B-176311(2), OCT 26, 1973

B-176311(2): Oct 26, 1973

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YOU HAVE PROTESTED AGAINST THE PROPOSED AWARD OF A CONTRACT TO HUGHES AIRCRAFT COMPANY (HUGHES) UNDER REQUEST FOR QUOTATIONS (RFQ) DAAB07-72-Q-0220. PROPOSALS WERE EVALUATED AND. IT WAS DETERMINED THAT ALL PROPOSALS. WERE WITHIN THE "ZONE OF CONSIDERATION" AND ELIGIBLE FOR NEGOTIATIONS. NEGOTIATIONS WERE HELD WITH ALL OFFERORS. TECHNICAL AND COST EVALUATIONS OF THE REVISED PROPOSALS WERE CONDUCTED AND ON JUNE 21. ECOM WAS NOTIFIED BY RCA OF THAT FIRM'S PROTEST AGAINST THE PROPOSED AWARD. ECOM HAS WITHHELD THE PROPOSED AWARD UNTIL THE ISSUES RAISED BY ALL THE PROTESTERS ARE RESOLVED. THE ARMY PROVIDED YOU AND THE OTHER PROTESTERS WITH COPIES OF ITS ADMINISTRATIVE REPORT BUT WITHOUT CERTAIN ATTACHMENTS WHICH WERE RESTRICTED FROM DISCLOSURE OUTSIDE THE GOVERNMENT.

B-176311(2), OCT 26, 1973

PRECIS-UNAVAILABLE

TO GENERAL ELECTRIC COMPANY:

BY LETTER DATED AUGUST 16, 1973, AND PRIOR CORRESPONDENCE, YOU HAVE PROTESTED AGAINST THE PROPOSED AWARD OF A CONTRACT TO HUGHES AIRCRAFT COMPANY (HUGHES) UNDER REQUEST FOR QUOTATIONS (RFQ) DAAB07-72-Q-0220, ISSUED ON FEBRUARY 15, 1972, BY THE UNITED STATES ARMY ELECTRONICS COMMAND (ECOM), FORT MONMOUTH, NEW JERSEY.

THE PROPOSED PROCUREMENT CALLS FOR FIVE EACH MOBILE MORTAR LOCATING RADAR (MMLR) AN/TPQ-36, ENGINEERING DEVELOPMENT MODELS, AND ANCILLARY ITEMS, ON A COST-PLUS-INCENTIVE-FEE (CPIF) BASIS. ON MARCH 30, 1972, FOUR OFFERORS RESPONDED TO THE RFQ (ITT GILFILLAN (ITT), HUGHES, RADIO CORPORATION OF AMERICA (RCA) AND GENERAL ELECTRIC COMPANY (GE)). PROPOSALS WERE EVALUATED AND, BASED UPON A REPORT DATED APRIL 28, 1972, IT WAS DETERMINED THAT ALL PROPOSALS, INCLUDING THAT OF GE, WERE WITHIN THE "ZONE OF CONSIDERATION" AND ELIGIBLE FOR NEGOTIATIONS. IN MAY 1972, NEGOTIATIONS WERE HELD WITH ALL OFFERORS. ON MAY 26, 1972, THE CLOSING DATE FOR NEGOTIATIONS AND SUBMISSION OF BEST AND FINAL OFFERS, ALL OFFERORS SUBMITTED REVISED PROPOSALS. TECHNICAL AND COST EVALUATIONS OF THE REVISED PROPOSALS WERE CONDUCTED AND ON JUNE 21, 1972, THE CONTRACTING OFFICER DETERMINED THAT THE AWARD SHOULD BE MADE TO HUGHES.

ON JUNE 22, ECOM WAS NOTIFIED BY RCA OF THAT FIRM'S PROTEST AGAINST THE PROPOSED AWARD. AS A RESULT OF THAT PROTEST, AND THOSE SUBMITTED BY ITT AND YOUR FIRM, ECOM HAS WITHHELD THE PROPOSED AWARD UNTIL THE ISSUES RAISED BY ALL THE PROTESTERS ARE RESOLVED.

