B-174096, NOV 4, 1971

B-174096: Nov 4, 1971

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PROTESTANT CONTENDS AWARD TO SYLVANIA WAS IMPROPER UNDER THE SOLICITATION'S ELIGIBILITY REQUIREMENTS CLAUSE. THE RECORD INDICATES THAT THESE ARE OF A HIGHLY SOPHISTICATED VARIETY FOR USE IN LIMITED SITUATIONS BY A FEW GOVERNMENT AGENCIES. AWARD WAS NOT IMPROPER. TO VALUE ENGINEERING COMPANY: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 17. THE SOLICITATION PROVIDED UNDER THE PARAGRAPH ENTITLED "ELIGIBILITY" THAT "COMMERCIAL ESTABLISHMENTS WHICH MANUFACTURE OR MARKET ALARM SYSTEMS OR WHO HAVE PARENT OR SUBSIDIARY COMPANY THAT MANUFACTURES OR MARKETS ALARM SYSTEMS WITHIN THE SCOPE OF THIS PROCUREMENT WILL BE INELIGIBLE FOR CONSIDERATION.". PROSPECTIVE OFFERORS WERE ALSO ADVISED THAT A COST-PLUS-A -FIXED-FEE CONTRACT WAS ANTICIPATED.

B-174096, NOV 4, 1971

BID PROTEST - AWARD CONTRARY TO SOLICITATION - ELIGIBILITY DENYING PROTEST OF VALUE ENGINEERING COMPANY AGAINST AWARD OF CONTRACT TO GTE SYLVANIA INCORPORATED UNDER RFP ISSUED BY THE LAW ENFORCEMENT ASSISTANCE ADMINISTRATION (LEAA), DEPARTMENT OF JUSTICE, FOR CONDUCTING AN EVALUATION OF SMALL BUSINESS AND RESIDENTIAL ALARM SYSTEMS. PROTESTANT CONTENDS AWARD TO SYLVANIA WAS IMPROPER UNDER THE SOLICITATION'S ELIGIBILITY REQUIREMENTS CLAUSE, WHICH DECLARED FIRMS THAT MANUFACTURE OR MARKET ALARM SYSTEMS WITHIN THE SCOPE OF THIS PROCUREMENT TO BE INELIGIBLE. ALTHOUGH MCGRAW HILL'S "ELECTRONIC BUYER'S GUIDE" LISTS SYLVANIA AS A MANUFACTURER OF ALARM SYSTEMS, THE RECORD INDICATES THAT THESE ARE OF A HIGHLY SOPHISTICATED VARIETY FOR USE IN LIMITED SITUATIONS BY A FEW GOVERNMENT AGENCIES. AS SYLVANIA DOES NOT MANUFACTURE OR MARKET COMMERCIAL ALARM SYSTEMS FOR USE IN SMALL BUSINESSES OR RESIDENCES, AWARD WAS NOT IMPROPER.

TO VALUE ENGINEERING COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 17, 1971, WITH ENCLOSURES, AND PRIOR CORRESPONDENCE, PROTESTING THE AWARD OF CONTRACT NO. J-LEAA-003- 72 TO GTE SYLVANIA INCORPORATED, WESTERN DIVISION, UNDER REQUEST FOR PROPOSALS (RFP) NO. J-012-LEAA-1, ISSUED ON APRIL 12, 1971, BY THE LAW ENFORCEMENT ASSISTANCE ADMINISTRATION (LEAA), DEPARTMENT OF JUSTICE.

