BNUMBER:  B-271136
DATE:  May 17, 1996
TITLE:  Monroe Systems for Business, Inc.

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Matter of:Monroe Systems for Business, Inc.

File:     B-271136

Date:May 17, 1996

Jerome Snyder for the protester.
Paul Grabelle, Esq., and Philip Kauffman, Esq., Department of Veterans 
Affairs, 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

Where contracting officer failed to seek clarification of warranty 
provision in protester's Federal Supply Schedule contract for 
photocopying equipment, and most reasonable interpretation of clause 
is that warranty extends to equipment acquired under lease to 
ownership plan (LTOP), protest against agency's price evaluation, 
which failed to give the protester credit for its warranty in an LTOP 
acquisition, is sustained since agency did not select vendor meeting 
its needs at the lowest overall cost.

DECISION

Monroe Systems for Business, Inc. protests the decision by the 
Department of Veterans Affairs (VA) to award a lease for nine 
photocopiers for use at the VA Medical Center in Long Beach, 
California, to Edgemont Business Systems, a Sharp Electronics 
Corporation dealer.  Monroe contends that its overall price for the 
photocopying equipment and associated maintenance is lower than 
Edgemont's and that it therefore should receive the award.

We sustain the protest.

After deciding to replace the nine photocopiers on a lease to 
ownership plan (LTOP) basis--under the terms of which title and 
ownership of the equipment is transferred to the government without 
any additional payment at the conclusion of the specified lease period 
(in this case, 36 months)--the contracting officer requested prices 
for the lease, installation, and maintenance[1] of appropriate 
machines from three vendors holding FSS contracts for photocopiers:  
Monroe, Edgemont, and Konica.  Both Monroe and Edgemont submitted 
prices, while Konica responded that it did not offer an LTOP.  The 
contracting officer determined that the copiers submitted by both 
Monroe and Edgemont would meet the medical center's needs and that 
price therefore would be the determinative factor in selection of an 
awardee.  In this regard, when ordering from the FSS, a procuring 
agency is required to order from the schedule contractor offering the 
lowest overall price for products meeting its needs.  Federal 
Acquisition Regulation (FAR)  sec.  8.404(b)(2), (c)(1); Imaging Technology 
Corp., B-270124, Feb. 12, 1996, 96-1 CPD  para.  68.

In calculating Edgemont's overall price, the contracting officer 
included only 33 months of maintenance since Edgemont had noted in its 
price proposal that "all copiers come with a 90 day warranty."  In 
calculating Monroe's overall price, in contrast, the contracting 
officer included maintenance costs for all 36 months.  As calculated 
on this basis, Edgemont's overall price was $1,596.80 lower than 
Monroe's ($81,349.92 vs. $82,946.72).  On February 2, the contracting 
officer notified Edgemont that it had been selected for award.

Monroe argues that the contracting officer erred in calculating its 
overall price.  The protester asserts that it, like Edgemont, offered 
a 90-day warranty on the copiers--and that the contracting officer 
therefore should have included maintenance costs for only 33 months in 
calculating its overall price, as she did in calculating Edgemont's.  
The protester maintains that its price, as correctly calculated, is 
$81,326.72, i.e., $23.20 less than Edgemont's.

The contracting officer responds that she did not interpret the 
warranty provision in Monroe's FSS contract as applying to LTOP 
acquisitions.  She contends that her interpretation is consistent with 
the view of a GSA contracting officer responsible for administering 
photocopier contracts that unless the terms of a vendor's FSS contract 
explicitly extend the vendor's warranty to equipment acquired under an 
LTOP, the warranty is presumed to apply to purchased equipment only.  
The VA contracting officer further argues that it is reasonable to 
require an explicit extension of the warranty to LTOP acquisitions 
given the FSS contract provision committing the government "to 
maintain the leased equipment while under LTOP."

