i i ~~~~~th- cdmptfioller~ junneal degcisio3n .t aof ... · b-190611 4 award linit, there is...

i i ~~~~~TH- CdMPTFIOLLER~ JUNNEALi DEgCISIO3N .t , aOF THEf UNITSO STATES

\ti,/%.4 ./ AWA ri.NGtTDN, D.C. 0 5 48

FILE: B-190611 DAi E: September 22, 1978

MATTER 0F E-. Id u Pont de Nemours & Compani'*Ionic-s Innirporated; Dow Ch4mical

DIGEST: Company.Permutit Company, Inc.

1. Notwithstanding possible.untimeliness of protestsun&do Bid ProtlijSt Procedures, protests will becoinsidered on ii<ritn where presiding jydge inlitigation related to protests has signedstipdrlatdo's expressing interest in GAO decisionon proteh t.

2. Prot.6fiiker hass not met burden ofaffirmativelyprbving versicn6 6f disputed facts wheeze con-flicting #taeiemenfs of'protester and dontract-'ng agency constitute 'only, evidencej,. Conse-quently, protester's decision to reduce per-meator stack height must be viewed as competi-tive respo-se rather than as response to RFPchange.

3. okO conclu'tdi procur'ing agency negotiated "pipewall' change in question with 'protester in- good

*J faith without complaint based on best engineeringjudgment.

4. There is na'.evl.Jienc in record to'rebut Iliteriorisposition thAtIAFP warranty requirements and eachofferor's warranty were discussed and clarifiedto each' offeror1 's satiisfaction. Moreover, pro-tester admits i understood warrantyprovisionsprior to best a'ld' finalJ'bffers go that protesterwas in position 'of correcting supposed penaltystemming from eI;rly reading cf provisions priorto final offer .ate.

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5. Allegation of laciN of uniform warranty evaluationin .Wt.de largely in abstract. Moreovec, to extentprotester was Concerned with lack of time forconsidering final offeks in view of allegedchanges in warranty ptovisions, it could haverequested additional time, but did not.

6. Based on review of conflicting technical positionsregarding pH controversy stemming from testing ofmembrane desalting unit, GAO cannot questionreasonableness of Interior's technical conclusionthat smal accumulated testing time involvl nq .pHexcursions below 4.5 makes it extremely questionablethat serious degradation of perweator componentwas caused by low pH of feedwater,

7. Under;rfacts that protester realized 1 ppm of till.compound--asserted to betroublesome'element--wraspreseht in feedwater prfor to final offer andt.tat.protester never identified compound us'troublbsome despite Interior request to identifytroublesome compounds when testing was started,GAO must conclude protester was, not seriouslyconcerned about' tin presence. Moreover, protesterstated (albeit allegedly'in'advertently) in finaloffer that calciuw rather' than tin causedpermeator degradation in issue.

8. GAO cannot questidn reasonableness of agency 'views that eliminating proposal scoting attributedto productivity loss caused by permeator degradationdoes not affect selection of proposed awardeesand that protester's alleged technical measurementinvolving "salt rejection, TDS and recovery'is "not accepted measure of technicaC perform-ance."

9. Whatever might have been improper aboUt Interior'soriginal proposal scorin'g technique, fact' that're-scoring of proposals under so-called normalized scor-ing method has not altered relative position ofofferors requires rejection of protest ground evenconsidering asserted defects in restoring.

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ad Colorado 'RiveL SLsin SaLivtttt>EtrOlAct requires,use of nadverid comercial techtology" for meetingdesalting objectives at iNCia ae eral.l cst to UnitedStates" neithet ,t\vhivb-sta n~dard requiresstate-of-art demonstratidnd'oreotr, revtiw of legislativehistory of act does. nqt supcorr- upposed require-Mont for state-of-art dft-monOLrtion of desaltingtechnology.

11. Contrary to argument a)viticel by' prctestert, RFP didnot reguire split awardsdof certsin sizes for atleast 'two deslt-.Ing procesase to extent awardswere 1m73ctica1" as to prices eind quantities.

12. Under' relevAnt dictionary defirlitions of word'impractical 4s used inrq cofrt-eict of xfP? provision,word m\eaniconaLdered- wisdorm -of Eputting awardinLtedton into effect under actual conditions ofproposed quantities and pUMicEra.

13. Given,.subjective charact.ertd agency decistoncontemplated b~y 2impract.iaaV exception toagency's stat4d award Intenticrz, view is rejectedthat pradticaility of i'.ecL.t1intg award intentibh waBto be limite'd; tot concept thet so long as proposalwas in compeeitive range impr.actical exceptioncould not be justified.

14. Altough hiist of obiections hre.rbe" raisedagainst wisdiom'of agency's-cecLaon Jco maAe, splitawardg for odly on#>menbrane idz1tinig process, oneaward of which exceeds, intenided 6O-percent-Lcapacitylimit, decision does not Lack ra-cional support.Although Interioriwas prepare~d to incur additionalexpense to make multiprocew sawards within intendedcapacity limit, ultimate experse of carrying outintent was excessive.

15. Aaeh'h PFotesters infst tey could have offeredlower prices by adjusting p sopoaed desaltingcaptacities had they known of agency's ultimatedecision to exceed intended maximum capacity

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award linit, there is nothing in record to indicatethat price reductions would have'affebted evaluatedranking. Motpeover, reasonably cautious offerorsshould have realized, undmr stated contingency,that percentage capacity limit might not headhered to and, therefore, should have offeredalternate -ffer above limit if perceived competitivepricing advantage might wne obtained.

16. Based on review. of technical objictions to singletechnology awt.'rds for desalting %nembrane concerningalleged.,obsolescence of selected membrane material,vulnerability ofI'iaaterial to high temperaturesand bacterial counts, ard.,laick of proper, operatinge..periendce!of sel'~de'd 'coiderns, for 'single CedcinologyhWards, (GAO cannot Wdohclude that agencyl' a judgmenton t'c'hical intrlciaies and jerits of competingmembranes lacks rational sup*rrt. Moreover, GAOaudit shtuws agendjt' cbnsidered' many of objectionsraised during'dvaluatidnh proctss, but never-thel~ss considered selected offerors to rankhighest on technial score.

17. GAO capnot question prbcuritg agency's implicitjudgment that competing desalting experiencesreasonably indicate evaluated strengths andweaknesses of ranked proponsals notwithstandingcriticisms advanced.

18. Ne'ither national' nor worJA wide competitivebalance of desalting indusctry is properfactor to affect selebtiora of awai'dees formembrane desalting equipment.

19. Even if public ranking of offerors 'for mem-brane desalting equipment viola't~ed regulations,fact-remains that release of info'mait'lon inno way affected validity 'of selection ofproposed awardees, since release tobk placeafter awardees' selections. Consequently, GAOcannot recommend that award selection bereconsidered.

La

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.4 20. Electrodialys'i desalting, offeror has not poiigted,'j I to 4ny speciE la deficienafai in agency's eviluatloa'

of its. wq'rritnty proposal or.1thdt of anv otWje,warranty'proposals to demonstrate its conci'fi)on

; that warranty provisions were not unlformly/;appliedother than protester's overall prop'osa?.,rar/ ing:which is not necessarily inconsistent .with/,speci.ficme it accorded to protester's longer wdrre'aty.

21. A'ency's position that acceptance of propowedadditional 'rack allowanceN modification--eveniLough not expressly prohibited, by RFP--wouldhave contravened warrant'y prov+s'ons ih not subjectto question. Moreover, prot'estir lid not complainabout denied modification during negotiations.

22. Importance given to, "high recoyvry" factor in* proposal evaluation was' not out of line w'ith

priJportionate wei'ht asslg'nedtfactor in RFP.Moreover, merit assigned to proposal which per-, mitted operation up to "plugging factor" of 65perr-ent was reasonable.

9.

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Table of Contents

i'PgeI. Background . . . . . . . . . . . . . . . . . . 10

II. Procurement History . . . . . . . . . . . . . 10

A . RFP. . . . . .a a .4 * * , * ,* , ,b0

1. Award Provisions . ....*.*.*.*.*.*.*,* 112. Technical Evaluation Criteria . . . . 12

3. Cost Evaluation Criterion . . . . . . 15

B. Negotiation Process . . . . . . . . . . 16

1. Initial Evaluation of Proposals . . . 16

2. Negotiations with Offerors . . . . . . 16

3. Evaluation of Best and Final Offers.'. 20

C. Analysis Leading to Proposed Awards *.. 20

III. du Pont's Protest . . . * * . . . . . . . . . 22

Interior Reply . . . . . . * . . 29

GAO Analysis .a . . . . . . . . . . . 39

A. Improper Changes in RPP . . . . . . . . . 22

Interior Reply . ... . . . . * . . 29

GAO Analysis . .. .......... 40

1. Permeator Stack Height * . . . . . . . 22

Interior Reply . . . . . . . . . . *., 29

GAO Analysis. . * . . . . . . . . . . 40

fl , ~p"i90611 7

;~ ~ ~ ~~2 Chng in Pip Wals2

Interior Reply ............ 30

I :'/

t ~~~~~~GAO Analysis . . . * 4.1

| ~~~~B. Ambiguity in Warrahty Provisions . . . . . 23

l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Interior Reply .............. 30

f ~GAO Analysis 41

Co Improper AgIncy Direction of M(inbraneIt2 Testing i P Walls . . . . . . . . . 23

Interior Reply ... . . . . . . . . . . 32

GAO Analysis . . . .., , . . . . . 42

D Technical Merit Not Scored Properly .. .27

Interior Reply .. . . . . 36

GAO Analysis . . . . . . . . . . .. . . 44E. Violaperngcyiretion of MebreRFP

, eProvisin . . . . . . . *. . . . . . . . . 28

Interior Reply . . . . . . . . * . . . . . 37

GAO Analysis . . . . . . . . . . . . . . . 44P. Improper Public Ranking of Offersl . . . 29

Interior Reply . . . . . . . . . . . . . 39

GAO Analysis . . . . ... . .. . .a 52

IV.' Provsi . . . . . . . . . . . . . . . 52

Interior Reply . . . . . . . . . a * *58

GAO Analysis . . . . . . . . . . . . . . . 62

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Page

A. Violation of "Plant Split" RPP'Provision . ..... 52

Interior Reply ...... . . . . . 58

GAO Analysis . ........... . 62

B. Technical Merit Not Scored Properly . . a 56

Interior Reply. ....... . . .. , 60

GAO Analysis . . . . .. . . . . . a a . 62

C. Improper Treatment of WarrantyProvisions. . . . . . . . . . . . . . , . 56

Interior Reply . . . . . . . . . , . . . 61

GAO Analysis. . . . . . . . . . . . . . . 63

D. ED Of ferors Compe'1It_-ely Dis-advantaged . . . . . . . . . . . . . . 57

Interior Reply. . . . . . . , . . . , . . 62

GAO Analysis . . . . . . . . . . . . . . 64

E. Improper Public Ranking of Offers . . . 57

Interior Reply. . . . . . . . . . . . . 62

GAO Analysis . . . . . . . . . . , . . . 64

F. Disclosure of Testing Information . . . . 58

Interior Reply . . . . . . . . . . . . . 62

GAO Analysis. . . . . . . . . . . . . . 64

V. Dow-Permutit Protest ..... .... . 64

Interior Reply . . . . . . . . . . . . . 68

GAO Analysis . . .. . .. .a. . . . . . 73

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Page

A. Lack of Meaningful Discussions ofYuma Testing . . . . . . , . . . . 64

Interior Reply . . . . . . . . . . . . . . 68

GAO Analysis . . . . . . . . . . . . . . . *73

B. Rack Allowance Problem . . . . . . . . . . 66

Interior Reply . . . . . . . . . . . . . . 71

GAO Analysis . . . . . . . . . . . . . . . 76

C. Bias in Evaluation . . . . . . . . . . . . 66

Interior Reply . . . . . . . . . . . . . . 71

GAO Analysis . . . . . . . . , . . . . . . 76

D. Violaktion of "Plant Split" Provisions . . 67

Int/rior Reply . S * . . . . . . 9 . . . 73

GAO Analysis . . . . . . . . . . . . . . 77

E. 'Size of Proposed Awards DestroisCompetition . . . . . . . . , . . . . . , 67

Interior Reply. . . . . . . . . . . . . . 73

GAO Analysis . . . 78

F. Improper Evaluation Weight forHigh Recovery Capability. . . . . . . . . 68

Interior Reply . . . . . . . . . . . . . 73

GAO Analysis . . . . . . . , . . . . . . 78

VI. Results of GAO Audit . . . . . . . . . . . . 78

VII. Conclusion . . . . . . . . . . . . . . . . . 80

, _ -. -. ..

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£. Background

In 1973, Minute No, 242 of the IntetnationalBoundary and Water Commission became effective. Thisminute requires that the United States take, certainsteps to control the salinity of the Colorado Riverwater being delivered to Mexico. Desalting plantcontruction to control the river's salinity wasauthccized in 1974.

.;e Bureau of Reclamaticn, Department of the Interior,was given the responsibility to select manufacturersand desalting processes to be installed in the YumaDesalting Plant to be built near Yuma, Arizona, as a,first step in controlling the river's salinity. The YumaDesalting Test Facility was constructed to test membranedesalting equipment potentially to be supplied for thedesalting plant. Thereafter, several manufacturers ofmembrane desalting equipment began testing operationsat the test facility.

Interior has informed us that many of the materialsevidencing the precise details of the procurement prov-cess--especially in regard to the ultimate selectionof the proposed awardees--are considered to be "priv-ileged" and not for release. It is our policy toaccept these agency-imposed restrictions and permitinterested parties to seek release of the documentsthrough appropriate non-GAO forums. Nevertheless, wehave reviewed all documents concerning the procure-ment.

II. Prccurement History

A. RFP

In March 1976, the Bureau issued request forproposals (RFP) No. DS-7186 for menmbrane desaltingequipment to be installed under a firm fixed-priceorifixed-price with escalation contra^t4 (The actualinstallation work is done under a separate contract.).,

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The RiFP described eight. items of need'i under "basicschedules." A basic. schedul)) was defined as consistingof items 1o 2, and 4, or iteenu, 5, 6, and 8, for turnishinqone 'proof" test unit, one desalting unit (20Miillion-gallon-per-day>IMg3l/d)),> hnd train!ng for Governmentemplthyees. Item 2 described a "membrane" process. Item6 described&,an electrodia1ysis" process. In additionto "basic schedule" awards, thM RFFY informed offerorsof the possibility of awards for aaditional "biock sizeincrements" of desalting capacity as to which offerorswere instructed to offer incremental prices under items3 and 7.

1. Award Provisions

The PFP further informed offerors:

N* * * The Governwent regerves the rig"It to..determine the number of additional ipcre-ments4to be awarded, at the appropriate(prIce]. The desire of the Government isto award a contract or contracts which !ncludeat least two processes. Further, the Goverr:mentwill, as best serves the intdrests of theCavernmenti,vlaward contracts for the totallb'4-.M-sgal/d iant' capacity to one or to morethan one offeror."

