DENIED: July 18, 1995 GSBCA 13319-P COMPUTER SALES INTERNATIONAL, INC., Protester, v. DEPARTMENT OF AGRICULTURE, Respondent, and FEDERAL COMPUTER CORPORATION, Intervenor. Lorraine S. Cherrick of Computer Sales International, Inc., St. Louis, MO, counsel for Protester. Kenneth E. Cohen and Betty L. Ollila, Office of the General Counsel, Department of Agriculture, Washington, DC, counsel for Respondent. David S. Kovach of Federal Computer Corporation, Falls Church, VA, counsel for Intervenor. Before Board Judges DANIELS (Chairman), PARKER, and BORWICK. DANIELS, Board Judge. Computer Sales International, Inc. (CSI) protests the conduct by the Department of Agriculture (USDA) of a procurement for the supply of a memory upgrade for a mainframe computer. USDA restricted the competition for the chance to supply this upgrade to two companies which hold nonmandatory multiple award schedule contracts with the General Services Administration (GSA), CSI and Federal Computer Corporation (FCC). The agency ultimately purchased the goods by placing an order against FCC's schedule contract. The protest counts allege three distinct violations of law involving warranty coverage for the memory upgrade, all of which purportedly affected the competition between CSI and FCC. At a telephonic conference held three days after the protest was filed, the Board denied CSI's request for discovery because the information CSI sought is irrelevant to the counts. We suggested an accelerated schedule for the filing of documents and briefs, and the parties agreed to it. CSI does not allege any violations of law peculiar to the placement of orders under multiple award schedule contracts. Consequently, we make no comments as to whether USDA acted legally in restricting the competition to two particular holders of schedule contracts, in using the procedures and terms it did in conducting the competition, or in fulfilling its needs by placing an order against a schedule contract. We similarly offer no judgment as to whether in placing the order against FCC's contract, USDA actually obtained the upgrade at "the lowest overall cost alternative to meet the needs of the Government," as it is required to do by statute when it places such an order. 41 U.S.C. 259(b)(3)(B) (1988). We view this procurement as the parties do -- simply as a competition between CSI and FCC -- and restrict our opinion to an analysis of whether USDA's actions violated laws in any of the ways alleged by CSI. We conclude that as between CSI and FCC, the procurement was fairly conducted and the memory upgrade was purchased at what can be considered, under the conditions of this competition, the lower overall cost alternative. Findings of Fact 1. USDA needs additional memory capacity for a mainframe computer which was manufactured by International Business Machines Corporation (IBM) and is located at the National Finance Center in New Orleans, Louisiana. Protest File, Exhibit A at 1- 8. The computer was installed in February 1994. Id. at 5. USDA believes that the system life of the computer is five years, and that the system life of the additional memory will be "the same as that of the [computer] into which it is installed." Id., Exhibits E at 99, G at 278. 2. In early May 1995, after reviewing various GSA multiple award schedule contracts, a USDA contracting officer requested quotations from FCC and CSI to fulfill the agency's requirement for a memory upgrade to the mainframe computer in question. Respondent's Brief, Attachment (declaration of contracting officer) 1-5. FCC responded with a price of $806,849, including three years of maintenance. Protest File, Exhibit B at 15. CSI gave a price of $584,638, not including maintenance. Id., Exhibit C at 39. 3. The contracting officer then "initiate[d] written discussions" with both companies. Protest File, Exhibits B at 19-20, C at 41-42. In response, FCC lowered its price to $799,849 and added six months to the maintenance offered. Id., Exhibit B at 21, 23. 4. On May 19, the contracting officer sent each firm a request for what he termed "best and final offers" (BAFOs). Protest File, Exhibits B at 25, C at 46. Three days later, a CSI vice president and the contracting officer discussed what the CSI vice president characterized as "the appropriate evaluation of services outside the scope of the requirements of the GSA contract." Id., Exhibit C at 47; Respondent's Brief, Attachment 13. The vice president maintained: Under the terms and conditions of the GSA contract, . . . warranty is not applicable under this contract since the equipment proposed is not new. . . . Factors outside the scope of this contract should be viewed as exceeding the minimum mandatory specifications and should not be considered in determining an award. Since Warranty is not a requirement under the terms of this contract, it should not be considered an evaluated option by the USDA. Protest File, Exhibit C at 47. She asked that the agency state specifically whether warranty would be a factor in the award of a contract, and if so, "[H]ow will the USDA evaluate offers received? What cost factor will be applied to offers that do not include warranty?" Id. at 48. 