B-213046, DEC 27, 1983

B-213046: Dec 27, 1983

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THE CONTRACTING AGENCY HAS THE PRIMARY RESPONSIBILITY FOR DETERMINING ITS MINIMUM NEEDS AND GAO WILL NOT QUESTION THE AGENCY'S DECISIONS CONCERNING THE BEST METHODS OF ACCOMMODATING ITS NEEDS ABSENT CLEAR EVIDENCE THAT THOSE DECISIONS ARE ARBITRARY OR OTHERWISE UNREASONABLE. GAO FINDS NO MERIT IN THE PROTESTER'S CHALLENGE TO THE AGENCY'S NOT GUARANTEEING A MINIMUM ORDER IN REQUIREMENTS SOLICITATION ON GROUNDS THAT THE CONTRACTOR HAS TO ASSUME THE MAXIMUM AMOUNT OF RISK UNLESS THERE IS SOME ASSURANCE OF RECEIVING A MINIMUM ORDER. IT IS WITHIN THE AMBIT OF ADMINISTRATIVE DISCRETION TO OFFER TO COMPETITION A PROPOSED CONTRACT IMPOSING MAXIMUM RISKS UPON THE CONTRACTOR AND MINIMUM ADMINISTRATIVE BURDENS ON THE AGENCY.

B-213046, DEC 27, 1983

DIGEST: 1. THE CONTRACTING AGENCY HAS THE PRIMARY RESPONSIBILITY FOR DETERMINING ITS MINIMUM NEEDS AND GAO WILL NOT QUESTION THE AGENCY'S DECISIONS CONCERNING THE BEST METHODS OF ACCOMMODATING ITS NEEDS ABSENT CLEAR EVIDENCE THAT THOSE DECISIONS ARE ARBITRARY OR OTHERWISE UNREASONABLE. GAO FINDS THAT THE PROTESTER HAS FAILED TO ESTABLISH UNREASONABLENESS OF THE PROTESTED SOLICITATION PROVISION REQUIRING THE SUCCESSFUL OFFEROR TO FURNISH QUALIFICATION HARDWARE FOR APPROVAL TESTING WITHIN 90 DAYS FROM THE DATE OF AWARD. 2. GAO FINDS NO MERIT IN THE PROTESTER'S CHALLENGE TO THE AGENCY'S NOT GUARANTEEING A MINIMUM ORDER IN REQUIREMENTS SOLICITATION ON GROUNDS THAT THE CONTRACTOR HAS TO ASSUME THE MAXIMUM AMOUNT OF RISK UNLESS THERE IS SOME ASSURANCE OF RECEIVING A MINIMUM ORDER. IT IS WITHIN THE AMBIT OF ADMINISTRATIVE DISCRETION TO OFFER TO COMPETITION A PROPOSED CONTRACT IMPOSING MAXIMUM RISKS UPON THE CONTRACTOR AND MINIMUM ADMINISTRATIVE BURDENS ON THE AGENCY.

DUROYD MANUFACTURING COMPANY:

DUROYD MANUFACTURING COMPANY, INC. (DUROYD), PROTESTS THE REQUIREMENT FOR THE INITIAL DELIVERY OF QUALIFICATION HARDWARE WITHIN 90 DAYS FROM THE DATE OF AWARD IN REQUEST FOR PROPOSALS (RFP) DAAH01-83 R-0244 ISSUED BY THE UNITED STATES ARMY MISSILE COMMAND, REDSTONE ARSENAL, ALABAMA. THE RFP IS A TOTAL SMALL BUSINESS SET-ASIDE FOR AN ESTIMATED QUANTITY OF RADIO -CONTROLLED MINIATURE AERIAL TARGETS (RCMAT). NO AWARD HAS BEEN MADE.

DUROYD CONTENDS THAT THE 90-DAY DELIVERY REQUIREMENT FOR THE QUALIFICATION RCMAT FOR APPROVAL TESTING IS UNDULY RESTRICTIVE BECAUSE IT IS IMPOSSIBLE FOR ANY COMPANY OTHER THAN THE CURRENT PRODUCER OF THE HARDWARE TO MEET THIS DELIVERY REQUIREMENT. DUROYD ALSO CONTENDS THAT THE RFP SHOULD GUARANTEE A MINIMUM ORDER OF RCMAT'S BY THE GOVERNMENT RATHER THAN JUST STATING THE GOVERNMENT'S ESTIMATED REQUIREMENTS.

