B-180018, JUN 12, 1974

B-180018: Jun 12, 1974

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DISAPPOINTED OFFEROR WHOSE TECHNICAL PROPOSAL WAS FOUND UNACCEPTABLE BY EVALUATION PANEL HAS NO BASIS FOR CONTENDING THAT. HIS PROPOSAL IS IN FACT ACCEPTABLE SINCE PROCURING ACTIVITY (1) FAILED TO NOTIFY HIM OF UNACCEPTABILITY. EXPERIENCE WITH PRODUCTION OF SAME OR SIMILAR UNITS - WERE OF SUCH A NATURE THAT RATINGS OF THREE OF FOUR PROPOSALS IN THESE AREAS WERE INADEQUATE AND COULD NOT BE IN ANY WAY IMPROVED BY CONDUCT OF NEGOTIATIONS WAS BASED UPON FACT THAT TIME WAS MOST CRITICAL ELEMENT OF PROCUREMENT. THE PROCURING ACTIVITY DID NOT CLEARLY CONVEY THIS FACT TO OFFERORS AND SUCH FAILURE TO SO INFORM OFFERORS WAS IMPROPER. 3. FAILURE OF PROCURING ACTIVITY TO INFORM OFFERORS OF RELATIVE WEIGHTS OF TECHNICAL AND PRICE PROPOSALS WAS IMPROPER.

B-180018, JUN 12, 1974

1. DISAPPOINTED OFFEROR WHOSE TECHNICAL PROPOSAL WAS FOUND UNACCEPTABLE BY EVALUATION PANEL HAS NO BASIS FOR CONTENDING THAT, NOTWITHSTANDING SUCH FINDING, HIS PROPOSAL IS IN FACT ACCEPTABLE SINCE PROCURING ACTIVITY (1) FAILED TO NOTIFY HIM OF UNACCEPTABILITY, (2) REQUESTED THAT PROTESTER EXTEND HIS PROPOSAL TIME AND (3) STATED THAT PROTESTER MIGHT BE OFFERED OPPORTUNITY TO RESUBMIT PROPOSAL IF NEGOTIATIONS WITH COMPETITOR DID NOT RESULT IN CONTRACT, SINCE SUCH DEFICIENCIES DO NOT NEGATE SUBSTANTIVE FINDING OF UNACCEPTABILITY BY PANEL. 2. DETERMINATION BY EVALUATION PANEL THAT THREE OF FOUR EVALUATION CRITERIA - PRODUCTION CAPABILITY OF VENDOR, AMOUNT OF DEVELOPMENT REQUIRED (DEGREE OF RISK), AND EXPERIENCE WITH PRODUCTION OF SAME OR SIMILAR UNITS - WERE OF SUCH A NATURE THAT RATINGS OF THREE OF FOUR PROPOSALS IN THESE AREAS WERE INADEQUATE AND COULD NOT BE IN ANY WAY IMPROVED BY CONDUCT OF NEGOTIATIONS WAS BASED UPON FACT THAT TIME WAS MOST CRITICAL ELEMENT OF PROCUREMENT. THE PROCURING ACTIVITY DID NOT CLEARLY CONVEY THIS FACT TO OFFERORS AND SUCH FAILURE TO SO INFORM OFFERORS WAS IMPROPER. 3. PROCURING ACTIVITY HAS NO OBLIGATION TO MAKE AWARD AT PRICE CALCULATED TO RESULT IN LOWEST OVERALL COST TO GOVERNMENT SINCE SECTION 1-3.801-1 OF FPR AND SOLICITATION PROVIDE THAT PROCUREMENT BE MADE TO BEST ADVANTAGE OF GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. HOWEVER, FAILURE OF PROCURING ACTIVITY TO INFORM OFFERORS OF RELATIVE WEIGHTS OF TECHNICAL AND PRICE PROPOSALS WAS IMPROPER, IN LIGHT OF FACT THAT PRICE DISPARITY OF PROPOSALS WAS GREAT, WITH ONLY OFFEROR FOUND ACCEPTABLE OFFERING HIGHEST PRICE. 4. CONTENTION OF UNSUCCESSFUL OFFEROR THAT COMPETITOR WAS TOLD OF COMPETITOR'S RELATIVE STANDING AND THAT ITS PRICE WAS TOO HIGH AND WAS DIRECTLY OR INDIRECTLY TOLD WHAT PRICE TO COME DOWN TO HAS NO MERIT SINCE SECTION 1-3.805-1(B) IS INAPPLICABLE IN PRESENT SITUATION SINCE NEGOTIATIONS WERE CONDUCTED WITH ONLY ONE OFFEROR; FURTHERMORE, IN PRESENT INSTANCE, UNSUCCESSFUL OFFEROR, WITH WHOM NEGOTIATIONS WERE NOT CONDUCTED, WAS INFORMED THAT PRICE OF COMPETITOR, WITH WHOM NEGOTIATIONS WERE CONDUCTED, WAS HIGH; RECORD CONTAINS NO INDICATION THAT COMPETITOR WAS INFORMED OF EITHER PRICE OR RELATIVE STANDING OF OFFERORS. 5. CONTENTION THAT UNSUCCESSFUL OFFEROR'S SMALL BUSINESS SIZE WAS NOT GIVEN FAVORABLE CONSIDERATION AS REQUIRED BY FPR SECTIONS 1 3.102(J) AND (N) IS UNFOUNDED SINCE REFERENCED SECTIONS OF FPR RELATE TO THE TYPES OF FACTORS WHICH PROCURING ACTIVITY WOULD TAKE INTO ACCOUNT DURING AND SUBSEQUENT TO CONDUCT OF NEGOTIATIONS WITH OFFEROR SUBMITTING ACCEPTABLE PROPOSAL OR PROPOSAL SUSCEPTIBLE TO BEING MADE ACCEPTABLE; THEREFORE, POLICY SET FORTH IN FPR IS INAPPLICABLE TO PRESENT SITUATION SINCE PROTESTER'S TECHNICAL PROPOSAL WAS DETERMINED UNACCEPTABLE. 6. CLAIM OF UNSUCCESSFUL OFFEROR FOR PROPOSAL PREPARATION COSTS IS WITHOUT MERIT SINCE LACK OF GOOD FAITH, ARBITRARINESS OR CAPRICIOUSNESS MUST BE ESTABLISHED AS PREREQUISITE TO RECOVERY AND THERE IS NO INDICATION ON RECORD THAT PROPOSALS WERE NOT SOLICITED IN GOOD FAITH. ALTHOUGH DETERMINATION OF UNACCEPTABILITY OF TECHNICAL PROPOSALS AND FAILURE TO PROVIDE OFFERORS WITH RELATIVE WEIGHTS OF TECHNICAL AND COST FACTORS WERE IMPROPER, THESE ACTIONS ALONE ARE NOT SO EGREGIOUS AS TO CONSTITUTE BAD FAITH OR TO ESTABLISH ARBITRARY OR CAPRICIOUS ACTIONS.

