Matter of: CK Technologies, Inc.; Eclypse International Corporation File: B-252471.2; B-252471.3; B-252471.4 Date: July 14, 1993
B-252471.2,B-252471.4,B-252471.3: Jul 14, 1993
PROCUREMENT Noncompetitive Negotiation Contract awards Sole sources Propriety Protests challenging agency's decision to make a sole-source purchase of a complete tester system are sustained where record shows that vendors other than the sole source can supply testers meeting the agency's needs. The protesters contend that the proposed sole-source award is improper because other firms manufacture cable testers capable of meeting the agency's MK 612 cable test/repair requirement. BACKGROUND The Seal Beach NWS is a Depot Level Maintenance Facility which performs the most extensive level of repairs to various naval ordnance systems and components. Hearing Transcript (Tr.) at 38. The challenged sole-source procurement is being conducted on behalf of the Organic Systems Component Rework (OSCR) division of the Seal Beach NWS for its MK 612 missile tester cable repair project.
Matter of: CK Technologies, Inc.; Eclypse International Corporation File: B-252471.2; B-252471.3; B-252471.4 Date: July 14, 1993
PROCUREMENT Noncompetitive Negotiation Contract awards Sole sources Propriety Protests challenging agency's decision to make a sole-source purchase of a complete tester system are sustained where record shows that vendors other than the sole source can supply testers meeting the agency's needs.
DECISION CK Technologies, Inc. (CKT) and Eclypse International Corporation protest the proposed sole-source award of a contract to DIT- MCO International by the Department of the Navy, for a high voltage wiring analyzer tester to be used to test and repair MK 612 missile tester interface cable circuit assemblies at the Naval Weapons Station (NWS) located at Seal Beach, California. The protesters contend that the proposed sole-source award is improper because other firms manufacture cable testers capable of meeting the agency's MK 612 cable test/repair requirement.
We sustain the protests.
The Seal Beach NWS is a Depot Level Maintenance Facility which performs the most extensive level of repairs to various naval ordnance systems and components. Hearing Transcript (Tr.) at 38. The challenged sole-source procurement is being conducted on behalf of the Organic Systems Component Rework (OSCR) division of the Seal Beach NWS for its MK 612 missile tester cable repair project, which consists of routine testing and repairs on 70 individual interface tester cables used by various fleet activities as part of MK 612 missile tester kits or "sets" in the field.
Since the mid 1980s, OSCR has been testing and repairing the MK 612 tester cables using a computerized equipment tester known as the Series 9500, which is manufactured by DIT-MCO. The Series 9500 tester consists of three integral components: the Master Switching Console (MSC); the Switching Bays--also referred to as switching modules; and the Operator Control Unit (OCU).
Because of the critical nature of the missile and missile tester items which OSCR services, and the degree of technical risk inherent in the testing and repair process, OSCR's repair projects are closely monitored and in effect regulated by the Naval Surface Warfare Assessment Center Division (NSWSES) located at Port Hueneme, California. Each OSCR repair project--such as the instant MK 612 cable test/repair requirement--is directed by a NSWSES official who is designated as the In Service Engineering Agent (ISEA) for that project. Under the close supervision of the ISEA, each procedure and equipment item involved in a particular project's test/repair operation must be evaluated and approved by means of a formal "validation" process before it can be utilized.
Because each of the MK 612 cable repair test programs was validated and developed using the DIT-MCO Series 9500, absent ISEA validation for another tester model, OSCR is currently restricted to utilizing the DIT- MCO 9500 for all of its MK 612 cable repair needs. Tr. at 14; 29.
On October 7, NRCC issued a sole-source request for proposals (RFP) to DIT-MCO for the model 2500; after learning of this solicitation via the Commerce Business Daily, both CKT and Eclypse filed agency-level protests- -dated October 14 and October 26, respectively--challenging the procurement as improper. On December 7, the Navy canceled the sole-source RFP; on January 21, 1993, NRCC issued an unrestricted "brand name or equal" RFP specifying the salient characteristics of the DIT-MCO model 2500. On January 26, February 1, and February 15, Eclypse and CKT filed agency-level protests challenging the unrestricted solicitation's DCS subcomponent "salient characteristic" specification as unduly restrictive.
On February 15, NRCC contracting personnel met with OSCR technical personnel to discuss the protests; at that time, NRCC reports that it discovered that its "initial understanding of [OSCR's technical] position had been incorrect" and that "procurement of any other manufacturer's equipment would necessitate the incurrence of unacceptable costs to modify and validate" the test programs and procedures specific to these MK 612 cable test/repairs. As a result of this meeting, by letter dated February 18, NRCC canceled the unrestricted RFP and advised both protesters that the tester analyzer requirement would be sole-sourced to DIT-MCO. On March 5 and March 8, CKT and Eclypse filed these protests.
According to the contracting officer, and as set forth in the initial agency report responding to these protests, the purpose of the procurement is to acquire an additional test station to be devoted to MK 612 testing. This position is reflected in the contemporaneous justification and approval (J&A) for the procurement, which purports to justify acquisition of a complete tester analyzer from DIT-MCO on a sole-source basis.
