Delta International, Inc., B-284364.2, May 11, 2000

Decision

Matter of: Delta International, Inc.

File: B-284364.2

Date: May 11, 2000

Melvin Rishe, Esq., and Howard Stanislawski, Esq., Sidley & Austin, for the
protester.

James J. McCullough, Esq., Deneen J. Melander, Esq., and Timothy W. Staley,
Esq., Fried, Frank, Harris, Shriver & Jacobson, for Science Applications
International Corporation, an intervenor.

Frank J. Sando, Esq., Federal Bureau of Investigation, for the agency.

Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
of the General Counsel, GAO, participated in the preparation of the
decision.


DIGEST

1. When an agency, in making a purchase under the Federal Supply Schedule
(FSS), decides not to consider some items because the agency concludes that
those items do not meet its needs, the vendor whose items are excluded from
consideration may protest the exclusion, and GAO will determine whether the
agency had a reasonable basis for determining that the excluded items did
not meet its needs.

2. In purchase of portable X-ray systems under the FSS, protest challenging
agency's conclusion that only a fully digital system would meet the
agency's needs is sustained where record fails to show that agency had a
reasonable basis for its conclusion that protester's system, which
protester asserts uses a hybrid analog/digital signal, would not meet the
agency's needs.


DECISION

Delta International, Inc. protests the Federal Bureau of Investigation's
(FBI) issuance of purchase order No. A9G906190 to Science Applications
International Corporation (SAIC) for portable X-ray inspection systems. The
purchase order was placed under SAIC's Federal Supply Schedule (FSS)
contract. Delta, which also has an FSS contract for portable X-ray
inspection systems, argues that the FBI improperly determined that its
equipment would not meet the agency's needs.

We sustain the protest.

The FBI explains that as part of a counter-terrorism initiative, Congress
appropriated funding for the acquisition of equipment for local and state
bomb technicians, and that its Bomb Data Center (BDC) was assigned to
identify and procure appropriate equipment. The BDC identified SAIC's RTR-4
Real Time Imaging Systems as among the items to be purchased for dispersal
to state and local bomb squads. Contracting Officer's Statement at 1; FBI
Procurement Justification, June 12, 1999, at 1. The BDC determined that
RTR-4 units should be purchased because the RTR-4 is the only "fully
digital" portable X-ray system available. Id. at 2. On September 21, 1999,
the FBI issued a purchase order worth approximately $9.8 million to SAIC
for 424 RTR-4 systems and associated equipment.

According to the agency, a fully digital system is required because:

[f]ull digitization would allow greater compatible technological
improvements, faster exchange of data information, and significant quality
control of resolutions. The use of a fully digital system would reduce
frequency roll-off associated with the use of an analog filter. It would
further eliminate image losses associated with the use of coax cables in
the analog system. Further noise distortion is avoided in a fully digital
system by the elimination of the Sync Grabber that is characteristic of the
analog format. . . . In addition, a fully digital system could be upgraded
to a wireless system at a later time, without loss of speed in image
transmission. [1]

Declaration of the Contracting Officer's Technical Representative (COTR),
Mar. 1, 2000, at 2-3. In addition, a fully digital system "will allow the
Bomb Technician on the scene of an incident to digitally transmit images to
other locations anywhere in the country for real-time assistance from other
experts." Declaration of COTR, Mar. 22, 2000, at 2.

By way of background, the FBI explains that the RTR-4 and Delta's system,
the foXray II, consist of three components, which are linked by cable: an
X-ray source, which generates X-rays that are directed at a suspect device;
an imager housing a camera, where the image is acquired; and a control
unit, which the bomb technician uses to send commands to control the other
components and which receives data from the imager and allows them to be
viewed on a screen. Declaration of COTR, Apr. 12, 2000, at 2; see also
Protester's Comments, Apr. 13, 2000, at 9. The two systems differ in the
manner in which they transmit data from the imager to the controller,
however. According to the COTR:

With the RTR-4, the camera housed in the imager is fully digital in that
the image is digitized on the chip within the camera itself, prior to any
transmission of data to the control unit. Transmission of data to the
control unit is in digital format. With the conventional technology of the
RTR-3 [the predecessor unit to the RTR-4], foXray [the predecessor to the
foXray II] and foXray II, the camera housed in the imager is analog. Only
analog video data is established within the camera, prior to transmission
to the control unit. Transmission of data to the control unit is in analog
video format.

