B-173427, MAR 14, 1972

B-173427, MAR 14, 1972

BID PROTEST - COST-PLUS-FIXED-FEE - METHOD OF EVALUATION - SEQUENTIAL CUTOFF DATES DECISION DENYING PROTEST OF SYSTEM DEVELOPMENT CORPORATION (SDC) AGAINST AWARD OF A SOLICITED TECHNICAL AND COST-PLUS-FIXED-FEE CONTRACT TO INTERNATIONAL BUSINESS MACHINES CORPORATION (IBM) UNDER AN RFP ISSUED BY THE DEFENSE COMMUNICATIONS AGENCY (DCA) FOR THE TECHNICAL SUPPORT AND ENHANCEMENT OF THE NATIONAL MILITARY COMMAND INFORMATION PROCESSING SYSTEM. PARAGRAPH 3-805.2, ASPR, SPECIFICALLY PROVIDES THAT PRICE NEED NOT BE THE CONTROLLING FACTOR IN A NEGOTIATED COST REIMBURSEMENT TYPE CONTRACT. SEE 50 COMP. GEN. 739 (1971). FURTHER, THE POINT EVALUATION METHOD ONLY REFLECTS AN IMPRECISE QUANTIFICATION OF SUBJECTIVE TECHNICAL JUDGMENTS WHICH MAY BE DISREGARDED WHERE THE POINT VARIANCE IS SLIGHT. IN THE INSTANT CASE, THE DECISION FOR AWARD TO IBM APPEARS TO HAVE BEEN BASED ON THAT FIRM'S INCUMBENT ADVANTAGE, PROPERLY EXPRESSED AS EXPERIENCE UNDER PARAGRAPH W(1) OF THE SUBJECT RFP. VIEWED IN THIS LIGHT, THE COMP. GEN. IS UNABLE TO CONCLUDE THAT THE AWARD TO IBM WAS AN ABUSE OF THE BROAD DISCRETION CONFERRED ON THE AGENCY BY ASPR 3-805.2 TO SELECT THE CONTRACTOR WHOSE PERFORMANCE WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT. WITH REGARD TO THE FAILURE OF DCA TO ESTABLISH COMMON CUTOFF DATES AS REQUIRED BY ASPR 3-805.1(B), SINCE THERE WAS NO IMPROPER DISCLOSURE OF INFORMATION AND SINCE THE CONTROLLING FACTOR WAS EXPERIENCE RATHER THAN COST, IT DOES NOT APPEAR THAT THE USE OF SEQUENTIAL CUTOFF DATES WAS PREJUDICIAL TO PROTESTANT. FOR THE FOREGOING REASONS, THE PROTEST IS DENIED.

TO ARENT, FOX, KITNER, PLOTKIN & KAHN:

WE REFER TO YOUR LETTER OF OCTOBER 6, 1971, AND PRIOR CORRESPONDENCE, PROTESTING ON BEHALF OF SYSTEM DEVELOPMENT CORPORATION (SDC) AGAINST THE DEFENSE COMMUNICATIONS AGENCY (DCA) AWARD OF A CONTRACT ON JUNE 22, 1971, TO INTERNATIONAL BUSINESS MACHINES CORPORATION (IBM) FEDERAL SYSTEMS DIVISION UNDER REQUEST FOR PROPOSALS DCA100-71-R-0027.

THE REQUEST FOR PROPOSALS SOLICITED TECHNICAL AND COST-PLUS-FIXED-FEE (CPFF) PRICE PROPOSALS FOR THE TECHNICAL SUPPORT AND ENHANCEMENT OF THE NATIONAL MILITARY COMMAND SYSTEM INFORMATION PROCESSING SYSTEM (NIPS 360 FFS). SIX PROPOSALS WERE RECEIVED BY THE CLOSING DATE, FEBRUARY 23, 1971. ON FEBRUARY 24, 1971, THE TECHNICAL PROPOSALS OF THE SIX WERE FORWARDED TO THE TECHNICAL EVALUATION COMMITTEE FOR REVIEW AND ANALYSIS. UPON EVALUATION, THE FOLLOWING RESULTS WERE REPORTED:

SCORE

COMPANY (POSSIBLE 300)

