TITLE:  SBC Federal Systems, B-283693; B-283693.2, December 27, 1999
BNUMBER:  B-283693; B-283693.2
DATE:  December 27, 1999
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SBC Federal Systems, B-283693; B-283693.2, December 27, 1999

Decision

Matter of: SBC Federal Systems

File: B-283693; B-283693.2

Date: December 27, 1999

James J. Regan, Esq., John E. McCarthy, Jr., Esq., and Daniel R. Forman,
Esq., Crowell & Moring, for the protester.

Judith Ward Mattox, Esq., for TennMark Telecommunications, Inc., an
intervenor.

Phillipa L. Anderson, Esq., and Dennis Foley, Esq., Department of Veterans
Affairs, for the agency.

Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Although contracting agency may have improperly performed a price/technical
tradeoff between proposals in violation of the solicitation's evaluation
scheme, the protester was not prejudiced by the improper tradeoff decision
where the record shows that agency reasonably concluded that protester's
proposal was technically unacceptable.

DECISION

SBC Federal Systems protests the issuance of a task order to TennMark
Telecommunications, Inc. by the Department of Veterans Affairs (VA), made
pursuant to a task order proposal request, No. VHA-014(VISN 18), issued to
all Nortel Authorized General Services Administration (GSA) Schedule
representatives listed on GSA Schedule No. GS-35F-1130D. The agency is
purchasing replacement telephone systems for VA Medical Centers in Big
Spring, Texas, and Prescott, Arizona. SBC argues that the agency improperly
conducted a price/technical tradeoff between its and Tennmark's proposals in
violation of the task order request's stated evaluation scheme.

We deny the protest.

As discussed in greater detail below, this protest turns ultimately on
prejudice. The solicitation here did not anticipate an evaluation of the
relative technical merits of the systems offered, as the VA is purchasing
commercially-available Nortel telephone systems from the GSA schedule.
Nevertheless, the record shows that the contracting officer permitted the
users of the system to perform a price/technical tradeoff. Thus, the
protester contends that the VA violated the solicitation's stated evaluation
scheme, and that award should have been made to SBC based on its
lower-priced, technically acceptable proposal.

The agency responds that even if it did perform a price/technical tradeoff
that considered relative technical merit, the protester was not prejudiced
because its proposal was technically unacceptable and could not have been
selected under this solicitation. Thus, the agency argues that any
price/technical tradeoff performed is irrelevant to the outcome of this
protest.

BACKGROUND

The task order request here was issued on May 27, 1999, and was distributed
to contractors identified on GSA Schedule No. GS-35F-1130D as distributors
of Nortel telephone systems. The solicitation advised that the VA was
seeking complete digital and voice telephone systems for the two Medical
Centers identified above, as well as a public address (PA) system for each
Medical Center. The solicitation advised potential offerors that the agency
would select the proposal which was most advantageous to the government; it
also stated that the evaluation factors would be past performance and price,
and that the two factors were approximately equal in weight. Solicitation at
69-70. The solicitation also identified five past performance subfactors
that are not at issue in this protest. Although there was no technical
evaluation factor, the solicitation advised offerors that

[t]echnical proposals must meet all mandatory requirements in the Scope and
Statement of Work. Proposals that fail to meet all of the mandatory
requirements will not be considered.

Solicitation at 70. Also, although the solicitation did not identify for
offerors which requirements were "mandatory" (and which presumably were
not), it did require that proposals specifically address each of the
numbered paragraphs in the statement of work to permit the evaluation team
to assess whether or not the requirement was met. Solicitation at 64.

By the due date for receipt of proposals, the VA received offers from SBC
and TennMark. SBC offered a Nortel product known as Option 61C for
$[deleted]; TennMark offered a Nortel product known as Option 81C for $3.5
million. Award Statement, undated, at 1. In two areas of SBC's proposal, the
company took direct issue with requirements of the solicitation--i.e., the
requirement for a warranty for voltage fluctuations and lightning, and the
requirement for a 48- or 70-volt PA system. The VA's final evaluation, in
essence, concluded that SBC's proposal was unacceptable with respect to its
warranty, and with respect to its 24-volt PA system. For comparison, the
final evaluation concluded that Tennmark's proposal was technically
acceptable in every area but one. In this area--information about the prior
employment of one of Tennmark's proposed employees--the VA final evaluation
stated, "It is recommended the response be considered as non-compliant and
not acceptable." Memorandum from Contracting Officer's Technical
Representative (COTR) to Contracting Officer (CO) 1 (Aug. 24, 1999).

