B-173248, FEB 24, 1972, 51 COMP GEN 531

B-173248, FEB 24, 1972, 51 COMP GEN 531

CONTRACTS - NEGOTIATION - EVALUATION FACTORS - MANNING REQUIREMENTS - NONCOMPLIANCE THE RELAXATION OF THE MANNING REQUIREMENTS DURING NEGOTIATIONS WITH THE LOW OFFEROR UNDER A REQUEST FOR QUOTATIONS (RFQ) TO PERFORM MAINTENANCE AND OPERATION SERVICES FOR A TECHNICAL LABORATORY FOR A 1 YEAR PERIOD WITH TWO 1-YEAR OPTIONS, AFTER ASSURING OFFERORS AT A PREQUOTATION CONFERENCE THAT THE MINIMUM MANNING REQUIREMENTS OF THE RFQ WOULD BE ENFORCED AND A PENALTY LEVIED FOR NONCOMPLIANCE, EVEN IF PERFORMANCE WAS SATISFACTORY, WITHOUT PROVIDING ALL OFFERORS IN THE COMPETITIVE RANGE AN OPPORTUNITY TO RECONSIDER THEIR OFFERS WAS CONTRARY TO PARAGRAPH 3-805.1(E) OF THE ARMED SERVICES PROCUREMENT REGULATION, AND THE OPTIONS SHOULD NOT BE EXERCISED, NOTWITHSTANDING THE AWARD WAS MADE WITH THE UNDERSTANDING THAT SATISFACTORY PERFORMANCE WITH LESS THAN THE SPECIFIED MINIMUM PERSONNEL WOULD BE ACCEPTABLE AND NO PRICE REDUCTION REQUIRED. CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SIZE - CONCLUSIVENESS OF DETERMINATION A DETERMINATION BY THE SIZE APPEALS BOARD OF THE SMALL BUSINESS ADMINISTRATION THAT THE LOW OFFEROR UNDER A REQUEST FOR QUOTATIONS WAS QUALIFIED AS A SMALL BUSINESS CONCERN ON BOTH THE DATE FOR RECEIPT OF QUOTATIONS AND THE DATE OF AWARD IS CONCLUSIVE PURSUANT TO 15 U.S.C. 637(B)(6), WHICH STATES THAT "OFFICES OF THE GOVERNMENT HAVING PROCUREMENT OR LENDING POWERS *** SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED 'SMALL-BUSINESS CONCERNS.'"

TO THE SECRETARY OF THE AIR FORCE, FEBRUARY 24, 1972:

WE REFER TO LETTER SPPM OF OCTOBER 4, 1971, AND PRIOR CORRESPONDENCE, FROM THE CONTRACT MANAGEMENT DIVISION, DIRECTORATE OF PROCUREMENT POLICY, DEPUTY CHIEF OF STAFF, SYSTEMS AND LOGISTICS, FURNISHING REPORTS ON THE PROTEST OF TECDATA, INC., AGAINST THE AWARD OF CONTRACT NO. F04693-71-C- 0084 TO ACTION INDUSTRIES, INC., UNDER REQUEST FOR QUOTATIONS (RFQ) NO. F04693-71-Q-0003, ISSUED BY THE BASE PROCUREMENT DIVISION, LOS ANGELES AIR FORCE STATION, CALIFORNIA.

THE RFQ, ISSUED ON MARCH 26, 1971, REQUESTED QUOTATIONS FROM APPROXIMATELY 30 PROSPECTIVE OFFERORS FOR A FIXED-PRICE CONTRACT COVERING THE PERFORMANCE OF MAINTENANCE AND OPERATIONS SERVICES FOR THE CIVIL ENGINEERING, PROTOTYPE TECHNICAL LABORATORY, AND CLASSIFIED MATERIALS DESTRUCTION FUNCTIONS AT THE LOS ANGELES AIR FORCE STATION. QUOTATIONS WERE TO BE SUBMITTED BY MAY 3, 1971. THE PROCUREMENT WAS A 100 PERCENT SMALL BUSINESS SET-ASIDE. UPON RECEIPT, EACH QUOTATION WAS TO BE EVALUATED ON THE BASIS OF ITS MANAGEMENT AND TECHNICAL PROPOSALS. NEGOTIATIONS WERE THEN TO BE CONDUCTED WITH ALL OFFERORS WHOSE PROPOSALS WERE DETERMINED BY THE EVALUATION BOARD TO BE WITHIN THE COMPETITIVE RANGE. AWARD WAS TO BE MADE TO THAT OFFEROR SUBMITTING THE BEST QUOTATION, PRICE AND OTHER FACTORS CONSIDERED. OF THE SEVEN QUOTATIONS RECEIVED, THE THREE THAT WERE CONSIDERED TO BE WITHIN THE COMPETITIVE RANGE WERE:

OFFEROR SCORE

ACTION INDUSTRIES, INC. (ACTION) 945

INTERSERVCO, INC. (INTERSERVCO) 1007

TECDATA, INC. (TECDATA) 976

THE QUOTATIONS WERE SCORED ON THE BASIS OF A POSSIBLE TOTAL OF 1,440, POINTS.

