B-214564, AUG 27, 1984, 84-2 CPD 228

B-214564: Aug 27, 1984

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CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - DISCUSSION WITH ALL OFFERORS REQUIREMENT - WHAT CONSTITUTES DISCUSSION - REVISION OF PROPOSAL OPPORTUNITY DIGEST: PROTEST IS SUSTAINED WHERE GAO IN CAMERA EXAMINATION OF DOCUMENTS SHOWS THAT AGENCY REOPENED NEGOTIATIONS WITH ONLY ONE (THE LOWEST PRICED) OF THE TWO OFFERORS REMAINING IN THE COMPETITIVE RANGE FOR THE PURPOSE OF REDUCING PRICE DOWNWARD TO THE LEVEL OF AVAILABLE FUNDING AND IN THE COURSE OF DISCUSSIONS ALTERED THE NATURE OF THE CONTRACT REQUIREMENTS (BY SUBSTITUTING GOVERNMENT-FURNISHED PROPERTY FOR ITEMS WHICH THE SOLICITATION REQUIRED THE CONTRACTOR TO FURNISH. BECAUSE HIGHER PRICED PROTESTING OFFEROR WAS NOT AFFORDED AN OPPORTUNITY TO COMPETE ON THE ALTERED REQUIREMENT AND IT IS NOT CLEAR THAT PROTESTER WAS NOT PREJUDICED.

B-214564, AUG 27, 1984, 84-2 CPD 228

CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - DISCUSSION WITH ALL OFFERORS REQUIREMENT - WHAT CONSTITUTES DISCUSSION - REVISION OF PROPOSAL OPPORTUNITY DIGEST: PROTEST IS SUSTAINED WHERE GAO IN CAMERA EXAMINATION OF DOCUMENTS SHOWS THAT AGENCY REOPENED NEGOTIATIONS WITH ONLY ONE (THE LOWEST PRICED) OF THE TWO OFFERORS REMAINING IN THE COMPETITIVE RANGE FOR THE PURPOSE OF REDUCING PRICE DOWNWARD TO THE LEVEL OF AVAILABLE FUNDING AND IN THE COURSE OF DISCUSSIONS ALTERED THE NATURE OF THE CONTRACT REQUIREMENTS (BY SUBSTITUTING GOVERNMENT-FURNISHED PROPERTY FOR ITEMS WHICH THE SOLICITATION REQUIRED THE CONTRACTOR TO FURNISH, AND APPARENTLY BY REALLOCATING SOME OF THE WORK CALLED FOR), BECAUSE HIGHER PRICED PROTESTING OFFEROR WAS NOT AFFORDED AN OPPORTUNITY TO COMPETE ON THE ALTERED REQUIREMENT AND IT IS NOT CLEAR THAT PROTESTER WAS NOT PREJUDICED.

JOINT ACTION IN COMMUNITY SERVICE, INC.:

JOINT ACTION IN COMMUNITY SERVICE, INC. (JACS), PROTESTS THE DEPARTMENT OF LABOR (LABOR) AWARD OF A COST-REIMBURSEMENT SOCIAL SERVICES CONTRACT TO WOMEN IN COMMUNITY SERVICE, INC. (WICS), UNDER REQUEST FOR PROPOSALS (RFP) NO. IX-84-14 ISSUED BY LABOR'S EMPLOYMENT AND TRAINING ADMINISTRATION, OFFICE OF JOB CORPS, SAN FRANCISCO, CALIFORNIA.

JACS CONTENDS: (1) THAT LABOR IMPROPERLY PROVIDED WICS WITH GOVERNMENT- FURNISHED PROPERTY (GFP); (2) THAT LABOR IMPROPERLY EVALUATED THE STAFF TO VOLUNTEER RATIO OF WICS'S PROPOSAL; AND (3) THAT LABOR IMPROPERLY EVALUATED THE COMPENSATION FOR PROFESSIONAL EMPLOYEES PORTION OF WICS'S COST PROPOSAL.

WE SUSTAIN THE PROTEST FOR TWO REASONS. OUR IN CAMERA REVIEW OF SOURCE SELECTION MATERIALS WHICH LABOR DID NOT DISCLOSE TO EITHER JACS OR WICS REVEALED THAT THE NEGOTIATION WAS DEFECTIVE AND THAT THE PRICE DIFFERENCE BETWEEN THE TWO OFFERORS IS NOT LARGE ENOUGH FOR US TO CONCLUDE WITH CONFIDENCE THAT JACS WAS NOT PREJUDICED BY THE AWARD TO WICS.

