January 29, 1991 (released, in entirety, as unprotected document June 2, 1995) Protests of : Integrated Systems Group, Inc. : GSBCA No. 10985-P 1953 Gallows Road, Suite 530 : Vienna, VA 22182 : : Federal Computer Corporation : GSBCA No. 10989-P 2745 Hartland Road : Falls Church, VA 22043 : : Government Technology Services, Inc.:GSBCA No. 10991-P 4100 Lafayette Center Drive : Chantilly, VA 22021 : : Solicitation No. N66032-88-R-003 : GSBCA No. 10985-P denied : GSBCA No. 10989-P denied : GSBCA No. 10991-P granted : Appearance for Protester, : Stephen L. Mills, VP Marketing Integrated Systems Group, Inc. : Integrated Systems Group, Inc. : 1953 Gallows Road, Suite 530 : Vienna, VA 22182 : Appearances for Protester/Intervenor,:Robert E. Gregg, Esquire Federal Computer Corporation : Thomas R. Folk, Esquire : Donna J. Kraus, Esquire : Hazel & Thomas : 3110 Fairview Park Drive : Falls Church, VA 22042 : : David S. Kovach, Esquire : Federal Computer Corporation : 2745 Hartland Road : Falls Church, VA 22043 : Appearances for Protester/Intervenor,:Richard J. Conway, Esquire Government Technology Services, Inc.:William M. Rosen, Esquire : Hilary S. Cairnie, Esquire : Dickstein, Shapiro & Morin : 8300 Boone Boulevard, Suite 800 : Vienna, VA 22180 : Appearances for Respondent, : Mark Wiener, Esquire Department of Navy : Ellen Washington, Esquire : Diane D. Hayden, Esquire : Automatic Data Processing : Selection Office : Bldg. 176-4, Washington Navy Yard : Washington, DC 20374 : Appearances for Intervenor, : Laura K. Kennedy, Esquire Zenith Data Systems Corporation : Timothy F. Haley, Esquire : Sandra Lee Fenske, Esquire : Rachel A. Sens, Esquire : Seyfarth, Shaw, Fairweather : & Geraldson : Suite 500 : 815 Connecticut Avenue, N.W. : Washington, DC 20006 Opinion by Administrative Judge Vergilio On November 16, 1990, Integrated Systems Group, Inc. (ISG) filed a protest with this Board. On November 19, Federal Computer Corporation (FCC) and Government Technology Services, Inc. (GTSI) also filed protests. The protests all concern actions of the respondent, the Department of Navy, in conducting its Desktop Companion procurement. FCC and GTSI have each intervened in the other two protests. Zenith Data Systems Corporation has intervened in all three protests. On November 27, without opposition, the Board suspended the procurement authority of the agency. Earlier protests have focused on agency actions in this same procurement. Having determined that the initial award to Zenith was improper, given that certain products Zenith offered failed to meet mandatory availability requirements, the Board required the agency to terminate its contract with Zenith. Government Technology Services, Inc., GSBCA No. 10389-P, 90-1 BCA 22,673, 1990 BPD 37, motions for reconsideration denied, 90-2 BCA 22,913, 1990 BPD 75 (Government Technology). A subsequent protest was dismissed with prejudice. SMS Data Products Group, Inc., GSBCA No. 10854-P (Nov. 29, 1990), 1990 BPD 416. At this juncture, with two technically acceptable proposals (of GTSI and FCC--submitted in late September 1989) before it, the agency has determined that an award against either would not be in the best interests of the Government. It has issued amendment 17 to the underlying solicitation, requesting second best and final offers from GTSI; FCC; SMS Data Products Group, Inc.; and Zenith, the only original offerors. The amendment also alters the solicitation in various respects. Notably, it changes the availability requirements by extending the date of product availability, and it shifts the contract period--many months which would have been covered under the original contract have already lapsed. ISG asserts that in the circumstances presented, statute and regulation require the agency to reopen the competition so as to request proposals from offerors in addition to the four in the original competitive range. FCC raises two counts of protest. First, it maintains that the agency improperly refused to make an award, and instead sought a new round of best and final offers. Alternatively, it contends that the amendment makes substantial changes to the solicitation so as to require cancelling the existing solicitation, obtaining a new delegation of procurement authority, and issuing a new solicitation. That is, FCC asserts that it must prepare what amounts to a completely new proposal in order to be competitive. Through its initial and amended protest, GTSI articulates thirteen counts. Through these assertions, GTSI maintains alternatively that it deserved the award; that if new BAFOs are appropriate, the competition should be limited to GTSI and FCC, the only two offerors with acceptable BAFOs before the agency; that if greater competition is appropriate, GTSI needs more time than the agency has permitted to submit a competitive second BAFO; and that the procurement should be cancelled and another delegation of procurement authority obtained before a new solicitation is issued to ensure full and open and fair and equal competition. In particular, the counts of the GTSI protest relate to these basic concepts, which parallel those of FCC, and to some extent ISG: I. The request for another round of BAFOs is improper, because the agency has revalidated its requirements and GTSI's proposal is compliant, technically superior, and at a fair and reasonable price. II. The amendment is arbitrary, capricious and lacking a rational basis for issuance, given that requirements have not changed, and that as of September 1990, the agency considered the solicitation an appropriate vehicle for award. III. Neither Zenith nor SMS should be considered within the competitive range, such that requesting BAFOs from Zenith and SMS is improper. IV. Issuance of the amendment constitutes impermissible technical leveling. V. Issuance of the amendment constitutes an impermissible auction. VI. The amendment is inconsistent with the revised delegation of procurement authority, which requires the agency to make an award promptly. VII. The selection criteria eliminate the contracting officer's discretion to make an award to an offeror whose proposal is technically superior by a significant margin; the letter accompanying the amendment substantially changes the meaning of the selection provisions. VIII. The solicitation requires an award based on the greatest value method; the agency failed to abide by this selection criterion when it made an award to Zenith and when it refused to make an award to GTSI. IX. The amendment so fundamentally changes the procurement that a new solicitation is required to enable GTSI (and other offerors) the opportunity to compete fairly. X. The agency did not reestablish a competitive range after the Zenith contract was terminated; providing Zenith and SMS with the amendment was improper because those offerors were not deemed to be within the competitive range. XI. The agency's selection analysis is impermissibly flawed because it includes comparisons to proposals of Zenith and SMS, which no longer had viable offers before the agency. XII. In contravention of selection criteria in the solicitation, and because of Congressional influence, the agency intends to make an award to the lowest priced, technically acceptable offeror. XIII. The agency issued and structured the amendment so that there would be little or no real competition and so that Zenith would be the likely awardee. Zenith filed a motion to dismiss or grant summary relief regarding count II of FCC's protest and counts