IN AUGUST 1972, THE ARMY PROVIDED YOU AND THE OTHER PROTESTERS WITH COPIES OF ITS ADMINISTRATIVE REPORT BUT WITHOUT CERTAIN ATTACHMENTS WHICH WERE RESTRICTED FROM DISCLOSURE OUTSIDE THE GOVERNMENT. ALL OF THE PROTESTERS OBJECTED TO THE OMISSION OF THE ATTACHMENTS AND, AS A RESULT, CERTAIN ADDITIONAL PORTIONS OF THE REPORT WERE PROVIDED. ITT AND RCA REQUESTED THE RELEASE OF ADDITIONAL PORTIONS OF THE REPORT FILED WITH THIS OFFICE. THESE REQUESTS WERE DENIED BY THE COMMANDING GENERAL OF ECOM. LATE SEPTEMBER 1972, BOTH ITT AND RCA APPEALED ECOM'S FAILURE TO RELEASE THE DISPUTED DOCUMENTS TO THE OFFICE OF THE SECRETARY OF THE ARMY UNDER THE FREEDOM OF INFORMATION ACT (5 U.S.C. 552). SUBSEQUENTLY, ON JANUARY 9 AND 10, 1973, SEPARATE "DEBRIEFING" CONFERENCES WERE HELD AT ECOM FOR EACH OF THE FOUR OFFERORS. HOWEVER, NO FURTHER DOCUMENTS WERE RELEASED. LETTERS DATED FEBRUARY 5, 1973, THE GENERAL COUNSEL OF THE ARMY ON BEHALF OF THE SECRETARY DENIED BOTH THE APPEALS OF RCA AND ITT.

ON MARCH 2, 1973, ITT FILED A COMPLAINT IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA (ITT GILFILLAN, INC. V. ROBERT F. FROEHLKE, CIVIL ACTION NO. 416-73) REQUESTING AN INJUNCTION AGAINST THE SECRETARY OF THE ARMY FROM WITHHOLDING THE REQUESTED DOCUMENTS. MEANWHILE, WE REQUESTED THAT THE PARTIES FILE THEIR RESPONSES TO THE PORTION OF THE ADMINISTRATIVE REPORT WHICH HAD BEEN RELEASED. ALL PARTIES COMPLIED WITH THIS REQUEST.

ON JUNE 28, 1973, HOWEVER, THE COURT ORDERED THE ARMY TO DISCLOSE SOME OF THE WITHHELD DOCUMENTS TO ITT WHILE EXEMPTING OTHERS FROM DISCLOSURE. AUGUST 1, 1973, ITT AND THE ARMY STIPULATED THAT THE ARMY WOULD RELEASE THE DOCUMENTS ORDERED BY THE COURT TO BE DISCLOSED; THAT NEITHER PARTY WOULD APPEAL THE ORDER OF THE DISTRICT COURT AND THAT ITT WOULD FILE ITS COMMENTS ON OR BEFORE AUGUST 14, 1973. THE ARMY HAS PROVIDED YOU WITH COPIES OF THESE DOCUMENTS. ACCORDINGLY, WE HAVE DELAYED OUR DECISION TO PERMIT YOU TO COMMENT ON THE RELEASED DOCUMENTS. YOUR COMMENTS HAVE BEEN RECEIVED AND CONSIDERED BY THIS OFFICE.

YOU ASSERT THAT THE PROPOSED AWARD TO HUGHES IS NOT IN THE BEST INTEREST OF THE GOVERNMENT FOR THE FOLLOWING REASONS: THE GOVERNMENT'S COST ESTIMATES AND ITS MAN-MONTH ESTIMATE ARE UNREALISTICALLY HIGH; ECOM RELIED ON THESE ESTIMATES IN ITS EVALUATION AND FAILED TO ADEQUATELY ASSESS THE RATIONALE OF GE'S ESTIMATES INCLUDING SUCH FACTORS AS PRIOR GE WORK, SUBCONTRACTED EFFORT, AND GE'S CPIF PENALTY FEE AND FIXED-PRICE-INCENTIVE PROPOSAL (FPI); AND ECOM FAILED TO CONDUCT MEANINGFUL NEGOTIATIONS WITH GE.

PERTINENT PORTIONS OF THE EVALUATION CRITERIA CONTAINED IN SECTION D OF THE RFQ ARE SET FORTH BELOW:

"D.1 BASIS FOR AWARD

ANY AWARD TO BE MADE WILL BE BASED ON THE BEST OVER-ALL PROPOSAL WITH APPROPRIATE CONSIDERATION GIVEN TO TECHNICAL PROPOSAL, PAST PERFORMANCE/MANAGEMENT, AND COST CONSIDERATION IN THAT ORDER OF IMPORTANCE.

OF THE THREE FACTORS SET FORTH ABOVE, TECHNICAL PROPOSAL, BY FAR, IS THE MOST IMPORTANT FACTOR AND BEARS GREATER WEIGHT THAN THE OTHER TWO FACTORS COMBINED.