SDC 254

IBM 249

COMPUTER SCIENCES CORPORATION (CSC) 218

INFORMATICS TISCO, INCORPORATED 214

GENERAL ELECTRIC COMPANY 196

RCA SERVICE COMPANY 162

THE TECHNICAL EVALUATION COMMITTEE EXPRESSED THE UNANIMOUS OPINION THAT BOTH SDC AND IBM WERE TECHNICALLY QUALIFIED BASED ON THEIR RESPONSES TO THE REQUEST FOR PROPOSALS AND RECOMMENDED THAT SELECTION FOR AWARD BE CONFINED TO SDC AND IBM. IN THIS CONNECTION, THE COMMITTEE WAS OF THE VIEW THAT THE OTHER FOUR PROPOSALS CONTAINED SIGNIFICANT DEFICIENCIES WHICH RENDERED THEM TECHNICALLY UNACCEPTABLE.

NOTWITHSTANDING THE TECHNICAL EVALUATION COMMITTEE RECOMMENDATION, THE CONTRACTING OFFICER IN THE EXERCISE OF HIS DISCRETION DETERMINED THAT THE PROPOSALS OF CSC AND INFORMATICS WERE SUSCEPTIBLE OF BEING MADE ACCEPTABLE. ACCORDINGLY, BOTH FIRMS WERE AFFORDED AN OPPORTUNITY TO SUBMIT REVISIONS TO THEIR TECHNICAL PROPOSALS. UPON REVIEW OF THESE REVISIONS, THE TECHNICAL EVALUATION COMMITTEE REPORTED REVISED SCORES FOR THE FIRMS. CSC RECEIVED 229 POINTS IN LIEU OF THE 218 POINTS INITIALLY AWARDED, WHILE INFORMATICS RECEIVED 222 POINTS IN LIEU OF THE 214 POINTS INITIALLY ASSIGNED.

THEREAFTER, FURTHER NEGOTIATIONS WERE CONDUCTED WITH ALL FOUR OFFERORS. AS A RESULT OF THESE NEGOTIATIONS, SDC INCREASED ITS ESTIMATED CPFF FROM THE $279,551 ORIGINALLY PROPOSED TO $315,304. SIMILARLY, IBM INCREASED ITS ESTIMATED CPFF FROM $312,235 TO $351,813. AFTER CONSIDERATION OF THE REVISED COST AND TECHNICAL PROPOSALS, IT WAS DETERMINED THAT THE AWARD OF THE CONTRACT TO IBM WOULD BE MOST ADVANTAGEOUS, PRICE AND OTHER FACTORS CONSIDERED.

IT IS YOUR BASIC CONTENTION THAT THE AWARD TO IBM WAS IMPROPER BECAUSE "SDC WAS TOLD THAT DCA EVALUATED ITS PROPOSAL AS FIRST TECHNICALLY AND LEAST EXPENSIVE AND THIS EVALUATION NEVER CHANGED." DCA DENIES THAT IT SUGGESTED THIS AND WE MUST CONCLUDE THAT THE IMPRESSION SDC RECEIVED AT THE DEBRIEFING THAT ITS PROPOSAL REMAINED FIRST TECHNICALLY IS NOT BORNE OUT BY THE RECORD.

WITH RESPECT TO THE INITIAL TECHNICAL EVALUATION, IT SEEMS CLEAR TO US THAT WHILE SDC'S TECHNICAL PROPOSAL RECEIVED FIVE POINTS MORE THAN IBM'S, THIS DIFFERENCE WAS NOT CONSIDERED SIGNIFICANT BY THE TECHNICAL EVALUATORS. THIS FACT IS EVIDENCED BY THE TECHNICAL EVALUATION COMMITTEE RECOMMENDATION, NOTED ABOVE, THAT EITHER SDC OR IBM BE SELECTED FOR AWARD. THERE IS, OF COURSE, NOTHING IMPROPER IN FAILING TO ACCORD ANY IMPORTANCE TO THE VARIANCE IN SCORES SINCE THE POINT EVALUATION REFLECTS A QUANTIFICATION OF SUBJECTIVE TECHNICAL JUDGMENTS WHICH MAY OR MAY NOT BE DRAWN WITH THE PRECISION EVIDENCED BY THE POINT SCORES.

