B-231108, Aug 12, 1988, 88-2 CPD 144

B-231108: Aug 12, 1988

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PROCUREMENT - Competitive Negotiation - Contract awards - Initial offer awards - Discussion - Propriety PROCUREMENT - Competitive Negotiation - Contract awards - Initial offer awards - Propriety DIGEST: Protest is sustained where contracting agency awarded a contract on the basis of initial proposals for an item that did not conform to a material solicitation requirement. Award made on terms different from basis on which competition was conducted is improper. Olympus typed in its own catalog item number (and the corresponding page in its catalog) for the direct view and forward oblique telescopes it was offering. No discussions were held. Contending that Olympus was only offering two (the direct and forward oblique) of the three required telescopes.

B-231108, Aug 12, 1988, 88-2 CPD 144

PROCUREMENT - Competitive Negotiation - Contract awards - Initial offer awards - Discussion - Propriety PROCUREMENT - Competitive Negotiation - Contract awards - Initial offer awards - Propriety DIGEST: Protest is sustained where contracting agency awarded a contract on the basis of initial proposals for an item that did not conform to a material solicitation requirement; award made on terms different from basis on which competition was conducted is improper, even though awardee agrees after award to provide the missing component at the same total price as initial offer.

CIRCON ACMI, Division of Circon Corporation:

CIRCON ACMI, a division of Circon Corporation, protests the award of a contract to Olympus Corporation, under request for proposals (RFP) No. DLA120-87-R-1952, issued by the Defense Logistics Agency (DLA) for six pediatric cystourethroscope kits. Circon alleges that DLA improperly accepted a proposal that did not conform to the material solicitation requirements.

We sustain the protest.

Cystourethroscope kits contain telescopes used in the examination of certain internal body organs. The solicitation required each kit to contain three telescopes, including a direct view telescope, a forward oblique telescope, and a catheterizing forward oblique telescope. The solicitation required offerors to certify and discuss their compliance or noncompliance with the specification requirements and to furnish technical literature in support of the discussion.

Of the offers received, Olympus submitted the low offer of six kits for a total of $42,501.06, while Circon offered six kits for a price of $45,456. Olympus certified in its offer that its proposed equipment complied with the salient characteristics for the telescopes, including the requirement for three telescopes in each kit. In the section of the RFP specifying the three types of telescopes required, Olympus typed in its own catalog item number (and the corresponding page in its catalog) for the direct view and forward oblique telescopes it was offering. Opposite the listing for a catheterizing forward oblique telescope, however, Olympus typed in "Albarran Bridge Single #A3733-- pg. 120," and did not specifically list a catheterizing forward obliques telescope. Nevertheless, the agency interpreted Olympus' offer as meeting the three- telescope requirement by offering one direct view telescope, two forward oblique telescopes, and a removable bridge, which could be used with one of the forward oblique telescopes to permit its use as a catheterizing telescope. Since the contracting officer found both offers to be fully acceptable as submitted and to meet all technical requirements, no discussions were held, and the agency proceeded to make award to Olympus as the low offeror.

Circon subsequently challenged the award to Olympus in a protest to the agency, contending that Olympus was only offering two (the direct and forward oblique) of the three required telescopes. The agency then requested Olympus to confirm it was offering kits with the required three telescopes. In response, Olympus stated that, contrary to DLA's interpretation, it had in fact offered only two telescopes plus a removable bridge for use on the forward oblique telescope, which allegedly made the kit functionally equivalent to a three-telescope kit. Olympus stated, however, that it would supply kits with three telescopes at the contract price. The agency then denied Circon's protest and took delivery of the kits. /1/

In its protest to our Office, Circon argues that the agency should not have accepted the offer of a kit not conforming to the clearly stated salient characteristic of three particular telescopes. Circon maintains that it suffered competitive prejudice when Olympus was allowed to revise its proposal to meet the three-telescope requirement after the award had been amde, outside of the competitive bidding process.

Solicitation technical requirements which set forth particular features of the product to be purchased are presumed to be material and essential to the needs of the government.

