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.