B-167259, B-167003, B-167846, AUG 19, 1970, 50 COMP GEN 110

B-167259, B-167003, B-167846, AUG 19, 1970, 50 COMP GEN 110

CONTRACTS - NEGOTIATION - EVALUATION FACTORS - FIREFIGHTING CONTRACTS - FACTORS OTHER THAN PRICE THE AUTHORITY IN SECTION 1-3.805 OF THE FEDERAL PROCUREMENT REGULATIONS TO NEGOTIATE RESEARCH AND DEVELOPMENT, OR COST REIMBURSABLE, OR SPECIAL SERVICE CONTRACTS WITHOUT PRICE COMPETITION BASED SOLELY ON A DETERMINATION THAT A PARTICULAR CONTRACTOR WOULD FURNISH SERVICES OF A HIGHER QUALITY THAN ANY OTHER CONTRACTOR, DOES NOT COVER THE SELECTION OF AIR TANKER OPERATORS BY THE FOREST SERVICE TO FIGHT FOREST FIRES AS SUCH SERVICE IS NOT WITHIN THE CATEGORIES CONTEMPLATED BY THE REGULATION FOR EXCEPTION TO PRICE COMPETITION, AND THE FAILURE TO INCLUDE PRICE AS A FACTOR OF CONTRACTOR SELECTION VIOLATES THE SPIRIT AND INTENT OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT AND IMPLEMENTING REGULATIONS. ALTHOUGH IT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT TO DISTURB THE CONTRACTS AWARDED AND OPTIONS EXERCISED, PRICE INCLUSION IN FUTURE OFFERS WILL BE REQUIRED. B-157954, DECEMBER 15, 1965, MODIFIED. CONTRACTS - NEGOTIATION - COMPETITION - PRICES WHILE THE RIGID RULES APPLICABLE TO FORMALLY ADVERTISED PROCUREMENTS GENERALLY REQUIRE AWARD TO THE LOWEST (PRICE) RESPONSIVE, RESPONSIBLE BIDDER, THE FLEXIBILITY INHERENT IN THE CONCEPT OF NEGOTIATION PERMITS AN AWARD TO BE MADE TO THE BEST ADVANTAGE OF THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. THEREFORE, THE UTILIZATION IN "COMPETITIVE NEGOTIATION" OF PRICE AS A FACTOR IN THE SELECTION OF A CONTRACTOR WILL NOT ADVERSELY AFFECT THE SELECTION OF A QUALIFIED CONTRACTOR BY THE FOREST SERVICE FOR THE PERFORMANCE OF FIREFIGHTING SERVICES.

TO THE SECRETARY OF AGRICULTURE, AUGUST 19, 1970:

REFERENCE IS MADE TO A REPORT FROM THE DIRECTOR, OFFICE OF PLANT AND OPERATIONS, DATED MARCH 10, 1970, SUBMITTED IN RESPONSE TO OUR LETTER OF FEBRUARY 5, 1970, CONCERNING A POSSIBLE DEFECT IN THE CURRENT FOREST SERVICE NEGOTIATION PROCEDURES BECAUSE OF THE ABSENCE OF ANY CONSIDERATION OF PRICE IN THE SELECTION OF AIR TANKER CONTRACTORS FOR THE VARIOUS NATIONWIDE REGIONS.

THE REPORT STATES THAT DETAILED COST STUDIES PERFORMED BY THE FOREST SERVICE HAVE ASSURED USE OF AIR TANKER OPERATORS AT REASONABLE PRICES FOR PROVIDED SERVICES. HOWEVER, AS THE FOREST SERVICE ACKNOWLEDGES, IN THE SELECTION OF AN OPERATOR FOR A CONTRACT, PRICE IS NOT A CONSIDERATION. THIS SITUATION IS AMPLY DEMONSTRATED BY CERTAIN LANGUAGE CONTAINED IN THE REGION 3 STANDARD LETTER REQUEST FOR TECHNICAL PROPOSALS WHICH, AFTER ADMONISHING OFFERORS NOT TO INCLUDE PRICES WHEN SUBMITTING THEIR PROPOSALS, STATES AS FOLLOWS:

*** IF AFTER EVALUATION YOUR FIRM IS DETERMINED TO BE THE BEST QUALIFIED FOR A BASE OR BASES WE WILL THEN ENTER INTO PRICE NEGOTIATION WITH YOU.