Paragraph 2.4#.2.c. of the RFP also provided:

"The Governme*nt de-sires that not all' theaezmb{ane desalting equipment be supplied

by-one manufacturer and that it ndt;ball beone prroce /s/' The iintent-is to procure amininzum of 20 percent and a maximum of60 percent of the',,1 ffective installedcapAcity from 'diy one- mabufacsurer. Theinthet is 1 1to awtrd contracts to assure amlninmu- of- two Jnd a maximum of three,manufac urers?, and to obtain 91mintmumof two and a niaxiinum of three processes.Kallow fine fiber, spiral wound, andtubular reverseLosmosis systems as wellas sheet flow and tortuous path ED

.5',~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~,

- - -'F ~~~~~ - - .1- '~~~~

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(electt"odiail'sis) systems are consideredsepa'rat'e processes. This is not meant tobe an inclusive list of processes to be usedin the plant, but the Governmentexeservesthe right to,,determine whether othersystems proposed shall be donsideredseparate processes. This is stated as anintention since equipment may be offeredin such quantity and at such prices as tomake Implementing this intention impractical.No portion of the plant has bee.. allocated toany particular grccass or to any part tzrul.rmanufacturer.

2. Technical Evaluation Criteria

The RFP informed offerors generally of therequirement for technical proposals and of the criteria(listed in descending order of importance) whichwould be used in evaluating technical proposals asfollows:

"3,1.1. SUBMISSION FORM

the technical proposal shall contain adescription of the equipment proposed,supplementary data, and procedures forproviding technical assistance. Thisproposal will be evaluated in accordancewith the criteria outlined in Section3.2. * * *

"SECTION 3.2-EVALUATION CRITERIA

3.2.1. EVALUATION CRITERIA

"An evaluation procedure has been developedwhich includes standards of perfcrmance orcompliance against which each proposal willbe evaluated. For many factors, particularlythose in which the Government must place sub-stantial reliance on offerors' statements,the evaluation will be heavily weighed bytha detail and quality of supportingdocumentation and data. The following is

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a Iist of the elements to be evaluated indescendin-g order of importance and of themajor factors which comprise these evaluationelements. The. first nine elements in thIslist (Subpa-ragt-phf a. through is ) 'compriseapproximaftelv two-hirds of the total evaluationwdight. However, all evaluation elements andfactors are significant and shall be consideredin 'the offerors' proposal. The factors ofhighest importance within each element arefollowed by an asterisk (*).

Wa. Process design.-The integration of theseparate jarts of the plant into a completehigh-quality. system and the capability of thedesaltin'g 'tqucpm'ent .to operate over the designrange of. v&aiablis. LA Major variables are-temperature,.feed sa[lin'ity, inlet, feed rate,and ptodbct water recovery. Factors includeoverall prbcess quality*, efficiency*, abilityto operate over the design rahge*, optimizationof design based on lowest annual cost*,applicability, simplicity of module arrangementand flow pattern, and additional flexibility.

"b, Membrane characteristics.-D-Lta from the YumaDesalting Test Facility and other applicationswill be used to substantiate design characteristics.Factors include the operational properties ofproduct flux* and salt rejection for reverseosmosis and current efficiency* and electricalresistance for electrodiilysis.

"c. Warranties.-Warrantiies on membraneelements*, desalting equipment productivity*,mechanical equipment, and chemical usage.These warranties will be considered primarilyin terms of their adequacy in protecting theGovernment and of producing accurate costestimates and a conservative plant design.

"d. Testing and experience.--The minufacturer'stesting at the Yuma Desalting Test Facility*.Previous desalting experience, and all aspectsof plant design, construction, and operationfor the plants the offeror describes. The

L .......... .

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membratie manu aturer s overall. capabilitiesfor manufacturing the proposed membrane equ'ip-ment within the time limits imposed. Factorsinclude qualifications of project personnel*,quality control procedures*, -eauipment pro-duction capabilities, and offe&ror's programfor training operating personnel.

"e. Membrane elemenpt'characteristics.-Membrane elemedt desigh and components otherthan the membrtane itself. Factors includemembrane element design, mecianical ,and chemicaldurability of coMpuone'tnis,-rsudceptib.'lity tofouling and scaling, weight of the membraneelements, and the adaptability for state-of-the-art improvements.

n f. Change of membrane properties;-negra-dation of membrane properties with time.Factors include average performance*,biological fouling or attack, chemicalntability, and rervice life.

"g. Desaltii,- unit maintenance.

"h. Operation, st&rtup, and shutdown.

"i. No load or minimal operation.

"j. Mechanical features of vessels andstacks. *

"}: Piping for reverse osmosis units.

"1. Electrodi'lysis rectifiers, piping,and accessory e;. ipment. * * 9

"im. Proof test unit. * * *

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n. Membrane supply and storage.

"o. Pretreatment and posttreatment.

P. ;,Hazards.,4% * *

q. Cleaning.

r. Corrosion mitigation find effects.

-s. Instrumentation.

"t. Structural s4tpports for vessel andstacks.

* ;

"u. Equipment other than mnicmhrane elements.| ~~~~~* * * 'I

(Technical requirements, includinq requirements forwarranties, were set forth at length elsewhere in theRFp. ) x1

3. Cost Evaluation firriterion

As to evaluation of proposed costs, the RFPprovided:

"While proposed costs will notbe poantscored in the evaluation of ptoposals,the costs proposed for the requirementswill be used as an aid to determine theofferor' s understanding of these iequire-ments. The relative importnriice betweencosts and technical quality is approxi-mately equal. Contracts will be awardedto the offerors whose proposals are mostadvantageous to the Government, price andother' factors considered. However, theGovernment reserves the righc -o accept

'I'

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other than the lowest cost proposals andto reject any or all proposals."

To correct errors in the RFP and to make changesas a result of comments received at a March 30, 1976,preproposal conference, several amendments to the RFPwere issued.

B. flegotiation Process

SevenoffeL'ors submitted proposals, includingE.e'l du Pont de Nemours & Company (du Pont), Dow ChemicalCoinpany-Permutit Compa'ny, Inde. (D-P), and Ionic's, Incor-porated. Initijl technical prop'osals were -evaluated bythree evaluators for eadh citegbry., Thehino-called Consensusevaluations" wae determined. Cost- val'uation was doneseparately. Technical and cost evalu'ations were ttien,reviewed, approved and given "cost per techni'cal point"ratings. (This technique was followed, Interior reports,so as to give cost and technical factors approximatelyequal weight.)

1. Initial Evaluation of Propos3ls

Based on evaluation of costs and technical scores,all seven offers received were determined to be inthe competitive range for the procurement. Offerirswere informed of this conclusion in le November 1976.

2. Negotiations with Offerors

After the competitive range was established,negotiations were conducted with a2l offerors. Eachofferor was requeisied to make a i- to 2-hour presenta-tion at the beginning of the ini-tial negotiation meeting.Additionally, negotiators and tedhnical advisorsvisited each offeror's and subcontractor's manufactur-ing plant and applicable,'operating plant to determinethe responsibility of each offteror.

Technical evaluators were present as advisorsduring initial negotiations pertaining to areas whichthey evaluated and were called upon fron time to timeduring subsequent negotiations. Cost evaluators werepresent during cost evaluation discussions and werecalled upon to present cost evaluations to offerors who

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requested them. The coorracti oficer did rotaEten'd negotiations, but was kept informed of theproceedings and 'gave negotiators gu ilance as neededand requested.

is to the events regard-ing neqotktfion, Interiorstates:

fl* * * In addition;to the 'orn'aL riegotiation.sessions at meetiing's, telephone negotiationsware conducted to discuss o cJarify specificpi ts. taised during the neefirgs or, as theyocdurred. Government participation in theseneqctiations was lImited to the desiggnatedne\gotiators with technical and cost evaluationpa icipants, as necessary. No fdrnial minuteswere prepared of these telephone negotiations.

Woffor'si.-swerve advised that regotfaElons wouldbe., c5Wndiicied," in part, on the basis of defi-ciencde&s in proposed equtpnent and proposaldocuments noted in evalUatt nw Initial prtpbsalsand subsequent mod afi6atfons to the proposals.Of fetbrts were sent letterti dete-jd between! Noven-ber 24 threough Novenmber 30, 19)6. detailingitems to be discussed dirin' initial. negotiations

*Ofierors were reqliested fo~ odify theirproposals 4iased on the detivierncies discussedand tob 4uMit< an amendment cove~rinq applicableportions of :their prdposas for Governnentreview prior,'Ao the next niecottaticn session.However, iiuunerotu 6. modificatt ioins were madeto some best aid final proposasLs in conflictpith the recm6tenda'tions made by the Govern-ment duting negotiations, and &ddltlonalmodifications were made which had nevtrbeen discussed. Moddficationiato the costproposal prior to submittal of best andfinal offers were only requested for itemswhich would have a significa;.c Impact onthe cost evaluation.

'In addition to negotiations wi t l theofferors, the test programs and resultswere discussed in detail in Deerenber 1976,with those offerors who had units on test

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at the Governmei'nt 's Yuma Desalting Test'Facility as requested by dile contractingofficer for the ho cost contracts underwhich testing was. being-perforliJd * *While these discUisSions were noti part ofthe formal negotiations, they'did re'lateto the overall effort of the offerors."The Panel 6fpCon'sultants reviewed theinitial technical h-roposa in orderto'identify any deficiencies which mayhave been initially overlooked. Theirreport' dated June 1, 1977, * * * raisedsome juestions which were discussedseparately with the :arious offerors.

"The solicitation was modified to makewarranty provisions nonenforceable againsttheir surety or sureties * *

"Copies of appropriate portions of theaudit reports were fbfnished to the',audited firm or subcontrtactor upon request.No audit, or portion thereof, of an'bfferoror subcontractor was, furhished to the otherpart5t, i.e., potential contractors were notfurnished subcontracebr'n audits or pprtionsof their own audit relating to subcontractors,nor were subcontractors furnished portionsof the offeror's audit relating to the sub-contractor.

"Costs questioned by the auditor and non-allowable costs were discussed with eachofferor., Those offerors whtUeq evaluatedcosts (annuil equivalent costs) in the ini-tial proposals were considered high wereadvised that their costs would need to bereduced to be competitive in the best andfinal offer; however, no dollar amountwas quoted.

"The initial proposal cost evaluationswere only discussed and presented to thoseofferors who requested it. * * *

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"ti'ce ne btiatibns yere more limited thanmgiiE oth6,rwise ',e anticipated since a~de-qua etprice competition existed for theprocurement. Cost evaluation was basdd onannual equivalent costi' rather than bidprices to provide least cost to, the Govern-ment. Since, cost evaluation arid techrnik.alevaluationr were gvten approximately equalweight, it was necessary for each offeror tcsubmit a ptoposal with a competitive annualequivalent 'cost, and hence a competitive price.

"Manufacft ring piint visits were made anddatiaon the manufact&irlg capability of eachoffebo4r were combined, with"data acquiredthrough the audit reports'to determine thatall prospective contractors were responriblewithin the meaning of 41 CFR 1-1.12.

".s noted above, detailed discussions cover-ing deficienbies n6ted by the Gove'rnment wereheld with each offeror. Amendment items tothe soliciitaton -after the competitive rangehad been established-weie discussed with allofferors prior, to issuing the amendment (No. 8),as noted in the minutes.,, All firms which madean, initial offer were within the competitiverange. - Warranty provisions were extensivelydiscussed with each offeror and changes inmost proposals re~'u1ted., The warranty re-quirements and definitibns were revised andclarified in Amendment No'. 8as a result ofthe discussions.' The Go6F"rnment consideredmodifying progress payment;'provisions inaccordance with new directives which werediscussed with several offelrors who voiceda preference for the initial provisions.No revision in progress payment provisionswas made. Other major items were discussedwith each cfferor * * *

"No oral or written neqotiations'4ere con-ducted between the Government and any offerorbetween the time of receipt of best and finaloffers and proposed award of contract. * * *

K..

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"Negotiati'ons were terminated and best andfinal proposals were due May 16, 1977, by1ltter from the Director of Design and Con-struction dated April 1, 1977 * * * Due toHydranautics revokinr4 their withdrawal onMay 6, 1977, the negotiations were con-tinjued and receipt\ date of best and finalproposals was delayed to July 11, 1977, bjletter from the Director of Design and Cori-struction dated May 12, 1977 * * *1"

3. Evaluation of Best and Final Offers

Regarding the evaluation of best and final Lroposals,Interior states:

"Under the, same procedures established forinitial proposals, besitand fiihalstproposalswere evaluat4d by three indepjeiident evaluatorsfor each category, who, together with theteam leader, arrived at a consensus evaluation

The cost .evaluation was also againprepared by the cost evaluation team.Similarly, t'e 'Panel of Consultants reviewedthe best and final.technibal proposals priorto selecting offers for award. Their report* * * raised several questions. Pertinentitems were considered by the Review Boardin the rev!ew of, the evaluations. Technicaland cost evaluatZons were ceviewed and amendedby the Review Board * * * and the final eval-uations prepared."

C. Analysis Leadingto ProDosed Awards

Thereafter, ih September 1977, Interior' s ReviewBoard decided on the award of two contracts underthe RFP. The Revl.ew Board wrote of its decision asfollows:

"The solicitation proposal schedule andsubparagraph 2.4.\'.c. of the solicitationstate in part: Sroposals will be consideredfor award on eithLr or both of the followingbasic schedules (as defined below), but no

B-L30611 21

proposal will be dcnsidered'for award for lessthan a basic schecbde, n6r will a proposalbe considered for award inh wh'ich prices arenot stated on the individual items within abasic schedule.' I* -* * 'Fur'ther, the Govern-ment will, as bests serves the interests ofthe Government, award contracts for approxi-mately 96-Mgal/d total piahticapacity to oneor, to more'than one offerbr. i\ * * * 'Theintent is to procure a minimuLn of 20 percentand a maximum of 60 prcenht of the effeCtiveinstalled capacity from any one manufacturer.The intont is to award contracts to assurea.miniitm` odf two and a maximum of threemarnufacturers, and to obtain,,a minimum oftwoa'nd a maximuiM of three processes' and'This is stated as an intention since equip-ment may be offered in such quantity and atsuch prices as to make implementing this in-tention impractical.'

"In accordance with the-above statements,the Review Board recommends award of twocontracts for the, required approximately96 Mgal/d £otal effective capacity as follows:Hydranauttdcs. 21.6 Mg&l/d (15 control blocks)and Fluid SyVtems Div., of Univ,.rsal OilProducts (UOP) 73.1 Mgal/d (66 r'iotrolblocks). The total nameplate plant capac-ity will be 95.67 Mgal/d (94.70 Mgal/deffective capacity), approximately the96 Mgal/d effective capacity stated in thesolicitation proposal schedule.

"The recommendation for awardi to Hydra-nautics is based on the highest overall(technical and cost] evaluation and t'.emaximum quantity offered by the firm.

The recommendation for award to FluidSystems Dive, UCP, is based on the sec-ond highest overall (technical and cost]evaluation, lbw cost for additional in-crements of capacity, and offer ofsufficient additional capacity."

