THIS OPINION WAS INITIALLY ISSUED UNDER PROTECTIVE ORDER AND IS BEING RELEASED TO THE PUBLIC IN REDACTED FORM ON NOVEMBER 29, 1993 DENIED: November 1, 1993 GSBCA 12508-P INTEGRATED SYSTEMS GROUP, INC., Protester, v. DEPARTMENT OF THE NAVY, Respondent. Shelton H. Skolnick of Skolnick & Leishman, P.C., Derwood, MD, counsel for Protester. Michael Cunningham, Diane-Marie Carrero, and Cheryl A. Phillips, Office of Counsel, Naval Regional Contracting Center, Department of the Navy, Philadelphia, PA; and Jonathan M. Kosarin, Office of Counsel, Naval Supply Systems Command, Department of the Navy, Washington, DC, counsel for Respondent. Before Board Judges DANIELS (Chairman), NEILL, and GOODMAN. NEILL, Board Judge. This protest was filed on July 27, 1993, by Integrated Systems Group, Inc. (ISG). It concerns the purchase, on a fixed price basis, of an Amdahl mainframe computer upgrade together with maintenance services for a one year period. The procurement is being conducted by the Naval Regional Contracting Center (NRCC) in Philadelphia. ISG contends that the Navy's decision to call for a second best and final offer (BAFO) constituted an auction and was not necessary or unavoidable and, therefore, was in violation of procurement regulations. On July 29, before the Board ruled on protester's request for a suspension of the Navy's delegation of procurement authority, the Navy proceeded with award of the contract to Pacific Atlantic Systems Leasing (PASL). Protester subsequently amended its complaint to charge that the awardee's offer was improperly qualified in that it was based on a provision not in the solicitation. The Navy filed requests for summary relief on counts in the original protest and in protester's amended complaint. On September 10, 1993, we denied the Navy's motion for relief regarding its decision to call for a second BAFO but granted the motion for summary relief regarding the count in protester's amended complaint. Integrated Systems Group, Inc. v. Department of the Navy, GSBCA 12508-P, (Sept. 30, 1993). In this decision, we deny the protester's remaining allegations that the Navy acted improperly in calling for a second BAFO. Findings of Fact 1. On January 8, 1993, the NRCC issued solicitation NOO140-93-R-CA13 for the acquisition of mainframe hardware component upgrades under a firm fixed price contract. Protest File, Exhibit 1. Award was to be made to the low priced, responsible offeror. Id. 2. On March 4, 1993, the solicitation closed. Three offers were received. Protest File, Exhibit 15; Transcript at 46. ISG's initial proposal totalled . Protest File, Exhibit 11. Prior to the closing date, PASL submitted an offer of . Shortly before closing, however, PASL increased its offer to . Id., Exhibits 12-14. 3. The contracting officer drew a competitive range of two offerors, ISG and PASL; she held discussions with both. BAFOs were solicited from the two offerors with a due date of April 30, 1993. Protest File, Exhibits 7, 15; Transcript at 46-47. 4. The two offerors responded to the call for BAFOs. Protest File, Exhibit 7; Transcript at 47. ISG's BAFO was originally priced at , but was reduced by to just prior to the deadline set for submission of BAFOs. Protest File, Exhibits 17-18. Transcript at 84-85. PASL's BAFO remained priced at the level established immediately prior to the earlier closing, namely . Protest File, Exhibits 14, 16. 5. Although the BAFO prices offered were higher than the Government's estimate of , the contracting officer determined the prices fair and reasonable based on the marketplace and competition received. Transcript at 48-49, 67- 68. 6. In making her responsibility inquiry regarding ISG, the contracting officer received negative information which led her to conclude that ISG was non-responsible. By letter dated June 8, the contracting officer forwarded a request to the Small Business Administration (SBA) for a certificate of competency (COC). Protest File, Exhibit 26; Transcript at 47, 59, 107, 119- 20. 7. The contracting officer knew that SBA would not complete its COC review until early July. Offers, however, were due to expire on June 30. Transcript at 47, 120. The contract negotiator, therefore, orally requested both ISG and PASL to extend their offers to July 30. In explaining to the PASL representative the need to extend their offer, the contract negotiator made no mention of the pending COC review. She said only that there had been additional delays in the processing of proposals. These oral requests were confirmed in writing. Protest File, Exhibits 3-4; Transcript at 60-62, 76-78. 8. By letter dated June 22, PASL responded to the request to extend its offer. In agreeing to the request for an extension, PASL also advised that "significant improvements in the market" would permit it to offer a reduction in its proposed pricing schedule from to . Protest File, Exhibit 5. 9. ISG did not provide an express written reply to the Navy's request for an extension of its offer. Transcript at 152. 10. By letter dated June 30, PASL advised the contracting officer that the price reduction mentioned in its letter of June 22 would have to be revised due to "supplier modification of prices." The new figure amounted to . PASL styled this price as an "offer" and assured the Navy that it would remain "valid through 30 July 1993." Protest File, Exhibit 6. 