Matter of: Loral Infrared & Imaging Systems, Inc. File: B-247127.3 Date: July 13, 1992 *REDACTED VERSION*

Matter of: Loral Infrared & Imaging Systems, Inc. File: B-247127.3 Date: July 13, 1992 *REDACTED VERSION*

Where agency awarded contract on the basis of initial proposals without establishing a competitive range, protester is an interested party to raise issues which, if sustained, could result in recommendation that the agency establish a competitive range, conduct discussions, and request best and final offers. Protest challenging awardee's demonstration of ability to produce required components of missile warning system is denied where record supports agency's determination that the awardee's proposal adequately demonstrated the firm's ability to perform the contract. Protest that awardee intends to provide components from a nonqualified source is denied where awardee's proposal expressly states that it will comply with all solicitation requirements and specifically references solicitation drawing identifying the qualified source. Protest that awardee's proposal failed to comply with solicitation informational requirement is denied where protester's interpretation of section in question is inconsistent with other solicitation provisions and the language at issue does not constitute a material requirement. Protest that agency converted evaluation formula in solicitation which required cost/technical tradeoff to one in which award was based on the low priced, technically acceptable proposal is denied where the record shows that the agency made a valid cost/technical tradeoff. Where agency awarded contract on the basis of initial proposals, protest that communications between agency and awardee prior to award constituted discussions, obligating the agency to conduct discussions with other offerors, is denied where the communications dealt with a matter of no consequence.

Attorneys

DECISION

Loral Infrared & Imaging Systems, Inc. (Loral) protests the award of a contract to Hercules Defense Electronics Systems, Inc. (HDES), under request for proposals (RFP) No. NOOO19-90-R-0038, issued by the Naval Air Systems Command (NAVAIR), Department of the Navy for the procurement of a quantity of AN/AAR-47 missile warning systems. Loral contends that HDES' proposal failed to comply with the solicitation requirements, that the agency evaluated proposals on a basis other than that set forth in the RFP, and that the agency improperly made an award on the basis of initial proposals after conducting discussions only with HDES.

We deny the protest.

BACKGROUND

The RFP was issued as a "build-to-spec[ifications]" solicitation [2] on May 9, 1991, and requested firm, fixed-price proposals for missile warning systems to be installed in various military aircraft. The systems, which were developed by Loral under a preceding research and development and production contract, are intended to detect incoming missiles and activate protective countermeasures.

The RFP specified that the systems offered must be comprised of three basic components or "weapon replaceable assemblies" (WRAs), including an "optical sensor converter" or "optical assembly," which functions to detect radiation from incoming missiles. The optical assembly is comprised of several components including a polymer film which must be placed as a coating over the assembly lens. The film is a combination of two chemical compounds, CX-1 and CX-0, each of which is synthesized from several elements.

On or before the August 14 closing date, proposals were submitted by several offerors, including Loral and HDES. The offers ranged from HDES' low price of approximately $40 million to a high price of nearly $[deleted] million. Loral's proposal offered a price of approximately $[deleted] million.

The agency's technical evaluators rated each proposal on an adjectival basis. [3] Loral's proposal was rated as "exceptional." Although the evaluators rated HDES' proposal as "good," they noted that in its proposal HDES had designated the polymer coating for the optical assembly lens and associated manufacturing process as "HDES proprietary." According to the evaluators' worksheets, three of the five evaluators initially believed this proprietary designation was prohibited by the RFP and, as a result, HDES' proposal was initially rated as "good/unacceptable." In fact, as the agency points out, the RFP did not require offerors to relinquish technical data rights as a condition of award. Accordingly, following discussions with the agency's contracts and legal personnel, the "unacceptable" portion of HDES' rating was deleted on November 20, and its rating remained "good."

The contracting officer subsequently wrote a letter to HDES dated November 27, stating, "[NAVAIR] has reason to suspect that [HDES's initial proposal] may contain a mistake." Referencing Federal Acquisition Regulation (FAR) Sec. 15.607, the agency requested that HDES clarify whether it intended to designate the polymer film and associated manufacturing process as "HDES proprietary." By letter also dated November 27, HDES responded: "the words `HDES proprietary' in both cases are a clerical mistake and should be removed."