FURTHER, THE REVISIONS TO THE TECHNICAL PROPOSALS SUBMITTED AS A RESULT OF THE CONTRACTING OFFICER'S NEGOTIATIONS WITH ALL OFFERORS WITHIN A COMPETITIVE RANGE WERE NOT FORMALLY SUBMITTED TO THE TECHNICAL EVALUATION COMMITTEE FOR FURTHER EVALUATION. IN THIS REGARD, WE CAN ATTACH NO LEGAL SIGNIFICANCE TO THE DCA FAILURE TO REQUIRE A FORMAL REEVALUATION BY THE TECHNICAL EVALUATION COMMITTEE. HOWEVER, THE REPORT OF SEPTEMBER 28, 1971, FROM THE DCA COUNSEL, INDICATES THAT, IN ADDITION TO THE CONTRACTING OFFICER, THE REVISIONS WERE REVIEWED BY AND COORDINATED WITH THE THEN DEPUTY DIRECTOR, NATIONAL MILITARY COMMAND SYSTEM TECHNICAL SUPPORT DIRECTORATE (THE DCA ELEMENT WHICH USES THE SERVICES COVERED BY THE RFP), THE DCA SENIOR AUTOMATIC DATA PROCESSING EQUIPMENT POLICY OFFICIAL, ITS ASSISTANT CHIEF OF STAFF FOR ADMINISTRATION AND ITS COUNSEL. AT THIS POINT IT MIGHT BE NOTED THAT THE ABSENCE OF A FORMAL CONSIDERATION OF THE REVISED TECHNICAL PROPOSALS BY THE TECHNICAL EVALUATION COMMITTEE MAY ACCOUNT FOR THE SDC IMPRESSION THAT IT REMAINED FIRST EVEN AFTER THE CONSIDERATION OF REVISED PROPOSALS.

INSOFAR AS THE ULTIMATE SELECTION OF IBM IS CONCERNED, THE RECORD INDICATES THAT DCA WEIGHED THE NEGOTIATED IMPROVEMENTS IN THE IBM REVISED PROPOSAL AGAINST THE SDC REVISED PROPOSAL, WHICH AS COMPARED WITH ITS INITIAL SUBMISSION WAS NOT AS FAVORABLE, AND CONCLUDED THAT AWARD TO IBM WOULD BE MOST ADVANTAGEOUS, NOTWITHSTANDING THE LOWER ESTIMATED COST AND FEE PROPOSED BY SDC.

WITH RESPECT TO THE FACT THAT SDC PROPOSED A LOWER ESTIMATED CPFF THAN IBM, DCA COUNSEL EMPHASIZES PARAGRAPH 3-805.2 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), WHICH PROVIDES:

"3-805.2 COST-REIMBURSEMENT TYPE CONTRACTS. IN SELECTING THE CONTRACTOR FOR A COST-REIMBURSEMENT TYPE CONTRACT, ESTIMATED COSTS OF CONTRACT PERFORMANCE AND PROPOSED FEES SHOULD NOT BE CONSIDERED AS CONTROLLING, SINCE IN THIS TYPE OF CONTRACT ADVANCE ESTIMATES OF COST MAY NOT PROVIDE VALID INDICATORS OF FINAL ACTUAL COSTS. THERE IS NO REQUIREMENT THAT COST -REIMBURSEMENT TYPE CONTRACTS BE AWARDED ON THE BASIS OF EITHER (1) THE LOWEST PROPOSED COST, (2) THE LOWEST PROPOSED FEE, OR (3) THE LOWEST TOTAL ESTIMATED COST PLUS PROPOSED FEE. THE AWARD OF COST-REIMBURSEMENT TYPE CONTRACTS PRIMARILY ON THE BASIS OF ESTIMATED COSTS MAY ENCOURAGE THE SUBMISSION OF UNREALISTICALLY LOW ESTIMATES AND INCREASE THE LIKELIHOOD OF COST OVERRUNS. THE COST ESTIMATE IS IMPORTANT TO DETERMINE THE PROSPECTIVE CONTRACTOR'S UNDERSTANDING OF THE PROJECT AND ABILITY TO ORGANIZE AND PERFORM THE CONTRACT. THE AGREED FEE MUST BE WITHIN THE LIMITS PRESCRIBED BY LAW AND APPROPRIATE TO THE WORK TO BE PERFORMED (SEE 3-808). BEYOND THIS, HOWEVER, THE PRIMARY CONSIDERATION IN DETERMINING TO WHOM THE AWARD SHALL BE MADE IS: WHICH CONTRACTOR CAN PERFORM THE CONTRACT IN A MANNER MOST ADVANTAGEOUS TO THE GOVERNMENT."

