Skip to main content

B-161782, MAR. 25, 1968

B-161782 Mar 25, 1968
Jump To:
Skip to Highlights

Highlights

SECRETARY: REFERENCE IS MADE TO A LETTER DATED JANUARY 31. SEVERAL PROPOSALS WERE RECEIVED. AFTER TECHNICAL EVALUATION WAS COMPLETED. THE CONTRACTING OFFICER CONCLUDED THAT THE MARCH 23 UNITEC REDUCTION WAS AN UNACCEPTABLY LATE MODIFICATION. AWARD WAS MADE TO BENDIX AT A PRICE OF $738. THE AWARD WAS MADE WITHOUT CONDUCTING NEGOTIATIONS WITH ANY OF THE OFFERORS. WE WERE CONCERNED IN OUR DECISION WITH THE CONTRACTING OFFICER'S FAILURE TO CONDUCT NEGOTIATIONS IN VIEW OF THE PRICE REDUCTION OFFERED BY UNITEC. A CONTRACTING OFFICER IS INSTRUCTED TO CONDUCT NEGOTIATIONS WITH ALL OFFERORS SUBMITTING COMPETITIVE PROPOSALS. WAS OFFERED A PRICE AT LEAST 15 PERCENT BELOW THE PRICE HE HAD INTENDED TO ACCEPT.

View Decision

B-161782, MAR. 25, 1968

TO MR. SECRETARY:

REFERENCE IS MADE TO A LETTER DATED JANUARY 31, 1968, FROM THE ASSISTANT SECRETARY OF THE NAVY (INSTALLATIONS AND LOGISTICS) CONCERNING OUR DECISION OF NOVEMBER 21, 1967, B-161782, AND CERTAIN OTHER RELATED MATTERS.

THE DECISION CONCERNED A PROTEST BY UNITEC INDUSTRIES AGAINST AN AWARD TO BENDIX FIELD ENGINEERING CORPORATION (BENDIX) UNDER A NEGOTIATED PROCUREMENT. BRIEFLY, YOUR DEPARTMENT ISSUED AN RFP ON JANUARY 16, 1967, WITH A CLOSING DATE OF MARCH 15, 1967. SEVERAL PROPOSALS WERE RECEIVED, WITH BENDIX AS THE LOW PROPOSER AT A PRICE OF $738,455. BY MARCH 22, 1967, AFTER TECHNICAL EVALUATION WAS COMPLETED, THE CONTRACTING OFFICER TENTATIVELY DECIDED TO MAKE AWARD TO BENDIX. ON MARCH 23, 1967, UNITEC, THE INCUMBENT CONTRACTOR, SUBMITTED AN OFFER REDUCING ITS PRICE FROM $795,397 TO $636,317, OR $102,000 BELOW THE BENDIX PRICE. THE CONTRACTING OFFICER CONCLUDED THAT THE MARCH 23 UNITEC REDUCTION WAS AN UNACCEPTABLY LATE MODIFICATION. ON JUNE 12, 1967, AWARD WAS MADE TO BENDIX AT A PRICE OF $738,455. THE AWARD WAS MADE WITHOUT CONDUCTING NEGOTIATIONS WITH ANY OF THE OFFERORS.

WE WERE CONCERNED IN OUR DECISION WITH THE CONTRACTING OFFICER'S FAILURE TO CONDUCT NEGOTIATIONS IN VIEW OF THE PRICE REDUCTION OFFERED BY UNITEC. UNDER 10 U.S.C. 2304 (G), A CONTRACTING OFFICER IS INSTRUCTED TO CONDUCT NEGOTIATIONS WITH ALL OFFERORS SUBMITTING COMPETITIVE PROPOSALS, UNLESS THE AWARD CAN BE MADE AT A FAIR AND REASONABLE PRICE BASED ON THE SUBMITTED PROPOSALS THEMSELVES. WE QUESTIONED THE CONTRACTING OFFICER'S REFUSAL TO ENTER INTO NEGOTIATIONS WHEN HE HAD THE OPPORTUNITY TO DO SO, AND WAS OFFERED A PRICE AT LEAST 15 PERCENT BELOW THE PRICE HE HAD INTENDED TO ACCEPT. IT SHOULD BE MENTIONED THAT BOTH UNITEC AND BENDIX WERE CONSIDERED COMPETENT TO PERFORM THE CONTRACT WORK, SO THAT PRICE ALONE WAS THE DETERMINING FACTOR FOR THE AWARD. IT SEEMED TO US THAT THE CONTRACTING OFFICER HAD FAILED TO COMPLY WITH THE SPIRIT OF THE STATUTE CALLING FOR NEGOTIATIONS (ALTHOUGH WE RECOGNIZED THAT THE AWARD TO BENDIX WAS LEGAL).

