B-178212, FEB 7, 1974, 53 COMP GEN 564

B-178212, FEB 7, 1974, 53 COMP GEN 564

CONTRACTS - NEGOTIATION - PRICES - DISCLOSURE SINCE THE QUESTION OF THE PROPRIETY OF THE CANCELLATION OF A REQUEST FOR PROPOSALS (RFP) AND THE SUBSEQUENT SOLICITATION OF AN INVITATION FOR BIDS (IFB) OF PLASTIC WEATHERSHIELDS IS NOT CONTINGENT UPON WHETHER OR NOT CHANGES IN SPECIFICATIONS WERE SUBSTANTIAL BUT UPON THE DISCOVERY OF A PRICE LEAK OF THE OFFER THAT WAS LOW AT THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS PRIOR TO BEGINNING THE SECOND ROUND OF NEGOTIATIONS, THE CANCELLATION OF THE RFP AND THE RESOLICITATION BY IFB WAS APPROPRIATE. CONTRACTS - PROTESTS - TIMELINESS - SOLICITATION IMPROPRIETIES THE DETERMINATION OF THE COMPTROLLER GENERAL IN 53 COMP. GEN. 139 THAT THE CIRCUMSTANCES SURROUNDING A PRICE LEAK, THE REOPENING OF NEGOTIATIONS, THE CANCELLATION OF THE REQUEST FOR PROPOSALS AND RESOLICITATION BY AN INVITATION FOR BIDS (IFB) WERE SIGNIFICANT TO PROCUREMENT PRACTICES AND THE PROTEST THEREFORE WAS FOR CONSIDERATION PURSUANT TO SECTION 20.2(B) OF THE INTERIM BID PROTEST PROCEDURES AND STANDARDS ALTHOUGH NOT TIMELY FILED, DOES NOT PRECLUDE THE PRESENT DETERMINATION THAT THE CONTENTION RAISED IN REQUEST FOR RECONSIDERATION THAT THE NAVY FAILED TO AMEND THE IFB TO INCLUDE A SPECIFICATION CHANGE ALLEGEDLY KNOWN TO IT IS UNTIMELY PURSUANT TO SECTION 20.2(A) OF THE PROCEDURES. CONTRACTS - NEGOTIATION - REOPENING - EXCEPTIONS IN OFFER UNNOTICED ALTHOUGH THE PROCURING ACTIVITY SHOULD HAVE KNOWN OF THE EXCEPTIONS TAKEN IN THE PROTESTER'S PROPOSAL PRIOR TO THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS AND SHOULD HAVE DISCUSSED SUCH EXCEPTIONS WITH THE PROTESTER PRIOR TO ITS SUBMISSION OF A BEST AND FINAL OFFER, SINCE DISCOVERY OF THE EXCEPTIONS TAKEN OCCURRED SUBSEQUENT TO THE SUBMISSION OF BEST AND FINAL OFFERS, THE PROCURING ACTIVITY HAD NO ALTERNATIVE BUT TO INSTITUTE A SECOND ROUND OF NEGOTIATIONS, AND THE FAILURE TO DISCOVER AND DISCUSS THE EXCEPTIONS IS NOT A SUFFICIENT BASIS TO REVERSE THE HOLDING IN 53 COMP. GEN. 139.

IN THE MATTER OF SWEDLOW, INCORPORATED, FEBRUARY 7, 1974:

ON SEPTEMBER 5, 1973, COUNSEL FOR SWEDLOW, INC. (SWEDLOW) REQUESTED RECONSIDERATION OF COMPTROLLER GENERAL DECISION OF AUGUST 31, 1973, 53 COMP. GEN. 139.

