BNUMBER: B-266210
DATE: February 9, 1996
TITLE: LaBarge Electronics
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Matter of:LaBarge Electronics
File: B-266210
Date: February 9, 1996
Stephen S. Kaye, Esq., and Regina V. Kunkle, Esq., Bryan Cave LLP, for
the protester.
Victor E. Covalt III, Esq., Woods & Aitken, for Telex Communications,
Inc., an interested party.
Robert A. Lincoln, Esq., The Library of Congress, for the agency.
Charles W. Morrow, Esq., and Guy R. Pietrovito, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
In a negotiated procurement for audio cassette machines, the procuring
agency properly determined to make a single award under a solicitation
that permitted up to two awards, where the agency received only two
offers and the protester's proposed price was determined to be
unreasonable.
DECISION
LaBarge Electronics protests the award of a contract to Telex
Communications, Inc., under request for proposals (RFP) No. RFP95-3,
issued by the Library of Congress, for audio cassette machines for the
National Library Service for the Blind and Physically Handicapped
(NLS). LaBarge contends that the agency unreasonably made a single
award where the solicitation provided for multiple awards.
We deny the protest.
The NLS administers a government program that provides books and
magazines on audio cassettes and audio cassette machines to eligible
blind and physically handicapped persons. Telex and LaBarge have
previously supplied audio cassette machines for this program under
separate contracts with the Library. Telex, the original supplier of
the audio cassettes machines, provided its C-1 model machine, while
LaBarge supplied the C-2 model. The two audio cassette models, while
essentially functionally equivalent, were subject to different
performance specifications, reflecting differences in design, method
of manufacture, and warranty periods.
The RFP, as initially issued, contemplated the award of a fixed-price
contract for an estimated quantity of 63,000 audio cassette machines
in each of the base and three option periods. Detailed specifications
for the audio cassette machines (NLS Specification 101-3) were set
forth in the RFP and provided mandatory design, performance, test, and
warranty requirements; other optional features, such as a battery
charging feature, were identified but not required.[1]
Offerors were informed that proposals of machines that were determined
to be compliant with the "mandatory requirements of NLS Specification
101-3" [emphasis in original] would be evaluated under the following
technical evaluation factors, listed in descending order of
importance:
Factor 1. Engineering capabilities, including adequacy and
currency of.
Factor 2. Quality control capability and procedures, including
adequacy and currency of.
Factor 3. Experience and past performance.
Factor 4. Production and warranty repair capability and
capacity.
Factor 5. Plant facilities and equipment.
Offerors were also informed that the reasonableness of their proposed
"cost" would be evaluated; in this regard, offerors were required to
provide cost breakdown for their proposed pricing. The RFP provided
that technical merit was more important than price.
The RFP provided for award on a best value basis and informed offerors
that the Library reserved the right to make two separate contract
awards, for 60 percent of the estimated quantity and for the remaining
40 percent, if two awards were determined to be in the Library's best
interest. The higher quantity award would be made to the offeror
whose combination of technical and price proposals has the highest
overall rankings and which represents the best value to the government
price and other factors considered. In addition, the RFP stated that
no more than two awards would be made and that the Library reserved
the right to make award of the entire quantity to a single offeror
whose proposal was considered acceptable and is responsible, if no
other offers were determined to be acceptable, price and other factors
considered.
Initial proposals were received from Telex and LaBarge and evaluated
as follows:
Technical Score Total Price
(of 75 pts. max.)
