BNUMBER:  B-279662.2; B-279662.3; B-279662.4 
DATE:  August 31, 1998
TITLE: Electronic Design, Inc., B-279662.2; B-279662.3; B-279662.4,
August 31, 1998
**********************************************************************

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:Electronic Design, Inc.

File:     B-279662.2; B-279662.3; B-279662.4

Date:August 31, 1998 

Brian A. Bannon, Esq., Wayne A. Keup, Esq., Margaret A. Dillenburg, 
Esq., and Joseph S. Carlin, Esq., Dyer Ellis & Joseph, for the 
protester.
David S. Cohen, Esq., William F. Savarino, Esq., Alex D. Kondï¿½, Esq., 
Victor G. Klingelhofer, Esq., and Laurel A. Hockey, Esq., Cohen Mohr, 
for Litton Integrated Systems Corporation, the intervenor.
John M. Davis, Esq., Michael Glennon, Esq., and Kelly Swartz, Esq., 
Department of the Navy, for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of 
the General Counsel, GAO, participated in the preparation of the 
decision.

DIGEST

1.  Agency's source selection decision in which price is considered 
only as an eligibility factor (i.e., price does or does not fall 
within agency's budget) is improper because it fails to consider price 
as a significant evaluation factor, as required by 10 U.S.C.  sec.  
2305(a)(2)(A) and  sec.  2305(a)(3)(A) (1994) and as contemplated by the 
best value evaluation plan stated in the solicitation.

2.  Agency conducted competition on an unequal basis where the 
awardee's initial proposal was substantially in excess of the page 
limitation stated in the solicitation, and the agency evaluated that 
proposal for award without specifically advising and providing the 
other offerors an opportunity to submit proposals without a page 
limitation.

DECISION

Electronic Design, Inc. (EDI) protests an award to Litton Integrated 
Systems Corporation under request for proposals (RFP) No. 
N00024-98-R-4013, issued by the Department of the Navy, Naval Sea 
Systems Command, for integrated ship control system upgrades for CG 47 
Ticonderoga class ships.[1]

We sustain the protests.

The RFP, issued on December 29, 1997, contemplated award of a 
fixed-price contract for equipment upgrades on 26 ships through fiscal 
year 2003.  Section M of the RFP stated the following 
evaluation/source selection plan:

     Attention is directed to Federal Acquisition Regulation (FAR) 
     52.215-16 which provides that the contract will be awarded to 
     that responsible offeror whose offer, conforming to the 
     solicitation, will be most advantageous to the Government, price 
     and other factors considered.  "Other factors" shall include all 
     of those evaluation factors which are described in this Section 
     M.  The Government has established the relative importance of the 
     evaluation factors as displayed below in descending order:

     Technical Portion

        ï¿½ Performance
        ï¿½ Integration and Testing
        ï¿½ Reduce Equipment Support Costs & Overcome
             Obsolescence
        ï¿½ Enhanced Ship Operations Capability
        ï¿½ DVD

RFP  sec.  M at 123.  Immediately following this statement, section M 
stated that offers must be for all items and that price must include 
destination shipping charges, followed by a provision governing the 
evaluation of previously approved Single Process Initiative processes.  
Section M then stated that award would be made to the offeror whose:

     (i) management proposal is acceptable, and 

     (ii) proposed price for all items . . . is, in each separate 
     year, equal to or less than the Navy budget for this effort, and

     (iii) whose technical proposal is the best of those submitted 
     which meet the criteria of (i) and (ii) above.  However, the 
     Government reserves the right to award to a lower priced, lower 
     technical score offeror if that offer represents the best value 
     to the Government.

Id. at 123-24.  Immediately following was the Navy's budget for this 
procurement for each year of the contract.[2]

Amendment 0002 stated the following question about the source 
selection plan and the agency's answer:

     35.  Page 123, . . . the Government reserves the right to award 
     to a lower priced, lesser technically qualified, offeror if it 
     represents the best value to the Government.  Is there a minimum 
     technical score or are there any absolute requirements the lower 
     priced offer must meet in order to be considered qualified?  Can 
     a lower priced offer be at substantial variance from the RFP in 
     areas such as software language?  What is the process the 
     Government will use to evaluate and select a lower priced, lessor 
     technically qualified offer vs. a maximally qualified offer at 
     the prices specified in the solicitation?
     
