B-176442, MAR 8, 1973

B-176442, MAR 8, 1973

BID PROTEST - EQUAL EVALUATION RATINGS - AWARD FOR COST CEILING - BIDDER RESPONSIBILITY - USE OF COST-PLUS-FIXED-FEE CONTRACT DECISION DENYING THE PROTEST OF CHALCO ENGINEERING CORPORATION AGAINST THE AWARD OF A CONTRACT TO THE BENDIX CORPORATION UNDER AN RFQ ISSUED AT EDWARDS AFB, CALIF., FOR THE REPAIR OF PROPULSION SYSTEM COMPONENTS AND EQUIPMENT. WHERE OFFERS ARE EQUAL ON THE BASIS OF THE RFQ'S EVALUATION CRITERIA, IT IS APPROPRIATE TO RESOLVE THE SELECTION BY CONSIDERATION OF PRICE, B 176223, SEPTEMBER 25, 1972, 52 COMP. GEN. , OR THE EXISTENCE OF A COST CEILING. ALSO, THE DETERMINATION AS TO THE NECESSARY MANNING LEVEL HAS NOT BEEN SHOWN TO BE ARBITRARY OR WITHOUT BASIS IN FACT. A RESPONSIBLE PROSPECTIVE CONTRACTOR IS ONE WHO HAS THE NECESSARY ORGANIZATION, EXPERIENCE, OPERATIONAL CONTROLS, AND TECHNICAL SKILLS, OR THE ABILITY TO OBTAIN THEM. ASPR 1-903.2. MOREOVER, THE PROVISIONS OF PUB. L. 92-473 ARE INAPPLICABLE TO THIS PROCUREMENT SINCE THEY WERE NOT ENACTED UNTIL AFTER THIS AWARD. FINALLY, A COST-PLUS-FIXED-FEE CONTRACT WITH A COST CEILING MAY BE PROPERLY PROCURED THROUGH AN RFQ.

TO MR. H. RANDALL BIXLER:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 28, 1972, AND PRIOR CORRESPONDENCE PROTESTING ON BEHALF OF THE CHALCO ENGINEERING CORPORATION (CHALCO) AGAINST THE AWARD OF A CONTRACT TO THE BENDIX CORPORATION (BENDIX) UNDER REQUEST FOR QUOTATIONS (RFQ) NO. F04611-72-Q 0096 ISSUED AT EDWARDS AIR FORCE BASE, CALIFORNIA.

THE SUBJECT SOLICITATION WAS FOR THE PROCUREMENT OF LABOR, PARTS AND MATERIALS FOR THE REPAIR, OVERHAUL, MODIFICATION AND CLEANING OF PROPULSION SYSTEM COMPONENTS AND EQUIPMENT AT THE AIR FORCE ROCKET PROPULSION LABORATORY AT EDWARDS AIR FORCE BASE. CHALCO, THE INCUMBENT CONTRACTOR, AND BENDIX WERE THE ONLY COMPANIES THAT SUBMITTED QUOTATIONS UNDER THE RFQ, WHICH STATED THAT "A COST-PLUS-A-FIXED-FEE (CPFF) TYPE CONTRACT IS CONTEMPLATED FOR THIS PROCUREMENT, HOWEVER, QUOTATIONS OFFERING ANOTHER TYPE CONTRACT WILL BE CONSIDERED."

THE INITIAL PROPOSAL OF CHALCO CALLED FOR 26 EMPLOYEES AT A TOTAL CPFF OF $398,734. THE INITIAL BENDIX CPFF PROPOSAL WAS IN THE AMOUNT OF $399,950 USING 34 EMPLOYEES. NEGOTIATIONS WERE CONDUCTED WITH BOTH PROPOSERS. JUNE 12, 1972, BENDIX SUBMITTED A REVISED PROPOSAL REDUCING THE INITIAL PROPOSAL TO $309,292 AND 26 EMPLOYEES. THEREAFTER, ON JUNE 13, 1972, CHALCO SUBMITTED A REVISED PROPOSAL OF $384,606 AND 25 EMPLOYEES.

SUBSEQUENTLY, BOTH COMPANIES WERE ADVISED THAT JUNE 27, 1972, WOULD BE THE CLOSING DATE FOR NEGOTIATIONS. ON THAT DATE, THERE WAS RECEIVED FROM CHALCO A SECOND REVISED PROPOSAL REDUCING THE NUMBER OF EMPLOYEES TO 21 AND THE TOTAL CPFF TO $274,062. NOTWITHSTANDING THE REDUCTION, AWARD OF THE CONTRACT WAS MADE TO BENDIX ON JUNE 30, 1972.

