B-175408, JUN 28, 1972

B-175408, JUN 28, 1972

BID PROTEST - ALLEGED RESTRICTIVE PROCUREMENT DECISION DENYING THE PROTEST OF MANAGEMENT CONTROL METHODS, INC; AGAINST AWARD TO INFORMATION SYSTEMS DEVELOPMENT, INC; UNDER AN IFB ISSUED BY THE HEW OFFICE OF EDUCATION FOR SUPPORT SERVICES IN PROCESSING STUDENT LOAN APPLICATIONS. IT APPEARS THAT THERE EXISTED A SUFFICIENT BASIS FOR RESTRICTING PERFORMANCE TO A SPECIFIC GEOGRAPHIC AREA AND FOR LIMITING THE TIME PERIOD FOR OBTAINING NECESSARY PROCESSING EQUIPMENT. FURTHER, PROTESTANT'S ALLEGATION THAT THE SUCCESSFUL CONTRACTOR WAS EXPECTING CHANGE ORDERS TO OFFSET ITS LOW BID IS PURELY SPECULATIVE. ACCORDINGLY, THE PROTEST MUST BE DENIED.

TO MANAGEMENT CONTROL METHODS, INC.:

WE REFER TO YOUR LETTER OF MARCH 8, 1972, AND SUBSEQUENT CORRESPONDENCE CONCERNING YOUR PROTEST UNDER INVITATION FOR BIDS (IFB) NO. 1-72, OE/R07, ISSUED BY THE U.S. OFFICE OF EDUCATION, DEPARTMENT OF HEALTH, EDUCATION AND WELFARE (HEW), ON FEBRUARY 15, 1972, FOR SUPPORT SERVICES IN PROCESSING LOAN APPLICATIONS UNDER THE STUDENT FINANCIAL AID PROGRAM FOR THE PERIOD APRIL 1, 1972, THROUGH MARCH 31, 1973.

THE IFB, AS AMENDED, STIPULATED, AMONG OTHER THINGS, THAT THE CONTRACTOR MUST BE LOCATED WITHIN THE COMMERCIAL GEOGRAPHIC LIMITS OF KANSAS CITY, MISSOURI; THAT THE CONTRACTOR WOULD HAVE TEN WORKING DAYS FROM THE EFFECTIVE DATE OF THE CONTRACT IN WHICH TO ATTAIN A LEVEL OF PROFICIENCY SUFFICIENT TO PROCESS THE APPROXIMATE DAILY VOLUME OF APPLICATIONS; AND THAT RECORDS WERE TO BE RECEIVED ON A MOHAWK 7505 DATA TRANSMITTER.

ON MARCH 8, 1972, YOU PROTESTED THE INCLUSION OF THE GEOGRAPHIC RESTRICTION IN THE IFB, AND CONTENDED THAT OTHER SPECIFICATIONS IN THE SOLICITATION WERE AMBIGUOUS. SUBSEQUENTLY, THE DEPARTMENT AMENDED THE IFB IN AN ATTEMPT TO CLARIFY THE SPECIFICATIONS. SINCE THE DEPARTMENT CONSIDERED THAT THE GEOGRAPHIC RESTRICTION WAS A MINIMUM NEED FOR THIS PROCUREMENT, THE PROVISION WAS NOT DELETED.

ON APRIL 5, 1972, BIDS WERE RECEIVED FROM FIVE COMPANIES, INCLUDING YOUR CONCERN AND INFORMATION SYSTEMS DEVELOPMENT, INC. (ISD). SUBSEQUENTLY, THE CONTRACTING OFFICER DETERMINED, IN ACCORDANCE WITH FEDERAL PROCUREMENT REGULATIONS (FPR) 1-2.407-8(B)(4), THAT AN IMMEDIATE AWARD TO ISD WAS NECESSARY, NOTWITHSTANDING THE PENDENCY OF YOUR PROTEST, TO INSURE CONTINUOUS PROCESSING OF THE APPLICATIONS. IN VIEW THEREOF, AND AS ISD HAD SUBMITTED THE LOWEST BID FOR THE REQUIREMENT, AN AWARD WAS MADE TO THAT CONCERN ON APRIL 12, 1972.

YOU NOW STATE THAT ISD HAD AN INSURMOUNTABLE ADVANTAGE FOR THE AWARD BECAUSE OF THAT CONCERN'S LOCATION WITHIN THE AREA PRESCRIBED IN THE IFB; THAT THE TIME ALLOWED FOR OBTAINING A LEVEL OF PROFICIENCY SUFFICIENT TO PROCESS THE DAILY VOLUME OF APPLICATIONS WAS TOO BRIEF, CONSIDERING THE DELIVERY TIME NECESSARY FOR OBTAINING THE REQUIRED PROCESSING EQUIPMENT; AND THAT ISD WAS EXPECTING TO RECEIVE CHANGE ORDERS TO OFFSET THE COMPANY'S LOW BID.