III, IV, V, VII, VIII and IX of GTSI's protest, alleging that the issues either fail to state a claim upon which relief can be granted or are untimely. The agency filed a motion to dismiss all counts of both the FCC and GTSI protests. It joins in the Zenith motion to dismiss. The agency articulates reasons to dismiss count II of the FCC protest and counts VI through IX of the GTSI protest. The Board concludes that the amended protest submitted by GTSI, raising counts X through XIII is timely, in that it simply adds specific instances of violations more generally asserted in prior counts. GTSI and FCC have filed motions seeking summary relief. Given apparent factual disputes, the Board did not earlier rule on these motions, which it denies. The Board denies the motions to dismiss the protests. The Board concludes that GTSI is the rightful awardee under the terms of the solicitation, statute, and regulation. The rationale expressed by the agency in support of forgoing an award to GTSI lacks a rational, supportable basis. The record reveals that the agency's requirements remain essentially unchanged from those for which competition was achieved under the solicitation, and that failure to make an award to GTSI would be inconsistent with statute and regulation and the integrity of the procurement process. Accordingly, the Board grants the protest of GTSI and revises the agency's procurement authority to require it to award the contract to GTSI within ten calendar days from the date of issuance of this opinion, after a formal determination of GTSI's responsibility has been made. The Board denies the protests of ISG and FCC. Findings of Fact 1. The agency is conducting this procurement under a delegation of procurement authority, dated March 31, 1988, obtained initially in response to an agency procurement request dated March 2, 1988. Protest File, Exhibits 1, 2; see 40 U.S.C. 759(b)(2) (1988). The procurement request notes that contract award was planned for the fourth quarter of fiscal year 1988 or the first quarter of fiscal year 1989. Id., Exhibit 1 at 3. The agency seeks to award a firm, fixed-price, requirements contract for hardware, software, and services to support the Department of Defense standard micro-processor based systems. Id., Exhibit 3 (solicitation) at C-2. 2. On September 25, 1989, the agency obtained best and final offers (BAFOs), after discussions had been completed concerning initial proposals and after live test demonstrations had been conducted. Protest File, Exhibit 26. The agency awarded a contract to Zenith on November 1, 1989. Id., Exhibit 13 at 3. In resolving a protest action challenging the award and related actions, the Board determined the award to be violative of statute and regulation because Zenith proposed items which failed to comply with the availability requirements of the solicitation. Also, the Board concluded that the agency employed a subfactor weighting scheme which was contrary to provisions of the solicitation. By opinion dated January 31, 1990, the Board granted the protest and revised the agency procurement authority "to require it [the agency] promptly to terminate the contract with Zenith, and to make an award in accordance with statute and regulation, keeping in mind the guidance provided in this opinion." Government Technology, 90-1 BCA 22,673 at 113,904, 1990 BPD 37 at 16. By opinion dated March 26, 1990, the Board denied requests for reconsideration submitted by the agency and Zenith. 90-2 BCA 22,913, 1990 BPD 75. Solicitation--pre-amendment 17 3. Regarding proposal evaluation, the solicitation provides that three factors will be evaluated: (1) overall cost to the Government; (2) technical excellence; and (3) contract support and management. Overall cost is the most important factor, with technical excellence slightly less important. Contract management and support is significantly less important than the other two. Moreover, the solicitation dictates: The final score for the proposal is then calculated as the sum of the three (3) Factor scores. Award shall be made to that responsible and technically acceptable offeror whose proposal, for which the appropriate type of funding is available, is the most advantageous to the Government, price and other factors considered. Protest File, Exhibit 3 at M-2 to M-3 ( M3). Although unstated in the solicitation, the agency allocated points to each factor: 45 for price; 40 for technical excellence; 15 for contract management and support. In evaluating proposals, the agency normalized the price factor such that the lowest-priced, acceptable proposal received the maximum number of points for that factor, with other offerors receiving a percentage of the points based upon their relationship to the lowest price. The agency did not so normalize the other two factors. Id., Exhibit 18. 4. The solicitation provides the following direction on the source selection process. M14. PRICE AND TECHNICAL TRADE-OFF M14.1 The Source Selection Authority reserves the right to evaluate all technical and price proposals according to what is in the best interests of the Government in each proposal. M14.2 This Solicitation employs technical and price trade-offs in its evaluation. Price is assigned weight as an evaluation factor. However, the fact that a proposal receives the highest number of evaluation points does not in itself justify acceptance of the highest rated proposal without regard to the price to the Government. M14.3 The Source Selection Authority will not be strictly bound by point scores. The Source Selection Authority retains the discretion to examine the technical point scores to determine whether a point differential between offerors represents any significant difference in technical merit. If it does not, then award may be made to the lower priced proposal even though its total point score is lower. M14.4 If the Source Selection Authority determines that the point difference represents actual technical superiority, and he agrees with the scoring, then he may abide by the scoring and may award to the highest point score. The decision will be made at the discretion of the Source Selection Authority and will depend on the facts and circumstances of the procurement. This determination shall be made regardless of the actual technical scores or total award score or the weight of price factors set forth in the evaluation criteria. M14.5 In summary, price/technical trade-off may be made, and the extent to which one may be sacrificed for the other is governed only by the tests of rationality and consistency with the established evaluation factors. Protest File, Exhibit 3 at M-14 to M-15. 5. The solicitation expressly envisions substitution of equipment and software, as well as improvements in technology. Regarding the former, if, during the life of the contract, the manufacture of equipment or software listed in the schedule is discontinued, the contractor is to provide the contracting officer with a proposed substitute. However, "No substitutes are authorized for the first 180 days of the contract." Protest File, Exhibit 3 at H-3 through H-4 ( H4). The solicitation explains: After contract award, the Government may solicit, and the Contractor is encouraged to propose independently, technology improvements or changes to the equipment, software, or other requirements of the contract. These improvements or changes may be proposed to save money, to improve performance, to save energy or for any other purpose which presents a technological advantage to the Government. Id. at H-4 through H-5 ( H5.1). Agency actions after protest 10389-P 6. Subsequent to the Board's granting of the protest of GTSI and denying of the motions for reconsideration, Finding 2, the agency terminated its contract with Zenith on March 20, 1990. Agency answer to GTSI protest, 30. It also revalidated its requirements and reviewed the scoring of the BAFOs. Protest File, Exhibit 25. 