THE FOREST SERVICE HAS CONTENDED THAT THE PROCEDURES IN QUESTION ARE IN ACCORDANCE WITH THE FEDERAL PROCUREMENT REGULATIONS (FPR). SPECIFICALLY, RELIANCE IS PLACED UPON THE FIRST SECTION OF FPR 1-3.805 WHICH PROVIDES:

THE PROCEDURES SET FORTH IN THIS SEC 1-3.805-1 ARE GENERALLY APPLICABLE TO NEGOTIATED PROCUREMENT. HOWEVER, THEY ARE NOT APPLICABLE WHERE THEIR USE WOULD BE INAPPROPRIATE, AS MAY BE THE CASE, FOR EXAMPLE, WHEN PROCURING RESEARCH AND DEVELOPMENT OR SPECIAL SERVICES (SUCH AS ARCHITECT- ENGINEER SERVICES) OR WHEN COST-REIMBURSEMENT TYPE CONTRACTING IS ANTICIPATED (SEE SEC 1-3.805-2). WHILE THE LOWEST PRICE OR LOWEST COST TO THE GOVERNMENT IS PROPERLY THE DECIDING FACTOR IN SOURCE SELECTION IN MANY INSTANCES, AWARD OF A CONTRACT PROPERLY MAY BE INFLUENCED BY THE PROPOSAL WHICH PROMISES THE GREATEST VALUE TO THE GOVERNMENT IN TERMS OF POSSIBLE PERFORMANCE, ULTIMATE PRODUCIBILITY, GROWTH POTENTIAL, AND OTHER FACTORS.

THE IMPLEMENTATION OF THIS SECTION, BY OPERATION, WOULD OBVIATE, INTER ALIA, THE CONSIDERATION OF PRICE IN THE SELECTION OF A CONTRACTOR.

IN OUR DECISION, B-157954, DECEMBER 15, 1965, WHICH APPROVED THE CURRENT FOREST SERVICE REGULATIONS UNDER REVIEW GOVERNING THE SELECTION OF AIR TANKER OPERATORS, WE SUBJECTED THE THEN PROPOSED REGULATIONS IN PART, TO THE CRITERIA SET FORTH IN FPR 1-3.102. THAT SECTION PROVIDES THAT, DURING THE COURSE OF NEGOTIATIONS, DUE ATTENTION SHOULD BE GIVEN TO LISTED FACTORS INCLUDING "COMPARISON OF PRICES QUOTED *** ."

IN 43 COMP. GEN. 353 (1963), WE HAD OCCASION TO CONSIDER AND RULE ON THE PROPRIETY OF A CIVILIAN AGENCY NEGOTIATING AND AWARDING A CONTRACT FOR THE PROCESSING AND SALE OF SEALSKINS TO AN OFFEROR ASSIGNED THE HIGHEST TECHNICAL RATING BASED ON ITS PROPOSAL WITHOUT THE CONSIDERATION OF PRICE IN THE SELECTION OF A CONTRACTOR FOR AWARD. ALTHOUGH WE RECOGNIZE THE DIFFERENCE BETWEEN THE PROCESSING AND SALE OF SEALSKINS AS OPPOSED TO THE SELECTION OF AN OPERATOR TO SUPPRESS FIRES WHICH MAY DESTROY VALUABLE GOVERNMENT FORESTS, THE METHOD OF EVALUATION AND AWARD WAS SIMILAR TO THE CURRENT PROCEDURES USED BY THE FOREST SERVICE TO SELECT THE "BEST QUALIFIED" AIR TANKER OPERATORS. WE STATED IN THE CITED DECISION THAT FPR REQUIRED PRICE COMPETITION IN THE PROCUREMENT OF SERVICES AND FOR THE CONSIDERATION OF OFFERED PRICES IN DETERMINING WHETHER A CONTRACT AWARD TO A PARTICULAR CONTRACTOR WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT. WE CONCLUDED THAT THE SOLICITATION AND CONSIDERATION OF COMPETITIVE PRICES WERE MATERIAL REQUIREMENTS IN SUCH PROCUREMENTS TO BE COMPLIED WITH IN ORDER TO ESTABLISH A VALID CONTRACT AWARD.

