B-183677, JANUARY 9, 1976, 55 COMP.GEN. 636

B-183677: Jan 9, 1976

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CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - BEST AND FINAL - ADDITIONAL ROUNDS - SECOND OFFER TECHNICALLY UNACCEPTABLE CONTRACTING OFFICER'S REJECTION OF PROTESTER'S SECOND BEST AND FINAL OFFER AS TECHNICALLY UNACCEPTABLE WAS PROPER WHERE COST DATA SUBMITTED WITH PROPOSAL APPEARED TO MATERIALLY CHANGE PREVIOUSLY ACCEPTABLE TECHNICAL PROPOSAL AND PROTESTER DID NOT FURNISH ADEQUATE DETAILED EXPLANATION OF APPARENT REVISIONS. REOPENING OF NEGOTIATIONS AFTER SUBMISSION OF SECOND BEST AND FINAL OFFERS WAS DEEMED NOT TO BE IN BEST INTERESTS OF THE GOVERNMENT. THIS RFP WAS ISSUED ON APRIL 8. A FIRM FIXED PRICE MULTI-YEAR CONTRACT WITH AN ECONOMIC PRICE ADJUSTMENT CLAUSE WAS TO BE AWARDED TO THAT RESPONSIVE.

B-183677, JANUARY 9, 1976, 55 COMP.GEN. 636

CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - BEST AND FINAL - ADDITIONAL ROUNDS - SECOND OFFER TECHNICALLY UNACCEPTABLE CONTRACTING OFFICER'S REJECTION OF PROTESTER'S SECOND BEST AND FINAL OFFER AS TECHNICALLY UNACCEPTABLE WAS PROPER WHERE COST DATA SUBMITTED WITH PROPOSAL APPEARED TO MATERIALLY CHANGE PREVIOUSLY ACCEPTABLE TECHNICAL PROPOSAL AND PROTESTER DID NOT FURNISH ADEQUATE DETAILED EXPLANATION OF APPARENT REVISIONS. CONTRACTS - NEGOTIATION - REOPENING - NOT IN BEST INTERESTS OF GOVERNMENT CONTRACTING OFFICER PROPERLY DID NOT SEEK CLARIFICATION OF REVISED BEST AND FINAL OFFER WHICH APPEARED TO BE INCONSISTENT WITH OFFER PREVIOUSLY SUBMITTED AND WITH REQUIREMENTS OF SOLICITATION, SINCE MATTER WENT TO HEART OF PROMISED PERFORMANCE AND COULD ONLY BE RESOLVED BY REOPENING NEGOTIATIONS WITH ALL OFFERORS IN COMPETITIVE RANGE, AND REOPENING OF NEGOTIATIONS AFTER SUBMISSION OF SECOND BEST AND FINAL OFFERS WAS DEEMED NOT TO BE IN BEST INTERESTS OF THE GOVERNMENT.

IN THE MATTER OF ELECTRONIC COMMUNICATIONS, INC., JANUARY 9, 1976:

ELECTRONIC COMMUNICATIONS, INC. (ECI) PROTESTS THE AWARD OF A CONTRACT TO HONEYWELL INFORMATION SYSTEMS, INC. UNDER REQUEST FOR PROPOSALS (RFP) DAAB07-74-R-0231 BY THE U.S. ARMY ELECTRONICS COMMAND (ECOM). THIS RFP WAS ISSUED ON APRIL 8, 1974, WITH A DUE DATE FOR SUBMISSION OF PROPOSALS OF MAY 10, 1974. THE RFP COVERED REQUIREMENTS FOR A TOTAL QUANTITY OF 6,900 TSEC/KG-27 ELECTRONIC KEY GENERATORS, TOGETHER WITH MECHANICAL GAGES AND GAGE CASES, PRODUCTION EVALUATION, DATA ITEMS AND CONCURRENT REPAIR PARTS. A FIRM FIXED PRICE MULTI-YEAR CONTRACT WITH AN ECONOMIC PRICE ADJUSTMENT CLAUSE WAS TO BE AWARDED TO THAT RESPONSIVE, RESPONSIBLE OFFEROR SUBMITTING THE LOWEST PRICED, TECHNICALLY ACCEPTABLE PROPOSAL.

INITIAL PROPOSALS WERE SUBMITTED BY 10 OFFERORS. NEGOTIATIONS WERE CONDUCTED AND EIGHT PROPOSALS WERE RECEIVED IN RESPONSE TO A REQUEST FOR BEST AND FINAL OFFERS. THE CONTRACTING OFFICER, HOWEVER, DETERMINED THAT IT WAS ESSENTIAL TO CONTINUE DISCUSSIONS AND ACCORDINGLY REOPENED NEGOTIATIONS AND ADVISED THE OFFERORS OF THIS ACTION. AT THE CONCLUSION OF THIS ROUND OF NEGOTIATION, OFFERORS WERE ADVISED BY TWX DATED FEBRUARY 27, 1975, THAT THEY HAD THE OPPORTUNITY TO SUBMIT A NEW BEST AND FINAL OFFER. THE TWX CONTAINED THE FOLLOWING LANGUAGE:

MAJOR REVISIONS ARE NOT EXPECTED BUT SHOULD YOU REVISE YOUR OFFER IN ANY WAY, COMPLETE AND DETAILED SUPPORT FOR THE REVISION AND ANY OTHER AFFECTED PART OF YOUR PROPOSAL MUST ACCOMPANY THE REVISION.

