B-179703, APR 26, 1974, 53 COMP GEN 800

B-179703: Apr 26, 1974

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CONTRACTS - NEGOTIATION - EVALUATION FACTORS - ADDITIONAL FACTORS - NOT IN REQUEST FOR PROPOSALS CONSIDERATION OF ADDITIONAL EVALUATION FACTORS NOT CONTAINED IN REQUEST FOR PROPOSALS (RFP) WAS PROPER IN VIEW OF FACT THAT ADDITIONAL FACTORS ARE SUFFICIENTLY CORRELATED TO GENERAL CRITERIA SHOWN IN RFP TO SATISFY REQUIREMENT THAT PROSPECTIVE OFFERORS BE ADVISED OF EVALUATION FACTORS WHICH WILL BE APPLIED TO THEIR PROPOSALS. FAILURE TO DISCLOSE RELATIVE WEIGHTS OF SUBCRITERIA DOES NOT WARRANT QUESTION BY GAO IF SUBCRITERIA USED ARE OF SUCH NATURE AS TO BE "DEFINITIVE" OF MAIN CRITERIA AS OPPOSED TO BEING ESSENTIAL CHARACTERISTICS OR MEASUREMENTS OF PERFORMANCE OF END ITEM BEING PROCURED. 51 COMP.

B-179703, APR 26, 1974, 53 COMP GEN 800

CONTRACTS - NEGOTIATION - EVALUATION FACTORS - ADDITIONAL FACTORS - NOT IN REQUEST FOR PROPOSALS CONSIDERATION OF ADDITIONAL EVALUATION FACTORS NOT CONTAINED IN REQUEST FOR PROPOSALS (RFP) WAS PROPER IN VIEW OF FACT THAT ADDITIONAL FACTORS ARE SUFFICIENTLY CORRELATED TO GENERAL CRITERIA SHOWN IN RFP TO SATISFY REQUIREMENT THAT PROSPECTIVE OFFERORS BE ADVISED OF EVALUATION FACTORS WHICH WILL BE APPLIED TO THEIR PROPOSALS; HOWEVER, FAILURE TO DISCLOSE ADDITIONAL FACTORS RAISES QUESTIONS OF IMPARTIALITY OF EVALUATION AND WEAKENS INTEGRITY OF PROCUREMENT SYSTEM. CONTRACTS - NEGOTIATIONS - EVALUATION FACTORS - CRITERIA - SUBCRITERIA ALTHOUGH OFFERORS UNDER REQUEST FOR PROPOSALS SHOULD BE INFORMED OF RELATIVE WEIGHTS OF MAIN CATEGORIES OF EVALUATION FACTORS, FAILURE TO DISCLOSE RELATIVE WEIGHTS OF SUBCRITERIA DOES NOT WARRANT QUESTION BY GAO IF SUBCRITERIA USED ARE OF SUCH NATURE AS TO BE "DEFINITIVE" OF MAIN CRITERIA AS OPPOSED TO BEING ESSENTIAL CHARACTERISTICS OR MEASUREMENTS OF PERFORMANCE OF END ITEM BEING PROCURED. 51 COMP. GEN. 272 MODIFIED. CONTRACTS - NEGOTIATION - EVALUATION FACTORS - PRICE ELEMENTS FOR CONSIDERATION - COST ESTIMATES USE OF ADJUSTED INDEPENDENT GOVERNMENT COST ESTIMATE (IGCE) IN EVALUATION OF PROPOSALS, AND ADDITION OF 41 PERCENT FACTOR TO ALL COST PROPOSALS APPEARS PROPER AS USE OF ADJUSTED IGCE WAS NEITHER ARBITRARY NOR CAPRICIOUS AND CONSTITUTED AN EXERCISE OF PROPOSAL EVALUATION RESPONSIBILITY. CONTRACTS - NEGOTIATION - AWARDS - PROPRIETY - EVALUATION OF PROPOSALS NORMALLY, GAO WILL NOT SUBSTITUTE ITS JUDGMENT FOR THAT OF CONTRACTING OFFICIALS BY MAKING INDEPENDENT DETERMINATION AS TO WHAT AREAS SHOULD BE CONSIDERED DURING EVALUATION AND THEREBY INFLUENCE WHICH OFFEROR SHOULD BE RATED FIRST AND RECEIVE AWARD; SUCH DETERMINATIONS BEING QUESTIONED ONLY UPON CLEAR SHOWING OF UNREASONABLENESS OR FAVORITISM, OR UPON CLEAR SHOWING OF VIOLATION OF PROCUREMENT STATUTES AND REGULATIONS. WAIVERS - GOLD FLOW - NEGOTIATED PROCUREMENT GOLD FLOW WAIVERS, PROPERLY OBTAINED THROUGH ARMY CHANNELS, ARE NOT SUBJECT TO QUESTION AT THIS TIME, AS REQUEST FOR WAIVER IS WITHIN DISCRETION OF PROCURING AGENCY AND EVEN THOUGH REASONABLE MEN MAY DIFFER AS TO SOUNDNESS OF RATIONALE BEHIND REQUEST, GAO WILL NOT SUBSTITUTE ITS OWN JUDGMENT WHEN NO ERROR HAS BEEN COMMITTED IN OBTAINING WAIVERS.

