B-171384, MAR 12, 1971, 50 COMP GEN 619

B-171384: Mar 12, 1971

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WHICH WAS MODIFIED TO REMOVE AS AN EVALUATION FACTOR THE COST OF FAILING TO AWARD THE CONTRACT TO THE CURRENT CONTRACTOR AND A POSSIBLE ORGANIZATIONAL CONFLICT OF INTEREST BECAUSE ONE OF THE OFFERORS WAS PERFORMING AS A SUBCONTRACTOR ON A PROGRAM TO BE ANALYZED BY THE NEW CONTRACTOR. THE CONTINUATION OF NEGOTIATIONS DURING WHICH PRICES WERE DISCLOSED DOES NOT CONSTITUTE PROHIBITED AUCTION TECHNIQUE AS NO COMPETITIVE ADVANTAGE RESULTED TO ANY OFFEROR AND THE TECHNIQUE PER SE IS NOT INHERENTLY ILLEGAL. 1971: REFERENCE IS MADE TO THE ADMINISTRATIVE REPORTS DATED DECEMBER 10. PROTESTS IN CONNECTION WITH THIS PROCUREMENT HAVE BEEN LODGED BY COMPUTER SCIENCES CORPORATION AND ITT DATA SERVICES.

B-171384, MAR 12, 1971, 50 COMP GEN 619

CONTRACTS - NEGOTIATION - CHANGES, ETC. - SPECIFICATIONS - PROPRIETY OF CHANGES UNDER REQUEST FOR PROPOSALS FOR FLEET COMPUTER PROGRAMMING SERVICES, WHICH WAS MODIFIED TO REMOVE AS AN EVALUATION FACTOR THE COST OF FAILING TO AWARD THE CONTRACT TO THE CURRENT CONTRACTOR AND A POSSIBLE ORGANIZATIONAL CONFLICT OF INTEREST BECAUSE ONE OF THE OFFERORS WAS PERFORMING AS A SUBCONTRACTOR ON A PROGRAM TO BE ANALYZED BY THE NEW CONTRACTOR, AND TO REVISE THE PROGRAM'S MANHOURS, THE CONTINUATION OF NEGOTIATIONS DURING WHICH PRICES WERE DISCLOSED DOES NOT CONSTITUTE PROHIBITED AUCTION TECHNIQUE AS NO COMPETITIVE ADVANTAGE RESULTED TO ANY OFFEROR AND THE TECHNIQUE PER SE IS NOT INHERENTLY ILLEGAL. THE SUBSTANTIAL CHANGES IN REQUIREMENTS AND IN THE COMPUTER INDUSTRY JUSTIFIED THE AMENDMENTS TO THE SOLICITATION ISSUED PURSUANT TO PARAGRAPH 3-805.1(E) OF THE ARMED SERVICES PROCUREMENT REGULATION AND THE CONTINUATION OF NEGOTIATIONS, THEREFORE, THE LAST PRICES SUBMITTED MAY BE OPENED AND CONSIDERED.

TO THE SECRETARY OF THE NAVY, MARCH 12, 1971:

REFERENCE IS MADE TO THE ADMINISTRATIVE REPORTS DATED DECEMBER 10, 1970, AND ENCLOSURES, FROM THE DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND, FILE NO. SUP 0232, AND THE REPORTS DATED MARCH 2, 1971, WITH ENCLOSURES, FROM THE ASSISTANT DIRECTOR, PURCHASE DIVISION, WASHINGTON NAVY YARD, CONCERNING REQUEST FOR PROPOSALS N00600 71-R-5083 ISSUED ON SEPTEMBER 18, 1970, BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C. PROTESTS IN CONNECTION WITH THIS PROCUREMENT HAVE BEEN LODGED BY COMPUTER SCIENCES CORPORATION AND ITT DATA SERVICES, TWO OF THE PROPOSERS WHO SUBMITTED ACCEPTABLE TECHNICAL PROPOSALS.