OF THE LAST TWO FACTORS, PAST PERFORMANCE/MANAGEMENT BEARS THE GREATER WEIGHT.

TO RECEIVE CONSIDERATION FOR AWARD, A RATING OF NO LESS THAN 'ACCEPTABLE' MUST BE ACHIEVED IN EACH OF THE THREE FACTORS.

"D.2 FACTORS AND SUB-FACTORS TO BE EVALUATED, IN RELATIVE ORDER OF IMPORTANCE

A. TECHNICAL PROPOSAL FOR DEVELOPMENT PHASE

(1) ENGINEERING APPROACH

(2) ENGINEERING MAN-HOURS

B. PAST PERFORMANCE/MANAGEMENT

C. COST CONSIDERATION

(1) COST PROPOSAL

(2) COST REALISM

(3) USE OF GOVERNMENT PROPERTY

"D.3 EVALUATION APPROACH

A.(2) ENGINEERING MAN-HOURS - SUFFICIENCY AND REASONABLENESS OF OFFEROR'S ESTIMATE OF ENGINEERING MAN-HOURS REQUIRED TO ACCOMPLISH HIS SPECIFIC TECHNICAL APPROACH.

C.(2) COST REALISM: AS PART OF PROPOSAL EVALUATION AND IN ORDER TO MINIMIZE POTENTIAL OR BUILT-IN COST GROWTH, THE GOVERNMENT INTENDS TO EVALUATE THE REALISM OF QUOTER'S PROPOSED COSTS IN TERMS OF THE QUOTER'S PROPOSED APPROACH. PROPOSALS MAY BE PENALIZED TO THE DEGREE THAT THE PROPOSED COSTS ARE UNREALISTICALLY LOW. TO ASSIST THE GOVERNMENT IN EVALUATING THIS AREA, QUOTERS ARE REQUIRED TO FURNISH THE FOLLOWING INFORMATION - A BRIEF BUT COMPREHENSIVE STATEMENT CONCERNING THE ESTIMATING PROCEDURES UTILIZED IN PREPARING THIS OFFER TO SPECIFICALLY INCLUDE A DESCRIPTION OF THE ORGANIZATION FOR ESTIMATING."

AS STATED, THE RECORD INDICATES THAT AS A RESULT OF THE INITIAL EVALUATION ALL OFFERS WERE DETERMINED TO BE WITHIN THE COMPETITIVE RANGE. ALTHOUGH ENGINEERING MAN-HOURS AND THE COST PROPOSALS HAD BEEN EVALUATED INITIALLY THEY WERE NOT CONSIDERED IN DETERMINING THE COMPETITIVE RANGE. IN THIS REGARD, THE EVALUATION REPORT OF APRIL 28, 1972, STATES:

"B.ENGINEERING MANPOWER IS AN IMPORTANT CONSIDERATION. HOWEVER, BECAUSE OF THE WIDE SPREAD AND THE LOW VALUE OF THREE OF THEM IN MANPOWER ESTIMATES, WE ARE NOT FACTORING THEM INTO THE EVALUATIONS AT THIS TIME.

IN THE EVALUATION, PROPOSALS WERE NUMERICALLY SCORED ONLY UNDER THE SUBFACTOR OF ENGINEERING APPROACH. ACCORDING TO THE RFQ, THIS SUBFACTOR, WHICH IS ASSIGNED PARAMOUNT WEIGHT UNDER THE EVALUATION CRITERIA, MEASURES AN OFFEROR'S UNDERSTANDING OF THE PROBLEM AND, AMONG OTHER THINGS, THE FEASIBILITY OF THE OFFEROR'S PROPOSED DESIGN. AS A RESULT OF THE INITIAL SCORING UNDER THIS SUBFACTOR IT WAS CONCLUDED THAT FROM AN ENGINEERING DESIGN STANDPOINT ALL FOUR PROPOSALS WERE ACCEPTABLE. GE'S PROPOSAL RECEIVED THE LOWEST SCORE UNDER THIS SUBFACTOR.