11. The contracting officer recognized that the price mentioned in PASL's letter of June 22 and even the upward adjustment of it in PASL's subsequent letter of June 30 were considerably below ISG's BAFO price of . She also recognized that this price would be considerably more in line with the Government's own estimate of . She was of the opinion that PASL's ability to offer significantly lower prices demonstrated changes in the marketplace. Transcript at 48-49. She concluded, therefore, that it would be in the best interest of the Government to reopen negotiations and request a second BAFO from ISG and PASL so that she could take advantage of significant cost savings. Id. at 53-54, 69, 129-31. 12. The contracting officer, therefore, requested and obtained approval on July 21 from the chief of her contracting office to reopen negotiations and request a second round of BAFOs. The authority to grant this approval had been delegated to this procurement official by the head of the contracting activity. Protest File, Exhibit 7; Transcript at 48, 51-53, 69- 72, 130-31. 13. In making the decision to reopen negotiations, the contracting officer and her superiors were particularly concerned that prices had not been revealed outside of the Government or to any offeror. She believed that no information regarding pricing had been released from her organization or from the SBA. Transcript at 51-52. 14. On June 28, the contract negotiator did provide an SBA official with ISG's initial BAFO pricing. Transcript at 84; Protest File, Exhibit 33. The official has testified that he received no other pricing information from the Navy in connection with the COC request. He did, however, receive some additional pricing information through discussions with ISG. This official has also testified that he did not release any of this information outside SBA and that other SBA employees having access to this information have assured him that they did not release this information either. This official has further testified that such information is routinely considered confidential and that even the fact that a COC review is underway is not made known to persons outside Government except to representatives of the firm actually being reviewed. Transcript at 109-16. 15. On July 21, 1993, offerors were advised orally and in writing that they could submit BAFOs. Protest File, Exhibits 8- 9; Transcript at 70-72. In replying, ISG raised its earlier BAFO by to . PASL replied by lowering the "offer" of , contained in its letter of June 30, to . Protest File, Exhibits 10, 21. PASL was determined by the contracting officer to be the low priced, responsible offeror. Award was made to PASL on July 29, 1993. Id., Exhibit 22; Transcript at 48. 16. Prior to making the award to PASL, the Navy had PASL recertify the Certificate of Procurement Integrity which it had previously submitted with its offer. Protest File, Exhibit 30. The contracting officer has testified that this is standard procedure and is done to confirm, for the record, that no improper disclosures have been made during the period leading to contract award. Transcript at 127-28. Discussion Protester's Status as an Interested Party During the hearing for this protest, it was disclosed that protester never extended its offer in response to an express request from the contract negotiator. See Findings 7, 9. The Board asked the parties to discuss the implications of this fact in their posthearing briefs. In briefing this issue, the Navy notes that with the expiration of ISG's BAFO on June 30, protester ceased to be an interested party. Nevertheless, the Navy concludes that ISG's status of a prospective offeror was revived once the contracting officer issued a second request for BAFOs. Respondent's Posthearing Brief at 8. Protester argues that the Navy's request for and ISG's submission of a BAFO reflects an extension of the acceptance period for ISG's proposal. Protester's Posthearing Brief at 6. We do not view the request for a second BAFO sufficient in and of itself to revise ISG's expired offer. Rather, we believe this occurred once ISG responded. We, therefore, view ISG's conduct an implicit agreement to the reinstatement of the previously expired offer which ISG was then at liberty to revise. Consequently, we are satisfied that ISG now has the status of an interested party to pursue this protest. Respondent's Renewed Motion for Summary Relief Following the presentation of protester's case in chief, counsel for respondent sought permission to renew their motion for summary relief on the issue of whether the contracting officer's request for a second BAFO amounted to an auction. The Board granted the request but nonetheless urged respondent to put on its own case in chief. In renewing their motion for summary relief, counsel for respondent have reminded the Board that the motion was originally denied because the Board found that there was a remaining question regarding a material fact in the case. Specifically, the parties were not in agreement that there had been no release of information regarding the prices offered or the ranking of offerors according to price. Respondent now points out that there is no testimony from any witness nor any other evidence that pricing information or information regarding the ranking of offerors was released to any person or entity outside the Government. Accordingly, respondent is of the opinion that there is no longer any controversy on this point. At the hearing, when asked to comment on respondent's request to renew its motion for summary relief, counsel for protester admitted that ISG could not show that actual disclosure had been made. Transcript at 99. We cannot conclude from this admission, however, that the issue is no longer in controversy. Rather, we are now called upon to weigh the evidence in support of the opposing positions.