TITLE: Lavi Systems, Inc., B-282295, June 24, 1999
BNUMBER: B-282295
DATE: June 24, 1999
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Lavi Systems, Inc., B-282295, June 24, 1999
Matter of: Lavi Systems, Inc.
File: B-282295
Date: June 24, 1999
Devon Hewitt, Esq., and Darryl G. McCallum, Esq., Shaw Pittman Potts &
Trowbridge, for the protester.
Scott Arnold, Esq., Harvey G. Sherzer, Esq., and W. Hartmann Young, Esq.,
Howrey & Simon, an intervenor.
Maj. Cynthia M. Mabry, Jeffrey I. Kessler, Esq., and Capt. Jeff M.
Neurauter, Department of the Army, for the agency.
Adam Vodraska, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Contracting agency reasonably considered the awardee an approved source
for a solicited helicopter part, notwithstanding that the awardee was
not listed in the solicitation as an approved source, where the
helicopter's prime manufacturer had approved the awardee's predecessor
as a source for the part 20 years ago; the awardee or its predecessors
had since continually manufactured the solicited item for the prime
manufacturer and other approved sources of the part; and the approved
source that currently owns the drawings to the part authorized the
awardee to submit an offer directly in response to the solicitation and
addressed the agency's concerns about the qualification of the awardee.
2. Contracting agency was not required to reevaluate the qualification of
the awardee, or retest its part, where, in substituting the awardee for
another approved source, there was no change of location or ownership
of the plant where the part which met the qualification requirement was
manufactured, or change in location or ownership of a previously
qualified manufacturer or source. Even if the agency had conducted a
reevaluation of the qualification of the awardee's predecessors
following earlier ownership changes and relocation of the awardee's
manufacturing facility, the protester has not shown why removal of the
awardee or its predecessors from the approved source list was warranted
or that retesting of the awardee's part was required.
3. Protest allegation that the awardee's part does not comply with the
specification, based on the protester's prior repairs to the awardee's
part, is denied where the contracting agency has previously found that
the awardee's part meets the specification; the awardee's first article
test results submitted with its offer demonstrate compliance with the
specification; and there is no evidence that the contracting agency has
relaxed the specification for the awardee.
DECISION
Lavi Systems, Inc. protests the award of a contract to Teledyne Electronics
Technology (TET), Lewisburg (Tennessee) Facility, by the United States Army
Aviation and Missile Command, Redstone Arsenal, Alabama, under request for
proposals (RFP) No. DAAH23-99-R-0025, for a production quantity of 21
Caution Advisory Panels, National Stock No. 1680-01-225-5629, for the Army's
UH-60 "Black Hawk" helicopter. [1]
We deny the protest.
BACKGROUND
The RFP contemplated the award of a fixed-price supply contract to the
responsible offeror whose technically acceptable offer represents the lowest
overall cost to the government. See RFP sect.sect. L-6, M-1. The RFP restricted
competition to three listed approved sources (Sikorsky Aircraft Corp.,
Litton Systems, Inc. and the protester) and to sources other than those
listed that are approved prior to award. [2] Id. sect.sect. B, at 6; L-16. The RFP
provided that a prospective offeror wishing to become an approved source
must submit a Source Approval Request that complies with the requirements of
the Competition Advocate's Shopping List, a paperwork qualification process
established by agency procedures. Id. sect. L-16.
The RFP incorporated the standard Qualification Requirements clause, Federal
Acquisition Regulation (FAR) sect. 52.209-1. Id. sect. I-68. That clause requires
the offeror to have demonstrated that it or its product meets the standards
prescribed for qualification prior to award of the contract and provides a
space for the offeror to indicate whether it or its product has already met
the qualification standards specified.
The RFP contained a technical data package that included the original
specification for the panel (as revised) from Sikorsky, the helicopter's
prime manufacturer. Id. sect. J, attach. 2; Contracting Officer's Statement para. 3.