     Answer:  A lower priced offer would have to meet all the 
     requirements of the RFP, as would any awardee.  The process by 
     which a best value determination is made is largely one of 
     judgment regarding the marginal benefits of specific features of 
     a specific proposal and price.

Amendment 0003 stated another question and agency answer concerning 
the source selection plan:

     g.  The draft information provided previously contained 
     considerable information concerning Cost as an Independent 
     Variable (CAIV).  The current RFP is silent in regard to CAIV.  
     Given the statement in Section M concerning awarding to a "lower 
     priced, lower technical score offeror" does this mean that CAIV 
     is not a consideration in this "best value" analysis?
     
     Answer:  It was not intended to discuss CAIV in the RFP, but 
     rather to use it as a tool in formulating the evaluation 
     criteria.  Lack of a dissertation on CAIV in the RFP is not a 
     change from the approach cited in the information document.  It 
     is still the approach to release the budget for this program, to 
     give substantial leeway in the technical solutions offered, and 
     to select the best system meeting the budget.  This is a CAIV 
     approach.  The Navy has added a feature of a "best value" 
     approach (which is different from CAIV) in granting the 
     possibility that it may accept a somewhat lesser technical 
     approach for a lower price, for two reasons:
        i. While the Navy has thought that the requirements cited in 
     the [statement of work] were challenging to meet for the stated 
     budget, technology is moving quickly enough to suggest that 
     requirements might be capable of being met for a lower price, 
     even in a technically optimal approach, in which case a best 
     value approach would be needed.
        ii. Substantial small business interest suggests that savings 
     may be available through innovative, low overhead business units, 
     thereby strengthening the possibility that meeting the 
     requirement does not preclude the possibility of price reductions 
     below the Navy budget.

The RFP, at 115, stated proposal preparation instructions which 
included the following page limitation:[3]

     The contractor shall submit a proposal that is no more than 3 
     binders.  Technical and management shall not exceed 150 pages - 
     one sided, no less than 12 point font, and no fold out pages. 

The Navy received initial proposals from four offerors, including EDI 
and Litton, by the closing date of February 27, 1998.  Litton's 
proposal consisted of one binder labeled "Management/Technical 
Proposal" with 149 material pages, a CD-ROM with video, and two 
additional binders of attachments consisting of approximately 1,700 
pages[4] to which the first binder made frequent reference.  EDI's 
management/technical proposal consisted of 136 material pages, 
including attachments.

By letter to Litton dated March 4, the Navy stated that the 
attachments which Litton submitted exceeded the 150-page limitation, 
and also contained 57 fold-out pages and a package of over-sized 
drawings, the submission of which was prohibited by the RFP.  The Navy 
instructed Litton to advise the agency which 150 pages, excluding 
fold-out and over-sized pages, should be considered for evaluation.

Litton responded by letter of March 4, stating that the binder marked 
as the management/technical proposal should be evaluated and that the 
two binders of attachments could be disregarded.  The letter explained 
that the attachments "were only provided as a convenience if further 
information was needed during the proposal review."

The technical evaluation review panel (TERP) attempted to evaluate the 
initial proposals, but determined that the significant number of 
deficiencies and weaknesses present in each offeror's proposal made 
evaluations based on those proposals impossible.  Agency Report, June 
26, 1998 cover letter, at 6-7; Agency Supplemental Report, July 24, 
1998 cover letter, at 5-6.  The Navy thus established a competitive 
range of all four proposals and opened discussions.

By letters to offerors dated March 20, the Navy provided questions to 
each offeror and requested written responses by March 27.  The letters 
also scheduled appointments for face-to-face discussions and stated, 
"You may present any information at discussions you wish to present."

The letter to Litton additionally stated:

     Your proposal contained pages beyond the page limit and a CD with 
     video, which was beyond the allowed material in the initial 
     proposal, against which the competitive range determination was 
     made.  If you wish that these now be considered as a part of the 
     material you present for discussions, please state this in 
     writing, or submit updated materials as you see fit.

EDI responded by letter dated March 26 and provided 16 pages of 
answers to 92 questions and several comments posed by the Navy, as 
well as two attachments totaling 11 pages.