5. The contracting officer asked for FCC's views on CSI's questions. Protest File, Exhibit B at 26. FCC noted that its schedule contract provides that FCC "shall transfer, or otherwise make available to the agency any remaining warranties provided by the manufacturer." Id. at 29; see also id., Exhibit F at 181. FCC urged that the Government take into consideration all factors within schedule contracts and value warranty service by assessing against each offer "a monthly cost equal to the cost USDA would pay the [original equipment manufacturer, IBM] to provide maintenance" for each month by which its warranty is shorter than the longest period offered. Id., Exhibit B at 27-30. FCC told the contracting officer that IBM charges the Government $8,700 per month to maintain the memory upgrade at issue in this case. Id. at 23. USDA believes this figure to be correct. Id., Exhibit A at 12; Respondent's Brief, Attachment 17. 6. On June 1, the contracting officer set June 5 as the deadline for submission of BAFOs. He told each firm: I have determined that it is proper to evaluate any warranty offered in addition to evaluating the prices proposed for the memory. . . . In submitting your BAFO, please utilize the enclosed pricing schedule. The basic requirement will comprise the central and expanded storage. The warranty/maintenance you choose to offer will be optional requirements. The BAFO's will be evaluated in accordance with the FAR [Federal Acquisition Regulation] provision at 52.217-5, Evaluation of Options (JUL 1990).[[foot #] 1] In connection with the evaluation of options, the Government has determined that each month of warranty in lieu of maintenance offered is valued at $8,700.00. Protest File, Exhibits B at 33, C at 50. The pricing schedule included blanks on which offerors were to enter prices for central storage and expanded storage, a number of months for which "warranty in lieu of maintenance" would be provided, and a price for the warranty. Id., Exhibits B at 34, C at 51. 7. FCC gave a price of $794,849, including 42 months of warranty in lieu of maintenance. Protest File, Exhibit B at 35- 36. CSI's price was $574,948, including 12 months of warranty. CSI explained that under the terms of its schedule contract, "warranty is normally not included in the price proposed," and that the firm was including warranty service in this price "under a special offering proposed to CSI by our supplier." Id., Exhibit C at 52-54. The firms offered used IBM equipment with the same model numbers. Id., Exhibits B at 35-36, C at 52-54. 8. USDA evaluators compared the prices by adding to CSI's price $261,000 ($8,700 per month -- the announced value of a warranty of maintenance -- times thirty months -- the length of time by which FCC's warranty exceeded CSI's). This resulted in "effective costs" of $835,948 for CSI's proposal and $794,849 for FCC's. The evaluators consequently recommended that award be made to FCC "based on the low net cost to the Government." Protest File, Exhibit A at 14. 9. On June 7, the contracting officer informed both FCC and CSI that he intended to place a purchase order against FCC's ----------- FOOTNOTE BEGINS --------- [foot #] 1 This clause provides: "Except when it is determined in accordance with FAR 17.206(b) not to be in the Government's best interests, the Government will evaluate offers for award purposes by adding the total price for all options to the total price for the basic requirement. Evaluation of options will not obligate the Government to exercise the option(s)." 48 CFR 52.217-5 (1994). The determination under FAR 17.206(b) is to be approved at a level above the contracting officer; it may be made, for example, "when there is a reasonable certainty that funds will be unavailable to permit exercise of the option." ----------- FOOTNOTE ENDS ----------- schedule contract. Respondent's Brief, Attachment 23-24. Nine days later, he placed the order for supply of the memory upgrade and 42 months of "balance of original equipment manufacturer's warranty." Protest File, Exhibit B at 37-38. The memory upgrade was installed on June 24 and 25. Id., Exhibit G at 278. Acceptance may not occur until July 25 at the earliest. Board's Memorandum of Conference of June 30, 1995, at 2. 