THEREAFTER, NEGOTIATIONS WERE CONDUCTED WITH EACH OF THESE OFFERORS, AND BY LETTER OF MAY 20, THE CONTRACTING OFFICER REQUESTED EACH OFFEROR TO SUBMIT ITS BEST AND FINAL PRICES ON OR BEFORE MAY 24. ALTHOUGH THE CONTRACT WAS TO COVER A 1-YEAR PERIOD WITH TWO 1-YEAR OPTIONS AND PRICES WERE TO BE SUBMITTED FOR EACH YEAR, THE LOW OFFEROR WAS TO BE DETERMINED ON THE BASIS OF THE TOTAL PRICE SUBMITTED FOR THE 3-YEAR PERIOD. THE FINAL PRICES FOR THE 3-YEAR PERIOD WERE AS FOLLOWS:

OFFEROR NET PRICE

ACTION $5,053,416.80

INTERSERVCO 5,064,851.53

TECDATA 5,133,300.69

A DETERMINATION WAS MADE TO AWARD THE CONTRACT TO ACTION. UNDER A DETERMINATION THAT THE PROCUREMENT WAS URGENT, AWARD WAS MADE TO ACTION ON JUNE 23, 1971, NOTWITHSTANDING A PROTEST BY TECDATA.

BY MESSAGE OF JUNE 11, 1971, AND SUBSEQUENT CORRESPONDENCE, TECDATA HAD PROTESTED THE AWARD OF THE CONTRACT. THE FIRST BASIS FOR THE PROTEST WAS THAT ACTION WAS NOT A SMALL BUSINESS CONCERN. THE SECOND BASIS WAS THAT ACTION WAS SUPPLYING LESS THAN THE 142 MINIMUM PERSONNEL REQUIRED UNDER THE CONTRACT WITHOUT BEING PENALIZED THEREFOR AND THAT, CONSEQUENTLY, ACTION MUST HAVE KNOWN THAT IT WOULD NOT BE REQUIRED TO FURNISH ALL THE PERSONNEL AND MUST HAVE COMPUTED ITS FINAL PRICES ACCORDINGLY, IF SO, IT IS CONTENDED, ALL OFFERORS WERE NOT SUBMITTING QUOTATIONS ON THE SAME BASIS.

THE QUESTION AS TO WHETHER ACTION WAS A SMALL BUSINESS CONCERN WAS SUBMITTED TO THE SMALL BUSINESS ADMINISTRATION. THE SIZE APPEALS BOARD ON DECEMBER 15, 1971, IN RECONSIDERING ITS DECISION OF OCTOBER 8 THAT ACTION WAS NOT A SMALL BUSINESS, DETERMINED ACTION TO HAVE BEEN QUALIFIED AS A SMALL BUSINESS CONCERN ON BOTH THE DATE FOR RECEIPT OF QUOTATIONS AND THE DATE OF AWARD. IN 15 U.S.C. 637(B)(6), IT IS STATED THAT "OFFICES OF THE GOVERNMENT HAVING PROCUREMENT OR LENDING POWERS *** SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED 'SMALL-BUSINESS CONCERN.'" SINCE THE DECISION OF THE SBA IS CONCLUSIVE BY STATUTE, THE PROTEST REGARDING THE SMALL BUSINESS STATUS OF ACTION IS DENIED. 44 COMP. GEN. 271, 273 (1964) AND 46 ID. 898, 900 (1967).

AS REGARDS THE SECOND BASIS FOR THE PROTEST, WE NOTE THAT PART IV, SECTION "M," ATTACHMENT "A," SECTION 1 OF THE RFQ, STATES AS FOLLOWS:

1.01 WORK STATEMENT

B. DESCRIPTION OF SERVICES. THE CONTRACTOR SHALL BE EXPECTED TO FURNISH AS MINIMUM REQUIREMENTS, THE *** MINIMUM NUMBER AND TYPE OF PERSONNEL CONTAINED IN ADDENDUM NO. II TO ATTACHMENT A IN ORDER TO PERFORM SATISFACTORILY ALL WORK NECESSARY. *** THIS DOES NOT RESTRICT THE CONTRACTOR FROM FURNISHING ADDITIONAL PROPERTY OR EMPLOYING ADDITIONAL PERSONNEL IF HE DETERMINES SUCH IS REQUIRED FOR HIM TO ACCOMPLISH HIS WORK.