IN RESPONSE TO THIS TWX, ECI IN MARCH 1975 SUBMITTED A REVISED BEST AND FINAL OFFER, WHICH CONSISTED OF A COVER LETTER, DD FORM 633 ENTITLED "CONTRACT PRICING PROPOSAL," AND CERTAIN OTHER DATA INCLUDING A COMPUTER RUN WHICH REFLECTED TOTAL LABOR HOURS BY CONTRACT LINE ITEM. THIS NEW BEST AND FINAL OFFER WAS APPROXIMATELY $11 MILLION LESS THAN ECI'S PREVIOUS BEST AND FINAL OFFER, AND SHOWED BOTH A REDUCTION IN OVERHEAD RATES AND AN INCREASE IN DIRECT LABOR HOURS. ALTHOUGH ECI'S PREVIOUS OFFER HAD BEEN REGARDED AS TECHNICALLY ACCEPTABLE, ECOM VIEWED THIS NEW OFFER AS UNACCEPTABLE BECAUSE IT REFLECTED AN UNSATISFACTORY PERFORMANCE SCHEDULE, PARTICULARLY WITH RESPECT TO THE LEVEL OF EFFORT ALLOCATION OVER THE 5 YEARS OF THE CONTRACT, AND BECAUSE IT LACKED SUFFICIENT SUPPORT FOR THE CHANGES MADE IN PRICE, OVERHEAD RATES, AND DIRECT LABOR. AS A RESULT, ECI'S LOW OFFER OF $27,238,098 WAS REJECTED AND AWARD WAS MADE TO HONEYWELL, THE NEXT LOW OFFEROR, AT A PRICE OF $27,598,958.61.

ECOM'S ACTIONS WERE PREDICATED PRIMARILY ON ITS READING OF THE DATA INCLUDED WITH ECI'S REVISED BEST AND FINAL OFFER. THE RFP ENVISIONED A PRODUCTION EFFORT OF 3 PROGRAM YEARS AND 5 CALENDAR YEARS, WITH THE FIRST PROGRAM YEAR EXTENDING OVER 3 CALENDAR YEARS. THE RFP CONTAINED VARIOUS CONTRACT LINE ITEMS (CLINS) FOR EACH OF THE 3 PROGRAM YEARS. ECI'S DATA INDICATED TO ECOM THAT ECI HAD "SHIFTED THE INCURRENCE OF COST ON 11 OUT OF 13 CLINS" AND THAT THE "NET EFFECT IS CONFUSION WHEN ONE TRIES TO RELATE THE APPLICATION OF EFFORT TO THE PROPOSED INCURRENCE OF COST."

IT WAS ECOM'S VIEW THAT ECI'S PROPOSAL SHOWED THAT EFFORTS WOULD BE EXPENDED AND COSTS INCURRED AT TIMES THAT WERE INCONSISTENT WITH THE NEEDS OF THE AGENCY AND WITH THE ESTABLISHED PROGRAM YEARS. THIS VIEW WAS BASED ON THE COMPUTER RUN FURNISHED WITH ECI'S PROPOSAL, WHICH INDICATED TO ECOM THAT ECI WOULD INCUR COSTS DURING INAPPROPRIATE CALENDAR OR CONTRACT YEARS WITH RESPECT TO THE CLINS CALLING FOR FIRST ARTICLE REQUIREMENTS, PRODUCTION OF GAGES, TEST EQUIPMENT AND SUPPORT SERVICES, TEST PLANS, AND DATA ITEMS. FOR EXAMPLE, ECOM READ THE COMPUTER RUN AS INDICATING THAT PRODUCTION AND DELIVERY OF MECHANICAL GAGES, REQUIRED BY CLIN 0003, WOULD OCCUR THROUGHOUT THE 5 CALENDAR YEARS OF THE CONTRACT. THIS WAS UNACCEPTABLE TO ECOM BECAUSE DELIVERY OF THE GAGES WAS REQUIRED PRIOR TO THE START OF FIRST ARTICLE TESTING DURING THE SECOND CALENDAR YEAR. ADDITION, THE COMPUTER RUN WAS READ BY ECOM AS INDICATING THAT THE MAJOR PRODUCTION EVALUATION EFFORT, REQUIRED BY CLINS 0010, 0014, AND 0018 FOR EACH OF THE 3 PROGRAM YEARS RESPECTIVELY, WOULD TAKE PLACE DURING THE SECOND PROGRAM (FOURTH CALENDAR) YEAR RATHER THAN THE FIRST, WHICH WAS ALSO UNACCEPTABLE TO ECOM.

