B-169563 (1), JUL. 20, 1970

B-169563 (1), JUL. 20, 1970

CONTRACTS -- BID PROTEST -- OPTION V NEW PROCUREMENT DECISION TO NATIONAL SERVICE CORPORATION DENYING PROTEST AGAINST DETERMINATION OF ARMY AVIATION CENTER TO EXERCISE AN OPTION RATHER THAN TO ADVERTISE FOR FISCAL YEAR AIRCRAFT REFUELING REQUIREMENTS. A DETERMINATION TO EXERCISE AN OPTION WITH THE INCUMBENT CONTRACTOR ON THE BASIS OF THE REASONABLE PRICE PAID UNDER CURRENT CONTRACT AS COMPARED TO BID PRICES ON PRIOR SOLICITATIONS AND EVIDENT INCREASE IN LABOR COSTS IS SUPPORTED BY THE RECORD.

TO NATIONAL SERVICE CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS DATED APRIL 14, 1970, AND APRIL 27, 1970, WITH ENCLOSURES, PROTESTING AGAINST THE DETERMINATION TO EXERCISE AN OPTION RATHER THAN TO ADVERTISE FOR REFUELING SERVICES FOR FISCAL YEAR 1971 AT THE ARMY AVIATION CENTER, FORT RUCKER, ALABAMA.

YOU CONTEND THAT THE CONTRACTING OFFICER DOES NOT INTEND TO COMPLY WITH THE PROVISIONS OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1 1505 REGARDING THE EXERCISE OF AN OPTION BY THE GOVERNMENT, BUT INSTEAD PROPOSES TO NEGOTIATE A RENEWAL OF THE CONTRACT WITH THE INCUMBENT CONTRACTOR. ORIGINALLY THE CONTRACT FOR THE REFUELING AND DEFUELING OF AIRCRAFT FOR FISCAL YEAR 1970 WAS AWARDED AFTER FORMAL ADVERTISING TO SOUTHERN GULF, INCORPORATED, THE LOW BIDDER. THE ESTIMATED AMOUNT OF THAT CONTRACT WAS $728,569.47. IT IS REPORTED THAT THE DEFENSE CONTRACT ADMINISTRATION SERVICES PRE-AWARD SURVEY DATED APRIL 4, 1969, INDICATED THAT ALTHOUGH THE CONTRACTOR'S PROPOSAL WAS REALISTIC, IT PROVIDED LITTLE INCENTIVE OR PROFIT MOTIVE TO PERFORM IN OTHER THAN A MARGINAL MANNER.

THE CONTRACTING OFFICER STATES THAT BECAUSE OF SOUTHERN GULF'S FAILURE TO PERFORM THE REQUIRED SERVICES IN A SAFE AND TIMELY MANNER, THE GOVERNMENT TERMINATED THE CONTRACT FOR DEFAULT ON JULY 15, 1969. IT IS REPORTED THAT THE SUBSEQUENT REPROCUREMENT RESULTED IN THE AWARD OF NEGOTIATED CONTRACT DABCO1-70-C-0041 TO SPEAR SERVICE, INCORPORATED, THE INCUMBENT CONTRACTOR, AT AN ESTIMATED CONTRACT PRICE OF $902,829.82. IT IS STATED THAT THIS PRICE WAS BASED ON THE SAME UNIT COST BID IN OCTOBER 1968 FOR CONTRACT NO. DAB-68-B-0102 FOR THE PERIOD FEBRUARY 1, 1969, THROUGH JUNE 30, 1969. THE CONTRACTING OFFICER HAS DETERMINED THAT, PRICE AND OTHER FACTORS CONSIDERED, THE EXERCISE OF THE OPTION TO EXTEND CLAUSE IN THE CONTRACT WITH SPEAR SERVICE, INCORPORATED, IS THE MOST ADVANTAGEOUS METHOD OF PROCUREMENT TO THE GOVERNMENT.

