B-165837, MAR. 28, 1969

B-165837, MAR. 28, 1969

TO AIRCRAFT ENGINEERING CORP.:

WE REFER AGAIN TO YOUR TELEGRAM OF DECEMBER 19, 1968, PROTESTING AGAINST THE AWARD OF A CONTRACT TO PETERSON BUILDERS, INC., UNDER REQUEST FOR PROPOSALS (RFP) NO. N00024-69-R-7020/S), ISSUED BY THE NAVAL SHIP SYSTEMS COMMAND, WASHINGTON, D.C.

THE RFP WAS ISSUED ON JULY 12, 1968, AND IT SOUGHT FIXED-PRICE OFFERS ON TWO BASES FOR DESIGN AND CONSTRUCTION OF A GLASS REINFORCED PLASTIC MINESWEEPER MIDSHIP TEST SECTION. COPIES OF THE RFP WERE MAILED TO 13 FIRMS. THE PURPOSE OF THE PROCUREMENT WAS "EXPLORATORY DEVELOPMENT," AS DEFINED IN PARAGRAPH 4-101 (A) (2) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). THE STATUTORY AUTHORIZATION FOR NEGOTIATION OF RESEARCH AND DEVELOPMENT CONTRACTS IS CONTAINED IN 10 U.S.C. 2304 (A) (11). THE CLOSING DATE FOR RECEIPT OF PROPOSALS WAS SEPTEMBER 6, 1968, AT WHICH TIME FIVE OFFERS WERE RECEIVED.

TECHNICAL EVALUATION OF THE OFFERS REVEALED THAT EACH OF THE FIVE WAS INCOMPLETE OR INADEQUATE IN ONE OR MORE RESPECTS; BUT IT WAS ALSO DECIDED THAT CERTAIN REQUIREMENTS SHOULD BE CHANGED OR ADDED. THE REPORT OF THE PROCUREMENT AGENCY LISTS NINE SEPARATE MODIFICATIONS, AND AMONG THEM ARE CHANGES REGARDING DELETION OF A REQUIREMENT FOR A TECHNICAL MANUAL, A LENGTHENING OF THE DELIVERY SCHEDULE, A CHANGE IN THE METHOD OF SHIPMENT OF THE FINISHED PRODUCT AND A DELETION OF THE ALTERNATIVE BASIS FOR PROPOSALS (THUS REQUIRING OFFERS ON ONLY THE ONE REMAINING BASIS).

BY LETTERS DATED NOVEMBER 1, 1968, THE PROCUREMENT AGENCY ADVISED ALL OFFERORS OF THESE CHANGES. EACH OFFEROR WAS ALSO INFORMED OF THE PARTICULAR POINTS IN HIS PROPOSAL WHICH HAD BEEN DETERMINED TO BE TECHNICALLY DEFICIENT. IT WAS FURTHER STATED IN THE LETTER THAT REVISIONS IN PROPOSALS WERE TO BE SUBMITTED IN TIME TO BE RECEIVED AT THE MAIN NAVY BUILDING IN WASHINGTON, C., BY 4:30 P.M., EASTERN STANDARD TIME, NOVEMBER 15, 1968. ATTENTION WAS SPECIFICALLY DIRECTED TO PARAGRAPH 8 OF STANDARD FORM 33A, ENTITLED "LATE OFFERS AND MODIFICATIONS OR WITHDRAWALS.' IT WAS STATED THAT ANY REVISION RECEIVED AFTER THE TIME SPECIFIED WOULD BE TREATED IN ACCORDANCE WITH PARAGRAPH 8. OFFERORS WERE ALSO CAUTIONED THAT PARAGRAPH 10 (G) OF STANDARD FORM 33A WOULD APPLY TO REVISED PROPOSALS SUBMITTED PURSUANT TO THE LETTER. THE REFERENCED PARAGRAPH PROVIDES:

"THE GOVERNMENT MAY AWARD A CONTRACT, BASED ON INITIAL OFFERS RECEIVED, WITHOUT DISCUSSION OF SUCH OFFERS. ACCORDINGLY, EACH INITIAL OFFER SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT.'