IN REACHING THIS CONCLUSION, WE REFERRED TO AND DISCUSSED PERTINENT FPR PROVISIONS, INCLUDING THE PREDECESSORS TO THE ABOVE-QUOTED FPR 1 3.102 AND FPR 1-3.805. WE REVIEWED THE LEGISLATIVE HISTORY PRECEDING THE PASSAGE OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, NOW CODIFIED AT 10 U.S.C. 2304 ET SEQ., SINCE THE LEGISLATIVE HISTORY OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, 40 U.S.C. 471 ET SEQ., WHICH FPR IMPLEMENTS, INDICATED AN INTENTION TO EXTEND THE SAME PROCUREMENT PRINCIPLES OF THE MILITARY DEPARTMENTS TO THE CIVILIAN AGENCIES. IN CONCLUSION, WE CONSTRUED THE HISTORY AS PROHIBITING THE NEGOTIATION OF CONTRACTS WITHOUT PRICE COMPETITION BASED SOLELY ON A DETERMINATION THAT, AS HERE, A PARTICULAR PROSPECTIVE CONTRACTOR WOULD FURNISH SERVICES OF A HIGHER QUALITY THAN ANY OTHER PROSPECTIVE CONTRACTOR.

THE COURT OF CLAIMS IN SCHOENBROD V UNITED STATES, 187 CT. CL. 627, 410 F. 2D 400 (1969), REACHED A CONCLUSION IN CONSONANCE WITH OUR HOLDING IN 43 COMP. GEN. 353, SUPRA, INVOLVING THE SAME PROCUREMENT.

THE FOREST SERVICE POSITION IS THAT THE REQUIREMENT FOR PROPOSALS IN THE SELECTION OF AIR TANKER OPERATORS TO INCLUDE PRICE DOES NOT APPLY SINCE CONSIDERATION OF PRICE AS A FACTOR WOULD NOT BE APPROPRIATE. FPR 1-3.805- 1 IS CITED IN SUPPORT OF THAT POSITION. CLEARLY, THE SERVICES HERE INVOLVED CANNOT BE CHARACTERIZED AS RESEARCH AND DEVELOPMENT. ALSO, THE RESULTING CONTRACTS ARE NOT OF THE COST-REIMBURSEMENT TYPE. THE ONLY REMAINING EXCEPTION TO THE STATED PROCEDURES PROVIDED BY FPR 1 3.805 APPLIES TO SPECIAL SERVICES, SUCH AS ARCHITECT-ENGINEERING SERVICES. HOWEVER, WE DO NOT BELIEVE THAT THE CONTRACTS HERE IN QUESTION PROPERLY SHOULD BE VIEWED AS BEING COVERED BY THAT EXCEPTION. IN ANY EVENT, OUR OFFICE HAS EXPRESSED THE VIEW THAT THE SELECTION OF ARCHITECT-ENGINEER SERVICES ON THE BASIS OF TECHNICAL QUALIFICATION ALONE, DOES NOT PERMIT THE PRICE COMPETITION CONTEMPLATED AND REQUIRED BY 10 U.S.C. 2304(G). COMP. GEN. 556 (1966). SEE 46 COMP. GEN. 191 (1966) AND 47 ID. 336 (1967), WHEREIN WE EXPRESSED THE SAME VIEW WITH REGARD TO RESEARCH AND DEVELOPMENT AND COST-REIMBURSEMENT PROCUREMENTS. ALTHOUGH 46 COMP. GEN. 556, SUPRA, REVIEWED PROVISIONS OF 10 U.S.C. 2304(G) WHICH GOVERNS PROCUREMENT BY THE ARMED SERVICES UNDER THE IMPLEMENTING ARMED SERVICES PROCUREMENT REGULATION, FOR THE REASONS STATED ABOVE, WE REACH A SIMILAR CONCLUSION WITH REGARD TO PROCUREMENTS BY THE CIVILIAN AGENCIES OF THE GOVERNMENT UNDER 40 U.S.C. 471 ET SEQ., AND THE IMPLEMENTING FPR.

