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PROCUREMENT - Competitive Negotiation - Discussion reopening - Propriety DIGEST: Contracting agency is not required to reopen discussions regarding extent of technical data rights proposed by offeror when cost-sharing is introduced in best and final offer (BAFO) where the work called for in the RFP falls within Defense Federal Acquisition Regulation Supplement Sec. 227.472-3(a)(1)(ii). The contract deliverables section of the RFP does not specify that all raw data is to be delivered to the government. Discussions were held and all three offerors submitted BAFOs by the March 21. Although Varian's proposal was technically superior to all offerors. The Navy should have sought clarification from Varian on the issue.

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B-236238, Nov 22, 1989, 89-2 CPD 487

PROCUREMENT - Competitive Negotiation - Discussion reopening - Propriety DIGEST: Contracting agency is not required to reopen discussions regarding extent of technical data rights proposed by offeror when cost-sharing is introduced in best and final offer (BAFO) where the work called for in the RFP falls within Defense Federal Acquisition Regulation Supplement Sec. 227.472-3(a)(1)(ii), but the contract deliverables section of the RFP does not specify that all raw data is to be delivered to the government, and the offeror did not indicate in its cost-sharing BAFO that it would give the required unlimited data rights to the government.

Varian Associates, Inc.:

Varian Associates, Inc., protests the award of a contract to Raytheon Company under request for proposals (RFP) No. N00014-88-R TB12, issued by the Naval Research Laboratory for the research, development, fabrication and delivery of a low noise amplifier. Varian principally argues that the Navy erred in rejecting the cost-sharing, with a cost ceiling to the government's share, arrangement proposed in Varian's best and final offer (BAFO) on the ground that it made it unclear whether the Navy would obtain unlimited data rights under the contract.

We deny the protest.

The solicitation, issued on August 1, 1988, called for the development of a "beyond state-of-the-art" low noise amplifier that would enhance the microwave solid state device and circuit technology base, allow for technology transfer into other applied research military programs, and create the potential for off-the-shelf availability of high dynamic range components for Navy fleet equipment. The resulting cost-plus-fixed-fee contract would require, as contract deliverables, monthly progress reports and a final draft report to include all test results, a technology assessment, and plans for future work. The Navy received seven offers by the September 9 closing date and included three offerors (Hughes Aircraft Company, Varian and Raytheon) in the competitive range. Discussions were held and all three offerors submitted BAFOs by the March 21, 1989, closing date.

In its BAFO, Varian revised its cost-plus-fixed-fee downward to $538,150, and further proposed to cost share, by forgoing its fixed fee and absorbing 15 percent of the estimated cost, thereby reducing the "contractual amount the Government would be committed to" to $457,428. The contracting officer determined Varian's BAFO to be a cost-sharing arrangement which would require further negotiations on the issue of technical data rights; specifically, the contracting officer found that the extent of the government's technical data rights would be unclear under a cost-sharing arrangement such as that proposed by Varian. Rather than conducting a second round of BAFOs, the Navy chose to treat Varian's BAFO price as $538,150, ignoring Varian's proposed cost sharing, with a cost ceiling to the government, arrangement that raised the alleged data rights problem. Accordingly, although Varian's proposal was technically superior to all offerors, its BAFO cost estimate of $538,150 made it the most expensive of the three proposals and reduced its total point score to third place. The Navy, having decided in the interim to fund two separate technological approaches to the research, awarded contracts to both Hughes for $446,698 and Raytheon for $492,821, on July 6.

Varian protested the award to Raytheon /1/ to our Office on July 18, arguing that the Navy incorrectly decided that Varian's cost sharing, with a cost ceiling to the government's share, arrangement may not provide unlimited technical data rights to the government, and that, in any event, the Navy should have sought clarification from Varian on the issue.

With regard to the issue of whether Varian's cost-sharing with ceiling arrangement altered the firm's commitment to provide unlimited data rights to the Navy, 10 U.S.C. Sec. 2320 (1988), the statute governing acquisition of rights in technical data, provides generally that the government has unlimited technical data rights pertaining to items and processes developed exclusively with government funds, and limited rights in data derived exclusively from privately funded work. With regard to technical data rights in work funded in part by the government and in part by private sources, 10 U.S.C. Sec. 2320(a)(2)(E) provides that the respective rights of the government and the contractor are to be determined by negotiation between the parties. Even where technical data is derived from mixed funding, however, Department of Defense Federal Acquisition Regulation Supplement (DFARS) Sec. 227.472-3(a)(1)(ii), which implements the statute, provides that the government will acquire unlimited rights in:

"Technical data resulting directly from performance of experimental, developmental, or research work specified as an element of performance under a Government contract or subcontract."

