______________________________________ DENIED: November 9, 1992 ______________________________________ GSBCA 11990-P INTEGRATED SYSTEMS GROUP, INC., Protester, v. DEFENSE LOGISTICS AGENCY, Respondent. Shelton H. Skolnick, Derwood, MD, counsel for Protester. Walter Thomas and Leonard Schoen, Office of the General Counsel, Defense Logistics Agency, Cameron Station, Alexandria, VA, counsel for Respondent. Before Board Judges LaBELLA, Acting Chief Judge, HENDLEY, and BORWICK. HENDLEY, Board Judge. On August 31, 1992, Integrated Systems Group, Inc. (ISG) protested the placing of an order for automatic data processing equipment with International Business Machines Corporation (IBM) by the respondent, Defense Logistics Agency, against a General Services Administration (GSA) nonmandatory schedule contract (GSA schedule contract). We find no violation of the applicable statutes and regulations and, consequently, deny the protest. Findings of Fact 1. On July 29, 1992, the respondent synopsized in the Commerce Business Daily (CBD) its intent to place an order under the nonmandatory GSA schedule contract, number GS00K90AGS5691, with IBM for the following items: 4 3172-001 controllers; 5 2001 channel adapters; 4 2220 ethernet adapters; 4 2500 rack mounts; 4 5601-400 controller programs; and 4 5735-HAL TCP/IP V2 MVS. Protest File, Exhibit 1. Although the respondent's synopsized notice contained more information, none of it is germane to this case. 2. A 5735-HAL is an IBM licensed software program that is available under the GSA schedule contract for a charge that is determined by, inter alia, the group number that IBM assigns to the computer in which the licensed program is to be installed. Protest File, Exhibit 34 at 417. For certain IBM licensed programs, including 5735-HAL, licenses in addition to the initial license (basic license) may be obtained for a Distributed Systems License Option (DSLO) charge. The one-time basic license charge is higher than the one-time DSLO license charge. Id. Under the terms of the GSA schedule contract, once a basic license is purchased, the procuring agency may purchase additional licenses, the DSLO licenses at a significantly lower cost. 3. Under the GSA schedule contract, the 5735-HAL licensed program has the following one-time charges: Group Basic DSLO 35 $37,352 $28,015 38 $41,094 $30,821 40 $45,203 $33,902 Protest File, Exhibit 34 at 417. The CBD notice did not specify that the respondent intended to procure one basic license and three DSLO licenses, nor did it say that it did not intend to do so. The synopsis stated that the projected system life was sixty months. Id., Exhibit 1. It also stated that any responses received would be evaluated for technical sufficiency and cost. Id. 4. By letter dated August 10, 1992, the protester asked the respondent about the type of mainframe on which the associated software would run. Protest File, Exhibit 2. The significance of the question lies in the fact that IBM charges different software licensing fees in the GSA schedule contract, depending on the mainframe on which the software is to run. Id., Exhibit 34. By letter dated August 11, 1992, in response to the protester's question, the respondent indicated to the protester that the software would be running on mainframes identified as Group 38 and Group 35 mainframes. Id., Exhibit 3. No additional questions were submitted to the respondent. Transcript at 64, 113, 158. 5. The protester submitted a response to the CBD notice on August 12, 1992. Protest File, Exhibits 4, 5. The response is significant in that it consisted essentially of the protester's price comparison between the respondent's purported costs of purchasing under the GSA schedule contract with IBM, versus the cost of purchasing the supplies from the protester. The response set out the separate prices for the items if purchased off the GSA schedule contract but only gave a total proffered price for a potential purchase from the protester. There are two significant facts that can be gleaned from a careful analysis of the protester's response. First, one can discern that the protester premised the purported costs of ordering under the GSA schedule contract upon the purchase of basic licenses only, without consideration of purchasing DSLO licenses. Second, inasmuch as the protester's original response did not separately price any of the items that it proffered, one could not have discerned, at that time, whether the protester considered any DSLO licenses in formulating its prices. The respondent reviewed the response and requested a number of clarifications from the protester regarding its warranty, maintenance prices, and total final price. Id., Exhibits 6, 8. 6. When the protester received the respondent's clarifica- tion requests, the protester held discussions with McData Corporation (McData), its supplier, regarding different license and maintenance options. Transcript at 152-54. The upshot of those discussions was that, unlike IBM, McData would not grant DSLO licenses for purchases of less than a minimum of ten such licenses, and only three DSLO licenses would be needed. Id. The respondent received the protester's clarifications and a final response reflecting reduced prices on August 17, 1992. That response sets out ISG's separate prices for, inter alia, the McData software. One could not deduce from the pricing whether the protester's response was, or was not, based on offering DSLO licenses. Protest File, Exhibit 9. 