TITLE:  Optical Systems Technology, Inc., B-292743.2, November 12, 2004
BNUMBER:  B-292743.2
DATE:  November 12, 2004
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   Decision

   Matter of:   Optical Systems Technology, Inc.

   File:            B-292743.2

   Date:              November 12, 2004

   Paul F. Maxin for the protester.

   Catherine E. Pollack, Esq., for Litton Electro-Optical Systems, an
intervenor.

   Angela J. Cosentino, Esq., Department of the Navy, for the agency.

   Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
of the General Counsel, GAO, participated in the preparation of the
decision.

   DIGEST

   1.  Protest that agency improperly failed to conduct testing to assess
accuracy of awardee's clip-on night vision devices prior to contract award
is denied where solicitation did not require such testing.

   2.  Where request for proposals required fixed prices and delivery in
accordance with a specified schedule, and protester included a pricing
contingency in its proposal and did not offer to deliver in accordance
with the required schedule, agency reasonably declined to consider the
proposal further.

   DECISION

   Optical Systems Technology, Inc. (OSTI) protests the rejection of its
proposal and the award of a contract for clip-on night vision devices to
Litton Electro-Optical Systems under request for proposals (RFP) No.
N00164-02-R-0014, issued by the Department of the Navy for miniature
day/night sight development for the special operations peculiar
modifications system.

   We deny the protest.

   The special operations peculiar modifications (SOPMOD) system is designed
and intended to provide special operations force (SOF) members, who
operate in a wide range of extreme conditions, with the ability to
reconfigure their weapons for various mission scenarios rapidly and
reliably.  The goal of the miniature day/night sight (MDNS) development
effort is to improve on the sighting capabilities of the current SOPMOD
system through the development of new items or the adaptation of
nondevelopmental/commercial off-the-shelf items, with improvement to be
measured using the currently fielded systems, where they exist, as
baselines.  Among the items sought under the RFP is a Clip-on Night Vision
Device (CNVD). [1]   The solicitation reported that the CNVD is "not
currently baselined," but noted:

   A current CNVD-type system is beginning acquisition and fielding under
Solicitation Number N00164-02-R-8512 (24 May 02), however this system is
optimized for sniper rifle (vice M4A1 Carbine) applications.  If available
during the [operational testing (OT)/developmental testing (DT)] phase of
this acquisition, it may be used as a baseline for comparison.

   RFP, amend. 5, S 3.3.1.3.  The protester notes that it is the manufacturer
of the "CNVD-type system" being procured under the above-referenced
solicitation.

   The solicitation specified both minimum or threshold (T) requirements and
desired or objective (O) requirements for the CNVD and other MDNS
subsystems; in addition, it specified Key Performance Parameters (KPP) and
Additional Performance Parameters (APP) pertaining to the subsystems.  The
solicitation described KPPs as "must-pass testing events" and provided
that "[a]ny offering failing the (T) value of any of the KPPs [would] be
removed from further testing and [would] not be considered for contract
award."  Id. S 3.1.2.  The solicitation described APPs as "tradable
parameters . . . used to measure effectiveness and performance," and
provided that "[f]ailure to meet either (T) or (O) requirement values
specified in an APP [did] not remove a submission from further testing or
from consideration for contract award."  Id. S 3.1.3. [2]  

   With regard to the CNVD, the RFP set forth KPP (T) requirements pertaining
to interfaces, waterproofing, power supplies, interoperability, and
weight.  Id. at 7-8, 15.  The RFP also identified a number of APPs
applicable to the CNVD, some of which applied to other MDNS subsystems as
well (e.g., improved operational test results, increased portability,
improved corrosion resistance and ease of cleaning, improved endurance,
improved reliability, and improved safety features), and some of which
applied to the CNVD only.  Id. at 8-11, 15-16.  APPs applying to the CNVD
only concerned size; compatibility with other optical sights; performance
capability in identifying, recognizing, and detecting targets; [3] and the
incorporation of a mechanism to predict remaining usable life.

   The solicitation contemplated the award of one or more
indefinite-delivery/ indefinite-quantity, fixed-price contracts for
developmental test prototypes, operational test prototypes, limited user
test items, and production quantities for the CNVD and each of the seven
other subsystems.  Award was to be made to the offerors whose proposals
were determined most advantageous to the government, price and other
factors considered.

   The solicitation provided for a three-phase evaluation process:  Phase 1
was to result in the selection of the proposal(s) that would move on to
phase 2; phase 2 was to consist of developmental testing; and phase 3 was
to consist of operational testing, followed by final source selection. 
Phase 1, step 1 was to consist of a preliminary review of proposals to
determine whether go/no go criteria (i.e., KPP thresholds) had been
satisfied; phase 1, step 2, to be conducted after an oral presentation/
demonstration by each offeror, was to consist of an evaluation of
proposals on the basis of the following factors and subfactors:  (1)
technical/user assessment (go/no go criteria (i.e., KPP thresholds); APPs
and KPP objectives; suitability/effectiveness; and (2) contracting and
management (past performance, schedule, subcontracting, price).  RFP,
addend. 3, at 1-2. [4]   The RFP provided that at phase 1, step 2,
compliance with KPP thresholds (other than weight) was to be determined by
analysis of the technical proposals and product sample review, while at
phase 2, compliance with KPP thresholds was to be determined via prototype
testing.  Id. at 5.

