TITLE: B-298582.2; B-298582.3, Aeronautical Instrument & Radio Company, January 10, 2007
BNUMBER: B-298582.2; B-298582.3
DATE: January 10, 2007
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B-298582.2; B-298582.3, Aeronautical Instrument & Radio Company, January 10, 2007

   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.

   Decision

   Matter of: Aeronautical Instrument & Radio Company

   File: B-298582.2; B-298582.3

   Date: January 10, 2007

   George N. Grammas, Esq., Robert E. Gregg, Esq., Karen R. Harbaugh, Esq.,
   and Steven D. Tibbetts, Esq., Squire, Sanders & Dempsey LLP, for the
   protester.

   Lars E. Anderson, Esq., Peter A. Riesen, Esq., and Keir X. Bancroft, Esq.,
   Venable LLP, for Tel Instrument Electronics Corporation, an intervenor.

   Timothy Lasko, Esq., Naval Air Systems Command, for the agency.

   Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   1. Protest that agency improperly ignored solicitation preference for
   commercial off-the-shelf (COTS) products in evaluating its and awardee's
   proposals as comparable is denied where record supports agency's
   determination that proposals reflect a comparable use of COTS products.

   2. Protest that agency's evaluation of awardee's proposal under management
   subfactor was unreasonably favorable because awardee allegedly did not
   propose program manager currently working for the firm is denied where
   record shows that awardee proposed one of its principal current employees
   as program manager.

   3. Protest that agency improperly refused to allow protester to correct
   alleged mistake in its price is denied where alleged mistake related to
   use of one set of indirect rates versus another, and protester provided no
   documentation to support its claimed mistake.

   DECISION

   Aeronautical Instrument & Radio Company (AIRCO) protests the award of a
   contract to Tel Instrument Electronics Corporation under request for
   proposals (RFP) No. N68335-05-R-0128, issued by the Department of the Navy
   to acquire a quantity of aircraft navigation test sets. AIRCO maintains
   that the agency misevaluated proposals, improperly relaxed a solicitation
   requirement for the awardee, and improperly failed to allow it to correct
   a mistake in its price proposal.

   We deny the protest.

   The RFP contemplated the award of an indefinite-delivery,
   indefinite-quantity, fixed-price contract for the manufacture of
   intermediate level (I-level) tactical aircraft navigation (TACAN) test
   sets (ITATS). Offerors were advised that the agency would evaluate
   proposals on the basis of price and several non-price considerations and
   make award on a "best value" basis. Specifically, the RFP advised that
   proposals would be evaluated under three non-price factors--technical,
   past performance and experience; that the technical factor was the most
   important consideration; that the past performance and experience factors
   combined were slightly less important than the technical factor; that the
   past performance factor was more important than the experience factor; and
   that the experience factor was slightly more important than price. Firms
   were further advised that each non-price evaluation factor included
   numerous subfactors. As relevant here, the subfactors under the technical
   factor were technical approach (most important), logistics, and management
   (equal in weight and slightly less important than technical approach).
   Offerors were advised that the agency would assign adjectival ratings and
   risk assessments for each technical factor/subfactor, and that past
   performance and experience would be assigned risk assessment ratings.[1]

   The agency received numerous proposals. It evaluated AIRCO's and Tel's
   proposals (the only proposals relevant here) as follows:

   +------------------------------------------------------------------------+
   |                  |          AIRCO           |           Tel            |
   |------------------+--------------------------+--------------------------|
   |Technical         | Highly Satisfactory/Low  | Highly Satisfactory/Low  |
   |                  |           Risk           |           Risk           |
   |------------------+--------------------------+--------------------------|
   |Technical Approach| Highly Satisfactory/Low  | Highly Satisfactory/Low  |
   |                  |           Risk           |           Risk           |
   |------------------+--------------------------+--------------------------|
   |Logistics         |  Satisfactory/Low Risk   |  Satisfactory/Low Risk   |
   |------------------+--------------------------+--------------------------|
   |Management        |  Satisfactory/Low Risk   |  Satisfactory/Low Risk   |
   |------------------+--------------------------+--------------------------|
   |Past Performance  |      Very Low Risk       |      Very Low Risk       |
   |------------------+--------------------------+--------------------------|
   |Past Experience   |      Very Low Risk       |      Very Low Risk       |
   |------------------+--------------------------+--------------------------|
   |Price             |        $[deleted]        |       $12,724,750        |
   +------------------------------------------------------------------------+

   AR, exh. 6 at 2. On the basis of these evaluation results, the agency
   found that Tel's and AIRCO's proposals were essentially technically equal
   and, accordingly, made award to Tel based on its lower price.

