B-177986, OCT 3, 1973, 53 COMP GEN 201

B-177986, OCT 3, 1973, 53 COMP GEN 201

CONTRACTS - NEGOTIATION - COMPETITION - DISCUSSION WITH ALL OFFERORS REQUIREMENT - COST-REIMBURSEMENT CONTRACTS THE ADMINISTRATIVE VIEW THAT THERE IS NO REQUIREMENT FOR COMPETITIVE DISCUSSION UNDER FPR 1-3.805-1(A)(5) WHEN A COST-REIMBURSEMENT CONTRACT IS CONTEMPLATED MEANS THAT COMPETITIVE DISCUSSIONS WOULD NOT BE REQUIRED EVEN WHEN PROPOSED COSTS OF THE MOST TECHNICALLY ACCEPTABLE OFFEROR WERE UNREASONABLE AND UNREALISTIC, AND THE BELIEF THAT DISCUSSIONS NEED NOT BE HELD IN ANY CIRCUMSTANCES WHEN A COST-TYPE AWARD IS INVOLVED CONFLICTS WITH THE REQUIREMENT IN THE SECTION THAT DISCUSSIONS BE HELD PRIOR TO AWARD WHERE THERE IS ANY UNCERTAINTY AS TO THE PRICING OR TECHNICAL ASPECTS OF A PROPOSAL. THE FACT THAT A COST TYPE AWARD NEED NOT NECESSARILY BE MADE AT THE LOWEST ESTIMATED COST DOES NOT NULLIFY THE GENERAL REQUIREMENT FOR DISCUSSION PRIOR TO AWARD OF A NEGOTIATED CONTRACT AS THE REQUIREMENT FOR DISCUSSIONS WITH COMPETITIVE OFFERORS FOR COST-TYPE AWARDS IS MANDATORY UNLESS ONE OF THE ENUMERATED EXCEPTIONS TO THE REQUIREMENT IS INVOLVED.

TO THE SECRETARY OF LABOR, OCTOBER 3, 1973:

ENCLOSED IS A COPY OF OUR DECISION OF TODAY DENYING THE PROTEST OF SYSTEMS TECHNOLOGY CORPORATION UNDER REQUEST FOR PROPOSALS MA/OPER 7301. THIS PROTEST WAS THE SUBJECT OF REPORTS DATED FEBRUARY 28 AND MARCH 30, 1973, FROM THE DIRECTOR, OFFICE OF POLICY AND EVALUATION, AND A REPORT DATED JULY 30, 1973, FROM THE ASSISTANT SECRETARY FOR ADMINISTRATION AND MANAGEMENT, MANPOWER ADMINISTRATION.

ALTHOUGH WE HAVE DENIED THE PROTEST, SINCE THE AWARD ON AN INITIAL PROPOSAL BASIS WAS JUSTIFIED UNDER FEDERAL PROCUREMENT REGULATIONS (FPR) 1 -3.805-1(A)(5), WE MUST TAKE ISSUE WITH THE VIEW INFORMALLY ADVANCED TO OUR OFFICE BY REPRESENTATIVES OF THE PROCURING OFFICE THAT THERE IS NO REQUIREMENT FOR COMPETITIVE DISCUSSIONS UNDER FPR 1-3.805 1(A) WHEN A COST -REIMBURSEMENT CONTRACT IS CONTEMPLATED.

PERTINENT EXCERPTS FROM THE FPR ARE SET OUT BELOW.

THE PROCEDURES SET FORTH IN THIS SEC 1-3.805-1 ARE GENERALLY APPLICABLE TO NEGOTIATED PROCUREMENT. HOWEVER, THEY ARE NOT APPLICABLE WHERE THEIR USE WOULD BE INAPPROPRIATE, AS MAY BE THE CASE, FOR EXAMPLE, WHEN PROCURING RESEARCH AND DEVELOPMENT OR SPECIAL SERVICES (SUCH AS ARCHITECT- ENGINEER SERVICES) OR WHEN COST REIMBURSEMENT TYPE CONTRACTING IS ANTICIPATED (SEE SEC 1-3.805-2). WHILE THE LOWEST PRICE OR LOWEST COST TO THE GOVERNMENT IS PROPERLY THE DECIDING FACTOR IN SOURCE SELECTION IN MANY INSTANCES, AWARD OF A CONTRACT PROPERLY MAY BE INFLUENCED BY THE PROPOSAL WHICH PROMISES THE GREATEST VALUE TO THE GOVERNMENT IN TERMS OF POSSIBLE PERFORMANCE, ULTIMATE PRODUCIBILITY, GROWTH POTENTIAL, AND OTHER FACTORS.