THE SOLICITATION REQUESTED PROPOSALS FOR PROGRAMMING SERVICES FOR THE FLEET COMPUTER PROGRAMMING CENTER, ATLANTIC, FOR 1 YEAR WITH OPTIONS FOR 2 SUCCEEDING YEARS. THE SCHEDULE SET OUT 18 LABOR CATEGORIES REPRESENTING TYPES OF PERSONNEL TO BE PROVIDED BY THE CONTRACTOR. FOR EACH CATEGORY, THE ESTIMATED HOURLY REQUIREMENTS BY YEAR WERE SET OUT FOR PERFORMANCE IN THE CONTRACTOR'S FACILITY (APPROXIMATELY 50 PERCENT) AND IN THE GOVERNMENT'S FACILITY, EACH ON STRAIGHT TIME AND OVERTIME. THE PRICE FOR EVALUATION PURPOSES WAS TO BE DETERMINED BY MULTIPLYING THE APPLICABLE HOURLY RATE BY THE ESTIMATED REQUIREMENTS. PROPOSALS WERE TO BE SUBMITTED BY CLOSE OF BUSINESS ON NOVEMBER 2, 1970. A PREPROPOSAL MEETING WAS HELD WITH ALL INTERESTED OFFERORS ON OCTOBER 2, 1970.

PRIOR TO THE PREPROPOSAL MEETING, THE CONTRACTING OFFICE ASCERTAINED THAT UNDER THE TERMS OF THE CURRENT CONTRACT, THE GOVERNMENT WOULD HAVE TO PAY THE INCUMBENT CONTRACTOR, ITT DATA SERVICES (ITT), ALLOCABLE RELOCATION AND SEVERANCE PAY COSTS, ESTIMATED AT $200,000, IN THE EVENT ITT DATA SERVICES DID NOT RECEIVE A FOLLOW-ON CONTRACT. SINCE THE COST WOULD BE INCURRED BY THE GOVERNMENT, THE CONTRACTING OFFICER DETERMINED THAT IT WOULD BE IN THE GOVERNMENT'S BEST INTEREST TO CONSIDER SUCH COST IN EVALUATING PROPOSALS. THIS CONCLUSION WAS CONVEYED TO THE PROSPECTIVE OFFERORS AT THE PREPROPOSAL MEETING. AMENDMENT 001 WAS ISSUED ON OCTOBER 8, 1970, ADDING THE ABOVE FINALIZATION COSTS ($200,000) AS A FACTOR IN THE EVALUATION OF PRICE PROPOSALS "OF EACH OFFEROR WITH THE EXCEPTION OF THE PRESENT CONTRACTOR (ITT)." IN ADDITION, ATTACHED TO THE AMENDMENT WERE A SERIES OF QUESTIONS AND ANSWERS PERTAINING TO THE PROCUREMENT WHICH WERE PRESENTED AT THE PREPROPOSAL MEETING.

FIVE TIMELY PROPOSALS WERE RECEIVED FROM THE FOLLOWING FIRMS:

COMPUTER SCIENCES CORPORATION, FIELD SERVICES DIVISION (CSC)

GENERAL ELECTRIC COMPANY (GE)

INTEGRATED SYSTEMS SUPPORT, INC. (ISS)

ITT DATA SERVICES (ITT)

PRC DATA SERVICES, INC. (PRC)

THE PROPOSALS WERE FORWARDED FOR TECHNICAL REVIEW TO THE FLEET COMPUTER PROGRAMMING CENTER, ATLANTIC, AT DAM NECK, VIRGINIA, FOR WHOM THE SERVICES SOUGHT WERE TO BE PERFORMED. AS A RESULT OF THE TECHNICAL REVIEW, COMPLETED ON NOVEMBER 10, 1970, THE PROPOSALS OF ITT AND ISS WERE CONSIDERED TECHNICALLY ACCEPTABLE. THE PROPOSALS OF GE AND PRC WERE FOUND TO BE UNACCEPTABLE DUE TO DEFICIENCIES IN THEIR PROPOSALS. THE CSC PROPOSAL WAS FOUND TECHNICALLY ACCEPTABLE AS TO THE TERMS OF THE SOLICITATION. HOWEVER, THE PROPOSAL REVEALED THAT CSC WAS RESPONSIBLE AS A SUBCONTRACTOR, UNDER AN EXISTING CONTRACT KNOWN AS THE AEGIS PROGRAM, FOR DEVELOPING A PROGRAM WHICH IS TO BE ANALYZED AND COMMENTED UPON UNDER THE SUPPORT CONTRACT SOLICITED HERE. THUS, THE POSSIBILITY OF A CONFLICT OF INTEREST WAS PRESENTED IF CSC BECAME THE CONTRACTOR.

