Matter of: Vega Precision Laboratories, Inc. File: B-252586 Date: July 9, 1993

Matter of: Vega Precision Laboratories, Inc. File: B-252586 Date: July 9, 1993

PROCUREMENT Noncompetitive Negotiation Contract awards Sole sources Propriety Award to the only qualified supplier under the authority of 10 U.S.C. Sec. 2304(c)(2) (1988) was not the result of inadequate advance planning or otherwise improper, where the agency had attempted to conduct a competitive procurement for more than a year prior to execution of sole- source justification and approval but ultimately determined that specifications were inadequate to allow completion of qualification process in time to meet urgent requirements. Where solicitation defined a qualified source as one who had provided an item produced in accordance with the specifications, which the protester admits were not adequate to allow it to prepare a response, protester had no reasonable basis for considering itself a qualified source.

Attorneys

DECISION Vega Precision Laboratories, Inc. protests the award of a contract under request for proposals (RFP) No. F09603-93-R-40456, for signal processor vehicle interfaces (SPVI). The protester argues that the agency improperly issued the solicitation on a sole-source basis, although it knew of other sources capable of meeting its technical needs.

We deny the protest.

On December 6, 1991, the agency issued RFP No. F09603-90-R-85992 for a firm, fixed-price contract for SPVIs for MQM-107 and BQM-34A subscale target drones for use with drone control systems.[1] The solicitation, as amended, called for a quantity of 47 to 115 SPVIs for the BQM-34A and 38 to 46 SPVIs for the MQM-107 on the basis of lowest price. Of this quantity, the agency designated 47 BQM-34A SPVIs and 25 MQM-107 SPVIs as a "mission essential quantity" (MEQ), to be awarded only to a proven source. The solicitation defined a proven source as "an offeror who has previously satisfactorily provided the identical or similar item to the [g]overnment or who proposes to provide an item manufactured by the prime manufacturer or the prime manufacturer's vendor." A similar item was defined as "an item produced in accordance with an earlier version of the specification(s)" provided in the solicitation.

With regard to unproven sources, the agency advised offerors that it considered the SPVI to be an item of such complexity and criticality that it would require any unproven source that qualified for award to submit first articles for testing. The solicitation provided for award of a quantity of two of each type of SPVI for first article testing, and contained an option for award of production quantities--quantities in excess of the MEQ--to an unproven source, if such a source offered the lowest price and passed first article testing.

On April 9, 1990, under a prior contract, the agency had obtained specifications for the SPVI from Micro Systems, Inc., the developer of the SPVI. Micro Systems's contract had called for configuration item specifications, which the agency had presumed would be of a performance type, adequate to define its needs for the purpose of conducting a competitive procurement. The specifications that Micro Systems delivered proved to be of a design type, which agency personnel accepted in the belief that such specifications would be even better than performance specifications in allowing offerors to propose a product that met the agency's needs.

The agency used the Micro Systems specifications to define its requirements for the competition, but discovered, through inquiries from several potential offerors, including Vega, that the design specifications contained several overly restrictive requirements, in addition to certain data inconsistencies. Three weeks after issuing the solicitation, the agency placed it on indefinite hold, while its own personnel attempted to revise the specifications to make them suitable for a competitive acquisition. It was not until June 1992 that the agency was ready to publish the revised specifications; it was decided at that time to revise the solicitation further by adding the requirement for MQM-107 SPVIs, which was originally covered by a separate solicitation. The agency issued the revised solicitation on September 11, 1992, but continued to receive complaints and inquiries from potential offerors; on November 16, in response to a detailed critique submitted by one of the offerors, the agency again placed the solicitation on indefinite hold while it studied the possibility of revising the specifications further.[2]

The agency ultimately determined that its own in-house expertise was insufficient to produce adequate specifications without the assistance of Micro Systems. By that time the agency faced an urgent and critical need for the MEQ SPVIs. As a result, on January 21, 1993, the agency prepared a justification and approval (J&A) for the use of other than full and open competition as required by the Competition in Contracting Act of 1984 (CICA), 10 U.S.C. Sec. 2304(f) (1988). The J&A stated that several Army drones had been fielded without SPVIs and could not be used; further, there were only 15 of the BQM-34A drones on hand and all would be destroyed by October, based on the number of kills necessary for operational readiness. If a quantity of SPVIs were not delivered by October, the agency would be unable to utilize its drone control systems for needed training; even at that point, the authorized kills would use several months supply. The agency determined that Micro Systems, as the only current qualified source, was the only contractor capable of delivering sufficient SPVIs to maintain the drone control systems until the agency could complete a competitive acquisition.

