B-154594, SEP. 22, 1964

B-154594, SEP. 22, 1964

TO INTERNATIONAL FERMONT DIVISION OF DYNAMICS CORPORATION OF AMERICA:

WE REFER TO A TELEFAX DATED JUNE 29, 1964, AND A LETTER DATED JULY 1, 1964, DIRECTED TO OUR OFFICE, WHEREIN YOU PROTEST AGAINST THE CONTRACTING OFFICER'S REFUSAL TO CONSIDER A QUANTITY DISCOUNT OFFERED BY YOUR COMPANY IN HIS EVALUATION OF PROPOSALS SUBMITTED IN CONNECTION WITH REQUEST FOR PROPOSALS 64-45018 ISSUED BY THE SACRAMENTO AIR MATERIEL AREA, MCCLELLAN AIR FORCE BASE, CALIFORNIA, ON NOVEMBER 14, 1963. YOU ALSO COMPLAIN THAT THE NEGOTIATIONS SURROUNDING THE PROCUREMENT HAVE BEEN IMPROPERLY CONDUCTED.

PROPOSALS WERE SOLICITED TO SUPPLY AN INDEFINITE QUANTITY OF FIVE DIFFERENT TYPES OF GENERATOR SETS WITH KILOWATT CAPACITIES RANGING FROM 15 TO 150 KILOWATTS. THE SUCCESSFUL OFFEROR WILL RECEIVE A CONTRACT FOR ONE YEAR'S REQUIREMENTS WITH GUARANTEED MINIMUM ORDERS TOTALING 223 UNITS AND POSSIBLE MAXIMUM ORDERS TOTALING A QUANTITY OF 2140 UNITS.

ITEMS 1 THROUGH 5 OF THE SCHEDULE DESCRIBED THE FIVE CLASSES OF GENERATOR SETS AND PROVIDED SPACES WHEREIN A UNIT PRICE AND TOTAL PRICE COULD BE SET FORTH FOR EACH OF SEVERAL QUANTITY RANGES CORRESPONDING TO THE POSSIBLE VOLUME OF TOTAL FUTURE ORDERS FOR A YEAR. UNIT PRICES WERE REQUIRED ON ALL ITEMS AND SUBITEMS. UNITS ORDERED PURSUANT TO ITEMS 1 THROUGH 5 WERE TO BE DELIVERED SKID MOUNTED. ITEMS 1A THROUGH 5A SOLICITED QUOTATIONS ON A SIMILAR CUMULATIVE BASIS FOR THE SAME UNITS DELIVERED WHEEL MOUNTED. ITEM 5A-1 CALLED FOR PRICES ON THE UNITS DESCRIBED IN ITEM 5 FOR DELIVERY MOUNTED IN TRAILERS. THE GOVERNMENT RESERVED THE RIGHT TO ORDER ANY TYPE OF GENERATOR SET TO BE DELIVERED SKID MOUNTED OR WHEEL MOUNTED AS ITS FUTURE NEEDS MIGHT DICTATE, AND, IN ADDITION, IT WAS STIPULATED THAT DELIVERIES OF ITEM 5 TRAILER MOUNTED MIGHT BE REQUIRED.

WHEEL MOUNTED GENERATOR SETS WERE TO BE PAID FOR AT THE UNIT PRICE OF A SKID MOUNTED SET PLUS AN ADDITIONAL CHARGE FOR WHEEL MOUNTING. TRAILER MOUNTED GENERATOR SETS WERE TO BE PAID FOR AT THE UNIT PRICE OF A SKID MOUNTED SET PLUS AN ADDITIONAL CHARGE FOR TRAILER MOUNTING. IT APPEARS FROM THE RECORD THAT SKID MOUNTING IS THE LEAST EXPENSIVE, AND TRAILER MOUNTING THE MOST EXPENSIVE METHOD OF FURNISHING THE UNITS.

PAGES 18 THROUGH 20 OF THE SCHEDULE SET FORTH A PROVISION ENTITLED "BASIS OF AWARD.' THIS CLAUSE STIPULATED THE FACTORS UPON WHICH THE AWARD OF A CONTRACT RESULTING FROM THE REQUEST FOR PROPOSALS WAS TO BE BASED. THE ESSENCE OF THE PARAGRAPH IS THAT THE OFFER PRESENTING THE LOWEST PRICE COMPUTED BY MULTIPLYING THE QUANTITY INCREMENTS OF EACH TYPE OF GENERATOR SET BY THE UNIT PRICES FOR EACH INCREMENT AND TOTALING THE RESULT, WOULD BE ACCEPTED BY THE GOVERNMENT. IT WAS ARBITRARILY ASSUMED FOR THE PURPOSE OF EVALUATION THAT ONE-HALF OF ALL UNITS TO BE DELIVERED UNDER THE FIRST FOUR ITEMS WOULD BE SKID MOUNTED AND ONE-HALF WOULD BE WHEEL MOUNTED. THE FURTHER ASSUMPTION WAS MADE THAT DELIVERIES UNDER ITEM 5 WOULD CONSIST OF ONE-THIRD SKID MOUNTED, ONE-THIRD WHEEL MOUNTED, AND ONE-THIRD TRAILER MOUNTED UNITS. THE TOTAL PRICES THEREBY ARRIVED AT WOULD BE ADJUSTED UPWARD TO PROVIDE FOR THE COST OF SPARE PARTS, DESCRIPTIVE DATA, PACKAGING AND PACKING, TRANSPORTATION COSTS, ETC., AND DOWNWARD FOR ANY "DISCOUNT OFFERED.' THE SUBPARAGRAPH ON DISCOUNTS WAS FOLLOWED PARENTHETICALLY BY A REFERENCE TO A PROVISION OF THE BOILER PLATE DEALING EXCLUSIVELY WITH PROMPT PAYMENT DISCOUNTS.

