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PROCUREMENT - Sealed Bidding - Two-step sealed bidding - Offers - Rejection - Propriety DIGEST: Protester's proposal was properly rejected as technically noncompliant under North Atlantic Treaty Organization modified two-step procurement conducted by the Department of the Air Force where protester was given notice of potential areas where its proposal did not comply with essential requirements of the solicitation and failed to correct those areas. The IFB was essentially a modified two-step sealed bid /1/ procurement conducted by the Electronics System Division. The IADS is a proposed North Atlantic Treaty Organization (NATO) funded. The system will provide long range detection of aircraft entering the Iceland military air defense identification zone and automated reporting of information between interfacing systems.

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B-237166.6, Mar 27, 1990, 90-1 CPD 333

PROCUREMENT - Sealed Bidding - Two-step sealed bidding - Offers - Rejection - Propriety DIGEST: Protester's proposal was properly rejected as technically noncompliant under North Atlantic Treaty Organization modified two-step procurement conducted by the Department of the Air Force where protester was given notice of potential areas where its proposal did not comply with essential requirements of the solicitation and failed to correct those areas.


Aydin Corporation, Computer and Monitor Division:

Aydin Corporation, Computer and Monitor Division protests the rejection of its technical proposal under invitation for bids (IFB) No. F19628-88-B- 0022. The IFB was essentially a modified two-step sealed bid /1/ procurement conducted by the Electronics System Division, Department of the Air Force, for the purpose of procuring the development of the Iceland Air Defense System (IADS).

We deny the protest.

The IADS is a proposed North Atlantic Treaty Organization (NATO) funded, ground-base, centrally controlled, air defense surveillance and control system. The system will provide long range detection of aircraft entering the Iceland military air defense identification zone and automated reporting of information between interfacing systems. Additionally, the IADS will maintain a "Recognized Air and Sea Picture" (display) to prevent tactical surprise by enemy air or sea attack, provide control of friendly aircraft, provide information for search and rescue, and provide pilot data to the Icelandic civil air traffic control center.

The Air Force, acting as an agent for NATO, issued the IFB on July 25, 1988, on a firm fixed-price basis. The IFB, a NATO procurement conducted in accordance with NATO procedures, as reflected in a NATO document incorporated by reference, was similar to the federal government's two- step sealed bidding procedures. Under the normal NATO bidding procedures, firms simultaneously submit separate technical and price proposals. /2/ Although consultation with bidders is encouraged in the interest of clarity, no alteration of proposals (including technical, financial and schedule changes) after the closing date is permissible. The United States, as host nation, sought and received NATO's approval to modify the NATO international competitive bidding two-step procedure for this procurement. Under the revised procedures, firms were allowed to submit one modification to their technical proposal package to correct potential deficiencies identified during the government reviews and at the same time submit another price proposal reflecting any technical revisions. The modified proposals were to only address the areas of concern identified by the government. /3/

Eight proposals were received by the closing date of January 11, 1989. In accordance with the modified international competitive bidding procedures, written discussions were initiated with all offerors by letters dated April 13, 1989, which identified potential areas of noncompliance. The responses to the clarification requests were received from all offerors and together with the information contained in the original proposals, were evaluated to determine each offerors' technical acceptability. Five of the eight offerors were determined to be technically noncompliant, and they were so notified by letter dated September 18, 1989.

The Air Force rejected Aydin's proposal based on information contained in Aydin's original technical proposal and responses to the clarification requests. Aydin filed its protest with our Office on December 11, after the agency denied Aydin's agency level protest.

Aydin's proposal was determined to be noncompliant with respect to 12 performance requirements involving the following areas:(1) interoperability; (2) display; (3) system registration; (4) switching (two items); (5) software engineering prototype; (6) government furnished equipment (two items); (7) software; (8) verification; (9) management- schedule; and (10) management-organization.