FOR THE REASONS SET FORTH BELOW, WE FIND DUROYD'S PROTEST TO BE WITHOUT MERIT.

THE RFP WAS ISSUED ON JULY 8, 1983. BY SEVERAL AMENDMENTS, THE CLOSING DATE FOR RECEIPT OF PROPOSALS WAS EXTENDED TO SEPTEMBER 30, 1983. MAILGRAM DATED SEPTEMBER 12, 1983, AND RECEIVED BY US ON SEPTEMBER 15, 1983, DUROYD FILED THE ABOVE-DESCRIBED PROTEST WITH OUR OFFICE.

DUROYD ASSERTS THAT THE RCMAT PROCUREMENT IS PRIMARILY A RESEARCH AND DEVELOPMENT EFFORT. ACCORDING TO DUROYD, THE MODEL AIRPLANES AVAILABLE ON THE COMMERCIAL MARKET ARE BUILT EITHER OF BALSA OR FIBERGLASS AND WOULD NOT MEET THE RFP'S SPECIFICATIONS AND DRASTIC CHANGES WOULD HAVE TO BE MADE TO AVAILABLE EQUIPMENT REQUIRING THE PRODUCTION OF SPECIAL TOOLING IN ORDER TO MANUFACTURE AND TEST THIS TYPE OF RCMAT'S. DUROYD FURTHER ALLEGES THAT THE ONLY RADIO RECEIVER SYSTEMS COMMERCIALLY AVAILABLE ALSO REQUIRE MAJOR CHANGES IN ORDER TO MEET THE "SWITCHABLE FOUR (4) FREQUENCIES" REQUIREMENT OF THE RFP.

DUROYD ESTIMATES THAT AT LEAST 10 MONTHS FROM THE DATE OF AWARD ARE NEEDED FOR A SUCCESSFUL OFFEROR TO MEET THE RFP'S REQUIREMENT FOR INITIAL DELIVERY OF QUALIFICATION HARDWARE. IN SUPPORT OF THIS ESTIMATE, DUROYD HAS FURNISHED US WITH A COPY OF A QUOTE FROM A POTENTIAL VENDOR IN WHICH THE VENDOR STATES THAT IT NEEDS 10 MONTHS FOR "DEVELOPMENT, FLYING TEST AND MAKING NECESSARY TOOLING AND DIES, MOLDS FOR MASS PRODUCTION" OF THE RCMAT'S SPECIFIED BY THE RFP.

THE ARMY STATES THAT IT RECEIVED 200 QUESTIONS FROM 13 OFFERORS IN RESPONSE TO THE ISSUANCE OF THE RFP AND ONLY DUROYD AND TWO OTHER COMPANIES QUESTIONED THE RFP'S DELIVERY SCHEDULE AND, OF THE 13 PROPOSALS SUBMITTED, ONLY DUROYD TOOK EXCEPTION TO THE DELIVERY SCHEDULE. THE ARMY EMPHASIZES, MOREOVER, THAT IN LIGHT OF THE INITIAL OBJECTIONS OF DUROYD AND THE TWO OTHER COMPANIES, THE RFP'S DELIVERY SCHEDULE WAS REEVALUATED AND WAS AGAIN DETERMINED TO BE REASONABLE AND NECESSARY IN ORDER TO MEET THE MINIMUM NEEDS OF THE GOVERNMENT. ACCORDING TO THE ARMY, THE RFP'S DELIVERY SCHEDULE WAS BASED ON CAREFUL CONSIDERATION OF THE NEEDS OF THE GOVERNMENT COUPLED WITH REALISTIC, REASONABLE LEADTIME TO ENSURE MAXIMUM COMPETITION. MORE SPECIFICALLY, THE ARMY STATES THAT FINAL SHIPMENT OF SIMILAR RCMAT'S UNDER AN EXISTING CONTRACT IS DUE IN OCTOBER 1983 AND THE RFP IS NECESSARY TO PROVIDE A CONTINUING SUPPLY OF NEW RCMAT'S.

