BNUMBER: B-272093; B-272093.2
DATE: September 12, 1996
TITLE: CDA Investment Technologies, Inc.
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DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a
GAO Protective Order. This version has been redacted or approved by
the parties involved for public release.
Matter of:CDA Investment Technologies, Inc.
File: B-272093; B-272093.2
Date:September 12, 1996
Kenneth B. Weckstein, Esq., and Raymond Fioravanti, Esq., Epstein
Becker & Green, P.C., for the protester.
Kenneth S. Kramer, Esq., and Catherine E. Pollack, Esq., Fried, Frank,
Harris, Shriver & Jacobson, for Disclosure, Inc., an intervenor.
George Conril Brown, Esq., Valerie G. Preiss, Esq., and Angela E.
Clark, Esq., Securities and Exchange Commission, for the agency.
Aldo A. Benejam, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protester was not prejudiced by any errors that may have occurred
in the evaluation of awardee's proposed use of a subcontractor for
manual data processing where the record shows that, given that the
task at issue comprises a relatively minor portion (less than 2
percent) of the overall effort and will become obsolete early in the
life of the contract, there is no reason to conclude that the proposal
ratings would have materially changed.
2. Protester's contention that agency improperly evaluated its past
performance is denied where the record shows that the agency evaluated
proposals in accordance with the criteria announced in the
solicitation, and the record reasonably supports the technical
evaluation panel's decision to downgrade the protester's proposal in
this area.
3. Contention that agency improperly conducted discussions only with
awardee is denied where the record shows that, although at time of
award agency sought to confirm that awardee intended to perform
consistent with its proposal submitted approximately 1-1/2 years
earlier, the agency reasonably concluded that the awardee did not make
any material changes to its proposal.
DECISION
CDA Investment Technologies, Inc. protests the award of a contract to
Disclosure, Inc. under request for proposals (RFP) No.
SECHQ1-94-R-0013, issued by the Securities and Exchange Commission
(SEC) for processing various forms required to be filed with the SEC.
The protester contends that the SEC improperly evaluated Disclosure's
proposal; that the SEC's evaluation of CDA's past performance was
unreasonable; and that the agency conducted improper discussions.
We deny the protest.
BACKGROUND
The RFP, issued October 31, 1994, contemplated the award of a
fixed-price contract for the required services for a base period with
up to four 1-year option periods. Section C of the RFP required the
contractor to perform several tasks, including keying in and
processing data filed with the SEC on Forms 13F, 3, 4, 5, and 144.[1]
The successful offeror is also required to provide computer readable
tapes and printouts, including official summaries of the information
filed on those forms, to the SEC and to maintain an "on-line" database
for use by the SEC.
Offerors were required to submit separate technical and business
(i.e., price) proposals. Section M of the RFP stated that technical
proposals would be evaluated on the basis of the following factors
(the subfactors within each factor are shown in parentheses and were
of equal importance): (1) technical qualifications (demonstrated
ability including past performance on similar contracts; reliability
and maintainability of the computer system; computer flexibility to
respond to requests for special projects; understanding of contract
requirements); (2) experience and references of key individuals
(demonstrated ability of key personnel); (3) past performance (quality
of the offeror's past work for government and nongovernment
customers); and (4) facilities (adequacy of the physical plant and
equipment, and flexibility of physical plant and equipment to handle
special projects). The technical qualifications factor was more
important than the other three, which were of equal importance.
As for price, the RFP stated that the agency would award the maximum
number of available points to the proposal offering the lowest total
price, including options, and proportionately lower scores to
higher-priced proposals. Of the total number of points available in
the evaluation, technical and price were worth 75 and 25 percent,
respectively. Award was to be made to the offeror whose proposal was
deemed to be most advantageous to the government.