Aydin argues that its proposal met the solicitation's essential requirements. Aydin also maintains that to the extent its offer was initially deficient, the Air Force by providing it only a single opportunity to exchange information regarding areas of potential noncompliance, failed to meet its obligation to conduct discussions in a manner that permitted Aydin to resolve all areas of potential noncompliance. Aydin further contends that the clarification requests did not properly inform Aydin of the specific areas it needed to address.

In response, the Air Force asserts that it conducted the type of discussions required by NATO by identifying all areas of potential noncompliance to the protester, and then affording the protester the opportunity to amend its bid. Additionally, the Air Force maintains that the clarification requests sufficiently notified Aydin of the areas deemed to be so significant that Aydin's failure to adequately address them within the context of the total proposal might result in rejection of its proposal. The Air Force states that in some instances, Aydin, in its proposal and responses to clarification requests, demonstrated a lack of understanding of the requirement.

Generally, our review of an agency's technical evaluation under a two- step sealed bid procurement is limited to the question of whether the evaluation was reasonable. The contracting agency may reject a proposal under step one where the agency reasonably evaluates the proposal as not meeting essential requirements. Gichner Iron Works, Inc., B-230099, May 16, 1988, 88-1 CPD Para. 459. In order to reject a proposal for technical deficiencies alone, however, the agency must find the proposal to be more than technically inferior-- it must be unacceptable in relation to the agency's requirements, that is, its stated minimum needs. See A.R.E. Mfg. Co., Inc., B-224086, Oct. 6, 1986, 86-2 CPD Para. 395.

The solicitation advised that the procurement was being conducted under NATO procedures which permitted only one opportunity to respond to clarification/discussion questions and provided that price revisions were limited to the technical changes. /4/ Proposal revisions are not normally permitted under the NATO procedures. In this case, the Air Force had obtained permission from NATO to permit proposal revisions. Under these procedures, we think that the Air Force's responsibility was to provide the offerors a reasonable opportunity to revise their proposals, not to engage in technical leveling or to permit offerors to rewrite the technical proposals. It remained the offerors' responsibility to establish their compliance with the technical requirements. We think Aydin failed to do so. For example, with respect to interoperability, that is, the system's ability to handle transmissions from other radar systems, the solicitation required offerors to propose reception and transmission procedures which will be used to manage data exchange by the four remote IADS Joint Tactical Information Distribution System (JTIDS) terminals which forms the single JTIDS network. Offerors were to describe the method of discriminating among redundant message receptions (same message received from different radar sources), the procedure for selecting the terminal for message transmission to the control center and the concept of how reporting responsibility to the control center will work for each terminal link.

After evaluating Aydin's initial proposal, the Air Force determined that there were four specific interoperability requirements that Aydin's proposal appeared not to meet. Aydin's proposal failed to clearly address the requirements that: (1) the determination of reporting responsibility to the control center be performed independently for each of the four JTIDS terminal links; (2) redundant messages be used for determining reporting responsibility; (3) the control center have the capability to retransmit data back to the terminals; and (4) data be inhibited from being retransmitted back to the terminal from which the data was received. During discussions, Aydin was advised of the solicitation requirement that the JTIDS terminal links be operated independently and was specifically requested to describe how the requirements for JTIDS data exchanges are satisfied, including:

"a. How reporting responsibility rules are applied to each JTIDS terminal links.

"b. How redundant messages are used in the determination of reporting responsibility.

"c. How data can be retransmitted from one IADS JTIDS terminal link to another."

Based on Aydin's responses to discussion questions, the Air Force determined that Aydin's design approach did not use redundant messages as required to determine reporting responsibility, did not provide the capability to transmit data received from one JTIDS terminal link to another and did not prevent data from being retransmitted back to the line from which data was received. Here, we believe that the Air Force's conclusions were reasonably based on Aydin's responses during discussions.

For example, the solicitation called for redundant messages to be used in determining reporting responsibilities. Aydin specifically stated during discussions that redundant messages would be discarded prior to determining reporting responsibilities. We agree with the agency's evaluation that, if redundant messages are discarded prior to establishing reporting responsibilities, they cannot be used in making that determination.

