B-176325, MAR 1, 1973

B-176325, MAR 1, 1973

BID PROTEST - OPTION OR MULTI-YEAR PROCUREMENT - AGENCY RESPONSE TO BIDDER QUESTIONS - RESPONSIBILITY DECISION AFFIRMING THE PRIOR DENIAL OF A PROTEST ON BEHALF OF SERVICE DISTRIBUTORS, INC., AGAINST THE AWARD OF A CONTRACT TO ANOTHER FIRM UNDER AN IFB ISSUED BY THE DEPARTMENT OF THE ARMY, FORT ORD, CALIF. SINCE THE RIGHTS AND OBLIGATIONS OF THE GOVERNMENT AND THE CONTRACTOR ARE GOVERNED BY THE REGULATIONS APPLICABLE TO OPTIONS, THEIR RESPECTIVE RIGHTS AND OBLIGATIONS ARE NOT THE SAME AS UNDER A MULTI-YEAR PROCUREMENT. THEREFORE, THERE IS NO BASIS FOR CONCLUDING THAT INCLUSION OF THE SECOND AND THIRD YEAR OPTION QUANTITIES IN THE EVALUATION HAS THE EFFECT OF TRANSFORMING THE PROCUREMENT INTO A MULTI YEAR PROCUREMENT. WHILE IT WOULD HAVE BEEN BETTER PROCEDURE FOR THE PROCURING ACTIVITY TO HAVE FORMALLY STATED ITS POSITION IN RESPONSE TO SERVICE DISTRIBUTORS' QUESTIONS, THE FAILURE TO DO SO DOES NOT RENDER THE PROCUREMENT DEFECTIVE SINCE THE INFORMATION WAS INFORMALLY SUPPLIED AND SERVICE DISTRIBUTORS WAS NOT MISLED. ALSO, THE DETERMINATION OF THE RESPONSIBILITY OF A PROSPECTIVE CONTRACTOR IS PRIMARILY A FUNCTION OF THE PROCURING ACTIVITY AND WILL NOT BE CHALLENGED BY GAO UNLESS SHOWN TO BE ARBITRARY, CAPRICIOUS, OR NOT IN GOOD FAITH, 45 COMP. GEN. 742 (1966). THE RECORD HEREIN CLEARLY SUPPORTS THE FINDING OF RESPONSIBILITY.

TO WAHL AND WAHL:

THIS REFERS TO YOUR LETTER OF DECEMBER 29, 1972, REQUESTING RECONSIDERATION OF OUR DECISION, B-176325, DECEMBER 21, 1972, WHICH DENIED THE PROTEST OF SERVICE DISTRIBUTORS, INCORPORATED, AGAINST THE AWARD OF A CONTRACT TO ANOTHER CONCERN UNDER INVITATION FOR BIDS NO. DABF-07-B-0113, ISSUED BY THE DEPARTMENT OF THE ARMY, FORT ORD, CALIFORNIA.

YOUR CONTENTIONS NUMBERED 1, 2 AND 3 IN YOUR LETTER OF DECEMBER 29, HAVE AGAIN RAISED THE QUESTION WHETHER INCLUDING THE SECOND AND THIRD YEAR OPTION QUANTITIES IN THE EVALUATION OF BIDS HAD THE EFFECT OF TRANSFORMING THE PROCUREMENT INTO A MULTI-YEAR PROCUREMENT.

