B-222317, JUL 9, 1986, 65 COMP.GEN. 715

B-222317: Jul 9, 1986

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

AGENCY DISCOVERED THAT IT HAD INCORRECTLY ADVISED ONE OFFEROR THAT ITS ALTERNATE INITIAL PROPOSAL WAS TECHNICALLY UNACCEPTABLE. THE RFP IS FOR AN AUTOMATED DATA SYSTEM TO SUPPORT THE CIVILIAN PERSONNEL FUNCTION ON ALL NAVY MANAGEMENT LEVELS. THAT ITS ALTERNATE INITIAL PROPOSAL WAS TECHNICALLY UNACCEPTABLE. THE NAVY DETERMINED THAT THE AWARD WAS IMPROPER. SPERRY ASSERTS THAT THE AWARD WAS NOT IMPROPER AND THAT THE NAVY'S ACTION HAS CREATED A PROHIBITED AUCTION. THE NAVY TECHNICAL EVALUATOR FOUND THAT BOTH SDC PROPOSALS WERE TECHNICALLY ACCEPTABLE. WAS FOUND TECHNICALLY ACCEPTABLE. THE OFFERORS WERE NOTIFIED BY LETTER DATED NOVEMBER 27. THE LETTER SENT TO SDC INCORRECTLY ADVISED SDC THAT ITS ALTERNATE PROPOSAL WAS NOT ACCEPTABLE.

B-222317, JUL 9, 1986, 65 COMP.GEN. 715

CONTRACTS - NEGOTIATION - OFFERS OR PROPOSALS - BEST AND FINAL - ADDITIONAL ROUNDS - AUCTION TECHNIQUE NOT INDICATED AGENCY ISSUED A STOP-WORK ORDER AND REOPENED NEGOTIATIONS FOR A SECOND ROUND OF BEST AND FINAL OFFERS WHERE, SHORTLY AFTER AWARD, AGENCY DISCOVERED THAT IT HAD INCORRECTLY ADVISED ONE OFFEROR THAT ITS ALTERNATE INITIAL PROPOSAL WAS TECHNICALLY UNACCEPTABLE, THEREBY PRECLUDING A BEST AND FINAL OFFER SUBMISSION, WHEN, IN FACT, THE PROPOSAL HAD BEEN FOUND TECHNICALLY ACCEPTABLE. CONTRACTS - NEGOTIATION - PRICES - DISCLOSURE WHERE AWARDEE'S BEST AND FINAL OFFER PRICE HAS BEEN DISCLOSED, TO ELIMINATE UNFAIR ADVANTAGE UNDER RECOMPETITION, AGENCY MAY REQUIRE OTHER OFFERORS TO AGREE TO SIMILAR DISCLOSURE. CONTRACTS - NEGOTIATION - AWARDS - ERRONEOUS DISCLOSURE OF OFFERORS PROPOSAL INFORMATION REQUIRED BY AGENCY TO PERMIT RECOMPETITION OF IMPROPERLY AWARDED CONTRACT MUST BE SUBSTANTIALLY SIMILAR BUT NEED NOT BE IDENTICAL.

MATTER OF: SPERRY CORPORATION, JULY 9, 1986:

SPERRY CORPORATION (SPERRY) PROTESTS THE REOPENING OF NEGOTIATIONS UNDER REQUEST FOR PROPOSALS (RFP) NO. 00244-85-R-0185 ISSUED BY THE NAVAL SUPPLY CENTER, SAN DIEGO (NAVY). THE RFP IS FOR AN AUTOMATED DATA SYSTEM TO SUPPORT THE CIVILIAN PERSONNEL FUNCTION ON ALL NAVY MANAGEMENT LEVELS.

THE NAVY AWARDED THE CONTRACT TO SPERRY ON JANUARY 13, 1986, BASED ON BEST AND FINAL OFFERS WHICH HAD BEEN RECEIVED ON JANUARY 3. HOWEVER, THE NAVY DISCOVERED THAT IT HAD INCORRECTLY ADVISED ANOTHER OFFEROR, SYSTEM DEVELOPMENT CORPORATION (SDC), THAT ITS ALTERNATE INITIAL PROPOSAL WAS TECHNICALLY UNACCEPTABLE. ACCORDINGLY, THE NAVY DETERMINED THAT THE AWARD WAS IMPROPER, ISSUED A STOPWORK ORDER TO SPERRY, AND INVITED A SECOND ROUND OF BEST AND FINAL OFFERS FROM ALL OFFERORS.

