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. Kond�, 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
� Performance
� Integration and Testing
� Reduce Equipment Support Costs & Overcome
Obsolescence
� Enhanced Ship Operations Capability
� 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.