GRANTED: November 9, 1993 GSBCA 12603-P INTEGRATED SYSTEMS GROUP, INC., Protester, v. NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, Respondent. Shelton H. Skolnick, Judy D. Leishman, Amy M. Hall, Wayne W. Finegar II, and Bruce J. Trimble of Skolnick & Leishman, P.C., Derwood, MD, counsel for Protester. Sumara M. Thompson-King, Office of the General Counsel, National Aeronautics and Space Administration, Washington, DC; and Jerald J. Kennemuth, Office of Chief Counsel, Lewis Research Center, Cleveland, OH, counsel for Respondent. Before Board Judges DANIELS (Chairman), BORWICK, and HYATT. DANIELS, Board Judge. The National Aeronautics and Space Administration's Lewis Research Center (NASA) needs to replace microcomputers containing 80286 central processing units (CPUs) with microcomputers containing 80386 and 80486 CPUs. The agency has invited bids for replacement motherboards which, when installed in the existing computers, will accomplish this goal. Integrated Systems Group, Inc. (ISG), has demonstrated that if NASA were to permit a vendor to supply entirely new computers, rather than the specified motherboards alone, the agency might be able to secure machines which would perform identical functions at lower cost. We consequently find that the specifications are unnecessarily restrictive -- in violation of statute and regulation -- and grant the protest. Findings of Fact 1. NASA currently has 245 microcomputers in the engineering directorate of its Lewis Research Center. Of these, 73 are Zenith Z-248 models which contain microprocessors that are based on the 80286 chip. NASA needs to upgrade these machines "to address the need for more rapid, efficient desktop computing and the increased [use] of Windows applications for both the engineering analysis and office automation environments." Protest File, Exhibits 2 at 2, 10, 23 at 1; Transcript at 72. 2. Each Zenith Z-248 computer contains what was referred to in our proceedings as a ten-slot motherboard (although the parties understand that the computer actually has a backplane configuration, rather than a motherboard). Transcript at 10, 16- 17; Protest File, Exhibit 23 at 1. A "motherboard" is the printed circuit board that holds the microprocessor, expansion slots, and other items. A "slot," or "expansion slot," is a place on the motherboard into which a printed circuit card may be plugged. Most motherboards now being produced have eight slots; ten-slot motherboards are unusual and command a premium price. Transcript at 10, 99-100. 3. NASA solicited bids to upgrade 34 of the computers into machines whose microprocessors are based on the 80386 chip and 39 into machines whose microprocessors are based on the 80486 chip. Protest File, Exhibit 7 at B-1. According to the invitation for bids, each upgrade must have numerous specified features, including "Ten (10) 16-bit ISA expansion slots" and "Form factor and drill/mounting pattern [to] conform to the Zenith 286/8 and 286/12 chassis." Id. at C-1 to C-2. ISG correctly read these specifications as requiring replacement of each computer's motherboard, rather than replacement of the entire chassis. Transcript at 9; see also id. at 72-73. When asked to relax the specifications to permit replacement of the machine, NASA refused. Protest File, Exhibit 15. 4. NASA insisted on ten-slot motherboard replacements because it wanted to retain the basic configuration of the boards in the computers it now has. Transcript at 42. As one of the individuals who wrote the specifications testified: "That was determined as a requirement due to the fact that the existing equipment currently had ten slots and the chassis or case contained the fit to reaccept that." Id. at 80. 5. NASA needs computers which will perform the functions of ten cards now in the agency's computers. Each computer has separate cards that perform six basic functions -- input/output, MFM hard disk drive controller, floppy disk drive controller, mouse bus, video bus, and ethernet connection. The agency needs space inside each computer for installing as many as four optional cards. Transcript at 42-43, 84-85; Protest File, Exhibits 7 at C-1, C-2, 13 at 3. 6. There are readily available in the marketplace combination cards each of which contains an IDE hard drive controller, a floppy drive controller, two serial ports, a parallel port, and a game port. Transcript at 17-18, 43-44, 83, 104. According to uncontested testimony by ISG witnesses, the price of one of these cards to an integrator such as ISG is under ten dollars. Id. at 17-18, 102. 7. The solicitation requires a bidder to provide, as part of its solution, "[s]upport for MFM." Protest File, Exhibit 7 at C-1, C-2. MFM is an older style hard disk drive which is lower in performance, has a slower response time, is more durable, and generally has less capacity than an IDE hard drive. Transcript at 18, 26-27, 45, 104. An MFM drive requires a controller which is contained on a separate card which can be inserted into a motherboard. Id. at 18. 