B-190611 22

III. du Pont's Protest

On learnig of tnterior' s late Se'ptember 1977decision to\award to udoP and Hydranautic"s, du Po-htfiled an October 13, 1977, protest against the awardswith Interior. Having received no responVse to its protest,du Pont filed a Novembe'r 1, 1977, protest with ourOffice. By complaint dated November 2, 1977, du Pontfiled suit in the U.S. District Court for 'the Districtof Columbia, Civil Action No. 77-1894, requesting,among other things, "injunctive relief * * *pending final determination bf DuPdnt's pirJ est tothe Comptroller General of any award ufn9 the instantsolicitation." By stipulation filed N6' Ir 14, 1977,Interior agreed that it would not award-i 6ontractsin question until after our decision on tLi protest.

The du Pont protest, as amended, to our Office issummarized in the following paragraphs.

A. lImproper Changes in RFP.

Important RFP specifications were chaniged during 'thecourse of negotiations which improperly affected cnlydu Pont and were not the subject of appropriate RFP amend-me~nt. These changes cause6 da Pont to increase its proposedcosts by 40 percent. These changes were:

1. Permeator Stack Height

In response to Interior's advice during negotiationsthat in order to be competitive the company's stackheight must be reduced to 10 feet, du Pont made the reduction.This advice was a0so accompanied by Interior's statementthat the additional costs associated with the heightchange would be "worth more" in technical points thanassociated costs. This direct mandate effectively changedthe stack height specification as far as du Pont wasconcerned to its pricing detrimenht--increasing du Pont'scapital costs by almost 40 percent. Using Interior'sevaluation formula, du Port's technical score wouldhave had to increase substantially to offset the costper'alty--yet a comparison of initial and final rankingof submitted proposals shows the opposite was true.

....

8-190611 23

Further, as to the arp'ument that the RFP provideda vertical $e ighE penalty ($1 per square foot per foot)forj all proposals with stack heights above 12 feet,du Poht poitts out that this penalty was less than thestipbulated penalty of $125,for every square foot ofhorizontal floor space occupied by the unit. Using thereduced stack height, the du Pont system required between2-1/2 to three times as much floor spaceas the high stacks required.

2. ChLaA` in Pipe Walls

The thickness of certain pipe walls proposedby du Pont was required to be increased and it wasnot permitted to use.'certain types of flanges. Additionally,du Pont was requir ',to add unnecessary valves to eachof 1,960 permeatorso. These requirements were not in theRFP.

B. :Ambiguity in Warranty Provisions

Ambiguity in warranty provision's resulted fromInter'ior's failures to define adequately s6'ch'vermsas. warranty period" and "service life." Interifrfailed to 'honor du 'Pont's request to define the4e terms,but-instead proceeded with decisions leading toV'newinterpretations of the warranty requirements only5 days'prior to the date for final proposals. Thesenew4 interpretationsof requirements were morerigorous and hence more costly than warrainty require-ments imposed on other companies. Moreover, the 5-day notice period was insufficient for offerors toreview and comprehend these changes.

On 'cA'is issue, du Pont explained its position indetail as follows:

"When this solicitation was originallyissued all bidders were required to offerfixed replacement rate warranties. In lateMarch, 1977, through amendment 8, theBureau offered bidders the opportunityto base their proposals on either thefixed replacement rate warranty or a prorated

A

B-190611 24

(battery type) warranty similar to that nor-mally offered by the two companies thatultimately were Uelected for contract awards.in order to use the battery type warranty, abidder had to warrant its product for sixyears. Those companies that would not extendth.- warranty to six years weLa_ requiredto6 bid with the fixed replacement ratewarranty. DuPont offered a five yearwarranty and was in this group.

"Section 2.7.1. of the RFP, as finallyamended, required that >11 prop6sals havea three year 'service life.' Sect-ion 1-.2.2defined service life as 'tile we'ightid averagelife of elements based on replacemniet 'inaccordance with the repladcemeiht'schedu"e1.'(Emphasis added). The calculation of thereplacement''schedule required the Use ofthe explanation and examples in section1.4 .5(c) (pages 25 and 25a of the RFP)[which contained errors.;

* * * * *

"After DuPont had spent months'attempt-ing to calculate a replacement schedule basedon this provision of the solicitation andafter it had orally complained tr the agencyabout this problem on numerous ot.Viasions, theBureau admitted in late June that the RFP wasin error. No amendment was issued and it isimpossible to determine whether all offerorswere given the same information regarding thecorrection.

"This&'error may not have affected the UOPand Hydranautick proposals since they probablybid on the alternate battery typo warranty.It had a ctitictil impact, however, on severalof the other bidders. Its effects on DuPontcan be measured by the Bureau's own accountof the January 10, 1977, telephone conferencewith DuPont * * *. The Bureau there stated thatapproximately one-third of DuPont's total annualcosts was made up of permeator replacements."

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Although n'tert&riar4ues 'that the admitted errorin the RFP's re&lacement schedule "had no effect uponDuPont's evaluatod membtrane replacement cost," Interiormisses the point. The error made it impossible forofferors to uhderstand-<'critic.Al part of the RFP, therebypreventing the pos4i.Llity of uniform responses aswell as possibly preventing du Pont from offZering a6-year, battery-type warranty at significant savings.

-C. Improper Agency Direction of MemLrane Testing

interior improperly downgraded du Pont's technical andcost. proposal brecause the "Government failed to properlyconduct certain tests." du Pon't specifically told Interiorthat theii jn of the feedwater for-the test unit wasto be mnaintair.ed at 5.5; hdwever, data on the 'pH ofthe feedwihar t it reached levels of lessthan 4 durin gbirtain time periods. Moreover, the' pro-duction of desalted water during the course of t$etests of du Pont's 'knit fell significantly on twooccasions due to I\ou'ling of the permeators by tinoxide caused by IrsteeIior's failure to maintain thestated pH level.

The evidence to support du Pont's conclusion, thecompany says, is as follows:

"1) The autopsies of the parmeators revealedthat the fouling was caused by tin oxide;

"2) The bronze pump, when removed andinspected, showed acid-caused corrosion;

"3) There was no other way for tin to havegotten into the system (the pretreatment offeedwater removes any tin naturally occur-ring Pn the supply water); and

"4) The periods when productivity dropped jdueto the fouling corresponded with those tineswhen the Government allowed the feedwater tubecome too acidic."

B-190611 2-

Despite the fact that du'Pont repeatedly toldInterior' that "excess acidity of the feediater"explained the production drop, the Ivan Hoek' report*erroneously concluded that du Pont did not explainthe cause of the fouling; the tin causingthe foulinq may have slipped through pretreatment;and the fouling resulted from sand infiltration.Finailt, the report did not even mention theloss of pH control or the badly corroded bronzepump.

As to Interior's position that the tin foulingcould not have been caused by excess acidity becauseof the lack of free oxygen in the water, du Pont states:(a) acid will corrode netal even without oxygen;(b) Interior never checked the amount of oxygen in thefeedwater; (c) photographs show corrosion; and (d)even if acidity did not cause tin fouling, tin musthave been present in the feedwater contrary to theRFP.

As to Interior's arguments that the manufacturerof du Pont's membrane pump recommended extreme pHranges, du Pont states that the manufacturer has sincediscontinued making this pump. Anyway, Interiorlet the pH fall below 4 many times. Moreover,Interior's analysis of productivity declines

*According to Interior, the "van Hoek" reportis one authored jointly by C. van Hoek, a Bureauof Reclamation employee, and J.D. Mavis, Jr., ofthe Burns and Roe Industrial Services Corporation.By contrast, a separate status report entitled"Operation, Maintenance, Development Testing of theYuma Desalting 'vest Facility" was authored by KennethTrompeter, an Interior employee. It is the latterreport which Interior uses to answer dr Pont's techni-cal arguments.

Bw190611 27

is faulty bc4Sause it relies on Aiiy one ofthree relevant trial periods for which less accuratedaily data sheets' are available..

It was improper, mdreover, for Interior to singleout du Pont's explanation on page 7 of its best andfinal proposal that calcium sulfate and/or calciumphosphate scaling was the cause of 1permeator degrada-tion because du Pont's statement wrs inadvertent;Interior kneev thtat the statement reflected du Pont'sthinking prior to the examination of the pump!many times du Pont had insisted that corrosion of thebronze pump was the cause; and the summary waspreceded by six pages exulaining that corrosion causedthe degradation in performance.

Further, it is. pqintless for Interior to insistthat the van Hoek r.pbrt was not the basis of thedu Pont evaluation since the conclusionsare conaistent with the conclusions reached duringthe evaluation which show that du Pont was penalizedfor Interior's mishandling of tests in some of theevaluation criteria.

If the performance drop resulting from Interior'sfailure to maintain the pH of the feedwater is excludedand an overall performance index of the hours of testingis computed, du Pont's overall perfotmahce index ishigher than the next highest ranking proposal. Ifthe data resulting from Interior's failure is notexcluded, du Pont is ranked fourth technically.

D. Technical Merit Not Scored Properly

Contrary to the RFP, technical merit was notaccorded equal weight with cost considerationbeqAuse Interior's own formula (seletting thesuccesiful offerors based on the lowest cost pertechnical point) does not afford equal weighting.Moreover, since interior's studies showed that du Pont'sunit operated longer and with better combination ofsalt rejection, TDS (total dissolved solids) andrecovery than other offerors', du Pont should not havebeen ranked sixth out of seven competing concerns un-less cost differences were given undue weight.

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Interior's cost evaluation formula--prescribing themathematical division of evaluated annual cost permillion daily gallons Jelivered to the river-by thetechnical score--does not result in equal weightbeing assigned to cost aqd technical facto; s underrecognized statistical methods. As to Interior'spurported recalculation of technical scores (costscores may not even have been recomputed), du Ponthas not seen the "after-the-fact" document furnishedto GAO. GAO should carefully review the calculations.At a minimum, Interior should upgrade du.Pont'stechnical score and use the correct formula to decidewhether there was prejudice. Moreover, the' recal-culation error in assigning 1,000 points to the high-est technical score rather than to a perfect scoreimproperly minimiz½s cost importance.

E. Violation of "Plant Split" RFP

The proposed award to UOP for more than a maximumof 60 percent of the deisalting capacity, as well as theawards to both UOP and HydraniAtutics for one desaltingprocess, violates pertinent RFP provisions requiringno more than a maximum of 60-percent capacity awardto any one manufacturer and awards for a minimumof two desalting processes. Ihtetior has not in anyway justified under theP.FP clause in question thatit is impractical to implement that intent. Haddu Pont realized Interior would award almost 80'per-cent of the capacity to one mansfacturer, *t couldhave proposed economies of scale and thereby madeits price more competitive. Moreover, the proposedaward to UOP for 80-percent capacity suggests thatUOP alone was told it could propose capacity iiithat amount.

Interior's argument that du.Pont's offer of 62-percent capacity undercuts the protester's positionthat the 60-percent limit was considered firm overlooksthat du Pont's 62-percent capacity offer was basedon an early Interior capacity estimate later revised.

Moteover, Interior's "impractical" exception"merely preserved the right of Interior to awarda contract to one company (such as DOW) for twodifferent processes."

Be190611 29

F. Impioper Public Ranking of Offers

The public ranking of concerns cn the results ofthe price/tochnical competition improperly damagedthe business reputation of Ehe unsuccessful offerorsand violated pertinent procurement regulations. It .is not sufficient for Interior to insist the disclosurewas not prejudicial in view of the serious competitivedamage caused by the release.

Interior Reply

Interi'ir n/rply is keyed below to the abo'vegrounds oc du Pont's protest. (Before summarizingInterior's reply, we point out that Interior con-siders that most, if not all, of the grounds ofprotest filed by du Pont, Ionics and D-P areuntimely under the GAO Bid Protest Procedures(4 C.F.R. part 20 (1978)),, The "untimelinen.;" issuerelated to these three protests is discussed belowtinder the "GAO Analysis" section concerning thedu Pont protest.)

A. Improper Changes in RFP

1. Permeator Stack Height

During the first negotiation sessi6n, both du Poitand Interior stated that theyt were not satisfied withthe proposed height. Although du Pont was informedthat stack's higher than the REP specified maximumcrane hook he'ight of 12 feet were utiIesirable, du Pontwas not prohibited from proposing higher stacks althoughhigh stacks wete subject to cost penalty as stated inthe RFP. Specifically, du Pont was never told thatthe stacks could not be highe" than 10 feet "in orderto be competitive." It was told it could be "morecompetitive" with a stack height reduction.

Although du Pont said its costs would be increasedsubstantially to shorten the stack height (whichwould 'necessitate many other related design changes),since this was a competitive negotiated procurementeach offeror ;;as free to make numerous decisions onwhether to increase or change quantites, quality,

B-190611 30

configuration or complexity of the equipment offeredin view of the respective cost impact on !ts competitiveposition, The du Pont Droposal as modified actuallyimproved its combined technical and cost ranking.Specifically, du Pont's teFhhical score was increased60 points because of the decreased height and reviseddesign which, when combined with the $2 million inincreased cost caused by the change, led to an overallrating increase.

2. Change in Pipe Walls

Because of du Pont's selected design pressure, itwas requested to propose Schedule 40 pipe, which itdid in its best and final offer.

In its protest, du Pont does not provide any specificinformation on which flanges it was not permitted touse. The provisions of the RFP subsection\2.7.4 inregard to flanges were discussed during negotiations.Lacktng further specifics on which valvas du Pont isbasing this portion of its protest, Interior can onlysurmise that it concerns the reject and product samplevalves required in the piping for each permeator/vessel, which situation should have been discussedduring negotiations.

B. Ambiguity In Warranty Requirements

The RFP subsection 1.4.5 sets forth the warrantyrequirements. The warranty proviiiohnscontiined inthe RFP were designed to be applicable to offerors ofboth reverse osmosis and electrodialysis equipmentand to allow each of feror to negotiate a warrantyappropriate for its offered system and still provideadequate protection to the Government. In five ofthe six negotiating sessions held with du Pont overa 6-monLh period, discussions'were1held dn the variousaspects of the warranty requirements and the warrahtiesoffered by du Pont. There was obviously ample opportunityfor du Pont to seek early clarification of the warrantyrequirements or definitions of terms involved in the

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RFP. The warranty requirements imposed upon du Pontwere no more rigorous than those imposed upon anyother offeror.

The Government modified its warranty requirementsin amendment No. 8 to the RFP in that it permitted aprorated price for all replacements as an alternateto no cost replacement for membrane elements requiredin excess of the replacement: schedule proposed by eachofferor. Also, in amendment' No. 8, the definitionsof warranted life, service life arid warranty periodwere clarified in sL'X -ection 1.2.2 and the amendmentprovided in subsection 4.2.4 for evaluating cost onthe basis of no replacement of membranes if the offerorwarranted no membrane degradation during no-loadoperation. Despite du Pont's claim to having no membranedegradation during no-load operation, it elected notto warrant on this basis and, therefore, its cost wasevaluated on the basis of replacing membranes duringno-load operation.

