B-227162, Sep 25, 1987, 66 Comp.Gen. 680

B-227162, Sep 25, 1987, 66 Comp.Gen. 680

Procurement - Competitive Negotiation - Partial contract awards - Propriety

DIGEST

Stic-Adhesive Products Company, Inc.:

Stic-Adhesive Products Company, Inc. protests the proposed method of award for items 1 through 10 of request for proposals (RFP) No. 10PR XXS- 4245, issued by the General Services Administration (GSA) for nonflaming enamel. The RFP provides for the award of parallel contracts to the two low offerors on each of the 10 items. Stic Adhesive objects to the use of parallel contracting, which it claims is intended to prevent it from receiving award of the entire requirement for certain items, and to the use of negotiated procedures rather than sealed bidding. Stic-Adhesive also claims the costs of filing and pursuing its protest. We deny the protest and the claim for costs.

Items 1 through 10 of the RFP contemplate the award of parallel requirements contracts for delivery of three colors of nonflaming enamel to several locations. The contracts are to meet the needs of federal agencies using GSA as a supply source for the period of July 1, 1987, or date of award, to June 30, 1988. The Navy is apparently the primary user of the nonflaming enamel, which is applied to the interior walls of ships. According to GSA, nonflaming enamel is considered critical to the safety of shipboard personnel in case of fire since it does not contribute to spread of the fire.

The solicitation provides for award on an item by item basis. The low responsive responsible offeror for an item will be awarded 60 percent of the government's requirements, and the second low responsive responsible offeror will be awarded the remaining 40 percent. The RFP requires that each successful offeror possess the production capacity to supply the total estimated requirements, and the government reserves the right to award the total requirements to the low offeror if the second low offeror's price is not determined to be fair and reasonable or if only one offer is received. The RFP also provides that orders will be placed with the secondary contractor in the event that the primary contractor defaults on individual orders or the entire contract.

Stic-Adhesive objects to the concept of parallel contracting, arguing that it is not in the government's best interest to procure from a source other than the lowest priced, responsive responsible offeror. Stic- Adhesive further argues that prospective contractors will offer higher prices in response to a solicitation under which they might receive award of 40 percent of the government's requirements than they would in response to a solicitation for 100 percent of the government's requirements.

The contracting agency is primarily responsible for determining the contracting method which will best accommodate its needs, and we will not disturb such a determination unless it is shown to be unreasonable, International Security Technology, Inc., B-215029, Jan. 2, 1985, 85-1 CPD Sec. 6. Here, as discussed below, the contracting officer determined that any potential increases in prices resulting from the parallel awards would be outweighed by the benefits of obtaining more than one contract source, and Stic-Adhesive has not shown that this determination was unreasonable.

The contracting officer determined that prior procurements for the nonflaming enamels had a history of poor supplier performance, and that a lapse in contract coverage could threaten the safety of shipboard personnel and cause delays in shipyard schedules. He concluded that by permitting the sharing of large orders, which might overtax an individual manufacturer's production capacity, parallel contract coverage would virtually eliminate the possibility of shortages of material, and that the benefits of this type of award would therefore outweigh any potential increase in proposed prices. Stic-Adhesive has not demonstrated that the contracting officer's decision to provide for parallel awards in these circumstances was unreasonable.

GSA decided that, in light of the performance problems in recent years, parallel awards were necessary to ensure continuous supply of the enamel, an item considered critical to shipboard safety. Stic Adhesive does not question the critical nature of the enamel, and the record shows a history of performance problems under prior contracts. Stic-Adhesive does argue, and the Navy agrees, that it currently is performing satisfactorily under a contract for three of the ten line items covered by the RFP. Stic- Adhesive's current satisfactory performance for only three line items, however, does not resolve GSA's concern about the capability of Stic- Adhesive and other firms to handle the greatly increased volume of orders which would be placed with any single firm if parallel awards were not made. Since Stic-Adhesive has not shown that GSA's concerns about the adverse effects of an interruption in supply and the potential offerors' capability to handle high volume orders were unreasonable, we see no basis to object to GSA's decision to make parallel awards. See American Bank Note Co., B-222589, Sept. 18, 1986, 86-2 CPD Sec. 316.

