Protest of Army Contract Award for Broadcast Station

Published by the Government Accountability Office on 1971-10-26.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                    1;E5Tr,.                              _     (    862
                              WiSHINGTON. D.C.                    ztmau

Dm73638                                                               OCT 2 6 1971


Mr. Eugene A. Wille
"fuction (Hwaii)"
P. 0. Bcz 3565
nonolulu, Hawaii 968fl
Dear Mr. Willes

     Reference is made to- 3ur letter of Ju17 36, 19713 to the
cMADM~ng General, U. S. Arwy Electronics Cand, protesting the
ward of a contract to Federal Electric Corpration (Fc) under
Request for Quotation M007-n7-Q.0429. Copies of this protest
were referred to this Office on July 23.1, a in view of such re-
ferral we have been advised that the Army does wt intend to rep3y
to YMM protest.

       Your buss of protest is that MEs quotation is so unrealiti-
cally law that it will be inpossible for FC to perfobm at the price
quoted, and that acceptance of its quotation violates the Goverment's
policy of avoiding quotations which are so low as to indicate the
offeror in "btuing" the contract. You also allege that the Govern-
men*t'I price analysis may bare been inaq     at nd you request re-
evalbtion of the pricing aspects of the FEC poosal, together with
a copy of the FEC costing pa*Age to enable you to point out areas
of unrealistie, eroneous ani/or onitted conts. Finally, ym advise
that notice of award vwan not sent to ym on a timely basis.
     Request for Quotation BLAB7-71nq-0429 solicited 21 fims to
qote on services and materiails to operate and maintain a broadcast
station in the Republic of V.LetnYn for 2 =nthe (P-72) with an
option for 12 additional onths (7Y-73). The two parts of the state-
ment of work listed periods of operation, mnimm manning requirements,
zintec2we and overmul schduls, conztruction of =me new facili-
tiea, acqui3ition of equiplit, reports and data preparation. Three
firma suboitted proposals on NV 18, 171. All propoas& were tech.
nically acceptable, and the prices proposed before negotiation were:


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                           *                        YY~~~~~~~-72     F         (Or3   n)
            -ace CoMimcation's Eng.,Oic.         *385,089          $181,390
            fction (Haii)"                       *000,526          $26,456
            ECs, IT Serviie.                     $348,658          $186,590

     Negotiations were conducted with you on June 14, FWC on June 15
and with Nge on the 16th.    :ach firm was requested to submit its
final and best price by June 21., 197l, with these resultss
                                                   Ff-72                       (option)
              W:_3                             - -5T,588           $137,855
            sfwction (Bawaii)"                     86, 251          2, 97
           Page           .369,2T3                                 $180,417

     Since PC ofrered the nzst favorsble price for both the initial
year and the option year, the record. Insctats that Its labor hours.
ekllI classificationsa d la)bor rates were carefully examined and
compred with the other offerings. The other proposed costs for
conatMCt*ioa, spare parts,'t)o1S, and other rquirYments were also
examined and found to be rea3onable and to meet the contract require-
=uMt    This analysis confirmed that Y' s qwitatiou provided for
adeqwte a reasonable coutract performame. Therefore, a8 outract.
was awardtd to'= on June 3), 1971. The record Indicates that notice
to the. asu1ccessfal otferore was sent out under date of July 1, 1971,
amd it would appear that suhl notice meets the aliS n infortion
prescribed-by t    Armed Services Procurement Regulation, specifically
AFA 3y508.3(a)?w ch reads:
           "Post-Award Notice of     ferors.
           (a)   PraqVly after making all awards in any
                 procuremert in excess of $10.,O0, the
                 contrleting oz=$cer shall give written
                 notice to the unsuccessful offerors that
                 th*ir proposeJ.s were not accepted, except
                 that such not ce need not be given where
                 notice has beea provided pursoant to
                 3-506.2(a). klsUch notice shall incade:

           .     .   .


                           (i)   the 'ua er of prospective contractors

                          (ij)   the nutxer of' proposals received;
                         (lii)   the name and address of each offeror
                                 receiving an avardj

                         -(iv)   the itecas quantitles, and unit prices
                                 of each awardj provided that, where
                                 the nuaWer of items or other factors
                                 -Iakes the 1Listing of unit prices
                                 i: practUleable' only the total contract
                                 price need be furnished; -and
                           (v)   in geueral tezmso the seos vw tbe
                                 ofrerorl's prosal was not'accepted,
                                                      oinfortio in
                                 eXCept ihere the price
                                 (iv) above readily reveals such reasonj
                                 but v n o event vill an offeror s cost
                                 breakdoin, profit, overhAd, rates, trade
                                 secreta',p r 8cturing processes and
                                 teebaiwes, or other confidential business
                                 ipoormfrsn ke disclosed to ar' other

           Addtiow informtion as to wk~ an ofeor's prpoal
           Vag UWt llCcepted 13bbd.be - rovided to the offeror
               upon~s requefft -to the contracting officer, sabject
               to the limitation in (v) abow.

