B-155756, MAR. 18, 1965

B-155756, MAR. 18, 1965

TO STORACK CORPORATION:

FURTHER REFERENCE IS MADE TO LETTERS DATED DECEMBER 10, 1964, AND JANUARY 12, 1965, FROM C AND M INDUSTRIAL ASSOCIATES, INC., PROTESTING ON YOUR BEHALF, AGAINST THE ACTIONS TAKEN BY THE GENERAL SERVICES ADMINISTRATION, FEDERAL SUPPLY SERVICE, WASHINGTON, D.C., IN REJECTING ALL BIDS RECEIVED UNDER A SMALL BUSINESS SET-ASIDE INVITATION AND READVERTISING THE GOVERNMENT'S NEEDS UNDER AN INVITATION WHICH DID NOT RESTRICT BIDDING AND AWARD TO SMALL BUSINESS CONCERNS.

UNDER INVITATION NO. FPNTH-J-68459 (TH/-A-10-23-64, ISSUED ON OCTOBER 2, 1964, BIDS WERE SOLICITED FOR SUPPLYING STEEL PALLET STORAGE RACKS DURING THE PERIOD BEGINNING FROM DATE OF AWARD THROUGH JULY 31, 1965. THE PROCUREMENT WAS TOTALLY SET ASIDE FOR SMALL BUSINESS CONCERNS. UNDER SCHEDULE "A" BIDDERS WERE TO QUOTE PRICES FOR FIXED QUANTITIES AND UNDER SCHEDULE "B" BIDDERS WERE TO QUOTE PRICES ON ESTIMATED QUANTITIES. EIGHT BIDS WERE OPENED ON OCTOBER 23, 1964.

IT IS REPORTED THAT BY LETTER DATED OCTOBER 22, 1964, WHICH WAS RECEIVED AFTER THE OPENING OF BIDS, THE STURDI-BILT DIVISION OF UNARCO INDUSTRIES, INC., A LARGE BUSINESS CONCERN, FILED A PROTEST BASED ON THE GROUND THAT THE PROCUREMENT SHOULD NOT HAVE BEEN SET ASIDE EXCLUSIVELY FOR COMPETITION AMONG SMALL BUSINESS CONCERNS. THE CORPORATION ALLEGED THAT THE GOVERNMENT WOULD PAY ALMOST 25 PERCENT MORE IN A SET-ASIDE PROCUREMENT THAN IN ONE INVOLVING UNRESTRICTED ADVERTISING. IN A LETTER DATED NOVEMBER 6, 1964, THE CORPORATION ENUMERATED FOUR CASES IN WHICH IT ALLEGED THAT VERY LOW PRICES HAD BEEN RECEIVED IN PROCURING SIMILAR ITEMS ON AN UNRESTRICTED BASIS. AFTER THE FOUR CASES CITED BY THE CORPORATION WERE ANALYZED BY THE CONTRACTING OFFICE IT WAS FELT THAT PROCUREMENT OF THE STORAGE RACKS ON A TOTAL SMALL BUSINESS SET-ASIDE WOULD RESULT IN THE PAYMENT OF AN UNWARRANTED DIFFERENTIAL OF APPROXIMATELY 33 PERCENT. ACCORDINGLY, IN CONJUNCTION WITH THE SMALL BUSINESS ADMINISTRATION, IT WAS DETERMINED THAT THE SET-ASIDE PROCEDURE WAS NOT WARRANTED IN THE INSTANT CASE. THE RECORD INDICATES THAT THE COMMISSIONER, FEDERAL SUPPLY SERVICE, CONCURRED IN THE ABOVE DETERMINATION.

THE PROCUREMENT WAS READVERTISED WITHOUT THE SMALL BUSINESS SET ASIDE LIMITATION. SEVEN BIDS WERE OPENED ON JANUARY 11, 1965. AFTER EVALUATION OF THE BIDS RECEIVED IT WAS DETERMINED THAT THE BID OF YOUR FIRM WAS THE LOWEST RECEIVED. THE RECORD INDICATES THAT THE BID SUBMITTED BY YOUR FIRM IN RESPONSE TO THE READVERTISED INVITATION WAS SLIGHTLY LOWER THAN THE BID SUBMITTED BY YOU IN RESPONSE TO THE ORIGINAL INVITATION. IT IS REPORTED THAT A CONTRACT FOR FURNISHING THE STORAGE RACKS WAS AWARDED TO YOUR FIRM ON FEBRUARY 17, 1965. HOWEVER, YOUR PROTEST AGAINST THE CANCELLATION AND READVERTISEMENT OF INVITATION NO. FPNTH-J-68459 (TH/-A-10-23-64 WAS NOT WITHDRAWN, AND IS THE SUBJECT OF THIS DECISION.