8. The combination card described in Finding 6 could only work in NASA's computers if the MFM hard drives now in the computers were replaced with IDE hard drives, because the IDE controller will not work with the existing MFM drives. Id. at 44. ISG understands this; it knows that if it proposes to eliminate the MFM controller card, it must also replace the existing hard drives and move all the data on the MFM drives to the IDE drives. Id. at 19. A NASA contractor's engineer confirmed that this solution would be technically acceptable. Id. at 86. 9. If the combination card is employed, three cards now installed in each of NASA's computers -- each of which fits into one slot -- would be replaced with a single card. Thus, ISG's vice-president testified, "[I]f they think ten [slots] is required to get their job done, then I could do the same job in eight." Transcript at 19-20. 10. The NASA center where the relevant computers are being used needs to communicate with its customers through an electronic messaging system. To perform this function, each computer must contain an ethernet card and associated software. Transcript at 65. The cost of these items, which are collectively called a "LIMS [for "Lewis Information Management System"] integration kit," is estimated by NASA to be $1,366. Id.; Protest File, Exhibit 23 at page 2 of Attachment 4. 11. The LIMS integration kits now present in NASA's computers can physically be removed and installed in replacement machines, where they will work acceptably. Transcript at 46-47. 12. NASA's computer manager testified that the agency insists on buying replacement motherboards, rather than new computers, for reasons of cost, not any technical problems. Transcript at 51. 13. Before issuing the invitation for bids, NASA considered the price differential between buying new computers through an existing contract and buying new motherboards only. The agency presented two separate analyses. The conclusion of one was that buying each new 486 computer to perform the necessary functions would cost $1,626 for a base system and $1,366 for a LIMS integration kit, whereas replacing a motherboard would cost only $1,120 for a base system and nothing for an integration kit. Transcript at 62-65; Protest File, Exhibit 23 at Attachment 4. The conclusion of the other study was that buying new motherboards would cost about $65,000 in all, and that buying new computers instead would cost about $202,000, a figure that was considered "not . . . realistic." Transcript at 126-28; Protest File, Exhibit 2. 14. This case comes to us in an unusual posture: although the protest complains about solicitation provisions, the case was not initiated until after NASA had received bids. Although such a sequence would generally make a protest untimely, Rule 5(b)(3)(i), ISG's protest is timely because it is a reprise of an agency protest which was timely filed and denied, and this case was initiated within ten working days of that denial. Rule 5(b)(3)(iii). We are consequently able to know about the bids that NASA actually received in response to the solicitation. Protest File, Exhibit 21. Among the bids that the agency believes are responsive to the solicitation, the lowest would yield a cost for replacement motherboards that is roughly the same as NASA's estimate. Protest File, Exhibit 21; letter from agency counsel to Board, Oct. 22, 1993. 15. ISG's vice-president testified that if his firm were permitted to supply replacement chassis, rather than replacement motherboards, "roughly speaking, even including a hard drive, [our] price is in the neighborhood of about $___ for the 486 requirement. For the 386 requirement, that's about $___ less. That's even including the hard drive." Transcript at 22. (The actual amounts were provided under protective order; we do not specify them so as not to prejudice competition when the agency resolicits bids or proposals as directed in this decision.) At these amounts, ISG's total price to NASA for the 73 computers involved in this procurement would be considerably less than the amount of the agency's estimate for replacement motherboards. We have independently reviewed advertisements in published sources for the retail sale of 486 and 386 computers, with special attention to machines that more or less meet the specifications listed in the solicitation at issue. Our review shows that the prices quoted by ISG's vice-president are well within the range of prices advertised for computers meeting NASA's needs. See, e.g., Computer Shopper (Oct. 1993 ed.). We consequently find the testimony to be credible. 16. The NASA contracting officer who is responsible for this procurement has been purchasing automatic data processing equipment for the agency for eight years. She testified that in that time, she has never bought a microcomputer for less than $1,000. Transcript at 119. She admitted, however, that she has actually bought few if any microcomputers during the past two years. Id. at 126. 