     With respect to your first poiat of roteat, to the effect that
 M3:a offer vaB SO uniroIstically low as to be iossibl* of perfon ,nce,
the record discloses that a conrehensive cost ansysis was forwarded by
the Contract p'rice An3yst. -to the- contracting officer on June 22, 1.9T7.
Imclued was a summy of egaotlations frm a cost stndoitt and a mre
detailed item by ite an1ysis of the proposed and negotiated figures of
the PM proposal, which in total price was the wst favorable of the
three, both as Oi        p:roposed and as finally negotiated. Also, as
neotiated,  F=C was the low bidder by a sub3tAUtial mrgin on both the


basic period (JY .72) and :fox the ot  year (? T3)- In adition to
total prices, an analysis was mae of the di1ect labor costs by job
title, hours to be atilied,    and vage rates eqaqyed in the cost
package.    All were found to be   listic and adequate for the work
described in the RN. In a similar mnner overhead rates, mterial
costs subcontracting' travel and suabsistewi and other Costi were
found valid.    In view of the foroing It would appear that the M
quote Wa sutfficient3y vmlidatedi and we are unable to aree with your
alleption that the offer was unrealistically low.
     Concerning your allegation that F:Might be %uying".the contract
    a loss or no profit basis, we believe the cost Analysis discussed
above tends to minimize this possibility. Additionealy while the
 O4vermt does not favr the practice of "buyjug inj" it is not illegal,
and the option for fiscal year 1973, vbich ray be exercised solely at
the Governint' discretion, establishes a ftute fixed price for
services whtch further reduces th.e contractor's opportunity to make up
833 deficit through subsequemt over pricing. &Suh an poln is one
of the precaiutionary tedmqae -suggested in AM 1-31.1fto protect the
GwsO    nt a4pv~inst       tx "tactica. Mat regulato deines and
discusses "Wring in as rol s:

     "(a). ISVng in'. refrs to the practice of attezting
    to ob4ain a contract Bwird by bxowingly offering a
    price or cost esiate Less than anticipated costs vith
    the expectation of eithir (i) increasing the contract
    price or estivated cost during the period of perfornmee
    through change orders ozr other means, or (ii) receiVing
    future follovwon comatetas at prices hih enough to
    recover ay losses. on the original'          c      ct.
    Such a practice is not 2?avored by the Departnt of
    Defame since its long-term effeets my diminish compe-
    tition and it my result in poor contract performnce.
    Where there is- reason to believe that buing int' has
    occurred, contracting oi!ficers shall assure that amts
    tbareby ezclu~ded in the development of the original
    contract price are not recovered in the pricing of
    change orders or follov on procureienta subject to cost
    aalysis.        --

                                                            - 4-


      *"(b)             To aVoid or uiniiaize.the opportunaity for 'bzying in'
      on a procarezeut:v hch is 1'iely to be swceeded by one.
      or wore 'foow on-' p-ocuraments, the Govermunt should
      obtain from the cOntrantor a bindlng price comitzont
      covering as much of the entire program concerned as i6
      practicable. 8uch a coditment say be *aecured through
      emploent .of oe -of te fllowing pcrrewaent techniques:

                  (i)                ~iti-year procuront, with a prowvion in
                                     the solicitat'ion that a price nay be submitted
                                     only. for the total ulti-year quantity (see
                                     1-322.2); or
                 (2) priced options fbr ad4itiowl quantities wich,
                     together witl tLe qeuantities being firmy
                                     contracte for, equal the antieiated totAl
                                     prop    xequ          s        (see L-1504).

      "(e) in additiom to thi use of the techniques noted in (b)
      abe, it. is Imortant that other safeguards be provided
      against the contractor'ls recovering, through subaequent over-
      pricing, from azy nitial lois s1.tuati3 Aaie to 'buying in."
      PcFr oi1e, see 3-813 vth respect to the amrtization of
      Uon-recuwing coCsts, aid 3-81.2(c) concrning price tuotatiou
      which the cttactIng officer considers unrasonable.
     With regard to the aplication of this regulation, we have
coaistntly held that it does -not afobrd a basis for retectioU of
a bid, since there is n specific provision therefor in the
re&latiu' aad there are spcEcifc presutionary actions set forth
to guide the contractingS £oiceryen ' buyig in' is suspected, or
la a Possibility. See B1l3.609jrmay 12, 1971; 50 CcW. Gen. 5QOAo
UM)7} aid cases cited therein.
     Your cncern abotrt the adequacy of the Government' s. price anaisis
was discused above, -WhilA your recollection of .a telephone conversation
with the Government price aralyst is to the effect that procurement
parsonnel vere surprised at FM's low price, but had no basis to challenge
or verify J:'s eosting paage, vwe can only conclude that yoa misunder-
stood the meaning of his cczments, since the record Indicates that a
thorough and complete price aalysis                                 was mude before the contract w

                                                                                    -.        -   5-

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                                      ::                                                   -                     867


                R~egarding the tine1±neia Of the notice to you of the award to
           flC. the above suwr7r of fe.ots indicAtes the action. taken was timely
           and net the requlremet of AMP 3-508.3(a)f azd the 14 daW period
           before your' receipt-'would appear to, be attribtable to the distance
              invoved'It does seen that some more rapid means of cczmimcatioas
           could have. been employed sw~ alao that mome complete Information
           about the &ward and the position of the other competitors ~Ko1ld have
            alayed your cowcrn        is owve r, is not       ~rta       ol
           affect the .egalitq of award* 48 Co...     .en. 35      198).  .

                          Concerning your reqqest for a copy of 7E's. costing package,
           it is the Departmnt                          .position that thia is confidential a
           proprietary Informtion which my not be disclosed without the
           consent of MlC In view of the proviaiona of ASPR 3-50a.3(a)(1r)
           q,2teA- above, -ve see -,no~bas s: f or disagreemut with the ,Departamet
           on this polnt.'
                                   Accodimg~yyour protest must ~A denied.

                                                                  Very truly yours,

       .         ..           ..   .~.     <.   .                   ...
                                                    .        ~ ~ ~C ~tolr
                                                        ~ ~~De)ut-y       ~ ~ Geoneral
                                                                                  ~ ~ ~.   ~      . ..    ..

                                                                    of the United States
                                                                                                2T11Ak   TOA00

                                                                                        al glixudV

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