A technical evaluation panel (TEP) rated the six proposals the agency
received by the time set on January 12, 1995, for receipt of initial
proposals. The TEP concluded that no discussions were necessary with
any offeror, but directed the contracting specialist to ask the
offerors to clarify their intent with respect to their proposed use of
subcontractors. Out of a maximum possible score of 75 weighted
points, CDA's technical proposal received 69.3 points; while
Disclosure's proposal earned 70.3 points. Of the six technical
proposals, Disclosure's was ranked first and CDA's second, based on
these scores. Both proposals received the maximum number of points in
the price area.[2] Based on the combined technical and price scores,
Disclosure's and CDA's proposals were ranked first and second,
respectively (95.3 points for Disclosure's proposal, 94.3 points for
CDA's). The TEP recommended that award be made to Disclosure.
Based on the TEP's recommendation, the contracting officer offered the
contract to Disclosure on May 1, 1996, expressly incorporating its
January 1995 proposal. Disclosure signed the contract on May 1 and
returned it to the SEC with a cover letter dated May 2, the contents
of which are discussed further below. On May 2, the contracting
officer signed the contract on behalf of the government.
PROTESTER'S CONTENTIONS
CDA contends that the evaluation of Disclosure's proposal was
unreasonable because it was based on inaccurate information regarding
Disclosure's proposed use of subcontractors. CDA also argues that the
TEP's evaluation of its past performance was unreasonable because the
TEP downgraded its proposal for performance problems for which CDA
contends it was not responsible. Finally, CDA argues that prior to
award the SEC improperly held discussions only with Disclosure,
thereby permitting Disclosure to modify its proposal, without giving
CDA a similar opportunity.
ANALYSIS
Evaluation of Disclosure's Proposal
CDA contends that the TEP's evaluation of Disclosure's proposal was
unreasonable because it was based on inaccurate information regarding
Disclosure's proposed use of subcontractors.
The record shows that in response to a request from the TEP, the
contract specialist contacted all offerors on August 24 and 25, 1995,
and asked each whether it "[planned] to utilize any subcontractors in
the performance of any of the requirements stated in the
solicitation." The contemporaneous notes of the responses show that
on August 24, Disclosure answered that it "believes all work will be
done in-house"; the next day, Disclosure stated that the firm would
not be using any subcontractors, "except for some outside data entry
services." In this connection, Disclosure's proposal stated that the
firm "is considering the use of an outside vendor for keying the 13F
filings . . . ."
With respect to CDA, while the firm's proposal stated that it planned
to use "external keyers" to key in Form 13F data primarily during the
quarterly filing deadlines, the contract specialist's notes state that
in reply to the clarification question CDA stated that the firm "does
not use subs"; this notation is followed by the remark: "(Not sure
proposal states that)." Further, it appears from the contract
specialist's notes that at least one other offeror responded that it
might use outside temporary help to input Form 13F data during peak
periods. Nevertheless, the contract specialist summarized the
offerors' responses to the TEP as if all offerors had answered in the
negative.
CDA contends that the SEC failed to identify and evaluate the
subcontractors Disclosure intends to use to perform the data-entry
services and instead improperly evaluated Disclosure's proposal under
the assumption that the firm would perform all work in-house. Since
Disclosure indicated its intent to use a subcontractor for some data
entry, and since the TEP failed to evaluate this aspect of the
proposal, CDA concludes that the evaluation was unreasonable. CDA
maintains that had the TEP been aware that Disclosure intended to use
a subcontractor, its proposal would have been downgraded because of
the firm's failure to properly manage subcontractors under a previous
contract.
Section L of the RFP required offerors to "identify any proposed
subcontractors and provide evidence of their ability to fulfill the
contract requirements." Although section M of the RFP does not
specifically include a factor for the evaluation of proposed
subcontractors, such evaluation clearly would be logically encompassed
by the "technical qualifications" evaluation factor. See Laidlaw
Envtl. Servs. (GS), Inc., B-271903, Aug. 6, 1996, 96-2 CPD para. 75. In
fact, the source selection plan developed for this procurement
instructed the TEP that when evaluating "demonstrated ability" under
the "technical qualifications" evaluation factor, if an offeror
proposed a subcontractor, the TEP was to "consider evidence of the
subcontractor's ability to perform." As explained below, however, we
need not decide whether the SEC should have inquired further as to
Disclosure's statement in its proposal that it was "considering the
use of an outside vendor for keying the 13F filings" or whether the
TEP improperly failed to evaluate that vendor's capabilities.