YOU CONTEND THAT THE REMOVAL OF THE SMALL BUSINESS SET-ASIDE TO ALLOW LARGE BUSINESS FIRMS TO SUBMIT BIDS DID NOT RESULT IN TREMENDOUS SAVINGS TO THE GOVERNMENT. WHILE IT IS TRUE THAT THE RECORD SHOWS THAT THE READVERTISEMENT OF THE PROCUREMENT IN QUESTION RESULTED ONLY IN A SLIGHT SAVINGS TO THE GOVERNMENT, WE ARE OF THE OPINION THAT THE PRIMARY QUESTION FOR CONSIDERATION IS WHETHER UNDER THE CIRCUMSTANCES THE CONTRACTING OFFICER WAS JUSTIFIED IN REJECTING ALL BIDS RECEIVED IN RESPONSE TO THE ORIGINAL INVITATION. THE ORIGINAL INVITATION WAS CANCELED BECAUSE OF A 23 -PERCENT DIFFERENTIAL BETWEEN THE PRICE QUOTED BY THE LOWEST BIDDER (YOUR FIRM) UNDER ORIGINAL INVITATION AND THE HIGHEST PRICE PAID UNDER FOUR MILITARY CONTRACTS FOR FURNISHING THE SAME TYPE OF EQUIPMENT. IT IS REPORTED THAT THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE AGREED WITH THE CONTRACTING OFFICER THAT AN AWARD UNDER THE ORIGINAL INVITATION WOULD HAVE BEEN DETRIMENTAL TO THE PUBLIC INTEREST, AND THAT THE READVERTISEMENT SHOULD BE OPEN TO ALL FIRMS WITHOUT REGARD TO SIZE.

PARAGRAPH 1-1.706-3 (B) OF THE FEDERAL PROCUREMENT REGULATIONS PROVIDES THAT IF THE CONTRACTING OFFICER CONSIDERS THAT PROCUREMENT OF THE SET- ASIDE PORTION FROM A SMALL BUSINESS CONCERN WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G. BECAUSE OF UNREASONABLE PRICE), THE CONTRACTING OFFICER SHALL WITHDRAW A UNILATERAL SET-ASIDE DETERMINATION OR INITIATE THE WITHDRAWAL OF A JOINT SET-ASIDE DETERMINATION BY GIVING TO THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE WRITTEN NOTICE CONTAINING THE REASONS FOR WITHDRAWING A JOINT DETERMINATION.

WE DO NOT CONSIDER THAT THE WITHDRAWAL OF THE SMALL BUSINESS SET ASIDE RELATING TO THIS PROPOSED PROCUREMENT WAS ARBITRARY IN ANY RESPECT, AND WE HAVE RECOGNIZED THE PROPRIETY OF WITHDRAWING SMALL BUSINESS SET-ASIDES IN CIRCUMSTANCES SIMILAR TO THOSE HERE INVOLVED. THUS, IN 37 COMP. GEN. 147, WE DETERMINED THAT THE WITHDRAWAL OF A SMALL BUSINESS SET-ASIDE AFTER OPENING OF BIDS WAS NOT IMPROPER INASMUCH AS THE LOW RESPONSIVE BID WAS APPROXIMATELY 10 PERCENT HIGHER THAN THE PRICE PREVIOUSLY PAID FOR THE SAME SUPPLIES, AND THE SUPPLIER HAD SUBMITTED A LOW BID WHICH COULD NOT BE ACCEPTED BECAUSE IT WAS RECEIVED LATE AND BECAUSE THE SUPPLIER NO LONGER QUALIFIED AS A SMALL BUSINESS CONCERN.

YOU HAVE SUGGESTED THAT IT WAS UNFAIR TO YOUR CORPORATION TO READVERTISE FOR BID AFTER YOUR BID PRICE UNDER THE ORIGINAL INVITATION WAS DISCLOSED. IT IS A SERIOUS MATTER TO CANCEL AN INVITATION FOR BIDS AFTER EACH COMPETITOR HAS LEARNED HIS COMPETITOR'S PRICE. HOWEVER, IT IS OUR OPINION THAT SUCH ACTION PROPERLY MAY BE TAKEN WHERE, AS HERE, THERE EXISTS A REASONABLE BASIS FOR CONCLUDING THAT CANCELLATION WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT. CANCELLATION FOR SUCH REASON IS SPECIFICALLY AUTHORIZED BY STATUTE IN THE CASE OF A FORMALLY ADVERTISED PROCUREMENT AND THE SAME RULE IS CONSISTENTLY APPLIED IN THE CONSIDERATION OF BIDS WHICH HAVE BEEN SOLICITED UNDER THE SMALL BUSINESS SET-ASIDE PROGRAM.

UNDER THE CIRCUMSTANCES, WE FIND NO BASIS TO OBJECT TO THE CANCELLATION OF THE ORIGINAL INVITATION.