Oxford Medical, Inc.-- Request for Reconsideration, B-224256.2, Feb. 24, 1987 87-1 CPD Para. 200. Consequently, offerors have a right to assume that such requirements will be enforced and, on the basis of them, to anticipate the scope of competition for award. Id. Award to an offeror that does not propose to meet specific RFP requirements is generally improper since the basis for an award must be the same, in its material terms, as that on which the competition is conducted. See Universal Shipping Co., Inc., B-223905.2, Apr. 20, 1987, 87-1 CPD Para. 424.

The award to Olympus was improper because the firm did not offer the required items. The requirement for a third telescope, the catheterizing forward oblique telescope, a clear solicitation requirement, was listed as a salient characteristic of the kits, and thus clearly was material. See California Mobile Communications, B-225768, Apr. 13, 1987, 87-1 CPD Para. 402. Olympus' offer on its face did not propose to meet the solicitation requirement for a third telescope; instead, Olympus offered to meet this part of the requirement with a bridge, so as to permit use of the forward oblique as a catheterizing telescope. Olympus acknowledged after award that it had only offered two telescopes in each kit, and the agency, as evidenced by its post-award request for confirmation from Olympus that it would supply the third (catheterizing forward oblique) telescope, recognized that Olympus' offer did not conform to the solicitation requirements and that the award thus was improper.

We think DLA properly concluded that steps should be taken to correct the flawed contract. Since the action taken, however, was tantamount to holding discussions, the agency was required to hold discussions with all offerors within the original competitive range, not just Olympus, and to provide each an opportunity to submit a revised proposal; it is improper to hold negotiations with one offeror so as to permit it to conform its unacceptable proposal to the solicitation requirements, and not also to permit other offerors in the competitive range to revise their proposals. See Automated Science Group, Inc., 65 Comp.Gen. 415 (1986), 86-1 CPD Para. 251; Bowman Square Properties, B-208699, Dec. 13, 1982, 82-2 CPD Para. 527.

By holding negotiations only with Olympus, after award, the agency gave Olympus the opportunity to decide, outside of the competitive process, whether it would meet the three-telescope requirement at its existing price i.e., the opportunity to decide whether to disavow the contract. Although Olympus did not change its price, we have no reason to believe that Olympus' price would have remained the same had it been asked to add another telescope to each kit during the competition, rather than in circumstances where it knew it might be inadvisable to raise its price.

The agency takes the position that its interpretation of Olympus' offer, albeit mistaken, was a reasonable reading of the offer, and that, therefore, the original award to the firm was reasonable. We disagree. It is clear, not only on the fact of Olympus' proposal, but also from the agency's post-award discussions with the awardee, that Olympus at all times intended to offer two instead of three telescopes. Again, we see nothing in Olympus' offer referring to a third telescope. As the agency's interpretation of the offer was untenable, the award based on that interpretation also was not reasonable.

DLA also argues that competitive prejudice to Circon has not been shown. However, we think such prejudice is sufficiently clear where one offeror receives an opportunity, outside of competition, to revise its proposal, including the opportunity to change its price and modify its proposal to make it acceptable, and another offeror is not afforded a similar opportunity.

The protest is sustained.

Delivery of the Olympus cystourethroscope kits has been made, so that corrective action is impracticable at this time. By letter of today, however, we are advising DLA that, in these circumstances, we find Circon entitled to reimbursement of its costs of pursuing this protest and of preparing and submitting it proposal. See 4 C.F.R. Sec. 21.6(d) (1988); 52 Fed.Reg. 46445, 46447-8 (1987); Allen Organ Co., B-230268, Junes 14, 1988, 88-1 CPD Para. 570.

/1/ Although Circon's protest was timely received in our Office (within 10 working days of the agency's denial of the agency-level protest), it was not filed with our Office within 10-calendar days of award so as to bring into effect the performance stay provisions of the Competition in Contracting Act, 31 U.S.C. Sec. 3553(d)(1) (Supp. IV 1986).