THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN ITS ENTIRETY ON DECEMBER 24, 1992 DENIED: December 18, 1992 GSBCA 12118-P S&W Associates International, Inc., Protester, v. Department of the Navy, Respondent. Wayne P. Gagner, pro se, Bethesda, MD, appearing for Protester. Harriet J. Halper, Mary C. Bell, and Karen L. Grosso, Office of the General Counsel, Naval Research Laboratory, Washington, DC, counsel for Respondent. Before Board Judges DEVINE, NEILL, and HYATT. NEILL, Board Judge. On October 14, 1992, this protest was filed by S&W Associates International, Inc. (S&W). It concerns a request for proposals issued by the United States Department of the Navy, Naval Research Laboratory (respondent). The parties have elected to submit their positions on the written record. See Rules 9, 11. Respondent seeks dismissal of this protest for lack of jurisdiction or, in the alternative, denial of the protest. For the reasons stated below, we deny respondent's motion to dismiss for lack of jurisdiction and deny the protest as well. Findings of Fact 1. On February 5, 1992, respondent issued request for proposals (RFP) number N00014-92-RGB02 for the purchase of high performance cesium frequency standards (i.e., cesium clocks). The solicitation is a brand name or equal procurement with a Hewlett-Packard model designated as the brand name. Protest File, Exhibit 1 at 2-3. Product Bulletin for Brand Name Product 2. The product bulletin states that the required cesium clock or frequency standard is often integrated into telecommunication, satellite communication, or navigation systems as a master clock. It utilizes internal microprocessor control. Operating parameters and instrument control are facilitated through an intuitive menu accessible via a front panel liquid crystal diode (LCD) display and keypad. To accommodate instrument configuration, the frequency standard also provides complete remote control and monitoring functions through a dedicated RS232C port. Supplemental Protest File, Exhibit 1, Attachment B at 5-6. 3. User defined functions include clock control, instrument configuration, and frequency offset. Clock control allows the user to set "the time and the date, schedule leapseconds, adjust the epoch time (in 50 nsec steps), and automatically synchronize the 1-pps signal to within 50 nsec of an external pulse." Instrument configuration allows the user to assign frequencies of 5 or 10 MHz to two independently programmable output ports and to configure the RS232C port. A rear panel logic output can also be programmed to signal when user-defined "abnormal" conditions exist. The user may also adjust the output frequency setting through the frequency offset function. Supplemental Protest File, Exhibit 1, Attachment B at 8, 10. 4. The Hewlett-Packard cesium clock is able to monitor key instrument parameters and print a hard copy report on a user attached printer. It also monitors significant internal events - - power source changes, hardware failure, warning conditions -- and automatically records the time and date of each such occurrence. A hard copy report of significant events may also be printed on the user attached printer. Supplemental Protest File, Exhibit 1, Attachment B at 8. Solicitation Requirements for Equal Products 5. The solicitation lists salient features which each frequency standard proposed must meet or exceed. Protest File, Exhibit 1 at 3; id., Attachment 1 at 1-3. The relevant salient features read as follows: 18. Output Configuration. The equipment must have: Two, high isolation RF outputs, each separately programmable for 5 or 10 MHz output. . . . . 24. Remote Access. All keyboard functions and status of the equipment must be accessible remotely by a computer terminal or computer via RS232C. . . . . 27. Automatic Control. Operation control, and adjustments of the equipment must be performed through a closed-loop system. An operator must be able to control the instrument via a front panel keyboard or remotely through RS232C to read status of the equipment or override the internal control loop. 28. Adjustments. All adjustments must be made via a front panel keyboard and display, or through the remote RS232C input. . . . Id. at 3. Evaluation and Award 6. The solicitation was a fixed price indefinite quantity contract. Protest File, Exhibit 1 at 11. Section B-1 listed contract line item number (CLIN) 0001 for 100 units. Section B-2 provided that "the minimum quantity to be ordered is 5 units and the maximum quantity is 100 units." Id. at 2; accord id. at 11 (Delivery Order Limitations). The period of performance was four years. Id. at 7. 