B-176445, FEB 22, 1973

B-176445, FEB 22, 1973

BID PROTEST - NEGOTIATIONS - COST PLUS FIXED FEE CONTRACT - REIMBURSEMENT CEILING DECISION DENYING THE PROTEST OF BOLT BERANEK AND NEWMAN, INC. (BB&N), AGAINST THE AWARD OF A CONTRACT TO WYLE LABORATORIES UNDER AN RFP ISSUED BY THE DEPARTMENT OF TRANSPORTATION FOR CONDUCTING A STUDY AND PREPARING A REPORT ON AN AIRPORT NOISE REDUCTION FORECAST. NO BASIS WAS PRESENTED TO CONCLUDE THAT THE CONTRACTING OFFICER ABUSED HIS DISCRETION IN DETERMINING THAT WYLE'S COST PLUS FIXED FEE (CPEE) PROPOSAL, WITH A CEILING ON REIMBURSEMENT, WAS MORE ADVANTAGEOUS TO THE GOVERNMENT THAN BB&N'S CPFF PROPOSAL WITHOUT A CEILING. 50 COMP. GEN. 390, 410 (1970). MOREOVER, A CONTRACTING OFFICER MAY ELECT TO UTILIZE A CPFF CONTRACT WITH A COST CEILING IF HE DETERMINES IT IS IN THE GOVERNMENT'S BEST INTERESTS, EVEN THOUGH SUCH A CONTRACT IS NOT DEFINED EITHER IN THE FPR OR THE DEPARTMENT OF TRANSPORTATION PROCUREMENT REGULATIONS. SEE FPR 1-3.401(A). FINALLY, IT HAS NOT BEEN SHOWN THAT BB&N WAS PREJUDICED BY THE CONTRACTING OFFICER'S CONDUCT OF NEGOTIATIONS FOR THIS RFP, SEE B-151967, JANUARY 2, 1964; NOR HAS IT BEEN SHOWN THAT THE REOPENING OF NEGOTIATIONS CONSTITUTED A PROHIBITED AUCTION TECHNIQUE. SEE FPR 1-3.805-1(B).

TO BOLT BERANEK AND NEWMAN, INC.:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 19, 1972, WITH ENCLOSURES, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE AWARD OF A CONTRACT ON JUNE 30, 1972, TO WYLE LABORATORIES UNDER REQUEST FOR PROPOSALS (RFP) NO. DOT-OS-20088, ISSUED BY THE DEPARTMENT OF TRANSPORTATION (DOT).

THE RFP SOLICITED PROPOSALS FOR CONDUCTING A STUDY AND PREPARING A REPORT CONCERNING AN AIRPORT NOISE REDUCTION FORECAST. OFFERORS WERE ADVISED THAT A COST-PLUS-FIXED-FEE CONTRACT (CPFF) WAS ANTICIPATED BUT THAT THE GOVERNMENT RESERVED THE RIGHT TO AWARD ON OTHER CONTRACT TYPES AND TO MAKE MORE THAN ONE AWARD IF DEEMED DESIRABLE. THE CLOSING DATE FOR RECEIPT OF PROPOSALS WAS JANUARY 31, 1973.

EIGHT OFFERS WERE RECEIVED AND EACH PROPOSAL WAS EVALUATED BY A TECHNICAL EVALUATION COMMITTEE AGAINST THE CRITERIA SET FORTH IN THE RFP. THE EVALUATION COMMITTEE CONCLUDED THAT BOLT, BERANEK AND NEWMAN, INC. (BB&N), WYLE LABORATORIES, AND ANOTHER FIRM HAD SUBMITTED TECHNICALLY ACCEPTABLE PROPOSALS. OUR REVIEW OF THE TECHNICAL EVALUATION MEMORANDUM FURNISHED BY THE CHIEF, PROCUREMENT OPERATIONS DIVISION, DOT, ON DECEMBER 19, 1972, INDICATES THAT THE BB&N AND WYLE PROPOSALS WERE ESSENTIALLY EQUAL WITH SCORES OF 114 AND 112, RESPECTIVELY, OUT OF A POSSIBLE 130 TECHNICAL POINTS.

