B-167492, AUGUST 12, 1969, 49 COMP. GEN. 98

B-167492, AUGUST 12, 1969, 49 COMP. GEN. 98

CONTRACTS -- NEGOTIATION -- EVALUATION FACTORS -- COMPETITIVE ADVANTAGE PRECLUDED WHEN A SOLE-SOURCE PROCUREMENT SOLICITED UNDER 10 U.S.C. 2304(A) (13) TO ASSURE STANDARDIZATION AND INTERCHANGEABILITY OF EQUIPMENT PARTS IS BROADENED TO PERMIT THE SUBMISSION OF OTHER PROPOSALS, ADDING A $40,000 EVALUATION FACTOR TO PROPOSALS OTHER THAN THE PROPOSAL OF THE SOLE SOURCE OFFEROR TO COVER THE COSTS RESULTING FROM FURNISHING UNITS DIFFERENT THAN THE SOLE SOURCE DESIGN WITHOUT PROVIDING AN OPPORTUNITY TO DISCUSS THE EVALUATION FACTOR WOULD BE DISADVANTAGEOUS TO THE GOVERNMENT IN MAKING AN AWARD. THE PRESENCE OR ABSENCE OF AN EVALUATION FACTOR AND THE AMOUNT OF THE FACTOR CAN HAVE A PRICE IMPACT AND, THEREFORE A PROPONENT WHOSE OFFER WAS CONDITIONED UPON DISCUSSION OF THE EVALUATION FACTOR AND POSSIBLE PRICE REDUCTION SHOULD BE GIVEN AN OPPORTUNITY FOR DISCUSSION AND ANOTHER ROUND OF PRICE REVISIONS PERMITTED. CONTRACTS -- NEGOTIATION -- EVALUATION FACTORS -- ESTIMATED COST HIGHER THAN FACTOR USED THE USE OF A $40,000 EVALUATION FACTOR, WHEN THE FACTOR ESTIMATED BY THE CONTRACTING OFFICE AS $41,000 CAN BE SUPPORTED BY RELIABLE EXPERIENCED COST DATA WOULD BE INAPPROPRIATE. IN USING THE LESSER EVALUATION FACTOR, THE DIFFERENCE OF $1,000 IN A CLOSE PRICE COMPETITION COULD HAVE A MATERIAL BEARING IN DETERMINING THE LOW OFFER.

TO THE SECRETARY OF THE NAVY, AUGUST 12, 1969:

REFERENCE IS MADE TO LETTER 00J:RHM:JAW N00024-69-R-7493(S) SER 63 OF JULY 11, 1969, FROM THE DIRECTOR OF CONTRACTS, NAVAL SHIP SYSTEMS COMMAND, REQUESTING A DECISION WHETHER AN AWARD MAY BE MADE UNDER REQUEST FOR PROPOSALS N00024-69-R-7493(S) WITHOUT FURTHER DISCUSSION OR NEGOTIATION.

SINCE NO AWARD HAS BEEN MADE AND A NEGOTIATED PROCUREMENT IS INVOLVED, OUR OFFICE IS RESTRICTED IN ITS RECITATION OF THE FACTS. PARAGRAPH 3- 507.2 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

THE INITIAL REQUEST FOR PROPOSALS WAS RESTRICTED TO A SINGLE SOURCE UNDER A SECRETARIAL DETERMINATION AND FINDINGS MADE PURSUANT TO 10 U.S.C. 2304(A)(13), AUTHORIZING THE NEGOTIATION OF CONTRACTS WHEN IT IS NECESSARY TO ASSURE STANDARDIZATION AND INTERCHANGEABILITY. SUBSEQUENTLY, BECAUSE OF THE INTEREST EXPRESSED BY ANOTHER SOURCE, THE SECRETARIAL DETERMINATION AND FINDINGS WERE BROADENED TO PERMIT THE SUBMISSION OF A PROPOSAL BY OTHER THAN THE ORIGINAL SOLE SOURCE; HOWEVER, AN EVALUATION FACTOR WAS PROVIDED WITH RESPECT TO ANY PROPOSAL FROM THE NEW SOURCE TO COVER ADDITIONAL COSTS RESULTING FROM THE FURNISHING OF UNITS DIFFERENT THAN THE SOLE-SOURCE DESIGN. THEREAFTER, BY LETTERS OF MAY 27, 1969, THE INTERESTED CONCERNS WERE ADVISED OF SOME CHANGES IN THE SPECIFICATIONS AND THAT A $40,000 EVALUATION FACTOR WOULD BE ADDED TO ANY PROPOSAL OFFERING UNITS NOT IDENTICAL TO THOSE CURRENTLY BEING INSTALLED. THE MAY 27 LETTER FURTHER ADVISED:

IN VIEW OF THE FOREGOING CHANGES, YOU ARE INVITED TO SUBMIT A REVISED PRICE PROPOSAL OR TO ADVISE THAT YOUR PREVIOUS PROPOSAL REMAINS UNCHANGED. THE GOVERNMENT MAY AWARD A CONTRACT, BASED ON OFFERS RECEIVED, WITHOUT DISCUSSION OF SUCH OFFERS. ACCORDINGLY, EACH OFFER SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT. IT STATED ALSO THAT THE CLOSING TIME FOR THE RECEIPT OF THE PROPOSAL WAS 4:30 P.M., JUNE 5, 1969, AND THAT ANY OFFER RECEIVED AFTER THAT TIME WOULD BE TREATED AS A LATE PROPOSAL IN ACCORDANCE WITH PRESCRIBED PROCEDURES.