SPERRY ASSERTS THAT THE AWARD WAS NOT IMPROPER AND THAT THE NAVY'S ACTION HAS CREATED A PROHIBITED AUCTION. SPERRY REQUESTS THAT THE STOP WORK ORDER BE RESCINDED AND THAT PERFORMANCE COMMENCE UNDER THE INITIAL AWARD.

WE DENY THE PROTEST AS WE FIND THAT THE NAVY TOOK APPROPRIATE ACTION TO REMEDY AN IMPROPER AWARD.

IN RESPONSE TO THE RFP, FOUR COMPANIES SUBMITTED INITIAL PROPOSALS, THREE OF WHICH, INCLUDING SDC, ALSO SUBMITTED ALTERNATE PROPOSALS. THE SDC ALTERNATE PROPOSAL INCLUDED, AMONG OTHER ITEMS, MODEL CI-300 AND MODEL CI- 600TC ITOH COMPANY, INC., LINE PRINTERS. THE NAVY TECHNICAL EVALUATOR FOUND THAT BOTH SDC PROPOSALS WERE TECHNICALLY ACCEPTABLE. THE SPERRY PROPOSAL, WHICH OFFERED THE SAME LINE PRINTERS, WAS FOUND TECHNICALLY ACCEPTABLE. THE OFFERORS WERE NOTIFIED BY LETTER DATED NOVEMBER 27, 1985, TO SUBMIT BEST AND FINAL OFFERS. HOWEVER, DUE TO AN ADMINISTRATIVE ERROR, THE LETTER SENT TO SDC INCORRECTLY ADVISED SDC THAT ITS ALTERNATE PROPOSAL WAS NOT ACCEPTABLE.

IN PREPARATION FOR SDC'S REQUESTED DEBRIEFING, THE ERROR WAS DISCOVERED. THE NAVY DETERMINED THAT SINCE AWARD HAS BEEN MADE TO SPERRY FOR THE SAME EQUIPMENT PROPOSED BY SDC, WHICH THE NAVY HAD ERRONEOUSLY ADVISED SDC WAS TECHNICALLY UNACCEPTABLE, A SECOND ROUND OF BEST AND FINAL OFFERS WAS NECESSARY. SINCE AWARD HAD BEEN MADE ONLY 1 WEEK PREVIOUSLY, AND PERFORMANCE HAD BARELY COMMENCED, THE NAVY ISSUED A STOP-WORK ORDER PENDING THE OUTCOME OF THE RECOMPETITION. IN ADDITION, BECAUSE SPERRY'S TOTAL CONTRACT PRICE AND TOTAL OPTION PRICES HAD BEEN DISCLOSED, EACH OTHER OFFEROR AGREED TO DISCLOSURE OF ITS TOTAL PRICES. REQUESTS FOR A SECOND ROUND OF BEST AND FINAL OFFERS WERE MAILED ON MARCH 4 WITH AN APRIL 7 CLOSING DATE.

SPERRY TAKES THE POSITION THAT WHILE SDC MAY HAVE BEEN PREJUDICED BY THE NAVY'S ERRONEOUS NOTIFICATION, IT WAS INCUMBENT ON SDC TO PURSUE THE MATTER AT THE TIME OF THE ERRONEOUS NOTICE, AND THAT THE AWARD TO SPERRY WAS NOT IMPROPER BECAUSE THERE WAS NO SHOWING THAT, ABSENT THE ERROR, SDC WOULD HAVE BEEN AWARDED A CONTRACT. ACCORDINGLY, SPERRY ARGUES THAT THE APPROPRIATE REMEDY IS TO AWARD PROPOSAL PREPARATION COSTS TO SDC AND ALLOW THE SPERRY AWARD TO STAND.

SDC STATES THAT UPON BEING ADVISED OF THE UNACCEPTABILITY OF ITS ALTERNATE PROPOSAL, IT CONTACTED THE NAVY TO REQUEST THE BASIS FOR THIS DETERMINATION, BUT WAS ADVISED THAT THIS INFORMATION COULD NOT BE PROVIDED UNTIL A DEBRIEFING. THE NAVY CONCURS IN THIS SEQUENCE OF EVENTS AND HAS PROVIDED A COPY OF A FILE MEMORANDUM DATED DECEMBER 2, 1985, SUMMARIZING THE CONTENT OF A TELEPHONE CONVERSATION BETWEEN THE NAVY CONTRACT NEGOTIATOR AND THE SDC CONTRACT MANAGER. THIS MEMO INDICATES THAT IN RESPONSE TO SDC'S INQUIRY AS TO WHY ITS ALTERNATE PROPOSAL WAS FOUND UNACCEPTABLE, THE NAVY ADVISED THAT THIS INFORMATION WAS PROPERLY THE SUBJECT OF THE POSTAWARD DEBRIEFING. THUS, SPERRY'S ALLEGATION THAT SDC FAILED TO PURSUE THE MATTER IS FACTUALLY INCORRECT.