ECI ARGUES THAT ECOM IMPROPERLY READ THE COMPUTER RUN AS ALLOCATING COSTS AND LABOR HOURS TO PARTICULAR CALENDAR YEARS. ECI CLAIMS THAT IT SUBMITTED THE COST DATA SOLELY TO SUPPORT ITS BEST AND FINAL PRICE, AND THAT IT DID NOT SUBMIT SUCH DATA TO AMEND OR MODIFY ITS TECHNICAL PROPOSAL WHICH PREVIOUSLY HAD BEEN CLASSIFIED AS ACCEPTABLE. ECI STATES THAT THE COMPUTER RUN SHOULD HAVE BEEN USED BY ECOM TO REVIEW THE TOTAL PROPOSED LABOR HOURS TO BE EXPENDED IN THE PERFORMANCE OF EACH CONTRACT LINE ITEM AND FOR NO OTHER PURPOSE. ECI CONCLUDES THAT THE COST DATA SUBMITTED IN MARCH 1975 "WAS NOT AND WAS NOT INTENDED TO BE EXPRESSIONS BY ECI OF ITS TECHNICAL RESPONSIBILITIES OR INTENTIONS, OR TO VARY THE CLEAR AND ACCEPTABLE MILESTONE CHARTS CAREFULLY PREPARED AND SUBMITTED AS PART OF ITS TECHNICAL PROPOSAL."

FURTHER, ECI MAINTAINS THAT ECOM'S DETERMINATION THAT THE ECI PROPOSAL WAS UNACCEPTABLE BECAUSE IT DID NOT CONTAIN AN EXPLANATION OF THE DIFFERENCES BETWEEN THE PRIOR PROPOSAL AND THE REVISED BEST AND FINAL OFFER WAS IMPROPER BECAUSE "NO SUCH EXPLANATION WAS INCLUDED IN THE EVALUATION FACTORS OF THE RFP * * * ." ECI CONTENDS THAT THE CHANGES IN THE MARCH 1975 BEST AND FINAL OFFER WERE CONSISTENT WITH A PREVIOUS ECOM- APPROVED CHANGE TO ITS TECHNICAL PROPOSAL WHICH NECESSITATED INCREASE IN DIRECT LABOR BUT ALLOWED A REDUCTION IN OVERHEAD.

ECI ALSO ASSERTS THAT IF ECOM HAD ANY QUESTIONS ABOUT ITS PROPOSAL, IT SHOULD HAVE REQUESTED CLARIFICATION RATHER THAN TREATING THE PROPOSAL AS UNACCEPTABLE.

WE BELIEVE THE RECORD SUPPORTS ECOM'S ACTIONS IN THIS CASE. IT IS WELL SETTLED THAT "AN OFFEROR MUST DEMONSTRATE AFFIRMATIVELY THE MERITS OF ITS PROPOSAL," KINTON CORPORATION, B-183105, JUNE 16, 1975, 75-1 CPD 365, AND THAT IT RUNS THE RISK OF PROPOSAL REJECTION IF IT FAILS TO DO SO CLEARLY. SEE PROGRAMMING METHODS, GTE INFORMATION SYSTEMS, INC., B-181845, DECEMBER 12, 1974. IT IS ALSO WELL SETTLED THAT WHEN A PROCUREMENT IS NEGOTIATED AND A COST OR PRICE PROPOSAL IS ONE SEGMENT OF AN OVERALL PROPOSAL CONTAINING TECHNICAL AND/OR OTHER SECTIONS, THE COST OR PRICE PROPOSAL, ALONG WITH SUPPORTING DATA, MAY BE CONSIDERED BY CONTRACTING AGENCIES IN THEIR EVALUATION OF THE OFFEROR'S UNDERSTANDING OF WHAT IS REQUIRED BY THE TECHNICAL OR OTHER SEGMENTS OF THE SOLICITATION. SEE, E.G., 52 COMP.GEN. 198 (1972); 50 ID. 788 (1971); KINTON CORPORATION, SUPRA; PROGRAMMING METHODS, GTE INFORMATION SYSTEMS, INC., SUPRA; B-174947, AUGUST 30, 1972. THIS RULE IS FOR APPLICATION WITH RESPECT TO EVALUATION OF BOTH INITIAL PROPOSALS AND BEST AND FINAL OFFERS, INCLUDING SITUATIONS IN WHICH A BEST AND FINAL PRICE PROPOSAL HAS A NEGATIVE IMPACT ON A TECHNICAL PROPOSAL PREVIOUSLY REGARDED AS ACCEPTABLE. KINTON CORPORATION, SUPRA; SEE ALSO SYSTEMS CONSULTANTS, INC., B-179825, MARCH 12, 1974, 71-3 CPD 128, AND AMERICAN MAINTENANCE AND MANAGEMENT SERVICES, INCORPORATED, B-179126, FEBRUARY 12, 1974, 74-1 CPD 64.

THE PROTESTER CLAIMS THAT ECOM COULD NOT PROPERLY REGARD THE SUBMITTED COST DATA AS MODIFYING ECI'S TECHNICAL PROPOSAL BECAUSE OF THE "WELL ESTABLISHED PRESUMPTION * * * THAT AFTER TECHNICAL ACCEPTABILITY HAS BEEN ESTABLISHED A BIDDER WOULD NOT LIKELY DISQUALIFY ITS TECHNICAL PROPOSAL BY INSERTING A CONTRARY CONDITION IN ITS BID." THAT PRESUMPTION, AS THE PROTESTER RECOGNIZES, IS APPLICABLE TO TWO STEP ADVERTISING. SEE, E.G., 52 COMP.GEN. 821 (1973); SPECTROLAB, A DIVISION OF TEXTRON, INC., B-180008, JUNE 12, 1974, 74-1 CPD 321. THE PROTESTER ARGUES, HOWEVER, THAT THE SITUATION IN THIS CASE IS ANALOGOUS TO TWO-STEP ADVERTISING BECAUSE THE RFP PROVIDED THAT AFTER TECHNICAL ACCEPTABILITY WAS ESTABLISHED AWARD WOULD BE MADE TO THE LOWEST OFFEROR.

