B-173953(2), B-174264, DEC 13, 1971

B-173953(2),B-174264: Dec 13, 1971

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CONCERNING THE AWARD TO SPERRY RAND: SINCE THE CASE INVOLVED THE PRECISE AMOUNTS OF EVALUATION FACTORS THAT WERE PROVIDED AN OFFEROR DURING THE PERIOD IT WAS PREPARING ITS PROPOSAL. THE APPROPRIATE TIME FOR RAISING THE ISSUE WAS DURING NEGOTIATIONS. AS NO PREJUDICE IS DEMONSTRATED BY THE AMOUNT OF THE EVALUATION FACTORS. SINCE THE BASE PRICE SUBMITTED BY PROTESTANT WAS HIGHER THAN THE EVALUATED PRICE OF SPERRY RAND. THE PROTEST IS DENIED. PROTEST IS DENIED. TO DONOVAN CONSTRUCTION COMPANY: FURTHER REFERENCE IS MADE TO YOUR TELEGRAMS AND LETTERS OF OCTOBER 5. WERE DISCUSSED IN THE ENCLOSED DECISION B-173953(1). THE FIRST BASIS UPON WHICH YOU PROTEST THE AWARD TO SPERRY RAND IS THAT ITS LOW OFFER MUST HAVE BEEN "SUBSIDIZED" BY THE IMPROPER ALLOCATION OF A PORTION OF ITS FIXED PRICE CONTRACT COSTS TO ITS COST REIMBURSABLE CONTRACTS AT LOUISIANA ARMY AMMUNITION PLANT.

B-173953(2), B-174264, DEC 13, 1971

BID PROTEST - EVALUATION FACTORS - APPROPRIATE TIME FOR PROTEST DECISION DENYING PROTEST OF DONOVAN CONSTRUCTION COMPANY AGAINST THE AWARD OF A THREE-MONTH EXTENSION OF A CONTRACT HELD BY CHAMBERLAIN MANUFACTURING CORPORATION AND AWARD OF A CONTRACT TO SPERRY RAND CORPORATION BY THE ARMY AMMUNITION PROCUREMENT AND SUPPLY AGENCY, JOLIET, ILL. CONCERNING THE AWARD TO SPERRY RAND: SINCE THE CASE INVOLVED THE PRECISE AMOUNTS OF EVALUATION FACTORS THAT WERE PROVIDED AN OFFEROR DURING THE PERIOD IT WAS PREPARING ITS PROPOSAL, THE APPROPRIATE TIME FOR RAISING THE ISSUE WAS DURING NEGOTIATIONS. FURTHER, AS NO PREJUDICE IS DEMONSTRATED BY THE AMOUNT OF THE EVALUATION FACTORS, SINCE THE BASE PRICE SUBMITTED BY PROTESTANT WAS HIGHER THAN THE EVALUATED PRICE OF SPERRY RAND, THE PROTEST IS DENIED. CONCERNING THE EXTENSION OF THE CONTRACT HELD BY CHAMBERLAIN MANUFACTURING CORPORATION: SINCE NO SHOWING OF ARBITRARY OR CAPRICIOUS ACTION WHICH PREJUDICED PROTESTANT'S FIRM HAS BEEN MADE, PROTEST IS DENIED.

TO DONOVAN CONSTRUCTION COMPANY:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAMS AND LETTERS OF OCTOBER 5, 1971, PROTESTING AGAINST THE AWARD OF A THREE-MONTH EXTENSION OF AN EXISTING CONTRACT HELD BY CHAMBERLAIN MANUFACTURING CORPORATION (OUR REFERENCE NUMBER B-174264) AND THE AWARD OF A CONTRACT TO SPERRY RAND CORPORATION (B-173953(2)) UNDER RFP DAAA09-71-R-0143 (RFP-0143), BY THE ARMY AMMUNITION PROCUREMENT AND SUPPLY AGENCY, JOLIET, ILLINOIS.

