oversight

Decisions of the Comptroller General of the United States, Volume 69, May 1990

Published by the Government Accountability Office on 1990-05-01.

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

           United States General Accounting Office


           Office of General Counsel




May 1990   Decisions of the
           Comptroller General
           of the United States
           Volume 69
           Pages 433-491
    *Current GAO Officials


      Comptroller General of the United States
      Charles A. Bowsher
      Deputy Comptroller General of the United States
      Vacant
      Special Assistant to the Comptroller General
      Milton J. Socolar
      General Counsel
      James F. Hinchman
      Deputy General Counsel
      Vacant
      Senior Associate General Counsels
      Seymour Efros
      Robert P. Murphy
      Richard R. Pierson
      Henry R. Wray
      Associate General Counsels
      Barry R. Bedrick
      Ronald Berger
      Robert L. Higgins
      Joan M. Hollenbach (Acting)
      Robert H. Hunter
      Gary L. Kepplinger
      Robert Strong
      Kathleen E. Wannisky




,
      Pagei
Contents


Preface                                    iii

Table of Decision Numbers                   v

List of Claimants, etc.                     vi

Tables of Statutes, etc.                   vii

Decisions of the Comptroller General       vii

Index                                  Index-1




                                                 0




 Page ii
*Preface


    This pamphlet is one in a series of monthly pamphlets which will be consolidat-
    ed on an annual basis and entitled Decisions of the Comptroller General of the
    United States. The annual volumes have been published since the establishment
    of the General Accounting Office by the Budget and Accounting Act, 1921. Deci-
    sions are rendered to heads of departments and establishments and to disburs-
    ing and certifying officers pursuant to 31 U.S.C. 3529 (formerly 31 U.S.C. 74 and
    82d). Decisions in connection with claims are issued in accordance with 31
    U.S.C. 3702 (formerly 31 U.S.C. 71). In addition, decisions on the validity of con-
    tract awards, pursuant to the Competition In Contracting Act (31 U.S.C.
    3554(e)(2) (Supp. III) (1985)), are rendered to interested parties.

    The decisions included in this pamphlet are presented in full text. Criteria ap-
    plied in selecting decisions for publication include whether the decision repre-
_   sents the first time certain issues are considered by the Comptroller General
    when the issues are likely to be of widespread interest to the government or the
    private sector, whether the decision modifies, clarifies, or overrules the findings
    of prior published decisions, and whether the decision otherwise deals with a
    significant issue of continuing interest on which there has been no published
    decision for a period of years.

    All decisions contained in this pamphlet are available in advance through the
    circulation of individual decision copies. Each pamphlet includes an index-digest
    and citation tables. The annual bound volume includes a cumulative index-
    digest and citation tables.

    To further assist in the research of matters coming within the jurisdiction of
    the General Accounting Office, ten consolidated indexes to the published vol-
    umes have been compiled to date, the first being entitled "Index to the Pub-
    lished Decisions of the Accounting Officers of the United States, 1894-1929," the
    second and subsequent indexes being entitled "Index of the Published Decision
    of the Comptroller" and "Index Digest-Published Decisions of the Comptroller
    General of the United States," respectively. The second volume covered the
    period from July 1, 1929, through June 30, 1940. Subsequent volumes have been
    published at five-year intervals, the commencing date being October 1 (since
    1976) to correspond with the fiscal year of the federal government.

    Page iii
Preface




Decisions appearing in this pamphlet and the annual bound volume should be
cited by volume, page number, and date, e.g., 67 Comp. Gen. 10 (1987). Decisions
of the Comptroller General that do not appear in the published pamphlets or
volumes should be cited by the appropriate file number and date, e.g., B-230777,
September 30, 1986.

Procurement law decisions issued since January 1, 1974 and Civilian Personnel
Law decisions, whether or not included in these pamphlets, are also available
from commercial computer timesharing services.

To further assist in research of Comptroller General decisions, the Office of the
General Counsel at the General Accounting Office maintains a telephone re-
search service at (202) 275-5028.




Page iv
*Table of Decision Numbers

                                             Page                                            Page
    B-216640.8, May 16, 1990                 455    B-237557.2, May 4, 1990                   438
    B-227353, May 23, 1990                   483    B-238306, May 14, 1990                    451
    B-233372.4, May 1, 1990                  433    B-238354, May 22, 1990                    472
    B-233742.5, et al., May 14, 1990         445    B-238371, May 18, 1990                    463
    B-235902, May 22, 1990                   469    B-238403, May 17, 1990                    459
    B-236929.2, May 11, 1990                 441    B-238682, B-238682.2, May 16,
    B-237005.2, May 31, 1990                 488    1990                                      456
                                                    B-239330, May 22, 1990                    476




S




    Cite Decisions as 69 Comp. Gen.-

    Uniform pagination. The page numbers in the pamphlet are identical to those in the permanent
    bound volume.

    Page v
List of Claimants, etc.

                               Page                                     Page
Air Force, Dept. of             445   International Association of                 ,|
Amray, Inc.                     456   Firefighters, Local F-100,                    l
Baxter Healthcare Corporation   451   President                  ,      455
Dawes, Violet M.                470   Martin Marietta Corporation       445
Deloitte & Touche               464   National Aeronautics and Space
                                      Administration                    470
Dictaphone Corporation          438   Omni Analysis                     434
Frank E. Basil, Inc.            472   SRS Technologies                  459
Health and Human Services,**
Deathof                         483   Social Security Administration,
  Dept. of                      483   former Commissioner               483
Honeywell Federal Systems, Inc. 445   TECOM, Inc.                       442
                                      Unisys Corporation                488
                                      United Power Corporation          477




                                                                               .
Page vi
*Tables of Statutes, etc.

    United States Statutes
    For use only as supplement to U.S. Code citations
                                  Page                                    Page                                      Page
    1935, ch. 812, 49 Stat. 967    484   1937, ch. 382, 50 Stat. 307       484   1951, ch. 621, § 22(b), 65 Stat.
                                                                                 687                                 484




    United States Code
    See also U.S. Statutes at Large
                                  Page                                    Page                                      Page
    5 U.S.C. § 5596                470   31 U.S.C. § 3702(b)(1)            456   45 U.S.C. §§ 215-228                484



.   29 U.S.C. §633a
    31
    31
    31
    31
         U.S.C.
         U.S.C.
         U.S.C.
         U.S.C.
                  §71a(1)
                  §3553
                  §3553(d)
                  §3702(b)
                                   470
                                   456
                                   450
                                   443
                                   455
                                         41 U.S.C. §253(a)(1)(A)
                                         41
                                         41
                                         41
                                         42
                                              U.S.C.
                                              U.S.C.
                                              U.S.C.
                                              U.S.C.
                                                       §259(b)(3)
                                                       §259(c)
                                                       § 403(7)
                                                       §2000e
                                                                           458
                                                                           458
                                                                           458
                                                                           458
                                                                           470
                                                                                 45 U.S.C. §§ 228a-228z-1
                                                                                 45 U.S.C.
                                                                                 45 U.S.C.
                                                                                 45 U.S.C.
                                                                                 45 U.S.C.
                                                                                             §228e(k)(2)
                                                                                             §§ 231-231u
                                                                                             §231f(c)(2)
                                                                                             §231q
                                                                                                                     484
                                                                                                                     484
                                                                                                                     484
                                                                                                                     483
                                                                                                                     484




    Published Decisions of the Comptrollers General
                                  Page                                    Page                                      Page
    5 Comp. Gen. 1058              456   64   Comp.    Gen. 155            455   68 Comp.    Gen.   206              476
    18 Comp. Gen. 84               456   64   Comp.    Gen. 279            443   68 Comp.    Gen.   300              434
    24 Comp. Gen. 9                456   64   Comp.    Gen. 349            470   68 Comp.    Gen.   400              435
    25 Comp. Gen. 670              456   66   Comp.    Gen. 289            449   68 Comp.    Gen.   559              434
    51 Comp. Gen. 595              480   66   Comp.    Gen. 289            466   68 Comp.    Gen.   681              455
    55 Comp. Gen. 469              480   67   Comp.    Gen. 442            436   69 Comp.    Gen.   30               450
    57 Comp. Gen. 675              487   67   Comp.    Gen. 467            456   69 Comp.    Gen.   122              435
    62 Comp. Gen. 80               456   68   Comp.    Gen. 69             481   69 Comp.    Gen.   170              482
    62 Comp. Gen. 239              471   68   Comp.    Gen. 206            454   69 Comp.    Gen.   214              445
                                                                                 69 Comp.    Gen.   421              453




    Decisions of the Court
                                  Page                                    Page                                      Page
    Copeland v. Marshall, 641            Hensley v. Eckerhart, 461 U.S.          Investment Co. Institute v.
    F.2d 880                      471    424                               471   Camp, 401 U.S. 617                  487

    Page vii
Tables of Statutes, etc.




Decisions of the Court
                                 Page                                  Page                                  Page
Copeland v. Marshall, 641               Kennedy v. Whitehurst, 690            Udall v. Tallman, 380 U.S. 1    487
F.2d 880                          471   F.2d 951                        471   United Power Corp. v. United
Hensley v. Eckerhart, 461 U.S.          Locom Corp., GSBCA 9101-C             States, Civil Action No. 90-
424                               471   (8951-P), 88-3 BCA ff 20,902    438   0931                            477
Investment Co. Institute v.             Palmer v General Services
 Camp, 401 U.S. 617               487   Administration, 787 F.2d 300    471




Page viii
*May 1990

    B-233372.4, May 1, 1990
    Procurement
    Bid Protests
    * GAO procedures
    * * Preparation costs
    * . * Attorney fees
    * N O E Amount determination
    Agency's general objections to the allegedly "excessive" number of hours claimed by the protester
    as spent by its attorneys and employees in pursuit of its protest provide an insufficient basis for
    concluding that the attendant costs are not reasonable where the hours are properly documented
    and certified.

    Procurement
    Bid Protests
    * GAO procedures
    ON Preparation costs
    Claim for bid protest costs incurred for working on a companion protest and in pursuit of a cost
    claim, and for contacting a congressional representative, are disallowed since they are unrelated to
    the pursuit of the protest.

    Procurement
    Bid Protests
    * GAO procedures
    E * Preparation costs
    * * * Profits
    Claim for profits on protester's labor costs is disallowed since there is no statutory basis to award
    profits as part of the costs for pursuing a bid protest.

    Procurement
    Bid Protests
    * GAO procedures
    * * Preparation costs
    Claim for a general and administrative expense factor to be applied to protester's direct expenses is
    disallowed in the absence of a sufficient explanation of the basis for that factor.

*   Matter of: Omni Analysis-Claim for Bid Protest Costs

    Page 433
                                                                                        (69 Comp. Gen.)
Gail Kezer Lowe, Esq., Kutak Rock & Campbell, for the protester.

Eloisa Regalado, Esq., Naval Supply Systems Command, Department of the Navy, for the agency.

Robert C. Arsenoff, Esq., and John Brosnan, Esq., Office of the General Counsel, GAO, participated
in the preparation of the decision.


Omni Analysis requests that our Office determine the amount it is entitled to
recover from the Department of the Navy for the costs of filing and pursuing its
protest in Omni Analysis, 68 Comp. Gen. 300 (1989), 89-1 CPD I 239, affd Omni
Analysis; Department of Navy-Requests for Recon. 68 Comp. Gen. 559 (1989),
89-2 CPD 1 73. We determine, as discussed below, that Omni is entitled to recov-
er $66,956.40 as the costs of filing and pursuing its protest.
Omni filed its original protest on October 27, 1988, against the award of a con-
tract to Advanced Technology, Inc. (ATI), for training support services. On
March 6, 1989, we sustained that protest on the basis that ATI had misrepre-
sented the availability of its personnel in its best and final offer and had, there-
by, compromised the integrity of the procurement process. We recommended
that the Navy not exercise the options under the contract. Both the Navy and
Omni filed requests for reconsideration. The Navy's request for reconsideration
alleged that Omni had not been prejudiced by ATI's actions, and otherwise chal-
lenged the recommended remedies including the award of protest costs. Omni's
request sought termination of basic contract and recompetition. On July 24,
1989, we affirmed our previous decision.                                                             V
The protester claims a total of $73,174.40, consisting of $35,210.40 in attorneys'
fees and $37,964 for time charged to company personnel in pursuing the protest,
as well as for certain company expenses. Because the parties have been unable
to reach an agreement concerning the amount to which Omni is entitled, we
have been requested to make that determination pursuant to our Bid Protest
Regulations, 4 C.F.R. § 21.6(e) (1989).

Attorneys' Fees

Of the total amount claimed, Omni requests reimbursement for $35,210.40 for
339.25 hours of attorneys' time plus related expenses. The hours claimed are
primarily for the work of two principal attorneys and their support staff, as
well as for certain word processing and proofreading services. Omni's attorneys
have certified that the hours billed were actually spent on filing and pursuing
the protest and that the hourly rates are those customary for the law firm. The
Navy does not challenge the reasonableness of the rates. Rather, the agency
challenges the number of hours billed as excessive, especially in light of the al-
legedly "simple" nature of the protest and the fact that Omni only prevailed on
one of the issues raised in its protest. The Navy criticizes the bill as excessive
for such matters as an alleged overexpenditure of time on basic research, too
many trips to law libraries, too many telephone conferences with the client, and

Page 434                                                                          (69 Comp. Gen.)
oversupervision of the lead attorney. The agency also questions certain expendi-
tures as not directly related to the protest and argues that the protester should
not be reimbursed for costs pertaining to issues raised but not sustained. In ad-
dition, the Navy asserts that Omni is not entitled to be reimbursed for costs in-
curred after it received the initial March 6 decision.
We generally accept the number of attorney hours claimed, if properly docu-
mented, unless specific hours deemed to be excessive can be identified and a
reasonable analysis for their rejection articulated. Princeton Gamma-Tech,
Inc.-Claim for Costs, 68 Comp. Gen. 400 (1989), 89-1 CPD II 401. Simply con-
cluding that the hours are excessive is inadequate, and generalized characteriza-
tions of a protest as being "simple" are not probative evidence that the number
of attorney hours claimed is excessive. See Data Based Decisions, Inc.-Claim
for Costs, 69 Comp. Gen. 122 (1989), 89-2 CPD ¶1538. Moreover, contrary to the
Navy's continuing argument, we specifically indicated in our reconsideration de-
cision that Omni's entitlement to protest costs was not limited solely to those
incurred in relation to the one issue upon which it prevailed. Omni Analysis et
al.-Request for Recon., 68 Comp. Gen. 559, supra.
We have reviewed the certified bill from counsel and find that the Navy's gen-
eral observations about the allegedly excessive number of hours spent by
Omni's counsel in pursuing the protest provide an insufficient basis for reject-
ing the protester's claim. Princeton Gamma-Tech, Inc.-Claim for Costs, 68
Comp. Gen. 400, supra. With regard to specific matters raised by the agency, or
disclosed by our own review, however, we disallow certain portions of the claim
for attorneys' fees.
Specifically, we disallow a total of $600 as follows as unrelated to the pursuit of
Omni's protest: $262.50 for 1.75 hours of attorney's time on November 16, 1988,
which in part was spent drafting correspondence relating to an unidentified
"companion protest," of which this Office has no record; $75.00 for .50 hours of
attorney's time on March 13, 1989, which in part was spent conferring about
"certification procedures for attorneys' fees," presumably in pursuit of Omni's
claim for bid protest costs; $187.50 for 1.25 hours of attorney's time on March
24, 1989, which in part was spent preparing a "bid costs letter," presumably in
pursuit of Omni's claim for its bid protest costs; and, $75.00 for .50 hours of at-
torney's time on April 4, 1989, which was spent working on a letter to a con-
gressional representative.
As indicated, we have no record of a "companion protest" filed with this Office.
Moreover, expenses for efforts to pursue claims for costs before this Office and
expenses for contacting a congressional representative are not allowable since
they are, in our view, unrelated to the pursuit of a protest. See Ultraviolet Puri-
fication Sys., Inc.-Claim for Bid Protest Costs, B-226941.3, Apr. 13, 1989, 89-1
CPD ¶376. While some of the disallowed billings indicate that a portion of the
time charged may have been spent on protest-related work, since they have
been billed in an aggregated manner, we are unable to discern what portion of
the charges actually constitutes allowable costs and, therefore, we have disal-
lowed the charges in full.

Page 435                                                             (69 Comp. Gen.)
As indicated above, the Navy has also challenged Omni's claim for attorney ex-
penses incurred after our first decision was issued on March 7, 1989. 'Omni's po-
sition is that it is entitled to these expenses because they were necessary to re-
spond to the Navy's request for reconsideration.' $1,080 of the claim is for re-
consideration costs. It is comprised primarily of charges for telephone confer-
ences with the client. Since no written response to the Navy's motion for recon-
sideration was ever requested by this Office, and none was ever filed by Omni,
we find no basis for allowing these claimed costs. Cf Pacific Northwest Bell Tel.
Co. et al.-Claim for Bid Protest Costs, 67 Comp. Gen. 442 (1988), 88-1 CPD 11 527
(allowing costs attendant to a protester's response to an agency motion for re-
consideration as necessary to further defend a successful challenge to improper
procurement practices).
Thus, we disallow a total of $1,680 from Omni's claim for attorney expenses.

Company Costs
Omni seeks $32,828 for 538 hours of time for three of its corporate officers, a
senior analyst, and an administrative assistant at burdened rates, inclusive of
General and Administrative (G&A) costs and other overhead, ranging from
$21.31 per hour to $74.34 per hour. In addition, Omni seeks a 9 percent "profit
fee" of $2,954 on these labor costs. Omni also claims $598 in direct expenses for
telephone charges and the fee of an expert witness. Finally, Omni separately
claims $1,584 for "G&A on expenses," i.e., "G&A" for its telephone and witness
bills as well as its $35,210 attorneys' bill.
The company president has certified that the hours claimed were spent in pur-
suit of the protest, and has certified the hourly labor rates. In addition, Omni
has included a narrative which describes what each person did during the hours
claimed in connection with the protest from the date of contract award during
various stages of the protest process through February 21, 1989, when the final
protest submission was filed.
Again, the Navy generally challenges the number of hours as excessive. The
agency also questions how the hourly labor rates were computed and suggests
that lack of any fractional hours in the billing of the time spent by company
personnel is an improper accounting of time actually spent on the protest. The
Navy criticizes the company's practice of charging for each participant's time at
various meetings, and asserts that there was a duplication of effort between the
company and its attorneys because Omni's description of its labor costs includes
a charge for assisting in the preparation of a reply memorandum filed with this
Office. Overall, the Navy concludes that Omni's labor description lacks suffi-
cient detail to enable it to distinguish which costs were associated with the issue
upon which the protester prevailed. Finally, the Navy asserts that Omni is not
entitled to profit on its labor costs and a factor for G&A on its direct expenses
as claimed.
 Omni does not argue that expenses during this period related to the filing of its own request for reconsideration.


Page 436                                                                                        (69 Comp. Gen.)
As to the agency's generalized conclusions that the total number of hours
claimed by Omni is per se excessive, we reiterate that such statements do not
relieve the agency of its burden to identify specific hours as excessive and to
articulate reasons for their rejection. Princeton Gamma-Tech, Inc.-Claim for
Costs, 68 Comp. Gen. 400, supra. Likewise, we find unpersuasive the agency's
questioning of burdened hourly labor rates which have been certified by the
company's president, and which do not otherwise appear, in our view, to be un-
reasonable. Id. As to the agency's suggestion that the company's estimates of
the time spent by its personnel in pursuit of the protest are unreliable, there is
nothing in the record which indicates that the estimates do not reasonably rep-
resent the amount of time spent on the protest by the individuals involved. See
Ultraviolet Purification Sys., Inc.-Claim for Bid Protest Costs, B-226941.3,
supra.
Further, we find nothing inherently unreasonable in charging for the time of
each participant in meetings they attended which were related to pursuing the
protest. There has been no allegation that the meetings did not occur or that
they not include the persons described by Omni as attending. As to the Navy's
allegation that Omni somehow duplicated the efforts of its attorneys by assist-
ing in the preparation of a reply memorandum, we see nothing wrong with cli-
ents providing nonlegal assistance in the preparation and review of filings and
factual exhibits, which Omni states was the case here, and such assistance does
not, in our view, compel a conclusion that efforts were needlessly duplicated, as
the Navy argues. Moreover, we note that Omni's submissions in this matter in-
volved a rather extensive investigation of ATI's proposed personnel by the pro-
tester which resulted in the preparation of numerous exhibits and affidavits. In
this regard, it is important to note that the results of the investigation conduct-
ed by Omni provided a factual predicate for our conclusion that ATI had mis-
represented the availability of its personnel.
With regard to the Navy's overall concern that Omni's labor bill lacks sufficient
detail to determine the amount of time spent on the issue on which the firm
prevailed, we again note that the protester's entitlement to its costs is not limit-
ed in this manner. Omni Analysis et al.-Request for Recon., 68 Comp. Gen. 559,
supra.
We do, however, agree with the Navy's position that Omni is not entitled to a
"profit fee" on its labor costs as claimed in the amount of $2,954. There is no
statutory basis for permitting the recovery of profit as part of protest costs and
we disallow this portion of the claim. See The Howard Finley Corp., B-226984.2,
Nov. 21, 1988, 88-2 CPD 1 492.
As stated above, Omni has also separately claimed a total of $1,584 for "G&A"
on its direct expenses-expressed as a percentage of its attorneys' bill and its
telephone and witness bills. The Navy questions these charges and notes that
Omni has not provided a basis for determining what factors are included in its
"G&A" calculations as applied to its direct expenses. In response, Omni has
stated only that use of the "G&A" rate in this manner is part of its "normal
billing practices."

