BNUMBER:  B-265602; B-265602.2
DATE:  December 15, 1995
TITLE:  Corion Corporation

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Matter of:Corion Corporation

File:     B-265602; B-265602.2

Date:     December 15, 1995

Jed L. Babbin, Esq., and Walter G. Birkel, Esq., Tighe, Patton, 
Tabackman & Babbin, L.L.P., Richard Linn, Esq., Marks & Murase, LLP, 
and Lawrence J. Sklute, Esq., for the protester.
Harry C. J. Blair, Esq., for Fraser-Volpe Corporation, an interested 
party.
Captain David Harney and William G. Bradley, Esq., Department of the 
Army, for the agency.
Behn Miller, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest that agency waived mandatory technical specification for 
awardee is denied where awardee's proposal documents reasonably convey 
intent to comply with specification.

2.  Protest that awardee's prices were materially unbalanced is denied 
where base price reasonably reflects price of engineering modification 
to commercial specifications required for production of first 20 
prototypes; awardee's price becomes low in the first option period of 
the contract (which included four option periods); and the agency 
reasonably expected to exercise all options.

3.  Protest that agency improperly relied on unstated evaluation 
criteria is denied where the record shows that the agency's judgments 
were reasonable and consistent with the explicit terms of the 
solicitation.

4.  Protest that agency improperly ignored negative pre-award survey 
in evaluating awardee's management experience and responsibility is 
denied where in the course of making its responsibility determination, 
the agency thoroughly considered the pre-award survey and reasonably 
concluded that awardee's successful production and delivery experience 
under eight recent contracts for identical items sufficiently rebutted 
concerns set forth in the survey regarding awardee's delinquent 
performance on another contract for a different type of item. 

DECISION

Corion Corporation protests the award of a contract to Fraser-Volpe 
Corporation (FVC) under request for proposals (RFP) No. 
DAAE20-95-R-0019, issued by the Army for 20 XM25 Stabilized 
Binoculars, and four follow-on production options, with a total option 
quantity ceiling of 5,000 binoculars.  Corion contends that the Army's 
technical evaluation was improper because the agency waived a 
mandatory technical requirement for the awardee and utilized 
evaluation criteria which were not specified in the RFP.  Corion also 
contends that the agency improperly disregarded a negative pre-award 
survey when it evaluated the manufacturing capability and experience 
of the awardee.

We deny the protest.

The XM25 is a hand-held, lightweight, internally stabilized binocular 
with laser protection and a rubber coating; it is classified as a 
non-developmental item (NDI).  The RFP was issued on March 3, 1995, 
and set forth the XM25 purchase item description in the statement of 
work (SOW).  The RFP required offerors to submit three samples for 
evaluation under four go/no-go criteria which required (1) that the 
sample be a binocular, consisting of two parallel telescopes; (2) that 
the binocular have an internally stabilized image; (3) that the 
binocular weigh 2.5 kilograms or less; and (4) that the binocular's 
size be equal to or less than 12 inches long, 9 inches wide, and 4 
inches high.  The RFP further provided that the Army would only 
evaluate proposals from those offerors whose binocular samples met 
each of the four go/no-go criteria.

Offerors were required to submit technical proposals demonstrating 
full compliance with each criterion set forth in the SOW, as well as a 
basic quantity pricing schedule and an "Evaluated Options" pricing 
schedule, which set forth an evaluation quantity for each option 
period.  The RFP provided that technical proposals would be evaluated 
on a "best value" basis under three evaluation factors--(1) technical; 
(2) price and cost; and (3) manufacturing capability, experience, and 
past performance--and that "[t]echnical [was] the single most 
important element, and significantly more important than [p]rice and 
[c]ost."  The RFP further stated that the Army would evaluate the 
degree to which the offeror's binocular samples met each of the SOW 
requirements, and--of significance to this protest--provided that:

     "Where the offeror's bid samples submitted do not meet a 
     specified requirement, the degree of risk associated with any 
     proposed modifications which are needed to enable it to meet the 
     requirements in time for delivery of test and production hardware 
     will be evaluated.  Apparent inconsistencies between the claimed 
     current capabilities and the bid sample or other literature, if 
     unexplained, may result in a lower evaluation."

