BNUMBER: B-274823
DATE: January 8, 1997
TITLE: Liebert Federal Systems, 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:Liebert Federal Systems, Inc.
File: B-274823
Date:January 8, 1997
Brian J. Donovan, Esq., Peter B. Jones, Esq., and Toni L. DeGasperin,
Esq., Jones & Donovan, for the protester.
Marc F. Efron, Esq., Paul Shnitzer, Esq., John E. McCarthy, Jr., Esq.,
Raymond F. Monroe, Esq., and Cheryl A. Soloman, Esq., Crowell & Moring
LLP, for Exide Electronics Corporation, the intervenor.
Gregory H. Petkoff, Esq., Maj. Mark R. Land, John E. Lariccia, Esq.,
and George W. Holliday, Esq., Department of the Air Force, for the
agency.
Susan K. McAuliffe, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest that agency waived mandatory technical requirements
(regarding commercial availability and Underwriters Laboratory (UL)
certification of products) for awardee is denied where cited
specifications were included in solicitation's performance
requirements and were not preconditions for award and agency
reasonably considered information in awardee's proposal regarding
firm's ability to meet commercial availability and UL certification
requirements prior to performance of the contract in determining
awardee's low proposal risk.
2. Agency was not required to exclude awardee from competition,
despite that firm's improper receipt (in violation of protective order
issued in prior protest) of certain of protester's proposed prices
where agency reasonably "leveled the playing field" for the
competition by releasing to all offerors, without objection, similar
information regarding the awardee's proposal, as well as certain model
contract pricing information for all offerors, and, contrary to
protester's contention that awardee's substantial change in salvage
value pricing was the result of awardee's improper use of protester's
proposal information, the record does not support protester's
allegations; rather, the record reasonably shows that awardee's
changed pricing on recompetition was the result of its own business
initiative and judgment.
3. Protest that awardee's prices were materially unbalanced is denied
where: there is no evidence that the offer contains enhanced prices;
higher prices in early base years and lower prices in last base year
and option years of contract reasonably reflect awardee's offered
volume discount, and were calculated and evaluated against agency's
stated revised anticipated quantity estimates (which estimates were
not timely protested); and although awardee's price becomes low in the
third base year of the contract (which included two 1-year option
periods), agency reasonably expects to exercise all options and
protester fails to show that reasonable doubt exists that award to the
firm will result in the lowest ultimate cost to the government.
4. Protest of agency's evaluation of cost proposals is denied where
the evaluation was conducted in accordance with the solicitation's
stated evaluation provisions and post-award protest of those
provisions (and estimated quantities included in those provisions) is
untimely in light of the information given to protester prior to
recompetition--if protester had reason to believe the evaluation
should have been conducted other than in the manner specifically set
out in the amended solicitation, the firm should have protested prior
to submitting its proposal on the recompetition.
DECISION
Liebert Federal Systems, Inc. protests the award of a contract to
Exide Electronics Corporation under request for proposals (RFP) No.
F04606-94-R-0002, issued by the Department of the Air Force,
Sacramento Air Logistics Center, for three phase 125-1000 kVA Static
Uninterruptible Power Supplies (SUPS)/SUPS Systems and SUPS-related
services (including support services for installation, ancillary
equipment, warranty, start-up, emergency/preventative maintenance,
training, and data) in the United States and overseas. The protester
challenges the agency's evaluation of the technical and cost
proposals, and the agency's determination that Exide's proposal
offered the lowest cost to the government.
We deny the protest.
BACKGROUND
The RFP, issued on May 18, 1994, contemplated the award of a
requirements contract with a 3-year base ordering period and two
1-year options. The RFP provided quantity estimates for proposal
preparation and evaluation purposes. Most of the RFP contract line
item numbers (CLIN) called for fixed prices, while others were cost
reimbursable or time-and-material items; certain prices for particular
site requirements (e.g., CLIN 24--installation and CLIN 25--ancillary
equipment) were to be negotiated after award. For these latter CLINs,
offerors were to propose pre-priced conversion factors (reflecting the
offeror's direct and indirect costs) to be applied after award to the
material or labor required for the site installation. For evaluation
of cost proposals for CLIN 24 (installation) and CLIN 25 (ancillary
equipment), the RFP provided two sample tasks, or "scenarios," for
which the offerors were to provide responses to include proposed
labor, material, and ancillary equipment--after application of
weighted conversion factors (and adding conversion factor cost) to the
average of the cost proposals for the scenarios, proposed costs were
to be multiplied by estimated quantities provided in the RFP at
section M-900.[1]
The RFP provided the following evaluation factors for award, listed in
descending order of importance: technical, management, and cost (cost
was to be evaluated for realism, completeness, and reasonableness);
proposal and performance risk were also to be evaluated. Award was to
be made to the offeror that submitted the proposal determined to offer
the best value to the government. Three proposals were received in
response to the RFP, discussions were held with the offerors, and best
and final offers (BAFO) were received. The agency, after determining
that the proposals were [deleted], and that Exide's proposed discounts
(where the other two offerors had not proposed discounts) rendered
that firm's cost proposal low, made award to Exide on June 4, 1995.
