BNUMBER:  B-278343; B-278343.2 
DATE:  January 20, 1998
TITLE: COMARK Federal Systems, B-278343; B-278343.2, January 20,
1998
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DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective 
Order.  This redacted version has been approved for public release.
Matter of:COMARK Federal Systems

File:     B-278343; B-278343.2

Date:January 20, 1998

Joseph P. Hornyak, Esq., Sonnenschein Nath & Rosenthal, for the 
protester.
Keith L. Baker, Esq., and Jeffrey E. Weinstein, Esq., Eckert Seamans 
Cherin & Mellott, LLC, for Sytel, Inc., an intervenor.
Kenneth E. Patton, Esq., and Ada E. Bosque, Esq., Department of Health 
and Human Services, for the agency.
Andrew T. Pogany, Esq., and John M. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Under request for quotations which asked vendors to identify a 
configuration of computer systems and related hardware and services on 
Federal Supply Schedule, where agency intended to conduct a technical 
evaluation and cost/technical trade-off, agency improperly failed to 
advise vendors of the basis for selection.  

DECISION

COMARK Federal Systems protests the issuance of a delivery order to 
Sytel, Inc. under request for quotations (RFQ) No. 0008, issued by the 
Health Care Financing Administration, Department of Health and Human 
Services, for computer desktop workstations.  COMARK principally 
argues that the agency improperly failed to advise vendors of the 
agency's actual needs and evaluated quotations in a manner that was 
inconsistent with the solicitation.

We sustain the protest.

BACKGROUND

In June 1997, the agency announced that it would issue multiple 
blanket purchase agreements (BPAs) covering a variety of computer 
hardware, software, associated equipment and services pursuant to the 
General Services Administration (GSA) Federal Supply Schedule (FSS).  
The agency tentatively identified six vendors to receive for review 
BPA "packages," which included, among other things, a sample personal 
computer specification, a document entitled "BPA Evaluation 
Requirements Criteria," and the agency's terms and conditions for 
future delivery orders to be issued under the BPA.  The BPA package 
required the submission of a demonstration workstation to undergo a 
benchmark test and specified that the proposed unit have a hard drive 
capable of storing 1 gigabyte (GB) of data.  In July, question and 
answer sessions were conducted and based on these sessions, as well as 
past performance evaluations, the agency selected four vendors, 
including COMARK and Sytel, to receive BPAs.  On August 6, the agency 
revised the BPA specifications to require a hard drive capable of 
storing a minimum of 2 GB of data.  Benchmark demonstrations were 
performed by the agency from mid-August through mid-September.  As 
relevant here, COMARK's "Plus Data" unit, which it proposed to meet 
the BPA specifications, successfully passed the benchmark 
demonstration, as did two models from Sytel and two from another 
vendor, BTG, Inc.  These three firms signed and accepted the BPAs on 
September 4.

On September 18, the agency issued RFQ No. 0008 to the three firms via 
electronic mail.  The RFQ called for a quantity of 1,950 desktop 
workstations and specifically stated that it was being issued "under 
[the agency's] BPA."  The BPA, in turn, specified that it was issued 
"[p]ursuant to GSA Federal Supply Contract[s]."  The RFQ contained 
numerous specifications, some of which were followed by the 
parenthetical designation "(minimum)."  Among the latter, the RFQ 
included a requirement for a "2 GB Hard Disk (minimum)."  The RFQ also 
required a 3-year on-site warranty for all items.  The RFQ did not 
contain any evaluation criteria.

From September 23 through September 29, the agency received quotes, 
which were rated on a 1,000-point system with eight categories, 
including system design, features, performance, and price (which 
accounted for [deleted] percent of the total score).  COMARK submitted 
two quotes; the chart below reflects its lower-priced quote.  The 
evaluation results contained a pricing error that significantly 
reduced COMARK's rating; we show below the total scores and prices, as 
the agency has corrected them in its post-protest calculations.  The 
total evaluated points includes both technical and price factors--that 
is, the scores reflect a combination of technical merit and price in a 
composite rating.  The evaluation results, in relevant part, were as 
follows:

           Vendor    Total Evaluated Score (Technical and Price)Price

       Sytel Dell    [deleted]          [deleted]

       Sytel Opal    [deleted]          [deleted]

       COMARK Plus Data[deleted]        [deleted]

       BTG Model A   [deleted]          [deleted]

       BTG Model B   [deleted]          [deleted]
Based on the mistaken evaluation results (that is, results which, as 
noted above, assumed a significantly higher price and therefore a 
lower total evaluated score for COMARK), the agency's Project Officer 
made the following determination:

     Based on the quotations and the evaluation criteria, I recommend 
     the purchase of the [Sytel] Dell system as a 'best value' 
     decision.  The Dell ranked highest on the [agency's] evaluation 
     test in system design, system configuration and performance, as 
     well as in overall scoring.  It has a newer chipset [deleted] 
     than the cheaper, and closest technically acceptable competitor, 
     [deleted].  In addition, the [Sytel] Dell system has a [deleted] 
     GB hard drive [versus] the 2 GB drive found on the less expensive 
     machines.           