Page 437                                                              (69 Comp. Gen.)
While we have not objected to Omni's claim for "G&A" and other overhead ex-
penses as they comprise part of the protester's certified burdened labor rates, W
we believe that Omni has failed to explain what the claimed "G&A" as a per-
centage of its attorneys' bill, phone and witness bills is intended to cover. In the
absence such an explanation of this portion of the claim, we are unable to con-
clude that it accurately reflects costs attendant to pursuing Omni's protest and
we, therefore, disallow it. See Locom Corp., GSBCA No. 9101-C (8951-P), 88-3
BCA NT20,902, 1988 BPD 1 120.
Thus, we disallow a total of $4,538 from Omni's claim for company expenses.

Conclusion
The total amount disallowed from Omni's claim of $73,174.40 is $6,218 ($1,680 in
attorneys' expenses and $4,538 in company expenses). We, therefore, find that
Omni is entitled to reimbursement in the amount of $66,956.40 for the reasona-
ble costs of filing and pursuing its protest.



B-237557.2, May 4, 1990
Procurement
Special Procurement Methods/Categories
* Federal supply schedule
* * Terms
* * * Purchase orders
                                                                                                        0
*E-E Quantity restrictions
Only reasonable reading of a Federal Supply Schedule contract is that an overall maximum order
limitation (MOL) on any order is to apply to all the items listed on that contract, including those
which do not have specific MOLs. Since the order for the lease of equipment exceeded the overall
MOL, the General Accounting Office recommends that it be terminated.

Matter of: Dictaphone Corporation

Chris E. Hagberg, Esq., Seyfarth, Shaw, Fairweather & Geraldson, for the protester.

David S. Cohen, Esq., Cohen & White, for Lanier Business Products, Inc., an interested party.
E.L. Harper, Department of Veterans Affairs, for the agency.
David Hasfurther, Esq., and John Brosnan, Esq., Office of the General Counsel, GAO, participated
in the preparation of the decision.


Dictaphone Corporation protests the issuance of purchase order No. 317J95103
by the Department of Veterans Affairs (VA) to Lanier Business Systems, Inc.,
for the 1-year lease with the option to purchase of a dictation system, including

Page 438                                                                              (69 Comp. Gen.)
maintenance and installation, for VA's Bay Pines, Florida, Medical Center. The
purchase order was placed under Lanier's General Services Administration
(GSA) Federal Supply Schedule (FSS) contract No. GS-COF-85661 for FSC
Group 74, which among other items includes dictation equipment. Dictaphone
contends that the award price of $167,940 is in violation of the $160,000 maxi-
mum order limitation (MOL) in Lanier's FSS contract and argues that the order
should be terminated and the VA's needs procured competitively.
We agree with the protester and sustain the protest.
Lanier's FSS contract for the dictation system ordered by VA contains the fol-
lowing terms:
TABLE OF AWARDS:

Special Item No.                  Description
  47-345-1                        System Equipment
  47-360                          Supplies and Accessories
  47-320                          Maintenance Services
  47-300                          FLTOP

MAXIMUM ORDER LIMITATION:
The total dollar value of any order placed under this contract shall not exceed $160,000.

Special Item No.                  Description                             M.O.L.
 47-345-1                         Systems Equipment                    $100,000
  47-360                          Accessories                           $ 60,000

   FLTOP refers to leasing of the system equipment rather than its outright purchase.

The agency argues that the $160,000 overall MOL was only to apply to special
item No. 47-345-1, purchase of the system equipment, and special item No.
47-360, supplies and accessories. It was not, according to VA, to apply to special
item Nos. 47-320 and 47-300, maintenance services and leasing of the equip-
ment. In support of its position, the agency points to the solicitation that result-
ed in Lanier's FSS contract and to the face pages on the original contract,
which the agency argues show that GSA and Lanier both intended that the
MOL not apply to leasing or maintenance services. In addition, the agency cites
a GSA memorandum prepared in response to the protest which states that ". . .
it is the policy of FSS not to include MOLs for lease items in the negotiation of
multiple award schedule contracts," and an internal GSA "Recommendation
For Award" prepared at the time Lanier's FSS contract was awarded which
contains the notation "No MOLs are established for services."
While it may well have been GSA's intention at the time of award of the FSS
contract to exclude the maintenance services and lease portions of the schedule
from the $160,000 MOL, we do not believe that the contract itself can be reason-
ably read that way. In this regard, the portions of the RFP and the award docu-
ments cited by the agency set forth the same scheme as set forth above. In each

Page 439                                                                                (69 Comp. Gen.)
of the cited documents there is an overall MOL listed as applicable to a "total
order" and specific smaller MOLs listed for special item Nos. 47-345-1 and
47-360. Further, in each there is no MOL listed as specifically applicable to spe-
cial item Nos. 47-320 or 47-300.
In our view, the only reasonable reading of the language in Lanier's schedule
stating that "the total dollar value of any order placed under this contract shall
not exceed $160,000" is that the $160,000 limit is to apply to all four special
items listed in the schedule. VA does not argue that special item Nos. 47-320
and 47-300 are not purchased via "orders" nor, in our view, is there anything
on the face of the schedule which would limit the application of the $160,000
overall limit to the two special items that are subject to specific MOLs of
$100,000 and $60,000, respectively. In fact, since any order involving both of
these two items would be limited by the specific MOLs to a total of $160,000, the
overall limit of $160,000 makes little sense except in the context of'orders for
maintenance service or leasing which have no individual limits.I A contract
must be interpreted so as to give meaning to all its provisions, Ebasco Construc-
tors Inc., B-231967, Nov. 16, 1988, 88-2 CPD f 480, and here, for the $160,000
MOL provision to be at all meaningful, it must also be applicable to mainte-
nance and leasing.
An order under an FSS contract may not exceed the established MOL covering
the subject matter of that order. Precision Mfg., Inc., B-224565, Jan. 12, 1987,
87-1 CPD ¶149. Since the purchase order covering the lease of the Lanier equip-
ment exceeds the $160,000 MOL which, in our view, applies to all of the items
listed in Lanier's FSS contract, we sustain Dictaphone's protest on that basis.
Moreover, our review of the record shows that while VA was under the impres-
sion that as a mandatory user of this particular FSS it was required to place
the order for the lease and maintenance services with Lanier, the agency's un-
derstanding was, in our view, incorrect. The instructions for the use of the FSC
Group 74 schedule provide as follows:
6. EXEMPTIONS TO MANDATORY USE
                                *            *           *            8            *


c. Except 47-145: Typewriters Electronic and 47-150: Attachment, Features and Accessories, except
GSA which will be MANDATORY SOURCES.
Exemptions from Mandatory Use (unless otherwise required by regulations of the ordering equip-
ment):
a. Rental, Repair and Maintenance of equipment; and
b. Purchases in Alaska, Hawaii and Puerto Rico.

'Lanier cites Copylease Corp. of America, B-205231, June 15, 1982, 82-1 CPD ¶ 583, as standing for the proposition
that an overall MOL like the $160,000 listed in Lanier's contract is to be applied only to items which are subject to
a specific MOL. In Copylease, we held that a similar overall MOL was not applicable to items listed under it which
had the word "none" written next to them under a heading "Maximum Order Limitation." We think that the
contract's use of the word "none" next to the excluded items distinguishes Copylease from this case which lacks         _
any such specific indicator that the MOL is not to apply.

Page 440                                                                                         (69 Comp. Gen.)
   hile VA argues that these items were not clearly listed as non-mandatory, we
disagree and conclude that under these instructions the lease2 of equipment
and the purchase of maintenance services are non-mandatory items. In this
regard, when a non-mandatory item is ordered, the agency must conduct the
procurement on a competitive basis if it has actual knowledge that it can pro-
cure the item from elsewhere than off the FSS at a price more advantageous to
the government-after allowing for the burden and cost of a new procurement.
Federal Property Management Regulations (FPMR), 41 C.F.R. § 101-26.401-5
(1986); Precise Copier Servs., B-232660, Jan. 10, 1989, 89-1 CPD ¶1 25. VA made
its determination to issue the purchase order to Lanier on the basis that the
items being procured were mandatory under Lanier's FSS contract. That deter-
mination did not include the required finding regarding the existence of an-
other source despite the fact that the record shows that VA was aware that Dic-
taphone maintained that it could offer similar equipment at a lower price.
The protest is sustained because the purchase order issued to Lanier exceeded
the applicable MOL. We, therefore, recommend that the purchase order be ter-
minated and the requirement be solicited on a competitive basis assuming that
the agency requirements cannot be met at a price below the MOL. Should the
agency decide that its needs may be met consistent with the MOL, it may order
its requirements from the FSS with due consideration to all the terms of the
schedule and, if applicable, FPMR 41 C.F.R. § 101-26.401-5 concerning non-man-
datory items.
We also find the protester is entitled to the costs of filing and pursuing its pro-
test, including attorneys' fees.3 Bid Protest Regulations, 4 C.F.R. § 21.6(d)(1)
(1989). The protester should submit its claim for these costs directly to the con-
tracting agency. 4 C.F.R. § 21.6(e).
The protest is sustained.



B-236929.2, May 11, 1990
Procurement
Sealed Bidding
* Bids
* * Responsiveness
E * E Price omission
* E K E Line items
The protester's deletion of one subline item in its low bid on a sealed-bid procurement should be
waived as a minor informality where the deleted bid requirement was not material or an essential

2 All parties agree that the term "Rental" used in the schedule refers to the type of lease which was the subject of
the VA's purchase order.
  The protester also claims that it is entitled to the cost of contesting a Lanier protest concerning the same pro-
curement before the General Services Administration Board of Contract Appeals. We have no authority to award
protest costs incurred before another forum.

Page 441                                                                                         (69 Comp. Gen.)
or integral part of the overall contract work and where the waiver of the requirement would not
affect the relative competitive standing of the bidders.                                                              W
Matter of: TECOM, Inc.

Ronald H. Uscher, Esq., Dempsey, Bastianelli, Brown & Touhey, for the protester.

Joel S. Rubinstein, Esq., Sadur, Pelland & Rubinstein, for Northeast Construction Co., an interested
party.
David La Croix, Esq., and Vasio Gianulias, Esq., Office of the General Counsel, Department of the
Navy, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the General Counsel, GAO, par-
ticipated in the preparation of the decision.


TECOM, Inc., protests the rejection of its bid and award of a contract to North-
east Construction Co., under invitation for bids (IFB) No. N62467-.89-B-0350,
issued by the Department of the Navy for the renovation and repair of family
housing at Shaw Air Force Base, Sumter, South Carolina. TECOM contends
that the Navy erred in rejecting TECOM's low bid as nonresponsive and that
the awardee's bid is itself nonresponsive.
We sustain the protest since TECOM's bid is responsive.
The IFB as originally issued contained a bidding schedule that required bidders
to submit a base bid, line item No. 0001, to renovate and repair 124 family hous-                                     _
ing units and 6 officers quarters in accordance with project plans, specifications,
and contract documents. Bidders were also required to submit unit prices and a
total price under line item No. 0002, for 20 subitems of indefinite quantity work
of varying estimated maximum quantities, and a total price for an additive item
No. 0003 to build fences and posts around trash pads as shown on the project
plans.
The Navy subsequently issued six amendments to the IFB. Amendment No. 3
expressly deleted subitem "AS" of line item No. 0002, indefinite quantity work,
to install a maximum estimated quantity of 250 downspouts. Amendment No. 5
replaced the original additive bid item No. 0003 with a new additive item, which
required bidders to submit a total price to remove existing fences and build
fences and posts as shown on the plans. Amendment No. 6 added a new additive
bid item No. 0004, for a residential range top extinguishing system, and re-
quired bidders to use an attached revised bid schedule in submitting their bid.
The revised bid schedule again contained subitem AS of line item No. 0002 for
downspouts and the original language of additive item No. 0003.1
'The contracting officer states that the agency did not intend to reinstate the downspout requirement or the origi-
nal language of additive bid item No. 0003. In this regard, the drawing clearly shows the deletion of downspouts
from the plans. On the other hand, in response to our inquiry concerning the agency's need for the downspouts,
the agency submitted the affidavit of the Chief of Engineering and Environmental Planning at Shaw Air Force
Base, who states that the agency had and will have a continuing need for downspouts.                                  5
                                                                                                                      _


Page 442                                                                                        (69 Comp. Gen.)
The Navy received eight bids. TECOM submitted the low bid of $2,992,118, and
Northeast was second low at $3,249,319. The Navy's bid estimate was $4,314,300.
TECOM acknowledged all six amendments and, as instructed by amendment
No. 6, submitted its bid on the revised bid schedule. TECOM, however, crossed
out subitem AS for the downspouts with the notation "see amendment #0003"
and altered the language of additive item No. 0003 to conform to the revised
language added by amendment No. 5. The Navy rejected TECOM's bid as nonre-
sponsive because TECOM had taken exception to the IFB requirements for the
downspouts and additive item No. 0003.
The Navy awarded a $3,171,484 contract to Northeast on January 9, 1990.2
TECOM protested on January 18.3 Contract performance has been suspended
pending our decision on the protest. 31 U.S.C. § 3553(d) (1988); 4 C.F.R. § 21.4(b)
(1989).
In its report, the Navy now concedes that TECOM's bid was responsive with
regard to additive item No. 3. The Navy, however, contends that TECOM's bid
must still be rejected as nonresponsive because of TECOM's deletion of the bid
requirement for installation of the downspouts. In this regard, the Navy con-
tends that the affirmative deletion of a contract requirement, as opposed to
mere omission of a bid price, cannot be waived as immaterial.
To be considered for award, a bid must offer unequivocally to comply with all of
the IFB's material terms at the offered price. Federal Acquisition Regulation
(FAR) § 14.301(a) (FAC 84-53); Main Elec. Ltd., B-224026, Nov. 3, 1986, 86-2
CPD M 511. However, a contracting officer should waive a defect in a bid as a
minor informality if the defect is immaterial and if waiver will not be prejudi-
cial to other bidders. Leslie & Elliott Co., 64 Comp. Gen. 279 (1985), 85-1 CPD
E 212. A defect is immaterial if the effect on price, quantity, quality, or delivery
is negligible when contrasted with the total cost or scope of the services being
acquired. FAR § 14.405. In this regard, the omission of a bid price may be
waived where the item for which the price is omitted (1) is divisible from the
solicitation's overall requirements,4 (2) is de minimis as to the total cost, and (3)
would not affect the competitive standing of bidders. Leslie & Elliott Co., 64
Comp. Gen. 279, supra; Custom Envtl. Serv., Inc., B-234774, May 24, 1989, 89-1
CPD 1 501.
Here, we conclude from our review of the record that TECOM's deletion of the
downspout requirement from the revised bid schedule was an immaterial defect
which would not require the rejection of its low bid. In this regard, the govern-
ment's estimate for this subline item is $15,000. This represents only 0.5 percent
2The   Navy did not obligate funds for item No. 0002, the schedule of indefinite quantity work, at the time of con-
tract award. The $77,835 difference between Northeast's bid price and the contract award amount reflects the
price bid by Northeast for item No. 0002.
s On September 14, 1989, Northeast protested to our Office (B-236929) that TECOM's bid was not responsive. We
dismissed Northeast's protest on September 28 as premature after the Navy informed us that they had not yet
made a decision regarding the responsiveness of TECOM's bid.
4 If an item is divisible, this indicates that it may have a negligible impact on the quality of the job contract work.
See Leslie & Elliott Co., 64 Comp. Gen. 279, supra.


Page 443                                                                                           (69 Comp. Gen.)
of TECOM's total bid price of $2,992,118. Northeast's bid was $3,249,319, of
which $250 was for the downspouts.5 We find that the cost to install the down-                                        W
spouts is de minimis in comparison to the costs of the overall contract require-
ments. Furthermore, since TECOM's bid is $257,201 lower than Northeast's bid,
and the downspout subitem represents, at most $15,000 based on the govern-
ment estimate, or only 5.8 percent of the difference between TECOM's and
Northeast's bid, the waiver of the failure to offer the downspouts will not ad-
versely affect the relative competitive standing of the bidders.
Moreover, we find no requirement that the installation of the downspout be per-
formed as a part of the overall contract requirements. The IFB sought, as the
basic bid, the general repair and renovation of family housing. The installation
of the downspouts was 1 of 20 subline items of indefinite quantity work, which
included such items as replacement of light switch cover plates, garbage dispos-
als, and bathroom light fixtures. The IFB provided that the government was not
obligated to order any of the indefinite quantity work. Thus, the installation of
the downspouts is not an essential or integral part of the overall contract per-
formance, such that the quality of the contract performance would be effected.
See Leslie & Elliott, 64 Comp. Gen. 279, supra.
Further, we do not agree with the Navy that TECOM intended to take excep-
tion to the solicitation requirements. Rather, the record shows that TECOM be-
lieved that it was promising to comply with all of the material terms of the IFB,
as amended. In this regard, the record indicates that the inclusion of the down-
spout line item in the IFB was inadvertent. See footnote No. 1, infra. While the
Navy in its post-conference comments has provided an affidavit from an engi-
neer which states there is a continuing need for the downspouts, this affidavit
provides no explanation as to why this line item was deleted from the IFB in
amendment No. 3 and does not refute the contracting officer's statement that
the inclusion of this line item in amendment No. 6 was inadvertent or explain
why the drawings show the deletion of the downspouts. Thus, while amendment
No. 6 unequivocally included the downspout line item, TECOM's confusion on
this point was understandable, given amendment No. 3's express deletion of this
requirement.
Under the circumstances, the Navy should waive TECOM's bid defect as a
minor informality since the defect is de minimis and divisible, and since the
waiver would not be prejudicial to other bidders.
Accordingly, we sustain the protest. We recommend that the Navy terminate
Northeast's contract for the convenience of the government and make award to
TECOM, if otherwise proper. TECOM is entitled to recover its costs of filing and
pursuing the protest, including reasonable attorneys' fees. 4 C.F.R. § 21.6(d).
TECOM should submit its claim for its costs directly to the agency. 4 C.F.R.
§ 21.6(e).
I The determination of the impact of the cost of an omitted bid item is based on the government estimate, if possi-
ble. Custom Envtl. Serv., Inc., B-234774, supra. However, using Northeast's $250 bid price for the installation of
the downspouts, the evaluated price to install the downspouts represents only 0.008 percent of TECOM's total bid
price.

Page 444                                                                                       (69 Comp. Gen.)
.   B-233742.5, et al., May 14, 1990
     Procurement
     Bid Protests
     * GAO procedures
     * * GAO decisions
     * * * Reconsideration
     Decision finding that awardee's proposal was noncompliant with solicitation requirements, and rec-
     ommending that negotiations be reopened under revised specifications, is affirmed where reconsider-
     ation request is based on mere disagreement with prior decision or arguments that could have been,
     but were not, raised during consideration of protest, and record does not otherwise show error of
     fact or law warranting reversal or modification of decision.

     Procurement
     Bid Protests
     * GAO decisions
     * * Recommendation affirmation
     Recommendation to reopen negotiations under revised specifications is affirmed notwithstanding po-
     tential for additional cost to the government where any such cost would be due in large measure to
     the agency having placed a substantial order under the contract after the protest conference, at
     which the awardee's compliance with the specifications was in issue, and only 1 month prior to the


.    due date for the General Accounting Office's decision.

     Matter of: Honeywell Federal Systems, Inc.; Martin Marietta
     Corporation; Department of the Air Force-Request for
     Reconsideration

     Thomas Madden, Esq., and Bill Walsh, Esq., Venable, Baetjer, Howard & Civiletti, for the protester.

     William W. Goodrich, Jr., Esq., Arent, Fox, Kintner, Plotkin & Kahn, for the interested party,
     Martin Marietta Corporation.

    John P. Janeck, Esq., Office of the General Counsel, Department of the Air Force, for the agency.

     David Ashen, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in
     the preparation of the decision.


