B-182556, APR 9, 1975

B-182556: Apr 9, 1975

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RESTRICTION OF SOLICITATION FOR DATA COMMUNICATIONS NETWORK TO TWO COMMON CARRIERS BECAUSE OF AGENCY'S DESIRE TO PROCURE TOTAL SYSTEM FROM ONE CONTRACTOR RATHER THAN THROUGH SEGMENTED PROCUREMENTS WILL NOT BE QUESTIONED AS AGENCY HAS SHOWN REASONABLE BASIS FOR SUCH DETERMINATION. 2. OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 AND PROCURING AGENCY PROCEDURES IS NOT FOR CONSIDERATION BY GAO AS ADHERENCE TO. DEPARTMENTAL POLICIES ARE CONCERN OF HEAD OF DEPARTMENT. 3. WHETHER OFFERORS POSSESS NECESSARY FCC TARIFFS TO OPERATE DATA COMMUNICATIONS SYSTEM AND CAN COMPLY WITH REQUIRED DELIVERY SCHEDULE ARE MATTERS OF RESPONSIBILITY AND. TARIFFS DO NOT HAVE TO BE OBTAINED UNTIL TIME FOR PERFORMANCE AND DETERMINATIONS OF AFFIRMATIVE RESPONSIBILITY ARE NO LONGER REVIEWED BY GAO ABSENT SHOWING OF FRAUD. 4.

B-182556, APR 9, 1975

1. RESTRICTION OF SOLICITATION FOR DATA COMMUNICATIONS NETWORK TO TWO COMMON CARRIERS BECAUSE OF AGENCY'S DESIRE TO PROCURE TOTAL SYSTEM FROM ONE CONTRACTOR RATHER THAN THROUGH SEGMENTED PROCUREMENTS WILL NOT BE QUESTIONED AS AGENCY HAS SHOWN REASONABLE BASIS FOR SUCH DETERMINATION. 2. ALLEGATION THAT MANNER OF PROCUREMENT VIOLATES CERTAIN POLICY STATEMENTS CONTAINED IN OFFICE OF TELECOMMUNICATION POLICY CIRCULAR, OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 AND PROCURING AGENCY PROCEDURES IS NOT FOR CONSIDERATION BY GAO AS ADHERENCE TO, OR DEPARTURES FROM, DEPARTMENTAL POLICIES ARE CONCERN OF HEAD OF DEPARTMENT. 3. WHETHER OFFERORS POSSESS NECESSARY FCC TARIFFS TO OPERATE DATA COMMUNICATIONS SYSTEM AND CAN COMPLY WITH REQUIRED DELIVERY SCHEDULE ARE MATTERS OF RESPONSIBILITY AND, THEREFORE, TARIFFS DO NOT HAVE TO BE OBTAINED UNTIL TIME FOR PERFORMANCE AND DETERMINATIONS OF AFFIRMATIVE RESPONSIBILITY ARE NO LONGER REVIEWED BY GAO ABSENT SHOWING OF FRAUD. 4. ASPR SEC. 22-1007(A) ENVISIONS USE OF COST ESTIMATES FOR TARIFFED SERVICES, AS PRICES SET BY REGULATION UNDER PUBLIC LAW 87-653, EVEN IF TARIFF IS NOT FILED UNTIL AFTER CONTRACT AWARD AND, THEREFORE, PROTEST THAT QUOTED PRICES ARE MERE ESTIMATES IS WITHOUT MERIT. FURTHER, AS SERVICES WILL BE TARIFFED, THERE IS NO REQUIREMENT FOR PRICE ANALYSIS OR COST AND PRICING DATA.

GENERAL DATACOMM INDUSTRIES, INC.:

GENERAL DATACOMM INDUSTRIES, INC. (GDC), HAS PROTESTED THE AWARDING OF A CONTRACT UNDER SOLICITATION NO. DCA200-R-087 ISSUED BY THE DEFENSE COMMUNICATIONS AGENCY (DCA), DEFENSE COMMERCIAL COMMUNICATIONS OFFICE (DECCO), SCOTT AIR FORCE BASE, ILLINOIS.