Although the three numbers stated' n the replace-ment schedule form of-the RFP were incorrect, as duPont alleges, the form was an example only and didnot affect the RFP requirements for the warranty orthe cost of the membrane replacement. Each offerorwas free to propose whatever realacement schedule andrate of replacement suited the offerors. membranes.Moreover, du Pont was informed of the error.

i, The claIm is')made by du Pont that it receivedimportant new interpretations juist 5 working days be-fore the closing date for receipt of best and finaloffers arid that it requested that a formal amendmentto the RFP be issued to insure that all offerorswould meet the same requirements. The RFP warrantyrequirements and each-offeror's warranty had been-discu ssd and clariqfd to each ofEtror's satisfaction.The clarifications provided to du Pont had also beenprovided to the other offerors. During the lastnegotiating session with du Pont, in late June of1977, the warranty reauirements of the RFP were >discussed, but rot modified. Therefore, an amendmnhtto the RFP wan riot nsacessary and was not issued.

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C. Ip2roper Agency Direction of Membrane Testing

Interior's status report on the Yuma DeNp altingTest Facility (July 1977) generalizes about'the operationof the various test units. While du Pont did not re-place membranes in its unit,- the productivity after10 percent of the proposed life dropped to levelsfar below du Pont's proposed level of performance,The degradation in performance was discussed withdu Pont on numerous occasions and led to a requestfor autopsy on two permeators in order to rieterminethe cause of degradation in performance. Althoughdu Pont tested high on recovery (ratio of productto feed volumes), it did not achieve the highestrecovery of all the units on test.

Productivity is a function of the offeror's mem-branh flux (rate of product water transfer per unitarea,! and the membrane area in the test unit. Thedu Ppnt unit had the largest membrane area of any unitson tnbst and also the lowest flux. In its proposal,du P'nt claimed a productivity in excess of thatachiived in its testing at the Test Facility. Thedu Pontxssertion that its process is superior in saltrejection is not a complete presentation of all of thefacts' required to evaluate Its equipment. Hi4h saltrejeution is only orne of several parameters which mustbe considered. The technical evaluation df Proposalsinvolved 20 separate categories. The ratings du Pontreceived on all categories resulted in its final ranking.

pH Problem

The Government attempted to operate t&e' Test Facilityincluding the manufacturers' units in accordance wisththeir instructions. It should be noted that, controlof feedwater pH is never so precise as to operate asystem at a fixed point. Rather, some narrbw range of+ 0.3 to + 0.5 is more common. The RFP cleartly showsa range of pH from 7 to 8 in the 'clearwell and does", infact, indicate the pH will be above this range 0.5 per-cent of the time respectively. Continuous pH recordingdevices were not installed until after du Pont's unit hadover 3,000 hours of operation. Prior to that time,operators checked the pH and recorded the valuet threetImes per day on the log sheet.

l~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

5-190611 33

Exhibit 4 attached to du Pont's comments of,April Z8S 1978, is an operator's guide for operationof its test plant at the Yuma Test Facility. Thisguide war supplied to Interior in December 1974. Onthe first page of this exhibit, item 11, under theheading "Start-up Procedures,T " indicates that feed pHmay be varied from 5.5 later in the test, On page 2of this exhibits under the heading 'paily Observations,"item 1 requires a chock of the fled pH and adjustmentsto acid feed rates as required (adjustment to acidfeed will change pH of feed). On page 3 of thisexhibit, under the heading_"Automatic Shutdown," item3 indicates that a pH higher than ,6.5 or lower than4.5 will shut the system down after a 5-minute timedelay. These threet~ems, of du Pont's instructionsfor operation of its test plant 'clearly. indicatethat feed pH needed to be checked and adjusted onlyonce a day since the instructions 3uggested thatonly a da$ly observation was required and that theplant woukd;.shut down automatically if the pH washigher thaira6.5 or lower than 4.5. These limitswere set by du Pont and presumably were based ona range w which would not be detrimental to itsmembrane. To now argue that Interior should havecontrolled the pH to an exact value of 5.5 whenonly a once-a-day chebk was requested by duPont orthat Interior should be responsible for low pH thatmay have corroded du Pont's pump when du Pont establishedan automatic shut-down limit of 4.5 is completelyunreasonable.

,p' | Tin-Fouling

Additionally, du Pont never advised Interior thatshort e'x'crs'iops of pH-below its recommended valuewould cau'se pump corrosion with a result of tindeposition on its membranes. Therefore, theGovernment car.n6ot.be het;ld responsiblefor any such result. IntertJor does not and has notargued that du Pont's pump/s were-not corroded. Thiscorrosion may bn.-.Ehe source of tin observed in theautopsied pfrmeators; however, this had not beenestablished conclusively, since tin has been foundin the feedwater and after pretreatment in the clear-well. This fouling could thus be an accumulation oftin from the feedwater.

8-190611 34

When offerors were asked to identify chemicalelements wh4bh miaht affect the operation of their testunits, no offeror including du Pont identified tin as apotential problem. As such, no special steps weoe takento identify tin in the feedwater. Accordingly, the feed-water was noL routinely analyzed for tin prior to bestand final offers. Such analysis was only performedafter the problem was recognized.

It should be reiterated that du Pont Was obligatedby (its no cost Yuma testing) contract to assure itselfthat its unit way being properly operated and that ade-quate data was being collected. In spite of all the abovebackground, Ipterior evaluated du Pont's proposal on thebasis of tItatements made there. Scaling, tin, chlorineand biological fouling were discussed in the du Pont pro-posal. It also discussed these same items along withaluminum, phoisphorous and silica on pages 3itthrough 6of section 3.4.9 of its best and final proposal. Thedu Pont summaiy of the possible causes of productivitydecline on patle 7 concludes that calcium sulfate and/orcalcium phosphate scale was the reason for the degradationin productivity.

The du Pbnt argument that, even though Its own con-clusion of they test results at the Test Facility citedcalcium sulfate and/or calcium phosphate as the causeof its permeatir degradation, somehow Interior shouldhave disregarclpd this conclusion and should have evaluateddu Pont's propasal on the basis of discussions held beforesubmittal of thie best and final offer is patently untenable,since the best and final offer represents an offeror'sfinal position.! Prior positions discussed during thenegotiation stage are subject to complete change in thebest and final offer.

Finally, du6ring early negotiations du Pont was fullyaware of the drop in unit productivity at the Test Facility.It took no steps; to correct the situation or to identifythe cause. At t:hat time, du Pont indicated it wanted toaccumulate operaitind time. One of the purposes of thetest facility was to determine if offerors could operatetheir units satisfactorily on feedwater pretreated similarly

B-190611 35

to that proposed for the final plant. In order to demon-strate it could operate fora long period of time,du Pont elected not to replace the permeators.

Notwithstanding that Interior considers its analysisof du Pont's performance to be sound and that theresultant technical scores iassigned to du Pont's proposalflowing fcom the testing to be similarly well-founded,Interior has reviewed its technical scoring analysisin light of du Pont's criticisms of the test experience.This examination shows that of the six categories inwhich testing at the facility was a considerationin the evaluation, du Pont sco'.ed 55.8 percent of themaximum possible points. Had du Pont scored the maximumpossible points in the six categories (which is highlyunlikely since only four perfect scores were given in allcategories for all prbpoltals), it would still havebeen ranked only fifth--having displaced D-P by only1.8 percent of D-P's combined technical and cost score.This examination shows ,'hat anything less than a perfectscore in all1 six categories wou:Md'have still rankeddu Pont ih sixth place. In any event, performance databased on du Pont's unit at the Teht Facility was onlyone of several sources of i mfornation used by theevaluators iwJ rriving at technical scores. The du Pontunit productivity at the Test Facility was used inconjutnction with product salinity in comparing unitperformance offered to that demonstrated. It was onlyto thi's degree. that Test Pacility performance was ger-mane to technical superioritA',. To support its technicalsuperiority at the Test Facility, du Pont multiplessalt rejection by TDS and recovery. This is not anaccepted measure of technical performance. Productivityis a major consideration in performance which cannotbe brushed aside.

Thus;, eveh it Interior did mismanage the TestFacility bperations, which is denied, it is clearthat theiEtbst results, when placed in proper perspective,had a limited influence or.L the technical evaluation.Each proposal was evaluated on 20 separate categories.Experience was a consideration in 12 of the categorieswith Test Facility experience considered in 6 categories.

:/6-190611 36

Further perspective is obtained by noting that experiencewas a consideration in 30 of the factors and Test Facilityexperience specifically referenced in only 9 factors.Thus, while experience was significant, the requirementfor this experience to be specifically from the TestFacility was not that great, It should be noted thatexperience at the Test Facility can be used for experience,but this is not a requirement in the RFP.

In addition, it should be stated that any appli-cation of Test Facility results considered not onlyreports by the Yuma operations and maintenance contractorbut also the offeror's interpretation of test resultsand judicious consideration of Test Facility operations.Interior believes that the test results were ableto provide data to the offeror in making the proposalwhich could not be otherwise obtained.

In summary, it was the technical proposal beingevaluated in accordance with the RFP evaluation categoriesthat resulted in the final technical score. Test Facilitytest results only affected the evaluation in 9 of the95 factors and in 6 of 20 categories. Furthermore,this data was considered only as to how well it supportedstatements and claims by the offeror, not Jn absoluteterms.


In Ats deliberations for determining contract award,Interiorci Review Board did compute the ranking ofproposals by utilizing the normalizing process requestedby du Pont. Exhibit Al (attached to one of ,Interior'sreports) is a copy of a document prepared b3 Mr. E. L. Carden,who was a member of t9j Review Board, showing the rankingobtained by normalizing the technical scores and costs.This exhibit Al was' made by Mr. Carden before theReview Bbard's memorandum dated September 23, 1977,recommending selection for award, was written. In exhibitAl, Mr. Carden used the highest technical score fornormalizing the technical scores, i.e., the highesttechnical score was assigned a value of 1,000 ant alllower scores a lesser value using a formula exactlyas suggested by du Pont.

a-190611 37

It is important to note that the ranking obtaihedby the normalizing priocess in exhibit Al is identicalto thep anking obtained by using the quotient obtainedby dividing the evaluated cost by the technical score.Based on this fact, the Review Board knew that rankingby the quotient obtained by;,)ividing evaluated cost bytechnical score did gave approximately equal importancebetween costs and technical quality as stated by paragraph1.2.4 of the RFP and paragraph 9 of the Foreword to theRFP.

As. further proof, Inte'rior has prepared exhibitA2. This exhibit A2 compares the ranking of proposalsobtained by dividing the evaluated cost by the technicalscore, as shown In the Review Board's 1 memorandum datedSeptember 23, 1977, to the ranking obtained by nor-malizing the evaluated costs and technical scores toa base of 1,000 exactly in accordance with the examplelabeled "weighting method" and equations shown by du Pont.This comparison shows that the ranking is identicalregardless of which of the two methods is used.E. Violation of "Plant SplitKRP Provhsion

It is Interibr's position that the equipment wasoffered in such quantity and at such"prices to prac-tically'prevent implementing itr\stated award intentionregarding "plant split." Also, the RFP's bidding schedulecontains the following:

"* * * The desire of.the Government is toaward a contract or contractW which includeat least two processes, Further, the Govern-ment~will, as best serves 1L!e interestsof the Government, award contracts forapproximately 96-Mgal/d total plant capacityto one or to more than one offeror."

.Once again the'desires of the Governmeht arecited. The bidding schedule clearly indicates thatthe Government may actually award only one contractin order to serve its best interests. The provi-sions of subsection 2.4 .2.c. and the wording in thebidding schedule clearly indicated to offerors thatthe Government would award a cor tract or contracts

B-190611 38

as best served its interest and that its desire toaobtain more than one process may not be implemented.Therefore, the Government has not acted contrary tothe provision of the RFP as claimed by du Pont.

Correspondence and the minutes of the December 17,137, 1975, Open Manufacturers Meeting are cited bydu Pont in support of its contention that the contractis to be let for a significantly greater quantitythan provided in the RFP. The correspondence cited*nd the minutes of the meeting both predate theissue date of the RFP. Both are in harmony withtI.e RFP in that the same intentions are statedalong with the same statements concerning contractawards that are in the best interests of the Governmentand the possible impracticality of implementing thoseintentions.

While du Pont contends that, if it had known thatInterior would consider awarding almost 80 percentof the capacity to one manufacturer, the economiesof scale could have resulted in lower unit costs, theadditional increments proposed by du Pont show nodecrease in cost for any additional increment overthe first additional increment, although the incre-".ent capacity offered by du Pont totaled twice thelapacity of the basic 20-Mgal/d offer., It is, there-fore, difficult to accept du Pont's argument that itwould have incorporated more economies of scale.

Moreover, prior to issuance of the RFP, du Pontclearly indicated that it would be interested in roughlytwo-thirds, or a little over 60 percent, of plant capacity.In fact, du Pont proposed just that--62 percent of capacity.

Further, du Pont's allegation that Interior, afterthe negotiation period, improperly asked UOP to increaseits proposal to more than 60 percent of the capacityis without basis and should be rejected as frivolous.UOP initially and in its best and final offered to fur-nish 100 percent of plant capacity.

.

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Pe ImrerPrublic Ranking of Offers

The contracting officer's letter of September 30,1977, does not violate the intent of the procurementregulations. The letter stated that Interior had com-pleted the evajuationn of the best and final offers,listed the firms in the order that their proposalsranked and named the firms to receive the award ofa contract. Although the award of a contract hadnot been formalized on September 30, 1977, the onlyremaining administrative item was the preaward EEOclearance. Upon receipt of the EEO clearances, theaward of contracts would have been made. The releaseof the information in no way affected the selectionof the successful firms or prejudiced any offeror inregard to this procurement. The timing of the disclosureof information contained in the September 30, 1977,letter is not germane to the selection of the successfulofferors.

lAOtAnalysis

A threshold question concerning' the timelinessof du Pont's protest (as well as the protests of D-Pand Tor.ics) has 'ueen raised by Interior and the pro-posed awardees concerning many of the grounds of pro-test raised by the three companies.

All of the protesters are active participants inthe above-referienced litigation in which stipulationshave been entered providing that Interior would not awardthe contracts in question until after our decision isissued on the protest. The stipulations have been signedby the presiding judge.

Generally, GAO will not decide the merits of aprotest where the issues involved--as here--are likelyto be disposed of in litigation unless the court expressesinterest in reviewing our decision on the protest. Kleen-Rite Corpo6tration, 8-189458, September 28, 1977, 77-T CPD237, In Dynalectron Corporation, 54 Comp. Gen. 1009 (1975),75-1 CPD 341, we concluded that, when the presiding judge

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signed a stipulation between the parties similar tothose signed in the present case, there was an expressionof court interest. Thus, both du Pont's and D-P's protestswill be considered on the merits.

Although Icnics has not obtained a similarlysigned stipulation, we view the court's granting Ionic9the right to intervene in these particular circumstancesas ar. expression of interest in obtaining the viewsof GAO on the Ionics' protest as well. Consequently,we will express our views on the issues raised in allprotests.

