B-176066(2), AUG 28, 1972

B-176066(2): Aug 28, 1972

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BELIEVES THAT IT WOULD HAVE BEEN IN THE GOVERNMENT'S BEST INTERESTS IF NEGOTIATIONS HAD BEEN CONDUCTED AND BURROUGHS ADVISED THAT ITS PROPOSAL APPEARED TO CONTAIN UNNECESSARY EQUIPMENT. GOULD: REFERENCE IS MADE TO A LETTER DATED JUNE 12. ENCLOSED IS A COPY OF OUR DECISION OF TODAY DENYING THE PROTEST. YOUR ATTENTION IS DIRECTED TO THAT PORTION OF OUR DECISION WHEREIN WE EXPRESS THE VIEW THAT DCA SHOULD HAVE BEEN INTERESTED IN THE REASONS BURROUGHS PROPOSED A DUAL CENTRAL PROCESSING UNIT (CPU) SYSTEM SINCE A SINGLE CPU HAD BEEN SUCCESSFULLY BENCHMARKED. WE BELIEVE IT WOULD HAVE BEEN IN THE GOVERNMENT'S BEST INTERESTS IF NEGOTIATIONS HAD BEEN CONDUCTED AND BURROUGHS ADVISED THAT ITS PROPOSAL APPEARED TO INCLUDE UNNECESSARY EQUIPMENT SINCE ITS SINGLE CPU HAD BEEN SUCCESSFULLY BENCHMARKED.

B-176066(2), AUG 28, 1972

BID PROTEST DENIED - NEGOTIATIONS - PRICE REASONABLENESS LETTER REGARDING DECISION OF TODAY DENYING A PROTEST BY THE BURROUGHS CORPORATION AGAINST THE AWARD OF A CONTRACT UNDER AN RFP ISSUED BY THE DEFENSE COMMUNICATIONS AGENCY. WHILE THE PROTEST HAS BEEN DENIED, THE COMP. GEN. BELIEVES THAT IT WOULD HAVE BEEN IN THE GOVERNMENT'S BEST INTERESTS IF NEGOTIATIONS HAD BEEN CONDUCTED AND BURROUGHS ADVISED THAT ITS PROPOSAL APPEARED TO CONTAIN UNNECESSARY EQUIPMENT. ALSO, GAO HAS SERIOUS RESERVATIONS ABOUT THE AGENCY'S POSITION THAT THE FAIRNESS AND REASONABLENESS OF THE PRICES MAY BE DETERMINED BY REFERENCE TO THE FEDERAL SUPPLY SCHEDULES. SEE FPMR 101- 32.407.

TO GENERAL GORDON T. GOULD:

REFERENCE IS MADE TO A LETTER DATED JUNE 12, 1972, REFERENCE NO. 105, AND SUBSEQUENT CORRESPONDENCE, FROM YOUR COUNSEL REPORTING ON THE PROTEST BY THE BURROUGHS CORPORATION AGAINST THE AWARD OF A CONTRACT UNDER RFP DCA100 -72-R-0018.

ENCLOSED IS A COPY OF OUR DECISION OF TODAY DENYING THE PROTEST.

YOUR ATTENTION IS DIRECTED TO THAT PORTION OF OUR DECISION WHEREIN WE EXPRESS THE VIEW THAT DCA SHOULD HAVE BEEN INTERESTED IN THE REASONS BURROUGHS PROPOSED A DUAL CENTRAL PROCESSING UNIT (CPU) SYSTEM SINCE A SINGLE CPU HAD BEEN SUCCESSFULLY BENCHMARKED, FOR BOTH THE BASIC AND EXPANDED REQUIREMENTS. AS STATED IN OUR DECISION, WE BELIEVE IT WOULD HAVE BEEN IN THE GOVERNMENT'S BEST INTERESTS IF NEGOTIATIONS HAD BEEN CONDUCTED AND BURROUGHS ADVISED THAT ITS PROPOSAL APPEARED TO INCLUDE UNNECESSARY EQUIPMENT SINCE ITS SINGLE CPU HAD BEEN SUCCESSFULLY BENCHMARKED.

