B-161101, JUN. 20, 1967

B-161101, JUN. 20, 1967

TO CALIFORNIA SYSTEMS COMPONENTS, INC.:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 17, 1967, PROTESTING ANY AWARD OF A CONTRACT FOR MICROELECTRONIC LOGIC MODULES AND RELATED HARDWARE BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, GODDARD SPACE FLIGHT CENTER, GREENBELT, MARYLAND, PURSUANT TO REQUEST FOR PROPOSAL NO. RFP S- 31058/552 DATED MARCH 3, 1967.

THE BASIC REASONS FOR YOUR PROTEST ARE STATED AS FOLLOWS:

"CALIFORNIA SYSTEMS COMPONENTS MANUFACTURES A COMPLETE LINE OF INTEGRATED CIRCUIT LOGIC CARDS AND ACCESSORIES WHICH MEETS THE NEEDS OF GSFC AS OUTLINED IN THEIR SPECIFICATION ENTITLED ,MICROELECTRONIC MODULE SPECIFICATIONS.' THE ENTIRE LINE OF CSC PRODUCTS IS AVAILABLE THROUGH OUR CONTRACT WITH THE FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION. CSC CONTENDS THAT GSFC IS IN DIRECT CONFLICT WITH NASA PROCUREMENT REGULATIONS, NPC-400 PARAGRAPH 5.103 BY AVOIDING THE USE OF THE FEDERAL SUPPLY SCHEDULE TO SATISFY THEIR NEEDS AND THE SOLICITATION OF PROPOSALS. CSC FURTHER CONTENDS THAT GSFC IS USING AN INITIAL PROCUREMENT OF APPROXIMATELY $30,000 AS THE BASIS FOR A TWO YEAR CONTRACT WHICH WILL EXCLUDE COMPETITION IN A RAPIDLY CHANGING MARKET FOR THAT PERIOD. FURTHERMORE, WE FEEL THAT THE USE OF AN RFP FOR COMMERCIALLY AVAILABLE ITEMS IS NOT CONSISTENT WITH THE INTENDED PURPOSE OF AN RFP. CALIFORNIA SYSTEMS COMPONENTS FINDS ITSELF IN A POSITION THAT IF WE WERE TO RESPOND TO THE RFP IT WOULD SERVE NO USEFUL PURPOSE, BECAUSE OUR PRICES ARE PUBLIC INFORMATION AT GSA, AND A COMPETITOR COULD SIMPLY BUY THE CONTRACT WITH A SPECIAL OFFER TO GSFC.' YOU FURTHER CONTEND THAT PURCHASE OF THE ITEMS UNDER YOUR CONTRACT WITH GENERAL SERVICES ADMINISTRATION WOULD RESULT IN MONETARY ADVANTAGES TO THE GOVERNMENT THROUGH THE ACCUMULATED VOLUME DISCOUNT PROVISION THEREIN, OFFERING A DISCOUNT RANGING FROM 3 TO 25 PERCENT BASED ON THE ACCUMULATED DOLLAR VOLUME OF ALL GOVERNMENT ORDERS PLACED FOR INTEGRATED CIRCUIT LOGIC CARDS ON YOUR CONTRACT. IN ADDITION YOU STATE:

"IT IS OUR IMPRESSION THAT GSFC HAS GONE TO EXTREMES TO AVOID USING THE FEDERAL SUPPLY SCHEDULE TO SATISFY THEIR NEEDS. SINCE EARLY NOVEMBER 1966 WE HAVE SUGGESTED REPEATEDLY THAT GSFC TECHNICALLY EVALUATE OUR PRODUCTS PRIOR TO ISSUING THE RFP; AND, IF FOUND UNSATISFACTORY, WE WOULD AND COULD NOT RESPOND TO THEIR RFP. WE FURTHER SUGGESTED THAT A TWO-STEP PROCUREMENT BE USED TO AVOID A NEGOTIATED CONTRACT.'