WE HAVE, OF COURSE, RECOGNIZED THAT IN THE CONTEXT OF A NEGOTIATED COST REIMBURSEMENT CONTRACT, PRICE NEED NOT BE THE CONTROLLING FACTOR. COMP. GEN. 739 (1971); 46 ID. 885 (1967). HOWEVER, AS YOU POINT OUT, WE WOULD AGREE THAT EVEN IN THIS CONTEXT IF TWO OFFERORS ARE SUBSTANTIALLY EQUAL INSOFAR AS THE "OTHER FACTORS" TO BE EVALUATED ARE CONCERNED, PRICE IS THE ONLY REMAINING DETERMINANT OF AWARD.

HERE, THE RECORD INDICATES THAT THE DECISION TO AWARD TO IBM TURNED SPECIFICALLY ON ITS EXPERIENCE VIS-A-VIS SDC EXPERIENCE. THE OVERALL IMPORTANCE OF THIS FACTOR WAS CLEARLY INDICATED IN PARAGRAPH W(1) OF THE RFP, WHICH SPECIFICALLY ASSIGNED "EXPERIENCE AND MANAGEMENT" A WEIGHT OF 60 PERCENT OF THE TOTAL POINTS ASSIGNED TO THE TECHNICAL EVALUATION. WHILE THE RFP CONTAINS NO PROVISION FOR EVALUATING PHASE IN COSTS FOR A NEW CONTRACTOR OR OTHER SPECIFIC EVALUATION ADVANTAGE FAVORING THE INCUMBENT, YOU RECOGNIZE THAT WITHIN THE CONFINES OF THIS EVALUATION CRITERION, THE IBM ADVANTAGE, IF ANY, AS AN INCUMBENT WOULD, AND COULD PROPERLY, BE EXPRESSED IN TERMS OF ITS EXPERIENCE. VIEWED IN THIS LIGHT, WE CANNOT SAY THAT THE AWARD TO IBM WAS BASED ON AN UNDISCLOSED EVALUATION CRITERION WHICH ACCORDED SPECIAL WEIGHT TO IBM AS THE INCUMBENT CONTRACTOR.

TURNING TO THE CONDUCT OF NEGOTIATIONS INSOFAR AS THEY PERTAIN TO THE EVALUATION OF THE RELATIVE EXPERIENCE OF IBM AND SDC, THE AUGUST 2, 1971, REPORT FROM THE DCA COUNSEL ADVISES, IN PERTINENT PART, THAT AS A RESULT OF THE REVIEW OF BACKGROUND INFORMATION AND THE TECHNICAL EVALUATION COMMITTEE REPORT -

" *** THE NUMBER OF MAN-MONTHS INITIALLY PROPOSED BY SDC, AND TAKEN AT FACE VALUE BY THE TECHNICAL COMMITTEE WERE SEVERELY DILUTED BY APPLICATION OF A FACTOR OF '89% EFFECTIVITY' REPRESENTING NON-WORK TIME DURING HOLIDAYS, VACATION TIME, ETC., REDUCING THE SDC REAL, DELIVERED EFFORT FROM 171 (MAN-MONTHS, THE LEVEL OF EFFORT ESTIMATED BY DCA TO BE NECESSARY TO MEET THE REQUIREMENTS OF THE PROGRAM) TO 152 MAN-MONTHS. THE ADVANCE AUDIT INFORMATION REVEALED A SKELETON TEAM, WITH KEY PERSONNEL NOT HIRED OR ONLY ON CONTINGENCY CONTRACTS TO SDC *** AND, FINALLY, IN THE SPECIFIC AREA OF NIPS 360 FFS SYSTEM EXPERTISE, THE TECHNICAL EVALUATION REPORT EXPLICITLY NOTED THE SDC WEAKNESS WHICH IT STATED 'MAY' BE OVERCOME BY PRIOR TRAINING TO BE OFFERED BY THE CONTRACTOR."