BY LETTER OF NOVEMBER 13, 1968, YOUR COMPANY RESPONDED TO THE NOVEMBER 1 LETTER OF THE PROCUREMENT AGENCY. THE LETTER CLOSED WITH THE FOLLOWING: "IN OUR FURTHER REVIEW OF THIS PROGRAM, WE HAVE BECOME AWARE OF OTHER AREAS THAT MAY AFFORD A FURTHER AND MORE SIGNIFICANT REDUCTION IN OUR OVERALL PRICING. SHOULD DISCUSSION OF THIS OPPORTUNITY INTEREST THE NAVY, WE WOULD BE PLEASED TO SEND TECHNICAL REPRESENTATIVES TO YOUR FACILITY WITHIN 3 WORKING DAYS AFTER YOUR REQUEST.'

IT IS REPORTED THAT THE PRICE OFFERED BY PETERSON BUILDERS IN ITS REVISED PROPOSAL WAS $610,279. YOUR REVISED PROPOSAL WAS IN THE AMOUNT OF $743,295.94. PETERSON WAS LOW OFFEROR AND YOU WERE SECOND LOWEST.

THE RFP REQUIRED SUBMISSION OF DD FORM 633-4 "CONTRACT PRICING PROPOSAL (RESEARCH AND DEVELOPMENT).' PETERSON FAILED TO INCLUDE THIS FORM WITH ITS REVISED OFFER. THE NAVY REQUESTED PETERSON TO REMEDY THIS OMISSION AND WITH AN EXPLANATORY LETTER DATED NOVEMBER 22, 1968, PETERSON DID SO.

THE ADMINISTRATIVE REPORT DISCLOSES THAT A SECOND TECHNICAL EVALUATION WAS CONDUCTED. THE CONCLUSION REACHED WAS THAT THERE WERE CERTAIN SLIGHT VARIATIONS BUT THAT NO PROPOSAL DEMONSTRATED SIGNIFICANT TECHNICAL SUPERIORITY. ALL FIVE OFFERORS WERE FOUND TO HAVE "ESSENTIALLY EQUAL TECHNICAL QUALIFICATIONS FOR THE DESIGN AND CONSTRUCTION OF THE TEST SECTION.' THE EVALUATORS RECOMMENDED AWARD ON THE BASIS OF LOWEST COST TO THE GOVERNMENT.

ON DECEMBER 4, 1968, A CONTRACT AWARD PANEL RECOMMENDED AWARD TO PETERSON BECAUSE OF ITS LOW PRICE. THE PETERSON PRICE WAS FOUND BY THE CONTRACTING OFFICER TO BE FAIR AND REASONABLE, AND HE DETERMINED THAT IT WAS BASED UPON ADEQUATE PRICE COMPETITION. BECAUSE OF THIS, CERTAIN ASPR CLAUSES WHICH HAD BEEN INCORPORATED INTO THE RFP WOULD BE INAPPLICABLE TO THE RESULTING CONTRACT, THAT IS, CLAUSES PRESCRIBED BY ASPR 7-104.29 (A), 7- 104.41 (A) AND 7-104.42 (A). IN THIS RESPECT, ASPR PROVIDES THAT THESE CLAUSES DO NOT APPLY TO NEGOTIATED CONTRACTS WHERE THERE HAS BEEN ADEQUATE PRICE COMPETITION. HOWEVER, ASPR CLAUSES 7-104.29 (B), 7-104.41 (B) AND 7 -104.42 (B) WERE PROPERLY FOR INCLUSION IN A CONTRACT WITH PETERSON BUILDERS. IN ORDER TO EFFECT A SUBSTITUTION OF THE "B" CLAUSES FOR THE "A" CLAUSES, THE GOVERNMENT CONTRACT NEGOTIATOR TELEPHONED PETERSON AND ASCERTAINED THAT THE PROPOSED SUBSTITUTION WOULD BE ACCEPTABLE.