7. On April 9, the solicitation was amended. Section B-1 was amended to add three additional CLINs for 100 units per CLIN. Protest File, Exhibit 3 at 2-5. The solicitation still sought a four-year contract. Id. at 7. Each year of contract performance, however, was designated as a separate CLIN with year one denoted as CLIN 0001, year two as CLIN 0002, etc. Section B- 2 of the solicitation was not amended. Id. at 2-5. 8. Protester bid the required Hewlett-Packard model for each of the four years under the contract. Protester bid a unit price and a total amount based on 100 units for each CLIN in accordance with the solicitation Section B-1. The unit prices bid by protester for each year under the contract are as follows: Year CLIN Amount Base Year 0001 $68,200 Second Year 0002 $70,250 Third Year 0003 $72,350 Fourth Year 0004 $74,525 The total bid for 100 units per CLIN, therefore, is $28,532,500. Protest File, Exhibit 4, Amendment 1 at 2-5. 9. Hewlett-Packard, the contract awardee, also bid its own frequency standard. Hewlett-Packard bid a unit price and a total amount based on 100 units for each CLIN in accordance with Section B-1. Supplemental Protest File, Exhibit 2 at 2-5. For orders less than 100 units, Hewlett-Packard listed a base price and a discount that varied depending on the dollar value of the order. In a letter dated April 30, 1992, Hewlett-Packard also confirmed its undiscounted unit prices for quantities less than 100 units. These unit prices bid by Hewlett-Packard, without the discount, are as follows: Year CLIN Amount Base Year 0001 $66,000 Second Year 0002 $69,300 Third Year 0003 $72,765 Fourth Year 0004 $76,400 The total bid for 100 units per CLIN, without the discount, is, therefore, $28,446,500. Id. at 1; Protest File, Exhibit 2. 10. Section M-2 of the solicitation provides that award will be made to the lowest priced technically acceptable offeror. It also provides as follows: For the purpose of award, evaluation of prices by the government will be based on the combined total for contract line item number (CLIN) 0001 through 0004. Protest File, Exhibit 3 at 8. 11. The record contains a statement from the "Contracting Officer and Head of Branch #1 of the Contracting Division at the Naval Research Laboratory," which indicates that she held discussions with Hewlett-Packard and protester concerning the subject procurement. The contracting officer states that both offerors were made aware during discussions that respondent had a requirement for a minimum of five units and a maximum of forty units per year, with a maximum total of 100 units over the four- year contract. The contracting officer also states that the minimum of five units and maximum forty units per year represents the order quantities and not the way in which the offers were evaluated. The contracting officer further states that offers were evaluated in accordance with solicitation Section M-2, as amended by Amendment 1. Protest File, Exhibit 5. 12. The record also contains a second statement from another contracting officer who is the "Contracting Officer and Head of Contracting Branch #2 of the Contracting Division of the Naval Research Laboratory." This contracting officer states that he evaluated the proposals submitted by Hewlett-Packard and protester. The evaluation is said to have been completed in accordance with Section M of the solicitation "based on the combined total for contact line item number (CLIN) 0001 through 0004." The contracting officer further states as follows: 4. According to Section B-2 of Amendment No. 0001 to the RFP and as stated to offerors during discussions by Ms. Conaway, the Government intended to purchase the cesium beam clocks in minimum orders of 5 units and maximum orders of 40 units per year. Therefore, only Hewlett Packard's originally offered prices that applied to quantities less than 100 units as restated in its 30 April 1992 letter [Finding 9], were applicable to this procurement and were evaluated in accordance with Section M-2 of the RFP as amended. The prices restated in Hewlett-Packard's letter of April 30 are the unit prices without discounts, namely, $66,000 in year one, $69,300 in year two, $72,765 in year three, and $76,400 in year four. Supplemental Protest File, Exhibit 2. This same contracting officer also states that Hewlett-Packard is the lowest priced offeror as evaluated pursuant to Section M-2. Supplemental Protest File, Exhibit 10. 13. Protester's representative states that all oral and written data from respondent "explicitly stated that contract award would be based on the submission of cost for 100 units only, and no other cost factors." Statement of Wayne P. Gagner, dated November 4, 1992. 