The J&A was approved to authorize the acquisition of the quantity of drones necessary to support the authorized kill rate until such time as the agency could obtain specifications adequate for purposes of competition and complete a competitive buy. The J&A cited as authority 10 U.S.C. Sec. 2304(c)(2), which allows the head of a military agency to use other than competitive procedures when the agency's need for the property or services is of such an unusual and compelling urgency that the United States would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals. The agency therefore issued RFP No. F09603-93-R-40456 on a sole-source basis to Micro Systems, the only source believed capable of meeting the urgent delivery requirements; the solicitation included purchase of a second set of specifications, which would be of a performance type, from Micro Systems, in order to allow issuance of a competitive solicitation.[3] This protest followed.

The protester asserts that by issuing a sole-source contract to Micro Systems, the agency violated CICA requirements for full and open competition. The protester disputes the agency's conclusion that Micro Systems was the only qualified producer of the SPVI, claiming that contrary to the facts alleged in the J&A, Vega is also a qualified source for the SPVI, having sold similar components to the government in the past, and that the agency knew that Vega was a qualified source for the SPVI. The protester alleges that the justification for limiting competition to Micro Systems results solely from problems with the specifications caused by the agency and that the agency has disregarded the CICA prohibition against an agency using its own lack of advance planning to justify limitations on competition.[4]

CICA provides for the use of noncompetitive procedures where the agency's need for the property or services is of such an unusual and compelling urgency that the United States would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits proposals. 10 U.S.C. Sec. 2304(c)(2). While CICA requires that the agency request offers from "as many potential sources as is practicable under the circumstances," 10 U.S.C. Sec. 2304(e), an agency may still limit the procurement to the only firm it reasonably believes can properly perform the work in the available time, provided this limitation is justified. Silco Eng'g & Mfg. Co., B-250012.6, May 7, 1993, 93-1 CPD Para. ___. Under no circumstances, however, may noncompetitive procedures be used on the basis of the lack of advance planning. 10 U.S.C. Sec. 2304(f)(5)(A). We conclude here that the agency was justified in its conclusion that Micro Systems was the only source capable of meeting its urgent requirements, and that the urgency did not result from the agency's lack of advance planning.

As long as an agency gives other sources an opportunity to become qualified, it may restrict competition to previously qualified sources where doing so is necessary to ensure the procurement of satisfactory end products. Silco Eng'g & Mfg. Co., supra. The protester does not question the agency's determination that it was necessary to purchase its urgent requirements from a proven (qualified) source, nor does it allege that the agency is purchasing SPVIs in excess of its urgent requirements, although it attributes the urgency to the agency's lack of advance planning. Rather, Vega maintains that it was a qualified source, which the agency was obligated to consider before awarding a contract.

The record indicates that the agency essentially established a qualification requirement by requiring offerors to become "proven sources," through the submission of first articles for testing. While agreeing that Vega is qualified in the sense that it possesses the technical capability to produce an SPVI meeting requirements once those requirements are defined, the agency maintains that Vega is simply incorrect in its assertion that it is a qualified source, in the sense of a proven source that already has met the qualification requirements for the SPVI.

