B-166019, AUG. 1, 1969

B-166019, AUG. 1, 1969

BID PROTEST - NEGOTIATION IRREGULARITIES DECISION TO SECRETARY OF THE NAVY CONCERNING PROTEST FILER-STOWELL SYSTEMS CORPORATION, LOW OFFEROR, AGAINST AWARD OF NEGOTIATED CONTRACT TO VITRO LABORATORIES FOR DEVELOPMENT OF HYDROGRAPHIC AND CHARTING SYSTEM FOR NAVAL OCEANOGRAPHIC OFFICE. THE CONDUCT OF THE CONTRACTING OFFICIALS FROM THE TIME VITRO WAS ADVISED THAT AWARD WAS CONTEMPLATED TO ANOTHER OFFEROR UNTIL THE TIME AWARD WAS ACTUALLY MADE TO VITRO REPRESENTED SERIOUS DEVIATIONS FROM THE REQUIREMENTS OF THE PROCUREMENT STATUTE AND THE IMPLEMENTING REGULATIONS. SINCE THE CONTRACT AWARDED VITRO HAD BEEN FULLY PERFORMED BY THE TIME THE INITIAL ADMINISTRATIVE REPORT WAS FURNISHED TO OUR OFFICE, WE ARE OBVIOUSLY PRECLUDED FROM TAKING ANY ADVERSE ACTION WITH RESPECT TO THE VITRO CONTRACT. THE FURNISHING OF INFORMATION TO VITRO THAT AWARD TO ANOTHER OFFEROR WAS IMMINENT VIOLATED THE ABOVE-CITED REGULATORY PROVISIONS AND, IN FACT, IT APPEARS THAT THIS INFORMATION LED DIRECTLY TO VITRO'S PROTEST AND TO ITS SUBSEQUENT PRICE REDUCTION. THE RECORD IS CLEAR THAT THE MANNER IN WHICH NEGOTIATIONS WERE CONDUCTED CLEARLY PREJUDICED FSSC, AND CARE SHOULD BE TAKEN TO PRECLUDE FUTURE SIMILAR OCCURRENCES.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTERS DATED APRIL 1, 1969, AND JUNE 13, 1969, FILE SUP 0232A, FROM THE DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND (NSSC), FURNISHING OUR OFFICE WITH A REPORT ON THE PROTEST OF FILER-STOWELL SYSTEMS CORPORATION (FSSC) UNDER REQUEST FOR QUOTATIONS (RFQ) NO. N62306-Q-0472, ISSUED BY THE UNITED STATES NAVAL OCEANOGRAPHIC OFFICE, SUITLAND, MARYLAND.

THE SUBJECT RFQ REQUESTED QUOTATIONS ON A COST-PLUS-FIXED-FEE (CPFF) BASIS FOR THE PREPARATION OF SPECIFICATIONS FOR AN ADVANCED DEVELOPMENT MODEL OF A HYDROGRAPHIC SURVEYING AND CHARTING SYSTEM. FIVE QUOTATIONS WERE RECEIVED BY THE AMENDED CLOSING DATE FOR SUBMISSION OF QUOTATIONS OF DECEMBER 9, 1968, THREE OF WHICH WERE DETERMINED TO BE TECHNICALLY UNACCEPTABLE. THE FSSC CPFF PROPOSAL IN THE AMOUNT OF $15,757, AND THE CPFF PROPOSAL OF VITRO LABORATORIES IN THE AMOUNT OF $16,350, WERE THE TWO CPFF QUOTATIONS DETERMINED TO BE TECHNICALLY ACCEPTABLE.

BECAUSE IT WAS FELT THAT THE AMOUNTS QUOTED BY FSSC AND VITRO WERE TOO LOW TO WARRANT THE USE OF A CPFF CONTRACT AND BECAUSE IT WAS ALSO FELT THAT THE PERFORMANCE TIME WAS TOO SHORT TO WARRANT CONTRACTING ON THAT BASIS, IT WAS DETERMINED ON DECEMBER 12, 1968, THAT A FIRM FIXED PRICE CONTRACT SHOULD BE NEGOTIATED. UPON NOTIFICATION OF THIS CHANGE, FSSC AND VITRO BOTH SUBMITTED LUMP-SUM PROPOSALS ON DECEMBER 16 AND 13, 1968, RESPECTIVELY, WHEREBY FSSC REVISED ITS PRICE TO $19,496 AND VITRO REVISED ITS PRICE TO $20,000.