On December 4, the agency's procurement review board (PRB) convened to review the technical and price evaluations. Loral's and HDES' proposals were the only two proposals to receive a technical rating higher than "acceptable." The PRB concluded that HDES' proposal offered the best overall value to the government. With regard to all proposals other than Loral's, this determination was based on the fact that HDES' proposal was rated as the superior technical, lower price proposal. With regard to Loral's proposal, the PRB specifically determined that the technical superiority offered by Loral was not sufficient to justify a price premium of $[deleted] million (approximately [deleted] percent)--the difference between Loral's price and HDES' price. A contract was awarded to HDES on December 20. This protest followed.

PRELIMINARY ISSUES

As a preliminary matter, the agency asserts that Loral is not an interested party to file a protest under our Bid Protest Regulations. See 4 C.F.R. Sec. 21.0(a) (1992). The agency argues that since it did not establish a competitive range or otherwise perform any final ranking of offerors, Loral has not established that it would be next in line for award if its protest were sustained and, thus, lacks a direct economic interest in award of a contract to HDES. The agency's argument is without merit. Were Loral to prevail on any of the issues raised, we could recommend that the agency establish a competitive range, conduct discussions with all offerors whose proposals are in that range, and request best and final offers. Since there is no indication that Loral's proposal, which was rated technically "exceptional," would be excluded from the competitive range, if we sustained its protest, Loral could have an opportunity to revise its proposal and compete for the award. Accordingly, Loral has a sufficient economic interest to qualify as an interested party to protest. See Mobile Telesystems, Inc., B-245146, Dec. 18, 1991, 91-2 CPD Para. 560; see also Keeson, Inc.; Ingram Demolition, Inc., B-245625; B-245655, Jan. 24, 1992, 92-1 CPD Para. 108.

The agency and HDES also argue that portions of Loral's protest are untimely because they were filed more than 10 days after Loral first received the redacted version of the agency's report. This argument also lacks merit. All of the issues raised by Loral were filed within 10 days of the date Loral's counsel received the complete, unredacted agency report to which it was entitled under the terms of our protective order. [4] We have reviewed the specific facts on which each protest issue is based and conclude that Loral raised each issue within 10 days of the time it was reasonably on notice of the issue.

DISCUSSION

Loral first protests that HDES' proposal failed to adequately demonstrate HDES' ability to produce the missile warning system components, particularly the optical assembly and the chemical compound CX-1. Loral refers to RFP section L-30, which asked offerors to describe their "specific experience in producing similar optical assemblies which use coatings similar to those required for this [optical] assembly," and M-4, which stated that proposals would be evaluated to determine the offerors' "understanding and ability to produce the optical assemblies which meet the technical requirements of the level three drawing package, process specification and other technical requirements of the solicitation."

Loral asserts that "on information and belief . . . [HDES] has had no past experience with similar optical assemblies and coatings," and that, therefore, its proposal must have been deficient in that area. Specifically, with regard to the chemical compound CX-1, Loral asserts that it is the only entity known to have successfully synthesized the compound and maintains that, since HDES did not approach Loral to provide or assist in the production of CX-1, HDES' proposal must have failed to demonstrate an ability to produce that compound.

HDES and the agency respond that, in preparing its proposal for this solicitation, HDES built two complete optical assemblies, designed and built the capital equipment necessary to manufacture the lens coating, and successfully produced the chemical compound CX-1. HDES and the agency note that the solicitation did not designate any required source for CX-1 and, instead, established specific specifications the compound must meet. HDES and the agency maintain that, as demonstrated by the test data submitted in its proposal, the agency reasonably determined that HDES' proposal demonstrated an ability to produce the optical assembly generally and the chemical compound CX-1 specifically. HDES and the agency also note that, contrary to Loral's assertions, HDES' proposal references a number of past projects in which HDES dealt with optical assemblies and/or coatings similar to those required by this solicitation. Accordingly, HDES and the agency maintain that, based on the data submitted in HDES' proposal, the agency reasonably determined that HDES' proposal demonstrated an ability to produce all necessary system components.