IN THE MATTER OF AEL SERVICE CORPORATION; FEDERAL ELECTRIC GMBH/SIEMENS AKTIENGESELLSCHAFT; PHILCO-FORD CORPORATION; PAGE COMMUNICATIONS ENGINEERS, APRIL 26, 1974:

ON MARCH 5, 1973, REQUEST FOR PROPOSALS (RFP) NO. DAJA37-73-R-0423, WAS ISSUED BY THE UNITED STATES ARMY PROCUREMENT AGENCY, EUROPE (USAPAE), FOR THE ENGINEERING AND INSTALLATION OF VARIOUS COMMUNICATION DEVICES INTENDED TO PROVIDE ARMED FORCES TELEVISION COVERAGE TO VARIOUS UNITED STATES MILITARY ELEMENTS LOCATED THROUGHOUT THE FEDERAL REPUBLIC OF GERMANY. FORTY FIRMS RECEIVED COPIES OF THE RFP. ON MARCH 30, 1973, A SOLICITATION CONFERENCE WAS HELD TO CLARIFY ANY QUESTIONS HELD BY PROSPECTIVE OFFERORS. ELEVEN FIRMS WERE REPRESENTED AT THE CONFERENCE. THE CLOSING DATE FOR SUBMISSION OF PROPOSALS IN RESPONSE TO THE SOLICITATION WAS SET FOR APRIL 30, 1973. OFFERS WERE RECEIVED FROM THE FOLLOWING FIRMS:

AEL SERVICE CORPORATION (AEL)

FEDERAL ELECTRIC/SIEMENS (FE/S) (A JOINT VENTURE)

PAGE COMMUNICATIONS ENGINEERS

PHILCO-FORD

SANDERS ASSOCIATES

ON MAY 2, 1973, THE PROPOSALS WERE FURNISHED TO THE SOURCE SELECTION EVALUATION BOARD (SSEB) FOR EVALUATION IN ACCORDANCE WITH THE EVALUATION PLAN DATED APRIL 25, 1973.

BETWEEN JUNE 20, 1973, AND AUGUST 13, 1973, NEGOTIATIONS WERE CONDUCTED WITH ALL OFFERORS WHO HAD SUBMITTED PROPOSALS. AUDIT REPORTS WERE RECEIVED AND USED DURING THE COST NEGOTIATIONS. THE NEGOTIATIONS WERE CONDUCTED IN TWO PHASES; TECHNICAL AND COST. TECHNICAL NEGOTIATIONS WITH AEL WERE HELD ON JUNE 26, 1973. PRIOR TO THE NEGOTIATIONS, THE CONTRACTING OFFICER, IN A LETTER DATED JUNE 12, 1973, ADVISED AEL OF CERTAIN QUESTIONS THAT SHOULD BE ANSWERED AT THE TECHNICAL NEGOTIATIONS AND THAT THERE WAS A SIGNIFICANT PROBLEM WITH AEL'S COST PROPOSAL. AEL REASSURED THE CONTRACTING OFFICER THAT ALL DIFFICULTIES WOULD BE RESOLVED. THE BEST AND FINAL OFFER DUE DATE WAS ESTABLISHED AS AUGUST 15, 1973, IN ORDER TO PERMIT ALL OFFERORS SUFFICIENT TIME TO CONSIDER AMENDMENT 0004, ISSUED JULY 10, 1973.

UPON RECEIPT OF THE BEST AND FINAL OFFERS FROM EACH OFFEROR, THE FINAL EVALUATIONS WERE MADE. THE SSEB RECOMMENDED FE/S FOR AWARD AS HAVING RECEIVED THE HIGHEST TOTAL COMPOSITE SCORE, AND AS HAVING SUBMITTED THE BEST OVER ALL PROPOSAL WHEN CONSIDERING ALL OF THE EVALUATION CRITERIA USED. THE CONTRACTING OFFICER, AFTER CONSIDERATION OF THE SSEB REPORT, MADE HIS OWN DECISION IN FAVOR OF FE/S AND AWARD WAS THEREAFTER MADE TO FE/S.

AEL PROTESTS THIS AWARD ALLEGING THAT THE CONTRACTING OFFICER GROSSLY ABUSED HIS DISCRETION RESPECTING SOURCE SELECTION AND, AS A RESULT, VIOLATED THE APPLICABLE REGULATIONS PERTAINING TO CRITERIA FOR AWARDS UNDER NEGOTIATED PROCUREMENTS. MORE SPECIFICALLY, AEL RAISES THE FOLLOWING CONTENTIONS: (1) THE EVALUATION CRITERIA WERE IMPROPERLY APPLIED; (2) THE RFP CONTAINED INHERENT DEFICIENCIES THAT REQUIRE IT TO BE CANCELED; (3) THE EVALUATION PROCESS WAS TAINTED BY BIAS, IRRATIONALITY, AND IGNORANCE; AND (4) AWARD TO FE/S WOULD RESULT IN AN ADVERSE GOLD FLOW SITUATION. IN ACCORDANCE WITH SECTION 20.9 OF OUR INTERIM BID PROTEST PROCEDURES AND STANDARDS, 4 CFR, AEL EXERCISED ITS RIGHT TO OFFER ORAL ARGUMENT IN SUPPORT OF ITS POSITION. OUR OFFICE EXTENDED THE OPPORTUNITY TO ALL PARTIES EXPRESSING AN INTEREST IN THIS MATTER TO ATTEND AN INFORMAL CONFERENCE ON JANUARY 8, 1974.