7. The evaluations of the BAFOs of GTSI, Zenith (primary and alternate), SMS, and FCC resulted in the following present- value prices, as well as points for technical excellence and for management and support. These point scores reflect an affirmation of the pre-award scores for technical and management and support scores; however, without a sufficient rationale, the evaluators simply added 10 points to the technical excellence scores because of improper weighting of subfactors, finding 2.[foot #] 1 Protest File, Exhibit 25. Offeror present-value tech m&s GTSI $487,869,120 568 134 Zenith (primary) $454,157,664 477 123 Zenith (alter.) $432,203,552 477 103 SMS $436,942,112 352 100 FCC $478,593,056 397 94 Id., Exhibit 18 at 6-7. 8. On May 29, the Source Selection Advisory Council (SSAC) convened to hear a briefing by the Source Selection Evaluation Board (SSEB) of the status of the procurement and to recommend further procurement action. The SSEB had conducted a technical review of the BAFOs of GTSI, SMS, and FCC, focusing upon all offered products. The SSAC concluded: ----------- FOOTNOTE BEGINS --------- [foot #] 1 The amended evaluation plan increased a possible score by 10 points; the evaluators have made no attempt to apportion those points based on technical excellence. Additionally, not sufficiently explained in the record, but of little particular moment in this decision, is the score of Zenith's technical proposal--increased by 20, not 10, points from the pre-award scoring. Compare Protest File, Exhibit 18 at 7 _______ with Exhibit 26 at 7, Exhibit 20, Enclosure 8 at 1, and ____ Government Technology, finding 23. Accordingly, in subsequent ______________________ calculations, the Board makes calculations based on original scores, which are not necessarily most favorable to GTSI. ----------- FOOTNOTE ENDS ----------- Based upon (1) the order of the court to make an award within applicable statute, etc., (2) the efforts of the SSEB to determine acceptability of products relating to Provision L7 and (3) the determination of the board that even in reopening discussions it was unlikely that there would be substantially more information to be obtained which would affect the selection outcome, the SSAC determined that the remaining proposals were technically acceptable. Protest File, Exhibit 25 (second and third pages of memorandum dated June 12, 1990). 9. At this same meeting the SSAC considered, with input from the SSEB, the three proposals, and dropped FCC's BAFO "from further detailed discussion because the score and cost relationship would not make them a candidate for selection recommendation." Protest File, Exhibit 25 (third page of memorandum dated June 12, 1990). Additionally, a "detailed discussion regarding the technical merits of GTSI's proposal took place." Id. The SSAC focused on various positive attributes of GTSI's BAFO. All technical areas were again reviewed with the question in mind whether there was a significant technical difference between GTSI and SMS proposals. The consensus of the SSAC is that there is a significant technical difference between the proposals with GTSI's being technically superior. . . . At the conclusion of the SSAC . . . the consensus of the SSAC was to recommend award to GTSI. Their proposal is in the best interests of the Government as well as of the greatest value to the Government. This conclusion was based on the agreement of the SSAC to modify the [Source Selection Plan] to reflect the solicitation (the OCR [optical mark reader] score was modified as part of the deliberations) [see Government Technology, 90-2 BCA at 113,903, 1990 BPD at 15], agreement that there was not a compelling reason to reopen discussions, the various Department of Defense users had an immediate need for the supplies and services solicited, and direction that information about the change in the mandatory USAF[United States Air Force]- use requirements . . . would be provided to those in the review and oversight process leading to the source selection decision by the selection authority. Id. (third and fourth pages). In summary, the SSAC "determined that GTSI's proposal is technically superior especially in those areas weighted most heavily, and GTSI achieved the highest point score considering price, technical excellence, and contract support and management excellence." The SSAC recommended award to GTSI. Id. (Attachment A). 10. A business clearance memorandum dated June 22 summarizes the actions, through that date, which the agency had undertaken relating to this procurement. It notes, "Except for the Zenith's Companion equipment maintenance prices, each offeror decreased all prices over time. This was acceptable because each offeror's price decrease was presented on an annual basis and conformed to the requirements of the solicitation." Protest File, Exhibit 24 at 7. (The same conclusions are repeated in a subsequent business clearance. Id., Exhibit 18 at 7.) The June 22 memorandum highlights the reasons supporting an award to GTSI, pointing out how the offering of GTSI is superior to that of SMS, and explaining some of the direct benefits to the Government: The recommendation of the SSAC is based on their assessment that the technical superiority of GTSI's proposal represents "actual technical superiority" and as such warrants the additional $72,615,712 when compared with the price proposed by SMS Data Products, Inc. A detailed summary of the specifics of what was proposed and its individual prices is included in the enclosures to Attachment B to Clearance Exhibit C. The backup power device and the disk drives offered give the Government significant functional benefits in the form of more data storage and the need for less space in limited office and shipboard environments. These benefits compensate for the additional costs. GTSI has proposed internal and external disk drives proposed by GTSI [sic] with a formatted capacity of 44.5MB and an access speed of 25 milliseconds. FCC's and SMS's drives have capacities of 21.4MB with access speeds of 40 milliseconds. GTSI proposed a smaller backup power unit of 900 cubic inches and 30 pounds. In addition, the Contracting Officer notes that the superior management and support offered will contribute significantly to the objectives, success and mission of the Department of Defense Small Computer Program. GTSI offered the Government an "on-line["] query of their data base, a large number of highly qualified support personnel, and Original Equipment Manufacturer hardware, software and software upgrade documentation. These support features were not proposed by SMS Data Products, Inc. Id., Exhibit 24 at 9-10. Attachments to the business clearance memorandum compare the cost and technical differences between certain items offered by GTSI and SMS; the benefits and value of the GTSI BAFO are detailed. Id., Attachments (Summary of Prices, and Extracted Summary Prices). The Board finds these details of benefits and differences to be well supported and credible, as the reviewers appropriately determined the value to the Government of the superiority (technical excellence and contract management and support) of the GTSI BAFO over that of SMS. Further, the memorandum states: The price proposed by Government Technology Services is determined "fair and reasonable" based on "adequate price competition" as defined at FAR 15.804-3(b). The proposed prices represent significant reductions from GSA/ADP Schedule prices for the high quality products proposed. Id. at 10. Tentative selection of GTSI 11. On June 22, 1990, the contracting officer concurred with the SSAC recommendation that an award be made to GTSI without further discussions. Protest File, Exhibit 13 at 4. 