THE DEVELOPMENT OF THE PROCUREMENT UNDER RFP-0143, AND THE PROPRIETY OF THE AWARD OF THE NON-SET-ASIDE PORTION THEREOF TO SPERRY RAND CORPORATION, WERE DISCUSSED IN THE ENCLOSED DECISION B-173953(1), DECEMBER 3, 1971, TO GOLDEN INDUSTRIES, INC. THE FIRST BASIS UPON WHICH YOU PROTEST THE AWARD TO SPERRY RAND IS THAT ITS LOW OFFER MUST HAVE BEEN "SUBSIDIZED" BY THE IMPROPER ALLOCATION OF A PORTION OF ITS FIXED PRICE CONTRACT COSTS TO ITS COST REIMBURSABLE CONTRACTS AT LOUISIANA ARMY AMMUNITION PLANT. THE SAME ISSUE WAS RAISED BY GOLDEN INDUSTRIES, AND WE BELIEVE OUR DISCUSSION THEREOF ON PAGES 9 AND 10 OF THE ENCLOSED DECISION IS DISPOSITIVE OF THE MATTER.

THE SECOND BASIS FOR YOUR PROTEST AGAINST THE AWARD TO SPERRY RAND IS THAT THE EVALUATION FACTORS APPLIED TO YOUR PROPOSAL WERE IMPROPERLY DETERMINED IN THAT:

" *** (A) HISTORICAL MACHINERY OVERHAUL EXPENSE WAS CHARGED AGAINST DONOVAN WHEREAS PROPER PROCEDURE WOULD HAVE TAKEN INTO ACCOUNT THAT HEAVY OVERHAUL EXPENSE WOULD RESULT IN LOWER FUTURE MAINTENANCE COSTS, AND (B) SUPPORT SERVICES WHICH ARE NOT OUT-OF-POCKET EXPENSE WERE IMPROPERLY CHARGED AGAINST DONOVAN, INASMUCH AS SUCH EXPENSES WILL EXIST REGARDLESS OF THE DONOVAN PLANT OPERATION."

SECTION C, PAGE 27 OF RFP-0143 ADVISED OFFERORS:

"OPERATING CONTRACTORS OF GOCO FACILITIES MAY PARTICIPATE IN THIS PROCUREMENT AND SUCH PARTICIPATION SHALL BE BASED ON USE OF THE GOCO FACILITIES. *** IT IS TO BE NOTED THAT IF SUCH OPERATING CONTRACTORS) DO PARTICIPATE, AWARDS) SHALL BE BASED ON EVALUATION OF OUT OF POCKET COSTS ONLY.

"PRIOR TO THE OPENING DATE OF THIS SOLICITATION, ALL PARTICIPANTS WILL BE NOTIFIED IN WRITING REGARDING THE EVALUATION FACTOR TO BE ADDED TO PRICES PROPOSED BY THE OPERATING CONTRACTOR OF A GOCO FACILITY. THIS EVALUATION FACTOR SHALL ENCOMPASS THE ESTIMATED OUT OF POCKET COSTS FOR ABNORMAL MAINTENANCE AND ESSENTIAL SERVICES WHICH ARE DIRECTLY ALLOCABLE TO THE INSTANT PROCUREMENT."

AMENDMENT 0002 TO THE SOLICITATION STATED THAT EVALUATION FACTORS OF $230,154 AND $1,039,045 FOR ABNORMAL MAINTENANCE AND ESSENTIAL SERVICES, RESPECTIVELY, WOULD BE ADDED TO YOUR BID. IT IS ADMINISTRATIVELY REPORTED THAT THESE FACTORS WERE NOT BASED ON FUTURE PROJECTED COSTS, BUT ON HISTORICAL EXPERIENCE. THE ABNORMAL MAINTENANCE COST FACTOR WAS DERIVED FROM THE MOST RECENT 14 MONTHS' EXPERIENCE SINCE THIS WAS THE APPROXIMATE PRODUCTION PERIOD COVERED BY RFP-0143. THE ESSENTIAL SERVICES EVALUATION FACTOR INCLUDED PRODUCTION RELATED COSTS OF UTILITIES, SEWAGE, FIRE AND GUARD PROTECTION, GROUNDS AND RAILROAD MAINTENANCE. WHILE YOUR PROTEST DID NOT ENUMERATE THOSE CHARGES YOU FOUND OBJECTIONABLE, IT IS THE DEPARTMENT OF THE ARMY'S UNDERSTANDING THAT YOU OBJECT TO INCLUSION IN THE EVALUATION FACTOR OF FIRE AND GUARD SERVICES, GROUNDS MAINTENANCE AND RAILROAD MAINTENANCE ON THE BASIS THAT THESE COSTS WOULD BE INCURRED WHETHER YOUR FACILITY WAS IN PRODUCTION OR LAYAWAY. THIS POSITION IS NOT ACCEPTED BY THE PROCURING ACTIVITY, WHICH CONSIDERS THESE COSTS TO BE ENTIRELY PRODUCTION RELATED AND APPROPRIATE FOR CONSIDERATION SINCE THE LEVEL OF FIRE/GUARD SERVICE, ROAD AND GROUNDS MAINTENANCE IS DIRECTLY RELATED TO THE LEVEL OF PRODUCTION ACTIVITY.

