BNUMBER: B-280463.3
DATE: November 25, 1998
TITLE: Rel-Tek Systems & Design, Inc., B-280463.3, November 25, 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:Rel-Tek Systems & Design, Inc.
File: B-280463.3
Date:November 25, 1998
Stephen S. Kaye, Esq., J. Michael Cooper, Esq., and Tina R. Tyson,
Esq., Bryan Cave, for the protester.
Richard J. Conway, Esq., J. Andrew Jackson, Esq., Edward W. Kirsch,
Esq., and Steven A. Alerding, Esq., Dickstein Shapiro Morin &
Oshinsky, for Oracle Corporation, an intervenor.
Jill A. Eggleston, Esq., and Terry G. Sloan, Esq., Defense Finance and
Accounting Service, for the agency.
Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Award is improper where awardee's proposal failed to conform to
material solicitation requirements regarding acceptance, warranty, and
software performance.
DECISION
Rel-Tek Systems & Design, Inc. protests the award of a contract to
Oracle Corporation under letter of interest (LOI) No. MDA-L-97-0005,
issued by the Defense Finance and Accounting Service (DFAS) for
accounting software and related services. Rel-Tek protests, among
other things, that the award was improper because Oracle's proposal
was ambiguous and failed to comply with material LOI requirements.
We sustain the protest.
The LOI was issued on March 25, 1997, under the General Services
Administration (GSA) Multiple Award Schedule (MAS) for Financial
Management Systems Software (FMSS) for the procurement of commercial
off-the-shelf (COTS) software and services. The LOI required COTS
software, software enhancements and modifications, system
installation, training, technical support services, documentation, and
maintenance.[1] The LOI, as amended, included a detailed statement of
work (SOW) which identified specifications to be met by each offeror's
proposed software, as well as required contract terms, services, and
deliverables. Award of a fixed-price requirements contract for a base
year and four 1-year option periods was to be made to the offeror
submitting the proposal determined to offer the "greatest
value"--where technical merit was moderately more important than
price. LOI Amendment No. 4, sec. L-1, sec. M-2.
Technical proposals were to be evaluated under two primary criteria:
technical and functional operational capabilities; and ability to
provide enhancements and to fully integrate the COTS system. Id. at sec.
M-3. Cost proposals were to be evaluated for realism. Id. at sec.
M-6.1.
Four proposals were submitted by the closing date for receipt of
proposals. All four were included in the competitive range for
written discussions; demonstration tests were conducted to validate
each offeror's COTS software's level of performance and the need for
enhancements to meet the SOW specifications. (One offeror withdrew
from the competition prior to the second round of demonstration
tests.) Final proposal revisions were submitted by the remaining
three offerors, including Rel-Tek and Oracle, by March 13, 1998.
Clarification request letters were sent to all offerors on April 1.
Among the many questions asked of Oracle were requests to clarify
certain terms and assumptions in its March 13 final proposal revision
submission, including perceived uncertainties in the Oracle proposal's
license terms. Oracle's April 3 response to the agency's April 1
clarification request letter affirmed portions of its proposal,
rephrased others, and noted, at 5, that Oracle believed that several
categories of LOI requirements "would still need to be negotiated by
the parties before executing a final contract," [deleted].
Although the other two offerors were found to have adequately
responded to the agency's earlier request, the agency determined that
additional "clarifications" were needed from Oracle to confirm the
firm's compliance with the LOI requirements in the areas Oracle felt
still needed to be negotiated, as well as other areas of its proposal.
Accordingly, on May 1, DFAS issued, only to Oracle, another request
for information; in this request, the agency informed Oracle that,
although the firm identified LOI requirements it believed would need
to be negotiated before award, the LOI terms were to remain unchanged.
The agency also specifically asked Oracle to confirm if its software
license and services agreement (SLSA), which was submitted as part of
the firm's proposal, complied with the requirements of the LOI.
In its May 7 response to the agency request, Oracle stated as follows:
[deleted] It has been Oracle's intent from the onset to
negotiate mutually favorable acceptance and performance terms for
the Government for the modification/customization required under
the LOI. Oracle's SLSA is an extension of the LOI terms and
conditions and requirements which, among other things, details
licensing arrangements and warranties for the products and
services anticipated under this project.
The evaluators remained concerned that this statement did not confirm
Oracle's compliance with all material solicitation terms--for
instance, [deleted]. The evaluators also remained concerned that the
SLSA proposed by Oracle did not mirror the LOI requirements for
license, warranty terms, and software performance, and thus was
technically unacceptable. The matter was then forwarded for DFAS
legal review, which concluded that the varying terms of the Oracle
proposal did not render the proposal unacceptable. Subsequently, the
contracting officer found the Oracle proposal acceptable.