MULTI-YEAR PROCUREMENT IS A METHOD OF CONTRACTING FOR KNOWN REQUIREMENTS IN QUANTITIES AND TOTAL COST NOT IN EXCESS OF PLANNED REQUIREMENTS FOR FIVE YEARS, EVEN THOUGH THE TOTAL FUNDS ULTIMATELY TO BE OBLIGATED ARE NOT AVAILABLE AT THE TIME OF ENTERING INTO THE CONTRACT. SEE ARMED SERVICES PROCUREMENT REGULATION 1-322.1(A). THE REGULATION PROVIDES FOR SOLICITATION OF PRICES BASED EITHER ON AWARD OF THE CURRENT ONE-YEAR PROGRAM QUANTITY ONLY, OR, IN THE ALTERNATIVE, ON THE TOTAL MULTI-YEAR QUANTITIES, WITH AWARD BEING MADE ON WHICHEVER BASIS REFLECTS THE LOWEST PRICE. ALTHOUGH AWARD MAY BE MADE ON A MULTI YEAR BASIS, FUNDS ARE OBLIGATED ONLY FOR THE FIRST YEAR'S QUANTITY AND SUCCEEDING YEARS' QUANTITIES ARE DEPENDENT UPON THE AVAILABILITY OF FUNDS. IF FUNDS FOR THE SUCCEEDING YEARS ARE NOT AVAILABLE, THE CONTRACT IS CANCELED. IN THE LATTER CASE, THE CONTRACTOR IS PROTECTED FROM LOSS BY CONTRACTUAL PROVISIONS ALLOWING REIMBURSEMENT OF UNRECOVERED NONRECURRING COSTS INCLUDED IN THE PRICE OF CANCELED ITEMS.

ON THE OTHER HAND, ASPR 1-1502 DEFINES AN OPTION CLAUSE AS "A PROVISION IN A CONTRACT UNDER WHICH, FOR A SPECIFIED TIME, THE GOVERNMENT MAY ELECT TO PURCHASE ADDITIONAL QUANTITIES ... OR MAY ELECT TO EXTEND THE PERIOD OF PERFORMANCE OF THE CONTRACT." ALTHOUGH THE AWARD OF A CONTRACT CONTAINING AN OPTION PROVISION OBLIGATES THE GOVERNMENT FOR ONLY THE BASIC QUANTITY OR TERM, THE CONTRACTOR IS REQUIRED TO GUARANTEE PRICES FOR A DEFINITE PERIOD OF TIME WITH NO GUARANTEE THAT ORDERS WILL BE PLACED. HOWEVER, UNLIKE A MULTI-YEAR CONTRACTOR, THE OPTION CONTRACTOR IS NOT PROTECTED AGAINST LOSS THROUGH REIMBURSEMENT OF UNRECOVERED, NONRECURRING COSTS INCLUDED IN THE PRICE OF THE UNEXERCISED OPTION QUANTITIES.

IN THE INSTANT CASE, AS NOTED PREVIOUSLY, THE SOLICITATION INCLUDED PROVISIONS PRESCRIBED BY ASPR FOR USE IN CONTRACTS CONTAINING OPTIONS, MAKING IT CLEAR THAT THE OPTION QUANTITIES WOULD BE INCLUDED IN THE EVALUATION BUT AWARD WOULD OBLIGATE THE GOVERNMENT FOR ONLY THE ONE YEAR. SINCE THE RIGHTS AND OBLIGATIONS OF THE GOVERNMENT AND CONTRACTOR ARE GOVERNED BY THE REGULATIONS APPLICABLE TO OPTIONS, THEIR RESPECTIVE RIGHTS AND OBLIGATIONS ARE NOT THE SAME AS UNDER A MULTI YEAR PROCUREMENT. THEREFORE, THERE IS NO BASIS FOR CONCLUDING, AS YOU CONTEND, THAT INCLUSION OF THE SECOND AND THIRD YEAR OPTION QUANTITIES IN THE EVALUATION HAS THE EFFECT OF TRANSFORMING THE PROCUREMENT INTO A MULTI-YEAR PROCUREMENT. THE STATEMENT IN THE PRIOR DECISION THAT IT WAS ASSUMED THAT CAPITAL EXPENDITURES WOULD BE INCLUDED IN THE FIRST YEAR OF THE CONTRACT RELATED TO THE PROCURING ACTIVITY'S JUSTIFICATION FOR INCLUDING THE OPTION QUANTITIES IN THE EVALUATION, SINCE ASPR 1 1504(D)(II) PROVIDES THAT THE OPTION QUANTITY MAY BE INCLUDED IN THE EVALUATION IF IT HAS BEEN DETERMINED THAT REALISTIC COMPETITION OF THE OPTION QUANTITY IS IMPRACTICABLE ONCE THE INITIAL CONTRACT IS AWARDED AND IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO EVALUATE THE OPTION IN ORDER TO PREVENT A "BUY-IN" AND NOT BECAUSE, AS YOU CONTEND, THIS WAS A MULTI-YEAR PROCUREMENT.