THE PURPOSE OF A CONFERENCE IS TO CRYSTALLIZE THE ISSUES BEFORE OUR OFFICE AND TO AFFORD ALL INTERESTED PARTIES AN OPPORTUNITY TO PRESENT THEIR VIEWS ON THE MERITS OF THE PROTEST. ALSO, OUR OFFICE GAINS FURTHER INSIGHT, NOT READILY DISCERNIBLE FROM THE RECORD, INTO SIGNIFICANT FACTORS INHERENT IN THE PARTICULAR PROCUREMENT BEING PROTESTED. THOUGH WE INVITED ARMY REPRESENTATIVES TO ATTEND THE CONFERENCE, THE INVITATION WAS DECLINED, APPARENTLY BECAUSE IT IS CONTRARY TO ARMY POLICY TO ATTEND PROTEST CONFERENCES. THOUGH WE ARE UNAWARE OF THE POLICY CONSIDERATIONS INVOLVED, IT IS DIFFICULT FOR US TO UNDERSTAND HOW ATTENDANCE COULD BE ADVERSE TO THE INTEREST OF THE ARMY OR DELETERIOUS TO ITS PROCUREMENT PROCESS. WE WOULD LIKE TO POINT OUT THAT OTHER PROCUREMENT AGENCIES PARTICIPATED IN THESE CONFERENCES AND HAVE ACKNOWLEDGED THEIR USEFULNESS. WE HAVE THEREFORE SUGGESTED TO THE DEPARTMENT OF THE ARMY THAT THIS POLICY BE RECONSIDERED SINCE THE ADVANTAGES TO BE GAINED ARE SIGNIFICANT.

I. WERE THE EVALUATION CRITERIA PROPERLY CONSTRUCTED AND APPLIED?

AS STATED IN PARAGRAPH 3-501(A) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), PROPER PROCUREMENT PROCEDURE REQUIRES THAT SOLICITATIONS CONTAIN THE INFORMATION NECESSARY TO ENABLE A PROSPECTIVE OFFEROR TO PREPARE A PROPOSAL OR QUOTATION PROPERLY. IT IS AEL'S CONTENTION THAT THE ARMY HAS FAILED TO DO THIS.

AEL ASSERTS THAT THE RFP MISINFORMED OFFERORS AS TO THE BASES FOR EVALUATION OF THEIR "TECHNICAL" AND "MANAGEMENT" PROPOSALS IN THAT THE NUMBER OF CRITERIA LISTED ON THE RFP WAS FEWER THAN THE NUMBER ACTUALLY USED (AND STATED) IN THE EVALUATION PLAN. ADDITIONALLY, THE RFP APPEARED TO INDICATE THAT EACH EVALUATION CRITERION WAS OF RELATIVELY EQUAL WEIGHT, WHEREAS THE EVALUATION PLAN DISCLOSED GREAT DISPARITIES IN VALUE BETWEEN THE EVALUATION CRITERIA.

THE EVALUATION PLAN, AS SET FORTH IN THE RFP, WAS AS FOLLOWS:

D-2 PROPOSAL EVALUATION FACTORS

1. TECHNICAL ADEQUACY (500 POINTS)

A. PROPOSAL. ***

B. UNDERSTANDING OF REQUIREMENTS. ***

C. FEASIBILITY OF APPROACH. ***

D. COMPLETENESS OF PROPOSALS. ***

E. SPECIFICATIONS AND STANDARDS. ***

F. PUBLICATIONS. ***

2. COMPANY RESPONSIBILITIES (300 POINTS)

A. COMPANY EXPERIENCE. ***

B. PERSONNEL. ***

C. ACCEPTANCE OF RESPONSIBILITY. ***

3. PRICE (200 POINTS)

THE EVALUATION PLAN ACTUALLY UTILIZED, HOWEVER, WAS AS FOLLOWS:

PROPOSAL EVALUATION FACTORS

1. TECHNICAL ADEQUACY (500 POINTS)

A. PROPOSAL.

B. UNDERSTANDING OF REQUIREMENT.

C. FEASIBILITY OF APPROACH.

D. COMPLETENESS OF PROPOSAL.

E. SPECIFICATIONS AND STANDARDS.

F. PUBLICATIONS

G. ALARM SYSTEM.

H. LOGISTICS.

2. COMPANY RESPONSIBILITIES (300 POINTS)

A. COMPANY EXPERIENCE.

B. PERSONNEL.

C. ACCEPTANCE OF RESPONSIBILITY.

3. PRICE (200 POINTS)

A. ESTIMATED TARGET COST & FEES.

B. RELATIONSHIP OF SHARE RATIO, TARGET FEE, MAX FEE, MIN FEE TO TARGET COSTS.

C. COST ACCOUNTING AND REPORTING SYSTEM.

D. FINANCIAL POSITION OF COMPANY & RELATED COST IMPACT.

E. QUALIFICATIONS & ASSIGNMENTS OF PERSONNEL & RELATED COSTS IMPACT.

F. TECHNICAL ADEQUACY OR SUPERIORITY OF QUOTATIONS & RELATED COST IMPACT.

ALTHOUGH THE ADDITIONAL EVALUATION CRITERIA MAY NOT BE EASILY CATEGORIZED UNDER THE CATEGORIES AS SET FORTH IN THE RFP, WE BELIEVE THERE IS SUFFICIENT CORRELATION BETWEEN THE ADDITIONAL EVALUATION FACTORS USED AND THE GENERALIZED CATEGORIES SHOWN IN THE RFP TO SATISFY THE REQUIREMENT THAT PROSPECTIVE OFFERORS BE ADVISED OF THE EVALUATION CRITERIA WHICH WILL BE APPLIED TO THEIR PROPOSALS. SEE 51 COMP. GEN. 397 (1972); 50 ID. 565, 574 (1971).

WE ARE, HOWEVER, CONCERNED WITH THE FACT THAT THE PROCURING AGENCY HAD THE NEW EVALUATION PLAN PRIOR TO THE DATE SET FOR INITIAL RECEIPT OF PROPOSALS BUT FAILED TO DISCLOSE THE ADDITIONAL CRITERIA TO PROSPECTIVE OFFERORS. THIS COULD HAVE BEEN ACCOMPLISHED BY ISSUING AN AMENDMENT TO THE RFP AS IS DETAILED IN ASPR 3-505 CONCERNING CORRECTIONS OF DEFECTS IN AN RFP. IN OUR OPINION, THE INTEGRITY OF THE COMPETITIVE PROCUREMENT SYSTEM DEMANDS THE TIMELY DISCLOSURE OF EVALUATION DATA TO PROSPECTIVE OFFERORS SO THAT BOTH THE PROCURING ACTIVITY AND THE RESPONDING OFFERORS MAY BE ON A COMMON GROUND AS TO THE BASIS OF AWARD SELECTION. WE BELIEVE THIS TO BE AN IMPORTANT STEP IN THE NEGOTIATED PROCUREMENT PROCESS SINCE OFFERORS FORMULATE THEIR PROPOSALS ON THE BASIS OF THE KNOWN EVALUATION FACTORS. IN OUR OPINION, WITHHOLDING OF RELEVANT EVALUATION CRITERIA RAISES THE QUESTION OF IMPARTIALITY OF THE EVALUATION PROCESS. THE BENEFITS THAT INURE TO THE GOVERNMENT THROUGH FULL TIMELY DISCLOSURE OF ALL RELEVANT EVALUATION CRITERIA ARE APPARENT. MOREOVER, WITHHOLDING OF RELEVANT EVALUATION CRITERIA, BE IT INTENTIONAL OR NOT, COULD ADVERSELY AFFECT THE INTEGRITY OF THE SYSTEM.

IN REGARD TO AEL'S CONTENTION CONCERNING DECEPTION AS TO THE RELATIVE WEIGHTS OF THE EVALUATION CRITERIA, IT HAS BEEN THE CONSISTENT POSITION OF OUR OFFICE THAT OFFERORS SHOULD BE PLACED IN A POSITION TO MAKE ACCURATE AND REALISTIC PROPOSALS BY INFORMING THEM IN THE SOLICITATION OF THE RELATIVE IMPORTANCE TO BE ATTACHED TO EACH EVALUATION FACTOR. 51 COMP. GEN. 272, 279 (1971); 50 ID. 565, 575, SUPRA; 49 ID. 229, 230 (1969); 47 ID. 336, 342 (1967); 44 ID. 439, 442 (1965). ACCORDINGLY, WE HAVE HELD THAT EACH EVALUATION FACTOR AND ITS RELATIVE IMPORTANCE SHOULD BE DISCLOSED TO OFFERORS. 51 COMP. GEN. 272, SUPRA; B-167867, JANUARY 20, 1970; B-167508, DECEMBER 8, 1969; 48 COMP. GEN. 314, 318 (1968).