DURING THE PERIOD NOVEMBER 12-19, 1970, DISCUSSIONS WERE HELD WITH ALL OFFERORS, WHO WERE THEN GIVEN AN OPPORTUNITY TO REVISE THEIR TECHNICAL AND PRICING PROPOSALS. IN VIEW OF THE SITUATION RESPECTING CSC AND THE AEGIS PROGRAM, EACH OFFEROR WAS REQUESTED BY LETTER DATED NOVEMBER 19, 1970, (A) TO STATE WHETHER IT IS OR WILL BE PERFORMING ANY WORK, EITHER AS A PRIME CONTRACTOR OR A SUBCONTRACTOR, WHICH WILL BE SUBJECT TO REVIEW UNDER THE PROPOSED CONTRACT, AND (B) TO IDENTIFY SUCH WORK BY CONTRACT NUMBER, CUSTOMER, AND DATE OF AWARD. THIS LETTER ALSO ADVISED THAT REVISED PROPOSALS COULD BE SUBMITTED UP TO THE CLOSE OF BUSINESS ON NOVEMBER 25, 1970.

EACH PROPOSER RESPONDED TO THE LETTER OF NOVEMBER 19, 1970. PRC PROVIDED ADDITIONAL INFORMATION IN SUPPORT OF ITS INITIAL RESPONSE. GE, ITT, CSC AND ISS ALSO RESPONDED TIMELY. THE ADDITIONAL INFORMATION WAS FORWARDED TO THE REQUIRING ACTIVITY FOR FURTHER EVALUATION. UPON REVIEW OF THE INFORMATION, THE PRC PROPOSAL WAS FOUND ACCEPTABLE. GE INDICATED THAT NO ADDITIONAL INFORMATION WOULD BE PROVIDED IN SUPPORT OF ITS INITIAL RESPONSE; THEREFORE, THE GE PROPOSAL CONTINUED TO BE REGARDED AS UNACCEPTABLE. ITT, PRC AND ISS TOOK THE OPPORTUNITY TO REDUCE THEIR PRICE PROPOSALS.

CSC REAFFIRMED ITS INITIAL PRICING PROPOSAL AND RESPONDED TO THE QUESTION OF ITS POSSIBLE CONFLICT OF INTEREST AS A MAJOR SUBCONTRACTOR UNDER AEGIS IF IT BECAME CONTRACTOR UNDER THIS SOLICITATION. IN ITS LETTER CSC ADVISED THE NAVY THAT IT HAD FILED A PROTEST WITH OUR OFFICE PREDICATED ON THE FOLLOWING POINTS: (1) RESTRICTING THE REQUEST FOR INFORMATION TO THE AEGIS PROGRAM ONLY IS DISCRIMINATORY TO CSC, SINCE THERE ARE MANY OTHER PROGRAMS OF PROBABLE INVOLVEMENT DURING THE 3-YEAR LIFE OF THIS CONTRACT; (2) THE QUESTION OF POTENTIAL CONFLICT OF INTEREST SHOULD HAVE BEEN INCLUDED IN THE ORIGINAL SOLICITATION WHEN EACH PROPOSER COULD HAVE MADE A JUDGMENT PRIOR TO PROPOSAL PREPARATION; AND (3) THE AEGIS CONFLICT OF INTEREST QUESTION CONTAINS NO REFERENCE TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) OR DEPARTMENT OF DEFENSE DIRECTIVE AND HAS NO LEGAL BASIS. IN ADDITION, IN CONNECTION WITH THE NAVY'S REQUEST FOR "INFORMATION CONCERNING POSSIBLE CONFLICTS OF INTEREST," CSC REPLIED THAT AN ORGANIZATION SEPARATE FROM THAT ENGAGED IN THE AEGIS PROGRAM WOULD PERFORM THIS CONTRACT; THAT IT HAS IN THE PAST OPERATED IN A POSSIBLE CONFLICT OF INTEREST ENVIRONMENT WITHOUT INCIDENT; THAT CONTRACTOR AND NAVY LEVEL OF COMMANDS EXIST OVER CSC IN THE AEGIS PROGRAM AND A NAVY LEVEL OF COMMAND EXISTS IN THE PROPOSED CONTRACT, THUS ESTABLISHING A BULWARK BETWEEN THE TWO CSC ORGANIZATIONS; AND THAT THE PRIME CONTRACTOR UNDER THE AEGIS PROGRAM IS NOT REQUIRED TO DELIVER UNTIL A DATE LONG AFTER COMPLETION OF THIS CONTRACT.

