Skip to main content

B-171663, APR 19, 1971, 50 COMP GEN 739

B-171663 Apr 19, 1971
Jump To:
Skip to Highlights

Highlights

ALTHOUGH THE SELECTED OFFEROR WAS NOT THE "SUCCESSFUL OFFEROR" CONTEMPLATED BY PARAGRAPH 3-506(B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). WITHOUT GIVING ALL OFFERORS WITHIN A COMPETITIVE RANGE AN OPPORTUNITY TO COMPETE ON THE BASIS OF ITS PREFERANCE WAS INCONSISTENT WITH THE CONCEPT OF COMPETITIVE NEGOTIATION. AS THE TIME FOR NEGOTIATING PRICE AND TECHNICAL ASPECTS IS DURING THE SOURCE SELECTION COMPETITIVE PHASE OF THE NEGOTIATING PROCESS AND. SINCE THE PROPOSED AWARDEE AND CONTENDING OFFERORS ARE AWARE OF EACH OTHER'S IDENTITY AND OF CERTAIN GENERAL TECHNICAL ASPECTS OF THE PROCUREMENT. THE REQUEST FOR QUOTATIONS WAS ISSUED PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304(A)(11).

View Decision

B-171663, APR 19, 1971, 50 COMP GEN 739

CONTRACTS - NEGOTIATION - COMPETITION - CHANGES SUBSEQUENT TO NEGOTIATION - "SOURCE SELECTION" CONCEPT IN THE NEGOTIATION UNDER 10 U.S.C. 2304(A)(11) OF A COST-PLUS INCENTIVE- FEE RESEARCH AND DEVELOPMENT CONTRACT FOR RADAR SETS WHERE THE CONTRACTING AGENCY LEFT THE CHOICE OF ONE OF THREE POWER TUBES TO BE USED TO THE OFFERORS, THE SELECTION OF OTHER THAN THE LOW OFFEROR ON THE BASIS OF A CHANGE IN THE TUBE PREFERRED AND THE ACCEPTANCE OF A PRICE REDUCTION, ALTHOUGH THE SELECTED OFFEROR WAS NOT THE "SUCCESSFUL OFFEROR" CONTEMPLATED BY PARAGRAPH 3-506(B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), AND THE BUSINESS CLEARANCE REQUIRED BY ASPR 1-403 HAD NOT BEEN SATISFIED, WITHOUT GIVING ALL OFFERORS WITHIN A COMPETITIVE RANGE AN OPPORTUNITY TO COMPETE ON THE BASIS OF ITS PREFERANCE WAS INCONSISTENT WITH THE CONCEPT OF COMPETITIVE NEGOTIATION, AS THE TIME FOR NEGOTIATING PRICE AND TECHNICAL ASPECTS IS DURING THE SOURCE SELECTION COMPETITIVE PHASE OF THE NEGOTIATING PROCESS AND, THEREFORE, NEGOTIATIONS SHOULD BE REOPENED TO AFFORD ALL OFFERORS AN OPPORTUNITY TO REVISE THEIR TECHNICAL AND PRICE PROPOSALS.

TO THE SECRETARY OF THE NAVY, APRIL 19, 1971:

WE REFER TO LETTERS, WITH ENCLOSURES, DATED FEBRUARY 5, 26 AND MARCH 19 AND 30, 1971, FROM COUNSEL, NAVAL AIR SYSTEMS COMMAND (HAVAIR), FURNISHING OUR OFFICE WITH REPORTS ON THE PROTESTS OF SYLVANIA ELECTRONICS PRODUCTS, INC., AND GENERAL DYNAMICS AGAINST THE PROPOSED AWARD OF A CONTRACT UNDER NAVAIR'S REQUEST FOR QUOTATIONS (RFQ) N00019 70-Q-0195.

SINCE THE PROPOSED AWARDEE AND CONTENDING OFFERORS ARE AWARE OF EACH OTHER'S IDENTITY AND OF CERTAIN GENERAL TECHNICAL ASPECTS OF THE PROCUREMENT, OUR RECITATION OF THE PERTINENT FACTS REFLECTS THIS KNOWLEDGE.

THE REQUEST FOR QUOTATIONS WAS ISSUED PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304(A)(11), AS IMPLEMENTED BY PARAGRAPH 4-101(A)(6) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), TO NEGOTIATE CONTRACTS CONTEMPLATING EXPERIMENTAL, DEVELOPMENTAL OR RESEARCH WORK. TECHNICAL PROPOSALS WERE REQUESTED FOR THE DEVELOPMENT, FABRICATION AND INSTALLATION OF TWO UHF COHERENT RADAR SYSTEMS (CRS); PRICE PROPOSALS WERE REQUIRED TO BE ON A COST-PLUS-INCENTIVE-FEE (CPIF) BASIS.

UNDER THE EVALUATION PROCEDURES UTILIZED, TECHNICAL PROPOSALS WERE REFERRED TO A SOURCE SELECTION EVALUATION BOARD (SSEB); COST PROPOSALS WERE FORWARDED TO A CONTRACT NEGOTIATOR FOR ANALYSIS. SSEB WAS CHARGED WITH THE RESPONSIBILITY OF RATING THE PROPOSALS AND REPORTING ITS FINDINGS TO THE SOURCE SELECTION ADVISORY COUNCIL (SSAC). RESULTS OF THE COST ANALYSIS ALSO WERE TO BE SUPPLIED TO THE SSAC. SSAC WAS TO REPORT ITS RECOMMENDATION TO THE SOURCE SELECTION AUTHORITY (SSA). SINCE THE ASSISTANT COMMANDER FOR CONTRACTS WAS RESPONSIBLE FOR REVIEWING THE SELECTION PROCEDURE AND MAKING THE FINAL DETERMINATION, THE SSA WAS TO PRESENT FINDINGS TO HIM IN THE FORM OF A RECOMMENDATION.