THE RFP SOLICITED DETAILED PROPOSALS FOR CONDUCTING AN EVALUATION OF SMALL BUSINESS AND RESIDENTIAL ALARM SYSTEMS. THE RFP SET OUT ELIGIBILITY REQUIREMENTS AND THE CRITERIA LEAA WOULD USE TO EVALUATE PROPOSALS. THE SOLICITATION PROVIDED UNDER THE PARAGRAPH ENTITLED "ELIGIBILITY" THAT "COMMERCIAL ESTABLISHMENTS WHICH MANUFACTURE OR MARKET ALARM SYSTEMS OR WHO HAVE PARENT OR SUBSIDIARY COMPANY THAT MANUFACTURES OR MARKETS ALARM SYSTEMS WITHIN THE SCOPE OF THIS PROCUREMENT WILL BE INELIGIBLE FOR CONSIDERATION." PROSPECTIVE OFFERORS WERE ALSO ADVISED THAT A COST-PLUS-A -FIXED-FEE CONTRACT WAS ANTICIPATED.

THIRTY-SEVEN OFFERS WERE RECEIVED AND EACH PROPOSAL WAS EVALUATED AGAINST THE CRITERIA ESTABLISHED IN THE RFP BY A TECHNICAL EVALUATION COMMITTEE COMPOSED OF PERSONNEL OF THE NATIONAL INSTITUTE FOR LAW ENFORCEMENT AND CRIMINAL JUSTICE. THE EVALUATION COMMITTEE CONCLUDED THAT SEVEN OFFERORS, INCLUDING YOUR FIRM, HAD SUBMITTED TECHNICALLY ACCEPTABLE PROPOSALS. LEAA ENTERED INTO NEGOTIATIONS WITH YOUR FIRM AND THE SIX OTHER OFFERORS WITHIN THE COMPETITIVE RANGE. ALL OFFERORS WERE GIVEN THE OPPORTUNITY TO MAKE ORAL PRESENTATIONS, TO ASK QUESTIONS, AND TO SUBMIT BEST AND FINAL OFFERS. AFTER COMPLETION OF NEGOTIATIONS, IT WAS DETERMINED THAT SYLVANIA SHOULD RECEIVE THE AWARD. HOWEVER, IT IS REPORTED THAT, ALTHOUGH A CONTRACT WAS AWARDED TO SYLVANIA, PERFORMANCE UNDER THE CONTRACT IS BEING HELD IN ABEYANCE PENDING A DECISION BY OUR OFFICE ON THE PROTEST.

FIRST, YOU CONTEND THAT SYLVANIA IS INELIGIBLE TO RECEIVE AN AWARD BECAUSE IT MANUFACTURES AND MARKETS ALARM SYSTEMS FALLING WITHIN THE SCOPE OF THE ABOVE-QUOTED ELIGIBILITY CLAUSE. IN SUPPORT OF THIS CONTENTION, YOU POINT TO A TRADE PUBLICATION, MCGRAW-HILL'S "ELECTRONIC BUYER'S GUIDE," WHICH LISTS SYLVANIA AS A MANUFACTURER OF ALARM SYSTEMS, AND TO CERTAIN OF SYLVANIA'S TECHNICAL DATA SHEETS WHICH DESCRIBE THREE ALARM SYSTEMS WHICH IT MANUFACTURES. ON THE OTHER HAND, LEAA AND SYLVANIA CONTEND THAT THE ALARM SYSTEMS MANUFACTURED BY SYLVANIA DO NOT FALL WITHIN THE SCOPE OF THE PROCUREMENT AND THAT, THEREFORE, SYLVANIA WAS CLEARLY ELIGIBLE FOR AWARD.

THE ELIGIBILITY REQUIREMENT WAS MADE A PART OF THE RFP IN ORDER TO EXCLUDE FROM CONSIDERATION COMPANIES WHO ARE PRESENTLY ENGAGED IN OR WHO HAVE PARENT OR SUBSIDIARY COMPANIES PRESENTLY ENGAGED IN THE MARKETING OR MANUFACTURE OF SMALL BUSINESS OR RESIDENTIAL ALARM SYSTEMS. THIS RESTRICTION WAS PROPOSED BY LEAA TECHNICAL PERSONNEL BECAUSE THEY BELIEVED IT WOULD BE TO THE GOVERNMENT'S BEST ADVANTAGE TO INSURE AN OBJECTIVE STUDY OF SMALL BUSINESS AND RESIDENTIAL ALARM SYSTEMS. IT ALSO IS REPORTED THAT THE PHRASE "WITHIN THE SCOPE OF THIS PROCUREMENT" WAS MADE A PART OF THE ELIGIBILITY REQUIREMENT STATEMENT SO AS TO ALLOW COMPANIES NOT SPECIFICALLY IN THE RESIDENTIAL AND SMALL BUSINESS ALARM SYSTEM AREA TO SUBMIT PROPOSALS.

