B-182984, MAY 13, 1975

B-182984, MAY 13, 1975

1. WHERE IT IS ALLEGED THAT SUCCESSFUL OFFEROR DID NOT MEET SPECIFICATION REQUIREMENTS OF SOLICITATION, GAO WILL NOT OVERTURN CONTRACT AWARD, SINCE SUCH DETERMINATIONS ARE MATTERS PRIMARILY WITHIN JURISDICTION OF PROCURING AGENCY, AND IN ABSENCE OF CLEAR AND CONVINCING EVIDENCE OF ABUSE OF AGENCY'S DISCRETION SUCH DETERMINATIONS WILL NOT BE DISTURBED. 2. PROTEST ALLEGING PROPOSAL IRREGULARITIES BASED ON EVENTS OCCURRING BEFORE SOLICITATION WAS ISSUED, BUT NOT FILED UNTIL AFTER AWARD WAS MADE, IS NOT TIMELY UNDER 4 C.F.R. SEC. 20.2(A) (1974). 3. AMOUNT OF TRADE-IN ALLOWANCES MADE IN OFFERS IS MATTER OF BUSINESS JUDGMENT. PROTESTER'S ALLEGATION THAT IT WAS FORCED BY CONTRACTING OFFICER TO MAINTAIN PRELIMINARY, INFORMATIONAL LOW TRADE-IN ALLOWANCE WHILE SUCCESSFUL OFFEROR WAS PERMITTED TO INCREASE AMOUNT OF TRADE-IN ALLOWANCE, IS NOT SUPPORTED BY THE EVIDENCE OF RECORD, AND IN THE ABSENCE OF SUCH EVIDENCE, LEGALITY OF CONTRACT AWARD WILL NOT BE QUESTIONED.

DICTAMATIC CORPORATION:

THIS CASE INVOLVES A PROTEST BY DICTAMATIC CORPORATION (DICTAMATIC) AGAINST THE AWARD OF A CONTRACT TO DICTAPHONE COPORATION (DICTAPHONE) FOR A WORD PROCESSING SYSTEM AT THE BREMERTON, WASHINGTON, NAVAL REGIONAL MEDICAL CENTER (BMC), UNDER DELIVERY ORDER NO. N68095-75-F 2090.

BEGINNING LATE IN 1971, DICTAMATIC WAS IN CONTACT WITH THE OFFICE OF PATIENT AFFAIRS OF THE BMC TO PERSUADE THE HOSPITAL PERSONNEL OF THE USEFULNESS OF A MORE MODERN SYSTEM OF RECORDING AND PROCESSING MEDICAL DICTATION. DICTAMATIC STATES THAT:

"*** THESE EFFORTS INCLUDED SURVEYS, OBSERVATIONS, EDUCATION, AND DEMONSTRATION OF THE BENEFITS THAT WOULD BE DERIVED FROM THE TYPE OF SYSTEM WE RECOMMENDED. PROPOSALS COVERING SYSTEM DESIGN AND COSTS WERE SUBMITTED PERIODICALLY. JUSTIFICATION FOR THE REPLACEMENT OF THE SYSTEM WAS ARRIVED AT LARGELY THROUGH (DICTAMATIC'S) *** EFFORTS, WITH REINFORCEMENT PROVIDED BY REPRESENTATIVES OF DICTAPHONE ***"

ON OCTOBER 4, 1974, THE DEPARTMENT OF THE NAVY'S BUREAU OF MEDICINE AND SURGERY GAVE THE BMC APPROVAL AND FUNDING AUTHORITY FOR THE DICTATION SYSTEM. THE BMC PATIENT AFFAIRS OFFICER WAS INFORMED OF THE APPROVAL, AND HE WAS ASKED BY THE CONTRACTING OFFICER TO DEVELOP PLANS AND SPECIFICATIONS SO THAT SOLICITATIONS COULD BE SENT TO QUALIFIED SOURCES. DICTAMATIC AND DICTAPHONE WERE THE ONLY QUALIFIED SOURCES IDENTIFIED ON THE GENERAL SERVICES ADMINISTRATION SCHEDULE, AND THE BMC PATIENT AFFAIRS OFFICER ASKED THEM FOR ASSISTANCE IN DEVELOPING THE SPECIFICATIONS REQUESTED BY THE CONTRACTING OFFICER. IN RESPONSE TO THIS REQUEST, BOTH CORPORATIONS SUBMITTED INFORMAL PROPOSALS FROM WHICH THE DESIRED SPECIFICATIONS COULD BE DEVELOPED. IN THIS REGARD THE CONTRACTING OFFICER STATES:

"IT SHOULD BE EMPHASIZED THAT THE RESPONSES WERE INFORMAL PROPOSALS TO DEVELOP SPECIFICATIONS AND WERE NOT RESPONSES TO FORMAL SOLICITATIONS

UNFORTUNATELY, ON OCTOBER 23, 1974, BEFORE ANY FORMAL SOLICITATIONS HAD BEEN ISSUED, THE BMC PATIENT AFFAIRS OFFICER ORALLY INFORMED A DICTAMATIC REPRESENTATIVE THAT, BASED ON THE INFORMAL PROPOSALS, DICTAMATIC WOULD BE AWARDED THE CONTRACT.