(A) AFTER RECEIPT OF INITIAL PROPOSALS, WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMITTED PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED, EXCEPT THAT THIS REQUIREMENT NEED NOT NECESSARILY BE APPLIED TO:

(5) PROCUREMENTS IN WHICH IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT OR SERVICE THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE: PROVIDED, THAT THE REQUEST FOR PROPOSALS CONTAINS A NOTICE TO ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED AND, HENCE, THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS, FROM A PRICE AND TECHNICAL STANDPOINT, WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT. IN ANY CASE WHERE THERE IS UNCERTAINTY AS TO THE PRICING OR TECHNICAL ASPECT OF ANY PROPOSALS, THE CONTRACTING OFFICER SHALL NOT MAKE AWARD WITHOUT FURTHER EXPLORATION AND DISCUSSION PRIOR TO AWARD. ***

(C) EXCEPT WHERE COST-REIMBURSEMENT TYPE CONTRACTS ARE TO BE USED (SEE SEC 1-3.805-2), A REQUEST FOR PROPOSALS MAY PROVIDE THAT AFTER RECEIPT OF INITIAL TECHNICAL PROPOSALS, *** AWARD SHALL BE MADE TO THAT OFFEROR OF AN ACCEPTABLE PROPOSAL WHO IS THE LOW RESPONSIBLE OFFEROR.

WE THINK THE ABOVE ADMINISTRATIVE VIEW CONFLICTS WITH THE REQUIREMENT IN FPR 1-3.805-1(A)(5) THAT DISCUSSIONS BE HELD PRIOR TO AWARD WHERE THERE IS ANY UNCERTAINTY AS TO PRICING OR TECHNICAL ASPECTS OF ANY PROPOSAL. FURTHER, ACCEPTANCE OF THE ADMINISTRATIVE VIEW WOULD MEAN THAT COMPETITIVE DISCUSSIONS WOULD NOT BE REQUIRED EVEN WHEN PROPOSED COSTS OF THE MOST TECHNICALLY ACCEPTABLE OFFEROR WERE UNREASONABLE OR UNREALISTIC.

IN OUR VIEW, FPR 1-3.805-1 SHOULD NOT BE READ TO PRODUCE THESE ABSURD RESULTS. WE DO NOT READ THAT PARAGRAPH TO MEAN THAT DISCUSSIONS NEED NOT BE HELD IN ANY CIRCUMSTANCE WHEN A COST-TYPE AWARD IS INVOLVED, AS HAS BEEN SUGGESTED. RATHER, WE BELIEVE THAT THE PARAGRAPH, READ AS A WHOLE, MERELY CAUTIONS THAT A COST-TYPE AWARD NEED NOT NECESSARILY BE MADE AT THE LOWEST ESTIMATED COST, BUT DOES NOT NULLIFY THE GENERAL REQUIREMENT FOR DISCUSSIONS PRIOR TO AWARD OF A NEGOTIATED PROCUREMENT. BY CONTRAST, FPR 1-3.805-1(C) PROVIDES THAT REQUESTS FOR PROPOSALS INVOLVING FIXED-PRICE AWARDS MAY DIRECTLY PROVIDE FOR AWARD TO THE "LOW, RESPONSIBLE OFFEROR."

IN SHORT, WE BELIEVE THE REQUIREMENT FOR DISCUSSIONS WITH COMPETITIVE OFFERORS FOR COST-TYPE AWARDS IS MANDATORY EXCEPT WHEN ANY ONE OF THE FIVE EXCEPTIONS TO THE REQUIREMENT FOR DISCUSSIONS MAY PROPERLY BE INVOKED. SEE FPR 1-3.805-1(A)(1)(5).

WE THEREFORE RECOMMEND THAT ACTION BE TAKEN TO ENSURE THAT THE REQUIREMENT FOR COMPETITIVE DISCUSSIONS, EXCEPT IN THE NUMERATED CIRCUMSTANCES, IS OBSERVED IN PROCUREMENTS FOR COST-TYPE AWARDS. PLEASE ADVISE US OF THE ACTION TAKEN IN RESPONSE TO OUR RECOMMENDATION.