   After learning of the award decision, AIRCO filed a protest with our
   Office. In response to that protest, the agency advised our Office that it
   intended to take corrective action by establishing a competitive range,
   advising the competitive range offerors of the agency's revised delivery
   schedule requirements for contract performance, engaging in discussions
   with the competitive range offerors, obtaining and evaluating revised
   proposals and making a new source selection decision. In light of this
   proposed corrective action, we dismissed AIRCO's protest as academic
   (B-298582, Aug. 25, 2006).

   Thereafter, the agency established a competitive range comprised of
   AIRCO's and Tel's proposals, amended the RFP to establish delivery
   requirements, and held limited discussions, primarily to permit the two
   firms to respond to the revised delivery requirements. In requesting final
   proposal revisions (FPR), the agency advised both firms that price changes
   were permitted only to the extent that they were related to compliance
   with the revised delivery schedule and that, accordingly, price changes
   had to be accompanied by supporting documentation.

   In its FPR, Tel affirmed its compliance with the agency's delivery
   requirements, and stated that its price remained the same as its original
   price. AIRCO, on the other hand, submitted a revised price of $[deleted],
   stating that its original proposal included a mistake in the calculation
   of overhead and general and administrative (G&A) expenses, and that its
   new lower price reflected a lower cost per production unit because
   [deleted].[2]

   In considering AIRCO's claimed mistake, the contracting officer contacted
   the Defense Contract Audit Agency (DCAA) to inquire as to AIRCO's current
   recommended rates. The information from DCAA showed that AIRCO's
   recommended indirect rates were more consistent with its earlier, higher
   price, so the agency refused to allow AIRCO to revise its price based on
   its alleged mistake and used AIRCO's earlier price ($[deleted]) in making
   its source selection decision. The agency concluded that any proposal
   changes resulting from the revised delivery requirements did not affect
   the firms' original technical ratings. Accordingly, as before, the agency
   made award to Tel on the basis of its lower price. AIRCO again challenges
   the source selection.

   COMMERCIAL OFF-THE-SHELF (COTS) PREFERENCE

   AIRCO bases several protest arguments on an RFP preference--evaluated
   under the technical approach subfactor--for a COTS solution to the
   agency's requirements. In this regard, the RFP provided as follows in
   section M (Evaluation Factors for Award):

     The use of NDI [non-developmental items] and COTS hardware and software
     shall be the first choice for development of ITATS. Development of new
     or special purpose hardware or software may only be considered if NDI or
     COTS is not available or is not capable of meeting the Performance
     Specification Requirements with minor modification. The preference for
     the use of COTS and commercial standards does not relieve the Contractor
     from meeting any of the ITATS Performance Specification requirements.

   RFP at 96. Further, section L (Instructions, Conditions and Notices to
   Offerors), repeated the above-quoted language, and went on to provide:
   "For the ITATS program, COTS Hardware will be defined along a gradient. At
   the low end (Level X) is minimum COTS insertion defined at the piece part
   level, at the high end (Level I) is maximum COTS, defined as fully
   commercial off the shelf items." RFP at 89.

   In reviewing protests concerning an agency's evaluation of proposals, our
   Office does not reevaluate proposals; rather, we will examine the
   evaluation to ensure that it was reasonable and consistent with the
   solicitation's evaluation criteria, as well as applicable statutes and
   regulations. Pickering Firm Inc., B-277396, Oct. 9, 1997, 97-2 CPD
   para. 99 at 4. The agency's evaluation here was reasonable.