7. The respondent considered the protester's response to be responsive and technically sufficient. Protest File, Exhibit 11. It should be noted that the protester properly priced Group 38 and Group 35 software as part of its response. Id., Exhibits 4, 9, 31. The respondent's cost analysis showed that--if purchased off the IBM GSA schedule contract--its life cycle cost would be $261,033. Id., Exhibit 15. The respondent's analysis mistakenly used the price for Group 40 software, a more expensive series of software, in place of the required Group 38 and Group 35 software. Id. Based on a straight-line evaluation, the contracting officer determined that the GSA schedule contract represented the lower cost alternative and issued an order against the schedule contract. Id., Exhibit 14. The day after the order was placed, the respondent informed the protester that the award had been made. Id., Exhibit 15. In response to questions from the protester about the adjusted present value of its prices, the respondent acknowledged that the straight-line value of its response had been used, and not the present value adjustment. Id. The respondent then reevaluated the prices to take into account the present value adjustment and the other factors set forth at 48 CFR 201-39.201 (1991), FIRMR 201-39.201 (lowest overall cost). Id. 8. The respondent's revised analysis took into account both the present value cost of the protester's response, $248,660.08, and the marginal costs associated with issuing a solicitation, which the respondent calculated to be $28,000. Protest File, Exhibit 15. The total adjusted value of the protester's response, $248,660.08, plus the marginal cost of issuing a solicitation, $28,000, totalled $276,660.08, which exceeded the cost under the GSA schedule contract of $261,033, when computed on a straight-line basis. Id. The margin between the protester's total cost and the GSA schedule contract was even greater when the GSA schedule contract price was adjusted for present value. Id. The respondent concluded from this analysis that the GSA schedule contract represented a lower overall cost to the Government. Id. 9. Not surprisingly, the protester objected to the addition of $28,000 in procurement costs to its proposal and formally protested to the Defense Logistics Agency on August 23, 1992, Protest File, Exhibit 18, and to this Board on August 31, 1992. On September 1, 1992, the respondent denied the agency level protest. Id., Exhibit 19. 10. On September 24, 1992, the respondent issued modification number P00001 to the GSA schedule contract order in order to correct significant errors in the original order. Respondent's Exhibit 1. The initial order had incorrectly ordered Group 40 software, and had been priced on that basis. Protest File, Exhibit 14. The modification corrected the order to reflect the required Group 38 and Group 35 software, and the prices were reduced accordingly. Respondent's Exhibit 1. The modification changed the requirements so that they were then consistent with the respondent's actual requirements and with the information that had been provided to the protester. Protest File, Exhibit 3. The modification reduced the cost of the GSA schedule contract order to $221,103. Respondent's Exhibit 1. 11. The evaluated five-year life cycle cost of the GSA schedule contract order, as corrected, was $239,262.84. Respondent's Exhibit 2. Adjusted for present value, the life cycle cost was $233,025.94. Id. Compared to the prices submitted by the protester, the schedule contract represented a cost savings of $29,076.36, or $15,634.14 when adjusted for present value. 12. On September 30, 1992, the protester amended its complaint to add allegations of unequal communications, unequal price commitments, and unequal cost evaluation. Protest Complaint Amendment 1. The respondent opposed the motion. We heard the case on the merits, including the motion. Discussion This has not been a model procurement. Errors occurred. However, it cannot be gainsaid that the GSA schedule contract represented the lowest cost alternative meeting the respondent's needs. The life cycle cost of the final GSA schedule contract order was $239,262.84, with an adjusted present value of $233,025.94. The price submitted by the protester was $268,339.20, with an adjusted present value of $248,660.08. The price of the GSA schedule contract for the required items was $29,076.36 less than the price of the protester's response. After adjustment for present value, the GSA schedule contract price was lower by $15,634.14. Placement of an order against a schedule contract is proper when such an order represents the "lowest overall cost alternative" to meet the needs of the Government. See