PARAGRAPH 5.103 OF THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION PROCUREMENT REGULATION (NPC-400), WHICH YOU CONTEND REQUIRES PURCHASE OF THE ITEMS PURSUANT TO YOUR CONTRACT WITH THE GENERAL SERVICES ADMINISTRATION, IS AS FOLLOWS:

"5.103 FEDERAL SUPPLY SCHEDULES NOT MANDATORY.

"/A) SUPPLIES OR SERVICES AVAILABLE FROM A FEDERAL SUPPLY SCHEDULE WHICH IS OPTIONAL FOR USE BY EXECUTIVE AGENCIES GENERALLY (OR IN WHICH NASA IS LISTED AS EXEMPT) SHALL BE ORDERED THEREFROM IF:

(I) THE SCHEDULE OR THE CONTRACTOR'S PRICE LIST IDENTIFIES THE ITEM BY FEDERAL STOCK NUMBER;

(II) DELIVERY REQUIREMENTS CAN BE MET (SEE 5.102 (A) );

(III) THE PROCUREMENT IS WITHIN THE MAXIMUM AND MINIMUM LIMITATIONS OF THE SCHEDULE;

(IV) THE PRICE IS DETERMINED TO BE FAIR AND REASONABLE; AND

(V) FOR PROCUREMENTS IN EXCESS OF $100,000, THE CONTRACTING OFFICER ESTABLISHES THAT THE REQUIREMENTS OF PL 87-653 HAVE BEEN MET (SEE 5.102 (H) ).

WHERE LISTED SUPPLIES OR SERVICES CAN BE PURCHASED FROM A NON MANDATORY FEDERAL SUPPLY SCHEDULE CONTRACTOR AT A PRICE SUBSTANTIALLY MORE FAVORABLE TO THE GOVERNMENT THAN THE PRICE LISTED, THE PROCUREMENT WILL BE ACCOMPLISHED AT THE MORE FAVORABLE PRICE. IMMEDIATELY SUBSEQUENT THERETO, A COPY OF THE CONTRACT WILL BE FURNISHED TO THE OFFICE WHICH ISSUED THE FEDERAL SUPPLY SCHEDULE.

"/B) NASA PROCUREMENT OFFICES SHALL NOT ORDINARILY SOLICIT BIDS OR PROPOSALS, OR OTHERWISE TEST THE MARKET, FOR COMPARISON WITH SCHEDULE PRICES. THE SOLICITATION OF BIDS OR PROPOSALS SHOULD BE UNDERTAKEN ONLY WHERE THE PROCUREMENT OFFICE HAS A FIRM BASIS FOR BELIEVING THAT IT CAN BE MORE ADVANTAGEOUS TO THE GOVERNMENT AFTER ALLOWING FOR THE BURDEN AND COST OF A NEW PROCUREMENT UNDER APPLICABLE PRESCRIBED PROCEDURES. WHERE A PROCUREMENT FROM A SOURCE MIGHT BE MORE ADVANTAGEOUS TO THE GOVERNMENT AS A GENERAL SOURCE, THE NAME AND ADDRESS OF THE SUPPLIER, TOGETHER WITH OTHER DETAILS OF THE PROCUREMENT ACTION, SHALL BE FORWARDED TO THE OFFICE WHICH ISSUED THE FEDERAL SUPPLY SCHEDULE.'