   Proposals were due by May 7, 2003.  RFP, amend. 5.  Five different
contractors submitted a total of nine different proposals for the CNVD. 
Oral presentations/demonstrations were conducted on June 5, 2003.  Over
the course of the next year, the agency conducted discussions and
requested final proposal revisions, which were due on June 15, 2004.  On
August 3, the agency awarded two contracts, one to Litton Electro-Optical
Systems and one to Insight Technology, Inc.  The product offered by Litton
uses image intensification technology, which is the same technology used
by OSTI's product, while the product offered by Insight uses the different
technology of thermal imagery. [5]  

   By letter dated August 5, the Navy notified OSTI that its offer had not
resulted in an award because its proposal was not considered to be the
best value to the government.  The letter explained that the evaluated
price of OSTI's proposal was substantially higher than the evaluated price
of the contract awarded for image intensified CNVDs; that the proposal
contained a pricing contingency that precluded award of a fixed-price
contract as contemplated by the solicitation; and that the protester's
proposed delivery schedule did not meet the solicitation's required
delivery schedule.  After requesting and receiving a debriefing that
essentially reiterated the above information, OSTI protested its
non-selection and the award to Litton to our Office. [6]

   OSTI argues that the Navy improperly failed to conduct testing to assess
the accuracy of Litton's units prior to awarding it a contract.  The
protester maintains that the agency evaluators could not reasonably have
determined Litton's proposal to be of greater value than its own without
first establishing that the Litton units were as accurate as its own
baseline system.  The protester further argues that its pricing
contingency and deviation from the required delivery schedule were the
product of its understanding that the Navy was seeking an improved CNVD,
and that it would have offered a lesser quality system without the pricing
contingency and delivery schedule deviation if it had been apprised that
the Navy was willing to consider systems that were not an improvement over
the baseline CNVD.

   In support of its first argument, OSTI contends that S 3.1 of the
solicitation sets forth a "fundamental accuracy" requirement for the CNVD
by requiring that "all MDNS subsystems (of which CNVD is one) must allow
the operator to better and more accurately fire on enemy targets." 
Protest at 6.  OSTI argues that the operator will be able "to better and
more accurately fire" on enemy targets only if the CNVD introduces no
inaccuracy into the existing aiming system; thus, the protester contends,
a "strict literal interpretation" of the requirement for more accurate
firing is that the CNVD be perfectly accurate.  Protest at 6.  According
to the protester, a perfectly accurate CNVD is one that is designed and
manufactured in a manner that precludes the shifting of internal
components "[b]ecause movements of critical components within the CNVD on
the order of 0.0001 inches can cause a noticeable aiming error."  Id. at
5.  OSTI further argues that, when read together, S 1.2 of the RFP, which
provides that improvement in sighting capabilities will be measured using
the currently fielded systems as baselines, and S 3.3.1.3, which provides
that "[i]f available during the OT/DT phase of this acquisition, [the
CNVD-type system acquired under solicitation No. N00164-02-R-8512] may be
used as a baseline for comparison," impose a requirement that "the
performance of the CNVD, including accuracy, must necessarily be at least
as good as the baseline [unit acquired under solicitation No.
N00164-02-R-8512]."  Id.

   We do not think that S 3.1, which provides as follows, can reasonably be
read as defining an accuracy requirement for the CNVD:

   Product Definition and Configuration:  MDNS Development includes the
development of new items or the adaptation of NDI/COTS items to provide
miniaturized day and night small arms sighting capabilities to SOF
operators.  MDNS sub-systems, when mounted on the M4A1 Carbine (and
possibly other SOF small arms) will allow SOF operators to better and more
rapidly acquire, identify, and accurately fire on enemy targets in combat
at ranges from 2 to 800 meters.  A secondary mission of these MDNS
subsystems is to provide better target observation, illumination, and
marking.  Most of the developments and improvements described below are
based on current aiming devices in the SOF and SOPMOD inventories.

