B-176656, FEB 13, 1973

B-176656: Feb 13, 1973

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GAO DOES NOT RECOMMEND TERMINATION OF THE AWARD BECAUSE THE PROCUREMENT IS IN AN ADVANCED STATE AND COMMITMENTS HAVE BEEN MADE IN RELIANCE UPON THE AWARD TO IBM. THIS PROCUREMENT WAS DEFICIENT WITH REGARD TO THE INADEQUATELY DOCUMENTED PROCEDURES UTILIZED. SECRETARY: REFERENCE IS MADE TO A LETTER OF JANUARY 17. THAT IT WAS ADVISED BY THE MINT TO INCLUDE IN ITS COST PROPOSAL EXTRA MAINTENANCE CHARGES RESULTING FROM EXTRA SHIFT USE OF THE EQUIPMENT AND THAT IT WOULD HAVE BEEN THE LOW OFFEROR HAD THE CHARGES BEEN DELETED BY THE MINT IN THE EVALUATION OF THE PROPOSAL. THE MINT STATES THAT THE REQUEST FOR PROPOSALS (RFP) DID NOT REQUIRE OFFERORS TO INCLUDE SUCH CHARGES AND DENIES THAT IT MADE AN ORAL CHANGE TO THE RFP WHICH WOULD HAVE REQUIRED THE PRICING OF EXTRA MAINTENANCE SERVICES.

B-176656, FEB 13, 1973

BID PROTEST - IMPROPER EVALUATIONS - FAILURE TO NEGOTIATE - INADEQUATE DOCUMENTATION CONCERNING THE PROTEST OF HONEYWELL INFORMATION SYSTEMS, INC., (HIS), AGAINST THE AWARD OF A CONTRACT TO INTERNATIONAL BUSINESS MACHINES (IBM) UNDER AN RFP ISSUED BY THE BUREAU OF THE MINT FOR AN AUTOMATIC DATA PROCESSING SYSTEM. ALTHOUGH THE PROCURING AGENCY VIOLATED FPR 1-3.804 IN THAT IT DID NOT CONDUCT DISCUSSIONS WITH HIS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES IN THE PRICE TO BE PAID AND IMPROPERLY EVALUATED THE HIS PROPOSAL TO THE PREJUDICE OF HIS, GAO DOES NOT RECOMMEND TERMINATION OF THE AWARD BECAUSE THE PROCUREMENT IS IN AN ADVANCED STATE AND COMMITMENTS HAVE BEEN MADE IN RELIANCE UPON THE AWARD TO IBM. MOREOVER, THIS PROCUREMENT WAS DEFICIENT WITH REGARD TO THE INADEQUATELY DOCUMENTED PROCEDURES UTILIZED.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER OF JANUARY 17, 1973, AND PRIOR CORRESPONDENCE, FROM THE DIRECTOR OF THE MINT RESPONDING TO THE PROTEST OF HONEYWELL INFORMATION SYSTEMS, INC. (HIS), AGAINST THE AWARD OF A CONTRACT BY THE BUREAU OF THE MINT (MINT) FOR AN AUTOMATIC DATA PROCESSING SYSTEM AND ASSOCIATED SERVICES TO THE INTERNATIONAL BUSINESS MACHINES CORPORATION (IBM).

HIS MAINTAINS, AMONG OTHER CONTENTIONS, THAT IT WAS ADVISED BY THE MINT TO INCLUDE IN ITS COST PROPOSAL EXTRA MAINTENANCE CHARGES RESULTING FROM EXTRA SHIFT USE OF THE EQUIPMENT AND THAT IT WOULD HAVE BEEN THE LOW OFFEROR HAD THE CHARGES BEEN DELETED BY THE MINT IN THE EVALUATION OF THE PROPOSAL. IN A LETTER OF OCTOBER 11, 1972, TO OUR OFFICE, THE MINT STATES THAT THE REQUEST FOR PROPOSALS (RFP) DID NOT REQUIRE OFFERORS TO INCLUDE SUCH CHARGES AND DENIES THAT IT MADE AN ORAL CHANGE TO THE RFP WHICH WOULD HAVE REQUIRED THE PRICING OF EXTRA MAINTENANCE SERVICES.