CONCEDING THE EFFICACY OF THIS PRINCIPLE, WE BELIEVE THAT ITS EFFECT SHOULD BE LIMITED TO THE PRINCIPAL EVALUATION FACTORS WHICH FORM THE JUDGMENTAL BASES FOR AWARD. THAT IS TO SAY, NOT ALL SUBCRITERIA OF THE PRINCIPAL FACTORS NEED BE TREATED IN THE SAME MANNER AS THE PRINCIPAL CRITERIA. IN THE INSTANT CASE, THE SUBCRITERIA LISTED UNDER "TECHNICAL ADEQUACY" MAY BE CATEGORIZED AS DEFINITIVELY DESCRIPTIVE OF THE MAIN CRITERION. IN OUR OPINION, SUBCRITERIA IN THE NATURE OF "PROPOSAL," "UNDERSTANDING OF REQUIREMENTS," "FEASIBILITY OF APPROACH," "COMPLETENESS OF PROPOSAL," "SPECIFICATIONS AND STANDARDS," "PUBLICATIONS" AND "LOGISTICS" ARE ALL DEFINITIVE CATEGORIES OF "TECHNICAL ADEQUACY." BEING DEFINITIVE SUBCRITERIA, WE FIND NO HARM IN THE FAILURE TO DISCLOSE THE RELATIVE WEIGHTS OF THESE TYPES OF SUBCRITERIA, AS THEY ARE ALL ELEMENTS WHICH BASICALLY COMPRISE THE MAIN CRITERIA, BUT IN A NARRATIVE FASHION. IT IS OUR OPINION THAT AN OFFEROR COULD NOT REALISTICALLY ASSUME THAT SUBCRITERIA OF SUCH A DEFINITIVE NATURE, UNLESS STATED OTHERWISE, WOULD BE OF EQUAL IMPORTANCE IN RELATION TO EACH OTHER. IT WOULD BE IMPROPER AND UNREALISTIC TO ASSUME THAT "PUBLICATIONS" SHOULD BE WEIGHTED ON A PAR WITH "UNDERSTANDING OF REQUIREMENTS."

WE DO, HOWEVER, WANT TO CLARIFY AND DISTINGUISH THIS POSITION FROM INSTANCES INVOLVING SUBCRITERIA WHICH ARE ESSENTIAL CHARACTERISTICS OR MEASUREMENTS OF PERFORMANCE OF THE END ITEM BEING PROCURED. IF THE SUBCRITERIA INVOLVED REQUIREMENTS FOR ITEMS SUCH AS THE CATV TOWERS, TRANSMITTERS, RECEIVERS, ETC., THEN WE BELIEVE THAT THE RELATIVE IMPORTANCE OF THESE SUBCRITERIA WOULD HAVE TO HAVE BEEN DISCLOSED IN ORDER TO ALLOW OFFERORS TO PROPERLY FORMULATE THEIR PROPOSALS.

OUR HOLDING IN 51 COMP. GEN. 272, 281, SUPRA, IS MODIFIED TO THE EXTENT THAT IT IS INCONSISTENT WITH THE FOREGOING STATEMENTS.

AS THE SUBCRITERIA IN THIS INSTANCE WERE OF A DEFINITIVE NATURE, WE FIND NO BASIS TO QUESTION THE PROPRIETY OF THE PROCUREMENT ON THIS ISSUE.

AEL FURTHER CONTENDS THAT THE GOVERNMENT RELIED TO AN IRRATIONAL EXTENT UPON THE INDEPENDENT GOVERNMENT COST ESTIMATE (IGCE) IN EVALUATING OFFERORS' COST PROPOSALS. AEL STATES THAT INSTEAD OF DISCARDING THE IGCE AS BEING TOO INFLATED, AND INSTEAD OF DISCUSSING SPECIFIC ASPECTS OF THE IGCE WITH INDIVIDUAL OFFERORS, THE EVALUATORS ADDED A 50 PERCENT FACTOR TO EACH COST PROPOSAL TO "COMPENSATE" FOR THE INADEQUACY OF THE IGCE AND/OR EACH OFFEROR'S MISCOMPREHENSION OF THE GOVERNMENT'S NEEDS. THIS, AEL ASSERTS, WAS CONTRA TO OUR DECISION IN 50 COMP. GEN. 16 (1970).

THE PROCURING AGENCY RESPONDED TO THIS CONTENTION BY STATING THAT THE COST ADJUSTMENTS WERE NOT FOR THE PURPOSE OF COMPENSATING FOR ANY POTENTIAL INADEQUACIES OF THE IGCE AND/OR OFFEROR'S MISCOMPREHENSION OF THE GOVERNMENT'S NEEDS. THE ORIGINAL IGCE WAS IN THE AMOUNT OF $9.566 MILLION. UPON RECEIPT OF ALL INITIAL PROPOSALS, THE CONTRACTING OFFICER REQUESTED GOVERNMENT ESTIMATORS TO REEVALUATE THE IGCE. THE ESTIMATORS, UPON REEVALUATION, CONFIRMED THE ACCURACY OF THE IGCE WITHIN PLUS OR MINUS 27 PERCENT, BASED ON THE TOTAL WEIGHTED FACTORS FOR THE COMPONENTS OF THE IGCE. SINCE OFFERORS HAD LESS TIME TO PREPARE COST ESTIMATES, AND THERE WAS A POTENTIAL FOR GREATER UNCERTAINTY FOR THE OFFEROR'S ESTIMATED COSTS, AN ADDITIONAL 50 PERCENT OF THE GOVERNMENT'S 27 PERCENT FACTOR WAS AUTHORIZED. THEREFORE, ALL ESTIMATED COST PROPOSALS WERE INCREASED AND/OR DECREASED BY 41 PERCENT (27 PERCENT PLUS 14 PERCENT) AND COMPARED ON A RANGE WITH THE IGCE WHICH WAS ADJUSTED BY 27 PERCENT.