A. Improper Changes in RFP

1. Permneator Stack Height

There is a factual dispute as to exactly whatdu Pont was told during negotiations about its stackheight. Interior insists it told du Pont only thatits proposal would be "more competitive" if stackheight was reduced; du Pont, on the other hand, insistsit was told that "to be competitive" the stack heightmust be reduced to 10 feet. The protester has not metthe burden of affirmatively proving its version ofthe disputed facts where conflicting statements ofthe protester and the contracting agency constitutethe only evidence. Reliable Maintenance Service, Inc -request for reconsideration, B-185103, May 24, 197b,76-1 CPD -2?; Phelps Protection Systems Inc., B-11148,November 7, 1974, 74-2 CPD 244.

Under this view of the facts, du Pont's decisionto reduce its stack height to be more competitive mustbe viewed simply as a response to competition ratherthan as a response to a mandatory requirement changingthe specifications. Further, we agree with Interiorthat under this advice du Pont could have retained itsoriginal stack height, if it chose to.

Finally, although du Pont generally insists thatits overall ranking declined as a result ot its stackheight change, we see nothing in the record to questionInterior's position that there was a specific improve-ment in du Pont's technical/cost score caused by thischange.

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2. Chang inA Pipe lls

We see nothing in the record to question Interior'sposition that it negotiated the changes in questionin good faith without complaint based on its bestengineering judgment.

B. Ambiguity In Warranty Provisions

The heart of du Pont's protest here relates toInterior's alleged failure to make clear its intentregarding warranty provisions until 5 days beforefinal offers were due and to du Pont's belief thatthese clarified provisions put du Pont at a competitivedisadvantage compared with the awardees. It is du Pont'sbelief that this clarified intent should have beenput forth in a formal amendment released to allofferors.

There is no evidence in the record to rebutInterior's position that the warranty requirementsand each offeror's warranty were discussed and clari-fied to each offeror's satisfaction. Moreover, du Pontadmits, in effect, that it understood the warranty pro-visions prior to submission of best and final offersand that it knew an additional 19-percent "penalty" wouldbe added to its costs pursuant to this understanding.Consequently, du Pont was in a position to remedy, tothe extent deemed competitively feasible, the "penalty"attaching to its understanding of the warranty provisionsbefore final proposals. Under this view, we see no reasonwhy du Pont could not have offered a 6-year "batterytype" warranty if it felt its "fixed replacement" warrantyproposal ras prejudiced by Interior's final clarificationof warrancy requirements.

As to du Pont's suggestion that confusion stemmingfrom inteipretations of the warranty provisions preventeduniform'responses and uniform evaluation, we note thatthe allegation is made largely in the abstract. Al-though du Pont notes that Ionics has also protested

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Interior's treatment of warranty provisions, no otherofferor has complained of this issue. Fuithne,, Tonics'equipment had a much longer warranted life and yet Ionicsdid not raise the "cost-penalty" issue specifically advancedby du Pont.

Finally, we observe that, if du Pont was genuinelyconcerned about possible competitive prejudice stem-ming from the warranty provisions, it could have requestedInterior to amend the RFP to provide additional time forofferors to consider the warranty provisions prior tosubmitting responses. The du Pont failure to request anamendment suggests it was not substantially concerned aboutprejudicial evaluation of the warranty provisions priorto the award announcement.

C. Improper Agency Direction of Membrane Testing

At the center of this disagreement are complextechnical issues regarding the evaluation of du Pont'stest unit and the reasons for the productivity declinefound in the unit. Unless the agency's technicaljudgments on these issues are unreasonably founded;we accept those decisions. Union Carbide Corporation,B-188426, Septer~ber 20, 1977, 77-2 CPD 204. Further, itis the procuring agency's responsibility, and not thatof our Office, to evaluate proposals including ,the meritsof varying technical approaches. Ads Audio Visual Pro-ductions, Inc., B-190760, March 15, 1978, 78-1 CPD 206.

pH Controversy

Based on our review of the conflicting technicalpositions detailed at length above, we cannot questionthe reasonableness of Interior's technical conclusionthat the "small accumulated time of pH excursions below4.5 makes it extremely questionable" that "serious(permeator] degradation" was caused by pH feedwater.

Altt natively, du Pont has suggested tnat thepermeator degradation was caused by tin in the plantfeedwater. Further, du Pont suggests that, if tin was

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in the feedwater, the RFP was deficient for not ident-ifying this metal. On the other hand, Interior haspointed out that: (1) before du Pont submitted itsbest and final offer, the company realized (in July 1977)that 1 ppm of a tin compound was present in the feed-water; and (2) du Pont never identified tin as a trouble-some element even though Interior specifically requestedofferors to identify these elemenits when testing wasstarted.JiUnder this alternate position, du Pontshould have brought the alleged troublesome tin presenceto Interior's atte~ntion as soron as it was discovered--certainly before submission of best and final offers.The failure to complain supports a conclusion that du Pontwas not seriously concerned about the presenceof this compoind. In any event, although du Pont hasexplained that its best and final proposal statement--which attributes permeator fouling to calcium rather then tinfouling--was inadvertent, the fact remains thaL thestatement is present in the offer and otherwise undercutsthe view that tin fouling caused the permeator loss ofperformance.

Finally, we cannot question the reasonableness ofInterior's alternate position that--assuming it, ratherthan du Pont, should be held liable for the company'sproductivity loss--giving du Pont's proposal the maximumpjoints in the six categories affected by the Yuma testing,this still does not affect selection of the proposedawardees. Although du Pont disagrees with this assessmentby insisting that other technical and cost categories werealso affected and that the better measurement of technicalperformance is shown by "multiplying salt rejection byTDS and recovery'," we see no basis to question thereasonableness of' Irietior'is position, especially sincethe test results were stated to be used only to verifyand substantiate statements and claims made by offerocsand not to be the subject of ranking in absolute terms.Nor can we question tnttjrior's technical judgment thatthe multiplication formula advanced by du Pont is "not anaccepted measure of technical perfoL ince." Consequently,du Pont's objections to the technical ranking of its offerare rejected.

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Whatever might have been improper about Interior'soriginal scoring technique, thefact that the rescoring--done under a so-called normalized scoring method--hasnot altered the relative position of offerors requiresus to reject this basis of protest which is also repeatedby Ionics below. Moreover, although du Pont alleged thatthere are some defects present in the recalculation,based on our review of the record, we must conclude thatthe asserted defect does not affect the relative rankingof offerors.

Finally, we reject the argument that the recalculationis suspect merely because it has been made after theselection of awardees. The recalculation was made onthe basis of the proposal scorces compiled as of thetime of the original award selection. Hence, therecalculation was not objectionable.

E. Violation of "Plant Split" RFP Provtsion

Bec&use this issue is common to the three pro-tests, all grounds uf protest raised by the threeprotesters under this issue will be considered in thissection of the decision and referenced in the sectionsof the decision dealing withmthe other protests.

Does the Colorado River Basin Salinity Control Act (P.L.93-320) under which the contracts are being awarded requiresplit awards of certain sizes for at least two desaltingprocesses to demonstrate the desalting "state-of-the-art"?(This subissue is exclusively argued by Ionics, whosedetailed arguments are summarized below.)

The Colorado River Basin Salinity Control Act !Jesignedto resolve the salinity problem of the Coloraco Riverwaters) does not contain any provisions that would requirecontracts awarded under the authority of the act to. demon-strate the art of desalting through use of more thainone type of technology. As Interior has pointed out,the act merely requires the use of "advanced commercialtechnology'! for meeting the desalting objectives at the"lowest overall cost to the United States"--neither ofwhich standard, obviously, would require a state-of-the-art demonstration.

Il

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As to the history of the act, we note the Executivebranch sent to the Congress two bills (H.R. 12834andS.3094) which incorporated certain of the 1972recommendations of Herbert Brownell (the President's(Nixon) Special Representative for Resolution of theSalinity Problem with Mexico) concerning the construc-tion of the desalting plant. There was no languagein either bill which approved use of the proposedplant for demonstrating the state-of-the-art. On thecontrary, the bills incorporated Mr. Brownell's concernthat costs be kept at minimum. Moreover, although the1972 Brownell recommendations which are relied on byIonics (repeated in Senate Report No. 93-906, June7, 1974) also stated that the "plant itself wouldmaterially assist in the development of desaltingtechnology * * * (and] information * * * gatheredthrough it would be of value in solving salinity prob-lems ** elsewhere in Ehe United States and Mexico

these statements were never carried intothe act itself nor referred to by the Congress in itsdiscussion of the proposed legislation. These state-ments, in our view, simply evidence Mr. Brownell'sbelief that the experience obtained--without regard to thedemonstration of one or more processes--would be usefulin solving future problems. In any evert, since thestatements did not find expression in the act andwere not mentioned with apparent approval (althoughprinted in the relevant Senate report), they fallshort of being an official pronouncement of the Senatecommittee involved. See section 48.06, "Reportsc'f Standing Committees," Sutherland StatutoryCo'ntstruction; MacDonald v. Best, 186 F. Supp. 217, 22.1(ND Cal. 1960). Moreover, the section-by-sectionanalysis of S. 3094 submitted with the bill by theDepartments of State and Interior speaks of theYuma plant using "advanced technology commerciallyavailable," but does not mention state-of-the-art asa goal. Further, representatives of these Departmentsstated in a jolAt letter that S. 3094 was intended toprovide for "the minimum works: and other measuresnecessary for this purpose"--a 'stated intent whichundercuts the notion of demonatrating state-of-the-art. Nowhere in the legislative history of the actis there any reference to the technological structureproposed by Ionics whereby more than one type of

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technology would be adopted for use at the plant in orderto demonstrate the state-of-the art. Instead, emphasisis repeatedly placed upon the state-of-the-art beingadvanced simply by the existence of the plant. The ideais that the experience gained through years of observingthe process used and results achieved at the Yuma plantwill serve to increase the fund of information on desaltingupon which planners of future plants can draw, not thatseveral technologies should be adopted. at Yuma so theirfunctioning and results can be observed. Consequently,we reject Ionics' argument about the intent of the act.

Does the RFP require split awards of certain sizes forat least two desalting processes?

Having concluded that the cited act does notsupport the supposed requirement for multiprocessawards, we turn to the RFP itself. We recognizethe extended grammatical analysis, noted below, Ionicshas made of the plant split-process provision (2.4.2.c.of the RFP). The end result of the company's argument,however, is to direct the reader from obtainingmeaning from a plain reading of the provision.

The provision, as reasonably read, states two ex-pres; intents: one, to procure a maximum of 60 percentof capacity from any one manufacturer, and, two, toaward contracts to assure a minimum of two processes.Next, in two sentences following these expressedintents, Interior lists specific processes as wellas a reserved right to determine whether other proposedprocesses are indeed separate processes. In our view,the next key sentence involving the impracticality(because of proposed quantities and prices)4 of implement-ing "this intention" refers to the two express intentsand not to the reserved right to further determineseparate processes.

First of all, the reserved right has nothing to dowith an intent, but merely stipulates a present fact.Second, "this inten:ion" is grammatically lihked with theexpressed intents mentioned two sentences eazrlier notwith-standing that the phrase is singular. "This intention"means no more than Interior's "award intention" as to

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which concept percentage capacity ard technologicalprocess are the components. We think this meaning isreasonably clear and did not require further clarifi-cation from the agency..

Under our analysis, it is clear that Interiorclearly informed all offerors that it might not awardfor a maximum of 60-percent capacity and for aminimum of two processes if quantities and pricesrendered this award intention "impractical." Asto the meaning of "impractical," lonics has advanced onedictionary definition (Fowler's Dictionary of ModernEnglish Usage (1965 ed.)) which defines the word "prac-tical" as meaning "adapted to actual conditions."We note that the first-listed definition of "im-practical" in Webster's New Collegiate Dictionary(1975'Ked.) is "not wise to put into or keep in practiceor effect." Thus, the decision to carry out Interior'sstated award intention depended--under the citeddefinitions--on the wisdom of putting the intention intoeffect considering the adaptability of proposals to"actual conditions"--namely, the quantities and pricesproposed by the offerors.

Was the carrying out of Interior's award intention"impractical"?

Under the extremely broad connotations of theword "impractical," Interior reserved the right todetermine tne adaptability of proposals to its statedaward intention. It should have been obvious toall offerors that the decision ultimately reachedunder this provision would be subjective. Neverthe-less, not one offeror complained, prior to submittingproposals and the announcement of the successful offerors,that the definition should be narrowed.

Given the subjective nature of the authorityInterior was to exercise 'in determining whether pricesand quantities proposed were impractical so far asintended capacity and process awards limits were

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concerned, we reject Ionics' suqgestion thatimpracticality was to be determined by Interior'sdetermination of competitive rahge and that, onceoffered prices and processes were determined to bein the competitive range, it would thus be practicalto carry out the award intention. In our view, thebroad authority vested in Interior under thisreservation was more than the right to determinemere "workability" (still a broad concept) in thesense of determining competitive range only, butrather, also, the wisdom of carrying out the in-tended awards given the proposed prices and quantitiesof otherwise basically workable, that is, competitive,proposals.

Although a host of objections has been leviedagainst the wisdom of Interior's decision, we findnone that, under scrutiny, render the decision ascompletely without rational support. Moreover, basedon our review of the range of prices and quantities,we cannot question Interior's "impractical" decision,namely: although Interior was prepared to incur someadditional expense to carry out its announced intention,the ultimate expense of doing this was exce-'dive.

We offer the following comments to other specificobjections noted below.

(a) (Ionics' argument) The letter Interior sentto Congress 1 week before the award decision wasannounced proposing waiver of solids recovery limitsto make electrodialysis proposers more competitiveapparently shows either that award to Ionics waspractical as of that date or that Interior was preparingevidence to show lack of prejudice toward Ionics' method.

GAO comment:

Although we have no reply from Interior on thisissue, GAO cannot question the ultimate analysis ofcost and quantities supporting the proposed awardseven if the decision was reached after the date ofthe letter in question.

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(b) (Ionics' argument) The Burns and Roe consultantsand certain presolicitation statements supported multi-process awards.

GAO comment:

The consultants were merely advising the Departmentas to their opinion, but Interior properly reserved theright to ultimately select the awardees under the statedprovision and criteria. Based on our review, the consultant'sadvice does not allow us to question the award.

Moreover, the cited presolicitation statements alsosupport the view that economic considerations might preventmultiprocess awards. I

(c) Prejudice to du Pont and Ionics allegedly flowedfrom the failure to propose on quantities higher than60 percent.