FURTHER, THE MINT, IN THE OCTOBER 11 LETTER, ACKNOWLEDGES ITS AWARENESS OF FOOTNOTES IN THE PROPOSAL COST TABLES (A) AND (B) SUBMITTED BY HIS WHICH SHOW UNDER HEADINGS ENTITLED "EXTRA MONTHLY MAINT," AND "EXTRA MAINTENANCE," RESPECTIVELY, CHARGES FOR EXTRA MAINTENANCE FOR EXTRA SHIFT USAGE AND PREVENTATIVE MAINTENANCE (PM) OUTSIDE THE PRINCIPAL PERIOD OF MAINTENANCE (PPM). NOTWITHSTANDING THIS NOTICE THE MINT CONTENDS:

*** THIS CHARGE WAS NOT FURTHER HIGHLIGHTED NOR EXPLAINED. AT NO TIME DID THE EVALUATION TEAM HAVE THE OPPORTUNITY TO COMPARE PREVIOUSLY SUBMITTED COST TABLES WITH SUBSEQUENT TABLES AS THE SUPERSEDED COST TABLES WERE WITHDRAWN AT THE TIME OF SUBSEQUENT SUBMISSIONS BY HONEYWELL. THE LETTERS OF TRANSMITTAL MADE NO MENTION OF CHANGES EITHER SUBSTANTIAL OR MINIMAL. THE TREASURY EVALUATION TEAM HAD NO WAY OF RECOGNIZING THAT ANY PART OF THIS ENTRY, ERGO WHAT PART, WAS OVER AND ABOVE THE REQUIREMENTS. THEREFORE, THERE WAS NO REASON FOR AWARENESS OF THE NEED FOR REMOVAL OF PART OF, OR ALL OF, THE $250,501 ITEM BEFORE EVALUATION. TO DATE, TREASURY HAS NOT BEEN FORMALLY ADVISED AS TO WHAT PART OF THE $250,510 WAS TO MEET THE MANDATORY REQUIREMENTS AND WHAT PART WAS OVER BID.

ACCEPTING THE MINT'S POSITION THAT THE EXTRA MAINTENANCE CHARGES WERE NOT REQUIRED TO BE INCLUDED IN THE COST PROPOSAL AND CONSIDERING THAT THE INFORMATION IN THE HIS COST TABLES WAS CONTRADICTORY TO THE MINT'S POSITION REQUIRE THE CONCLUSION THAT THE MINT FAILED TO FOLLOW SECTION 1- 3.804 OF THE FEDERAL PROCUREMENT REGULATIONS WHICH PROVIDES THAT DISCUSSIONS SHALL BE CONDUCTED WITH OFFERORS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID. THE ADMITTED LACK OF CLARITY IS THE VERY REASON WHY DISCUSSIONS WERE NECESSARY. THE CONTENDED DIFFICULTY IN DETERMINING THE AMOUNT OF THE CHARGES DOES NOT OBVIATE THE MINT'S KNOWLEDGE THAT AN UNNECESSARY COST HAD BEEN INCLUDED AND, CONSEQUENTLY, THESE CONTENTIONS PROVIDE NO BASIS FOR A CONCLUSION ON OUR PART THAT THE COST FOOTNOTES AND THEIR IMPORT COULD BE DISREGARDED IN THE NEGOTIATION PROCESS. FURTHER, THE MINT'S FAILURE IN THIS REGARD PREJUDICED HIS TO AN EXTENT GREATER THAN THE APPROXIMATELY $10,600 SEPARATING THE HIS AND IBM FINAL OFFERS.