ACCORDING TO THE ADMINISTRATIVE REPORT, THESE WERE THE ONLY TWO OCCASIONS AFTER NOVEMBER 15 WHEN THERE WAS CONTACT BETWEEN THE GOVERNMENT AND PETERSON. ON DECEMBER 16, 1968, THE CONTRACT WAS AWARDED TO PETERSON BUILDERS.

IN YOUR TELEGRAM OF PROTEST YOU ASSERT: "* * * ON DEC 6, 1968 THE ASSIGNED GOVERNMENT REPRESENTATIVE T MARCERON ADVISED AIRCRAFT ENGINEERING CORP. THAT NO DISCUSSION COULD BE HELD REGARDING OUR OFFER TO PRESENT PROPOSED PRICING REDUCTIONS WITHOUT SIMILAR DISCUSSIONS BEING HELD WITH ALL RESPONSIVE BIDDERS. CONTRARY TO THIS STATED POSITION NEGOTIATIONS WERE AT THAT TIME UNDER WAY WITH PETERSON BUILDERS. PETERSON BUILDERS WAS CONSEQUENTLY PROVIDED A DISTINCT AND UNFAIR ADVANTAGE OVER AIRCRAFT ENGINEERING CORP AND OTHER RESPONSIVE BIDDERS. * * *"

THE REPORT OF THE ADMINISTRATIVE AGENCY RELATES THAT ON DECEMBER 6, 1968, A REPRESENTATIVE OF YOUR COMPANY TELEPHONED THE GOVERNMENT'S REPRESENTATIVE, MR. THOMAS MARCERON. AFTER YOUR REPRESENTATIVE WAS INFORMED THAT NO AWARD HAD YET BEEN MADE, HE REPEATED THAT AIRCRAFT ENGINEERING WAS WILLING TO PROVIDE AN ORAL DISSERTATION IN SUPPORT OF ITS NOVEMBER 13 PROPOSAL, PARTICULARLY CONCERNING THOSE UNDEFINED "AREAS" WHERE SAVINGS MIGHT POSSIBLY BE REALIZED. IT IS INTERESTING TO NOTE THAT PETERSON BUILDERS, IN ITS REVISED PROPOSAL OF NOVEMBER 13, SPECIFIED TWO ASPECTS OF THE RFP REQUIREMENTS, ONE OF WHICH WAS NOT CONSIDERED BY PETERSON TO BE GOOD SHIPBUILDING PRACTICE, THE OTHER CHARACTERIZED AS UNNECESSARILY EXPENSIVE. PETERSON THEN STATED THAT "THESE ITEMS COULD BE DISCUSSED IN DETAIL DURING A CONFERENCE OR NEGOTIATION - IF YOU SO DESIRE.'

YOUR COMPANY ADDRESSED A LETTER TO MR. MARCERON ON DECEMBER 6, 1968. THE PROCUREMENT AGENCY'S REPORT IS NOT CLEAR CONCERNING THE DATE AND TIME OF THE LETTER'S RECEIPT BY THE CONTRACTING OFFICER. HOWEVER, THE LETTER APPEARS TO BE MERELY CONFIRMATORY OF THE TELEPHONE CONVERSATION WHICH IN TURN SEEMS TO BE NO MORE THAN A REAFFIRMATION OF THAT PORTION OF YOUR NOVEMBER 13 LETTER WHICH WE HAVE QUOTED ABOVE.

THE LAW GOVERNING THE CONDUCT OF WRITTEN OR ORAL DISCUSSIONS IN NEGOTIATED PROCUREMENTS IS CONTAINED IN 10 U.S.C. 2304 (G) WHICH PROVIDES:

"/G) IN ALL NEGOTIATED PROCUREMENTS IN EXCESS OF $2,500 IN WHICH RATES OR PRICES ARE NOT FIXED BY LAW OR REGULATION AND IN WHICH TIME OF DELIVERY WILL PERMIT, PROPOSALS SHALL BE SOLICTED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED, AND WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED: PROVIDED, HOWEVER, THAT THE REQUIREMENTS OF THIS SUBSECTION WITH RESPECT TO WRITTEN OR ORAL DISCUSSIONS NEED NOT BE APPLIED TO PROCUREMENTS IN IMPLEMENTATION OF AUTHORIZED SET-ASIDE PROGRAMS OR TO PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT, THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES AND WHERE THE REQUEST FOR PROPOSALS NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION.' SUBSEQUENT TO RECEIPT OF PROPOSALS, PUBLIC LAW 90-500 BECAME EFFECTIVE AND AMENDED THIS SUBSECTION BY ADDING THE WORDS "INCLUDING PRICE" AFTER THE WORD "PROPOSALS" WHERE FIRST USED IN THE SUBSECTION.