Integrated Systems Group, Inc., GSBCA 11494-P, 92-1 BCA 24,621, 1991 BPD 335; Federal Systems Group, Inc., GSBCA 9924-P, 89-2 BCA 21,758, 1989 BPD 105; Diversified Computer Consultants, B-241764, 70 Comp. Gen. _ (1991), 91-1 CPD 224. The protester's complaint that the respondent assessed excessive administrative procurement costs of $28,000 in evaluating its response is moot. The cost of purchasing under the GSA schedule contract is $29,076.36 less than the price proffered in the protester's response to the CBD notice. Consequently, the $28,000 evaluation factor is irrelevant to any decision to purchase from the GSA schedule contract. We are not required, and hence do not rule, on whether such costs can be considered, and in what amount, although FIRMR 201-39.201 specifically provides for consideration of the cost of conducting a solicited contract action and the costs associated with use of the Federal information processing (FIP) resources. On September 30, 1992, the protester moved to amend its protest complaint, contending, inter alia, that the respondent's cost evaluation was improper because the respondent elected to order one basic and three DSLO licenses under the GSA schedule contract without specifically stating its intent to do so in the CBD notice. Amended Protest Complaint. In actuality, the protester premised its response to the CBD notice on its ability to underbid the total price for the supplies as it believed them to be stated in the GSA schedule contract. The prices available to the respondent, and other Government agencies, under the GSA schedule contract were certainly known to, and were easily available to, the protester. The testimony and documents through this case clearly show that the protester had complete knowledge of the contents of the GSA schedule contract. The protester contends that the respondent, in comparing the protester's response to the cost of purchasing from the GSA schedule contract, used DSLO licenses, which the protester did not use. The protester contends that such an evaluation was unequal and violated the Competition in Contracting Act of 1984, 41 U.S.C. 253; 10 U.S.C. 2304 (1990). The GSA schedule contract specifies the terms and conditions under which licensed program materials may be purchased. Protest File, Exhibit 34 at 8-4 to -7. The GSA schedule contract specifically states: For certain licensed programs, licenses in addition to the initial license (Basic License) may be obtained for a Distributed Systems License Option (DSLO) charge. Id. at 8-5. The licensed software programs required by the respondent were available under the GSA schedule contract with a basic license and additional licenses at a DSLO charge. Id. at 417. The DSLO charge for the additional licenses was lower than the charge for the basic license.[foot #] 1 Id. The respondent evaluated its costs of procuring under the GSA schedule contract on the basis of purchasing one basic license and three DSLO licenses and eventually ordered these licenses. Respondent's Exhibit 1. The CBD notice stated that the respondent required four licensed programs. Protest File, Exhibit 1. It did not specify a required mix of basic and DSLO licenses. Id. The testimony of the protester's president indicated that the protester discussed with its supplier, McData, the possibility of offering DSLO licenses in its response to the CBD Notice. Transcript at 149. Although the protester's president indicated that the protester did not think the respondent wanted DSLO licenses, the CBD notice offers no support for such a belief. It is clear from the testimony given by the representative from McData, that its third-party software supplier would not, at that time, provide DSLO licenses when fewer than ten licenses were being purchased. Transcript at 175-76. The protester's testimony also indicated that the protester and McData discussed offering a variation on the DSLO license approach, by having the protester assume some responsibility for resolving any problems encountered by the respondent, as an alternative to offering basic licenses. Id. at 153. The protester's president testified that the time pressure of submitting a response to the CBD notice, however, prevented the protester from working through ----------- FOOTNOTE BEGINS --------- [foot #] 1 For Group 38 software a basic license cost $41,094 and additional DSLO licenses cost $30,821 each. For Group 35 software the cost was $37,352 for a basic license and $28,015 for DSLO licenses. Protest File, Exhibit 34 at 417. ----------- FOOTNOTE ENDS ----------- the "several alternatives" that were available to the protester. Id. at 149, 153. The respondent evaluated the protester's response and determined it was technically acceptable. It was higher priced, however, by approximately fifteen thousand dollars. After the protest was filed, the protester was able to negotiate competitive prices with McData for DSLO licenses. As of the second day of the hearing, October 8, 1992, the protester could proffer lower prices based upon DSLO licenses negotiated with McData. Protester's Exhibit 