That award was protested to our Office by the two unsuccessful
offerors, Liebert and L.K. Comstock, Inc. We sustained the protests
by decision of December 14, L.K. Comstock, Inc. and Liebert Fed. Sys.,
Inc., B-261711.5; B-261711.6, Dec. 14, 1995, 96-1 CPD para. 4. We found
the agency's cost evaluation of the proposals unreasonable because the
agency's evaluation of Exide's proposed discounts were based on
inaccurate estimates which skewed the evaluation so that it was
uncertain whether Exide had submitted the lowest cost proposal. In
that decision, we recommended that the agency review the quantity
estimates and evaluation provisions of the RFP and amend the RFP as
appropriate. In light of the improper disclosure of certain
proprietary proposal information (Liebert's and Comstock's total BAFO
prices and one of Liebert's first year unit prices) to Exide, we also
recommended that the agency ensure to the greatest extent practicable
a level playing field among the offerors. In response to our
decision, the agency terminated the original contract awarded to
Exide, amended the RFP, and requested and evaluated new proposals.
(The current protest concerns the agency's actions in response to that
decision's recommendations and the resulting recompetition for award.)
Amendment No. 4 to the RFP, issued on April 29, 1996, contained
revised quantity estimates (the amendment reduced the estimated
quantity of SUPS modules from 1,135 to 618, reduced the CLIN 24
quantity estimate from 1,135 to 494, and reduced the CLIN 25 quantity
estimate from 935 to 410) and clarified, but did not materially
change, the agency's cost evaluation methodology; the balance of the
RFP generally remained unchanged, including the scenario tasks for
which new proposals were requested. To "level the playing field," the
agency released Exide's total price to the other offerors and all
offerors were required to release to the other competitors (at least
in an acceptable redacted form) their model contracts (providing
pricing information) that were submitted with their earlier proposals.
All three offerors were determined to have submitted [deleted]. The
agency determined that Exide's proposal (which included discount
terms, as did each of the offeror's revised proposals) offered the
lowest cost to the government and awarded a contract under the RFP to
Exide on September 20, 1996. This protest followed.
DISCUSSION
Technical Evaluation
The RFP, in the statement of work (SOW) section, included a
requirement for the contractor to provide standard products that
"shall be commercially available equipment," and incorporated ("to
form a part of this SOW") an engineering specification (SM-ALC/LIEE
92-03) which provided that "SUPS modules shall be UL 1778 certified."
Section L of the RFP, which provided instructions for proposal
preparation, instructed offerors to include in their proposals certain
existing documentation--operational and maintenance manuals, related
parts lists, brochures, and evidence of UL certification for each SUPS
kVA size. Liebert contends that since [deleted] of Exide's SUPS
models [deleted] are not currently in the commercial marketplace and
are not currently UL certified, the agency improperly waived mandatory
technical requirements for Exide and unreasonably failed to assign a
higher risk to the Exide proposal for failure to comply with these
technical requirements.
Exide's proposal indeed did not establish that these [deleted] SUPS
models were commercially available or UL certified at the time of
proposal submission. It did provide a basis for the agency to
conclude, however, that the models would be UL certified and
commercially available by the time of delivery. In this regard, the
record shows that the agency considered that [deleted] of Exide's
proposed models were [deleted]. The agency also considered, based
upon Exide's proposal information and explanations, that the [deleted]
model [deleted]. The agency found that Exide had [deleted] and that,
regarding these [deleted] challenged models, Exide's proposal still
offered low risk given the offeror's [deleted]. (The agency
evaluators specifically concluded that the "risk due to the lack of
[UL certification] documentation is mitigated by Exide's approach for
obtaining UL certification prior to the government's required delivery
date.")