THE RELEVANT FACTS AS SET FORTH IN THE ABOVE-REFERENCED DECISION ARE AS FOLLOWS: BY LETTER DATED MAY 17, 1973, SWEDLOW PROTESTED AGAINST THE AWARD OF A CONTRACT TO ANY OTHER BIDDER UNDER INVITATION FOR BIDS (IFB) N00197- 73-B-0215, ISSUED BY THE NAVAL ORDNANCE STATION, LOUISVILLE, KENTUCKY (NOSL), ON FEBRUARY 22, 1973. IT IS SWEDLOW'S CONTENTION THAT A CONTRACT SHOULD HAVE BEEN AWARDED TO IT UNDER REQUEST FOR PROPOSALS (RFP) N00197-73 -R-0018, PREVIOUSLY ISSUED BY THE SAME AGENCY ON NOVEMBER 3, 1972.

THE RFP COVERED THE FURNISHING OF 140 GLASS REINFORCED PLASTIC WEATHERSHIELDS ON A MULTIYEAR BASIS. THE USE OF NEGOTIATION WAS JUSTIFIED ON THE BASIS THAT PUBLIC EXIGENCY WOULD NOT PERMIT THE DELAY INCIDENT TO ADVERTISING. (10 U.S.C. 2304(A)(2)). THE CLOSING DATE FOR RECEIPT OF PROPOSALS WAS DECEMBER 16, 1972. EIGHT OFFERS WERE SUBMITTED, THE LOWEST OF WHICH WAS THAT OF CTL-DIXIE, INC. (CTL DIXIE). FOLLOWING RECEIPT OF PROPOSALS, NEGOTIATIONS WERE CONDUCTED WITH ALL OFFERORS, EACH OF WHICH WAS NOTIFIED BY TELEGRAM THAT IT COULD SUBMIT ITS BEST AND FINAL OFFER NO LATER THAN 4 P.M., DECEMBER 28, 1972, AT WHICH TIME NEGOTIATIONS WOULD CLOSE. AT THE CLOSE OF THIS ROUND OF NEGOTIATIONS, SWEDLOW HAD REPLACED CTL-DIXIE AS THE LOW OFFEROR, HAVING MADE A REDUCTION IN ITS UNIT PRICE FOR THE MULTIYEAR ITEMS FROM $10,930 TO $9,767.

AS A RESULT OF THESE NEGOTIATIONS, THE GOVERNMENT WAS PREPARED TO MAKE AN AWARD TO SWEDLOW. HOWEVER, A PREAWARD REVIEW OF THE PROPOSED CONTRACT REVEALED THAT THE WRONG DEFECTIVE PRICING CLAUSES HAD BEEN SPECIFIED IN THE RFP. ALSO, IT WAS QUESTIONED AS TO WHETHER SWEDLOW HAD, IN FACT, TAKEN SEVERAL EXCEPTIONS TO THE TERMS AND CONDITIONS OF THE RFP OR IF IT HAD MERELY "REQUESTED" SUCH CHANGES. NEITHER OF THESE DISCREPANCIES HAD BEEN CORRECTED DURING NEGOTIATIONS. THEREFORE, NOSL DETERMINED THAT THE SOLICITATION SHOULD BE AMENDED TO INSERT THE CORRECT CLAUSES, AND ON JANUARY 9, 1973, NEGOTIATIONS WERE OPENED FOR A SECOND TIME, BEST AND FINAL OFFERS BEING REQUESTED NO LATER THAN 4 P.M. ON JANUARY 17, 1973.