THE PROCUREMENT AGENCY HAS TAKEN THE POSITION THAT ITS FAILURE TO ENTER INTO NEGOTIATIONS WITH YOUR FIRM WAS NOT IMPROPER, SINCE ALL OFFERORS WERE ADVISED IN THE RFP THAT AWARD MIGHT BE MADE ON THE BASIS OF REVISED PROPOSALS WITHOUT DISCUSSION, NO DISCUSSIONS WERE HELD WITH ANYONE AND THERE WAS "ADEQUATE COMPETITION" SUCH AS WOULD ENSURE A FAIR AND REASONABLE PRICE.

WE DISAGREE WITH THE AGENCY'S POSITION IN THIS MATTER. SECTION 2304 (G) PERMITS AWARD WITHOUT DISCUSSION ONLY INSOFAR AS AWARD MAY BE MADE ON THE BASIS OF AN "INITIAL PROPOSAL.' WE ARE AWARE OF NO EXTENSION OF THE LITERAL LANGUAGE TO A SITUATION SUCH AS THIS WHERE ALL OFFERORS HAVE ALREADY BEEN GIVEN AN OPPORTUNITY TO MAKE REVISIONS BOTH AS TO TECHNICAL MATTERS AND AS TO PRICE. IN FACT, IT IS REPORTED THAT ALL FIVE OFFERORS (SOME, OF COURSE, TO A GREATER EXTENT THAN OTHERS) REVISED THEIR PRICES IN RESPONSE TO THE NOVEMBER 1 LETTER OF THE PROCUREMENT AGENCY. WE BELIEVE THAT THE NOVEMBER 1 LETTER AND THE RESPONSES THERETO WERE "DISCUSSIONS" WITHIN THE MEANING AND INTENT OF SECTION 2304 (G). THE CONTRACT AWARDED ON DECEMBER 16 WAS THEREFORE BASED UPON A NEGOTIATED "REVISED PROPOSAL" RATHER THAN ON AN "INITIAL PROPOSAL.'

IT IS OBVIOUS THAT WHEN NEGOTIATIONS ARE CONDUCTED, THEY MUST BE BROUGHT TO A CLOSE AT SOME POINT PRIOR TO AWARD OF A CONTRACT. THE MANNER OF TERMINATING NEGOTIATIONS IS ESTABLISHED BY ASPR 3-805.1 (B), WHICH STATES IN MATERIAL PART:

"* * * WHENEVER NEGOTIATIONS ARE CONDUCTED WITH SEVERAL OFFERORS, WHILE SUCH NEGOTIATIONS MAY BE CONDUCTED SUCCESSIVELY, ALL OFFERORS SELECTED TO PARTICIPATE IN SUCH NEGOTIATIONS (SEE (A) ABOVE) SHALL BE OFFERED AN EQUITABLE OPPORTUNITY TO SUBMIT SUCH PRICE, TECHNICAL, OR OTHER REVISIONS IN THEIR PROPOSALS AS MAY RESULT FROM THE NEGOTIATIONS. ALL SUCH OFFERORS SHALL BE INFORMED OF THE SPECIFIED DATE (AND TIME IF DESIRED) OF THE CLOSING OF NEGOTIATIONS AND THAT ANY REVISIONS TO THEIR PROPOSALS MUST BE SUBMITTED BY THAT DATE. ALL SUCH OFFERORS SHALL BE INFORMED THAT ANY REVISION RECEIVED AFTER SUCH DATE SHALL BE TREATED AS A LATE PROPOSAL IN ACCORDANCE WITH THE -LATE PROPOSALS' PROVISIONS OF THE REQUEST FOR PROPOSALS. (IN THE EXCEPTIONAL CIRCUMSTANCES WHERE THE SECRETARY CONCERNED AUTHORIZES CONSIDERATION OF SUCH A LATE PROPOSAL, RESOLICITATION SHALL BE LIMITED TO THE SELECTED OFFERORS WITH WHOM NEGOTIATIONS HAVE BEEN CONDUCTED.) IN ADDITION, ALL SUCH OFFERORS SHALL ALSO BE INFORMED THAT AFTER THE SPECIFIED DATE FOR THE CLOSING OF NEGOTIATION NO INFORMATION OTHER THAN NOTICE OF UNACCEPTABILITY OF PROPOSAL, IF APPLICABLE (SEE 3- 508), WILL BE FURNISHED TO ANY OFFEROR UNTIL AWARD HAS BEEN MADE.'