Telex 68 $51,488,010
LaBarge 44 $58,430,290
Because the offerors' proposed prices far exceeded the Library's
estimated price, the agency decided to reduce the contract
requirements. Accordingly, the agency amended the RFP to reduce the
estimated quantity of audio cassette machines to 50,000 per contract
period, to reduce the warranty period from 3 years to 1 year, to allow
for more frequent contract price adjustment for fluctuations in the
yen-to-dollar ratio, and to change the possible multiple awards split
to 80 and 20 percent. Specifically, the RFP award criteria language
was amended to provide:
"If two awards are determined to be in the Library's best
interest, contractor selection for the higher quantity (80
percent) will be made to that offeror whose combination of
technical and price proposals has the highest overall ranking and
which represents the overall best value to the Government, is
most advantageous, price and other factors considered, and is
within the available Library of Congress resources. Contractor
selection for the remaining quantity (20 percent) will then be
made to that offeror whose combination of technical and price
proposals has the next highest ranking and which represents the
second best value to the Government, price and other factors
considered, and is within the available Library of Congress
reserves. No more than two awards shall be made. The Library
reserves the right to make award of the entire quantity to a
single offeror whose proposal is considered acceptable and who is
responsible, if no other offers are determined acceptable, price
and other factors considered."
After amendment of the RFP, the agency conducted technical and cost
discussions with the offerors. Among other things, LaBarge was
informed that its proposed unit prices were considered "excessive."
Revised proposals were received and evaluated as follows:
Technical Score Total Price
Telex 70.2 $38,135,000
LaBarge 48.4 $57,466,000
At the agency's request, the Defense Contract Audit Agency (DCAA)
reviewed the offerors' revised price proposals. Among other things,
the DCAA questioned LaBarge's claimed overhead rate. The agency
determined that the offerors' revised technical proposals satisfied
the agency's technical concerns, but that further discussions would be
conducted with offerors regarding their price proposals.
Oral cost/price discussions were conducted with both offerors.
LaBarge was again informed that its proposed price was "very high" and
that the firm should consider ways to reduce its price, such as
reducing its overhead, reviewing material costs, reducing its warranty
price, and considering "any changes in labor hours that might result
from learning curve improvement." At the conclusion of discussions,
best and final offers (BAFO) were received. Telex reduced its
proposed price to $35,533,000, and LaBarge reduced its proposed price
to $45,842,700. Although LaBarge reduced its overall proposed price,
its BAFO price actually reflected an increase in its per audio
cassette unit pricing.[2] LaBarge's per unit price was approximately
26 percent higher than Telex's.
DCAA reviewed the offerors' BAFO price submissions and informed the
agency that LaBarge had provided insufficient information to allow
DCAA to make any further audit conclusions regarding the firm's final
proposed pricing and its increased per unit prices. Regarding Telex's
BAFO price, DCAA found that Telex's estimated costs were reasonably
supported and that it did not appear that additional discussion would
result in any further reduction in Telex's proposed price.
The contracting officer reviewed the offerors' technical evaluation
ratings and final proposed pricing. LaBarge's lower score reflected
the fact that LaBarge's proposal lacked depth in the area of
engineering capability and had demonstrated weaknesses in quality
assurance procedures, in past performance, and in production capacity
and capability. Specifically, the contracting officer noted that
LaBarge had not satisfied its monthly production requirements of the
prior contract because of a high rate of rework and rejection under
that contract. Comparing LaBarge's BAFO price to that of Telex
(LaBarge was more than $10 million higher) and considering that
multiple awards to the two firms would result in significantly less
units being purchased (more than 2,000 units in the base year alone),
the contracting officer determined that LaBarge's proposed price was
unreasonable and that only a single award should be made to Telex.
LaBarge first complains that the RFP required the award of two
contracts where, as here, the agency received two technically
acceptable offers, irrespective of the firms' proposed prices.
We disagree. The RFP unambiguously provided that the Library would
consider making multiple awards where this was determined to be in the
agency's best interest. In determining whether multiple awards were
appropriate and in the agency's best interest, the RFP specifically
provided for the agency's consideration of price and stated that only
one award would be made where the agency determined that no other
offer was acceptable, price and other factors considered.
Here, the Library determined that LaBarge's offer was not acceptable
because its proposed price was unreasonably high. The Library also
found that multiple awards were not in the agency's best interest
because it would result in substantially fewer units being purchased.