Accordingly, the delivery order was issued to Sytel on September 30, 
1997.  This protest followed.

The protester argues that the RFQ was silent as to what evaluation 
criteria the agency would follow, and that the agency nevertheless 
improperly engaged in a "best value" procurement instead of selecting 
the low, technically acceptable quote.[1]  The agency responds that 
best value determinations are permitted under the FSS.

The RFQ specifically referred to the BPA, which, in turn, stated that 
it was issued pursuant to the GSA FSS.  Accordingly, the provisions of 
Federal Acquisition Regulation (FAR) Subpart 8.4 apply.  Those 
provisions anticipate agencies reviewing vendors' federal supply 
schedules--in effect, their catalogs--and then placing an order 
directly with the schedule contractor that can provide the supply (or 
service) that represents the best value and meets the agency's needs 
at the lowest overall cost.  FAR  sec.  8.404(b)(2) (June 1997).[2]  When 
agencies review competing vendors' schedule offerings, they are 
permitted to make a best-value determination that takes into account 
"[s]pecial features of one item not provided by comparable items which 
are required in effective program performance."  FAR  sec.  
8.404(b)(2)(ii)(A).[3]  When agencies take this approach, there is no 
requirement that vendors receive any advance notice, regarding either 
the agency's needs or the selection criteria.

Agencies, however, may shift the responsibility for selecting items 
from schedule offerings to the vendors, by issuing solicitations 
(typically in the form of RFQs) that call on the vendors to select, 
from among the hundreds (or thousands) of possible configurations of 
the items on their schedules, a particular configuration on which to 
submit a quotation.  It is certainly understandable that an agency 
would prefer for the vendors to construct these configurations; 
particularly in the area of information technology, the large number 
of possible combinations might make it difficult for agency personnel 
unfamiliar with the particular equipment or related technical issues 
to select one configuration by reviewing vendors' schedule 
offerings.[4]

Yet once an agency decides, by issuing an RFQ (a procedure not 
mentioned in FAR Subpart 8.4), to shift to the vendors the burden of 
selecting items on which to quote, the agency must provide some 
guidance about the selection criteria, in order to allow vendors to 
compete intelligently.[5]  Haworth, Inc.; Knoll N. Am., Inc., 73 Comp. 
Gen. 283, 286 (1994), 94-2 CPD  para.  98 at 5.  Where the agency intends to 
use the vendors' responses as the basis of a detailed technical 
evaluation and cost/technical trade-off, the agency has elected to use 
an approach that is more like a competition in a negotiated 
procurement than a simple FSS buy, and the RFQ is therefore required 
to provide for a fair and equitable competition.  See EMC Corp., 
B-277133, Sept. 4, 1997, 97-2 CPD  para.  64 at 3; L.A. Sys., Inc., 
B-276349, June 9, 1997, 97-1 CPD  para.  206 at 3-4.  While an agency need 
not identify detailed evaluation criteria in an RFQ, even where it is 
asking vendors to select items from their schedules and where the 
agency intends to conduct a technical evaluation, it must indicate, at 
a minimum, the basis on which the selection is to be made, including 
whether the agency intends to select the low-cost technically 
acceptable quotation, or whether the agency is willing to consider 
paying a higher price for superior technical features (that is, 
whether it contemplates performing a cost/technical trade-off).  

In the field of information technology, where schedule contractors 
typically have a wide spectrum of items--from cut-rate to 
cutting-edge--on their schedules, an FSS vendor needs guidance from 
the agency in order to rationally decide which products to select in 
responding to an RFQ.  To use an example drawing on the facts of this 
protest, when the agency is asking a computer vendor to decide whether 
to submit a quotation for a hard drive with a 2 GB storage capacity 
for a lower price, or one with a [deleted] GB capacity at a higher 
price--where both possibilities are covered by the schedule 
contract--the vendor cannot intelligently make that choice without 
guidance about the basis on which the agency intends to make its 
selection.

In the multi-million dollar acquisition at issue in this protest, the 
agency intended to conduct a detailed technical evaluation and 
cost/technical trade-off, yet it asked vendors to submit quotations 
with less guidance than is required to be given in a solicitation for 
a far smaller purchase under the simplified acquisition procedures of 
Part 13 of the FAR.  See FAR  sec.  13.106-2(a)(1) ("Solicitations shall 
notify suppliers of the basis upon which award is to be made.").  
Specifically, the agency apparently viewed the specifications set out 
in the RFQ only as a statement of the minimum it was willing to 
purchase, and it was willing to pay a higher price for greater 
technical capabilities.  It failed, however, to advise vendors of that 
critical fact.