ALSO, CONGRESSIONAL POLICY AND INTENT IN THIS GENERAL AREA RECENTLY HAS BEEN CRYSTALLIZED BY THE PASSAGE OF PUBLIC LAW 90-500, CODIFIED IN 10 U.S.C. 2304(G), WHICH REQUIRES THAT PROPOSALS SOLICITED IN NEGOTIATED PROCUREMENTS INCLUDE PRICE.

THEREFORE, WE MUST CONCLUDE THAT THE FAILURE OF THE CURRENT FOREST SERVICE REGULATIONS TO REQUIRE THAT OFFERS SOLICITED INCLUDE PRICE, TO BE UTILIZED AS A FACTOR IN THE SELECTION OF AIR TANKER OPERATORS, VIOLATES THE SPIRIT AND INTENT OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT AND IMPLEMENTING FPR. IN VIEW OF THE IMPENDING FIRE SEASON, WE DO NOT BELIEVE THAT IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO DISTURB THE CONTRACT AWARDS AND OPTIONS EXERCISED FOR THE 1970 FIRE SEASON. SEE 45 COMP. GEN. 71 (1965) AND 47 ID. 448 (1968). HOWEVER, OPTIONS FOR THE 1971 FIRE SEASON SHOULD NOT BE EXERCISED. SEE 48 COMP. GEN. 593 (1969). CURRENT FOREST SERVICE REGULATIONS, NOW BEING REVISED, SHOULD BE SUPPLEMENTED TO PROVIDE FOR PRICE CONSIDERATION CONSISTENT WITH THIS DECISION COMMENCING WITH THE 1971 FIRE SEASON.

IN ACCORDANCE WITH OUR REGULATIONS CODIFIED AT 4 CFR 20, WE INVITED COMMENTS WITH RESPECT TO THE POSSIBLE NONEXERCISE OF THE 1971 OPTIONS FROM THE 22 AIR TANKER OPERATORS PERFORMING UNDER CURRENT FOREST SERVICE CONTRACTS, AND THE NATIONAL AIR TANKERS ASSOCIATION, WHICH REPRESENTS 19 OF THOSE OPERATORS. WE HAVE RECEIVED AND CAREFULLY CONSIDERED COMMENTS RECEIVED FROM 14 OF THE OPERATORS, AND A BRIEF SUBMITTED BY THE ASSOCIATION'S GENERAL COUNSEL. ALL BUT ONE OF THE COMMENTS RECEIVED FAVORED THE CONTINUED MAINTENANCE OF THE CURRENT FOREST SERVICE NEGOTIATION PROCEDURES WHICH DO NOT UTILIZE COMPETITIVE PRICING IN THE SELECTION OF AIR TANKER CONTRACTORS.

MANY OF THESE COMMENTS EXPRESSED THE FEAR, AS DID THE FOREST SERVICE THAT, IN EFFECT THE INCLUSION OF PRICE IN PROPOSALS WOULD CAUSE A RETURN TO FORMAL ADVERTISING WHICH WOULD ENGENDER THE UNDESIRABLE TYPE OF COMPETITION THAT WAS ONE OF THE REASONS FOR THE ADOPTION OF THE CURRENT FOREST SERVICE REGULATIONS. IT IS NOT OUR INTENTION TO REQUIRE A RETURN TO THE STRICT PROCEDURES OF FORMAL ADVERTISING. SEE THE LAST SENTENCE OF FPR 1-3.805-1, SUPRA. IN THIS CONNECTION, WE HAVE CONSISTENTLY HELD THAT ALL FACTORS DEEMED ESSENTIAL TO THE ACCOMPLISHMENT OF A NEGOTIATED PROCUREMENT SHOULD BE TAKEN INTO CONSIDERATION IN EFFECTING THE AWARDS OF CONTRACTS. SEE 40 COMP. GEN. 508 (1961).