12. As detailed in a memorandum dated August 23, the Director of Contract Policy did not approve the business clearance memorandum; instead he requested that the SSAC consider specific issues before the recommendation could be presented to the Source Selection Authority (SSA). (1) A significantly lower price was offered by Zenith for a technically equivalent proposal. In addition, review of price trends for equipment similar to some of the major deliverables under the contract suggest that retail market prices have dropped approximately 10% since offers were submitted. In the aggregate, these considerations suggest that the price of the recommended offeror may be high by in excess of $100 million. Considering the probability that a significantly lower price would be readily obtainable, can we prudently award to the offeror you recommend, or should we conclude that the price is not reasonable and reopen discussions to all offerors, including Zenith? (2) The SSAC concluded that technical differences, primarily in storage devices and a backup power supply, were worth a significant premium over the low offeror remaining after the elimination of Zenith. After a check of schedule and retail prices for some of these technical features, we have reached a different conclusion. To assist us in understanding the reason for your conclusion, please quantify the price premium that you believe the major technical differences to be worth, and provide your views on what these differences would cost in the market. (3) Of the seven hardware items most significant to the technical evaluation, two offered by the recommended awardee and four offered by the runner-up appear to be out of production. It is reasonable to assume that numerous other items are also no longer manufactured. Given that we know that extensive product substitution will be necessary, do we still have sufficient basis for an award decision, or is it clearly in the Government's best interest to reopen discussions to all offerors (including Zenith)? Protest File, Exhibit 23. 13. On August 24, a new SSA was appointed. Protest File, Exhibit 20 at 1. On August 28, the SSAC met to participate in briefings on the status of the procurement. After the briefings, the "SSAC concluded that the clearance authorities['] concerns were valid on the technical merit of GTSI's proposal and its additional cost of $72,615,712." Id. at 3. A memorandum for the record details the events of the meeting: Upon review of the costs associated with the increased technical benefits of the GTSI proposal, the SSAC noted that for the additional 216 technical excellence points, the Government would pay $29,196,850 in net present value dollars for hardware and software. However, an award to GTSI would cost $487,869,120. representing an additional cost of $51,927,008 over the SMS low cost proposal. In effect, the Government would potentially pay a premium of $21,730,158 for products/services not related to technical excellence. To quantify the economic benefits, the technical points and associated costs of all items were reviewed by the SSAC. Of these, three items were discussed in depth: storage devices, backup power, and printers & devices. These items, with points and proposed dollars, are listed as follows: (storage devices and printers & devices are of similar importance in the technical evaluation): GTSI SMS Difference[foot #] 2 Storage Devices Technical Points 225 35 190 Proposed Dollars $35,094,881$34,038,629$1,056,212 Backup Power Technical Points 40 10 30 Proposed Dollars $12,944,043$13,888,467($944,424) Printers & Devices Technical Points 110 120 (10) Proposed Dollars $101,784,704 $90,289,824$11,494,680 Although the storage devices and backup power proposed by GTSI offer additional technical benefit for a very reasonable price, the SMS proposed printers and devices were technically superior and cost $11.5 million less, effectively reducing the benefits in the GTSI proposal. In review, the SSAC was unable to specifically quantify the economic benefits sufficient to offset the considerable financial premium of an award to GTSI. Based upon these finding, the SSAC reconsidered its previous recommendation and concluded that while there is technical merit in GTSI's ----------- FOOTNOTE BEGINS --------- [foot #] 2 The chart contains mathematical inaccuracies; if the proposed dollars for the GTSI and SMS proposals are correct, the differences actually are $1,056,252 and $11,494,880, for the first and third items, respectively. ----------- FOOTNOTE ENDS ----------- proposal, it is not significant in relationship to the greater overall cost of GTSI's proposal. As a result, . . . the consensus of the SSAC was to recommend award to SMS Data Products Group Inc. Their proposal is in the best interests of the Government as well as of the greatest value to the Government. Id. at 4-5. 14. The information in the memorandum and its attachments supports the conclusion that the BAFO of GTSI is technically superior to that of SMS, at a reasonable increase in price. A contrary conclusion is simply not sufficiently supported. Protest File, Exhibit 20, Enclosures 7, 8. The information and record are insufficient to credibly discount the earlier detailed conclusions of the SSAC, which indicate that GTSI's BAFO represents the best value to the Government. Findings 8-11. In a "summary of prices and availability (major items)," a comparison of seven line items in the BAFOs of GTSI and SMS, the prices of GTSI compare favorably to those of SMS and GSA schedule prices--these figures do not support a conclusion that GTSI's prices are unreasonable, or that a significant financial premium is associated with GTSI's BAFO. Id., Enclosure 1. Moreover, the conclusions with respect to the technical merit of the two BAFOs ignores, or makes light of, at best, the technical importance and technical points (possible, awarded, and compared to one another) for the three items in question. Id., Enclosure 6 (Points Plan Summary), Exhibit 24. 