The agency states that the volume of Forms 3, 4, and 5 processed over
the last year has been approximately 16,000 per month, while the
volume of Form 144 is approximately 3,000 per month, for a total of
approximately 19,000 forms processed per month or 57,000 forms per
quarter (about 228,000 forms per year). On the other hand, the agency
states that the volume of Form 13F--which is only filed on a quarterly
basis--is approximately 1,100 per quarter (or about 4,400 forms per
year). Based on these figures, it is clear that manual processing of
Form 13F (i.e., keying in data from paper forms), constitutes less
than 2 percent of the total work contemplated under the contract.[3]
In addition, the agency states, and the protester does not dispute,
that keying in paper Form 13F data will soon be obsolete. The SEC
explains that it is moving towards requiring that all Form 13F filings
be made electronically by the end of 1996, rendering manual data entry
unnecessary. Consistent with this move toward electronic filings, the
SEC anticipates that the volume of paper Form 13Fs filed will decrease
over time as electronic filing of that form becomes mandatory.[4]
Competitive prejudice is an essential element of a viable protest.
Lithos Restoration Ltd., 71 Comp. Gen. 367 (1992), 92-1 CPD para. 379.
Where no prejudice is shown, or is otherwise evident, our Office will
not disturb an award, even if some technical deficiency in the award
process arguably may have occurred. Merrick Eng'g, Inc., B-238706.3,
Aug. 16, 1990, 90-2 CPD para. 130, aff'd, B-238706.4, Dec. 3, 1990, 90-2
CPD para. 444.
To show prejudice here, CDA must at a minimum show, or it must
otherwise be evident from the record, that the evaluators would have
deducted more than 3 raw points from Disclosure's numerical score
under the "technical qualifications" evaluation factor.[5] Given that
this evaluation factor encompassed several elements unrelated to
subcontractor use, and given that manual Form 13F processing is
expected to account for less than 2 percent of the total effort and
that this task will soon become obsolete, there is no reasonable basis
upon which to conclude that the TEP, had it been advised by the
contract specialist that Disclosure intended to use a subcontractor to
key in Form 13F data, would have downgraded Disclosure's proposal[6]
by any meaningful amount. Accordingly, we conclude that CDA was not
prejudiced by any deficiencies that may have occurred in the
evaluation in this regard.
Evaluation of Past Performance
The tasks required by the RFP are currently being performed under two
separate contracts--one contract that the SEC awarded to CDA for
processing Form 13F, and one contract awarded to Disclosure for
processing Forms 3, 4, 5 and 144. In addition to being a prime
contractor for processing Form 13F, CDA is a subcontractor under
Disclosure's contract, whereby CDA also processes Forms 3, 4, 5, and
144.
CDA argues that the agency improperly evaluated its proposal under the
past performance factor. In this regard, CDA contends that the TEP
improperly assigned a weakness to its proposal under this area
primarily because of a recent backlog of unprocessed forms under CDA's
subcontract. Although CDA does not dispute that processing delays
occurred, the protester contends that the TEP unreasonably evaluated
its proposal because the delays in processing Form 5 were not entirely
CDA's fault; in fact, CDA maintains, since Disclosure was the prime
contractor, that firm's proposal also should have been downgraded in
the past performance area.
In reviewing a protest challenging an agency's technical evaluation,
we examine the record to ensure that the agency's evaluation was
reasonable and consistent with the stated evaluation criteria. See
Abt Assocs., Inc., B-237060.2, Feb. 26, 1990, 90-1 CPD para. 223. Where a
solicitation requires the evaluation of offerors' past performance, an
agency has discretion to determine the scope of the offerors'
performance histories to be considered, provided all proposals are
evaluated on the same basis and consistent with the solicitation's
requirements. See, e.g., Federal Envtl. Servs., Inc., B-250135.4, May
24, 1993, 93-1 CPD para. 398. Based on our review of the record, we find
no basis to object to the evaluation of proposals in this area.