IN ITS PROTEST LETTER OF NOVEMBER 25, 1970, TO OUR OFFICE, CSC CONTENDED THAT (1) NEITHER THE PRIME CONTRACT NOR SUBCONTRACT IN THE AEGIS PROGRAM RESTRICTS CSC FROM SEEKING OR PERFORMING ANY EFFORT SUCH AS REQUIRED IN THE SUBJECT SOLICITATION; (2) THE NAVY LETTER OF NOVEMBER 19, 1970, RESTRICTS THE REQUEST FOR INFORMATION TO THE AEGIS PROGRAM NOTWITHSTANDING OTHER PROGRAMS EXIST WHERE POTENTIAL CONTRACTORS ARE PERFORMING WORK SIMILAR TO AEGIS, IN A PRIME CONTRACTOR CAPACITY; (3) THE $200,000 EVALUATION FACTOR PROVIDES THE INCUMBENT CONTRACTOR WITH PREFERENTIAL TREATMENT AND A NONVALID COMPETITIVE ADVANTAGE.

IN ITS REPORT DATED DECEMBER 3, 1970, TO THE NAVY PURCHASING OFFICE ON THE REVISED PROPOSALS, THE PROCURING ACTIVITY, AS INDICATED ABOVE, EVALUATED THE PRC PROPOSAL, IN VIEW OF THE ADDITIONAL INFORMATION SUBMITTED, AS TECHNICALLY ACCEPTABLE. THE GE PROPOSAL REMAINED UNACCEPTABLE. THE CSC REPLY CONCERNING POSSIBLE CONFLICT OF INTEREST WAS REVIEWED IN DETAIL AND IT WAS CONCLUDED THAT NOT WITHSTANDING THE CSC COMMENTS, A POSSIBLE CONFLICT OF INTEREST SITUATION DID EXIST IN CONNECTION WITH THE AEGIS PROGRAM. IN ADDITION, THE REPORT REVIEWED ALL OTHER COMPUTER PROGRAMS THAT WOULD COME WITHIN THE SCOPE OF THE CURRENT PROCUREMENT AND DETERMINED THAT NONE OF THE OFFERORS WAS "CURRENTLY PERFORMING WORK WHICH WOULD INVOLVE POSSIBLE CONFLICT OF INTEREST UNDER THIS SOLICITATION." THE REPORT ALSO OFFERED TWO POSSIBLE METHODS OF RESOLUTION OF THE SITUATION; (1) REMOVE THE AEGIS PROGRAM FROM THE SOLICITATION, WHICH WOULD REQUIRE A SEPARATE CONTRACT AND TEND TO REDUCE THE COST ADVANTAGE OF THE CURRENT OFFERINGS, AND (2) USE CIVIL SERVICE PERSONNEL ON THE AEGIS EFFORT, WHICH WAS NOT RECOMMENDED FOR STATED REASONS.

AFTER REVIEWING THE ABOVE REPORT, THE CONTRACTING OFFICER RECOMMENDED TO OUR OFFICE THAT THE CSC PROPOSAL BE REJECTED ON THE BASIS THAT WORK ASSIGNMENT UNDER THE SOLICITATION WOULD CREATE AN INHERENT ORGANIZATIONAL CONFLICT OF INTEREST.

BY TELEGRAM OF JULY 18, 1971, ITT PROTESTED AWARD TO ANYONE OTHER THAN ITSELF. ITT CONTENDS THAT CSC ON INFORMATION AND BELIEF IS BARRED BY REASON OF CONFLICT OF INTEREST; THAT NOTWITHSTANDING THE FILING OF A "BEST AND FINAL OFFER" ON NOVEMBER 25, 1970, CSC IS SEEKING TO ENGAGE IN FURTHER NEGOTIATION WITH THE NAVY WHICH WILL GIVE CSC AN UNFAIR ADVANTAGE; AND THAT THE CSC PROPOSAL IS NOT RESPONSIVE TO THE SOLICITATION SINCE IT HAS NOT OBTAINED FIRM COMMITMENTS WITH 85 PERCENT OF PROSPECTIVE PERSONNEL PRIOR TO BIDDING AS REQUESTED BY THE REQUEST FOR PROPOSALS.