15. The Director of Contract Policy commented as follows, in a memorandum for the file, regarding his memorandum of August 23, 1990, Finding 12, and the SSAC's altered recommendation, Finding 13: The SSAC analysis clearly indicates a substantial reduction in price being offered in the 2nd year and out. This reduction in effect validates that that [sic] the firms did in fact believe prices were going down and they accordingly offered lower prices in the out years to reflect this position. Our concerns were satisfied with knowledge that prices dropped in the out years. Relative to the worth of the high rated technical offer (GTSI) the SSAC reconsidered their position, as listed in their memo for the record dated 31 August 1990 (last two pages). This further review resulted in their position changing to reflect that SMS was now considered the best overall offeror vice GTSI. Their analysis validates the undersigned's concerns. In addition, an analysis was performed on selected items/prices offered by GTSI and SMS and this analysis reflected favorable trends (lower prices) when compared to GSA schedule pricing. (see item 3) The out of production/not available issue was reviewed in detail by ADPSO [Automatic Data Processing Selection Office]. They had an independent firm review each item offered by GTSI and SMS. (See items 1 and 5) The analysis reflects that approximately only 7% of the items offered by GTSI and SMS are not available. In addition, some items which the undersigned questioned, being in production, the analysis reflects (based on better info) are available. Protest File, Exhibit 21. The Director of Contract Policy states in the memorandum that the recommendation to award to SMS is supportable, and that the business clearance, Protest File, Exhibit 18, will be authorized. Id. Tentative selection of SMS 16. Through a business clearance memorandum dated August 30, the contracting officer recommended an award to SMS, after normalizing prices to the SMS BAFO and comparing the BAFOs of SMS, GTSI and FCC. The aggregate prices; present-value prices; points for price (normalized), technical, and management and support; and total points are as follows. Offeror aggregate p-v price pr. tech m&stotal GTSI $609,014,976 $487,869,120 39.7 22.6 11.874.2 SMS$536,399,264 $436,942,112 45.0 14.0 8.867.8 FCC$589,807,808 $478,593,056 40.8 15.8 8.364.9 Protest File, Exhibit 18. 17. The contracting officer, with the assistance of independent researchers, made determinations regarding the continued availability of hardware and software products offered by GTSI and SMS from the original manufacturers. The figures were arrived at without consulting either offeror. As of September 11, the contracting officer concluded that, of the hardware and software items in the two BAFOs, approximately 90% of the same items were still available from the manufacturers; substitute models were available for 6%; and no conclusions were drawn for 4%, because the original manufacturer could not be contacted. These results are summarized in an addendum, dated September 11, to a business clearance memorandum, in which the contracting officer concludes: "Based on this analysis we find that most products that were proposed are still available. In conclusion, we believe that there still exists a basis for an award decision." Protest File, Exhibit 14, Addendum 2 at 2. 18. On September 14, 1990, the SSAC recommended to the SSA that an award be made to SMS because its BAFO provided the greatest value to the Government. Protest File, Exhibit 15 ( 2). The SSA concluded that SMS offered the "greatest value to the Navy" and was prepared to authorize an award to SMS upon confirmation that SMS's proposal still was valid. Id. ( 5). 19. The agency requested GTSI, FCC, and SMS to extend their BAFOs until October 9, 1990, by providing a written response by September 25. Protest File, Exhibit 15 ( 7). SMS did not respond to the request. Id. ( 8). GTSI and FCC extended their BAFOs. Id., Exhibit 17. On September 28, the SSA was made aware of SMS's lack of response. Id., Exhibits 15 ( 8), 17. On October 2, the SSA returned to the SSAC its recommendation of award to SMS; the SSA did not authorize an award to SMS. Id., Exhibit 15 ( 8, 9). Request for second BAFOs 20. On October 2, the SSAC reconvened to recommend a course of action to the SSA. Five alternatives were considered: (1) cancel and resolicit; (2) request second BAFOs without conducting written or oral discussions; (3) award to FCC or GTSI based on existing BAFOs; (4) conduct discussions, receive second BAFOs, and continue as a greatest value award; and (5) conduct discussions, receive second BAFOs, and award to low-priced, technically acceptable offer. Protest File, Exhibit 14. The SSAC rejected the suggestion of cancelling the procurement, "as there is a continuing requirement in DOD [Department of Defense]." Id. at 1. The SSAC also rejected the suggestion of making an award to either GTSI or FCC: For only a few additional raw technical excellence points above the SMS proposal, award to FCC would be at an additional $41 million (net present value) in contract life cycle cost. The additional technical excellence obtained by an award to GTSI was also not considered worth the additional $51 million (net present value) in contract life cycle cost over the SMS proposal. Id. at 2. However, the agency did not consider the management and support factor, and superior score of GTSI in this category, when analyzing the relative benefits of the BAFOs. Transcript at 281. Further, the SSAC rejected the suggestions of conducting discussions, because of projected milestones and a "need to obtain products and services as quickly as possible." Protest File, Exhibit 14 at 2. 21. The SSAC, through a business clearance memorandum dated October 26, recommended the second approach. Protest File, Exhibit 13. The Director of Contract Policy unconditionally approved the business clearance memorandum, with a signature dated November 5. Id. 22. By a memorandum dated November 1, the SSAC recommended to the SSA that second BAFOs be requested of GTSI, FCC, SMS, and Zenith, whom, the SSAC indicated, the contracting officer had determined to be within the competitive range in accordance with regulation, FAR 15.609(a). Protest File, Exhibit 10. As a memorandum dated November 2 indicates, the SSA concurred in the result, authorizing the contracting officer to reopen discussions and to request second BAFOs from the four offerors. Id., Exhibit 9. In a memorandum to the record dated November 2, the SSA sets forth his rationale as to why this action is "clearly in the Government's interests": (1) a continuing Government need for obtaining the products and services; (2) potential significant dollar savings to the Government; (3) prices offered by GTSI and FCC "are too high. This position is based on analysis of prices offered by all offerors; GSA schedule prices; and declining price trends in the industry"; and (4) the additional rationale addressed in a business clearance memorandum, Protest File, Exhibit 13. Id., Exhibit 11. 23. By letters dated November 2, the contracting officer notified GTSI, FCC, SMS and Zenith of the agency decision to request second BAFOs and intent to make a prompt award. The letters highlight that product changes are permitted. Offerors were permitted to submit written questions no later than November 16, to which the agency would provide written responses no later than December 7. The letters note that section L7, "Availability of Equipment and Software," has been amended, and that a new date for availability of products has been established. Additionally, the letters provide: Provision M14, "Price and Technical Tradeoff" has not changed. You are again advised that the Source Selection Authority (SSA) has considerable flexibility in determining which proposal offers the greatest value. If the SSA determines that technical point scores (consisting of the scores for the technical excellence factor and the contract support and management factor) represent a significant difference in technical merit between proposals, the SSA may authorize an award to a higher priced proposal. However, the SSA is not required to do so. If the SSA determines that the higher price to be paid for the significant difference in technical merit does not provide the greatest value, the SSA may