DISCUSSIONS WERE HELD WITH ALL FOUR OFFERORS FROM MAY 3 THROUGH MAY 15, 1972. THE RECORD INDICATES THAT ALL OFFERORS, EXCEPT HUGHES, WERE INFORMED THAT ECOM CONSIDERED THE COSTS AND LEVELS OF EFFORT PROPOSED TO BE TOO LOW OVERALL, ALTHOUGH HUGHES WAS INFORMED THAT ITS PRICE WAS CONSIDERED "LOW IN CERTAIN AREAS AND HIGH IN OTHERS." THE RECORD ALSO REVEALS THAT ALL OFFERORS WERE REQUESTED TO SUBMIT REVISED TECHNICAL PROPOSALS INCORPORATING RESPONSES TO TECHNICAL QUESTIONS RAISED DURING THE DISCUSSIONS. THEY WERE ALSO REQUESTED TO RESUBMIT COST PROPOSALS INCORPORATING CHANGES GENERATED BY THE SUPPLEMENTAL TECHNICAL PROPOSALS AND THE COMMENTS OF THE DEFENSE CONTRACT AUDIT AGENCY (DCAA), WHICH HAD AUDITED THE OFFERORS' COST PROPOSALS. IN ADDITION, OFFERORS WERE INSTRUCTED TO CONSIDER AN ECOM SUGGESTED INCENTIVE PLAN AND TO SUBMIT A FPI PROPOSAL ALSO.

WHEN ECOM EVALUATED THE REVISED COST AND TECHNICAL PROPOSALS, INCLUDING ALL OF THE SUBFACTORS UNDER THE TECHNICAL CRITERION, IT FOUND THAT, NOTWITHSTANDING THE WARNINGS CONVEYED TO THE OFFERORS DURING NEGOTIATION, THEY ALL FAILED TO SIGNIFICANTLY RAISE THEIR PROPOSED LEVELS OF EFFORT. SINCE ONLY HUGHES' PROPOSED LEVEL OF EFFORT AND COST ESTIMATES WERE CONSIDERED REASONABLY IN LINE WITH THE GOVERNMENT ESTIMATES AND SINCE HUGHES RECEIVED THE HIGHEST SCORE UNDER THE SUBFACTOR OF ENGINEERING APPROACH, ECOM CONCLUDED THAT HUGHES WAS THE ONLY ACCEPTABLE OFFEROR AND SHOULD RECEIVE THE AWARD.

INITIALLY, YOU CONTEND THAT ECOM'S LEVEL OF EFFORT AND COST ESTIMATES AGAINST WHICH THE GE PROPOSAL WAS EVALUATED WERE UNREASONABLY HIGH. SUPPORT OF THIS CONTENTION YOU CITE THE FACT THAT BOTH OF THESE ESTIMATES WERE DERIVED PRIMARILY FROM COST EXPERIENCE UNDER THE PRIOR AN/TPQ-28 CONTRACT. YOU OBJECT TO ECOM'S USE OF THIS COST EXPERIENCE BECAUSE YOU ASSERT THAT SUBSEQUENT TO THE AWARD OF THIS CONTRACT SIGNIFICANT COST ESCALATIONS OCCURRED AS THE RESULT OF REDESIGNS AND INCREASES IN SCOPE DIRECTED BY THE GOVERNMENT. ACCORDINGLY, YOU CONCLUDE THAT THE COST FIGURES USED AS A BASIS FOR THESE ESTIMATES WERE INFLATED BY COSTS INCURRED IN A NONCOMPETITIVE ENVIRONMENT AND WERE NOT APPLICABLE TO THE BASIC DESIGN WORK REQUIRED BY THE SUBJECT SOLICITATION. YOU SUGGEST THAT ECOM'S ESTIMATES WERE DESIGNED TO AVOID THE APPEARANCE OF COST GROWTH RATHER THAN TO PREDICT THE LOWEST POSSIBLE COST OF PERFORMING THE REQUIRED WORK.

THE RECORD INDICATES THAT ON NOVEMBER 1, 1971, PRIOR TO THE ISSUANCE OF THE SUBJECT SOLICITATION, ECOM PREPARED AN INDEPENDENT GOVERNMENT COST ESTIMATE (IGCE) FOR FIVE ENGINEERING DEVELOPMENT SETS. THIS COST ESTIMATE WAS BASED PRIMARILY ON ACTUAL COSTS INCURRED IN FULLY COMPLETING ONE RADAR SET AND PARTIALLY COMPLETING TWO OTHERS UNDER THE AN/TPQ-28 CONTRACT. THESE ACTUAL COSTS WERE ADJUSTED FOR DESIGN AND QUANTITY CHANGES BETWEEN THE AN/TPQ-28 AND THE SUBJECT AN/TPQ-36 PROCUREMENT, AS WELL AS FOR INFLATION FACTORS.