     Honeywell Federal Systems, Inc., Martin Marietta Corporation and the Depart-
     ment of the Air Force request reconsideration of our decision in Martin Mariet-
     ta Corp., 69 Comp. Gen. 214 (1990), 90-1 CPD ¶ 132. In that decision, we sus-
     tained Martin Marietta's protest against the Air Force's award of a contract to
     Honeywell under request for proposals (RFP) No. F19628-88-R-0038, for micro-
     computer workstations for the World-Wide Military Command and Control Sys-
     tem's Information System (WIS). We sustained the protest on the basis that
     Honeywell failed to satisfy the RFP requirement for a multi-tasking capability.
    We affirm the decision.

     Page 445                                                                          (69 Comp. Gen.)
The WIS specification generally required that the workstations "be capable of
executing correctly a multi-tasking operating system that meets the require-*
ments of 3.1.4.2.1" of the specification. That paragraph defined the required
multi-tasking capability as the ability to support the concurrent execution of a
minimum of 10 "tasks," and specifically stated that the multi-tasking operating
system must be capable of providing at least 10 windows on the computer
screen. Honeywell offered an Apple Corporation Macintosh lIx computer with
an A/UX operating system, Apple's implementation of the UNIX operating
system. It proposed to meet the specification requirements in the user support
services area (one of the four broad classes of required application software) for
wordprocessing, spreadsheet and graphics capabilities with Macintosh operating
system (MAC/OS) applications running under the A/UX operating system. Al-
though multiple, non-MAC/OS applications could be executed simultaneously
on this system, only one MAC/OS software application could be run at a time in
the required secure operating mode; multiple MAC/OS applications could not be
launched. (Honeywell proposed to supply after award an upgrade which would
enable the operating system to launch multiple MAC/OS applications.)
In its protest of the subsequent award to Honeywell, Martin Marietta contended
that Honeywell's proposed workstation failed to comply with the solicitation re-
quirement for a multi-tasking operating system because it lacked the current
capability to initiate and simultaneously execute multiple user support services
applications. The Air Force and Honeywell, on the other hand, argued that
since the detailed definition of the required multi-tasking capability was found
only in a subsection of the specification section describing one of the other
broad classes of required application software, that is, the system and applica-
tions development support services, the multi-tasking requirement only applied
to that class of software applications.
We disagreed with Honeywell and the agency. We found that their interpreta-
tion ignored the general provisions of the specification requiring "a multi-task-
ing operating system that meets the requirements of 3.1.4.2.1" and those provid-
ing that the required user support services software shall execute "within, and
under the control of the native environment supplied by the Target [Required]
Workstation multi-tasking operating system." In our view, the specification,
when read as a whole, generally required the operating system offered for the
initial deliveries to be capable of initiating and simultaneously executing up to
10 of the proposed software tasks or applications; the specification did not envi-
sion that the overall requirement for multi-tasking could be frustrated by allow-
ing an offeror to propose a class of software that does not permit multi-tasking.
Accordingly, we concluded that Honeywell's proposed system was noncompliant
with the multi-tasking requirement. We sustained the protest on this ground
and recommended that the agency reopen negotiations with the offerors in the
competitive range, clarify its actual minimum needs with respect to multi-task-
ing, and then request a new round of best and final offers (BAFOs).


Page 446                                                            (69 Comp. Gen.)
Multi-Tasking
Honeywell contends, and the Air Force concurs, that our prior decision errone-
ously failed to take into consideration the fact that the specification defined the
required multi-tasking capability in terms of the concurrent execution of a min-
imum of 10 "tasks," that is, units of work to be accomplished within a particu-
lar software application, rather than in terms of software applications or pro-
grams themselves, which may consist of one or more tasks. Honeywell concludes
that since its system is capable of executing 10 tasks under one application, it
met the multi-tasking requirement. In addition, Honeywell contends that our
decision failed to distinguish between the operating system and the software ap-
plications. According to Honeywell, since the specification by its terms required
a "multi-tasking operating system" and Honeywell proposed an operating
system capable of multi-tasking given appropriate software, the fact that multi-
ple MAC/OS applications could not be simultaneously executed on the operat-
ing system at time of award due to the lack of appropriate software at that time
is irrelevant; in Honeywell's view, the multi-tasking requirement extended only
to the operating system, and not to the software.
Under our Bid Protest Regulations, a party requesting reconsideration must
show that our decision was founded on an error of either fact or law, or specify
information not previously considered that warrants reversal or modification of
our decision. 4 C.F.R. § 21.12(a). Our Regulations do not permit a piecemeal
presentation of evidence, information or analyses, since a piecemeal presenta-
tion could disrupt the procurement process indefinitely; accordingly, where a
party raises in its reconsideration request an argument that it could have, but
did not raise at the time of the protest, the argument does not provide a basis
for reconsideration. See FAA Seattle Venture, Ltd.-Request for Reconsideration,
B-234998.4, Oct. 12, 1989, 89-2 CPD ¶J 342; Daylight Plastics, Inc.-Request for
Recon., B-225057.2, Apr. 28, 1987, 87-1 CPD 1T 440.
Honeywell clearly could have argued at the time of the protest that the
task/application distinction was significant for purposes of defining the multi-
tasking requirement; neither it nor the agency did so, and the issue thus was
never presented for our consideration. Indeed, during the protest conference, a
technical expert called by Honeywell described the multi-tasking requirement
as a requirement for "system multi-tasking with 10 active tasks or applications.
And that is the key word, applications." Conference Transcript 335. When asked
by our Office whether he was distinguishing between tasks and applications, the
Honeywell technical expert replied "No." Id. This argument therefore is not
now a basis for reconsidering our decision.
In any case, we find Honeywell's task/application argument unpersuasive. The
specification defined the required multi-tasking capability in broad terms; no so-
licitation provision restricted the requirement to providing only for the simulta-
neous execution of tasks running under a single application. In the absence of a
specific exclusion from the broad sweep of the language regarding multi-task-
ing, we think the only reasonable interpretation of the requirement is that the

Page 447                                                             (69 Comp. Gen.)
proposed operating system must be capable of supporting the simultaneous exe-
cution of any reasonable combination of up to 10 tasks, including those combina-
tions of tasks running under more than one application.
Regarding Honeywell's second argument, as noted above, we specifically reject-
ed in our prior decision the position that the RFP created a distinction between
the operating system and the proposed applications for purposes of defining the
extent of the multi-tasking requirement. Again, given the broad, unrestricted
definition of the requirement for a multi-tasking operating system, it is our
view that the specification did not envision that the overall requirement for
multi-tasking could be frustrated by allowing an offeror to propose a class of
software that does not permit multi-tasking. Honeywell's mere disagreement
with our decision in this regard does not serve as a basis for us to reconsider the
decision. Id.
Honeywell maintains that the solicitation is subject to more than one reasona-
ble interpretation; according to Honeywell, "reasonable minds can certainly
differ over exactly what [the specification] requires in terms of multi-tasking."
We disagree. As stated above and in our original decision, we read the multi-
tasking provision as applicable to tasks from different applications. In any case,
even if we shared the view now advanced by Honeywell (the same view as
adopted by the agency's evaluators), our decision would be the same. Specifica-
tions must be free from ambiguities and must describe the minimum needs of
the procuring activity accurately. See T&A Painting, Inc., B-229655.2, May 4,
1988, 88-1 CPD 11 435. Where it is clear that offerors have responded to a solici-
tation requirement based upon different reasonable assumptions as to what the
requirement was, the competition was conducted on an unequal basis and the
requirement generally must be resolicited. See Reflect-A-Life, Inc., B-232108.2,
Sept. 29, 1989, 89-2 CPD X 295. Thus, since Honeywell's reading of the multi-
tasking requirement, as experienced here, is different than Martin Marietta's,
the competition should be reopened.

Reopening Negotiations
In their requests for reconsideration, Martin Marietta and the Air Force ques-
tion our recommended remedy. In our prior decision, we recommended that the
agency reopen negotiations with the offerors in the competitive range, clearly
state what capabilities are necessary to satisfy its actual minimum needs with
respect to multi-tasking (and any other provisions that should be clarified to
assure that offerors are provided with an opportunity to compete on a common
basis), and then request a new round of BAFOs. (In addition, we found Martin
Marietta to be entitled to recover protest costs.)
Both Martin Marietta and the Air Force assert that it would not be in the best
interest of the government to reopen negotiations. The Air Force contends that
our recommendation would result in substantial cost to the government, and a
significant delay in fielding new WIS workstations and developing specialized
software for them, in the event reopening negotiations ultimately resulted in ac-

Page 448                                                             (69 Comp. Gen.)
    .   quisition of a workstation that was not 100 percent compatible with the Honey-
        well workstations already purchased. According to the agency, it has placed
        orders with Honeywell for hardware, software and services totaling $19,270,000;
        the equipment reportedly would have a residual, resale value of between only
        $6,343,000 and $9,684,000. In addition, the agency estimates that award to an-
        other offeror would result in the loss of $1,873,000 already expended by the
        agency for contract administration, $2,570,000 expended for software develop-
        ment, and $100,000 expended for training, and would require the expenditure of
        $2,000,000 to reopen the source selection process. In sum, as detailed by the
        agency, the costs of acquiring an incompatible workstation could total between
        $16,129,000 and $19,470,000.1 The Air Force also is concerned that there would
        be a lengthy delay in fielding an improved communications network in the
        event that implementation of our recommendation resulted in award for an in-
        compatible WIS workstation. The agency concludes that it would be more appro-
        priate to limit the remedy here to a finding that Martin Marietta is entitled to
        recover the cost of preparing its proposal (in addition to its protest cost).
        Martin Marietta, on the other hand, reiterates its previous request, which we
        denied in our prior decision, that we recommend the immediate termination of
        Honeywell's contract, and direct that award be made to Martin Marietta.
        Martin Marietta argues that it would be prejudiced by a reopening of negotia-
        tions because information concerning its proposed approach and prices has been
        revealed during the course of the protest, and Honeywell has gained additional
        time in which to remedy its system's multi-tasking deficiencies and other al-
        leged deficiencies with respect to the specification requirements (concerning a
        database management system and access to the mainframe computers which
        form the core of the WIS network). In addition, Martin Marietta questions the
        reported impact on the agency of terminating Honeywell's contract, asserting
        that: (1) the agency's estimate of the cost of terminating Honeywell's contract is
        overstated; (2) award to Martin Marietta would save the government money be-
        cause of its lower stated BAFO price, notwithstanding any termination and
        transition costs; (3) software developed pursuant to the "open" software stand-
        ards in the specification should be fully portable-transferable-to Martin Mar-
        ietta's workstation; and (4) that it can immediately supply a large number of
        workstations, thus minimizing any delay in fielding new WIS workstations.
        We are not persuaded that the circumstances here warrant modifying our rec-
        ommendation. First, a directed award 3to Martin Marietta would not be appro-
        priate. We sustained Martin Marietta's protest because Honeywell's proposal
        failed to conform to the material requirement for a multi-tasking capability and
        thus could not form the basis for award. See Consulting and Program Manage-
        ment, 66 Comp. Gen. 289 (1987), 87-1 CPD li 229. It appeared that the specifica-
        tion was in fact defective; based on its initial determination that Honeywell's
        proposed system would satisfy its minimum needs and its arguments in re-
        ' At one point in its request for reconsideration, the Air Force refers to a potential cost impact of $25,333,000. This
*       figure, however, apparently does not account for the residual, resale value of the ordered equipment as estimated
        by the agency.


        Page 449                                                                                           (69 Comp. Gen.)
sponse to the protest, the Air Force essentially has found that the specification
overstated its minimum needs. Tektronix, Inc., B-225769, June 8, 1987, 87-1
CPD 1I 590, aff'd, Biddle Instruments; Tektronix,       Inc.-Recon.,     B-225769.9,
B-225769.3, Sept. 15, 1987, 87-2 CPD 1I 251. While the appropriate remedy of
course depends upon all the circumstances surrounding the procurement,
United States Coast Guard-Request for Advance Decision, 69 Comp. Gen. 30
(1989), 89-2 CPD 2 366, the proper remedy in these circumstances generally is
revision of the specification to reflect the agency's actual minimum! needs, af-
fording offerors an opportunity to respond to the revised specification and, if ap-
propriate based on the recompetition, terminating the improperly awarded con-
tract. See generally id.; Consulting and Program Management, 66 Comp. Gen.
289, supra (recommendation to resolicit under revised specifications).
There is no evidence that Martin Marietta will be placed at a competitive disad-
vantage by the reopening of negotiations; Martin Marietta has had the same
opportunity as Honeywell to further develop or modify its system and to remedy
the evaluated deficiencies. In any case, the risk of an auction or the possibility
of other prejudice to Martin Marietta resulting from reopening is secondary to
the need to preserve the integrity of the competitive procurement system
through appropriate corrective action. See generally Power Dynatec Corp.,
B-236896, Dec. 6, 1989, 89-2 CPD t 522.
The Air Force's estimate of the extent of the potential increased cost to the gov-
ernment also does not persuade us that Honeywell's contract should be allowed
to stand without reopening the competition. In this regard, the Air Force's esti-
mates are based on the possibility of an award for an incompatible system, but           W
the agency has not documented the extent and effect of any likely incompatibil-
ity; we note for instance that, as indicated above, Martin Marietta maintains
that software developed in accordance with the specification should be fully
compatible with any compliant system. The agency's estimate of the residual
value of equipment already ordered also is unsupported and thus is only specu-
lative. The Air Force's position also ignores the potential cost savings, that may
be realized from reopening the competition; Martin Marietta offered a lower
fixed price than Honeywell in its BAFO for the evaluated quantity (which was
approximately 25 percent of the maximum quantity), and relaxation of the spec-
ifications to reflect the agency's actual minimum needs may result in lower
prices.
To the extent that implementation of our recommendation may result in a net
cost increase to the government, we point out that this is due in large measure
to the agency having placed an order under the contract for supplies in the
amount of $15,300,000--81 percent of all hardware, software and services or-
dered-on December 29, 1989; this was after the protest conference, and only 1
month before the due date for our decision. Although we recognize that the pro-
test was not filed soon enough after award to bring into effect the stay provi-
sions of the Competition in Contracting Act of 1984, 31 U.S.C. § 3553 (Supp. V
1987), nevertheless, in our view, the agency assumed the risk that by issuing a
substantial delivery order after the conference and 1 month prior to the due

Page 450                                                               (69 Comp. Gen.)
date for our decision, its actions would result in additional cost to the govern-
ment. We are not inclined to alter our otherwise appropriate recommendation
based on costs incurred by the Air Force at that juncture in the protest process.
Finally, the potential for delay appears to be mitigated by the fact that Martin
Marietta states it has a significant number of workstations available for deliv-
ery to the agency should it receive an award.
The decision is affirmed.



B-238306, May 14, 1990
Procurement
Special Procurement Methods/Categories
* Federal supply schedule
* * Offers
* * * Rejection
*Md E Propriety
Under multiple-award Federal Supply Schedule (FSS) solicitation, where agency determined that
protester offered required most favored customer pricing-prices equal to or lower than offeror's
lowest commercial prices-for certain percentage of large number of items and solicitation provided
for possible award on a product-by-product basis, outright rejection of proposal for unreasonable
pricing was improper; agency should have given protester opportunity through discussions to estab-
lish which items were priced acceptably, requested best and final offer, and included protester on
FSS for all properly priced items.

Matter of: Baxter Healthcare Corporation

Justin D. Simon, Esq., Dickstein, Shapiro & Morin, for the protester.
E. L. Harper, Office of Acquisition and Materiel Management, Department of Veterans Affairs, for
the agency.
David Ashen, Esq., and John M. Melody, Esq., Office of the General Counsel, GAO, participated in
the preparation of the decision.


Baxter Healthcare Corporation protests the Department of Veterans Affairs'
(VA) rejection of its proposal under request for proposals (RFP) No. M3-Q1-89,
a multiple-award Federal Supply Schedule (FSS) solicitation for medical sup-
plies. Baxter challenges VA's determination that it could not find Baxter's of-
fered prices equal to or better than those offered its most favored customer
(MFC), and its resultant rejection of Baxter's entire proposal as unreasonably
priced.
We sustain the protest.

Page 451                                                                         (69 Comp. Gen.)
Background
Under multiple-award schedules, contracts are negotiated with more than one
supplier for delivery of commercial supplies and services that are comparable
and of the same generic type, at prices based on discounts from commercial
price lists. Federal Acquisition Regulation (FAR) § 38.102-2(a). Contracts are
awarded only after the contracting officer determines that the prices, terms and
conditions offered are fair and reasonable. FAR § 38.102-2(c). Generally, the de-
termination of price reasonableness is a matter of administrative discretion in-
volving the exercise of business judgment by the contracting officer; therefore,
we will question such a determination only where it is clearly unreasonable or
there is a showing of bad faith or fraud. See Sal Esparza, Inc., B-231097, Aug.
22, 1988, 88-2 CPD f 168.
Although VA is authorized to award schedule contracts for certain medical
items, the FSS program is directed and managed by the General Services Ad-
ministration (GSA). FAR §§ 38.000 and 38.101(e). An agency's determination of
price reasonableness therefore is proper when it meets the standards in GSA's
Policy Statement on Multiple Award Schedule Procurement, 47 Fed. Reg. 50,242
(1982), which establishes a goal of obtaining discounts from an offeror's estab-
lished catalog or commercial prices that are equal to or better than discounts
the offeror extends to its MFC. 47 Fed. Reg. 50,244; see Credit Bureau Inc. of
Georgia, B-220890, Feb. 27, 1986, 86-1 CPD 1 202. The Policy Statement does
provide for awarding FSS contracts even when the discount offered the govern-
ment is not equal to or greater than the MFC's discount, where the govern-
ment's terms and conditions differ from those given to the MFC, for instance
"where the government's overall volume of purchases does not warrant the best
price." 47 Fed. Reg. 50,244.
The RFP solicited offers for a 3-year FSS contract to supply 37 categories, or
special item numbers (SINs), of surgical and medical equipment and supplies.
For each SIN under which offerors were proposing products, the solicitation re-
quested the offerors to furnish pricing and sales data for the 5 products with the
largest dollar sales volume. Three different divisions of Baxter submitted offers
for over 8,400 products under approximately 17 of the SINs. After reviewing the
pricing and sales data furnished with Baxter's offers, and additional informa-
tion furnished at VA's request, the contracting officer, on January 31, 1989, re-
quested an audit by the Defense Contract Audit Agency (DCAA). The audit ex-
amined data for 188 products, chosen by the government to include the SINs
accounting for the highest volume of government sales and those products com-
prising a significant percentage of government sales in each SIN.
Although the audit showed that Baxter was offering MFC pricing for approxi-
mately 12 of the 188 products, for nearly all (over 85 percent) of the remaining
products, Baxter was offering a price higher than or equal to its highest com-
mercial price among the sales surveyed. Furthermore, according to DCAA, Bax-
ter's commercial prices, which varied widely, bore no relation to the volume of
sales to a particular customer, so that some customers purchasing large vol-
Page 452                                                            (69 Comp. Gen.)
.   umes of products paid more per unit than customers purchasing in smaller
    volume. As a result, DCAA found that Baxter did not have an MFC, but instead
    sold its products "at whatever the market will bear." The contracting officer ac-
    cepted DCAA's finding and concluded that there thus was no basis for determin-
    ing Baxter's prices fair and reasonable. VA considered asking Baxter for cost or
    pricing data, "which would have been the only other basis for award," but de-
    cided against it, concluding on the basis of past experience with Baxter that the
    firm would refuse to supply such data. Accordingly, the contracting officer re-
    jected Baxter's proposal without requesting a best and final offer.
    Baxter challenges VA's determination that it has no MFC, arguing that an
    MFC in fact was readily ascertainable by means of a simple arithmetical com-
    parison of the prices Baxter charges its commercial customers with Baxter's
    proposed prices on this RFP. Baxter maintains that its proposal should not have
    been rejected for inability to determine reasonableness of its prices.