WE DO NOT AGREE. UNDER THE TWO-STEP FORMAL ADVERTISING METHOD OF PROCUREMENT, ONLY OFFERORS SUBMITTING ACCEPTABLE TECHNICAL PROPOSALS DURING THE FIRST STEP ARE PERMITTED TO BID DURING THE SECOND STEP, AND THE BIDS, TO BE RESPONSIVE, MUST BE BASED ON THOSE TECHNICALLY ACCEPTABLE PROPOSALS. BIDDERS DO NOT HAVE THE OPTION OF PROPOSING CHANGES TO THEIR PROPOSALS DURING THAT SECOND STEP. IN NEGOTIATED PROCUREMENTS, HOWEVER, OFFERORS MAY REVISE ANY ASPECT OF THEIR PROPOSALS UNTIL NEGOTIATIONS ARE CLOSED, SEE, I.E., BELL AEROSPACE COMPANY, 55 COMP.GEN. 244 (1975), 75-2 CPD 168, AND THOSE REVISIONS MUST FIRST BE EVALUATED BY THE PROCURING ACTIVITY BEFORE THERE CAN BE ANY DETERMINATION OF ACCEPTABILITY OF THE PROPOSALS AS SO REVISED. ACCORDINGLY, WE THINK IT IS CLEAR THAT THE RFP PROVISION FOR AWARDING A CONTRACT TO THE LOWEST TECHNICALLY ACCEPTABLE OFFEROR REFERS TO A DETERMINATION OF TECHNICAL ACCEPTABILITY AFTER RECEIPT AND EVALUATION OF ALL FINAL OFFERS AND NOT TO ANY PREVIOUS FINDING OF TECHNICAL ACCEPTABILITY. WE THEREFORE FIND NO BASIS FOR VIEWING THIS SITUATION AS ANALOGOUS TO TWO-STEP ADVERTISING.

WITH REGARD TO THE ACTUAL EVALUATION OF ECI'S FINAL PROPOSAL, WE AGREE WITH ECOM THAT ECI'S PROPOSAL WAS CONFUSING AND SUBJECT TO BEING READ AS NOT COMPLYING WITH ECOM'S REQUIREMENTS. ECI'S COVERING LETTER STATED THAT "ECI'S BEST AND FINAL PRICING" WAS BEING SUBMITTED AND WAS "INTENDED TO REVISE, WHERE APPLICABLE, OUR ORIGINAL PROPOSAL * * * AND SUBSEQUENT REVISIONS THEREOF * * * . (THIS PROPOSAL REFLECTS A CORPORATE COMMITMENT ON THE PART OF ECI." THE "DD FORM 633 SUPPORT DATA" SUBMITTED WITH THE PROPOSAL STATED THAT "SECTION E PROVIDES A COMPUTER RUN WHICH REFLECTS TOTAL LABOR HOURS BY CONTRACT LINE ITEM." THIS COMPUTER RUN CONSISTED OF, INTER ALIA, SEPARATE PAGES FOR EACH CLIN AND SHOWED VARIOUS COST ITEMS (MATERIAL, ENGINEERING DIRECT LABOR, OTHER DIRECT LABOR, ETC.) BROKEN DOWN BY CALENDAR YEAR. IT IS NOT DISPUTED THAT FOR MANY OF THE CLINS, THE CALENDAR YEAR ALLOCATIONS WERE INCONSISTENT WITH RFP REQUIREMENTS.

ECI STATES THAT THE COMPUTER RUN WAS NOT INTENDED TO REFLECT COST INCURRENCE IN ANY PARTICULAR CALENDAR YEAR, BUT WAS FURNISHED ONLY TO ALLOW ECOM TO REVIEW FOR EACH CLIN "THE TOTAL PROPOSED LABOR HOURS TO BE EXPENDED IN THE PERFORMANCE OF EACH CONTRACT LINE ITEM AND FOR NO OTHER PURPOSE." ECI FURTHER STATES THAT THE REFERENCE TO THE COMPUTER RUN IN ITS SUPPORT DATA PUT ECOM ON NOTICE "THAT THE RUN REFLECTED ONLY THE TOTAL HOURS BY CONTRACT LINE ITEM."

THE SUPPORT DATA STATEMENT, HOWEVER, WAS NOT SO LIMITED. WHILE IT DID SAY THAT THE COMPUTER RUN "REFLECTS TOTAL LABOR HOURS BY CONTRACT LINE ITEM," THE RUN ALSO REFLECTED ON ALLOCATION OF THOSE LABOR HOURS OVER SEVERAL CALENDAR YEARS. NOWHERE IN ITS FINAL OFFER DID ECI INDICATE THAT THE COMPUTER RUN WAS SUBMITTED FOR ONE PURPOSE ONLY OR THAT THE ALLOCATION SHOWN WAS NOT ACCURATE AND WAS NOT TO BE CONSIDERED. IN THIS REGARD, WE NOTE THAT ECI'S PREVIOUS BEST AND FINAL OFFER INCLUDED A COMPUTER RUN WHICH ALSO ALLOCATED LABOR HOURS BY CALENDAR YEAR AND WHICH, FOR MOST OF THE CLINS, ACCURATELY REFLECTED ECI'S PROPOSED ALLOCATION OF EFFORT. UNDER THESE CIRCUMSTANCES, WE DO NOT THINK THAT ECOM ACTED UNREASONABLY IN READING THE REVISED COMPUTER RUN AS INDICATING BOTH TOTAL HOURS AND COST PER CLIN AND THE CALENDAR YEAR ALLOCATION OF THOSE HOURS AND COSTS. SINCE THOSE ALLOCATIONS WERE NOT CONSISTENT WITH RFP PERFORMANCE REQUIREMENTS, ECOM COULD RATIONALLY REGARD THIS ECI PROPOSAL AS UNACCEPTABLE.

