTAL PRICES FOR FY 71 IS AS FOLLOWS:

READERS READER/PRINTERS

BELL & HOWELL $146,006.30 $117,478.02

AS AWARDED 91,383.79 76,736.00

EXCESS OF B & H PRICES

OVER AWARD $ 54,622.51 $ 40,742.02

DELIVERY ORDER F33600-71-F-0847 TO CMV FOR 541 MICROFILM READERS WAS TERMINATED FOR DEFAULT ON DECEMBER 14, 1970, DUE TO THE CONTRACTOR'S FAILURE TO PERFORM. THE SERVICES WERE REPROCURED FROM 3M, THE ONLY CONTRACTOR ON THE MANDATORY FSS, FSC GROUP 67, PART IV, SECTION B, OFFERING EQUIPMENT FOR RENTAL THAT HAS FILM CARTRIDGE COMPATIBILITY WITH THE 3M MICROFILM READER/PRINTERS WHICH HAD BEEN DELIVERED UNDER DELIVERY ORDER F33600-71-F-0846. THE REPROCUREMENT WAS EFFECTED UNDER DELIVERY ORDER F33600-71-F-2577, ISSUED DECEMBER 18, 1970.

THE REPROCUREMENT ACTION AGAINST THE DEFAULTED CONTRACTOR'S ACCOUNT WAS MADE IN ACCORDANCE WITH ASPR 8-602.6(A). IMMEDIATE ACTION WAS NECESSARY IN ORDER TO MITIGATE THE DEFAULTED CONTRACTOR'S DAMAGES AND TO ENABLE THE AIR FORCE TO ACTIVATE THE SYSTEM ASSOCIATED WITH THE MICROFILM READERS, COMPRISED OF FOUR OTHER RENTAL COMPONENTS UNDER FOUR SEPARATE CONTRACTS, ALREADY INSTALLED AT OKLAHOMA CITY AIR MATERIEL AREA AND SAN ANTONIO AIR MATERIEL AREA.

BASED ON WHAT YOU TERM "TOTAL SYSTEMS COST," YOUR UNSOLICITED PROPOSAL PURPORTS TO OFFSET THE HIGHER COST OF LEASING AND PURCHASING YOUR EQUIPMENT BY PROJECTING TIME SAVINGS AFFORDED IN ITS OPERATION PRINCIPALLY THROUGH THE USE OF A DOUBLE-CORE CARTRIDGE WHICH DOES NOT REQUIRE REWINDING AFTER VIEWING. IT IS YOUR CONTENTION THAT YOUR EQUIPMENT, AT HIGHER RENTALS AND PURCHASE PRICE, WOULD BE LESS EXPENSIVE TO THE GOVERNMENT THAN THE EQUIPMENT OF THE FIRMS TO WHICH THE AWARDS WERE MADE BECAUSE OF A LOWER MAN-HOUR OPERATIONAL EXPENDITURE. IT IS YOUR FURTHER CONTENTION THAT NO EXTENSIVE TESTING AND EVALUATION OF THE DIFFERENT MICROFILM SYSTEMS HAD BEEN CONDUCTED PRIOR TO ISSUANCE OF THE PURCHASE ORDERS, AND THAT A POTENTIAL "COST AVOIDANCE" OF SEVERAL MILLION DOLLARS IN OPERATIONAL SAVINGS IS A MOST VALID REASON FOR PROVING OR DISPROVING YOUR ALLEGATIONS AS TO SAVINGS. YOU REQUEST THAT THIS OFFICE DIRECT AFLC TO CANCEL ALL DELIVERY ORDERS FOR EQUIPMENT AS YET NOT DELIVERED, RETURN THE UNITS WHICH HAVE BEEN DELIVERED AND REEVALUATE THE COST OF THE READERS AND READER/PRINTERS ON THE BASIS OF THE TOTAL SYSTEMS COST.