The RFP required first article inspection and contractor testing of the
solicited item. RFP sect.sect. B, at 6-7; C-1; I-69. However, the RFP provided that
if the offeror has previously furnished identical or similar supplies to
those solicited which have been accepted by the government, the contracting
officer may waive the requirement for first article approval. Id. sect. L-15.
Such offerors were also encouraged to submit an offer based on exclusion of
the requirement for first article approval as long as they furnished test
reports or other evidence showing that the first article or production
equipment they manufactured and delivered under any prior government
contract has been approved or accepted by the government prior to the RFP's
closing date. Id. sect. B, at 7; L-15.
When the contracting agency issued the RFP on November 5, 1998, it sent
copies to the three approved sources for the item listed in the RFP
(Sikorsky, Litton and Lavi). Agency Report, Tab Q, Prenegotiation Memorandum
para. 3. Sikorsky did not submit an offer. Contracting Officer's Statement para. 2.
In a letter dated December 7, Litton informed the agency that it was
authorizing TET, its subcontractor on another Army contract for the panels,
to submit an offer directly in its own name in response to the solicitation,
in advance of an executed royalty/license agreement. Agency Report, Tabs I,
J.
The agency received two offers--from TET and Lavi--by the RFP's extended
closing date of December 14. Contracting Officer's Statement para. 2. TET's
total price was $286,671 ($13,651 for each unit). Lavi's total price was
$350,394.45 ($16,685.45 for each unit).
TET, in the cover letter to its offer, referenced the December 7 letter from
Litton to the contracting officer authorizing TET to submit an offer
directly. TET provided first article test approval data for the item with
its offer and listed the prior Army contracts it has performed for supplying
the item, including the recent contract with Litton listed in the RFP's
procurement history. The offer also stated that a royalty, payable to
Litton, is included in the price, and that TET and Litton are in the process
of finalizing a licensing agreement for the item. TET's offer indicated that
it already met the RFP's qualification standards.
Lavi's offered panel was based on its redesign of certain features of the
original panel, for which it had been granted source approval.
On February 26, 1999, the contracting officer awarded the contract to TET as
the lowest-priced, technically acceptable and qualified offeror. Contracting
Officer's Statement para. 13. Lavi's protest followed its notification that it
was the unsuccessful offeror and that award had been made to TET, a source
not listed in the RFP. [3]
ANALYSIS
Lavi objects to the Army's determination that TET is an approved source to
supply the solicited panels. Specifically, the protester maintains that the
Army failed to determine whether TET was properly qualified or approved
before award.
The system of qualifying and approving products, which is generally used
prior to, and independent of, individual procurements, is nevertheless an
integral part of the system of procuring qualified and approved products.
Apache Enters., Inc., B-275813.2, Apr. 23, 1997, 97-1 CPD para. 146 at 3. Where,
as here, a solicitation requires that the source of the product procured be
qualified or approved, it is improper for a contracting agency to include in
the list of approved sources a source that has not been properly approved
and whose product does not satisfy the applicable specifications. Id.
Including such a source in the list may constitute a basis for sustaining a
protest if the agency's action prejudices the protester. Id.
Here, the Army ultimately determined that TET should have been listed in the
RFP as an approved source, Contracting Officer's Statement para. 9, and that it
was unnecessary to "reapprove" a source (TET) that was already qualified and
manufacturing the panels. Agency Report, Tabs M, N. Specifically, the record
shows that in determining that TET was an approved source, the Army
considered that Teledyne Controls, TET's predecessor, was first approved in
1978 by Sikorsky, the UH-60 helicopter's prime manufacturer, as the source
for the panels. Contracting Officer's Statement para. 11. The Army also
considered that Teledyne Controls remains listed as the source for the
panels on Sikorsky's specification (including the latest revision) and that
TET or its predecessors have always been, and continue to be, Sikorsky's
source for the panels. Id. para.para. 9, 11. Because TET's predecessor had been
approved by the prime manufacturer, the Army concluded that TET should have
been listed in the RFP as an approved source pursuant to RFP sect. L-16, which
provides that a source is to be listed in the RFP as an approved source if
it has been "approved by the prime manufacturer or the Government" for
supply of the item. (Emphasis added.)