DURING THE PERIOD BETWEEN THE DEVELOPMENT OF THE IGCE AND THE ISSUANCE OF THE RFQ, RESEARCH AND DEVELOPMENT EFFORTS WERE IN PROGRESS WHICH RESULTED IN A REDUCTION OF THE REQUIRED DESIGN EFFORT, WHICH INFORMATION WAS INCLUDED IN THE RFQ. ACCORDINGLY, A REVISED IGCE WAS PREPARED. THIS ESTIMATE WAS THEN INDIVIDUALIZED FOR EACH PROPOSAL BY MULTIPLYING THE GOVERNMENT ESTIMATE FOR THE 5 SETS BY A "SCALER" FACTOR RELATED TO THE CALCULATED MISSION EQUIPMENT COSTS OF THE GOVERNMENT AND EACH OFFEROR. THE GOVERNMENT ESTIMATE OF 2500 MAN-MONTHS OF EFFORT (DURING THE EVALUATION ECOM CONVERTED THE OFFERORS ESTIMATES WHICH WERE EXPRESSED AS MAN-HOURS TO MAN-MONTHS) FOR ITEM 0001 (5 RADAR SETS) WAS DERIVED FROM THE ORIGINAL IGCE DEVELOPED IN NOVEMBER 1971.

ALTHOUGH YOU CONTEND THAT THE ECOM METHOD OF DEVELOPING THESE ESTIMATES WAS INACCURATE, WE FIND NO BASIS FOR CONCLUDING THAT ANOTHER METHOD WOULD HAVE BEEN MORE APPROPRIATE. IN MATTERS SUCH AS THIS, THE ADMINISTRATIVE JUDGMENT AS TO WHICH METHOD SHOULD BE USED IS ENTITLED TO GREAT WEIGHT. IN OUR VIEW THAT JUDGMENT MAY NOT BE OVERRULED BY THIS OFFICE SO LONG AS IT IS REASONABLE. BASED ON OUR REVIEW OF THE RECORD WE CANNOT SAY THAT ECOM'S METHODOLOGY IN DEVELOPING ITS ESTIMATES WAS UNREASONABLE.

YOU ALSO CONTEND THAT ECOM'S EVALUATION OF THE COSTS AND MAN-HOURS PROPOSED BY GE WAS ERRONEOUS IN THAT ECOM FAILED TO PROPERLY CONSIDER GE'S PRIOR EXPERIENCE AND INVESTMENT. IN THIS CONNECTION, YOU HAVE PROVIDED US WITH INFORMATION WHICH YOU BELIEVE SHOWS THAT GE'S TOTAL COST ESTIMATE IS, IN FACT, REALISTIC. SPECIFICALLY, YOU ARGUE THAT ECOM SHOULD HAVE CONSIDERED GE'S PLAN TO SUBCONTRACT THE ENGINEERING EFFORT AND GE'S METHOD OF APPLYING DIRECT CHARGES AND OVERHEAD PERSONNEL TO THE ESTIMATE.

THE RECORD INDICATES THAT ALL THE INFORMATION CONTAINED IN THE GE PROPOSAL WAS CONSIDERED BY THE ECOM EVALUATORS AND THAT THEY WERE NOT PERSUADED THAT THE DATA CONTAINED IN THE GE PROPOSAL JUSTIFIED GE'S PROPOSED COST AND MAN-MONTH FIGURES. THE RECORD DOES NOT DISCLOSE THAT ECOM'S EVALUATION WAS ARBITRARY.

IN ADDITION TO THE ABOVE-CITED ARGUMENTS, YOU CONTEND THAT ECOM USED A FACTOR OF 173 HOURS PER MAN-MONTH IN CONVERTING THE GE MAN-HOUR ESTIMATE WHEN 158 IS THE FACTOR WHICH SHOULD HAVE BEEN USED. IT IS OUR VIEW THAT IF ECOM HAD USED THE CONVERSION FACTOR YOU SUGGEST THE INCREASE IN GE'S ESTIMATE OF ONLY 10 PERCENT WOULD NOT HAVE BEEN SIGNIFICANT ENOUGH TO HAVE INFLUENCED THE AWARD SELECTION.

FURTHER, YOU CONTEND THAT ECOM VIOLATED THE RULE THAT THE MINIMUM STANDARDS REQUIRED FOR AWARD MUST BE CLEARLY SPELLED OUT IN THE SOLICITATION. IN THIS REGARD, YOU NOTE THAT THE RFQ PROVIDED THAT AN OFFEROR MUST RECEIVE A RATING OF NO LESS THAN ACCEPTABLE IN EACH OF THE THREE FACTORS, WHILE GE WAS DISQUALIFIED BECAUSE ITS PROPOSAL WAS DEEMED UNACCEPTABLE UNDER ONLY TWO SUBFACTORS.