   The paragraph is a general introduction that summarizes the purpose and
goals of the MDNS development effort.  The mandatory features of the CNVD
are set forth in subsequent sections of the RFP as KPP threshold
requirements, and none of these KPP (T) requirements pertains to
accuracy.  To the extent that the protester believes that the RFP should
have included such requirements, it should have objected to the
solicitation's terms prior to the time set for receipt of proposals.  See
Bid Protest Regulations, 4 C.F.R. S 21.2(a)(1) (2004). [7]  

   Regarding OSTI's argument that SS 1.2 and 3.3.1.3 of the RFP, when read
together, impose a requirement that "the performance of the CNVD,
including accuracy, must necessarily be at least as good as the baseline
[unit acquired under solicitation No. N00164-02-R-8512]," S 3.3.1.3
explicitly provided that the CNVD was "not currently baselined."  While
the section did go on to provide that acquisition and fielding of a
"CNVD-type system" optimized for the sniper rifle was underway and might
be used as a baseline "if available under the OT/DT phase of the
acquisition," it is clear from the foregoing language that even if the
agency ultimately determined to use the protester's system as a baseline
for measuring improvement, it would not do so until phases 2 and 3 of the
evaluation.  Accordingly, S 3.3.1.3 does not support the protester's
argument that the solicitation required the agency to use its product as a
baseline for comparison during phase 1 of the evaluation. 

   We turn then to the protester's argument that it included a pricing
contingency in its proposal and deviated from the required delivery
schedule based on its understanding that the Navy was seeking an improved
CNVD, and that it would have offered a lesser quality system without the
pricing contingency and delivery schedule deviation if it had been
apprised that the Navy was willing to consider systems that were not an
improvement over its "baseline" CNVD. [8]   While the protester contends
that "[i]n order to exceed the performance of the Baseline unit, OSTI was
required to incorporate an expensive high-performance image intensifier
into its device whose cost and delivery could not be guaranteed by the
manufacturer," the solicitation did not require the protester to
incorporate the particular tube in question into its product.  The
protester elected to do so itself.  Moreover, even assuming for the sake
of argument that the RFP had required this particular tube and that the
supplier of the tube would not guarantee its price, this did not require
the protester to pass any risk of a price increase on to the government. 
Solicitations frequently require offerors to bear pricing risks, and the
bottom line is that where an RFP requires fixed prices and a proposal does
not offer fixed prices, the proposal as submitted cannot be considered for
award.  Georgetown University--Recon., B-249365.3, June 7, 1993, 93-1 CPD
P 434 at 5.  Similarly, award generally cannot be made on the basis of a
proposal that takes exception to a required delivery schedule.  American
Fuel Cell & Coated Fabrics Co., B-293020, Jan. 12, 2004, 2004 CPD P 13 at
5.

   In conclusion, we think that the agency acted consistently with the terms
of the solicitation in selecting Litton's proposal, and in not selecting
OSTI's proposal, for award.

   The protest is denied.

   Anthony H. Gamboa

   General Counsel

   ------------------------

   [1] The solicitation also seeks improved versions of the enhanced combat
optical scope, miniature night vision sight, backup iron sight, rail
interface system, visible bright light, carbine visible laser, and
infrared pointing, illuminating, and aiming laser.

   [2] The RFP further clarified at S 3.1.4 that "KPP (O) values and APP (T)
and (O) values are the equivalent of research and development goals."

   [3] Desired performance capability for CNVDs using image intensification
technology was defined as follows:

   +------------------------------------------------------------------------+
|CAPABILITY             |STARLIGHT               |1/4 MOON               |
|-----------------------+------------------------+-----------------------|
|IDENTIFICATION         |80 m (T)/150 m (O)      |150 m (T)/200 m (O)    |
|-----------------------+------------------------+-----------------------|
|RECOGNITION            |120 m (T)/200 m (O)     |200 m (T)/250 m (O)    |
|-----------------------+------------------------+-----------------------|
|DETECTION              |165 m (T)/300 m (O)     |250 m (T)/325 m (O)    |
+------------------------------------------------------------------------+

   Id. at 15-16.

   [4] Because OSTI's protest concerns the agency's phase 1 evaluation, this
decision does not include detail regarding the phase 2 and phase 3
evaluation factors.

   [5] The RFP recognized both image intensification and thermal imagery as
existing night vision technologies, noting that image intensification was
used primarily to identify targets and was the most likely technology to
be used by the SOF operator to aim and shoot at night, whereas thermal
imagery was normally used both day and night for detection of targets at
long ranges.

   [6] OSTI did not protest the award to Insight Technology.

   [7] We also find it noteworthy that the protester essentially concedes
that its CNVD does not meet the perfect accuracy standard that it claims
the solicitation requires.  In this regard, OSTI asserts that it designed
its CNVD to meet the accuracy standard established in its prior contract,
i.e., "less [than] 1 MOA [Minute of Angle] error at STP [Standard Pressure
and Temperature]"; the protester also asserts, however, that "[a]n error
of 1 MOA corresponds to a miss distance of approximately nine (9) inches
at 800 meters, a substantial error when operating against human targets." 
Protest at 6.

   [8] The specific wording of the pricing contingency was as follows:

   All pricing for [offered] units is contingent upon the availability of,
and pricing for, image intensifier tube manufactured by a third party
vendor . . . .  To the extent that [the third party vendor] increases its
pricing beyond that contained in this quotation, OSTI reserves the right
to increase its [offered] price on a matching dollar for dollar basis
without further mark-up.

   Attachment 2 to Protester's Revised Proposal.