Rel-Tek's technical proposal was rated [deleted] overall (with a total
score of [deleted], compared to Oracle's technical proposal's overall
score of [deleted], out of a possible [deleted] total points). Final
Technical Evaluation Report, Executive Summary of Results, at 1.
[deleted] Rel-Tek's proposal was evaluated at a price of $[deleted];
Oracle's proposal's evaluated price was $[deleted]. [deleted] Award
was made to Oracle on June 22. Rel-Tek's protest of the award
followed.
In negotiated procurements, any proposal that fails to conform to
material terms and conditions of the solicitation should be considered
unacceptable and may not form the basis for an award. Barents Group,
L.L.C., B-276082, B-276082.2, May 9, 1997, 97-1 CPD para. 164 at 10;
Martin Marietta Corp., B-233742.4, Jan. 31, 1990, 90-1 CPD para. 132 at 7.
Rel-Tek contends that certain terms of the LOI, including requirements
regarding warranty, acceptance, and compliance with performance
specifications, are material requirements that must be met without
qualification--regardless of whether the solicitation sets them out as
minimum requirements--because they affect the government's rights
under the resulting contract. We agree. See Scientific-Atlanta,
Inc., B-255343.2, B-255343.4, Mar. 14, 1994, 94-1 CPD para. 325 at 9;
Montgomery Furniture Co., B-229678, Mar. 1, 1988, 88-1 CPD para. 212 at 2.
The remaining question, therefore, is whether Oracle's varying
proposal terms in these areas demonstrate that the proposal does not
comply with the stated requirements. As discussed below, the record
here shows that Oracle's proposal did not comply with material
requirements of the LOI, and thus was unacceptable.
The LOI included two acceptance periods that are relevant to this
protest. The acceptance period requirements under the LOI, sec. C-3.1 of
Amendment No. 0008, at 2, stated that the agency would "notify the
contractor of acceptance or rejection of the FMSS by written
notification within 120 calendar days of receipt." Notification of
the acceptance or rejection of the Department of Defense Agency
License to be delivered with the FMSS would be received within "30
calendar days of receipt of such." Id. at 3.
Our review of the Oracle proposal submissions and the firm's response
to the agency's request for information shows that Oracle did not
clearly commit to the LOI's required 120-day acceptance provision
regarding the FMSS. Rather, the firm continued, up until the time of
award, to offer its own acceptance provisions. For instance, in its
final proposal revision submission of March 13, Oracle generally
stated that it accepted amendment No. 0008's 120-day acceptance period
for the FMSS (the firm's proposal also indicated acceptance of the
amended LOI's 30-day acceptance period for the license). In its April
3 correspondence, however, Oracle essentially retracted any commitment
it may have earlier made to the required 120-day acceptance terms for
the FMSS by indicating its intent to instead negotiate the acceptance
period terms of any resulting contract. By letter of May 1, the
agency informed Oracle that the acceptance (and other) terms of the
LOI would remain unchanged; the agency's letter also sought
confirmation from Oracle as to the firm's compliance with LOI
provisions. In its May 7 response, Oracle, "offer[ing] . . . comments
and clarifications," stated that "[a]cceptance of COTS Programs shall
be in accordance with standard commercial practices, as set forth in
the next paragraph." The next paragraph of that letter discussed the
30-day acceptance period for each "Program license." The evaluators
were concerned, and we believe reasonably so, that Oracle was now
applying the 30-day acceptance period, which under the LOI was
applicable to the license, to the FMSS itself, thus shortening the
LOI's 120-day acceptance period for the FMSS. As one evaluator
pointed out, Oracle's SLSA at times uses the term "program license" to
refer to the actual software program, rather than only to the license
to use the program (e.g., the SLSA, regarding the performance of the
program for warranty purposes, refers to performance of the "Program
license." SLSA at sec. 5.2.A).
In our opinion, the Oracle proposal, read as a whole, is, at best,
ambiguous as to whether the firm committed to accept the LOI's 120-day
acceptance period for the FMSS. This is a material ambiguity, since
shortening the FMSS acceptance period from 120 to 30 days limits the
agency's rights in this regard. The other offerors agreed to meet the
LOI's acceptance terms, and, in so doing, took on the associated
additional risks, while Oracle did not and thereby limited its
risk.[2]
Next, the record demonstrates that Oracle also failed to commit to the
LOI's warranty requirements. Section 3.7 of the SOW states that the
offeror's "warranty shall begin the day of final inspection and
acceptance by the [agency] and shall continue to be in effect for 360
[calendar] days from the issuance date of such." (Emphasis added.)