SINCE THE ENGINEERING MAN-HOURS AND COST REALISM SUBFACTORS WERE RANKED SECOND IN IMPORTANCE UNDER THEIR RESPECTIVE FACTORS IN THE RFQ IT IS CLEAR THAT THESE SUBFACTORS WERE EXTREMELY IMPORTANT ITEMS TO BE CONSIDERED IN THE AWARD SELECTION. IN THIS REGARD THE RFQ EXPLAINED THAT "PROPOSALS MAY BE PENALIZED TO THE DEGREE PROPOSED COSTS ARE UNREALISTICALLY LOW." OUR OPINION, THEREFORE, AN OFFEROR SHOULD HAVE KNOWN FROM THE CRITERIA SET FORTH IN THE RFQ THAT IF IT PROPOSED UNREALISTICALLY LOW MANPOWER OR COST ESTIMATES THAT THIS WOULD HAVE A SERIOUS IMPACT ON ITS RATING UNDER THE TECHNICAL AND COST PROPOSAL FACTORS. YOU NEXT CONTEND THAT MEANINGFUL NEGOTIATIONS WERE NOT CONDUCTED WITH GE EITHER BEFORE OR AFTER THE SUBMISSION OF GE'S BEST AND FINAL OFFER. IT IS YOUR CONTENTION THAT ECOM PERSONNEL DID NOT DISCUSS IN ANY DETAIL THE GE COST AND MANPOWER ESTIMATES AND THAT, IN FACT, GE WAS GIVEN TO BELIEVE THAT ITS COST ESTIMATE SHOULD BE AS LOW AS POSSIBLE. YOU POINT OUT THAT SINCE THE RFQ WARNED AGAINST "GOLD PLATING" AND SINCE THE DCAA AUDIT REPORT RECOMMENDED THAT SOME OF THE PROPOSED COSTS IN GE'S INITIAL PROPOSAL WERE OVERSTATED, GE DID NOT INCREASE ITS PROPOSED COSTS. IN SUPPORT OF YOUR POSITION, YOU CITE 47 COMP. GEN. 336 (1967) WHERE WE HELD THAT AN AGENCY SHOULD REOPEN NEGOTIATIONS AFTER SUBMISSION OF BEST AND FINAL OFFERS WHERE ALL OFFERORS' COST ESTIMATES WERE CONSIDERED UNREASONABLE.

IN ADDITION, YOU CONTEND THAT THE ECOM EVALUATORS FAILED TO NOTIFY GE THAT ITS ANTENNA DESIGN WAS CONSIDERED TOO COMPLICATED; THAT THEY FAILED TO CONSIDER GE'S ALTERNATE TECHNICAL PROPOSALS WHICH INCLUDED AN ANTENNA DESIGN OF THE TYPE WHICH ECOM SEEMED TO PREFER; AND THAT THE ECOM EVALUATORS ACTED ARBITRARILY IN NOT CONSIDERING GE'S ALTERNATE COST PROPOSAL BASED ON A FPI TYPE CONTRACT.

CONCERNING THE PROVISION IN THE RFQ WARNING AGAINST "GOLD PLATING," IT IS EVIDENT THAT SUCH A PROVISION MUST BE READ IN THE CONTEXT OF THE COST REALISM SUBFACTOR. FURTHERMORE, ALTHOUGH THE DCAA REPORT QUESTIONED $257,588 OF GE'S PROPOSED COSTS, IT IS CLEAR FROM THE DCAA REPORT THAT IT DID NOT DEAL WITH THE MERITS OF GE'S PROPOSAL. IN OTHER WORDS, WHILE THE DCAA REPORT INDICATED THAT CERTAIN COST ELEMENTS OF THE PROPOSAL WERE OVERSTATED, IT DID NOT DISCUSS THE VALIDITY OF GE'S OVERALL COST PROPOSAL.

IN THIS CONNECTION, THE RECORD INDICATES THAT GE WAS INFORMED BY ECOM DURING NEGOTIATIONS OF ITS DOUBTS REGARDING GE'S OVERALL COST AND LEVEL OF EFFORT ESTIMATES. THE MEMORANDUM OF NEGOTIATIONS WITH GE DATED MAY 9, 1972, REFLECTS THAT THE COST ANALYST STATED TO GE THAT "GE'S PRICE WAS VERY LOW OVERALL." ALSO, HE INDICATED SEVERAL AREAS WHERE GE'S COSTS WERE LOW. THE MEMORANDUM OF NEGOTIATIONS ALSO INDICATES THAT GE WAS INFORMED THAT IT PROPOSED "INSUFFICIENT MANPOWER OVERALL." BASED ON THE FOREGOING IT APPEARS THAT ECOM REASONABLY ADVISED GE OF ITS MISGIVINGS CONCERNING GE'S COST AND LEVEL OF EFFORT ESTIMATES.