CONCERNED ABOUT ENTERING A SECOND ROUND OF NEGOTIATIONS, A REPRESENTATIVE FROM SWEDLOW CONTACTED COUNSEL FOR NOSL. THE BASIS FOR ITS CONCERN WAS THE ALLEGATION THAT AN EMPLOYEE OF NOSL HAD INFORMED SWEDLOW'S CLOSEST COMPETITOR, CTL-DIXIE, THAT SWEDLOW WAS THE FORMER LOW OFFEROR AND THAT MOST LIKELY SWEDLOW'S PRICE ON THE RFP HAD BEEN LEAKED TO THE COMPETITION. UPON INVESTIGATION BY NOSL, THESE ALLEGATIONS WERE BORNE OUT. FURTHERMORE, IT WAS DISCOVERED DURING THE COURSE OF THE INVESTIGATION THAT CERTAIN DRAWINGS AND SPECIFICATIONS HAD BEEN SUBSTANTIALLY REVISED BY THE REQUIRING ACTIVITY. IN LIGHT OF ALL OF THESE CIRCUMSTANCES, THE CONTRACTING OFFICER MADE THE DETERMINATION TO CANCEL THE SECOND ROUND OF NEGOTIATIONS AND TO REPROCURE THE SHIELDS AT A LATER DATE. ALL OFFERORS WERE ADVISED OF THIS DETERMINATION BY TELEGRAM DATED JANUARY 11, 1973. NONE OF THE OFFERORS PROTESTED THE DECISION TO CANCEL AT THAT TIME.

ON FEBRUARY 22, 1973, THE REQUIREMENT FOR THE SHIELDS WAS RESOLICITED UNDER IFB N00197-73-B-0215. THE SOLICITATION CONTAINED REVISED DRAWINGS AND SPECIFICATIONS. EIGHT BIDS WERE SUBMITTED UNDER THE IFB, THE TWO LOW OF WHICH (FOR THE MULTIYEAR ITEMS) WERE AT IDENTICAL PRICES AND BOTH BELOW THE BID OF SWEDLOW.

THE DAY AFTER BID OPENING, MARCH 16, 1973, SWEDLOW FILED A FORMAL PROTEST WITH OUR OFFICE PROTESTING AGAINST AWARD OF A CONTRACT UNDER THE IFB AND AGAINST ALL OF THE ACTIONS TAKEN BY NOSL AFTER THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS ON DECEMBER 28, 1972. IT IS SWEDLOW'S CONTENTION THAT IT IS ENTITLED TO AN AWARD UNDER THE INITIAL RFP.

PURSUANT TO SECTION 20.9 OF THE INTERIM BID PROTEST PROCEDURES AND STANDARDS, 4 CFR PART 20, COUNSEL FOR SWEDLOW REQUESTED A CONFERENCE ON THE PROTEST. ON AUGUST 8, 1973, A CONFERENCE CONCERNING THE TIMELINESS OF THE PROTEST WAS HELD WITH ATTORNEYS REPRESENTING SWEDLOW AND BRUNSWICK CORP., AND REPRESENTATIVES OF NOSL AND OUR OFFICE. IN ADDITION, ON AUGUST 23, 1973, A CONFERENCE CONCERNING THE MERITS OF THE PROTEST WAS HELD WITH ATTORNEYS REPRESENTING SWEDLOW AND BRUNSWICK AND REPRESENTATIVES OF SWEDLOW, ALTAIR ENTERPRISES, INC., THE SMALL BUSINESS ADMINISTRATION (SBA), NOSL AND OUR OFFICE.

BY DECISION DATED AUGUST 31, 1973, OUR OFFICE DENIED SWEDLOW'S PROTEST ON THE BASIS THAT THE CONTRACTING OFFICER WAS JUSTIFIED IN NOT AWARDING A CONTRACT TO SWEDLOW UNDER THE RFP.