HEW REPORTS THAT ITS DECISION TO USE A CENTRAL PROCESSING CENTER WAS MADE AFTER TAKING A MANAGEMENT SURVEY OF THE ADMINISTRATION OF THE STUDENT LOAN PROGRAM. THAT SURVEY INDICATED THAT IT TOOK TOO MUCH TIME TO PROCESS LOAN APPLICATIONS BECAUSE LOAN APPLICATIONS WERE ROUTED THROUGH THREE CONTRACTOR-OPERATED ENCODER SITES AND WERE GIVEN MULTIPLE, MANUAL REVIEWS. ACCORDINGLY, THE SURVEY RECOMMENDED THAT THE THREE ENCODER SITES (KANSAS CITY, ATLANTA, SAN FRANCISCO) BE REPLACED WITH ONE CENTRALIZED DATA PREPARATION AND PROCESSING CENTER.

HEW FURTHER STATES THAT SEVERAL FACTORS INFLUENCED ITS DECISION TO SELECT KANSAS CITY AS THE SITE FOR THIS CENTER AS FOLLOWS: (1) SKILLED LABOR WAS AVAILABLE IN THE CITY; (2) 50 PERCENT OF THE FEDERAL INSURANCE COMMITMENT OPERATIONS WERE CURRENTLY MADE IN THE CITY; (3) THE CITY WAS CENTRALLY LOCATED IN THE UNITED STATES.

OUR OFFICE HAS HELD THAT A DECISION TO RESTRICT PERFORMANCE TO A SPECIFIC GEOGRAPHIC AREA IS A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY WHEN CONDITIONS WARRANT SUCH RESTRICTION. B-173141, OCTOBER 14, 1971; B- 161807, SEPTEMBER 7, 1967. WE CANNOT CONCLUDE, BASED ON OUR REVIEW OF RECORD, THAT HEW'S DECISION TO CONSOLIDATE THE WORK OF THE THREE ENCODER SITES AND REQUIRE THE CONTRACTOR TO BE LOCATED IN KANSAS CITY WAS ARBITRARY OR MADE IN BAD FAITH, OR THAT AN ADEQUATE BASIS HAS BEEN PRESENTED FOR OBJECTION BY THIS OFFICE TO SUCH ACTION.

CONCERNING YOUR ALLEGATION THAT THE TIME ALLOWED FOR OBTAINING A LEVEL OF PROFICIENCY SUFFICIENT TO PROCESS THE DAILY VOLUME OF APPLICATIONS WAS TOO BRIEF, CONSIDERING THE NECESSITY FOR OBTAINING MACHINES WITH THE ESSENTIAL DATA TRANSMISSION CAPABILITIES, IT IS THE POSITION OF HEW THAT SUCH REQUIREMENT WAS NEEDED IN ORDER TO CONTINUE PROCESSING THE APPLICATIONS IN AN EFFECTIVE MANNER. WE CANNOT DISAGREE WITH HEW'S POSITION THAT THE PROCESSING OF THE LOAN APPLICATIONS WITHOUT UNDUE DELAY WAS A MATERIAL NEED OF THE AGENCY WHICH WARRANTED THE SHORT PERIOD FOR OBTAINING THE NECESSARY PROCESSING EQUIPMENT TO MEET SUCH NEED. ALTHOUGH YOU STATE THAT YOU WOULD HAVE HAD TO OBTAIN ADDITIONAL EQUIPMENT TO HAVE GONE INTO OPERATION IN KANSAS CITY, THIS DOES NOT ESTABLISH THAT YOU WERE UNDULY PREJUDICED SINCE IT IS LIKELY THAT ISD WOULD ALSO HAVE BEEN REQUIRED TO OBTAIN ADDITIONAL PERSONNEL AND EQUIPMENT, BY REASON OF THE CONSOLIDATION OF THE OPERATIONS OF THE THREE SEPARATE LOCATIONS AT ONE SITE, TO MEET THE LEVEL OF PROFICIENCY REQUIREMENT OF THE IFB. ALSO, YOUR ALLEGATION THAT ISD EXPECTED TO RECEIVE CHANGE ORDERS TO OFFSET ITS LOW BID, MUST BE REGARDED AS SPECULATIVE AND NOT PROVIDING A SUBSTANTIAL BASIS FOR QUESTIONING THE VALIDITY OF THE AWARD.

FOR THE REASONS SET FORTH ABOVE, YOUR PROTEST MUST BE DENIED.