By the April 7 closing date, offers were received from FVC and 
Corion.[1]  After concluding that each offeror's three binocular 
samples met the four go/no-go criteria, the agency conducted its 
technical evaluation of the proposals and samples.  On May 23, the 
Army issued discussion letters which set forth each offer's technical 
deficiencies and requested that the deficient technical areas be 
"further addressed/clarified."  Of significance to this protest, the 
Army's letter to FVC advised the firm that while each of FVC's 
submitted bid samples passed the go/no-go criteria, one of the samples 
"slightly did not meet" the SOW's resolution requirement which 
provided

     "The day system resolution in the caged mode with the unit 
     powered down shall be 4.3 seconds of arc or better, when measured 
     at the center of the field of view."

Arc-second resolution is typically measured by arc-seconds of "line 
pair"--or "LP."  This measurement standard reflects the amount of 
distance between the human eye and the object at which an optic's 
focus--or resolution--between two lines (thus, the term "line pair") 
can be distinguished.  In this case, the specification set forth above 
required a resolution of "4.3 seconds of arc or better"--but did not 
include the term "line pair."  Based on its 20 years of experience in 
manufacturing the XM25, the degree of magnification required by the 
RFP, and the resolution specification's omission of the term "LP," FVC 
concluded that the 4.3 number listed above referred to the width of 
one line in the resolution line pair measurement; consequently, FVC 
determined that all binoculars produced for this contract had to meet 
an 8.6 arc-second LP requirement (two lines with the width of 4.3 
arc-seconds each) and prepared its binocular samples in accordance 
with this interpretation.  After receiving the Army's discussion 
letter, FVC learned that the 4.3 number in the resolution 
specification was intended to refer to a 4.3 arc-second LP--and that 
the "line pair" reference had been inadvertently omitted.

By letter dated May 31, FVC provided the Army with a 25-page technical 
briefing paper which responded to and discussed each of the technical 
deficiencies outlined in the Army's discussion letter.  With regard to 
the resolution specification, FVC explained the basis for its initial 
interpretation of the specification, and further requested that the 
agency "modify the specification resolution allowance from 4.3 
arc[-]seconds to 5.0 arc[-]seconds."  FVC's reason for requesting the 
modification was clear:  the firm asserted that a 5.0 arc-second LP 
specification would meet the Army's minimum needs since this 
measurement represented state-of-the art resolution.  Nevertheless, 
FVC further advised the agency that "[s]hould the [Army] determine 
that the 4.3 arc[-] second [LP] is essential FVC can meet this 
requirement for a slight increase in price."  FVC explained that the 
price increase would reflect the cost of realigning its optic 
production equipment to the 4.3 arc-second LP standard.

The Army carefully reviewed FVC's request for a 5.0 arc-second LP 
measurement but ultimately determined that its minimum needs required 
the more stringent 4.3 arc-second LP resolution standard.  On June 6, 
the contracting officer separately informed both FVC and Corion by 
telephone that the 4.3 arc-second LP resolution specification was a 
firm requirement and would not be modified.  On June 21, the Army 
ended technical discussions and requested best and final offers (BAFO) 
from FVC and Corion; both offerors submitted BAFOs by June 28.  On 
July 26, the Army awarded the contract to FVC based on its technically 
superior, lower-priced offer.  On August 7, Corion filed this protest 
at our Office; the protest was timely supplemented on September 21, 
after Corion attended an agency debriefing.

