B-180268, JUN 11, 1974

B-180268, JUN 11, 1974

1. DETERMINATIONS CONCERNING QUALIFICATIONS OF PROSPECTIVE GOVERNMENT CONTRACTORS REQUIRE THE EXERCISE OF INDEPENDENT JUDGMENT BY ADMINISTRATIVE AGENCY AND GAO THEREFORE DOES NOT QUESTION AGENCY DECISIONS IN SUCH MATTERS UNLESS SHOWN TO BE WITHOUT A REASONABLE BASIS. IN THE INSTANT CASE, AGENCY'S DETERMINATION HAS REASONABLE BASIS. 2. SOLICITATION PROVISION THAT AWARD BE MADE TO OFFEROR WHO SUBMITS AN ACCEPTABLE PROPOSAL AND THE LOWEST TOTAL PRICE DOES NOT REQUIRE AWARD ON THE BASIS OF INITIAL PRICE SUBMISSION. NEGOTIATIONS WERE CONDUCTED BY AGENCY TO RESOLVE TECHNICAL AND COST QUESTIONS RAISED DURING EVALUATION OF OFFERS AND WERE IN FULL ACCORD WITH THE STATUTORY AND REGULATORY DIRECTIVE FOR CONDUCTING NEGOTIATIONS. ASPR 3-805.1(A) AND 10 U.S.C. 2304(G). 3. OFFER OF A PATENT INDEMNITY PROVISION BY PROTESTER IS NOT FOR EVALUATION IN VIEW OF UNCERTAINTY OF PATENT INFRINGEMENT. 45 COMP. GEN. 13 (1965). 4. FACT THAT AGENCY NEGOTIATORS MAY HAVE MADE NUMEROUS COMMENTS TO OFFEROR DURING NEGOTIATIONS, IN CONTRAST TO LIMITED DISCUSSIONS WITH PROTESTER, WHICH RESULTED IN OFFEROR SUBSTANTIALLY REDUCING ITS BEST AND FINAL PRICE BELOW THAT OF PROTESTER, IS NOT BASIS FOR CONCLUDING THAT IMPROPER NEGOTIATING TECHNIQUES WERE EMPLOYED OR THAT THE NEGOTIATIONS WERE CONDUCTED IN A MANNER VIOLATIVE OF THE PROHIBITION AGAINST "AUCTION TECHNIQUES" IN ASPR 305.1(B) SINCE THE REGULATION DOES PERMIT THE PROCURING AGENCY TO INFORM AN OFFEROR THAT ITS PRICE IS TOO HIGH AND THERE IS NO EVIDENCE THAT PROTESTER'S PRICE WAS IMPROPERLY DISCLOSED.

TO RADIATION SYSTEMS, INC.:

ON JULY 25, 1973, REQUEST FOR PROPOSALS (RFP) NO. DAAB07-74-R-0026, WAS ISSUED BY THE U.S. ARMY ELECTRONICS COMMAND, (AEC), FORT MONMOUTH, NEW JERSEY. THE RFP SOLICITED PROPOSALS FOR THE FABRICATION OF ANTENNA MASTS WITH ACCESSORY KIT, EXTENSION KIT, SPARE PARTS AND ANCILLARY ITEMS INCIDENT THERETO. RADIATION SYSTEMS, INCORPORATED (RSI) AND AINSLIE CORPORATION (AINSLIE) SUBMITTED PROPOSALS WHICH WERE THEN EVALUATED. NEGOTIATIONS WERE THEN CONDUCTED WITH BOTH RSI AND AINSLIE. AFTER BEST AND FINAL PROPOSALS WERE RECEIVED BY THE ARMY, BUT BEFORE ANY AWARD WAS MADE, RSI FILED A PROTEST WITH THE CONTRACTING OFFICER WHICH WAS SUBSEQUENTLY DENIED AND AWARD WAS MADE TO AINSLIE, THE LOW OFFEROR, ON THE BASIS OF THE FIRM'S FIXED PRICE OF $899,836.00. THEREAFTER, RSI PROTESTED TO THIS OFFICE THE AWARD OF THE CONTRACT TO AINSLIE.