GAO comment:

Although du Pont insists that it could have proposedgreater reductions for quantities greater than 60 percenthad it known proposals for more than 60 percent wouldbe considered, Whete is nothing in the description ofdu Pont's average pricing scheme wh!ch lends support tothe view that high enough pricing re\Iuctions would haveresulted to affect its evaluated ranking. There is alsonothing in the record to support Ionics' claim of suffi-cient reductions to offset the financial advantages inthe proposed awards. Further, even though Ionics had theopportunity to price on the basis of 60-percent capacity,Ionics proposed on only 42-percent capacity, thereby apparentlyforegoing the pri-'ing advantage au:ruing to offerors propos-ing greater capacities. Moreover, as to both du Pont andtonics, we"beliei'e reasonably cautious offerors shouldhave realized th&'d it might be impractical for Interiorto stay within, the 6C-percent capacity iimit for awardand hence alternate Offers for greater than 60-percentcapacity should hase' also been submitted. Under this view,UOP's over-110-percent offer was merely a reasonable reactionto an RFP contingency.

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(d) Prejudice to Ionics stemming from preparing atechnically advanced proposal in reliance on the plantsplit provision.

GAO comment:

In our view, the RFP was reasonably clear aboutthe importance of technical and cost criteria andofferors willingly responded without complaint. Moreovec,to the extent that the stated importance of the technicaland cost criteria might have been overridden in the awardprocess through a deliberate splitting (under Interior'sintended award provision) of capacity to insure multi-process awards irrespective of technical or cost merits,it is clear that the present proposed awards to thetop-ranked otferors (cost and technical equally weightedunder a normalized scoring method) prevent an arbitrarysplit.

(e) Selection of one process is allegedly improperon numerous technical grounds, including allegedobsolescence of the selected membrane material, vul-nerability of the material to high temperatures andbacterial counts, and lack of proper operating experienceof the selected concerns.

GAO comment:

We have reviewed these objections as detailed above.Based on this review, we cannot conclude that Interior'sjudgment on the technical intricacies and merits ofthe competing offers lacks rational support notwith-standing Ionics' objections to the contrary. Specifically,our factual audit, as detailed below, shows that Interiorconsidered many of these objections in its evaluationprocess. Notwithstanding these objections, the Department'sbest technical judgment was that the process should stillbe select.ed--a judgment that we are unable to question.

As to Ionics' citation of Ionics Incorporated,B-179087, June 5, 1974, 74-1 CPD 302, that decisionmerely noted observations of technical judgments aboutcertain membrane equipment offered by a company otherthan one of the selectees here for a "water treatment

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plant" to be constructed in Utah. In view of thedifferences between the suppliers then and now andthe locations and uses of the water, we cannot concludethat the decision is for application here. Even, ifthe decision were to be applied, we cannot concludethat it necessarily would overrule Interior's technicalpo.;ition to the contrary, in view of the claimed weaknessesin the competr2ng technology. Similarly, we cannot concludethat the alleged experience of the State of Arizonawith the offered equipment overrules Interior's technicaljudgment.

Furthermore, although Ionics has questionedInterior's evaluation of competing operating experi-ences--both as to selectees and the protesters--wecannot question Interior's judgment that the competingexperiences are reasonably indicative of the evaluatedstrengths and weakness of the ranked proposals notwith-standing the criticisms advanced as to alleged biasand the like.

Finally, as to Interior's suggestion that thereis a simple solution to a performance difficultyexhibited by the selected equipment, we cannot con-test Interior's technical judgment that this canbe accomplished even though the outlineof thesolution has not been advanced for purposes of thisprotest. Alternatively, there does not seer to bea sufficient basis to question the ranked technicalpositions even considering that the outline of thesolution has not been advanced.

(M D-P and Ionics suggest that the one processawards will allegedly disturb the national and world-wide competitive balance of the industry and will other-wise harm the technological evolution of the desaltingindustry.

GAO comment:

We agree with Interior's position that neitherof these factors was properly for consideration inselecting the awardees.

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F. Improper Public Ranking of Offers

All protesters have complained of Interior'srelease of the proposal ranking. Ionics especiallyhas submitted detailed argument that one or moreregulations were violated in the process of the re-lease of this information.

Assuming that the cited regulations were infact violated, the simple fact remains that the re-lease of the information in no way affected thevalidity of the selection of the proposed awardees,because the release took place after the selectionof the awardees. Consequently, even if we were toassume the regulations were violated, this assumptionwould not prompt us to recommend that the proposedselection be reconsidered. At most, a violationwould prompt us to recommend that the circumstancesgiving rise to the violation be examined withthe intent of preventing future violations. Thisrecommendation would be the only "enforcementpenalty" that our Office could consider.

Since it is the apparent position of the pro-tes:ing parties that their interest in this issueis only to obtain a reconsideration of the awarddecision, we see no point in dealing with thepropriety of the disclosure so far as future circum-stances are concerned, especially since the litigationis only concerned with the present procurement.

Ion ics' Protest

Ionics has also protested the award and inter-vened in the above-numbered civil action. Thecompany's grounds of protest are discussedbelow.

A. Violation of "Plant Split" RFP Provision

Ionics insists that the word "impractical" asused in the RFP's "plant split" provision refers toInterior's reservations of the right to determine

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whether "other systems" should be added to the fiveprocesses listed in the provision. This right wasreserved, in Ionics' view, because Interior foresawthat, if as nmr.ny as 10 other processes were consideredas separate and added to the five listed in the RFP, itmight involve such a quantity of equipment and sucha price to the Government as to make implementing theintention to choose additional processes impractical.Ionics argues, moreover, that, if the "impractical"phrase,0d d not mean a restriction on the number of"other systems," it is unclear as to which of thetwo earlier sentences (the "plant split" and"minimum of two processes" sentences) the qualifi-cation applies. Clearly, the word "this" would nothave been used if it was to apply to both sentencesas Interior j.ow insists.

Further, since Interior insists the qualifierextends to cost considerations only, offerors whoimproved their technical proposals were unfairlytreated. However, merely because a higher costtechnically acceptable proposal is more expensivedoes not mean it is impractical. Moreover, if thesolicitation is ambiguous, the ambiguity should beconstrued against Interior under well-accepted prin-ciples--not against the offerors who relied on areasonable contrary interpretation to their detriment.

Further, as defined by Fowler's Dictionaryof Modern English Usage, "impractical" means "notadapted to actual conditions." "Impractical" as usedin the RFP, therefore, means that Interior couldeliminate only those processes which could not beadapted to actual conditions, i.e., those that couldnot work. Thus, only if all processes but one wereunworkable with respect to quantity and price couldInterior choose just one process. However, Interiordoes not insist that all processes save one were unwork-able. It found all offers in the competitive range andthus practical.

Further, Interior's September 22, 1977, letter tothe Congress shows that 1 week prior to the announce-ment of the successful offerors the electrodialysis methodwas considered practical. This means that Interior's finaldecision excluding Ionics as impractical had not beenmade. To accept this view, however, means Interior's

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view on practicality abruptly changed, The other viewis that Interior had made its decision to excludethe electrodialysis method and the letter was a mereccver to defend against protests stemming from aoasbuilt into both the law and the RFP for the reverseosmosis method of the selected awardees.

Ionics stresses that it was practical--coiitraryto Interior's assertion--to implement the "plant split"provision. To the contrary, Tonics insists, theYuma Desalting Plant report written by Burns and Roe,the consultants hired by the Gcvernment, "evaluateda plant split based upon 33% electrodialysis, 33%hollow fiber reverse osmosis and 33% spiral woundreverse osmosis," Since Innics is a worldwidesupplier of electrodialysis eaquipment and sincemuch of the consultant's report was based on Ionics'data, Ionics could not expect that its submissionof an offer based on this method would be consideredimpractical. In fact, Interior has disregarded theconsultants' advice that Ionics' method had an"operational advantage" making "inclusion as part ofthe final plant report desirable."

Ionics also insists the proposed awards for oietechnological process offended the stated public goalsfor the Yuma Project which include demonstrationof the state-of-the-art for desalting processes nationallyand worldwide. These goals wiere supported in theRFP by the statement concerning the approximatelyequal weight assigned to cost and technical merita_ well as a September 1973 interior report entitled"Colorado River International Salinity Control Project."

A7s to the stated public goals, Ionics arguesthat the author (former Artorney General Brownell)of the treaty under which the Salinitv Control Act wasenacted indicted that the desalting in the Yuma plantwould be by membrane process and that the plant wouldassist in the development of desalting tecb'iology.Moreover, the demonstration of the "state-of-the-art"qoal is consistent with Ionics' understanding of thepresent state-of-the-art in desalting technology inwhich the Yuma plant represents a level of evolution

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of desalting technology as well as the best opportunityyet to construct a demonstration and evaluation ofcompetitive technologies.

Since the project was for demonstration of theart, Ionics understood that companies' higher initialprices, 'ouch as proposed by lonics, could be offsetby technical considerations such as novelty of design,process reliability, company experience and otherconsiderations. Although Ionics did not believea new technical approach was necessary, the companyspent a considerable portion of its effort to optimizea novel technical/cost approach., Had Ionics realizedthe Government would opt for a minimal technicaladvance, Ionics would have bid itscstandard linewith no new technology and its lowest price. Moreover,if Ionics knew a more than 60-percent capacity offer wouldhave been considered for award, it would have reducedits price accordingly.

Technical risk was enhanced by Interior's selectionof conberns with very limited expelience in termsof years in the business or number of operatinginstallations and in choosing a process involving amembrane material which is unstable and disaster-prone, especfially in the high temperature Yuma area.As to the reliability of this material, GAO hasrecognized the Air Force view in one procurement thatthe material "cannot operate efficiently." The Stateof Arizona has also questioned the selected membranewhich is also vulnerable to varying pH levels,bacterial and particulate attack.

These defects are also shown in Interior's reportson Hydranautics' and UOP's current facilities whichsimply should not have merited any proposal considerationbecause of varic;is difficulties whereas Ionics'experience was improperly downgraded.

Interior's bias is also shobih by its statementtha;t the solution to the degradation of UOP's membranedifficulties is rather "obvious and standard" withoutfurther explanation. Ionics insists there is no easysolution.

A ~~~~~~~~~~~~~~~~~~~~~~l

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Moreover, Interior admits that tonics' electro-dialysis approach was not impractical to begin with.The fact that Ionics' initial proposal was considertd inthe competitive range shows that the proposal was con-sidered practical at least up to the time for receiptof best and final offers. Ionics contends that, unlet sthe final offers of all three processes were so variedin quantity and so high in price from their initialoffers, at 'east one of the eliminated processes shouldhave been chosen based on the statement.

B. Technical Merit Not Scored Properly

As to Int1'rior's application of the equal weightingRFP scheme, IonlILz prepared its offer with respect tothe statement in the Salinity Control Act that obtainingthe required services at the "lowest overall cost tothe United States" meant the "lowest overall cost"connected with an appropriately high-quality technicalproposal. Moreover, to the extent Interior no%'f assertsthat cost, and not demonstration of state-of-i.he-art,was the objective, Ionics insists that Interior improp-erly departed from the RFP's statement of the relativeimportance of cost and technical considerations.

As to Interior's suggestion that a scoring by the"normalization method" does not change the standings,this is mere "after the fact rationalization."Mcteover, Interior's method of individually scoringeach proposa] by technical and cost merit withoutregard to process type was inconsistent with theRFP intention to award on an optimum combinatinonof processes.

C. Improper Treatment of Warranty Provisions

The waerranty provisions of the RFP were misleading,vague and not applied uniformly. Since Ionics' membranest'end to fail over a longer lifetime than reverseosmosis membranes, Ionics could have been prejudicedby Interior's warranty evaluation procedure, especiallysince Interior never confirmed or accepted Ionics'understanding of the warranty and service life provisions.

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Because of Ionics' objections about the prejudiceit was suffering in the warranty provisions area,Interior permitted Ionics to prepare alternativewarranty approaches finally resulting in a 7-yearwarranty period on a "cost pooling" of warranteditems approach. Interior did not interpret thewarranty as Ionics intended it to be interpreted.This is so because Interior improperly said Ionics"could have gained a cost and technical advantageby warranting thc membranes for a longer time period."This statement cnn mean only that warranty require-ments were not uniformly applied.

Notwithstanding that therps were several meetingsbetween Interior and Ionics personnel on warranty provisions,Ionics' concern about the warranty requirements per-taining to its longer-life (up to 20 years) electro-dialysis membranes were never satisfied. The require-ment "to warrant the life" of the original set ofmembranes tended to favor the reverse osmosis process(where membranes all tend to fail at a lifetime justin excess of that required by the TFP) in that Ionicswasc, thus required to provide a much longer warrantythan that required of the selected offerors.

D. ED Offerors Competitively Disadvantage3

Interior unfairly placed electrodialysis (ED)offerors at a competitive disadvantage relative toreverse osmosis offerors by requiring ED offerorsto provide specialized rectifiers.

E. Improper Public Ranking of Offers

The action of Interior in public ranking of thefinal offer was contrary to procurement regulationsand policy and has produced serious and perhaps unre-pairable damage to Ionics' trade reputation. This actionviolated a pertinent probbrement regulation. Althoughthe award selection itself was not prejudiced, becausethe release of the ranking took place after the selection,real harm has been done to Ionics' competitive standingbecause of the release of this information.

I L -

3-190611 58

F. Disclosure of Testing Information

Apart from Interior's unauthorized release of theofferors' ranking, Interior improperly released someof all offerors' test material to Dow Chemical Companyin early 1978 after the selection was announced andprotests filed. This disclosure was prejudicial totonics.

Interior Replv

A. Violation of "Plant Split." RFP Provision

As stated in the reply to du Pont'v. protest, Ionicswas aware of Interi6r's reserved right dlot to implementits "two process award" intent if offered quantitiesand prices made the intent impractical. Interior couldnot determine whether this intent was practical untilit completed evaluation of best and fin#l offers. Noteour reply in the du Pont protest ars to the details forour impractical finding wh'ch was cased on the "finalrankings an] the quantities and Frices of offeredequipment."

Further, the memo of the "Yuma Desalting PlantOpen Manufacturers Meetin' Minutes" (December 15, 1975)furnished to Ionics stated we wou'ld limit the amountspent to get a plant split and this would not be in theRFP.

Moreover, in the article in the April 1977 editionof Industrial Wlater Engineering (which first appearedin a paper presented at the First Desalination Congressof the American Continent, Mexico City, Mexico,October 1976), from which Ionics liberally quoted, thestatement was made: "Also, since economic and technicalconsideration's may dictate selection outside of thisrange, the solicitation stated the plant split betweenmanufacturers and orocesses is an intent, with thecontracting officer free to award as many contractsas best serves the Government's interest."

B-190611 59

As to Ionics' grammatical analysis of the plantsplit provision, Interior considers the analsisisillogical. The "save for impractical" qualifierdoes not apply to the list of processes in thetwo sentences prior to the-qualifier (which areconcerned with Interior's reserved right to deter-mine other acceptable systems), but rather to thetwo intentions (regarding awarded capacity limitsand awarded processes) found in the involved pro-vision.

The language of the qualifying phrase impliesthat any determination of impracticality will comeafter best and finrwl offers prior to iward of anyprocurement, since an offeror might c'Pange its priceor quantity in the best and final offer. Moreover,the fault that Ionics fnd other offerors were in thecompetitive range after initial proposals has nobearing on the impractical determination because ofcost, technical and quantity changes finally proposed.