Our Office will not independently evaluate proposals for the purpose of substituting our evaluation for that of the procuring agency. Rather, we will review the agency's evaluation, along with the proposals submitted, to ensure that the evaluation was reasonable and consistent with the stated evaluation criteria. A protester's disagreement with an agency's judgment does not establish that an evaluation was unreasonable. Continental RPVs, B-246788, Mar. 31, 1992, 92-1 CPD Para. 324. Based on our review of HDES' proposal, we find no basis to question the reasonableness of the agency's determination that HDES adequately demonstrated an ability to meet all the requirements of the RFP including an ability to produce the optical assembly and the chemical compound CX-1.

Loral next protests that HDES' proposal should have been found deficient for failure to comply with the RFP's requirements regarding qualified sources. Specifically, Loral notes that RFP drawing No. 21049270 identified a single qualified source for photomultiplier tubes (PMT), a necessary component of the optical assemblies. Loral asserts that HDES' proposal indicated an intent to obtain PMTs from unqualified sources.

HDES and the agency respond that, contrary to Loral's assertions, HDES' proposal indicated it would obtain PMTs only from a qualified source. Specifically, HDES' proposal stated generally that it would comply with all solicitation requirements, and Section 2.1.4.1 of its proposal specifically referenced RFP drawing No. 21049270, which identified the qualified source. We find no basis for Thoral's allegation that the agency should have found HDES' proposal deficient for offering to use an unqualified source for the PMTs.

Related to the issue of qualified sources, boral protests that HDES' proposal failed to comply with RFP Section L-30, Subsection 2.1.3.4, which stated:

"Off-the-Shelf Non-WRA Components. [5] For any off-the-shelf components to be integrated into the hardware which the offeror intends to buy, provide the rationale for that approach. In addition, provide the following information:

(a) vendor name (b) address (c) nomenclature (d) availability (include data rights) (e) areas which either exceed or do not meet specified performance."

In response to this RFP section, neither HDES' nor Loral's proposal provided any information regarding vendors of "off-the-shelf" components. However, HDES did volunteer that it had searched extensively for alternative sources for various critical parts and assemblies and that, in the event it subsequently sought and obtained qualification of such alternative sources, it would provide the agency with information regarding those sources.

Loral protests that, in light of HDES' reference to potential alternative sources, the absence of any specific information regarding such sources should have rendered its proposal unacceptable. We disagree.

Loral does not dispute that, prior to submission of proposals, the agency formally advised all offerors that qualification of alternative sources was permissible. Loral's protest that HDES' proposal failed to comply with RFP Section L-30, Subsection 2.1.3.4, interprets this section as effectively limiting qualification of alternative sources to those identified at the time proposals were submitted. Nothing in the solicitation supports this interpretation. On the contrary, Loral's interpretation is inconsistent with the agency's formal statement permitting subsequent qualification of alternative sources. In any event, even if we were to accept Loral's interpretation that this provision sought information regarding all vendors for which qualification might subsequently be sought, we do not view HDES' proposal as materially deficient for failure to provide such information, since HDES is otherwise obligated under the terms of the solicitation and its proposal to obtain specified components only from qualified sources. See Kora & Williams Corp., B-200503, Feb. 24, 1981, 81-1 CPD Para. 131.

Loral next protests that the agency failed to follow the evaluation formula established in the RFP. In this regard, Section M-4 of the RFP provided that proposals would be evaluated on the basis of price, technical, schedule and management factors, "with price significantly more important than technical [and] technical more important than both schedule and management combined." Loral protests that, instead of following this evaluation formula, the agency applied a formula in which "the low cost acceptable offer was selected without regard to the relative advantages which may have been offered with respect to all factors."

The agency responds that its evaluators considered and rated all aspects of the offerors' proposals and that the PRB balanced price and technical factors; that is, the PRB specifically considered whether Loral's "exceptional" proposal was worth $[deleted] million ([deleted] percent) more than HDES' "good" proposal and concluded it was not. The agency's assertions in this regard are supported by the evaluators' worksheets and the PRB minutes which were submitted as part of the record.