TO RADIATION SYSTEMS INC.:

REQUEST FOR PROPOSALS (RFP) 70-73-HEW-OS WAS ISSUED BY THE DEPARTMENT OF HEALTH, EDUCATION AND WELFARE (HEW) ON JUNE 21, 1973, TO 32 SOURCES FOR THE PROCUREMENT OF 5 TRANSMIT-ONLY TERMINALS FOR THE APPLICATIONS TECHNOLOGY SATELLITE-F (SERIES) (ATS-F) HEALTH/EDUCATION TECHNOLOGY (HET) SATELLITE EXPERIMENT. PROPOSALS WERE RECEIVED FROM THE FOLLOWING FOUR FIRMS: HUGHES AIRCRAFT COMPANY (HUGHES), WESTINGHOUSE ELECTRIC CORPORATION (WESTINGHOUSE), RADIATION SYSTEMS INCORPORATED (RSI), AND ENERGY SYSTEMS (ES).

DURING THE PLANNING OF THE PROCUREMENT, THE PROJECT OFFICER REQUESTED THAT A CONTRACT BE AWARDED ON A SOLE-SOURCE BASIS TO HUGHES FOR THE FOLLOWING REASONS:

"HUGHES AIRCRAFT COMPANY HAS THE ONLY KNOWN S-BAND TRANSMIT TERMINAL DESIGN COMPATIBLE WITH THE PLANNED EXPERIMENTAL PROGRAM. THIS TERMINAL WAS DEVELOPED AND TESTED WITH SATISFACTION ON A PROTO-TYPE CONTRACT WITH THIS OFFICE ENDING FEBRUARY 1973. THE DESIGN EFFORT WAS PERFORMED ON A FIXED PRICE CONTRACT AND REMAINS AS PROPRIETARY INFORMATION OF THE HUGHES AIRCRAFT COMPANY.

"THE ATS-F SATELLITE WILL BE ORBITED IN EARLY APRIL 1974. IN ORDER TO BEGIN EXPERIMENTATION WHEN THE SPACECRAFT IS TURNED OVER TO THE USERS ALL EQUIPMENT MUST BE IN THE FIELD AND CHECK OUT AS PART OF THE EXPERIMENTAL NETWORK BY MARCH 1974. THEREFORE, DELIVERY OF THE FINAL UNITS MUST BE NO LATER THAN JANUARY 1974 TO PERMIT INSTALLATION AND CHECKOUT ON-SITE. THIS REQUIRES THAT THE FIRST TWO UNITS BE DELIVERED SIX MONTHS FROM DATE OF CONTRACT. MAXIMUM CONFIDENCE MUST OF NECESSITY BE IN THE HUGHES AIRCRAFT COMPANY BECAUSE OF THEIR DEVELOPMENT OF THE EXACT PROTO-TYPE UNDER AN OPEN CONTRACT SOLICITATION CONDUCTED IN MAY 1972.

"THE PROPOSED CONTRACTOR FULFILLED THEIR PRIOR CONTRACTUAL COMMITMENTS IN A SATISFACTORY MANNER, THUS CONVINCING THE PROJECT OFFICER AND THE PEOPLE WITH WHOM THEY DEALT THAT THEY ARE CAPABLE OF MEETING THE PRESENT REQUIREMENTS."

NOTWITHSTANDING THE ARGUMENT PUT FORTH BY THE PROJECT MANAGER, THE CONTRACTING OFFICER DETERMINED TO SEEK COMPETITION. THE FOUR PROPOSALS WERE SUBMITTED TO THE EVALUATION PANEL FOR TECHNICAL EVALUATION ON JULY 17, 1973.