BY LETTER DATED FEBRUARY 8, 1971, ITT SUBMITTED ADDITIONAL MATTER IN SUPPORT OF ITS EARLIER TELEGRAM. THIS LETTER STATES THAT IN JANUARY 1971, CSC SUBMITTED A CONFIDENTIAL STATEMENT TO THE ASSISTANT SECRETARY OF THE NAVY (INSTALLATIONS AND LOGISTICS) RAISING ISSUES CONCERNING THE PROCUREMENT NOT PREVIOUSLY RAISED TO OUR OFFICE; THAT OTHER OFFERORS DID NOT COMPLY WITH THE REQUIREMENTS OF THE SOLICITATION CONCERNING EMPLOYEES TO BE ASSIGNED TO THE PROJECT; THAT NAVY'S "FINALIZATION COSTS" SET AT $200,000 FOR EVALUATION PURPOSES, IS GROSSLY UNDERESTIMATED; THAT A PROPER FIGURE WOULD BE ONE IN EXCESS OF ONE MILLION DOLLARS; THAT NAVY UNILATERALLY NEGOTIATED WITH CSC AFTER SUBMISSION OF BEST AND FINAL OFFERS; AND THAT CSC IS DISQUALIFIED BECAUSE OF ITS CONFLICT OF INTEREST.

IN AN EFFORT TO RESOLVE THE SITUATION, THE CONTRACTING OFFICER DIRECTED A LETTER DATED FEBRUARY 10, 1971, TO ALL ACCEPTABLE OFFERORS, REVISING THE SOLICITATION TO:

A. DELETE ALL REFERENCE TO SERVICES IN CONNECTION WITH THE AEGIS PROGRAM.

B. REVISE THE REQUIREMENT THAT ONE-HALF OF THE WORK WOULD BE PERFORMED IN CONTRACTOR PROVIDED SPACE AND ONE-HALF IN GOVERNMENT PROVIDED SPACE TO PROVIDE THAT ALL WORK WOULD BE PERFORMED IN GOVERNMENT PROVIDED BUILDING SPACE.

C. SET FORTH THE REVISED ESTIMATES OF MAN-HOURS RESULTING FROM THE CHANGES EFFECTED IN A AND B.

D. REQUIRE INFORMATION RELATING TO POTENTIAL CONFLICT OF INTEREST EITHER AS PRIME CONTRACTOR OR SUBCONTRACTOR IN ANY OF 13 PROGRAMS LISTED IN THE REVISION.

THE LETTER ALSO AFFORDED THE OFFERORS AN OPPORTUNITY TO REVISE THEIR PROPOSALS BOTH AS TO PRICING AND TECHNICAL ASPECTS.

BOTH ITT AND CSC PROTESTED THIS ACTION BY THE NAVY. ITT REITERATED THE EARLIER BASES OF PROTEST AND STATED THAT THE DELETION OF AEGIS IS INCONSISTENT WITH AN EARLIER NAVY STATEMENT THAT SUCH ACTION WOULD BE UNDESIRABLE AND THAT COSTS OF THE PROGRAM WOULD BE INCREASED. ITT ALSO STATED THAT THE SOLICITATION IS MATERIALLY DEFICIENT IN FAILING TO SPECIFY THE RELATIVE WEIGHTS ATTACHED TO EVALUATION CRITERIA AND IN ITS FAILURE TO INDICATE THE RELATIVE IMPORTANCE OF TECHNICAL AS AGAINST COST CONSIDERATIONS.

CSC CONTENDS THERE IS NO VALID BASIS FOR REOPENING NEGOTIATIONS SINCE THE AMENDMENTS ARE OF INSIGNIFICANT CONSEQUENCE; THAT REOPENING NEGOTIATIONS IS TANTAMOUNT TO CONDUCTING AN AUCTION SINCE IT BELIEVES ALL OFFERORS ARE AWARE OF THE CSC LOW PRICE OFFER; THAT COST INFORMATION SUBMITTED WITH EARLIER PROPOSALS IS EASILY ADAPTABLE TO THE INSIGNIFICANT CHANGED REQUIREMENTS, INCLUDING THE DELETION OF THE REQUIREMENT FOR AN OFFSITE FACILITY, SINCE ONSITE FIGURES HAVE ALREADY BEEN SUBMITTED AND THE PROCUREMENT IS ON A TIME AND MATERIAL BASIS.

ON FEBRUARY 22, 1971, CSC FILED AN ACTION AGAINST THE SECRETARY OF THE NAVY IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, CIVIL ACTION NO. 406-71, TO ENJOIN THE NAVY FROM PROCEEDING WITH THIS PROCUREMENT. CERTAIN PRICE PROPOSALS WERE REVEALED IN THE PROCEEDING. A RESULT OF THIS DISCLOSURE, THE NAVY, ON FEBRUARY 23, 1971, IN THE INTEREST OF FAIRNESS DISCLOSED THE INITIAL AND AMENDED PRICE PROPOSALS OF ALL OFFERORS WHO WERE ALSO ADVISED THAT REVISIONS TO TECHNICAL AND PRICE PROPOSALS WOULD BE ACCEPTED UNTIL MARCH 1, 1971. ON THE FOLLOWING DAY, THE NAVY ISSUED A FURTHER MODIFICATION, AS FOLLOWS:

AS INDICATED IN THE PRE-PROPOSAL CONFERENCE AND IN CONFIRMATION OF SAME, ALL PROPOSALS WILL BE EVALUATED AS SET FORTH BELOW: SECTION D. PARA. 2. EVALUATION OF PROPOSALS IS AMENDED AS FOLLOWS:

TECHNICAL

A. EVALUATION OF TECHNICAL PROPOSALS FOR ACCEPTABILITY WILL BE BASED ON THE FOLLOWING CRITERIA:

(1) THE CONTRACTOR'S EXPERIENCE, COMPETENCE, AND RECORD OF PERFORMANCE IN THE AREAS DISCUSSED ABOVE.

(2) PROPOSED STAFFING PLAN.

(3) QUALIFICATIONS OF THE PERSONNEL TO BE ASSIGNED TO PERFORM THE WORK.

(4) THE EXTENT TO WHICH THE GOVERNMENT CAN RELY ON ASSIGNMENT TO WORK UNDER THE PROPOSED CONTRACT, OF THE PERSONNEL WHOSE RESUMES WERE SUBMITTED.

PRICE

B. ALL PROPOSERS ARE HEREBY NOTIFIED THAT IF A TECHNICAL PROPOSAL IS DEEMED BY THE GOVERNMENT TO BE TECHNICALLY ACCEPTABLE THEN THE GOVERNMENT WILL CONSIDER PRICE TO BE THE PREDOMINANT FACTOR IN MAKING A CONTRACT AWARD. THE DATE AND TIME FOR RECEIPT OF REVISIONS TO PROPOSALS REMAINS 4:30 P.M., 1 MARCH 1971. ALL OTHER TERMS AND CONDITIONS OF THE SOLICITATION, AS AMENDED, REMAIN IN EFFECT.

FOLLOWING THE ABOVE MODIFICATION, ON FEBRUARY 24, 1971, CSC PROTESTED THE ACTION BY THE NAVY, MAINTAINING THAT THE NAVY IS CONDUCTING AN "AUCTION," WHICH IS PROHIBITED BY ASPR 3-805.1(B) AND OUR DECISIONS. ON FEBRUARY 25, 1971, ITT SUBMITTED A STATEMENT REITERATING ITS EARLIER PROTEST NOTWITHSTANDING THE LATEST REVISION. IT ALSO POINTS OUT THAT THE LATEST REVISION APPEARS TO CHANGE THE EVALUATION EMPHASIS FROM PERFORMANCE TO PRICE. ITT URGES THAT THE REVISION REQUIRES ANOTHER ROUND OF PROPOSALS FOR A NUMBER OF REASONS INCLUDING THE FOLLOWING: A. ASPR AND THE POLICY OF OUR OFFICE REQUIRE THE REOPENING OF NEGOTIATIONS.

B. DELETION OF AEGIS PROJECT REQUIRES SPREADING OF INDIRECT COSTS OVER A SMALLER BASE.

C. DELETION OF THE REQUIREMENT FOR AN OFF-SITE FACILITY REQUIRES READJUSTMENT OF INDIRECT COSTS.

D. PERFORMANCE OF THE CONTRACT IS TO START AT A MUCH LATER DATE THAN CONTEMPLATED WHEN EARLIER PROPOSALS WERE SUBMITTED.

E. EVALUATION CRITERIA ARE CHANGED.

IN A SUPPLEMENTAL LETTER, CSC URGED THAT THE USE OF THE "FINALIZATION" COSTS AS A FACTOR ($200,000) IN EVALUATION IS IMPROPER, SINCE THIS PAYMENT IS ONLY DEFERRED IF ITT IS THE SUCCESSFUL OFFEROR IN THE CURRENT PROCUREMENT; THAT NEGOTIATIONS WERE NOT CONDUCTED WITH CSC FOLLOWING THE CLOSING DATE OF NOVEMBER 25, 1970; AND THAT THERE WOULD BE NO ORGANIZATIONAL CONFLICT OF INTEREST AS TO THE AEGIS PROJECT AND THIS PROCUREMENT IF CSC IS AWARDED THE CONTRACT.