DCA CONCERN ON THE FIRST POINT WAS ALLEVIATED BY THE SDC ADJUSTMENT OF ITS PROPOSED MAN-MONTHS TO THE 171 MAN-MONTHS ESTIMATED BY THE GOVERNMENT. WITH RESPECT TO SDC'S PROPOSED PERSONNEL, HOWEVER, THE DCA COUNSEL'S REPORT OF AUGUST 2, 1971, ADVISES THAT:

" *** IN THE AREA OF PERSONNEL FOR THE PROPOSED TEAM, AND THE EXPERTISE POSSESSED BY THEM, THE FINAL SDC CONFIRMATION OF NEGOTIATIONS STILL LEFT CONSIDERABLE DOUBTS AS TO THEIR ABILITY TO RESPOND TO THE PROPOSED WORK. A KEY PROPOSED EMPLOYEE BALKED AT THE LAST MINUTE AND FAILED TO JOIN THE CONTRACTOR'S STAFF (THIS PROPOSED EMPLOYEE WAS "KEY" IN THE SENSE THAT THE TECHNICAL EVALUATION TEAM CONSIDERED HIS PRESENCE AN ASSET OF THE INITIAL SDC PROPOSAL); ANOTHER PROPOSED KEY EMPLOYEE WAS STILL ON CONTINGENCY CONTRACT, AND IT SHOULD BE NOTED THAT EVEN IN THE PROTEST LETTER ITSELF, HIRING FROM THE INCUMBENT CONTRACTOR IS STILL CONSIDERED A POSSIBILITY, THOUGH WITH WHAT DEGREE OF ASSURANCE IS NOT ADDRESSED. FINALLY, THE SDC CONFIRMATION FAILED TO LAY TO REST THE DOUBTS AS TO THEIR POSSESSION OF PERSONNEL SKILLED IN THE 360 NIPS FFS SYSTEM.

" *** KNOWLEDGE AND EXPERIENCE IN THE NIPS 360 FFS SYSTEM ITSELF IS CRITICAL TO THE PROPER PERFORMANCE OF THE WORK CONTEMPLATED BY THE WORK STATEMENT. ALTHOUGH SDC SHOWED SOME EXPERIENCE IN THIS SYSTEM, IBM SHOWED ALMOST THREE TIMES AS MUCH. IT IS THIS KIND OF EXPERIENCE THAT PROVIDES THE ABILITY TO WORK THE SYSTEM ITSELF AS OPPOSED TO THE APPLICATIONS THEREOF."

WITH REGARD TO THE EXPERIENCE OF THE PROPOSED IBM TEAM, THE RECORD INDICATES THAT IBM REVISED AND UPGRADED THE PERSONNEL PROPOSED AND ALSO ADJUSTED THE ESTIMATE OF THE MAN-MONTHS OF EFFORT NECESSARY FROM THE 150 INITIALLY PROPOSED TO 159 MAN-MONTHS. WE NOTE THAT IBM'S INITIAL ESTIMATE OF THE MAN-MONTHS NECESSARILY WAS QUESTIONED AND COUNTED AGAINST IT BY THE TECHNICAL EVALUATION COMMITTEE.

ACCORDINGLY, ON THE BASIS OF THE RECORD BEFORE US, WE CANNOT SAY THAT THERE IS CLEAR AND CONVINCING EVIDENCE THAT THE DCA AWARD OF A CONTRACT TO IBM WAS AN ABUSE OF THE BROAD DISCRETION CONFERRED ON IT BY ASPR 3 805.2 TO SELECT THE CONTRACTOR WHO CAN PERFORM THE CONTRACT IN THE MANNER MOST ADVANTAGEOUS TO THE GOVERNMENT.