WE BELIEVE THAT THE NOVEMBER 1 LETTER TO ALL OFFERORS SHOULD BE REGARDED AS HAVING BEEN ISSUED IN CONTEMPLATION OF THE ABOVE PROVISIONS. HOWEVER, THE LETTER DID NOT CONFORM TO THE REQUIREMENT OF THE LAST SENTENCE, QUOTED ABOVE, THAT ALL OFFERORS BE NOTIFIED, EXCEPT FOR NOTICE OF UNACCEPTABILITY OF PROPOSAL, THAT AFTER THE DATE SPECIFIED NO INFORMATION WILL BE FURNISHED ANY OFFEROR UNTIL AWARD.

THE ATTEMPT TO CLOSE NEGOTIATIONS ON NOVEMBER 15 -- THE DATE FIXED IN THE NOVEMBER 1 LETTER FOR THE RECEIPT OF PROPOSAL REVISIONS -- WAS NOT IN CONFORMITY WITH THE PRESCRIBED REGULATIONS AND WAS INEFFECTIVE TO ACCOMPLISH THE AGENCY'S PURPOSE IN ISSUING THE NOVEMBER 1 LETTER. WHILE WE CONSIDER THAT THE NEGOTIATIONS WERE NEVER FORMALLY CLOSED, OFFERORS WERE LED TO BELIEVE THAT NOVEMBER 15 WAS THE CUTOFF DATE AND, THUS, THAT DATE CAN BE VIEWED AS AN INFORMAL CLOSE OF NEGOTIATIONS. THE QUESTION THEREFORE ARISES WHETHER YOUR FIRM WAS DISADVANTAGED BY THE TWO SUBSEQUENT CONTACTS BETWEEN THE AGENCY AND PETERSON BUILDERS.

THE PRICING DATA FORM WHICH THE GOVERNMENT PERMITTED PETERSON TO SUPPLY ON NOVEMBER 22 SHOULD HAVE BEEN SUBMITTED ALONG WITH ITS REVISED OFFER OF NOVEMBER 13. THE PETERSON OFFER WAS THEREBY PUT ON A PAR WITH YOUR OFFER THEREBY PERMITTING THE EVALUATION OF OFFERS ON AN EQUAL BASIS. BUT NEITHER AT THAT TIME NOR LATER WHEN PETERSON WAS ADBISED OF THE SUBSTITUTION OF CLAUSES WAS PETERSON PERMITTED TO REVISE ITS PROPOSAL IN TERMS OF OVERALL PRICE, QUALITY, DELIVERY OR TECHNICAL APPROACH. THEREFORE CONCLUDE THAT THE AWARD TO PETERSON DID NOT INVOLVE OR RESULT FROM A COMPETITIVE ADVANTAGE ENJOYED SOLELY BY THAT COMPANY. CF. B- 165988, MARCH 11, 1969, 48 COMP. GEN. -----, WHERE, IN EFFECT, TWO SEPARATE CUTOFF DATES WERE ESTABLISHED, WITH RESULTING PREJUDICE TO COMPETING OFFERORS. FOR THIS REASON, AND SINCE THE CONTRACT WITH PETERSON APPEARS PROPER IN OTHER RESPECTS, YOUR PROTEST IS DENIED.