B-173181, DEC 20, 1971, 51 COMP GEN 372

B-173181, DEC 20, 1971, 51 COMP GEN 372

BIDS - TWO-STEP PROCUREMENT - FIRST-STEP - PURPOSE SINCE THE ONLY OFFEROR IN ADDITION TO THE INCUMBENT CONTRACTOR RESPONDING TO THE REQUEST FOR TECHNICAL PROPOSALS UNDER A TWO-STEP PROCUREMENT FOR THE INSTALLATION OF A TELECOMMUNICATIONS SYSTEM OVERSEAS, WHO IN ANSWERING THE QUESTIONS POSED AFTER THE EVALUATION OF OFFERS INDICATED THE RISK INCIDENT TO THE SITE COULD NOT BE ASSUMED WITHOUT SURVEYING THE SITE, WAS ERRONEOUSLY DETERMINED TO BE NONRESPONSIVE AND WAS IMPROPERLY DENIED AN OPPORTUNITY TO PARTICIPATE IN THE SECOND-STEP INVITING PRICES NOTWITHSTANDING BY THEN THE SITE HAD BEEN SURVEYED, THE CONTRACTING OFFICER'S SUBSEQUENT DETERMINATION TO MAKE THE PROCUREMENT COMPETITIVE AND PERMIT THE REJECTED OFFEROR TO SUBMIT A TECHNICALLY ACCEPTABLE PROPOSAL WAS IN LINE WITH THE FIRST STEP'S INTENDED PURPOSE OF FOSTERING COMPETITION, AND THE OFFEROR SHOULD BE ALLOWED TO COMPETE IN THE SECOND STEP AS A SOLE SOURCE AWARD TO THE INCUMBENT CONTRACTOR WOULD NOT BE JUSTIFIED.

TO THE SECRETARY OF THE ARMY, DECEMBER 20, 1971:

WE REFER TO LETTERS AMCGC-P OF SEPTEMBER 15 AND OCTOBER 18, 1971, FROM THE DEPUTY GENERAL COUNSEL, FORWARDING A REPORT ON THE PHILCO-FORD CORPORATION PROTEST AGAINST AWARD OF A CONTRACT TO ANY OTHER FIRM UNDER REQUEST FOR TECHNICAL PROPOSALS NO. DAAB07-71-B0340, ISSUED BY THE UNITED STATES ARMY ELECTRONICS COMMAND (ECOM), FORT MONMOUTH, NEW JERSEY.

THIS TWO-STEP FORMALLY ADVERTISED PROCUREMENT COVERS SERVICES AND MATERIALS FOR THE INSTALLATION OF AN INTEGRATED MICROWAVE LINE-OF-SIGHT TELECOMMUNICATIONS SYSTEM IN GERMANY. STEP ONE REQUIRES A TECHNICAL PROPOSAL TO BE SUBMITTED BY EACH OFFEROR FOR TECHNICAL EVALUATION AS TO THE ACCEPTABILITY OF THE OFFEROR'S APPROACH TO THE STATED REQUIREMENTS. STEP TWO CALLS FOR THE SUBMISSION OF A BID PRICE BY ALL OFFERORS WHOSE PROPOSALS HAVE BEEN DETERMINED TO BE TECHNICALLY ACCEPTABLE. THE REQUEST FOR TECHNICAL PROPOSALS WAS ISSUED ON MARCH 26, 1971, AND PROPOSALS WERE TO BE SUBMITTED BY APRIL 26. OF THE 33 FIRMS SOLICITED, ONLY THE FEDERAL ELECTRIC CORPORATION (FEC) - THE INCUMBENT CONTRACTOR - AND PHILCO-FORD SUBMITTED PROPOSALS. AFTER EVALUATION OF THESE TWO PROPOSALS, ECOM GAVE EACH OFFEROR A SEPARATE SET OF QUESTIONS TO BE ANSWERED FOR CLARIFICATION PURPOSES AND RETURNED TO ECOM BY MAY 24. FEC WAS GIVEN 139 QUESTIONS ON MAY 18 AT ECOM. AT THAT TIME, FEC REVIEWED THE QUESTIONS AND REQUESTED VARIOUS CLARIFICATIONS. SEVEN QUESTIONS WERE DELETED BY ECOM AS A RESULT THEREOF. PHILCO-FORD WAS FURNISHED 284 QUESTIONS ON MAY 17. THE PROCURING AGENCY REPORTS THAT THERE WAS SOME DISCUSSION OF THE QUESTIONS AT THIS TIME, ALTHOUGH THE DISCUSSION WAS NOT EXTENSIVE AND, IN THE MAIN, RELATED TO PHILCO-FORD'S SURPRISE AT BEING GIVEN SO MANY QUESTIONS.