ON MAY 28, A SOURCE OTHER THAN THE SOLE SOURCE REQUESTED INFORMATION EXPLAINING HOW THE $40,000 FACTOR WAS COMPUTED. THIS NEW SOURCE WAS ADVISED BY THE NAVY THAT THE INFORMATION WOULD NOT BE FURNISHED AND THAT THE FACTOR WOULD NOT BE CHANGED.

BY LETTER OF JUNE 4, 1969, THE SAME SOURCE SUBMITTED A REVISED PRICE PROPOSAL IN WHICH IT EXPRESSED CONCERN OVER THE APPLICATION OF THE $40,000 EVALUATION FACTOR. THE LETTER RECOGNIZED THAT CERTAIN COSTS TO THE GOVERNMENT WOULD BE APPLICABLE, BUT EXPRESSED THE VIEW THAT THE FACTOR UTILIZED WAS GROSSLY OVERESTIMATED AND INDICATED A WILLINGNESS TO DISCUSS THE MATTER DURING NEGOTIATION WITH A POSSIBLE EQUITABLE ADJUSTMENT IN PRICE AT THAT TIME.

THE JULY 11 LETTER FROM THE DIRECTOR OF CONTRACTS HAS ADVISED THAT THE COSTS RESULTING FROM FURNISHING UNITS OTHER THAN THE SOLE-SOURCE DESIGN HAVE BEEN REVIEWED BY THE COMMAND WHICH IS SATISFIED THAT THEY REPRESENT A FAIR ESTIMATE SINCE THE COSTS HAVE ACTUALLY BEEN ESTIMATED TO BE $41,000 ROUNDED OUT TO $40,000. IT IS STATED THAT THE DETERMINATION OF THE FACTOR IS A MATTER WITHIN THE COMMAND'S AREA OF RESPONSIBILITY AND THAT IT IS NOT PROPER FOR NEGOTIATION. FURTHER, IT IS STATED THAT, WHILE THE MAY 27 LETTERS DID NOT STRICTLY COMPLY WITH THE REQUIREMENTS OF ASPR 3-805.1(B) WITH REGARD TO THE CLOSING OF NEGOTIATIONS, PARTICULARLY IN THAT OFFERORS WERE NOT NOTIFIED THAT, EXCEPT FOR NOTICE OF UNACCEPTABILITY OF PROPOSALS, NO INFORMATION WOULD BE FURNISHED ANY OFFEROR AFTER THE DATE SPECIFIED UNTIL AWARD WAS MADE, AND THAT NEGOTIATIONS WERE, THEREFORE, NEVER FORMALLY CLOSED, THE NEGOTIATIONS WERE INFORMALLY CLOSED ON JUNE 5, CITING B-165837, MARCH 28, 1969. THE COMMAND STATES THAT FURTHER NEGOTIATION WOULD APPROACH THE USE OF AUCTION TECHNIQUES AND IT THEREFORE DOES NOT PROPOSE TO AFFORD OFFERORS A FURTHER OPPORTUNITY TO SUBMIT REVISED OFFERS.