IN RESPONSE TO YOUR PRINCIPAL CONTENTIONS CONCERNING THE SUBJECT PROCUREMENT THE CHIEF, PROCUREMENT DIVISION, OF THE PROCURING ACTIVITY SUBMITTED THE FOLLOWING REPORT:

"ON OCTOBER 26, 1966 A PROCUREMENT REQUEST WAS RECEIVED IN THE PROCUREMENT DIVISION FOR THE ESTABLISHMENT OF AN INDEFINITE QUANTITY CONTRACT FOR MICROELECTRONIC MODULES. THESE MODULES (ELECTRONIC CIRCUITS) ARE PACKAGED ASSEMBLIES OF DEPOSITED COMPONENTS HAVING SOLDER CONNECTIONS AND ARE USED BY THE PROCESSOR DEVELOPMENT BRANCH OF THE INFORMATION PROCESSING DIVISION TO BUILD VARIED MAJOR GROUND INFORMATION PROCESSING SYSTEMS, SUCH AS PROCESSORS EMPLOYING ON-LINE OMPUTORS; STORED PROGRAM PROCESSORS WITH ASSOCIATED DISPLAY EQUIPMENT AND SPECIAL PURPOSE DIGITAL TAPE UNIT TEST EQUIPMENT. IT IS IMPOSSIBLE TO FORECAST THE EXACT KINDS OF SYSTEMS TO BE BUILT. SOME OF THE SYSTEMS WILL BE INTERFACED AND IT IS MANDATORY THAT THE SYSTEMS AND PARTS BE COMPATIBLE AND INTERCHANGEABLE. ADDITIONALLY FOR PURPOSES OF TECHNICIAN AND ENGINEERING TRAINING, IT IS NECESSARY TO HAVE ONLY ONE COMPANY'S PRODUCT TO MINIMIZE THIS TRAINING. SINCE ONLY PERFORMANCE SPECIFICATIONS EXIST, THE DECISION TO NEGOTIATE COMPETITIVELY, A TWO YEAR INDEFINITE QUANTITY CONTRACT WAS MADE, PROVIDING A MINIMUM GUARANTEE OF $34,000.00 AND A MAXIMUM OF $300,000.00 TO THE SUCCESSFUL CONTRACTOR.

"LETTERS DATED NOVEMBER 2, 3, AND 25, 1966, OBJECTING TO THE CIRCULATION OF AN RFP, WERE RECEIVED FROM CALIFORNIA SYSTEMS COMPONENTS (CSC). THESE LETTERS, CSC CITED NPC-400, PARAGRAPH 5.103 ENTITLED "FEDERAL SUPPLY SCHEDULES NOT MANDATORY.' AS A RESULT OF THIS INFORMATION, CONCURRENT ACTIONS AS FOLLOWS WERE ACCOMPLISHED:

"SINCE ONLY PERFORMANCE SPECIFICATIONS REQUIRING TOTAL SYSTEM CAPABILITY ARE AVAILABLE, IT IS NOT READILY ASCERTAINABLE FROM THE GSA FEDERAL SUPPLY SCHEDULE THAT THESE SPECIFICATIONS WERE COMPLIED WITH, HOWEVER, A PRELIMINARY TECHNICAL EVALUATION WAS CONDUCTED UTILIZING THE INFORMATION AVAILABLE FROM THE GSA AND THE GSA SUPPLY SCHEDULE CONTRACT. WHILE THIS PRELIMINARY EVALUATION INDICATED THAT THE CSC PRODUCT WOULD NOT MEET THE GSFC SPECIFICATIONS, THIS ASPECT WAS NOT FORMALLY CONCLUDED DUE TO THE PRICE COMPARISON EXPLAINED IN PARAGRAPH 2 BELOW. (AS DISCUSSED LATER, IT IS POINTED OUT THAT THE FORMAL COMPLETION OF THE TECHNICAL EVALUATION, WHICH IS IN THIS FILE, SHOWS THAT THE CSC PRODUCT DOES NOT MEET THE GSFC SPECIFICATION IN SEVERAL AREAS).