FOUR PROPOSALS WERE RECEIVED BY JULY 7, 1970, ONE OF WHICH WAS SUBSEQUENTLY DETERMINED TO BE TECHNICALLY UNACCEPTABLE AND WAS NOT FURTHER CONSIDERED. THEREAFTER, DISCUSSIONS WERE HELD WITH SYLVANIA, RAYTHEON COMPANY AND GENERAL DYNAMICS. THESE DISCUSSIONS CULMINATED IN LETTERS DATED AUGUST 20, 1970, TO EACH OFFEROR, WHICH IDENTIFIED AND REQUESTED CLARIFICATION OF SPECIFIC DEFICIENCIES IN EACH PROPOSAL. IN ADDITION, EACH LETTER PROVIDED, IN PART, AS FOLLOWS:

TO CONCLUDE THE COMPETITION WITH SEVERAL SOURCES WITH RESPECT TO THE PROCUREMENT COVERED BY RFQ NO. N00019-70-Q-0195 IT IS REQUESTED THAT YOU CLARIFY, SUPPORT, CORRECT, IMPROVE OR REVISE YOUR TECHNICAL, MANAGEMENT AND COST PROPOSALS AS NECESSARY TO PROVIDE YOUR BEST AND FINAL OFFER *** .

*** ANY REPLY RECEIVED AFTER *** (CLOSE OF BUSINESS ON SEPTEMBER 21, 1970) WILL BE TREATED AS A LATE QUOTATION IN ACCORDANCE WITH THE "LATE QUOTATION" PROVISIONS OF THE RFQ.

FAILURE TO RESPOND TO THIS LETTER WILL BE CONSIDERED TO MEAN THAT YOU DO NOT WISH TO BE FURTHER CONSIDERED FOR AWARD OF A CONTRACT UNDER THE RFQ AND MAY BE GROUNDS FOR DISQUALIFICATION. UNLESS THIS COMMAND FINDS IT NECESSARY OR DESIRABLE TO CONTACT YOU FURTHER, NO ADDITIONAL INFORMATION WILL BE FURNISHED UNTIL AN AWARD IS MADE. ***

THE AUGUST 20 LETTERS ADEQUATELY ADVISED OFFERORS OF THE CLOSING OF NEGOTIATIONS. 48 COMP. GEN. 536 (1969); ID. 381 (1968). TIMELY REPLIES WERE THEREAFTER RECEIVED FROM ALL THREE FIRMS.

ON OCTOBER 1, 1970, THE SSEB FORMALLY REPORTED THE RESULTS OF ITS TECHNICAL EVALUATION TO THE SSAC. THEREAFTER, THE SSAC RECEIVED AN ORAL BRIEFING FROM A CONTRACT NEGOTIATOR ON THE RESULTS OF THE COST ANALYSIS. ON OCTOBER 22, 1970, SSAC REPORTED THE RESULTS OF ITS DELIBERATIONS TO THE SSA. BY MEMORANDUM DATED OCTOBER 29, 1970, TO THE ASSISTANT COMMANDER FOR CONTRACTS, NAVAIR, SSA RECOMMENDED THAT AWARD BE MADE TO RAYTHEON. WITH RESPECT TO THE ASSISTANT COMMANDER'S DECISION, THE RECORD CONTAINS THE FOLLOWING MEMORANDUM DATED FEBRUARY 25, 1971:

1. SOME FEW DAYS BEFORE *** (SSA) SENT ME THE MEMORANDUM REFERRED TO ABOVE, HE MET WITH ME AND I REVIEWED WITH HIM THE RECOMMENDATION HE WAS MAKING AT THAT TIME TO SELECT THE RAYTHEON COMPANY AS CONTRACTOR *** .

2. AT THAT TIME, HAVING REVIEWED THE FACTORS WHICH LED TO HIS RECOMMENDATION AND HAVING DISCUSSED THOSE FACTORS WITH HIM, I APPROVED, UPON THE ADVICE OF MY STAFF, AND IN MY CAPACITY AS A CONTRACTING OFFICER, THAT RECOMMENDATION.

3. THEREFORE, UPON RECEIPT OF *** (THE MEMORANDUM), HAVING PREVIOUSLY APPROVED *** (SSA'S) RECOMMENDATION, I DIRECTED MY STAFF TO TAKE THE NECESSARY ACTION TO ENTER INTO A CONTRACT WITH THE RAYTHEON COMPANY.

ON NOVEMBER 13, 1970, AT A MEETING OF THE SSAC, THE SSA ANNOUNCED THE ASSISTANT COMMANDER'S DECISION. PRESENT AT THE MEETING WAS A PROJECT MANAGER, INSTRUMENTATION SHIPS PROJECT, NAVAL SHIP SYSTEMS COMMAND (NAVSHIPS), WHOSE ROLE IS EXPLAINED IN THE NAVAIR'S COUNSEL'S LETTER OF FEBRUARY 26, 1971. IT APPEARS THEREFROM THAT NAVAIR WAS REQUESTED BY THE PROJECT MANAGER TO PREPARE THE PROCUREMENT PACKAGE, OBTAIN PROPOSALS, SELECT THE BEST OFFER AND AWARD THE CONTRACT. AN EXAMINATION OF THE SHIP PROJECT DIRECTIVE DATED OCTOBER 14, 1969, ALSO INDICATES THAT ANY CHANGES IN THE SCOPE OF WORK, SCHEDULES, OR FUNDING WOULD REQUIRE THE APPROVAL OF THE PROJECT MANAGER. A MEMORANDUM DATED NOVEMBER 23, 1970, FROM THE COMMANDER, NAVAIR, TO THE COMMANDER, NAVSHIPS, STATES THAT AT THE CONCLUSION OF THE NOVEMBER 13 MEETING THE PROJECT MANAGER REQUESTED THAT NEGOTIATIONS LEADING TO CONTRACT AWARD BE HELD UP PENDING REVIEW OF THE ENTIRE PROGRAM, OF WHICH THIS SYSTEM IS A PART. THIS REVIEW, WE UNDERSTAND, INVOLVED A CONSIDERATION OF WHETHER TO ELIMINATE OR CUT BACK THE ENTIRE PROGRAM.