ON JANUARY 23, 1970, THE DIRECTOR OF MATERIEL ACQUISITION, OFFICE OF THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS) APPROVED THE CONTRACTING OFFICER'S DETERMINATION TO EXERCISE THE OPTION. SUBSEQUENTLY, BY LETTER OF JANUARY 28, 1970, NATIONAL SERVICE CORPORATION EXPRESSED INTEREST IN THE FISCAL YEAR 1971 REFUELING/DEFUELING CONTRACT PERIOD. VIEW OF ITS HIGH BID ON IFB DABCO1-68-B-0056 FOR FISCAL YEAR 1969, AND ITS FAILURE TO RESPOND TO THE LAST TWO SOLICITATIONS, THE CONTRACTING OFFICER STATES THAT LITTLE IMPORTANCE WAS ATTACHED TO THIS EXPRESSION OF INTEREST.

ASPR 1-1505 PROVIDES, IN PART, AS FOLLOWS:

"(C) OPTIONS SHOULD BE EXERCISED ONLY IF IT IS DETERMINED THAT --

(I)FUNDS ARE AVAILABLE

(II) THE REQUIREMENT COVERED BY THE OPTION FULFILLS AN EXISTING NEED OF THE GOVERNMENT, AND

(III)THE EXERCISE OF THE OPTION IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

"(D) INSOFAR AS PRICE IS CONCERNED, THE DETERMINATION UNDER (C)(III) ABOVE SHALL BE MADE ON THE BASIS OF ONE OF THE FOLLOWING:

(1) A NEW SOLICITATION FAILS TO PRODUCE A BETTER PRICE THAN THAT OFFERED BY THE OPTION. WHEN THE CONTRACTING OFFICER ANTICIPATES THAT THE OPTION PRICE WILL BE THE BEST PRICE AVAILABLE, HE SHOULD NOT USE THIS METHOD OF TESTING THE MARKET BUT SHOULD USE ONE OF THE METHODS IN (2), (3), OR (4) BELOW (SEE 1-309).

(2) AN INFORMAL INVESTIGATION OF PRICES, OR OTHER EXAMINATION OF THE MARKET, INDICATES CLEARLY THAT A BETTER PRICE THAN THAT OFFERED BY THE OPTION CANNOT BE OBTAINED.

(3) THE TIME BETWEEN THE AWARD OF THE CONTRACT CONTAINING THE OPTION AND THE EXERCISE OF THE OPTION IS SO SHORT THAT IT INDICATES THE OPTION PRICE IS THE LOWEST PRICE OBTAINABLE, CONSIDERING SUCH FACTORS AS MARKET STABILITY AND A COMPARISION OF THE TIME SINCE AWARD WITH THE USUAL DURATION OF CONTRACTS FOR SUCH SUPPLIES AND SERVICES.

(4)ESTABLISHED PRICES ARE READILY ASCERTAINABLE AND CLEARLY INDICATE THAT FORMAL ADVERTISING OR INFORMAL SOLICITATION CAN OBVIOUSLY SERVE NO USEFUL PURPOSE.

"(E) INSOFAR AS THE 'OTHER FACTORS' MENTIONED IN (C) (III) ABOVE ARE CONCERNED, THE DETERMINATION SHOULD, AMONG OTHER THINGS, TAKE INTO ACCOUNT THE GOVERNMENT'S NEED FOR CONTINUITY OF OPERATIONS AND POTENTIAL COSTS TO THE GOVERNMENT OF DISRUPTING OPERATIONS, INCLUDING THE COST OF RELOCATING NECESSARY GOVERNMENT-FURNISHED EQUIPMENT (AS, FOR EXAMPLE, IN CERTAIN REPAIR AND OVERHAUL CONTRACTS FOR AIRCRAFT OR OTHER COMPLEX EQUIPMENT)."

WE DO NOT AGREE WITH THE CONTRACTING OFFICERS REASONS FOR ATTACHING LITTLE IMPORTANCE TO YOUR EXPRESSION OF INTEREST IN THE PROCUREMENT. HOWEVER, THE FOLLOWING INFORMATION WITH REGARD TO PAST PROCUREMENTS OF THESE SERVICES, FURNISHED AS PART OF THE ADMINISTRATIVE REPORT IS SIGNIFICANT: IFB NUMBER CONTRACT PERIOD BIDDER BID PRICE AIII-01-044-66-65 JULY 1, '66-JUNE P&B SERVICES $ 917,700.00

30, '67SERVICES & 1,057,190.40

MAINTENANCE

FACILITIES, INC. DABC01-68-B-0056 JULY 1, '68- SPEAR SERVICE INC. 988,596.11

JUNE 30, '69 P&B SERVICES 1,068,000.00

NATIONAL SERVICE 1,322,098.41

CORP. DABC01-68-B-0102 FEBRUARY 1, '69- SPEAR SERVICE, INC. 399,978.77

JUNE 30, '69 SERVICE & 578,110.43

MAINTENANCE

FACILITIES, INC.