RSI FIRST CONTENDS THAT AINSLIE IS UNABLE TO MEET THE FIRST ARTICLE DELIVERY REQUIREMENTS. IT NOTES THAT THE SOLICITATION ADVISED OFFERORS THAT DELIVERY SCHEDULES WERE FIRM, THAT AN EXTENSION WAS NOT CONSIDERED POSSIBLE AND THAT OFFERORS SHOULD NOT SUBMIT PROPOSALS IF THERE WAS ANY DOUBT AS TO ONE'S ABILITY TO MEET THE DELIVERY DATE. RSI ALLEGES THAT AS A RESULT OF ITS ACQUISITION OF VARIOUS RIGHTS FROM THE ORIGINAL MANUFACTURER, INCLUDING PATENT RIGHTS, DRAWINGS, TOOLS AND FIXTURES, THE ARMY'S DETERMINATION THAT AINSLIE COULD SATISFY THE SPECIFIED DELIVERY DATE WAS CLEARLY IN ERROR SINCE IT BELIEVES THAT THERE WAS NO WAY AINSLIE COULD BUY RAW MATERIALS, DESIGN AND FABRICATE TOOLS AND DIES, AND DELIVER WITHIN THE SEVEN MONTH REQUIREMENT. RSI STATES THAT UNDER THE CIRCUMSTANCES THE FINDING WAS ARBITRARY AND CAPRICIOUS AND MADE TO TAKE ADVANTAGE OF AINSLIE'S SIGNIFICANTLY LOWER PRICE.

THE RECORD SHOWS THAT THE CONTRACTING OFFICER REQUESTED THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCASR), BOSTON, MASSACHUSETTS, TO MAKE A PREAWARD SURVEY OF AINSLIE. THE ENSUING SURVEY REPORT CONTAINED VARIOUS FINDINGS REFLECTING UNFAVORABLY ON THAT FIRM'S PURCHASING AND SUBCONTRACTING PLANS AND ITS ABILITY TO MEET THE SPECIFIED DELIVERY SCHEDULE. AS A RESULT OF THESE FINDINGS, THE DCASR RECOMMENDED THAT AWARD NOT BE MADE TO AINLSIE.

SUBSEQUENTLY, AINSLIE FURNISHED THE ARMY WITH EVIDENCE OF AN AGREEMENT WITH ITS SUPPLIER WHICH STATED THAT THE MATERIAL IN QUESTION WOULD BE AVAILABLE FOR PERFORMANCE OF THE CONTRACT.

THE CONTRACTING OFFICER THEREFORE REQUESTED A RE-SURVEY OF THE AREAS IN WHICH THE BIDDER WAS FOUND UNSATISFACTORY. DCASR DECLINED TO CHANGE ITS PRIOR RECOMMENDATION BECAUSE THE PURCHASE AGREEMENT SUBMITTED BY AINSLIE HAD EXPIRED AND THEREFORE NO ASSURANCE WAS PROVIDED THAT THE REQUIRED DELIVERY SCHEDULE WOULD BE MET. HOWEVER, ON NOVEMBER 27, 1973, AINSLIE OBTAINED A NEW PURCHASE AGREEMENT WITH ITS SUPPLIER AND ON THIS BASIS THE CONTRACTING OFFICER DETERMINED THAT THE FIRM WAS RESPONSIBLE AND CAPABLE OF MEETING THE CONTRACT DELIVERY SCHEDULE.

DETERMINATIONS CONCERNING THE QUALIFICATIONS OF PROSPECTIVE GOVERNMENT CONTRACTORS REQUIRE THE EXERCISE OF INDEPENDENT JUDGMENT AND ARE PRIMARILY FOR RESOLUTION BY THE ADMINISTRATIVE AGENCY INVOLVED. IF A REASONABLE BASIS EXISTS FOR THE DETERMINATION, WE WILL NOT SUBSTITUTE OUR JUDGMENT IN SUCH A CASE AND WILL UPHOLD THE CONTRACTING OFFICER'S DETERMINATION OF RESPONSIBILITY. 37 COMP. GEN. 430 (1957); 52 COMP. GEN. 783 (1973).