BECAUSE OF ITS SUBSTANTIALLY HIGHER CPFF PROPOSAL, THE OTHER FIRM WAS DETERMINED NOT TO BE WITHIN THE COMPETITIVE RANGE. NEGOTIATIONS WERE OPENED WITH BB&N AND WYLE LABORATORIES ON FEBRUARY 22, 1972, AND CLOSED ON APRIL 14, 1972. AT THE CLOSE OF NEGOTIATIONS, BB&N AND WYLE LABORATORIES SUBMITTED CPFF OFFERS IN THE AMOUNTS OF $427,740 AND $412,926.57, RESPECTIVELY.

HOWEVER, IT IS REPORTED THAT SINCE THE CONTRACTING OFFICER COULD NOT AFFIRMATIVELY DETERMINE THAT WYLE COULD PERFORM WITHIN ITS ESTIMATE, HE DECIDED TO REOPEN NEGOTIATIONS ON MAY 10, 1972, FOR THE SOLE PURPOSE OF NEGOTIATING A CEILING ON REIMBURSEMENT WITH EACH OFFEROR TO ELIMINATE THE POSSIBILITY OF A COST OVERRUN. NEGOTIATIONS TO REACH THIS OBJECTIVE WERE FORMALLY COMMENCED WITH BB&N AND WYLE ON MAY 11, 1972, AND CLOSED AS OF 4:00 P.M. ON MAY 17, 1972, AFTER FIRST ESTABLISHING WITH EACH OFFEROR THAT THIS WAS A MUTUALLY AGREEABLE TIME FOR CLOSING. WYLE AGREED TO PERFORM THE WORK UNDER THE TERMS OF ITS PRIOR CPFF OFFER OF $412,926.57 AND TO ACCEPT A CEILING ON REIMBURSEMENT AT THAT PRICE. HOWEVER, BY MAY 17, 1972, THE CONTRACTING OFFICER HAD ONLY RECEIVED A CPFF PROPOSAL OF $385,109 FROM BB&N. HE, THEREFORE, CALLED A BB&N REPRESENTATIVE TO ASK WHY THE FIRM HAD FAILED TO SUBMIT A CPFF PROPOSAL WITH A CEILING ON REIMBURSEMENT. THE CONTRACTING OFFICER STATES THAT THE REPRESENTATIVE INDICATED THAT THE FAILURE WAS AN OVERSIGHT AND THAT BB&N WOULD ACCEPT A COST CEILING ON ITS APRIL 11, 1972, CPFF PROPOSAL OF $427,740. THE CONTRACTING OFFICER ACCEPTED THE PROPOSAL SUBJECT TO FORMAL CONFIRMATION. A CONFIRMING TELEGRAM WAS RECEIVED ON MAY 18, 1972.

IN A FURTHER TELEGRAM OF MAY 24, 1972, BB&N ADVISED THE CONTRACTING OFFICER THAT IT WOULD ACCEPT A CPFF TYPE OF CONTRACT IN THE AMOUNT OF $385,000 OR A FIXED-PRICE CONTRACT IN THE AMOUNT OF $395,000 OR A CPFF CONTRACT WITH A CEILING OF $395,000. BY LETTER DATED MAY 31, 1972, THE CONTRACTING OFFICER ADVISED YOUR FIRM THAT SINCE YOUR PROPOSAL WAS RECEIVED ON MAY 26, 1972, AFTER THE CLOSING TIME SET FORTH IN HIS TELEGRAM OF MAY 15, 1972, IT COULD NOT BE CONSIDERED FOR AWARD EXCEPT UNDER THE CIRCUMSTANCES SET FORTH IN DOT PROCUREMENT REGULATIONS 12 3.5008, RELATING TO LATE PROPOSALS. BY LETTER DATED JULY 3, 1972, THE CONTRACTING OFFICER ADVISED YOU THAT YOUR LATE PROPOSAL HAD BEEN THOROUGHLY EVALUATED AND THAT IT HAD BEEN DETERMINED THAT ACCEPTANCE OF THE PROPOSAL WAS NOT OF EXTREME IMPORTANCE TO THE GOVERNMENT. SEE 46 COMP. GEN. 42 (1966); DOT PR 12- 3.5008(A)(2). YOU WERE ALSO ADVISED THAT A CPFF CONTRACT WITH A CEILING PRICE OF $412,937.57 HAD BEEN AWARDED TO WYLE LABORATORIES. YOUR PROTEST TO OUR OFFICE FOLLOWED.