PART IV, SECTION "M," ADDENDUM NO. II, ATTACHMENT "A" OF THE RFQ PROVIDES A LIST WITH JOB DESCRIPTIONS OF 133 CONTRACTOR PERSONNEL. PART IV, SECTION "M," ATTACHMENT "A," SECTION XVI, SPECIFICALLY SETS OUT THE WORK HOURS FOR EACH OF THESE PERSONNEL. EACH IS TO BE EMPLOYED ON THE BASIS OF A 40-HOUR WORKWEEK. PART IV, SECTION "M," ATTACHMENT "B," OF THE RFQ LISTS FOUR PERSONNEL TO BE ASSIGNED TO THE PROTOTYPE TECHNICAL LABORATORY FUNCTION AND THEIR HOURS OF EMPLOYMENT. PART IV, SECTION "M," ATTACHMENT "C" LISTS FIVE PERSONNEL TO BE ASSIGNED TO THE CLASSIFIED MATERIALS DESTRUCTION FUNCTION AND THEIR HOURS OF EMPLOYMENT. THESE NINE PERSONNEL ARE ALSO TO BE EMPLOYED ON THE BASIS OF A 40-HOUR WORKWEEK.

FURTHER, AT THE PREQUOTATION CONFERENCE HELD ON APRIL 6, 1971, THE FOLLOWING QUESTIONS WERE AMONG THE 20 POSED AND ANSWERED:

17. REFERENCE PART IV SEC. M PARA 1.01B "DESCRIPTION OF SERVICES" AND 1.06A "WORKING FORCE"

(A) THE STATEMENT OF WORK CLEARLY REQUIRES THAT THE CONTRACTOR PROVIDE SUFFICIENT PERSONNEL TO PERFORM THE REQUIRED SERVICES SATISFACTORILY. HOWEVER, IS THE CONTRACTOR REQUIRED TO PROVIDE THE MINIMUM PERSONNEL SPECIFIED IN ADDENDUM II TO ATTACHMENT A IF HE IS ABLE TO PERFORM THE SERVICES SATISFACTORILY WITH A LESSER NUMBER OF EMPLOYEES?

ANSWER: YES. THE CONTRACTOR IS REQUIRED TO FURNISH THE MINIMUM NUMBER OF PERSONNEL AS SET FORTH IN ADDENDUM II TO ATTACHMENT A.

(B) IF THE CONTRACTOR IS REQUIRED TO PROVIDE THE MINIMUM PERSONNEL SPECIFIED IN ADDENDUM II TO ATTACHMENT A, IS THERE A PENALTY LEVIED ON THE CONTRACTOR FOR HOURS NOT PROVIDED, ASSUMING THAT THE SERVICES ARE BEING PERFORMED SATISFACTORILY?

ANSWER: YES.

19. REFERENCE PART IV SECTION M, ADDENDUM II ATTACHMENT A. IS THE TOTAL NUMBER OF PERSONNEL (133) THE ABSOLUTE MINIMUM WHICH MUST BE PROVIDED OR CAN CONTRACTOR PROVIDE LESS PEOPLE?

ANSWER: YES. THE TOTAL NUMBER OF PERSONNEL IS THE MINIMUM.

THE CONTRACTING OFFICER SUBSEQUENTLY FURNISHED ALL THE PROSPECTIVE OFFERORS A WRITTEN LIST OF THE QUESTIONS AND ANSWERS.

APPARENTLY, THE NATURE AND SCOPE OF THE PENALTY CLAUSE THAT WAS TO BE APPLICABLE WHEN LESS THAN THE MINIMUM NUMBER OF PERSONNEL WAS FURNISHED WERE TO BE FORMULATED DURING NEGOTIATIONS TO BE HELD WITH ACCEPTABLE OFFERORS. THE BASE CIVIL ENGINEER NOTICED THE OMISSION OF SUCH A CLAUSE FROM THE RFQ AND BROUGHT THIS TO THE ATTENTION OF THE CONTRACTING OFFICER. HE WAS TOLD THAT THE MATTER WOULD BE TAKEN CARE OF DURING NEGOTIATIONS. WE ALSO NOTE THAT THE FIXED-PRICE CONTRACTS FOR THESE SERVICES HELD BY TECDATA DURING THE 2 PREVIOUS YEARS CONTAINED A DEDUCTION CLAUSE PROVIDING THAT IF THE CONTRACTOR FAILED TO FURNISH THE MINIMUM NUMBER OF MAN-HOURS, THAT NUMBER BEING BASED ON THE MINIMUM MANNING REQUIREMENT OF 175 PERSONNEL FOR THE FIRST CONTRACT AND 144 PERSONNEL FOR THE SECOND CONTRACT, THE CONTRACT PRICES WERE TO BE REDUCED BY AN HOURLY RATE.