THE EVALUATION FACTORS FOR ABNORMAL MAINTENANCE AND ESSENTIAL SERVICES AT THE TWIN CITIES ARMY AMMUNITION PLANT WERE FIRST SET FORTH IN AMENDMENT 0002 TO RFP-0143, WHICH ALTHOUGH UNDATED IS SHOWN BY A TIME STAMP TO HAVE BEEN RECEIVED BY YOUR COMPANY ON JULY 30, 1971. THESE FACTORS WERE REVISED BY AMENDMENT 0004, DATED AUGUST 5, 1971. THE COVER LETTER TO YOUR INITIAL PROPOSAL, DATED AUGUST 27, 1971, OBJECTED TO THE AMOUNT OF THE EVALUATION FACTORS IN VIRTUALLY THE SAME MANNER AS THE INSTANT PROTEST. ADDITIONALLY, THE RECORD OF NEGOTIATIONS FOR THIS PROCUREMENT SHOWS THAT THE PROPRIETY OF THE EVALUATION FACTORS WAS DISCUSSED IN CONTRACT NEGOTIATIONS ON SEPTEMBER 8, 1971.

THIS IS THEREFORE A CASE IN WHICH THE PRECISE AMOUNTS OF EVALUATION FACTORS WERE PROVIDED AN OFFEROR DURING THE PERIOD OF PREPARATION OF ITS PROPOSAL AND THE PROPRIETY OF THOSE FACTORS WAS DISCUSSED IN THE INITIAL PROPOSAL AND DURING NEGOTIATIONS LEADING TO SUBMISSION OF THE BEST AND FINAL OFFER. WE BELIEVE THAT THE APPROPRIATE TIME TO HAVE CONTENDED BEFORE OUR OFFICE THAT THESE FACTORS WOULD RESULT IN AN IMPROPER EVALUATION OF YOUR PROPOSAL WAS BEFORE PROPOSAL SUBMISSION, NOT AFTER AWARD TO SPERRY RAND. WE ALSO OBSERVE THAT AS A PRACTICAL MATTER, CONSIDERATION OF YOUR PROPOSAL DOES NOT APPEAR TO HAVE BEEN PREJUDICED BY THE AMOUNT OF THE EVALUATION FACTORS SINCE THE BASE PRICE SUBMITTED BY YOUR FIRM IS HIGHER THAN THE EVALUATED PRICE OF SPERRY RAND. THEREFORE, EVEN APPLICATION OF A ZERO FACTOR FOR ABNORMAL MAINTENANCE AND ESSENTIAL SERVICES WOULD NOT HAVE RESULTED IN AN AWARD TO YOU.

ACCORDINGLY, YOUR PROTEST UNDER RFP-0143 IS DENIED.

YOU HAVE ALSO PROTESTED AGAINST MODIFICATION P00005, DATED SEPTEMBER 30, 1971, TO CONTRACT DAAA09-71-C-0079 HELD BY CHAMBERLAIN MANUFACTURING CORPORATION. THIS MODIFICATION INCREASED BY 225,000 THE QUANTITY OF 155MM PROJECTILES TO BE SUPPLIED UNDER THAT CONTRACT AND EXTENDED THE DELIVERY SCHEDULE BY THREE MONTHS. YOU CONTEND THE MODIFICATION WAS IMPROPER BECAUSE: (1) YOUR FIRM WAS NOT GIVEN THE OPPORTUNITY TO NEGOTIATE A SIMILAR EXTENSION TO YOUR CONTRACT; (2) THE UNEMPLOYMENT RATE OF ST. PAUL- MINNEAPOLIS EXCEEDS THAT OF SCRANTON; (3) YOUR CAPACITY FOR INCREASED PRODUCTION IS SUPERIOR TO THAT OF THE SCRANTON ARMY AMMUNITION PLANT; (4) YOUR COMPANY HAS A RECORD OF QUALITY PERFORMANCE AND PROMPT DELIVERY; AND (5) THE FAILURE TO GRANT A SIMILAR EXTENSION TO YOUR FIRM WILL RESULT IN THE TERMINATION OF 750 EMPLOYEES.