BY LETTER OF NOVEMBER 17, 1970, RAYTHEON SUBMITTED A MODIFICATION REDUCING ITS COST PROPOSAL. NAVAIR ACCEPTED THIS MODIFICATION IN ACCORDANCE WITH THE "LATE PROPOSALS" PROVISION OF ASPR 3-506(B), CONTAINED IN THE RFQ, WHICH PROVIDES THAT:

*** A MODIFICATION OF AN OFFER WHICH MAKES THE TERMS OF THE OTHERWISE SUCCESSFUL OFFER MORE FAVORABLE TO THE GOVERNMENT WILL BE CONSIDERED AT ANY TIME IT IS RECEIVED AND MAY THEREAFTER BE ACCEPTED.

ON JANUARY 7, 1971, NAVAIR SENT A BUSINESS CLEARANCE TO THE NAVAL MATERIAL COMMAND FOR APPROVAL. NAVY PROCUREMENT DIRECTIVES 1-403.50 DEFINES A "BUSINESS CLEARANCE" AS THE REQUIRED APPROVAL BY THE CHIEF OF NAVAL MATERIAL OF THE BUSINESS ASPECTS OF PROPOSED CONTRACTUAL ACTIONS PURSUANT TO 10 U.S.C. 5082.

BY TELEGRAM DATED JANUARY 11, 1971, AND SUBSEQUENT CORRESPONDENCE, SYLVANIA, BY ITS COUNSEL, SELLERS, CONNER & CUNEO, PROTESTED THE PROPOSED AWARD TO OUR OFFICE. BY LETTERS DATED FEBRUARY 23 AND MARCH 11, 1971, GENERAL DYNAMICS JOINED IN SYLVANIA'S PROTEST. IN ACCORDANCE WITH OUR PROTEST PROCEDURES RAYTHEON WAS AFFORDED AN OPPORTUNITY TO COMMENT ON THE ALLEGATIONS RAISED AND IT RESPONDED THROUGH ITS COUNSEL, MATZKIN & DAY, BY LETTER DATED MARCH 15, 1971.

ON JANUARY 22, 1971, THE NAVAL MATERIAL COMMAND APPROVED THE BUSINESS CLEARANCE. AWARD IS NOW BEING WITHHELD PENDING OUR DECISION ON THE MERITS OF THE PROTESTS.

THREE BASIC CONTENTIONS ARE RAISED AND ARE CONSIDERED BELOW UNDER THEIR RESPECTIVE CAPTIONS.

TECHNICAL EVALUATION OF PROPOSALS

OFFERORS WERE ADVISED IN PARAGRAPH (9) OF THE RFQ'S INSTRUCTIONS AND CONDITIONS THAT THE FOLLOWING CRITERIA WOULD BE USED IN TECHNICAL EVALUATION AND SOURCE SELECTION:

A. THE FOLLOWING EVALUATION CRITERIA, RANKED IN ORDER TO RELATIVE IMPORTANCE, WILL BE USED IN EVALUATING EACH OFFEROR'S PROPOSAL SUBMITTED IN RESPONSE TO THIS PROCUREMENT:

(1) THE CONTRACTOR'S UNDERSTANDING OF THE SCOPE OF THE WORK AS SHOWN BY THE SCIENTIFIC OR TECHNICAL APPROACH PROPOSED, WITH PARTICULAR EMPHASIS ON THE TRANSMITTER, RECEIVER AND DATA DIGITIZING SUB-SYSTEMS IN THAT ORDER.

(2) THE EXTENT TO WHICH THE DESIGN DETAILS, PERFORMANCE REQUIREMENTS, TEST PROCEDURES, ETC., OUTLINED IN THE OFFEROR'S SPECIFICATION MEET THE REQUIREMENTS OF SPECIFICATION CRS-70.

(3) THE SOUNDNESS OF THE APPROACH TO THIS PROJECT AND TO THE SOLUTION OF SUCH PROBLEM (S) AS MAY BE INVOLVED IN SATISFACTORY PERFORMANCE THEREOF.

(4) THE FUNCTIONAL AND OPERATIONAL SUITABILITY OF EQUIPMENT WHICH WILL MEET SPECIFICATIONS AND PROVIDE FLEXIBILITY FOR FUTURE MODIFICATION.

(5) THE RELIABILITY OF THE PROPOSED DESIGN.

(6) THE SIMPLICITY OF THE PROPOSED DESIGN WITH DUE CONSIDERATION TO STANDARDIZATION AND MINIMUM OPERATIONAL COSTS.

(7) THE EASE OF MAINTENANCE OF THE PROPOSED DESIGN.

(8) QUALITY COMMENSURATE WITH THE MISSION OF THE EQUIPMENT.