PROTESTER'S CONTENTIONS

Corion contends that FVC's proposal does not commit it to provide 
binoculars equipped with the 4.3 arc-second LP resolution and that, 
consequently, the Army  must have waived this requirement for the 
awardee.  Corion also argues that the awardee does not understand this 
requirement because its pricing is materially unbalanced.  Corion 
further contends that the Army improperly downgraded its proposal 
based on application of unstated evaluation criteria.  Finally, Corion 
contends that the agency ignored a negative pre-award survey of FVC, 
resulting in an improper evaluation of the firm's manufacturing 
capability and experience.

ANALYSIS

Compliance with the 4.3 Arc-Second LP Resolution Requirement

Corion argues that because FVC did not explicitly use the term "4.3 
arc-seconds" in its BAFO, the awardee is not obligated to meet the 4.3 
arc-second LP resolution requirement, and, consequently, the Army must 
have improperly waived this mandatory specification for the awardee.  
In this regard, the record shows that as its BAFO, FVC, like Corion, 
submitted only a cover letter and new pricing schedules.

In a negotiated procurement, an offeror must demonstrate within the 
four corners of its proposal that it will perform the required work in 
accordance with the terms and conditions set forth in the 
solicitation.  See A&W Maintenance Servs., Inc., B-258293; B-258293.2, 
Jan. 6, 1995, 95-1 CPD  8.  In this case, we think that the Army 
reasonably concluded that FVC was committed to comply with the 4.3 
arc-second LP resolution specification.

In its May 31 technical response to the Army's discussion letter, FVC 
clearly explained why it regarded the resolution specification as 
ambiguous, and set forth a reasoned basis for its interpretation.  
Next, although FVC asked that the Army modify the resolution standard, 
it also stated

     "Should the U. S. Government determine that the 4.3 arc[-]second 
     [LP] is essential FVC can meet this requirement for a slight 
     increase in cost."

Additionally, in the cover letter attached to the technical response, 
FVC reiterated that if the day resolution "specification remains 
unchanged" this option would impact FVC's costs.  Thus, FVC clearly 
communicated that if the Army insisted on the 4.3 arc-second LP 
resolution requirement, it would comply with this requirement--though 
at a higher price.

Finally, although FVC's BAFO does not refer to any specific arc-second 
LP resolution measurement, the cover letter to the BAFO states

     "Our review consisted of evaluating the impact on cost and 
     schedule of [FVC's laser hardening] Technical Approach, the 
     clarified resolution specification and other clarifications 
     discussed in our letter of May 31, 1995."

The remainder of FVC's BAFO consisted of a revised pricing schedule 
which reflected a $3.9 million increase over its initial proposal 
price.

Based on FVC's offer to meet the standard if so required; the agency's 
June 6 conversation with offerors making clear that the 4.3 arc-second 
requirement was firm; FVC's statement after discussions on this issue 
that its BAFO price increase reflected the "clarified resolution 
specification"; and the BAFO price increase itself, we think the 
agency reasonably concluded that FVC's final offer was based on the 
required 4.3 arc-second LP resolution feature.[2]  See E. W. Bliss 
Co., B-255648.3, Apr. 26, 1994, 94-1 CPD  280.

FVC's Pricing

The RFP's basic pricing schedule solicited fixed prices for the base 
contract quantity of 20 binoculars, and the "Evaluated Options" 
pricing schedule solicited fixed prices for the four follow-on 
production option quantities.  The record shows that although FVC's 
total contract price for the base and option quantities was $2.3 
million lower than Corion's, FVC's price for the base 20-unit 
production quantity was significantly higher than Corion's base 
price.[3]  As a result, Corion argues that FVC's pricing proposal is 
materially unbalanced.

