[Protest of Navy Delivery Order]

A firm protested the Navy's placement of a delivery order under a Federal Supply Schedule contract, contending that: (1) the Navy should have ordered the lowest priced equipment which met its minimum needs and was available through the schedule; and (2) when it became questionable whether the Navy's minimum needs were available from the schedule, the Navy should have revised its statement of minimum needs or procured the lowest priced, nonconforming equipment that was available through the schedule. The protester also claimed reimbursement for loss of profit and commission and for bid preparation costs. The Navy had issued a solicitation for the required goods and subsequently discovered that the product could be procured through the schedule. The protester advised the Navy that its specified needs could not be met through the schedule, but the Navy initiated a procurement through the schedule using the same specifications. In its low bid, the protester noted that the specifications could not be met by any manufacturer. However, the Navy awarded the delivery order because the awardee promised without reservation to meet all specifications. The awardee delivered a nonconforming product and later agreed that no manufacturer could could have met the specifications. GAO held that: (1) the Navy should have chosen the protester's lower priced, equally nonconforming equipment; (2) there was no basis upon which to award the protester lost profits or commission; and (3) since the Navy acted in an arbitrary and capricious manner, the protester was entitled to reimbursement of bid preparation costs. Accordingly, the protest was sustained and the claim was denied in part and allowed in part.