YOUR FOURTH CONTENTION IS THAT SERVICE DISTRIBUTORS WAS NOT GIVEN ADEQUATE RESPONSES CONCERNING CERTAIN QUESTIONS ASKED PRIOR TO THE BID OPENING ON JUNE 2 RELATING TO THE AVAILABILITY OF FUNDS FOR THIS PROCUREMENT. THE CONTRACTING OFFICER'S MEMORANDUM OF JUNE 20, 1972, REFERS TO A MEETING ON MAY 18, 1972, BETWEEN THE CONTRACTING OFFICER AND SERVICE DISTRIBUTORS' REPRESENTATIVES AT WHICH TIME CERTAIN MATTERS WERE DISCUSSED. ONE OF THE MATTERS DISCUSSED WAS THE DEFINITION OF THE TERM "AVAILABILITY OF FUNDS" AS USED IN PARAGRAPH C-23 OF THE SOLICITATION. THE CONTRACTING OFFICER'S MEMORANDUM STATES THAT THE "AVAILABILITY OF FUNDS" CLAUSE HAS BEEN EXPLAINED TO SERVICE DISTRIBUTORS' REPRESENTATIVES ON SEVERAL DIFFERENT OCCASIONS AS AN ADMINISTRATIVE DEVICE WHEREBY THE CONTRACTING OFFICER MAY SOLICIT BIDS EVEN THOUGH FUNDS HAVE NOT ACTUALLY BEEN CERTIFIED AS AVAILABLE WHEN THE CONTRACTING OFFICER HAS REASONABLE EXPECTATION THAT FUNDS WILL BE AVAILABLE AS, FOR EXAMPLE, IN THE SITUATION WHERE A SOLICITATION IS ISSUED JUST BEFORE THE END OF A FISCAL YEAR BUT THE CONTRACT WILL NOT BE AWARDED UNTIL THE NEXT FISCAL YEAR, WHICH APPARENTLY WAS THE SITUATION IN THIS CASE. THE CONTRACTING OFFICER'S MEMORANDUM FURTHER STATES THAT ON MAY 18, SERVICE DISTRIBUTORS' REPRESENTATIVES WERE ADVISED THAT NO EQUIPMENT WOULD BE INSTALLED UNTIL FUNDS BECAME AVAILABLE; THAT THE GOVERNMENT WOULD NOT RUN OUT OF FUNDS IN THE MIDDLE OF THE CONTRACT SINCE FUNDS FOR THE ENTIRE CONTRACT AMOUNT WOULD BE OBLIGATED BEFORE BEGINNING PERFORMANCE; AND THAT NOTICE OF THE AVAILABILITY OF FUNDS WOULD BE GIVEN IMMEDIATELY UPON THE CONTRACTING OFFICER'S BEING ADVISED OF SUCH AVAILABILITY. WHILE IT WOULD HAVE BEEN BETTER PROCEDURE FOR THE PROCURING ACTIVITY TO HAVE FORMALLY STATED ITS POSITION IN RESPONSE TO SERVICE DISTRIBUTORS' LETTER OF MAY 19, WE DO NOT BELIEVE THAT THE FAILURE TO DO SO WAS SUCH THAT THE PROCUREMENT WAS DEFECTIVE SINCE IT APPEARS THAT THE INFORMATION WAS INFORMALLY FURNISHED AND SERVICE DISTRIBUTORS WAS NOT MISLED.