Oracle's SLSA, however, provides for a [deleted] warranty to begin
upon [deleted] of the warranted product to the agency.[3] As
discussed above, the LOI's acceptance period requirement for the FMSS
program provides for acceptance or rejection of the FMSS within 120
days of delivery. Oracle's SLSA warranty is inconsistent with the LOI
warranty period requirement, since, under the clear terms of the LOI,
the required 360-day warranty period is not to commence until final
acceptance--well after (as much as [deleted] after) [deleted] of the
product. In other words, Oracle's [deleted] warranty will cease as
much as [deleted] before the end of the warranty period required by
the LOI. Oracle's failure to commit to the LOI's material warranty
terms limits the government's rights in this area. See Montgomery
Furniture, supra, at 2.
Further, in its April 3 response to the agency's questions about its
final proposal revision, Oracle listed section H-6 of the LOI,
regarding software performance, as one of the issues that still had to
be negotiated. Section H-6 of the LOI, at 16, provides:
Any software furnished or modified under this contract must
conform to and perform in accordance with DFAS's specifications
and requirements as set forth in this letter of interest and all
other . . . core requirements must be met.
Subsequently, in its May 7 response to the agency's May 1 letter
reiterating that the LOI terms were to remain unchanged, Oracle
suggested that section H-6 be deleted, and stated: "The COTS Programs
provided under this [LOI] or any subsequent orders stemming from this
[LOI] are warranted for a period of [deleted] as further set forth in
the [GSA] schedule . . . and [Oracle's] SLSA (Sections 5.2 and 5.3)."
The technical evaluators questioned the technical acceptability of
Oracle's proposal based on this qualification regarding section H-6;
the agency's legal review, however, concluded that the proposal was
acceptable despite the qualification, without elaborating on the basis
of that determination. We agree with the evaluators'
determination--the materiality of the requirement (performance in
accordance with all required specifications) is clear, as is the fact
that Oracle never stated prior to award that it accepted the required
performance terms. On the contrary, the record shows that Oracle
indicated an intention not to be bound by the performance requirements
of sec. H-6, and committed itself only to performance in accordance with
the [deleted] terms of its own SLSA. [deleted]
Although the agency had earlier informed Oracle that all LOI
requirements remained unchanged, the firm continued to propose its own
terms for performance of the stated requirements. The record shows
that Oracle, although it had been questioned by the agency about its
intended compliance with material terms of the solicitation, did not
clearly state that it would comply with stated material requirements
regarding acceptance, warranty, and software performance.
Accordingly, we sustain the protest.
We recommend that the DFAS conduct discussions with all offerors whose
proposals were in the competitive range at the time of award, request
best and final offers, and proceed with the source selection
process.[4] If, after the selection process has concluded, another
offeror's proposal is determined to offer the greatest value to the
government under the terms of the LOI, the DFAS should terminate
Oracle's contract, and award to that offeror. We also recommend that
the protester be reimbursed the reasonable cost of filing and pursuing
its protest, including attorneys' fees. 4 C.F.R. sec. 21.8(d)(1) (1998).
The protester should submit its claim for costs, detailing and
certifying the time expended and costs incurred, with the contracting
agency within 60 days after receipt of this decision. 4 C.F.R. sec.
21.8(f)(1).
The protest is sustained.
Comptroller General
of the United States
1. The LOI was issued in support of the Defense Procurement Payment
System, Program Management Office, formed to standardize and modernize
contractor and vendor payment, grant, and entitlement systems.
2. In its comments responding to the agency's report, Oracle argues
that, since its May 7 response added language asking that the agency
"[p]lease delete" the LOI requirement, the submission was only a
precatory suggestion by the offeror that the agency change its
requirement, and that it cannot be interpreted as taking exception to
the requirement. Intervenor's Comments, Sept. 28, 1998, at 21.
Although, in some instances, an offeror's precatory request for
different requirements may convey only a desire for certain contract
terms, without indicating the offeror's noncompliance with original
solicitation requirements, see, e.g., GMI, Inc., B-239064, July 3,
1990, 90-2 CPD para. 8 at 3, that is not the case here, where award was
made to a firm that had not committed to comply with all acceptance
periods included in the LOI.
3. The Oracle SLSA, which provides [deleted].
4. Rel-Tek also raised additional protest issues--i.e., regarding the
realism of Oracle's proposed price, the adequacy of discussions, and
an alleged conflict of interest arising from the recent employment by
Oracle of a former DFAS senior executive. Our corrective
recommendation for the most part renders these additional issues
academic. Nonetheless, we have reviewed these issues and, based on
the protest record, we conclude that they are without merit.