B-143277, JULY 20, 1960, 40 COMP. GEN. 40

B-143277, JULY 20, 1960, 40 COMP. GEN. 40

CONTRACTS - COMPETITIVE SYSTEM - TWO-STEP PROCUREMENTS - DURATION, ETC., FOR SUBMISSION OF ACCEPTABLE PROPOSALS UNDER A TWO-STEP PROCUREMENT FOR HIGHLY SPECIALIZED EQUIPMENT WHICH REQUIRED BIDDERS TO FURNISH SUFFICIENT DATA TO ENABLE THE PROCUREMENT AGENCY TO DETERMINE PRECISELY WHAT EQUIPMENT WAS BEING OFFERED AND THAT THE EQUIPMENT MET THE GOVERNMENT REQUIREMENTS, A BIDDER WHO HAD DESIGNED AND MANUFACTURED THE PROTOTYPE MODEL UNDER A PRIOR SPECIFICATION, BUT WHO DID NOT SUBMIT SUFFICIENT DATA FOR A DETERMINATION THAT THE PROPOSAL MET THE NEW ENGINEERING REQUIREMENTS, WAS NOT IMPROPERLY DENIED THE OPPORTUNITY TO CORRECT THE MATERIAL DEFICIENCIES IN THE PROPOSAL, THE PROCUREMENT AGENCY HAVING THE RIGHT TO REASONABLY CIRCUMSCRIBE THE AREA OF CONSIDERATION AND THE TIME AND TO CONDITION THE CONSIDERATION UPON THE TECHNICAL DATA SUBMITTED UNLESS ONLY MARGINAL DEFICIENCIES WERE NOTED IN WHICH EVENT CORRECTION WAS PERMITTED.

TO E. S. HILL, JULY 20, 1960:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 28, 1960, PROTESTING THE AWARD OF A CONTRACT FOR 70MM. HAND-HELD, TYPE KE-28A, CAMERAS UNDER INVITATION 33-600-60-245 ISSUED AS THE SECOND PHASE OF A TWO-STEP PROCUREMENT INITIATED BY REQUEST FOR TECHNICAL PROPOSAL R60-2033-107 NOAS.

YOUR PROTEST IS PREMISED ON THE GROUND THAT THE TWO-STEP FORMAL ADVERTISING PROCEDURE IS SO UNREASONABLY RESTRICTIVE AS TO VIOLATE THE CONCEPT OF FULL AND FREE COMPETITION REQUIRED IN ORDINARY FORMAL ADVERTISING. IN THE ALTERNATIVE, YOU STATE THAT IF THE PROCEDURE IS VALID, THEN THE FAILURE OF THE PROCUREMENT OFFICIALS TO GIVE YOU AN OPPORTUNITY TO SUPPLY INFORMATION AND DATA THAT WOULD QUALIFY YOUR DEFICIENT TECHNICAL PROPOSAL WAS CONTRARY TO THE TERMS OF THE REQUEST FOR PROPOSAL WHICH STATED:

THE RIGHT IS RESERVED TO NEGOTIATE WITH FIRMS HAVING MARGINAL, TECHNICAL PROPOSALS THAT MAY BECOME ACCEPTABLE TO MEET THE REQUIREMENTS OF THE AIR FORCE.

IN THIS LATTER CONNECTION, YOU POINT OUT THAT YOUR TECHNICAL PROPOSAL INCLUDED A STATEMENT THAT THE CARDONA COMPANY HAD BECOME A DIVISION OF FAIRCHILD AND THAT THE CARDONA COMPANY HAD DESIGNED AND FABRICATED THE PROTOTYPE MODEL OF THE KE-28A CAMERA. IT IS YOUR POSITION THAT THE FAIRCHILD REPUTATION IN THE FIELD OF CAMERAS AND THE DEMONSTRATED CAPABILITY OF THE CARDONA COMPANY WITH RESPECT TO THE KE 28A PROTOTYPE REQUIRED THE PROCURING OFFICIALS TO ELICIT INFORMATION FROM FAIRCHILD THAT WOULD HAVE MADE ITS PROPOSAL ACCEPTABLE.