WE HAVE REVIEWED THE INFORMATION WHICH WAS CONSIDERED BY THE CONTRACTING OFFICER IN ARRIVING AT HIS AFFIRMATIVE DETERMINATION OF RESPONSIBILITY, AS WELL AS RSI'S CONTENTIONS IN THIS REGARD, AND WE MUST CONCLUDE THAT THERE IS A REASONABLE BASIS TO SUPPORT THE CONTRACTING OFFICER'S DETERMINATION.

RSI ALSO OBJECTS TO THE NEGOTIATIONS FOR BEST AND FINAL OFFERS WHICH WERE CONDUCTED BY THE ARMY. WHILE THESE NEGOTIATIONS RESULTED IN A SUBSTANTIALLY LOWER PRICE FROM AINSLIE, THE PROTESTER ARGUES THAT SOLICITATION PARAGRAPH D.1 REQUIRED THAT THE AWARD BE MADE ON THE BASIS OF THE INITIAL PRICE SUBMISSIONS. THE REFERENCED PARAGRAPH PROVIDES IN PART AS FOLLOWS:

"SECTION D - EVALUATION AND AWARD FACTORS

D.1 BASIS FOR AWARD

"AWARD WILL BE MADE IN ACCORDANCE WITH PARAGRAPH C-10 TO THE OFFEROR WHO SUBMITS AN ACCEPTABLE TECHNICAL PROPOSAL AS CALLED FOR UNDER SECTION D.2 AND THE LOWEST TOTAL PRICE."

IN OUR OPINION THE ABOVE-QUOTED SOLICITATION PROVISION DOES NOT REQUIRE THAT AWARD BE MADE ON THE BASIS OF THE INITIAL PRICE SUBMISSIONS SO AS TO PRECLUDE THE GOVERNMENT FROM CONDUCTING NEGOTIATIONS. IT IS REPORTED THAT IN THE INSTANT CASE, THE CONTRACTING OFFICIALS FELT IT NECESSARY TO SUBMIT TO EACH OFFEROR A NUMBER OF TECHNICAL QUESTIONS RAISED BY THE GOVERNMENT ENGINEERS AS WELL AS COST QUESTIONS RAISED BY THE DCAA AUDITOR AND PRICE ANALYST. EACH CONTRACTOR WAS THEN REQUESTED TO SUBMIT A "BEST AND FINAL" PRICE BY NOVEMBER 13, 1973, TAKING INTO CONSIDERATION THE DISCUSSIONS WHICH WERE CONDUCTED. WE NOTE THAT ALTHOUGH ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-805.1, WHICH IMPLEMENTS 10 U.S.C. 2304(G), PERMITS THE AWARD OF A CONTRACT ON THE BASIS OF INITIAL PROPOSALS WHERE THE RFP NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSIONS AND WHERE THE CIRCUMSTANCES OTHERWISE WARRANT, THE EXERCISE OF SUCH RIGHT IS DISCRETIONARY. 52 COMP. GEN. 425 (1973). IN FACT, THE SECTION EXPRESSES A PREFERENCE FOR DISCUSSION. THE REGULATION STATES THAT AFTER RECEIPT OF INITIAL PROPOSALS DISCUSSIONS "SHALL BE CONDUCTED" WITH ALL RESPONSIBLE OFFERORS WITHIN A COMPETITIVE RANGE, BUT THAT THE DISCUSSION REQUIREMENT "NEED NOT BE APPLIED" TO CERTAIN SITUATIONS INCLUDING PROCUREMENTS WHERE ADEQUATE COMPETITION CLEARLY DEMONSTRATES THAT A FAIR AND REASONABLE PRICE WILL BE ACHIEVED. FURTHER, SUBPARAGRAPH (A)(V) OF SECTION 3-805.1 STATES THAT:

"*** IN ANY CASE WHERE THERE IS UNCERTAINTY AS TO THE PRICING OR TECHNICAL ASPECTS OF ANY PROPOSALS, THE CONTRACTING OFFICER SHALL NOT MAKE AWARD WITHOUT FURTHER EXPLORATION AND DISCUSSION PRIOR TO AWARD. ***"

AS WE STATED IN 50 COMP. GEN. 117, 123 (1970):

"WHEN NEGOTIATIONS ARE CONDUCTED THE FACT THAT INITIAL PROPOSALS MAY BE RATED AS ACCEPTABLE DOES NOT INVALIDATE THE NECESSITY FOR DISCUSSIONS OF THEIR WEAKNESSES, EXCESSES OR DEFICIENCIES IN ORDER THAT THE CONTRACTING OFFICER MAY OBTAIN THAT CONTRACT WHICH IS MOST ADVANTAGEOUS TO THE GOVERNMENT. WE HAVE STATED THAT DISCUSSIONS OF THIS NATURE SHOULD BE CONDUCTED WHENEVER IT IS ESSENTIAL TO OBTAIN INFORMATION NECESSARY TO EVALUATE A PROPOSAL OR TO ENABLE THE OFFEROR TO UPGRADE THE PROPOSAL. (47 COMP. GEN. 29 (1967)). ***"

THEREFORE, IT IS CLEAR THAT IN THE CIRCUMSTANCES THE ARMY'S CONDUCT OF NEGOTIATIONS WAS IN FULL ACCORD WITH THE STATUTORY AND REGULATORY REQUIREMENTS.

RSI NEXT CONTENDS THAT THE ARMY'S REFUSAL TO CONSIDER ITS OFFER OF A "PATENT INDEMNITY CLAUSE" IN SELECTING THE MOST ADVANTAGEOUS PROPOSAL WAS "INEQUITABLE." IN THIS CONNECTION, THE CONTRACTING OFFICER CONTENDS THAT THESE ARE PERFORMANCE-TYPE SPECIFICATIONS AND THE CONTRACTOR CAN THEREFORE VARY THE STRUCTURE AND STILL CONFORM TO THE SPECIFICATIONS. IT IS FURTHER STATED THAT THERE IS NO WAY OF KNOWING FOR CERTAIN WHETHER THE DELIVERED HARDWARE WILL INFRINGE ANY PATENT. UNDER SUCH CIRCUMSTANCES WE HAVE HELD THAT POSSIBLE COSTS TO THE GOVERNMENT OF DEFENDING ANY LITIGATION WHICH MIGHT BE INSTITUTED AS A RESULT OF A PROCUREMENT ACTION SHOULD NOT BE CONSIDERED. 45 COMP. GEN. 13, 16 (1965).

FINALLY, RSI ALLEGES THAT IN CONTRAST TO THE DISCUSSIONS WHICH WERE CONDUCTED WITH IT AINSLIE WAS GIVEN FAVORABLE TREATMENT BY THE AGENCY NEGOTIATORS. IT STATES THAT THE AGENCY NEGOTIATORS CONDUCTED A LIMITED DISCUSSION, "MUCH LESS THAN AN HOUR", OF ITS PROPOSAL. ON THE OTHER HAND, RSI BELIEVES THAT IN THE CASE OF AINSLIE'S NUMEROUS COMMENTS WERE MADE AS TO AREAS IN WHICH ITS COSTS WERE CONSIDERED TO BE EXCESSIVE, WITH THE RESULT THAT IT SUBSTANTIALLY REDUCED ITS OVERALL PRICE IN ITS BEST AND FINAL OFFER. RSI ARGUES THAT THE CONSIDERABLE DROP IN AINSLIE'S PRICE SHOWS THAT THE CONTRACTING AGENCY ENGAGED IN AN AUCTION TECHNIQUE BY INDICATING TO AINSLIE THAT ITS PRICE "WAS NOT LOW IN RELATION TO THAT OF ANOTHER OFFEROR", IN VIOLATION OF ASPR 3-805.1(B) AND THAT THERE WAS A LEAK OF RSI'S PRICE.