[foot #] 1 Accordingly, we will make our own finding on this issue and proceed with a ----------- FOOTNOTE BEGINS --------- [foot #] 1 In his posthearing argument, counsel for protester now appears to take the position that the issue of whether a disclosure was made is not even material to the case. For reasons which should become apparent in our discussion of whether the second call for BAFOs was an auction, we disagree. ----------- FOOTNOTE ENDS ----------- decision on the merits of the protest. Respondent's motion for summary relief is, therefore, once more denied. Did the Call for a Second BAFO Constitute an Auction? In criticizing the decision of the contracting officer to call for a second BAFO, protester relies on the guidance contained in the Federal Acquisition Regulation (FAR) which warns against the use of auction techniques. The FAR provides: (e) The following conduct may constitute prohibited conduct . . . . . . . . (2) Auction techniques, such as -- (i) Indicating to an offeror a cost or price that it must meet to obtain further consideration; (ii) Advising an offeror of its price standing relative to another offeror (however, it is permissible to inform an offeror that its cost or price is considered by the Government to be too high or unrealistic); and (iii) Otherwise furnishing information about other offerors' prices. 48 CFR 15.610 (1992). As already noted, respondent's motion for summary relief was denied in part because protester convinced us that there was indeed controversy regarding the material fact of whether information regarding pricing or ranking of offerors had been released to parties outside the Government. Faced with the inability to demonstrate that this did occur, protester now argues that the auction techniques described in the FAR are nothing more than examples and that the course of action followed in this case by the contracting officer, although not described in the FAR, is nonetheless equally objectionable. Protester writes: It is protester's position that there are auction techniques other than those listed in FAR 15.610(e)(2) which are not addressed in the Navy's Motion for Summary Judgement. Specifically, Protester asserts that an auction technique is (a) the unsolicited offer of a price decrease by an apparent loser after the submission of the first BAFOs, and (b) the government agency responding to that unsolicited offer by requesting second BAFOs. Protester's Posthearing Brief at 5. Elsewhere, protester contends: [T]he Navy's sole purpose for requesting the Second BAFO was to award a contract at a lower price based on the unsolicited decrease/increase offers submitted by the apparent loser after the submission of the First BAFOs. Id. at 4. It is not altogether clear to us what protester intends by the use of the phrase "apparent loser." It is obviously of special importance since counsel has gone to the trouble of underlining the phrase when using it in his posthearing brief. We understand the phrase to suggest that, although information regarding pricing or ranking has not been revealed, other circumstances nonetheless make it "apparent" to a vendor that it has lost. When such a vendor submits an offer after BAFO and that offer is low enough to convince the contracting officer to seek a second BAFO, this, we assume, in the mind of protester, constitutes an impermissible auction technique. We agree that the examples of auction techniques given in the FAR are just that -- examples. Conceivably other examples do exist. In the past, however, we have held that the common thread running through any example of an auction technique is that it will always involve information as to the existence of specific pricing. See Richard S. Carson & Associates, Inc., GSBCA 11452- P, 92-1 BCA 24,641, 1991 BPD 338 (information as to the existence of specific prices is an essential element of an auction).[foot #] 2 As already noted above, counsel for protester has freely admitted that he cannot show that a disclosure of information regarding pricing or ranking has been made in this procurement. For this reason we reject the would-be example as not being representative of an authentic auction technique. In addition, we find the example inappropriate for the simple reason that protester has failed to identify for us the circumstances which allegedly led PASL, in the absence of information regarding pricing or ranking, to conclude it was the "apparent loser" in this procurement. "Apparent" is a strong term -- considerably stronger than such terms such as "possible" or "probable." Presumably protester failed to demonstrate that PASL knew it was the "apparent loser" because, prior to contract award, nothing would permit a vendor to draw such a conclusion short of information regarding pricing or ranking. In short, we do not find the contracting officer's call for a second BAFO constituted an auction. ----------- FOOTNOTE BEGINS --------- [foot #] 2 We note that the Board's holding refers to "information regarding the existence of specific