THE EVALUATION CRITERIA PUBLISHED IN THE RFP AND UTILIZED BY THE PANEL WERE AS FOLLOWS:

"WEIGHTING CRITERIA

25% SYSTEM DESIGN

15% PRODUCTION CAPABILITY OF VENDOR

30% AMOUNT OF DEVELOPMENT REQUIRED

(DEGREE OF RISK)

30% EXPERIENCE WITH PRODUCTION OF THE SAME OR

SIMILAR UNITS"

A SUMMARY OF THE PANEL MEMBERS' NUMERICAL EVALUATION OF THE PROPOSALS WAS AVERAGED AND THE RESULTS WERE AS FOLLOWS:

HUGHES 87

WESTINGHOUSE 77

RSI 76

ES 69

THE EVALUATION PANEL THUS CONCLUDED THAT:

"HUGHES IS THE ONLY OFFEROR WHOSE TECHNICAL PROPOSAL CAN BE UNCONDITIONALLY ACCEPTABLE. THE OTHER PROPOSALS EACH HAVE NUMEROUS SHORTCOMINGS WHICH HAVE BEEN DETAILED ABOVE.

"SIMILARLY, HUGHES IS THE ONLY OFFEROR TO PRESENT A CREDIBLE DELIVERY SCHEDULE AND TO POSSESS THE RELEVANT BACKGROUND AND EXPERIENCE IN THE DEVELOPMENT AND CONSTRUCTION OF LOW-POWER, S-BAND SYSTEMS TO ASSURE TIMELY AND ACCEPTABLE PERFORMANCE. WHEREAS THE TECHNICAL POINTS OF THE OTHER OFFERORS COULD BE NEGOTIATED AND MODIFIED, THE DEGREE OF DEVELOPMENT REQUIRED, PRODUCTION CAPABILITY, AND RELEVANT EXPERIENCE ARE CLEARLY EVIDENT FROM THE PROPOSALS AND COULD NOT BE MODIFIED THROUGH NEGOTIATION. THEREFORE, THE COMMITTEE SEES NO VALUE IN NEGOTIATIONS WITH THE OFFERORS OTHER THAN HUGHES.

"THE COMMITTEE CATEGORIZES THE PROPOSALS AS FOLLOWS:

"ACCEPTABLE: HUGHES AIRCRAFT COMPANY

"UNACCEPTABLE: ENERGY SYSTEMS, RADIATION SYSTEMS, INC.,

WESTINGHOUSE ELECTRIC CORPORATION"

ON JULY 25, 1973, THE BUSINESS PROPOSAL OF EACH OFFEROR WAS SUBMITTED TO THE EVALUATION PANEL. BY MEMORANDUM DATED JULY 30, 1973, THE EVALUATION COMMITTEE STATED:

"*** THE COMMITTEE REAFFIRMS THEIR PREVIOUS EVALUATION WITHOUT ANY CHANGES AND RECOMMENDS THAT A CONTRACT FOR THIS PROCUREMENT BE AWARDED TO HUGHES AIRCRAFT COMPANY. THIS MEMORANDUM PRESENTS FURTHER DISCUSSION IN SUPPORT OF THIS CONCLUSION.

"THE PRICE INFORMATION AS CONTAINED IN THE BUSINESS PROPOSALS IS SUMMARIZED AS FOLLOWS:

"ENERGY SYSTEMS $134,500

"HUGHES 253,208

AFC OPTION61,714

314,992

"RSI 157,562

"WESTINGHOUSE 181,672

"THERE IS CLEARLY A WIDE SPREAD IN THESE PRICES. HOWEVER, IT MUST BE NOTED THAT THE RANKING OF THESE PROPOSALS BY PRICE FROM HIGHEST TO LOWEST CORRESPONDS EXACTLY WITH THE COMMITTEE'S TECHNICAL RANKING OF THESE PROPOSALS. IT IS REASONABLE TO EXPECT THAT PROPOSALS OFFERING HIGHER TECHNICAL QUALITY SHOULD ALSO REQUEST A HIGHER PRICE.

"A FINAL NOTE SHOULD BE ADDED ABOUT THE REASONABLENESS OF THE HUGHES PRICE SINCE IT IS CONSIDERABLY HIGHER THAN THE PRICES OF THE OTHER OFFERORS. THE COMMITTEE'S INITIAL ESTIMATE OF THE COST OF THIS PROCUREMENT WAS SIMILAR TO THE HUGHES PRICE. EXAMINATION OF THE HUGHES BUSINESS PROPOSAL SHOWS THAT THEY ARE PUTTING MANY MORE MAN-HOURS OF EFFORT INTO THIS PROJECT THAN THE OTHER OFFERORS. (HUGHES, APPROX 8200 MAN-HOURS; WESTINGHOUSE, 5900; RSI, 3700; ENERGY SYSTEMS, AMOUNT NOT DETAILED IN PROPOSAL.) OF COURSE, THE ABSOLUTE NUMBER OF MAN-HOURS ALONE THAT ARE COMMITTED TO THIS PROJECT CANNOT BE TAKEN AS AN INDICATION OF THE QUALITY OF THE PROPOSAL. EVEN IF WESTINGHOUSE OR RSI WOULD SUBSTANTIALLY INCREASE THEIR MAN-HOUR INPUT, THIS COULD NOT SUBSTANTIALLY AFFECT THEIR EVALUATION. AS HAS BEEN SHOWN ABOVE, THE OFFERORS OTHER THAN HUGHES DO NOT HAVE THE EXPERIENCE OR EXPERTISE WHICH WOULD MAKE ADDITIONAL MANPOWER INPUT VERY VALUABLE. ON THE OTHER HAND, HUGHES HAS DEMONSTRATED A SUPERIOR LEVEL OF EXPERIENCE AND EXPERTISE. THUS, THEIR COMMITMENT OF A LARGE NUMBER OF MAN-HOURS IS TAKEN TO CONFIRM THE TECHNICAL QUALITY OF THEIR PROPOSAL AND TO SUPPORT THE REASONABLENESS OF THEIR PRICE."