On the same date of the COTR's evaluation memorandum, the CO directed an
e-mail message to the users of the telephone systems at issue here. In
relevant part, this message appears to invite the users of the system to
make a tradeoff between the two competing proposals. The portions of the
message that support this interpretation are set forth below:

[E]ach offeror proposed a different Nortel platform. Along with different
platforms come different concerns and different costs. [The COTR] and I
believe this will need to be a VISN [1] (in conjunction with the facilities)
call. We provide the following to assist you in your determination. For
simplicity, I have labeled the offerors "Vendor A" and "Vendor B." While
there may be a quick determination based on the evaluated costs for these
systems, I recommend you [look] at long range plans for each of these
facilities and the amount of growth that may take place in the next 5 years.

Vendor A [TennMark] proposed a Nortel Option 81C. The system characteristics
for this system [are] as follows:

Option 81C System Characteristics:

Maximum number of ports -- 10,000

* * * * *

Vendor B [SBC] proposed a Nortel Option 61C. The system characteristics for
this system [are] as follows:

Option 61C System Characteristics:

Maximum number of ports -- 2,000

* * * * *

In the statement of work the VA has sized the Big Spring switch for a
maximum of 969 ports. For Prescott, the switch is sized for a maximum of
1385 ports. Looking at this and going with the Option 61C, Big Spring will
have the ability to grow approximately 1000 ports and Prescott will have the
ability to grow approximately 400 ports. When considering the costs between
the two vendors, take into consideration how quickly the extra ports in the
61C will be taken thereby placing the facility in a situation of upgrading
to a larger platform.

Agency Report (AR), Tab 21, E-mail Message from CO to Numerous Recipients,
Aug. 24, 1999, 4:13 p.m. The message also contains language that repeats the
COTR's findings that SBC's proposal is non-compliant in two areas, and
TennMark's proposal is non-compliant in one. The record shows, however, that
on the same day as the e-mail message, the CO overrode the COTR's conclusion
that the TennMark proposal was unacceptable. AR, Tab 19, at 3.

In response to the CO's e-mail message, the users of the telephone systems
conferred with each other further via e-mail, and ultimately selected the
higher-priced TennMark proposal because of its capacity for future growth,
characterized by its greater number of ports. Upon communication of their
choice to the CO, she issued a task order to TennMark on September 7, and
gave notice to SBC the same day. In response to SBC's request for a
debriefing, the CO prepared a written debriefing letter, dated September 15,
which both stated that SBC's proposal was "non-compliant" in the two areas
discussed above, and also described a price/technical tradeoff decision
based on the greater capacity of the 81C system. The letter concludes as
follows:

The team determined that the cost[s] between the Options 61C and 81C were
not that great considering the features and capabilities of the Option 81C
were much greater. The fact that Vendor B [SBC] to the team was technically
non-compliant in two areas of their technical proposal was a consideration
also.

Letter from CO to SBC 4 (Sept. 15, 1999).

This protest followed.

DISCUSSION

SBC argues that the VA performed a price/technical tradeoff between SBC's
and TennMark's proposals in violation of the evaluation scheme. In addition,
SBC challenges any contention by the agency that its proposal was
technically unacceptable. In this regard, SBC argues that the CO's August 24
e-mail message to the VISN users, quoted above, and the users' response,
show both that the tradeoff occurred, and that the agency believed that
either proposal could be accepted for award.

In response, the VA denies that it made a tradeoff between SBC's and
TennMark's proposals, but argues that regardless of whether it did, or did
not, SBC was not prejudiced by these actions, because its proposal was
technically unacceptable and not eligible for award. Prejudice to the
protester is critical to our decisionmaking, since our Office will not
sustain a protest unless the protester demonstrates a reasonable possibility
of prejudice, that is, unless the protester demonstrates that, but for the
agency's actions, it would have had a substantial chance of receiving the
award. McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996).