IN YOUR LETTER OF SEPTEMBER 20, 1972, TWO PRINCIPAL CONTENTIONS ARE ADVANCED IN SUPPORT OF YOUR POSITION THAT THE AWARD TO WYLE WAS PREJUDICIAL TO YOUR FIRM, AND THEREFORE IMPROPER.

FIRST, YOU QUESTION THE FAILURE OF THE CONTRACTING OFFICER TO AWARD A CONTRACT TO BB&N ON THE BASIS OF THE CPFF OFFER OF $385,109 WHICH WAS SUBMITTED ON MAY 17, 1972, BEFORE THE CLOSING HOUR FOR RECEIPT OF PROPOSALS. WHILE YOUR CPFF PROPOSAL OF $385,109 WAS CONSIDERED BY THE CONTRACTING OFFICER FOR PURPOSES OF AWARD, IT WAS NOT ACCEPTED BECAUSE IT WAS THE OPINION OF THE CONTRACTING OFFICER THAT THE OFFER UNDERESTIMATED THE ACTUAL TOTAL COSTS THAT WOULD BE INCURRED.

BB&N'S LETTER OF MAY 17, 1972, TRANSMITTING THE $382,109 CPFF PROPOSAL, STATED THAT THE REDUCTION IN ESTIMATED COST WAS INFLUENCED BY THE RECEIPT OF A MAJOR CONTRACT AFTER THE SUBMISSION OF ITS ORIGINAL $435,650 CPFF PROPOSAL (LATER REDUCED TO $427,720 AT THE CLOSE OF NEGOTIATIONS OF APRIL 14, 1972). IN LIGHT OF THIS OTHER CONTRACT, YOU QUESTION THE SOUNDNESS OF THE CONTRACTING OFFICER'S ASSESSMENT. IN REPLY, THE NOVEMBER 20, 1972, ADMINISTRATIVE REPORT CONTAINS THE FOLLOWING PERTINENT COMMENTS:

THAT THE BB&N OFFER OF $385,109 WAS UNDER ESTIMATED (SIC) WAS DETERMINED NOT BY A CONSIDERATION OF THIS PRICE REDUCTION, BUT BY A DOCUMENTED ANALYSIS OF THEIR PROBABLE COSTS. THIS SAME ANALYSIS WAS APPLIED IN THE CASE OF WYLE LABORATORIES. IT WAS THIS CONCERN BY THE GOVERNMENT AS TO THE ACCURACY OF THE OFFEROR'S COST ESTIMATES WHICH, IN PART, LED TO THE PREFERENCE FOR A CEILING PRICE CONTRACT.

WITH RESPECT TO THE SAVINGS CLAIMED BY BB&N AS A RESULT OF THEIR AVIATION ADVISORY COMMISSION (AAC) CONTRACT, OUR TECHNICAL PERSONNEL CONSIDER THAT (1) A REDUCTION OF COMPUTER COSTS WAS NOT WARRANTED ON THE BASIS OF THE AAC WORK SINCE ALL OF THE COMPUTER RUNS WOULD HAVE TO BE REDONE USING NEWER AND MORE ACCURATE NOISE LEVEL AND AIRCRAFT PERFORMANCE DATA WHICH IS EXPECTED TO BECOME AVAILABLE STARTING THIS FALL, AND (2) THAT THERE WILL BE ONLY A PARTIAL SAVINGS IN MANPOWER, NOT THE PROJECTED AMOUNT, SINCE IT WILL BE NECESSARY TO RECODE THE INPUT TO INCORPORATE THE REVISED NOISE AND AIRCRAFT PERFORMANCE DATA. FURTHERMORE, AS WE STATED IN THE RFP, THE DOT NOISE CONTOUR MODEL WILL BE USED FOR THE ANALYSIS. THIS WAS NOT USED BY BB&N FOR THE AAC STUDY, AND, THEREFORE, FURTHER RECODING OF THE DATA WILL BE NECESSARY. GIVEN THE ABOVE, IT BECOMES HIGHLY QUESTIONABLE WHETHER THE SAVINGS ALLEGED BY BB&N AS A RESULT OF THE AAC WORK WOULD BE REALIZED.

