BNUMBER: B-272336; B-272336.2
DATE: September 27, 1996
TITLE: Integrated Systems Group
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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:Integrated Systems Group
File: B-272336; B-272336.2
Date:September 27, 1996
Shelton H. Skolnick, Esq., Skolnick & Leishman, for the protester.
Melissa K. Erny, Esq., Department of the Navy, for the agency.
John Van Schaik, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Where agency permitted offeror to submit information to clarify an
ambiguity in the price of its alternate offer and to make that
alternate offer acceptable, the agency conducted discussions. Since
discussions were conducted with one offeror, the agency should have
conducted discussions with all offerors whose proposals were in the
competitive range and permitted those offerors to submit best and
final offers.
DECISION
Integrated Systems Group, Inc. (ISG) protests the award of a contract
to Force Computers, Inc. under request for proposals (RFP) No.
N00163-95-R-0003, issued by the Department of the Navy for central
processor units and right to use licenses. ISG argues that the Navy
improperly opened discussions with Force Computers after initially
awarding the contract to ISG.
We sustain the protest.
The solicitation sought proposals for a base quantity of 30 processors
and licenses; offerors could propose specified units manufactured by
Force Computers or Themis Computer, Inc. by inserting prices in the
appropriate spaces in section B of the RFP. Offerors also were to
submit prices for processors, licenses, and technical data for three
option periods. Under the RFP, the first option could be exercised up
to 365 days after award, the second option could be exercised up to
730 days after award, and the third option could be exercised up to
1,095 days after award. Although the RFP called for prices on 300
processors in each of the option periods, the solicitation limited the
number of processors that could be ordered under the options to 300.
The solicitation included no specific warranty terms; offerors could
offer their standard commercial warranties.
Under the solicitation, award was to be made to the offeror whose
proposal represented the best overall value to the government,
including consideration of price and "quality performance history."
Each proposal was to be assigned a rating of low, moderate, or high
risk based on an assessment of performance data. The solicitation
explained that prices would be evaluated by adding each offeror's
total price for the base period, the average of the offeror's unit
prices for the option quantities multiplied by the maximum option
quantity of 300 units, and a price for data.
Three proposals were submitted. Force Computers offered its own
products, and ISG offered both Force Computers and Themis products.
All of the proposals were given low risk ratings.
Based on an evaluation of prices, ISG's Themis proposal was determined
to offer the lowest overall price of $2,267,105. Although Force
Computers' proposal included four additional pricing pages attached to
its section B, the agency initially ignored those additional pages in
the calculation of Force Computers' price. Based solely on the prices
in section B of its proposal, the agency calculated Force Computers'
price as $2,313,295. The contract initially was awarded to ISG and
unsuccessful offeror letters were sent to Force Computers and the
third offeror. Those letters included ISG's price.
After the award, the contracting officer received a phone call from
Force Computers questioning whether alternate proposals in its
additional price pages had been evaluated and arguing that Force
Computers should have been found to have submitted the lowest price.
That phone call was followed by a letter dated April 24, 1996, from
Force Computers requesting a review of the award decision. In that
letter, Force Computers stated that its proposal offered three
"options . . . in accordance with Section M (M2 Alternate
Specifications)"[1] and that the second and third options offered
significantly lower prices than the award price. The letter further
stated:
"After further reviewing our submittal, it has become apparent
that possibly the presentation although we admit may have been
somewhat confusing, would still have provided a lower total price
to the Government in the M2 options. The total savings to the
government were either $427,740.00 or $692,340.00 (19% or 31%) in
[Force Computers'] M2 options II and II, and each provided a
three (3) year warranty. The purpose of these proposed options
was to provide 'Best Value for the Government.'"
A memorandum prepared by the contracting officer before the protest
was filed explains that an agency contract negotiator reviewed the
additional pages in Force Computers' proposal and concluded that Force
Computers was offering the government a discount on a 2-year warranty
and had proposed a price for a one- time purchase of 300 of the
processors which was required to be taken within of calendar year
1996. The contracting officer's memorandum explains that these
alternatives were rejected because the government does not purchase
additional warranty coverage and funding would not be available to
purchase all 300 processors at one time.