"A PRICE COMPARISON WAS MADE USING A PREVIOUS "TYPICAL" ORDER FROM COMPUTER CONTROL CORPORATION (3-C) AS A BASIS FOR COMPUTATION. THIS EXAMPLE CONTAINED ITEMS THAT ARE USED FREQUENTLY AND THUS WAS CONSIDERED A FAIR REPRESENTATION FOR COMPARISON. THE RESULT OF THIS CALCULATION (ENCLOSURE 4) WHICH USED THE MAXIMUM CSC DISCOUNTS (AND THE NORMAL 3-C DISCOUNTS) INDICATED THAT GSFC WOULD EXPECT A SAVINGS IF A COMPETITIVE PROCUREMENT PRACTICE WERE UTILIZED.

"THUS, WE WOULD EXPECT LOWER PRICES FROM A COMPETITIVE SOLICITATION, PARTICULARLY WITH THE KNOWLEDGE THAT THERE WERE SEVERAL COMPANIES THAT COULD SUBMIT PROPOSALS. A FURTHER ADVANTAGE TO COMPETITION WOULD BE THE RECEIPT OF PROPOSALS BASED ON THE LATEST STATE OF THE ART, THUS ASSURING US OF THE BEST IN TECHNICAL APPROACH AND RELIABILITY.

"ACCORDINGLY, PURSUANT TO NASA PROCUREMENT REGULATION 5.103, A DETERMINATION WAS MADE THAT THERE WAS " . . . A FIRM BASIS FOR BELIEVING THAT IT CAN BE MORE ADVANTAGEOUS TO THE GOVERNMENT. . . .' (ENCLOSURE 8)

"IN VIEW OF THE ABOVE, A LETTER WAS TRANSMITTED TO CSC ON JANUARY 9, 1967 STATING THAT PURSUANT TO NASA PR 5.103, A COMPETITIVE SOLICITATION WAS DETERMINED APPROPRIATE AND THAT THEIR PROPOSAL, IF SUBMITTED, WOULD BE EVALUATED. (ENCLOSURE 5)

"A TWO-STEP FORMALLY ADVERTISED PROCUREMENT WAS NOT USED BECAUSE NEGOTIATION IS REQUIRED TO FORMULATE THE CONTRACT AFTER PROPOSALS ARE RECEIVED. DUE TO THE FACT THAT THE SUPPLIERS OF THESE TYPES OF ITEMS FABRICATE AND ASSEMBLE THE ITEMS BY DIFFERENT METHODS, THE EXACT DESCRIPTION OF EACH DELIVERABLE ITEM CANNOT BE ESTABLISHED FOR THE PURPOSE OF AN IFB. FOR EXAMPLE, WE MAY HAVE A REQUIREMENT FOR 2000 GATES. DUE TO THE FACT THAT MANUFACTURERS FABRICATE THESE ITEMS DIFFERENTLY, WE CANNOT USE AN ITEM DESCRIPTION OF 2000 GATES BUT RATHER MUST SPECIFY "CARDS" OR PACKAGES. ONE COMPANY'S PACKAGE CONTAINS 10 GATES WHILE ANOTHER COMPANY'S CONTAINS 11 GATES AND THE SMALLEST DELIVERABLE ITEM AVAILABLE IS "A PACKAGE.' THUS, AN IFB COULD NOT CONTAIN A PROPER SCHEDULE OF DELIVERABLE ITEMS WHICH WOULD BE COMMON TO ALL BIDDERS, AND THEREFORE, THE WORK STATEMENT MUST BE INDIVIDUALLY NEGOTIATED.

"FURTHER AS STATED IN THE NEGOTIATION AUTHORITY, FORMAL ADVERTISING IS NEITHER FEASIBLE NOR PRACTICABLE FOR THIS PROCUREMENT SINCE SUFFICIENT SPECIFICATIONS) DRAWINGS ARE NOT AVAILABLE TO ALLOW AN EQUITABLE, ACCURATE, AND NON-RESTRICTIVE DEFINITION OF THE REQUIREMENT. THROUGH THE NEGOTIATION PROCESS, THE MOST CAPABLE CONTRACTOR CAN BE SELECTED ONLY AFTER EVALUATING THE PROPOSALS SUBMITTED WHICH WILL BE BASED ON GENERAL SPECIFICATIONS. THEREFORE, IT IS DEEMED THAT NEGOTIATION IS THE ONLY PRACTICABLE MEANS OF EFFECTIVE PROCUREMENT.'