prices" and not necessarily the pricing information itself. Thus the information may relate only to ranking which, in turn, is based on pricing information. ----------- FOOTNOTE ENDS ----------- Was the Call for a Second BAFO Necessary and Unavoidable? Protester also alleges that the contracting officer's call for a second BAFO violated the Department of Defense Supplement to the FAR (DFAR). The provision relied on by protester states: To ensure that additional requests for best and final offers are used only when necessary and unavoidable, HCAs [Heads of Contracting Activities] shall -- (A) Periodically analyze data collected under paragraph (c)(ii) of this section; (B) Take appropriate corrective action, e.g. training, revising approval levels; and (C) Provide periodic summary reports to the SPE [Senior Procurement Executive] as specified in department/agency regulations. 48 CFR 215.611 (1992). We find the decision of the contracting officer to call for a second BAFO entirely reasonable under the circumstances. The decision was not made lightly. Steps were taken to secure the requisite approvals. Finding 12. The contracting officer was of the opinion that the offer from PASL reflected changes in the marketplace. Finding 11. Nevertheless, she and her superiors displayed appropriate concern for the integrity of the procurement system and, in particular, the need to ensure that confidentiality regarding pricing and ranking had not been breached. Given the record before us, we find no indication that this confidentiality was compromised. Findings 7, 13, 14, 16. The prospect of significant cost savings through a second BAFO was indeed promising. The price mentioned in PASL's letter of June 22 represented a decrease of over twenty-nine percent from ISG's low BAFO. Admittedly, this price was raised in PASL's letter of June 30 and PASL's second BAFO represented a decrease of only percent. Nevertheless the savings projected and ultimately realized through award to PASL were unquestionably significant. Findings 8, 11, 15. Furthermore, although the higher prices offered with the first BAFO were competitive, the lower price obtained through the second BAFO had the added attractiveness of being more in line with the Government's own estimate. See Finding 5. In a case with facts strikingly similar to those in this case, the Comptroller General denied a protest challenging a contracting officer's decision to call for another BAFO based on information received in the late modification of a BAFO. In denying the protest, the GAO observed that it found no legal merit in the protest and explained why. The reason is that FAR, 48 C.F.R. 15.611(c), authorizes contracting officers to reopen discussions after BAFO's when it clearly is in the government's interest to do so. That decision is within the contracting officer's discretion, and essentially should be based on whether the late modification fairly indicates that negotiations would be highly advantageous to the Government. Nelson Electric, Marine Division, B-227906, 87-2 CPD 286. While we are not obliged to follow the decisions of the Comptroller General, we accord to them the deference they rightly deserve in view of Comptroller General's extensive experience in the resolution of contested procurement decisions. See Planning Research Corp. v. United States, 971 F.2d 736, 740 (Fed Cir. 1992); United States v. Lockheed Corp., 817 F.2d 1565, 1567 (Fed. Cir. 1987). In this case, we see no reason why we should not reach a conclusion similar to that reached by GAO in Nelson. Protester is apparently of the opinion that the call for a second BAFO was improper because it was not necessary and could readily have been avoided. We disagree. The DFAR guidance cited by protester must be read together with other applicable guidance on the subject. As the Comptroller General has pointed out, the FAR authorizes contracting officers to reopen discussions after BAFOs when it is clearly in the Government's interest to do so. Obviously implicit in such a decision is an acknowledgement that such a step is necessary and should not be avoided. Indeed, it would be difficult to conceive of a situation where reopening negotiations is clearly in the Government's best interests but one can still reasonably conclude that it is not necessary to do so or that such a course of action should be avoided. See Motorola Computer Systems, Inc., GSBCA 9170-P, 88-1 BCA 20,324; 1987 BPD 247 (contracting officer's decision to proceed with award without reopening discussions was unreasonable because she knew reopening discussions was clearly within the Government's interest). We find, therefore, that in this case, the contracting officer reasonably did consider it necessary to pursue the prospect of cost savings and did not consider that she could or should avoid calling for a second BAFO. We see no cause for disturbing her decision, motivated as it was by an overriding concern for the Government's best interest. Protester has failed to convince us that this decision was an unreasonable one. Decision This protest is DENIED. The Board's order of July 30, 1993, suspending the delegation of procurement authority applicable to this procurement expires in accordance with its terms. _________________________ EDWIN B. NEILL Board Judge We concur: ________________________ STEPHEN M. DANIELS Board Judge ________________________ ALLAN H. GOODMAN Board Judge