The memorandum further explains that the negotiator was confused as to
what Force Computers was proposing in its alternate pricing on the
first additional page attached to its section B prices. According to
the memorandum, during a conference call with Force Computers, agency
officials asked the firm: "Besides the extended warranty, what was
your intent of how the Government should [have] evaluated your
alternate pricing?" When this question was not answered to the
agency's satisfaction, an agency official stated: "Your alternate
pricing is contingent upon exercising all of the options." Force
Computers responded that the pricing was not contingent. The
memorandum states that an agency official requested that Force
Computers submit a letter explaining its prices.
In letters dated May 1 and May 2, Force Computers explained that it
had submitted three different pricing proposals, each independent of
the other two and that under a contract resulting from any of its
proposals, the government would have the right to exercise the options
as described in the option clause of the solicitation. More
specifically, the May 2 letter explained that the first option could
be exercised by the agency up to 365 days after award, the second
option up to 730 days after award, and the third option up to 1,095
days after award.
The contracting officer reports that:
"In light of the clarification received from [Force Computers], I
reevaluated the proposals, including [Force Computers'] alternate
proposal which included a 24% discount on pricing for the option
quantities from its Section B pricing. The results of that
evaluation were that [Force Computers'] alternate proposal
offered the lowest total evaluated price at $1,825,677.00."
ISG's contract was terminated and a contract was awarded to Force
Computers.
ISG argues that Force Computers' alternate proposal on which the award
was based was unacceptable as submitted and therefore could not be the
basis for award. In addition, ISG argues that the telephone
conference calls with Force Computers and the letters from that firm
after the contract was awarded to ISG amounted to discussions since
those communications were necessary to make Force Computers' alternate
proposal acceptable. According to ISG, the Navy violated regulatory
requirements by not opening discussions with ISG and other competitive
range offerors and requesting best and final offers (BAFO) from those
firms.
It is a fundamental principle of federal procurement that all offerors
must be treated equally. Loral Terracom; Marconi Italiana, 66 Comp.
Gen. 272 (1987), 87-1 CPD para. 182. Thus, the conduct of discussions
with one offeror generally requires that discussions be conducted with
all competitive range offerors and that offerors have an opportunity
to submit revised offers. Microlog Corp., B-237486, Feb. 26, 1990,
90-1 CPD para. 227. Discussions occur whenever (1) an offeror is given an
opportunity to revise or modify its proposal, or (2) information
provided by an offeror is essential for determining the acceptability
of its proposal. Federal Acquisition Regulation (FAR) sec. 15.601 (FAC
90-40); HFS, Inc., B-248204.2, Sept. 18, 1992, 92-2 CPD para. 188. Here,
we conclude that the agency's post award communications with Force
Computers constituted discussions both because Force Computers was
given an opportunity to modify its proposal and because the firm
provided information essential for determining the acceptability of
its alternate proposal.
First, after the firm was informed of ISG's low price, Force Computers
was permitted to modify its alternate proposal to remove an ambiguity
concerning the price of its extended warranty. Based on the firm's
proposal as submitted, the cost of the extended warranty included in
Force Computers' alternate proposal was unclear. The second of the
four additional pages included with the proposal appears to offer a
2-year extended warranty with a 24-percent discount on the firm's
section B prices for processors in the options years. The fourth
additional page attached to the proposal, however, includes different
warranty price terms; that page was Force Computers quotation form for
an extended warranty for the Force Computers processor called for by
the RFP. After the statement: "We are pleased to submit the
following quotation," the quotation form included the following:
Quantity Description Price
1 Year Extended Warranty 12% of Cost of Unit Price
2 Year Extended Warranty 24% of Cost of Unit Price
Thus, the last of the four pages could be read as including an
extended warranty of 1-year at an additional cost of 12 percent of the
unit price of a processor, or an extended warranty of 2 years at an
additional cost of 24 percent. Based on the proposal itself, it is
unclear how these terms were to be reconciled with the second page
offer of a 2-year extended warranty with a 24-percent discount.
Similarly, it was not clear which prices included the extended
warranty and what was meant by such proposal terms as:
"THIS [price] IS CALCULATED BASED ON THE FOLLOWING CRITERIA[:]
. . . . .
"*EXTENDED WARRANTY COSTS ARE 12% PER UNIT PER YEAR OR 1% PER
MONTH."