Concerning Ionics' charge that Interior has notjustified its award decision under the qualifyingphrase, Interior responds as follows. It is true thatInterior stated the desire of a plant split betweenprocesses and between manufacturer. to reduce the risksinvolved in having only one membrane supplier and tominimize risks regarding failure of equipment to producethe desired quantity at the desired salinity. Furthermore,Interior was prepared to incur some additional expensein order to reduce these risks. However, Interior waso3bviously limited in the amount of additional expenseit could incur to be consistent with the legislativeintent of least cost and good administrative practices,and it was for this reason that the "escape clause"regarding the intent was included in the RFP. The escapeclause, "This is stated as an intention since equipmentmay be offered i.i such quantity and at such prices asto make implementing this intention impractical," limitedthe considerations to quantities and prices offered.

2- 190611 60

Ionics' final prices wtce considered impractical.Notwithstanding that the consultant found that in-clusion of the ED proceso might be desitable, thisdid not mean thet the process could be included.The fact is that Ionics' best and final proposal--tectnical and cost factors--did not rate high enoughfor award. Moreover, Ionics could not have been mis-led, since paragraph 2,4.2.c. of the RFP said "noportion of the plant has been allocated to anyparticular process or to any particular manufact.urer."

Concerning Ionics' related complaint that Interior'simpractical decision gave cost too much weight, Ionicshas chosen to misread or ignore that RFP statement con-cerning the relative importance of quality and costs byinsisting that technical merit%!should ultimately prevailover cost even though the RFP states technical is equalto cost.

During negotiations, Interior encouraged use ofavailable advanced technology--that is consistentwith the need that the process selected be efficientand up-to-date. It is not true that Interior encouragedofferors to propose novel designs. Although IonicspLoposed its Government-funded "Mark IV Stack"--presumably in an effort to advance the state-of-the-art--as an alternate in its initial proposal, Ionicsapparently made an early decision not to propose the"Mark IV Stack" in its best and final offer.


Final offers were ranked in a weighting processwhich gives approximately equal weight to cost andtechnical factors. Interior's statement that overallcost was important was said in the context of the legis-lation and does not mean that in the actual weightingprocess :ost was given undue weight. Moreover, in areranking, using the so-called "normalizing" procedure,the selection is confirmed and shown to be identical tothe result earlier produced.

B-190611 61


As to its objections about evaluating the warrantyprovisions, Ionics should have sought clarificationsabout the mefning of the'se terms during negotiationsand before the date for best and final offers.All offerors were treated the same in regard towarranty requirements which were discussed in all fournegotiation sessions held with Ionics. If Ionics hadlonger-life membranes, then it could have gained acost and technical advantage by warranting the membranesfor a longer time period. Ionics initially proposed topool the warranty for all items in a single cost pool.This pooling was undesirable to Interior and wasdiscussed in negotiations. Ionics retained thispooling arrangement in its best and final offer.

Interior told Ionics, moreover, that its approachinvolving measuring the rate of membrane usage atthe end of the 7-year warranty period was acceptableajid that the cost of membrane replacement shouldreflect this provision. Ionics said that it wouldmeet this requirement. Ionics indicat&ed its warrantieswould 'be low in cost, meet Ionics' business considera-tions and be realistic regarding operation. Thus, theGovernment felt it had reached a meeting of the mindsregarding this consideration. Statements in the ccl-tract ing officer's report relative to additionalcost kind technical advantage by warranting the longerperiod were referring to Ionics' claimed 20-year lifeas opposed to the warranted life contained in theproposal, including the adjustment based on rate ofusage. We believe the record will show Ionics wasevaluated correctly in both the technical and costevaluations.

Ionics' proposal involving measuring the rate ofmembrane usage at the 'end of the 7-year warranty periodwas acceptable to the Government, was in conformancewith the RFP requirements and was evaluated as proposed.All other offerors' proposals were also in Conformancewith the RFP requirements and were evaluated as proposed.As such, the warranty requirements were evaluated uni-formly.

9-190611 6 2

D. ED Offerors Competitively Disadvantaged

Although Ionics claims that Interior prejudicedits position by requiring it to accept the warrantyand performance risk of specialized rectifiers, Ionicsdid this at its own choice. It had the option underparagraph 2.6.1.c. of the RFP to allow Interiorto furnish rectifiers of standard design. In anyevent, the proper time to have complained about thisalleged unfairness was before the submission of finalproposals.

E. Improper Public P.ankihg of Offers

Interior's basic position on the release of theranking is that the release in no way prejudicedthe selection for the awards or any offeror gen rally.The letter did not detail any aspect of the C03t ortechnical evaluation. Moreover, any firm that participatesin a competitive procurement must assume the risksassociated with its offer not being identified as themost favorable offer.


As to Interior's release of proprietary informa-tion to Dow concerning other concerns' test performance,Interior did not knowingly release these documents toDow, Interior informed the other offerors of the docu-ments in Dow's possession, requested that the documentsbe kept confidential, and requested Dow to considerputting the documents in escrow with a disinterestedthird party.

GAO Analysis

A. Violation of "Plant Split" RFP Provision


These issues (A. and B.) have been discussedabove under the analysis of du Pont's protest.

B-19'611 63


Ionics contends that Interior could not haveunderstood its warranty approach because of Interior'sstatement that Ionics could have gained a costand technical advantage by proposing a longer war-ranty. Interior's statement also shows, in Ionics'view, that warranty requirements were not uniformlyapplied.

Apart fram Interior's statement--which we taketo be a general statement that a longer proposedwarranty would generally advance the competitivescore of a proposal in comparison with a shorterwarranty--lonics has not pointed to any specificdifferences in Interior's evaluation of its warrantyproposal or that of any offeror to demonstrateits ulcimate conclusion that warranty provisionswere not uniformly applied other than its observationthat its ranking does not evidence a greater priorityassigned to a longer warranty. The final rankingwas based on many factors; however, Ionics' rankingis not necessarily inconsistent with specific meritaccorded for a longer warranaty. Furthermore, basedon the review of the current record before us,we must conclude that Interior has 'reasonablyevaluated proposal warranties.

As to Ionics' suggestion that the warrantiesproposed by the selected concerns may be worthlessbecause of the allegedly defective material used,we note that Interior has considered these variousalleged defects and its best technical judgment iscontrary to Ionics' position. we cannot questionthis technical judgment.

Finally, as with the case of du Pont's objectionto Interior's treatment of the warranty provisions,any complaint that Ionics might have had with re-gard to bias in the provisions or other perceiveddefects in the provisions should have been raised,at the latest, prior to submission of final proposals.

j ~~~~~~~~~~~~~~~1~~~

Kl

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D. ED Offerors Competitively Disadvantaged

We agree with the Department's position that,since Ionics had the option under the RFP forrectifiers of standard design, the alleged biascould have been removed had Ionics properly broughtthis problem to Interior's attention prior to thesubmission of best and final offers.

E. .Improper Public Ranking of Offers


See the discussion of these issues in thedu Pont section of the decision.

As to Interior's inadvertent release of offer-ors' alleged proprietary materials to Dow ChemicalCompany, since this release was post-selection aswell a; inadvertent, it does not affect the proprietyof the award.

Dow-Permutit Protest

Dow-Permutit (D-P) has also protested the pro-posed awards. D-P's grounds of protest are sum-marized in the following paragraphs.

A. Lack of Meaningful Discussions of YumaTestinq

D-P alleges that Interior failed to conductmeaningful discussions with it since D-P's finalranking shows that there must have been negotiabledeficiencies in the proposal. For example, D-Prequested copies of all 32 months of testing onthe D-P unit; however, only 2 months' test reportswere provided. The first time that D-P saw Interior'sfull interpretation of the test site data was in lateMay 1977 after D-P's best and final negotiations hadbeen prepared, As a consequence, l-P redeived noinformation on what pretreatment experiments were

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taking place. Any of the experiments could haveinfluenced the interpretation of L-!.s performance.Thus, Interior's failure to discuss the test per-formance prevented D-P from explaining or reactingto the interpretations of that performance.

Moreover, contrary to Interior's position,D-P's December 1975 and January 1976 requests forcopies of test reports were acknowledged by Mr. Cohanof Interior. Mr. Cohan, in fact, promised that therequests would be honored. Moreover, contrary toInterior's position, D-P's requests "constitutedcontinuing requests for the monthly summaries ofperformance."

Although some of the Interior reports promisedin! mid-March 1976 were received in May 1977, thiswas "too late to influence the negotiations" becausethe D-P proposal had been mainly completed prior tothe initial closing date in April 1977. Eventhough some data was thetefore received prior tothe final closing date, Interior's failure to negotiatelift D-P with no meaningful data analysis prior tothe conclusion of negotiations.

Despite repeated requests, moreover, D-P wasnot given sufficient information on the Government'spretreatment experience which involved "frequentupsets." Thus, D-P was unaware of the Government'saluminum permanganate and ferric sulfate tests.Therefore, even if Interior discontinued these specialtreatments, the important point is that D-P wasnot told of all relevant facts as to its testexperience so as to allow D-P to take neededcorrective action.

Interior improperly failed to tell D-P of anegative interpretation of D-P's Yuma test per-foiemance. Thus, D-P had no reason to suspect anegative interpretation in view of -Dp's competitiverange ranking. Rather than engaging in meaningfuldiscussions, Interior restricted iLs communications

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to minor and relatively inconsequential pointsconsisting of very few deficiencies in hardware anddesign interpretations, This led D-P to believethat no significant deficiencies existed in itsproposal and precluded D-P from making adjustmentswhere it now appears Interior perceived deficiencies.

Additionally, Interior improperly failed tohold meaningful cost discussions with D-P. The onlypoint discussed with D-P was Interior's suggestionchat D-P was a little high on cost and that adjust-ments could be made by having replacements withoutpressure vessels.

Because of the lack of meaningful discussions,certain errors in the consultant's analysis ofD-P's performance were permitted to exist. Forexample, D-P's analysis of performance shows thatthe performance decline was well within the pre-dicted decline for that system contrary to theconsultant's positicn. Other errors are also presentin the consultant's analysis.

B. Rack Allowance Problem

In March 1977, Tnterior improperly denied D-Pan allowance for extra racks or space for extraracks 9hich would have lowered D-P's cost proposal.This denial was improper because the RFP did notspecifically prohibit this rack allowance. Moreover,the denial placed a large liability for guaranteedperformance on D-P which had to be made up byincreased costs for the warranted permeators, thusprejudiL ng D-P's competitive position.

C. Bias in Evaluation

The report of Interior's consultants suggestssome lack of impartiality. Only the systems of

AP and Hydranautics were favorably described evenprior to submission of best and final proposals.

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Not only did Interior favor the selected spiralwound technology over other processes, but it deliber-ately adjusted its internal decisions and the RFP topermit Hydranautics to continue to participate in theprocurement and to be selected, For example, Interiorsays that it relied on certain side-by-side tests ofpermeator and spiral modules which show spiral moduletes&ing superiority. Actually, the testing companyhas stated it never included spiral modules in thetesting program and that the superiority conclusionwas never drawn. This leads D-P to believe that Interiornever considered the favorable performance of the D-Punit with respect to the plugging factor.

Moreover, Interior made some critical changesin the requirements for the procurment so as to permitHydranautics to become successful. Those changes are:(1) reducing the amount of an efficiency bond originallyrequired of Hydranautics and all other offerors withoutdiscussing this reduction with D-P; (2) allowingHydranautics' unit to be tested at Government expenseafter the company withdrew its offer; (3) allowingHydranautics to reenter competition after it hadwithdrawn its proposal; (4) postponing the date ofbest and final offers several times to accommodateHydranautics' needs especially for "EEO clearance"and a required audit.

D. Violation of "Plant Split" Provisions

The proposed awards are inconsistent with rele-vant RPP provisions especially since Interior musthave realized it would incur an extra cost penaltyto award for two processes.

E. Size of Proposed Awards Destroys Competition

The size of the proposed awards destroys thecompetitive balance of dev&= iping technologies exist-ing in the world market today.

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F. Impropet Evaluation Weight for HighRecover Capability

The evaluation weight Interior placed ona svstem's ability to operate at high recoveries ex-ceeded the "average importance" rating assigned tothis consideration in the RFP. D-P was never informedof the "recovery contest" that was being conducted byInterior. D-P operated within the safest ranges ofrecovery arid never expected that its recovery might be adeficiency.

Moreover, although the RFP specified thetreatment water's "plugging factor" to be not lessthan 65 percent for 98 percent of the testingtime, D-P's performance was downgraded becauseof presumed superior resistance of spiral-wound membraneplugging, D-P's hollow-fiber membranes performedwell, although the plugging factor of the feedwaterfrequently was worse--say up to 75 percent--Thanthat specified. If a 75-percent plugging factorhad been smecified, D-P would have designed andproposed a design to meet that factor.

Intertor Reply

A. Lack of Mearningful Discussions of Yuma Testinq

Extensive discussions were conducted with D-Prepreserta'ives because of the perceived obligationto discuss with the offeror the deficiencies in itsproposal. The performance of D-P's test unit wasextensively discussed during negotiations. Allidentified' deficiencies were in fact discussed withfl-P.

M2oreover, contrary to the allegation thatInterior did not hold meaningful discussions withD-P concerning its performance at the Test Facility,Interior requested such discussions which were helJ'with Warren A7Hammond of D-P on December 21, 1976,at Interior's office in Denver. At that meeting,Interior questioned D-P extensively concerningthe technical problem.

El!_1.l

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As to requests for data, all offerors testingequipment at the Test Facility were notified inthe December 1975 meeting that portions of theoperation and maintenance contractor's report per-taming to the pretreatment and respective offeror'stest units would be supplied upon request. Thisinformation was in addition to the daily operationslog sheet on their respective test units which wasbeing forwarded and has continuously been forwarded.D-P's requests for data were primarily from itsdivision handling electrodialysis and the requestswere filed under that file. Therefore, in searchingour files on its reverse osmosis equipment, wecould not find the request. After reviewing therequests as attached to its comments, it isclear that the request was for data available upto that time, not on a continuing basis.

Since D-P and others had not requested thesereports on a continuing basis, the no-cost contractwith the offerors was revised in January 1977 toforward to them portions of the reports relating totheir equipment. The pretreatment portions wereonly made available upon request by this modification;however, it was this action by the Government whichled to the May 1977 transmittal of D-P's part of thesummary reports, not any interest shown by D-P.

It is interesting to note that after receiptof these reports, D-P made a management decisionnot to revise its proposal since it had been printedand was ready to be submitted. In addition, noeffort to discuss the interpretations in the reportswas made by D-P.