(9) THE USE OF MATERIALS WHICH WILL RESULT IN BEST EASE OF OPERATION AND MAINTENANCE IN ALL TYPES OF CONDITIONS.

(10) THE AVAILABILITY AND COMPETENCE OF EXPERIENCED ENGINEERING, MANAGEMENT, SCIENTIFIC OR OTHER TECHNICAL PERSONNEL.

(11) THE CONTRACTOR'S EXPERIENCE OR PERTINENT NOVEL IDEAS IN THE SPECIFIC BRANCH OF SCIENCE OR TECHNOLOGY INVOLVED.

(12) THE AVAILABILITY, FROM ANY SOURCE, OF NECESSARY RESEARCH, TEST AND PRODUCTION FACILITIES.

(13) THE CONTRACTOR'S WILLINGNESS TO DEVOTE HIS RESOURCES TO THE PROPOSED WORK WITH APPROPRIATE DILIGENCE.

(14) THE PROPOSED ASSIGNMENT OF PERSONNEL.

(15) THE OVER-ALL MANAGEMENT OF THE PROPOSED PROGRAM.

B. IN ADDITION TO THE PRECEDING EVALUATION CRITERIA, A CONFIDENCE FACTOR AS INDICATED BY PAST PERFORMANCE IN MEETING CONTRACTUAL OBLIGATIONS AND CREDIBILITY OF THE STATEMENTS MADE IN THE OFFEROR'S PROPOSAL WILL BE APPLIED IN THE EVALUATION OF PROPOSALS SUBMITTED HEREUNDER.

THE FOREGOING CRITERIA ENCOMPASS BOTH TECHNICAL AND MANAGEMENT ASPECTS OF THE PROPOSALS AND WERE ASSIGNED A TOTAL WEIGHT OF 75 PERCENT (50 PERCENT TECHNICAL; 25 PERCENT MANAGEMENT). INSOFAR AS TECHNICAL EVALUATION IS CONCERNED, WE ARE DEALING ESSENTIALLY WITH THE FIRST SIX FACTORS, WHICH, AMONG OTHERS, RELATE TO THE POWER SYSTEM OF THE TRANSMITTER.

WE UNDERSTAND THAT THREE TYPES OF POWER TUBES ARE AVAILABLE FOR USE IN TRANSMITTER DESIGN: THE KLYSTRON; THE COAXITRON; THE TRAVELING WAVE TUBE (TWT). THE IMPORTANCE OF TUBE SELECTION IN TRANSMITTER DESIGN IS INDICATED IN NAVAIR'S COUNSEL'S LETTER OF FEBRUARY 5, 1971:

*** THE HIGH RISK AREA IN THIS PROCUREMENT HAS ALWAYS BEEN RECOGNIZED TO BE THE ACHIEVEMENT OF THE RATHER HIGH TRANSMITTER SUSTAINED AVERAGE POWER OUTPUT REQUIREMENTS. SINCE THE TRANSMITTER TUBE SELECTED GOVERNS TRANSMITTER POWER CAPABILITIES, THE TUBE'S CHARACTERISTICS ARE OF OBVIOUS CONCERN. ***

NO LIMITATION WAS PLACED ON THE USE OF ANY TUBE TYPE IN TRANSMITTER DESIGN BY THE RFQ. COUNSEL'S LETTER OF FEBRUARY 5 ADVISES THAT WHEN THE RFQ WAS ISSUED ONLY THE KLYSTRON AND COAXITRON WERE KNOWN TO BE SUITABLE POWER SOURCES AND, OF THE TWO, THE COAXITRON WAS PREFERRED. SYLVANIA ELECTED TO OFFER A COAXITRON-BASED DESIGN, WHILE SPECIFICALLY REJECTING THE TWT AS A SUITABLE POWER SOURCE FOR CRS. GENERAL DYNAMICS BASED ITS DESIGN ON A KLYSTRON BUT ALSO SUBMITTED AN ALTERNATE PROPOSAL (AS IT WAS PERMITTED TO DO BY THE RFQ) BASED ON THE USE OF A COAXITRON. RAYTHEON BASED ITS PROPOSAL ON A TWT APPROACH. COUNSEL'S LETTER TERMS RAYTHEON'S OFFER AS "UNEXPECTED" AND STATES THAT NAVAIR WAS NOT AWARE OF A SUITABLE APPROACH TO TRANSMITTER DESIGN BASED ON A TWT UNTIL PROPOSED BY RAYTHEON.

AGAINST THIS BACKGROUND BOTH SYLVANIA AND GENERAL DYNAMICS ASSERT THAT NAVAIR WAS "PREDISPOSED" TO THE USE OF A TWT POWER TUBE IN TRANSMITTER DESIGN, WHICH WAS ULTIMATELY THE BASIS FOR THE SELECTION OF RAYTHEON, AND THAT NAVAIR IMPROPERLY FAILED TO DISCLOSE THIS PREDISPOSITION TO ALL OFFERORS. IN SYLVANIA'S SUBMISSION OF MARCH 3, 1971, IT IS ASSERTED THAT THE ADVANTAGES OF USING A TWT POWER SOURCE REVEAL CORRESPONDING DISADVANTAGES IN THE USE OF A COAXITRON, WHICH, IN EFFECT, WERE DEFICIENCIES IN SYLVANIA'S PROPOSAL THAT NAVAIR SHOULD HAVE DRAWN TO ITS ATTENTION DURING THE COURSE OF NEGOTIATION.