OUR DECISION IN TURN HAS CAUSED SOME CONCERN WITHIN YOUR DEPARTMENT REGARDING THE ADEQUACY OF THE ASPR COVERAGE OF LATE PROPOSALS AND LATE MODIFICATIONS TO PROPOSALS. WE ARE ADVISED THAT THE CURRENT ASPR COVERAGE DEVELOPED AS A RESULT OF A PROTEST MADE IN 1962 AGAINST THE REFUSAL TO IGNORE A LATE PROPOSED REDUCTION IN PRICE FOR THE CONVERSION OF A VICTORY SHIP. THE REDUCTION WAS CONSIDERABLE, AND THE SECRETARY OF DEFENSE EXPLAINED THAT A REBIDDING WAS APPROPRIATE IN VIEW OF THE SIGNIFICANT PRICE REDUCTION OFFERED. HE STATED, HOWEVER, THAT THE PROCEDURES FOR HANDLING LATE PROPOSALS IN COMPETITIVE NEGOTIATIONS SHOULD BE CHANGED. CONCLUDED AS FOLLOWS IN A LETTER DATED JUNE 7, 1962:

"* * * I HAVE CONCLUDED THAT A PROCEDURE WHICH NORMALLY RESULTS IN THE REJECTION OF SUCH BIDS, WHILE IT OCCASIONALLY MAY RESULT IN A HIGHER PRICE TO THE GOVERNMENT, WILL, ON THE AVERAGE, REDUCE OUR COSTS BY ASSURING THAT WE RECEIVE THE BEST PRICES IN THE ORIGINAL BIDDING. IN ADDITION, IT WILL PRESERVE THE INTEGRITY OF THE COMPETITIVE SYSTEM AND AVOID CHICANERY OR THE APPEARANCE THEREOF. ACCORDINGLY, I HAVE DIRECTED THAT OUR PROCUREMENT REGULATIONS BE CHANGED IMMEDIATELY TO ASSURE THAT LATE BIDS IN COMPETITIVE NEGOTIATIONS ARE REJECTED. THE ONLY EXCEPTIONS WILL BE WHERE THE CONSIDERATION OF THE LATE BID WOULD BE OF EXTREME IMPORTANCE TO THE GOVERNMENT, AS WHERE IT OFFERED SOME IMPORTANT TECHNICAL OR SCIENTIFIC BREAK-THROUGH. SUCH EXCEPTIONS WILL REQUIRE APPROVAL AT SECRETARIAL LEVELS WITHIN THE DEPARTMENTS.'

THE CURRENT ASPR COVERAGE PROVIDES THAT LATE PROPOSALS AND MODIFICATIONS THERETO SHALL NOT BE CONSIDERED, EXCEPT WHEN:

"* * * CONSIDERATION OF A LATE PROPOSAL IS OF EXTREME IMPORTANCE TO THE GOVERNMENT, AS FOR EXAMPLE, WHERE IT OFFERS SOME IMPORTANT TECHNICAL OR SCIENTIFIC BREAK-THROUGH; * * *.' (ASPR 3-506). IN LIGHT OF THE UNITEC CASE, YOUR DEPARTMENT FEELS THAT SOME CLARIFICATION OF THE ASPR LANGUAGE MAY BE DESIRABLE. SPECIFICALLY, THE SUGGESTION IS THAT THE ASPR PROVISION BE AMENDED TO STATE THAT WHERE LATE PROPOSALS OR LATE MODIFICATIONS APPEAR TO OFFER EXTRAORDINARY MONETARY SAVINGS, THE MATTER SHALL BE REFERRED TO THE SERVICE SECRETARIES OR THE DIRECTOR OF DSA, AS APPROPRIATE, WHO WILL DETERMINE WHETHER THEY SHOULD OR SHOULD NOT BE CONSIDERED.

WE HAVE DISCUSSED THIS PROPOSAL WITH MEMBERS OF YOUR DEPARTMENT, BUT NO DEFINITE CONCLUSIONS WERE REACHED. WE TAKE THIS OPPORTUNITY TO FURTHER EXPRESS OUR THOUGHTS ON THE MATTER.

THE LATE BID CONCEPT WHICH IMPLIES THE ESTABLISHMENT OF DEFINITE CUT OFF POINTS IS AN ESSENTIAL INGREDIENT OF THE FORMALLY ADVERTISED PROCUREMENT. WE HAVE NO PROBLEM IN TRANSLATING THE LATENESS" OR "CUT OFF POINT" CONCEPT TO THE NEGOTIATING AREA IN APPROPRIATE CIRCUMSTANCES. WE ARE IN AGREEMENT WITH THE VIEWS EXPRESSED BY THE SECRETARY OF DEFENSE IN HIS LETTER OF JUNE 7, 1962. FOR THE REASONS STATED BY THE SECRETARY, WE AGREE THAT LATE PROPOSALS AND LATE MODIFICATIONS TO PROPOSALS ORDINARILY SHOULD BE REJECTED IN COMPETITIVE NEGOTIATIONS.