THE REGULATIONS FOR TWO-STEP FORMAL ADVERTISING PROVIDED FOR IN AIR FORCE PROCUREMENT INSTRUCTIONS 2-2100 ET SEQ. WERE PROMULGATED AT THE SUGGESTION OF THE SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS OF THE HOUSE ARMED SERVICES COMMITTEE. SEE REPORT ON STUDY OF ARMED SERVICES PROCUREMENT ACT, JUNE 15, 1957, P. 652 ET SEQ. THIS METHOD OF PROCUREMENT IS USED WHEN SPECIFICATIONS ARE NOT SUFFICIENTLY DEFINITIVE TO PERMIT FULL AND FREE COMPETITION WITHOUT NEGOTIATION AS TO THE TECHNICAL ASPECTS OF THE REQUIREMENT TO OBTAIN AN ACCEPTABLE BASIS OF UNDERSTANDING BETWEEN THE INDIVIDUAL BIDDERS AND THE GOVERNMENT. IT IS DESIGNED TO MAKE GREATER USE OF ADVERTISING PROCEDURES IN SITUATIONS WHERE NEGOTIATED PROCEDURES PREVIOUSLY WERE FOLLOWED. IN THE FIRST PHASE OF THE PROCUREMENT, ALL PROSPECTIVE BIDDERS ARE FURNISHED A PERFORMANCE SPECIFICATION AND ARE REQUESTED TO SUBMIT TECHNICAL PROPOSALS, WITHOUT PRICES. THESE ARE REVIEWED BY A GROUP OF QUALIFIED GOVERNMENT ENGINEERS TO DETERMINE THE TECHNICAL ACCEPTABILITY OF THE OFFERED ITEM. IN THE SECOND PHASE, FIRMS THAT HAVE QUALIFIED BY SUBMITTING ACCEPTABLE TECHNICAL PROPOSALS ARE INVITED TO BID UNDER NORMAL ADVERTISING PROCEDURES ON AN INVITATION WHICH INCLUDES A REQUIREMENT FOR COMPLIANCE WITH THE TECHNICAL PROPOSAL. AWARD OF THE CONTRACT IS MADE TO THE LOWEST RESPONSIBLE BIDDER.

AS IN FORMAL ADVERTISING, THE TWO-STEP PROCEDURE HAS CUT-OFF DATES. PROSPECTIVE BIDDERS ARE REQUIRED TO SUBMIT TECHNICAL PROPOSALS BY A SPECIFIED DATE. HOWEVER, IN THE EVENT ANY TECHNICAL PROPOSAL IS CONSIDERED BY THE EVALUATION GROUP TO BE ON THE PERIPHERY OF ACCEPTABILITY IN THAT IT REQUIRES ONLY SOME MINOR POINT OF CLARIFICATION, THE PROCUREMENT OFFICIALS WILL PERMIT THE CONTRACTOR TO SUPPLY THE INFORMATION TO BRING THE PROPOSAL UP TO AN ACCEPTABLE LEVEL. BUT WHERE A TECHNICAL PROPOSAL IS MATERIALLY DEFICIENT, THE PROPOSER IS NOT ACCORDED AN OPPORTUNITY TO QUALIFY HIS PROPOSAL. THE RESPONSIBILITY FOR DETERMINING WHETHER ANY TECHNICAL PROPOSAL MEETS THE GOVERNMENT'S PERFORMANCE SPECIFICATION IS SOLELY THAT OF THE PROCURING ACTIVITY.