THE SOLICITATION IS FOR PROVIDING A REAL TIME, FULL PERIOD, DIGITAL DATA COMMUNICATIONS NETWORK BETWEEN THE MILITARY AIRLIFT COMMAND INTEGRATED MANAGEMENT SYSTEM (MACIMS) COMPUTER LOCATED AT SCOTT AFB AND EXISTING GOVERNMENT-FURNISHED COMPUTER INPUT/OUTPUT EQUIPMENT AT 15 LOCATIONS THROUGHOUT THE UNITED STATES.

THE SOLICITATION WAS LIMITED TO TWO OFFERORS, AMERICAN TELEPHONE AND TELEGRAPH COMPANY (AT&T) AND WESTERN UNION TELEGRAPH COMPANY (WU) BECAUSE OF DECCO'S DESIRE TO OBTAIN A SINGLE CONTRACTOR CAPABLE OF PROVIDING "END TO END" SERVICE. THIS ACTION WAS TAKEN TO AVOID A SEGMENTED PROCUREMENT WHICH WOULD HAVE NECESSITATED ESTABLISHMENT OF A TECHNNICAL CONTROL CAPABILITY BY THE GOVERNMENT AND CAUSED DIFFICULTIES IN PROVIDING SYSTEMS ENGINEERING AND INTEGRATION OF HARDWARE AND CIRCUITING FROM DIFFERENT SOURCES. AT&T AND WU ARE THE ONLY FIRMS WHICH POSSESS THE NECESSARY LINES OR CIRCUITS BETWEEN THE BASES TO BE LINKED BY MACIMS. THEREFORE, IT WAS DETERMINED TO BE IN THE BEST INTEREST OF THE GOVERNMENT TO CONTRACT WITH ONE OF THESE COMMON CARRIERS AND ALLOW THE SUCCESSFUL OFFEROR TO SUBCONTRACT FOR THE ADDITIONAL EQUIPMENT WHICH IT DID NOT POSSESS, SUCH AS MODEMS AND MULTIPLEX EQUIPMENT, TO COMPLETE THE SYSTEM.

GDC HAS PROTESTED THE RESTRICTION OF THE SOLICITATION TO AT&T AND WU AND CONTENDS THAT THE SOLICITATION SHOULD BE CANCELED AND THAT GDC AND OTHER DATA COMMUNICATIONS EQUIPMENT MANUFACTURERS BE ALLOWED TO COMPETE UNDER A REISSUED SOLICITATION. GDC HAS ADVANCED NUMEROUS GROUNDS IN SUPPORT OF ITS PROTEST IN ITS LETTERS OF NOVEMBER 25 AND DECEMBER 16, 1974, WHICH WILL BE CONSIDERED INDIVIDUALLY.

FIRST, GDC CONTENDS THAT THIS METHOD OF PROCUREMENT IS NOT THE LEAST EXPENSIVE MANNER OF OBTAINING THE SYSTEM DESIRED BY DCA. GDC ARGUES THAT THE GOVERNMENT COULD OBTAIN THE SYSTEM MORE ECONOMICALLY BY LEASING THE REQUIRED CIRCUITS FROM THE COMMON CARRIERS AND PURCHASING OR LEASING THE MODEM AND MULTIPLEX EQUIPMENT DIRECTLY FROM THE SUPPLIERS. THE PROPOSED METHOD OF PROCUREMENT WOULD ENTAIL THE SUCCESSFUL COMMON CARRIER HAVING TO SUBCONTRACT FOR THESE ITEMS AND THEN ADD THE COST OF SPARE PARTS, INSTALLATION AND MAINTENANCE TRAINING AND ENGINEERING TO THE PRICE CHARGED TO THE GOVERNMENT.

WHETHER TO PROCURE BY MEANS OF A SYSTEMS APPROACH OR BY SEPARATE PROCUREMENTS OF INDIVIDUAL ITEMS IS A DETERMINATION FOR THE CONTRACTING AGENCY AND SUCH DETERMINATION WILL NOT BE DISTURBED BY OUR OFFICE IN THE ABSENCE OF A CLEAR SHOWING THAT THE DETERMINATION LACKED A REASONABLE BASIS. 53 COMP. GEN. 270 (1973) AND MATTER OF ALLEN AND VICKERS, INC., AMERICAN LAUNDRY MACHINERY, 54 COMP. GEN. (B-181359, DECEMBER 2, 1974).

