B-162173, SEP. 29, 1967

B-162173, SEP. 29, 1967

BIDS - UNBALANCED DECISION TO SECY. OF THE NAVY CONCERNING PROTEST OF FRED A. ARNOLD, INC., AGAINST AWARD TO THE CARDAN COMPANY, INC. FOR CONSTRUCTION OF WOMEN'S BARRACKS AT CAMP PENDLETON BY THE NAVAL FACILITIES ENGINEERING COMMAND. A BIDDER FOR CONSTRUCTION OF BUILDINGS SUBJECT TO A STATUTORY COST LIMITATION WHO, WHEN REQUESTED TO REVISE ITS COST BREAKDOWN FOR A WAIVER OF THE STATUTORY LIMITATION, FURNISHED ESTIMATES ESTABLISHING THAT ITS ORIGINAL BID WAS MATERIALLY UNBALANCED ALTHOUGH LUMP SUM BID PRICE WAS NOT AFFECTED SHOULD NOT HAVE BEEN GIVEN OPPORTUNITY AFTER BID OPENING TO BALANCE ITS COSTS. HOWEVER, SINCE A WAIVER OF THE STATUTORY LIMITATION UNDER ASPR 1-109 FOR A DEVIATION FROM ASPR 18-110 (C) HAS BEEN GRANTED NO OBJECTION TO AWARD WILL BE MADE.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER (0211C/RP: LAC) OF SEPTEMBER 7, 1967, FROM THE NAVAL FACILITIES ENGINEERING COMMAND, REPORTING ON THE PROTEST OF FRED A. ARNOLD, INC., AGAINST AWARDS TO THE CARDAN COMPANY, INC., UNDER INVITATIONS FOR BIDS N62473-67-B-0200 AND N62473-67-B 0057.

INVITATION -0200 SOLICITED BIDS FOR THE CONSTRUCTION OF AN ENLISTED WOMEN'S BARRACKS AT CAMP PENDLETON, CALIFORNIA. SECTION 1A.18 OF THE SPECIFICATIONS PROVIDED THAT THE COST LIMIT FOR THE BARRACKS WORK TO THE 5 -FOOT LINE WAS $340,800. SECTION 1A.18.1 STATED: "BIDDERS ARE REQUIRED TO BREAK DOWN THEIR BID TO INDICATE THE AMOUNT BID FOR EACH BUILDING SUBJECT TO COST LIMITATIONS. THE BREAKDOWN SHALL BE SUBMITTED WITH THE BID ON APPENDIX -A,- ATTACHED TO THE BID FORM (STANDARD FORM 21), FOR THIS PURPOSE. BIDS AND/OR PROPOSALS WHICH DO NOT CONTAIN PRICES FOR THE COST LIMITATION ITEMS (APPENDIX -A-) WILL BE CONSIDERED NONRESPONSIVE.' APPENDIX "A" PROVIDED SPACES FOR THE BIDDERS TO STATE THE COST TO THE 5- FOOT LINE, THE COST OF ALL OTHER WORK, AND THE TOTAL OF THE TWO COSTS. APPENDIX "A" ALSO CONTAINED A CERTIFICATION AS FOLLOWS: "THE UNDERSIGNED BIDDER HEREBY CERTIFIES THAT EACH PRICE STATED ABOVE INCLUDES AN APPROXIMATE APPORTIONMENT OF ALL ESTIMATED APPLICABLE COSTS, DIRECT AND INDIRECT, AS WELL AS OVERHEAD AND PROFIT. BIDS AND/OR PROPOSALS CONTAINING PRICES WITHIN COST LIMITATIONS, MAY BE REJECTED IF THE BID OR PROPOSAL IS UNBALANCED. AN UNBALANCED BID OR PROPOSALIS ONE WHICH IS BASED ON PRICES SIGNIFICANTLY LESS THAN COST FOR SOME WORK, AND PRICES WHICH ARE OVERSTATED FOR OTHER WORK.'

SEVEN BIDS WERE RECEIVED. THE CARDAN COMPANY, INC. SUBMITTED THE LOWEST TOTAL BID IN AN AMOUNT OF $775,000. THE REMAINING BIDS RANGED FROM $780,821 TO $846,450. ON APPENDIX "A," CARDAN INDICATED THE COST TO THE 5 -FOOT LINE WAS $339,800 AND THE COST OF ALL OTHER WORK WAS $436,000. ARNOLD, THE PROTESTANT, INDICATED THE COST TO THE 5-FOOT LINE WAS $340,500 AND THE COST OF THE OTHER WORK WAS $440,321. FOUR OTHER BIDDERS SHOWED THE COST OF THE WORK TO THE 5-FOOT LINE AS $340,000. ONE BIDDER SHOWED THAT COST AS $741,164 AND THE COST OF THE OTHER WORK AS $72,770. CARDAN WAS REQUESTED TO REVISE ITS PRICE BREAKDOWN TO MORE ACCURATELY STATE THE COSTS TO THE 5-FOOT LINE SO THAT PROCEDURES COULD BE INITIATED TO OBTAIN A WAIVER OF THE STATUTORY LIMITATION AS PROVIDED IN SECTION 609 OF PUBLIC LAW 89-568, 80 STAT. 756, AND ARMED SERVICES PROCUREMENT REGULATION (ASPR) 18-110. PARAGRAPH (C) OF THE LATTER ASPR SECTION PROVIDES THAT A BID CONTAINING PRICES THAT EXCEED APPLICABLE STATUTORY COST LIMITATIONS SHALL BE REJECTED UNLESS FOR CONSTRUCTION OF, AMONG OTHERS, BARRACKS FOR ENLISTED PERSONNEL AND THE DETERMINATION OF THE SECRETARY OF DEFENSE HAS BEEN OBTAINED THAT THE LIMITATIONS ON CONSTRUCTION COSTS IN THE ANNUAL MILITARY CONSTRUCTION ACT SHALL NOT APPLY AS IMPRACTICAL. CARDAN FURNISHED A REVISED BREAKDOWN SHOWING THE WORK TO THE 5-FOOT LINE AS $580,000 AND THE OTHER WORK AS $195,800. THE TOTAL PRICE FOR THE ADVERTISED CONSTRUCTION WORK REMAINED UNCHANGED.

