B-238520.2, Apr 19, 1991, 91-1 CPD 385

B-238520.2, Apr 19, 1991, 91-1 CPD 385

PROCUREMENT - Competitive Negotiation - Discussion - Adequacy - Criteria PROCUREMENT - Specifications - Brand name/equal specifications - Equivalent products - Acceptance criteria PROCUREMENT - Competitive Negotiation - Alternate offers - Rejection - Propriety DIGEST: Protest that agency failed to evaluate proposed alternate "equal" items in brand name or equal procurement for shipboard information systems is sustained where agency engaged in technical discussions concerning alternate items and protester responded in its first best and final offer (BAFO) by amending alternate proposal to address agency comments; although protester's subsequent BAFOs did not specifically mention alternate items, the BAFOs stated that protester was letting its technical proposal stand as submitted, only revised the cost proposal in other areas of the specifications and did not withdraw the alternate proposal, while the agency failed to resolve any uncertainties through meaningful discussions.

Attorneys

Peirce-Phelps, Inc.:

Peirce-Phelps, Inc. protests the award of a contract to Techniarts Engineering under request for proposals (RFP) No. N00024-89-R-4263(Q), issued by the Naval Sea Systems Command, Department of the Navy, for shipboard information, training, and entertainment (SITE) systems. Peirce -Phelps alleges that the Navy improperly failed to consider the firm's alternate proposal which, as the low, technically acceptable proposal, should have been selected for the award.

We sustain the protest.

The RFP, issued in July 1989, called for four SITE systems, designated SITE Systems 200, 300, 400, and 500, reflecting various configurations of audiovisual components (such as video cassette recorders). In response to the solicitation, the Navy received proposals from Techniarts, Peirce- Phelps and three other offerors. After discussions, Techniarts was determined to be the apparent successful offeror. However, during the ensuing preaward survey, it was determined that Techniarts had failed to include in its proposal a number of required components; the contracting officer then found the firm nonresponsible on the ground that it lacked the financial capability to absorb the additional costs associated with supplying the omitted equipment. After it was determined that there had been a change in the agency's requirements, the Navy reopened negotiations in June 1990 and amended the solicitation to eliminate the System 500 requirement and restructure the procurement on a brand name or equal basis. As amended, the solicitation provided that award would be made to the low, responsible offeror whose proposal was technically acceptable. The solicitation cautioned that unless an offeror clearly indicated in its proposal that it was offering an "equal" product, the proposal would be considered an offer for the brand name product referenced in the RFP.

Peirce-Phelps, Techniarts and one other offeror participated in the reopened negotiations. In its initial July 30 proposal responding to the revised solicitation, Peirce-Phelps listed in a bill of materials the brand name and equal products it was offering for each system. The listed prices were reflected in Section B, the schedule of supplies and services, of its proposal. The firm, however, also submitted a cover letter to the proposal stating:

"Peirce-Phelps is pleased to submit our proposal for the Site project.

"Delineated below are certain comments, clarifications and alternate equipment recommendations which you may wish to consider. In some cases they offer significant savings to the Navy.

"Alternate 1 - Base Site 400

"Paragraph No. 3.1.3.1 - Time Base Corrector/Framestorer

"We have included in the bill of materials the unit specified, which is the Scientific Atlanta DPS-175. For further cost savings to the government we would propose, as an alternate, the Nova 710S-F full frame time base corrector. Utilizing this as an alternate on the 400 base system total of 60 units would result in a savings of $219,712.20.

Example:

No. of Units Unit Sell Total Sell

Scientific Atlanta 60 $6,216.87 $373,012.05

DPS-175

Nova 710S-F 60 $2,555.00 $153,300.00

Difference = $219,712.05

"If all options are exercised savings would be $582,237.33."

In addition, the cover letter proposed three possible "Alternates"-- Alternates 2A, 2B and 2C-- to another component of System 400 which Peirce -Phelps had listed in its bill of materials, likewise specifying the unit price and total savings-- from $114,477 to $261,022-- associated with each alternate, and, as an additional "Alternate," offered the possibility of still further savings-- from $75,000 to $125,000-- from use of enhanced commercial manuals rather than the documentation specified by the agency. Peirce-Phelps noted in its proposal that if all alternates were accepted the savings to the agency would total $968,259.

In considering Peirce-Phelps' initial July 30 proposal, the Navy evaluated the technical acceptability of both the items proposed in the bill of materials and in the cover letter. In the written comments furnished to Peirce-Phelps, the agency advised that the proposed "Alternate 1"-- the Nova full frame time base corrector-- "would be an acceptable" equal item if Peirce-Phelps clarified its compliance with certain specified salient characteristics, and that the "Alternate 2A" item was an acceptable equal if it included certain capabilities.

In the cover letter to its August 17 best and final offer (BAFO), Peirce- Phelps enumerated the changes it had made in its proposal. With respect to the alternate items, Peirce-Phelps stated that it "understood" the agency's comments concerning Alternates 1 and 2A, represented that according to the manufacturer, the Alternate 1 item met or exceeded the requirements, and quoted a new unit price for the Alternate 2A item with the capabilities specified by the agency in its comments. In addition, Peirce-Phelps included a new bill of materials reflecting certain changes made in response to other agency comments; as was the case with respect to its previous July 30 proposal, the bill of materials in Peirce-Phelps' BAFO did not reflect the substitution of any alternate items. Although it also furnished a new Section B schedule, it stated that:

"The changes to the Proposal, enumerated above, resulting from compliance with the list of comments, have been incorporated into our Best and Final Offer ... without amendment to our quoted total pricing."