OUR DIFFICULTY, HOWEVER, IS WITH THE CURRENT REGULATION WHICH CALLS FOR THE REJECTION OF LATE PROPOSALS AND LATE MODIFICATIONS TO PROPOSALS AND, AT THE SAME TIME, CALLS FOR THE CONDUCT OF NEGOTIATIONS, WITH CERTAIN PERMISSIVE EXCEPTIONS. THERE IS AN UNCERTAINTY IN THE PRESENT PROCEDURE WHICH GIVES RISE TO THE SITUATION ENCOUNTERED IN THE UNITEC CASE. OFFERORS CANNOT BE SURE WHETHER AN UNSOLICITED PRICE REDUCTION WILL BE IGNORED ON THE BASIS OF "LATENESS" OR CONSIDERED UNDER THE PROVISION PERMITTING NEGOTIATIONS. IT IS NATURAL UNDER THESE CIRCUMSTANCES TO EXPECT SOME OFFERORS TO SUBMIT LATE MODIFICATIONS, AND EVEN CONTRACTING OFFICERS MAY NOT ALWAYS BE CERTAIN AS TO WHEN NEGOTIATIONS SHOULD OR MAY BE CONDUCTED.

WE AGREE WITH THE CHANGE YOU SUGGEST; HOWEVER, WE PROPOSE AN ADDITIONAL CHANGE. IN COMPETITIVE NEGOTIATED PROCUREMENTS, WE SUGGEST A PROVISION SUBSTANTIALLY AS FOLLOWS MIGHT BE USED:

"AWARD SELECTION:

"A. AWARD WILL BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED IF IT IS DETERMINED THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WILL RESULT IN A FAIR AND REASONABLE PRICE, UNLESS NEGOTIATIONS ARE NECESSITATED BY FACTORS OTHER THAN PRICE, OR UNLESS AN EXCEPTION IS AUTHORIZED IN ACCORDANCE WITH ASPR 3-506. HENCE, PROPOSALS SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS WHICH THE OFFEROR CAN PROPOSE TO THE GOVERNMENT.

"B. IN THE EVENT THAT THE GOVERNMENT DOES NOT MAKE AN AWARD WITHOUT FURTHER DISCUSSION, WRITTEN OR ORAL NEGOTIATIONS WILL BE CONDUCTED ONLY WITH RESPONSIBLE OFFERORS WHO HAVE SUBMITTED PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED. A CLOSING DATE FOR FURTHER NEGOTIATIONS WITH SELECTED OFFERORS WILL BE ESTABLISHED, AND ANY REVISION TO A PROPOSAL RECEIVED AFTER SUCH DATE WILL BE TREATED AS A LATE PROPOSAL IN ACCORDANCE WITH THE -LATE PROPOSALS' PROVISION OF THIS RFP. AFTER THE SPECIFIED DATE FOR CLOSING OF NEGOTIATIONS, NO INFORMATION OTHER THAN NOTICE OF UNACCEPTABILITY OF PROPOSAL (IF APPLICABLE) WILL BE FURNISHED TO ANY OFFEROR UNTIL AWARD HAS BEEN MADE.' ALSO ASPR 3-805 COULD BE REVISED SOMEWHAT AS FOLLOWS: ,ASPR 3-805. SELECTION OF OFFERORS FOR NEGOTIATION AND AWARD. "3 805.1 GENERAL "/A) * * *

"/A) (V) * * * (PROVIDED, HOWEVER, THAT IN SUCH PROCUREMENTS, THE REQUEST FOR PROPOSALS SHALL NOTIFY ALL OFFERORS THAT AWARD WILL BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED IF IT IS DETERMINED THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WILL RESULT IN A FAIR AND REASONABLE PRICE, UNLESS NEGOTIATIONS ARE NECESSITATED BY FACTORS OTHER THAN PRICE, OR UNLESS AN EXCEPTION IS AUTHORIZED IN ACCORDANCE WITH ASPR 3-506 (LATE PROPOSALS AND MODIFICATION); AND HENCE, PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT.)"

THUS WE ARE PROPOSING REALLY ONE CHANGE IN THE CURRENT PROCEDURE. ALTHOUGH THE STATUTE (2304/G) ( DOES STATE THAT RFP'S SHOULD ADVISE "OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION" , WE BELIEVE A MORE DEFINITE STATEMENT OF INTENTION IS NEEDED IN SOLICITATIONS IN ORDER TO REMOVE SOME OF THE UNCERTAINTY CONTAINED IN THE CURRENT PROCEDURE AND INCIDENTALLY TO BETTER ASSURE THE SUBMISSION OF INITIAL PROPOSALS ON THE MOST FAVORABLE TERMS. OF COURSE, WE WOULD BE GLAD TO DISCUSS THE MATTER FURTHER WITH YOUR DEPARTMENT, IF DESIRED.

ENCLOSED IS A COPY OF OUR LETTER DATED FEBRUARY 19, 1968, TO TECHNER, RUBIN AND SHAPIRO WITH REGARD TO OUR DECISION OF NOVEMBER 21, 1967.

GAO Contacts

Office of Public Affairs