BNUMBER:  B-280431 
DATE:  September 29, 1998
TITLE: I.T.S. Corporation, B-280431, September 29, 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:I.T.S. Corporation

File:     B-280431

Date:September 29, 1998

Gerald N. Gordon, Esq., Sheppard, Mullin, Richter & Hampton, for the 
protester.
John W. Huckle, Esq., and Gregory H. Petkoff, Esq., Department of the 
Air Force, for the agency.
Tania Calhoun, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest that contracting agency conducted prejudicially unequal 
discussions by asking some offerors--but not protester--questions 
related to the sufficiency of their proposed staffing levels during 
both rounds of discussions and asking the protester a similar question 
during the second round of discussions only is denied where the 
awardee was in the same position as the protester going into the 
second round of discussions, and where the key information supplied to 
all offerors did not come until that second round of discussions.

DECISION

I.T.S. Corporation protests the elimination of its proposal from the 
competitive range and the subsequent award of a contract to MCA 
Engineers, Inc. under request for proposals (RFP) No. 
F04684-98-R-0003, issued by the Department of the Air Force to obtain 
technical support for computer services at Vandenberg Air Force Base, 
California.  I.T.S. contends that the Air Force conducted 
prejudicially unequal and misleading discussions with the firm.    

We deny the protest.

The Air Force issued this solicitation on February 2, 1998, to obtain 
such services as the installation, operation, maintenance, 
programming, and management of computer resources; computer security; 
and life-cycle acquisition management.  RFP  sec.  C-1,  para.  1.1.  The 
solicitation, set aside for small businesses, anticipated the award of 
a contract with fixed-price, labor hour, and cost-reimbursement line 
items to be performed over a 4-month base period, with up to four 
1-year option periods.  RFP  sec.  L-65C, F-12.  

Award was to be made to the offeror that submitted the lowest-priced, 
technically acceptable proposal.  RFP  sec.  M-601.  Technical proposals 
were to be evaluated under five factors, only one of which, 
management, is at issue here.  In evaluating proposals under the 
management factor, the agency planned to review, among other things, 
each offeror's proposed "organizational structure, manning levels and 
qualifications" in order to ascertain whether they were acceptable for 
the performance of the performance work statement (PWS).  RFP  sec.  
M-602(B)(2). 

Amendment No. 01 included the Air Force's responses to questions posed 
by prospective offerors.  In response to one firm's observation that 
it would be helpful to have a government staffing estimate, the Air 
Force stated that the solicitation did not specify staffing levels and 
that proposals were to be based upon the offerors' experience and 
understanding of the PWS, workload estimates, and technical exhibits.  
Amendment No. 01, Questions and Answers Section at 1.  While the 
solicitation itself did not specify staffing levels, the Air Force's 
independent government estimate (IGE) was based upon a staffing level 
of 23 full-time equivalents (FTE), broken down by various tasks.[1]  
IGE at 2.

The Air Force received six proposals by the March 26 extended closing 
date.  The technical evaluation team (TET) evaluated each proposal and 
prepared clarification requests (CR) and deficiency reports (DR) for 
each offeror.  Relevant to this protest, two offerors were issued CRs 
which asked them to clarify that their staffing levels were sufficient 
to support the requirements of specific PWS paragraphs.  MCA was 
issued a CR which referenced a figure and specific text in its 
proposal and asked the firm to clarify the total staffing offered--the 
record shows that the numbers in the figure and text were not the 
same.  The only staffing-level-related CR issued to I.T.S. advised the 
firm that it had failed to describe how a certain support task would 
be performed and misunderstood certain related staffing requirements.  
All four of these offerors proposed staffing levels of substantially 
fewer than 23 FTEs, and only one offeror's proposed staffing level was 
lower than that of I.T.S.       

The contracting officer included all six proposals in the competitive 
range and issued each offeror its respective CRs/DRs.  The TET 
reviewed all of the CR/DR responses and forwarded its conclusions to 
the contracting officer, who found that each offeror had outstanding 
issues.  Relevant to this protest, the four offerors above did not 
have satisfactory staffing levels when compared with the government's 
undisclosed standard.  In this regard, neither offeror that was asked 
to clarify whether its staffing levels were sufficient to support 
certain requirements increased its staffing levels--one sought to 
justify its staffing levels and the other merely stated that its 
staffing levels were sufficient.  MCA did not increase its staffing 
level but did, as asked, clarify the discrepancy in its proposal.  The 
only offeror that increased its staffing level--to [DELETED] FTEs--was 
I.T.S.