The record also shows that the Army considered that since 1991 (when
Teledyne Controls' panel manufacturing facility was relocated from
California), the panels have been manufactured at TET's Lewisburg facility.
Contracting Officer's Statement para. 6. This facility has continued to
manufacture the panels for Litton, which bought the rights to the panel
drawings and specifications from TET's predecessor, Teledyne Controls, and
replaced Teledyne Controls on the approved source list for the part in 1995.
Id. para.para. 6, 11. Specifically, TET's Lewisburg facility (which was not sold to
Litton) functions as a subcontract build-to-print manufacturer and repair
depot for the panel product line acquired by Litton from Teledyne Controls.
Id. para. 6. The Army was mindful that TET had manufactured panels identical to
the ones solicited under the Army's recent contract with Litton listed in
the RFP's procurement history. Id. para. 9.
The record further shows that the Army took into account Litton's
authorization to TET to submit an offer directly to the Army. Contracting
Officer's Statement para. 6. Litton's authorization also responded to the Army's
concerns that TET may provide a different product than Litton, may not meet
all the quality requirements that Litton had on previous contracts, and may
not be a qualified contractor. Agency Report, Tab I. Specifically, Litton
informed the Army that "[f]rom a technical standpoint, the licensing of the
product by Litton to [TET] is invisible to the Government." Id. Litton
pointed out that "[i]t was, in fact, [TET] effort that qualified the product
it now builds as an authorized vendor of Litton." Litton reiterated that
TET's Lewisburg facility had been manufacturing the panels since 1992, and
has been manufacturing them on behalf of Litton since January 1995. Litton
noted that the panels supplied earlier in 1998 under the Litton contract
listed in the RFP's procurement history were manufactured by TET and shipped
directly from the Lewisburg facility to the government. Litton informed the
Army that in the past, Litton has provided TET engineering and contract
administration support as well as authorization to build to its drawings.
Litton stated that, for the current procurement, Litton will provide TET
authorization to build to Litton drawings and will continue to provide TET
engineering support under the proposed royalty/licensing agreement with TET.
Based on the above, and in view of the fact that the panel offered by TET
apparently is identical to the panels it has supplied, and continues to
supply, for Sikorsky and Litton, we find the agency had sufficient basis to
consider TET an approved source and, as such, to conclude that TET should
have been listed as an approved source in the RFP. [4]
The protester contends that the Army could not properly rely on the prior
qualification of Teledyne Controls and Litton in treating TET as an approved
source. According to the Lavi, changes in TET's ownership and production
location required reevaluation of the qualification and retesting of the
panel under FAR sect. 52.209-1(f) (RFP sect. I-68), which provides as follows:
Any change in location or ownership of the plant where a previously
qualified product or service was manufactured or performed requires
reevaluation of the qualification. Similarly, any change in location or
ownership of a previously qualified manufacturer or source requires
reevaluation of the qualification. The reevaluation must be accomplished
before the date of award.
This provision obligates the agency to reevaluate the qualification, but not
necessarily to retest the product, when ownership of the manufacturing
facility or manufacturing location is changed. See Automated Power Sys.,
Inc., B-236545,
Nov. 7, 1989, 89-2 CPD para. 439 at 2. Whether to require retesting for the
purposes of an approved source listing is a discretionary matter, see FAR sect.
9.207(b), and we will not object to the agency's exercise of discretion
absent a showing that it lacked a reasonable basis. Automated Power Sys.,
Inc., B-224203, Feb. 4, 1987, 87-1 CPD para. 109 at 3.
With respect to the Army's substitution of TET for Litton on the approved
source list, we conclude that no reevaluation or retesting under FAR sect.