DCA, IN ITS REPORT TO OUR OFFICE ON THE PROTEST, STATED THAT IT HAD CONSIDERED A SEGMENTED OR FRAGMENTED PROCUREMENT APPROACH TO THE MACIMS SYSTEM. HOWEVER, DUE TO PAST EXPERIENCE WITH A SIMILAR, LESS EXTENSIVE SYSTEM PROCURED FROM MORE THAN ONE CONTRACTOR, DCA FOUND THAT THE RESULTING SERVICE DID NOT MEET THE AGENCY'S MINIMUM REQUIREMENTS AND THE CONTRACTS WERE TERMINATED. IN ORDER TO AVOID A REPETITION OF THE ABOVE PROBLEMS, IT WOULD BE NECESSARY, ACCORDING TO DCA, TO ESTABLISH A GOVERNMENT TECHNICAL CONTROL FACILITY TO MONITOR AND MANAGE THE CIRCUITS AND EQUIPMENT, THEREBY INCURRING ADDITIONAL MONETARY AND MANPOWER OUTLAYS. AS BOTH COMMON CARRIERS ALREADY MAINTAIN SUCH FACILITIES FOR THEIR OWN CIRCUITS, THE MANAGEMENT OF THE MACIMS SYSTEM COULD BE MET BY EITHER FIRM WITH A SMALL INCREASE IN THEIR INVESTMENT.

GDC ANSWERS THIS ARGUMENT BY STATING THAT BECAUSE OF THE UNIQUE CAPABILITIES OF ITS EQUIPMENT FOR DIAGNOSIS OF PROBLEMS WHICH MAY ARISE IN THE SYSTEM, A SEPARATE GOVERNMENT TECHNICAL CONTROL FACILITY IS NOT NECESSARY. THIS CLAIM IS NOT SUBSTANTIATED ACCORDING TO DCA AND FURTHER, PROBLEMS OF NON-CARRIER MANAGEMENT OF COMMON CARRIER FACILITIES, IN VIOLATION OF THE FEDERAL COMMUNICATIONS COMMISSION (FCC) RULES AND REGULATION, WILL ARISE.

WE BELIEVE THAT DCA HAS SUFFICIENTLY JUSTIFIED THE SYSTEMS APPROACH WHICH IT HAS TAKEN AND, THEREFORE, THERE IS NO BASIS FOR US TO OBJECT TO SUCH DETERMINATION.

NEXT, GDC STATES THAT THIS METHOD OF PROCUREMENT DOES NOT MAXIMIZE COMPETITION IN THAT THERE WAS DISCRIMINATION IN THE SELECTION OF OFFERORS. THE PROCUREMENT OF THE MACIMS WAS SYNOPSIZED IN THE COMMERCE BUSINESS DAILY (CBD) FOR SUBCONTRACTING PURPOSES ONLY AND STATED THAT AT&T AND WU WOULD BE SOLICITED AS PRIME CONTRACTORS. THE SYNOPSIS REFERENCED NOTE 5 IN THE NUMBERED NOTE SYSTEM OF THE CBD WHICH READS AS FOLLOWS:

"5. THE PROPOSED PROCUREMENT HAS BEEN SYNOPSIZED SOLELY FOR THE PURPOSE OF REFLECTING SUB-CONTRACTING OPPORTUNITIES WHICH MAY OR MAY NOT BE AVAILABLE. THE FIRMS LISTED IN THE COMMERCE BUSINESS DAILY ARE THE ONLY FIRMS KNOWN TO THE PROCURING ACTIVITY WHICH HAVE THE FACILITIES, DATA, AND TECHNICAL KNOWLEDGE NECESSARY TO MEET THE PROCUREMENT REQUIREMENTS. FOR THOSE REASONS, SOLICITATION HAS BEEN LIMITED TO THOSE KNOWN FIRMS.