The contracting officer concluded that the workload estimates and 
technical exhibits used by the offerors to prepare their initial 
proposals, as well as the first round of discussions, had failed to 
resolve staffing issues.  Contracting Officer's Statement of July 9 at 
3.  As a result, she issued amendment No. 04, which replaced the 
definition of the management factor with one that added the staffing 
levels used in the IGE:  "The following government standards will be 
used to evaluate offeror's manning levels:  Management (2), Security 
(2), Computer Support (9), Property Management (7), ADPE Training 
Specialist (2), MIPS Coordinator/Supervisor (1), Sustaining Engineer 
(5)."  Amendment No. 04 at 2. 

Each offeror was sent a copy of the amendment along with CRs and/or 
DRs.  Relevant to this protest, each of the four offerors above was 
issued a discussion item which stated:  "Offeror's staffing chart does 
not meet government standards.  Offeror must submit revised staffing 
chart or sufficiently explain how all requirements of the contract can 
be met with staffing proposed."[2]  See, e.g., I.T.S. CR-006.  Each 
offeror was instructed to use amendment No. 04 for guidance in 
preparing its response to this instruction.  

The CR/DR responses show that three of the four offerors increased 
their staffing levels to between 20 and 23 FTEs.  I.T.S., on the other 
hand, increased its staffing level only to [DELETED] FTEs, as set 
forth in a table illustrating the comparison between the government 
staffing standards and its proposed staffing levels, and provided 
additional justification for its staffing levels.  The firm also 
included a table which set forth its "effective" staffing level of 
[DELETED] FTEs, based upon its assumption that the government's 
staffing estimate utilized 1,776 annual productive hours as opposed to 
its own use of 2,000 annual productive hours.[3]

The TET evaluated the CR/DR responses and concluded that all six 
offerors were technically acceptable.  Accordingly, on May 14, the 
contracting officer asked all offerors to submit final proposal 
revisions.  Each request stated that the offeror's proposal had been 
deemed technically acceptable; that negotiations were now closed; and 
that the firm was being given an opportunity to submit a new price 
proposal.  See, e.g., I.T.S. Request for Final Proposal Revision at 1.  

I.T.S.'s final proposal revision made no changes to its technical 
proposal but lowered its price to $ [DELETED], the lowest price 
evaluated.  On May 27, the contracting officer sent the following 
memorandum to I.T.S.:

     We have evaluated your final proposal revision and . . . 
     additional clarification is required.  During discussions you 
     amended your technical proposal by increasing staffing for the 
     basic effort . . . from [DELETED] manyears to [DELETED][4] 
     manyears.  However, your final proposal revision shows a decrease 
     in total price.  Please provide cost data that supports pricing 
     of the additional manyears in your final proposal revision.  

In a telephone call later that day, I.T.S. told the contracting 
officer that it had actually increased its staffing from [DELETED] 
FTEs to [DELETED] FTEs.  Its May 27 follow-up letter repeated this 
fact and added that it would provide the number and types of personnel 
necessary to support the mission, regardless of its proposal estimate; 
"[t]his is a firm, iron-clad guarantee."   

In response to the contracting officer's query, the TET advised that, 
due to "ambiguities in I.T.S.'s response to CR-006, an interpretation 
error was made regarding staffing estimates.  The government thought 
I.T.S. increased their staffing to approximately [DELETED][5] persons, 
when in fact [I.T.S.'s May 27 clarification] indicates increased 
staffing of only [DELETED] FTE. . . . the proposed staffing of 
[DELETED] is unacceptable."  TET Memorandum of May 27.  The TET 
subsequently explained that the portions of I.T.S.'s revised proposal 
concerning the computer support and property management tasks did not 
meet the minimum staffing level requirements when the workload data 
were considered.  This remained true even when I.T.S.'s "effective" 
FTE levels were taken into account.[6]  TET Memorandum of May 29.

In a May 31 letter, I.T.S. repeated its pledge to provide the number 
and type of personnel necessary to support the mission regardless of 
its proposal estimate and stated that it would "staff with a minimum 
of [DELETED] additional service technicians at no increase in price.  
We will employ these additional personnel in the computer support 
functional area . . . .  This brings our total proposed staffing level 
from [DELETED] to [DELETED] FTEs . . . .  If additional resources are 
required, we will gladly provide them."  I.T.S. Letter of May 31 at 1.  