THE RECORD INDICATES THAT PRIOR TO THE ISSUANCE OF THE RFP, MEETINGS WERE HELD BETWEEN TECHNICAL AND CONTRACTING PERSONNEL AND IT WAS CONCLUDED THAT TO ELIMINATE FROM CONSIDERATION ALL COMPANIES MANUFACTURING OR MARKETING ALARM SYSTEMS WOULD BE AN UNNECESSARY RESTRICTION OF COMPETITION AND WOULD ELIMINATE COMPANIES AND PERSONNEL WHO HAVE OBTAINED VAST EXPERIENCE IN THE SCIENCE OF ALARM SYSTEMS THROUGH WORK PERFORMED AND RESEARCH DONE FOR THE MILITARY, OTHER GOVERNMENT AGENCIES, AS WELL AS IN COMMERCIAL AREAS OTHER THAN RESIDENTIAL AND SMALL BUSINESS. IT IS THE OPINION OF THE CONTRACTING OFFICE THAT THIS NEED FOR EXPERIENCE AND ADEQUATE COMPETITION OFFSETS ANY POSSIBILITY OF LACK OF OBJECTIVITY BY A MANUFACTURER OF ALARM SYSTEMS OUTSIDE THE SCOPE OF THE PROCUREMENT.

CONCERNING MCGRAW-HILL'S "ELECTRONIC BUYER'S GUIDE" WHICH YOU CITE AS EVIDENCE THAT SYLVANIA MANUFACTURES AND MARKETS ALARM SYSTEMS FALLING WITHIN THE SCOPE OF THE PROCUREMENT, WE ARE ADVISED THAT SUCH GUIDE DOES NOT SPECIFY THE TYPES OF ALARM SYSTEMS MANUFACTURED BY THE LISTED COMPANIES; THAT SYLVANIA IS LISTED UNDER TWO BROAD HEADINGS, NAMELY, "ALARMS - ELECTRONIC AUDIBLE SIGNAL" AND "ALARMS - INTRUDER;" AND THAT THE GUIDE DOES NOT ESTABLISH THAT SYLVANIA MANUFACTURES RESIDENTIAL AND SMALL BUSINESS ALARM SYSTEMS WHICH ARE WITHIN THE SCOPE OF THE PROCUREMENT. REGARDING THE TECHNICAL DATA SHEETS, IT IS REPORTED THAT SUCH SHEETS DESCRIBE THREE ALARM SYSTEMS MANUFACTURED BY SYLVANIA AND THAT THE ITEMS ARE "PHOTOCONDUCTIVE INTRUSION DETECTOR," "AIRCRAFT INTRUSION DETECTOR," AND "BALANCED TRANSMISSION LINE SECURITY SYSTEM." IN REGARD TO THE FOREGOING DEVICES, LEAA STATES IN ITS REPORT OF SEPTEMBER 30, 1971, TO OUR OFFICE, AS FOLLOWS:

"PHOTOCONDUCTIVE INTRUSION DETECTOR - THIS DEVICE WAS DEVELOPED FOR A GOVERNMENT REQUIREMENT. IT HAS A LIMITED USE SINCE IT MUST OPERATE IN A TOTALLY CLOSED ENVIRONMENT (NO WINDOWS). THE SYLVANIA LITERATURE INDICATES THAT TYPICAL APPLICATIONS INCLUDE 'CLASSIFIED STORAGE AREAS, BRIEFING AND DISPLAY ROOMS AND PROTECTION OF WEAPONS OR OTHER HIGH VALUE MATERIAL.' THE CONTRACTING OFFICER DETERMINED THAT THERE WAS NO EVIDENCE THAT SYLVANIA ATTEMPTED TO MARKET THIS ITEM FOR SMALL BUSINESS. SYLVANIA'S LEGAL COUNSEL ALSO INDICATED THAT THE DEVICE IS NO LONGER MARKETED BY SYLVANIA AND NONE WERE EVER SOLD TO A NON GOVERNMENT CUSTOMER.