D-P also refers to a July 1977 paper by C.van Hoek which discussed pretreatment experimentsinvolving alum, permanganese and ferric sulfatewhich it states "could have influenced the interpre-tation of i_-'s performance." Experiments involvingalum and permanganese were discontinued in July 1974and January 1975, respectively. D-P's first test

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unit started operation on October 16, 1974, and,therefore, did not use water with alum pretreatmentand could have only logged 1,400 hours maximum ofoperation with permanganese pretreatment. In fact,considerably less exposure ils likely. Furthermore, dueto numerous replacement oE elements by D-P, theinfluence of this possible exposure to permanganeseon D-P test results would be minimal. Lime pretreat-ment testing with intermittent use of ferric sulfatecoagulant aid has been conducted since July 1974.This system has been the primary pretreatment systemwhich was known or should have been known by D-P fromTest Facility visits and other Discussions. IfD-P was concerned about the pretreatment tests, itwas afforded the opportunity to obtain the pretreat-ment test data, which it declined to pursue.

Adequate cost discussions were also held con-trary to D-P's criticism. Cost evaluation andthe results of the Defense Contract Audit Agency(DCAA) audit were discussed in the first and secondnegotiation meetings. Interior informed the D-Pnegotiators that the D-P costs were high. Neverthe-less, D-P's proposal was always considered in thecompetitive range. In view of the fact that thiswas a competitive negotiated procurement, Interiornegotiators were precluded .from using any indicationof a price that had to be met for D-P to be competitive.

Although D-P insists that the van Hoek reportmisinterprets fD-P's data, the paper was not usedin the evaluation of proposals. Hence, D-P sufferedno prejudice. In any event, data used in the vanHoek report was purposely modified to demonstratetypical test results. The curves and slopes ofthe curves reflect this modification. Since thedata was purposely modified for use in the vanHoek report, D-P is totally incorrect in statingthat the paper reflected inaccuracies in Interior'sevaluation of D-P's data and that Interior wasbiased in favor of competitors' systems even beforebest and finals were submitted.

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Further, D-P has stated:

"* * * However, on page 12 of the Bureau'srebruary 24, 1978 Lesponse to the DuPontprotest, the Buread specifically refersto the Van Hoek report as 'The Bureau'sstatus report, Operation, Maintenance,Development Testing of the Yuma Desalt-ing Test Facility (July 1977),' and quotesliberally from that report in an attemptto refute DuPont statements on technicalperformance.*

This report was prepared by Ken Trompeter, not Cornelisvan Hoek. Furthermore, Interior merely identifiedthe report content. The remainder of the paragraphin the contracting officer's report responding todu Pont's protest discusses the performance of du Pont'stest unit and does not quote from either the Trompeterreport or the van Hoek paper.


Interior properly rejected D-P's request--andsimilar requests of other offerors--for additionalrack and membranes when and if the warranted performancewas not achieved by D-P's membrane equipment. Accept-ance of this request would have contravened the RFP'swarranty provision which requires the offeror towarrant; that the equipment as supplied shall meetd'esign conditions. Acceptanct of the proposed modifica-t'on Louls Antail having Interior purchase and installadditional equipment, control system capacity andother items related to increased membrane equipment.If D-P disagreed with the rejection, ample opportunityexisted 'or filing a protest prior to submission ofits best and final offer.


The quoted provisions of the van Hoek reportwhich allegedly show bias toward the proposed awarfcescontain statements such as "fairly uniform and

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slightly better" and "another satisfactory performance"in describing "figure 2" cited by D-P. In any event,the cited report says absolutely nothing about theawardees bv name. The statement aboutscaling was that of an employee of another Tnterioroffice. Moreover, the statement was not consideredduring proposal evaluation.

As to D-P's further suggestions that Interior6 is biased in favor of the spiral-wound technology,Interior makes the following points below:

(1) Because :.-terior believed that the protectionoffered by the bond would not be worth the significantlyhigher costs associated with it, and not because ofHIydranautics' complaint, Interio4 changed the require-ment. Also, Hydranautics was not the only offeror havingserious concerns regarding the bonding requirement.Further, the bonding requirement was having a "chillingeffect" on all but the largest companies. Consequently,in order to increase competition and reduce cost, Interiorissued an amendment to all offerors. Although thechange benefited hydranautics, it also benefited allofferors. If Interior had been as partial as alleged,a decision to amend the bonding requirement would havebeen made prior to or shortly after Hydranautics' with-drawal rather than 2 months later. Hydranauticswas properly allowed to revive its offer under GAOprecedent. (See, for example, Radionics, Incorporated,8-185597, April 14, 1976, 76-1 CPD 252.)

(2) D-P is fully aware that audits were requestedon all offers and not just Hydranautics'. Therefore, adelay in submission of best and final offers toallow for the completion of flydranautics' au6dtwas appropriate.

(3) Although Interior does not deny that the timefor best and final offers was extended, in part, toallow Hydranautics to submit its best and finaloffer, the extension was granted to allow all offerorsto fully consider the bonding change and to modifytheir Proposals.

B-19061l 7 3

Di. Violation of "Plant Split" Provisions

See Interior's replies to du Pont's and Ionics'

similar protests.-

E. Size of Proposed Awards Destroys Competition.

See Interior's reply to Ionics' similar protest.

F. Improper Evaluation Wetght for HighRecovery Capability

It is obvious that the fl-P proposal which limitedoperation of its equipment to a plugging factor of notgreater thi'n 60 percent when the Government's RFPrequirement was for operation up to a plugging factorof 65 percent ¶ust be downgraded with respect to aproposal which permits operation up to a pluggingfactor of 65 percen'tx-

GAO Analysis

A. Lack of iteaninytul Discussions of YumnaTesting

Before turni4'g to the individual issues involvedunder this headtng, it Mhfould be noted that, as ageneral proposition, discussionB must be meaningfulin negotiated procurements to the extent that of ferorsare given information as to the areas in which theirproposals are deficient. The content and extent ofthose discussions will not be questioned, however,absent an agency's failure to rationally justify thediscussions actually undertaken. Joseh h~aArchitects, B-187160, December 13, 1977,, 77-2 CPD 458.Further, so long as there is a real possibility of"technical transfusion" of one offerorls approach toanother offeror via discussions, the area involvingtechnical transfusion need not be discussed. Dynalectroncorporation, 55 Camp. Gen. 859 (1976), 76-1 CPD 167.Finally, to the extent that an offeror alleges lackof meaningful. discussions largely in the abstract,the protest is for denial. GTE Sylvania, Inc.,8-188272, November 30, 1977, 77-2 CPD 422.

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(a) Was D-P sufficiently informed as to itstest performance?

Despite the conflict over the question whetherD-P requested test reports on a "continuing basis"or not, it is clear that D-P received extensivetest data no later than May 1977 in addition to lI-P'sweekly receipt of daily logs containing data on theperformance of its equipment a$ the Test Facility.Since best and final proposals were not receiveduntil July 1977, D-P obviously had a 2-monthperiod to revise its offer or suggest to Interiorthat further discussions should be held to eXploredeficiencies related to the test data. D-P's failureto pursue either route on the grounds that it hadalready prepared its final offer as of May 1977suggests that D-P was not substantially concernedabout lack of discussions related to its test data.(b) Did Interior properly conduct competitivediscussions in areas relating to what D-P considersa negative interpretation" of its test performance?

Although D-P insists that Interior's discussionof technical weaknesses involved relatively minorpoints, D-P has not specifically suggested whereInterior failed to discuss serious deficiencies orweaknesses in the D-P proposal other than sayingInterior faile& to generaljy discuss its negativeview of the D-P test performance. Based on theserecitals, D-P is alleging lack of discussions largelyin the abstract. In any event, we see no basis inthe record to contest Interior's judgment as tothe adequacy of technical discussions had with D-P.(c) Were the cost discussions held with C-Padequate?

Since bcth Intericr's cost evaluation and theDCAA's audit report were discussed with D-P and D-Pwas specially informed as to some cost deficienciesas well as a general cost objection, we cannotquestion Interior's judgment that adequate costdiscussions were held with the company.

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(d) Alleged misinterpretation of D-P's testdata.

Based on our review, of the opposing positions,we cannot question that the alleged errors in thevan Hoek report were not prejudicial to D-P, sincethe paper was not used in the evaluation of the proposalbecause the data curves and slopes of curves usedin the paper were purposely modified to demonstratetypical test results and not the performance of D-P.Moreover, we disagree with D-P's assertion thatInterior'a response to the du Pont protest demonstratesits reliance on the report by naming van Hoek asthe author of Interior's status report. In our view,Interior rebutted this charge by noting that "KenTrompeter, not Cornelis van Hoek," was the authorof this report.

Consequently, D-P has not shown, in our view,how erroneous interpretation of its performanceinfluenced consideration of its proposal.

Further, we cannot question Interior's positionthat the Yuma testing was not as critical as suggestedsince the relative strengths and weaknesses revealesdby the testing were not to be scored in absolute termsbut only indirectly insofar as testing confirmed ordisapproved offerors' statements. To the extent D-Pbelieves that the test results and this indirect scoringtechnique prejudiced consideration of its proposal,it has failed to specifically allege how ranking resultswould have changed had proper results and direct scoringprevailed.

Finally, although D-P alleges--as did du Pont--that Interior did not successfully complete thetesting, our factual audit did find that Interiorconsidered the vulnerability of desalting membranesto: (1) high temperature, (2) pH, (3) bacterialattack, and (4) particulate attack. To the extentYuma testing was sufficiently rionrous in lightof the above factors--even if "out-of-contrcl" as

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alleged by D-P--to demonstrate problems with someor all of the membranes, we believe--contraij toD-P's assertion--that this testing constituted bene-ficial knowledge for. evaluation purposes underextreme conditions.

Consequently, we cannot question the proposedaward under this aspect of the protest.


lie cannot question Interior' s position thatacceptance of D-P's proposal would have contravenedwarranty provisions that the equipment as suppliedwould meet design conditions even though the RFPdid not expressly prohibit this allowance. Moreover,we agree with Interior' s position that the appropriatetime for D7 P to have challenged Interior's positionon this allowance was during negotiations, but,in any event, prior to final offers. Nevertheless,D-P did not complain.


As stated above, we cannot question Interior'sposition that the van Hoek report was not actuallyused in the evaluation. Moreover, the statementsallegedly attributing superiority to other awardeesare hardly terms of superiority as such but rat erterms of mild preference, that is, "slightly better,""fairly uniform," and "sitisfactory performance."

D-P also complains that Interior permittedHydranautics to withdraw its proposal and then, pur-suant to the inducement of a changed efficiency bondrequirement, permitted Hydranautics to revive itsoffer.

An offeror may waive the expiration of its pro-posal acceptance period so as to receive award onthe basis of the offer as submitted. Radionics,Incorporated, supra, and cases cited in the text.Since an offeror may waive the expiration of its

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proposal and thereby reinstate its proposal forpurposes of award, we see no bar to an offeror revivingits prior proposal for the purpose of increasing thecompetition in an on-going procurement. Thus, we seeno impropriety in allowing Hydranautics'-reentryinto competition. Moreover, we cannot questionInterior'l position that the changed bonding require-ment was responsive to complaints other than thoseof Hydranautics alone or that the modification wasbeneficial to all concerns.

Although we do not have a factual reply fromInterior on the circumstances surrounding the allegedtesting of Hydranautics' unit at Government expenseduring the period of withdrawal, we see no objectionto this testing--assuming Interior's financialappropriation supporting the testing would otherwiseallow payment--to the extent the Government reasonablybelieved the testing would further its store ofdesalting knowledge. In any event, there is noallegation that this testing period in itself putall other offerors at a competitive disadvantage,since it appears all units received extensive testing.

Finally, we cannot question the extension of bestand final proposal dates pending the completion ofan audit on Hydrardautics. This additional timewould have givea all offerors further time to reflect onpossible changes in their proposals, as well aspermitting additional competition for the awards--both reasons clearly constituting, in our view, anextension in the best interest of the Government.Moreover, there is no evidence that D-P eitherquestioned Interior about the reasons for the post-ponement of best and finals or that D-P protestedthese postponements at any time prior to the dateof best and final proposals.

D. Violation of "Plant Split" Provisions

See our analysis under du Pont's section ofthis decision.

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E. Size of Proposed Awards Destroys Competition

This factor is properly outside the scope ofthis procurement as is D-P's suggestion that furthertesting and analysis be tondicted to take into accountevolutionary developments in the state of desaltingtechnology.

F. Improper Evaluation Weight for HighRecovery Capability

Contrary to D-P's position, we see no evidencein the entire record of the evaluation leading tothe proposed awards that the importance assignedto this factor was out of proportion to that con-veyed in the REP or that the spiral-wound membranesselected were improperly accorded merit for resistenceto "plugging."

Nor can we question Interior's statement thata proposal permitting operation up to a "pluggingfactor" of 65 percent should achieve greater meritover one permitting operation up to 60 percentin view of the RFP's stipulation of a pluggingfactor of up to 65 percent.

Results of GAO Audit

As all parties to this protest are aware, GAO'sCommunity and Economic Development Division (CED)made a factual audit of the circumstances of theproposed awards.

The questions reviewed and the conclusionsreached by that audit are as follows:

1. Review the information supporting the Bureauof Reclamation's decision to award contractsfor the Yuma desalting plant to two firmsthat will use the same membrane desaltingprocess, instead of more than one process asinitially contemplated.

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2. Determine whether the Bureau's formula usedto rank the bidders gave approximately equalweight to cost and technical factors, asstated in the request for proposal (RFP).

3. Ascertain whether the Bureau consideredtechnological factors pertaining to thevulnerability of desalting membranes to:(1) high temperature, (2) pH, (3) bacterialattack, and (4) particulate attack.

CED reviewed the negotiation, proposal andcontract files related to the subject procurementlocated at 1the Bureau's Engineering and ResearchCenter, Denver, Colorado. CED found no data inaddition to the information the Bureau had alreadyprovided that would affect the merits of the bidprotest or adversely impact on the Bureau'sdecision to use only one membrane desalting process.

The cost and technical information supportingthe Bureau's decision to go with only one membranedesalting process is clear; v summarized in theSeptember 23, 1977, memorandum containing theBureau's Review Board's recommendations for award.

In their bid protests, du Pont and Ionics statedthat the Bureau's formula of dividing evaluatedcost by techniical merit points yielding cost pertechnical point does not accomplish equal weight-ing of cost and technical points as provided bythe RFP. It was suggested by du Pont that, toprovide equal weights to the factors in this pro-curement, the Bureau should have normalized theevaluated costs and technical merit points andthen added the two together to obtain the properranking of proposals.

Bureau officials agreed thac the method ofdividing cost by technical points may not alwaysprovide the same ranking as the du Pont method.However, these officials said that the Bureau's

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Review Board during its deliberations did verifyits ranking method by following the normalizedprocess requested by du Pont and arrived at thesame results.

CED reviewed the Bureau's computations andfound that they were correct. CED also arrivedat the same ranking as the Bureau following themethod suggested by Ionics for providing approximatelyequal weight between cost and technical points.

In reviewing the Bureau's files and documentsevaluating the various contract proposals, CEDfound that the Bureau did consider the vulnerabilityof desalting membranes to: (1) high temperature,(2) pH, (3) bacterial attack, and (4) particulateattack.

Conclusion

Based on our above analysis and the resultsof our audit, we deny the protests.

Acting Comptroller Generalof the United States

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