On June 3, the contracting officer advised I.T.S. that its proposal 
had been reevaluated and was no longer being considered for award.  
She explained that the firm's proposal had been eliminated from the 
competitive range when the government discovered that its staffing 
levels were not at the acceptable range, a fact that became known when 
I.T.S. responded to the request for clarification of its final 
proposal revision.  The contracting officer concluded by stating that 
the government would not consider any further revisions of I.T.S.'s 
proposal.  Award was made to MCA at a price of $5,664,783, and I.T.S. 
filed this protest after its debriefing.  

I.T.S. contends that the Air Force conducted prejudicially unequal 
discussions by asking three offerors questions related to their 
staffing levels during both rounds of discussions, while asking I.T.S. 
such a question during the second round of discussions only.  As 
characterized by I.T.S., the Air Force gave these three offerors "two 
'bites' at the total staffing 'apple' under circumstances where those 
offerors had to know the second time around that their proposal would 
not be accepted unless they substantially increased their proposed 
staffing.  I.T.S. was not given the same two opportunities . . . ."  
I.T.S. Comments at 3-4.  I.T.S. further contends that the Air Force 
misled it during that second round of discussions by issuing the 
firm's staffing level instruction as a CR--which implied that a 
clarification would suffice--instead of a DR--which would have implied 
that the firm's staffing level was technically unacceptable.

Solicitations issued after January 1, 1998, such as this one, are 
governed by the Federal Acquisition Regulation (FAR) as amended by 
Federal Acquisition Circular (FAC) No. 97-02, which includes the Part 
15 rewrite.  The Part 15 rewrite revised the procurement regulations 
that apply when an agency is contracting using negotiated procedures, 
including those regulations governing exchanges with offerors after 
the receipt of proposals, as set forth at FAR  sec.  15.306.  The 
organization of FAR  sec.  15.306 corresponds with the possible stages of a 
negotiated procurement:  subsection (a) concerns situations where 
award without discussions is contemplated but clarifications are 
necessary; subsection (b) concerns communications with offerors before 
establishment of the competitive range; subsection (c) concerns the 
establishment of the competitive range itself; and subsection (d) 
concerns exchanges with offerors after the establishment of the 
competitive range.  The exchanges at issue in this protest fall under 
this last category.  Section 15.306(d) of the revised FAR defines 
these exchanges as follows:

     Negotiations are exchanges, in either a competitive or sole 
     source environment, between the Government and offerors, that are 
     undertaken with the intent of allowing the offeror to revise its 
     proposal. . . . When negotiations are conducted in a competitive 
     acquisition, they take place after establishment of the 
     competitive range and are called discussions.

Section 15.306(d) includes the following guidance with respect to the 
conduct of discussions:

     (3)  The contracting officer shall . . . indicate to, or discuss 
     with, each offeror still being considered for award, significant 
     weaknesses, deficiencies, and other aspects of its proposal (such 
     as cost, price, technical approach, past performance, and terms 
     and conditions) that could, in the opinion of the contracting 
     officer, be altered or explained to enhance materially the 
     proposal's potential for award.  The scope and extent of 
     discussions are a matter of contracting officer judgment. 
Section 15.306(e) of the FAR sets forth specific limitations on these 
exchanges.  Relevant to this protest, that section provides that 
government personnel involved in the acquisition shall not engage in 
conduct that favors one offeror over another. FAR  sec.  15.306(e)(1).

The statutory and regulatory requirement for discussions with all 
competitive range offerors (10 U.S.C.A.  sec.  2305(b)(4)(A)(i) (West Supp. 
1998) and FAR  sec.  15.306(d)(1)) means that such discussions must be 
meaningful, equitable, and not misleading.  See, e.g., 
Ameriko/Omserv--Recon., B-252879.4, May 25, 1994, 94-1 CPD  para.  341 at 3.  
In addition, as noted above, FAR  sec.  15.306(e)(1) prohibits government 
personnel from engaging in conduct that favors one offeror over 
another.  Notwithstanding the revisions in the FAR language, we do not 
view the rewrite as having changed the prior legal requirements 
governing discussions in any way relevant to this case.  We have 
carefully considered the record here, including multiple submissions 
from both parties, and conclude that the agency's actions were 
consistent with these legal requirements.

