B-196100.2, OCTOBER 20, 1980, 60 COMP.GEN. 36

B-196100.2: Oct 20, 1980

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CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - PREPARATION - COSTS - ARBITRARY AND CAPRICIOUS GOVERNMENT ACTION CLAIM FOR PROPOSAL PREPARATION COSTS IS DENIED SINCE RECORD FAILS TO ESTABLISH AGENCY'S ACTIONS WERE FRAUDULENT. ONLY THAT AGENCY WAS MISTAKEN IN BELIEVING BEST AND FINAL OFFERS COULD BE REQUESTED WITHOUT FIRST CONDUCTING DISCUSSIONS CONCERNING TECHNICAL DEFICIENCIES IN PROPOSALS. THAT IT WOULD HAVE RECEIVED AWARD BUT FOR AGENCY'S FAILURE TO PROPERLY CONSIDER ITS PROPOSAL. WE HELD THAT THE IRS ERRED IN FAILING TO CONDUCT MEANINGFUL DISCUSSIONS WITH DECISION SCIENCES CORPORATION (DCS) WHOSE LOWER PRICE PROPOSAL WAS WITHIN THE COMPETITIVE RANGE. THE RECORD DID NOT ESTABLISH THAT THE DEFICIENCY WAS THE RESULT OF FRAUDULENT.

B-196100.2, OCTOBER 20, 1980, 60 COMP.GEN. 36

CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - PREPARATION - COSTS - ARBITRARY AND CAPRICIOUS GOVERNMENT ACTION CLAIM FOR PROPOSAL PREPARATION COSTS IS DENIED SINCE RECORD FAILS TO ESTABLISH AGENCY'S ACTIONS WERE FRAUDULENT, ARBITRARY OR CAPRICIOUS, BUT ONLY THAT AGENCY WAS MISTAKEN IN BELIEVING BEST AND FINAL OFFERS COULD BE REQUESTED WITHOUT FIRST CONDUCTING DISCUSSIONS CONCERNING TECHNICAL DEFICIENCIES IN PROPOSALS. CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - PREPARATION - COSTS - RECOVERY CRITERIA - COURT DECISION EFFECT RECENT DECISION OF COURT OF CLAIMS STATING RECOVERY OF PROPOSAL PREPARATION COSTS REQUIRES SHOWING ONLY THAT CLAIMANT HAD SUBSTANTIAL CHANCE OF AWARD RATHER THAN, AS PREVIOUSLY HELD BY GENERAL ACCOUNTING OFFICE, THAT IT WOULD HAVE RECEIVED AWARD BUT FOR AGENCY'S FAILURE TO PROPERLY CONSIDER ITS PROPOSAL, DID NOT ELIMINATE REQUIREMENT FOR SHOWING OF ARBITRARY OR CAPRICIOUS AGENCY ACTION BEFORE RECOVERY CAN BE PERMITTED.

MATTER OF: DECISION SCIENCES CORPORATION - CLAIM FOR PROPOSAL PREPARATION COSTS, OCTOBER 20, 1980:

IN DECISION SCIENCES CORPORATION, B-196100, MAY 23, 1980, 80-1 CPD 357, WE SUSTAINED A PROTEST OF THE AWARD OF A CONTRACT TO MESSER ASSOCIATES, INC. BY THE INTERNAL REVENUE SERVICE (IRS) UNDER REQUEST FOR PROPOSALS NO. IRS-79-66. WE HELD THAT THE IRS ERRED IN FAILING TO CONDUCT MEANINGFUL DISCUSSIONS WITH DECISION SCIENCES CORPORATION (DCS) WHOSE LOWER PRICE PROPOSAL WAS WITHIN THE COMPETITIVE RANGE. WE FURTHER HELD THAT, DESPITE DSC'S ASSERTIONS, THE RECORD DID NOT ESTABLISH THAT THE DEFICIENCY WAS THE RESULT OF FRAUDULENT, ARBITRARY OR CAPRICIOUS ACTION BY THE AGENCY BUT, RATHER, THAT THE AGENCY WAS MISTAKEN IN ITS BELIEF THAT IN THIS CASE IT COULD REQUEST BEST AND FINAL OFFERS WITHOUT FIRST CONDUCTING DISCUSSIONS CONCERNING TECHNICAL DEFICIENCIES IN PROPOSALS.

DSC HAS SINCE SUBMITTED A CLAIM FOR RECOVERY OF ITS PROPOSAL PREPARATION EXPENSES WHICH IT ESTIMATES TO BE AT LEAST $25,000. FOR REASONS DISCUSSED BELOW, THIS CLAIM IS DENIED.