BY USING A METHOD OF ADJUSTMENT OF THIS NATURE, AN OFFEROR SUBMITTING A HIGHER COST WOULD RECEIVE A GREATER UPWARD (AND DOWNWARD) ADJUSTMENT THAN AN OFFEROR SUBMITTING A LOWER COST. APPLYING THIS RATIONALE TO THE FACTS OF THIS PROCUREMENT, THE FOLLOWING ADJUSTMENTS WERE MADE. INITIALLY, FE/S' COST PROPOSAL WAS APPROXIMATELY $3 MILLION LESS THAN THE IGCE. AEL'S COST PROPOSAL WAS APPROXIMATELY $4 MILLION LESS THAN THE IGCE. ADJUSTING EACH AMOUNT BY 41 PERCENT AND THE IGCE BY 27 PERCENT, THE PROPOSAL HAD A COST RANGE AS FOLLOWS: FE/S - $9.3 MILLION TO $3.8 MILLION, PHILCO-FORD - $9.9 MILLION TO $4.1 MILLION, NORTHRUP PAGE - $3.0 MILLION TO $1.2 MILLION, SANDERS ASSOCIATES - $7.8 MILLION TO $3.2 MILLION, AND AEL - $7.0 TO $2.9 MILLION. THE IGCE RANGE WAS $11.2 MILLION TO $6.4 MILLION. THESE COST RANGES WERE PLOTTED IN A BAR GRAPH MANNER, EXTENDING FROM $0 TO $12 MILLION. THE IGCE, WHEN PLOTTED, WAS DIVIDED INTO 10 EQUAL SEGMENTS, EACH SEGMENT REPRESENTING ONE-TENTH OF THE COST RANGE BETWEEN $6.4 MILLION AND $11.2 MILLION. SCORES WERE THEN DETERMINED BY ESTABLISHING WHERE THE HIGH END OF EACH ADJUSTED COST PROPOSAL FELL, IN RELATION TO THE IGCE. THE FARTHER ALONG THE IGCE BAR A COST FELL, THE MORE POINTS IT RECEIVED. THEREFORE, WHILE THE INITIAL SPREAD BETWEEN FE/S AND AEL WAS $1 MILLION, THE ADJUSTED SPREAD BETWEEN FE/S AND AEL WAS BETTER THAN $2 MILLION - AND IN THIS LIGHT IT CAN BE SEEN WHY FE/S RECEIVED A GREATER SCORE.

THEREFORE, WHILE WE WISH TO RESERVE COMMENT ON THE MERITS OF THIS TYPE OF EVALUATION PLAN, BASED ON THE RECORD BEFORE US, WE FIND NO BASIS TO QUESTION THE USE OF THIS PLAN IN THE INSTANT PROCUREMENT. ITS APPLICATION WAS NEITHER ARBITRARY NOR CAPRICIOUS AND UNDER THE CIRCUMSTANCES, APPEARS TO HAVE BEEN A PROPER EXERCISE OF PROCUREMENT DISCRETION. MOREOVER, AS CONCERNS THE INSTANT PROCUREMENT, IT APPEARS THAT IF THE PRICE OR COST EVALUATION SCORES WERE TO BE TOTALLY DISREGARDED FE/S, PHILCO-FORD AND AEL WOULD STILL REMAIN IN THE SAME RELATIVE POSITIONS.

AS CONCERNS OUR DECISION 50 COMP. GEN. 16, SUPRA, CITED BY COUNSEL FOR AEL, THAT DECISION STANDS FOR THE PROPOSITION THAT A GOVERNMENT ESTIMATE, BY ITSELF, IS NOT A SOUND BASIS FOR REJECTING A PROPOSAL WITHOUT FURTHER NEGOTIATIONS, IF THAT PROPOSAL WAS WITHIN THE COMPETITIVE RANGE. IN THE INSTANT PROCUREMENT, NEGOTIATIONS WERE CONDUCTED WITH ALL FIVE FIRMS SUBMITTING PROPOSALS. NO FIRM WAS ELIMINATED SOLELY ON THE COST EVALUATION, NOR WAS THE IGCE ADJUSTMENT APPLIED TO ONE OFFER IN A MANNER DIFFERENT FROM ANY OF THE OTHER OFFERS. WE THEREFORE FIND THE ABOVE DECISION TO BE INAPPLICABLE TO THE CASE AT HAND.

II. WERE THERE INHERENT DEFICIENCIES IN THE RFP THAT COMPEL CANCELLATION?

AEL CONTENDS THAT THERE WERE DEFICIENCIES IN THE RFP WHICH WERE SO SEVERE THAT THE CHARIMAN OF THE TECHNICAL EVALUATION PANEL RECOMMENDED THAT THE RFP BE CANCELED. AEL STATES THAT THERE WERE SEVERAL AREAS OF UNCERTAINTY PERTAINING TO SYSTEM DEFINITION AND THAT THE AWARDEE WOULD HAVE BEEN ABLE TO INCREASE ITS PROFITS TO AN UNLIMITED AMOUNT. THE BASIS FOR THESE CONTENTIONS ARE STATEMENTS IN THE RECORD MADE BY THE CHAIRMAN OF THE EVALUATION BOARD. THAT SAME CHAIRMAN, HOWEVER, WAS A PARTY TO THE EVALUATION REPORT WHICH RECOMMENDED AWARD TO THE HIGHEST RANKING OFFEROR. BY RECOMMENDING AWARD BE MADE, IT APPEARS TO US THAT THE SSEB WAIVED ANY RECOMMENDATIONS THEY MAY HAVE CONSIDERED AS CONCERNS CANCELLATION OF THE RFP.