MOREOVER, WE DO NOT AGREE THAT 47 COMP. GEN. 336, SUPRA, IS DIRECTLY APPLICABLE. IN THAT CASE WE CRITICIZED THE AGENCY FOR ITS FAILURE TO REOPEN NEGOTIATIONS AFTER AGENCY PERSONNEL DETERMINED THAT ALL OFFERORS HAD PROPOSED COST ESTIMATES FOR A COST TYPE CONTRACT WHICH WERE CONSIDERED TO BE UNREASONABLY LOW. AS A RESULT OF THIS DETERMINATION THE AGENCY BASED ITS AWARD SELECTION SOLELY ON THE PROPOSED FEE FLOOR AND HEALTH BENEFIT COSTS. IT WAS OUR OPINION THAT THIS METHOD OF SELECTION CONSTITUTED A CHANGE IN THE STATED EVALUATION APPROACH THAT COULD HAVE RESULTED IN A CONTRACT OTHER THAN THAT CONTEMPLATED BY THE SOLICITATION. WE EMPHASIZED IN THAT CASE THAT THE AWARD WAS IMPROPER BECAUSE NONE OF THE OFFERORS WAS INFORMED DURING THE NEGOTIATIONS THAT THE AGENCY DOUBTED THE REASONABLENESS OF THE COST ESTIMATES.

IN REGARD TO THE GE ANTENNA DESIGN THE MEMORANDUM OF NEGOTIATIONS INDICATES THAT GE WAS ASKED A NUMBER OF QUESTIONS PERTAINING TO THE TECHNICAL ASPECTS OF ITS ANTENNA. THE ECOM EVALUATORS WERE NOT PERSUADED, HOWEVER, THAT THE OVERALL DESIGN CONCEPT OF THE GE ANTENNA WAS AS ATTRACTIVE AS THOSE PROPOSED BY THE OTHER OFFERORS. IT WAS ECOM'S VIEW THAT THE GE DESIGN WOULD REQUIRE FURTHER DEVELOPMENT AND ENGINEERING WHICH COULD, IN THE AGENCY'S OPINION, INVOLVE BOTH AN INCREASE IN DELIVERY TIME AND ADDITIONAL COSTS.

WE DO NOT BELIEVE THAT THE AGENCY HAD A DUTY TO NEGOTIATE WITH GE TO THE POINT WHERE ITS PROPOSED ANTENNA DESIGN WAS BROUGHT UP TO THE LEVEL OF THOSE PROPOSED BY THE OTHER OFFERORS. SEE 51 COMP. GEN. 621 (1972). ANY EVENT, IT MUST BE EMPHASIZED THAT THE GE PROPOSAL WAS DETERMINED TO BE UNACCEPTABLE PRIMARILY AS A RESULT OF ECOM'S CONCLUSION THAT GE'S PROPOSED COST AND LEVEL OF EFFORT ESTIMATES WERE TOO LOW.

IN REGARD TO GE'S ALTERNATE DESIGN PROPOSALS THE RECORD INDICATES THAT THEY WERE SUBMITTED WITH GE'S FINAL OFFER AFTER THE NEGOTIATIONS WERE CLOSED. ECOM DETERMINED THAT THESE ALTERNATE PROPOSALS WERE INADEQUATE BECAUSE THEY DID NOT CONTAIN SUFFICIENT INFORMATION FOR EVALUATION. THESE CIRCUMSTANCES WE DO NOT BELIEVE THAT ECOM WAS REQUIRED TO REOPEN NEGOTIATIONS TO CONSIDER THESE ALTERNATE PROPOSALS.

CONCERNING GE'S RPI PROPOSAL, THE RECORD SHOWS THAT THIS PROPOSAL WAS CONSIDERED, BUT ECOM DETERMINED THAT A COST TYPE CONTRACT WOULD BE IN THE GOVERNMENT'S BEST INTEREST. WE HAVE HELD THAT THE DETERMINATION OF THE TYPE OF CONTRACT TO BE NEGOTIATED IS TO BE MADE BY THE AGENCY BASED ON ITS VIEW OF THE GOVERNMENT'S BEST INTEREST. SEE 46 COMP. GEN. 632 (1967) AND 10 U.S.C. 2306(A). IN THE CASE AT HAND GE WAS INFORMED OF ECOM'S DOUBTS REGARDING ITS OVERALL COST ESTIMATE AND WAS GIVEN AN OPPORTUNITY TO ESTABLISH THE REASONABLENESS OF ITS COST ESTIMATE IN A REVISED PROPOSAL.