THE RECORD DOES, HOWEVER, ESTABLISH THE VALIDITY OF YOUR OTHER MAJOR CONTENTION - NAMELY, DCA FAILED TO ESTABLISH COMMON CUTOFF DATES FOR THE SUBMISSION OF BEST AND FINAL OFFERS AS REQUIRED BY ASPR 3 805.1(B). THIS CONNECTION, NEGOTIATIONS WERE COMMENCED AND CONCLUDED WITH SDC ON JUNE 2, 1971, WHILE NEGOTIATIONS WITH IBM WERE CONDUCTED AND CONCLUDED ON JUNE 9, 1971. THE DCA COUNSEL REPORT OF AUGUST 2, 1971, STATES THAT AT THE CONCLUSION OF NEGOTIATIONS WITH SDC, IT WAS ASKED AND AGREED TO SUBMIT ITS FINAL PROPOSAL BY "THE MIDDLE OF THE NEXT WEEK," WHICH WAS JUNE 9. THIS AGREEMENT IS IN DISPUTE, FOR, AS YOU STATE IN YOUR LETTER OF JULY 8, 1971, THE CONTRACTING OFFICER CALLED AN SDC REPRESENTATIVE AND ADVISED THAT HE HAD NOT RECEIVED ITS REVISED PROPOSAL AND, IN REPLY, WAS TOLD THAT SINCE NO DATE FOR SUBMISSION HAD BEEN SPECIFIED, SDC WOULD SUBMIT ITS PROPOSAL ON THE FOLLOWING DAY, JUNE 9. YOU FURTHER ALLEGE THAT ON JUNE 9, AT 1:30 P.M., THE CONTRACTING OFFICER CALLED AGAIN, ASKED FOR AND WAS GIVEN THE SDC PRICE. LATER IN THE DAY, AN SDC REPRESENTATIVE SUBMITTED ITS REVISED PROPOSAL. THE SUBSTANCE OF THIS CONVERSATION IS ALSO DISPUTED. DCA MAINTAINS THAT THE CONTRACTING OFFICER MERELY INQUIRED AFTER THE SDC PROPOSAL AND THAT THE SDC REPRESENTATIVE VOLUNTEERED THE PRICE ON THE TELEPHONE.

A MORE MATERIAL ALLEGATION CENTERS AROUND YOUR "UNDERSTANDING" THAT NEGOTIATIONS WERE CONDUCTED WITH IBM ON THE AFTERNOON OF THE 9TH WITH THE POSSIBILITY THAT BY "INADVERTENCE OR OTHERWISE, IBM WAS GIVEN OR OBTAINED SOME INDICATION OF THE TERMS AND PRICE OF THE SDC PROPOSAL." THE DCA COUNSEL REPORT OF AUGUST 2 CATEGORICALLY STATES, HOWEVER, THAT NEGOTIATIONS WITH IBM ON JUNE 9 WERE CONDUCTED AND CONCLUDED PRIOR TO THE CONTRACTING OFFICER'S TELEPHONE CALL AND DENIES THAT ANY INFORMATION WAS COMMUNICATED TO IBM. IBM SUBSEQUENTLY SUBMITTED ITS REVISED PROPOSAL ON JUNE 14, 1971, AS REQUIRED. IN LIGHT OF THE DCA REPRESENTATIONS, WE ARE UNABLE TO CONCLUDE THAT THERE WAS AN IMPROPER DISCLOSURE. MOREOVER, EVEN IF THERE WAS A DISCLOSURE TO IBM OF THE SDC COST ESTIMATE, SDC WAS NOT PREJUDICED BY THE DISCLOSURE SINCE IT IS NOT APPARENT THAT IBM TOOK ADVANTAGE OF IT AS THE IBM COST ESTIMATE REMAINED HIGHER THAN THE SDC ESTIMATE. ALSO, EXPERIENCE, NOT COST, WAS THE CONTROLLING FACTOR IN SELECTING IBM FOR AWARD. FURTHER, WE CANNOT SAY THAT THE USE OF SEQUENTIAL CUTOFF DATES WAS PREJUDICIAL TO SDC IN THIS CASE. IN THIS CONNECTION, SDC ACTUALLY HAD MORE WORKING DAYS IN WHICH TO REPLY THAN IBM. WE ARE, HOWEVER, DRAWING THE FAILURE TO COMPLY WITH ASPR 3-805.1(B) TO THE ATTENTION OF THE DIRECTOR OF DCA FOR FUTURE CORRECTIVE ACTION. FOR THE FOREGOING REASONS, THE PROTEST IS DENIED.