authorize an award on a proposal with a lower technical point score and lower price. Protest File, Exhibits 27-30. The letters also draw the attention of the offerors to amendment 17, which-- contains a change to the Government's Live Test Demonstration (LTD) requirements. A post-award LTD is now specified rather than the previous requirement that an offeror complete the LTD prior to contract award. Your attention is directed to the new paragraph 1.1.2 of Attachment 2 and the new paragraph E10.5 of the revised Clause E10 contained in the enclosed amendment. Id. Further, the letters note that discussions will be concluded on December 7, 1990, with the second BAFOs due on January 7, 1991. Finally, the BAFO must "be a legally binding offer which shall continue in effect through 30 JUN 1991." Id. Amendment 17 24. Amendment 17, with an effective date of November 2, 1990, alters the solicitation in various respects. Protest File, Exhibit 5. The firm, fixed-price, requirements contract will expire September 30, 1991, with optional annual renewals, while the total duration of the contract, including the exercise of any option, shall not exceed 84 months. Id. at B-2 ( B1.1), I-10 (DFARS 252.270-7004 (SEP 1987)). Previously, the contract would expire on September 30, 1989, and the total duration of this contract, including the exercise of any options could not extend beyond September 30, 1996. Id., Exhibit 4, Amendment 16 at B-2 ( B1.1), I-8 (DFAR 252.270-7004 (SEP 1987)). Under the amendment, "The estimated contract award date is presumed to be 01 APR 1991." Protest File, Exhibit 5 at L-6 ( L14.3.1.1). Previously, the presumed date of contract award was October 1, 1989. Id., Exhibit 4, Amendment 14 at L-6 ( L14.3.1.1). 25. Under the amendment, the evaluation switched, for some line items, from fiscal years 1990 through 1996 to fiscal years 1991 through 1998, with some minor variations in quantities. Protest File, Exhibit 4, Amendment 14 at M-7 through M-9 and Attachment 8, Exhibit 5 at M-7 through M-9 and Attachment 8. Further, paragraph M11.2 was eliminated by Amendment 17: "All offerors in the competitive range shall conduct a LTD of their proposed equipment and software, at no cost to the Government." Protest File, Exhibit 4, Amendment 10 at M-12, Exhibit 5 at M-12. In fact, amendment 17 expressly notes: "Products substituted upon the submission of the Offeror's second best and final offer (BAFO) shall not be demonstrated prior to award of the contract." Id., Exhibit 5 at AT2-1 ( 1.1.2). Other correspondence 26. The record reflects that Zenith and various Members of Congress, apparently at the urging of Zenith, have taken an interest in the award of this procurement, and have written to various individuals working on this procurement or having oversight responsibilities. FCC Protest File, Exhibits 21-24; GTSI Protest File, Exhibit 17. Discussion Motions GTSI and FCC have requested summary relief on various issues of protest. However, a moving party may not obtain summary relief when there exist material issues of fact in dispute. This is such a situation. Accordingly, the Board permitted the parties to develop a record with exhibits, depositions, and a hearing transcript. The Board denies the motions. Zenith maintains that counts III (SMS and Zenith in the competitive range), IV (technical leveling), and V (impermissible auction) of the GTSI protest must be dismissed for failure to state a claim upon which relief can be granted. GTSI is entitled to develop a record to demonstrate the alleged violations and the prejudice which would result. The agency moves to dismiss count VI of the GTSI protest, because of a lack of a valid basis or because of frivolousness. The agency maintains that a premise of this count--that the Board revised the procurement authority to require the agency to make a prompt award--is erroneous. Statute has always constrained the agency to make an award with reasonable promptness. 10 U.S.C. 2305(b)(3) (1988). The Board's revision of procurement authority was consistent with this requirement. Finding 2. Moreover, the agency has maintained throughout this protest that it has acted promptly. The agency contends that counts VII and VIII are untimely. Zenith suggests that count VII is premature, and that count VIII fails to state a violation of law. These counts involve the selection criteria, paragraph M14. The counts are not made in the abstract; rather, they are raised in relation to the agency's issuance of amendment 17. With that issuance, GTSI learned that the agency, in fact, was not proceeding with an award under initial BAFOs. Also, it put into question the appropriate interpretation of the selection criteria, which could affect the ability of GTSI to compete sufficiently. These counts were timely raised after the issuance of amendment 17 and raise valid issues. Regarding count II of the FCC protest and count IX of the GTSI protest, Zenith and the agency maintain that neither protester has standing to assert that amendment 17 made such substantial changes in the solicitation so as to require cancellation and resolicitation. The agency asserts that each remains in the competition, such that neither has been harmed. It cites in support System Dynamics, Inc., GSBCA No. 9763-P, 89-1 BCA 21,497, 1988 BPD 324. GTSI and FCC are appropriate parties to assert that cancellation is required by statute or an appropriate form of relief. First, ISG raised this issue; these protesters have a direct economic interest in the procurement, and can and have intervened on the issue. Moreover, the count is raised in the alternative to other counts, as each protester asserts that amendment 17 has improperly harmed its ability to compete fairly because of the time constraints under which responses must be made. The Board denies the motions of Zenith and of the agency to dismiss the various counts of protest. Merits The issues raised by the parties focus attention on numerous particular actions by the agency. The Board first reaches those issues which relate to the propriety of the agency determination not to award a contract to GTSI. The Board concludes that such a determination is inconsistent with the terms of the solicitation, statute and regulation. Given this conclusion, the Board need not reach many of the specific issues raised by GTSI. Award versus second BAFOs By May 29, the agency had affirmed its requirements expressed in the solicitation, and determined that it had three acceptable BAFOs before it--those of GTSI, FCC, and SMS. Finding 6. The SSAC noted the superiority of the GTSI BAFO, and concluded that it represented the greatest value to the Government. Moreover, as of June 22, the SSAC and the contracting officer concluded that the GTSI BAFO proposed fair and reasonable prices which represented significant reductions from schedule prices. Findings 9, 10. On June 22, the contracting officer concurred with the SSAC recommendation to award the contract to GTSI without further discussions. Finding 11. No definitive action was taken on the recommendation until August 23, when the SSA did not approve the business clearance memorandum and posed three questions for SSAC consideration. Finding 12. The suggestions and conclusions expressed in the memorandum of that date and subsequent determinations lack support in the record. Initially, the record does not suggest that the proposals of Zenith and GTSI are "technically equivalent." Rather, the agency has affirmed its evaluation criteria and the technical