    Analysis
    VA's determination of price unreasonableness as it related to Baxter's prices for



.
    the products in the sample for which it was not offering its lowest prices was
    unobjectionable. Notwithstanding the likelihood of approximately $65 million in
    sales to the government for the products it proposed, Baxter offered its highest
    commercial price (among the sales surveyed) for nearly all of the sampled prod-
    ucts other than the 12 for which it was offering MFC pricing, and the firm has
    failed to demonstrate that any difference in terms and conditions adequately ex-
    plains the relatively higher prices offered the government. See Policy State-
    ment, 47 Fed. Reg. 50,244 (burden is on offeror to identify differing terms and
    conditions which explain price differential); Baxter Healthcare Corp.,
    B-230580.5, Apr. 26, 1990, 69 Comp. Gen. 421, 90-1 CPD Pi 429. The Policy State-
    ment permits inclusion of products with the lowest net price on the schedule
    even where they are not MFC prices. However, VA's review of nearly 50 prod-
    ucts selected by Baxter did not show the lowest net prices. Although the agency
    found that inadequate product descriptions from two of the divisions precluded
    determination of comparable products, none of Baxter's prices for the products
    from the third division were lower than the prices offered by competitors (as
    selected by Baxter) for comparable products. We note that an agency properly
    may perform a price evaluation based on a sampling of item prices. 47 Fed. Reg.
    50,248; Carrier Joint Venture, B-233702, Mar. 13, 1989, 89-1 CPD r 268.
    While we find VA properly rejected Baxter's proposal as to products for which
    the firm did not offer MFC pricing, we also find that VA improperly rejected
    the proposal as to the MFC-priced items revealed in the sampling. As VA itself
    acknowledges, the solicitation provided that award may be made on a product-
    by-product basis.' Indeed, according to the agency, not only can "a contract be
    I The solicitation indicated that the award decision may be made on a product-by-product basis when it (1) re-
    quired the submission of catalogs or price lists and the listing of sales and commercial discounts for specific, pro-
                                                                Continued


    Page 453                                                                                         (69 Comp. Gen.)
awarded for a single item under a SIN just as easily as for many items under
that SIN," it may even be to the disadvantage of the government under the cir-                                         W
cumstances not to evaluate on a product-by-product basis.
Where offered products are priced equal to or lower than the offeror's lowest
commercial prices for the products and, as was the case here, are not otherwise
determined to be out of line with government estimates and the prices proposed
by other offerors, there is no basis for rejecting the products as unreasonably
priced due to the lack of MFC pricing on other items. Thus, since data available
to and considered by the agency indicated that Baxter's offered prices for 12
products were equal to or lower than Baxter's lowest commercial prices, these
products should have been included on the schedule.
In addition, once the audit sampling showed MFC pricing for a percentage of
the items, VA should have taken further steps to identify which of Baxter's
other products were properly priced. The results of the sampling-MFC pricing
for approximately 12 of 188 products-suggested statistically that Baxter may
have been offering MFC pricing for over 500 (i.e., approximately 6 percent) of
the 8,400 products it offered. The solicitation specifically provided that a BAFO
would be requested at the conclusion of negotiations. In our view, instead of re-
jecting Baxter's proposal outright without requesting a BAFO, the agency
should have afforded Baxter the opportunity to indicate (and furnish substanti-
ating sales data for) the remaining products for which it was offering MFC pric-
ing. Of course, VA then would have been permitted to sample the products iden-
tified to determine whether they all in fact satisfied the MFC pricing crite-
rion-that is, whether Baxter was offering the government its lowest prices-
and warranted inclusion on the schedule.
The protest is sustained.
By separate letter of today to the Secretary of Veterans Affairs, we are recom-
mending that VA reopen negotiations and afford Baxter the opportunity to
submit a BAFO certifying and documenting for which products it is offering
MFC pricing. In addition, we find that Baxter is entitled to be reimbursed its
protest costs. 4 C.F.R. § 21.6(d)(1) (1989); see Falcon Carriers, Inc., 68 Comp. Gen.
206 (1989), 89-1 CPD M 96.




posed products; (2) established a minimum level of anticipated purchases as a precondition to award for any par-
ticular product; and (3) provided that the agency may make awards for the listed articles or services, but cautioned
that it would award "only one contract for each specific product" in the event of multiple offers of identical prod-
ucts. See Baxter Healthcare Corp., B-230580.5, supra.


Page 454                                                                                         (69 Comp. Gen.)
*   B-216640.8, May 16, 1990
    Civilian Personnel
    Compensation
    * Overtime
    * * Claims
    * * * Statutes of limitation
    On reconsideration, our prior decision denying additional overtime compensation to individual mem-
    bers of the International Association of Firefighters, Local F-100, is affirmed. An initial request for
    a decision was not accompanied by a signed representation authorization or claim over the signa-
    ture of the individual claimants so as to toll the 6-year Barring Act, 31 U.S.C. § 3702(b) (1982). The 6-
    year period of limitation in 31 U.S.C. § 3702(b) is a condition precedent to the right to have a claim
    considered by our Office, and our Office has no authority to waive or modify its application. 68
    Comp. Gen. 681 (1989), affirmed.


    Matter of: Federal Firefighters-Overtime Pay-Application of Barring
    Act-Reconsideration

    Frederick Evans, Jr., President, International Association of Firefighters, Local


.
    F-100, through counsel, requests reconsideration of our decision Federal Fire-
    fighters, 68 Comp. Gen. 681 (1989). The decision, among other things, denied a
    request for additional Fair Labor Standards Act compensation because an ini-
    tial letter request from Mr. Evans was not accompanied by a signed representa-
    tion authorization or claim over the signature of the individual claimants so as
    to toll the 6-year Barring Act, 31 U.S.C. § 3702(b) (1982).
    Mr. Evans contends that a claim was accepted by this Office on behalf of all of
    its union members in accordance with our regulations. Therefore, the Barring
    Act was tolled for purposes of retroactive payment of overtime compensation for
    each union-represented employee.
    It is true as Mr. Evans contends that this Office accepted his initial request for
    a decision under our procedures in 4 C.F.R. part 22 (1989), which sets forth the
    procedures governing requests for decisions concerning the legality of appropri-
    ated fund expenditures on matters of mutual concern to federal agencies and
    labor organizations. The regulations provide that a decision may be granted to
    the head of a labor organization representing federal employees. 4 C.F.R. § 22.2.
    However, these regulations clearly require a power of attorney in cases where
    payment on a claim is to be made. 4 C.F.R. §§ 11.3 and 22.3(e). This is because
    our authority to issue a decision is distinct from the statutory and regulatory
    requirements governing our consideration of a claim since the 6-year period of
    limitation in 31 U.S.C. § 3702(b) is not a mere statute of limitations, but is a
    condition precedent to the right to have a claim considered by our Office. Hai
    Tha Truong, 64 Comp. Gen. 155, 160 (1984).
    Mr. Evans contends that our requirement that a claim must be presented in
    writing over the signature and address of the claimant is a mere "technical"
*   requirement. However, this requirement corresponds to the statutory language

    Page 455                                                                               (69 Comp. Gen.)
 in 31 U.S.C. § 3702(b)(1) which states that "a claim against the government pre-
 sented under this section must contain the signature and address of the claim-                            W
ant or an authorized representative."' Thus, our regulations implement the
statute and have the full force and effect of law. A claimant's compliance with
the regulations has long been considered a necessary prerequisite to our consid-
eration of a claim. 5 Comp. Gen. 1058 (1926); 18 Comp. Gen. 84, 89 (1938); 24
Comp. Gen. 9, 10 (1944); 25 Comp. Gen. 670, 673 (1946). See also, James W Greg-
ory, B-201936, Apr. 21, 1981, where we applied the Barring Act and refused to
consider an employee's claim which had previously been presented by a certify-
ing officer whose request for an advance decision was not accompanied by a
signed claim or voucher.
We would also point out that numerous members of Local F-100 were aware of
the procedural requirement to file a claim in their individual capacity in order
to toll the Barring Act, and did so in this case. Firefighters, B-216640il7, supra,
at 3.
Also, we have consistently held that we are without authority to waive or
modify the application of 31 U.S.C. § 3702(b). Carmine A. Barone, 67 Comp. Gen.
467 (1988); Frederick C. Welch, 62 Comp. Gen. 80 (1982).
Accordingly, upon reconsideration, Mr. Evans's claim for additional 'overtime
compensation on behalf of Local F-100 members is denied.                  l



B-238682, B-238682.2, May 16, 1990
Procurement
Special Procurement Methods/Categories
* Federal supply schedule
*EUse
* * * Propriety
Contracting agency may acquire items under a Federal Supply Schedule (FSS) contract where inci-
dental, non-FSS items are also being acquired in the same procurement so long as the acquisition is
made at the lowest aggregate price and the cost of the non-FSS items is insignificant compared to
the total cost of the procurement. Where agency solicits a fully integrated system, a significant por-
tion of which is not available under FSS, agency cannot reasonably conclude that items to be ac-
quired are FSS items and, therefore, agency is required to procure entire system on open market.

Matter of: Amray, Inc.

Virginia D. Green, Esq., Reed, Smith, Shaw and McClay, for the protester.

Stephen B. Hamilton for JEOL USA, Inc., an interested party.

Arthur I. Rettinger, Esq., Office of the Chief Counsel, U.S. Customs Service, for the agency.

' Recodification of the language substituted "representative" for "agent or attorney." 31 U.S.C. § 71a(l)1(1976).@

Page 456                                                                               (69 Comp. Gen.)
O   Scott H. Riback, Esq., and Michael R. Golden, Esq., Office of the General Counsel, GAO, participated
    in the preparation of the decision.


    Amray, Inc., protests the award of delivery order No. CS-H-90-00016-7 to JEOL
    USA, Inc., under request for quotations (RFQ) No. 89-200, issued by the Cus-
    toms Service for a quantity of scanning electron microscopes (SEM). Amray
    argues that the agency improperly made award to JEOL under the Federal
    Supply Schedule (FSS).
    We sustain the protest.
    The RFQ was issued on August 8, 1989, to all three FSS vendors listed under
    Federal Supply Classification group 66, part II, section C, category 603-24(b) of
    the General Services Administration's (GSA) multiple-award FSS for clinical
    and biological equipment.' This RFQ was issued to determine if FSS contractors
    could meet the agency's specific needs. Firms were requested to provide quotes
    for a quantity of three fully integrated SEMs which met the various mechani-
    cal, dimensional, and performance characteristics specified in the RFQ. In re-
    sponse, all three firms submitted quotations for various configurations of their
    respective equipment to meet the requirements specified in the RFQ. In this


.   regard, Amray submitted three alternate quotations which varied in terms of
    the configuration of the firm's equipment and also varied in terms of price.
    JEOL submitted a quotation which offered to supply its FSS-listed model 820
    SEM and which included, among other accessories, a Princeton Gama-Tech
    (PGT) IMIX x-ray with imaging which was an item not listed in the firm's FSS
    schedule.2
    After receipt of the quotations, the agency's technical representatives conducted
    an evaluation of the various configurations offered and concluded that systems
    which featured the PGT-IMIX were the only systems which would meet the
    agency's requirements. It specifically concluded that this feature was mandato-
    ry to meet its needs. The agency therefore awarded a delivery order to JEOL on
    the grounds that the firm had offered the lowest overall evaluated price for the
    desired systems. The agency discussed with JEOL its price on certain open
    market items, items not on JEOL's FSS, which resulted in a price reduction.
    Apparently, the Customs Service also discovered that it had a requirement for
    one additional SEM. The Customs Service subsequently awarded a delivery
    order to JEOL for four JEOL model 820 SEMs with related accessories for a
    total amount of $975,666. Of that amount, almost half represents non-FSS acces-
    sories available only in the open market, the most significant of which is the
    PGT-IMIX which was offered by JEOL at a price of $67,900 per unit.3
     ' The Customs Service is a mandatory user of the FSS.
    2 Amray's second quotation included the PGT-IMIX system which was also not listed on its FSS. The agency re-
    ports that this system helps the agency in analyzing commodity samples for subsequent tariff classification.
    'The record indicates that JEOL intends to furnish its model 6100 instead of its model 820 which is allegedly a
    "replacement" model for the 820, offering various technological upgrades. The JEOL model 6100 is not currently
    listed in the firm's FSS catalogue, the substitution apparently not having yet been approved by GSA.


    Page 457                                                                                    (69 Comp. Gen.)
Based on our in camera review of the award documents, we conclude that the
Customs Service has improperly placed a delivery order against JEOL's FSS             W
contract for items not included under that firm's contract. Consequently, we
need not specifically address the various allegations raised by Amray.
As a general rule, agencies which are mandatory FSS buyers must acquire
items exclusively from FSS vendors when the required items or similar items
are available under the FSS. See Federal Acquisition Regulation § 8.404 (FAC
84-49); Federal Property Management Regulations, 41 C.F.R. § 101-26.401
(1989). Our Office has permitted agencies to acquire items under an FSS con-
tract where incidental, non-FSS items are also being acquired in the same pro-
curement so long as the acquisition is made at the lowest aggregate price and
the cost of the non-FSS items is small compared to the total cost of the procure-
ment. See Synergetics Int'l, Inc., B-213018, Feb. 23, 1984, 84-1 CPD 1232. In Syn-
ergetics, for example, we found unobjectionable an agency's acquisition of satel-
lite data collection platforms from an FSS vendor which did not have certain
minor components of the overall system available under its FSS contract. In
that case we noted that the acquisition of the nonschedule items was reasonable
because the agency required that the items in question be compatible with the
schedule items and the cost of the non-FSS items was small in comparison to
the overall cost of the procurement.
Under the Competition in Contracting Act of 1984 (CICA) agencies are required,
when procuring property or services, to obtain full and open competition
through the use of competitive procedures. 41 U.S.C. § 253(a)(1)(A) (1988). "Full
and open competition" is obtained when "all responsible sources are permitted         W
to submit sealed bids or competitive proposals." Id; 41 U.S.C. §§ 259(c) and
403(7). CICA further defines the term "competitive procedures" to include GSA
multiple award schedule program procedures, if program participation has been
open to all responsible sources, and orders and contracts under such procedures
result in the lowest overall cost meeting government needs. 41 U.S.C. § 259(b)(3).
Under CICA, where the items contained in the FSS contracts have been subject
to competitive procedures to ensure that any order placed under the FSS will
result in the lowest overall cost to the government, CICA permits agencies to
purchase from FSS contracts. However, it follows that items not listed on the
schedule (such as open market items) have not been subjected to the competitive
procedures (full and open competition) that CICA requires.
Here, the Customs Service solicited a fully integrated SEM system configured to
meet its particular requirements and placed a delivery order with JEOL for
such a system, almost half the value of which is represented by non-FSS items.
Also, the most significant open market item was the PGT-IMIX x-ray which
was a mandatory item needed to meet agency needs. Under these circumstances
we think that the agency erred in regarding the SEM system in question as an
FSS item. Consistent with this position, we have held that where a predominant
portion of an agency's requirement is comprised of non-FSS items, the agency
has acted properly in conducting its procurement outside of the FSS. Profession-
al Carpet Serv., B-222986, July 24, 1986, 86-2 CPD 1 108. In our view, where an

Page 458                                                            (69 Comp. Gen.)
.   agency seeks to acquire a system which is comprised of both FSS and non-FSS
    items, and the non-FSS items of the system represent a significant portion of
    the acquisition and cannot be easily or reasonably separated from the FSS
    items, the system may not be acquired under the FSS. In this regard, we note
    that there is no way that the agency could be assured that the acquisition was
    made at the lowest overall cost since roughly half of the acquisition's value was
    awarded without the benefit of CICA's competitive procedures. Specifically, all
    potential vendors, other than FSS vendors, were excluded from filling the agen-
    cy's requirements. We therefore conclude that the agency erred in placing the
    delivery order with JEOL and believe that the acquisition should instead have
    been conducted by issuing an unrestricted formal solicitation open to all firms.
    The protest is sustained.
    We are recommending by separate letter of today to the Secretary of the Treas-
    ury that the contract awarded to JEOL be terminated for the convenience of
    the government. In addition, we are recommending that the Customs Service
    resolicit its requirements competitively. Finally, we find the protester is entitled
    to the costs of filing and pursuing its bid protest including attorneys' fees. 4
    C.F.R. § 21.6(d)(1) (1989).



O   B-238403, May 17, 1990
    Procurement
    Competitive Negotiation
    * Offers
    * * Cost realism
    * * MEvaluation
    * U MM Administrative discretion
    Agency may rely on the recommendations of the Defense Contract Audit Agency concerning direct
    labor and indirect cost rates in analyzing cost proposals.

    Procurement
    Competitive Negotiation
    * Offers
    MMEvaluation
    MMMPersonnel
    Agency does not have a duty to verify the availability of prospective employees proposed by an of-
    feror for whom offeror has submitted letters of commitment.




.
    Matter of: SRS Technologies

    Lawrence M. Farrell, Esq., McKenna, Conner & Cuneo, for the protester.

    Page 459                                                                          (69 Comp. Gen.)
Joseph D. West, Esq., Ronald A. Schechter, Esq., and Jeffrey M. Villet, Esq., Jones, Day, Reavis &
Pogue, for Engineering & Economic Research, Inc., and Walter R. Andrews, for RMS Technologies, W
Inc., the interested parties.

Craig E. Hodge, Esq., and Peggie L. Roberson, Esq., Office of Command Counsel, Department of the
Army, for the agency.
Jennifer Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office of the General Counsel, GAO,
participated in the preparation of the decision.


SRS Technologies protests the U.S. Army Missile Command's (MICOM) award
of a contract for software engineering support services to Engineering & Eco-
nomics Research, Inc. (EER), under request for proposals (RFP) No.
DAAH01-89-R-0007. SRS contends that MICOM failed to make certain adjust-
ments required by the solicitation to offerors' cost proposals and that it failed to
perform an adequate cost realism analysis. The protester also argues that EER
submitted misleading documentation of its ability to secure qualified personnel
to work on the contract.
We dismiss the protest in part and deny it in part.
The RFP, which was set aside for small disadvantaged businesses, anticipated
the award of a cost-plus-award-fee contract for basic and option performance pe-
riods extending through September 1993. Offerors were advised that in the eval-
uation of proposals, technical factors would be significantly more important
than cost, which would in turn be significantly more important than manage-
ment. As part of their technical proposals, offerors were required to define the
technical personnel mix that they would use to perform the contract tasks and
to identify the particular individuals that they would employ. For individuals
not currently in their employ, offerors were required to submit letters affirming
the individual's intent to accept full-time employment with the offeror if it were
awarded the contract. The RFP also provided that for purposes of evaluating
cost, the agency would develop a most probable cost assessment for each propos-
al based on the offeror's technical and management approach.
Four proposals were submitted in response to the RFP. The agency determined
that EER's proposal, which was second low in evaluated cost, represented the
best value to the government and selected it for award. SRS' protest to our
Office followed.
SRS argues first that the agency failed to adjust offerors' cost proposals to
standardize evaluation on a 40-hour workweek or to reflect government-provid-
ed space, as required by the solicitation.
The RFP provided that in determining most probable cost, offers would be eval-
uated on the basis of a 40-hour workweek standard regardless of whether or not
the offeror had proposed to use uncompensated overtime. The RFP also provid-
ed that cost proposals would be adjusted, as appropriate, for government-fur-
nished property, transportation, rent-free use of government property and other
such factors.