CONCERN WAS ALSO EXPRESSED ABOUT THE BURDEN RATES OF ONE OF YOUR SUBCONTRACTORS. IN THIS REGARD, THE REPORT CONTAINS THE FOLLOWING COMMENT:

THE CONTRACTING OFFICER DID NOT QUESTION THE BB&N BURDEN RATES, BUT RATHER THOSE OF ITS SUBCONTRACTOR. THE BB&N SUBCONTRACTOR USED OVERHEAD BURDEN AND G&A RATES OF 45% AND 23%, RESPECTIVELY. THE DCAA RECOMMENDED A COMPOSITE RATE OF 103%. THIS MATTER WAS BROUGHT TO THE ATTENTION OF BB&N DURING PRICE NEGOTIATIONS, BUT WAS NOT CONSIDERED BY THEM IN THEIR BEST AND FINAL OFFER. DCAA NOTED THAT USE OF THE RECOMMENDED COMPOSITE BURDEN RATE WOULD HAVE INCREASED THE SUBCONTRACTOR'S COST, BEFORE FEE, BY $8,356.

IN VIEW OF THE FOREGOING, AND FROM REVIEW OF THE RECORD BEFORE US, NO BASIS IS PRESENTED FOR OUR OFFICE TO CONCLUDE THAT THE CONTRACTING OFFICER ABUSED HIS DISCRETION IN ASSESSING THE CREDIBILITY OF YOUR PROPOSAL OR, MORE IMPORTANTLY, IN DETERMINING THAT THE ACCEPTANCE OF WYLE'S $412,926.57 CPFF PROPOSAL WITH A CEILING ON REIMBURSEMENT WAS MORE ADVANTAGEOUS THAN THE ACCEPTANCE OF YOUR CPFF OFFER WITHOUT A CEILING. 50 COMP. GEN. 390, 410 (1970).

YOUR SECOND CONTENTION IS THAT A CPFF CONTRACT WITH A CEILING ON REIMBURSEMENT IS NOT DEFINED IN THE FEDERAL PROCUREMENT REGULATIONS (FPR) OR THE DOT PR AND THAT SUCH TYPE OF CONTRACT HAS NEVER BEEN PROPERLY EXPLAINED TO REPRESENTATIVES OF YOUR FIRM DURING THE PERIOD OF NEGOTIATIONS. YOU ALSO MAINTAIN THAT THE USUAL CPFF CONTRACT WOULD HAVE BEEN SUFFICIENT TO PROTECT THE GOVERNMENT'S INTEREST.

WHILE IT IS TRUE THAT A CPFF CONTRACT WITH A COST CEILING IS NOT DEFINED IN EITHER THE FPR OR THE DOT PR, SUCH OMISSION DOES NOT CONSTITUTE A BASIS FOR CONCLUDING THAT THIS TYPE OF CONTRACT IS PRECLUDED BY THE REGULATIONS. FPR 1-3.401(A) PROVIDES THAT A CONTRACT NEGOTIATED UNDER PART 1-3 MAY BE OF ANY TYPE OR COMBINATION OF TYPES DESCRIBED IN SUBPART 1 -3.4 WHICH WILL PROMOTE THE INTERESTS OF THE GOVERNMENT, SUBJECT TO THE RESTRICTION OF FPR 1-3.401(B), WHICH PROHIBITS THE COST-PLUS-A-PERCENTAGE- OF-COST METHOD OF CONTRACTING. APART FROM THE PROHIBITION AGAINST COST- PLUS-A-PERCENTAGE-OF-COST CONTRACTING, SELECTION OF THE APPROPRIATE FORM OF CONTRACT IS A MATTER OF JUDGMENT. SEE FPR 1-3.403(A). THE CONTRACTING OFFICER'S POSITION IS THAT THE INTERESTS OF THE GOVERNMENT ARE BETTER PROTECTED UNDER THE CIRCUMSTANCES OF THIS PROCUREMENT BY A CEILING ON REIMBURSEMENT SINCE THE CONTRACTOR WILL BE OBLIGATED TO PERFORM THE ENTIRE JOB FOR A TOTAL PRICE NOT IN EXCESS OF THE CEILING PRICE, WHILE A STANDARD CPFF ARRANGEMENT DOES NOT INSURE THAT THE JOB WILL BE COMPLETED WITHIN THE ESTIMATED CPFF. WE CANNOT DISAGREE WITH THIS VIEW.