Litton also responded by letter dated March 26, which consisted of 35 
pages of answers to 79 questions and several comments posed by the 
agency.[5]  In response to the Navy's comment regarding Litton's 
initial proposal pages in excess of the RFP's page limit, Litton 
stated, "Litton does wish that the pages attached to our proposal, 
including the CD with video, now be considered as part of the material 
we present for discussions."

In addition, the letter included six of the previously submitted 
attachments, as well as two new attachments of more than 80 pages.

Following these submissions, the discussions meetings were held and 
concluded in early April.  The Navy requested that final proposal 
revisions be submitted by April 11.  EDI's final proposal revisions 
included 38 pages related to its technical proposal.  Litton's final 
proposal revisions included only minor revision of its technical 
proposal.

The agency evaluated final proposals.  One offeror's price for the 
first year was higher than the agency's stated budget; the proposal 
was thus determined ineligible for award and eliminated from further 
consideration.  The evaluation results for the remaining three 
proposals were as follows:

          Offeror Management RatingTechnical RatingPrice

          Litton  Acceptable [DELETED]  $138,624,300   

          EDI     Acceptable [DELETED]  $[DELETED]  

          A       Acceptable [DELETED]  $[DELETED]  
The contract award review panel (CARP) considered the evaluation 
results and made the following recommendation to award the contract to 
Litton:

     The RFP clearly stated that award will be made to the offeror 
     whose (i) management proposal is acceptable, and (ii) proposed 
     price for all items . . . is, in each separate year, equal to or 
     less than the Navy budget for this effort.  Litton, EDI and 
     [Offeror A] satisfy these two conditions.  The RFP continues to 
     state in Section M that in the event that there is more than one 
     offeror under budget with an acceptable Management score that 
     award will be made to the offeror "whose technical proposal is 
     the best of those submitted which meet the criteria of (i) and 
     (ii) above."  Litton's technical score of [DELETED] far outscores 
     the other two offerors and the difference in technical merit 
     easily justifies the paying of an approximately $[DELETED] 
     million premium over the lowest priced offer submitted by EDI.

Memorandum from CARP Chairman to Procuring Contracting Officer 4-5 
(May 14, 1998).

The CARP's recommendation was approved by the source selection 
authority on May 14 and the contract was awarded to Litton.  EDI 
requested and received a debriefing; these protests followed.  The 
Navy has stayed performance of the contract due to the protests.

EDI's initial protest stated that the price considered by the Navy in 
evaluating EDI's proposals was incorrect.  EDI asserted that the price 
offered in its proposal was $[DELETED], more than $[DELETED] million 
less than Litton's price.  EDI alleged that the price/technical 
tradeoff based on a $[DELETED] million dollar difference was 
unreasonable and that award to EDI was warranted.  EDI later filed a 
supplemental protest challenging the adequacy of discussions and the 
specific technical evaluations of both EDI's and Litton's proposals.

The agency report acknowledged that the Navy made an error in 
calculating EDI's price, and that EDI's correct price was more than 
$[DELETED] million less than Litton's price.  Agency Report, June 26 
cover letter, at 11.  However, the Navy stated that this error in 
calculating price had no effect on the selection of Litton because the 
RFP gave the agency the discretion either to make award based on the 
highest-rated technical proposal among the proposals with prices at or 
below the stated budget, or to conduct a price/technical tradeoff.  
Id. at 11, 11 n.10, and 38; see also Agency Supplemental Report, July 
24 cover letter, at 3-4.  The report stated, "The CARP did not conduct 
a cost-technical best value trade-off, as it was not required to do so 
under its stated evaluation scheme." Agency Report, June 26 cover 
letter, at 11.

The agency explained its position as follows:

     Because of the [DELETED] spread of [DELETED] between EDI's and 
     Litton's total technical scores, the Navy was not required to, 
     and in fact was precluded from, awarding to EDI on the basis of a 
     technical-cost tradeoff, regardless of whether EDI's price was 
     $[DELETED] million or $[DELETED] million lower than Litton's.

     . . . [T]he decision to award to Litton was based on technical 
     merit alone.  Because of the substantial gap between Litton's and 
     EDI's technical scores, the Navy did not conduct a best-value 
     analysis or technical-cost tradeoff, it was not required to do 
     so, and, because of the gap in technical scores, would not have 
     done one regardless of the price offered by EDI.