BOTH OFFERORS TIMELY RETURNED THEIR ANSWERS TO ECOM. THEREAFTER, THE PROPOSAL OF FEC WAS JUDGED ACCEPTABLE. THE ANSWERS SUBMITTED BY PHILCO FORD, HOWEVER, INDICATED THAT PHILCO-FORD WOULD NOT ASSUME WITHOUT A SITE SURVEY THE RISK PRESCRIBED BY STEP ONE FOR INACCURACIES OR OMISSIONS IN THE SITE REPORT DATA FURNISHED WITH THE SOLICITATION. PHILCO-FORD HAD REQUESTED OF THE CONTRACTING OFFICER ON MAY 18 THAT IT BE ALLOWED AN EXTENSION OF 4 WEEKS FOR THE SUBMISSION OF ITS ANSWERS IN ORDER TO CONDUCT A SITE SURVEY IN GERMANY. THE CONTRACTING OFFICER DENIED THIS REQUEST ON MAY 20 AS UNTIMELY. CONSEQUENTLY, ON MAY 26, THE CONTRACTING OFFICER NOTIFIED PHILCO-FORD THAT ITS PROPOSAL HAS BEEN FOUND NONRESPONSIVE FOR FAILURE TO CONFORM TO AN ESSENTIAL REQUIREMENT OF THE SOLICITATION BY NOT ASSUMING THE RISKS CONTEMPLATED THEREIN. SUBSEQUENTLY, ON MAY 28, 1971, THE PHILCO-FORD PROPOSAL WAS DETERMINED TO BE UNACCEPTABLE. THEREAFTER, PHILCO-FORD PROTESTED TO OUR OFFICE.

BECAUSE PHILCO-FORD WAS NO LONGER CONSIDERED ELIGIBLE, NEGOTIATIONS WERE ENTERED INTO WITH FEC, THE ONLY REMAINING ACCEPTABLE OFFEROR, PURSUANT TO PARAGRAPH 3-210.2 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). ECOM SUBMITTED TO FEC A REQUEST FOR PROPOSAL CONTEMPLATING A FIXED-PRICE INCENTIVE-FEE CONTRACT. FEC SUBMITTED ITS PROPOSAL. AN AUDIT OF THE PROPOSAL WAS MADE AND THE COST AND PRICING DATA IN THE PROPOSAL WERE REVIEWED BY THE GOVERNMENT. NEGOTIATIONS BETWEEN ECOM AND FEC WERE CONDUCTED FROM JUNE 12 TO JUNE 16, AT WHICH TIME A FINAL PRICE FOR THE CONTRACT WAS ULTIMATELY AGREED UPON BY THE PARTIES. HOWEVER, NO CONTRACT AWARD WAS MADE.

WHILE PRICE NEGOTIATIONS WITH FEC WERE BEING CONDUCTED, THE PHILCO FORD PROTEST WAS ALSO BEING STUDIED BY THE ECOM LEGAL OFFICE, WITH PARTICULAR ATTENTION TO THE ALLEGATION BY PHILCO-FORD THAT A SITE SURVEY WAS NECESSARY IN ORDER TO ANSWER SOME OF THE 284 QUESTIONS. IT WAS PHILCO- FORD'S CONTENTION THAT MANY OF THE QUESTIONS REQUIRED DETAILED TECHNICAL INFORMATION AVAILABLE ONLY TO GOVERNMENT PROGRAM REPRESENTATIVES AND THE ON-SITE INCUMBENT CONTRACTOR. FURTHER, IT WAS ALLEGED THAT THE INFORMATION REQUESTED GROSSLY EXCEEDED THE SCOPE OF THE "GENERAL AND LOCAL SITE CONDITIONS" AS SET FORTH IN THE SOLICITATION AND THAT, THEREFORE, SATISFACTORY ANSWERS COULD BE GIVEN TO THE PROCURING ACTIVITY ONLY AFTER A SITE SURVEY. REVIEW BY ECOM ENGINEERS FOUND THAT 13 OF THESE QUESTIONS DID, IN FACT, REQUIRE A SITE SURVEY, AND IN VIEW OF THIS DETERMINATION, IT WAS DECIDED THAT THE PHILCO-FORD PROPOSAL HAD BEEN ERRONEOUSLY DETERMINED TO BE NONRESPONSIVE FOR FAILURE TO COMPLY WITH THE SOLICITATION.