   Based on its understanding that Tel intended to create an I-level tester
   from another piece of equipment manufactured by the firm, an O-level
   tester,[3] AIRCO asserted in its initial protest that Tel's proposed ITATS
   is not a COTS item but, rather, a device custom developed in response to
   the solicitation. AIRCO cited nine aspects of the performance
   specification and asserted that Tel's O-level tester would need to be
   substantially reengineered to meet those requirements. In its comments on
   the agency report, AIRCO made no further mention of the nine performance
   requirements, and focused instead on one ITATS component, the TACAN beacon
   simulator (which AIRCO also referenced in its initial protest).[4] AIRCO
   maintains that Tel's TACAN beacon simulator will be manufactured by
   combining two existing Tel products, and thus is a developmental, rather
   than a COTS, item. AIRCO concludes that it was unreasonable for the agency
   to assign Tel's proposal a low risk rating under the technical factor
   because this developmental effort introduces significant risk into Tel's
   performance of the contract.

   This argument is without merit. As noted above, the agency advised
   offerors that it intended to evaluate the degree to which firms offered
   COTS solutions using a gradient from high (an entirely COTS solution) to
   low (use of COTS piece parts). The record shows that Tel's proposed TACAN
   beacon simulator in particular, and its ITATS in general, are comprised
   substantially of COTS components or assemblies that the firm already was
   manufacturing. With respect to the TACAN beacon simulator, Tel combined
   two previously manufactured items in its inventory, its [deleted] and
   [deleted] test sets. AR, exh. 4, at 32-33. Tel's engineer explained the
   combination of these two units in an affidavit as follows:

     In responding to the ITATS Solicitation, Tel proposed the [deleted],
     which is a variant of Tel's field-proven [deleted] [test set]. The key
     change will be the substitution of the existing RF board in the
     [deleted] with the state-of-the-art Tel-designed [deleted] RF board.
     Specifically, the [deleted] will include [deleted] enabled RF board
     design (employed in the fielded [deleted]) and TACAN [deleted] firmware
     taken from Tel's [deleted] test unit. Utilizing this [deleted] TACAN
     technology in the [deleted] will not entail any hardware changes to the
     Tel RF circuit board, although some relatively minor software and
     firmware modification will be required to achieve the specified ITATS
     tolerances and additional user test functions. The [deleted] would also
     incorporate fully automated TACAN test routines leveraging a hardware
     and software architecture based on an existing [deleted] design
     developed and deployed with Contact Test Set Generation II (CTS II).
     This automation hardware and software is 100 % COTS.

   Tel Comments, Nov. 13, 2006, exh. 1, at 2. In effect, therefore, Tel
   proposed to insert a circuit board from one preexisting COTS product into
   another preexisting COTS product with no modifications to the hardware,
   and only minor modifications to its firmware and software.

   The record shows that AIRCO proposed to modify its [deleted] in a similar
   manner. Specifically, AIRCO proposed to perform [deleted] in order to meet
   the RFP requirements, [deleted]. AR, exh. 3, at 24-25. AIRCO's proposal
   also similarly contemplates changes to its product's firmware and
   software. Id. at 24-25.

   Regarding the offerors' proposed ITATS units more generally, the record
   shows that both firms proposed, largely, to incorporate COTS technology,
   but to modify it somewhat to meet the RFP requirements. Tel's proposal
   shows that, of the 19 major subassemblies that comprise its offered
   product, 15 are COTS subassemblies, 2 are modified COTS subassemblies, and
   2 are developmental items. AR, exh. 4, at 40-41. In comparison, AIRCO
   proposed a total of [deleted] to its existing product in order to comply
   with the specifications and, as noted above, proposed to use its
   [deleted], to meet the RFP requirements. (AIRCO's proposal contains an
   item-by-item table detailing each component of the specifications and a
   representation concerning whether its product is COTS or must be modified
   in order to meet the specifications.) AR, exh. 3, at 8-23, 25-26. We
   conclude that the agency reasonably viewed the two firms' solutions to the
   COTS preference as comparable (in terms of the degree to which each firm
   would have to modify its COTS products to meet the specifications), and
   therefore reasonably assigned the proposals comparable risk ratings under
   the technical approach subfactor.

   AIRCO argues alternatively that, to the extent the Tel product may be
   considered a COTS item, the agency improperly relaxed the COTS requirement
   without advising AIRCO. In a similar vein, AIRCO argues that the RFP
   contained a latent ambiguity as to the need to offer a "true" COTS product
   rather than a product that only incorporates COTS assemblies into a "new"
   product.