THE PROCURING ACTIVITY CONCLUDED THAT TIME WAS THE MOST CRITICAL ELEMENT OF THE PROCUREMENT SINCE DELIVERY WAS TO BE ACCOMPLISHED SEVEN MONTHS AFTER THE CONTRACT AWARD AND THAT DISCUSSIONS COULD NEITHER MINIMIZE DEVELOPMENTAL TIME NOR IMPART THE PRODUCTION EXPERIENCE THAT WAS LACKING. THEREFORE, IT WAS DETERMINED THAT MEANINGFUL NEGOTIATIONS COULD NOT BE HELD WITH ANY OFFEROR OTHER THAN HUGHES. CONSEQUENTLY, HUGHES WAS THE ONLY OFFEROR WITH WHOM NEGOTIATIONS WERE CONDUCTED.

SINCE FUNDS WERE NOT AVAILABLE FOR THE PROCUREMENT, THE CONTRACT SPECIALIST, ON AUGUST 27, 1973, REQUESTED ALL OFFERORS TO EXTEND THEIR ACCEPTANCE PERIODS UNTIL OCTOBER 16, 1973. ALL OFFERORS EXTENDED THEIR ACCEPTANCE PERIODS. SUBSEQUENTLY, ALL OFFERORS WERE TELEPHONICALLY REQUESTED TO EXTEND THEIR ACCEPTANCE PERIODS UNTIL OCTOBER 31, 1973. THE FUNDING NECESSARY FOR THE PROCUREMENT WAS RECEIVED, AND ON OCTOBER 26, 1973, NEGOTIATIONS WERE BEGUN WITH HUGHES. SINCE AGREEMENT ON THE FINAL PRICE COULD NOT BE REACHED WITH HUGHES DURING THAT SESSION, THE CONTRACT SPECIALIST AGAIN REQUESTED THAT ALL OFFERORS EXTEND THEIR ACCEPTANCE DATES UNTIL NOVEMBER 16, 1973. IN EXPLANATION OF THE REQUEST, THE CONTRACTING OFFICER STATED THAT:

"*** THE REASON FOR THIS ACTION WAS THAT, EVEN THOUGH THE OTHER OFFERS WERE DEEMED UNACCEPTABLE, THE CONTRACT SPECIALIST WANTED TO KEEP THE PROCUREMENT ALIVE IN CASE AGREEMENT COULD NOT BE REACHED WITH HUGHES AIRCRAFT COMPANY. THE CONTRACT SPECIALIST'S INTENTION WAS THAT, IF NEGOTIATIONS FAILED WITH HUGHES AIRCRAFT COMPANY, TO REQUEST THE OTHER OFFERORS TO SUBMIT ADDENDA TO THEIR PROPOSALS (WITH MINOR SPECIFICATION CHANGES) WITHOUT REPEATING THE WHOLE PROCUREMENT CYCLE, SINCE IT WAS OBVIOUS FROM THE RESPONSES TO THE RFP THAT THESE WERE THE ONLY COMPANIES THAT COULD PRODUCE THE TERMINALS, IF GIVEN ENOUGH TIME FOR RESEARCH AND DEVELOPMENT. IT IS NOTED THAT THE EVALUATION CRITERIA ARE BASED PREDOMINANTLY UPON EVIDENCE OF THE OFFEROR'S ABILITY TO DELIVER WITHIN A SEVEN-MONTH PERIOD."

IT IS REPORTED THAT WHEN MAKING THE FINAL REQUEST TO RSI TO EXTEND THE ACCEPTANCE PERIOD OF ITS OFFER, THE CONTRACT SPECIALIST, TO THE BEST OF HIS RECOLLECTION, STATED: "I AM REQUESTING THAT YOU EXTEND YOUR PROPOSAL ACCEPTANCE TO NOVEMBER 16, 1973; I AM HAVING DISCUSSIONS WITH ANOTHER CONTRACTOR. HOWEVER, IF WE CANNOT REACH AGREEMENT, YOUR COMPANY MAY GET A CHANCE TO RESUBMIT YOUR PROPOSAL."

RSI PROTESTED TO THE PROCUREMENT ACTIVITY THE AWARD OF A CONTRACT TO ANY FIRM OTHER THAN RSI. AN URGENCY DETERMINATION WAS MADE AND A FIXED PRICE CONTRACT IN THE AMOUNT OF $240,500 WAS AWARDED TO HUGHES ON NOVEMBER 27, 1973, NOTWITHSTANDING THE PROTEST OF RSI. BY LETTER DATED NOVEMBER 21, 1973, OUR OFFICE WAS INFORMED BY THE ASSISTANT SECRETARY FOR ADMINISTRATION AND MANAGEMENT, HEW, THAT AWARD WAS TO BE MADE.