TOWARD THE END OF THIS REVIEW PERIOD OF PHILCO-FORD'S ALLEGATION, MORE SPECIFICALLY ON JULY 21, 1971, PHILCO-FORD WAS ADVISED TELEPHONICALLY BY ECOM FOR THE FIRST TIME THAT ITS PROPOSAL HAD BEEN FOUND TO BE TECHNICALLY UNACCEPTABLE IN MAY. THE ORIGINAL TECHNICAL EVALUATION HAD BEEN BASED UPON THE FOLLOWING SCORING CRITERIA: 60 POINTS OR BETTER - TECHNICALLY ACCEPTABLE; 59-50 POINTS - SUSCEPTIBLE OF BEING MADE ACCEPTABLE; 49 POINTS AND BELOW - TECHNICALLY UNACCEPTABLE AND EXCLUDED FROM FURTHER NEGOTIATION. ALTHOUGH PHILCO FORD'S PROPOSAL HAD BEEN EVALUATED INITIALLY AT BELOW 50 POINTS, A MANAGERIAL DECISION WAS MADE DURING THE REVIEW PERIOD TO CONSIDER THE PROPOSAL AS SUSCEPTIBLE OF BEING MADE ACCEPTABLE. THE MOTIVATING FACTOR BEHIND THIS DECISION WAS THE DESIRE TO MAINTAIN THE COMPETITIVE ASPECTS OF THE PROCUREMENT BY ELIMINATING THE NECESSITY OF MAKING THE PROCUREMENT ON A SOLE SOURCE BASIS. BY ECOM LETTER OF JULY 22, PHILCO FORD WAS ADVISED THAT NOTWITHSTANDING THE DETERMINATION THAT ITS PROPOSAL WAS TECHNICALLY UNACCEPTABLE, IT WOULD BE GIVEN THE OPPORTUNITY TO MEET WITH ECOM PERSONNEL ON JULY 29 TO FURTHER DISCUSS AND POSSIBLY CLARIFY ITS PROPOSAL.

AT THE JULY 29 MEETING, IT WAS AGREED THAT 13 OF THE 284 ORIGINAL QUESTIONS WERE INAPPROPRIATE IN THAT A SITE SURVEY WOULD BE NEEDED TO ANSWER THEM. AS TO THE OTHER 271 QUESTIONS, PHILCO-FORD'S RESPONSE OF MAY 24 HAD SATISFACTORILY ANSWERED ALL BUT APPROXIMATELY 23. PHILCO FORD WAS NOW GIVEN UNTIL AUGUST 2 TO CLARIFY ITS RESPONSES TO THESE QUESTIONS. AFTER A REVIEW OF THE AUGUST 2 RESPONSES, PHILCO-FORD CONDUCTED A SITE SURVEY AND WAS GIVEN A FURTHER OPPORTUNITY TO CLARIFY A FEW REMAINING AREAS OF ITS PROPOSAL BECAUSE IT WAS NOW ALMOST TECHNICALLY ACCEPTABLE. THIS FINAL CLARIFICATION WAS SUBMITTED ON AUGUST 30, AND ON SEPTEMBER 1 PHILCO-FORD'S PROPOSAL WAS DETERMINED TO BE TECHNICALLY ACCEPTABLE. THE CONTRACTING OFFICER SUBSEQUENTLY PROPOSED ISSUING THE SECOND-STEP INVITATION REQUESTING BID PRICES FROM BOTH FEC AND PHILCO-FORD. HOWEVER, IN THE ADMINISTRATIVE REPORT OF OCTOBER 18, 1971, IT WAS RECOMMENDED THAT THE PROCUREMENT BE LIMITED TO FEC BECAUSE OF THE EARLIER DETERMINATION THAT PHILCO-FORD WAS TECHNICALLY UNACCEPTABLE.