AN INVESTIGATION CONDUCTED BY OUR OFFICE INTO THIS PROCUREMENT REVEALED NO INFORMATION IN THE RECORDS COVERING THE PREAWARD NEGOTIATIONS BETWEEN THE CONTRACTING OFFICER AND ACTION WHICH WOULD INDICATE THAT THE FIRM WAS TOLD IN ADVANCE OF SUBMITTING ITS PRICE QUOTATION THAT LESS THAN 142 PERSONNEL COULD BE USED IN PERFORMING THE WORK REQUIRED. IT FURTHER REVEALED THAT NO MENTION WAS MADE DURING NEGOTIATIONS TO ANY OFFEROR THAT MINIMUM MANNING WAS NOT MANDATORY UNTIL THE FINAL NEGOTIATION SESSION WITH ACTION. AT THIS FINAL SESSION, THE BASE CIVIL ENGINEER STATED THAT IT WAS HIS OPINION THAT THE CONTRACTOR WOULD BE REQUIRED TO PROVIDE THE MINIMUM NUMBER OF PERSONNEL AT ALL TIMES. THE PRESIDENT OF ACTION TOOK EXCEPTION TO THE STATEMENT ON THE GROUNDS THAT THE REQUIREMENT WAS IMPOSSIBLE TO ACCOMPLISH AND WAS INCONSISTENT WITH THE FIXED-PRICE NATURE OF THE RFQ. THE RECORD OF NEGOTIATION INDICATES THAT AS A RESULT OF THE DISCUSSION SOME THOUGHT WAS GIVEN TO REQUIRING THE CONTRACTOR TO PROVIDE 142 PERSONNEL WITH VARIATIONS SUBJECT TO THE APPROVAL OF THE CONTRACTING OFFICER AND TO PROVIDE FOR AMENDMENT OF THE CONTRACT IF THE WORKLOAD DIMINISHED OR INCREASED OVER A CONTINUOUS PERIOD OF TIME. HOWEVER NO SUCH PROVISIONS WERE INCLUDED IN THE CONTRACT.

IN ADDITION, SAMSO FORM 126, ATTACHMENT 1, DATED JUNE 10, 1971, FROM THE AIR FORCE PROCUREMENT REVIEW COMMITTEE, CONTAINED THE FOLLOWING CLAUSE TO BE ADDED TO THE CONTRACT:

B. IN THE EVENT THE CONTRACTOR FAILS TO FURNISH THE MINIMUM MANNING REQUIREMENTS, AS REQUIRED BY A ABOVE, THE PARTIES SHALL NEGOTIATE A REDUCTION IN THE CONTRACT PRICE AT THE END OF EACH MONTH CONTRACTOR FAILS TO MEET SUCH MINIMUM MANNING REQUIREMENT *** .

THE REQUIREMENT FOR THE CLAUSE WAS DELETED BY THE REVIEW COMMITTEE ON JUNE 20, 1971, AS A RESULT OF CONVERSATIONS BETWEEN THE CONTRACTING OFFICER AND A MEMBER OF THE REVIEW COMMITTEE. A DIFFERENT CLAUSE WAS INCORPORATED INTO THE CONTRACT BY THE ADDITION OF PARAGRAPH 19, PART II, SECTION "J", WHICH PROVIDES AS FOLLOWS:

19. MANNING REQUIREMENTS

A. THE MANNING REQUIREMENTS SET FORTH IN PART IV, SECTION M, ADDENDUM NO. II, ATTACHMENT A, ATTACHMENT B, AND ATTACHMENT C ARE CONSIDERED THE MINIMUM NECESSARY BY THE GOVERNMENT TO PERFORM ALL THE WORK UNDER THIS CONTRACT. THE CONTRACTOR SHALL PROVIDE THE CONTRACTING OFFICER WITH PERIODIC REPORTS WHEN AND AS CALLED FOR BY THE CONTRACTING OFFICER, BUT IN NO EVENT LESS THAN ONCE A MONTH.