WE DO NOTE THAT ECOM HAS TAKEN INCONSISTENT POSITIONS IN INTERPRETING THE COMPUTER RUN WITH RESPECT TO THE PRODUCTION EVALUATION CLINS. THE COMPUTER RUN REFLECTED THE FOLLOWING: (TABLE OMITTED)

ON THE ONE HAND, ECOM'S OVERVIEW COMMITTEE FOR THIS PROCUREMENT POINTED OUT THAT ECI HAD SHIFTED ITS PROPOSED INCURRENCE OF COST FOR THESE CLINS FROM WHAT HAD BEEN PREVIOUSLY OFFERED TO THE 3 CALENDAR YEARS SHOWN. THE COMMITTEE STATED, WITH RESPECT TO BOTH THESE CLINS AND CERTAIN OTHERS, THAT "THE CONTRACTOR EXPECTS TO EXPEND DOLLARS FOR SUCCEEDING PROGRAM YEAR EFFORTS, YEARS IN ADVANCE OF AUTHORIZATION TO PROCEED WITH A GIVEN PROGRAM YEAR." THIS WAS CONSISTENT WITH HOW THE COMPUTER RUN WAS INTERPRETED WITH RESPECT TO THE OTHER CLINS. ON THE OTHER HAND, THE COMMITTEE AND THE CONTRACTING OFFICER ALSO EXPRESSED CONCERN THAT ECI'S EMPHASIS ON PRODUCTION EVALUATION WAS NOW IN THE SECOND PROGRAM (FOURTH CALENDAR) YEAR (CLIN 0014) INSTEAD OF IN THE FIRST PROGRAM YEAR (CLIN 0010) AS IT HAD BEEN IN ECI'S INITIAL BEST AND FINAL OFFER. THIS LATTER INTERPRETATION IGNORES THE CALENDAR YEAR ALLOCATION OF THE COMPUTER RUN AND INSTEAD RELIES ON THE SPECIFIC AMOUNT SHOWN BY CLIN.

ALTHOUGH THESE INTERPRETATIONS ARE INCONSISTENT, WE THINK IT IS CLEAR FROM THE RECORD THAT UNDER EITHER READING ECI'S PROPOSAL WAS INCONSISTENT WITH THE RFP. UNDER THE FIRST INTERPRETATION, ALL PRODUCTION EVALUATION WOULD OCCUR DURING THE FIRST PROGRAM (FIRST 3 CALENDAR) YEARS), EVEN THOUGH SOME PRODUCTION EVALUATION EFFORT WAS REQUIRED FOR THE 2 SUBSEQUENT PROGRAM (CALENDAR) YEARS. UNDER THE SECOND INTERPRETATION, WHAT ECOM REGARDS AS "ONLY A NOMINAL EFFORT IN THE FIRST THREE CALENDAR YEARS (THE CRITICAL PERIOD)" WOULD TAKE PLACE, WHILE THE BULK OF THE EFFORT WOULD OCCUR DURING THE SECOND PROGRAM YEAR, WHICH WAS CONSIDERED TO BE TOO LATE IN VIEW OF THE NATURE AND PURPOSE OF THE PRODUCTION EVALUATION REQUIREMENT. FURTHERMORE, UNDER BOTH INTERPRETATIONS IT IS CLEAR THAT ECI'S PREVIOUS ACCEPTABLE APPROACH OF EMPHASIZING PRODUCTION EVALUATION AT THE OUTSET OF THE CONTRACT AND THEN TAPERING THE EFFORT IN SUCCEEDING YEARS WAS MODIFIED TO AN UNACCEPTABLE APPROACH REFLECTING AN INITIAL "NOMINAL" EFFORT FOLLOWED BY A MUCH GREATER EFFORT. THE SIGNIFICANCE TO ECOM OF THE PRODUCTION EVALUATION REQUIREMENT AND THE OFFERORS' UNDERSTANDING OF AND WILLINGNESS TO COMPLY WITH THAT REQUIREMENT IS READILY APPARENT FROM THE RECORD. AMONG THE EVALUATION CRITERIA IN THE RFP WAS A PROVISION SPECIFYING THAT "THE PROPOSAL MUST DEMONSTRATE A CLEAR UNDERSTANDING AND KNOWLEDGE OF THE TECHNICAL AND CONTRACTUAL RESPONSIBILITIES IMPOSED UPON THE OFFEROR BY THE PRODUCTION EVALUATION PROVISION OF J.23. A SUFFICIENT DEGREE AND LEVEL OF TECHNICAL AND ADMINISTRATIVE EFFORT MUST BE ALLOCATED TO PERFORM ALL TASKS REQUIRED UNDER J.23." PARAGRAPH J.23 REQUIRED THE CONTRACTOR TO PERFORM "A DETAILED REVIEW OF ALL TECHNICAL DATA FURNISHED UNDER THE CONTRACT * * * TO DETERMINE, IDENTIFY, AND CORRECT ANY OMISSION, DISCREPANCY, OR ERROR * * * OR DEFICIENCY IN THE DESIGN WHICH MAY PRECLUDE PRACTICAL MANUFACTURER OR ASSEMBLY, TESTING OR INSPECTION, OR THE ATTAINMENT OF REQUIRED PERFORMANCE * * * ." THE RATIONALE FOR THIS REQUIREMENT IS EXPLAINED BY ECOM AS FOLLOWS:

THE SIGNIFICANCE OF PRODUCTION EVALUATION IS THAT IT GETS PRODUCTION ENGINEERING IMMEDIATELY INVOLVED IN THE PRODUCTION ASPECTS OF THE CONTRACT BY A REVIEW OF THE TECHNICAL DATA PACKAGE. * * * THIS ACCOMPLISHES AN IN- DEPTH REVIEW OF THE TECHNICAL DATA PACKAGE BEFORE THE CONTRACTOR GETS SO DEEPLY INTO PRODUCTION THAT CHANGES ARE BOTH COSTLY AND TIME-CONSUMING. * * CONSEQUENTLY, IT IS EXTREMELY IMPORTANT THAT, IF ANY BENEFITS ARE TO BE DERIVED * * * THE EFFORT INVOLVED * * * BE PERFORMED RIGHT AFTER THE AWARD OF THE CONTRACT AND CONTINUE THEREAFTER THROUGHOUT THE LIFE OF PRODUCTION.

IN LIGHT OF THIS EXPLANATION AND THE RFP PROVISIONS, WE THINK UNDER EITHER INTERPRETATION OF ECI'S COMPUTER RUN ECOM COULD RATIONALLY CONCLUDE THAT ECI'S PROPOSAL DID NOT DEMONSTRATE ECI'S CLEAR "UNDERSTANDING OF THE LEVEL OF EFFORT TO BE APPLIED DURING CONTRACT PERFORMANCE" AND REGARD THE PROPOSAL AS UNACCEPTABLE FOR THAT REASON.

ECOM'S DETERMINATION THAT ECI'S SECOND BEST AND FINAL PROPOSAL WAS UNACCEPTABLE WAS ALSO BASED IN PART ON THE APPROXIMATELY $11 MILLION PRICE DECREASE COUPLED WITH AN INCREASE OF 265,000 HOURS OF DIRECT LABOR. ECOM BELIEVED THE PRICE DECREASE WAS NOT EXPLAINED "IN ANY TERMS WHICH COULD RELATE THE DECREASES TO THE IMPACT ON TECHNICAL PERFORMANCE," PARTICULARLY IN VIEW OF THE INCREASE IN DIRECT LABOR HOURS.

ECI CLAIMS, HOWEVER, THAT THESE CHANGES MERELY REFLECTED ITS REVISED APPROACH OF USING A FACILITY DEDICATED SOLELY TO PRODUCTION FOR THIS PROCUREMENT. ECI STATES THAT WHEN NEGOTIATIONS WERE REOPENED AFTER SUBMISSION OF INITIAL BEST AND FINAL OFFERS, ECI PROPOSED THE USE OF A DEDICATED FACILITY, WHICH WOULD INVOLVE AN INCREASE IN DIRECT LABOR HOURS AND A DECREASE IN THE OVERHEAD RATE BECAUSE "WHEN A PLANT IS DEDICATED TO THE PERFORMANCE OF A SINGLE PROJECT, MANY MORE JOBS ARE ACCOUNTED FOR AS DIRECT LABOR THAN IN A PLANT WITH A MULTIPLICITY OF PROJECTS." ACCORDING TO ECI, IT "EXPLAINED THIS IN ITS PRESENTATION WHICH PRECEDED ECOM'S APPROVAL OF THE DEDICATED FACILITY CONCEPT." ALSO ACCORDING TO ECI, SINCE NO EVALUATION FACTOR REQUIRED IT TO EXPLAIN CHANGES IN ITS PRICE PROPOSAL AS A CONDITION PRECEDENT TO AWARD, ECOM COULD NOT PROPERLY REFUSE TO AWARD A CONTRACT TO ECI ON THIS BASIS.

THE RECORD SHOWS THAT WHILE ECI'S SECOND BEST AND FINAL OFFER DID STATE IN THE COVERING LETTER THAT ITS REVISED PRICING WAS ATTRIBUTABLE TO A DECISION TO ACCEPT A REDUCED PROFIT, THE CHANGE TO A DEDICATED FACILITY, AND A REVISION OF THE ECONOMIC PRICE ADJUSTMENT CLAUSE, ECOM REGARDED THAT STATEMENT ALONE AS INSUFFICIENT SUPPORT FOR THE CHANGES THAT WERE MADE, IN PART BECAUSE THE DEDICATED FACILITY DID NOT YET EXIST AND THE FIRST 5 TO 6 MONTHS OF CONTRACT PERFORMANCE WOULD HAVE TO TAKE PLACE IN THE PLANT INITIALLY PROPOSED. ECOM ALSO BELIEVED THAT VARIOUS REDUCTIONS IN OVERHEAD EXPENSES WERE "RADICAL" (FOR EXAMPLE, THE MANUFACTURING OVERHEAD RATE FOR 1975 WAS CHANGED FROM 119.4% TO 21.5%) AND RESULTED IN "UNUSUALLY LOW RATES." CONCERN WAS ALSO EXPRESSED NOT ONLY OVER THE LARGEST INCREASE IN DIRECT LABOR HOURS, BUT ALSO OVER THE ELIMINATION OF ALL FIELD ENGINEERING EFFORTS.