Varian's initial proposal, since it offered a cost-plus-fixed-fee arrangement, guaranteed the Navy unlimited data rights because it would be developed exclusively with government funds. The other two offerors also proposed this arrangement. By proposing a cost-sharing, with a ceiling to the government's share, arrangement at the BAFO stage, in lieu of a cost- plus-fixed-fee arrangement, Varian changed the form of contract proposed from exclusive government funding to mixed funding.

Varian's BAFO did not provide any indication that the Navy's unlimited right to use or disclose technical data to be developed under the contract was changed in any way from its initial proposal in which Varian implicitly agreed that the government had unlimited technical data rights. Rather, by proposing a cost-sharing, with a cost ceiling to the government's share, arrangement, Varian merely offered to absorb some of the costs under the contract in an effort to reduce the overall cost of its proposal and thus improve its chance at award.

As noted above, even where mixed funding is involved, DFARS Sec. 227.472- 3(a)(1)(ii) provides that the government will have unlimited data rights derived from, as in this case, "experimental, developmental, or research work" which is also specified as an "element of performance" under a government contract. Here, in the Navy's view, the precise wording of the solicitation, particularly the Contract Data Requirements List, DD Form 1423, might not commit a contractor operating under a mixed funding contract to give the government unlimited rights in all the raw data generated by the research, since the deliverables listed included progress reports and a final report including significant test data, technology assessment and plans for future work, but did not specify the delivery of all raw data as an "element of performance" under the contract within the meaning of DFARS Sec. 227.472-3(a)(1)(ii). Given the uncertainty concerning data rights under a cost-sharing arrangement, the contracting officer determined that discussing the technical data rights issue and other issues related to Varian's cost-sharing arrangement-- regarding invoicing under Varian's proposed contract, sharing future cost increases in the event of additional research effort, and future contractor claims in the event of termination for convenience /2/ would necessitate reopening negotiations with all offerors, which the Navy did not choose to do.

We find the Navy's decision not to reopen discussions to be reasonable. An agency is not required to reopen discussions or allow an offeror further opportunity to revise its proposal when a deficiency first becomes apparent in a BAFO. Addsco Industries, Inc., B-233693, Mar. 28, 1989, 89-1 CPD Para. 317. Consequently, an offeror should not anticipate further discussions after submission of a BAFO. Conrac Corp., SCD Division, 66 Comp.Gen. 444 (1987), 87-1 CPD Para. 497. An offeror has an obligation to submit a proposal which fully complies with the terms and conditions of the solicitation and runs the risk of having its proposal rejected if it fails to do so. E & S Computer Sales, Inc., B-233608, Dec. 2, 1988, 88-2 CPD Para. 556.

Here, there was no indication in Varian's BAFO that it intended to give the government unlimited data rights under its proposed cost sharing arrangement. The work called for by the RFP falls within DFARS Sec. 227.472-3(a)(1)(ii), which provides for unlimited rights to the government under mixed funding only in technical data resulting from performance of developmental or research work specified as an element of performance under a government contract. However, the contract deliverables section of the RFP did not specify that all raw data was to be delivered to the government; the only deliverables listed were progress reports and a final report including significant test data, a technology assessment and plans for future work. As a result of this omission, the Navy could not conclude, without further discussions with Varian, whether or not the firm would supply all the raw data generated under the contract to the government, and, consequently, whether Varian's cost-sharing BAFO was acceptable.

Accordingly, the Navy was reasonable in determining that the question of data rights in a cost-sharing arrangement introduced by an offeror at the BAFO stage, where the RFP did not that all raw data was to be deliverable to the government, constituted an issue of sufficient import to necessitate reopening of discussions rather than merely seeking clarification of the offeror. the information sought from Varian was clearly essential to determining the acceptability of its cost-sharing BAFO, and therefore the Navy would have had to reopen negotiations in order to resolve the data rights issue raised in Varian's BAFO, which the Navy was not required to do.

We deny the protest.

/1/ Varian does not challenge the award to Hughes, which received the highest total score of the three offerors.

/2/ These issues were first raised by the Navy in its report to our Office; they were not cited as requiring discussions in connection with Varian's BAFO at the time of its rejection.

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