Declaration of COTR, Apr. 12, 2000, at 2.

Delta argues that the agency improperly determined that only a fully
digital X-ray system would meet its needs. The protester contends that its
system is essentially digital in nature and, although it employs a hybrid
analog/digital technology to transmit data from the imager to the
controller, it does not use an analog filter, coaxial cables, or a Sync
Grabber, and thus does not have the problems that the agency associates
with these features. The protester further contends that its system
transmits data from the imager to the controller faster than the RTR-4;
that it achieves better quality images than the RTR-4, "with quality being
measured in quantitative forms, such as resolution, penetration and dynamic
range"; and that it already has wireless capability. Protester's Comments,
Mar. 13, 2000, at 4-5. Delta also argues, in response to the agency's
argument that fully digital transmission is important because of its
compatibility with other digital equipment, that both the RTR-4 and the
foXray II transmit images from the controller to other equipment digitally;
as a result, the protester contends, "each of the products is fully
compatible with other digital equipment, and there is absolutely no
difference between them in this regard." Protester's Comments, Apr. 13,
2000, at 3.

The agency views the protest as contending that the protester "should have
been given an opportunity to compete for award of the FSS order." Agency
Memorandum of Law at 2. The agency points out that, when placing an order
under an FSS, an agency is not required to seek further competition.
Federal Acquisition Regulation (FAR)  8.404(a). On that basis, the agency
contends that the protest should be denied.

It is true, as the agency contends, that agencies are generally not
required to compete FSS buys (other than in the limited ways, not relevant
here, that are set out in FAR 8.404(b)). Accordingly, if the protest were
contending that the agency was required to conduct a competition, it would
be dismissed for failure to state a valid basis of protest.

Here, however, the question is not whether the agency was required to
compete the buy, but rather whether the agency had a reasonable basis for
determining that only the RTR-4 met its needs. Indeed, the agency itself
states that, in our Office's review of this matter, "the focus should
properly be whether there is a reasonable basis for the agency
requirements." Agency Memorandum of Law at 3. We agree.

Section 259(b)(3) (1994) of title 41 of the United States Code provides
that the procedures established for the General Services Administration's
multiple award schedule program (that is, the FSS program) satisfy the
general requirement in 41 U.S.C. 253(a)(1) for use of competitive
procedures "if--(A) participation in the program has been open to all
responsible sources; and (B) orders and contracts under such procedures
result in the lowest overall cost alternative to meet the needs of the
Government." See also FAR 8.404(a). Use of the streamlined procedures of
the FSS in lieu of conducting a competition is thus premised on a
determination regarding what the agency's needs are and which FSS supply or
service meets those needs at the lowest overall cost. The fundamental
principle of government accountability dictates that those determinations
are subject to review, and we view it as axiomatic that, in order to
withstand review when challenged in a bid protest, the agency must be able
to provide a reasonable basis for its determinations regarding its needs
and the FSS supply or service that meets those needs at the lowest overall
cost.

Consistent with that principle of accountability, FAR  8.404(b)(7)
provides that,

[i]f an agency's requirement in excess of the [$2,500] micro-purchase
threshold is defined so as to require a particular brand name, product, or
a feature of a product peculiar to one manufacturer, thereby precluding
consideration of a product manufactured by another company, the ordering
office shall include an explanation in the file as to why the particular
brand name, product, or feature is essential to satisfy the agency's needs.