AS NOTED ABOVE, ECOM'S MESSAGE REQUESTING REVISED BEST AND FINAL OFFERS WARNED THAT "COMPLETE AND DETAILED SUPPORT" FOR ANY REVISIONS MADE "MUST ACCOMPANY THE REVISION." ALTHOUGH THIS REQUIREMENT ITSELF DID NOT THEREBY BECOME AN EVALUATION FACTOR, IT DID PUT OFFERORS ON NOTICE THAT SUPPORTING DATA OR EXPLANATIONS FOR ANY PROPOSAL REVISIONS WOULD BE NECESSARY IN ORDER FOR ECOM TO EVALUATE THE REVISIONS. WHILE IT IS TRUE, AS ECI POINTS OUT, THAT OFFERORS FREQUENTLY REDUCE THEIR PRICES SUBSTANTIALLY IN THE FINAL STAGES OF NEGOTIATION WITHOUT ANY CORRESPONDING DECREASE IN GOVERNMENT REQUIREMENTS, SEE GLOBAL GRAPHICS, INC., 54 COMP.GEN. 84 (1974), 74-2 CPD 73, PROCURING ACTIVITIES ARE NOT THEREBY PRECLUDED FROM CONSIDERING THE IMPACT OF SUCH REDUCTIONS ON THE OFFEROR'S OVERALL PROPOSAL. HERE IT APPEARS THAT ECOM BELIEVED IT COULD NOT EVALUATE CERTAIN OF THE REVISIONS IN THE ECI PROPOSAL BECAUSE OF THE ABSENCE OF THE REQUIRED "DETAILED SUPPORT." WE FIND NO BASIS FOR DISAGREEING WITH ECOM ON THIS POINT.

THERE REMAINS FOR CONSIDERATION ECI'S ASSERTION THAT ECOM, RATHER THAN REJECTING ECI'S PROPOSAL, SHOULD HAVE ATTEMPTED TO RESOLVE THE DISCREPANCIES IN THE PROPOSAL BY SEEKING CLARIFICATION FROM ECI. ACCORDING TO THE PROTESTER, THE CONTRACTING OFFICER HAD A DUTY TO SEEK "VERIFICATION OF COST DATA" AND COULD DO SO "FOR PURPOSES OF CLARIFICATION WITHOUT INVOKING THE REQUIREMENT FOR REOPENING NEGOTIATIONS WITH ALL OFFERORS." ECI FURTHER CLAIMS THAT THE MOST THAT COULD BE SAID OF ITS PROPOSAL IS THAT THE COMPUTER RUN CREATED AN AMBIGUITY WHICH THE CONTRACTING OFFICER HAD A DUTY TO RESOLVE BY REOPENING NEGOTIATIONS.

ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-805.1(B) (1974 ED.) PERMITS INQUIRIES TO AN OFFEROR FOR THE SOLE PURPOSE OF ELIMINATING MINOR UNCERTAINTIES. A MINOR UNCERTAINTY OR IRREGULARITY IS ONE WHICH IS MERELY A MATTER OF FORM OR SOME IMMATERIAL VARIATION FROM THE EXACT REQUIREMENTS OF THE SOLICITATION, HAVING NO EFFECT OR MERELY A TRIVIAL EFFECT ON PRICE, QUALITY, QUANTITY OR DELIVERY, THE CORRECTION OF WHICH WOULD NOT BE PREJUDICIAL TO OTHER OFFERORS. IN THE PRESENT INSTANCE THE DEFICIENCIES IN THE ECI PROPOSAL, AS PERCEIVED BY THE CONTRACTING OFFICER, WERE VARIATIONS FROM THE CONTRACT LINE ITEM REQUIREMENTS WHICH WENT TO THE HEART OF ECI'S PROMISED PERFORMANCE AND ITS UNDERSTANDING OF WHAT WAS REQUIRED. WE BELIEVE THE CONTRACTING OFFICER ACTED PROPERLY IN VIEWING THESE VARIATIONS AS MORE THAN MINOR IRREGULARITIES WHICH WERE NOT SUSCEPTIBLE TO CLARIFICATION WITHOUT THE REOPENING OF NEGOTIATIONS. SEE TELEDYNE INET, B-180252, MAY 22, 1974, 74-1 CPD 279.

ECOM RECOGNIZED THAT "ECI COULD PROBABLY CORRECT THE DEFICIENCIES AND BECOME ACCEPTABLE" IF NEGOTIATIONS WERE REOPENED. HOWEVER, IT WAS DECIDED NOT TO REOPEN NEGOTIATIONS BECAUSE OF THE "SEVERE" AUCTION IMPLICATIONS AND BECAUSE "NEGOTIATIONS HAD BEEN REOPENED BEFORE, AND * * * THERE HAD BEEN EXTENSIVE DISCUSSIONS AFTER THAT TO PRECLUDE DEFICIENCIES * * * ."