BY LETTER DATED MARCH 3, 1971, ISS OBJECTED TO CSC'S PROTESTS AND OFFERED REASONS WHY THE LATEST REVISION TO THE SOLICITATION SHOULD BE ALLOWED TO STAND AND NEW PRICE PROPOSALS (SUBMITTED MARCH 1, 1971, BUT SECURED UNOPENED PENDING THIS DECISION) REQUIRED BY REASON OF THE REVISED REQUIREMENTS. ESSENTIALLY, ISS ARGUES THAT THE ELIMINATION OF 36,928 HOURS AND THE CONTRACTOR-PROVIDED FACILITY, AND THE DETERIORATION IN ECONOMIC CONDITIONS IN THE COMPUTER SOFTWARE INDUSTRY SINCE NOVEMBER 1970, WOULD HAVE A SIGNIFICANT EFFECT ON PRICES.

THIS MATTER AROSE WITH BUT A SINGLE ISSUE - WHETHER THERE WOULD BE AN ORGANIZATIONAL CONFLICT OF INTEREST IF CSC WAS THE SUCCESSFUL OFFEROR, BECAUSE IT IS A SUBCONTRACTOR ON THE AEGIS PROGRAM.

THE CONFLICT OF INTEREST QUESTION BECOMES ACADEMIC IF THE LATEST REVISIONS ARE PERMITTED TO STAND, WITH THE OPTION TO SUBMIT NEW TECHNICAL AND PRICE PROPOSALS. THE QUESTION OF RELATIVE WEIGHTS OF EVALUATION FACTORS WOULD ALSO BECOME ACADEMIC SINCE IT IS PROVIDED IN THE LATEST REVISION THAT IF A TECHNICAL PROPOSAL IS DEEMED ACCEPTABLE, THE GOVERNMENT WILL CONSIDER PRICE TO BE THE PREDOMINANT FACTOR IN MAKING AWARD.

CSC HAS ARGUED THAT SINCE THE AEGIS PROGRAM CONSTITUTES ONLY 3 PERCENT OF THE WORK UNDER THIS PROCUREMENT, ITS DELETION CAN BE CLASSIFIED AS "DE MINIMIS." CSC URGES ALSO THAT THE COST IMPACT OF THE OTHER REVISIONS CAN BE DETERMINED FROM THE PROPOSALS ALREADY SUBMITTED, RENDERING THE REVISION INSIGNIFICANT AND NOT REQUIRING FURTHER NEGOTIATIONS OR PRICE PROPOSALS. ITT ESTIMATES AEGIS AS 10 PERCENT OF THE WORK AND OF EXTREME SIGNIFICANCE IN THE ALLOTMENT OF INDIRECT COSTS.

WHILE WE CAN APPRECIATE THE CSC POSITION AS TO EACH INDIVIDUAL ITEM OF THE REVISION, WE MUST REACH A DIFFERENT CONCLUSION ON THE AGGREGATE EFFECT OF ALL THE CHANGED REQUIREMENTS. THE REDUCTION OF THE ESTIMATED NUMBER OF MANHOURS (36,928) REQUIRED FOR THE REVISED PROGRAM AND THE ELIMINATION OF THE CONTRACTOR-PROVIDED FACILITIES FOR ONE-HALF OF THE WORK FORCE MUST NECESSARILY HAVE SOME IMPACT ON THE INDIRECT COSTS OF THE SEVERAL OFFERORS. WHETHER THIS IMPACT IS GREAT OR SMALL, WE HAVE NO WAY OF KNOWING. THIS IS A MATTER OF INDIVIDUAL ALLOCATION OF OVERHEAD RATES AND OTHER INDIRECT COSTS.

AS ALREADY NOTED, ONE OF THE OTHER PARTIES, ISS, ALSO MAINTAINS THAT THE ECONOMIC SITUATION WITH REGARD TO AVAILABILITY OF EMPLOYEES AND WAGE RATES HAS SO CHANGED AS TO MAKE THE NOVEMBER 1970 PRICE PROPOSALS UNREALISTIC AT THE PRESENT TIME. WE APPRECIATE THAT THIS FACTOR WOULD NOT HAVE ANY IMMEDIATE EFFECT ON THOSE OFFERORS WITH FIRM CONTRACTUAL COMMITMENTS WITH CURRENT EMPLOYEES. YET IT MUST BE CONCEDED THAT THERE IS A SIGNIFICANT CHANGE IN THE REQUIREMENTS. HOW SUBSTANTIAL THE CHANGE IS CAN BE DETERMINED ONLY BY OPENING THE LATEST PROPOSALS. WE, THEREFORE, CONCLUDE THAT THE NAVY'S CALL FOR NEW PRICE PROPOSALS IN CONJUNCTION WITH THE LATEST REVISIONS IS JUSTIFIABLE AND NOT CONTRARY TO LAW OR REGULATION. SEE ASPR 3-805.1(E) WHICH CLEARLY CONTEMPLATES THE ISSUANCE OF AN AMENDMENT TO THE SOLICITATION WHEN A MATERIAL CHANGE IS EFFECTED IN THE COURSE OF NEGOTIATIONS. WHILE IT MAY BE POSSIBLE TO EVALUATE PROPOSALS TO REFLECT THE AMENDED REQUIREMENTS BY SIMPLY MULTIPLYING THE APPROPRIATE WAGE RATES IN THE NOVEMBER 25 PROPOSALS BY THE MANHOURS NOW DEEMED APPROPRIATE, THIS WOULD NOT ACCURATELY REFLECT POSSIBLE CHANGES IN INDIRECT COSTS.