THE CONTRACTING OFFICER ELABORATES ON THIS OCCURRENCE IN HIS ADMINISTRATIVE REPORT AS FOLLOWS:

"*** APPROXIMATELY TWO HOURS AFTER THAT VERBAL DELIVERY ORDER, PLACED BY AN INDIVIDUAL NOT AUTHORIZED TO OBLIGATE THE GOVERNMENT, I BECAME AWARE OF THE SITUATION AND IMMEDIATELY TOOK STEPS TO CANCEL IT. *** WITHIN 2 TO 3 HOURS AFTER THAT, THE DICTAMATIC CORPORATION HAD RECEIVED OFFICIAL NOTIFICATION THAT THE VERBAL DELIVERY ORDER NUMBER WAS CANCELED."

ON NOVEMBER 8, 1974, A FORMAL REQUEST FOR INFORMATION WHICH WOULD FORM THE BASIS OF A PURCHASE ORDER WAS SENT TO BOTH DICTAMATIC AND DICTAPHONE. THE LETTER REQUEST WAS AMENDED ON NOVEMBER 14 AND BOTH CORPORATIONS SUBMITTED TIMELY OFFERS. ON DECEMBER 17, 1974, CONTRACT NO. N68095-75-F- 2090 WAS AWARDED TO DICTAPHONE. ON DECEMBER 23, 1974, THE CONTRACTING OFFICER RECEIVED A LETTER DATED DECEMBER 19, 1974, FROM DICTAMATIC, PROTESTING THE AWARD TO DICTAPHONE. THE CONTRACTING OFFICER DENIED DICTAMATIC'S PROTEST ON DECEMBER 31, 1974, AND BY LETTERS OF JANUARY 3 AND 7, 1975, RECEIVED IN OUR OFFICE ON JANUARY 8 AND 9, 1975, RESPECTIVELY, DICTAMATIC HAS PROTESTED TO US THE AWARD TO DICTAPHONE.

DICTAMATIC BASES ITS PROTEST ON TWO THEORIES:

(1) DICTAPHONE'S EQUIPMENT DOES NOT MEET ALL OF THE SPECIFICATIONS SET FORTH IN THE NOVEMBER 8 LETTER REQUEST AND THEREFORE ITS OFFER IS NONRESPONSIVE, AND

(2) THERE WERE VARIOUS OTHER IRREGULARITIES WHICH SHOULD RESULT IN THE DISQUALIFICATION OF DICTAPHONE'S OFFER.

AS TO THE FIRST GROUND OF PROTEST, DICTAMATIC STATES SIMPLY THAT:

"***ON PAGE 1, PARAGRAPH B, NUMBER 2 (OF THE LETTER OF NOVEMBER 8), THE SPECIFICATIONS STATE THAT THE RECORDER/TRANSCRIBER SHOULD HAVE THE 'ABILITY TO ACCEPT DIRECT WIRE, DIAL DICTATE, TOUCH TONE, AUTOMATIC CHANNEL SELECTION, PROGRAMMER INPUT IN ANY COMBINATION SO DESIRED.' EQUIPMENT LISTED IN DICTAPHONE'S AUTHORIZED FEDERAL SUPPLY SCHEDULE DOES NOT MEET THAT SPECIFICATION."

THE CONTRACTING OFFICER STATED IN RESPONSE TO DICTAMATIC'S CLAIM OF NONRESPONSIVENESS THAT "THE SYSTEMS OFFERED BY YOUR FIRM AND BY DICTAPHONE BOTH MEET THE SPECIFICATIONS. THIS WAS CONFIRMED IN WRITING PRIOR TO AWARD." OUR OFFICE HAS CONSISTENTLY HELD THAT THE DRAFTING OF SPECIFICATIONS TO MEET THE NEEDS OF THE GOVERNMENT AND THE DETERMINATION OF WHETHER PRODUCTS OFFERED MEET THOSE NEEDS ARE MATTERS PRIMARILY WITHIN THE JURISDICTION OF THE PROCURING AGENCY, AND IN THE ABSENCE OF CLEAR AND CONVINCING EVIDENCE OF ERROR WE WILL NOT DISTURB THE AGENCY'S EXERCISE OF DISCRETION. SINCE DICTAMATIC HAS PRODUCED NO EVIDENCE TO SUPPORT ITS ALLEGATIONS OF DICTAPHONE'S NONRESPONSIVENESS THERE IS NO LEGAL BASIS FOR US TO QUESTION THE AWARD TO DICTAPHONE.