THE RECORD BEFORE US DOES NOT INDICATE WHY AN AUCTION WOULD HAVE RESULTED FROM THE REOPENING OF NEGOTIATIONS, SINCE THERE IS NO EVIDENCE OF A PRICE LEAK AND IT IS WELL SETTLED THAT SUCCESSIVE CALLS FOR NEW BEST AND FINAL OFFERS AFTER NEGOTIATIONS ARE REOPENED DO NOT AUTOMATICALLY ENGENDER AN AUCTION. SEE BELL AEROSPACE COMPANY, SUPRA. NEVERTHELESS, WE CANNOT SAY THAT THE CONTRACTING OFFICER ACTED IMPROPERLY SINCE "ONCE NEGOTIATIONS HAD BEEN HELD AND BEST AND FINAL OFFERS RECEIVED, NEGOTIATIONS SHOULD NOT BE REOPENED UNLESS IT IS CLEARLY IN THE BEST INTERESTS OF THE GOVERNMENT TO DO SO." ILC DOVER, B-182104, NOVEMBER 29, 1974, 74-2CPD 301. HERE ECOM DETERMINED THAT REOPENING OF NEGOTIATIONS WOULD NOT BE IN THE GOVERNMENT'S BEST INTERESTS BECAUSE THE UNACCEPTABILITY OF ECI'S PROPOSAL WAS DUE PRIMARILY TO UNEXPLAINED CHANGES IN ITS PROPOSAL AND BECAUSE NEGOTIATIONS WITH ALL OFFERORS WOULD SERVE NO USEFUL PURPOSE AND WOULD BENEFIT ONLY ECI.

THE CASES CITED BY ECI IN SUPPORT OF ITS ASSERTION THAT NEGOTIATIONS SHOULD HAVE BEEN REOPENED ARE INAPPOSITE. IN ACCESS CORPORATION, B-181962, NOVEMBER 26, 1974, 74-2 CPD 294, WHICH ECI CITES FOR THE PROPOSITION THAT "IF THE CONTRACTING OFFICER FAILS TO RESOLVE A PATENT AMBIGUITY IN A PROPOSAL HE MUST REOPEN NEGOTIATIONS," THE PROTEST WAS DENIED BECAUSE THERE WAS NO PATENT AMBIGUITY. IN 52 COMP.GEN. 409 (1973), WHICH IS CITED IN ACCESS CORPORATION, THE PROTEST WAS UPHELD BECAUSE AN AMBIGUITY WAS CONTAINED IN THE INITIAL PROPOSAL AND THE CONTRACTING OFFICER DID NOT SPECIFICALLY SEEK TO RESOLVE IT DURING THE DISCUSSIONS WHICH PRECEDED SUBMISSION OF BEST AND FINAL OFFERS. HERE, OF COURSE, THE ALLEGED AMBIGUITY WAS CONTAINED IN A BEST AND FINAL OFFER AND RESULTED FROM UNEXPLAINED PROPOSAL REVISIONS.

ECI FURTHER CLAIMS THAT "THE DUTY TO INQUIRE DOES NOT CHANGE" WHEN AN UNCERTAINTY ARISES IN A BEST AND FINAL OFFER, AND CITES LOCKHEED PROPULSION COMPANY; THIOKOL CORPORATION, 53 COMP.GEN. 977 (1974), 74-1 CPD 339. IN THAT CASE, LOCKHEED, IN ITS BEST AND FINAL OFFER, SUBSTANTIALLY REDUCED ITS PROPOSED LABOR HOURS WITHOUT SIGNIFICANT SUBSTANTIATION AND DID NOT RELATE THE REDUCTIONS TO THE WORK TO BE PERFORMED. THERE THE CONTRACTING AGENCY ACCEPTED THIS REVISED PROPOSAL. ALTHOUGH WE UPHELD THE AGENCY'S ACTION, WE STATED THAT IT "PROBABLY SHOULD HAVE QUESTIONED LOCKHEED'S SIGNIFICANT LEARNING CURVE REDUCTION * * * ." WE DID NOT SAY THAT SUCH UNSUPPORTED CHANGES IN A PROPOSAL MUST GIVE RISE TO A REOPENING OF NEGOTIATIONS BEFORE THE PROPOSAL CAN BE REJECTED AS UNACCEPTABLE. THE CONTRARY, SINCE OFFERORS MUST AFFIRMATIVELY DEMONSTRATE THE ACCEPTABILITY OF THEIR PROPOSALS, KINTON CORPORATION, SUPRA, WE BELIEVE THAT WHEN A REQUEST FOR BEST AND FINAL OFFERS CLEARLY WARNS OFFERORS TO SUBSTANTIATE ANY CHANGES MADE IN A PROPOSAL AND AN OFFEROR SUBMITS A REVISED PROPOSAL WITHOUT SUCH SUBSTANTIATION, THE CONTRACTING OFFICER NEED NOT REOPEN NEGOTIATIONS AND MAY REJECT THE PROPOSAL IF UNSUPPORTED CHANGES RENDER THE PROPOSAL UNACCEPTABLE.

IN THE LIGHT OF THE FOREGOING, THE PROTEST OF ECI IS DENIED.