It is true that, during the first round of discussions, only two of 
the four offerors with staffing levels substantially below the 
government standard were asked to clarify that their staffing levels 
were sufficient to support the requirements of the principal tasks of 
the contract.  We agree with the protester that the phrasing of the 
question casts doubt on the agency's assertion that it was focused on 
whether the proposals provided complete information relating to 
staffing levels, rather than on whether staffing levels were adequate 
to accomplish the effort.  However, we are not persuaded that the 
question had any effect, since neither offeror raised its staffing 
level and only one even attempted to justify its staffing level.  As 
I.T.S. itself states, "the offerors to whom the manning level CRs were 
issued did not 'get the message'" that the proposed staffing was too 
low.  I.T.S. Comments at 7.  The record shows, moreover, that the 
discussion item given to the most relevant offeror, the eventual 
awardee, at this time could not have put it on notice that its 
staffing levels were insufficient since it was only asked to clarify a 
discrepancy in its proposal.  As a result, that offeror, MCA, was in 
exactly the same position as I.T.S. going into the second round of 
discussions.  Most important, unlike the situation in National Medical 
Staffing, Inc., B-259402, B-259402.2, Mar. 24, 1995, 95-1 CPD  para.  163, 
the principal precedent relied upon by I.T.S., the agency did 
eventually put the protester on notice of the precise issue of 
concern, thereby mitigating any inequity that might have initially 
occurred.

In this regard, the instruction given to all four offerors during the 
second round of discussions put each of them, including I.T.S., on 
notice that (1) the Air Force believed that 23 FTEs were required to 
perform the contract's requirements; (2) the Air Force planned to 
evaluate proposed staffing levels based upon this standard; and (3) 
offerors who did not propose 23 FTEs were required to supply a 
sufficient explanation for not doing so.  In the face of this specific 
instruction, I.T.S. proposed a staffing level far below the standard 
it knew it would be evaluated against and opted, instead, to take the 
risk that the agency might find its explanation for doing so 
insufficient.    

We simply do not agree with I.T.S. that two of the offerors here 
increased their staffing levels to approximate the government standard 
only because the second round discussion item somehow reinforced the 
first.  It is clear that the key piece of information given to all of 
the offerors was the government standard.  This point is reinforced by 
the fact that MCA, the awardee, was in the same position as I.T.S. and 
substantially increased its staffing level based solely on the same 
second round discussion item provided to I.T.S.  As a result, we 
cannot conclude that the agency conducted prejudicially unequal 
discussions.  

I.T.S. also argues that the Air Force misled it during that second 
round of discussions by issuing the firm's staffing level instruction 
as a CR--which implied that a clarification would suffice--instead of 
a DR--which would have implied that the firm's staffing level was 
technically unacceptable.  However, as the agency points out, and as 
the discussion item makes plain, offerors were free to propose 
staffing levels based upon their own technical approach, experience, 
and professional judgment; I.T.S.'s proposed staffing was not per se 
unacceptable.  Moreover, as noted above, the eventual awardee also 
received this discussion point as a CR, not a DR. 

Since I.T.S. does not challenge the Air Force's evaluation of its 
proposal as technically unacceptable, the agency properly eliminated 
its proposal from the competitive range, see FAR  sec.  15.306(d)(4), and 
properly declined to consider any further revisions to its proposal.  
See FAR  sec.  15.307(a).

The protest is denied.

Comptroller General
of the United States

1. This figure is exclusive of the five FTEs estimated necessary for 
the sustaining engineering task, which is not at issue here.  All of 
the total staffing levels referenced in this decision are likewise 
exclusive of the FTEs for the sustaining engineering task.

2. I.T.S. makes much of the fact that two offerors were given this 
instruction in the form of DRs, while it was given this instruction in 
the form of a CR.  The record shows that, for the sake of convenience, 
the instructions given the first two offerors were simply added to 
discussion items previously issued as DRs and as yet unresolved.  
I.T.S., in contrast, had no unresolved discussion items.  In any 
event, I.T.S. was treated in the same way as MCA, the awardee, which 
also received this instruction in the form of a CR.

3. The IGE actually utilized 1,886 annual productive hours to 
calculate staffing requirements.  IGE at 1.  I.T.S. apparently drew 
its assumption of 1,776 annual productive hours from OMB A-76 
circulars, which are not applicable here.  I.T.S. Letter of May 27 at 
1.  

4. As the agency now recognizes, this figure should have been 
[DELETED], calculated by subtracting the "effective" number of FTEs 
proposed for the sustaining engineering task (5.6) from the 
protester's total "effective" staffing level ([DELETED]).

5. This figure appears to be a rounded-up reference to the total 
number of FTEs in the protester's "effective" staffing 
level--[DELETED].

6. I.T.S. has not challenged any aspect of the Air Force's conclusion 
that its staffing level was unacceptably low.