1. Had the protester been able to obtain the lower DSLO prices negotiated with McData long after the time it submitted its response to the CBD notice, it would have been able to submit the lowest cost alternative to the respondent. The purpose of the CBD notice is to permit the agency to determine from the responses whether ordering from the schedule contract represents the lowest overall cost alternative to meet the needs of the Government. FIRMR 201-39.501-3(c). To be effective, the CBD notice must include sufficient information about the intended order so that potential vendors may submit responses which are comparable to an order under the schedule contract. See Integrated Systems Group, Inc., GSBCA 11494-P, 92- 1 BCA 24,621, 1991 BPD 335 (CBD notice must contain sufficient information for vendors to submit reasonable responses). Because the CBD synopsis is only used to test the market, it need not contain the detail required of a solicitation. Id. at 122,809, 1991 BPD 335, at 5 (citing International Business Machine Corp., GSBCA 9528-P, 88-3 BCA 21,082, 1988 BPD 177); Diversified Computer Consultants, B-241764, 70 Comp. Gen. _ (1991), 91-1 CPD 224. In this case, the CBD notice identified the software that was required by the Government. Protest File, Exhibit 1. While the Government did not designate specific license options in the CBD notice, the GSA schedule contract explained the available options in detail. Id. Exhibit 34 at 8-5, 417. This explanation included terms and conditions, and specific prices. Id. The testimony by the protester's president reflected that the protester was well aware of the DSLO option and its potential application to this procurement. Transcript at 149, 152-55, 157-58. The protester specifically discussed with McData the possibility of offering a DSLO license in its response to the CBD notice, although McData could not then provide DSLO licenses because of the small number of licenses required by the Government. Id. at 149, 165. The protester also explored a variation on the DSLO option whereby the protester would assume some responsibility for software maintenance. Id. at 153. It was the protester's supplier and the time pressures of responding to the CBD notice that prevented the protester from including alternative comparable licensing approaches in its response. Id. at 149, 153. In the face of this testimony, we discount the protester's contention that it did not think that the Government wanted DSLO licenses. Transcript at 149. Protester has not pointed to any information that it received from the respondent that should have led it to such a conclusion. It is clear that the protester was actually aware of the DSLO license option. Cf. International Business Machine Corp., GSBCA 9528-P, 88-3 BCA 21,082, at 106,442-3, 1988 BPD 177, at 8 (where vendor was actually aware of an issue, its contention that it should have been put on notice through the CBD notice is a belated attempt to "take a second bite at the apple"). The gravamen of the protester's complaint about the CBD notice is that, had it known that DSLO licenses could be included in its response, it would have reduced the price of its response. Assuming, arguendo, the correctness of the protester's assertion, the protester was not prejudiced by the lack of a specific statement in the CBD notice about license options; to the contrary, the protester was familiar with the DSLO option, explored it with its supplier, explored a variation on the DSLO license with its supplier, and was free to submit a response reflecting this option, as its primary or as a second response to the CBD notice. Transcript at 149, 152-55, 157-58. More to the point, the protester's basic premise that it could have submitted lower prices if the CBD notice had specifically addressed the DSLO option is false. As previously described, the representative from McData testified that at the time responses to the CBD notice were due, McData's contract with its software supplier required that ten licenses be purchased before DSLO licenses would be provided. Transcript at 175-76. Although at the hearing McData indicated that it could now provide DSLO licenses, it acknowledged that these licenses were not available in the required numbers at the time responses were due, are not now generally available, and are now being offered to the protester as a result of the protest. Id. at 176-77, 179. In the end, McData acknowledged that it is currently "going through the process of working with our suppliers to get our maintenance costs in line with IBM." Id. at 171. The Government properly synopsized its requirement and, eventually, properly evaluated the response received from the protester. The order placed against the GSA schedule contract represented the lowest overall cost alternative to meet the needs of the Government. Decision For the reasons set forth herein, the protest is DENIED. _________________________ JAMES W. HENDLEY Board Judge We Concur: _________________________ VINCENT A. LaBELLA Acting Chief Board Judge __________________________ ANTHONY S. BORWICK Board Judge