Id. at 38 (footnote omitted).  

EDI then filed a second supplemental protest, alleging that the Navy's 
interpretation and implementation of the source selection plan stated 
in the RFP violated the requirement that price be evaluated for every 
source selection, pursuant to 10 U.S.C.  sec.  2305(a)(3)(A) (1994).  EDI 
also alleged that, based on review of Litton's proposal and related 
agency correspondence produced with the Navy's report, the Navy 
treated offerors unequally by allowing Litton to submit a proposal 
that far exceeded the stated page limitation.  We sustain the protest 
on these two bases.

CONSIDERATION OF PRICE

As a general rule, the Competition in Contracting Act of 1984 (CICA) 
requires contracting agencies to include cost or price as a 
significant evaluation factor that must be considered in the 
evaluation of proposals.  10 U.S.C.  sec.  2305(a)(2)(A), 
2305(a)(3)(A)(ii); Boeing Sikorsky Aircraft Support, B-277263.2, 
B-277263.3, Sept. 29, 1997, 97-2 CPD  para.  91 at 9-10; see FAR  sec.  
15.605(b)(1)(i) (June 1997).  An evaluation and source selection which 
fails to give significant consideration to cost or price is 
inconsistent with CICA and cannot not serve as a reasonable basis for 
award.  Boeing Sikorsky Aircraft Support, supra.  Cost or price has 
not been accorded significant consideration if the agency's evaluation 
and source selection decision so minimizes the potential impact of 
cost or price as to make it a nominal evaluation factor.  Coastal 
Science and Eng'g, Inc., B-236041, Nov. 7, 1989, 89-2 CPD  para.  436 at 3.

Here, the agency states that price was considered only to determine 
whether a proposal was eligible for award.  Proposals with prices 
greater than the budget were not eligible for, nor considered for 
award.  Once three of the proposals were determined eligible for award 
based on price, the Navy states that it did not consider the relative 
differences in price among the proposals, and did not perform a 
price/technical tradeoff; rather, technical merit was the sole 
consideration in the selection decision.[6]  Thus, to the extent the 
agency did consider price in this procurement, it was solely to 
determine basic eligibility for award.  Such a consideration of price 
is nominal; indeed, anything less would be to ignore price completely.

We conclude that the Navy's evaluation and source selection decision 
did not give significant consideration to price, and therefore was 
inconsistent with CICA and cannot form the basis for an award.  Also 
we note that the relative weight of price to the non-price evaluation 
factors was not stated in this RFP as required by CICA, 10 U.S.C.  sec.  
2305(a)(3)(A)(iii).  Where, as here, a solicitation does not 
explicitly state the relative importance of price or cost in relation 
to the other evaluation factors, our Office will presume that price or 
cost is of weight equal to the other factors.  See Ogden Support 
Servs., Inc., B-270354, Feb. 28, 1996, 96-1 CPD  para.  175 at 2 n.2.

We find no merit in the allegations asserted by counsel for the agency 
and Litton that this protest basis was untimely filed because it was 
either apparent from the terms of the RFP or from information provided 
to EDI during its debriefing.

The protest basis was not apparent on the face of the RFP because 
section M states that award would be made to the offeror whose offer 
"will be most advantageous to the Government, price and other factors 
considered" and "reserve[d] the right to award to a lower priced, 
lower technical score offeror if that offer represent the best value 
to the government."  RFP  sec.  M, at 123-24.  This terminology indicates 
that a price/technical tradeoff would be performed if the 
highest-rated offer was not also the lowest-priced offer.  This 
interpretation was confirmed by the agency's explanations of the best 
value selection scheme stated in amendments 0002 and 0003 (quoted 
above). Therefore, the Navy's now stated intent not to consider 
relative price differences was not apparent from the face of the RFP.