WE BELIEVE THAT THE ABOVE REPORT PROVIDES AN ADEQUATE JUSTIFICATION FOR NOT PURCHASING THE ITEMS FROM THE FEDERAL SUPPLY SCHEDULE, SINCE THE PRICE COMPARISON REFERRED TO APPEARS TO ESTABLISH A FIRM BASIS (IN ACCORDANCE WITH NASA PR 5.103 (B) ( FOR BELIEVING THAT IT COULD BE MORE ADVANTAGEOUS TO THE GOVERNMENT TO OBTAIN COMPETITION FOR SUPPLYING THOSE NEEDS WHICH WERE OUTLINED IN THE REQUEST FOR PROPOSALS.

FURTHER, THE REGULATION ON WHICH YOUR PROTEST IS BASED PERTAINS TO FEDERAL SUPPLY SCHEDULES WHICH HAVE NOT BEEN DESIGNATED FOR MANDATORY USE BY THE EXECUTIVE AGENCIES, AND THE SAME REGULATION REQUIRES THE USE OF SUCH A SCHEDULE ONLY WHEN THERE EXIST ALL FIVE OF THE CONDITIONS SPECIFIED IN THE REGULATION. IN ADDITION TO THE FOURTH CONDITION CONCERNING PRICE, IT IS NOTED THAT THE FIRST CONDITION IS THAT "THE SCHEDULE OR THE CONTRACTOR'S PRICE LIST IDENTIFIES THE ITEM BY FEDERAL STOCK NUMBER.' SINCE WE HAVE RECEIVED INFORMAL ADVICE FROM THE GENERAL SERVICES ADMINISTRATION THAT THE PERTINENT FEDERAL SUPPLY SCHEDULE DOES NOT IDENTIFY THE ITEMS HERE CONCERNED BY FEDERAL STOCK NUMBERS, AND AS FEDERAL STOCK NUMBERS FOR SUCH ITEMS ARE NOT SHOWN ON YOUR PRICE LIST--- AND HAVE NOT, ACCORDING TO OUR INFORMATION, BEEN ASSIGNED TO SUCH ITEMS--- IT APPEARS, CONTRARY TO YOUR CONTENTION, THAT NASA PR 5.103 DOES NOT DIRECT USE OF THE FEDERAL SUPPLY SCHEDULE FOR THIS PROCUREMENT, IRRESPECTIVE OF THE PRICE FACTOR.

YOUR CORRESPONDENCE WITH THE GODDARD SPACE FLIGHT CENTER, PARTICULARLY YOUR LETTER OF NOVEMBER 25, 1966, INDICATES THAT YOUR OBJECTIVE WAS TO CONVINCE THAT AGENCY THAT IT SHOULD ORDER ITS REQUIREMENTS FROM YOU UNDER YOUR FSS CONTRACT, RATHER THAN TO ENTER INTO COMPETITION WITH OTHER PROSPECTIVE SUPPLIERS. IN THE CIRCUMSTANCES, AND SINCE YOU DID NOT UNDERTAKE TO SUBMIT A PROPOSAL ON THE PROCUREMENT WHEN GIVEN THE OPPORTUNITY TO DO SO, AND IT APPEARS THAT SUBSTANTIAL COMPETITION WAS OBTAINED WITHOUT OBJECTION FROM ANY OTHER SOURCE, WE FEEL THAT CONSIDERATION OF YOUR OBJECTIONS TO THE FORM OF PROCUREMENT PROCEDURE ADOPTED (WHICH WERE NOT SUBMITTED TO GSFC AT THE TIME THE RFP WAS ISSUED) WOULD SERVE NO USEFUL PURPOSE.