The solicitation also called for transmission of data from one terminal to another including the capability of the control center to transmit data received from one terminal to another. Aydin specifically stated in discussions that there was no provision in its design to transmit data received from one JTIDS terminal link to another, although Aydin did recognize this as a requirement of the solicitation. Aydin now argues that since the Air Force has indicated through its protest response, that a NATO restriction which prevented the JTIDS terminal from using its built -in relay capability was no longer a requirement, the JTIDS terminals can transmit data received from one JTIDS terminal to another, with no change to Aydin's design. However, this approach did not address the requirement that the control center have the capability to transmit data received from one JTIDS terminal to another.

Finally, the solicitation called for a design which prevented data from being retransmitted back to the source terminal. Aydin's clarification response indicated that its proposed design did not provide that a terminal could independently prevent data from being retransmitted back to the terminal from which the data was received. Aydin's basic argument here is that the relevant clarification request did not address this retransmission issue. However, it was Aydin's responses to the clarification request which indicated to the Air Force that Aydin did not propose this feature which is a requirement of the four JTIDS terminals being capable of acting independently. Aydin maintains that its initial proposal clearly indicated that it was treating the JTIDS terminals independently. However, the Air Force states that when a clarification response conflicted with the original technical proposal, the clarification response was considered as the most current position of the offeror and, thus, was substituted for that particular item in the proposal. Offerors specifically were warned to consider their responses to clarification requests carefully because they would have only one chance to make their proposals compliant. Aydin's clarification statement at best made its proposal ambiguous and we believe the agency reasonably concluded that Aydin's proposal was noncompliant in this area.

Aydin generally argues that implementation of any message transmission scheme requires the same amount of work consisting of relatively few decisions. Aydin maintains that to change the areas at issue here would have no price impact to the government. In response, the Air Force states that the areas of interoperability that Aydin was determined to be noncompliant represent a significant amount of software computer processing time to implement. As noted by the Air Force, this processing task was not addressed in Aydin's technical proposal and necessarily would impact other areas of its technical proposal concerning meeting scheduling requirements and its cost proposal. Further, the Air Force asserts, and we agree, that these areas of noncompliance reasonably indicate a lack of understanding of the agency's requirements. Thus, we do not find the Air Force evaluation of interoperability to be unreasonable. It was incumbent upon Aydin to provide the Air Force details of their approach to ensure that the technology involved was understood and the requirement would be delivered in a timely manner.

The agency also found Aydin noncompliant concerning its proposed design for the display control console. The console controls the display of the radar information collected and is manually operated by the use of switches. The solicitation required that category selection controls be simultaneously viewable with action entry controls and feature selection controls. The Air Force also states that it was intended that these controls be viewable continuously. Aydin's proposed design provided for some controls to be hard switches and others to be soft switches that are displayable on request. According to the Air Force, in Aydin's design, display of the category selection controls is replaced when subsequent commands are invoked for some action entry controls. Consequently, Aydin design was found technically noncompliant for not providing continuous viewing of the controls as intended or simultaneous viewing as specified. Aydin objects to being determined noncompliant in this area because the requirement was not for these controls to be viewable continuously nor did the relevant clarification request indicate that the controls had to be viewable continuously. We agree with Aydin that the specifications do not specifically require continuous simultaneous viewing of the three types of controls. However, the agency also states that Aydin's design does not provide for simultaneous viewing of these controls. The agency states, and the protester does not deny, that under Aydin's design when the category select function key is depressed, it replaces the action entry commands that had been previously selected and displayed in the menu area. Consequently, the category selection controls are simultaneously viewable with only some of the action entry controls and not all of them as required. Aydin does not deny that its design operates in this manner and fails to explain how its approach actually meets the requirement that the three types of controls be simultaneously viewable. /5/ In this regard, the Air Force maintains that Aydin's design approach demonstrates a lack of understanding of the requirements and how surveillance and weapons control operators perform their functions and constitutes an unacceptable human engineering design. The Air Force maintains that the man-machine interface is a critical element of the system, and if not understood and properly designed will significantly impact the effectiveness of the system. Moreover, it is the Air Force's position that it would be necessary for Aydin to add many switches or provide an additional display device for soft switches in order for Aydin's design to meet the requirement.