IT IS CLEAR FROM THE RECORD THAT DICTAMATIC'S SECOND BASIS FOR PROTEST IS CAUSED IN LARGE PART BY ITS MISTAKEN BELIEF THAT IN SUBMITTING INFORMAL PROPOSALS TO THE BMC PATIENT AFFAIRS OFFICER AS A PRELIMINARY STEP IN DEVELOPING SPECIFICATIONS IT WAS ACTUALLY BIDDING FOR A CONTRACT, COUPLED WITH THE MISTAKEN ORAL ADVICE THAT IT WOULD RECEIVE THE AWARD. IT IS ALSO CLEAR THAT THE ONLY FORMAL SOLICITATION FOR THIS PROCUREMENT WAS ISSUED ON NOVEMBER 8, 1974. THE COVER LETTER TO DICTAMATIC ACCOMPANYING THE SOLICITATION SPECIFICALLY STATED THAT:

"THIS SHOULD BE CONSIDERED A FORMAL REQUEST FOR INFORMATION FROM THE REQUEST HAS BEEN FORWARDED TO THE DICTAPHONE CORPORATION THIS SAME DATE. INFORMATION RECEIVED AS A RESULT OF THESE REQUESTS WILL FORM THE BASIS OF A PURCHASE DECISION IN STRICT COMPLIANCE WITH APPLICABLE LAW AND WITHIN AVAILABLE FUNDS."

UNDER THESE CIRCUMSTANCES IT IS CLEAR THAT DICTAMATIC HAD CONSTRUCTIVE, IF NOT ACTUAL, KNOWLEDGE OF PRECISELY WHAT TRANSPIRED BETWEEN OCTOBER 4, 1974, WHEN FUNDING AUTHORITY WAS GIVEN FOR THE DICTATING SYSTEM, AND NOVEMBER 8, 1974, WHEN THE SOLICITATION WAS ISSUED.

OUR INTERIM BID PROTEST PROCEDURES AND STANDARDS, AT 4 CODE OF FEDERAL REGULATIONS (C.F.R.) 20.2(A) (1974) REQUIRE THAT:

"*** PROTESTS BASED UPON ALLEGED IMPROPRIETIES IN ANY TYPE OF SOLICITATION WHICH ARE APPARENT PRIOR TO BID OPENING OR THE CLOSING DATE FOR RECEIPT OF PROPOSALS SHALL BE FILED PRIOR TO BID OPENING OR THE CLOSING DATE FOR RECEIPT OF PROPOSALS."

IT IS THE INTENT OF THESE REGULATIONS TO RESOLVE PROTESTS AT THE EARLIEST TIME POSSIBLE.

APPARENTLY THE IRREGULARITIES ALLEGED BY DICTAMATIC WERE EVIDENT BY LATE OCTOBER OF 1974. NEVERTHELESS DICTAMATIC DID NOT FILE A PROTEST BASED ON THESE MATTERS UNTIL APPROXIMATELY TWO MONTHS AFTER THIS BASIS FOR ITS PROTEST BECAME KNOWN. AS A MATTER OF FACT DICTAMATIC STATED IN A COVER LETTER ACCOMPANYING ITS OFFER THAT:

"WE ARE PLEASED TO SUBMIT THE ATTACHED PROPOSAL FOR A NYEMATIC SYSTEM TO FULFILL THE REQUIREMENTS AS LAID OUT IN YOUR SPECIFICATIONS DATED 8 NOVEMBER, 1974. THE SYSTEM AS PROPOSED FULFILLS ALL THE SPECIFICATIONS WITH NO EXCEPTIONS. THE ATTACHED DESCRIPTION OF THE SYSTEM APPLIES TO THE ATTACHED SCHEMATIC DIAGRAM OF THE SYSTEM."