Although as a result of Force Computers' explanation agency officials
decided the firm was offering an extended warranty at a discounted
price, based on the proposal itself, including all of the attached
pages, the price of the extended warranty was ambiguous.[2] The
agency's communications with Force Computers to resolve the ambiguity
concerning the warranty pricing after the award to ISG amounted to
discussion since during those communications the firm was permitted to
modify its proposal to remove the ambiguity.[3] See Information
Ventures, Inc., B-245128, Dec. 18, 1991, 91-2 CPD para. 558.
Second, the agency's communications with Force Computers constituted
discussions because the firm was permitted to submit information
essential for determining the acceptability of its alternate proposal.
As submitted, Force Computers' alternate proposal was not acceptable
because it did not clearly meet the terms of the solicitation. The
third additional page included with Force Computers' proposal stated:
"M2-ALTERNATE SPECIFICATIONS-ALTERNATE BID
"THIS ALTERNATE PROPOSAL IS FOR A ONE-TIME PURCHASE OF 300 PIECES
THAT DELIVERY OF ALL BOARDS MUST BE TAKEN WITHIN 12 MONTHS OF
CALENDAR YEAR 1996."
Although Force Computers' proposal package included two sets of option
prices in addition to the option prices in section B, the proposal did
not state that two separate and independent alternate proposals were
intended and did not clearly state which delivery terms were to apply
to which set of option prices. Thus, it was unclear from the face of
the proposal as submitted whether any alternate proposal would meet
the solicitation requirement that the first option could be exercised
up to 365 days after award, the second option up to 730 days after
award, and the third option up to 1,095 days after award. The
agency's contract negotiator declined to evaluate the alternate
proposals in part because of questions concerning the delivery
schedule in the alternate proposals for the options. Not until Force
Computers submitted its May 1 and May 2 letters did the firm
specifically bind itself to the option schedule in the solicitation.
In negotiated procurements, any proposal that fails to conform to
material terms and conditions of a solicitation should be considered
unacceptable and may not form the basis for an award. Martin Marietta
Corp., 69 Comp. Gen. 214 (1990), 90-1 CPD para. 132. The solicitation
unambiguously required that the second and third options could be
exercised up to 730 days and 1,095 days after award, respectively.
But for the post-award communications with Force Computers, that
firm's alternate proposal would not have been acceptable due to the
ambiguity concerning its compliance with the option schedule required
by the solicitation. Thus, the telephone conferences with Force
Computers, and that firm's written responses--which declared the
firm's intent to comply with the option schedule under its alternate
proposal--amounted to discussions. FAR sec. 15.601; ALT Communications.,
Inc., B-246315, Mar. 2, 1992, 92-1 CPD para. 248. Since discussions were
conducted with Force Computers, discussions should have been opened
with all competitive range offerors and BAFOs should have been
requested.
ISG was prejudiced by the Navy's actions because it is not clear that
the outcome of the competition would have remained the same had ISG
been provided an opportunity to revise its proposal. See Microlog
Corp., supra. In this regard, it is not uncommon for offerors to
offer substantial price reductions when given the opportunity, even
when the government's requirements have not changed. Information
Ventures, Inc., supra.
We recommend that the Navy open negotiations with ISG and Force
Computers and request BAFOs. If ISG offers the lowest price in its
BAFO, the contract with Force Computers should be terminated and award
made to ISG. We also find that ISG is entitled to the costs of filing
and pursuing this protest. 4 C.F.R. sec. 21.8(d)(1) (1996). In
accordance with 4 C.F.R. sec. 21.8(f)(1), ISG's certified claim for such
costs, detailing the time expended and costs incurred, must be
submitted directly to the agency within 90 days of receipt of this
decision.
The protest is sustained.
Comptroller General
of the United States
1. The solicitation, at section M2, permitted offerors to submit
alternate offers meeting commercial standards equal to the military
specifications in the solicitation.
2. The terms of this alternate proposal were not limited to a single
one of the attached pages but were included on all of those pages
since the last sentence of the first attached page states:
"PLEASE REVIEW THE ATTACHED PROPOSED SAVINGS PER BOARD TO
GET THE AVERAGE COST PER BOARD THAT INCLUDES THE EXTENDED
WARRANTY."
3. The agency does not explain why they disregarded the fourth page or
how the terms on that page are consistent with other terms in Force
Computers' proposal.