THE ADMINISTRATIVE REPORT ACKNOWLEDGES YOUR EXCELLENT RECORD OF QUALITY AND PROMPT DELIVERY AND AGREES THAT THE CAPACITY OF YOUR FACILITY EXCEEDS THAT OF THE SCRANTON ARMY AMMUNITION PLANT. HOWEVER, THIS INCREASED CAPACITY WAS NOT RELEVANT TO THE DECISION TO EXTEND PRODUCTION AT SCRANTON SINCE THE COMBINED CAPACITIES OF SPERRY RAND AND EITHER SCRANTON OR GOLDEN INDUSTRIES WOULD BE MORE THAN ADEQUATE TO MEET THE ARMY'S POTENTIAL REQUIREMENTS. THE DECISION TO MODIFY THE SCRANTON CONTRACT WAS MADE IN LIGHT OF DEVELOPMENTS IN THE PROCUREMENT UNDER RFP-0143, THE LABOR SURPLUS AREA STATUS OF THE OFFERORS UNDER THAT SOLICITATION, AND THE PROBABLE AWARDS TO BE MADE THEREUNDER, AS DISCUSSED BELOW.

REQUEST FOR PROPOSALS DAAA09-71-R-0143 WAS ISSUED TO FULFILL THE FISCAL YEAR 1972 REQUIREMENTS FOR 155MM PROJECTILES. AS WE DISCUSSED IN OUR ENCLOSED DECISION TO GOLDEN INDUSTRIES, FIFTY PERCENT OF THE PROCUREMENT WAS SET ASIDE FOR LABOR SURPLUS AREA CONCERNS IN ACCORDANCE WITH THE CLAUSE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE (1970 JUN)" (ASPR 1- 804.2(B)(1)). THE ARMY'S REDUCED REQUIREMENTS WERE SUCH THAT ANY TWO OF THE FIVE CURRENT PRODUCERS OF THE PROJECTILES COULD ASSURE DELIVERY. THIS WAS RECOGNIZED IN RFP-0143, PAGE 26 OF WHICH STATED:

"THE GOVERNMENT EXPECTS THAT ONE OR MORE OFFERORS PARTICIPATING IN THIS COMPETITIVE PROCUREMENT ACTION WILL BE UNSUCCESSFUL AND MAY NOT RECEIVE ANY AWARD AS A RESULT OF THIS SOLICITATION. AS A RESULT OF THIS SOLICITATION THE GOVERNMENT WILL MAKE ONE AWARD ON THE NON-SET ASIDE QUANTITY AND ONE AWARD ON THE SET ASIDE QUANTITY. THE BIDDER RECEIVING THE AWARD ON THE NON-SET ASIDE QUANTITY SHALL BE PRECLUDED FROM RECEIVING THE AWARD ON THE SET ASIDE QUANTITY."

IN REGARD TO THE SET-ASIDE, SPERRY RAND AND CHAMBERLAIN (NEW BEDFORD AND SCRANTON) SUBMITTED WITH THEIR INITIAL PROPOSALS CERTIFICATES OF ELIGIBILITY FOR FIRST PREFERENCE. GOLDEN INDICATED IN ITS PROPOSAL THAT IT WAS A SMALL BUSINESS CONCERN IN A LABOR SURPLUS AREA, BUT DID NOT SUBMIT A CERTIFICATE OF ELIGIBILITY. YOUR FIRM INSERTED "N/A" (PRESUMABLY "NOT APPLICABLE") IN THE BLANKS PROVIDED IN PARAGRAPH (C) OF THE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE" CLAUSE, EVIDENCING A LACK OF DESIRE TO BE CONSIDERED FOR AWARD AS A LABOR SURPLUS AREA CONCERN. THEREFORE, UPON RECEIPT OF INITIAL PROPOSALS, OFFERORS HAD THE FOLLOWING PRIORITY FOR CONSIDERATION FOR AWARD OF THE SET-ASIDE PORTION OF THE PROCUREMENT:

GROUP 1 - NONE

GROUP 2 - (1) SPERRY RAND

(2) SCRANTON

(3) NEW BEDFORD

GROUP 3 - NONE

GROUP 4 - NONE

GROUP 5 - GOLDEN INDUSTRIES.