THE PROPRIETY OF ISSUING AN INVITATION TO PHILCO-FORD IS QUESTIONED BY FEC. IT IS FIRST CONTENDED THAT THE ORIGINAL REJECTION OF PHILCO FORD'S PROPOSAL ON THE BASES THAT IT WAS BOTH NONRESPONSIVE AND TECHNICALLY UNACCEPTABLE WAS CORRECT AND THAT THE LATER DISCUSSIONS LEADING TO THE DETERMINATION THAT PHILCO-FORD SHOULD BE ALLOWED TO TAKE PART IN THE SECOND STEP OF THE PROCUREMENT WERE IMPROPER. IT IS FURTHER CONTENDED THAT PHILCO-FORD WAS GIVEN THE OPPORTUNITY TO REPROPOSE ON A NUMBER OF OCCASIONS, TO CONDUCT A SITE SURVEY IN AUGUST, AND IN EFFECT THEREBY TO ALTER ITS PROPOSAL TO AN EXTENT AND IN A MANNER NOT ACCORDED FEC, THUS LEADING TO THE CONCLUSION THAT FEC DID NOT RECEIVE EQUAL TREATMENT FROM THE PROCURING AGENCY. IT IS ALSO ALLEGED THAT DELETION OF THE 13 QUESTIONS DID NOT CAUSE PHILCO-FORD TO ASSUME THE RISKS CONTEMPLATED BY THE FIRST STEP, BUT RATHER THE CAUSATION FOR THIS WAS THE SITE SURVEY WHICH PHILCO-FORD WAS ALLOWED TO CONDUCT IN AUGUST, AFTER IT HAD APPARENTLY FOREGONE ITS RIGHT TO MAKE SUCH A SURVEY BY SUBMITTING ITS ORIGINAL PROPOSAL WITHOUT REQUESTING PERMISSION TO MAKE THE SURVEY. FEC CONCLUDES THAT THE QUESTIONS PUT PHILCO-FORD ON NOTICE THAT IT HAD MISCONSTRUED THE SITE CONDITIONS AND DATA AND THAT HAVING REALIZED ITS ERROR THAT FIRM WOULD UNDER NO CIRCUMSTANCES HAVE ASSUMED THE RISK FOR ERRORS IN SUCH DATA WITHOUT FIRST HAVING CONDUCTED A SITE SURVEY. FINALLY, IT IS ALLEGED THAT ALLOWING PHILCO-FORD TO PARTICIPATE IN THE SECOND STEP WOULD BE IRREPARABLY DETRIMENTAL TO FEC BECAUSE IT IS LIKELY THAT THE PRICES FEC USED IN COMPUTING ITS FINAL NEGOTIATED PRICE HAVE BEEN DIVULGED SO THAT PHILCO-FORD WILL BE ABLE TO ASCERTAIN FEC'S NEGOTIATED PRICE. CONSEQUENTLY, UNDER THE SECOND STEP FEC WILL BE FORCED TO BID AGAINST ITSELF AS WELL AS PHILCO-FORD.