Page 460                                                                           (69 Comp. Gen.)
O   The agency denies the protester's first allegation, explaining (with supporting
    documentation) that although the labor rates that EER offered included uncom-
    pensated overtime, it had based its assessment of the most probable rates on a
    40-hour workweek standard. SRS, in commenting on the agency report, did not
    take exception to the agency's response; we therefore consider it to have aban-
    doned this issue and will not consider it further. Vista Scientific Corp.,
    B-231966.2, Dec. 27, 1988, 88-2 CPD q 625.
    In response to the protester's second allegation, MICOM contends that it was
    not required to adjust offerors' cost proposals for government-furnished office
    space since all offerors would have use of the same government-provided space.
    The RFP, as amended, provided under section H-10 that the government would
    furnish a total of 2,400 square feet of office space at Redstone Arsenal, Ala-
    bama, for use by the contractor in the performance of the proposed contract.
    The solicitation also provided, under section M, a formula to be used to adjust
    proposals to eliminate any competitive advantage that might accrue to a con-
    tractor possessing government production and research property other than
    that listed in section H of the RFP. In response to an offeror's request for clari-
    fication of the difference between the government-furnished property referenced
    in section H-10 and the government-owned production and research property


.   referenced in sections M-2 and M-3, the agency explained in amendment 2 to
    the RFP that:
    The Government Furnished Property (GFP) set out in Paragraph H-10 is that property which will
    be used in performance of the effort described in the Statement of Work, and is available to all
    offerors with no adjustment to the most probable cost. Under Paragraphs M-2 and M-3, any offeror
    can request additional Government-owned production and research property for which an evalua-
    tion to determine most probable cost will be made in accordance [with] Section M.
    Thus, contrary to the protester's contention, the solicitation did not require that
    proposals be adjusted to take into account the government-furnished office
    space provided in section H-10; rather, it clearly informed offerors that cost pro-
    posals would not be adjusted on that basis since the same office space would be
    available to all offerors.
    In commenting on the agency report, the protester argues that despite the fact
    that the same office space would be available to all offerors, proposals should
    have been adjusted to take into account the government-furnished space since
    not all offerors may have made the same assumptions regarding its use in deter-
    mining their overhead rates. SRS contends that it bid its full overhead rate,
    which assumes performance in its own, as opposed to government-furnished, of-
    fices for all personnel to be provided under the contract since it was unsure
    whether the government-furnished office space would be available for perma-
    nent (as opposed to transitory) location of employees. The protester maintains


.
    that if it had reflected the use of government-furnished office space in its over-
    head rate, that rate would have been reduced by approximately 37 percent for
    those employees who could be located in the government-furnished offices, and
    that this reduction in overhead could have had an overall impact on its price of
    between 7 and 10 percent. SRS asserts that if EER assumed that the govern-

    Page 461                                                                        (69 Comp. Gen.)
ment-furnished space would be available for permanent location of employees,
the two proposals could not have been evaluated on an equal basis without ad-
justment.
The protester is now arguing in essence that the RFP was ambiguous as to
whether the government-furnished office space would be available for perma-
nent location of the contractor's employees. This ground of protest is untimely,
since any such ambiguity was apparent prior to the closing date for receipt of
initial proposal, and should therefore have been protested prior to that date. 4
C.F.R. § 21.2(a)(1) (1989). In any event, EER denies that its overhead rate reflect-
ed the use of government-furnished office space, and thus SRS' premise! that the
two offerors based their proposals on differing assumptions regarding the use of
government-furnished space is without foundation.
The protester next argues that MICOM failed to conduct an adequate cost real-
ism analysis of offerors' proposals. SRS contends that the contracting officer
had a duty to conduct her own analysis of the direct labor and indirect cost
rates proposed in determining the most probable cost of offerors' proposals and
that she instead relied entirely on the computations of the Defense Contract
Audit Agency (DCAA). The protester also argues that in determining mbst prob-
able cost, the agency should have formulated its own estimate as to the number
of hours in each labor category that would be required to perform the contract
tasks and then compared this estimate with the breakdown of hours by labor
category proposed by each offeror.l
With regard to the protester's first contention, we see nothing inappropriate in                                       W
the agency's having relied on the rate recommendations of the DCAA in per-
forming its cost analysis of proposals. See NKF Eng'g, Inc., et al., B-232143,
B-232143.2, Nov. 21, 1988, 88-2 CPD 1 497; Allied Maritime Management Orga-
nization, Inc., B-222918, B-222918.2, Aug. 26, 1986, 86-2 CPD ¶227. As far as
SRS' second argument is concerned, we think that it reflects a misunderstand-
ing of the purpose of cost realism/most probable cost analysis. The protester's
argument, as we understand it, is that to assess most probable cost the agency
should have determined the appropriate labor mix for performing the contract
tasks and then applied the labor and indirect cost rates proposed by each of-
feror to this labor mix. The purpose of cost realism analysis is not to determine
what an offeror price's would be using a technical approach prescribed by the
agency; rather, it is to determine what, in the government's view, it would real-
istically cost the offeror to perform given the offeror's own technical approach.2
Gary Bailey EngVg Consultants, B-233438, Mar. 10, 1989, 89-1 CPD ¶1 263.1
  The protester also alleged in its initial protest that the agency had failed to perform an adequate cost realism
analysis by failing to consider all of the elements set forth in Federal Acquisition Regulation (FAR) § 15.805-3(a).
In its report, the agency pointed out that the FAR did not require consideration of all of the elements set forth in
that section, but rather provided that the agency should consider the elements, "as appropriate," in performing
cost analysis. The agency further noted that it had, in any event, taken all of the elements into consideration.
Since the protester did not attempt to rebut the agency's response in commenting on the report, we consider it to
have abandoned this issue.                                                                               l
2 This is not to say that labor mix was an irrelevant consideration in the evaluation of proposals of course. The

adequacy of the labor mix proposed was considered in the technical evaluation of proposals.


Page 462                                                                                        (69 Cormp. Gen.)
.   SRS finally argues that EER submitted misleading documentation of its ability
    to secure qualified personnel to work on the contract. According to the protest-
    er, EER could not have obtained commitments from certain individuals current-
    ly employed by Teledyne-Brown whom it proposed to employ since all Teledyne-
    Brown employees had committed either to retain their positions with Teledyne-
    Brown, with whom SRS proposed to subcontract, or to work for the protester if
    it received the award. The protester also argues that the agency had a duty to
    verify that the employees whom EER indicated it would hire were in fact avail-
    able.
    We question the foundation of the protester's first argument, which appears to
    be that any employee who had committed to work for it (either directly or as an
    employee of a subcontractor) if it received the award could not also have en-
    tered into a commitment to work for EER in the event that that firm received
    the award. We know of nothing that would prevent an individual from entering
    into a contingent commitment for employment with more than one offeror
    under a solicitation provided that each commitment was made conditional upon
    the offeror receiving award of the contract. We therefore see no reason to
    assume, as SRS suggests we should, that because certain Teledyne-Brown em-
    ployees had committed to work for SRS if it received the award that they could
    not also have entered into a contingent commitment to work for EER if it were

O   selected for award. We are furthermore aware of no authority-and SRS has
    cited none-that would support the protester's assertion that the agency had a
    duty to verify independently the availability of individuals not currently in
    EER's employ for whom EER had submitted letters of commitment.
    The protest is dismissed in part and denied in part.



    B-238371, May 18, 1990
    Procurement
    Competitive Negotiation
    * Offers
    * * Evaluation
    * * * Personnel experience
    Protest that awardee's proposed labor mix does not meet solicitation personnel education and expe-
    rience requirements, and therefore agency's evaluation of awardee's proposal was unreasonable, is
    denied where record shows that proposed labor mix met the solicitation staff requirements.




    Page 463                                                                          (69 Comp. Gen.)
Procurement                                                                              E
Competitive Negotiation
* Competitive advantage
* * Conflicts of interest
E * * Allegation substantiation                                                          I
*E   EE    Lacking
Protest that awardee is ineligible for a contract because of a conflict of interest arising from its
relationship with a company which could possibly be subject to audit services required under
present contract is denied where agency reasonably determines that no actual conflict Sexists and
where agency's proper administration of task orders issued under contract would provide adequate
safeguards to prevent the contractor from possibly conducting a biased audit.

Matter of: Deloitte & Touche

Donald D. Harmata, Esq., for the protester.

William A. Roberts III, Esq., Howrey & Simon, for KPMG Peat Marwick, an interested party.

Col. Herman A. Peguese, Department of the Air Force, for the agency.

Susan K. McAuliffe, Esq., Andrew T. Pogany, Esq., and Michael R. Golden, Esq., Office of the Gener-
al Counsel, GAO, participated in the preparation of the decision.


Deloitte & Touche protests the award of a contract to KPMG Peat Marwick
under request for proposals (RFP) No. F33600-89-R-0281. The solicitation,
issued by the Department of the Air Force, is for professional, multidisciplined,
management audit and evaluation services to study the ongoing modernization
programs of the Air Force Logistics Command, the Air Force Accounting and
Finance Center, the Defense Logistics Agency, and the United States Army Re-
serve. Deloitte primarily alleges that Peat's proposed labor mix and low price
indicate that the individual staff members proposed by Peat do not satisfy the
experience and qualification requirements set forth in the solicitation for each
required labor category. In addition to challenging the agency's evaluation of its
own technical proposal, the protester also contends that Peat is ineligible for
award because of an alleged organizational conflict of interest.
We deny the protest.
The RFP, issued August 13, 1989, and subsequently amended five times, solicit-
ed technical and cost proposals for an indefinite quantity, task order contract
for 1 basic year of audit and evaluation services, with 4 option years. Offerors
were required to propose fixed hourly rates, including profit, overhead and ad-
ministrative costs for five specified labor categories of individuals, with each
labor category having to meet certain minimum personnel qualifications. The
RFP's statement of work and level of effort also provided, as a guide, for each
labor category, the approximate percentage of the total estimated number of                            -
person hours required for each of the basic and option years.

Page 464                                                                           (69 Comp. Gen.)
.   A summary of the RFP's five labor categories, corresponding hourly percent-
    ages, and minimum personnel qualifications follows:

    Labor Classification               Percent of Total Hours                 Personnel
                                                                              Qualifications*
    Project Leader                     10                                     graduate;
                                                                              10 years
    Assistant Project Leader           15                                     undergraduate;
                                                                              7 years
    Senior Analyst                     40                                     undergraduate;
                                                                              2 years
    Analyst                            25                                     1undergraduate;
                                                                              2 years
    Administrator                      10                                     undergraduate;
                                                                              1 year

        'Educational degree or equivalent training; related work experience
    The RFP advised offerors that award would be made in accordance with a
    "lowest evaluated price technique" to the offeror with the highest total weight-
    ed score considering the following evaluation factors, listed in descending order


.   of importance: (1) technical merit (35 percent); (2) price (30 percent); (3) task
    order responses (25 percent); and (4) management capability (10 percent).
    For the purpose of cost proposal evaluation, the lowest total proposed price to
    the government would receive the highest score, and price would be determined
    by multiplying the offeror's proposed hourly rate for each labor category times
    the estimated hours per category provided in the RFP.
    Only Deloitte and Peat submitted proposals by the October 13, 1989, closing
    date. A clarification request regarding pricing was issued to Deloitte, and best
    and final offers were received from the two firms by November 21. Both firms'
    technical proposals were found acceptable and received similar scores. Peat's
    cost proposal of $25,132,602.18 (for the basic year and 4 option years) received a
    substantially higher weighted score under the RFP's lowest evaluated price
    technique than Deloitte's cost proposal of $31,064,589. Peat's proposal, consider-
    ing technical and price scores, received a higher overall score than Deloitte's
    proposal. The Air Force reports that Peat's price was considered reasonable and
    realistic by the agency, and Peat was awarded the contract on January 4, 1990.
    Deloitte filed its protest with our Office on January 23, based upon information
    it acquired at a January 11 debriefing with the agency.
    The protester first contends that Peat offered an artificially low contract price
    by proposing a labor mix that uses mostly lower hourly-rate personnel, and pos-
    sibly outside personnel, who apparently do not meet the RFP's education and


.
    related experience requirements for the five labor categories. Deloitte specifical-
    ly challenges the awardee's proposed labor mix of Peat partners (20 percent),
    senior managers (20 percent), and managers (60 percent), for the estimated
    project leader hours called for in the RFP. The protester proposed only its part-
    ners, at a substantially higher hourly rate, to meet the same requirement for

    Page 465                                                                         (69 Comp. Gen.)
 project leader hours. Deloitte asserts that all "Big 6" accounting firms (includ-
 ing Deloitte and Peat) follow the same personnel promotion scheme under
                                                                                       B
which partnership is granted to personnel with 10 years experience. According-
ly, Deloitte contends that Peat's proposed labor mix does not meet the RFP's 10-
year experience requirement for project leader hours since Peat proposes to use
some of its senior managers and managers for these hours instead of using only
partners. Similarly, Deloitte alleges that the awardee's proposed use of consult-
ants (who Deloitte claims would generally only have between 0 and 5 years ex-
perience under the typical "Big 6" accounting firm hierarchy) as assistant
project managers indicates that these individuals do not have the RFP's requi-
site 7 years experience for that labor category. The protester essentially chal-
lenges the agency's evaluation and asks our Office to review the awardee's pro-
posal (including each resume) to determine whether or not Peat's proposed staff
meets the RFP's requirements.
The Air Force found that the awardee's technical proposal properly used the
multi-disciplined skills of Peat personnel under each of the five labor categories.
The agency emphasizes that the RFP did not require that firms propose only
their partners as project leaders, as Deloitte chose to do, but rather that all
project leader hours, as well as the hours to be filled by the other labor catego-
ries, be performed by individuals possessing the requisite education or equiva-
lent training and the required experience. Air Force evaluators found that
Peat's proposed staff met the RFP's requirements and, in most instances, ex-
ceeded the minimum personnel qualifications required, regardless of each indi-
vidual's in-house Peat title.                                              I           _
Since Deloitte questions the Air Force's evaluation of Peat's proposal for techni-
cal merit and personnel capability, namely the qualifications and experience of
its proposed staff, the question for our Office is whether the agency's assess-
ment and scoring of these factors was reasonable, in accord with stated criteria,
and complied with applicable statutes and regulations. See, e.g., Consulting and
Program Management, 66 Comp. Gen. 289 (1987), 87-1 CPD 11 229. Based upon
our review of the awardee's proposal, we find that the Air Force's evaluation of
Peat's proposal meets these standards and thus find no reason to question
either the evaluation or the award.
As noted above, the RFP listed technical merit and management capability as
technical evaluation factors. In other sections of the solicitation, offerors were
instructed to submit personnel resumes to ensure that its proposed staff met the
specific experience requirements for each labor category, which we regard as
material to the technical evaluation. Our review of Peat's proposal, its person-
nel qualification matrix, and all resumes it submitted for its proposed "core
teams" indicates that, regardless of in-house Peat title, each individual specifi-
cally proposed by Peat for each labor category meets the education (or equiva-
lent training) and related experience requirements for that category. The RFP
specifically allowed offerors to propose a labor mix using multi-disciplined skills
for each labor category and advised offerors to submit a composite labor rate for
each of the five labor categories that reflected the proposed labor mix. Thus, we

Page 466                                                             (69 Comp. Gen.)
    find Peat's approach in proposing a labor mix to be in accordance with the
    RFP's instructions and, further, find that Peat's proposed labor mix meets the
    requisite minimum personnel qualifications. We also note that the RFP pro-
    vides that the contractor must furnish a resume for approval by the contracting
    officer for each employee within 1 week of that employee's performance under
    the contract. Thus, through the RFP's terms and the agency's administration of
    the contract, there will be consistent review of Peat staff qualifications through-
    out the term of the contract. We find no reason to question the reasonableness
    of the agency's evaluation of Peat's proposal.
    Deloitte additionally contends that the awardee's alleged use of less experienced
    staff also indicates that Peat's proposal fails to satisfy the requirement for
    proper supervision of audits which is set forth in the Government Auditing
    Standards, 1988 edition, issued by the General Accounting Office and referenced
    in the RFP. The protester, in questioning Peat's use of its program analysts at a
    "very low hourly rate of $16.46" without charging overhead or administrative
    fees, also claims that Peat may be proposing to use an excessive number of un-
    trained outside personnel in violation of the Government Auditing Standards.
    The agency claims Deloitte's concerns regarding the awardee's compliance with
    the Government Auditing Standards are unfounded because Peat's proposal in-
    dicates that all auditing services will be properly supervised by qualified person-
    nel and that Peat, which documented its past compliance with the standards

O   through submission of a required peer review by an independent certified public
    accountant, also certified compliance with the standards in its proposal. As for
    Deloitte's suggestion that the low hourly rate proposed for Peat program ana-
    lysts indicates excessive use of outside untrained personnel, the agency states
    that Deloitte is factually incorrect because Peat has not proposed the use of any
    outside personnel, and each of Peat's proposed in-house program analysts, for
    which Peat will absorb overhead and administrative fees, meets the RFP's re-
    quired personnel qualifications.
    We find reasonable the Air Force's determination of Peat's compliance with the
    Government Auditing Standards since Peat's proposal not only certifies compli-
    ance, but also shows appropriate personnel qualifications to ensure proper su-
    pervision and performance of the audit services. Further, Peat's proposal docu-
    ments, through a certified peer review by Arthur Young and Company, the
    firm's general practice of compliance, and exhibits substantial previous experi-
    ence conducting audits of federal agencies in accordance with the referenced
    standards. Additionally, the proposal indicates that one member of Peat's pro-
    posed staff participated on the Auditing Standards Advisory Council which de-
    veloped the 1988 Government Auditing Standards, while another member is the
    chairperson of the American Institute of Certified Public Accountants. We find
    no reason to question that the Air Force's determination of Peat's compliance
    with the referenced Government Auditing Standards was other than reasonable.
    The protester also contends that the agency failed to evaluate its proposal in
e   accordance with the terms of the RFP and improperly downgraded its proposal
    on technical merit and task order responses for what the evaluators found to be

    Page 467                                                             (69 Comp. Gen.)
 overstaffing and front-loading of manhours. Deloitte basically contends that
 since the Government Auditing Standards emphasize the need for adequate               W
planning of audit work, the evaluators improperly penalized Deloitte for provid-
ing conscientious up-front planning of its task responses. Deloitte also states
that it is the incumbent of these services, and that its prior proposal and per-
formance have never been questioned about overloading manhours, and thus,
the present evaluators must have erred in their determination. We note' howev-
er, that since Deloitte's proposed price of $31,064,589 received an evaluation
score of only 24.27 points, (where Peat's proposed price of $25,132,602.18 re-
ceived the full 30 points available), and since there is nothing in the record that
calls into question the agency's determination that Peat's price was realistic
and reasonable, even if Deloitte received perfect scores under each of the re-
maining three technical evaluation factors, its total weighted score still would
not displace Peat as the apparent awardee under the RFP's lowest evaluated
price plan. Since Deloitte would not be in line for award even if it succeeded on
this protest basis, we do not see how the protester was prejudiced by the techni-
cal evaluation of its proposal. See Employment Perspective, B-218338, June 24,
1985, 85-1 CPD T715; Lingtec, Inc., B-208777, Aug. 30, 1983, 83-2 CPD I 279.
Finally, Deloitte argues that Peat is ineligible for award because of a conflict of
interest arising from Peat's alleged business relationship with Integrated Micro-
computer Services, Inc. (IMS), which apparently provided computer software
systems to the Air Force Logistics Command. Deloitte suggests that since IMS
was earlier named by Peat as a possible source for certain time sharing l.services
required under an unrelated contract held by Peat with the General Services
Administration for software re-engineering services, an impermissible organiza-        W
tional conflict of interest is present, since IMS could possibly be subjedt to the
audit and evaluation services procured by the Air Force under the present con-
tract with Peat. Deloitte suggests that such a business relationship mayiprevent
Peat from objectively and independently auditing the four modernization pro-
grams, at least to the extent that IMS might be involved in such an autdit, and
that Peat should have been precluded from competing for the award. Deloitte
specifically references clause H-902 of the RFP which excludes the successful
contractor from participating as a future contractor or subcontractor in the pro-
curement of any phase of the four named modernization programs. Deloitte also
points out that the RFP's cover letter warned that "contractors with past or
present acquisition, development, or installation involvement in the above
named programs will be eliminated due to conflict of interest." Deloitte inti-
mates that Peat's prior relationship with IMS, although unrelated to the four
modernization programs, gives Peat an impermissible interest in work that may
have to be evaluated.
The Air Force reports that no conflict of interest exists because the prohibition
here only precludes the contractor from participating in any contracts relating
to the programs to be audited under this contract and no one has alleged that
Peat has or will be involved in such a prohibited contract. As to the relationship
between IMS and Peat under the GSA contract, Peat asserts that not a single
task order has been issued by GSA to Peat and that Peat has not ordered any

Page 468                                                             (69 Comp. Gen.)
O   services from IMS. Peat certified in its proposal that it did not have any conflict
    of interest related to the work to be performed under the RFP and further
    states that it has no vested interest in IMS that could impede its objectivity.
    The responsibility for determining whether an actual or apparent conflict of in-
    terest will arise if a firm is awarded a particular contract, and to what extent
    the firm should be excluded from the competition, rests with the contracting
    agency. We will not overturn the agency's determination in this regard except
    where it is shown to be unreasonable. D. K. Shifflet & Assocs., Ltd., B-234251,
    May 2, 1989, 89-1 CPD X1 419.
    Here, we find that the agency reasonably determined the award to Peat was
    proper, and we do not find that the tenuous nature of the alleged business rela-
    tionship between Peat and IMS constitutes an impermissible organizational con-
    flict of interest to warrant upsetting the present award. The RFP only prohibit-
    ed the contractor from business relationships in the four named programs sub-
    ject to the contract. Peat certified its independence from any conflict and no evi-
    dence presented shows otherwise. Further, performance under the audit and
    evaluation contract is on a task order basis, and as a result, the agency can ex-
    ercise care and directly control the scope of Peat's work through proper con-
    tract administration which we believe would provide adequate safeguards to


.   prevent Peat from possibly conducting a biased evaluation, even if IMS is sub-
    jected to an audit under the contract. In our view, the remote relationship be-
    tween these firms and our expectations of close and proper contract administra-
    tion of any task order issued, especially one that involves IMS, will adequately
    prevent Peat's objectivity from being impaired, and are sufficient to confirm
    that, despite the claim of a conflict of interest with IMS, the agency's determi-
    nation to award to Peat was reasonable and proper.
    The protest is denied.



    B-235902, May 22, 1990
    Civilian Personnel
    Compensation
    * Retroactive compensation
    * * Adverse personnel actions
    * * * Attorney fees
    *E A  E Eligibility
     Although there is no authority to pay attorney fees in connection with an administrative settlement
     of a complaint of age discrimination, a federal agency may pay the full claim for attorney fees relat-
     ed to settlement of an employee's age and sex discrimination complaints where the agency concedes
     that the employee would have prevailed in the same manner on just the sex discrimination com-
     plaint.



    Page 469                                                                              (69 Comp. Gen.)
Matter of: Violet M. Dawes-Attorney fees in settlement of sex and age
discrimination complaints

The issue in this decision concerns a claim for attorney fees incident to settle-
ment of an employee's complaints of discrimination based on age and Isex. For
the reasons set forth below, we hold that the agency may pay the entire claim
for attorney fees where the agency concedes that if the employee had pursued
only the sex discrimination complaint, the agency would have settled the case
in the same manner.