Specifically, the record shows that the Library performed a detailed
price analysis that included consideration of DCAA's cost audit of
LaBarge's proposal and comparison to the government's estimate,
LaBarge's previous contract prices, and Telex's proposed price. As
noted above, LaBarge's BAFO price was more than $10 million higher
over the three year period than Telex's and its base period per unit
price was more than 26 percent higher.
A determination of price reasonableness is a matter of agency
discretion which we will not question absent a showing that the
determination was unreasonable or made in bad faith. Ashland Sales
and Serv. Co., B-259625; B-259625.2, Apr. 14, 1995, 95-1 CPD para. 198.
An agency may properly base its price reasonableness determination on
comparison with government estimates, past procurement history,
current market conditions, or any other relevant factors, including
information revealed by the competition. Id.; Golden Mfg. Co., Inc.,
B-255347, Feb. 24, 1994, 94-1 CPD para. 183.
LaBarge challenges the agency's price reasonableness determination,
asserting that the Library did not consider the unique features of its
proposed audio cassette machine, such as battery charging. The RFP,
however, did not provide for the comparative evaluation of offerors'
proposed audio cassette machines; rather, offerors were merely
required to demonstrate that their proposed machines would satisfy the
mandatory requirements of NLS Specification 101-3. The battery
charging feature to which LaBarge points was identified in the
specifications as an optional, and not a required, feature. Under the
solicitation criteria, the Library could not provide LaBarge with
"extra credit" for non-mandatory features of its offered machine, as
the protester asserts.
LaBarge complains that the Library acted unreasonably in comparing its
BAFO price to the prior contract prices for the audio cassette
machines because the prior contract pricing was based upon
"substantially different market conditions." Specifically, LaBarge
argues that the agency failed to consider the difference in
yen-to-dollar ratio. The record, however, shows that the agency was
aware of the fluctuation in yen-to-dollar ratio and in response to the
fluctuation had amended the RFP to provide more frequent contract
price adjustments. We find that the agency appropriately considered
the prior procurement history of these units as one factor in the
agency's price analysis.
LaBarge also complains that the Library did not consider the allegedly
unfair price advantage Telex enjoyed from its possession and use of
government-furnished equipment. The RFP, however, did not provide for
the price evaluation of an offeror's use of government-furnished
equipment, as would be required. If LaBarge believed that Telex had
an unfair competitive advantage arising from its possession of
government-furnished equipment, it should have protested the RFP's
failure to provide for evaluation of government-furnished equipment
prior to the closing date for receipt of proposals.
LaBarge also protests that the Library failed to conduct meaningful
discussions with it when the contracting officer did not inform
LaBarge that the offered optional features of its proposed machine
should be eliminated. We disagree. While agencies generally are
required to conduct meaningful discussions by leading offerors into
the areas of their proposals requiring amplification, this does not
mean that an agency must "spoon-feed" an offeror as to each and every
item that must be revised, added, deleted, or otherwise addressed to
improve a proposal. See Acumen Eng'g/Analysis, Inc., B-260102, May
11, 1995, 95-1 CPD para. 240; Califone Int'l, Inc., B-246233; B-246233.2,
Feb. 25, 1992, 92-1 CPD para. 226. Here, the Library repeatedly informed
LaBarge that its proposed price was considered excessive or
unreasonably high. This was sufficient to inform LaBarge of the area
of its proposal requiring revision. There was no requirement that the
agency inform LaBarge that its offer of features that were not
required by the RFP might have contributed to LaBarge's unreasonably
high price.[3]
In conclusion, we find that the record demonstrates that the Library
properly determined that LaBarge's price was unreasonable and that a
single award to Telex was in the best interest of the government.
The protest is denied.
Comptroller General
of the United States
1. The optional battery management feature was standard equipment on
the C-2 model cassette machine.
2. LaBarge reduced its warranty pricing.
3. We note that LaBarge's cost proposal did not detail the costs
associated with this feature, and the Library therefore would have had
no way of knowing what additional costs Labarge was incurring by
providing this feature.