YOU HAVE PROTESTED THE AWARD TO BENDIX ON A NUMBER OF GROUNDS. YOU HAVE CONTENDED THAT CHALCO WAS THE LOWEST RESPONSIVE AND RESPONSIBLE OFFEROR AND THEREFORE ENTITLED TO AWARD. HOWEVER, A REVIEW OF THE ADMINISTRATIVE RECORD REVEALS THAT THE CHALCO AND BENDIX TECHNICAL PROPOSALS WERE EVALUATED AND RECEIVED RATING SCORES OF 40 AND 43, RESPECTIVELY, BUT IN VIEW OF THE SMALL DIFFERENCE IN SCORES WERE CONSIDERED TO BE EQUAL. SINCE THE PROPOSALS WERE SUBSTANTIALLY EQUAL ON THE BASIS OF THE FACTORS PROVIDED FOR EVALUATION IN THE RFQ, A DETERMINATION WAS MADE TO MAKE AN AWARD TO BENDIX BECAUSE OF SKEPTICISM THAT CHALCO WOULD BE ABLE TO PERFORM ADEQUATELY WITH 21 EMPLOYEES AND BECAUSE WITH BENDIX THERE WOULD BE LESS RISK OF COST OVERRUN BECAUSE IT OFFERED A COST CEILING. CHALCO HAD DECLINED TO OFFER A COST CEILING WHEN PROVIDED AN OPPORTUNITY TO DO SO.

YOU HAVE CONTENDED THAT "RISK" WAS NOT A PROPER FACTOR FOR CONSIDERATION SINCE IT WAS NOT ONE OF THE FACTORS ENUMERATED FOR EVALUATION IN THE RFQ. THE FACTORS ENUMERATED IN THE RFQ WERE UNDERSTANDING THE PROBLEM, SOUNDNESS OF APPROACH, COMPLIANCE WITH REQUIREMENTS AND SPECIAL TECHNICAL FACTORS. HOWEVER, SINCE LITTLE DIFFERENCE WAS FOUND TO EXIST IN THE TECHNICAL PROPOSALS FOR THE ENUMERATED FACTORS, AN AWARD SELECTION BASED ON COST RISK DOES NOT APPEAR TO BE INAPPROPRIATE ESPECIALLY WHERE THE RFQ PROVIDED FOR THE CONSIDERATION OF OTHER THAN A STRICT CPFF TYPE AND CHALCO WAS INVITED TO OFFER A COST CEILING TOO. WHERE OFFERS ARE EQUAL ON THE BASIS OF EVALUATION PROVIDED IN THE RFQ, IT WOULD NOT BE INAPPROPRIATE TO RESOLVE THE SELECTION BY CONSIDERATION OF PRICE. B-176223, SEPTEMBER 25, 1972, 52 COMP. GEN. . A COST CEILING HAS THE EFFECT OF LIMITING THE AMOUNT OR PRICE THAT MAY BE PAID UNDER A CONTRACT AND THEREFORE MAY BE CONSIDERED AN INTEGRAL PART OF PRICE. THUS, WE DO NOT FIND THE RELIANCE UPON THE COST CEILING TO BE INAPPROPRIATE.

YOU HAVE DISPUTED THAT THERE WAS A BASIS FOR DOUBTING THE 21 EMPLOYEE MANNING LEVEL PROPOSED BY CHALCO. YOU HAVE STATED THAT THE NUMBER WAS BASED UPON THE EXPERIENCE THAT CHALCO HAD UNDER THE PRIOR CONTRACT. FURTHER, YOU HAVE NOTED THAT THE ADMINISTRATIVE REPORT CONTAINS THE STATEMENT THAT THROUGHOUT THE NEGOTIATIONS A MANNING LEVEL OF 24 WAS CONSIDERED AS A FLOOR BELOW WHICH A CONTRACTOR COULD NOT PROPERLY OPERATE. SINCE THERE WAS A RECOGNIZED 15 PERCENT REDUCTION IN WORK LEVELS BROUGHT TO THE OFFERORS' ATTENTION DURING NEGOTIATIONS, THE MANNING LEVEL FLOOR, WHICH HAD NEVER BEEN COMMUNICATED TO CHALCO, SHOULD HAVE BEEN REDUCED TO 21 EMPLOYEES ACCORDING TO YOU.