THE RECORD DISCLOSES THAT A SEPARATE MEETING WAS HELD WITH EACH OFFEROR AND THAT AT EACH MEETING TECHNICAL AND COST QUESTIONS WERE RAISED BY THE GOVERNMENT NEGOTIATORS PERTINENT TO THE PARTICULAR PROPOSAL BEING DISCUSSED. AFTERWARDS, EACH OFFEROR WAS REQUESTED TO SUBMIT A "BEST AND FINAL" OFFER. AS INDICATED PREVIOUSLY, THE AGENCY DENIES THAT RSI'S PRICE WAS REVEALED. ALTHOUGH WE ASSUME THAT AINSLIE WAS INFORMED BY CONTRACTING OFFICIALS AS TO THOSE AREAS IN ITS PROPOSAL WHICH WERE CONSIDERED BY THE GOVERNMENT TO BE EXCESSIVE, WE DO NOT BELIEVE THAT THESE DISCUSSIONS WERE AN IMPROPER NEGOTIATION TECHNIQUE OR THAT THE SUBSTANTIAL LOWERING OF AINSLIE'S PRICE AS A RESULT THEREOF, INDICATED THAT AUCTION TECHNIQUES WERE EMPLOYED. ALTHOUGH ASPR 8-305.1(B) PROHIBITS THE USE OF AUCTION TECHNIQUES, IT IS PERMISSIBLE FOR A PROCURING ACTIVITY TO INFORM AN OFFEROR THAT ITS PRICE IS CONSIDERED BY THE GOVERNMENT TO BE TOO HIGH. IS NOT UNCOMMON FOR OFFERORS TO OFFER SUBSTANTIAL PRICE REDUCTIONS IN THE FINAL STAGES OF NEGOTIATIONS, EVEN WITHOUT CHANGES IN THE GOVERNMENT'S REQUIREMENTS. SEE B-174141, JANUARY 20, 1972. RSI HAS NOT ADVANCED ANY CONCRETE EVIDENCE TO CONTROVERT THE ADMINISTRATIVE POSITION THAT ITS PRICE WAS NOT REVEALED, BUT MERELY INFERS THAT AUCTION TECHNIQUE WAS UTILIZED FROM THE FACT THAT AINSLIE SUBSTANTIALLY LOWERED ITS PRICE FOLLOWING ITS MEETING WITH GOVERNMENT OFFICIALS. WE DO NOT THINK SUCH A CONCLUSION MAY REASONABLY BE DRAWN IN THE ABOVE CIRCUMSTANCES. THE TERM "AUCTION" CONNOTES OPEN PRICE BIDDING BETWEEN TWO COMPETING OFFERORS, RATHER THAN THE NEGOTIATION OF A PRICE WHERE AN OFFEROR'S STANDING WITH RESPECT TO ITS COMPETITOR IS NOT DIVULGED. THEREFORE, WE DO NOT FIND THAT IMPROPER NEGOTIATION TECHNIQUES WERE EMPLOYED OR THAT THE PROCUREMENT WAS CONDUCTED IN A MANNER VIOLATIVE OF THE PROHIBITION AGAINST THE "AUCTION TECHNIQUE" SET FORTH IN ASPR 3-805.1(B).

ACCORDINGLY, WE CONCLUDE THAT THERE IS NO LEGAL BASIS TO QUESTION THE PROPRIETY OF THE AWARD OF THE CONTRACT TO AINSLIE AND RSI'S PROTEST AGAINST SUCH AWARD IS DENIED. WITH REGARD TO RSI'S REQUEST FOR REIMBURSEMENT OF BID PREPARATION COSTS, THE MATTER NEED NOT BE CONSIDERED FURTHER IN VIEW OF OUR DENIAL OF THE PROTEST.