Contrary to the protester's position, the RFP did not require that
offerors propose already commercially available and UL certified SUPS.
The commercial availability and UL certification requirements of the
RFP were set forth in the RFP's performance work statement and as such
constitute contractor performance/delivery requirements rather than
preconditions to award. See ADT Sec. Sys., Inc., B-249932.2, Feb. 4,
1993, 93-1 CPD para. 100. Although offerors were instructed to include in
their proposals documentation regarding SUPS commercial availability
and UL certification, this documentation requirement must be read in
conjunction with the actual RFP specification requirements to which it
relates. As indicated, those requirements were for delivery of
commercially available, UL certified models, not for models meeting
those requirements prior to award. In other words, the documentation
requirement was only to establish that the offeror would meet
performance requirements at the time of delivery. Based on Exide's
proposal and explanations, we think that the agency could reasonably
conclude that Exide's products at issue would meet the commercial
availability and UL certification requirements at that time.[2]
Improper Use of Protester's Proposal Information
Liebert next contends that Exide should be excluded from the
competition due to its improper use of Liebert's proprietary proposal
information (principally, the protester's proposed salvage value
offered as a credit in its response to a scenario task to account for
the value of equipment to be removed and replaced). As stated above,
during the prior protest to our Office, proprietary proposal
information (the total BAFO prices proposed by Liebert and Comstock
and one of Liebert's first year unit prices) was improperly released
to Exide in violation of the terms of a protective order issued by our
Office.[3] Liebert contends that it is likely that Exide had access
to and used improperly obtained information regarding the protester's
originally proposed high salvage value since the salvage value
proposed by Exide in the recompetition is approximately [deleted]
higher than the salvage value included in Exide's proposal submitted
in the initial competition.
The agency contends that there is no reason to question that Exide's
increase in salvage value is the result of anything other than Exide's
own business initiative and judgment. Our review of the record
confirms the reasonableness of the agency's position. Liebert's
proposed salvage value was not released to Exide. What was released
was Liebert's (and Comstock's) original BAFO total prices and one of
Liebert's first year unit prices. The subsequent release of
information to level the playing field after the improper release
included the model contract prices (although some of Liebert's prices,
including its proposed salvage values, were redacted by Liebert prior
to distribution to the other offerors). Although an offeror could, at
most, deduce from that information the prices proposed for the
scenario effort, an offeror could not determine the level of salvage
value claimed by any other offeror.
Liebert also contends that a further improper release to Exide of
protected Liebert pricing information must have occurred because there
is no other rational basis to account for the dramatic increase in
Exide's proposed salvage value. We find this assertion entirely
speculative. In any event, Exide has explained that upon
reexamination of its proposal under the recompetition, Exide
investigated many alternatives to reducing its cost proposal. For
example, [deleted]. This reduced Exide's costs in a number of areas,
some of which are discussed further in this decision. Exide also
reexamined its prior salvage value proposal, [deleted] (and which was
initially considered reasonable by Exide), and determined that the
prior figure was unrealistically low. [deleted] Thus, the record
supports Exide's explanation that its increase in its proposed salvage
value was the result of its own business initiative and judgment to
maintain its competitive position. In this regard, we note that
[deleted] supports that Exide's cost reductions were the result of its
own initiative, not its knowledge of Liebert's pricing strategy.
Unbalanced Pricing
Liebert contends that the agency failed to recognize that Exide's
proposal is materially unbalanced because it is based upon quantity
discounts [deleted] which reasonably will not be realized, and if the
stated quantities are realized, the proposed discounted prices will
not take effect until the last base year of the contract. Liebert
contends that Exide's proposal should therefore be rejected.
The concept of unbalancing may apply in negotiated procurements where,
as here, price constitutes the primary basis for the source selection.
Laidlaw Envtl. Servs. (GS), Inc., B-261603, Oct. 11, 1995, 95-2 CPD para.
171. Unbalanced pricing has two aspects: first, if the offer is
based on nominal prices for some of the work and enhanced prices for
other work, it is mathematically unbalanced; and second, whether award
on the basis of that mathematically unbalanced offer will result in
the lowest overall cost to the government--if there is reasonable
doubt that it will not, the offer is materially unbalanced and cannot
be accepted. Astrosystems, Inc., B-260399.2, July 11, 1995, 95-2 CPD para.