17. If NASA replaces the motherboards in its 73 existing computers, at the completion of the transaction, it will have 73 machines that perform all functions the agency needs and 73 spare motherboards. If NASA instead purchases 73 new 386 and 486 computers, it will have 73 machines that perform all functions the agency needs and 73 286 computers that could function as free-standing units if supplemented with keyboards, monitors, and video cards. Transcript at 47-48, 72-74. 18. ISG's vice-president testified, without challenge, that the present fair market value of the computers NASA needs to upgrade is about $200 to $250 each. Transcript at 27-29. NASA has not performed an analysis of the difference in value between 73 spare motherboards and 73 286 computers. Id. at 74. 19. Because of NASA's need to communicate electronically with its customers, a free-standing computer which does not contain a LIMS integration kit is of virtually no use to the agency. Thus, if NASA buys new computers to replace the 73 286 computers in question, it would need to buy 73 integration kits in order to make use of all 144 computers it would have. Transcript at 65-66, 69-71, 74-75. NASA's computer-aided engineering manager believes that the agency does not have sufficient funds to purchase these kits. Id. at 112. 20. NASA's computer manager believes that to compare the price to the agency of buying replacement motherboards with the price of buying replacement chassis, the agency must include with the cost of the replacement chassis the cost of new integration kits to be installed in them. Transcript at 113. 21. ISG's vice-president believes that to install a replacement motherboard in each of NASA's computers would take about two to two and one-half hours per computer. Transcript at 10-16; Protester's Exhibit 1. NASA's computer manager believes, based on information provided to him by his center's support service contractor, that the work would take only one hour. Transcript at 55-56. He also believes, based on information provided to him by the contractor, that installing new machines would take one hour. Id. A representative of the contractor testified that transferring data from an MFM hard drive to an IDE drive takes between 30 seconds and one minute per megabyte of data. Id. at 89-90. Most of the MFM drives now on the computers in question contain a maximum of either twenty or forty megabytes of data; a few contain a maximum of eighty. Id. at 44, 90-92. Discussion When an agency conducts a procurement for property or services, it is with limited exceptions to "obtain full and open competition through the use of competitive procedures." 10 U.S.C.A. 2304(a)(1)(A) (West Supp. 1993). To do this, an agency shall "develop specifications in such manner as is necessary to obtain full and open competition with due regard to the nature of the property or services to be acquired." Id. at 2305(a)(1)(A)(iii). Specifications may "include restrictive provisions or conditions only to the extent necessary to satisfy the needs of the executive agency or as authorized by law." Id. at 2305(a)(1)(B)(ii). "Full and open competition" means that "all responsible sources are permitted to submit sealed bids or competitive proposals on the procurement." 41 U.S.C. 403(6) (1988). The statute's mandates are reflected in the Federal Acquisition Regulation, in provisions such as 48 CFR 6.101(a), 10.002(a)(1), (3), and 10.004(a) (1991). As we explained in Amdahl Corp. v. Department of Health and Human Services, GSBCA 11998-P, 93-2 BCA 25,612, 1992 BPD 325 -- In evaluating the merit of a protest which alleges that full and open competition has been compromised by an agency's insertion into a solicitation of an unnecessarily restrictive specification, we take as a given the agency's requirements. This does not mean, though, that every specification is necessarily associated with those requirements. . . . We have a limited role in these protests: to determine whether the challenged specification bears a rational relationship to fulfillment of the requirements. The protester has the burden of establishing by a preponderance of the evidence that the narrowing of competition is impermissible in that it does not have such a relationship. 93-2 BCA at 127,486, 1992 BPD 325, at 8-9 (citations omitted). In the instant case, NASA needs 386 and 486 microcomputers, rather than the 286s it has now, to handle "the need for more rapid, efficient desktop computing and the increased [use] of Windows applications." Finding 1. The 386s and 486s must be able to support the functions of all ten printed circuit cards that are now installed in the 286s. Finding 5. These are the only agency requirements that have been identified to us. NASA is interested in meeting them at the lowest possible cost. Finding 12. Congress has enunciated a policy that agencies "require descriptions of agency requirements, whenever practicable, in terms of functions to be performed or performance required." 10 U.S.C.A. 2301(b)(7) (West Supp. 1993). In furtherance of this policy, the Federal Information Resources Management Regulation provides that agencies shall "[d]escribe requirements in terms of functions to be performed and performance to be achieved, unless a more restrictive statement of requirements is necessary to satisfy the needs of the agency." 