To the extent the Navy argues that the RFP gave the agency the 
discretion to choose between a best value selection or a selection 
based solely on evaluated technical quality of eligible offers, this 
interpretation of the terms of the RFP is not reasonable, because, 
under such an interpretation, the agency could wait to choose between 
two different sets of evaluation criteria until after proposals had 
been submitted and evaluated.  This would violate the requirement in 
CICA that solicitations in negotiated procurements identify the 
significant evaluation factors and subfactors and their relative 
importance.  10 U.S.C.  sec.   2305(a)(2)(A) and 2305(a)(3)(A).  
Accordingly, it was reasonable for the protester to read the 
solicitation, as do we, to mean that the agency would conduct a 
price/technical tradeoff if a technically acceptable proposal was 
submitted that was priced lower than the highest-rated proposal.  

The record also does not show that EDI learned during the debriefing 
that the agency did not perform a price/technical tradeoff.  The 
record of the debriefing states that EDI was informed that the 
difference in technical merit between Litton's and EDI's proposals 
justified award to Litton at a higher price, which is consistent with 
the best value selection plan stated in the RFP.  We have no basis to 
conclude that EDI learned prior to receipt of the agency report that 
the Navy did not give significant consideration to price in its source 
selection decision.  Since the supplemental protest raising this issue 
was filed within 10 days of EDI's receipt of the report, the protest 
is timely.  4 C.F.R.  sec.  21.2(a)(2) (1998).

UNEQUAL TREATMENT/PAGE LIMITATION

It is a fundamental principle of government procurement that 
competition must be conducted on an equal basis; that is, offerors 
must be treated equally and be provided with a common basis for the 
preparation of their proposals.  For Your Info., Inc., B-278352, Dec. 
15, 1997, 97-2 CPD  para.  164 at 4; Marine Research Specialists, B-265869, 
Jan. 2, 1996, 96-1 CPD  para.  1 at 3-4; see ITT Electron Tech. Div., 
B-242289, Apr. 18, 1991, 91-1 CPD  para.  383 at 9-10.

Litton's initial proposal exceeded the page limitation by 
approximately 1,700 pages--more than 10 times the stated page limit.  
The record shows that the excess pages were an integral part of the 
initial proposal.  Not only did Litton's basic proposal make frequent 
references to these attachments in two supplemental binders, the 
attachments also contained much information necessary for evaluating 
the proposal's compliance with the solicitation requirements.  The 
importance of the excess pages in Litton's evaluation is readily 
apparent from the fact that prior to evaluation of the excess pages, 
Litton's proposal was considered too deficient to evaluate, and after 
evaluation of those pages, Litton's proposal was evaluated as 
"[DELETED]."  Although Litton did respond to discussion questions 
prior to the evaluation, the amount of information provided in 
response to these questions was insignificant in comparison to the 
amount of information provided in the attachments.  Neither the agency 
nor Litton alleges that the improvement in Litton's technical proposal 
was not substantially attributable to the evaluation of the excess 
pages, and it would strain credulity to conclude that the these pages 
did not significantly influence the evaluation.

The problem is not so much that Litton submitted additional material 
beyond the 150-page limitation during discussions; indeed, the agency 
instructed all offerors that they could present any information at 
discussions.  However, the agency did not indicate to any offeror that 
initial proposals were so deficient as to preclude evaluation, nor did 
it indicate to any offeror except Litton, either during or after 
discussions, that the Navy would consider submissions which would 
essentially constitute a resubmission of initial proposals with no 
page limitation.[7]  Thus, even if the agency would have considered 
what in essence would have been new initial proposals with no page 
limitations, the Navy did not provide the other offerors with 
reasonable notice of their opportunity to submit such proposals.

The Navy did give such notice and opportunity to Litton, in that the 
Navy's letter of March 20 specifically asked Litton if it wished the 
Navy to consider the previously excluded material.  Litton's 
acceptance of the Navy's offer resulted in the Navy considering the 
1,900-page submission which Litton had prepared and submitted as its 
initial proposal.  Since, ultimately, the agency did consider Litton's 
initial proposal as submitted, whereas all the other offerors adhered 
to the stated page limitation in preparing their initial proposals, 
the Navy created an unequal competition which could not be rectified 
by the general instruction to offerors to "present any information at 
discussions" they wished.  See ITT Electron Tech. Div., supra 
(agency's consideration during discussions of an appendix submitted 
with initial proposal which exceeded the page limitation unfairly 
prejudiced other offerors, even though other offerors were permitted 
to submit additional information during discussions).