BY LETTER DATED OCTOBER 31, 1973, AND SUBSEQUENT CORRESPONDENCE, RSI PROTESTED TO OUR OFFICE THE AWARD TO ANY OTHER FIRM UNDER RFP 70-73-HEW OS. THAT FIRM'S PROTEST IS PREDICATED UPON THE FOLLOWING CONTENTIONS: (1) THAT RSI'S TECHNICAL AND PRICE PROPOSALS WERE WITHIN THE COMPETITIVE RANGE AND THAT HEW THEREFORE HAD A DUTY TO NEGOTIATE WITH THAT FIRM IN ACCORDANCE WITH SECTION 1-3.805-1(A) OF THE FEDERAL PROCUREMENT REGULATIONS (FPR); (2) THAT HEW FAILED TO MAKE THE AWARD AT A PRICE CALCULATED TO RESULT IN THE LOWEST OVERALL COST TO THE GOVERNMENT; (3) THAT HEW UTILIZED AN AUCTION TECHNIQUE IN VIOLATION OF FPR SECTION 1-3.805 -1(B); AND (4) THAT THE AGENCY FAILED TO GIVE FAVORABLE CONSIDERATION TO SMALL BUSINESS SIZE AS REQUIRED BY SECTIONS 1-3.102(F) AND 1-3.102(N) OF FPR, AND THAT LARGE BUSINESS SIZE FIRMS WERE PREFERRED. RSI HAS REQUESTED PROPOSAL PREPARATION COSTS, OR IN THE ALTERNATIVE, THAT THE CONTRACT BE AWARDED TO THAT FIRM IF HUGHES HAS FALLEN BEHIND SCHEDULE OR IF ORBITING DATE IS SLIPPING FROM APRIL 1974.

RSI CONTENDS THAT ITS PROPOSAL WAS WITHIN THE COMPETITIVE RANGE, BOTH TECHNICALLY AND PRICE WISE AND THAT THE PROCURING ACTIVITY THEREFORE HAD TO NEGOTIATE WITH THAT FIRM IN ACCORDANCE WITH SECTION 1-3.805-1(A) OF FPR. IT APPEARS THAT THIS CONTENTION IS BASED UPON THE FOLLOWING FACTS: (1) THAT RSI WAS NOT NOTIFIED THAT ITS TECHNICAL PROPOSAL HAD BEEN FOUND TO BE UNACCEPTABLE; (2) THAT THE CONTRACTING OFFICER REQUESTED EXTENSIONS OF THE ACCEPTANCE DATE OF RSI'S PROPOSAL AND (3) THAT THE CONTRACTING OFFICER, WHEN REQUESTING ONE OF THE EXTENSIONS, INFORMED AN RSI REPRESENTATIVE THAT HE WAS HAVING DISCUSSIONS WITH ANOTHER CONTRACTOR AND IF AGREEMENT COULD NOT BE REACHED, RSI MIGHT HAVE THE OPPORTUNITY TO RESUBMIT ITS PROPOSAL.

THE PROCURING ACTIVITY HAS TAKEN THE POSITION THAT RSI'S PROPOSAL WAS AT NO TIME CONSIDERED TO BE ACCEPTABLE, AND THAT THE DECISION WAS MADE TO REQUEST EXTENSIONS OF UNACCEPTABLE PROPOSALS "TO INSURE THAT THE GOVERNMENT WOULD BE IN A POSITION TO SALVAGE AT LEAST SOME PORTION OF THE TIME AVAILABLE FOR EXPERIMENTATION SHOULD IT NOT BE POSSIBLE TO AWARD A CONTRACT TO HUGHES. THE CONTRACT SPECIALIST TOOK AN ACTION WHICH IN HIS JUDGMENT WOULD ENABLE HIM TO AWARD A CONTRACT WITH RELAXED SPECIFICATIONS IF SUCH AN AWARD COULD BE MADE ON A TECHNICALLY AND ECONOMICALLY FEASIBLE BASIS." THE ADMINISTRATIVE REPORT CONCEDES THAT "THIS ACTION *** MISLED THE PROTESTANT INTO BELIEVING THAT ITS PROPOSAL WAS IN THE COMPETITIVE RANGE." SINCE THE RSI PROPOSAL WAS, IN FACT, TECHNICALLY UNACCEPTABLE, THE PROVISIONS OF FPR 1-3.805-1(A) DID NOT APPLY.

IN ESSENCE, RSI IS CONTENDING THAT NOTWITHSTANDING THE CONCLUSIONS OF THE TECHNICAL EVALUATION PANEL, ITS PROPOSAL IS ACCEPTABLE BECAUSE THE ACTIONS OF THE PROCURING ACTIVITY WERE INCONSISTENT WITH A FINDING OF UNACCEPTABILITY.

IT IS OUR POSITION THAT, WHILE THE ACTIONS OF THE PROCURING ACTIVITY WITH REGARD TO RSI SUBSEQUENT TO THE TECHNICAL EVALUATION OF THE PANEL WERE INCONSISTENT WITH THE CONCLUSION OF UNACCEPTABILITY REACHED BY THE PANEL, SUCH INCONSISTENCY DOES NOT NEGATE THE FINDINGS OF THE PANEL. IRREGULARITIES SUCH AS THOSE DISCUSSED ABOVE, CANNOT CHANGE THE SUBSTANTIVE FINDING OF THE EVALUATION PANEL. ACCORDINGLY, GIVEN THE FINDING OF THE EVALUATION PANEL THAT RSI'S TECHNICAL PROPOSAL WAS UNACCEPTABLE, THE PROCURING ACTIVITY WAS UNDER NO OBLIGATION TO CONDUCT NEGOTIATIONS WITH RSI, SINCE SECTION 1-3.805-1(A) OF FPR REQUIRES THE CONDUCT OF DISCUSSIONS ONLY WITH RESPONSIBLE OFFERORS WHO SUBMITTED PROPOSALS WITHIN A COMPETITIVE RANGE. HOWEVER, IT SHOULD BE MADE CLEAR THAT THESE REQUESTS FOR EXTENSIONS WERE HIGHLY IMPROPER. THEY MISLED RSI INTO BELIEVING THAT IT WAS IN THE COMPETITIVE RANGE AND MAY HAVE CAUSED THE PROTESTER TO INCUR ADDITIONAL COSTS AS A RESULT THEREOF.