YOU ALLEGE THAT THE SPECIAL FEATURES OF YOUR DOUBLE-CORE CARTRIDGE WILL CREATE SAVINGS (COST AVOIDANCE) TO THE GOVERNMENT OF FROM $3,519,000 TO $6,200,000 COMPARED TO ANY OTHER SYSTEM, AND THAT THESE SAVINGS SHOULD BE PART OF THE EVALUATION. YOUR COST AVOIDANCE PROPOSAL IS BASED UPON 243,750,000 LOOKUPS OVER FIVE YEARS, AT A SAVINGS OF 11.9 SECONDS FOR EACH LOOKUP, FOR TOTAL SAVINGS OF 677,000 MANHOURS AT $5.08 PER HOUR. ALTHOUGH AFLC ACKNOWLEDGES THAT SUCH SAVINGS IN MANHOURS MIGHT BE CORRECT IF USE OF THE EQUIPMENT WAS A CONTINUOUS OPERATION, THE AGENCY STATES THAT THE EQUIPMENT WILL NOT BE USED IN THAT MANNER. INSTEAD, THE READERS AND READER/PRINTERS WILL BE USED AS THE NEED ARISES BY PERSONNEL FROM VARIOUS FUNCTIONAL ACTIVITIES (MATERIAL MANAGEMENT, CATALOGING, MAINTENANCE, DATA SERVICES, PACKAGING AND TRANSPORTATION, ETC.) AT WIDELY SCATTERED LOCATIONS ON EACH AFLC BASE AS ANOTHER TOOL IN THE PERFORMANCE OF THEIR DUTIES.

IT IS ALSO THE DEPARTMENT'S POSITION THAT THE SAVINGS OF A FEW SECONDS IN EACH MICROFILM LOOKUP BY AN ESTIMATED 7,710 USERS IN WIDELY SCATTERED FUNCTIONAL AREAS WOULD NOT "PERMIT A REDUCTION OF APPROXIMATELY 70 PERSONNEL, WHICH WOULD BE THE ONLY WAY TO ACTUALLY OFFSET THE INCREASED COSTS OF THE BELL AND HOWELL EQUIPMENT AND CARTRIDGE COST." IT IS FURTHER REPORTED THAT THE SYSTEM IS NEW WITHIN AFLC, AND THE ANTICIPATED USAGE OF THE EQUIPMENT IS BASED ON ESTIMATES, AND PROJECTIONS THEREOF, WITHOUT ANY ACTUAL EXPERIENCE OR ADEQUATE QUANTITATIVE INFORMATION WHICH COULD BE USED AS A FIRM BASIS FOR PREDICTING THE EXTENT TO WHICH THE EQUIPMENT WOULD BE EMPLOYED.

WHILE WE DO NOT AGREE WITH THE CONTRACTING OFFICER'S POSITION THAT PROVEN OPERATIONAL SAVINGS IN TIME MAY NOT BE RECOGNIZED AND EVALUATED IN THE RENTAL OF THE EQUIPMENT UNLESS AN ACTUAL REDUCTION OF PERSONNEL CAN BE EFFECTED THEREBY, THE AMOUNT OF TIME SAVINGS IS IN DISPUTE AND IT SEEMS CLEAR THAT UNDER THE ABOVE CIRCUMSTANCES ANY DETERMINATION OF THE AMOUNT OF SAVINGS THAT WOULD RESULT FROM THE USE OF BELL AND HOWELL EQUIPMENT WOULD BE, AT BEST, HIGHLY CONJECTURAL AND FOUNDED UPON VARIOUS BROAD ASSUMPTIONS. IN SITUATIONS OF THIS NATURE, WHERE A FIRM BASIS HAS NOT BEEN ESTABLISHED FOR COMPUTING EVALUATION FACTORS WITH REASONABLE CERTAINTY, IT HAS BEEN OUR CONSISTENT POSITION THAT SUCH FACTORS MAY NOT BE USED IN EVALUATING THE COST OF THE PRODUCTS OFFERED. SEE 33 COMP. GEN. 108 (1953); 35 ID. 282 (1955); 36 ID. 380 (1956); 45 ID. 59 (1965); 47 ID. 233 (1967); AND B-159750, JANUARY 11, 1967.

SINCE IT IS OUR VIEW THAT THE AMOUNT OF SAVINGS WHICH WOULD BE EFFECTED THROUGH USE OF THE BELL AND HOWELL EQUIPMENT HAS NOT BEEN ADEQUATELY ESTABLISHED FOR USE AS AN EVALUATION FACTOR, WE CANNOT CONCLUDE THAT THE RECORD PROVIDES THE FULL JUSTIFICATION REQUIRED BY THE ABOVE REGULATIONS FOR AWARDS AT OTHER THAN THE LOWEST DELIVERED PRICES AVAILABLE UNDER THE MANDATORY FEDERAL SUPPLY SCHEDULE. ACCORDINGLY, WE FIND NO BASIS ON WHICH IT COULD PROPERLY BE HELD THAT THE AWARDS WERE CLEARLY ILLEGAL, SO AS TO REQUIRE THE CANCELLATION OF 3M'S CONTRACT AND THE RETURN OF THE DELIVERED EQUIPMENT. ACCORDINGLY, YOUR REQUEST FOR SUCH ACTION MUST BE DENIED.