NEXT YOU CONTEND THAT ECOM MAY HAVE GIVEN HUGHES AN UNFAIR COST ADVANTAGE BECAUSE OF THE COMMONALITY FEATURE BETWEEN THIS PROPOSED CONTRACT AND THE SIMILAR AN/TPQ-37 CONTRACT WHICH HAS ALREADY BEEN AWARDED TO HUGHES. YOU ASSERT THAT SINCE HUGHES HAS RECEIVED THE AN/TPQ-37 CONTRACT, ECOM, IN ORDER TO TAKE ADVANTAGE OF THE SAVINGS UNDER THE COMMONALITY ADJUSTMENT CLAUSE IN THAT CONTRACT, WOULD HAVE TO AWARD THE AN/TPQ-36 CONTRACT TO HUGHES. THUS YOU CONCLUDE THAT THE AWARD OF THE AN/TPQ-37 CONTRACT MUST HAVE BEEN A SIGNIFICANT EVALUATION FACTOR IN THIS PROCUREMENT.

ECOM REPORTS THAT ANY SAVINGS BASED ON COMMONALITY BETWEEN THE AN/TPQ 36 AND OTHER EQUIPMENT ON SEPARATE CONTRACTS WERE NOT EVALUATED OR CONSIDERED IN MAKING THE AWARD SELECTION. THE RECORD PROVIDES NO BASIS UPON WHICH WE MAY DISPUTE ECOM'S POSITION IN THIS MATTER.

THROUGHOUT YOUR ARGUMENT YOU HAVE EMPHASIZED THE POINT THAT ECOM WAS ARBITRARY IN IGNORING THE COST SAVINGS INHERENT IN GE'S LOWER COST ESTIMATE. IN THIS CONNECTION, YOU HAVE CONTENDED THAT EVEN IN AN OVERRUN SITUATION THE ULTIMATE COST TO THE GOVERNMENT WOULD BE LOWER IF THE CONTRACT WERE AWARDED TO GE. OF COURSE, THIS ARGUMENT IS PREMISED ON YOUR CONCLUSION THAT THE GE PROPOSAL IS TECHNICALLY ACCEPTABLE AND SUBSTANTIALLY EQUAL TO THE HUGHES PROPOSAL. AS MENTIONED ABOVE, WE FIND NO BASIS TO DISAGREE WITH ECOM'S CONTRARY CONCLUSIONS.

IN THE INSTANT CASE THE HUGHES PROPOSAL WAS SELECTED FOR AWARD BECAUSE IN ECOM'S OPINION IT WAS THE ONLY PROPOSAL WHICH OFFERED AN ACCEPTABLE LEVEL OF EFFORT AND AN ACCEPTABLE COST ESTIMATE. WE HAVE HELD IN A SIMILAR SITUATION THAT THE AWARD OF COST-REIMBURSEMENT CONTRACTS REQUIRES PROCUREMENT PERSONNEL TO EXERCISE INFORMED JUDGMENTS AS TO WHETHER SUBMITTED PROPOSALS ARE REALISTIC CONCERNING THE PROPOSED COSTS AND TECHNICAL APPROACHES INVOLVED. WE BELIEVE THAT SUCH JUDGMENTS MUST PROPERLY BE LEFT TO THE ADMINISTRATIVE DISCRETION OF THE CONTRACTING AGENCIES INVOLVED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS "REALISM" OF COSTS AND TECHNICAL APPROACHES, AND MUST BEAR THE MAJOR CRITICISM FOR ANY DIFFICULTIES OR EXPENSES EXPERIENCED BY REASON OF A DEFECTIVE ANALYSIS. SEE 50 COMP. GEN. 390 (1970).

ALTHOUGH YOU HAVE DISPUTED ECOM'S VIEW AND POINTED OUT SEVERAL SHORTCOMINGS IN ITS EVALUATION OF THE PROPOSALS, WE ARE NOT ABLE TO CONCLUDE THAT ECOM'S SELECTION OF HUGHES WAS ARBITRARY OR OTHERWISE IMPROPER.

ACCORDINGLY, YOUR PROTEST IS DENIED.

ENCLOSED ARE COPIES OF OUR DECISIONS OF TODAY TO ITT AND RCA, RESPECTIVELY, IN CONNECTION WITH THEIR PROTESTS UNDER THIS PROCUREMENT.