NOR DO WE FIND THAT OPENING THE PROCUREMENT TO A THIRD ROUND OF NEGOTIATIONS CONSTITUTES AN AUCTION OR USE OF AUCTION TECHNIQUES. IN THIS CONNECTION, IN A REPORT DATED MARCH 2, 1971, THE NAVY PURCHASING OFFICE COMMENTED:

THE AMENDMENT OF 10 FEBRUARY 1971 WAS ISSUED AT A TIME WHEN NO PUBLIC OR PRIVATE ANNOUNCEMENT ABOUT PRICES HAD BEEN MADE. THERE WAS NO INTENT ON THE PART OF THE GOVERNMENT BY ISSUING THIS AMENDMENT TO CONDUCT AN AUCTION, NOR WAS IT AN AUCTION TECHNIQUE IN VIEW OF THE CHANGES IN THE SOLICITATION. COMPUTER SCIENCES CORPORATION, THE LOW OFFEROR, WAS THE ONLY FIRM THAT HAD ANY PRICING INFORMATION. DISCLOSURE OF PRICES WAS SUBSEQUENTLY MADE BY COMPUTER SCIENCES CORPORATION, FIRST BY THE LETTER WHICH THIS CORRESPONDENCE ANSWERS, AND SECOND WHEN THAT FIRM PUBLICLY DISCLOSED THEM IN OPEN COURT. IN THE INTEREST OF FAIRNESS TO ALL PARTIES, PRICES FOR ALL OFFERORS WERE ANNOUNCED BY THIS OFFICE ON 23 FEBRUARY 1971. THE CLIMATE FOR AN AUCTION WAS FINALLY CREATED BY THE PROTESTANT.

WE HAVE STATED THAT "THERE IS NOTHING INHERENTLY ILLEGAL FROM A PROCUREMENT STANDPOINT IN AN AUCTION *** ." 48 COMP. GEN. 436, 541 (1969). HOWEVER, OUR OFFICE HAS NEVER APPROVED ANY PROCEDURE WHEREBY INFORMATION WHICH WOULD GIVE AN UNFAIR COMPETITIVE ADVANTAGE TO ANY PROPOSER WOULD BE DISCLOSED DURING THE NEGOTIATION PROCESS. EACH SITUATION MUST BE JUDGED IN THE LIGHT OF THE PARTICULAR CIRCUMSTANCES. HERE IT DOES NOT APPEAR THAT THE CONTRACTING OFFICE DISCLOSED THE PRICE PROPOSALS UNTIL AFTER CSC HAD REVEALED THEM IN ITS COURT PROCEEDINGS. DO NOT CONCEDE THAT AN "AUCTION TECHNIQUE" WAS USED IN THIS SITUATION. HOWEVER, IF IT WERE, IT WAS INSTITUTED BY CSC.

ACCORDINGLY, WE CONCLUDE THAT THE LATEST ROUND OF REVISED PROPOSALS SCHEDULED FOR SUBMISSION BY MARCH 1 MAY PROPERLY BE OPENED AND CONSIDERED. IN OUR VIEW, ITT'S POSITION THAT YET ANOTHER ROUND OF PROPOSALS IS REQUIRED, NEED NOT BE CONSIDERED AT THIS TIME SINCE THE RESULTS OF THE LATEST ROUND MAY DISPOSE OF THE ISSUES RAISED.

A COPY OF THIS DECISION HAS BEEN FORWARDED TO COUNSEL FOR EACH OF THE PROPOSERS WHOSE TECHNICAL PROPOSALS HAVE BEEN FOUND ACCEPTABLE.