WE BELIEVE THAT THE CONTRACTING OFFICER INCORRECTLY DETERMINED THAT PHILCO-FORD'S MAY 18 REQUEST FOR AN EXTENSION OF THE TIME PERIOD FOR SUBMITTING ITS ANSWERS SO AS TO BE ABLE TO CONDUCT A SITE SURVEY IN GERMANY SHOULD BE DENIED. HAVING REGARD FOR THE TIME NECESSARY TO MAKE A SITE INSPECTION, TO EXAMINE DATA CONCERNING THE WORK, AND TO PREPARE ESTIMATES FROM THE PLANS AND SPECIFICATIONS, THE ALLOTMENT OF A GREATER AMOUNT OF TIME THAN THAT PROVIDED FOR THE DEVELOPMENT OF PROPOSALS WAS NECESSARY IN ORDER TO PERMIT SOURCES OTHER THAN THE INCUMBENT TO COMPETE ON THE PROCUREMENT. A PERIOD OF 30 DAYS WAS ALLOTTED FOR THE PREPARATION OF PROPOSALS. PHILCO-FORD ALLEGES THAT THIS PERIOD WAS FURTHER SHORTENED BECAUSE IT RECEIVED THE SOLICITATION ON APRIL 1, 1971, AND NOT ON THE MARCH 26 ISSUANCE DATE. WE NOTE THAT WITHIN THIS 25-30 DAY PERIOD A PROPOSER WHO WAS UNFAMILIER WITH THE SITE WOULD HAVE HAD TO REVIEW THE SOLICITATION AND ASSOCIATED DATA IN ORDER TO DETERMINE WHETHER OR NOT A SITE SURVEY WOULD BE NECESSARY. THE PROPOSER WOULD ALSO, MOST ASSUREDLY, HAVE FOUND IT ADVISABLE TO ATTEND THE PRE-INVITATION CONFERENCE WHICH WAS HELD ON APRIL 8, 1971. SHOULD THE NEED FOR A SITE SURVEY THEN BE DETERMINED TO EXIST, A 1 WEEK NOTIFICATION TO THE STRATCOM-EUROPE REPRESENTATIVE PRIOR TO THAT PROPOSER'S ARRIVAL IN GERMANY WAS REQUIRED. AND EVEN AFTER TIME HAD BEEN ALLOTTED FOR THE ACTUAL MAKING OF A SITE SURVEY, THE DATA GLEANED THEREFROM HAD TO BE REFINED AND ASSIMILATED AND INCORPORATED IN DEVELOPING THE PROPOSAL TO BE SUBMITTED. FURTHER, AMENDMENTS TO THE SOLICITATION WERE ISSUED ON APRIL 14 AND 16. NOT ONLY DID THE CIRCUMSTANCES CREATE A SITUATION WHICH IN ESSENCE NEGATED THE POSSIBILITY FOR ANY MEANINGFUL SITE SURVEY, BUT THEY ALSO CREATED A NONCOMPETITIVE AURA, CONSIDERING THAT ONE PROPOSER WAS NOT FAMILIAR WITH THE ACTUAL SITE CONDITIONS, WHEREAS THE OTHER WAS THE ON-SITE INCUMBENT CONTRACTOR AND THUS HAD ALL THE INFORMATION NECESSARY FOR INTELLIGENT BIDDING ON THE PROCUREMENT.

CONSEQUENTLY, PHILCO-FORD, IN VIEW OF THE SHORT PERIOD ALLOTTED FOR THE DEVELOPMENT AND SUBMISSION OF ITS PROPOSALS AND IN VIEW OF THE OPTIONAL NATURE OF THE SITE SURVEY, DETERMINED TO FOREGO THE SURVEY BECAUSE OF THE APPARENT ADEQUACY OF THE GOVERNMENT-PROVIDED DATA AND TO CONCENTRATE UPON DEVELOPMENT OF A RESPONSIVE PROPOSAL. IT WAS NOT UNTIL THE RECEIPT OF THE 284 QUESTIONS THAT PHILCO-FORD DETERMINED AN ACCEPTABLE TECHNICAL PROPOSAL COULD BE SUBMITTED ONLY WITH THE AID OF A SITE SURVEY. IN VIEW OF THE FACT THAT THE SITE SURVEY WAS NEEDED TO ADEQUATELY ANSWER THE QUESTIONS GIVEN PHILCO-FORD BY ECOM, IN VIEW OF THE FACT THAT FURTHER AMENDMENTS TO THE SOLICITATION WERE ISSUED MAY 18 AND 19, RESPECTIVELY, WITHOUT CHANGE IN THE REQUIREMENT FOR SUBMISSION OF AMENDED TECHNICAL PROPOSALS BY MAY 24, AND IN VIEW OF THE NEED TO ACTUALLY PLACE THE PROCUREMENT ON A COMPETITIVE FOOTING, THE TIME EXTENSION REQUESTED BY PHILCO-FORD TO PERMIT A SITE SURVEY SHOULD HAVE BEEN GRANTED. HAD THIS BEEN DONE, PHILCO-FORD PROBABLY WOULD NOT HAVE SUBMITTED A NONRESPONSIVE PROPOSAL REFUSING TO ASSUME THE RISKS FOR ERRORS OR DISCREPANCIES IN THE GOVERNMENT-PROVIDED DATA. FURTHER, THAT A SITE SURVEY WAS NECESSARY AND BENEFICIAL IS MADE EVIDENT BY THE FACT THAT AFTER PHILCO-FORD MADE THE SITE SURVEY, PHILCO- FORD EASILY WAS ABLE TO MAKE ITS PROPOSAL ACCEPTABLE.