IN ADDITION, IT SHOULD BE NOTED THAT THE RECORD OF THE PROCURING ACTIVITY EVIDENCES A MORE FUNDAMENTAL PROBLEM NOT RAISED BY RSI, CONCERNING THE DETERMINATION OF THE COMPETITIVE RANGE. AS STATED PREVIOUSLY, THE CRITERIA STATED IN THE RFP AND USED BY THE EVALUATION PANEL IN RATING THE TECHNICAL PROPOSALS ASSIGNED THE FOLLOWING WEIGHTING TO THE EVALUATION CRITERIA:

"WEIGHTING CRITERIA

25%SYSTEM DESIGN

15% PRODUCTION CAPABILITY OF VENDOR

30% AMOUNT OF DEVELOPMENT REQUIRED

(DEGREE OF RISK)

30% EXPERIENCE WITH PRODUCTION OF THE SAME OR SIMILAR UNITS"

THE AVERAGE OF THE EVALUATION PANEL'S NUMERICAL RATING OF THE INDIVIDUAL CRITERIA IS AS FOLLOWS:

CRITERIA HUGHES WESTINGHOUSE RSI ENERGY

SYSTEMS

SYSTEM DESIGN 20.8 18.8 19 16

PRODUCTION CAPABILITY

OF VENDOR 16.2 12.8 12.9 11.9

AMOUNT OF DEVELOPMENT

REQUIRED (DEGREE OF

RISK) 26.3 22.6 23 19.6

EXPERIENCE WITH

PRODUCTION OF THE SAME

OR SIMILAR UNITS 26.2 23 20.2 18

THE EVALUATION COMMITTEE CONCLUDED THAT HUGHES WAS THE ONLY ACCEPTABLE OFFEROR. IN REACHING THIS CONCLUSION THE EVALUATION PANEL STATED THAT "*** WHEREAS THE TECHNICAL POINTS OF THE OTHER OFFERORS COULD BE NEGOTIATED AND MODIFIED, THE DEGREE OF DEVELOPMENT REQUIRED, PRODUCTION CAPABILITY, AND RELEVANT EXPERIENCE ARE CLEARLY EVIDENT FROM THE PROPOSALS AND COULD NOT BE MODIFIED THROUGH NEGOTIATION ***." IN ESSENCE, THE EVALUATION PANEL CONCLUDED THAT WHILE THE TECHNICAL PROPOSALS OF THE REMAINING OFFERORS WERE SUSCEPTIBLE OF BEING MADE ACCEPTABLE BY NEGOTIATIONS, THE AREAS IN WHICH THESE PROPOSALS WERE DEFICIENT - THREE OF THE FOUR EVALUATION CRITERIA, DEGREE OF DEVELOPMENT, PRODUCTION CAPABILITY, AND RELEVANT EXPERIENCE - ARE OF SUCH A NATURE THAT THEY COULD NOT BE MODIFIED THROUGH NEGOTIATION. CONSEQUENTLY, THE PANEL REASONED THAT THESE PROPOSALS WERE, IN FACT, UNACCEPTABLE.

IMPLICIT IN THIS ARGUMENT IS THE FACT THAT TIME WAS CONSIDERED TO BE THE MOST CRITICAL ELEMENT OF THE PROCUREMENT AND THAT THE EVALUATION PANEL CONCLUDED THAT ONLY HUGHES HAD A CREDIBLE DELIVERY SCHEDULE. AS STATED BY THE CHAIRMAN OF THE TECHNICAL COMMITTEE, THE NEED FOR "*** DELIVERY OF THIS EQUIPMENT WITHIN AN EXTREMELY SHORT TIME FRAME WAS CLEARLY INDICATED WITHIN THE RFP ITSELF, BOTH IN THE DELIVERY SCHEDULE AND IN THE EVALUATION CRITERIA. THE EVALUATION COMMITTEE EXAMINED THIS POINT CAREFULLY. ONLY HUGHES WAS ABLE TO PRESENT CONVINCING EVIDENCE OF BEING ABLE TO MEET THE REQUIRED DELIVERY SCHEDULE." HOWEVER, THE FACT THAT TIME WAS SO CRITICAL WAS NOT UNEQUIVOCALLY STATED EITHER IN THE RFP OR CONVEYED TO THE OFFERORS IN ANY OTHER MANNER. THE INCLUSION OF THE DELIVERY SCHEDULE AND EVALUATION CRITERIA IN THE RFP DID NOT ADEQUATELY CONVEY THE IMPORTANCE OF TIME TO THE OFFERORS. THE FAILURE OF THE PROCURING ACTIVITY TO INFORM THE OFFERORS THAT TIME WAS THE MOST CRITICAL ELEMENT OF THE PROCUREMENT WAS IMPROPER.