BEFORE AFPI 2-2100 ET SEQ. AND THE IMPLEMENTATION THERETO WERE ISSUED, PROBLEMS CONTEMPLATED BY THE AIR FORCE WERE BROUGHT TO THE ATTENTION OF THE SUBCOMMITTEE FOR SPECIAL INVESTIGATIONS OF THE HOUSE ARMED SERVICES COMMITTEE. SEE REPORT OF JUNE 15, 1957, SUPRA, P. 660. ONE OF THE SPECIFIC PROBLEMS ANTICIPATED WAS THE SITUATION ARISING FROM PROTESTS BY FIRMS SUBMITTING UNACCEPTABLE TECHNICAL PROPOSALS AND DENIED THE OPPORTUNITY FOR FURTHER NEGOTIATION. ANOTHER EXPECTED PROBLEM WAS THAT FIRMS WOULD WANT TO NEGOTIATE ON AND ON UNTIL THEIR TECHNICAL PROPOSALS WERE ACCEPTABLE. NOTWITHSTANDING THE FACT THAT SPECIFIC PROBLEMS SUCH AS HAVE ARISEN HERE WERE ANTICIPATED, THE BENEFITS FLOWING FROM THIS PROCEDURE WERE CONSIDERED BY THE SUBCOMMITTEE TO OUTWEIGH THE SHORTCOMINGS. WE ALSO MUST RECOGNIZE THAT A PROCEDURE THAT PERMITS PROCUREMENT OFFICIALS TO REASONABLY CIRCUMSCRIBE THE AREA OF CONSIDERATION OF PROPOSALS IN CERTAIN CASES IS NECESSARY IF THEY ARE TO ACHIEVE THEIR EVALUATION AND CONSUMMATE THEIR COMMITMENTS WITHIN THEIR TIME LIMITATIONS. OBVIOUSLY, PROCUREMENTS CANNOT BE LEFT OPEN INDEFINITELY NOR BIDDERS PERMITTED TO ENGAGE IN ACTIVITY WHICH WOULD BRING ABOUT THAT RESULT.

THE PROCEDURE EMPLOYED IN TWO-STEP ADVERTISING IS NOT UNLIKE THAT FOLLOWED IN THE PROCUREMENT OF QUALIFIED PRODUCTS. IN THE LATTER PROCEDURE, THE AWARD OF THE CONTRACT IS RESTRICTED TO MANUFACTURERS WHO HAVE PREVIOUSLY QUALIFIED THEIR PRODUCTS. IN 36 COMP. GEN. 809, WE HELD THAT SUCH AN AWARD WAS NOT RENDERED ILLEGAL BECAUSE SOME OF THE BIDDERS WERE NOT ABLE TO QUALIFY THEIR PRODUCTS IN TIME FOR THE AWARD. WITH REGARD TO THE CONTENTION THAT THE QUALIFIED PRODUCTS PROCEDURE WAS RESTRICTIVE OF FULL AND FREE COMPETITION, WE POINTED OUT THAT WE WOULD NOT BE JUSTIFIED IN QUESTIONING THE PROCEDURE AS OTHER THAN A PROPER METHOD OF PROCUREMENT, SINCE THE ADMINISTRATIVE AGENCIES ARE VESTED WITH A REASONABLE DEGREE OF DISCRETION TO DETERMINE THE EXTENT OF COMPETITION WHICH MAY BE REQUIRED IN PARTICULAR CASES AND LEGITIMATE RESTRICTIONS ON COMPETITION IN GOVERNMENT PROCUREMENT HAVE BEEN DETERMINED TO BE VALID WHEN THE NEEDS OF THE AGENCY HAVE REQUIRED IT. IN VIEW OF THE SIMILARITY OF THE SITUATIONS, THE PRINCIPLES ENUNCIATED WITH RESPECT TO QUALIFIED PRODUCTS PROCUREMENTS ARE APPLICABLE TO TO THE INSTANT TWO-STAGE PROCUREMENT.