14. Section K of the solicitation contains a clause entitled "Notice of Evaluation Preference for Small Disadvantaged Business Concerns," 48 CFR 252.219-7006 (1991). This clause provides a ten percent cost advantage to small disadvantaged business (SDB) concerns that agree "to furnish in performing this contract only end items manufactured or produced by small disadvantaged business concerns" or, under Alternative I, "end items manufactured or produced by small business concerns." Protest File, Exhibit 4 at 50-52. 15. Protester certified that it is an SDB concern. Protest File, Exhibit 4 at 49. 16. During a prehearing conference for this protest, respondent stated that a ten percent cost preference was not added for cost evaluation purposes because protester was obviously offering the product of a large business, not the product of a small business or an SDB. Respondent also acknowledged that protester's bid is technically acceptable. Memorandum of Prehearing Conference (Oct. 20, 1992). 17. On September 25, respondent selected Hewlett-Packard for award. The award schedule states that no more than 100 units will be awarded throughout the four-year contract. The schedule also states that a minimum of five units and a maximum of forty units will be awarded each year. The schedule price per unit for each CLIN is as follows: Year CLIN Amount Base Year 0001 $66,000 Second Year 0002 $69,300 Third Year 0003 $72,765 Fourth Year 0004 $76,400 The contract ceiling price was not to exceed $7,336,100. Supplemental Protest File, Exhibit 9. This amount is based on an order pattern of forty units under CLIN 0004, forty units under CLIN 0003, fifteen units under CLIN 0002, and five units under CLIN 0001, for a total of 100 units over the four-year contract. Respondent's Brief, Exhibit 2. Discussion Jurisdiction The Board has jurisdiction to hear protests concerning procurements for automatic data processing equipment (ADPE) as defined in the Brooks Act. 40 U.S.C. 759 (1988). The Act provides in pertinent part as follows: (2)(A) For purposes of this section, the term "automatic data processing equipment" means any equipment or interconnected system or subsystems of equipment that is used in the automatic acquisition, storage, manipulation, management, movement, control, display, switching interchange, transmission, or reception, of data or information -- (i) by a Federal agency, or . . . . (B) Such term includes -- (i) computers; (ii) ancillary equipment; . . . . (v) related resources as defined by regulations issued by the Administrator of General Services. 40 U.S.C. 759(a). The Administrator of the General Services Administration has issued the Federal Information Resources Management Regulation (FIRMR) to implement the Brooks Act. 41 CFR 201 (FIRMR 201). The FIRMR is applicable to federal information processing (FIP) resources, which are defined to mean the same thing as what the Brooks Act defines as ADPE. Childress & Associates v. Action, GSBCA 11768-P, 92-2 BCA 24,997, at 124,589, 1992 BPD 103, at 5. Products subject to the FIRMR, therefore, may also be subject to the Brooks Act. The FIRMR, in pertinent part, provides as follows: (5) The FIRMR does not apply to the acquisition, management, and use of products containing embedded FIP equipment when: (i) The embedded FIP equipment would need to be substantially modified to be used other than as an integral part of the product; or (ii) . . . Embedded FIP equipment is FIP equipment that is an integral part of the product, where the principal function of the product is not the "automatic acquisition, storage, manipulation, management, movement, control, display switching interchange, transmission, or reception of data or information." FIRMR 201-39.101-3(b)(5); accord FIRMR 201-1.002-2(e). FIRMR Bulletin A-1 provides examples of products said to contain embedded FIP equipment and thus subject to the FIRMR exception as set forth at 201-39.101. The Bulletin, in relevant part, provides as follows: The Federal Government frequently acquires products containing embedded FIP equipment. Such products are designed and produced to function using the FIP equipment (most commonly microprocessors) as an integral part of the product. The FIRMR, at 201-1.002 [and 201-39.101-3(b)(5)], describes the parameters to be applied when determining FIRMR applicability to products containing embedded FIP equipment. Some examples of products that often contain embedded FIP equipment are electronic clocks and watches, automobiles, elevators, blood analyzers, and drill presses using numerical control. FIRMR