Finally, the solicitation required a procedure called system registration to correlate tracks where multiple reports on the same target are received but the reports depict the target in different positions. The solicitation specifically required that a capability be provided for automatically adjusting for differences between track data reporting sources. It further established a margin of error for the system. It was not clear to the Air Force that Aydin, in its initial proposal, would satisfy the system registration required margin of error, consequently, during discussions, Aydin was asked to describe how its proposed system registration process would satisfy the required levels of performance by describing each step in the process and the error margins allocated to each step. Aydin in its response to the clarification request, did not describe in any detail how its proposed design for the system registration process met error margins, but instead submitted a proposed algorithm. The algorithm was evaluated by the Air Force and determined to have contained errors and, even after correction by the Air Force Aydin's proposed algorithm did not demonstrate that the required error rate would be met. It is Aydin's position that, although an algorithm was not required, it presented a partial algorithm in its response to describe system registration. Aydin maintains that it never asserted that this was a final algorithm and at all times committed itself to compliance with the specification. However, the record shows that Aydin was specifically asked to describe how its design would accomplish system registration and simply did not persuade the agency that its design could meet this requirement.

In our view, with regard to the technical requirements discussed above, the Air Force reasonably determined that Aydin did not meet these requirements and properly rejected the technical proposal. Moreover, although Aydin consistently states that it is committed to complying with the requirements, Aydin failed to demonstrate in its technical proposal an ability to meet the requirements. Further, we are not persuaded that the deficiencies contained in Aydin's proposal regarding these requirements, especially concerning interoperability and display, were easily correctable without significant revisions to Aydin's design.

The protest is denied.

/1/ The two-step process is a hybrid method of procurement under which the step one procedure is similar to a negotiated procurement in that the agency requests technical proposals and may hold discussions and request revised proposals, and step two is conducted by sealed bidding among those firms that submitted acceptable proposals under step one. See Datron Sys., Inc., B-220423, B-220423.2, Mar. 18, 1986, 86-1 CPD Para. 264. Under this procedure, bids are based on the technical proposals. Here, the offerors submitted separate technical and price proposals simultaneously; however, only the price proposals of the technically compliant offerors were to be subsequently evaluated.

/2/ Although under the NATO procedures the step one submission is called a bid, here, in essence, offerors submitted technical and price proposals.

/3/ For a more detailed discussion concerning the conduct of this procurement, see Harris Corp. and Lockheed Missiles & Space Co., Inc., B-237166.4, B-237166.5, Feb. 16, 1990, 90-1 CPD Para. ***.

/4/ We note that the Air Force's source selection plan (SSP) indicates that multiple clarification requests were permitted and included a schedule which envisioned a second round of clarification requests. However, the SSP was not part of the RFP. SSPs are in the nature of internal agency guidance and as such do not give outside parties any rights. Pan Am World Servs., Inc., B-235976, Sept. 28, 1989, 89-2 CPD Para. 283. It is the RFP which controls.

Here, the RFP invoked NATO procedures subject to a deviation permitting the opportunity to respond to one round of clarification requests. This procedure was set forth in the RFP and also was confirmed in the cover letter to the clarification requests.

/5/ Aydin cites the specification as requiring that only action entry controls which are applicable to the console mode shall be simultaneously viewable. Aydin fails to explain why the action entry commands which are not capable of simultaneous viewing are not applicable to the console mode. In any event, the clarification request, reflecting the Air Force's interpretation of the requirement, expressly called for category selection controls to be simultaneously viewable with action entry controls.

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