"ANY FIRM NOT LISTED IN THIS PUBLISHED NOTICE MAY OBTAIN A BID SET FOR DIRECT BIDDING ONLY BY FURNISHING A WRITTEN STATEMENT SIGNED BY A CORPORATE OFFICIAL OF THE COMPANY, CERTIFYING THAT THE COMPANY POSSESSES THE LATEST DATA, AND THE FACILITIES, EQUIPMENT AND TECHNICAL KNOW-HOW TO PERFORM AS A PRIME CONTRACTOR ON THE PROCUREMENT CONCERNED.

"REQUESTS FOR BID SETS FOR THIS PROCUREMENT WILL NOT BE HONORED WITHOUT THE PRESCRIBED CERTIFICATE FROM CORPORATE LEVEL."

GDC CONTENDS THAT NEITHER AT&T NOR WU COULD HAVE CERTIFIED THAT THEY POSSESSED THE NECESSARY FACILITIES BECAUSE AS STATED PREVIOUSLY, THE TWO FIRMS MUST SUBCONTRACT FOR THE MODEMS AND MULTIPLEX EQUIPMENT REQUIRED BY THE SPECIFICATIONS. THEREFORE, GDC MAINTAINS THAT THE TWO COMMON CARRIERS HAVE BEEN ALLOWED TO COMPETE FOR THE AWARD WITHOUT THE CERTIFICATION WHILE OTHER FIRMS ARE HELD TO THE CERTIFICATION REQUIREMENT, WHICH THEY CANNOT MEET BECAUSE THEY LACK THE REQUIRED CIRCUITS.

WHILE DCA DID PERMIT AT&T AND WU TO COMPETE WITHOUT CERTIFYING THAT THEY POSSESSED THE FACILITIES, DATA AND TECHNICAL KNOWLEDGE NECESSARY TO MEET THE PROCUREMENT REQUIREMENTS, THIS WAS NECESSITATED BY THE PREVIOUSLY DISCUSSED SYSTEMS APPROACH ADOPTED BY DCA. NO OTHER PROSPECTIVE BIDDER COULD HAVE MADE SUCH A CERTIFICATION EITHER. THE NEGOTIATION AUTHORITY BEING EMPLOYED BY DCA IS 10 U.S.C. SEC. 2304(A)(10) (1970) AND ARMED SERVICES PROCUREMENT REGULATION (ASPR) SEC. 3-210.2(XIII) (1974 ED.) BECAUSE IT IS IMPRACTICABLE TO OBTAIN COMPETITION AND IMPOSSIBLE TO DRAFT ADEQUATE SPECIFICATIONS SUITABLE FOR FORMAL ADVERTISING. WHILE NEGOTIATED PROCUREMENTS ARE REQUIRED TO BE ON A COMPETITIVE BASIS TO THE MAXIMUM EXTENT PRACTICABLE (ASPR SEC. 3-101(B)), THIS REQUIREMENT IS TEMPERED BY THE ACTUAL NEEDS OF THE AGENCY OR THE NATURE OF THE PROCUREMENT. MATTER OF GOULD, INC., ADVANCED TECHNOLOGY GROUP, B-181448, OCTOBER 15, 1974. THEREFORE, AS DCA WAS PROCURING A TOTAL SYSTEM, WHICH IT DETERMINED WAS NECESSARY TO MEET ITS MINIMUM NEEDS, OUR OFFICE WILL NOT OBJECT TO THE ABOVE RESTRICTION ON COMPETITION.

THIRDLY, GDC STATES THAT THE PRESENT COURSE OF ACTION OF DCA UNDER THIS PROCUREMENT VIOLATES BOTH DCA CIRCULAR 350-135-1 ENTITLED "DEFENSE COMMERCIAL COMMUNICATIONS LEASING PROCEDURES" AND OFFICE OF TELECOMMUNICATIONS POLICY CIRCULAR NO. 13 "FEDERAL USE OF COMMERCIAL TELECOMMUNICATION SERVICE" (OTP 13).