The warranty provision, in the General Terms and Conditions section of 
Monroe's FSS contract, states as follows:

     "Monroe warrants to the [g]overnment that the equipment delivered 
     under this Agreement will at the time of delivery be free of 
     defects of manufacture.  During the 90 day warranty period Monroe 
     will provide at no cost to the [g]overnment adjustments, repair, 
     labor and parts replacement, excluding photoreceptor drum, 
     including transportation of the equipment to and from Monroe's 
     repair facility, if required, excluding repair required due to 
     accident, misuse or neglect by the [g]overnment. . . ."

We agree with Monroe that the most reasonable interpretation of this 
language is that the warranty extends to copiers acquired under its 
LTOP since they are "equipment delivered" under the agreement.  
Moreover, it is apparent from a promotional brochure summarizing 
Monroe's LTOP (published by Monroe in 1993 and furnished to us in 
conjunction with this protest, but apparently not in the contracting 
officer's possession at the time of her evaluation) that this is 
Monroe's longstanding interpretation of its warranty language.  In an 
introductory section to the brochure, Monroe states that copiers 
acquired under its LTOP come with a "90 day warranty" and that a 
maintenance contract must be procured with each copier "for the term 
of the LTOP (excluding 90 day warranty)."  With regard to GSA's 
argument that warranty provisions are presumed not to apply to LTOPs 
unless explicitly identified as applicable, we think that 
identification of the warranty as applying to all equipment "delivered 
under this Agreement" was sufficiently explicit to place purchasers on 
notice that Monroe was not limiting its warranty to items purchased.  
Since, as noted above, Monroe's overall price is lower than Edgemont's 
after factoring in the cost savings from the 90-day warranty, the VA 
should have placed the order with Monroe.  See FAR  sec.  8.404(b)(2), 
(c)(1). 

To the extent that the contracting officer viewed Monroe's offer of a 
90-day warranty as unclear, she could (and should) have sought 
clarification from Monroe.  In this regard, we note that a request for 
quotations is a negotiated procurement and agencies are not barred 
from holding discussions with, and seeking additional information 
from, vendors after the submission of quotations.  Imaging Technology 
Corp., supra.  Without clarifying that Monroe did not intend to offer 
90 days of free maintenance, the contracting officer could not be 
certain that its overall price was higher than Edgemont's; she 
therefore could not be certain that in selecting Edgemont for award, 
she had selected the vendor that met the agency's needs at the lowest 
overall cost, as required by FAR  sec.  8.404.  

Given our conclusion that Monroe's 90-day warranty provision applies 
to LTOP acquisitions--or, at a minimum, that the contracting officer 
should have clarified any perceived ambiguity in the warranty 
terms--we sustain Monroe's protest.[2]  Since it is clear, based on 
the record developed in conjunction with this protest, that Monroe 
intended to offer 90 days of free maintenance to the government and 
that its overall price, less the cost of 3 months maintenance, is 
lower than Edgemont's, we recommend that the VA enter into an 
agreement for lease of the copiers from Monroe rather than Edgemont.  
We also recommend that the agency pay the protester the costs of 
filing and pursuing its protest.  See Bid Protest Regulations, 4 
C.F.R.  sec.  21.8(d)(1) (1996).  In accordance with section 21.8(f)(1) of 
our Regulations, Monroe's certified claim for such costs, detailing 
the time expended and the costs incurred, must be submitted directly 
to the agency within 90 days after receipt of this decision.

The protest is sustained.

Comptroller General
of the United States

1. The General Services Administration (GSA) solicitation pursuant to 
which the Federal Supply Schedule (FSS) contracts for photocopying 
equipment were awarded, as well as the portions of both Monroe's and 
Sharp's FSS photocopier contracts pertaining to LTOPs, provide that 
"the [g]overnment agrees to maintain the leased equipment while under 
LTOP at the current prices, terms and conditions covered under 
[special item number] 51-57 [the full service maintenance portion of 
the FSS contract]."

2. Monroe also argued, as an alternative basis of protest, that the 
contracting officer should have included maintenance costs for only 
the first year of the LTOP in calculating vendors' overall prices, 
since second and third year maintenance costs are subject to change 
pursuant to an Economic Price Adjustment clause contained in the 
master solicitation.  Since we sustain Monroe's protest on the 
previously discussed ground, we need not address this argument.