B-168626, JUL 30, 1970, 50 COMP GEN 67

B-168626, JUL 30, 1970, 50 COMP GEN 67

CONTRACTS - NEGOTIATION - COMPETITION - DISCUSSION WITH ALL OFFERORS REQUIREMENT - PRICE SOLE EVALUATION FACTOR IN THE NEGOTIATION OF A PROCUREMENT, THE EXCEPTION IN 10 U.S.C. 2304(G) TO CONDUCTING DISCUSSIONS WITH ALL RESPONSIBLE OFFERORS WITHIN A COMPETITIVE RANGE MAY NOT BE INVOKED BY A CONTRACTING OFFICER TO MAKE AN AWARD TO OTHER THAN THE LOW RESPONSIBLE OFFEROR WHERE PRICE IS THE SOLE EVALUATION FACTOR AND, THEREFORE, AN AWARD TO THE SECOND LOW OFFEROR, THE INCUMBENT CONTRACTOR, WITHOUT OBTAINING A CERTIFICATE OF COMPETENCY (COC) ON THE LOW OFFEROR, A SMALL BUSINESS CONCERN CONSIDERED NONRESPONSIBLE ON FACTORS RELATING TO CAPACITY AND CREDIT WAS ILLEGAL AND THE AWARD SHOULD BE CANCELED. NO AWARD SHOULD HAVE BEEN MADE UNLESS THE SMALL BUSINESS ADMINISTRATION REFUSED TO ISSUE A COC OR DID NOT RESPOND TO THE REFERRAL WITHIN 15 DAYS, OR IN THE ALTERNATIVE IF THE LOW PROPOSAL WAS UNACCEPTABLE WITHOUT CLARIFICATION, DISCUSSIONS SHOULD HAVE BEEN CONDUCTED WITH ALL OFFERORS WITHIN A COMPETITIVE RANGE.

TO THE SECRETARY OF THE ARMY, JULY 30, 1970:

THIS CONCERNS THE PROTEST BY PACIFIC SHIPWRIGHTS, INCORPORATED, AGAINST THE CONTRACT AWARD TO STAN FLOWERS COMPANY, INCORPORATED, UNDER REQUEST FOR PROPOSALS NO. DAHC23-70-R-0003 ISSUED BY THE OAKLAND ARMY TERMINAL FOR SHIPWRIGHT CARPENTRY SERVICES. THIS PROTEST WAS THE SUBJECT OF A REPORT DATED JUNE 5, 1970, FROM YOUR DEPUTY FOR PROCUREMENT.

REQUEST FOR PROPOSALS NO. DAHC23-70-R-0003 WAS ISSUED ON DECEMBER 18, 1969. FOUR OFFERS WERE RECEIVED AND OPENED ON JANUARY 27, 1970, PACIFIC SUBMITTED THE LOW PROPOSAL. FLOWERS, THE INCUMBENT CONTRACTOR, SUBMITTED THE SECOND LOW PROPOSAL. THE CONTRACTING OFFICER ACTING UPON THE RECOMMENDATION OF HIS ADVISORY PANEL DETERMINED THAT ONLY THOSE TWO PROPOSALS WERE WITHIN THE COMPETITIVE RANGE FOR CONSIDERATION.

ON FEBRUARY 2, 1970, A PRE-AWARD SURVEY BY THE DEFENSE CONTRACT ADMINISTRATION SERVICE (DCAS) WAS REQUESTED ON PACIFIC. THE CONTRACTING OFFICER ALSO REQUESTED THE DEFENSE CONTRACTS AUDIT AGENCY (DCAA) TO REVIEW PACIFIC'S ACCOUNTING SYSTEM. BASED ON THE NEGATIVE RECOMMENDATIONS OF DCAS AND DCAA, THE CONTRACTING OFFICER CONSIDERED PACIFIC TO BE NONRESPONSIBLE FOR THIS PROCUREMENT. SINCE PACIFIC, A SMALL BUSINESS CONCERN, WAS DETERMINED NONRESPONSIBLE FOR REASONS RELATING TO CAPACITY AND CREDIT, THE CONTRACTING OFFICER REFERRED THAT FIRM TO THE SMALL BUSINESS ADMINISTRATION (SBA) ON FEBRUARY 13, 1970, FOR THE POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY (COC). AS THE RESULT OF CONVERSATIONS ON FEBRUARY 19, 1970, WITH HIS LEGAL ADVISOR AND AN SBA OFFICIAL, THE CONTRACTING OFFICER DECIDED HIS REFERRAL OF PACIFIC FOR A COC WAS PREMATURE INASMUCH AS NEGOTIATIONS WOULD PROBABLY BE REQUIRED WITH THAT OFFEROR CONCERNING TWO ITEMS, ACID BOXES AND TRANSPORTATION, PRIOR TO MAKING AN ACTUAL AWARD. THE REQUEST FOR A COC WAS WITHDRAWN ON FEBRUARY 25, 1970.