BACKGROUND

THE RFP MERGES IN ONE PROCUREMENT THE ACQUISITION OF COUNSELING, PLACEMENT SUPPORT, AND POST-PLACEMENT SUPPORT SERVICES FOR MALE AND FEMALE JOB CORPS ENROLLEES. JACS AND WICS ARE NONPROFIT NATIONAL VOLUNTEER ORGANIZATIONS WHICH HAVE BEEN, SINCE THE 1960'S, PRIMARY JOB CORPS CONTRACTORS. JACS ASSISTED YOUNG MEN WHILE WICS ASSISTED YOUNG WOMEN. THE BULK OF THE ASSISTANCE IS PROVIDED BY VOLUNTEERS, ALTHOUGH BOTH ORGANIZATIONS MAINTAIN SMALL PROFESSIONAL STAFFS. PREVIOUS GOVERNMENT CONTRACTS HAVE REQUIRED THE COMPILATION AND SUBMISSION OF VOLUNTEER LISTS. THE VOLUNTEER LISTS CONTAIN THE NAMES OF INDIVIDUALS, ACROSS THE COUNTRY, WHO HAVE BOTH TRAINING AND EXPERIENCE IN PROVIDING THE RFP REQUIRED SERVICES TO THE RESPECTIVE JACS AND WICS CONSTITUENCIES; AND WHO ARE WILLING TO FURNISH THOSE SERVICES AT NO COST TO THE GOVERNMENT, SAVE EXPENSES. LABOR REPORTS THAT THESE LISTS ARE GOVERNMENT PROPERTY.

UNDER THE RFP THE CONTRACTOR IS RESPONSIBLE FOR THE PROVISION OF PERSONNEL, OFFICE FACILITIES AND EQUIPMENT.

JACS AND WICS WERE THE ONLY OFFERORS. AFTER INITIAL EVALUATION, BOTH PROPOSALS WERE WITHIN THE COMPETITIVE RANGE FOR FURTHER NEGOTIATIONS. FOLLOWING WRITTEN AND ORAL DISCUSSIONS, BOTH ORGANIZATIONS SUBMITTED BEST AND FINAL OFFERS (BAFO). LABOR EVALUATED THE BAFO'S AND JUDGED THEM SUBSTANTIALLY EQUAL ON TECHNICAL MERIT; HOWEVER, WICS'S EVALUATED COST WAS APPROXIMATELY 17 PERCENT LOWER THAN JACS'S EVALUATED COST. ON THIS BASIS, LABOR DECIDED THAT WICS WOULD RECEIVE THE AWARD. OUR IN CAMERA REVIEW OF SOURCE SELECTION DOCUMENTS SHOWS THAT NOTWITHSTANDING THE DECISION TO AWARD TO WICS, WICS'S PRICE EXCEEDED AVAILABLE FUNDING BY APPROXIMATELY $1,200. LABOR THEN REOPENED DISCUSSIONS WITH WICS PRIOR TO ACTUAL CONTRACT AWARD AND NEGOTIATED THE NECESSARY PRICE REDUCTION TO MEET AVAILABLE FUNDING LIMITS. THERE IS NO INDICATION IN THE RECORD THAT LABOR ADVISED JACS OF THE POST-BAFO NEGOTIATIONS WITH WICS.

INITIALLY, WE NOTE IT IS NOT OUR FUNCTION TO CONDUCT A DE NOVO REVIEW OF TECHNICAL PROPOSALS, NOR IS IT OUR FUNCTION TO INDEPENDENTLY DETERMINE THEIR RELATIVE MERIT, SINCE THE EVALUATION OF PROPOSALS IS PROPERLY THE FUNCTION OF THE PROCURING AGENCY. E-SYSTEMS, INC., B-191346, MAR. 20, 1979, 79-1 CPD PARA. 192. PROCURING AGENCIES ARE RELATIVELY FREE TO DETERMINE THE MANNER IN WHICH PROPOSALS WILL BE EVALUATED SO LONG AS THE METHOD SELECTED PROVIDES A RATIONAL BASIS FOR SOURCE SELECTION AND THE ACTUAL EVALUATION IS CONDUCTED IN ACCORDANCE WITH THE ESTABLISHED CRITERIA. SEE FRANCIS & JACKSON ASSOCIATES, 57 COMP.GEN. 224 (1978), 78-1 CPD PARA. 79. THUS, OUR FUNCTION IS NOT TO SELECT ONE OF SEVERAL PROPOSALS AS MOST ADVANTAGEOUS TO THE GOVERNMENT, BUT RATHER TO DECIDE WHETHER THE PROCURING AGENCY'S SELECTION HAS BEEN SHOWN TO BE LEGALLY OBJECTIONABLE. INTASA, B-191877, NOV. 15, 1978, 78-2 CPD PARA. 347. FINALLY, WHERE THERE IS AN IRRECONCILABLE CONFLICT BETWEEN THE AGENCY'S AND THE PROTESTER'S VERSIONS OF THE FACTS, IN THE ABSENCE OF PROBATIVE EVIDENCE (OTHER THAN STATEMENTS FROM EACH SIDE), WE MUST ACCEPT THE AGENCY'S VERSION OF THE FACTS. CONTRACT SUPPORT COMPANY, B-184845, MAR. 19, 1976, 76-1 CPD PARA. 184.