Where, in connection with an FSS purchase in excess of the micro-purchase
threshold, a bid protest challenges an agency's definition of its needs
that excludes consideration of supplies or services offered by the
protesting FSS vendor, we will review the agency's documentation, including
its report to our Office, in order to determine whether the agency's
definition of its needs has a reasonable basis. See Design Contempo, Inc.,
B-270483, Mar. 12, 1996, 96-1 CPD  146 at 3; National Mailing Sys.,
B-250441, Jan. 28, 1993, 93-1 CPD  75 at 2, recon. denied, B-250441.2,
June 28, 1993, 93-1 CPD  496; TSI Inc., B-249815, Dec. 22, 1992, 92-2 CPD
 429 at 2. In FSS buys, as in other procurements, the determination of
what the agency needs and which products meet those needs is within the
agency's discretion, and we will not sustain a protest in this area unless
the determination lacks a reasonable basis. See Design Contempo, Inc.,
supra.

Here, we conclude that the FBI lacked a reasonable basis for its
determination that the protester's system did not meet the agency's needs.

Specifically, in response to the protester's arguments and questioning by
our Office, the agency elaborated on the requirement for full digitization
that underlay the decision that the protester's system could not satisfy
the agency's needs. The COTR conceded that the RTR-4 does not transmit data
from the imager to the controller faster than the foXray II, as he had
originally argued; he explained, however, that the RTR-4, because it
transmits only digital data, can alter its speed of transmission, and that
the ability to transmit more slowly is in fact an advantage because it
allows for the transmission of a more detailed image. According to the
COTR:

The digital camera technology of the RTR-4 allows variations or changes in
transmission frequency in order to achieve a higher resolution or more
sensitivity in the intensity scale. The RTR-4 can alter its speed based
upon the data to be captured and transmitted. If there is detailed data the
digital technology has the capability to operate at a reduced rate in order
to ensure it captures the detail quality in image resolution. Analog video
is not able to achieve this operation at a reduced frequency and thereby
sacrifices resolution and image sensitivity for speed. . . . The RTR-4's
ability to operate at reduced or varying frequencies insures a higher
quality image. The inability of analog video to make this adjustment
results in a lesser image quality. The quality of image resolution becomes
more noticeable as the length of the transmission increases. The longer the
transmission cable distance the more likely high frequency signal will be
degraded when transmitted in analog format. We are procuring systems with
330 feet of cable, for operator safety reasons. At that length there is a
noticeable difference in image between digital and analog technology.

Declaration of COTR, Apr. 12, 2000, at 1-2. The COTR further explained, in
response to the protester's argument that its system already has wireless
capability, that there is a difference between the wireless capabilities of
the RTR-4 and the foXray II due to the difference between digital and
analog technology:

Digital transmission in a wireless format with the RTR-4 allows
multidirectional transmissions of images as well as encrypted transmissions
in sensitive environments, to prevent interception or monitoring. The
analog transmission of the foXray II in wireless mode would allow any
commercial receiver working at the same frequency to intercept such analog
transmissions. Such a mishap could have adverse consequences.

Id. at 3. Finally, in response to the protester's argument that its system
has the capability to transmit data digitally to other equipment, the COTR
explained that, although the foXray II can transmit data to other locations
in digital format after the data have been converted from analog to digital
in the controller, the earlier analog transmission (from the imager to the
controller) has resulted in a loss of edge and image sharpness, and thus
the image that is transmitted to other locations is of a lesser quality.
[2] Letter from FBI to GAO 2 (Apr. 13, 2000).

The justification for a fully digital requirement now advanced by the
agency differs considerably from the justification that it originally
advanced. Whereas the agency originally argued that one advantage of a
fully digital system is its higher speed in transmitting data, the agency
now argues that it is the ability of a digital system to transmit data more
slowly that is an advantage. Further, whereas the agency originally
attributed the ability of the digital system to produce better quality
images to the fact that it does not use an analog filter or coaxial cables,
it now argues that the ability to generate better quality images is
attributable to the ability of the digital system to operate at reduced or
varying frequencies. Third, whereas the agency originally argued that an
advantage of a fully digital system is that it could be upgraded to
wireless at a later date without loss of speed in image transmission, it
now argues that the advantage of digital over analog is that a digital
transmission in wireless mode can be encrypted, whereas an analog
transmission cannot be.