SECONDLY, RSI CONTENDS THAT HEW FAILED TO MAKE THE AWARD AT A PRICE CALCULATED TO RESULT IN THE LOWEST OVERALL COST TO THE GOVERNMENT. WITH REGARD TO THE METHOD OF EVALUATION TO BE USED IN THE EVALUATION OF THE PROPOSALS SUBMITTED, SECTION XII OF THE RFP PROVIDES:

"SECTION XII - METHOD OF PROPOSAL EVALUATION

THE GOVERNMENT CONTEMPLATES AWARD OF A CONTRACT TO THAT FIRM WHOSE PROPOSAL DEMONSTRATES THAT THE FIRM WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. THE GOVERNMENT RESERVES THE RIGHT TO AWARD A CONTRACT TO OTHER THAN THE LOW OFFEROR OR TO NOT MAKE AN AWARD IF THAT IS DEEMED TO SERVE ITS BEST INTEREST."

IT SHOULD BE NOTED THAT THE GOVERNMENT MUST MAKE AN AWARD THAT IT CONSIDERS TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. THE GOVERNMENT HAS NO OBLIGATION TO MAKE AN AWARD AT A PRICE CALCULATED TO RESULT IN THE LOWEST OVERALL COST TO THE GOVERNMENT, AS CONTENDED BY THE PROTESTER.

HOWEVER, THE SOLICITATION DOES NOT INDICATE THE RELATIVE WEIGHTS OF THE TECHNICAL AND PRICE PROPOSALS NOR DOES THE SOLICITATION INDICATE IN ANY OTHER MANNER WHETHER EITHER THE TECHNICAL OR COST FACTORS WOULD BE PARAMOUNT. AS A MATTER OF SOUND PROCUREMENT POLICY AN RFP SHOULD ADVISE OFFERORS OF THE RELATIVE IMPORTANCE OF PRICE IN RELATION TO THE OTHER LISTED EVALUATION FACTORS. SEE 49 COMP. GEN. 229, 230 (1969). THE PRICE DISPARITY OF THE PROPOSALS WAS GREAT, WITH THE ONLY OFFEROR FOUND TO BE ACCEPTABLE OFFERING THE HIGHEST PRICE, WHICH WAS APPROXIMATELY $71,000 IN EXCESS OF THE NEXT HIGH PRICE. THE FAILURE OF THE PROCURING ACTIVITY TO ADVISE OFFERORS OF THE RELATIVE IMPORTANCE OF PRICE IN RELATION TO THE OTHER EVALUATION FACTORS WAS IMPROPER. SEE 52 COMP. GEN. 161, 163, 164 (1972).

THE OBJECTIVE OF NEGOTIATION IS STATED IN FPR 3-801.1, WHICH PROVIDES THAT WHEN PROCUREMENTS ARE UNDERTAKEN PURSUANT TO NEGOTIATION, MAXIMUM COMPETITION SHOULD BE OBTAINED TO THE END THAT THE PROCUREMENT WILL BE MADE TO THE "BEST ADVANTAGE OF THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED." SEE 51 COMP. GEN. 431 (1972); 53 COMP. GEN. 5 (B-177847, JULY 10, 1973). NEITHER THE FAILURE OF THE PROCURING ACTIVITY TO INFORM THE OFFERORS THAT TIME WAS THE MOST CRITICAL ELEMENT OF THE PROCUREMENT, NOR ITS FAILURE TO INFORM THE OFFERORS THAT THE TECHNICAL, RATHER THAN COST, FACTOR WAS PARAMOUNT, INDICATES THAT MAXIMUM COMPETITION WAS ACHIEVED. IN OUR OPINION, WE MUST CONCLUDE THAT THESE OMISSIONS OF THE PROCURING ACTIVITY WERE IN ERROR AND THAT, AS A RESULT, RSI WAS IMPROPERLY DENIED THE OPPORTUNITY TO EFFECTIVELY COMPETE FOR THIS PROCUREMENT TO THE DISADVANTAGE OF THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

WHILE PRACTICAL CONSIDERATIONS PRECLUDE OUR DISTURBING THE AWARD MADE TO HUGHES, WE STRONGLY RECOMMEND THAT ALL PROPER AND NECESSARY ACTIONS BE TAKEN TO PRECLUDE A RECURRENCE OF THIS SITUATION SO AS TO ASSURE THAT THE MAXIMUM COMPETITION BOTH BY LAW AND REGULATION BE OBTAINED IN FUTURE PROCUREMENTS OF THIS NATURE.

RSI'S THIRD CONTENTION CONCERNS THE ALLEGED USE OF AN AUCTION TECHNIQUE IN VIOLATION OF SECTION 1-3.805-1(B) OF FPR. RSI CONTENDS THAT "THE COMPETITOR WAS TOLD OF HIS RELATIVE STANDING AND THAT HIS PRICE WAS TOO HIGH AND WAS DIRECTLY OR INDIRECTLY TOLD WHAT PRICE TO COME DOWN TO."

ALTHOUGH IT IS NOT ENTIRELY CLEAR, IT APPEARS THAT RSI IS REFERRING TO THE STATEMENT MADE BY THE CONTRACT SPECIALIST IN OCTOBER 1973, THAT "I AM REQUESTING THAT YOU EXTEND YOUR PROPOSAL ACCEPTANCE PERIOD TO NOVEMBER 16, 1973. I AM HAVING DISCUSSIONS WITH ANOTHER CONTRACTOR. HOWEVER, IF WE CANNOT REACH AGREEMENT, YOUR COMPANY MAY GET A CHANCE TO RESUBMIT YOUR PROPOSAL."