"AIRCRAFT INTRUSION DETECTOR - THIS DEVICE IS DESIGNED TO PROTECT AIRCRAFT AGAINST TAMPERING. THE CONTRACTING OFFICER DETERMINED THAT NO APPLICATION TO SMALL BUSINESS OR RESIDENCES WAS EVIDENT. SYLVANIA'S LEGAL COUNSEL STATED FLATLY THAT THIS DEVICE WAS NOT DESIGNED FOR THE SMALL BUSINESS OR RESIDENTIAL MARKETS AND THAT ALTHOUGH IT COULD BE USED TO PROTECT A CAR OR TRUCK, NO SUCH MARKET EXISTS BECAUSE OF ITS HIGH COST (OVER $5000) AND SOPHISTICATION. THE CONTRACTING OFFICER IN HIS FINDINGS INDICATED THAT THE DEVICE IN FACT WOULD HAVE TO BE MODIFIED BEFORE IT COULD BE USED FOR A TRUCK OR CAR AND THAT ALARM SYSTEMS FOR CARS AND TRUCKS WERE NOT A PRIMARY CONSIDERATION OF THIS PROCUREMENT.

"BALANCED TRANSMISSION LINE SECURITY SYSTEM - THIS DEVICE IS TECHNICALLY AN ALARM SYSTEM, BUT ITS REAL PURPOSE IS TO DETECT THE PRESENCE OF AN INTRUDER. THID DEVICE IS NOT MARKETED COMMERCIALLY AND NO MENTION WAS MADE OF IT IN THE CONTRACTING OFFICER'S FINDINGS SINCE ITS ONLY APPLICATION TO DATE HAS BEEN IN SOUTHEAST ASIA. IT HAS BEEN USED TO ESTABLISH 'ELECTRONIC WALLS' AROUND MILITARY BASE PERIMETERS. SYLVANIA HAS INDICATED THAT THIS DEVICE IS NO LONGER AVAILABLE."

AS FURTHER SUPPORT FOR THE FACT THAT SYLVANIA DOES NOT MANUFACTURE ALARM SYSTEMS WITHIN THE SCOPE OF THIS PROCUREMENT, LEAA POINTS OUT THAT ON THE FIRST PAGE OF ITS PROPOSAL SYLVANIA STATED THAT IT "DOES NOT MANUFACTURE ANY COMMERCIAL DETECTION SYSTEMS." ON THE BASIS OF THE PRESENT RECORD, IT DOES NOT APPEAR THAT SYLVANIA MANUFACTURES ALARM SYSTEMS WHICH FALL WITHIN THE SCOPE OF THIS PROCUREMENT.

SECOND, YOU STATE THAT SINCE ONE OF THE OBJECTIVES OF THE RFP IS A "DETERMINATION OF THE MOST COST EFFECTIVE ALARM SYSTEMS FOR THE PROTECTION OF SMALL BUSINESSES," ANY PROPOSAL SUBMITTED BY SYLVANIA CANNOT BE CONSIDERED IN THE BEST INTEREST OF THE GOVERNMENT BECAUSE AS A MANUFACTURER OF ALARM SYSTEMS IT COULD BE PREJUDICED IN ITS EVALUATION. SINCE THE RECORD INDICATES THAT SYLVANIA DOES NOT NOW MANUFACTURE AND DOES NOT HAVE ANY INTENTION TO MANUFACTURE SMALL BUSINESS AND RESIDENTIAL ALARM SYSTEMS IN THE FUTURE, THERE DOES NOT APPEAR TO BE ANY BASIS FOR CONCLUDING THAT SYLVANIA WOULD BE PREJUDICED IN CONDUCTING THE CONTEMPLATED EVALUATION.