INASMUCH AS CARDAN WAS REQUESTED TO REVISE ITS ORIGINAL COSTS SO THAT A REQUEST WAIVER OF THE STATUTORY LIMITATION COULD BE INITIATED, IT WOULD SEEM TO FOLLOW THAT THE WORK TO THE 5-FOOT LINE COULD NOT BE ACCOMPLISHED WITHIN THE STATUTORY LIMITATION. ALSO, THE REVISED COSTS FURNISHED BY CARDAN ESTABLISH THAT ITS ORIGINAL BID WAS MATERIALLY UNBALANCED AS EVIDENCED BY THE FACT THAT, UPON REVISION, MORE THAN $240,000 WAS ADDED TO THE WORK TO THE 5-FOOT LINE AND DEDUCTED FROM THE OTHER WORK. ALTHOUGH THE CERTIFICATION QUOTED ABOVE PROVIDES THAT UNBALANCED BIDS "MAY" BE REJECTED, ASPR 18-110 (C) SPECIFICALLY PROVIDES THAT A BID WHICH IS MATERIALLY UNBLANCED "SHALL" BE REJECTED. WHILE IT IS STATED IN THE REPORT OF SEPTEMBER 7 THAT THE DISTRIBUTION OF COSTS BETWEEN THE AMOUNTS SHOWN FOR CONSTRUCTION OF THE BARRACKS TO THE 5-FOOT LINE AND ALL THE OTHER WORK IS IN THE NATURE OF AN INTERNAL BREAKDOWN AND DOES NOT AFFECT THE LUMP-SUM BID PRICE NOR THE RELATIVE POSITION OF BIDDERS, THE UNBALANCING INVOLVED IN THE ORIGINAL CARDAN COST BREAKDOWN, APPARENTLY AS WELL AS IN THE BREAKDOWN OF FIVE OTHER BIDDERS, IS THE KIND OF UNBALANCING WHICH THE ASPR SEEKS TO GUARD AGAINST. THE MATERIAL SIGNIFICANCE OF THE PROVISION FOR ALLOCATION OF COSTS BETWEEN WORK UP TO AND BEYOND THE 5-FOOT LINE IS ILLUSTRATED BY THE FACT THAT ASPR 18-110 (B) REQUIRES, AND THE INVITATION INCLUDES, A STATEMENT THAT BIDS MUST SET FORTH ACCURATE INFORMATION AND THAT THE PENALTY FOR FALSE STATEMENTS IN BIDS IS PRESCRIBED IN 18 U.S.C. 1001. FURTHER, THE IMPORTANCE OF THE BREAKDOWN OF COSTS IS STRESSED IN SECTION 1A.18.1 OF THE SPECIFICATIONS, ABOVE, WHICH PROVIDES THAT BIDS WHICH DO NOT CONTAIN PRICES FOR THE COST LIMITATION ITEMS (APPENDIX "A") WILL BE CONSIDERED NONRESPONSIVE. ALTHOUGH THE BIDDERS WERE REQUIRED TO CERTIFY THAT THEIR COSTS IN APPENDIX "A" REPRESENTED AN "APPROXIMATE APPORTIONMENT OF ALL ESTIMATED APPLICABLE COSTS," THEIR ORIGINAL BID COSTS WERE SO UNBALANCED AS TO RAISE A PRESUMPTION THAT SUCH COSTS WERE NOT AS CERTIFIED.

UNDER THE EXISTING REGULATIONS CITED ABOVE, IT DOES NOT APPEAR THAT CARDAN SHOULD HAVE BEEN PROVIDED WITH AN OPPORTUNITY AFTER BID OPENING TO BALANCE ITS COSTS BETWEEN THE WORK TO THE 5-FOOT LINE AND THE OTHER WORK. HOWEVER, IT IS OUR UNDERSTANDING THAT THE SECRETARY OF DEFENSE HAS APPROVED THE REQUESTED WAIVER OF THE STATUTORY LIMITATION AND THAT A REQUEST MADE UNDER ASPR 1-109 FOR A DEVIATION FROM ASPR 18-110 (C) HAS BEEN GRANTED IN THIS CASE. THEREFORE, OUR OFFICE WOULD HAVE NO OBJECTION TO AN AWARD TO CARDAN UNDER THE INVITATION.

THE PROTEST OF ARNOLD WITH RESPECT TO INVITATION -0057 IS CONSIDERED IN A SEPARATE DECISION OF TODAY TO THE PROTESTANT, COPY ENCLOSED FOR YOUR INFORMATION.