   This argument is without merit. First, as is implicit in the above
   discussion, we do not agree that the agency relaxed the COTS preference
   for either offeror. Rather, the firms were treated equally in that both
   offered modified COTS products to meet the agency's requirements, and both
   proposals were evaluated as offering this modified COTS approach.
   Correspondingly, we find nothing ambiguous in the RFP as it relates to the
   COTS preference; the RFP advised offerors that the COTS preference would
   be evaluated using a gradient that took into consideration the spectrum of
   possibilities--from using only COTS piece parts to offering an entirely
   unmodified COTS product--and the agency's evaluation was consistent with
   this scheme.

   TEL'S PROGRAM MANAGER

   AIRCO asserts that it was unreasonable for the agency to rate Tel's
   proposal low risk under the management subfactor because the firm offered
   a program manager who it had not yet hired. This argument is without
   merit. While Tel's proposal stated that it was interviewing candidates to
   replace Tel's current program manager, the proposal specifically
   designated TEL's vice president of operations as program manager, and in
   an affidavit submitted in connection with the protest, this individual
   states that he currently is serving as Tel's program manager. Tel
   Comments, Nov. 13, 2006, exh. 1. The mere possibility that the program
   manager could be replaced did not require the agency to downgrade the
   proposal.

   AIRCO'S ALLEGED MISTAKE

   AIRCO asserts that the agency improperly disallowed correction of its
   claimed pricing mistake (discussed above) relating to the calculation of
   its indirect rates. The protester states that it contacted the contracting
   officer immediately after discovering its mistake and was advised that it
   should submit its corrected price, along with documentation supporting its
   claimed mistake. AIRCO maintains that the agency thereafter determined
   that it had not submitted sufficient documentation to substantiate its
   correction, but never gave it an additional opportunity to submit
   supporting documentation.

   This argument is without merit. AIRCO submitted absolutely no
   documentation to support its alleged mistake claim at the time it
   submitted its FPR, beyond its revised pricing sheets. The Federal
   Acquisition Regulation (FAR) calls for the production of clear and
   convincing evidence establishing the mistake and the offer actually
   intended. FAR sections15.306(b)(3)(i), 14.407-3. The record shows that the
   firm did not even provide the contracting officer with a price breakdown
   showing its allegedly revised overhead and G&A rates, and this in turn led
   the contracting officer to contact DCAA to obtain information that would
   allow the contracting officer to attempt to essentially reverse engineer
   AIRCO's original and revised prices. Even in the course of its protest,
   AIRCO has supplied no documentation of any sort to support its claimed
   mistake. Absent such documentation, there was no basis for the agency to
   permit correction.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] The agency's source selection plan specified adjectival ratings of
   outstanding, highly satisfactory, satisfactory, marginal or unsatisfactory
   for the technical factor and subfactors, and risk ratings of low, medium
   or high. Agency Report (AR), exh. 1, at 15.

   [2] AIRCO's FPR also offered an "alternate" price of $[deleted], stating
   that, [deleted]. However, the proposal did not include a revised technical
   proposal detailing these changes to its product. The record shows that the
   Navy did not evaluate AIRCO's alternate proposal because AIRCO had not
   submitted a revised technical proposal. AIRCO does not argue that this was
   improper, and we have no basis to question the agency's decision here.

   [3] An O-level tester performs pass/fail tests to determine whether a
   piece of equipment is functioning properly, while an I-level tester, more
   sophisticated than an O-level tester, isolates a fault that has been
   detected at the line replaceable or shop replaceable unit level.

   [4] AIRCO's comments did include an annotated table reproduced from Tel's
   proposal which, without elaboration, offers conclusory comments on the
   COTS status of various components of Tel's ITATS. For example, in
   reference to Tel's RF-I/O assembly, which Tel's proposal described as a
   modified COTS item, AIRCO concludes, without explanation, that the item is
   "not produced; developmental item." AIRCO Comments, Nov. 13, 2006, at 7.
   These annotations are not related to AIRCO's earlier arguments relating to
   the nine enumerated specification requirements and, in the absence of
   further elaboration, do not constitute an independent basis of protest. In
   any case, we address the broad comparability of the offerors' proposed
   products below.