POST-BAFO NEGOTIATIONS AND GFP

WE HAVE RECOGNIZED THAT AGENCIES CONFRONTED WITH PROPOSAL PRICES IN EXCESS OF AVAILABLE FUNDING MAY PROPERLY CHANGE THE RFP'S STATEMENT OF WORK IN ORDER TO ESTABLISH A BASIS FOR THE LATER NEGOTIATION OF LOWER PRICES SO LONG AS ALL OFFERORS WITHIN THE COMPETITIVE RANGE ARE ADVISED OF THE CHANGE. B-161405, OCT. 2, 1967; CHRYSLER MOTORS CORPORATION, B-186600, SEPT. 29, 1976, 76-2 CPD PARA. 294. HOWEVER, AS A GENERAL RULE, IT IS IMPROPER FOR AN AGENCY, AFTER RECEIPT OF BAFO'S, TO REOPEN NEGOTIATIONS (EVEN IF THEY ARE CHARACTERIZED AS ONLY "TOUCH-UP" NEGOTIATIONS) WITH ONLY ONE OFFEROR WHERE OTHER OFFERORS REMAIN WITHIN THE COMPETITIVE RANGE BECAUSE EVERY OFFEROR WITHIN THE COMPETITIVE RANGE HAS THE RIGHT TO CHANGE OR MODIFY ITS PROPOSAL, INCLUDING PRICE, FOR ANY REASON WHATEVER, AS LONG AS NEGOTIATIONS REMAIN OPEN. UNIVERSITY OF NEW ORLEANS, 56 COMP.GEN. 958 (1977), 77-2 CPD PARA. 201. MOREOVER, WHEN THERE ARE SIGNIFICANT OR SUBSTANTIAL CHANGES IN THE GOVERNMENT'S REQUIREMENTS, FEDERAL PROCUREMENT REGULATIONS, 41 C.F.R. SEC. 3.805.1(D) (1983), REQUIRE:

"(D) WHEN, DURING NEGOTIATIONS, A SUBSTANTIAL CHANGE OCCURS IN THE GOVERNMENT'S REQUIREMENTS OR A DECISION IS REACHED TO RELAX, INCREASE, OR OTHERWISE MODIFY THE SCOPE OF THE WORK OR STATEMENT OF REQUIREMENT, SUCH CHANGE OR MODIFICATION SHALL BE MADE IN WRITING AS AN AMENDMENT TO THE REQUEST FOR PROPOSALS, AND A COPY SHALL BE FURNISHED TO EACH PROSPECTIVE CONTRACTOR."

ABSENT A COMPELLING REASON, THIS REGULATION APPLIES TO A SIGNIFICANT OR SUBSTANTIAL CHANGE EVEN WHERE THE COMPETITIVE RANGE HAS BEEN REDUCED TO ONLY ONE OFFEROR. THUS, IF DURING FINAL DISCUSSIONS IT BECOMES OBVIOUS THAT THE CONTRACT REQUIREMENTS BEING NEGOTIATED WITH THE SOLE REMAINING OFFEROR DIFFER SIGNIFICANTLY FROM THE REQUIREMENTS STATED IN THE RFP, THE CONTRACTING OFFICER MUST AMEND THE RFP AND SEEK NEW OFFERS. COMPUTEK INCORPORATED, ONTEL CORPORATION, 54 COMP.GEN. 1080 (1975), 75-1 CPD PARA. 384.

APPLICATION OF THE FOREGOING RULES TO SPECIFIC CASES REQUIRES AN ASSESSMENT OF THE SIGNIFICANCE OF THE PROTESTED CHANGES IN TERMS OF THE RESULTING PREJUDICE TO OFFERORS OTHER THAN THE AWARDEE. WHERE THE PROTESTED CHANGE IS NOT PREJUDICIAL, THE PROTEST IS DENIED. SEE D&P TRANSPORTATION COMPANY, INC., B-190735, JULY 14, 1978, 78-2 CPD PARA. 37.