ranking and scoring of items; the 100- plus point difference between the proposals, when considering technical excellence and management and support, reflects something other than equivalency and something more than a minimal difference. The SSAC also investigated price trends. Both prior and subsequent to the August 23 memorandum, the agency concluded that prices adequately decreased over time in the GTSI BAFO. Findings 10, 15. Although decreasing prices are not unusual in the computer industry, both the Government and the contractors assume certain obligations and risks by entering into multi-year contracts. While market prices may tend to decline steadily, one suspects that an agency enters into a long-term contract anticipating better prices over the life of the entire contract, while assuring itself of a supplier of goods and/or services. The agency limits its ability to enter into yearly contracts, which may or may not result in better prices. Further, the agency may benefit by obtaining substitute products, representing technological upgrades, at reduced prices. The agency has not postulated why this procurement is different from what may have been anticipated by the offerors or the agency so as to require the submission of prices. The agency has found the prices proposed by GTSI to be fair and reasonable over the life of the contract; the SSAC analysis provides no support to question these conclusions. The differences between the GTSI and SMS BAFO are significant; the agency has failed to substantiate a conclusion that the technical differences are not worth the added cost. On the three items alone, upon which the memorandum focuses, GTSI scored 375 points compared to 165 points for SMS--a difference of 210 points or 127 percent. The cost comparison reveals, in proposed dollars, $149,823,628 for GTSI and $138,216,920 for SMS--a difference of $11,606,708, less than ten percent of SMS's proposed dollars for more than double the technical points of SMS. Findings 13, 14. In reaching its final determinations, the agency minimized the superior technical characteristics of GTSI's BAFO, and instead focused principally on cost differences. Additionally, the agency ignored the relative merits of the management and support aspects of the proposals, where GTSI was rated more than a third better than SMS. Under the selection criteria established in the solicitation, which dictate the importance of the various aspects of the BAFOs, the technical excellence and contract management and support aspects of GTSI's BAFO are apparent. A calculation of the present dollar value per technical (technical excellence and management and support) point, finding 7, for each offeror yields the following results: $705,013.18 ($487,869,120 : - 692) for GTSI $994,995.96 ($478,593,056 : - 481) for FCC $988,556.81 ($436,942,112 : - 442) for SMS $783,030.46 ($454,157,664 : - 580) for Zenith primary proposal (which the agency deemed to be non-acceptable) $771,719.06 ($432,203,552 : - 560) for the Zenith alternate proposal (which the Board found to be non-acceptable) This analysis is, of course, not the only one which a comparison of the proposals may have entailed. Nevertheless, a rational basis has not been presented which substantiates the conclusion that an award to GTSI would involve a considerable financial premium. The solicitation requested offers which would be evaluated with cost the most important factor, but with technical excellence only slightly less important. Offerors proposed accordingly; the agency may not discount the evaluation and selection criteria.[foot #] 3 ----------- FOOTNOTE BEGINS --------- [foot #] 3 As noted in the earlier GTSI protest, "Normalization which automatically assures a maximum number of points for only one category may well lead to a skewing of the relationship amongst factors. Such scoring would clearly require the exercise of special care by the selection official and those providing input as to the award determination." Government __________ Technology, 90-1 BCA at 113,904, 1990 BPD 75 at 15. Here, only __________ price was so normalized. A normalization of technical, as well as price, factors yields the following for GTSI, SMS, and FCC, findings 7, 16. GTSI 94.7 (= 39.7 + 40.0 + 15.0); SMS 81 (= 45.0 + 24.8 + 11.2); FCC 79.3 (= 40.8 + 28.0 +10.5). When compared to the scores in finding 16, this analysis demonstrates that by not normalizing technical and management scores, or taking the normalization into consideration, the agency made its evaluation of offers in a way which discounted the strengths of the GTSI offer. Even under the scoring that was actually used, however, GTSI received more points than any other offeror. ----------- FOOTNOTE ENDS ----------- Under the selection criteria of the solicitation, GTSI's BAFO provides the agency with significant technical superiority. Just as the SSAC and contracting officer determined in mid-1990, the record fully supports the conclusion that the price for this superiority is reasonable, while it demonstrates that a contrary determination is neither rational nor consistent with the established evaluation factors. The superiority, in technical excellence and contract management and support, of the GTSI BAFO offers a true advantage to the Government for a fair and reasonable price. The final conclusions of the SSAC, business clearance authorities, and SSA to the contrary inappropriately disregard or misconstrue what GTSI has offered, particularly in comparison with the SMS BAFO. The SSAC also investigated the availability of products from original manufacturers, not the offerors, thereby ignoring the possibility that the offerors could secure products from sources other than the manufacturers. In any event, the actual analysis reveals no real problem with the availability of GTSI's proposed products. Findings 15, 17. The analysis in response to the questions raised by the Director of Contract Policy fully supports the conclusion that award to GTSI was in the best interest of the Government. More importantly, for purposes of these protests, the contrary conclusion of the SSAC and SSA is not rationally supported. At no time has the agency questioned the evaluation criteria or the weights assigned to the various items. However, in determining not to make an award to GTSI, both before and after SMS did not renew its offer, the agency ignored these indicators of technical excellence when it came down to making an award determination. Price became disproportionately important compared to the other evaluation criteria. The superiority of GTSI's BAFO over the other BAFOs in terms of technical excellence and management and support was minimized or not recognized. The evaluation and selection criteria placed GTSI with the highest overall score. The rationale used by the agency to support its actions is not rationally based. The agency has not substantiated how an award to anyone else could be in the best interests of the Government, and would be consistent with the terms and conditions of the solicitation. The agency has violated requirements that an award be made with reasonable promptness to the offer in accordance with the terms of the solicitation. 