With regard to Stic-Adhesive's allegation that GSA's use of parallel contracting is intended to prevent it from receiving award of the entire requirement for certain items, where a protester alleges that procurement officials have acted intentionally to preclude it from receiving an award, the protester must submit virtually irrefutable proof that the officials had a specific and malicious intent to harm the protester, since contracting officials are otherwise presumed to act in good faith. The Big Picture Co., Inc., B-220859.2, Mar. 4, 1986, 86-1 CPD Sec. 218. Stic- Adhesive has presented no such evidence. Although Stic-Adhesive alleges that GSA's decision to make parallel awards is part of an ongoing effort by the agency to avoid doing business with it, there is no evidence in the record to suggest that GSA intends to exclude Stic-Adhesive from competing under the RFP.

Stic-Adhesive also protests the use of negotiation procedures rather than sealed bidding for the procurement. Under the Competition in Contracting Act of 1984 (CICA), agencies are required to obtain full and open competition and to use the competitive procedures or combination of competitive procedures best suited under the circumstances of the procurement. 41 U.S.C. 253(a)(1) (Supp. III 1985). In determining the procedures appropriate under the circumstances, the agency is required to solicit sealed bids only if, among other factors, award will be made based on lowest price. See 41 U.S.C. 253(a)(2)(A)(ii); Adrian Supply Co.-- Reconsideration, B-225440.2, Mar. 30, 1987, 66 Comp.Gen., 87-1 CPD Sec. 357. Since, in this case, the RFP provides that award will be made to both the lowest and the second lowest priced offeror, the award clearly will not be made solely on the basis of lowest price. Accordingly, GSA could not properly use sealed bidding under CICA, 41 U.S.C. 253(a)(2)(A)(ii).

The protester also argues that if more than one source of supply is required, multiple award schedule contracts should be issued pursuant to Part 38 of the Federal Acquisition Regulation (FAR), 48 C.F.R. Part 38 (1986). The FAR provides that multiple award schedule contracts are appropriate when either (1) it is not practical to draft specifications or other descriptions of the required supplies or services and there are multiple suppliers able to furnish similar commercial suppliers or services, or (2) selectivity is necessary for ordering offices to meet their varying needs. FAR, 48 C.F.R. 38.102 2(b). Neither circumstance is present here: a specification for the nonflaming enamel exists, and since enamel produced in accordance with the specification will meet the needs of all ordering offices, selectivity is unnecessary.

Stic-Adhesive further contends that a contract entered into pursuant to the RFP would lack mutuality (and therefore be unenforceable) since the RFP does not provide for a minimum quantity guarantee. Although the protester's argument on this point is somewhat unclear, we understand its position to be that because GSA has had extensive experience in the procurement of nonflaming enamels, it should have included a minimum quantity guarantee in the solicitation, and its failure to do so deprives offerors of a meaningful basis on which to prepare their proposals.

The FAR does not require the inclusion of a minimum order guarantee in a requirements contract.

It requires only that the contract state, if feasible, the maximum limit of the contractor's obligation to deliver and the government's obligation to order. FAR, 48 C.F.R. 16.503(a)(2). No minimum guarantees are required for a requirements contract to be valid because the agreement to procure a specified percentage of the agency's requirements constitutes adequate consideration. See Sentinel Electronics, Inc., B-221914.2 et al., Aug. 7, 1986, 86-2 CPD Sec. 166. The fact that this contracting format imposes maximum risks on the contractor does not make it objectionable; offerors may, after all, take these risks into consideration in formulating their prices. See Duroyd Manufacturing Co., B-213046, Dec. 27, 1983, 84-1 CPD Sec 28. In addition, the inclusion of estimated quantities in the RFP provides a reasonable basis for offerors to prepare their price proposals. Id.

Finally, Stic-Adhesive claims the costs of filing and pursuing its protest, including attorney's fees. Our Bid Protest Regulations provide for the recovery of protest costs only where we determine that a statute or regulation has been violated. 4 C.F.R. 21.6(d) (1987). Since we have made no such determination in this case, we deny the protester's claim. DSP Technology, Inc., B-220593, Jan. 28, 1986, 86-1 CPD Sec. 96. The protest and the claim are denied.