ALTHOUGH WE AGREE THAT THE MANNING LEVEL FLOOR SHOULD HAVE BEEN COMMUNICATED TO OFFERORS FOR CONSIDERATION IN THE PREPARATION OF THEIR PROPOSALS, WE DO NOT BELIEVE THAT THE FAILURE TO PROVIDE SUCH INFORMATION IN THIS CASE IS A MATERIAL BASIS FOR DISTURBING THE AWARD, SINCE THE ULTIMATE DETERMINATION DID NOT TURN ON THE MANNING LEVEL ALONE, BUT UPON THE TOTAL COST RISK. FURTHER, IT APPEARS FROM MEMORANDA IN THE RECORD THAT, PRIOR TO NEGOTIATIONS WITH THE OFFERORS, GOVERNMENT PERSONNEL TOOK INTO CONSIDERATION THE FACT THAT THE WORK HAD BEEN PERFORMED IN THE PAST WITH LESS THAN 24 PERSONNEL. BECAUSE OF REPRESENTATIONS MADE BY PROJECT ENGINEERS THAT THE WORKLOAD WAS BEING PERFORMED WITH 24 PEOPLE AND THAT 24 WAS THE PROPER LEVEL, IT WAS DECIDED THAT SUCH LEVEL WAS APPROPRIATE. FURTHER, IT WAS FELT THAT THE 24 PERSONNEL LEVEL WOULD NOT BE AFFECTED BY THE RECOGNIZED 15 PERCENT WORK LEVEL REDUCTION SINCE THAT REDUCTION WAS CONSIDERED TO BE OFFSET BY A REQUIREMENT FOR EMPLOYEES IN A COMPONENT MANAGEMENT RECORDS PROGRAM. THEREFORE, THE MANNING LEVEL DOES NOT APPEAR TO HAVE BEEN AN ARBITRARY FIGURE OR TO HAVE OVERLOOKED THE 15 PERCENT REDUCTION IN THE WORKLOAD.

YOU CONTEND THAT CHALCO WAS A SMALL BUSINESS FIRM AND THAT THE AIR FORCE FAILED TO CONSIDER THIS FACTOR IN MAKING THE AWARD TO A LARGE FIRM, BENDIX. SINCE THE INSTANT PROCUREMENT WAS NOT A SMALL BUSINESS SET-ASIDE, CHALCO WAS NOT ENTITLED TO ANY PREFERENCE BECAUSE OF ITS SMALL BUSINESS SIZE AND AWARD COULD BE MADE TO ANY FIRM REGARDLESS OF SIZE.

ANOTHER CONTENTION IS THAT THE SERVICES CALLED FOR UNDER THE CONTRACT ARE TOTALLY UNIQUE AND THAT CHALCO POSSESSES THE ONLY EMPLOYEES EXPERIENCED IN THIS TYPE OF SERVICE. HOWEVER, UNDER THE STANDARDS PROVIDED IN ASPR 1- 903.2 A RESPONSIBLE PROSPECTIVE CONTRACTOR IS ONE WHO HAS THE NECESSARY ORGANIZATION, EXPERIENCE, OPERATIONAL CONTROLS AND TECHNICAL SKILLS OR THE ABILITY TO OBTAIN THEM. IN THIS CASE, BEFORE AN AWARD WAS MADE TO BENDIX, THE CONTRACTING OFFICER MADE SUCH A DETERMINATION. SINCE IT IS NOT UNUSUAL FOR A SUCCESSOR CONTRACTOR IN A MANNING CONTRACT TO HIRE THE EMPLOYEES OF THE PREDECESSOR CONTRACTOR AND BENDIX HAD INDICATED SUCH AN INTENTION, THERE APPEARS TO HAVE BEEN A BASIS FOR CONCLUDING THAT BENDIX WOULD BE ABLE TO OBTAIN THE NECESSARY WORK FORCE AND BE ABLE TO PERFORM AS REQUIRED.

IT IS FURTHER CONTENDED THAT THE AIR FORCE WAIVED FOR BENDIX THE REQUIREMENT IN PART I, SECTION C, ITEM 20(D) OF THE RFQ WHICH CALLED FOR THE OFFEROR TO FURNISH:

NAMES OF PERSONS TO BE ASSIGNED FOR DIRECT WORK ON THE PROJECT AND AS DIRECT TECHNICAL SUPERVISORS, PLUS:

(1) THEIR EXPERIENCE ON SIMILAR PROJECTS OR EQUIPMENT.