MOREOVER, WE HAVE NEVER REQUIRED THAT THE AWARD OF A CONTRACT BE MADE TO THE LOWEST PRICED OFFEROR UNDER A NEGOTIATED PROCUREMENT WITHOUT REGARD TO OTHER APPROPRIATE FACTORS. SEE B-167374, OCTOBER 6, 1969, AND CASES CITED THEREIN; B-164715, OCTOBER 24, 1968, AND CASES CITED THEREIN. FOR FURTHER CLARIFICATION OF OUR POSITION IN THIS REGARD, WE QUOTE FROM OUR LETTER B- 152306, SEPTEMBER 15, 1967, IN RESPONSE TO A SIMILAR ALLEGATION THAT THE UTILIZATION OF PRICE AS A FACTOR IN THE SELECTION OF A CONTRACTOR UNDER A NEGOTIATED CONTRACT WOULD NECESSITATE A RETURN TO FORMAL ADVERTISING:

THE "COMPETITIVE NEGOTIATION" CONTEMPLATED BY PUBLIC LAW 87-653 (10 U.S.C. 2304(G)) IS CLEARLY DISTINGUISHABLE FROM "COMPETITIVE BIDDING" OR PRICE COMPETITION UNDER THE FORMAL ADVERTISING FOR BIDS STATUTES. WHILE THE RIGID RULES APPLICABLE TO FORMALLY ADVERTISED PROCUREMENTS GENERALLY REQUIRE AWARD TO THE LOWEST (PRICE) RESPONSIVE, RESPONSIBLE BIDDER, THE FLEXIBILITY INHERENT IN THE CONCEPT OF NEGOTIATION PERMITS AN AWARD TO BE MADE TO THE BEST ADVANTAGE OF THE GOVERNMENT, "PRICE AND OTHER FACTORS CONSIDERED." NEGOTIATION PERMITS, AND INDEED REQUIRES, THE CONTRACTING OFFICIALS OF THE GOVERNMENT TO CONSIDER THESE "OTHER FACTORS" OF THE PROCUREMENT, WHICH, IN A PROPER CASE, MAY RESULT IN AN AWARD TO ONE OFFEROR AS OPPOSED TO ANOTHER LESS QUALIFIED OFFEROR SUBMITTING A LOWER PRICE. YOU SUGGEST THAT "ONCE COMPETITIVE PRICE FIGURES HAVE BEEN SUBMITTED, THEY ALMOST ALWAYS DOMINATE ALL OTHER CONSIDERATIONS." HOWEVER, THE AWARD OF AN ARCHITECT-ENGINEER CONTRACT MAY AND PROPERLY SHOULD BE INFLUENCED BY A PROPOSAL WHICH PROMISES THE GREATEST VALUE TO THE GOVERNMENT IN TERMS OF POSSIBLE PERFORMANCE, ULTIMATE PRODUCTIBILITY AND OTHER FACTORS, RATHER THAN THE PROPOSAL OFFERING THE LOWEST PRICE OR PROBABLE COST AND FIXED FEE. WE BELIEVE THAT THE CONTRACTING OFFICIALS ARE AS CONCERNED ABOUT SECURING QUALITY SERVICES AS ARE THE ARCHITECT- ENGINEERS AND THAT THE EXERCISE OF SKILL AND MATURE JUDGMENT IN NEGOTIATING CONTRACTS WILL PRECLUDE THE AWARD OF CONTRACTS ON THE BASIS OF PRICE ALONE TO THE ULTIMATE DISADVANTAGE OF THE GOVERNMENT.

ALTHOUGH WE CAN APPRECIATE THE CURRENT CONTRACTORS' CLAIMS THAT THEIR RESPECTIVE BUSINESS POSITIONS WILL BE ADVERSELY AFFECTED IF THE 1971 OPTIONS ARE NOT EXERCISED, THE CONTRACTS INVOLVED DO NOT PROVIDE FOR AUTOMATIC RENEWAL OF THE OPTIONS. THEY PROVIDE THAT RENEWAL IS PERMISSIVE AND REQUIRES THE AGREEMENT OF THE GOVERNMENT. ALSO, THE CURRENT AIR TANKER CONTRACTORS WILL HAVE THE OPPORTUNITY TO COMPETE FOR THE AWARD OF CONTRACTS FOR THE 1971 FIRE SEASON AND FUTURE FIRE SEASONS UNDER THE PROPOSED REVISED REGULATIONS WHICH SHOULD REQUIRE THAT PRICE BE INCLUDED IN ALL PROPOSAL SUBMISSION FOR THE AWARD OF AIR TANKER SERVICE CONTRACTS. OUR DECISION B-157954, SUPRA, IS AMPLIFIED IN CONSONANCE WITH THIS DECISION.