Background
The Goddard Space Flight Center, National Aeronautics and Space Admiinistra-
tion (NASA), questions whether it may pay the remaining one-half of, a claim
for attorney fees in an informal settlement of sex and age discrimination com-
plaints filed by Ms. Violet M. Dawes, a NASA employee.l
In October 1985, Ms. Dawes filed complaints of discrimination against NASA
based on age under the Age Discrimination in Employment Act of .1967, as
amended, 29 U.S.C. § 633a (1982), and sex under Title VII of the Civil Rights Act
of 1964, as amended, 42 U.S.C. §§ 2000e et seq. (1982). In April 1989, the agency,
following negotiations with Ms. Dawes's attorney, entered into a settlement
agreement which involved retroactive promotions for Ms. Dawes and backpay
plus interest.22
The parties also stated in the settlement agreement that there was "nro objec-
tive manner" in which to allocate attorney fees to either ground of the com-
plaints (age and sex discrimination) and that of the total attorney fees claimed
in connection with these complaints, $4,511.57, the agency would pay one-half
and submit the question to our Office whether the remaining fees may be paid.3
Ms. Dawes's attorney argues that since her claims of age and sex discrimination
arose out of a "common core of facts," she is entitled to payment of the full
amount of her attorney fees. Her attorney distinguishes our decision in Albert
D. Parker, 64 Comp. Gen. 349 (1985), denying attorney fees in an informal settle-
ment of an age discrimination complaint on the basis that the claim in Parker
related solely to age discrimination.
' This request for an advance decision was submitted by Charles Tulip, Jr., Comptroller, Goddard Space Flight
Center, National Aeronautics and Space Administration. Comments were submitted by Ms. Dawes's attorney,
Edward H. Passman.
2 There is no authority for the payment of interest in this case. There has been no finding of an "unjustified or

unwarranted" personnel action under the Back Pay Act, 5 U.S.C. § 5596 (1982), and the Equal Opportunity Em-
ployment Commission (EEOC) has stated there is no authority for the payment of interest on backpay to federal
employees who prevail in discrimination claims. 54 Fed. Reg. 45,747, 45,751 (to be codified at 29 C.F.R.
§ 1614.501(e)) (1989).                                                                                 1
3 Discrimination based on sex is one ground of the complaint for which attorney's fees are authorized under Title
VIL. 29 C.F.R. § 1613.271(d) (1988).                                                                 .




Page 470                                                                                      (69 Comp. Gen.)
O Opinion
   In view of the statutory authority granted to the Equal Employment Opportuni-
   ty Commission (EEOC), our Office does not render decisions on the merits of, or
   conduct investigations into, allegations of discrimination in employment in
   other agencies of the government. See 29 U.S.C. § 633a (1982); 62 Comp. Gen. 239
   (1983). However, based upon our authority to determine the legality of expendi-
   tures of appropriated funds, we may determine the legality of awards agreed to
   by agencies in informal settlements of discrimination complaints. 62 Comp. Gen.
   239, supra.
   With regard to the payment of attorney fees in connection with age discrimina-
   tion cases, we note that the courts have specifically held that attorney fees are
   not payable in the administrative settlement of such cases. See Kennedy v.
    Whitehurst, 690 F.2d 951 (D.C. Cir. 1982); Palmer v. General Services Adminis-
   tration, 787 F.2d 300 (8th Cir. 1986). The court in Kennedy reviewed the legisla-
   tive history of the Age Discrimination in Employment Act and explained that
   the differences in enforcement schemes between Title VII of the Civil Rights
   Act and the Age Discrimination Act make clear that only Title VII permits
   award of attorney fees at the administrative level. As noted above, we held in


e  Albert D. Parker, supra, that attorney fees could not be paid in age discrimina-
   tion cases which were settled administratively.
   Ms. Dawes's attorney argues that Parker, supra, is distinguishable from this
   case because that decision addressed a settlement of a claim based entirely on
   age discrimination, whereas this case involves mixed allegations of discrimina-
   tion based on sex and age. Citing to an EEOC decision involving allegations of
   discrimination based on sex and age, the attorney argues for payment of the full
   amount of attorney fees in this case.4
   We agree that the entire claim for attorney fees may be paid in this case, if
   otherwise allowable. We have been informally advised by an agency official that
   if Ms. Dawes had pursued only the sex discrimination charge, she would have
   prevailed in the same manner as agreed to by the agency in administrative set-
   tlement of her complaint. We also note that the courts have not denied pay-
   ment of attorney fees for time spent on other unsuccessful claims or legal theo-
   ries if the claims or theories were intertwined and not "truly fractionable." 5
   Accordingly, the agency may pay the remaining one-half of the attorney fees
   claimed.




   4   Beatrice Haddock v. Department of the Air Force, EEOC No. 01830822, June 30, 1983.
   5 Hensley v. Eckerhart; 461 U.S. 424 (1983); Copeland v. Marshall, 641 F.2d 880, 891-92 n.18 (D.C. Cir. 1980) (en
   banc).


   Page 471                                                                                       (69 Comp. Gen.)
B-238354, May 22, 1990
Procurement
Competitive Negotiation
* Offers
*E Evaluation errors                                                                       i
* *E Personnel experience
* EU0 Point ratings
Agency's use of a rating plan that resulted in the assignment of zero points for a labor category in
the evaluation of protester's best and final offer, on the ground that 3 of 11 resumes submitted for
the category were unacceptable, was an improper material departure from the evaluation plan set
forth in the solicitation; the plan stated there, and used by the agency in evaluating initial propos-
als provided for a composite score based on the scores of all resumes submitted, regardless of wheth-
er any particular resume was found unacceptable.

Matter of: Frank E. Basil, Inc.

Fred G. Rockwell, Esq., for the protester.

Donald A. Tobin, Esq., Dempsey, Bastianelli, Brown & Touhey, for C.F.S. Air Cargo, an, interested
party.
Peter D. Butt, Esq., and Geoffrey D. Chun, Esq., Department of the Navy, for the agency.

Stephen J. Gary, Esq., David A. Ashen, Esq., and John M. Melody, Esq., Office of the General Coun-
sel, GAO, participated in the preparation of the decision.                             i



Frank E. Basil, Inc., protests the Department of the Navy's award of a contract
to C.F.S. Air Cargo (CFS), under request for proposals (RFP) No.
N00600-89-R-2509, for terminal services to support the operation of an expedit-
ed shipment system. The protester asserts that the Navy improperly [departed
from the RFP's stated evaluation plan in evaluating its best and final offer
(BAFO), and thereby deprived Basil of the award.
We sustain the protest.
The solicitation requested proposals for a 5-year contract to provide terminal
management and cargo handling services at 11 sites. The RFP provided for
award to be made to the offeror whose proposal offered the greatest value to the
government from a technical and cost standpoint; it stated that technical fac-
tors would carry a weight 1.5 times than that of cost. The solicitation listed, in
descending order of importance, three technical evaluation factors, including
management plan (with an undisclosed weight of 27.6 of 60 "greatest value"
points available under the technical factors), personnel staffing plan (25.2
points), and business resources (7.2 points). With respect to the factor for person-
nel staffing, the solicitation required offerors to provide with their technical
proposal resumes (and letters of commitment for personnel not yet employed)
for 25 key personnel in 5 categories, listed in descending order of importance as                        W
Page 472                                                                             (69 Comp. Gen.)
(1) one system manager (with an undisclosed weight of 6 points); (2) one special
handling/expediting manager (5.4 points); (3) one quality control manager (4.8
points); (4) eleven terminal managers (4.8 points); and (5) eleven terminal haz-
ardous material specialists (THMS) (4.2 points).
Five offerors submitted proposals in response to the solicitation; all were includ-
ed in the competitive range and, after written and oral discussions, were re-
quested to submit BAFOs. Based upon its evaluation of BAFOs, the Navy deter-
mined that the proposal submitted by CFS, the incumbent contractor for most
of the services, offered the greatest value to the government. CFS' price of
$65,366,210 and its technical score of 42.9 points resulted in that firm's receiv-
ing 79.13 out of 100 available greatest value points, and thus the highest great-
est value score. Another offeror, Global Associates, received 77.93 points, the
second highest score, while Basil, with a price of $65,501,224 and a technical
score of 40.9 points, received 77.1 points, the third highest score. Upon learning
of the resulting award to CFS, Basil filed this protest with our Office.
Basil questions the Navy's evaluation of the resumes for individuals it proposed
under the THMS labor category. The RFP specified that the 11 resumes to be
submitted for this category must each demonstrate a minimum of 5 years expe-
rience in handling hazardous material. In evaluating Basil's initial proposal, the
Navy found that 8 of the 11 resumes submitted for THMS were unacceptable,
based on their failure to show that the proposed individuals possessed the re-
quired minimum hazardous materials experience; as a result, Basil received the
equivalent of 1.068 of a possible 4.2 points. After being advised by the Navy of
this deficiency in its proposal, Basil submitted new resumes in its BAFO. How-
ever, although the Navy now found that 8 of the 11 resumes submitted showed
acceptable experience and only 3 were unacceptable, the agency gave Basil a
score of zero for the entire category. The Navy explains that the panel applied a
"more effective" scoring technique to the evaluation of BAFOs; if a labor cate-
gory contained any unacceptable resumes, the entire category was given a score
of zero.
Basil objects that assigning zero points for the entire category was a departure
from the RFP's stated evaluation scheme, which provided that "where multiple
resumes are required for a labor category, the rating shall be a composite of re-
sumes submitted for that category." (Italic added.) Basil contends that under the
stated evaluation plan, even if the Navy were correct that 3 of the 11 individ-
uals lacked the required experience and were therefore unacceptable, it was en-
titled to partial credit for the category, based on an averaging of the scores for
acceptable and unacceptable resumes, just as it received partial credit in its ini-
tial proposal, where a much smaller percentage of resumes was found accepta-
ble.
Our review of a technical evaluation is limited to a determination of whether
the evaluation was fair and reasonable and consistent with the stated evalua-
' The record does not include documentation of the final proposal evaluation methodology; according to the
agency, "after the final evaluation, the .. . spreadsheets were discarded as a matter of routine."

Page 473                                                                                             (69 Comp. Gen.)
tion criteria. See Space Applications Corp., B-233143.3, Sept. 21, 1989, 89-2 CPD
¶1255. Procuring agencies do not have the discretion to announce in a solicita-
tion that one evaluation plan will be used and then follow another in the actual
evaluation; consequently, it is improper for an agency to depart in a material
way from the evaluation plan prescribed in the RFP without informing the of-
ferors and giving them an opportunity to structure their proposals with' the new
evaluation scheme in mind. See National Capital Medical Found., Inc.,
B-215303.5, June 4, 1985, 85-1 CPD   ¶J637.
We find that the Navy's evaluation of Basil's BAFO materially departed from
the solicitation's stated evaluation criteria. The RFP gave no indication' that an
offeror would receive zero points for an entire labor category if any one of the
resumes was rated less than acceptable. On the contrary, the RFP provision re-
garding composite scoring, in our view, clearly indicated to offerors that a labor
category would be scored by taking into account the individual scores; of all of
the resumes. This interpretation is consistent with the manner in which the
Navy itself evaluated initial proposals, that is, by calculating the composite
score for the THMS category based on all of the individual resumes submitted.
Further, although the Navy advised Basil during discussions that a nu! mber of
the individuals it initially proposed failed to meet the experience requirements,
the agency did not advise it that the failure of any one of the individuals to
meet those requirements in the final evaluation would result in a zero score for
the entire category. Absent notice of the agency's intended approach, its depar-
ture from the stated evaluation criteria rendered the evaluation of the THMS
labor category improper. See generally National Capital Medical Found., Inc.,
B-215303.5, supra (agency improperly departed from evaluation criteria when it
awarded zero of 310 possible points if any one of multiple admission/quality
control objectives for medical peer review plan was less than acceptable).
The Navy asserts that even if the THMS category had been scored in the
manner urged by Basil, the agency still would have made the award to CFS,
based on the best value to the government, and that Basil therefore 'was not
prejudiced by the allegedly improper scoring. According to the Navy, if the
scores of Basil's acceptable THMS resumes were averaged with the scores of the
unacceptable resumes, which each received a score of zero, the revised score for
the THMS category would be approximately 2.4 greatest value points out of a
possible 4.2 points, instead of zero; as a result, the protester's new technical
score (43.3 points) would be higher than CFS' technical score (42.9 points), and
Basil's overall revised score (79.5 points) also would be higher than the award-
ee's (79.1 points). The Navy maintains, however, that Basil's proposal still would
be considered technically inferior because the small difference in technical
point scores would be more than offset by the significance of the three unaccept-
able resumes for THMS positions; these positions are so critical, according to
the Navy, that the failure to meet minimum experience requirements would
have warranted outright rejection of the proposal. At best, according to the
agency, the revised technical scores would have been so close as to represent no
significant technical difference, and CFS' lower proposed price ($65,366,210),

Page 474                                                            (69 Comp. Gen.)
.   which was $135,014, or 0.2 percent, less than Basil's ($65,501,224), would have
    been the determinative factor.2
    We are not persuaded by the Navy's assertion that Basil was not prejudiced by
    the agency's departure from the evaluation criteria. First, although the agency
    asserts that the THMS labor category was so important that deficiencies in
    some of the resumes would have warranted outright rejection of the proposal,
    we find more credible the agency's characterization elsewhere in its report of
    the deficiencies as minor in the context of the overall evaluation scheme. Specif-
    ically, in explaining its evaluation of Basil's BAFO, the Navy itself states that it
    gave Basil a score of zero for the THMS category, instead of rejecting the pro-
    posal outright, only because it considered the category minor and the deficiency
    not sufficiently important to warrant rejection of the entire proposal. Further,
    we note that the RFP listed the THMS labor category as the least important of
    the five labor categories, with the least number of possible points.
    Likewise, in its contemporaneous evaluation of Basil's proposal, the agency eval-
    uation panel concluded that, although the three individuals proposed for THMS
    positions lacked the minimum required experience, they
    do, however, each have several years [experience] actually packing and certifying [hazardous materi-
    al]. This hands on experience (while less than 5 full years) could be nearly as valuable as the 5 years
    of general (handling) experience required. The individuals proposed could be accepted for the follow-
    ing reasons: (a) The positions are not at the critical terminals . . . (c) Redundancy within the system
    represented by the Special Handling/Expediting Manager and the Terminal Managers all having
    [hazardous materials] handling and certification experience.

    In this regard, we note that 1 of the 3 individuals in question had 53 of the
    required 60 months of hazardous materials experience and another may have
    had as much as 57 months of relevant experience. In our view, the evaluation
    panel's conclusions confirm that the deficiencies in the proposals were not criti-
    cal to the overall contract, and therefore would not have warranted rejection of
    the proposal.
    As for the agency's assertion that award would have been made to CFS in any
    case, on the basis of its lower priced purportedly technically superior offer, we
    find the technical scores and proposed prices too close to draw any meaningful
    conclusions as to what the outcome of the cost/technical tradeoff would have
    been had Basil's proposal been properly evaluated. In this regard, we consider it
    significant that technical factors were 1.5 times more important than cost and,
    although the composite technical scores were close, Basil scored higher than
    CFS under 8 of the 14 technical subcriteria.
    Also casting doubt on the evaluation is the protester's assertion that the Navy
    improperly downgraded its proposal, based on the three deficient resumes,
    under factors unrelated to the THMS category. The Navy specifically denies


.   this, but Basil's argument is supported by the final evaluation summary; for ex-
    ' In this regard, the Navy notes that the RFP reserved to the contracting officer "the discretion to examine the
    technical point scores to determine whether a point differential between offerors represents any significant differ-
    ence in technical merit. Award may be made to the lowest cost proposal even though its Greatest Value Score is
    not the highest."

    Page 475                                                                                        (69 Comp. Gen.)
ample, the summary for the organizational structure and resources subcriterion
specifically notes the three proposed individuals' lack of experience. It thus is                      W
unclear precisely how much impact these experience deficiencies had on the
evaluation as a whole. See generally Falcon Carriers, Inc., 68 Comp. Gen. 206
(1989), 89-1 CPD IT 96 (protest sustained where record establishes possibility of
competitive prejudice from improper agency action). In these circumstances, the
only appropriate remedy is to resubmit Basil's proposal to the evaluation panel
for reevaluation in accordance with the evaluation scheme set forth in the solic-
itation.
By separate letter to the Secretary of the Navy, we are recommending that
Basil's proposal be resubmitted to the evaluation panel for evaluation on the
basis of the evaluation scheme set forth in the solicitation, with the results of
the evaluation properly documented as provided for in Federal Acquisition Reg-
ulation § 15.608(a). Following evaluation, the Navy should terminate its contract
with CFS if appropriate. In addition, we find that Basil is entitled to be reim-
bursed its protest costs. 4 C.F.R. § 21.6(d)(1) (1989); see Falcon Carriers, Inc., 68
Comp. Gen. 206, supra.
The protest is sustained.



B-239330, May 22, 1990
Procurement
Socio-Economic Policies
* Small businesses
*E Contract award notification
* * * Notification procedures
* E N E Pre-award periods
Procurement
Socio-Economic Policies
* Small businesses
* * Contract awards
* * * Size status
.* N E Misrepresentation
Protest is sustained where agency, without notice to unsuccessful offerors, awarded a contract under
a small business set-aside to a firm ultimately determined by the Small Business Administration to
be other than small, based on agency's desire to make immediate award in order to avoid the ad-
ministrative inconvenience of applying for an exception from a rumored funding freeze.




Page 476                                                                           (69 Comp. Gen.)
Procurement
Socio-Economic Policies
* Small business set-asides
* * Contract awards
* * * Price reasonableness
Contracting officer may not ignore prior procurement history, government estimate, and other rele-
vant evidence in determining whether small business price received was in fact fair and reasonable.

Matter of: United Power Corporation

Wayne A. Keup, Esq., Dyer, Ellis, Joseph & Mills, for the protester.
Edward J. Obloy, Esq., and Andrew H. Deranger, Esq., Office of the General Counsel, Defense Map-
ping Agency, for the agency.
C. Douglas McArthur, Esq., Andrew T. Pogany, Esq., and Michael R. Golden, Esq., Office of the Gen-
eral Counsel, GAO, participated in the preparation of the decision.