10. CSI filed an agency protest on June 13. Protest File, Exhibit D at 66-71; Protester's Brief, Attachment (affidavit of CSI vice president) 7. The contracting officer denied this protest on June 26. Id. at 75-78. CSI filed its protest with this Board on June 27. 11. The mainframe computer on which the memory upgrade is being installed is currently being maintained by NOLA Computer Services, Inc., under a contract with USDA. Protest File, Exhibit E at 105-75. The contract is for a base period which ends on September 30, 1995, and includes four option periods of one year each. Id. at 116-20. On June 8, USDA notified NOLA that "the Government intends to exercise the option to renew the . . . contract for [fiscal year] 1996 [October 1, 1995, through September 30, 1996]." Id. at 176. This intention continues to exist. Id., Exhibit G at 278. The chief of the computer resources management branch at the National Finance Center anticipates that the other options will be exercised, too. Id. 12. The maintenance contract provides: "Should the Government alter or install attachments which affect maintenance of this equipment and that could increase the maintenance costs to the contractor, additional maintenance charges will be made on an individual installation basis." Protest File, Exhibit E at 130. According to the chief of the computer resources management branch, "Remedial maintenance for the memory upgrade, such as replacing a board when it malfunctions, would not be covered by the existing maintenance contract without an amendment to the existing maintenance contract and without an increase in price to the contract. The warranty offering eliminates the requirement to modify the maintenance contract for remedial maintenance." Id., Exhibit G at 278. Discussion CSI maintains that USDA violated law in three ways during the conduct of this procurement: Count I. By not revealing that it had established (or allowed its vendor to establish) a 42-month system life, USDA prevented full and open competition. Count II. CSI's submission, which included a 12-month warranty at a reduced price, should have caused the agency to contact CSI to determine the cost of a 42-month warranty. Count III. The requirement of a 42-month warranty may very well exceed USDA's minimum needs, since the maintenance contract covering the mainframe computer on which the memory upgrade is being installed expires on September 30, 1995, and any new maintenance contract on the mainframe is likely to cover not only that computer, but also its component parts (including the memory upgrade). Timeliness of protest FCC, supported by USDA, contends that the protest is untimely. FCC says that the protest really complains about the terms of the request for BAFOs. It suggests that because under our Rule 5(b)(3)(i) such a protest had to be filed before BAFOs were due (June 5), and the agency protest on which this complaint is based was not submitted until after that date (June 13), the protest is untimely. (A protest may be filed at the Board within ten working days of the date of adverse action on an agency protest, but only if the agency protest itself would have been timely under our rules if it had been filed here. Rule 5(b)(3)(iii).) CSI responds that "[t]he subject matter of this protest is the combination of a 42-month warranty with the use of the $8700 evaluation factor for each month of warranty in lieu of maintenance . . . -- it is not the $8700 evaluation factor standing on its own." Protester's Brief at 1. CSI urges that the timeliness of the agency protest be judged against Rule 5(b)(3)(ii), which says that a ground of protest not based on alleged, apparent solicitation improprieties is timely if it is filed within ten working days after its basis is known or should have been known, whichever is earlier. CSI maintains that because it did not learn until June 7 that FCC had offered a 42- month warranty, the filing of the agency protest on June 13 was timely. CSI has the better of this argument. FCC is correct that CSI may not now complain about the terms of the competition. CSI says that it is not objecting to those terms, however -- only to the way in which USDA acted once proposals were submitted. The protest was filed within ten working days of the date on which CSI learned the basis of its protest -- that USDA had accepted a proposal which included a 42-month warranty in lieu of maintenance. FCC's motion to dismiss the case as untimely filed is denied. We will consider the protester's allegations. Merits Count I. Contrary to CSI's