THE NAVY, CITING UNITED STATES TESTING CO., INC,, B-205450, JUNE 18, 1982, 82-1 CPD PARA. 604, ARGUES THAT SINCE THE AWARD TO SPERRY WAS CLEARLY IMPROPER, AND THE IMPROPRIETY WAS ASCERTAINED ALMOST IMMEDIATELY AFTER AWARD, THE DEFICIENCY WAS ONE WHICH IT WAS REQUIRED TO CORRECT. THE NAVY STATES THAT THE ACTION IT TOOK IS IN ACCORD WITH OUR OFFICE'S DECISIONS SUCH AS HONEYWELL INFORMATION SYSTEMS, INC., 56 COMP.GEN. 505 (1977), 77-1 CPD PARA. 256 AND WOODWARD ASSOCS., INC.; MONTEREY TECHNOLOGY, INC., B-216714, B-216714.2, MAR. 5, 1985, 85-1 CPD PARA. 274. IN THESE DECISIONS, WE HELD THAT WHERE AN IMPROPER AWARD HAS BEEN MADE, TERMINATION AND RECOMPETITION OF A NEGOTIATED CONTRACT IS APPROPRIATE EVEN WHERE THERE HAS BEEN PRICE DISCLOSURE REGARDING THE AWARDEE'S OFFER. THESE CASES ALSO PERMIT THE AGENCY TO REQUIRE EXPOSURE OF ALL PRICES WHEN IT IS NECESSARY, AS HERE, TO TAKE PROPER CORRECTIVE ACTION. SUCH DISCLOSURE WAS REQUIRED BY THE NAVY IN THIS CASE, AND WAS AGREED TO BY THE OFFERORS.

SPERRY CONTENDS THAT SINCE THIS APPROACH CREATES A PROHIBITED AUCTION, IT IS LIMITED TO SITUATIONS IN WHICH AWARD HAS BEEN MADE TO A TECHNICALLY UNACCEPTABLE OR NOT THE LOWEST-PRICED OFFEROR, AND IT IS CLEAR THAT THE CONTRACT SHOULD OTHERWISE HAVE BEEN AWARDED TO THE PROTESTER. SPERRY CITES DELTA DATA SYSTEMS CORPORATION V. WEBSTER, 744 F.2D 197, 205 (D.C. CIR. 1984), FOR THE PROPOSITION THAT AN ESSENTIAL REQUIREMENT OF OVERTURNING ANY AWARD IS A CLEAR SHOWING THAT BUT FOR THE GOVERNMENT NONCOMPLIANCE WITH REGULATIONS THE PROTESTER WOULD HAVE RECEIVED THE AWARD. HOWEVER, THE DELTA DATA CASE DEALS WITH THE PROPRIETY OF A COURT ORDERING AN AWARD TO A PROTESTER UNDER THE ORIGINAL SOLICITATION. IT DOES NOT ADDRESS EITHER THE FACT SITUATION OR REMEDY AT ISSUE HERE, WHICH CONCERNS CORRECTIVE ACTION TAKEN BY THE PROCURING AGENCY.

IN OUR PRIOR CASES, WE HAVE CONSIDERED THE APPROPRIATENESS OF TAKING REMEDIAL ACTION IN TERMS OF OUR TRADITIONAL CONSIDERATION OF A NUMBER OF FACTORS, INCLUDING THE SERIOUSNESS OF THE PROCUREMENT DEFICIENCY, THE DEGREE OF PREJUDICE TO OTHER OFFERORS OR THE INTEGRITY OF THE COMPETITIVE PROCUREMENT SYSTEM, THE GOOD FAITH OF THE PARTIES, THE EXTENT OF PERFORMANCE, THE COST TO THE GOVERNMENT, THE URGENCY OF THE PROCUREMENT, AND THE IMPACT ON THE USER AGENCY'S MISSION. IN OUR VIEW, WHERE, AS HERE, AN OFFEROR WAS PREVENTED FROM COMPETING BECAUSE OF AGENCY ACTION ON THE BASIS OF THE EQUIPMENT WHICH WAS SUBSTANTIALLY THE SAME AS THE EQUIPMENT FOR WHICH AWARD WAS MADE, THIS DEFICIENCY IS SUFFICIENTLY SERIOUS AND PREJUDICIAL TO WARRANT THE REMEDIAL ACTION TAKEN BY THE NAVY.