MOREOVER, WHILE YOUR AGENCY'S REPORTS SUGGEST THAT THE FAIRNESS AND REASONABLENESS OF THE PRICES OFFERED MAY BE ESTABLISHED BY COMPARING THOSE PRICES TO THE PRICES LISTED ON THE FEDERAL SUPPLY SCHEDULES (FSS), WE HAVE SERIOUS RESERVATIONS CONCERNING THE VALIDITY OF THIS POSITION. COUNSEL HAS CITED ASPR 5-103 AS SUPPORT FOR THE POSITION THAT THE FSS PRICE LISTS MAY BE RELIED UPON AS CONTAINING REASONABLE PRICES FOR AUTOMATIC DATA PROCESSING EQUIPMENT (ADPE). IT SHOULD BE NOTED, HOWEVER, THAT SECTION 101-32.407 OF THE FEDERAL PROPERTY MANAGEMENT REGULATIONS (FPMR) PLACES CERTAIN LIMITATIONS ON THE USE OF THE FSS IN THE ACQUISITION OF ADPE AND SUCH LIMITATIONS APPEAR TO BE MADE APPLICABLE TO ALL FEDERAL AGENCIES BY FPMR 101-32.401. SEE 51 COMP. GEN. (B-173302, FEBRUARY 1, 1972). SPECIFICALLY, FPMR 101 32.407(C) PROVIDES THAT THE EXISTENCE OF AN FSS CONTRACT DOES NOT WAIVE THE REQUIREMENT FOR FULL COMPETITION IN OBTAINING ADPE, AND FPMR 101 32.407(D) QUALIFIES THIS PRINCIPLE BY ALLOWING THE PROCUREMENT OF ADPE UNDER AN FSS ONLY WHEN A DETERMINATION AS TO LOWEST OVERALL COST CAN BE REACHED AND DOCUMENTED, WITHOUT FURTHER SOLICITATION AND NEGOTIATION. THUS, IT DOES NOT APPEAR THAT THE REASONABLENESS OF AN FSS PRICE FOR ADPE IS ACTUALLY ESTABLISHED FOR SUBSEQUENT PURCHASES MERELY BY THE APPEARANCE OF THAT PRICE ON THE SCHEDULE.

IN ADDITION, COUNSEL ARGUES THAT IT WAS NOT CONSIDERED REASONABLE TO ASSUME THAT THESE MAJOR HARDWARE VENDORS WOULD REDUCE THE FSS PRICE OF THEIR MAJOR HARDWARE ITEMS, PARTICULARLY IN VIEW OF THE "MOST FAVORED CUSTOMER" TYPE PROVISIONS (PRICE REDUCTIONS CLAUSE) APPLICABLE TO FSS VENDORS. IT SHOULD BE NOTED, HOWEVER, THAT THE FSS SPECIFICALLY REMOVES FROM THE PURVIEW OF THE "PRICE REDUCTIONS" CLAUSE ANY BETTER PRICES, TERMS, OR CONDITIONS RECEIVED FROM A SCHEDULE VENDOR UNDER "OTHER CONTRACTUAL ARRANGEMENTS" PURSUANT TO FPMR 101-32.403-1(B). (SEE SPECIAL PROVISIONS 1(E) OF THE FSS AND PARAGRAPH (E) OF THE PRICE REDUCTIONS CLAUSE.) SINCE DCA DID NOT PURCHASE OFF THE SCHEDULE BUT PURSUED AN INDEPENDENT CONTRACTUAL ARRANGEMENT, IT SEEMS AT LEAST DEBATABLE THAT THE "PRICE REDUCTIONS" PROVISIONS WERE RELEVANT IN THIS CASE.

FINALLY, WE WISH TO POINT OUT THAT OUR OFFICE IS CURRENTLY ENGAGED IN A GOVERNMENT-WIDE REVIEW OF THE USE OF THE FSS LISTINGS OF ADPE IN VIEW OF ALLEGATIONS FROM OTHER SOURCES THAT THE USE OF SUCH LISTINGS BY THE AGENCIES HAS NOT RESULTED IN OBTAINING FOR THE GOVERNMENT PRICES AS FAVORABLE AS THOSE WHICH COULD BE EXPECTED FROM COMPETITIVE SOLICITATIONS.