THE RECORD SHOWS THAT LABOR EXCLUDED JACS FROM THE POST-BAFO NEGOTIATIONS AND APPARENTLY ALTERED THE RFP'S GFP REQUIREMENTS DURING THE POST-BAFO NEGOTIATIONS. SPECIFICALLY, IT APPEARS THAT LABOR ESTABLISHED A CEILING PRICE AT THE LEVEL OF AVAILABLE FUNDING (APPROXIMATELY $1,200 BELOW WICS'S OFFER). LABOR THEN ALTERED THE RFP REQUIREMENTS BY SUBSTITUTING GFP FOR WHAT WAS PREVIOUSLY CONTRACTOR FURNISHED PROPERTY. THE GFP CONSISTED OF OFFICE SPACE, PHONE SERVICE, OFFICE FURNITURE/EQUIP (OFFICE GFP), AND APPARENTLY A LIST OF JACS'S VOLUNTEERS (LIST GFP). THE OFFICE GFP, IF VALUED AT THE PRICES SET OUT IN WICS'S COST PROPOSAL, WAS WORTH APPROXIMATELY $40,500. IT IS NOT KNOWN WHAT THE LIST GFP WAS WORTH TO WICS. ON THIS BASIS, WICS COULD HAVE REDUCED ITS PRICE $40,500; HOWEVER, BOTH PARTIES AGREED TO LIMIT THE PRICE REDUCTION TO THE $1,200 NECESSARY TO COME WITHIN THE AVAILABLE FUNDING. IF IT IS ASSUMED THAT LABOR NEGOTIATED A DOLLAR FOR DOLLAR REDUCTION FOR EACH ITEM OF GFP FURNISHED, THE OUTCOME WOULD HAVE BEEN A $39,300 BALANCE. THE RECORD DOES NOT SHOW THE EXACT AMOUNT OF THIS BALANCE. LABOR REFERS TO THE BALANCE AS "SAVINGS." THE RECORD SHOWS THAT LABOR AND WICS AGREED THAT THE "SAVINGS" WOULD BE REALLOCATED WITHIN THE TOTAL BUDGET. IT IS NOT CLEAR WHETHER LABOR AND WICS HAD SPECIFIC WORK IN MIND TO WHICH THE SAVINGS WOULD BE REALLOCATED.

JACS'S ARGUMENT IS PREMISED UPON ITS KNOWLEDGE OF THE AWARD PRICE AND THE GFP FURNISHED TO WICS. JACS BELIEVES IT WAS PREJUDICED BY LABOR'S DECISION TO PROVIDE GFP BECAUSE IF IT HAD RECEIVED SIMILAR GFP, IT WOULD HAVE PROPOSED A PRICE BELOW THE AWARD PRICE. JACS VALUED THE OFFICE GFP AT $43,100 AND THE LIST GFP AT $44,900. JACS ARGUES THAT IT WOULD HAVE CUT ONE PROFESSIONAL STAFF POSITION IF LABOR HAD PROVIDED JACS WITH A LIST OF WICS'S VOLUNTEERS. JACS STATES THAT IT WOULD THEN HAVE HAD ACCESS TO A GROUP OF TRAINED VOLUNTEERS EXPERIENCED IN HANDLING THE PROBLEMS OF YOUNG WOMEN AND HAVE BEEN RELIEVED OF THE RESPONSIBILITY OF RECRUITING AND TRAINING SIMILAR VOLUNTEERS.

THE RECORD SHOWS THAT DURING NEGOTIATIONS, LABOR ASKED JACS TO JUSTIFY THE ADDITIONAL STAFF POSITION WHICH JACS NOW CLAIMS COULD HAVE BEEN ELIMINATED. IN ITS BAFO, JACS JUSTIFIED THE POSITION IN TERMS OF INCREASED WORKLOAD, PARTICULARLY IN RECRUITING VOLUNTEERS TO HANDLE THE EXPANSION OF SUPPORT SERVICES (PRE AND POSTNATAL CHILD CARE, FAMILY PLANNING, ETC.) TO FEMALE CORPS MEMBERS. LABOR ARGUES THAT BOTH WICS AND JACS PROPOSED AN EXTRA POSITION FOR THE DEVELOPMENT OF VOLUNTEERS AND THAT SINCE WICS, APPARENTLY WITH BENEFIT OF THE JACS VOLUNTEER LIST, HAS NOT BEEN ABLE TO REDUCE ITS STAFF, THERE IS NO REASON TO BELIEVE THAT JACS COULD REDUCE ITS STAFF WERE IT PROVIDED WITH A LIST OF WICS VOLUNTEERS.