SPERRY ASSERTS THAT THE AUCTION TECHNIQUES INVOKED HERE ARE PROHIBITED EXCEPT FOR VERY EXCEPTIONAL SITUATIONS. WHILE THE FEDERAL ACQUISITION REGULATION, 48 C.F.R. SEC. 15.610(D)(3) (1984), DOES PROSCRIBE THE USE OF AUCTION TECHNIQUES, WE INTERPRET THIS TO APPLY TO THE NEGOTIATION TACTIC OF INDICATING ONE OFFEROR'S PRICE TO ANOTHER OFFEROR DURING NEGOTIATIONS. WE HAVE HELD THAT WHERE REOPENING OF NEGOTIATIONS IS PROPERLY REQUIRED, NOTWITHSTANDING THE DISCLOSURE OF AN OFFEROR'S PROPOSAL, THIS DOES NOT CONSTITUTE EITHER IMPROPER TECHNICAL LEVELING OR AN IMPROPER AUCTION. YOUTH DEVELOPMENT ASSOCS., B-216801, FEB. 1, 1985, 85-1 CPD PARA. 126.

IN ADDITION, THERE IS NOTHING INHERENTLY ILLEGAL IN THE CONDUCT OF AN AUCTION IN A NEGOTIATED PROCUREMENT. RATHER, THE POSSIBILITY THAT A CONTRACT MAY NOT BE AWARDED BASED ON TRUE COMPETITION ON AN EQUAL BASIS HAS A MORE HARMFUL EFFECT ON THE INTEGRITY OF THE COMPETITIVE PROCUREMENT SYSTEM THAN THE FEAR OF AN AUCTION. HONEYWELL INFORMATION SYSTEMS, INC., 56 COMP.GEN. AT 512, SUPRA; HARRIS CORP., B-204827, MAR. 23, 1982, 82-1 CPD PARA. 274. THE STATUTORY REQUIREMENTS FOR COMPETITION TAKE PRIMACY OVER THE REGULATORY PROHIBITIONS OF AUCTION TECHNIQUES. PRC INFORMATION SCIENCES CO., 56 COMP.GEN. 768, 783 (1977), 77-2 CPD PARA. 11. MOREOVER, THE NAVY HERE MADE A PARTICULAR EFFORT TO EQUALIZE THE COMPETITION BY REQUIRING PRICE DISCLOSURE BY ALL OFFERORS.

SPERRY ALSO ARGUES THAT THE APPROACH TAKEN HERE IS UNFAIR BECAUSE THE INFORMATION DISCLOSED ABOUT ITS OFFER WAS GREATER THAN THE INFORMATION ABOUT THE SDC OFFER. SPERRY POINTS OUT THAT WHILE ITS BEST AND FINAL OFFER PRICING WAS DISCLOSED, THERE IS NO SUCH DISCLOSURE PROVIDED FOR SDC'S BEST AND FINAL OFFER ON ITS ALTERNATE PROPOSAL. HONEYWELL INFORMATION SYSTEMS, INC., 56 COMP.GEN. 505, SUPRA, REQUIRES THE DISCLOSURE OF SUBSTANTIALLY COMPARABLE INFORMATION, NOT OF IDENTICAL INFORMATION. THERE WAS NO BEST AND FINAL OFFER PRICE FOR SDC'S ALTERNATE PROPOSAL THAT COULD BE DISCLOSED BECAUSE SDC DID NOT SUBMIT A BEST AND FINAL OFFER ON ITS ALTERNATE PROPOSAL WHEN IT WAS ADVISED BY THE NAVY THAT THE PROPOSAL WAS TECHNICALLY UNACCEPTABLE. THE NAVY, HOWEVER, DID DISCLOSE SDC'S INITIAL OFFER PRICES FOR ITS ALTERNATE PROPOSAL. UNDER THE CIRCUMSTANCES, THE NAVY HAS MADE A SUBSTANTIALLY COMPARABLE DISCLOSURE; IT CAN NOT BE EXPECTED TO DISCLOSE INFORMATION THAT DOES NOT EXIST.

