BNUMBER:  B-266210
DATE:  February 9, 1996
TITLE:  LaBarge Electronics

**********************************************************************

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.