ON FEBRUARY 24, 1970, THE ADVISORY PANEL WAS CONVENED AND AWARD WAS RECOMMENDED TO FLOWERS AS THE LOW RESPONSIVE RESPONSIBLE OFFEROR. THAT RECOMMENDATION WAS BASED ON THE CONTRACTING OFFICER'S DETERMINATION THAT PACIFIC WAS NOT RESPONSIBLE AND A PRICE ANALYSIS WHICH CONCLUDED THE OFFER BY FLOWERS WAS FAIR AND REASONABLE. SUBSEQUENT TO THE ADJOURNMENT OF THAT MEETING A VOLUNTARY PRICE REDUCTION BY LETTER DATED FEBRUARY 20, 1970, WAS RECEIVED FROM FLOWERS. THE ADVISORY PANEL WAS RECONVENED AND AWARD WAS AGAIN RECOMMENDED TO FLOWERS AT THE REDUCED PRICE SINCE ACCEPTANCE OF THE PRICE REDUCTION WAS CONSIDERED IN THE BEST INTEREST OF THE GOVERNMENT. THE CONTRACTING OFFICER ADOPTED THAT RECOMMENDATION AND AWARD WAS MADE TO FLOWERS ON FEBRUARY 26, 1970.

WE BELIEVE THE CONTRACTING OFFICER ACTED ERRONEOUSLY AND THAT THE AWARD TO FLOWERS WAS IMPROPER. THIS PROCUREMENT WAS NEGOTIATED PURSUANT TO THE AUTHORITY CONTAINED IN 10 U.S.C. 2304(A)(10). THAT EXCEPTION TO FORMAL ADVERTISING WAS INVOKED BY THE CONTRACTING OFFICER BECAUSE OF THE SMALL NUMBER OF SHIPWRIGHT CARPENTRY FIRMS IN THE AREA. THE REQUEST FOR PROPOSALS DID NOT REQUIRE OR PROVIDE FOR SUBMISSION OF TECHNICAL PROPOSALS INVOLVING NOVEL OR DIFFERENT APPROACHES. RATHER OFFERORS WERE REQUIRED ONLY TO SUBMIT ITEM AND TOTAL PRICES. FURTHER, THE REQUEST FOR PROPOSALS ADVISED ON PAGE A-1, EVALUATION PAGE:

SOLICITATIONS WILL BE EVALUATED ON THE BASIS OF THE SUM OF THE TOTAL OF THOSE SCHEDULES FOR WHICH PRICE OFFERS ARE MADE AS FOLLOWS:

SIMILAR ADVICE WAS CONTAINED ON PAGE 9 OF THE REQUEST FOR PROPOSALS AND ON PAGE 2 OF THE "DISSEMINATION OF CLARIFICATIONS AND INTERPRETATIONS TO PROSPECTIVE OFFERORS." THEREFORE, AWARD UNDER THIS PROCUREMENT WAS TO BE BASED ON PRICE ALONE NOT OTHER FACTORS SUCH AS THE TECHNICAL APPROACH OFFERED.

WHEN NEGOTIATING A CONTRACT OVER $2,500 PURSUANT TO ONE OF THE PERMISSIBLE EXCEPTIONS CONTAINED IN 10 U.S.C. 2304, SUBSECTION (G) OF THAT STATUTE REQUIRES DISCUSSIONS TO BE HELD WITH ALL RESPONSIBLE OFFERORS WITHIN A COMPETITIVE RANGE. AN EXCEPTION TO THAT MANDATORY REQUIREMENT IS PROVIDED WHERE BASED UPON ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE THE ACCEPTANCE OF AN INITIAL PROPOSAL WOULD RESULT IN A FAIR AND REASONABLE PRICE AND OFFERORS HAVE BEEN NOTIFIED IN THE REQUEST FOR PROPOSALS THAT SUCH AN AWARD MAY BE MADE. HOWEVER, THAT EXCEPTION DOES NOT PERMIT THE CONTRACTING OFFICER TO MAKE AWARD WHERE PRICE IS THE SOLE EVALUATION FACTOR TO OTHER THAN THE LOW RESPONSIBLE OFFEROR. CF. 48 COMP. GEN. 663, 668 (1969). THEREFORE, AWARD SHOULD HAVE BEEN MADE TO FLOWERS PRIOR TO DISCUSSIONS ONLY IF PACIFIC WAS FOUND NOT TO BE A RESPONSIBLE OFFEROR.