Bulletin A-1, Attachment A at 2-3. Respondent moves to dismiss this protest for lack of jurisdiction on the ground that the procurement is not subject to the FIRMR and the Brooks Act. Specifically, respondent contends that the product is excluded from the Board's jurisdiction under the FIRMR exception for products containing embedded FIP resources. Respondent claims that the microprocessor which controls the proposed frequency standard is embedded FIP equipment that would need substantial modification to be used other than as an integral part of the frequency standard. Respondent offers the statement of an electrical engineer declaring that the microprocessor contains a factory programmed read-only memory and that the microprocessor would be virtually useless if separated from the frequency standard. Respondent also relies on FIRMR Bulletin A-1, Attachment A, to analogize the microprocessor in the proposed frequency standard to a microprocessor in an electronic clock as an example of embedded FIP equipment. We find that respondent has incorrectly applied the FIRMR exception for embedded FIP equipment. By its terms, the exception only applies to products where the principal function of the product is not an ADPE application. For reasons set out below, we conclude that the principal function of the frequency standard required under this solicitation is to perform ADPE applications and that the FIRMR exception for embedded equipment is, therefore, inapplicable. The Brooks Act includes "ancillary equipment" within the definition of ADPE. In the past, we have defined "ancillary equipment" as including equipment through which data or information processed or utilized by a computer or ADPE passes. Liebert Corp., GSBCA 11300-P, 91-3 BCA 24,330, at 121,562, 1991 BPD 196, at 7. The FIRMR provides examples of "ancillary equipment" which is said to be "designed for use in conjunction with or controlled by a computer system."[foot #] 1 FIRMR Bulletin A-1, Attachment A at 2. We have also held that equipment procured under a solicitation which requires the procured product to have the capacity to interface with computers, Julie Research Laboratories, Inc., GSBCA 9549-P, 88-3 BCA 21,076, at 106,421, 1988 BPD 168, at 6, or which requires equipment designed to interface with computer equipment, Best Power Technology Sales Corp., GSBCA 11400-P, 92-1 BCA 24,625, at 122,838, 1991 BPD 318, at 8, appeal docketed, No. 92-1118 (Fed. Cir. Mar. 20, 1992), is "ancillary equipment" within the Brooks Act's definition of ADPE. The cesium clock required under this solicitation is ancillary equipment. The solicitation requires that the clock be able to manage, move, control, display, or transmit information or data as a segment of an interconnected system or subsystem of ADPE. Of particular importance is the solicitation requirement ----------- FOOTNOTE BEGINS --------- [foot #] 1 FIRMR Bulletin A-1, Attachment A at 2, provides the following examples of ancillary equipment: "disk drives, tape drives, plotters, printer, storage and backup devices, cable connected to computers, digital imaging equipment, optical storage and/or retrieval equipment, source data automation/recording equipment (e.g., optical character recognition devices, computer-generated microfilm and other data acquisition devices), punched card accounting equipment, and office automation equipment that was designed for use in conjunction with or controlled by a computer system." ----------- FOOTNOTE ENDS ----------- that the clock provide remote access and control by a computer terminal or computer via a RS232C port. Finding 5. The clock must also have the ability to transmit signals through two separately programmable high isolation RF outputs. Id. The unit also has the capacity to monitor its operations and then either display such information on an LCD or transmit the information to a user attached printer. Findings 2, 4. These functions required under the terms of the solicitation demonstrate that the required clock is designed for use in a system or a subsystem of ADPE.