THE RFQ IS SILENT AS TO THE PARTICULAR TYPE OF POWER SOURCE TO BE USED. TO US, THE LATITUDE AFFORDED BY THE RFQ UNDERSCORES THE FACT THAT TUBE SELECTION WAS LEFT TO THE TECHNICAL JUDGMENT OF EACH OFFEROR. GIVEN THE DEVELOPMENTAL NATURE OF THE PROCUREMENT, SYLVANIA'S AND GENERAL DYNAMICS' COMPLAINT IS, IN OUR VIEW, BASICALLY THAT AFTER INITIAL EVALUATION OF TECHNICAL PROPOSALS, NAVAIR HAD ESTABLISHED A JUDGMENTAL HIERARCHY WITH THE TWT RATED FIRST, AND THAT NAVAIR WAS REQUIRED TO MAKE THIS PREFERENCE KNOWN. RAYTHEON, IN RESPONSE, MAINTAINS IN ITS LETTER OF MARCH 15 THAT "TO NOW ALLOW ANY OF THE OTHER OFFERORS TO NEGOTIATE ON THE BASIS OF RAYTHEON'S COMPETITIVE TECHNICAL APPROACH CREATES THE FORBIDDEN AUCTION TECHNIQUE IN A TECHNICAL SENSE RATHER THAN THE OFTENTIMES QUOTED SENSE OF PRICE."

IN OUR VIEW, THE PROPRIETY OF DISCLOSING RAYTHEON'S TECHNICAL APPROACH TO THE USE OF THE TWT IS NOT AN ISSUE HERE, FOR THE ARGUMENT IS NOT THAT RAYTHEON'S TECHNICAL APPROACH SHOULD HAVE BEEN DISCUSSED, BUT RATHER THAT NAVAIR SHOULD HAVE REVEALED ITS PREFERENCES RELATIVE TO THE THREE KNOWN POWER SOURCES.

FROM OUR REVIEW OF THE TECHNICAL EVALUATION MEMORANDA MADE AVAILABLE TO US, IT APPEARS THAT THE TUBE SELECTED MADE A SIGNIFICANT EVALUATIVE DIFFERENCE BETWEEN THE PROPOSALS. THE PREDOMINANCE OF THE TUBE OFFERED IN THE EVALUATION OF TECHNICAL PROPOSALS IS EXPRESSED IN TERMS OF THE TECHNICAL RISKS INVOLVED IN CONCURRENT TUBE AND SYSTEM DEVELOPMENT. ASSESSMENT OF THE TECHNICAL RISKS INVOLVED OBVIOUSLY REQUIRES A BALANCING OF THE ADVANTAGES AND DISADVANTAGES OF THE POWER SOURCE SELECTED. BELIEVE THAT BOTH SYLVANIA AND GENERAL DYNAMICS SHOULD HAVE BEEN GIVEN AN OPPORTUNITY DURING THE COURSE OF NEGOTIATIONS TO ADDRESS THE QUESTION OF THE RISKS ASSOCIATED WITH THE USE OF A COAXITRON. IN THIS REGARD, SYLVANIA'S SUBMISSIONS HAVE RAISED A NUMBER OF TECHNICAL FACTUAL DISPUTES RELATIVE TO THE MERITS OF THE COAXITRON VIS-A-VIS THE TWT, AND WHILE WE ARE NOT PREPARED TO RESOLVE THESE MATTERS, NAVAIR'S RESPONSES INDICATE THAT COMPLETELY ACCURATE INFORMATION WAS NOT IN NAVAIR'S POSSESSION AT THE TIME OF EVALUATION. MOREOVER, SINCE THE THREE POWER SOURCES WERE KNOWN TO THE OFFERORS, DISCUSSION OF THEIR RELATIVE MERITS WOULD HAVE BEEN APPROPRIATE.

FAILURE TO GIVE COST PROPER CONSIDERATION

SYLVANIA ALLEGES THAT ITS FINAL COST PROPOSAL WAS THE LOWEST RECEIVED AND THAT RAYTHEON'S COST PROPOSAL WAS SUBSTANTIALLY HIGHER. SYLVANIA MAINTAINS THAT ONCE A DETERMINATION IS MADE THAT TWO OR MORE OFFERORS ARE TECHNICALLY ACCEPTABLE, THE CONSIDERATION OF TECHNICAL MERIT SHOULD CEASE, AND THE GOVERNING CRITERION SHOULD BE COST.

ASSUMING THE ACCURACY OF SYLVANIA'S ALLEGATION, THE APPLICATION OF THE COST FACTOR WAS NOT CONTROLLING, SINCE COST WAS ASSIGNED A WEIGHT OF ONLY 25 PERCENT. WE HAVE RECOGNIZED THAT IN THE CONTEXT OF NEGOTIATED COST- REIMBURSEMENT-TYPE RESEARCH AND DEVELOPMENT CONTRACTS, PROPOSED COST OR PRICE IS NOT NECESSARILY CONTROLLING IN DETERMINING WHICH PROPOSAL IS MOST ADVANTAGEOUS TO THE GOVERNMENT. B-170374, MARCH 2, 1971; B-165471, JANUARY 24, 1969. THERE IS, HOWEVER, MERIT IN SYLVANIA'S POSITION FOR, AS WE STATED IN 50 COMP. GEN. 246, OCTOBER 6, 1970:

WHERE *** TWO OFFERORS ARE ESSENTIALLY EQUAL AS TO TECHNICAL ABILITY AND RESOURCES TO SUCCESSFULLY PERFORM A RESEARCH AND DEVELOPMENT EFFORT, THE ONLY CONSIDERATION REMAINING FOR EVALUATION IS PRICE. IN SUCH A SITUATION, WE BELIEVE THAT THE LOWER PRICED OFFER REPRESENTS AN ADVANTAGE TO THE GOVERNMENT WHICH SHOULD NOT BE IGNORED. INDEED, ASPR 4-106.4 MAKES IT CLEAR THAT AWARDS SHOULD NOT BE FOR CAPABILITIES THAT EXCEED THOSE DETERMINED TO BE NECESSARY FOR SUCCESSFUL PERFORMANCE OF THE WORK. VIEW THE AWARD TO TI AS EVIDENCING A DETERMINATION THAT THE COST PREMIUM INVOLVED IN MAKING AN AWARD TO SRL, BASED ON ITS SLIGHT TECHNICAL SUPERIORITY OVER TI, WOULD NOT BE JUSTIFIED IN LIGHT OF THE ACCEPTABLE LEVEL OF EFFORT AND ACCOMPLISHMENT EXPECTED OF TI AT A LOWER COST. THE CONCEPTS EXPRESSED IN ASPR 3-805.2 AND 4-106.5(A) THAT PRICE IS NOT THE CONTROLLING FACTOR IN THE AWARD OF COST-REIMBURSEMENT AND RESEARCH AND DEVELOPMENT CONTRACTS RELATE, IN OUR VIEW, TO SITUATIONS WHEREIN THE FAVORED OFFEROR IS SIGNIFICANTLY SUPERIOR IN TECHNICAL ABILITY AND RESOURCES OVER LOWER PRICED, LESS QUALIFIED OFFERORS. ***

NAVAIR'S COUNSEL'S LETTER OF FEBRUARY 5, 1971, STATED THAT COST WAS NOT IGNORED AND SUGGESTED THAT, IN RETROSPECT, IT MAY HAVE BEEN TOO HEAVILY WEIGHTED. FROM OUR REVIEW OF THE RECORD INITIALLY SUBMITTED WITH COUNSEL'S LETTER, IT APPEARED TO US THAT THE CONSIDERATION GIVEN TO COST WAS LIMITED TO THE MATHEMATICAL APPORTIONMENT OF EVALUATION POINTS AMONG THE COST PROPOSALS. IN RESPONSE TO OUR INFORMAL INQUIRY, COUNSEL'S LETTER OF MARCH 30 TRANSMITTED AN ENCLOSURE INDICATING THE EXTENT OF COST AND PRICE ANALYSIS. THE ENCLOSURE INDICATES THAT AFTER INITIAL QUOTATIONS WERE RECEIVED, THE COST AND PRICING INFORMATION CONTAINED ON THE DD FORM 633'S SUBMITTED BY THE OFFERORS WAS ABSTRACTED AND ANALYZED BY COMPARING THE QUOTATIONS RECEIVED WITH THE COSTS INCURRED IN CONNECTION WITH A PRIOR DISSIMILAR SYSTEM. ON THE BASIS OF THIS ANALYSIS, AN ORAL PRESENTATION WAS MADE TO THE SSAC WHERE IT WAS POINTED OUT THAT DIFFERENCES BETWEEN CRS AND THE PRIOR SYSTEM MADE AN EXACT COMPARISON IMPOSSIBLE. DURING DISCUSSIONS EACH OFFEROR WAS REQUESTED TO FURNISH ADDITIONAL INFORMATION. SINCE THE BEST AND FINAL OFFERS DIFFERED LITTLE FROM THE INITIAL QUOTATIONS, SSAC WAS SIMPLY INFORMED OF THEIR DOLLAR VALUE. AFTER SOURCE SELECTION, RAYTHEON'S COST PROPOSAL WAS AGAIN ANALYZED AND THE CONTRACT NEGOTIATOR PLANNED TO DISCUSS IT WITH THE OFFEROR WITH A VIEW TOWARD NEGOTIATING A REDUCTION. THIS ACTION WAS FOUND TO BE UNNECESSARY IN VIEW OF RAYTHEON'S VOLUNTARY COST REDUCTION. THE CONTRACT NEGOTIATOR FURTHER STATES THAT: "AT NO TIME PRIOR TO THE SELECTION OF RAYTHEON AS THE WINNER DID I HOLD OUT OR INFER TO THE SSAC OR ANYONE ELSE THAT I COULD GET RAYTHEON TO REDUCE ITS PRICE IF ALLOWED TO DO SO." ACCEPTING THE CONTRACT NEGOTIATOR'S STATEMENT, THE FACT REMAINS THAT COST NEGOTIATIONS WITH RAYTHEON WERE CONTEMPLATED. THAT SUCH ACTION WAS RENDERED UNNECESSARY BY RAYTHEON'S COST REDUCTION DOES NOT OBSCURE THE BASIC POINT: THE TIME FOR EXPLORING THE COST ASPECTS OF A PROPOSAL - THAT IS, ALL PROPOSALS WITHIN A COMPETITIVE RANGE - IS DURING THE COURSE OF NEGOTIATIONS AND NOT AT SOME TIME AFTER THE RECEIPT OF BEST AND FINAL OFFERS. WE BELIEVE THAT THE NEGOTIATION TECHNIQUES EVIDENT FROM THE RECORD, AS EXEMPLIFIED BY THE CONTEMPLATED COST NEGOTIATIONS WITH RAYTHEON, ARE INCONSISTENT WITH THE CONCEPT OF COMPETITIVE NEGOTIATION. IN THIS CONNECTION, ASPR 3-804 PROVIDES THAT:

EVALUATION OF OFFERORS' OR CONTRACTORS' PROPOSALS, INCLUDING PRICE REVISION PROPOSALS, BY ALL PERSONNEL CONCERNED, WITH THE PROCUREMENT, AS WELL AS SUBSEQUENT NEGOTIATIONS WITH THE OFFEROR OR CONTRACTOR, SHALL BE COMPLETED EXPEDITIOUSLY. COMPLETE AGREEMENT OF THE PARTIES ON ALL BASIC ISSUES SHALL BE THE OBJECTIVE OF CONTRACT NEGOTIATIONS. ORAL DISCUSSIONS OR WRITTEN COMMUNICATIONS SHALL BE CONDUCTED WITH OFFERORS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID. BASIC QUESTIONS SHOULD NOT BE LEFT FOR LATER AGREEMENT DURING PRICE REVISIONS OR OTHER SUPPLEMENTAL PROCEEDINGS. COST AND PROFIT FIGURES OF ONE OFFEROR OR CONTRACTOR SHALL NOT BE REVEALED TO OTHER OFFERORS OR CONTRACTORS.