IN YOUR LETTER OF JANUARY 12, 1965, YOU STATE---

"IN ANY EVENT AND IRRESPECTIVE TO YOUR DECISION RELATIVE TO THIS PROTEST, WE WISH TO SUPPLEMENT OUR PROTEST WITH A REQUEST FOR YOUR DECISION ON AN ADDITIONAL ITEM AS FOLLOWS. PAGE 9 OF THE READVERTISED INVITATION STATES UNDER SCHEDULE B: "... THE GOVERNMENT DOES NOT GUARANTEE TO ORDER ANY QUANTITIES OTHER THAN PROVIDED IN SCHEDULE "A.'" ON PAGE 4, IN SUMMARY,"METHOD OF AWARD" STATES THAT THE LOW AGGREGATE BID WILL BE DETERMINED BY ADDING THE TOTAL PRICE OF THE FIXED QUANTITIES OF SCHEDULE A TO THE ESTIMATED QUANTITIES OF SCHEDULE B, PLUS FREIGHT TO THREE VARIOUS BASING POINTS. IF THE GOVERNMENT DOES NOT GUARANTEE TO BUY ANY QUANTITIES, THEN HOW CAN SOMETHING WHICH IS NOT GUARANTEED AS A PART OF THE PROCUREMENT BE CONSIDERED IN THE OVERALL EVALUATION OF THE SAID PROCUREMENT? WE CAN UNDERSTAND THE USE OF BASING POINTS AND ESTIMATED QUANTITIES BEING USED IN AN EVALUATION IF A MINIMUM, REPEAT MINIMUM, QUANTITY IS GUARANTEED UNDER THE ESTIMATED ITEM. THIS IS NOT THE CASE. ACCORDING TO THE LANGUAGE OF THE INVITATION, IF GSA DOES NOT BUY ANY OF THE ITEMS UNDER SCHEDULE B, THERE IS NO QUESTION AS TO WHO IS THE LOW BIDDER. THIS IS SIMPLY THE LOWEST TOTAL DOLLAR BID FOR SCHEDULE A.

"IT IS OUR CONTENTION, THEREFORE, THAT, ALTHOUGH THE PRICES OF SCHEDULE B CANNOT BE TOTALLY IGNORED IN THE EVALUATION AND MUST BE IN DIRECT PROPORTION TO THE UNIT PRICES OF SCHEDULE A, THEY CERTAINLY CANNOT BECOME A FACTOR IN DECIDING WHO IS TO RECEIVE THE AWARD FOR SCHEDULE A. HERE, AGAIN, WE MUST REPEAT THAT WE FEEL THAT IT IS CERTAINLY NOT VERY DIFFICULT TO BE A LOW BIDDER WHEN ALL OF THE OTHER BIDDERS' PRICES ARE KNOWN. FEEL THAT IT IS EQUALLY OBVIOUS THAT THERE IS NO SUBSTANTIAL SAVING OF 25 PERCENT (WHICH IS THE FIGURE WE UNDERSTAND HAS BEEN USED TO JUSTIFY REMOVING THE SMALL BUSINESS SET ASIDE), BUT, RATHER THERE IS THE POSSIBILITY THAT NO SAVING EXISTS. IN FACT, RE-PROCUREMENT COSTS WILL, UNDOUBTEDLY, FAR EXCEED ANY SO-CALLED SAVING.'

WE ARE OF THE OPINION THAT THE ACTION OF THE CONTRACTING OFFICE IN GROUPING SCHEDULES "A" (FIXED QUANTITIES) AND "B" (ESTIMATED QUANTITIES) TOGETHER FOR THE PURPOSE OF MAKING ONE AWARD WAS PROPER NOTWITHSTANDING THE FACT THAT NO QUANTITIES WERE GUARANTEED UNDER SCHEDULE "B.' BELIEVE THAT THE USE OF SCHEDULE "B" FOR BID EVALUATION SERVED THE INTERESTS OF BOTH THE GOVERNMENT AND THE BIDDERS. IN REGARD TO THE VALIDITY OF SCHEDULE "B," IT IS WELL ESTABLISHED THERE NEED BE NO MINIMUM GUARANTEES, AND THAT AN AGREEMENT TO PROCURE ALL OF AN AGENCY'S REQUIREMENTS, WITHOUT MINIMUM GUARANTEES, CONSTITUTES ADEQUATE CONSIDERATION. SHADER CONTRACTORS, INC. V. UNITED STATES, 276 F.2D 1, 149 CT.CL. 535 (1960). THIS BEING TRUE, IT APPEARS CLEAR THAT A CONTRACT WHICH NOT ONLY OBLIGATES THE GOVERNMENT TO ORDER ALL OF ITS REQUIREMENTS BUT ALSO TO ORDER A SPECIFIED MINIMUM IS ALSO VALID.