United Power Corporation protests the award of a contract to EPE Technol-
ogies, Inc., under request for proposals (RFP) No. DMA600-90-R-0032, issued as
a total small business set-aside by the Defense Mapping Agency for power condi-
tioning systems to be used in computer rooms. The protester contends that the
agency improperly awarded a contract to a large business without providing the
notice required by Federal Acquisition Regulation (FAR) § 15.1001(b)(2) (FAC
84-13). The protester has also filed suit in the United States District Court for
the District of Columbia, United Power Corp. v. United States, Civil Action No.
90-0931, seeking injunctive relief. The court has stayed performance of the con-
tract pending our decision. We have invoked the express option provided for in
our Bid Protest Regulations. 4 C.F.R. § 21.8 (1989).
We sustain the protest.
On February 13, 1990, the agency issued the solicitation for a firm, fixed-price
contract for a base requirement of 39 75-kVA power conditioning and distribu-
tion systems, plus related start-up services, training and data, with an option
for an additional 26 systems to be provided as government-furnished equipment
to contractors conducting site preparation for a portion of the agency's digital
production system which is under construction at the aerospace center complex
in St. Louis, Missouri.
The power systems will protect equipment and data from power anomalies, both
by controlling the flow of current and by providing power in the event of tempo-
rary outages in the special electrical feeder lines that are to service the facility.
The digital production system is an integral part of the agency's modernization
effort which will allow the agency to move from a predominantly manual effort
to a system which will produce maps, charts, and geodetic products using com-
puter-assisted and digital production techniques.
Page 477                                                                           (69 Comp. Gen.)
The solicitation provided for evaluation of option prices and for award to that
offeror which, as the result of price and technical evaluations, obtained the
highest total weighted score, termed the "greatest value score" (GVS). The solic-
itation set forth six technical evaluation factors and provided that for the pur-
poses of award, the total value of the technical factors would be significantly
more important than price.
The agency received six proposals from five contractors on March 12 and com-
pleted its technical evaluation on March 15. As a result of this evaluation, the
agency found that only two offerors, the awardee and the protester, were in the
competitive range. Although the protester received a higher technical score, the
awardee's price was substantially lower, resulting in a slightly higher total GVS
score.
Although at the time the RFP was issued the agency did not contemplate
awarding a contract until on or about May 1, 1990, the contracting officer, on
March 15, "was informed by senior management that it appeared all [Depart-
ment of Defense] funds for obligation under contract would be frozen on or
about Monday, 19 March 1990." She was requested by senior management "to
make every effort to award [the] contract prior to imposition of the freeze." The
agency thereupon decided that award on the basis of initial proposals would be
advantageous to the government. Prior to such an award, the protester orally
advised the agency that the proposed awardee had merged with a large, foreign-
owned business and was no longer a small business. However, the agency states
that its quick check of various electronic commercial databases indicated that                                        W
the awardee met the 500-employee size requirement.2 The agency awarded the
contract to EPE Technologies on March 16, without written notice to unsuccess-
ful offerors, based on the contracting officer's unwritten determination that the
urgency of the procurement necessitated award without delay.3
On March 20, the protester submitted a protest of the awardee's size status. The
protester submitted evidence that in February the awardee had entered into a
merger agreement with a large, foreign-owned business. (The awardee had sub-
mitted its proposal, in which it had certified itself as a small business, on March
8, 4 days prior to the date set for receipt of initial proposals and 1 day prior to
the final transfer of stock.) The protester produced a copy of an internal memo-
randum dated February 8 advising EPE Technologies' employees of the impend-
ing merger, a February 12 news story concerning the merger, and a Dun &
Bradstreet report dated March 16, which contained details of the new owner-
' The awardee's evaluated GVS score was 92.4 points, while the protester's was 89 points. The awardee's price for
the base requirement was $906,438, and the protester's was $1,213,697. The awardee's total evaluated price, includ-
ing options, was $1,510,730, and the protester's was $2,061,248. The independent government estimate, including
options, was $2,232,672.
2The protester has presented evidence to refute this finding by the agency. Further, the parties stipulated in
court that the agency representative participating in the search was under the belief that the acquisition of a
small business by a large business "did not necessarily mean that [the small business] would no longer be small,"
if it retained a separate board of trustees with no direct control by the parent company.
3On March 19, the contracting officer states that she completed a written draft of a memorandum detailing the
rationale for waiving the pre-award notice based on urgency. Our copy of this draft memorandum in the record is
undated and unsigned. The final version was executed on April 13, 1990.                                               W

Page 478                                                                                        (69 Comp. Gen.)
ship arrangement. On March 23, the contracting officer sent the size protest to
the Small Business Administration (SBA).
On April 5, the SBA issued a determination in response to the protester's
"timely size protest" that the awardee was other than small for the purposes of
the procurement.4 The SBA noted that its regulations clearly provide that for
the purpose of determining size status, merger agreements and other arrange-
ments affecting a concern's affiliation with another firm or a change of control
are considered executed as of the date upon which the firm certifies its status.
54 Fed. Reg. 52,634 (1989) (to be codified at 13 C.F.R. § 121.904). On April 13, the
agency advised the protester that despite the SBA decision, it would not termi-
nate the contract. This protest followed on April 17.5
Under FAR § 15.1001(b)(2), the contracting agency is required to inform unsuc-
cessful offerors in writing, prior to award, of the name and location of the ap-
parent successful offeror, in order to permit challenges to the successful offer-
or's small business size status. Generally, after receiving a timely size protest,
the contracting officer must withhold award of the contract until the SBA has
made a size determination, or until 10 business days have elapsed since the
SBA's receipt of the size protest, whichever occurs first. FAR § 19.302(h)(1) (FAC
84-56). The award of a contract without notice to unsuccessful offerors is subject
to a timely size protest in the absence of a valid urgency determination. Superi-
or Eng'g and Elecs. Co., Inc., B-224023, Dec. 22, 1986, 86-2 CPD 1698. The con-
tracting officer need not provide notice where she determines in writing that
the urgency of the procurement necessitates award without delay. Where the
agency awards a contract pursuant to a proper urgency determination, the
notice requirements concerning size status are waived and a subsequent SBA
determination that the awardee is other than small is prospective and termina-
tion of the contract is not required. Id. We review such determinations for rea-
sonableness, and where they are executed after award, we will consider whether
the determination suggests deliberation at the time of award. See Science Sys.
and Applications, Inc., B-236477, Dec. 15, 1989, 89-2 CPD ¶T558. We conclude
that, in the instant case, the determination was unreasonable and that there
was more than sufficient time to complete the size protest prior to any award.6
4 Under new SBA regulations, a size protest received within 5 days after receipt from the contracting officer of
notification of the identity of the awardee is timely and applies to the procurement in question even though the
contracting officer may have awarded the contract prior to receipt of the protest. See 54 Fed. Reg. 52,634 (1989) (to
be codified at 13 C.F.R. § 121.1603).
5The agency argues that the protest is untimely since continued performance of EPE Technologies' contract
served as constructive notice that the agency had denied United Power's agency-level size protest of March 20. A
size protest, however, is different from a bid protest. Further, we find that the protest is timely since it was not
until the SBA determined that EPE Technologies was other than small and that the protester was advised that
the agency would ignore the SBA determination that the protest ground arose, that is, on April 13. The agency
also argues that our Office should dismiss the protest because the protester failed to deliver a copy of the protest
to the offices that the RFP designated for service of protests. The agency had been previously aware of the protest-
er's principal allegations, and our Office provided the agency with a copy of the protest within 2 days of the filing.
Our Bid Protest Regulations, 4 C.F.R. § 21.1(f), state that our Office will not dismiss a protest where no prejudice
has been shown, and we find none here.
6We also find that EPE Technologies failed to self-certify its small business status in good faith. The standard of
good faith when applied to a certification as a small business is not limited to an incident of intentional misrepre-
                                                           Continued

Page 479                                                                                          (69 Comp. Gen.)
The final written determination executed by the contracting officer on April 13
concerns the role of the digital production system to the agency's mission. The W
contracting officer notes that the RFP delivery schedule is extremely optimistic,
based on the delivery schedule supplied by the awardee, that any slippage of the
delivery schedule "could" result in day-to-day slippage of the digital production
system's full operational capability, and that such slippage could expose the
agency to large delay claims by construction contractors.
We note, however, that in arguing the importance of the agency's mission and
the importance of the digital production system to that mission, the contracting
officer presents no basis for concluding that a delay in award would have de-
layed construction of the digital production system. As noted by the District
Court in the protester's suit (order granting preliminary injunction), the con-
tracting officer's determination contains no basis for presuming that a delay in
award, to allow the protester to pursue its size status protest, would have pre-
vented timely delivery of the power systems to the construction contractors.
While the determination states that the awardee considered the schedule opti-
mistic, the record shows that the awardee had already offered to make early
deliveries in return for an increase in the contract price. The protester, for its
part, avers that it could make timely deliveries if a contract were awarded as
late as May. Indeed, the record contains an affidavit from the agency's technical
representative, expressing his opinion that award by mid-May probably would
not have delayed delivery of the power systems. We conclude that at the time
the notice was waived (mid-March), the agency had ample time to refer the size                                           w
status protest to SBA and to process an award without delaying delivery of the                                           W
power systems.
The only other factor that could have delayed delivery would have been the ne-
cessity of obtaining an exemption if the rumored funding freeze had become re-
ality. The agency's senior procurement executive confirms that several sources
had reported the pending freeze and that, in a telephone call, the Office of the
Secretary of Defense refused to confirm or deny that it planned to impose such
a freeze. He therefore directed contracting personnel to expedite awards and to
take every action to award certain procurements. A request for exemption from
an earlier freeze had taken 2 months to process, and the contracting officer was
directed by senior management at the agency to expedite the procurement. The
contracting officer's determination must be read in this context, and we find
that neither the funding freeze nor the agency's desire to avoid the inconven-
ience and delay attendant to seeking an exemption from the funding freeze,
sentation; since self-certifications are usually not questioned, offerors must be held to a higher than usual degree
of care in determining whether they are or are not a small business. 51 Comp. Gen. 595 (1972). The record here
discloses that on February 9, 5 weeks prior to award, the awardee widely circulated among its employees and the
media the news of its acquisition; the awardee sponsored meetings for its sales representatives to discuss the de-
tails and implications of the acquisition. During the period preceding the submission of offers for the current solic-
itation, the finalization of the acquisition awaited only the approval of the Secretary of State of California for the
formal transfer of stock, which was placed in a trusteeship controlled by the purchaser. The awardee executed the


                                                                                                                             W
self-certification 1 day prior to the formal transfer. We believe that a reasonably prudent offeror would therefore
have been on notice that there was a serious question as to its size status. See Bancroft Cap Co., Inc. et al., 55       -
Comp. Gen. 469 (1975), 75-2 CPD q 321.

Page 480                                                                                          (69 Comp. Gen.)
*
    .«  under guidelines duly promulgated by the Secretary of Defense, provided a valid
        basis for a finding of urgency. Cf Maximus, Inc., 68 Comp. Gen. 69 (1988), 88-2
        CPD 11 467.
        In sum, we find that the agency's primary motive for waiving the pre-award
        notice was its fear that funds might be frozen and its desire to avoid the incon-
        venience of applying for an exemption from the rumored funding freeze that
        never materialized. We find that the contracting officer's determination was un-
        reasonable and the written determination of urgency prepared after award does
        not reflect a product of reasoned deliberation; the SBA's determination that
        EPE Technologies is other than small is therefore applicable to the current pro-
        curement and its contract must be terminated.
        The agency also argues that the protester is not an interested party for the pur-
        poses of filing a protest under our Bid Protest Regulations, 4 C.F.R. § 21.0(a),
        since it would not receive award even if its protest were sustained. In support of
        this assertion, the agency notes that the protester's proposal did not comply
        with the RFP requirements, since the protester did not provide a firm price for
        the evaluated option quantities.7 The contracting officer also argues that if EPE
        Technologies is eliminated from the competition, she cannot make award to the
        protester, because, based on EPE Technologies' price, she has in fact determined
        that the protester's price is not fair and reasonable. She advises our Office that

    .   in such circumstances, she will therefore simply dissolve the small business set-
        aside.
        A determination of price reasonableness for a small business set-aside is within
        the discretion of the procuring agency, and we will not disturb such a determi-
        nation unless it is clearly unreasonable. Flagg Integrated Sys. Technology,
        B-214153, Aug. 24, 1984, 84-2 CPD 11 221. We believe that the contracting offi-
        cer's determination in this case is clearly unreasonable.
        According to FAR § 19.501(J) (FAC 84-48), a contract may not be awarded under
        a small business set-aside if the cost to the agency exceeds the item's fair
        market price. FAR § 19.001 (FAC 84-56) defines fair market price as a price
        based on reasonable costs under normal competitive conditions, and not on the
        lowest possible cost. FAR § 19.202-6 (FAC 84-56) directs agencies to determine
        fair market price in accordance with FAR § 15.805-2 (FAC 84-51), which per-
        mits a contracting officer to use the price analysis techniques that will ensure a
        fair and reasonable price, including a comparison of proposed prices received in
        response to the solicitation, a comparison of prior proposed or contract prices
        with current proposed prices, and a comparison with independent government
        cost estimates.
        Here, the parties stipulated in the court proceedings that the contracting officer
        relied solely on the large business price in determining that the protester's


.       7The protester's cost proposal noted the possibility of a price increase for option units shipped after March 31,
        1991. However, the protester states that it is willing to provide all the option quantities at the firm, fixed-price
        contained in its proposal. We merely note that the protester's proposal would easily be susceptible to correction
        through discussions. See Cajar Defense Support Co., B-237522, Feb. 23, 1990, 90-1 CPD 213.
                                                                                               r




        Page 481                                                                                         (69 Comp. Gen.)
price was not fair and reasonable, ignoring all other evidence. We believe that
it is unreasonable to rely solely on the large business price, where all other evi-     W
dence indicates that the price submitted by the small business was in fact fair
and reasonable. See Victronics, Inc., 69 Comp. Gen. 170 (1990), 90-1 CPD f 57.
We find no basis whatsoever for finding the protester's price to be unreason-
able. The record shows that the price submitted by the protester is entirely in
line with the prior procurement history for the item and is below the govern-
ment estimate. Indeed, shortly before this protest was filed, the agency ap-
proved a contract modification for the construction contractor to procure the
item at a price 25 percent higher than that here offered by the protester; fur-
thermore, the price offered by the protester is less than that appearing on the
General Services Administration schedule price lists of both the protester and
EPE Technologies. The record also suggests that the awardee's price may have
been below-cost since the price was two-thirds that which it had previously of-
fered for similar systems and two-thirds of the government estimate. Moreover,
we believe that having given primacy to technical factors and thereby inducing
the protester to submit a higher price, higher quality proposal, the agency
cannot, under the circumstances here, declare that price to be other than fair
and reasonable. To do otherwise would be contrary to the congressional policy
favoring small businesses, which allows awards to small businesses at premium
prices, so long as those prices are not unreasonable. See APAC-Tenn., Inc.,
B-229710 et al., Feb. 8, 1988, 88-1 CPD I 124.
We therefore conclude that the agency has not justified the need to waive notice
of award to unsuccessful offerors, that the contracting officer abused her discre-          W
tion, and that the protester was prejudiced thereby. As we have stated,~the SBA
determination that EPE Technologies is other than small therefore applies to
the current procurement, and we are therefore by letter of today to the Direc-
tor, Defense Mapping Agency, recommending that the agency terminate EPE
Technologies' contract for the convenience of the government and award the
contract under the solicitation to the protester after affording the protester an
opportunity to cure the reference in its cost proposal to a possible price increase
for the option quantities. We award the protester its costs of pursuing, this pro-
test, including attorneys' fees; the protester should submit its claim for costs di-
rectly to the agency. 4 C.F.R. § 21.6(d).
The protest is sustained.




Page 482                                                              (69 Comp. Gen.)
B-227353, May 23, 1990
Appropriations/Financial Management
Budget Process
* Funds transfer
* * General/administrative costs
* * * Cost allocation
Section 7(c)(2) of the Railroad Retirement Act of 1974, 45 U.S.C. § 231f(c)(2) (1982), provides for trans-
ferring funds between the Social Security trust funds and the Railroad Retirement Account. When
computing costs for this purpose, either full costing or incremental costing may be used since ad-
ministrative cost determinations are left to the discretion of Railroad Retirement Board and Secre-
tary of Health and Human Services.


Matter of: Determining costs for transfers between the Social Security
trust funds and the Railroad Retirement Account

This responds to a request from Dorcas Hardy, former Commissioner of the
Social Security Administration (SSA), Department of Health and Human Serv-
ices (HHS), for a decision concerning the proper method for computing costs in
connection with the transfer of funds (financial interchange) between the Social
Security trust funds' and the Railroad Retirement Account authorized by sec-
tion 7(c)(2) of the Railroad Retirement Act of 1974 (1974 Act), 45 U.S.C.
§ 231f(c)(2) (1982). Section 7(c)(2) authorizes transfers of those amounts which,
when added to or subtracted from the Social Security trust funds, "would place
each such trust fund in the same position in which it would have been" if rail-
road employees had been covered by the social security program and the rail-
road retirement program had never been enacted into law.
SSA fully allocates all administrative costs, including staff overhead, when de-
termining the Social Security trust funds' administrative expenses for the pur-
poses of computing the financial interchange. However, the Office of the Inspec-
tor General, HHS (OIG), maintains that using full cost allocation results in an
administrative cost determination greater than permitted by section 7(c)(2),
thereby placing the trust funds in a financial position other than that required
by section 7(c)(2). Accordingly, the report recommends that SSA use only incre-
mental costs to determine administrative expenses for the purpose of computing
the amount of the financial interchange.2
For the reasons discussed below, we believe that it is within the discretion
vested in the Railroad Retirement Board and the Secretary of Health and
Human Services by section 7(c)(2) of the 1974 Act to use full costing to deter-
  "'Social Security trust funds" means the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Dis-
ability Insurance Trust Fund, and the Federal Hospital Insurance Trust Fund.
2 U.S. Department of Health and Human Services, Office of Inspector General, Office of Audit: "Review of Select-
ed Aspects of the Financial Interchange Behavior, the Social Security Administration and the Railroad Retire-
ment Board Social Security Administration" (Audit Control No. 113-62671, August 13, 1985) [hereafter cited as
OIG Report].

Page 483                                                                                     (69 Comp. Gen.)
mine administrative costs for the purpose of the financial interchange between
the Social Security trust funds and the Railroad Retirement Account.

Background
In the 1930s, many private pension plans established by the railroads encoun-
tered financial difficulties. This led to legislation which created a federal rail-
road retirement program and established a Railroad Retirement Board (Board)
to administer the program.3 The legislation provides benefits to retired and dis-
abled railroad workers and their dependents in a manner similar to the benefits
that social security provides to other retired and disabled workers.
Initially, employers and employees financed the railroad retirement program
from their contributions. During the 1940s, railroad retirees received benefits
much higher than those paid by social security. In 1950, the Congress increased
social security benefits and liberalized the social security eligibility' require-
ments to enable millions of beneficiaries to receive immediate benefits. These
increases in social security benefits substantially narrowed the difference in
benefits between the two systems, but not in contributions.
Consequently, Congress in 1951 amended the Railroad Retirement Act of 1937
to increase railroad retirement benefits and the number of eligible beneficiaries
without substantially increasing contributions. However, because of potential
funding problems, the legislation provided for an annual transfer of funds-the
financial interchange-between the Social Security trust funds and the Railroad                                          v
Retirement Account. Act of October 30, 1951, ch. 621, sec. 22(b), 65 Stat. 687, 45
U.S.C. § 228e(k)(2) (1952) (1951 Act). The financial interchange was intended to
compensate for the exclusion of railroad employees from social security cover-
age. It was felt that this exclusion benefited the social security program because
the railroad retirement program had a high rate of beneficiaries to tax-contrib-
uting workers. See S. Rep. No. 890, 82d Cong., 1st Sess. 14-16, 27 (1951). The
legislation also placed railroad employees with less than ten years of employ-
ment at the time of their retirement or disability under the social security pro-
gram. Sec. 22(a) of the 1951 Act, 45 U.S.C. § 231q (1982). The financial inter-
change also compensates for these costs.4 The Railroad Retirement Act of 1937
was amended in its entirety and completely revised by the 1974 Act. The 1974
Act restructured the railroad retirement program but retained the provision for
the financial interchange. S. Rep. No. 93-1163, 93d Cong., 2d Sess. 49 (1974).

I Act of August 29, 1935, ch. 812, 49 Stat. 967, 45 U.S.C. §§ 215-228 (1940). The 1935 act was amended in its entire-
ty and completely revised by act of June 24, 1937, ch. 382, 50 Stat. 307, 45 U.S.C. §§ 228a-228z-1 (1940) (known as
the Railroad Retirement Act of 1937). Current authority for the railroad retirement program is provided by the
Railroad Retirement Act of 1974, 45 U.S.C. §§ 231-231u (1982).
4 For further information concerning the evolution and operation of the financial interchange, see GAO, Railroad
Retirement, Federal Financial Involvement at 12-16 (GAO/HRD-86-88, B-222204, May 9, 1986) and GAO, Inaccu-
rate Fund Transfers Between Social Security Administration and Railroad Retirement Board at 1-2
(GAO/HRD-83-2, B-210707, April 4, 1983).                                                                                W
Page 484                                                                                         (69 Comp. Gen.)
The Matter In Dispute
Section 7(c)(2) of the 1974 Act requires the Board and the Secretary of HHS, at
the close of each fiscal year, to determine the amounts which, if added to or
subtracted from the Social Security trust funds, "would place each such Trust
Fund in the same position in which it would have been" if railroad employees
had been covered by the social security program after December 31, 1936 and
the railroad retirement program had never been enacted into law. Once the
amount of the transfer is determined by the Board and the Secretary of HHS,
the Secretary of the Treasury is required to transfer the amount certified by the
Board or the Secretary of HHS between the Railroad Retirement Account and
the trust funds. 45 U.S.C. § 231f(c)(2) (1982).
The actual computation of the amount is done by the Board. The Board esti-
mates (1) the benefits that would have been paid to railroad employees if they
had been covered by the social security program, (2) the social security taxes
that would have been collected, and (3) the administrative expenses SSA would
have incurred if railroad retirement beneficiaries had been covered under the
social security program. GAO/HRD-83-2 at 2. For the third item, the Board
bases its estimate on unit cost factors developed by SSA. Id. at 18.
Once these amounts are determined for each of the Social Security trust funds,
the benefit payments and administrative costs are added together and compared
to the taxes that would have been collected. If the combined costs are greater
than the taxes that would have been collected, the difference plus interest is
transferred from the particular Social Security trust fund to the Railroad Re-
tirement Account. If the amount of taxes that would have been collected ex-
ceeds the costs that would have been incurred, the difference plus interest is
transferred from the Railroad Retirement Account to the particular Social Secu-
rity trust fund. For each year since 1957, net transfers have been out of the
social security system and into the railroad retirement system. Id. at 4.
The unit cost factor reflects SSA's estimated cost in administering each of its
programs. SSA estimates the cost for initial enrollment, eligibility determina-
tions and benefits computations, maintaining benefit rolls, and handling com-
pensation reports for each of its programs. In developing the unit costs, SSA in-
cludes staff overhead as part of its full cost calculation. According to the OIG's
Report, about 15 percent of the total administrative expense is attributed to
staff overhead functions. OIG Report at 6. The OIG concluded that including
staff overhead in the unit cost computation of administrative expense results in
administrative expenses greater than permitted by section 7(c)(2) of the 1974
Act and does not result in fund transfers that would place each of the Social
Security trust funds in the same position it would have been in if railroad em-
ployees had been covered by the social security program. The OIG therefore rec-
ommended that only incremental costs be included, and the Board concurred.
Id. at 6-7. However, the Commissioner of Social Security, who certifies the
amount of the transfer on behalf of the Secretary of HHS, disagrees. Therefore,
the Commissioner requested our independent views on this matter.