[foot #] 2 Because we find the clock required under the solicitation is in fact ancillary equipment and, therefore, ADPE under the Brooks Act and the FIRMR, we conclude that the Board does have jurisdiction over this protest. Merits The central issue in this protest is whether protester is entitled to a ten percent cost preference accorded qualifying SDB concerns in the evaluation of its proposal. Respondent determined that the preference was inapplicable because protester bid the product of a large business. We agree. Pursuant to contract clause K-26, an SDB concern that agrees to offer the product of another SDB, or the product of a small business under Alternative I to this clause, is entitled to a ten percent cost preference in the evaluation of its bid. Finding 14; see also Baszile Metals Service, B-237925, et al., 90-1 CPD 378, at 3-4 (Apr. 10, 1990) (construing an earlier version of this clause); cf. Sonicraft, Inc. v. Defense Information Systems Agency, GSBCA 11750-P, slip op. at 38-39, 43 (May 15, 1992) (ten percent cost preference is applicable only to SDBs who agree that at least fifty percent of the costs of contract performance incurred for personnel would be expended for their employees). Protester, an SDB concern, Finding 15, bid the frequency standard manufactured by Hewlett-Packard. To qualify for the ten percent preference, protester must show that Hewlett-Packard is a small business. It has not done so, and has thus failed to carry its burden on this issue. We, therefore, hold that the ten percent cost preference is inapplicable to protester's offer. Having concluded that the cost preference is inapplicable, we now examine protester's allegation that it is the lowest cost technically acceptable offeror. In support of its contention, protester compares its price for 100 units during the first year of the contract, $6,820,000, see Finding 8, with the contract ceiling price of $7,336,100 stated in the notice of award, see Finding 17; Complaint, Attachment 1. ----------- FOOTNOTE BEGINS --------- [foot #] 2 This is confirmed by the product literature for the offered product. Finding 2. ----------- FOOTNOTE ENDS ----------- Protester's comparison is irrelevant. Bids were evaluated on a scheme different from the ordering pattern which was used to calculate the contract ceiling price. The solicitation called for, and the bidders bid, 100 units per CLIN for each of the four years envisioned for the contract. Findings 7-10. Furthermore, it serves no purpose to compare the price offered for the first year of performance to a value based on prices offered over the full four-year term of the contract, especially when the latter figure was calculated using an ordering pattern different from that used for the preparation and evaluation of bids. Protester also alleges that award was made on unstated evaluation criteria. Protester alleges that it was told in the RFP and during discussions with respondent's contracting officer that evaluation was going to be based on 100 units, not a smaller number of units. Protester's Final Brief at 1. Respondent, however, provides statements from two contracting officers that proposals were evaluated as stated in Section M of the RFP. Findings 11-12. Protester has provided no information which contradicts these statements. Protester only states that award was based on forty unit increments. Protester's Final Brief at 1; see also Finding 17. Protester is once again confusing the number of units used for the preparation and evaluation of bids with the number of units used to calculate the maximum funding placed on the contract as awarded. Under an indefinite quantity contract such as this, the two quantities used need not be the same. Thus, we are not troubled by the fact that respondent calculated the contract ceiling price based, in part, on forty unit increments. What is important is that offers be evaluated as stated in the RFP. We are satisfied that respondent conducted a proper evaluation. The solicitation states that offers are evaluated based on the combined total for CLINs 0001 through 0004. Finding 10. Respondent has demonstrated that Hewlett-Packard is the lowest priced offeror under this evaluation method, without application of the ten percent cost preference. Hewlett- Packard's total cost for 100 units per CLIN is $28,446,500. See Finding 9. Protester's total cost is $28,532,500. See Finding 8. These figures were calculated by multiplying the price per unit for each CLIN by 100 units, then adding the totals.[foot #] 3 See Respondent's Brief at 3-4. This demonstration, coupled with the unrebutted statements from respondent's contracting officers, convinces us that the offers were evaluated in accordance with the criteria in the RFP. Decision ----------- FOOTNOTE BEGINS --------- [foot #] 3 The unit prices evaluated did not reflect any applicable quantity discounts. Finding 9. ----------- FOOTNOTE ENDS ----------- Respondent's motion to dismiss for lack of jurisdiction is DENIED. The protest is also DENIED. _______________________ EDWIN B. NEILL Board Judge We concur: ____________________ ______________________ DONALD W. DEVINE CATHERINE B. HYATT Board Judge Board Judge