Although the evaluators found that CDA had a good performance history
overall, the TEP downgraded CDA's proposal under past performance
primarily because of problems the SEC had recently experienced in
connection with processing Forms 3, 4, 5, and 144. The TEP final
evaluation report shows that the evaluators were uniformly critical of
CDA's past performance as a subcontractor to Disclosure. The TEP
chairman summarized several recent problems in CDA's performance,
specifically noting CDA's inaccurate classification of Forms 3 and 4,
and incorrectly marking Forms 3, 4, and 5 as "inconsistent," leading
to several complaints from filers affected by the errors; "significant
problems" in the working relationship between CDA, Disclosure, and the
SEC with respect to Forms 3, 4, 5, and 144; persistent delays in the
publication of official summaries of securities transactions; and a
long-term backlog in CDA's processing Forms 3, 4, and 5.
CDA argues that the TEP unreasonably downgraded its proposal under
past performance more severely than it did Disclosure's proposal, and
that some of the difficulties noted by the TEP under the prior
contract were improperly attributed solely to CDA. These arguments
are without merit. The record shows that the evaluators deliberated
as to both firms' contribution to the delays and performance problems
under the prior contract, and rated both CDA's and Disclosure's
proposal
consistent with their perception of each firm's responsibility for
processing the forms. For instance, the record shows that one
evaluator specifically attributed some of the performance problems
with Forms 3, 4, 5, and 144 to Disclosure as the prime contractor.
Another evaluator downgraded Disclosure's proposal because the firm
had displayed an inability to properly manage CDA's subcontract. All
three evaluators agreed, however, that both Disclosure and CDA should
share some of the responsibility for the performance problems and
adjusted both offerors' final scores accordingly.
While CDA argues that it was not responsible for processing one of the
forms (Form 5) until October 1994, and explains that the delays
associated with processing that form were primarily due to an
unanticipated increase in filings, that is only one of several forms
CDA processed as a subcontractor to Disclosure with which the SEC
experienced problems; CDA does not deny that performance problems also
existed with the other forms. CDA's argument that the TEP downgraded
its proposal out of proportion to its blame for the backlogs in
processing the forms essentially reflects CDA's disagreement with the
individual evaluators' judgment, based on their personal experience
with the prior contract, on the degree of responsibility to be placed
on CDA and Disclosure for the problems. CDA's disagreement with this
aspect of the evaluation does not establish that the evaluation of
CDA's proposal was unreasonable. See Sarasota Measurements &
Controls, Inc., B-252406.3, July 15, 1994, 94-2 CPD para. 32.
Alleged Revisions to Disclosure's Initial Proposal
As explained above, Disclosure signed the contract on May 1.
Disclosure returned the signed contract to the SEC with a cover letter
dated May 2, stating in relevant part that:
"We note that Disclosure's offer dated January 12, 1995, has been
incorporated [into the contract] by reference. . . . However,
given the period of time between the date of that offer, and now,
when the selection of the contract has been finalized, we would
like to inform the [SEC] that several changes have occurred with
regard to our operations. In summary, these changes related to
certain personnel who are no longer with the company but for whom
equal or more capable staff have been employed, to the exact
technical solutions and methodologies to be used, and the use of
subcontractors, which have impacted our approach today versus the
1995 proposal.
These updates in no way alter the material terms and conditions
of our offer, particularly as they relate to the services
contemplated, tasks, and prices. We intend to fulfill the
requirements indicated in the contract completely, albeit in a
different, more capable manner than had been initially proposed.
. . ."