52.209-1(f) was required, because, as described above, Litton, an approved
source, authorized TET, its manufacturer, to submit an offer directly to the
Army in response to this RFP. There simply was no change of location or
ownership of the Lewisburg plant, where the panel which met the
qualification requirement was manufactured, or change in location or
ownership of a previously qualified manufacturer or source, as a result of
the substitution itself, which would trigger the reevaluation or retesting
requirement of FAR sect. 52.209-1(f).
We agree with the Army that even if, based on TET's earlier ownership
changes and the 1991 relocation of its manufacturing facility, the agency
had conducted a reevaluation of the qualification of TET or its
predecessors, the protester has not shown why removal of TET or its
predecessors from the approved source list was warranted or that retesting
of TET's panel was required. For example, the protester has failed to rebut
the Army's reasonable position that since there has been no change to the
design of the panel, the manufacturing process, or the manufacturing
location since TET's predecessor Teledyne Controls was last listed on the
approved source list, the Army reasonably relied on the prior qualification
of Teledyne Controls in considering TET as an approved source. Although the
manufacturing facility for the panel was relocated to Lewisburg in 1991, the
protester has not described why this change in location itself reasonably
should have resulted in the removal of Teledyne Controls as an approved
source, or why TET's removal is required now based on this 8-year old change
in the location of its predecessor's manufacturing facility.
Finally, the protester contends that TET's panel, as currently designed and
manufactured, does not meet the Sikorsky performance specification
incorporated in the RFP.
The protester explains that in late 1995, in connection with a separate
repair contract, it found that the panels manufactured by TET under prior
contracts and submitted to Lavi by the Army for repair exhibited flickering
of the panel lights and the potential for false malfunction indications. The
protester states that the Army instructed it to return the repaired panels
only after the units had been redesigned to meet the Sikorsky specification
and to submit value engineering change proposals for the manufacture of the
panels that would eliminate the problems identified. After Lavi submitted
the requested value engineering change proposals to eliminate the
deficiencies it identified, the Army required Lavi to test its redesigned
panel to the satisfaction of the Army. As a result of Lavi's successful
completion of these tests, the Army approved Lavi as a source for the
manufacture of the panels.
The protester argues that TET could not have properly qualified as an
approved source unless it had access to the technical data developed by Lavi
which details the design and engineering changes necessary for the
TET-manufactured Litton panels to comply with the Sikorsky specification.
Since the Army represented that the Army provided no other firm--including
TET--access to this data, [5] and Lavi's data was necessary to manufacture a
compliant panel, the protester maintains that the Army must have improperly
relaxed the Sikorsky specification to the benefit of TET.
The protester suggests that the Army acted in bad faith by requiring Lavi to
redesign the panel previously manufactured by TET to comply with the
Sikorsky specification and then "knowingly accepting non-compliant [panel]
units from TET." Comments at 6 n.6.
The Army maintains that the panels manufactured by TET have been acceptable,
pointing out that only 3 percent of the panels have had to be removed from
service due to the flickering light problem. Contracting Officer's Statement
attach. 2 para. 3. In response to the protest, the Army reviewed Quality
Deficiency Reports from Black Hawk helicopter activities for the past 7
years and found no reported deficiencies in the panels. The Army also
checked the acceptance records from Sikorsky, the UH-60 manufacturer, dating
back to 1982, and found no reported deficiencies of any substance. Further,
according to the Army, reports to the Program Manager from the field and
site visit records do not indicate any deficiency or problems with the
panels manufactured by TET. Moreover, TET's first article test results (for
panels it manufactured for Litton) submitted with its offer indicate that
its panels demonstrate no flickering and were acceptable to the agency.
Contracting Officer's Statement attach. 6; Agency Report, Tab K. Based on
these results, the Army waived first article testing for the panel offered
by TET in response to this RFP. Contracting Officer's Statement para. 4; Agency
Report, Tabs T, U. Accordingly, we cannot agree with the protester that the
agency improperly relaxed the Sikorsky specification in awarding the
contract to TET based on its allegedly nonconforming panel.