18. With regard to estimated quantities in requirements-type
solicitations, consideration of the materiality of unbalancing begins
with a determination of the accuracy of the solicitation's estimates
of the agency's anticipated needs--unreliable estimates can raise
doubts as to whether a low mathematically unbalanced offer would
actually result in the lowest cost to the government. Id.
Liebert's allegations that Exide's offer is materially unbalanced fail
for several reasons. First, there is no evidence that the Exide offer
contained enhanced prices and thus the offer has not been shown to be
mathematically unbalanced; the differential among the offerors' prices
here does not by itself render the offer mathematically unbalanced.
See Laidlaw Envtl. Servs. (GS), Inc., supra. Second, although Liebert
was aware of the problems noted in the originally issued RFP's
quantity estimates, our prior decision recommending that the agency
verify and revise its quantity estimates, the agency's amendment to
the RFP's stated quantities for the recompetition, and the agency's
confirmation of the accuracy of those estimates, it did not protest
the use of the solicitation estimates until after the award on the
recompetition. In these circumstances, (unlike the earlier protest,
where we concluded that there was no reasonable basis for a protester
to question the stated estimates until after learning that one offeror
had included discount terms in its proposal and the resulting
increased importance of the accuracy of the estimates to the
evaluation for award), if Liebert believed that the amended RFP
contained inaccurate estimates which permitted offerors to devise a
pricing approach to take advantage of the allegedly defective
estimates, Liebert should have protested on this basis before the
closing time for receipt of proposals on the recompetition. Bid
Protest Regulations, section 21.2(a)(1), 61 Fed. Reg. 39,043 (1996)
(to be codified at 4 C.F.R. sec. 21.2(a)(1)). To the extent Liebert is
now protesting the accuracy of the amended RFP's estimates, its
challenge is untimely. Astrosystems, Inc., supra. Since Exide's
[deleted] reasonably reflect the awardee's offered volume discount,
and were calculated and evaluated against the agency's stated revised
anticipated quantity estimates, we again have no reason to find the
offer mathematically unbalanced.
Third, although the protester argues that, irrespective of the
accuracy of the RFP estimates, there is reason to doubt that
acceptance of Exide's offer will result in the lowest cost to the
government because the proposed volume discount would not be triggered
[deleted], the record supports the agency's position that exercise of
the options is reasonably likely (e.g., due to anticipated need under
the contract, as well as the time and effort necessary to prepare for
a follow-on procurement of this complexity). Thus, there is no
reasonable basis to doubt that Exide's offer will result in the lowest
ultimate cost to the government. Accordingly, we do not find Exide's
offer unbalanced. Id.
Cost Evaluation
Liebert next protests the award on the basis that the agency's cost
evaluations were unreasonable and improper. Liebert contends, for
instance, that the agency improperly failed to adopt our Office's
recommendation to revise the evaluation provisions and used inaccurate
estimates in evaluating the offerors' ancillary equipment costs, that
the agency failed to appropriately consider (and rate higher) the risk
involved in Exide's unrealistically low prices, that the agency
unreasonably accepted Exide's unsupported decreases in proposed effort
and hours (resulting in, as the protester contends, unsupported
substantial decreases in Exide's proposed prices), and that the agency
unreasonably accepted Exide's unrealistically high proposed salvage
value without allowing Liebert an opportunity to submit a similar
highest possible proposal for that value.
Regarding Liebert's challenge that the agency failed to adopt our
recommendations to revise the RFP evaluation provisions and used
inaccurate estimates in evaluating the offeror's ancillary equipment
costs in its total evaluated cost and most probable cost evaluations,
we find, as stated above, that Liebert's post-recompetition,
post-award challenge to the recompetition terms is untimely.[4] Given
the information available to the protester regarding the original
competition (including the importance of the accuracy of the agency's
stated estimates for purposes of evaluation of proposed
prices--especially in light of the need for proper evaluation of an
offeror's discount terms), our decision sustaining its protest of that
competition, and the stated terms of the recompetition (where the
agency repeatedly confirmed that cost evaluations would be conducted
as stated in the RFP using the stated revised quantity estimates for
cost evaluation purposes), if the protester had reason to believe the
evaluation should have been conducted other than in the manner
specifically set out in the amended solicitation, the firm should have
protested prior to submitting its proposal on the recompetition. Id.
Notably, the protester did not contest the RFP's stated cost
evaluation scheme, but instead participated in the competition on
those terms and submitted newly proposed discounts to the government
to be factored in the agency's evaluation of its scenario and
ancillary equipment pricing. In fact, in its proposal on the
recompetition, Liebert urged the agency
"[deleted]."