assertion, the Federal Information Resources Management Regulation, at 41 CFR 201- 20.103-2 (1994), does not require agencies to reveal to prospective offerors the system lives of the goods those agencies need; the regulation mandates only that as part of requirements analyses, agencies establish system lives. USDA did establish an anticipated system life for the memory upgrade. The agency did not tell CSI and FCC the duration of that life. Instead, it said that the Government considered a warranty in lieu of maintenance to be valuable and indicated that it had no particular length of warranty in mind. It invited each offeror to propose the length it thought appropriate and prescribed a method for comparing the values of warranties of different durations. We fail to understand how this might have prevented fair competition between CSI and FCC. While USDA, by restricting competition to only two firms, may well have prevented full and open competition to fulfill its requirement, that is not a matter CSI may object to, since CSI was a willing participant in the procurement. CSI's difficulty with the agency's action appears to be that CSI believed that since the standard warranty for the memory upgrade in question is twelve months (Protester's Brief, Attachment 10 & Exhibits), USDA would evaluate only twelve months' worth of warranty. This belief is the product not of any agency violation of law, but rather of a vendor's mistaken assumption based on a misreading of the request for offers. Also not well taken is CSI's contention that only a 12-month warranty should have been evaluated because an internal USDA planning document written in December 1994 states, "Used memory will be acceptable if warranted 'AS NEW'. New equipment is warranted for twelve (12) months." See Protest File, Exhibit A at 3. This document was not released to the companies in the course of the procurement and cannot be construed as affecting the announced terms of the competition. Count II. The Federal Acquisition Regulation, at 48 CFR 15.611(c) (1994), provides that in a negotiated procurement, after a contracting officer receives BAFOs, he may reopen discussions if "it is clearly in the Government's interest to do so." CSI's BAFO included a 12-month warranty at a price lower than CSI had initially offered without any warranty. From these facts, CSI draws the conclusion that the USDA contracting officer should have recognized that CSI could offer a 42-month warranty at a lower price than its BAFO price plus the $261,000 penalty which the agency assessed in accordance with its previous announcement. Thus, CSI maintains, it was clearly in the Government's interest to reopen discussions and request a second round of BAFOs, with new prices to be based on the common footing of a 42-month warranty. We do not agree with CSI's conclusion. In our view, a more obvious deduction for the contracting officer to have made, from the prices he received, was that because the two prices (with the penalty attached to CSI's) were within about five percent of each other, the monthly penalty assessment fairly described the value of the warranty. Reopening discussions might consequently have resulted in the companies' preparing new proposals based on warranties of different lengths, but giving the agency similar values. Thus, reopening discussions was not clearly in the Government's best interest. If USDA had told the two companies, prior to the submission of BAFOs, that it required a warranty in lieu of maintenance over a particular period of time, the agency would have stimulated a different kind of competition and could conceivably have received better offers. After having received the offers submitted, however, if the contracting officer had told CSI that FCC had offered a 42-month warranty, he would have been engaging in the proscribed practice of "technical leveling" -- "helping an offeror to bring its proposal up to the level of other proposals through successive rounds of discussion, such as by pointing out weaknesses resulting from the offeror's lack of diligence, competence, or inventiveness in preparing the proposal." 