THIS OFFICE FIRST PERMITTED REIMBURSEMENT OF BID/PROPOSAL PREPARATION COSTS IN T & H COMPANY, 54 COMP.GEN. 1021(1975), 75-1 CPD 345, WHERE WE ADOPTED THE STANDARD ANNOUNCED IN KECO INDUSTRIES, INC. V. UNITED STATES, 492 F.2D 1200 (CT.CL. 1974). IN APPLYING THIS STANDARD, WE HAVE HELD THAT RECOVERY OF SUCH COSTS REQUIRES A SHOWING THAT THE AGENCY'S ACTIONS WERE SO ARBITRARY OR CAPRICIOUS AS TO HAVE DEPRIVED THE CLAIMANT OF AN AWARD TO WHICH IT WAS OTHERWISE ENTITLED. MORGAN BUSINESS ASSOCIATES, B-188387, MAY 16, 1977, 77-1 CPD 344; SYSTEM DEVELOPMENT CORPORATION, B-191195, AUGUST 31, 1978, 78-2 CPD 159. IN A RECENT CASE, ALTHOUGH THE UNITED STATES COURT OF CLAIMS DENIED PROPOSAL PREPARATION COSTS WHERE AN AGENCY LOST AND DID NOT CONSIDER A PROPOSAL, THE COURT STATED AN OFFEROR NEED SHOW ONLY THAT THERE WAS A SUBSTANTIAL CHANCE IT WOULD HAVE RECEIVED THE AWARD. MORGAN BUSINESS ASSOCIATES, INC. V. UNITED STATES, CT.CL. NO. 274-78, APRIL 2, 1980. IN A FOOTNOTE, THE COURT SPECIFICALLY DENIED THAT ITS OPINION IN MCCARTY CORPORATION V. UNITED STATES, 499 F.2D 633 (CT.CL. 1974), PROVIDED ANY BASIS FOR OUR DECISIONS IN AMPEX CORPORATION; RCA CORPORATION, B-183739, NOVEMBER 14, 1975, 75-2 CPD 304 AND MORGAN BUSINESS ASSOCIATES, SUPRA, WHICH HELD THAT PROPOSAL PREPARATION COST RECOVERY REQUIRED A SHOWING THAT THE CLAIMANT WOULD HAVE RECEIVED THE AWARD BUT FOR THE AGENCY'S FAILURE TO PROPERLY CONSIDER ITS PROPOSAL.

THE COURT DID NOT, HOWEVER, ELIMINATE THE NEED FOR A SHOWING OF ARBITRARY OR CAPRICIOUS AGENCY ACTION AND IT REJECTED THE PROPOSITION THAT ANY BREACH OF AN AGENCY'S DUTY TO GIVE CONSIDERATION TO A PROPOSAL CREATES AN IMMEDIATE ENTITLEMENT TO PROPOSAL PREPARATION COSTS. THUS, IN THE ABSENCE OF A FINDING OF ARBITRARY OR CAPRICIOUS ACTION, PROPOSAL PREPARATION COSTS CANNOT BE RECOVERED EVEN IF THE CLAIMANT WOULD HAVE RECEIVED THE AWARD EXCEPT FOR THE AGENCY'S MISTAKE, INADVERTENCE, SIMPLE NEGLIGENCE OR LACK OF DUE DILIGENCE. CASE INFORMATION SYSTEMS, INC., B-186932, OCTOBER 25, 1978, 78-2 CPD 299; FORTEC CONSTRUCTORS, B-188770, AUGUST 7, 1979, 79-2 CPD 89. IN KECO INDUSTRIES, INC. V. UNITED STATES, SUPRA, THE COURT, WHILE AMPLIFYING ITS POSITION THAT THE ULTIMATE STANDARD IS WHETHER THE AGENCY WAS ARBITRARY OR CAPRICIOUS, STATED THAT A PROVEN VIOLATION OF PERTINENT STATUTES OR REGULATIONS "CAN, BUT NEED NOT NECESSARILY, BE GROUND FOR RECOVERY."

IN ITS PROTEST, DCS DISAGREED WITH THE AGENCY'S DOWN-GRADING OF ITS PROPOSAL FOR BEING UNCLEAR AND NOT SPECIFIC AS TO HOW MUCH TIME EACH PROFESSIONAL WOULD DEVOTE TO EACH TASK. WE FOUND THE AGENCY'S ACTIONS IN THIS REGARD TO HAVE BEEN REASONABLE. DSC ALSO ALLEGED THAT THE AGENCY WAS MOTIVATED BY BAD FAITH AND WAS BIASED TOWARD ITS COMPETITOR, ALLEGATIONS WHICH WE FOUND UNSUPPORTED BY THE RECORD. THE ONLY RESPECT IN WHICH WE SUSTAINED DSC'S PROTEST WAS THAT THE AGENCY MADE AN HONEST ERROR IN JUDGMENT IN CONCLUDING THAT IT NEED NOT CONDUCT COMPETITIVE RANGE DISCUSSIONS IN THIS CASE, EVEN THOUGH IT REQUESTED BEST AND FINAL OFFERS. IN ALL OTHER RESPECTS, WE FOUND THE PROCUREMENT WAS PROPERLY CONDUCTED AND THE TECHNICAL AND COST EVALUATIONS COMPLIED WITH THE CRITERIA AND COST EVALUATION FORMULA SPECIFIED IN THE SOLICITATION.

UNDER CERTAIN CIRCUMSTANCES, A SIMPLE REQUEST FOR BEST AND FINAL OFFERS MAY CONSTITUTE ADEQUATE DISCUSSIONS. SEE, E.G., DYNETERIA, INC., B-181707, FEBRUARY 7, 1975, 75-1 CPD 86. HERE, IN LIGHT OF THE DEFICIENCIES IN DSC'S PROPOSAL, WE BELIEVE THAT IN ORDER FOR THE DISCUSSIONS TO HAVE BEEN "MEANINGFUL", AS REQUIRED BY OUR DECISIONS, THE AGENCY SHOULD HAVE PRECEDED ITS REQUEST FOR BEST AND FINAL OFFERS WITH COMPETITIVE RANGE DISCUSSIONS OF THE DEFICIENCIES IT PERCEIVED. HOWEVER, WE REMAIN OF THE BELIEF THAT IN THIS CASE THE PROCUREMENT DEFICIENCY DOES NOT REFLECT SUCH ARBITRARY ACTION SO AS TO BE GROUND FOR RECOVERY OF PROPOSAL PREPARATION COSTS.

THE CLAIM IS DENIED.