As the agency points out, and as the record confirms, the cost
evaluations for ancillary equipment (including the evaluation of
Exide's and [deleted] proposed discounts for such equipment) were
conducted in accordance with the stated RFP terms, as Liebert itself
had desired. The protester's untimely protest in this regard will not
be considered.
Liebert next challenges that the agency failed to appropriately
consider (and rate higher) the risk involved in Exide's
unrealistically low prices. For example, Liebert questions Exide's
proposed prices for salvage value, Exide's substantial decrease in its
ancillary equipment costs, and Exide's decrease in its proposed labor
hours and conversion factors.[5]
We have reviewed the record in response to each of Liebert's
contentions and find that the agency reasonably evaluated the
awardee's proposal in these areas after having considered Exide's
explanations for the decreases in its prices, hours, and conversion
factors. For instance, as Exide explains in its recompetition
proposal, [deleted] (which, as the incumbent, has substantial
demonstrated experience and ability) to perform [deleted] more
efficiently and economically using its own resources. Next, as to
Liebert's challenges to Exide's allegedly unrealistically low prices
for ancillary equipment, the record clearly shows that the agency
reasonably adjusted Exide's proposed prices upward in calculating the
firm's total evaluated price--for instance, [deleted] and [deleted].
Finally, as to Liebert's contentions that the agency improperly based
its evaluation on Exide's proposed highest possible salvage value, the
agency points out that even if it normalized the salvage value amount
for all offerors or gave Liebert credit for a higher salvage value,
given the substantial difference in evaluated prices between the
offerors, the competitive standing of the offerors would not change.
In short, the agency on this recompetition performed a comprehensive
evaluation of the proposals (including at least seven different
calculations of evaluated price under which Exide remained the low
offeror by at least [deleted]. Liebert's protest contentions provide
no basis to question the propriety of the agency's cost evaluation and
the ultimate source selection decision.
The protest is denied.
Comptroller General
of the United States
1. Proposal responses to the scenarios were also evaluated for
technical merit.
2. Liebert also contends that Exide's proposal failed to comply with
the RFP's [deleted]. Our review of the record, however, shows that
the agency reasonably determined that the Exide proposal met this
requirement. Exide clearly proposed the use of either [deleted]. The
RFP did not prohibit the use of ancillary equipment to meet this
requirement, as proposed by Exide, and did not address in detail how
[deleted]. Liebert also challenges the reasonableness of the
[deleted] assigned to the Exide proposal in light of a concern that
[deleted]. The record shows, however, that the agency's initial
concern in this regard was reasonably alleviated because [deleted].
Moreover, [deleted].
3. By separate letters of April 15, 1996, to Exide's counsel and
Liebert's counsel (who was also found to have inadvertently violated
the terms of the protective order), our Office imposed, respectively,
appropriate sanctions and admonishment. Submissions from Exide on the
matter assured that the copies of the documents which failed to redact
the protected pricing information were retrieved from Exide and that
any individuals who saw those documents were instructed not to discuss
the protected information. The inappropriately redacted documents in
question, contrary to Liebert's suspicions, did not include
information regarding proposed salvage value.
4. Exide maintained in its recompetition proposal the firm's earlier
proposed discount of $50,000 for ancillary equipment exceeding
$400,000 per installation site. Since the Exide response to scenario
No. 2 contained ancillary equipment in excess of $400,000, the $50,000
discount was used by the agency in evaluating the awardee's CLIN 25
evaluated price by factoring that discount, in accordance with the
evaluation formula in the RFP, to the number of installations stated
in the RFP for evaluation of that CLIN (410). Although we still
believe, as was a basis for our prior sustain of the original
competition, that since it is unlikely that all of the stated
installations will require in excess of $400,000 in ancillary
equipment, it is questionable for the agency to evaluate most probable
cost by factoring the full quantity stated in the calculation of CLIN
25 evaluated prices, we find the protester's current challenge to the
agency's evaluation methodology, which was conducted in accordance
with the stated terms of the amended RFP, untimely, as discussed
above.
5. Liebert correctly points out that the agency's cost evaluation
contains, as the agency concedes, a mathematical error in its
calculation of Exide's discount for installation material and that
[deleted] should be added to Exide's evaluated total price. Given the
substantial difference in price between the offerors' evaluated
prices, however, this error had no effect on the award determination.