Page 485                                                            (69 Comp. Gen.)
HHS OIG Position
The OIG believes that SSA's staff overhead cost would not increase with the ad-
dition of the railroad retirement program caseload. Therefore, all of the staff
overhead costs should not be included in the administrative expense determina-
tion.5 The OIG states that:
To place the trust funds in the same position they would have been in had railroad employment
been covered by the Social Security Act, a careful analysis is needed to determine only those addi-
tional administrative costs SSA would incur if they were to process the RRB caseload.

The OIG reasons that some of the overhead staff costs are not dependent on the
rise and fall of workload production; that these staff overhead functions are al-
ready in place within the SSA organization and would exist regardless of the
additional workload from Railroad Retirement Board cases.

SSA Position
According to the OIG Report, SSA disagrees with the OIG's conclusion that full
cost treatment, including staff overhead costs, was inappropriate. SSA also
argues that the concept of full cost accounting requires that both direct and in-
direct costs be included in the determination of administrative costs for pur-
poses of the financial interchange, and to do otherwise would be inconsistent
with the methods for determining administrative costs for other purposes. OIG
Report at 6-8.
In various submissions provided to this Office, SSA points out that the concept                                           _
of full costing is a standard principle throughout government accounting that
has been recognized by the decisions of this Office. SSA also states that full cost-
ing was incorporated in the administrative accounting system formally ap-
proved by the General Accounting Office on September 30, 1980. SSA notes that
while our 1983 audit report on the financial interchange recommended a
number of changes in the methods SSA used to calculate administrative costs,
we did not recommend that SSA exclude staff overhead costs that are allocated
in accordance with SSA's cost accounting system.
Finally, there are several other cases where the calculation of benefits and asso-
ciated administrative costs are used to determine transfers into the trust funds.
These are payments for military service credits, special age-72 benefits, and pen-
sion reform. In each of these cases, the administrative costs used are based on
direct and indirect costs. SSA argues that using an incremental cost methodolo-
gy in computing SSA's administrative unit costs for the financial interchange
might require for purposes of consistency changes in other computations affect-
ing benefit transfers from the general fund to the trust funds.
I 0IG Report at 6-7. The GIG report identifies charges for the following staff overhead functions as being improp-
er: Central office administration, program policy, research, statistics, actuarial, legislative liaison, planning, pro-
gram information/public affairs, and management information. The OIG characterizes direct and indirect person-
nel costs including training, operations management and supervision related to the processing of the workload, as
proper charges.

Page 486                                                                                           (69 Comp. Gen.)
S
w     iscussion
    We agree with SSA that the concept of full costing is an accepted accounting
    principle throughout government accounting.8 As such, we would not lightly
    hold that its use is prohibited unless the law expressly, or by necessary implica-
    tion requires such.7 Thus, the question is whether section 7(c)(2) of the 1974 Act
    expressly or by necessary implication precludes the use of full costing when de-
    termining administrative costs for the purpose of computing the amount of the
    financial interchange.
    Section 7(c)(2) of the 1974 Act makes no mention of cost recovery. It merely re-
    quires the Board and the Secretary to "determine the amounts, if any, which if
    added to or subtracted from" the Social Security trust funds that "would place
    each such Trust Fund in the same position in which it would have been" if rail-
    road employees had been covered by the social security program after December
    31, 1936, and the railroad retirement program had never been enacted into law.
    We are unable to glean from the language of the law a prohibition on the use of
    an otherwise generally accepted method of administrative cost determination
    such as full costing. The law does not prescribe the method for placing the
    funds in the same position they otherwise would have been in had the railroad
    retirees only been covered by social security system, or for making related ad-

OS  ministrative cost determinations.
    Section 7(c)(2) of the 1974 Act leaves to the discretion of the Board and the Sec-
    retary the methodology for determining the amount of the financial inter-
    change and whether the respective funds are in fact being maintained in the
    same position they would have been if there had been no separate railroad re-
    tirement system. The full cost method for determining administrative costs has
    been in effect since at least 1976 (when the SSA's Cost Analysis System for iden-
    tifying costs took effect) and SSA indicates that it was probably in effect earlier.
    A contemporaneous construction put on a statute by an agency charged with its
    administration is entitled to deference and is generally affirmed by courts if
    reasonable, Udall v. Tallman, 380 U.S. 1, 16 (1965); Investment Co. Institute v.
    Camp, 401 U.S. 617, 626-627 (1971). Thus, the prior determination by the Board
    and the Secretary to use full costing when computing administrative costs for
    the purpose of determining the amount of the financial interchange is entitled
    to some deference as a proper interpretation of their authority under section
    7(c)(2) of the 1974 Act.
    6 See, e.g., GAO, Policy and Procedures Manual for Guidance of Federal Agencies, tit. 2, appendix I, pages 10-11
    (TS 2-24, October 31, 1984), recognizing that full costs may be appropriate for financial reporting purposes.
    7We   note that 57 Comp. Gen. 675 (1978) concluded that the "actual cost" recovery required by the Economy Act of
    1932 should be based upon a full cost methodology to the extent described in the decision. Our decision was based
    on our construction of the Economy Act in light of legislative history clearly reflecting Congress's rejection of the




.
    incremental cost recovery requirement imposed by earlier decisions of this Office for interagency reimbursable
    work performed prior to enactment of the Economy Act. See 57 Comp. Gen. at 678-679. Although, the cost recov-
    ery methodology required by the Economy Act does not control the determination of costs for purposes of the
    financial interchange required by section 7(c)(2) of the 1974 Act, it does support the conclusion that the full cost
    method is, at a minimum, a reasonable method, if not the preferred or required method, to be used when deter-
    mining costs in other situations, absent a clear legal requirement to the contrary.


    Page 487                                                                                         (69 Comp. Gen.)
Additionally, as noted in the OIG's Report, the amount in dispute represents
roughly 15 percent of the administrative expense cost figure applicable to this
computation of the total amount transferred for each year. The administrative
expense figure itself represents a small proportion of the total amounts involved
in computing the financial interchange. It is unclear whether the cost and
burden entailed in SSA singling out the financial interchange for a different ac-
counting treatment than that which SSA applies when computing ireimburse-
ment involving the Social Security trust funds under other provisions of law
warrant the imposition of the incremental costing method in the absence of a
clear legislative requirement that it do so.
Consequently, in view of the discretion vested in the Board and the Secretary,
we cannot conclude that their decision to use full costing to determine adminis-
trative costs for the purpose of the financial interchange violates section 7(c)(2)
of the 1974 Act.



B-237005.2, May 31, 1990
Procurement
Bid Protests
* GAO procedures
* * GAO decisions
. 0 0 Reconsideration
Procurement
Competitive Negotiation
* Contract awards
* * Propriety
General Accounting Office denies request for reconsideration of previous decision which upheld
award to low evaluated offeror, in absence of evidence that low evaluated offer would result in other
than the lowest ultimate cost to the government.

Matter of: Unisys Corporation-Reconsideration

Bernard Fried, Esq., for the protester.
C. Douglas McArthur, Esq., Andrew T. Pogany, Esq., and Michael R. Golden, Esq., Office of the Gen-
eral Counsel, GAO, participated in the preparation of the decision.


Unisys Corporation requests reconsideration of our decision, Unisys Corp.,
B-237005, Jan. 5, 1990, 90-1 CPD 124, denying its protest against the award of
a contract to Raytheon Company under request for proposals (RFP) No.
F04606-89-R-0104, issued by the Air Force for spare parts for microwave radio
terminal sets. We denied the protest because, based on an implicit representa-
tion by the agency that it did not intend to order substantial quantities of addi-

Page 488                                                                            (69SComp. Gen.)
T   .   onal spare parts under the contract at higher prices from Raytheon, we found
      o evidence that acceptance of the low offeror's proposal would result in other
    than the lowest ultimate cost to the government.
    We deny the request for reconsideration.
    The agency issued the solicitation on January 10, 1989, for a firm, fixed-price
    indefinite quantity contract for 23 line items of spare parts for a period of 3
    years. On June 30, the agency combined the solicitation with two other solicita-
    tions for similar spare parts, for a total of 48 line items. Each line item con-
    tained a minimum initial quantity, to be ordered upon award, and a maximum
    order quantity that the agency could purchase over the 3-year period of the con-
    tract.
    The amended solicitation required potential offerors to submit prices for the
    minimum initial quantity of each line item; each offeror also submitted prices
    in four quantity ranges for each line item for each of the 3 years of the contract
    period; these 576 prices, applicable only if the agency should order parts in addi-
    tion to the minimum initial quantity, were termed the "pricing matrix." The
    solicitation advised offerors that the agency would evaluate prices by adding the
    unit costs in the pricing matrix (quantity of 1 each) to the total cost of the mini-



    ._
    mum initial quantity (price multiplied by minimum initial quantity) and provid-
    ed for award to the responsive, responsible offeror submitting the lowest evalu-
    ated offer. This scheme gave primary emphasis to the minimum initial quanti-
    ty, which represented the agency's only firm requirement. The solicitation fur-
O   ther provided that the government could reject any offer that was materially
    unbalanced as to prices for the minimum initial quantity and the matrix quan-
    tity ranges, defining unbalanced offers as any that were "based on prices signifi-
    cantly less than cost for some work and prices which are significantly overstat-
    ed for other work."
    The agency received two offers on July 20, 1989. Although the prices in the pric-
    ing matrix that the awardee submitted were generally higher than the prices in
    the matrix that the protester submitted, the awardee's prices for the minimum
    initial quantity were so low that when the agency applied the price evaluation
    criteria, Raytheon's evaluated price was low.' In its proposal, the awardee pro-
    vided a justification for offering a lower price for the initial quantity, explaining
    in essence that it was passing along the advantage of a reduction in material
    and labor costs due to a concurrent "production buy" of the radio terminals by
    the Air Force in a separate procurement. The agency favorably considered this
    explanation and awarded a contract to Raytheon on August 16; it issued a deliv-
    ery order for the minimum initial quantity on August 29. Unisys filed its initial
    protest after receiving written notification of the award.
    I For example, the awardee offered a higher price for line item 1 than did the protester in each quantity range
    (15-29, 30-64, 65-139 and 140-275), for each of 3 contract years; nevertheless, its price for the minimum initial
    quantity of 85, $631 each, was considerably lower than the protester's price of $746, so that its evaluated price for
*   line item 1 (the 12 quantity range prices added to the price of the minimum initial quantity) was approximately
    $8,000 less than the protester's.


    Page 489                                                                                         (69 Comp. Gen.)
In its initial protest, Unisys argued that the awardee's offer was mathematica
ly and materially unbalanced, and that the maximum order quantities stated i]
the solicitation represented a valid estimate of the agency's probable needs over
the 3-year contract period. The protester pointed out that any purchase in
excess of 18 percent of the quantity remaining under the contract (that is, in
excess of the minimum initial quantity already ordered) would result in the pro-
tester, and not the awardee, offering the lowest ultimate cost to the govern-
ment, even considering the awardee's low cost for the minimum initial order
quantity.                                                                                                                  j
In response, we noted that consistent with Federal Acquisition Regulation
§ 16.504, which states that indefinite quantity contracts are for the specific situ-
ation where the agency is unable to determine its precise requirements during
the contract period and it is inadvisable to commit the government to order
more than a minimum quantity, the record did not support a conclusion that
the maximum order quantity set forth in the solicitation was intended to be an
accurate estimate of the agency's requirements.
The agency pointed out that having purchased the minimum initial quantity, it
had no obligation to purchase additional quantities from the awardee. Further,
the agency stated that the contracting officer had directed agency buyers, prior
to issuing any further delivery orders under the contract, to review the abstract
of offers to determine whether the contract offered the best price to the govern-
ment or whether any new requirement should be recompeted to obtain a better
price.
Absent any evidence that the agency intended to order any additional substan-W
tial quantities of spare parts from the awardee, we concluded in our prior deci-
sion that award to Raytheon was not likely to result in other than the lowest
overall cost to the government. Since the price evaluation was consistent with
the solicitation's heavy emphasis on the minimum initial quantity and since the
agency was not obligated to order and apparently would not in fact order sub-
stantial additional quantities at the higher prices from the awardee, we denied
the protest.
In requesting reconsideration of this decision, the protester contends that the
record in the original protest contained evidence that the agency intends to
order additional quantities from Raytheon. The protester restates its belief that
the maximum order quantity contained in the solicitation represented a valid
estimate of the agency's requirements for the 3-year contract period. The pro-
tester points out that regardless of the review procedure instituted to ensure
that buyers consider whether lower prices are available elsewhere, the agency
offers no assurance that it will not order additional requirements in an amount
that would negate its savings under the initial order.2
The record in the initial protest established that Raytheon submitted the low
offer for the initial order quantity, but its offer was not low if the agency or-
2The   protester also alleges that the agency has funded the contract far beyond the initial order price. Our review
of the contract shows, however, that funds will only be made available for each delivery order when placed.            U
Page 490                                                                                         (69 Comp. Gen.)
      ered any portion beyond 18 percent of the remaining quantity. Nevertheless,
*      e denied the protest on the basis of the agency's implicit representation that it
    had no intention of awarding additional substantial quantities beyond the ini-
    tial order quantity. In response to the reconsideration request, we have again
    contacted the agency to verify that it does not intend to order substantial addi-
    tional quantities under the contract. The agency advises us that currently it has
    no requirements for the items, that budgetary reductions have reduced require-
    ments in general and that it does not anticipate that its customers will generate
    new requirements for 6 months. The agency reiterates its intention to review
    any orders that may be received to ascertain whether placing orders at the
    price available under the Raytheon pricing matrix offers the best price to gov-
    ernment or whether any new requirement should be recompeted to obtain a
    better price.
    While the protester disagrees with our finding that the award to Raytheon as
    the low evaluated offer is proper, such disagreement or reiteration of arguments
    previously made provide no basis for reconsideration. See Tecom Indus., Inc.-
    Request for Recon., B-236371.2, Feb. 13, 1990, 90-1 CPD M185. We find no evi-
     dence that the agency intends to order additional substantial quantities under
    the contract which would warrant reconsideration of our decision not to disturb
     the award to Raytheon.




    Page 491                                                               (69 Comp. Gen.)
*Appropriations/ Financial
 Management

 Budget Process
 * Funds transfer
 * * General/administrative costs
 * * * Cost allocation
 Section 7(c)(2) of the Railroad Retirement Act of 1974, 45 U.S.C. § 231f(c)(2) (1982), provides for trans-
 ferring funds between the Social Security trust funds and the Railroad Retirement Account. When
 computing costs for this purpose, either full costing or incremental costing may be used since ad-
 ministrative cost determinations are left to the discretion of Railroad Retirement Board and Secre-
 tary of Health and Human Services.
                                                                                                       483




 Index-l                                                                                 (69 Comp. Gen.)
                                                                                                            b




Civilian Personnel


Compensation
* Overtime
* * Claims
* * * Statutes of limitation
On reconsideration, our prior decision denying additional overtime compensation to individual mem-
bers of the International Association of Firefighters, Local F-100, is affirmed. An initial request for
a decision was not accompanied by a signed representation authorization or claim over the signa-
ture of the individual claimants so as to toll the 6-year Barring Act, 31 U.S.C. § 3702(b) (1982). The 6-
year period of limitation in 31 U.S.C. § 3702(b) is a condition precedent to the right to have a claim
considered by our Office, and our Office has no authority to waive or modify its application. 68
Comp. Gen. 681 (1989), affirmed.
                                                                                                     455
* Retroactive compensation
* * Adverse personnel actions
N * * Attorney fees
* H U E Eligibility
Although there is no authority to pay attorney fees in connection with an administrative settlement
                                                                                                       0
of a complaint of age discrimination, a federal agency may pay the full claim for attorney fees relat-
ed to settlement of an employee's age and sex discrimination complaints where the agency concedes
that the employee would have prevailed in the same manner on just the sex discrimination com-
plaint.
                                                                                                     469




                                                                                         !0
Index-2                                                                                (69 Comp. Gen.)
*Wrocurement

      Bid Protests
      * GAO decisions
      * * Recommendation affirmation
      Recommendation to reopen negotiations under revised specifications is affirmed notwithstanding po-
      tential for additional cost to the government where any such cost would be due in large measure to
      the agency having placed a substantial order under the contract after the protest conference, at
      which the awardee's compliance with the specifications was in issue, and only 1 month prior to the
      due date for the General Accounting Office's decision.
                                                                                                     445
      * GAO procedures
      * * GAO decisions
      * * * Reconsideration
     Decision finding that awardee's proposal was noncompliant with solicitation requirements, and rec-
     ommending that negotiations be reopened under revised specifications, is affirmed where reconsider-
 _ation request is based on mere disagreement with prior decision or arguments that could have been,
inut     were not, raised during consideration of protest, and record does not otherwise show error of
  Wl act or law warranting reversal or modification of decision.
                                                                                                       445
      * GAO procedures
      ME GAO decisions
      * * * Reconsideration
      General Accounting Office denies request for reconsideration of previous decision which upheld
      award to low evaluated offeror, in absence of evidence that low evaluated offer would result in other
      than the lowest ultimate cost to the government.
                                                                                                        488
      * GAO procedures
      E * Preparation costs
      Claim for a general and administrative expense factor to be applied to protester's direct expenses is
      disallowed in the absence of a sufficient explanation of the basis for that factor.
                                                                                                       433
      * GAO procedures
      E * Preparation costs
      Claim for bid protest costs incurred for working on a companion protest and in pursuit of a cost
      claim, and for contacting a congressional representative, are disallowed since they are unrelated to
      the pursuit of the protest.
                                                                                                       433


      Index-3                                                                             (69 Comp. Gen.)
Procurement




* GAO procedures
* * Preparation costs
* * * Attorney fees
* . N Amount determination
Agency's general objections to the allegedly "excessive" number of hours claimed by the protester
as spent by its attorneys and employees in pursuit of its protest provide an insufficient basis for
concluding that the attendant costs are not reasonable where the hours are properly documented
and certified.
                                                                                                  433
* GAO procedures
I * Preparation costs
* * * Profits
Claim for profits on protester's labor costs is disallowed since there is no statutory basis to award
profits as part of the costs for pursuing a bid protest.


Competitive Negotiation
* Competitive advantage
* * Conflicts of interest
* * * Allegation substantiation
*E E Lacking
 Protest that awardee is ineligible for a contract because of a conflict of interest arising from its
 relationship with a company which could possibly be subject to audit services required under
 present contract is denied where agency reasonably determines that no actual conflict exists and
 where agency's proper administration of task orders issued under contract would provide adequate
 safeguards to prevent the contractor from possibly conducting a biased audit.
                                                                                                   464
 * Contract awards
 * * Propriety
 General Accounting Office denies request for reconsideration of previous decision which upheld
 award to low evaluated offeror, in absence of evidence that low evaluated offer would result in other
 than the lowest ultimate cost to the government.
                                                                                                   488




Index-4                                                                              (69 Comp. Gen.)
       I* Offers

V      * * Cost realism
          * * Evaluation
       II II     Administrative discretion
       Agency may rely on the recommendations of the Defense Contract Audit Agency concerning direct
       labor and indirect cost rates in analyzing cost proposals.
                                                                                                     459
       * Offers
       * * Evaluation
         I I * Personnel
       Agency does not have a duty to verify the availability of prospective employees proposed by an of-
       feror for whom offeror has submitted letters of commitment.
                                                                                                     459
      * Offers
    _N*    Evaluation
         E * Personnel experience
      Protest that awardee's proposed labor mix does not meet solicitation personnel education and expe-
      rience requirements, and therefore agency's evaluation of awardee's proposal was unreasonable, is
      denied where record shows that proposed labor mix met the solicitation staff requirements.
                                                                                                          463
       * Offers
       * * Evaluation errors
        I * * Personnel experience
       III     IPoint ratings
       Agency's use of a rating plan that resulted in the assignment of zero points for a labor category in
       the evaluation of protester's best and final offer, on the ground that 3 of 11 resumes submitted for
       the category were unacceptable, was an improper material departure from the evaluation plan set
       forth in the solicitation; the plan stated there, and used by the agency in evaluating initial propos-
       als provided for a composite score based on the scores of all resumes submitted, regardless of wheth-
       er any particular resume was found unacceptable.
                                                                                                         472

       Sealed Bidding
       * Bids
       * * Responsiveness
       * * * Price omission
       * H U E Line items
       The protester's deletion of one subline item in its low bid on a sealed-bid procurement should be
W      Avaived as a minor informality where the deleted bid requirement was not material or an essential
       Index-5                                                                              (69 Comp. Gen.)
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