IT IS UNNECESSARY TO DECIDE WHETHER THE CURRENT ACTIONS OF DCA ARE CONSISTENT WITH THE ABOVE TWO POLICY STATEMENTS AS MATTERS OF EXECUTIVE POLICY DO NOT ESTABLISH LEGAL RIGHTS AND RESPONSIBILITIES AND ARE NOT WITHIN THE DECISION FUNCTIONS OF OUR OFFICE. ADHERENCE TO, OR DEPARTURES FROM, DEPARTMENTAL POLICIES ARE SOLELY THE CONCERN OF THE HEAD OF THE DEPARTMENT. 43 COMP. GEN. 217 (1963) AND 53 COMP. GEN. 86 (1973).

GDC FURTHER STATES THAT DCA FAILED TO MAKE A PRICE AND COST ANALYSIS OF ALTERNATE METHODS OF PROCUREMENT AS REQUIRED BY THE OFFICE OF MANAGEMENT AND BUDGET CIRCULAR A-76 AND BY THE ABOVE-CITED DCA CIRCULAR. AFORESAID, MATTERS OF EXECUTIVE POLICY ARE NOT WITHIN THE DECISION FUNCTIONS OF OUR OFFICE AND THIS INCLUDES OMB CIRCULAR A-76. 53 COMP. GEN., SUPRA. REGARDING THE REQUIREMENT IN DCA CIRCULAR 350 135-1, CHAPTER 5, PARAGRAPH 2 STATES, IN PART:

"2. COST AND PRICE ANALYSIS. SOME FORM OF COST OR PRICING ANALYSIS IS NORMALLY REQUIRED IF THE SERVICE OR ITEM BEING LEASED IS NOT A COMMON CARRIER TARIFF ITEM OR IS NOT LISTED ON A GSA FSS. WHEN REQUIRED BY ASPR 22-1007, AND WHEN OTHERWISE DETERMINED BY THE CONTRACTING OFFICER TO BE NECESSARY, COST OR PRICING DATA WILL BE REQUIRED FROM THE CONTRACTOR.

SINCE THESE SERVICES WILL BE COMMON CARRIER TARIFFED ITEMS, THERE IS NO REQUIREMENT FOR COST OR PRICE ANALYSIS. FURTHER, ASPR SEC. 22-1007 WHICH READS AS FOLLOWS DOES NOT REQUIRE COST AND PRICING DATA:

"22-1007 COST OR PRICING DATA.

(A) RATES OR PRELIMINARY ESTIMATES QUOTED BY A COMMON CARRIER FOR TARIFFED SERVICES ARE CONSIDERED TO BE PRICES SET BY REGULATION WITHIN THE PROVISIONS OF PUBLIC LAW 87-653, EVEN IF THE TARIFF WILL NOT BE ESTABLISHED UNTIL AFTER EXECUTION OF THE CONTRACT. ACCORDINGLY, EXCEPT AS PROVIDED IN (B), COMMON CARRIERS ARE NOT REQUIRED TO SUBMIT COST OR PRICING DATA PRIOR TO AWARD OF CONTRACTS FOR TARIFFED SERVICES. ON THE OTHER HAND, RATES OR PRELIMINARY ESTIMATES QUOTED BY A COMMON CARRIER FOR NONTARIFFED SERVICE OR BY A NONCOMMON CARRIER FOR ANY SERVICE ARE NOT CONSIDERED TO BE PRICES SET BY REGULATION; AND THE PROVISIONS OF PUBLIC LAW 87-653 AND 3-807.3 SHALL BE APPLIED ACCORDINGLY."