FURTHER EVIDENCE OF THE BASIS UPON WHICH THE CONTRACT WAS AWARDED IS INCLUDED IN A JUNE 23, 1971, LETTER FROM ACTION TO THE BASE PROCUREMENT DIVISION SIGNED BY THE PRESIDENT OF ACTION AND CONCURRED IN BY THE CONTRACTING OFFICER:

*** THE POSITION OF THE AIR FORCE AND ACTION INDUSTRIES, INC., CONCERNING THE NUMBER OF PERSONNEL REQUIRED, AS DISCUSSED AND MUTUALLY AGREED DURING NEGOTIATIONS, IS: THE AIR FORCE CONSIDERS 142 PERSONNEL THE MINIMUM NECESSARY TO PERFORM ALL THE WORK UNDER THE CONTRACT; HOWEVER, SATISFACTORY PERFORMANCE WITH LESS THAN 142 PERSONNEL WILL BE ACCEPTABLE, WITH NO DEDUCTIONS BEING APPLICABLE.

SINCE THE TIME OF CONTRACT AWARD, AS THE INVESTIGATION CONDUCTED BY OUR OFFICE INDICATES, THE CONTRACTOR RARELY, IF EVER, HAS FURNISHED 142 PERSONNEL. APPARENTLY, THERE HAVE BEEN MORE THAN A FEW DAYS DURING WHICH LESS THAN 100 PERSONNEL HAVE BEEN FURNISHED. THE CONTRACTOR DOES NOT INCLUDE THE NUMBER OF PERSONNEL FURNISHED IN HIS MONTHLY REPORT SUBMITTED UNDER THE "MANNING REQUIREMENTS" CLAUSE OF THE CONTRACT. CONSIDERING THIS, AND AS IT IS THE OPINION OF THE CONTRACTING OFFICER THAT THE NUMBER OF PERSONNEL THE CONTRACTOR PROVIDES IS IRRELEVANT AS LONG AS HE PERFORMS HIS WORK SATISFACTORILY, WE FAIL TO SEE WHY THE CONTRACTING OFFICER FELT CONSTRAINED TO TELL THE PRESIDENT OF TECDATA AT A CONFERENCE HELD ON JULY 8, 1971, THAT ACTION WAS BEING REQUIRED TO FURNISH THE MINIMUM NUMBER OF PERSONNEL, EVEN THOUGH THE CONTRACTING OFFICER HAD SPECIFICALLY BEEN INFORMED BY THE BASE CIVIL ENGINEER THAT ACTION WAS NOT FURNISHING THIS MINIMUM NUMBER OF PERSONNEL.

IN VIEW OF THE JUNE 23, 1971, AGREEMENT WE ARE UNABLE TO CONCLUDE THAT THE UTILIZATION BY ACTION OF LESS THAN 142 EMPLOYEES IS CONTRARY TO THE INTENTION OF THE CONTRACTING OFFICER AND ACTION UNDER THE CONTRACT. NEVERTHELESS, IT IS OUR VIEW THAT THE PREQUOTATION CONFERENCE AND THE RFQ WERE MISLEADING IN THAT THE FORMER HAD INDICATED THAT THE TOTAL NUMBER OF MANNING IN THE RFQ WAS THE ABSOLUTE MINIMUM AND THE LATTER SPECIFICALLY SET FORTH THE VARIOUS JOB DESCRIPTIONS, THE NUMBER OF PERSONS FOR EACH JOB DESCRIPTION, AND THE SPECIFIC DUTIES, EXPERIENCE AND EDUCATION PERTAINING TO EACH JOB DESCRIPTION. FURTHER, EACH OFFEROR WAS REQUIRED TO LIST EACH OF THE 142 PERSONNEL WITH THE HOURLY WAGE RATE AND RESULTING EXPENSE OF EMPLOYING EACH AS A PART OF SUBMITTING ITS PROPOSED PRICE. THERE IS NOTHING IN THE RECORD WHICH INDICATES THAT ANYONE OTHER THAN ACTION WAS SPECIFICALLY ADVISED THAT THE LISTED PERSONNEL REQUIREMENTS WOULD NOT HAVE TO BE COMPLIED WITH IN THE PERFORMANCE OF THE CONTRACT. THE RELAXATION OF THAT REQUIREMENT WITHOUT PROVIDING ALL OFFERORS IN THE COMPETITIVE RANGE AN OPPORTUNITY TO CONSIDER THE EFFECT OF SUCH ACTION UPON THEIR OFFERS WAS CONTRARY TO REGULATIONS. SEE ASPR 3-805.1(E).

ACCORDINGLY, IN VIEW OF THE FOREGOING, WE BELIEVE THAT NEW PROPOSALS SHOULD BE SOLICITED RATHER THAN EXERCISING THE OPTIONS IN THE CONTRACT WITH ACTION AND WE SO RECOMMEND.