WHILE WE OBJECT TO THE NEGOTIATION TECHNIQUES EMPLOYED HERE, WE DO NOT INTEND TO SUGGEST THAT COST IS CONTROLLING. HOWEVER, SINCE THE RECORD DEMONSTRATES THAT NOTWITHSTANDING THE TECHNICAL EVALUATION OF PROPOSALS, COST WAS ADVANCED AS A POTENTIAL BASIS FOR MAKING AWARD, A CLEAR UNDERSTANDING OF THE VALIDITY OF EACH COST PROPOSAL WAS AND IS ESSENTIAL.

ACCEPTANCE OF MODIFICATION TO RAYTHEON PROPOSAL AFTER "BEST AND FINAL" OFFERS

FOCUSING ON THE SSA'S MEMORANDUM OF OCTOBER 29, 1970, AND THE CONCURRENT APPROVAL OF THE ASSISTANT COMMANDER FOR CONTRACTS, IT IS NAVAIR'S POSITION THAT IT HAD ARRIVED AT A FINAL DETERMINATION TO CONTRACT WITH RAYTHEON SOME 2 WEEKS BEFORE RAYTHEON SUBMITTED ITS COST REDUCTION. SYLVANIA, ON THE OTHER HAND, URGES IN ITS LETTER OF MARCH 3, 1971, THAT THE TERM "OTHERWISE SUCCESSFUL OFFEROR" AS USED IN ASPR 3 506(G) GOES TO THE QUESTION OF WHETHER A PARTICULAR OFFEROR WOULD "UNQUESTIONABLY RECEIVE THE AWARD IF IN FACT THE AWARD WERE MADE," FOR THE FOLLOWING REASONS:

SYLVANIA DOES NOT BELIEVE THAT THE TERM "OTHERWISE SUCCESSFUL OFFEROR" INVOLVES WHETHER OR NOT AN AWARD ITSELF WILL BE MADE SINCE THERE ARE MANY REASONS WHY AN AWARD MAY NOT BE MADE THAT HAVE NO BEARING ON THE SELECTED OFFEROR AT ALL, E.G., AVAILABILITY OF FUNDS OR DISCONTINUANCE OF THE REQUIREMENT. HOWEVER, ASSUMING THAT AN AWARD WILL BE MADE, IN ORDER FOR AN OFFEROR TO BE "THE SUCCESSFUL OFFEROR" ALL THE LEGAL AND REGULATORY ACTIONS, DIRECTORY AND JUDGMENTAL, PREREQUISITE TO MAKING AN AWARD MUST HAVE BEEN EXECUTED IN THAT OFFEROR'S FAVOR. THAT IS THE POINT AT WHICH, BASED UPON THE UNAMENDED PROPOSAL, A BINDING CONTRACTUAL COMMITMENT COULD BE MADE TO SUCH OFFEROR.

IT IS SYLVANIA'S POSITION THAT RAYTHEON WAS NOT AN "OTHERWISE SUCCESSFUL OFFEROR" AT THE TIME IT SUBMITTED ITS COST REDUCTION PROPOSAL. THE NAVY ADMITS IN ITS REPORT DATED FEBRUARY 26, 1971 (PAGE 5) THAT NO BUSINESS CLEARANCE HAD BEEN GRANTED BY NAVMAT AT THE TIME RAYTHON SUBMITTED ITS COST REDUCTION. INDEED, A BUSINESS CLEARANCE WAS NOT EVEN REQUESTED FROM NAVMAT UNTIL SOME TWO MONTHS AFTER RAYTHEON'S COST REDUCTION PROPOSAL. SYLVANIA SUBMITS THAT UNDER THE APPLICABLE LAW AND REGULATIONS RAYTHEON WAS NOT AN "OTHERWISE SUCCESSFUL OFFEROR" AT LEAST UNTIL BUSINESS CLEARANCE HAD BEEN GRANTED BY NAVMAT.

FIRST, A BUSINESS CLEARANCE IS A MANDATORY LEGAL REQUIREMENT WHICH MUST BE COMPLIED WITH BEFORE AN AWARD CAN BE MADE TO A DESIRED SOURCE. ASPR SECTION 1-400 STATES:

"THIS PART... IMPOSES LIMITATIONS UPON THE AUTHORITY TO ENTER INTO ... CONTRACTS."

ASPR SECTION 1-403 STATES AS FOLLOWS:

"REQUIREMENTS TO BE MET BEFORE ENTERING INTO CONTRACTS. NO CONTRACT SHALL BE ENTERED INTO UNLESS ALL APPLICABLE REQUIREMENTS OF LAW AND OF THIS REGULATION ... , INCLUDING BUSINESS CLEARANCE AND APPROVAL, HAVE BEEN MET."