WE NOTE THAT THE TWO-STEP PROCEDURE WAS INITIATED AND INTENDED TO EXTEND THE BENEFITS OF COMPETITIVE ADVERTISING TO PROCUREMENTS WHICH PREVIOUSLY WERE NEGOTIATED. WHILE THE SECOND STEP OF THIS PROCEDURE IS CONDUCTED IN ACCORDANCE WITH THE RATHER RIGID RULES OF FORMAL ADVERTISING PROCEDURES (ASPR 2-503.2), THE FIRST STEP, IN FURTHERANCE OF THE GOAL OF MAXIMIZED COMPETITION, CONTEMPLATES THE QUALIFICATION OF AS MANY SOURCES AS POSSIBLE. THIS GOAL MUST BE BALANCED, OF COURSE, WITH THE NEED OF THE PROCURING ACTIVITY TO FULFILL ITS REQUIREMENTS WITHIN GIVEN TIME LIMITS. THUS, WE HAVE HELD THAT UNDER CERTAIN CIRCUMSTANCES DURING THE FIRST STEP, THE REQUEST OF AND ACCEPTANCE BY THE CONTRACTING OFFICER OF A NEW OR AMENDED TECHNICAL PROPOSAL FROM A PROPOSER AFTER THE EXPIRATION OF THE DATE FOR SUBMISSION OF PROPOSALS AND AFTER THAT PROPOSER'S ORIGINAL PROPOSAL HAD BEEN REJECTED AS UNACCEPTABLE WAS PROPER AND CONSISTENT WITH THE PHILOSOPHY OF TWO-STEP PROCUREMENT PROCEDURES. SEE B-160324, APRIL 5 AND FEBRUARY 16, 1967. HERE, THE CONTRACTING OFFICER'S DECISION TO MAKE THE PRESENT PROCUREMENT COMPETITIVE BY ALLOWING PHILCO-FORD THE OPPORTUNITY TO SUBMIT A TECHNICALLY ACCEPTABLE PROPOSAL WAS IN LINE WITH THE FIRST STEP'S INTENDED PURPOSE OF FOSTERING COMPETITION. THAT SUCH ACTION WAS NECESSARY TO PLACE PHILCO-FORD ON AN EQUAL FOOTING WITH FEC - THE INCUMBENT CONTRACTOR - IS A SUFFICIENT ANSWER TO THE CHARGES OF UNEQUAL TREATMENT AND FAVORITISM. AS TO THE ALLEGATION THAT FEC'S PRICES HAVE BEEN DIVULGED BECAUSE OF ITS NEGOTIATIONS WITH THE GOVERNMENT AND THAT TO ALLOW ISSUANCE OF THE SECOND STEP WOULD BE UNFAIR AND HIGHLY DETRIMENTAL TO FEC, WE NOTE THAT ASPR 3-507.2 FORBIDS, AFTER RECEIPT BY THE GOVERNMENT, THE DISSEMINATION OF ANY INFORMATION CONTAINED IN ANY PROPOSAL OR QUOTATION TO THE PUBLIC OR TO ANYONE WITHIN THE GOVERNMENT NOT HAVING A LEGITIMATE INTEREST THEREIN. WE REALIZE THERE IS A POSSIBILITY THAT SOME INFORMATION ABOUT FEC'S PRICING MAY HAVE "LEAKED" FROM COMMERCIAL SOURCES. IF SO, THIS IS UNFORTUNATE, BUT IT IS NOT IN OUR OPINION A SUFFICIENT JUSTIFICATION TO MAKE AWARD TO FEC ON A SOLE SOURCE BASIS.

FOR THE FOREGOING REASONS, PHILCO-FORD SHOULD BE ALLOWED TO COMPETE IN THE SECOND STEP OF THE PROCUREMENT.