41 CFR 201-20.103-3(b) (1992). The use of functional specifications is consistent with the legislature's direction that agencies maximize the opportunities for full and open competition for Government contracts. Microsolve, Inc., GSBCA 8564-P, 88-1 BCA 20,321, at 102,743, 1987 BPD 244, at 9, aff'd, 856 F.2d 202 (table) (Fed. Cir. 1988). NASA inserted into its invitation for bids, however, design specifications that limit the ways in which a vendor may meet the agency's needs: a bidder may only propose to supply ten-slot motherboards which have a certain drill/mounting pattern and thus could replace the motherboards now present in the 286 computers. Finding 3. NASA refused to permit a vendor to meet the agency's needs by supplying replacement computers, rather than replacement motherboards, even though it believes that technically, new computers could serve it just as well. Findings 3, 12. It wanted to retain the same boxes and board configuration that it now has. Finding 4. NASA believed that this decision was reasonable because replacement computers would cost far more than replacement motherboards. Finding 13. The evidence adduced at hearing demonstrates that this conclusion is not correct. The agency's needs can actually be satisfied by a less restrictive statement of requirements -- and very likely, at a lower cost. The ten-slot motherboards that NASA specified are rarely manufactured and command a premium price. Finding 2. A computer with an eight-slot motherboard can provide the same functionality because a single, inexpensive combination card can substitute for three of the cards occupying slots on the ten-slot board. Findings 5, 6, 9. Based on the evidence in the record, we find that the two options available to NASA compare, for each of the 73 computers involved, as follows: REPLACEMENT MOTHERBOARD REPLACEMENT COMPUTER Materials New motherboard New computer; new combination card; new IDE hard drive(s) Labor Remove and replace old Remove LIMS integration motherboard; remove kit and some cards from cards on old board and old computer and install install them on new them in new one; board transfer data from MFM hard drive(s) to IDE hard drive(s); set up computer Salvage Old motherboard Old computer, less LIMS items integration kit, keyboard, monitor, and video card An analysis of this information demonstrates that NASA's cost estimate was badly flawed. A new computer, even with the addition of a necessary combination card and replacement hard drive or drives, Findings 6-9, is likely to cost considerably less than a new ten-slot motherboard. Findings 14, 15. Even if the NASA contracting officer's information about the cost of new computers was ever realistic, it is admittedly out of date. Finding 16. The amount of labor involved in the two options is in dispute, but it is not large for either choice. Finding 21. The salvage value of the old motherboard, which could be used by the agency as a spare for computers in other offices, is unknown; the old computer, on the other hand, has significant value on the marketplace, even if (because it could not be used for communication with outsiders) it would have marginal utility to the agency. Findings 17-19. A NASA engineer's belief that buying replacement computers rather than replacement motherboards would necessitate also buying integration kits for the new computers, Findings 19, 20, makes no sense; the old kits could be transferred to new computers virtually as easily as the cards in them could be installed on new motherboards. Finding 11. Requiring NASA to permit competition against functional, rather than design, specifications will not necessarily result in an award to ISG. Indeed, it will not even necessarily result in an award to a bidder who proposes a solution like the one that ISG wishes to bid. Competition will, however, give the Government an opportunity to benefit from vendors' exercise of innovative powers; NASA will have a chance to select, from among alternative solutions, the approach which is truly most advantageous to the Government. H.R. Conf. Rep. No. 861, 98th Cong., 2d Sess. 1429 (1984). The crucible of the marketplace will be the true test of how the agency's needs can most economically be met. Decision The protest is GRANTED. The General Services Administrator's delegation to NASA of authority to proceed with the subject is amended as follows: NASA shall replace the contested design specifications in its invitation for bids with functional specifications. If the agency believes that various proposed ways of meeting its needs will result in different sorts of ancillary financial impacts (such as labor costs imposed on the agency, or benefits from having different sorts of salvage items), it shall state in the solicitation how those impacts will be evaluated. The agency may then permit further competition to meet its needs. _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ ANTHONY S. BORWICK CATHERINE B. HYATT Board Judge Board Judge