48 CFR 15.610(d) (1994). FCC's greater inventiveness was figuring out that under the terms of this competition, a lower overall cost could be achieved by offering the memory upgrade with a longer warranty and a higher price.2 Count III. CSI contends that any warranty which covers maintenance after September 30, 1995, is meaningless to USDA, and consequently should not have been evaluated. According to CSI, this is because the agency will enter into a new contract for all maintenance after that date on the mainframe computer on which ____________________ 2 The parties disagree about whether FCC's BAFO varied from the terms and conditions of its schedule contract. CSI says that it did; on various occasions, CSI has suggested that the reason is that (a) the contract includes only a 90-day warranty; (b) 42 months is longer than the standard 12-month warranty; and (c) FCC changed the length of warranty from 36 months in its initial proposal to 42 months in its BAFO. FCC insists that because its schedule contract provides that FCC "shall transfer, or otherwise make available to the agency any remaining warranties provided by the manufacturer," FCC may within the terms of the contract pass on to the Government any remaining warranty on any particular piece of equipment it chooses to provide in response to any particular order. We need not choose between these positions, because even if CSI is correct and USDA's acceptance of a proposal which varies from the terms and conditions of a schedule contract was impermissible, CSI may not be heard to complain about the action. CSI's own BAFO explicitly states that it varies from the terms of CSI's schedule contract. "The integrity of the protest process does not permit a protester to argue the unreasonableness of an interpretation of a solicitation provision which the protester itself held during the procurement." Technology Advancement Group, Inc. v. Department _________________________________________________ of the Navy, GSBCA 12709-P, 94-2 BCA 26,714, at 132,884, 1994 ___________ BPD 29, at 7-8 (quoting Xerox Corp., GSBCA 9862-P, 89-2 BCA ___________ 21,652, at 108,923, 1989 BPD 68, at 21). the memory upgrade is being installed, and that new contract will cover all maintenance on the upgrade. CSI is correct in its position that an agency may not consider as valuable the portion of a warranty which covers maintenance during a period of time beyond which the agency expects to need that maintenance. If, for example, FCC had offered a 100-month warranty on the memory upgrade and USDA expected to require maintenance on the upgrade for only twenty months, the agency should not have evaluated the last eighty months of the warranty as having worth. This principle has no application to the situation here, however. USDA's current maintenance contract on the mainframe does not cover remedial maintenance on attachments the Government installs on the computer which could increase maintenance costs. A memory upgrade is clearly such an attachment.3 The contract does not expire on September 30, 1995; it includes four option years after that date, and USDA anticipates exercising all of them and has already announced an intention to exercise the first one. USDA reasonably expects to require maintenance service on the upgrade during all months in which both of the following two items are extant: (a) the current mainframe maintenance contract and (b) the memory upgrade's anticipated system life. The mainframe maintenance contract, including options, runs through September 1999. The anticipated system life of the memory upgrade is not entirely clear. USDA says it is "the same as that of the [computer] into which it is installed." The computer's life is expected to last for five years after installation, or until February 1999. Five years after installation of the memory upgrade will be June 2000. Even if we assume that the sooner of these dates is the appropriate one, since FCC's 42-month warranty covers the period until December, 1998, USDA can reasonably anticipate needing maintenance coverage over the memory upgrade for the entire length of the warranty. Thus, the agency acted sensibly in evaluating all 42 months as having worth. ____________________ 3 CSI suggests that because the contract requires the contractor to "maintain the equipment, to include any accessible technologies," maintenance of any memory upgrade is covered by the contract. See Protest File, Exhibit E at 130. USDA says ___ that the term "accessible technologies" refers to accessibility by disabled employees. Respondent's Brief at 20. Whatever this term may mean, we conclude, in light of the clear contract provision regarding "attachments" which may generate increased maintenance costs, that a memory upgrade is not within the realm of equipment the contractor must maintain at the agreed price. Decision FCC's motion to dismiss the protest as untimely filed is DENIED. Because we conclude that none of the three counts has merit, the protest is also DENIED. _________________________ STEPHEN M. DANIELS Board Judge We concur: _________________________ _________________________ ROBERT W. PARKER ANTHONY S. BORWICK Board Judge Board Judge