SECTION 1-3.805-1(B) OF THE FPR PROVIDES AS FOLLOWS:

"WHENEVER NEGOTIATIONS ARE CONDUCTED WITH MORE THAN ONE OFFEROR, NO INDICATION SHALL BE GIVEN TO ANY OFFEROR OF A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION SINCE SUCH PRACTICE CONSTITUTES AN AUCTION TECHNIQUE WHICH MUST BE AVOIDED. LIKEWISE, NO OFFEROR SHALL BE ADVISED OF HIS RELATIVE STANDING WITH OTHER OFFERORS AS TO PRICE OR BE FURNISHED INFORMATION AS TO THE PRICES OFFERED BY OTHER OFFERORS. ***"

AS SEEN FROM THE ABOVE-QUOTED PROVISION, THIS SECTION OF THE FPR IS APPLICABLE TO ONLY THOSE SITUATIONS IN WHICH "NEGOTIATIONS ARE CONDUCTED WITH MORE THAN ONE OFFEROR." IT IS NOT APPLICABLE TO SITUATIONS SUCH AS THE ONE UNDER CONSIDERATION IN WHICH DISCUSSIONS ARE BEING CONDUCTED WITH ONLY ONE OFFEROR. THE PURPOSE OF THE PROHIBITION AGAINST DISCLOSURE OF PRICE AND RELATIVE STANDING IS TO PREVENT ONE COMPETING OFFEROR TO IMPROVE HIS OFFER VIS A VIS OTHER COMPETING OFFERORS.

IT SHOULD BE NOTED THAT IN THE PRESENT INSTANCE, RSI, WHO WAS INFORMED THAT HUGHES PRICE WAS HIGH, WAS NOT AN OFFEROR WITH WHOM NEGOTIATIONS WERE BEING CONDUCTED. FURTHERMORE, THE RECORD CONTAINS NO INDICATION THAT HUGHES WAS INFORMED EITHER OF THE PRICE OR THE RELATIVE STANDING OF THE OFFERORS.

LASTLY, RSI CONTENDS THAT ITS SMALL BUSINESS SIZE WAS NOT GIVEN FAVORABLE CONSIDERATION AS REQUIRED BY SECTIONS 1-3.102(J) AND 1 3.102(N) OF THE FPR. THE PROCUREMENT WAS NOT A SMALL BUSINESS SET ASIDE. HOWEVER, RSI INDICATES IN ITS PROPOSAL THAT IT WAS A SMALL BUSINESS CONCERN. SECTION 1 -3.102 OF THE FPR PROVIDES AS FOLLOWS:

"DURING THE COURSE OF NEGOTIATIONS, DUE ATTENTION SHALL BE GIVEN TO THE FOLLOWING AND ANY OTHER APPROPRIATE FACTORS:

"(J) CONSIDERATION OF THE SIZE OF THE BUSINESS CONCERN.

"(N) CONSIDERATION OF SUBCONTRACTING, WITH THE EXTENSIVE USE OF SMALL BUSINESS SUBCONTRACTORS BEING CONSIDERED A FAVORABLE FACTOR."

THE ABOVE-QUOTED SECTIONS OF THE FPR RELATE TO THE TYPES OF FACTORS WHICH THE PROCURING ACTIVITY WOULD TAKE INTO ACCOUNT DURING AND SUBSEQUENT TO THE CONDUCT OF DISCUSSIONS WITH AN OFFEROR IN THOSE SITUATIONS IN WHICH AN OFFEROR'S PROPOSAL IS FOUND TO BE ACCEPTABLE OR SUSCEPTIBLE TO BEING MADE ACCEPTABLE. SINCE THE PROCURING ACTIVITY CONCLUDED THAT RSI'S TECHNICAL PROPOSAL WAS UNACCEPTABLE, THE POLICY SET FORTH IN SECTION 1-3.102 IS INAPPLICABLE.

WITH REGARD TO RSI'S CLAIM FOR PROPOSAL PREPARATION COSTS, FEDERAL COURTS HAVE RECOGNIZED THAT OFFERORS ARE ENTITLED TO HAVE THEIR PROPOSAL CONSIDERED FAIRLY AND HONESTLY FOR AWARD AND THAT THE RECOVERY OF PROPOSAL PREPARATION EXPENSES IS POSSIBLE IF IT CAN BE SHOWN THAT PROPOSALS WERE NOT SO CONSIDERED. HOWEVER, LACK OF GOOD FAITH, ARBITRARINESS OR CAPRICIOUSNESS MUST BE ESTABLISHED AS A PREREQUISITE TO RECOVERY. SEE HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 177 F. SUPP. 251 (CT. CL. 1959); AND KECO INDUSTRIES, INC. V. UNITED STATES, 428 F.2D. 1233 (CT. CL. 1970) (CT. CL. NO. 173-69, 1974).

THERE IS NO INDICATION IN THE RECORD BEFORE US THAT PROPOSALS WERE NOT SOLICITED IN GOOD FAITH. ALTHOUGH WE HAVE CONCLUDED THAT THE FAILURE TO INFORM OFFERORS THAT TIME WAS THE MOST CRITICAL ELEMENT OF THE PROCUREMENT AND THE FAILURE TO PROVIDE OFFERORS WITH THE RELATIVE WEIGHTS OF TECHNICAL AND COST FACTORS WERE IMPROPER, NEITHER OF THESE OMISSIONS IS SO EGREGIOUS AS TO CONSTITUTE BAD FAITH OR COULD BE CONSIDERED ARBITRARY OR CAPRICIOUS.

ACCORDINGLY, THE PROTEST AND CLAIM FOR PROPOSAL PREPARATION COSTS ARE DENIED.