When it subsequently learned that the specifications for System 300 called for an insufficient number of video cassette recorders, the Navy requested the submission of revised BAFOs. In its September 14 response, Peirce-Phelps advised the agency that it was "allowing our technical proposal to stand as submitted, but have revised our cost proposal to reflect the change resulting from amendment No. 0006, which increased the quantity of video cassette items." Peirce-Phelps included in its revised BAFO a revised Section B schedule and bill of materials for System 300, reflecting the addition of the video cassette recorders; it stated that the enclosures should be "substituted for the relevant pages in our best and final offer." Peirce-Phelps did not mention the alternate items. When the agency then requested a further round of revised BAFOs, Peirce- Phelps responded on September 20 that it was "letting its proposal stand as previously submitted."

Peirce-Phelps' price for the basic and option quantities, as set forth in its bill of materials and Section B, and not including the savings offered by its alternate items, totaled $32,002,769. When the proposed alternates are taken into account, Peirce-Phelps' price would be reduced by up to $968,259, for a revised total of $31,034,510. The agency, however, made award to Techniarts on the basis of its total quoted price of $31,505,308. Upon learning of the award price, Peirce Phelps concluded that the agency had not considered its alternate items in evaluating proposals; it thereupon filed this protest.

The Navy does not dispute the technical acceptability of the alternate items. Rather, the agency argues that notwithstanding the fact that Peirce-Phelps was advised in the agency's comments on its initial July 30 proposal that the items were acceptable, Peirce-Phelps never incorporated the items into its revised proposal or into an alternate proposal. points out that not only were the alternate items never incorporated into Peirce-Phelps' bill of materials and their lower prices never reflected in Peirce-Phelps' Section B schedule, but the alternate items also were not specifically mentioned in Peirce-Phelps' September 14 or September 20 BAFOs. Furthermore, the Navy maintains that the effect on price of substituting the alternate items was not readily calculable for the various option quantities since Peirce-Phelps did not specify unit prices for the option quantities and the prices for the option quantities of the overall system varied with the option item and quantity.

We find the Navy's interpretation of Peirce-Phelps' proposal unduly narrow. In our view, in using the word "Alternate" to describe the items listed in its July 30 cover letter and by providing unit and extended prices, Peirce-Phelps was clearly offering for evaluation an alternate proposal incorporating these items. Indeed, with respect to Alternate 2, Peirce-Phelps stated that "we are proposing three (3) alternates" to the equipment listed in the bill of materials. In this context, although Peirce-Phelps also described the items as "alternate equipment recommendations," we believe that it should have been apparent to the agency that Peirce-Phelps was offering the items if the equipment was found acceptable. Furthermore, the agency, in its comments on the July 30 proposal, appeared to accept Peirce-Phelps' characterization of the items since it likewise referred to "Alternate 1" and "Alternate 2A" when conducting technical discussions with respect to the items. As for Peirce -Phelps' failure to mention the alternate proposal in its September 14 or September 20 BAFOs, we do not consider these omissions significant since the BAFOs clearly were limited in scope to that necessary to respond to the changes made by the agency in the specification, none of which affected the alternate items.

As noted by the agency, the alternate items were never incorporated into a bill of materials or Section B schedule, alternate or otherwise. However, the effect of substituting the alternate items was reasonably ascertainable from the cover letters for Alternates 1 and 2, where the savings were stated as a deduction from Peirce-Phelps' Section B schedule prices. Although Peirce-Phelps did not set forth unit prices for the option quantities, a simple mathematical calculation shows that the stated total savings for the basic plus option quantities was simply the unit savings multiplied by the basic plus option quantities. In other words, Peirce-Phelps was proposing fixed unit prices for the Alternates 1 and 2 items over the entire range of quantities. While the range of savings-- $75,000 to $125,000- proposed by Peirce-Phelps under Alternate 3 for use of an alternative to the required manuals provided an imprecise, insufficient basis for evaluation, when the savings offered under Alternates 1 and 2 are taken into consideration, Peirce-Phelps appears to displace Techniarts as the low offeror.

In any case, if the agency had any doubt as to whether Peirce-Phelps was offering the alternate equipment, or even if it read Peirce-Phelps' proposal as not offering the alternate equipment , we think it was obligated to pursue the matter further through discussions with Peirce Phelps in light of the acceptability of the equipment and the cost savings associated with it. Where there are uncertainties with respect to proposals, attempts should be made to resolve the problem with meaningful discussions which point out the uncertainties and give the offeror an opportunity to resolve them. See American Management Sys., Inc., B-215283, Aug. 20, 1984, 84-2 CPD Para. 199. The requirement for meaningful discussions extends to alternate, acceptable proposals within the competitive range. San/Bar Corp., B-219644.3, Feb. 21, 1986, 86-1 CPD Para. 183. Where an agency fails to resolve an uncertainty during discussions which it should reasonably have detected and which materially prejudices an offeror, the agency has failed in its obligation to conduct meaningful discussions. American Management Sys., Inc., B-215283, supra. Here, it appears that the Navy's failure to resolve any uncertainties in Peirce-Phelps' alternate proposal and to take into account that proposal in evaluating offers may have deprived Peirce-Phelps of award and the agency of substantial savings.

By letter of today to the Secretary of the Navy, we are recommending that Techniarts' contract be terminated for the convenience of the government and award made to Peirce-Phelps on the basis of its alternate proposal, if otherwise appropriate. Further, we find Peirce Phelps to be entitled to reimbursement of the costs of pursuing this protest, including attorneys' fees. 4 C.F.R. Sec. 21.6(d)(1) (1991); see Falcon Carriers, Inc., 68 Comp.Gen. 206 (1989), 89-1 CPD Para. 96.

The protest is sustained.