10 U.S.C. 2305(a)(3), (b)(1), (b)(3) (1988); FAR 15.605, 15.612(d), DFARS 215.605. Paragraph M14 does not provide the contracting officer with unfettered discretion in the selection process. As noted above, selection determinations must be consistent with the evaluation and selection factors. Paragraph M14.5 of the solicitation highlights this. Finding 4. The record reveals the positive attributes of the GTSI BAFO, as well as the technical superiority in comparison with all other offerors. GTSI has demonstrated that the determinations of agency personnel that the technical merit of GTSI's BAFO is offset by associated increased cost lacks a supportable foundation. GTSI has proven that the agency erroneously did not move forward with the award to GTSI in mid-1990. With well documented and substantiated findings, the SSAC and contracting officer concluded that the GTSI BAFO represented the best value to the Government, findings 8-11, 14. The record does not support the reversal of the conclusion. Findings 13-15. Additionally, the record reveals that the circumstances affecting an award have not so substantially changed so as to make any other determination at this time reasonable. Indeed, the agency insists that the circumstances are not sufficiently different so as to mandate that it obtain a new delegation of procurement authority and issue a new solicitation. FAR 15.606 (changes in Government requirements). Further, the products offered by the various offerors are, with few possible exceptions, still available. Findings 15, 17. In the weeks before these protests began, the agency reaffirmed its requirements and the general sufficiency of the solicitation to obtain those requirements. Findings 17-20, 22. The conclusion of the agency that the prices offered by GTSI in its proposal "are too high," Finding 22, lacks support in the record. The solicitation remains an appropriate vehicle for the agency to use to satisfy its continuing requirements. Although "directed awards are an exceptional form of relief," SMS Data Products Group, Inc., GSBCA 10864-P (Oct. 23, 1990), 1990 BPD 348 at 6, here the Board is requiring the agency to make the award dictated by statute, regulation, the terms of the solicitation, given that the record demonstrates that a continuing need for the solicited requirements exists, and the solicitation remains an appropriate vehicle for award. Although inappropriately discounted when determinations were made not to award to GTSI, the findings of the agency support only one conclusion: award to GTSI is in the best interests of the Government. The Board, therefore, is not substituting its own judgment for that of the agency, but rather, is determining that the agency exercised its discretion in an arbitrary and capricious manner. The Board is now directing that action be taken fully consistent with the only reasonable exercise of discretion. The agency should have made an award to GTSI long ago. Agency actions alone caused the time to elapse from the date of the initial Board determination (requiring a prompt termination of the Zenith contract and award) to the present. Significantly more time passed than the six weeks between initial BAFOs and award. The passage of time has not served as a basis to invalidate the award which should have occurred. Award to GTSI remains appropriate and is required. This is not to say that the unavoidable passage of time which makes BAFOs stale, or the desire to obtain prices more reflective of the existing market, could not serve as a basis to seek a second round of BAFOs when information is inadequate to reasonably justify selection of a contractor. Multiple BAFOs GTSI maintains that issuance of amendment 17 will result in multiple rounds of BAFOs in violation of regulation, FAR 15.611(c), DFAR 215.611(c). GTSI asserts that the agency has at least one technically acceptable offer before it, that of GTSI, and that all of the agency's requirements could be satisfied with the award. The first cited regulation provides: "After receipt of best and final offers, the contracting officer should not reopen discussions unless it is clearly in the Government's interest to do so (e.g., it is clear that information available at that time is inadequate to reasonably justify contractor selection and award based on the best and final offers received)." The second provides: "Second or subsequent requests for best and final offers require close monitoring and control . . . to avoid auction techniques, enhance protection of source selection sensitive data, and ensure that contracts are awarded fairly and promptly." GTSI has demonstrated that the agency should have proceeded with the award to it, and that the circumstances now are not sufficiently different so that the best interests of the Government are served by receipt of new BAFOs. In other words, the rationale used by the agency to justify another round of BAFOs lacks a credible and supportable basis. Impermissible influence GTSI and FCC have made much of the letters from Zenith to Members of Congress and agency personnel, as well as letters from Congress to agency personnel involved in the procurement, either directly or in positions of oversight. Neither protester suggests that those involved in procurement decisions should be barred from receiving such inquiries or suggestions of courses of action to pursue. At issue before the Board are the actions of the agency. The Board reviews those actions in a de novo manner and determines if the actions are violative of statute, regulation, or a delegation of procurement authority. In this instance, the Board concludes that the actions of the agency are impermissible. This is because GTSI, and the record as a whole, have demonstrated that there did not exist a rational basis for not proceeding with the award to GTSI, in May 1990 through the present. Whether or not any specific input helped or hindered the agency personnel in reaching determinations and taking actions is of no effect. The determinative actions were flawed. ISG protest ISG maintains that the agency acted improperly by not reopening the competition so as to permit offerors, in addition to GTSI, FCC, SMS, and Zenith, to submit proposals. The Board denies the protest in light of the conclusions reached above. Amendment 17 should not have been issued. The agency should have awarded the contract to GTSI; the Board is requiring the agency to undertake this action. Accordingly, it would be inappropriate for the agency to reopen competition to satisfy these requirements. FCC protest FCC contends that the agency improperly refused to make an award. The assertion is correct; however, the only appropriate awardee is GTSI. Given the differences between the GTSI and FCC BAFOs, there exists no basis in the record to question the determination of the SSAC regarding FCC. Finding 9. FCC does not prevail on this issue, in which GTSI, not FCC, is the direct beneficiary. The Board denies this basis of protest. FCC contends in the alternative that a recompetition is required because of substantially changed circumstances. For the reasons stated regarding the ISG protest, the Board denies this basis of protest. Decision The protest of GTSI is granted. The protests of ISG and FCC are denied. The suspension of procurement authority effective on November 27 lapses by its very terms. The Board revises the procurement authority of the agency to require it to award the contract to GTSI within ten calendar days from the date of issuance of this opinion, after a formal determination of responsibility has been made. _______________________________ JOSEPH A. VERGILIO Administrative Judge We concur: _______________________________ _______________________________ ANTHONY S. BORWICK STEPHEN M. DANIELS Administrative Judge Administrative Judge