According to CDA, this letter is evidence that Disclosure made
material changes to its proposal prior to award with respect to its
use of subcontractors, and that the SEC improperly conducted
discussions with Disclosure by making award on the basis of the
revised proposal without giving the other offerors an opportunity to
revise their proposals.
Discussions occur when an offeror is given an opportunity to revise or
modify its proposal, or when information requested from and provided
by an offeror is essential for determining the acceptability of its
proposal. Federal Acquisition Regulation sec. 15.601 (FAC 90-31);
Paramax Sys. Corp.; CAE-Link Corp., B-253098.4; B-253098.5, Oct. 27,
1993, 93-2 CPD para. 282. If a procuring agency holds discussions with
one offeror, it must hold discussions with all offerors whose
proposals are in the competitive range. See HFS Inc., B-248204.2,
Sept. 18, 1992, 92-2 CPD para. 188.
As discussed in greater detail below, we disagree with the protester's
contention that Disclosure's cover letter made material changes to the
firm's proposal with respect to the use of subcontractors.
Accordingly, the agency was not required to hold discussions with all
the offerors before making award to Disclosure.
Subsequent to the SEC's receipt of Disclosure's May 2 letter, the
contracting officer informed Disclosure that "the [SEC] cannot accept
changes to an offeror's proposal after proposals are received, unless
revisions are invited." The contracting officer explained that
Disclosure's proposal had been evaluated and selected for award
according to the terms of the RFP and Disclosure's initial proposal,
and requested Disclosure to confirm in writing its willingness to
accept and perform the contract under the terms of the RFP and in
accordance with Disclosure's proposal as submitted.
In a May 29 letter, Disclosure's president responded to the
contracting officer's request, assuring the SEC that the firm was
committed to performing the contract consistent with the terms of its
proposal. Disclosure's president stated that nothing in the May 2
letter diminished the firm's commitment, "nor modified any term or
condition" of its proposal.
Disclosure further explained that its statement with respect to the
use of subcontractors is consistent with its technical approach as
stated in its initial proposal. In this regard, as stated earlier,
Disclosure's proposal stated that "Disclosure is considering the use
of an outside vendor for keying the 13F filings. . . ." Disclosure
reaffirmed that statement in its response to the contracting officer,
explaining that the firm was still considering that option.
Disclosure's letter further assured the SEC that it had "no other
plans, intentions, or agreements to use subcontractors to produce the
data required by the contract."
Subsequently, to further assure himself that Disclosure agreed to be
bound by the terms of its proposal as it was evaluated and selected
for award, the contracting officer held a telephone conference with
Disclosure. The record shows that the conference included a
representative of Disclosure and SEC's Director of the Office of
Filings and Information Services (OFIS) (the division within the SEC
responsible for processing the forms covered by the contract). The
record contains a document dated June 3 memorializing that telephone
conference, in which the contracting officer affirms that based on
their inquiry, both he and the OFIS Director were satisfied that
Disclosure "had made no changes to its proposal and was contemplating
performance in accordance with the terms of the contract and its
proposal."
Contrary to the protester's contentions, the record does not show that
Disclosure made any material changes to its initial proposal with
respect to the use of subcontractors through the May 2 letter, or
through subsequent communications with the SEC. As noted above,
Disclosure's proposal stated that the firm was considering the use of
a subcontractor for keying in the Form 13F filings; the record
indicates that it is not an uncommon practice for the contractor to
supplement its work force during the peak periods corresponding to the
regulatory quarterly filing deadlines. The May 2 letter, with its
general reference to the use of subcontractors, cannot reasonably be
read as materially changing the approach set out in Disclosure's
proposal. To the extent the May 2 letter raised any uncertainty about
Disclosure's intent, the record shows that, in light of the responses
to his inquiries, the contracting officer reasonably concluded that
the awardee did not make any material changes to its proposal.