(2) THEIR GENERAL QUALIFICATIONS, INCLUDING EDUCATION AND SPECIFIC ACCOMPLISHMENTS.

(3) PERCENT OF TOTAL TIME EACH WILL BE AVAILABLE FOR THIS PROJECT FOR THE DURATION ESTIMATED BY THE OFFEROR.

IT IS CONTENDED THAT THIS PROVISION REQUIRED THE LIST OF EMPLOYEES TO INCLUDE ALL WHO ARE ASSIGNED FOR DIRECT WORK AND ALSO THOSE ASSIGNED AS TECHNICAL SUPERVISORS. IN THAT CONNECTION, IT IS STATED THAT BENDIX WOULD HAVE HAD TO SUBMIT RESUMES ON AT LEAST 12 INDIVIDUALS. BENDIX CONSIDERED IT TO APPLY ONLY TO DIRECT TECHNICAL SUPERVISORS AND FURNISHED ONLY FOUR RESUMES. HOWEVER, SINCE CHALCO SUBMITTED ONLY ONE MORE RESUME THAN BENDIX, IT APPEARS THAT CHALCO'S UNDERSTANDING AT THE TIME OF SUBMISSION WAS NO DIFFERENT THAN THAT OF BENDIX AND THAT WAIVER, AS SUCH, WAS NOT INVOLVED.

ANOTHER BASIS OF PROTEST IS THAT BENDIX PLANNED TO HIRE MANY CHALCO PERSONNEL AT A 15 TO 20 PERCENT SALARY REDUCTION WHICH GAVE THEM A COMPETITIVE ADVANTAGE IN THE PROCUREMENT. FURTHER, YOU STATE THAT THE INTENT OF CONGRESS TO AVOID SUCH LABOR PRACTICES WAS EXPRESSED IN AN AMENDMENT TO THE SERVICE CONTRACT ACT OF 1965, H.R. 15376, 92ND CONGRESS, WHICH REQUIRES A SUCCESSOR CONTRACTOR TO BE BOUND BY THE PRIOR CONTRACTOR'S WAGE AGREEMENT. HOWEVER, THE AMENDMENT, ENACTED INTO LAW ON OCTOBER 9, 1972, AS PUBLIC LAW 92-473, WAS NOT IN EFFECT WHEN THE PROPOSALS WERE BEING EVALUATED PRIOR TO THE AWARD ON JUNE 30, 1972.

YOU HAVE ALSO CONTENDED THAT BOTH BENDIX AND CHALCO WERE ORALLY ADVISED TO BID ON A 15 PERCENT REDUCTION IN WORK LEVELS AS STATED IN THE RFQ BUT THAT THE RFQ WAS NEVER AMENDED IN WRITING TO REFLECT THE CHANGE. ALTHOUGH IT MAY BE THAT THE WORK REDUCTION SHOULD HAVE BEEN REDUCED TO A WRITTEN AMENDMENT IN ACCORDANCE WITH ASPR 3-805.1(E), THE FACT REMAINS THAT BOTH CHALCO AND BENDIX WERE ORALLY ADVISED OF THE CHANGE AND REVISED THEIR PROPOSALS AS A RESULT OF THE INFORMATION. CHALCO THEREFORE WAS NOT PREJUDICED BY THE ABSENCE OF A FORMAL MODIFICATION.

THE FINAL BASIS OF THE PROTEST IS THAT IF THE COSTS INCIDENT TO THE COMPLETION OF THE CONTRACT COULD BE ACCURATELY PREDICTED AND FROZEN, THE PROCUREMENT SHOULD HAVE BEEN ADVERTISED RATHER THAN NEGOTIATED. AS NOTED ABOVE, BENDIX ACCEPTED A COST CEILING ON THE CONTRACT. THIS DOES NOT MEAN THAT IT IS A FIXED PRICE CONTRACT, BUT ONLY THAT IT WILL BE ONE WHEN THE CEILING IS REACHED. SUCH AN APPROACH IS NOT INCONSISTENT WITH NEGOTIATION. MOREOVER, NEGOTIATION IS NOT PRECLUDED SIMPLY BECAUSE A CONTRACT IS TO BE AWARDED FOR A FIXED PRICE.

IN VIEW OF THE FOREGOING, THE PROTEST IS DENIED.