We find this contention without merit.  First, both the Army and FVC 
explain that the higher base quantity price reflects the cost of 
engineering changes to commercial specifications.  The RFP required 
that 5 of the initial 20 base quantity binoculars be equipped with a 
special "3rd generation" night vision capability--a technology which 
the Army estimate indicates would cost at least $100,000.[4]  
Additionally, as permitted by the RFP, FVC proposed a technical 
modification to the existing commercial specifications which gives the 
Army an internal electronic means for stabilizing the binoculars 
during non-use; the cost of implementing this feature, as well as the 
cost of realigning FVC's optic production equipment to obtain the 4.3 
arc-second LP resolution for the entire production line, is reflected 
in the base quantity unit price of $34,805 per binocular.[5]

Next, a comparison between the FVC and Corion pricing reveals that the 
Army will realize a price savings as soon as the first option is 
exercised:

     Price   No. of Units          FVC       Corion

     Base
     Quantity    20           $   696,100    $   419,220
     
     Option 1     425           1,880,625      2,493,900

     Option 2   1,725           7,357,125      8,330,025

     Option 3   1,800           7,965,000      8,692,200
     
     Option 4   1,050           4,882,500      5,070,450

The Army states that it intends to exercise all options.

Under these circumstances, since the higher base price has been 
reasonably explained and related to FVC's technical superiority, and 
since the Army will immediately obtain price savings upon exercising 
the first contract option, we find FVC's pricing to be 
unobjectionable.  See A&W Maintenance Servs., Inc., B-255711, Mar. 25, 
1994, 94-1 CPD  214; Integrated Protection Sys., Inc., B-254457.2; 
B-254457.3, Jan. 19, 1994, 94-1 CPD  24.

Unstated Evaluation Criteria

The record shows that Corion's technical proposal was downgraded in 
part because its binocular samples failed to meet the required 4.3 
arc-second LP resolution requirement, and because the agency 
determined that Corion's manufacturing method for complying with the 
resolution requirement was high risk.  Corion contends that these 
portions of the agency's technical evaluation were improper because 
the Army deviated from the solicitation's evaluation criteria.

Although the protester contends that the agency applied unstated 
evaluation factors, the record simply does not support this 
contention.  First, the RFP specifically provided that "Bid Sample 
Resolution" would be examined as part of the technical evaluation.  
Thus, offerors were clearly on notice that their samples would be 
evaluated to ascertain whether they met the 4.3 arc-second LP 
resolution specification.

Next, although Corion maintains that the Army could not properly 
consider whether a manufacturing method involved "risk," in fact the 
RFP specifically provided that:

     "Where the offeror's bid samples submitted do not meet a 
     specified requirement,  the degree of risk associated with any 
     proposed modifications which are needed to enable it to meet the 
     requirements in time for delivery . . . will be evaluated."  
     (Emphasis added.)

Clearly, both the binocular samples' non-compliance with the required 
resolution specification, as well as the risk inherent in an offeror's 
technique for correcting such technical non-compliance, were 
encompassed by the above-referenced solicitation provision.  
Consequently, we deny this ground of protest.[6]  See San Diego State 
Univ. Found., B-250838.3, Apr. 21, 1993, 93-1 CPD  337.

Impact of the Negative Pre-Award Survey

The record shows that during the technical evaluation, the Army asked 
the Defense Logistics Agency (DLA) to conduct pre-award surveys of 
both Corion and FVC.  On May 23, DLA completed its pre-award survey of 
FVC and recommended no award  on the ground that FVC had encountered 
production problems in the past due to its "difficulty receiving 
vendor materials in a timely manner."  As a result, the DLA evaluator 
noted that although FVC had "show[n] its ability to deliver on 
schedule, the question of vendor control to receive material in a 
timely manner must be addressed in detail."  Despite the negative 
pre-award survey, the record shows that FVC received a favorable 
technical rating--slightly higher than the protester's--under the 
manufacturing capability, experience and past performance evaluation 
factor.   Corion challenges this aspect of the technical evaluation on 
the ground that the Army improperly disregarded the negative pre-award 
survey.