COUNSEL HAS PREDICATED HIS REQUEST FOR RECONSIDERATION UPON THE FOLLOWING: FIRST, HE CONTENDS THAT THE ABOVE-REFERENCED DECISION RELIED HEAVILY UPON CHANGES IN SPECIFICATIONS AS JUSTIFYING SOLICITATION BY IFB AND THAT AT THE CONFERENCE HELD AT THE GENERAL ACCOUNTING OFFICE ON AUGUST 23, 1973, SWEDLOW DEMONSTRATED THAT THE CHANGES WERE INSIGNIFICANT. SECOND, COUNSEL CONTENDS THAT THERE WAS A VERY SIGNIFICANT SPECIFICATION CHANGE THAT WAS KNOWN TO THE NAVY BEFORE THE IFB OPENING AND YET THERE WAS NO AMENDMENT TO THE IFB TO INCLUDE THIS SPECIFICATION CHANGE. MAINTAINS THAT THIS POINT WAS RAISED AT THE CONFERENCE ON AUGUST 23, 1973, AND THAT IT WAS NOT CONTESTED. THIRD, COUNSEL ALLEGES AS AN ADDITIONAL BASIS FOR RECONSIDERATION THAT SWEDLOW WAS NOT NOTIFIED THAT ITS FIRST OFFER WAS NONRESPONSIVE BECAUSE OF ALLEGED EXCEPTIONS PRIOR TO MAKING ITS SECOND OFFER. AS A CONSEQUENCE, COUNSEL CONTENDS THAT SWEDLOW WAS LED TO BELIEVE THAT ITS SECOND OFFER WAS RESPONSIVE. AGAIN, COUNSEL HAS STATED THAT THE FOREGOING WAS NOTED AT THE CONFERENCE OF AUGUST 23, 1973, AND NOT REFUTED.

AS STATED ABOVE, THE FIRST CONTENTION RAISED ON BEHALF OF SWEDLOW CONCERNS THE RELIANCE BY THIS OFFICE UPON CHANGES IN SPECIFICATIONS AS JUSTIFICATION FOR CANCELLATION OF THE RFP AND SOLICITATION BY FORMAL ADVERTISING. AS EVIDENCED BY THE TELEGRAM SENT BY NOSL DATED JANUARY 11, 1973, WHICH STATED THAT THE RFP "IS HEREBY CANCELED AS THE RESULT OF THE DRAWINGS AND SPECIFICATIONS BEING REVISED," NOSL DID RELY UPON THE CHANGE IN SPECIFICATIONS AS A BASIS FOR CANCELLATION OF THE RFP. FURTHERMORE, IN THE DECISION OF AUGUST 31, THIS OFFICE EXPRESSED AGREEMENT WITH THE CANCELLATION AND SUBSEQUENT RESOLICITATION BY STATING THAT "FORMAL ADVERTISING BECAME PRACTICABLE WITH THE CHANGES IN THE SPECIFICATIONS." HOWEVER, IT IS PRESENTLY THE POSITION OF THIS OFFICE THAT THE QUESTION OF THE PROPRIETY OF THE CANCELLATION OF THE RFP AND SOLICITATION OF THE IFB IS NOT CONTINGENT UPON WHETHER OR NOT THE CHANGES IN THE SPECIFICATIONS WERE SUBSTANTIAL. IT IS OUR VIEW THAT THE FUNDAMENTAL ISSUE RAISED IS WHETHER UPON LEARNING OF THE PRICE LEAK PRIOR TO BEGINNING THE SECOND ROUND OF NEGOTIATIONS THE ACTIONS OF THE CONTRACTING OFFICER - THE CANCELLATION OF THE RFP AND SOLICITATION OF THE IFB - WERE APPROPRIATE.