ASPR SECTION 3-102(B) STATES:

"(B) NO CONTRACT SHALL BE ENTERED INTO AS A RESULT OF NEGOTIATION UNLESS OR UNTIL THE FOLLOWING REQUIREMENTS HAVE BEEN SATISFIED:

"(III) SUCH BUSINESS CLEARANCE OR APPROVAL AS IS PRESCRIBED BY APPLICABLE DEPARTMENTAL PROCEDURES HAS BEEN OBTAINED ... "

SECOND, THE NAVY PROCUREMENT DIRECTIVES IMPLEMENTING ASPR MAKE IT UNMISTAKABLY CLEAR THAT NO AWARD MAY BE MADE TO AN OFFEROR WITHOUT A BUSINESS CLEARANCE. SECTION 1-403.50 OF NPD PRESCRIBES THE CONDITIONS FOR AWARD AS FOLLOWS:

"BUSINESS CLEARANCE IS THE REQUIRED APPROVAL BY THE CHIEF OF NAVAL MATERIAL OF BUSINESS ASPECTS OF PROPOSED CONTRACTUAL ACTIONS. SUCH CLEARANCE IS REQUIRED PURSUANT TO STATUTE (10 U.S.C. 5082) AND AUTHORITY DERIVED FROM THE SECRETARY OF THE NAVY. REQUEST FOR BUSINESS CLEARANCE IS SUBMITTED ON A BUSINESS CLEARANCE MEMORANDUM. ...

"(B) POST-NEGOTIATION BUSINESS CLEARANCE.

... UPON COMPLETION OF NEGOTIATION, THE POST-NEGOTIATION BUSINESS CLEARANCE MEMORANDUM SHALL SET FORTH IN DETAIL THE NEGOTIATION RESULTS OBTAINED. ... NO COMMITMENT SHALL BE MADE TO A PROSPECTIVE CONTRACTOR PRIOR TO OBTAINING THE CHIEF OF NAVAL MATERIAL'S APPROVAL OF THE POST NEGOTIATION BUSINESS CLEARANCE MEMORANDUM."

BASED UPON THE PLAIN MEANING OF THE FOREGOING REGULATIONS, WHICH IMPLEMENT STATUTORY REQUIREMENTS, IT IS SYLVANIA'S POSITION THAT A BUSINESS CLEARANCE OF RAYTHEON WAS A LEGAL PREREQUISITE TO RAYTHEON BEING AN "OTHERWISE SUCCESSFUL OFFEROR" IN ACCORDANCE WITH ASPR 3 506(G). THE NAVY'S OWN ADMISSION, A BUSINESS CLEARANCE OF RAYTHEON BY NAVMAT HAD NOT BEEN MADE AT THE TIME RAYTHEON'S COST REDUCTION PROPOSAL WAS SUBMITTED AND INDEED WAS NOT REQUESTED UNTIL SOME TWO MONTHS AFTER RAYTHEON'S COST REDUCTION PROPOSAL WAS SUBMITTED. AS NO AWARD COULD BE MADE TO RAYTHEON WITHOUT NAVMAT APPROVAL, RAYTHEON WAS NOT A "SUCCESSFUL OFFEROR" AT THE TIME THE NAVY ACCEPTED ITS COST REDUCTION PROPOSAL.

WE APPROACH THIS QUESTION FROM THE STANDPOINT OF THE PREJUDICIAL EFFECT, IF ANY, TO THE COMPETING OFFERORS RESULTING FROM ACCEPTANCE OF THE MODIFICATION - AN INQUIRY WHICH WILL TURN ON THE PARTICULAR FACTS OF EACH CASE. BY DEFINITION, THE ACCEPTANCE OF A MODIFICATION FROM AN OTHERWISE SUCCESSFUL OFFEROR WILL NOT RESULT IN PREJUDICE TO THE OTHER OFFERORS. ALSO ASSUMES THAT THE REDUCTION WAS VOLUNTARY AND THERE HAS BEEN NO SUGGESTION THAT RAYTHEON'S MODIFICATION WAS SOLICITED. FROM THIS VIEW POINT, WE AGREE GENERALLY THAT THE APPROVAL OF THE ASSISTANT COMMANDER FOR CONTRACTS, CONCLUDING THE SOURCE SELECTION PROCESS, IS A DETERMINATION OF THE "OTHERWISE SUCCESSFUL" OFFEROR, SINCE NAVAIR WAS CHARGED WITH THE SELECTION OF THE CONTRACTOR. THIS PRESUMES THAT IN EFFECTING THE SELECTION ALL REQUIREMENTS OF ASPR 3 800, GOVERNING THE CONDUCT OF NEGOTIATIONS, HAVE BEEN COMPLIED WITH.

HERE, HOWEVER, FURTHER NEGOTIATIONS WERE CONTEMPLATED WITH THE "SUCCESSFUL" OFFEROR WITH A VIEW TO SEEKING A PRICE REDUCTION. THE RESULTING IMPLICATION IS CLEAR: THE PREVIOUS SELECTION MIGHT FAIL ABSENT A PRICE REDUCTION. THEREFORE, IN OUR VIEW, RAYTHEON WAS SOMETHING LESS THAN THE "SUCCESSFUL OFFEROR" AT THE TIME OF SOURCE SELECTION.

ACCORDINGLY, WE BELIEVE THAT ALL OF THE DEFECTS DISCUSSED ABOVE REQUIRE THAT NEGOTIATIONS BE REOPENED AND ALL OFFERORS WITHIN A COMPETITIVE RANGE BE AFFORDED AN OPPORTUNITY TO REVISE THEIR TECHNICAL AND PRICE PROPOSALS.

GAO Contacts

Office of Public Affairs