NEXT, GDC CONTENDS THAT NEITHER AT&T NOR WU CAN LEGALLY PROVIDE THE REQUIRED SERVICES SINCE NEITHER CARRIER HAS ON FILE WITH THE FCC THE REQUIRED TARIFFS TO ALLOW THEM TO FURNISH SUCH A SERVICE. THE NEED FOR APPROVAL BY THE FCC OF THE SERVICE AND THE RATES TO BE CHARGED IS SIMILAR TO THE REQUIREMENT CONTAINED IN OTHER TYPES OF SOLICITATIONS THAT A BIDDER OR OFFEROR POSSESS A CERTAIN LICENSE OR PERMIT. OUR OFFICE HAS CONSISTENTLY HELD THAT A LICENSE REQUIREMENT IN A SOLICITATION IS A REQUIREMENT CONCERNING THE RESPONSIBILITY OF PROSPECTIVE CONTRACTORS AND NOT RELATED TO THE EVALUATION OR RESPONSIVENESS OF A BID. 53 COMP. GEN. 36, 38 (1973). IN 46 COMP. GEN. 36, 38 (1973). IN 46 COMP. GEN. 326 (1966), WE STATED THAT THE CRITICAL TIME FOR ACTUAL COMPLIANCE WITH A REQUIREMENT CONCERNING RESPONSIBILITY COULD BE AS LATE AS THE TIME FOR PERFORMANCE PLUS ANY LEAD TIME WHICH MAY BE NECESSARY IN A PARTICULAR CASE. THEREFORE, WE FIND NO REASON TO HOLD THAT EITHER AT&T OR WU MUST POSSESS THE NECESSARY TARIFFS AT THE TIME THEY SUBMITTED PROPOSALS OR AT THE TIME OF AWARD, BUT ONLY THAT THEY MUST OBTAIN THE TARIFFS PRIOR TO PERFORMANCE.

HOWEVER, ONE ARGUMENT WHICH GDC MAKES REGARDING THE NEED FOR TARIFFS DOES NOT INVOLVE THE ABOVE RULE. GDC STATES THAT AS THE RATES TO BE CHARGED BY THE SUCCESSFUL OFFEROR MUST BE APPROVED BY THE FCC, THE OFFERS SUBMITTED TO DCA ARE ONLY ESTIMATES OF EXPECTED CHARGES, WHICH COULD CHANGE UPON FILING WITH THE FCC AND, THEREFORE, THERE IS NO ASSURANCE THAT AWARD WILL BE MADE TO THE LOW OFFEROR. DCA HAS RESPONDED THAT CARRIER SUBMISSION OF PROPOSALS WITH COST ESTIMATES IN SUPPORT OF RATES AND CHARGES TO BE FILED IN A TARIFF SUBSEQUENT TO AWARD IS AN ACCEPTED, STANDARD METHOD OF PROPOSING NEW OR UNIQUE SERVICES NOT PREVIOUSLY OFFERED. THIS APPROACH IS ENVISIONED BY THE ABOVE-CITED ASPR SEC. 22-1007(A) AND, THEREFORE, WE FEEL THIS BASIS FOR PRICING PROPOSALS WAS PROPER.

FINALLY, GDC CONTENDS THAT NEITHER COMMON CARRIER WILL BE ABLE TO MEET THE REQUIRED DELIVERY SCHEDULE BECAUSE OF THE TIME REQUIRED TO FILE THE TARIFFS AND TO SUBCONTRACT FOR THE NECESSARY ITEMS WHICH THE CARRIERS DO NOT POSSESS. ORIGINALLY, THE SOLICITATION REQUIRED DELIVERY OF THE SYSTEM 37 DAYS AFTER AWARD, HOWEVER, BY AMENDMENT 2 TO THE SOLICITATION, DATED OCTOBER 29, 1974, THE REQUIRED DELIVERY WAS EXTENDED TO 6 MONTHS AFTER AWARD. THE ABILITY OF A CONTRACTOR TO PERFORM A CONTRACT WITHIN THE REQUIRED TIME FRAME IS A MATTER OF RESPONSIBILITY. THE DETERMINATION OF RESPONSIBILITY OF PROSPECTIVE CONTRACTORS IS LARGELY WITHIN THE DISCRETION OF THE PROCUREMENT OFFICIALS WHO MUST BEAR ANY DIFFICULTIES EXPERIENCED BY REASON OF A CONTRACTOR'S NONRESPONSIBILITY. IF THE CONTRACTING OFFICER FINDS A BIDDER OR OFFEROR RESPONSIBLE, WE DO NOT BELIEVE THE FINDING SHOULD BE REVIEWED BY OUR OFFICE ABSENT A SHOWING OF FRAUD. MATTER OF TELECTRO SYSTEMS CORP., B-183397, MARCH 21, 1975.

FOR THE FOREGOING REASONS, THE PROTEST OF GDC IS DENIED.