IN PROCUREMENTS, ADVERTISED OR NEGOTIATED, A CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY IS NOT FINAL INSOFAR AS THE CAPACITY OR CREDIT OF A SMALL BUSINESS IS CONCERNED. AS A RESULT THE CONTRACTING OFFICER'S INITIAL UNFAVORABLE DETERMINATION DOES NOT WARRANT IGNORING A MORE FAVORABLE PROPOSAL OF A SMALL BUSINESS CONCERN EITHER IN MAKING AWARD WITHOUT DISCUSSIONS OR WHEN ACTUALLY CONDUCTING DISCUSSIONS. ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-705.4(C) REQUIRES THE CONTRACTING OFFICER TO REFER A SMALL BUSINESS CONCERN TO THE SBA FOR THE POSSIBLE ISSUANCE OF A COC WHERE THE PROPOSAL OF THAT CONCERN IS TO BE REJECTED BECAUSE THE CONCERN HAS BEEN DETERMINED TO BE NONRESPONSIBLE AS TO CAPACITY OR CREDIT. THE NEGATIVE DCAS SURVEY AND THE DCAA REPORT UPON WHICH THE CONTRACTING OFFICER RELIED IN MAKING HIS DETERMINATION WERE BASED ON FACTORS DIRECTLY RELATED TO PACIFIC'S CAPACITY AND CREDIT TO PERFORM THE CONTRACT. UNDER THESE CIRCUMSTANCES THE CONTRACTING OFFICER WAS REQUIRED TO REFER PACIFIC TO THE SBA FOR A COC UNLESS AWARD COULD NOT BE DELAYED. THE RECORD BEFORE THIS OFFICE CONTAINS NO JUSTIFICATION FOR FINDING AWARD MUST HAVE BEEN MADE WITHOUT DELAY AND IN ANY CASE SUCH A DETERMINATION WITH THE REQUISITE DOCUMENTATION AND APPROVAL BY THE CHIEF OF THE PURCHASING OFFICE WAS NOT IN FACT MADE. SEE ASPR 1-705.4(C)(IV). THEREFORE, NO AWARD SHOULD HAVE BEEN MADE IN THIS INSTANCE UNLESS THE SBA REFUSED TO ISSUE PACIFIC A COC OR UNTIL 15 DAYS HAD EXPIRED AFTER THE REFERRAL TO SBA. IF A COC HAD BEEN ISSUED ANY CONTRACT WAS REQUIRED TO BE AWARDED TO PACIFIC. SEE 15 U.S.C. 637(B)(7) AND ASPR 1-705.4(A).

IN THE ALTERNATIVE IF THE CONTRACTING OFFICER BELIEVED PACIFIC'S PROPOSAL WAS UNACCEPTABLE WITHOUT CLARIFICATION, THEN DISCUSSIONS SHOULD HAVE BEEN CONDUCTED WITH ALL OFFERORS WITHIN THE COMPETITIVE RANGE. ASPR 3-805.1(A) (V) STATES THAT THE CONTRACTING OFFICER SHALL NOT MAKE AWARD WITHOUT FURTHER DISCUSSION WHERE THERE IS SOME QUESTION AS TO THE PRICING OR TECHNICAL ASPECTS OF A PROPOSAL. AFTER CONDUCTING SUCH DISCUSSIONS AWARD SHOULD HAVE BEEN MADE TO THE LOW RESPONSIBLE OFFEROR MEETING THE GOVERNMENT'S NEEDS. IN THE EVENT THAT THE LOW OFFEROR WAS STILL A SMALL BUSINESS CONCERN AND DETERMINED TO BE NONRESPONSIBLE BY THE CONTRACTING OFFICER FOR REASONS OF CAPACITY OR CREDIT, THEN AT THAT POINT THE MATTER SHOULD ALSO HAVE BEEN REFERRED TO THE SBA FOR A COC. CF. 48 COMP. GEN. 536, 541 (1969).

IN ANY EVENT AWARD TO FLOWERS WOULD BE LEGAL ONLY IF EITHER THE SBA REFUSED TO ISSUE A COC TO PACIFIC OR FAILED TO ACT WITHIN 15 DAYS, OR IF AFTER HOLDING DISCUSSIONS FLOWER'S PROPOSAL WAS LOWER THAN PACIFIC'S. SINCE THE CONTRACTING OFFICER'S FAILURE TO FOLLOW THE PROPER PROCEDURES WAS DIRECTLY CONTRARY TO THE REGULATIONS IMPLEMENTING THE SMALL BUSINESS ACT OF 1953 AND THE ARMED SERVICES PROCUREMENT ACT OF 1948, WE BELIEVE THE AWARD TO FLOWERS WAS ILLEGAL. ACCORDINGLY, WE CONCUR IN YOUR PROPOSED ACTION TO CANCEL THE CONTRACT.