Contrary to Lavi's assertion, TET was not required to manufacture a panel
based on Lavi's redesign because the RFP did not require the offered panel
to be designed to Lavi's drawings, but treated both the original Sikorsky
and the Lavi panel designs as acceptable. Although the Army approved Lavi's
design changes, the panels offered by TET in response to this solicitation
are based on the original design specifications approved by Sikorsky, which
are still acceptable to the Army and included in the RFP's technical data
package. Contracting Officer's Statement para. 12; Army Supplemental Comments
enclosures. Indeed, the Army points out that the panels manufactured by TET
and its predecessors to the original specification have been in service for
nearly 20 years and have successfully undergone a series of qualification
tests both at the component and system level. Army Supplemental Comments
enclosures. The Army states that the current unit design and performance is
"operationally acceptable and safe for use in the UH-60 aircraft" and notes
that Sikorsky is currently installing the panels manufactured by TET to the
original specification on production aircraft without the Lavi design
changes. Id. To the extent Lavi is protesting that the RFP's performance
specification/technical data package is defective (i.e., does not meet the
minimum needs of the Army) because it did not require Lavi's design changes,
Lavi's argument is an untimely protest of an apparent solicitation
impropriety. 4 C.F.R. sect. 21.2(a)(1) (1999).
Finally, we find without merit the protester's allegation of bad faith. To
show bad faith, a protester must submit convincing proof that the procuring
agency directed its actions with the malicious and specific intent to injure
the protester. Molly Maguires, B-278056, Dec. 22, 1997, 97-2 CPD para. 169 at 5.
As discussed above, there is no basis in the record to conclude that the
Army accepted panels from TET that failed to comply with the Sikorsky
specification. We also see no reason to question the Army's good faith when
it required rigorous testing of Lavi's proposed redesign. The
TET-manufactured panels had already been in service for many years and were
performing to the Army's satisfaction, and thus the Army reasonably
scrutinized Lavi's proposed redesign. Moreover, in approving Lavi as a
source for the panel, the Army encouraged a new competitor--hardly indicia
of bad faith. As to Lavi's assertion that TET's product will not meet the
agency's minimum needs because it was not subjected to more stringent
testing than that provided for by the RFP, we will not consider a protest
that a procurement should be subject to greater restriction than an agency
believes is necessary to meet its needs. Apache Enters., Inc., supra, at 2
n.2.
The protest is denied.
Comptroller General
of the United States
Notes
1. The panels are electronic devices that display various indicator lights
that alert a pilot to certain conditions or malfunctions in the helicopter's
systems.
2. The RFP provided the recent procurement history for the solicited panel,
listing contracts from 1998 with Lavi and Litton, along with unit prices and
quantities. RFP sect. A-3.
3. After concluding that TET was an approved source, the Army updated the
approved source database for the item by replacing Litton with TET. Agency
Report, Tab N.
4. We see no basis to conclude that Lavi was prejudiced by the agency's
failure to list TET as an approved source in the RFP. Prejudice is an
essential element of a viable protest, and where no prejudice is shown, or
is otherwise evident, our Office will not disturb award, even if some
technical deficiency in the procurement may have occurred. Apache Enters.,
Inc., supra, at 4. Here, to establish prejudice, Lavi would need to show
that it could and would have displaced TET as the low offeror had Lavi known
of TET's qualification as an approved source. Id. Lavi neither alleges it
would have submitted a lower price had it known of TET's qualification nor
that it would have sought to qualify its panel under the allegedly lesser
standard applicable to TET's panel. There is simply no evidence in the
record showing that Lavi could or would have altered its offer to its
competitive advantage had it known that TET was an approved source for the
panels.
5. Lavi granted limited data rights to the government under a modification
to its repair contract so that its design and testing data could be provided
"to the OEM and/or Sikorsky Aircraft." Comments, Tab A, exh. 3, at 4.