A PROTESTER WHO OBJECTS TO THE REQUIREMENTS IN A SOLICITATION BEARS A HEAVY BURDEN. THE CONTRACTING AGENCY HAS THE PRIMARY RESPONSIBILITY FOR DETERMINING ITS MINIMUM NEEDS AND FOR DRAFTING REQUIREMENTS WHICH REFLECT THOSE NEEDS. ROMAR CONSULTANTS, INC., B-206489, OCTOBER 15, 1982, 82-2 CPD 339; DYNALECTRON CORPORATION, B-198679, AUGUST 11, 1981, 81-2 CPD 115. IT IS THE CONTRACTING AGENCY WHICH IS MOST FAMILIAR WITH THE CONDITIONS UNDER WHICH THE SUPPLIES OR SERVICES HAVE BEEN AND WILL BE USED, AND OUR STANDARD FOR REVIEWING PROTESTS CHALLENGING AGENCY REQUIREMENTS HAS BEEN FASHIONED TO TAKE THIS FACT INTO ACCOUNT. SPECIFICALLY, OUR OFFICE WILL NOT QUESTION AGENCIES' DECISIONS CONCERNING THE BEST METHODS OF ACCOMMODATING THEIR NEEDS ABSENT CLEAR EVIDENCE THAT THOSE DECISIONS ARE ARBITRARY OR OTHERWISE UNREASONABLE. FOUR-PHASE SYSTEMS, INC., B-201642, JULY 22, 1981, 81-2 CPD 56. FURTHERMORE, WHILE AGENCIES SHOULD FORMULATE THEIR NEEDS SO AS TO MAXIMIZE COMPETITION, BURDENSOME REQUIREMENTS WHICH MAY LIMIT COMPETITION ARE NOT UNREASONABLE, SO LONG AS THEY REFLECT THE GOVERNMENT'S LEGITIMATE MINIMUM NEEDS. EDUCATIONAL MEDIA DIVISION, INC., B-193501, MARCH 27, 1979, 79-1 CPD 204. FINALLY, IT IS ALSO IMPORTANT TO NOTE THAT A PROCURING AGENCY'S TECHNICAL CONCLUSIONS CONCERNING ITS ACTUAL NEEDS ARE ENTITLED TO GREAT WEIGHT AND WILL BE ACCEPTED UNLESS THERE IS A CLEAR SHOWING THAT THE CONCLUSIONS ARE ARBITRARY. INDUSTRIAL ACOUSTICS COMPANY, INC., ET AL., B-194517, FEBRUARY 19, 1980, 80-1 CPD 139.

WE FIND DUROYD'S EVIDENCE THAT 10 MONTHS FROM THE DATE OF AWARD ARE NEEDED IN ORDER TO DELIVER THE INITIAL QUALIFICATION RCMAT HARDWARE TO BE UNCONVINCING. PARAGRAPH H-1 OF THE RFP, AS AMENDED, PROVIDES THAT THE CONTRACTOR SHALL DELIVER THE QUALIFICATION HARDWARE WITHIN 90 CALENDAR DAYS FROM THE DATE OF CONTRACT TO REDSTONE ARSENAL FOR CONTRACTOR DEMONSTRATION AND GOVERNMENT APPROVAL TESTS. THE CONTRACTING OFFICER IS REQUIRED TO FURNISH WITHIN 60 DAYS FOLLOWING RECEIPT OF THE QUALIFICATION HARDWARE WRITTEN NOTICE OF APPROVAL, CONDITIONAL APPROVAL, OR DISAPPROVAL. IN THE EVENT DELIVERY ORDERS ARE ISSUED AFTER THE CONTRACTOR'S HARDWARE IS APPROVED, THE RFP REQUIRES DELIVERY AT A CERTAIN MAXIMUM RATE PER MONTH BEGINNING NOT LATER THAN 90 DAYS AFTER THE EFFECTIVE DATE OF AN ORDER.

THE VENDOR QUOTE WHICH DUROYD HAS GIVEN US TALKS ABOUT TOOLING, DIES AND MOLDS FOR "MASS PRODUCTION." IN OUR VIEW, THE ABOVE-DESCRIBED RFP DELIVERY SCHEDULE CONTEMPLATES THE DELIVERY OF AN INITIAL RCMAT FOR APPROVAL PRIOR TO CONTRACTOR DELIVERY OF MASS PRODUCED RCMAT'S. THUS, UNDER THE TERMS OF THE RFP, THE CONTRACTOR HAS APPROXIMATELY 240 DAYS FROM AWARD TO BEGIN MASS PRODUCTION.