THIRD, YOU CONTEND THAT SYLVANIA'S EFFECTIVENESS COULD BE LIMITED BECAUSE OF ITS COMPETITIVE POSITION WITH OTHER ALARM MANUFACTURERS AND BECAUSE OTHER MANUFACTURERS WOULD BE RELUCTANT TO GIVE SYLVANIA ESSENTIAL INFORMATION. HOWEVER, NO EVIDENCE HAS BEEN FURNISHED TO SUPPORT YOUR CONTENTION IN THIS RESPECT. FURTHERMORE, IT IS REPORTED THAT SYLVANIA HAS SUCCESSFULLY CARRIED OUT A STUDY FOR THE DEPARTMENT OF STATE AND THE REPORT PREPARED ON THAT STUDY IS A CLEAR INDICATION THAT SYLVANIA HAS AN ADEQUATE DATA BASE ON ALARM SYSTEMS AND THAT IT HAS THE ABILITY TO OBTAIN THE NECESSARY ADDITIONAL INFORMATION ON ALARM SYSTEMS. MOREOVER, SYLVANIA IN ITS PROPOSAL INDICATED THAT IT ALREADY HAS AN EXTENSIVE LIBRARY OF COMMERCIALLY AVAILABLE ALARM SYSTEMS THAT INCLUDES TECHNICAL PERFORMANCE AND COST INFORMATION.

THE FINAL BASIS FOR YOUR PROTEST RELATES TO THE MANNER IN WHICH THE SUCCESSFUL OFFEROR WAS SELECTED. YOU QUESTION AN AWARD AT A PRICE HIGHER THAN THE PRICE OFFERED BY YOUR FIRM. WHILE YOUR FIRM DID SUBMIT THE LOWEST PROPOSAL AS TO PRICE, IT IS NOTED THAT OF THE PROPOSALS OF THE SEVEN OFFERORS WITHIN THE COMPETITIVE RANGE, THE EVALUATION BOARD RANKED YOUR PROPOSAL THE LOWEST OF ALL SEVEN TECHNICALLY ACCEPTABLE PROPOSALS. THE CONTRACT THAT WAS AWARDED FOR THE STUDY OF SMALL BUSINESS AND RESIDENTIAL ALARM SYSTEMS IS A COST-PLUS-A-FIXED-FEE TYPE CONTRACT. UNDER SUCH METHOD OF CONTRACTING, THE PRICE SUBMITTED BY OFFERORS OR THE COSTS OF PERFORMING THE STUDY ARE ONLY ESTIMATES OF WHAT IT MAY ACTUALLY COST. THE CONTRACTOR IN SUCH SITUATIONS IS REIMBURSED NOT ON THE BASIS OF HIS COST ESTIMATE BUT FOR THE ACTUAL COSTS INCURRED IN PERFORMING THE WORK. SINCE THE ESTIMATED PRICE QUOTED BY THE OFFEROR DOES NOT CONTROL THE AMOUNT OF ACTUAL REIMBURSEMENT, OFFERS TO PERFORM WORK ON A COST-PLUS-A- FIXED-FEE BASIS ARE NOT EVALUATED ON A STRICT PRICE BASIS. IN THIS CONNECTION, FEDERAL PROCUREMENT REGULATIONS 1-3.805-2 STATES:

"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 (A) THE LOWEST PROPOSED COST, (B) THE LOWEST PROPOSED FEE, OR (C) 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 AGENCY PROCEDURES AND APPROPRIATE TO THE WORK TO BE PERFORMED (SEE SEC 1-3.808). 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."

ACCORDINGLY, THE PROTEST IS DENIED.