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WHEN UNDER A TWO-STEP PROCUREMENT THERE IS ONLY ONE SOURCE THAT IS TECHNICALLY ACCEPTABLE UNDER THE FIRST STEP. FORMAL ADVERTISING IN THE SECOND STEP IS AUTHORIZED ONLY WHEN THERE WILL BE COMPETITION AMONG TECHNICALLY ACCEPTABLE BIDDERS. SINCE THERE WAS A SINGLE ACCEPTABLE PROPOSAL IN THE FIRST STEP THERE WAS NO OPPORTUNITY FOR COMPETITION. THE SECOND STEP WAS FOR DISCONTINUANCE. SECRETARY: REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 19. THERE IS ENCLOSED FOR YOUR INFORMATION A COPY OF OUR DECISION OF TODAY TO THE CLAIMANT DENYING THE CLAIM. WE BELIEVE THAT THE PROCEDURES EMPLOYED IN THIS PROCUREMENT WITH REFERENCE TO THE SECOND- STEP SOLICITATION WERE INCONSISTENT WITH ASPR 2-503. THE REPORT FURNISHED OUR OFFICE ADVISED THAT NORFOLK WAS THE ONLY COMPANY THAT SUBMITTED A TECHNICAL PROPOSAL UNDER THE FIRST STEP AND THAT AN INVITATION FOR BIDS WAS ISSUED UNDER THE SECOND STEP TO NORFOLK ONLY.

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B-162279, JAN. 11, 1968

BIDS - TWO STEP PROCUREMENT - SECOND STEP ADVERTISEMENT DECISION TO SECRETARY OF ARMY SUGGESTING CORRECTIVE ACTION AS RESULT OF REVIEW OF PROTEST OF NORFOLK CONVEYOR DIVISION, JERVIS B. WEBB COMPANY. WHEN UNDER A TWO-STEP PROCUREMENT THERE IS ONLY ONE SOURCE THAT IS TECHNICALLY ACCEPTABLE UNDER THE FIRST STEP, ASPR 3-210.2 (III) (H) DOES NOT AUTHORIZE ADVERTISING TO THE EXCLUSION OF NEGOTIATION. FORMAL ADVERTISING IN THE SECOND STEP IS AUTHORIZED ONLY WHEN THERE WILL BE COMPETITION AMONG TECHNICALLY ACCEPTABLE BIDDERS. SINCE THERE WAS A SINGLE ACCEPTABLE PROPOSAL IN THE FIRST STEP THERE WAS NO OPPORTUNITY FOR COMPETITION, THE SECOND STEP WAS FOR DISCONTINUANCE.

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 19, 1967, FROM THE ACTING DEPUTY DIRECTOR OF PROCUREMENT AND PRODUCTION, ARMY MATERIEL COMMAND, FURNISHING A REPORT ON THE PROTEST OF THE NORFOLK CONVEYOR DIVISION, JERVIS B. WEBB COMPANY, WITH RESPECT TO THE TWO-STEP FORMAL ADVERTISING PROCUREMENT COVERED BY REQUEST FOR PROPOSALS DAAC27-67-R 0002 AND INVITATION FOR BIDS DAAC27-67-B-0025.

THE PROTESTANT HAS WITHDRAWN THE PROTEST AND HAS FILED A CLAIM FOR THE EXPENSE OF PREPARING A TECHNICAL PROPOSAL AND FOR OTHER DAMAGES. THERE IS ENCLOSED FOR YOUR INFORMATION A COPY OF OUR DECISION OF TODAY TO THE CLAIMANT DENYING THE CLAIM. HOWEVER, AS SET FORTH BELOW, WE BELIEVE THAT THE PROCEDURES EMPLOYED IN THIS PROCUREMENT WITH REFERENCE TO THE SECOND- STEP SOLICITATION WERE INCONSISTENT WITH ASPR 2-503.

THE REPORT FURNISHED OUR OFFICE ADVISED THAT NORFOLK WAS THE ONLY COMPANY THAT SUBMITTED A TECHNICAL PROPOSAL UNDER THE FIRST STEP AND THAT AN INVITATION FOR BIDS WAS ISSUED UNDER THE SECOND STEP TO NORFOLK ONLY.

ALTHOUGH PARAGRAPH 2-503.1 (H) PROVIDES THAT WHEN THE FIRST STEPRESULTS IN NO ACCEPTABLE TECHNICAL PROPOSAL OR IN ONLY ONE ACCEPTABLE TECHNICAL PROPOSAL, THE PROCUREMENT "MAY" BE CONTINUED BY NEGOTIATION UNDER THE AUTHORITY OF ASPR 3-210.2 (III), SUBPARAGRAPH (H) DOES NOT APPEAR TO HAVE BEEN INTENDED TO AUTHORIZE ADVERTISING TO THE EXCLUSION OF NEGOTIATION WHEN ONLY ONE SOURCE IS TECHNICALLY ACCEPTABLE. SEE PARTICULARLY THE PRECEDING SENTENCE OF SUBPARAGRAPH (H) WHICH PROVIDES THAT IF, AS A RESULT OF THE EVALUATION OF TECHNICAL PROPOSALS, IT IS NECESSARY TO DISCONTINUE TWO-STEP FORMAL ADVERTISING, THE MATTER SHALL BE DOCUMENTED FOR THE RECORD. WE BELIEVE, THEREFORE, THAT NEGOTIATION WITH THE ONLY TECHNICALLY ACCEPTABLE SOURCE WAS ONLY AN ALTERNATIVE TO DISCONTINUING THE PROCUREMENT. ASPR 2-501 PROVIDES THAT TWO-STEP FORMAL ADVERTISING IS A METHOD OF PROCUREMENT DESIGNED TO EXPAND THE USE AND OBTAIN THE BENEFITS OF FORMAL ADVERTISING. ONE OF THE OBVIOUS BENEFITS OF FORMAL ADVERTISING IS COMPETITION. WHERE THERE IS ONLY ONE SOURCE, THERE OBVIOUSLY IS NO COMPETITION. MOREOVER, ASPR 2-503.1 (E) PROVIDES THAT IF THE CONTRACTING OFFICER DETERMINES THAT THERE ARE SUFFICIENT ACCEPTABLE PROPOSALS "TO ASSURE ADEQUATE PRICE COMPETITION UNDER STEP TWO," HE CAN PROCEED WITH THE SECOND STEP WITHOUT DELAYING TO QUALIFY ADDITIONAL PROPOSALS. ADDITIONALLY, ASPR 2-503.2 PROVIDES THAT THE INVITATION FOR BIDS IN THE SECOND STEP WILL BE ISSUED ONLY TO "THOSE SOURCES" WHOSE PROPOSALS HAVE BEEN DETERMINED ACCEPTABLE UNDER THE FIRST STEP.

ACCORDINGLY, IN LIGHT OF THE FOREGOING, OUR OFFICE IS OF THE VIEW THAT FORMAL ADVERTISING IN THE SECOND STEP IS AUTHORIZED ONLY WHEN THERE WILL BE COMPETITION AMONG TECHNICALLY ACCEPTABLE BIDDERS. SINCE THERE WAS A SINGLE ACCEPTABLE PROPOSAL IN THE FIRST STEP AND THUS NO OPPORTUNITY FOR COMPETITION, THE SECOND STEP WAS FOR DISCONTINUANCE. AS NOTED ABOVE, THE ONLY ALTERNATIVE WAS CONTINUING THE PROCUREMENT BY NEGOTIATION UNDER ASPR 3-210.2 (III).

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