WE AFFIRM THE DETERMINATION MADE BY OUR OFFICE IN THE DECISION OF AUGUST 31 THAT THE CONTRACTING OFFICER COULD NOT HAVE MADE AN AWARD UNDER THE RFP TO SWEDLOW AS LOW OFFEROR AFTER LEARNING OF THE PRICE LEAK BECAUSE SWEDLOW'S OFFER WAS UNACCEPTABLE AT THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS. CONSEQUENTLY, IT APPEARS THAT THE CONTRACTING OFFICER AFTER LEARNING OF THE PRICE LEAK HAD THE FOLLOWING OPTIONS: (1) TO CONTINUE THE SECOND ROUND OF NEGOTIATIONS, AFTER ISSUING AN AMENDMENT TO THE SOLICITATION CONTAINING THE REVISED DRAWINGS AND SPECIFICATIONS; (2) TO CANCEL THE RFP AND SUBSEQUENTLY ISSUE A NEW RFP CONTAINING THE REVISED DRAWINGS AND SPECIFICATIONS; OR (3) TO CANCEL THE RFP AND ISSUE AN IFB CONTAINING THE REVISED DRAWINGS AND SPECIFICATIONS. FORMAL ADVERTISING RATHER THAN NEGOTIATION IS THE PREFERRED METHOD OF PROCUREMENT. SINCE THE BASIS FOR THE ORIGINAL DETERMINATION TO NEGOTIATE THE PROCUREMENT OF WEATHERSHIELDS - THAT PUBLIC EXIGENCY WOULD NOT PERMIT DELAY INCIDENT TO FORMAL ADVERTISING - APPEARS NO LONGER TO BE REGARDED BY THE CONTRACTING OFFICER AS JUSTIFIED, THE CANCELLATION OF THE RFP AND ISSUANCE OF THE IFB WAS PROPER.

CONSEQUENTLY, IT IS THE POSITION OF THIS OFFICE THAT THE CANCELLATION OF THE RFP AND THE SUBSEQUENT RESOLICITATION OF WEATHERSHIELDS BY THE IFB, NOTWITHSTANDING THE DELAYS NECESSITATED BY FORMAL ADVERTISING, WAS AN APPROPRIATE REMEDY UNDER THE CIRCUMSTANCES.

WE FIND THAT COUNSEL'S SECOND CONTENTION WHICH CONCERNS THE FAILURE OF THE NAVY TO AMEND THE IFB TO INCLUDE A SPECIFICATION CHANGE ALLEGEDLY KNOWN TO THE NAVY PRIOR TO IFB OPENING IS UNTIMELY. THE INTERIM BID PROTEST PROCEDURES AND STANDARDS, 4 CFR 20.2(A), PROVIDES THAT:

***PROTESTS BASED UPON ALLEGED IMPROPRIETIES IN ANY TYPE OF SOLICITATION WHICH ARE APPARENT PRIOR TO BID OPENING OR THE CLOSING DATE FOR RECEIPT OF PROPOSALS SHALL BE FILED PRIOR TO BID OPENING OR THE CLOSING DATE FOR RECEIPT OF PROPOSALS. ***

SINCE THE ALLEGED FAILURE OF THE NAVY TO AMEND ITS SOLICITATION WAS APPARENT TO SWEDLOW PRIOR TO THE OPENING OF BIDS OF MARCH 15, 1973, THIS ISSUE IS UNTIMELY RAISED.

IN OUR DECISION OF AUGUST 31, WE DETERMINED "THAT THE ISSUE RAISED QUESTIONING THE ACTION TAKEN BY THE CONTRACTING OFFICER UNDER THE CIRCUMSTANCES PREVAILING AT THE CLOSE OF THE FIRST ROUND OF NEGOTATIONS IS ONE OF SIGNIFICANCE TO PROCUREMENT PROCEDURES." CONSEQUENTLY, THIS ISSUE WAS CONSIDERED UNDER SECTION 20.2(B) OF THE INTERIM BID PROTEST PROCEDURES AND STANDARDS WHICH PROVIDES:

THE COMPTROLLER GENERAL, FOR GOOD CAUSE SHOWN, OR WHERE HE DETERMINES THAT A PROTEST RAISES ISSUES SIGNIFICANT TO PROCUREMENT PRACTICES OR PROCEDURES, MAY CONSIDER ANY PROTEST WHICH IS NOT FILED TIMELY.

HOWEVER, THE ABOVE DETERMINATION BY OUR OFFICE OF THE EXISTENCE OF A SIGNIFICANT ISSUE (THE CIRCUMSTANCES SURROUNDING THE PRICE LEAK REOPENING OF NEGOTIATIONS CHANGE FROM RFP TO IFB) DOES NOT PRECLUDE THE PRESENT DETERMINATION THAT THE CONTENTION CONCERNING THE FAILURE OF THE NAVY TO INCLUDE A SPECIFICATION CHANGE IN THE SOLICITATION IS UNTIMELY.