MOREOVER, GIVEN ALL OF THESE EXISTING UNCERTAINTIES AS POINTED OUT BY AEL, WE QUESTION HOW IT WAS POSSIBLE THAT AEL SUBMITTED A PROPOSAL WHICH THEY DECLARE TO BE RESPONSIVE TO THE REQUIREMENTS OF THE SOLICITATION. AEL FELT THAT THEY WERE RESPONSIVE (WHICH THEY WERE) TO SPECIFIC REQUIREMENTS, SUCH REQUIREMENTS MUST HAVE BEEN SPECIFIC ENOUGH FOR THE ARMY TO MAKE AN AWARD THEREUNDER.

AEL NEXT CONTENDS THAT TWO AMBIGUITIES IN THE RFP'S SPECIFICATIONS REMAINED THROUGHOUT THE ENTIRE PROCUREMENT ACTION AND RAISE SERIOUS QUESTION AS TO THE VIABILITY OF THE RFP AND ANY CONTRACT AWARDED THEREUNDER. HOWEVER, AEL WAS AWARE OF THESE AMBIGUITIES THROUGHOUT THE NEGOTIATION PROCESS. SECTION 20.2(A) OF OUR INTERIM BID PROTEST PROCEDURES AND STANDARDS PROVIDES THAT PROTESTS BASED UPON ALLEGED IMPROPRIETIES IN SOLICITATIONS WHICH ARE APPARENT PRIOR TO THE CLOSING DATE FOR RECEIPT OF PROPOSALS SHALL BE FILED PRIOR TO SUCH CLOSING DATE. ACCORDINGLY, AS THIS POINT HAD NOT BEEN RAISED PRIOR TO AUGUST 15, 1973, THIS ASPECT OF THE PROTEST IS UNTIMELY AND WILL NOT BE CONSIDERED.

III. WAS THE EVALUATION PROCESS TAINTED BY BIAS, IRRATIONALITY AND IGNORANCE?

IT IS THE AEL'S POSITION THAT THE ENTIRE PROPOSAL EVALUATION PROCESS WAS TAINTED BY BIAS, IRRATIONALITY AND IGNORANCE. AEL CONTENDS THAT THERE WAS A PRO-GERMAN BIAS IN THAT FE/S RECEIVED A HIGHER EVALUATION AS A RESULT OF HAVING (A) A FULLY TRAINED AND EXPERIENCED STAFF LOCATED IN GERMANY, (B) MADE ARRANGEMENTS FOR ALL OF THE OFFICE SPACE REQUIRED IN THE MANNHEIM AREA FOR PROJECT IMPLEMENTATION, AND (C) A BETTER KNOWLEDGE OF GERMAN ELECTRICAL SPECIFICATIONS AND PROPOSED SITE LOCATIONS. AEL CONTENDS FURTHER THAT IT WAS SEVERELY PENALIZED BECAUSE ONE OF ITS PROPOSED SUBCONTRACTORS (UNICOM, INCORPORATED) WAS A NEWLY FORMED CORPORATION. AND FINALLY, AEL CONTENDS THAT THE ENTIRE EVALUATION PROCESS WAS HIGHLY QUESTIONABLE DUE TO THE INCREASE IN EVALUATION SCORES AFTER BEST AND FINAL OFFERS, WHEN THE NEW SCORES ARE VIEWED AND ARE SOUGHT TO BE JUSTIFIED IN LIGHT OF THE INFORMATION SUBMITTED BETWEEN THE ROUNDS OF EVALUATION IN RESPONSE TO QUESTIONS PRESENTED BY THE SSEB.

THE ARMY HAS REBUTTED THESE ARGUMENTS BY STATING THAT ALL OF THE ITEMS IN QUESTION MENTIONED ABOVE PROPERLY CAME WITHIN THE PURVIEW OF THE EVALUATION CRITERIA. ONLY AFTER CONSIDERATION OF ALL OF THE EVALUATION RESULTS DID THE CONTRACTING OFFICER SELECT FE/S AS REPRESENTING THE GREATEST VALUE TO THE GOVERNMENT. THIS CHOICE WAS CONCURRED IN BY ALL OTHERS CONNECTED WITH THE PROCUREMENT.

WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICIALS BY MAKING AN INDEPENDENT DETERMINATION AS TO WHAT AREAS SHOULD BE CONSIDERED DURING EVALUATION AND THEREBY INFLUENCE WHICH OFFEROR SHOULD BE RATED FIRST AND RECEIVE AWARD. SUCH DETERMINATIONS WILL BE QUESTIONED BY OUR OFFICE ONLY UPON A CLEAR SHOWING OF UNREASONABLENESS OR FAVORITISM, OR UPON A CLEAR SHOWING OF A VIOLATION OF THE PROCUREMENT STATUTES AND REGULATIONS. SEE B-164552, FEBRUARY 24, 1969. THE RECORD BEFORE US SHOWS THAT AEL'S PROPOSAL WAS EVALUATED IN ACCORDANCE WITH THE CRITERIA SET FORTH IN THE EVALUATION PLAN. ALL OF THE OTHER FIRMS WERE EVALUATED ON THESE SAME CRITERIA. UNDER THIS PROCEDURE, FE/S WAS DULY SELECTED FOR AWARD. WE DO NOT FIND THAT THE AWARD MADE WAS CONTRARY TO EXISTING LAW OR REGULATION, OR THAT IT CAN BE CONSIDERED TO BE ARBITRARY OR CAPRICIOUS. NEITHER DO WE FIND THAT THE EVALUATION PROCESS WAS TAINTED BY BIAS OR FAVORITISM.