SOUTHERN GULF, INC. 823,331.36

EDDIE P. DRAUGHON 936,486.09 DABC01-69-B 0048 JULY 1, '69- SOUTHERN GULF, INC. 728,569.47

JUNE 30, '70 SPEAR SERVICE, INC. 942,199.19

DYNAMIC 1,997,160.00

ENTERPRISES, INC.

THE PRESENT CONTRACT PRICE OF $902,829.82 IS CLEARLY REASONABLE IN VIEW OF THE HISTORY OF BID PRICES SET FORTH ABOVE. THE CONTRACT PRICE RESULTING FROM EXTENDING THE CONTRACT UNDER ITS PRESENT TERMS WOULD ALSO BE REASONABLE. THE CONTRACTING OFFICER STATES IN SUPPORT OF HIS DETERMINATION TO EXERCISE THE OPTION THAT CURRENT WAGE RATES ARE GENERALLY HIGHER THAN WHEN THE BASIC CONTRACT WAS AWARDED, AND WAGES CONSTITUTE APPROXIMATELY TWO-THIRDS OF THE AUDITED CONTRACT COSTS. BASED ON THE PRESENT RECORD, WE HAVE NO REASON TO QUESTION THIS STATEMENT. IN VIEW OF THE REASONABLE PRICE PAID UNDER THE PRESENT CONTRACT AS COMPARED TO BID PRICES ON PRIOR SOLICITATIONS AND THE EVIDENT INCREASE IN LABOR COSTS, WE CANNOT FIND THE CONTRACTING OFFICER'S CONCLUSION THAT EXERCISING THE OPTION WOULD PRECLUDE THE PROBABILITY OF INCREASED COST TO THE GOVERNMENT IS ERRONEOUS OR OTHERWISE IN VIOLATION OF ASPR 1-1505. WE MIGHT ALSO POINT OUT THAT YOU HAVE OFFERED NO EVIDENCE TO REFUTE THE CONTRACTING OFFICER'S CONCLUSION.

YOU TAKE ISSUE WITH THE STATEMENT THAT SPEAR IS THE ONLY CONTRACTOR WITH A RECORD OF SATISFACTORY CONTRACT PERFORMANCE. YOU ALLEGE THAT THE PRESENT CONTRACT IS THE ONLY ONE SPEAR HAS HAD AND IS THEREFORE AN INSUFFICIENT BASIS UPON WHICH TO PREDICATE A RECORD OF SATISFACTORY PERFORMANCE. THE RECORD BEFORE US, HOWEVER, REVEALS THAT SPEAR WAS AWARDED CONTRACT NO. DABC01-69-C-0141 ON NOVEMBER 15, 1969, FOR THE CONTRACT PERIOD OF FEBRUARY 1, 1969 THROUGH JUNE 30, 1969, AND IT IS REPORTED THAT DURING THAT PERIOD THE CONTRACTOR'S PERFORMANCE WAS EXCELLENT. IT IS ALSO REPORTED THAT PERFORMANCE UNDER THE PRESENT CONTRACT IS EXCELLENT. WE ARE OF THE OPINION THAT THE RECORD SUPPORTS THE CONCLUSION THAT THE CONTRACTOR DOES HAVE A RECORD OF SATISFACTORY PERFORMANCE.

FOR THE REASONS STATED, WE FIND NO BASIS TO INTERFERE WITH THE ARMY'S DECISION TO EXERCISE THE OPTION TO EXTEND THE CONTRACT WITH SPEAR SERVICE, INCORPORATED. ACCORDINGLY, YOUR PROTEST IS DENIED.