WE AGREE THAT THE DETERMINATION OF THE EVALUATION FACTOR IS A MATTER WITHIN THE COMMAND'S AREA OF RESPONSIBILITY. HOWEVER, IN OUR OPINION, THE PRESENCE OR ABSENCE OF AN EVALUATION FACTOR AND THE AMOUNT THEREOF CAN HAVE AN IMPACT UPON THE PRICES OFFERED AND IN THAT SENSE CAN AFFECT ONE OF THE ESSENTIAL TERMS (PRICE) OF THE CONTRACT. WE BELIEVE THAT ANY PROSPECTIVE OFFEROR OR BIDDER WHO REQUESTS AN OPPORTUNITY TO DISCUSS THE BASIS FOR A PARTICULAR EVALUATION FACTOR ORDINARILY SHOULD BE ACCORDED SUCH AN OPPORTUNITY. THEREFORE, WE CONCLUDE THAT THE NEW SOURCE WHO REQUESTED AN OPPORTUNITY TO DISCUSS THE $40,000 EVALUATION FACTOR BEFORE SUBMITTING ITS REVISED PROPOSAL SHOULD HAVE BEEN GRANTED THAT OPPORTUNITY AT THAT TIME. WE RECOGNIZE THAT OPPORTUNITY FOR SUCH DISCUSSION MIGHT NOT HAVE RESULTED IN ANY CHANGE IN THE AMOUNT OF THE EVALUATION FACTOR, BUT THE OFFEROR, AT LEAST, MIGHT HAVE SATISFIED ITSELF, BEFORE SUBMITTING A REVISED OFFER, OF THE CORRECTNESS OF THE ADMINISTRATIVE POSITION OR, IN THE ABSENCE THEREOF, WOULD HAVE HAD AN OPPORTUNITY TO SHOW THE PROCUREMENT ACTIVITY WHEREIN IT MAY HAVE ERRED. MOREOVER, IT IS ENTIRELY CONCEIVABLE THAT CHANGES BENEFITING THE GOVERNMENT COULD RESULT FROM SUCH DISCUSSIONS. IN THIS REGARD, ASPR 3-507.2(B) PROVIDES FOR DISCUSSION OF TECHNICAL AND OTHER INFORMATION WITH PROSPECTIVE CONTRACTORS AND CONTEMPLATES THE ISSUANCE OF AMENDMENTS TO REQUEST FOR PROPOSALS WHICH REFLECT THE RESULTS OF SUCH DISCUSSIONS. THUS, THE ASPR SEEMS TO CONTEMPLATE THAT OFFERORS WILL HAVE AN OPPORTUNITY TO DISCUSS THOSE ASPECTS OF REQUESTS FOR PROPOSALS WHICH ARE PERTINENT TO THE PREPARATION OF RESPONSES THERETO. SINCE THE OBJECTIVE OF THE PROCUREMENT STATUTE AND IMPLEMENTING REGULATIONS IS TO ASSURE THAT THE AWARD OF A NEGOTIATED CONTRACT WILL BE MADE TO THAT RESPONSIBLE OFFEROR WHOSE OFFER IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED, WE DO NOT BELIEVE THAT AN OTHERWISE ELIGIBLE OFFEROR SHOULD BE DENIED THE OPPORTUNITY TO DISCUSS THE ELEMENTS OF AN EVALUATION FACTOR WHICH IS DIRECTLY PREJUDICIAL TO ITS COMPETITIVE POSITION.

ACCORDINGLY, SINCE THE NEW SOURCE WAS DEPRIVED OF AN OPPORTUNITY TO DISCUSS TIMELY THE EVALUATION FACTOR AND IT CONDITIONED ITS OFFER UPON SUCH A DISCUSSION AND EXPLANATION AND POSSIBLE PRICE REDUCTION, WE BELIEVE IT WOULD BE APPROPRIATE AT THIS TIME TO ENTER INTO DISCUSSIONS WITH THAT SOURCE, AND ANY OTHER RESPONDING SOURCE, CONCERNING THE EVALUATION FACTOR AND TO PERMIT ANOTHER ROUND OF PRICE REVISIONS. WE FEEL THAT THIS IS ESPECIALLY REQUIRED SINCE NEGOTIATIONS HAVE NOT BEEN FORMALLY CLOSED (CF. B-165837, SUPRA). WHETHER SUCH PROCEDURE APPROACHES AN AUCTION TECHNIQUE IS NOT MATERIAL, SINCE ADDITIONAL PRICING INFORMATION IS NECESSARY TO CORRECT WHAT WE BELIEVE HAS BEEN AN OMISSION IN THE PROCUREMENT PROCESS. IN THIS REGARD, IT IS SIGNIFICANT THAT THE STANDING AND PRICES OF THE OFFERORS HAVE NOT BEEN REVEALED. FURTHER, IN 48 COMP. GEN. 536, FEBRUARY 13, 1969, IT WAS STATED:

*** IN A SENSE, THE VERY CONDUCT OF NEGOTIATIONS AFTER RECEIPT OF INITIAL PROPOSALS MAY BE ARGUED TO RESEMBLE AN AUCTION TECHNIQUE, BUT THIS IS WHAT THE LAW CALLS FOR. THERE IS NOTHING INHERENTLY ILLEGAL FROM A PROCUREMENT STANDPOINT IN AN AUCTION *** .

IN ADDITION, WE QUESTION THE AMOUNT OF THE $40,000 EVALUATION FACTOR WHEN A $41,000 FACTOR WAS ESTIMATED BY THE NAVY SHIPYARD AT PHILADELPHIA. THE ESTIMATE WAS REASONABLY ACCURATE, AS THE REPORT SEEMS TO CONTEND, IT WAS INAPPROPRIATE TO USE A LESSER FIGURE. WE ARE UNINFORMED AS TO THE BASIC DETAILS OF THE $41,000 ESTIMATE; HOWEVER, IF IT IS SUPPORTABLE BY RELIABLE EXPERIENCED COST DATA, THE $41,000 AMOUNT SHOULD HAVE BEEN UTILIZED. IN CLOSE PRICE COMPETITION, A DIFFERENCE OF $1,000 MAY HAVE A MATERIAL BEARING IN DETERMINING THE LOW OFFER.