FOLLOWING RECEIPT OF INITIAL PROPOSALS, GENERAL NEGOTIATIONS WITH ALL OFFERORS WERE HELD FROM SEPTEMBER 1 THROUGH 10. ON SEPTEMBER 27, THE NON- SET-ASIDE AWARD WAS MADE TO SPERRY RAND. UNDER THE TERMS OF THE SOLICITATION, SPERRY RAND COULD NOT ALSO RECEIVE AWARD OF THE SET-ASIDE PORTION. ON SEPTEMBER 7, DURING THE NEGOTIATIONS, GOLDEN HAD SUBMITTED TO APSA A CERTIFICATE OF ELIGIBILITY FOR FIRST PREFERENCE WHICH, IF ACCEPTED, WOULD HAVE PLACED GOLDEN IN PRIORITY GROUP 1 FOR NEGOTIATION OF THE SET- ASIDE. WHEN APSA REJECTED THE CERTIFICATE AS BEING UNTIMELY SUBMITTED, GOLDEN PROTESTED TO OUR OFFICE. ADDITIONALLY, CHAMBERLAIN ADVISED US THAT IT WOULD PROTEST SHOULD WE SUSTAIN GOLDEN'S PROTEST. WHILE THE GOLDEN PROTEST WAS UNDER CONSIDERATION BY OUR OFFICE, THE EXISTING CONTRACT WITH SCRANTON WAS MODIFIED TO EXTEND DELIVERIES.

IT IS ADMINISTRATIVELY REPORTED THAT DELIVERIES FROM SCRANTON UNDER ITS EXISTING CONTRACT WOULD BE COMPLETED EARLY IN NOVEMBER, 1971. ADDITIONAL QUANTITIES WERE NOT AWARDED TO SCRANTON BY SEPTEMBER 30, A BREAK IN PRODUCTION WOULD OCCUR. NEGOTIATIONS WERE HELD WITH SCRANTON WHICH CULMINATED IN THE CONTRACT MODIFICATION AT THE SAME UNIT PRICE OFFERED BY SCRANTON UNDER RFP-0143. WE ARE INFORMALLY ADVISED BY THE DEPARTMENT OF THE ARMY THAT A SIMILAR MODIFICATION WAS MADE TO AN EXISTING CONTRACT OF GOLDEN'S, IN ORDER TO KEEP THAT FACILITY IN PRODUCTION. THESE MODIFICATIONS WERE MADE WITH THE OBJECTIVE OF MAINTAINING CONTINUITY OF PRODUCTION IN THOSE OFFERORS COMPETING FOR THE SET-ASIDE AND ASSURING THAT BOTH OF THOSE FIRMS WOULD BE IN A POSITION TO EQUITABLY PURSUE THE SET- ASIDE. CONVERSELY, GOLDEN'S PROTEST WOULD NOT HAVE RESULTED IN AN AWARD OF THE NON-SET-ASIDE PORTION TO YOUR FIRM, SINCE YOUR CONCERN POSSESSED NO LABOR SURPLUS STATUS, AND COMPETITION FOR THE SET-ASIDE WAS RESTRICTED TO CHAMBERLAIN AND GOLDEN. THEREFORE, AT THE TIME OF THE MODIFICATION OF THE SCRANTON CONTRACT, IT WAS A VIRTUAL CERTAINTY THAT YOUR FIRM WAS NOT IN COMPETITION FOR AN AWARD.

IN VIEW OF THE FOREGOING, WE ARE UNABLE TO CONCLUDE THAT THE EXTENSION OF THE EXISTING SCRANTON CONTRACT WAS AN ARBITRARY OR CAPRICIOUS ACTION WHICH PREJUDICED CONSIDERATION OF YOUR FIRM IN THE CURRENT PROCUREMENT, OR THAT AN EXTENSION OF YOUR CONTRACT WAS ALSO NECESSARY OR PROPER. ACCORDINGLY, YOUR PROTEST IS DENIED.