As with the agency's initial arguments, the protester takes issue with each
of the agency's post-protest positions. Specifically, Delta disputes the
agency's contentions that the RTR-4 is able to generate a higher quality
image than the foXray II; that the quality of image generated by the foXray
II will degrade if it is transmitted a distance of 330 feet from the imager
to the controller; and that the foXray II's signal cannot be encrypted in
wireless mode. Delta maintains that its system provides higher resolution
and greater penetration capability than the RTR-4; [3] that "there is no
degradation of the foXray II's image quality even at [a distance from
imager to controller of] 150 meters, or 492 feet"; and that its signal can
be encrypted. Protester's Comments, Apr. 13, 2000, at 4, 10, 11. The
protester argues that the agency has made certain incorrect assumptions
regarding the capabilities of the foXray II based on its experience with
other systems, such as SAIC's RTR-3, which transmit an analog signal from
the imager to the controller. Delta maintains that these assumptions do not
hold true for its system because the signal that it transmits from imager
to controller is, rather than analog, an analog/digital hybrid.

Based on our review of the record here, we conclude that the agency did not
have a reasonable basis for believing that only the RTR-4 system would meet
its needs. Every justification for the agency's position, including those
offered during the course of the protest, is premised on the assumption
that the only alternative to the RTR-4 system is a system in which data are
transmitted from the imager to the controller in analog format. Delta has
repeatedly denied the correctness of this assumption with regard to its
system, arguing that its signal is an analog/digital hybrid. There is no
evidence in the record that the FBI had any basis for its assumption that
the deficiencies of analog systems applied to the foXray II or ever sought
to determine whether a system using a hybrid signal might serve its needs.

Because the FBI has not demonstrated that its assessment of its needs and
of Delta's system's compliance with those needs had a reasonable basis, we
sustain the protest. In light of the changes in the agency's explanation of
its needs during the course of the protest, we recommend that the FBI
review its needs to ensure that they are as articulated during the protest,
[4] and that the agency then make a determination of whether the
protester's system is able to meet those needs. If the agency determines
that it is, we recommend that, in accordance with FAR  8.404(b)(3)(ii),
the agency contact Delta and SAIC to seek reductions in their schedule
prices. If, once this information has been received, the FBI determines
that issuance of an order to Delta will meet the agency's needs at a lower
overall cost than the order issued to SAIC, we recommend that the agency
cancel the order issued to SAIC and issue an order for any undelivered
systems to Delta. We also recommend that the agency reimburse the protester
for its costs of filing and pursuing the protest, including attorneys'
fees. Bid Protest Regulations, 4 C.F.R.  21.8(d)(1) (2000). In accordance
with section 21.8(f)(1) of our Regulations, Delta's certified claims for
such costs, detailing the time expended and the costs incurred, must be
submitted directly to the agency within 60 days after receipt of the
decision.

The protest is sustained.

Comptroller General
of the United States


Notes

1. The contracting specialist explains that wireless technology would
eliminate the need for cables to link the components of the system.
According to the contracting specialist, the FBI is not now ready to adopt
wireless technology because of the possibility that use of a wireless
frequency might detonate a bomb; the agency might consider converting to
wireless systems when the technology advances sufficiently, however.
Declaration of Contracting Specialist, Feb. 1, 2000, at 1.

2. The agency does not dispute the protester's contention that its system
does not use an analog filter, coaxial cables, or a Sync Grabber, features
identified in the COTR's declaration of March 1 as characteristic of an
analog system. The COTR had pointed to these features in support of the
agency's position that a system with such features would not meet its
needs.

3. As proof that the foXray II provides higher resolution and greater
penetration capability than the RTR-4, the protester has submitted a copy
of a standardized test chart demonstrating the ability of the foXray to
detect a wire .004 inches in diameter, a capability that the RTR-4 lacks,
according to the protester. Delta also offers proof that its system can
detect a wire with a diameter of .005 inches behind a 1/8 inch steel plate;
the protester maintains that according to SAIC's Internet site, the
thinnest wire that the RTR-4 can detect behind a 1/8 inch steel plate is
.008 inches in diameter. Protester's Comments, Apr. 13, 2000, at 11.

4. We understand the agency's position now to be that it needs a system
that not only will generate a high-quality image generally, but one which
also can transmit an image from an imager to a controller 330 feet away
without degradation, and has the ability to encrypt a wireless signal.