Because the overriding mandate of the Competition in Contracting Act of 1984 (CICA) is for "full and open competition" in government procurements obtained through the use of competitive procedures, 10 U.S.C. Sec. 2304(a)(1)(A) (1988), this Office will closely scrutinize sole-source procurements conducted under the exception to that mandate authorized by 10 U.S.C. Sec. 2304(c)(1), which specifically permits noncompetitive acquisitions when the items needed are available from only one source. Test Sys. Assocs., Inc., 71 Comp.Gen. 33 (1991), 91-2 CPD Para. 367. In this case, the record shows that in invoking 10 U.S.C. Sec. 2304(c)(1), the Navy relied on 10 U.S.C. Sec. 2304(d)(1)(B)(i), which permits the procurement of follow-on goods or services on a noncompetitive basis from the original source where the agency determines that it is likely that award to other than the incumbent would result in substantial duplication of cost which is not expected to be recovered through competition. Specifically, although it acknowledges that the protesters' testers would meet its minimum needs, the Navy asserts that procuring any other manufacturer's tester except the DIT-MCO 2500 "would require extensive programmability review and entail the extensive and expensive revalidation of the [MK 612 cable] test procedures and documentation"--a process for which the Navy asserts it would have to spend approximately $105,000 in validation costs for the new equipment. We find this justification unpersuasive.
The record shows that regardless of which manufacturer's tester is procured, the agency will be required to conduct a new validation effort-- entailing certification of the new equipment hardware as well as a de novo ISEA review of the test programs and procedures which were developed specific to the Series 9500; thus, even if the agency procures the Series 2500 instead of the CKT or Eclypse tester models, a new--essentially identical--validation effort will be required due to the change in equipment models. Tr. at 14-15; 93-94.
The evidence indicates that the validation costs which would be incurred in the event the CKT or Eclypse models were procured are essentially equal to those involved in the validation of a DIT-MCO Series 2500. The agency does not dispute either the CKT or Eclypse tester's capability to perform the MK 612 cable testing and repairs; further, the record shows that because OSCR's test programs are written in American Standard Code for Information Interchange--which is a 7-bit universal standard code/language adopted to facilitate the interchange of data among differing types of data processing and data communications equipment--both the CKT and Eclypse models can run these test programs without any modification. Since validation would be required even if DIT-MCO's model were procured, and since the agency's $105,000 validation cost is based on technical assumptions which apply equally in the case of the Series 2500 and the CKT and Eclypse tester models--specifically, that the test programs will require "minimum massage" and that the change in the operations manual will be de minimis and limited to specifying the new manufacturer's model- -we see no basis for the agency's conclusion that procuring the DIT-MCO Series 2500 would avoid the $105,000 validation expense.
In sum, we conclude that the agency may not properly purchase a tester system on a sole-source basis from DIT-MCO, given that the protesters can provide testers that meet the agency's needs, and the record does not support the agency's conclusion that acquisition of a tester from any source other than DIT-MCO would entail significant additional costs.
At the hearing on the protest, the agency argued for the first time that it needs not an additional tester, but spare parts for the tester it already possesses. The technical representatives from both OSCR and the ISEA stated that the purpose of purchasing the Series 2500 from DIT-MCO is simply to acquire two spare parts for the Series 9500. The OSCR technical representatives reported that this acquisition is being conducted as part of a systematic "upgrade" for standard missile and missile tester repair operations throughout the fleet. In early 1992, NAVSEA directed NSWSES to allocate funding and direct each of the missile repair projects to procure critical, or "high failure," spare parts for equipment items used in the various programs' repair operations. With respect to the Series 9500, there are two high failure parts identified by OSCR: the Digital Comparator Subsystem III (DCS)--located in the MSC component; and the Control Unit (CU)--located in the OCU component. The DCS and the CU constitute subcomponent parts which can be plugged in and out of their hardware locations in both the Series 9500 and Series 2500 without any disassembly to the rest of the tester system.
We have no basis for challenging the agency's assertion that it needs to acquire spare parts for the Series 9500, and there is no dispute that the protesters cannot meet that need. However, that is not the procurement before us. The J&A for the current procurement specifies a requirement for a full tester analyzer, a requirement the protesters can meet. Their protest of the sole-source procurement of that requirement from DIT-MCO is therefore sustained. If OSCR's needs are as described in the hearing, and the Navy does not wish to acquire a complete tester analyzer, it may cancel the RFP and proceed with a procurement in accordance with its actual needs.
Since we sustain the protests, we find that the protesters are entitled to recover the reasonable costs of filing and pursuing the protests. 4 C.F.R. Sec. 21.6(d) (1993). The protesters should submit their claims for costs, detailing and certifying the time expended and costs incurred, directly to the agency within 60 working days of receipt of this decision. 4 C.F.R. Sec. 21.6(f)(1).
The protests are sustained.
1. On June 3, 1993, a hearing was conducted pursuant to 4 C.F.R. Sec. 21.5 (1993) to receive testimony regarding the technical requirements of this procurement and to explore the agency's justification for the sole- source procurement.
2. The MK 612 tester cables being repaired here are part of "tester sets" used by the fleet activities to conduct missile circuitry tests at the actual MK 612 missile sites.
3. We note that Eclypse has recently won two Navy contract awards for its tester model where its model was competed against the DIT-MCO Series 2500; similarly, CKT has been source-approved as an alternate tester model to the DIT-MCO Series 2500 under the DIT-MCO Series 2500 national stock number.
4. Additionally, both CKT and Eclypse have reviewed the basis for this estimate and have offered to absorb or eliminate several of the costs to the Navy such as production labor and the cost of ISEA transportation. It also appears from the record that the protesters could reduce the Navy's costs by either utilizing in-house company personnel or employing an independent private laboratory to facilitate OSCR's preliminary review. Tr. at 85; 95.
5. We note that while the cost of procuring the DCS and CU subcomponents as individual spares would amount to $35,200, the cost of the Series 2500 is $83,540.