The cases relied on by CDA[7] in support of its argument that, the May
2 letter modified the terms of Disclosure's proposal, are inapplicable
here. In those cases, the offeror or bidder either took exception to
material terms of the solicitation, or conditioned its offer on terms
inconsistent with those in the solicitation. Here, as already
explained, there is nothing in Disclosure's May 2 letter to the SEC
that suggests that the firm took exception to any material term of the
solicitation, or that Disclosure conditioned its offer on the SEC's
acceptance of changes to its proposal.
Based on our review of the record, we conclude that the contracting
officer properly determined that award was made on the basis of
Disclosure's proposal as it was evaluated and selected, and that the
May 2 letter made no material changes to the proposal. Accordingly,
there is no basis for us to conclude that the SEC conducted improper
discussions with Disclosure such that it was required to give the
other offerors an opportunity to revise their proposal before making
award.[8]
The protest is denied.
Comptroller General
of the United States
1. SEC rules require securities holdings by certain "insiders," such
as officers and directors, to be reported to the SEC on Form 3;
subsequent transactions are reported on Form 4; and an annual report
is submitted on Form 5. Form 144 is a notice of intent to sell
restricted securities. Form 13F is a report of securities holdings
filed quarterly by institutional investment managers. See 17 C.F.R. sec.
240.13f-1, 240.16a-3 (1996).
2. Both CDA and Disclosure offered proposals at no cost to the
government, and thus each proposal earned 25 points for price, the
maximum number of points available.
3. While these figures vary slightly from those provided in the RFP in
response to offerors' questions, the figures in the solicitation yield
results consistent with our analysis and conclusion.
4. Recognizing that electronic filing of Form 13 is the wave of the
future, CDA stated in its proposal that "[t]oday, approximately 13 or
one [percent] of Form 13F filings are received on tape and process[ed]
via the [Electronic Data Gathering Analysis and Retrieval] system.
This number is expected to grow materially over the period of the
contract."
5. As explained above, CDA's and Disclosure's weighted scores differed
by 1 point. The weighted scores were based on raw technical scores of
234.3 (Disclosure) and 231 (CDA). Thus, for CDA's proposal to be
ranked higher than Disclosure's, its raw score would have to increase
by more than 3.3 points.
6. With respect to Form 13F, since CDA proposed to use "external
keyers predominantly to meet the four peak [quarterly filing
periods]," any rescoring involving subcontractors could also affect
CDA's score.
7. Ameriko, Inc., B-266034.2, Mar. 18, 1996, 96-1 CPD para. 176 (Ameriko's
cover letter to its best and final offer specifically took exception
to a material term of the RFP; relying on our decision in Emerald
Maint., Inc., 70 Comp. Gen. 355 (1991), 91-1 CPD para. 320, the agency
properly determined that Ameriko's offer could not be accepted); New
Dimension Masonry, Inc., B-258876, Feb. 21, 1995, 95-1 CPD para. 102
(bidder included statements in cover letter conditioning the bid);
Minuteman Aviation, Inc.--Recon., B-231504.2, Oct. 13, 1988, 88-2 CPD para.
348 (cover letter from agency requiring inclusion of a safety proposal
in contract was rejected by intended awardee, and thus agency properly
rejected bid); Environmental Tectonics Corp., B-225474, Feb. 17, 1987,
87-1 CPD para. 175 (agency improperly awarded contract to offeror that
failed to delete certain material qualifications from its proposal
until after the closing date for receipt of best and final offers).
8. CDA also argues that the award was improper because Disclosure's
offer had expired. It is not improper for an agency to accept an
expired offer without opening negotiations where, as here, acceptance
is not prejudicial to the competitive system. See The Fletcher
Constr. Co., Ltd., B-248977, Oct. 15, 1992, 92-2 CPD para. 246. Since we
conclude that Disclosure made no material changes to its proposal, and
all offers had expired by the May 1996 award date, the SEC properly
allowed Disclosure to waive the expiration of its proposal acceptance
period since a waiver under such circumstances is not prejudicial to
the competitive system. See Sublette Elec., Inc., B-232586, Nov. 30,
1988, 88-2 CPD para. 540.