FURTHERMORE, ANY PROSPECTIVE CONTRACTOR, IN OUR OPINION, WILL HAVE HAD MORE THAN THE 90 DAYS FOLLOWING AWARD BY THE TIME SUCH CONTRACTOR HAS DESIGNED, MANUFACTURED, TESTED, AND DEBUGGED THE QUALIFICATION RCMAT HARDWARE IT SUBMITS TO THE GOVERNMENT FOR APPROVAL. AS NOTED ABOVE, THE CLOSING DATE FOR RECEIPT OF INITIAL PROPOSALS UNDER THE RFP WAS SEPTEMBER 30, 1983, NEARLY 3 MONTHS FOLLOWING THE ISSUANCE OF THE RFP ON JULY 8, 1983. PARAGRAPH L-27 OF THE RFP SPECIFICALLY STATES THAT AN OFFEROR'S TECHNICAL PROPOSAL MUST REFLECT "COMPLETE UNDERSTANDING" OF THE RFP'S STATEMENT OF WORK AND TECHNICAL CAPABILITY TO PERFORM THE OVERALL EFFORT IN ORDER FOR THE OFFEROR'S PROPOSAL TO BE ACCEPTABLE. CONSEQUENTLY, WE FIND THAT WHILE AN OFFEROR WOULD NOT MANUFACTURE AND TEST ITS QUALIFICATION HARDWARE DURING THE TIME BEFORE SUBMISSION OF INITIAL PROPOSALS, AN OFFEROR WOULD, IN ORDER TO MEET THE RFP REQUIREMENTS, DEVELOP A THOROUGH DESIGN CONCEPT OF THE RCMAT AND DEVELOP SOURCES FOR THE MATERIALS IT NEEDS TO ULTIMATELY MANUFACTURE THE QUALIFICATION RCMAT. SEE EXIDE POWER SYSTEMS, DIVISION, ESB, INC., AUGUST 9, 1978, 78-2 CPD 106.

IN ADDITION, AS NOTED ABOVE, 13 PROPOSALS WERE RECEIVED AND ONLY DUROYD TOOK EXCEPTION TO THE 90-DAY REQUIREMENT AND, THEREFORE, WE CANNOT SAY COMPETITION WAS INHIBITED. SEE KLEIN-SEIB ADVERTISING AND PUBLIC RELATIONS, INC., B-200399, SEPTEMBER 28, 1981, 81-2 CPD 251.

AS TO THE GOVERNMENT'S GUARANTEEING A MINIMUM ORDER OF RCMAT'S, DUROYD ARGUES THAT THE GOVERNMENT ASSUMES NO RISK UNDER THE RFP AND THE CONTRACTOR HAS TO ASSUME A MAXIMUM AMOUNT OF RISK BY HAVING ITS FACILITY AND MANPOWER AVAILABLE AT THE "PLEASURE OF THE GOVERNMENT" SHOULD THE GOVERNMENT DECIDE TO PLACE AN ORDER. HOWEVER, WE HAVE HELD THAT IT IS WITHIN THE AMBIT OF ADMINISTRATIVE DISCRETION TO OFFER THE COMPETITION A PROPOSED CONTRACT IMPOSING MAXIMUM RISKS UPON THE CONTRACTOR AND MINIMUM ADMINISTRATIVE BURDENS ON THE AGENCY. MASSMAN CONSTRUCTION CO., B-204196, JUNE 25, 1982, 82-1 CPD 624. IN ANY EVENT, THE RFP PROVIDES, IN ACCORDANCE WITH DEFENSE ACQUISITION REGULATION SEC. 3-409.2(A) (1976 ED.), ESTIMATES OF THE GOVERNMENT'S NEEDS FOR EACH CONTRACT LINE ITEM. WE HAVE HELD THE INCLUSION OF REASONABLE ESTIMATED QUANTITIES IN REQUIREMENTS-TYPE SOLICITATIONS MAKES IT POSSIBLE FOR OFFERORS TO PREPARE THEIR PRICES PROPERLY AND PERMITS EVALUATION TO DETERMINE THE LOWEST COST OFFER. SEE JOHNSON & WALES COLLEGE, B-199293, APRIL 8, 1981, 81-1 CPD 266.

WE DENY DUROYD'S PROTEST.