YOUR FIFTH CONTENTION AGAIN RAISES THE QUESTION WHETHER ALLIANCE PROPERTIES, INCORPORATED, IS A RESPONSIBLE PROSPECTIVE CONTRACTOR. THIS DETERMINATION IS PRIMARILY THE FUNCTION OF THE PROCURING ACTIVITY AND WILL NOT BE QUESTIONED BY OUR OFFICE UNLESS SHOWN TO BE ARBITRARY, CAPRICIOUS OR NOT IN GOOD FAITH. 45 COMP. GEN. 742, 748 (1966). IN OUR DECISION OF DECEMBER 21 WE INDICATED THAT ALLIANCE PROPERTIES' CAPABILITIES TO PERFORM A CONTRACT FOR THIS PROCUREMENT WERE INVESTIGATED BY THE DEFENSE CONTRACT ADMINISTRATIVE SERVICES REGION (DCASR), SAN FRANCISCO AND ALLIANCE PROPERTIES WAS FOUND ACCEPTABLE IN ALL CATAGORIES SOME OF WHICH WE SUMMARIZED FROM THE DCASR REPORT. WE THEREFORE CONCLUDED THAT THE CONTRACTING OFFICER'S DETERMINATION WAS ADEQUATELY SUPPORTED BY THE RECORD AND COULD NOT BE QUESTIONED BY OUR OFFICE.

YOU STATE THAT NO REFERENCE WAS MADE TO ALLIANCE'S POOR PERFORMANCE AT THE NAVAL BASE AT TREASURE ISLAND; THAT IT IS INCONCEIVABLE THAT ALLIANCE HAS "EXPERIENCED MEN READY TO PERFORM" AND "PERSONNEL STANDING BY WAITING TO PERFORM"; AND THAT THE STATEMENT WITH RESPECT TO ALLIANCE'S PAST PERFORMANCE PROVES THAT IT HAS NOT HAD ENOUGH EXPERIENCE WITH WASHERS AND DRYERS TO PERFORM. ALTHOUGH THE DCASR REPORT DOES NOT INCLUDE INFORMATION CONCERNING THE CONTRACT YOU REFER TO, IT DOES LIST 3 CURRENT AND 3 PAST CONTRACTS FOR SIMILAR SERVICES AT GOVERNMENT INSTALLATIONS WHERE ALLIANCE'S RECORD OF PERFORMANCE WAS SATISFACTORY. THE NARRATIVE PORTION OF THE REPORT INCLUDES THE FOLLOWING STATEMENT:

"CONTACT WITH SEVERAL PROCUREMENT OFFICERS REVEALED THAT THIS COMPANY MAINTAINS AN ADEQUATE WORK FORCE, SPARE PARTS, EQUIPMENT, ETC., TO PROVIDE ABOVE AVERAGE PERFORMANCE."

WITH REGARD TO PERSONNEL, THE REPORT LISTS 21 SKILLED PRODUCTION EMPLOYEES, ONE ENGINEERING EMPLOYEE AND 5 ADMINISTRATIVE EMPLOYEES. FURTHERMORE, 3 ADDITIONAL EMPLOYEES ARE TO BE HIRED AND A TOTAL OF 5 EMPLOYEES WILL BE DETAILED TO PERFORM THE SUBJECT CONTRACT. AS NOTED PREVIOUSLY, DCASR DETERMINED THAT IN A 14-YEAR PERIOD OF PERFORMANCE AT GOVERNMENT FACILITIES ALLIANCE HAD MAINTAINED OVER 5,000 APPLIANCES, INCLUDING WASHERS AND DRYERS. ALTHOUGH 6 OTHER APPLIANCES ARE INCLUDED IN THIS GROUP AND THE RATION OF WASHERS AND DRYERS IS NOT STATED, WE SEE NO BASIS FOR CONCLUDING THAT THIS PROVES ALLIANCE'S INABILITY TO PERFORM. THE CONTRARY, WE BELIEVE THAT THIS EXPERIENCE, ALONG WITH THE OTHER INFORMATION DEVELOPED IN THE REPORT REASONABLY SUPPORTS THE AFFIRMATIVE DETERMINATION OF RESPONSIBILITY.

THEREFORE, WE AFFIRM OUR DECISION OF DECEMBER 21, 1972.