SPERRY'S FINAL ARGUMENT REGARDING THE INEQUITY OF THE REMEDY CONCERNS THE POSSIBILITY THAT INFORMATION REGARDING THE CONFIGURATION OF ITS SYSTEM MAY HAVE BECOME AVAILABLE TO SDC, WHILE SPERRY WAS NOT PROVIDED WITH SIMILAR INFORMATION REGARDING SDC'S PROPOSAL. THIS IS BASED ON THE FACT THAT, AFTER CONTRACT AWARD, MEETINGS OCCURRED BETWEEN SPERRY EMPLOYEES, GOVERNMENT EMPLOYEES AND REPRESENTATIVES OF CERTAIN GOVERNMENT CONTRACTORS, NONE OF WHICH PARTICIPATED IN THE COMPETITION TO BEGIN PHASING IN THE SPERRY EQUIPMENT. THESE MEETINGS, HELD WITH SPERRY'S CONSENT, INCLUDED AN ORAL AND WRITTEN EXPLANATION OF THE SPERRY SYSTEM. ACCORDING TO THE NAVY, PARTICIPANTS WERE CAUTIONED AGAINST UNAUTHORIZED DISCLOSURES. THE NAVY HAS OBTAINED AFFIDAVITS FROM THE 15 PERSONS, OTHER THAN SPERRY REPRESENTATIVES AND GOVERNMENT PERSONNEL, WHICH ATTEST TO THEIR NONDISCLOSURE OF THE INFORMATION PROVIDED AT THE MEETINGS. SPERRY ASSERTS THAT THE MEETINGS WERE OPEN, THAT NONDISCLOSURE WAS NOT REQUIRED, AND THAT NO PRECAUTIONS WERE TAKEN OTHER THAN USE OF A SIGN-IN SHEET, WHICH IT BELIEVES MAY NOT HAVE BEEN SIGNED BY LATE ARRIVALS. WE FIND THAT THE NAVY HAS PROVIDED REASONABLE SAFEGUARDS AND ASSURANCE AGAINST THE POSSIBILITY OF DISCLOSURE BY HAVING OBTAINED THE AFFIDAVITS OF THE RECORDED PARTICIPANTS. THERE IS ALSO NO INDICATION THAT ANY DISCLOSURE WAS OTHER THAN INCIDENT TO THE CONDUCT OF THE IMPLEMENTATION OF THE AWARD, OR THAT IT WAS MADE AVAILABLE TO SDC PERSONNEL. UNDER THE CIRCUMSTANCES, WE CONCLUDE THAT THE DISCLOSURE THE NAVY MADE WAS SUITABLE, AND THAT FURTHER DISCLOSURE OF OTHER OFFERORS' CONFIGURATION BASED ON THE POSSIBILITY THAT INFORMATION REGARDING SPERRY'S PROPOSAL MAY HAVE BEEN DISSEMINATED WOULD BE UNWARRANTED.

SPERRY HAS ALSO REQUESTED THAT WE REVIEW ALL THE ORIGINAL PROPOSALS AND NEW BEST AND FINAL OFFERS TO DETERMINE WHETHER THEY HAVE BEEN AFFECTED BY THE RELEASE OF SPERRY'S PRICES AND THE ALLEGED RELEASE OF ITS CONFIGURATION. WE BELIEVE THIS EXERCISE WOULD BE INAPPROPRIATE. THE RELEASE OF PRICE INFORMATION IS REQUIRED IN THIS SITUATION, AND CAN BE EXPECTED TO BE TAKEN INTO ACCOUNT BY OFFERORS. REGARDING THE ALLEGED CONFIGURATION RELEASE, WE NOTE THAT AWARD WAS MADE TO THE TECHNICALLY ACCEPTABLE OFFEROR WITH THE LOWEST EVALUATED PRICE. SINCE SDC'S INITIAL OFFER WAS FOUND TECHNICALLY ACCEPTABLE BY THE NAVY, WE DO NOT BELIEVE THAT SDC COULD HAVE BENEFITED BY THE TYPE OF TECHNICAL LEVELING WHICH SPERRY SUGGESTS MAY HAVE BEEN MADE POSSIBLE AS THE RESULT OF THE ALLEGED CONFIGURATION DISCLOSURE.

THE PROTEST IS DENIED.