In performing a cost/technical tradeoff, an agency's source selection authority retains considerable discretion in determining the significance of technical rating differentials and their relationship to differentials in proposed costs. Associations for the Educ. of the Deaf, Inc., B-220868, Mar. 5, 1986, 86-1 CPD Para. 22. Our Office will not substitute its judgment for that of the agency's provided the agency's cost/technical tradeoff is rational and consistent with the established evaluation factors. Maytag Aircraft Corp., B-237068.3, Apr. 26, 1990, 90-1 CPD Para. 430.

Here, the record provides no basis to question the rationality of the agency's determination that the difference between Loral's and HDES' technical proposals did not warrant a $[deleted] million price premium, and this determination was consistent with the RFP's evaluation formula which put offerors on notice that price was "significantly more important" than any other evaluation factor.

Finally, Loral protests that the agency improperly awarded a contract to HDES on the basis of initial proposals. Loral argues that the agency's communications with HDES regarding its designation of certain portions of its proposal as "HDES proprietary" constituted discussions which obligated the agency to establish a competitive range and similarly conduct discussions with all other offerors whose proposals are in that range. See FAR Sec. 15.610. HDES and the agency argue that the communications between the agency and HDES involved only clarification of HDES' proposal and did not rise to the level of discussions which would require discussions with other offerors. See FAR Sec. 15.601.

The FAR defines discussions as communications between the government and an offeror that "involves information essential for determining the acceptability of a proposal or, . . . provides the offeror an opportunity to revise or modify its proposal." In contrast, clarifications are defined as communications with an offeror "for the sole purpose of eliminating minor irregularities, informalities, or apparent clerical mistakes in the proposal." FAR Sec. 15.601.

Here, HDES neither made an otherwise unacceptable proposal acceptable nor modified its proposal in any meaningful way. As Loral expressly acknowledges in its comments, the RFP did not require or request offerors to relinquish any technical data rights as a condition of award. [6] (In fact, the record indicates that the agency had obtained unlimited technical data rights under the prior research and development contract.) Therefore, HDES' proprietary markings regarding the polymer film were inconsequential--they deprived the government of nothing to which it would otherwise have been entitled under the resulting contract and properly could have had no effect on proposal evaluation. Accordingly, neither the communication between the agency and HDES nor HDES' subsequent removal of the markings constituted discussions.

The protest is denied.

* The decision issued on July 13, 1992, contained proprietary information and was subject to a General Accounting Office protective order. This version of the decision has been redacted. Deletions in text are indicated by "[deleted]."

2. In response to a question prior to submission of proposals, the agency stated, "this is a build-to-spec[ifications solicitation] with the benefit of a Level III drawing package." Under "build-to-spec[ifications]" solicitations, design responsibility generally resides with the contractor. By comparison, under "build-to-print" solicitations, design responsibility generally resides with the government.

3. Proposals were rated as "exceptional," "good," "acceptable," "marginally acceptable," or "unacceptable."

4. A portion of the agency report was classified; our Office reviewed but did not release the classified portion of the report.

5. In response to a pre-closing date question that the agency "provide a . . . definition of `off-the-shelf non-WRA components,'" the agency stated, "non-WRA components are such items as the PMT, circuit card assemblies, power supplies, etc."

6. As the agency points out, such a requirement would have violated 10 U.S.C. Sec. 2320(a) (2) (1988), as implemented by Defense Federal Acquisition Regulation Supplement (DFARS) Sec. 227.403-71, which prohibits an agency from requiring as a condition of award that a contractor relinquish technical data rights except under circumstances which are inapplicable here. See 10 U.S.C. Sec. 2320(a) (2) (F). Loral has not argued that the agency' s interpretation of the statute is erroneous or that under the circumstances here the agency could have required removal of the proprietary markings. Accordingly, while initially three of the five agency evaluators rated HDES' proposal as "good/unacceptable," based on their erroneous belief that the RFP precluded proprietary markings, those ratings were properly corrected to "good/acceptable" prior to the agency's communication with HDES.