IF IT IS ASSUMED THAT THE LIST GFP HAD NO VALUE TO WICS AND THAT WICS WOULD HAVE OFFERED A DOLLAR FOR DOLLAR PRICE REDUCTION EQUAL TO THE VALUATION OF THE OFFICE GFP FOUND IN ITS PROPOSAL, THEN WICS'S EVALUATED PRICE WOULD BE APPROXIMATELY $8,300 BELOW JAC'S EVALUATED PRICE (USING JAC'S FIGURES).

IN OUR VIEW, THERE IS REASON TO BELIEVE THAT JACS MIGHT HAVE REDUCED ITS STAFF, AS IT CLAIMS, HAD IT BEEN FURNISHED THE WICS VOLUNTEER LIST. JACS AND WICS ADDED THE STAFF POSITIONS IN QUESTION FOR DIFFERENT REASONS: JACS TO GAIN VOLUNTEERS; AND WICS TO DECENTRALIZE ITS PROFESSIONAL STAFF. POSSESSION OF THE WICS VOLUNTEER LIST MIGHT HAVE SUBSTANTIALLY REDUCED JACS NEED TO RECRUIT AND TRAIN VOLUNTEERS SINCE WICS VOLUNTEERS WERE TRAINED, EXPERIENCED AND IN PLACE. THERE IS NOTHING IN THE RECORD INDICATING THAT JACS HAD A DECENTRALIZATION PROBLEM SIMILAR TO WICS AND WOULD FOR THAT REASON HAVE BEEN PREVENTED FROM ELIMINATING THE POSITION IN QUESTION. WE CANNOT DETERMINE EXACTLY WHAT JACS WOULD HAVE DONE HAD IT BEEN ADVISED OF EITHER THE SUBSTITUTION OF OFFICE GFP OR OF THE REALLOCATION OF ANY "SAVINGS," RESULTING FROM ANY JACS PRICE REDUCTION BELOW THE CEILING PRICE TO OTHER PARTS OF ITS BUDGET. HOWEVER, BOTH JACS AND WICS WERE SUBSTANTIALLY EQUAL TECHNICALLY. IT IS ARGUABLE THAT, IF JACS HAD BEEN NOTIFIED OF THE GFP SUBSTITUTION AND AFFORDED AN OPPORTUNITY TO NEGOTIATE A PRICE REDUCTION, JACS COULD HAVE SUBSTANTIALLY REDUCED THE DIFFERENCE BETWEEN THE TWO OFFERS. WE THINK IT WOULD BE SPECULATIVE TO TRY AND PREDICT WHETHER JACS'S PRICE REDUCTION IN THOSE CIRCUMSTANCES WOULD HAVE EXCEEDED WICS'S, BEARING IN MIND THAT THE EXACT MAGNITUDE OF THE WICS REDUCTION DOES NOT APPEAR IN THE RECORD BEFORE US. CONSEQUENTLY, WE CANNOT FIND THAT JACS WAS NOT PREJUDICED BY LABOR REOPENING NEGOTIATIONS WITH ONLY WICS.

WE THEREFORE SUSTAIN THE PROTEST. WE RECOMMEND THAT LABOR REOPEN NEGOTIATIONS WITH BOTH JACS AND WICS WITH A CLEAR STATEMENT OF ITS MINIMUM REQUIREMENTS. SHOULD JACS'S OFFER PROVE THE BETTER, WICS'S CONTRACT SHOULD BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT AND AWARD MADE TO JACS. BECAUSE WE HAVE SUSTAINED THE PROTEST ON THE BASIS OF JACS'S FIRST CONTENTION, WE WILL NOT CONSIDER THE BALANCE OF JACS'S PROTEST.

SINCE THIS DECISION CONTAINS A RECOMMENDATION THAT CORRECTIVE ACTION BE TAKEN, WE ARE FURNISHING COPIES TO THE SENATE COMMITTEES ON GOVERNMENTAL AFFAIRS AND APPROPRIATIONS AND THE HOUSE COMMITTEES ON GOVERNMENT OPERATIONS AND APPROPRIATIONS IN ACCORDANCE WITH SECTION 236 OF THE LEGISLATIVE REORGANIZATION ACT OF 1970, 31 U.S.C. SEC. 720, AS ADOPTED BY PUBLIC LAW 97-258 (FORMERLY 31 U.S.C. SEC. 1176 (1976)), WHICH REQUIRES THE SUBMISSION OF WRITTEN STATEMENTS BY THE AGENCY TO THE COMMITTEES CONCERNING THE ACTION TAKEN WITH RESPECT TO OUR RECOMMENDATION.