The agency suggests that the protester's challenge to the RFQ's 
failure to set out evaluation criteria should be dismissed as 
untimely, pursuant to 4 C.F.R.  sec.  21.2(a)(1) (1997).  We believe that 
the defect in the RFQ only became apparent when the protester learned 
that the agency's needs were not for selection of the low-priced, 
technically acceptable quotation (as the protester reasonably 
expected, as explained below).  Similarly, we reject the agency's 
contention that the RFQ made clear, through the use of the word 
"minimum" next to certain specifications, that a best-value 
determination might be the basis of the source selection here.  In our 
view, the parentheticals in the list of specifications did not by 
themselves indicate the intended basis of selection, since they would 
have been consistent with either a lowest-price, technically 
acceptable approach or a best-value one.

The protester contends that, on one of the two technical factors on 
which the selection decision rested, the capacity of the hard drive, 
it could have quoted an item equal in capacity to that quoted by 
Sytel.  The agency does not deny that the protester's FSS contract 
includes such an item.[6]  The protester contends that the reason that 
it did not quote a configuration with greater capabilities was that it 
understood the RFQ to mean that the agency's needs were for the 
low-priced, technically acceptable configuration.  Such a reading of a 
solicitation that does not otherwise explain the agency's evaluation 
criteria was reasonable.[7]  See Vistron, Inc., B-277497, Oct. 17, 
1997, 97-2 CPD  para.  107 at 4 (where a solicitation does not contain 
evaluation factors other than price, general rule is that price is the 
sole evaluation criterion).  We conclude that the RFQ did not 
accurately state the agency's requirements and that the protester was 
prejudiced by the agency's action in this regard.

Because the agency requested quotations from vendors without advising 
them that the agency did not require the low-priced, technically 
acceptable configuration, we sustain the protest.  We recommend that 
the agency amend the RFQ to advise the firms holding BPAs of the 
agency's needs, including whether the agency is willing to conduct a 
cost/technical trade-off, if configurations are quoted that exceed the 
minimum specifications stated in the RFQ.  If, upon reviewing 
quotations received in response to the amended RFQ, the agency selects 
other than Sytel, we recommend that the agency cancel that firm's 
purchase order and issue a purchase order to the vendor selected.  We 
also recommend that the protester be reimbursed the reasonable costs 
of filing and pursuing the protest, including attorneys' fees.  4 
C.F.R.  sec.  21.8(d)(1).  The protester should submit its certified claim 
for such costs, detailing the time expended and the costs incurred, 
directly to the contracting agency within 60 days after receipt of 
this decision.

The protest is sustained.

Comptroller General
of the United States

1. COMARK also alleges that it was orally advised by a contract 
specialist after the benchmark demonstrations that "price [would] now 
determine" the winner of this competition.  The agency denies that 
such advice was given.  In light of our resolution of the protest, we 
need not resolve this factual dispute or the other protest grounds 
raised by COMARK.

2. The modification to this provision introduced by Federal 
Acquisition Circular (FAC) 97-01 deleted the reference in this 
paragraph to "lowest overall cost."  This modification (which, in any 
event, was not yet in effect when the RFQ at issue in this protest was 
issued) would not change our analysis.  We note, however, that the 
requirement that FSS purchases, in order to be exempt from the mandate 
for full and open competition, be made at the "lowest overall cost" 
has a statutory basis, and thus cannot be removed by a modification to 
the regulation.  41 U.S.C.  sec.  259(b)(3)(B) (1994).

3. FAC 97-01 slightly reworded the provision, but without changing its 
meaning in a way relevant here, and shifted its location to FAR  sec.  
8.404(b)(2)(i).

4. The same may apply for furniture, another area where schedules are 
widely used.  See, e.g., Design Contempo, Inc., B-270483, Mar. 12, 
1996, 96-1 CPD  para.  146.

5. Where an agency uses the RFQ simply to request price quotations for 
items identified by the agency (for example, where the agency is 
seeking a price reduction), the concern discussed here does not arise, 
since the agency is asking the vendors only to quote prices, not to 
choose the items on which to quote.  See FAR  sec.  8.404(b)(3) (FAC 97-01) 
(agency shall generally seek price reductions where the value of the 
purchase exceeds the maximum order threshold).

6. While the hard drive benchmark tested by the protester did not have 
a [deleted] GB capacity, there was apparently no requirement that 
vendors quote configurations that had been benchmark tested.  
Similarly, the protester contends that it could offer, apparently 
through its FSS contract, the chipset that the agency preferred.

7. The agency argues that, since the protester did not submit the 
lowest technically acceptable quotation, it is not an interested party 
for purposes of pursuing this protest.  (The protester contends that 
the only quote which was lower than its own was ineligible for 
selection.)  Since the agency's needs were apparently not for the 
low-priced, technically acceptable solution and we are recommending 
that the agency amend the solicitation accordingly, we conclude that 
the protester is an interested party.  See 4 C.F.R.  sec.  21.0(a).