In essence, the Navy allowed Litton to leave the starting gate well 
ahead of the other offerors and never gave the other offerors 
sufficient information or a comparable opportunity which might have 
allowed them to catch up and compete under the same conditions as 
Litton.  Since the record suggests that the page limitation on initial 
proposals is not required to satisfy the agency's needs, the 
appropriate way to place competing offerors on equal footing with 
Litton would appear to be to similarly allow the other offerors to 
prepare and submit proposals without a page limitation and to benefit 
from discussions on such proposals to the same extent as did Litton.

RECOMMENDATION

We recommend that the agency amend the RFP to reflect its actual 
needs, including with regard to the page limitation and the intended 
evaluation scheme, solicit proposals from the four offerors who 
competed here, and conduct an evaluation and source selection which is 
otherwise consistent with this decision.  If an offeror other than 
Litton is selected for award, we recommend that the Navy terminate the 
contract previously awarded to Litton.  We also recommend that the 
protester be reimbursed the reasonable costs of filing and pursuing 
its protests, including attorneys' fees and consultant fees.[8]  4 
C.F.R.  sec.  21.8(d)(1) (1998).  The protester's certified claim for 
costs, detailing the time spent and costs incurred, must be submitted 
to the agency within 60 days of receiving this decision.  4 C.F.R.  sec.  
21.8(f)(1).

The protests are sustained.

Comptroller General
of the United States

1. The requirement included the removal of existing equipment, 
production and installation of the upgraded systems, testing of a 
complete integrated system at the land-based engineering site, 
engineering support, and options for direct vendor delivery (DVD) of 
spare parts.  See RFP  sec.  C, at. 13-25 and Attachment 1, statement of 
work, at 1-6.

2. The total 5-year budget was $155.1 million.

3. Amendment 0002, item No. 47, stated that the cover letter, blank 
dividers, and pages which simply show the arrangement of content 
elsewhere in the proposal would be excluded from this page limitation.

4. Many of the pages in Litton's attachments contained text on both 
sides.  Amendment 0001, item No. 7, stated that each double-sided page 
would be counted as two pages toward the proposal page limitation.  
The identification of page totals here considers double-sided pages as 
two pages.

5. Included in Litton's 35-page response was the text of the agency's 
questions.

6. We note that the CARP's award recommendation based on the erroneous 
calculation of EDI's price appears to describe a price/technical 
tradeoff.  Memorandum from CARP Chairman to Procuring Contracting 
Officer 5 (May 14, 1998).  However, as noted, the agency consistently 
denies that a price/technical tradeoff was performed.  The Navy stated 
that the apparent tradeoff described in the CARP's recommendation "was 
not dispositive of the source selection."  Agency Report, June 26, 
1998 cover letter, at 11.  It supported this statement with quotations 
from the CARP's recommendation to show that the selection between 
EDI's and Litton's proposals was based solely on technical merit.  Id. 
at 11-12 n. 11.  In any event, no best value award selection was made 
which considered EDI's correct price.

7. The parties disagree about whether EDI's final proposal exceeded 
the 150-page limitation, with the agency suggesting that EDI's 
submission of more than 150 pages proves that EDI knew that it, too, 
was free to submit as many pages as it wished after discussions.  Even 
if all of EDI's submissions are counted as proposal pages, however, 
the few pages that would exceed 150 pages would be de minimis compared 
to Litton's 1,700 excess pages, and the record does not otherwise 
indicate that EDI believed that it could submit an unlimited number of 
pages, particularly since, unlike Litton, it had not received notice 
suggesting that, either during or after discussions, it could 
(re-)submit a complete proposal not subject to a page limitation.

8. Since we recommend a recompetition and new evaluation of proposals, 
EDI's additional issues concerning discussions and the evaluation of 
both its own and Litton's proposals are rendered academic.  Although 
we are not addressing those academic issues here, we recommend that 
the protester be reimbursed its reasonable costs of filing and 
pursuing all protest issues because, regardless of whether the 
protester would have prevailed on any given issue, all of the issues 
are related to the same core protest of the evaluation and source 
selection decision from which all of the protest issues arose.  See 
Main Bldg. Maintenance, Inc.--Costs, B-260945.6, Dec. 15, 1997, 97-2 
CPD  para.  163 at 5.