While we agree with the protester that the record here suggests that the
selection decision may have been based on a price/technical tradeoff, in
violation of the terms of the solicitation, we need not reach this issue. As
set forth below, we conclude that even if a tradeoff was performed, SBC was
not prejudiced because the VA reasonably concluded that SBC's proposal was
technically unacceptable.

As a threshold matter, we recognize that the VA's position that SBC's
proposal was technically unacceptable appears inconsistent with the CO's
invitation to the VISN users to choose, in her words, Vendor A or Vendor B.
This apparent inconsistency leads SBC to base its arguments on technical
acceptability on the premise that once the CO permitted the users to choose
between the two proposals, any prior conclusion that SBC's proposal was
unacceptable is overridden by the evidence that the users (and in SBC's
view, the CO) are proceeding as if SBC's proposal is acceptable. Our Office
convened a hearing to ask the CO to address this inconsistency.

At the hearing, the CO testified that the purpose of her August 24 message
was only to inquire about whether the VISN users had sufficient funds for
the award to TennMark, although she admitted that the message contains "a
poor choice of words." Video Transcript (VT) at 10:38:29, 11:51:15. In
addition, the CO explained that she viewed SBC's proposal as technically
unacceptable, even though she acceded to the demands of the users to provide
them with information about the two proposals so that they might reach their
own conclusions. VT at 10:40:30, 10:45:54, 11:54:25, 11:58:40. Consistent
with her testimony that she viewed SBC's proposal as unacceptable, she
explained at the hearing that if the VISN users had responded to her e-mail
message by asking her to award the contract to SBC, she would have had to
reopen the competition, advise the offerors that solicitation requirements
were being relaxed, and allow submission of revised proposals to address the
changed requirements. VT at 10:52:41, 11:57:35. While the CO's invitation to
the users to choose between a technically acceptable proposal and a
technically unacceptable proposal was inappropriate, her testimony regarding
her view of the SBC proposal was credible, and leads our Office to find that
the CO has consistently viewed SBC's proposal as unacceptable.

With respect to the two areas where the CO concluded that SBC was
technically unacceptable, there is no dispute in the record that SBC did not
comply with the solicitation's requirement for a warranty for voltage
fluctuations and lightning, and its requirement for a 48- or 70-volt PA
system. We have reviewed the record in each of these areas, and we think the
agency's conclusions were reasonable under the terms of this solicitation.

For example, when SBC proposed to meet the requirement for a 48- or 70-volt
PA system with a 24-volt system, the VA expressly advised SBC that a 24-volt
system was not acceptable. Letter from CO to SBC 3 (Aug. 12, 1999). In its
response to the VA's discussion questions, SBC continued to argue that the
VA should accept its 24-volt system, and pointed out that the higher-powered
systems sought by the VA would cost "approximately 2.5 times the price" of
SBC's system. Letter from SBC to CO attach. at 10 (Aug. 20, 1999). In our
view, SBC's own words show that the agency could not have accepted SBC's
lower-powered (and lower-priced) PA system without amending the solicitation
to relax the specifications so that TennMark could offer a similarly
lower-powered (and lower-priced) PA system. [2] See Container Prods. Corp.,
B-255883, Apr. 13, 1994, 94-1 CPD para. 255 at 5 (protest sustained where agency
treated offerors unequally by waiving a solicitation requirement for the
awardee without relaxing the requirement for other offerors).

Since the proposal did not offer the required configuration for the PA
system, since the VA considered this a material requirement of the
solicitation--and told SBC the same during discussions, and since SBC
acknowledges a significant price differential between its system and the
system required by the solicitation, we think the CO reasonably concluded
that SBC's proposal was technically unacceptable. Therefore, SBC was not
prejudiced, even if there was an improper price/technical tradeoff.

The protest is denied.

Comptroller General
of the United States

Notes

1. VISN is an acronym for Veterans Integrated Service Network.

2. Since we find that the agency reasonably concluded that SBC's PA system
rendered its proposal technically unacceptable, we need not address in
detail SBC's failure to provide the required warranty for voltage
fluctuations and lightning. For the record, however, we find that this
non-compliance also provided a reasonable basis for concluding that the SBC
proposal was technically unacceptable.