WHILE THE REQUEST FOR TECHNICAL PROPOSALS INDICATED THAT THE PROCUREMENT OFFICIALS MIGHT NEGOTIATE WITH FIRMS THAT SUBMITTED MARGINAL PROPOSALS, THE FIVE GOVERNMENT ENGINEERS WHO INDEPENDENTLY EVALUATED ALL THE PROPOSALS DETERMINED THAT THE FAIRCHILD PROPOSAL DID NOT FALL WITHIN THE "MARGINAL" CATEGORY. AS INDICATED ABOVE, THE DETERMINATION OF THE ACCEPTABILITY OF TECHNICAL PROPOSALS IS VESTED IN THE PROCUREMENT OFFICIALS WHO ARE BEST QUALIFIED TO EVALUATE THEM AND IN ACCORDANCE WITH WELL ESTABLISHED PRECEDENT, WE WILL NOT QUESTION THEIR DETERMINATION.

ALTHOUGH THE CARDONA COMPANY HAD DESIGNED AND FABRICATED THE PROTOTYPE MODEL OF THE KE-28A CAMERA, PROSPECTIVE BIDDERS WERE STRONGLY URGED IN THE REQUEST FOR TECHNICAL PROPOSALS TO COMPLY STRICTLY AND COMPLETELY WITH THE PERFORMANCE SPECIFICATION AND "NOT TO RELY ON DATA PREVIOUSLY SUBMITTED BEING GIVEN ANY CONSIDERATION.' FURTHER, PROSPECTIVE BIDDERS WERE ADVISED AT THE APRIL 22 BRIEFING CONFERENCE, WHICH WAS ATTENDED BY A FAIRCHILD REPRESENTATIVE, THAT, WHILE THE PROTOTYPE MET THE SPECIFICATION ON WHICH IT WAS PROCURED, IT DID NOT MEET THE PERFORMANCE SPECIFICATION IN R60-2033 -107-NOAS, AND THAT CONSIDERABLE ENGINEERING WOULD BE REQUIRED TO MAKE THE CAMERA CONFORM TO THE CURRENT SPECIFICATION AND REQUIREMENTS. SINCE THE PROCUREMENT INVOLVED HIGHLY SPECIALIZED EQUIPMENT IT WAS APPROPRIATE FOR THE REQUEST FOR TECHNICAL PROPOSALS TO CONDITION THE CONSIDERATION AND EVALUATION UPON THE SUPPLY OF DATA ESSENTIAL TO DETERMINE WHETHER THE PROPOSED EQUIPMENT MEETS THE AGENCY'S REQUIREMENTS AND TO ENABLE IT TO INTELLIGENTLY CONCLUDE PRECISELY WHAT ANY PROPOSER INTENDS TO FURNISH.

QUESTIONS CONCERNING ANY FIRM'S REPUTATION OR ABILITY TO PERFORM ARE MATTERS OF RESPONSIBILITY WHICH ARE CONSIDERED AFTER THE RECEIPT OF BIDS IN THE SECOND STAGE OF THE PROCUREMENT. IN THIS CONNECTION, SEE AFPI 2- 2103 (1) WHICH PROVIDES THAT SUBMISSION AND EVALUATION OF BIDS AND AWARD OF CONTRACT WILL BE STRICTLY IN ACCORDANCE WITH ASPR AND AFPI SECTION II, PARTS 3 AND 4. PART 4 OF THOSE REGULATIONS COVERS THE RESPONSIBILITY OF BIDDERS.

INASMUCH AS FAIRCHILD'S TECHNICAL PROPOSAL WAS DETERMINED TO BE UNACCEPTABLE, ANY BID MADE BY THE COMPANY UNDER THE SECOND-STEP INVITATION TO BID, WHICH REQUIRED PERFORMANCE IN ACCORDANCE WITH THE PERFORMANCE SPECIFICATION AND THE ACCEPTABLE TECHNICAL PROPOSAL APPROVED IN THE FIRST STEP, WOULD NOT HAVE BEEN RESPONSIVE. THEREFORE, IT WAS NOT IMPROPER FOR THE CONTRACTING AGENCY NOT TO SOLICIT A BID FROM FAIRCHILD.