WITH RESPECT TO THE ADEQUACY OF THE CONTRACTING OFFICER'S EXPLANATION, WE HAVE REVIEWED THE RECORDS OF BB&N'S PRINCIPAL NEGOTIATORS, WHICH WERE TRANSMITTED IN YOUR LETTER OF DECEMBER 19. REFERRING TO YOUR PRINCIPAL NEGOTIATOR'S CONTEMPORANEOUS MEMORANDA, WE NOTE THAT ON MAY 10, 1972, THE CONTRACTING OFFICER CALLED AND ASKED IF BB&N WOULD ACCEPT A "COST CEILING." IN RESPONSE TO THE NEGOTIATOR'S REQUEST FOR A DEFINITION, A MEMORANDUM DATED MAY 10, 1972, RECORDS THE FOLLOWING RESPONSE BY THE CONTRACTING OFFICER: "*** HE REPLIED THE CONTRACT WOULD BE COST REIMBURSEMENT UP TO THE COST EST. AND FIXED PRICE THEREAFTER." MEMORANDUM OF MAY 11, 1972, RECORDS A FURTHER CONVERSATION WITH THE CONTRACTING OFFICER. DURING THIS CONVERSATION, THE PRINCIPAL NEGOTIATOR ADVISED THE CONTRACTING OFFICER THAT BB&N "WOULD ACCEPT A COST CEILING ON OUR QUOTATION AT 427K. DUE TO THE RECEIPT OF AN AIRPORT ADVISORY COMMISSION CONTRACT *** WE FELT THE ESTIMATE WAS VALID FOR A FIXED PRICE QUOTATION."

FINALLY, WITH REFERENCE TO THE CONTRACTING OFFICER'S CALL ON MAY 17, 1972, INQUIRING ABOUT THE ABSENCE OF A COST CEILING, A MEMORANDUM OF THE SAME DATE RECORDS THE FOLLOWING REPLY: "I AGAIN STATED WE WOULD ACCEPT A COST CEILING ON THE $427 QUOTE." THIS ACCEPTANCE WAS CONFIRMED IN THE MAY 18, 1972, TELEGRAM IN THE FOLLOWING TERMS: "CONFIRMING MY TELEPHONE CONVERSATION WITH (THE CONTRACTING OFFICER) ON 11 MAY 72 BB&N WILL ACCEPT A COST CEILING ON OUR QUOTATION OF 11 APRIL 72 OF $427,740.00."

IN LIGHT OF THESE MEMORANDA AND THE OTHER RECORDS FURNISHED BY BB&N AND TAKING INTO CONSIDERATION THE CONTRACTING OFFICER'S POSITION ON THIS MATTER, WE ARE NOT PREPARED TO CONCLUDE THAT BB&N WAS MISLED AS TO WHAT THE CONTRACTING OFFICER WANTED WHEN HE ASKED FOR A "COST CEILING." MOREOVER, SINCE BB&N DID, IN FACT, SUBMIT A CPFF PROPOSAL WITH A CEILING ON REIMBURSEMENT, WE CANNOT SAY THAT BB&N WAS PREJUDICED BY THE CONTRACTING OFFICER'S CONDUCT OF NEGOTIATIONS WITH RESPECT TO THIS MATTER. SEE B-151967, JANUARY 2, 1964.

FINALLY, WE CANNOT AGREE THAT THE CONTRACTING OFFICER'S DECISION TO REOPEN NEGOTIATIONS AND HIS SUBSEQUENT CONDUCT OF THE NEGOTIATIONS CONSTITUTED A PROHIBITED AUCTION TECHNIQUE. SEE FPR 1-3.805-1(B); 48 COMP. GEN. 536, 541 (1969); AND 51 ID. 457, 463 (1972).

ACCORDINGLY, YOUR PROTEST IS DENIED.