The record shows that the pre-award survey was used in the agency's 
assessment of FVC's responsibility, but was not considered in the 
technical evaluation of FVC.  Even assuming that the agency was 
required to consider the pre-award survey in the course of the 
technical evaluation, however, there is no basis in the record to 
conclude that FVC's rating under the manufacturing capability, 
experience, and past performance evaluation factor would have changed.  
On the contrary, the record shows that in the course of making his 
responsibility determination, the contracting officer conducted a 
detailed review of the findings in the pre-award survey and reasonably 
concluded that it revealed no major concerns related to this 
procurement.

Although the DLA surveyor recommended "no award," he nonetheless 
stated that "[FVC] could deliver the items on-time IF the vendor 
control was actively in-place. "  After receiving the survey, the 
contracting officer further investigated the findings in the survey, 
and questioned FVC about its current vendor control status.  On July 
18, as a result of his investigation, the contracting officer executed 
a "Decision to Override Negative Pre-Award Survey." 

The contracting officer concluded that FVC only encountered vendor 
control problems on those contracts where the procured items were 
non-NDI items--which typically involved a higher degree of difficulty 
due to the use of unusual and limited numbers of supplies from limited 
numbers of sources in remote locations.  In contrast, this contract 
does not present the same obstacles since the binoculars are NDI items 
with numerous commercial sources of component supplies.  Moreover, FVC 
has successfully completed eight contracts for these items with other 
agencies, and has had no delinquencies or problems in the last 24 
months.

Next, the contracting officer determined that a contributing element 
to FVC's delinquencies on non-NDI contracts in the past had been the 
contractor's limited financial resources.  However, as evidenced by 
DLA's May 23 findings, FVC now has received a positive financial 
recommendation.

Finally, because of DLA's negative pre-award survey, the contracting 
officer asked FVC to provide evidence of its ability to control 
vendors and obtain supplies for this contract; FVC responded with firm 
quotes and commitments from its suppliers.

The record shows that the Army thoroughly and carefully considered 
DLA's pre-award survey findings and nonetheless concluded that the 
principle deficiencies were not significant with respect to the 
current contract.  Under these circumstances, we see no basis to 
object to the selection decision based on the agency's failure to 
consider the pre-award survey during the technical evaluation.

The protest is denied.

Comptroller General
of the United States

1. A third offer was also received but later eliminated from the 
competitive range as technically unacceptable on May 30.

2. We note that the actual contract award document executed by the 
parties reflects this compliance by stating that "[a]s a 
clarification, the resolution shall be as stated in the purchase 
description and shall be for a line pair not an individual line."

3. A comparison of the unit prices is as follows:

                               FVC      Corion

            Base Quantity   $34,805 ea $20,916 ea

            Option 1           4,425     5,868
            Option 2           4,265     4,829
            Option 3           4,425     4,829
            Option 4           4,650     4,829 

The total evaluated price for FVC was $22,855,130; the total evaluated 
price for Corion was $25,214,189.

4. The record shows that a similar commercial binocular equipped with 
similar night capability (but which would not meet the Army's more 
stringent minimum needs here) is available on the General Services 
Administration's Federal Supply Schedule for $20,000 more than the 
price of a binocular without that feature.  Since five night-vision 
equipped binoculars are required here, the Army estimates that this 
technology would add approximately $100,000 to the base price.

5. The Army acknowledges that it will pay a higher price in the 
prototype phase of this contract to realize the benefits of FVC's 
technically superior product.

6. Corion was notified in the Army's May 23 discussion letter that its 
submitted binocular samples did not meet the resolution requirement.  
Corion was also advised in the letter that its proposed manufacturing 
method indicated that it would not produce a high yield of binoculars 
meeting the resolution requirement, and that the method "could 
potentially cause production problems" and "does not present a strong 
understanding of the requirement."  Consequently, to the extent Corion 
suggests that it was not adequately apprised of these deficiencies, 
this contention is without merit, especially since the record contains 
a written response from Corion to the Army's discussion letter stating 
that "[y]our letter correctly states the fact that mass production 
techniques will yield only a percentage of precision prism needed for 
this requirement."