ON DECEMBER 18, 1968, A CONTRACT DOCUMENT IN THE NAME OF FSSC WAS DUPLICATED AND PREPARED FOR SIGNATURE. ON DECEMBER 19, 1968, HOWEVER, VITRO PROTESTED TO THE CONTRACTING OFFICER THAT NO SPECIFICADATE FOR THE CLOSING OF NEGOTIATIONS AND THE SUBMISSION OF REVISED FIXED-PRICE PROPOSALS HAD BEEN SET AS REQUIRED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-805.1 (B). THE PROTEST WAS SUSTAINED BY THE CONTRACTING OFFICER AND AMENDMENT P002 WAS ISSUED REQUIRING FORMAL CONFIRMATION BY JANUARY 21, 1969, OF NEGOTIATIONS FOR A FIXED-PRICE CONTRACT, AND REVISING AN RFQ CLAUSE NOT PERTINENT TO THE SUBJECT PROTEST. THEREAFTER, VITRO, ON JANUARY 17, 1969, SUBMITTED A REVISED FIXED-PRICE OFFER IN THE AMOUNT OF $15,800, WHILE FSSC CONFIRMED ITS PREVIOUS OFFER OF $19,496 BY ITS LETTER OF JANUARY 16, 1969, ACKNOWLEDGING AMENDMENT P002. AWARD WAS MADE TO VITRO ON JANUARY 21, 1969, ON THE BASIS OF ITS LOW FIXED-PRICE OFFER.

BY LETTER DATED JANUARY 27, 1969, TO OUR OFFICE, FSSC PROTESTED THAT AWARD WAS NOT MADE TO THE LOWEST OFFEROR BECAUSE ITS CPFF OFFER WAS $43 LOWER THAN THE FIXED-PRICE FIGURE ON WHICH AWARD WAS MADE TO VITRO, AND THAT "THERE IS SUBSTANTIVE EVIDENCE THAT PRICE INFORMATION WAS RELEASED TO VITRO IN VIOLATION OF ASPR 3-507.2B.' FSSC ALSO ALLEGED THAT THE FACT THAT VITRO AMENDED ITS PROPOSAL TO OFFER A LOWER PRICE ON A FIXED PRICE BASIS, WITH ITS ATTENDANT GREATER RISKS THAN THOSE ATTRIBUTABLE ON A CPFF BASIS, PROVIDED EVIDENCE THAT VITRO WAS GIVEN INFORMATION DURING NEGOTIATIONS WITH RESPECT TO COST CONTINGENCIES NOT PROVIDED TO FSSC IN DEROGATION OF THE REQUIREMENTS OF ASPR, SECTION 3, PART 8. FINALLY, FSSC COMPLAINED THAT IT WAS NOT ADVISED AFTER SUBMISSION OF ITS ALTERNATE FIXED -PRICE PROPOSAL THAT THE CONTRACT TO BE AWARDED WAS TO BE AWARDED ON A FIXED PRICE RATHER THAN ON A CPFF BASIS.

WITH RESPECT TO THE FSSC CONTENTION THAT ITS OFFER WAS LOW BY $43, THE APRIL 1 REPORT FROM NSSC POINTED OUT THAT WHILE FSSC HAD BEEN LOW ON A CPFF BASIS, VITRO WAS LOW BY $4,496 ON A FIXED-PRICE BASIS, THE BASIS ON WHICH IT WAS DETERMINED TO MAKE AWARD. WITH RESPECT TO THE FSSC CONTENTION THAT IT WAS NOT ADVISED AFTER SUBMISSION OF ITS ALTERNATE FIXED -PRICE PROPOSAL THAT THE CONTRACT TO BE AWARDED WAS TO BE AWARDED ON A FIXED-PRICE BASIS, THE REPORT STATES THAT "PROTESTANT DID ACKNOWLEDGE BY LETTER OF 16 JANUARY 1969 THAT IT RECEIVED AMENDMENT P002, WHICH ESTABLISHED A CLOSING DATE FOR SUBMISSION OF OFFERS ON A FIRM FIXED PRICE BASIS, WHICH IT RETURNED CONFIRMING ITS OFFER OF 16 DECEMBER 1968.'

CONCERNING THE ALLEGATION THAT PROCUREMENT INFORMATION WAS DISCLOSED TO VITRO DURING NEGOTIATIONS TO THE PREJUDICE OF FSSC, THE REPORT OF JUNE 13, 1969, ADVISED THAT AN INVESTIGATION HAD BEEN PERFORMED BY THE NAVAL INVESTIGATIVE SERVICE, AND IT APPEARS FROM THE REPORT OF INVESTIGATION THAT THE ALLEGATION IS SUBSTANTIALLY CORRECT.

IN OUR OPINION, THE APRIL 1, 1969, ADMINISTRATIVE REPORT ADEQUATELY ANSWERS FSSC'S CONTENTIONS WITH REGARD TO ITS LOWER CPFF PRICE AND THE ALLEGED FAILURE TO ADVISE THAT AWARD WOULD BE MADE ON A FIXED-PRICE BASIS.