THERE IS NO INDICATION THAT DICTAMATIC WAS AT ALL CONCERNED WITH THE STATE OF AFFAIRS AT THIS TIME. IT WAS NOT UNTIL LATE IN DECEMBER OF 1974, AFTER THE CONTRACT HAD BEEN AWARDED TO DICTAPHONE, THAT DICTAMATIC MADE ANY ALLEGATIONS OF IMPROPRIETIES. THIS ASPECT OF THE PROTEST IS NOT

NEVERTHELESS, THERE IS ONE TIMELY ASPECT OF DICTAMATIC'S PROTEST CONCERNING OTHER IRREGULARITIES. DICTAMATIC ALLEGES THAT DICTAPHONE'S PROPOSAL "OFFERED A TRADE-IN ALLOWANCE THAT WAS RIDICULOUSLY HIGHER THAN WHAT WAS OFFERED IN THEIR FIRST QUOTATION. ON THE OTHER HAND, WE WERE FORCED TO MAINTAIN OUR ORIGINAL TRADE-IN OFFER AS A RESULT OF MY CONVERSATIONS WITH THE CONTRACTING OFFICER REGARDING THE SUBJECT OF TRADE- INS." SINCE THIS INFORMATION ONLY CAME TO LIGHT AT THE TIME OF CONTRACT AWARD, WE WILL CONSIDER IT ON THE MERITS.

SOMETIME BETWEEN THE DATE THAT THE LETTER REQUEST WAS ISSUED AND THE DATE THAT THE OFFERS WERE RECEIVED (THE EXACT DATE IS NOT ESTABLISHED ON THE RECORD) A DICTAMATIC REPRESENTATIVE SPOKE WITH THE CONTRACTING OFFICER ABOUT THE MATTER OF OFFEROR'S TRADE-IN ALLOWANCES ON THE BMC'S EQUIPMENT WHICH WAS TO BE REPLACED BY THE NEW SYSTEM. DICTAMATIC WAS CONCERNED THAT TRADE-IN VALUES MIGHT BE INFLATED TO "UNREASONABLE" LEVELS IN ORDER TO BE AWARDED THE CONTRACT. THE PROTESTER STATES:

"*** THE INITIAL PROPOSALS OFFERED BY BOTH VENDORS REFLECTED WHAT THEY CONSIDERED A FAIR TRADE-IN ALLOWANCE ON EXISTING EQUIPMENT. GIVEN A SECOND CHANCE, THE VENDOR WHO STOOD TO LOSE WOULD BE GIVEN AN OPPORTUNITY TO OFFER A SYSTEM AT A COST THAT COULD EVEN RESULT IN A FINANCIAL LOSS TO THAT COMPANY, JUST TO KEEP THEIR COMPETITOR FROM GETTING THE ORDER *** THE CIRCUMSTANCES MADE IT INCUMBENT UPON US TO GET CLARIFICATION, OR GUIDELINES, ON THE POSSIBILITY OF UNREASONABLE TRADE-IN ALLOWANCE. QUESTION, PARAPHRASED, TO LCDR CARPENTER WAS; 'WHAT IF A VENDOR OFFERED $8,000.00 TRADE-IN ALLOWANCE THE SECOND TIME, AFTER OFFERING $1,000.00 THE FIRST TIME?' THE ANSWER WAS THAT THAT WOULD MAKE THE BID 'HIGHLY SUSPECT' (LCDR CARPENTER'S WORDS IN QUOTATIONS). AS A RESULT OF THIS CONVERSATION, WE QUOTED THE SAME TRADE-IN ALLOWANCE ON THE SECOND BID AS ON THE FIRST BID."

IN RESPONSE TO THIS ALLEGATION THE CONTRACTING OFFICER HAS RESPONDED THAT: "I STRONGLY DENY THAT FROM ANYTHING SAID COULD AN INFERENCE HAVE BEEN DRAWN THAT OFFERORS WOULD BE DISQUALIFIED ON THE BASIS OF A HIGH TRADE-IN PROPOSAL."

WE HAVE FOUND NOTHING IN THE SOLICITATION WHICH WOULD INDICATE THAT AN OFFER WITH A HIGH TRADE-IN ALLOWANCE WOULD BE CONSIDERED NONRESPONSIVE. TRADE-IN OFFERS ARE MATTERS OF BUSINESS JUDGMENT, AND WE FIND NOTHING FROM THE EVIDENCE OF RECORD TO INDICATE THAT THERE WAS ANYTHING ILLEGAL OR UNREASONABLE IN DICTAPHONE'S ACT OF INCREASING ITS TRADE-IN ALLOWANCE IN RESPONSE TO THE SOLICITATION OR IN DICTAMATIC'S MAINTAINING ITS ORIGINAL TRADE-IN ALLOWANCE. UNDER THESE CIRCUMSTANCES, THE AWARD OF THE CONTRACT TO DICTAPHONE WILL NOT BE QUESTIONED.

ACCORDINGLY, THE PROTEST IS DENIED.