THE FINAL CONTENTION RAISED BY COUNSEL IS THAT SWEDLOW WAS NOT NOTIFIED THAT ITS FIRST OFFER MADE AT THE CLOSE OF RECEIPT OF PROPOSALS (DECEMBER 16, 1972) WAS NOT RESPONSIVE BECAUSE OF THE ALLEGED EXCEPTIONS PRIOR TO MAKING ITS SECOND OFFER AT THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS (DECEMBER 28, 1972). AS A CONSEQUENCE, COUNSEL CONTENDS THAT SWEDLOW WAS LED TO BELIEVE THAT ITS SECOND OFFER WAS RESPONSIVE.

THE EXCEPTION TAKEN BY SWEDLOW IN ITS PROPOSAL MADE ON DECEMBER 16, 1972, WHICH INCLUDED THE SUBSTITUTION OF A 30-DAY AFTER-AWARD OPTION PROVISION FOR THE OPTION PROVIDING FOR EXERCISE 90 DAYS PRIOR TO FINAL DELIVERY CONTAINED IN THE SOLICITATION, SHOULD HAVE BEEN KNOWN TO NOSL PRIOR TO THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS. ARMED SERVICES PROCUREMENT REGULATION 3-805.3(A) PROVIDES:

ALL OFFERORS SELECTED TO PARTICIPATE IN DISCUSSIONS SHALL BE ADVISED OF DEFICIENCIES IN THEIR PROPOSALS AND SHALL BE OFFERED A REASONABLE OPPORTUNITY TO CORRECT OR RESOLVE THE DEFICIENCIES AND TO SUBMIT SUCH PRICE OR COST, TECHNICAL OR OTHER REVISIONS TO THEIR PROPOSALS THAT MAY RESULT FROM THE DISCUSSIONS. A DEFICIENCY IS DEFINED AS THAT PART OF AN OFFEROR'S PROPOSAL WHICH WOULD NOT SATISFY THE GOVERNMENT'S REQUIREMENTS.

IMPLICIT IN THE ABOVE-QUOTED PROVISION IS THE OBLIGATION ON THE PART OF THE PROCURING ACTIVITY TO UNCOVER ALL DEFICIENCIES CONTAINED IN AN OFFER PRIOR TO HOLDING DISCUSSIONS WITH THE OFFEROR. HOWEVER, IT IS APPARENT THAT THESE EXCEPTIONS WERE NOT KNOWN TO NOSL UNTIL SOME TIME SUBSEQUENT TO THE SUBMISSION OF BEST AND FINAL OFFERS ON DECEMBER 28, 1972.

WE ARE IN AGREEMENT WITH COUNSEL FOR SWEDLOW THAT NOSL SHOULD HAVE KNOWN OF THE EXCEPTIONS PRIOR TO THE CLOSE OF THE FIRST ROUND OF NEGOTIATIONS AND SHOULD HAVE DISCUSSED SUCH EXCEPTIONS WITH SWEDLOW PRIOR TO SWEDLOW'S SUBMISSION OF A BEST AND FINAL OFFER. WHILE IT IS UNFORTUNATE THAT THE DISCOVERY DID NOT OCCUR PRIOR TO DECEMBER 28, 1972, THE FACT REMAINS THAT SUCH DISCOVERY OCCURRED SUBSEQUENT TO SWEDLOW'S SUBMISSION OF A BEST AND FINAL OFFER AND NOSL HAD NO ALTERNATIVE AT THAT POINT IN TIME OTHER THAN TO INSTITUTE A SECOND ROUND OF NEGOTIATIONS.

FOR THE REASONS SET FORTH ABOVE, THE DECISION OF AUGUST 31, 1973, 53 COMP. GEN. 139 IS AFFIRMED.