WE MUST CONCLUDE, HOWEVER, THAT THE CONDUCT OF THE CONTRACTING OFFICIALS FROM THE TIME VITRO WAS ADVISED THAT AWARD WAS CONTEMPLATED TO ANOTHER OFFEROR UNTIL THE TIME AWARD WAS ACTUALLY MADE TO VITRO REPRESENTED SERIOUS DEVIATIONS FROM THE REQUIREMENTS OF THE PROCUREMENT STATUTE AND THE IMPLEMENTING REGULATIONS. SINCE THE CONTRACT AWARDED VITRO HAD BEEN FULLY PERFORMED BY THE TIME THE INITIAL ADMINISTRATIVE REPORT WAS FURNISHED TO OUR OFFICE, WE ARE OBVIOUSLY PRECLUDED FROM TAKING ANY ADVERSE ACTION WITH RESPECT TO THE VITRO CONTRACT. HOWEVER, WE POINT OUT THE DEPARTURES FROM GOOD PROCUREMENT PRACTICES WITH THE HOPE THAT FUTURE SIMILAR IRREGULARITIES MAY BE AVOIDED.

IN THE FIRST PLACE, IT IS AN ELEMENTARY RULE IN NEGOTIATED PROCUREMENTS THAT INFORMATION TENDING TO GIVE ONE OFFEROR AN ADVANTAGE OVER OTHERS SHOULD NOT BE DIVULGED. SEE 46 COMP. GEN. 612. IN THIS REGARD, ASPR 3- 507.2 (B) AND 3-805.1 (B) REQUIRE EQUAL TREATMENT OF ALL OFFERORS AND PROHIBIT THE USE OF AUCTION TECHNIQUES PRACTICED HERE. WHILE THE INFORMATION DIVULGED TO VITRO MAY HAVE BEEN COMMUNICATED IN GOOD FAITH, THE FACT REMAINS THAT SUCH DISCLOSURE GAVE VITRO A COMPETITIVE ADVANTAGE OVER FSSC BY PUTTING IT ON NOTICE BEFORE THE CLOSE OF NEGOTIATIONS THAT AWARD WOULD BE MADE TO ANOTHER AND PRESUMABLY LOWER OFFEROR THAT REASONABLY CREATED THE NECESSITY FOR REDUCING ITS PRICE IN ORDER TO PRECLUDE THE CONTEMPLATED AWARD TO FSSC. IN OUR OPINION, THE FURNISHING OF INFORMATION TO VITRO THAT AWARD TO ANOTHER OFFEROR WAS IMMINENT VIOLATED THE ABOVE-CITED REGULATORY PROVISIONS AND, IN FACT, IT APPEARS THAT THIS INFORMATION LED DIRECTLY TO VITRO'S PROTEST AND TO ITS SUBSEQUENT PRICE REDUCTION.

ADDITIONALLY, AMENDMENT P002, WHICH REQUIRED "FORMAL CONFIRMATION OF NEGOTIATIONS," IN OUR OPINION, WAS NOT SUFFICIENTLY EXPLICIT TO PUT OFFERORS ON NOTICE THAT PRICE REVISIONS WERE REQUESTED OR THAT THEY WOULD BE IN FACT ACCEPTABLE. WITH REGARD TO THE NATURE AND EXTENT OF INFORMATION REQUIRED IN A NOTICE TO OFFERORS OF THE FINAL DATE FOR THE SUBMISSION OF PROPOSAL MODIFICATIONS, WE STATED IN B-165988, MARCH 11, 1969, 48 COMP. GEN. ----, THAT:

"* * * OFFERORS SHOULD BE ADVISED (1) THAT NEGOTIATIONS ARE BEING CONDUCTED; (2) THAT OFFERORS ARE BEING ASKED FOR THEIR -BEST AND FINAL- OFFER, NOT MERELY TO CONFIRM OR RECONFIRM PRIOR OFFERS; AND, FINALLY (3) THAT ANY REVISION MUST BE SUBMITTED BY THE DATE SPECIFIED. SEE B 163882, FEBRUARY 13, 1969, 48 COMP. GEN. ----; AND B-164581, DECEMBER 27, 1968, 48 COMP. GEN. ----.' THAT AMENDMENT P002 DID NOT MEET THESE REQUIREMENTS IS EVIDENCED, WE THINK, BY FSSC'S STATEMENT THAT "AT NO TIME WAS FSSC EVER INFORMED THAT THE COMPETITION HAD BEEN REOPENED.'

AS INDICATED ABOVE, NO CORRECTIVE ACTION IS NOW POSSIBLE. HOWEVER, WE THINK THAT THE RECORD IS CLEAR THAT THE MANNER IN WHICH NEGOTIATIONS WERE CONDUCTED CLEARLY PREJUDICED FSSC, AND WE URGE THAT CARE BE TAKEN TO PRECLUDE FUTURE SIMILAR OCCURRENCES.