IV. WILL AWARD TO FE/S RESULT IN A NEGATIVE "GOLD FLOW" SITUATION?

THE FINAL CONTENTION RAISED BY AEL IS THAT AN AWARD TO FE/S WILL RESULT IN ADVERSE GOLD FLOW CONSEQUENCES. AEL CONTENDS THAT BOTH THE "FE" AND "S" COMPONENTS OF FE/S ARE GERMAN CORPORATIONS. AS A RESULT, ALL COSTS AND ALL PROFIT (FEE) WILL NECESSARILY BE EXPENDED BY THE GOVERNMENT IN GERMANY RATHER THAN IN THE UNITED STATES. THIS, AEL STATES, WILL RESULT IN A NEGATIVE GOLD FLOW SITUATION AS COMPARED TO AWARD TO AN AMERICAN FIRM AND, THEREFORE, AWARD TO FE/S WAS NOT MOST ADVANTAGEOUS WITHIN THE MEANING OF THE EVALUATION CRITERIA CONTAINED IN THE RFP AND CERTAINLY WAS NOT IN THE BEST INTERESTS OF THE UNITED STATES GOVERNMENT.

FE/S REBUTS THE ABOVE CONTENTION BY ASSERTING THAT "FE," ALTHOUGH A GERMAN COMPANY, IS A WHOLLY OWNED SUBSIDIARY OF FEDERAL ELECTRIC CORPORATION, A DELAWARE CORPORATION. THE SOLE FUNCTION OF THE SUBSIDIARY IS TO SERVE AS THE PARENT'S OPERATING ARM IN GERMANY. THEREFORE, ALL G&A EXPENSES AND FEE, IF ANY, RESULTING FROM "FE'S" PERFORMANCE OF THE CONTRACT WILL AS A MATTER OF COURSE BE REPATRIATED TO ITS AMERICAN PARENT.

THE ARMY HAS TAKEN THE POSITION THAT THE BULK OF THE CONTRACT WORK EFFORT INVOLVES INSTALLATION, CONSTRUCTION, TESTING AND COMMISSIONING OF TOWERS, BUILDINGS AND MICROWAVE, MATV/CATV DISTRIBUTION SYSTEMS IN GERMANY. MOREOVER, ANY AMERICAN PERSONNEL EMPLOYED FOR THIS PROJECT WOULD HAVE TO LIVE IN THE GERMANY ECONOMY AND THUS EXPEND AMERICAN CURRENCY TO SUPPORT THEMSELVES IN GERMANY. TO REDUCE GOLD FLOW CONSEQUENCES, ALL MATV/CATV EQUIPMENT WAS REQUIRED TO BE OF UNITED STATES ORIGIN. THE CONTRACTING OFFICER WAS OF THE OPINION THAT NO MATTER WHICH FIRM RECEIVED THE AWARD, APPROXIMATELY $5.4 MILLION WOULD HAVE TO BE EXPENDED IN GERMANY. THEREFORE, IT WAS DECIDED THAT THE ONLY DIFFERENCE IN GOLD FLOW WOULD BE THE DIFFERENCES BETWEEN PROPOSALS AS TO ESTIMATED COST AND PERCENTAGE FEE.

IT WAS ON THIS BASIS THAT THREE SEPARATE GOLD FLOW WAIVERS WERE REQUESTED FOR VARIOUS ASPECTS OF THE PROCUREMENT. ALL WAIVERS WERE FORWARDED THROUGH PROPER CHANNELS TO THE INDIVIDUALS RESPONSIBLE FOR GRANTING SUCH REQUESTS. ALL WAIVERS WERE GRANTED BEFORE AWARD WAS MADE UNDER THE RFP. ALTHOUGH REASONABLE MEN MIGHT DIFFER AS TO THE SOUNDNESS OF THE RATIONALE BEHIND THE GRANTING OF THE REQUESTED WAIVERS, OUR OFFICE WILL NOT, AT THIS TIME, SUBSTITUTE OUR OPINION FOR THAT OF THE INDIVIDUALS RESPONSIBLE FOR THE DECISIONS. WE FIND NO PROCEDURAL ERRORS IN THE GRANTING OF SUCH WAIVERS AND, THEREFORE, THE WAIVERS MUST STAND.

IN VIEW OF THE FOREGOING DISCUSSION, WE ARE OF THE OPINION THAT THE AWARD TO FE/S IS NOT SUBJECT TO OBJECTION BY GAO. ACCORDINGLY, THE PROTEST OF AEL IS DENIED.