IN ADDITION, ALTHOUGH WE WOULD AGREE THAT THE FOOTNOTES THEMSELVES DO NOT INDICATE WHAT PARTS OF THE AMOUNTS INVOLVED WERE UNNECESSARY CHARGES, WE BELIEVE THAT A REASONABLE ESTIMATE OF THE AMOUNTS INVOLVED IS POSSIBLE FROM THE INFORMATION IN THE PROPOSAL. ARTICLE XIV, PARAGRAPH 5B, AT PAGE 48 OF THE HIS PROPOSAL, PROVIDES THAT USE OF EQUIPMENT BEYOND THE PPM BUT UP TO 16 CONSECUTIVE HOURS A DAY REQUIRES AN ADDITIONAL CHARGE OF 30 PERCENT OF THE ORIGINAL OR ADJUSTED TOTAL BASIC MONTHLY MAINTENANCE CHARGES. THE CORRECTNESS OF USING THE 30 PERCENT FIGURE IS INDICATED BY THE FACT THAT RFP SECTION IV2A(2) ADVISES OFFERORS TO COMPUTE ALL COSTS ON A ONE-SHIFT BASIS CONSISTING OF AN 8-HOUR DAY BUT THEN, AT SECTION IV2C(2), REQUESTS A FIGURE OF EXTRA USE RENTAL BASED ON AN ADDITIONAL 8- HOUR SHIFT.

AN EXAMINATION OF THE HIS COST TABLE (A) REVEALS THAT THE TOTAL EXTRA MONTHLY MAINTENANCE FIGURE OF $3,854 IS SLIGHTLY IN EXCESS OF 30 PERCENT OF THE TOTAL BASIC MONTHLY MAINTENANCE AMOUNT OF $9,584, AS WOULD BE EXPECTED IF THE FIGURE CONTAINED AN AMOUNT, AS CONTENDED, IN ADDITION TO EXTRA MAINTENANCE CHARGES. IT IS REASONABLE TO CONCLUDE, THEREFORE, THAT 30 PERCENT OF THE $9,584 AMOUNT REPRESENTED THE CHARGE FOR EXTRA MAINTENANCE FOR EXTRA SHIFT USE WITH THE REMAINDER BEING THE CHARGE FOR PM OUTSIDE PPM. THE 30-PERCENT FIGURE EXTENDED ON COST TABLE (B) IN THE MANNER INDICATED WOULD REPRESENT THE TOTAL VALUE OF ALL EXTRA MAINTENANCE FOR EXTRA SHIFT USE. THE TOTAL FIGURE OF $186,875 SO SUBSTANTIALLY COINCIDES WITH THE $187,500 CLAIMED BY HIS THAT IT MAY BE CONCLUDED THESE COSTS ARE ASCERTAINABLE WITH REASONABLE CERTAINTY. THEY SHOULD, THEREFORE, HAVE BEEN TAKEN INTO CONSIDERATION WITH A VIEW TOWARD HAVING HIS ELIMINATE THEM FROM THE PROPOSAL.

FOR THE FOREGOING REASONS, IT APPEARS THAT THE HIS PROPOSAL WAS IMPROPERLY EVALUATED TO THE PREJUDICE OF HIS. IN VIEW OF THE REPRESENTATIONS MADE AS TO THE ADVANCED STATE OF THE PROCUREMENT AND THE SEVERAL COMMITMENTS THAT HAVE BEEN MADE BY THE MINT IN RELIANCE UPON THE AWARD TO IBM, OUR OFFICE DOES NOT RECOMMEND TERMINATION OF THE AWARD. HOWEVER, WE DO RECOMMEND THAT APPROPRIATE STEPS BE TAKEN TO PRECLUDE A RECURRENCE OF THE DEFICIENCIES NOTED HEREIN. IN ADDITION TO THE FOREGOING, WE NOTED OTHER DEFICIENCIES IN THE PROCUREMENT WHICH RELATE TO INADEQUATELY DOCUMENTED PROCEDURES UTILIZED. IN THIS REGARD, OUR OFFICE HAS RECENTLY RECOMMENDED THAT REQUESTS FOR BEST AND FINAL OFFERS AND ADVICE CONCERNING CUTOFF DATES FOR CLOSING NEGOTIATIONS BE IN DOCUMENTED WRITING WHENEVER FEASIBLE (B-176683(1) AND (2), DECEMBER 21, 1972), AND THAT PROCEDURES BE INSTITUTED WHICH WOULD REQUIRE WRITTEN MINUTES OF NEGOTIATIONS. B-176438(2), DECEMBER 27, 1972.