The protester contends that agency personnel orally informed Vega that it was a qualified source for the SPVI in September; the agency denies this, and the record contains several letters from Vega in which the protester is clearly seeking clarification of its status; further, the agency's responses clearly indicate that it did not consider any source other than Micro Systems to be a "proven source." RFP No. F09603-90-R-85992 defined a proven source as one who had produced an SPVI "in accordance with an earlier version of the specification," a criterion that Vega clearly had not met. The protester never responded to agency requests to identify any contract under which it had supplied SPVIs in accordance with the specifications. Since, as Vega acknowledges, the specifications were inadequate for any potential producer but Micro Systems to produce an item meeting requirements of form, fit, and function, Vega had no reasonable basis for believing that the agency had designated Vega as a proven source.[5]

Nor does the record show that, as the protester alleges, the agency either created the problems with the specification or that it failed in its duty to conduct proper advance planning. Rather, the record shows a consistent and longstanding effort by the agency to develop specifications adequate for competition. While the protester asserts that the agency was lax in failing to obtain level III drawings adequate for competition from Micro Systems, the agency does not own the rights to such data; as a result, the awardee has refused to supply level III drawings for use in a competitive procurement.

Despite the agency's error in accepting overly restrictive design specifications from Micro Systems, the record shows that the major factor in delaying the procurement was Micro Systems's unwillingness to supply level III drawings and the agency's lack of expertise in generating a usable set of specifications from the design specifications provided by Micro Systems, not a lack of advance planning. See Environmental Tectonics Corp., B-248611, Sept. 8, 1992, 92-2 CPD Para. 160. While the protester suggests that the agency might have issued a draft solicitation or held a preproposal conference, the protester suggests no basis for presuming that the outcome would have been any different--the discovery of errors in the specifications, an attempt at revision, and the ultimate decision to scrap the design specifications and cancel the competitive procurement until such time as the agency could obtain another set of specifications, suitable for competition, from Micro Systems.

Vega also asserts that since the agency has tasked Micro Systems to deliver another set of performance type specifications, suitable for competitive acquisition, the awardee's contract should contain a conflict of interest clause barring it from competing for award under future production contracts. The agency believes that no such clause is warranted, pointing out that FAR Sec. 9.505-2(a)(1)(i) does not require such a clause where a contractor such as Micro Systems furnishes specifications or data regarding a product they provide. The agency therefore reasonably determined that it was not necessary to insert a conflict of interest clause in Micro Systems's contract.[6]

The protest is denied.

1. The SPVI is an encoder/decoder that relays information from the transponder, which receives directions from the ground, to the drone controls. The SPVI must interface with the existing Drone Tracking Control System and Drone Formation Control System (used by the Army), as well as the Gulf Range Drone Control Upgrade System, coming on line at Tyndall Air Force Base.

2. Vega had continued to study the specifications and was in the process of drafting its own list of questions, when the agency suspended further action on the procurement.

3. In the course of this protest, the agency canceled RFP No. F09603-90-R -85992, with the intent of issuing a competitive procurement for remaining quantities after obtaining specifications adequate for competition.

4. The protester also asserts that the agency violated fundamental procurement policy by failing to publish notice of the solicitation in the Commerce Business Daily. Such publication is not required where an agency properly makes the determination to limit competition under 10 U.S.C. Sec. 2304(c)(2). Federal Acquisition Regulation (FAR) Sec. 5.202(a)(2); Electro -Methods, Inc., B-250931, Feb. 26, 1993, 93-1 CPD Para. 181.

5. The protester identifies its Vehicle Borne Subsystem (VBS) as the same or identical item being procured from Micro Systems. The VBS consists of a transponder, coaxial switch, antenna and encoder/decoder, while the SPVI is essentially only the encoder/decoder portion of the system. At a hearing held on the protest, the protester denied that the VBS was tested using the SPVI in place of the Vega encoder/ decoder, asserting that its system was incompatible with the Micro Systems SPVI. Vega thus tacitly admits that it has never produced a compatible SPVI, although it asserts that it can reconfigure its encoder/decoder for testing within 2 or 3 months.

6. In its initial protest, Vega also asserted that Micro Systems submitted an unreasonable price for the SPVIs; the agency's response indicated that it found the price to be reasonable based on comparison with previous purchases, and the protester has never responded to the agency's comments in that regard. We therefore deem the issue to be abandoned. See Birch & Davis Assocs., Inc.--Protest and Recon., B-246120.3; B-246120.4., Apr. 20, 1992, 92-1 CPD Para. 372.