IT WAS CLEARLY STATED THAT THE ABOVE-OUTLINED COMPUTATION WAS FOR EVALUATION PURPOSES ONLY AND THAT THE ACTUAL REQUIREMENTS OF THE GOVERNMENT UNDER THE PROPOSED CONTRACT WERE AS YET UNKNOWN AND UNDETERMINED.

INTERNATIONAL FERMONT SUBMITTED A PROPOSAL ON FEBRUARY 29, 1964, IN WHICH THE UNIT PRICES DID NOT DIFFER BY PRODUCTION INCREMENT. ON MARCH 2, 1964, IT OFFERED BY A TELEGRAPHIC REVISION A DISCOUNT OF 20 PERCENT OF THE SELLING PRICE (SUBSEQUENTLY INCREASED TO 27 PERCENT BY TWX RECEIVED ON APRIL 10, 1964) "WHEN THE MAXIMUM NUMBER OF UNITS ARE ORDERED ALL WHEEL MOUNTED.'

EIGHT PROPOSALS WERE RECEIVED ON THE SOLICITATION PRIOR TO 12:00 NOON, APRIL 10, 1964, THE CONTRACTING OFFICER'S DEADLINE FOR THE RECEIPT OF FINAL PROPOSALS AND PROPOSAL REVISIONS. YOUR PRICE ON THE MAXIMUM QUANTITY, COMPUTED TO INCLUDE THE 27 PERCENT DISCOUNT, EVIDENTLY WAS THE LOWEST OFFERED UNDER THE EVALUATION BASIS SET FORTH IN THE REQUEST FOR PROPOSALS. YOUR PRICE WOULD NOT BE THE LOWEST, HOWEVER, IF THE DISCOUNT WERE TO BE DISREGARDED.

IT APPEARS FROM THE RECORD THAT PROCUREMENT OFFICIALS WERE CONFUSED AS TO THE PRECISE MEANING OF THE DISCOUNT AT THE TIME IT WAS FIRST OFFERED. CONTINUOUS REQUESTS FOR CLARIFICATION WERE MADE AND, AFTER SEVERAL NEGOTIATION SESSIONS WITH FERMONT REPRESENTATIVES, IT BECAME EVIDENT THAT THE DISCOUNT WOULD APPLY ONLY IN THE EVENT THE GOVERNMENT PROCURED THE MAXIMUM QUANTITY OF ALL ITEMS AND THEN ONLY IF ALL UNITS PURCHASED UNDER ITEMS 1 THROUGH 4 WERE WHEEL MOUNTED AND ALL UNITS PURCHASED UNDER ITEM 5 WERE TRAILER MOUNTED. THE CONTRACTING OFFICER CONCLUDED THAT THESE LIMITATIONS RENDERED THE DISCOUNT OF LITTLE UTILITY TO THE GOVERNMENT BUT DID NOT INFORM YOUR COMPANY IN WRITING OF THIS DETERMINATION PRIOR TO THE EXPIRATION OF THE APRIL 10TH DEADLINE, ALTHOUGH HE ORALLY ADVISED YOUR REPRESENTATIVES AT A NEGOTIATION CONFERENCE HELD ON MARCH 31, 1964, THAT HE CONSIDERED THE DISCOUNT "IMPROPER" AND WOULD NOT TAKE IT INTO ACCOUNT IN EVALUATING YOUR PROPOSAL.

YOUR COMPANY QUESTIONED THE PROPRIETY OF THE CONTRACTING OFFICER'S INTENTION TO OVERLOOK THE DISCOUNT IN THE EVALUATION PROCESS, CITING THE DECISIONS OF OUR OFFICE IN B-150014 DATED NOVEMBER 20, 1962, AND B-148046 DATED APRIL 25, 1962, AS AUTHORITY TO THE CONTRARY. A WRITTEN NOTIFICATION OF THE GOVERNMENT'S POSITION ON THE DISCOUNT WAS REQUESTED SEVERAL TIMES ON YOUR BEHALF PRIOR TO APRIL 10TH. EACH REQUEST WAS MET WITH A DEMAND FOR CLARIFICATION OF THE MEANING OF THE DISCOUNT. YOU STATE THAT CLARIFICATION WAS RENDERED TO GOVERNMENT OFFICIALS AFTER EACH REQUEST UNTIL THE DEADLINE FOR SUBMISSION OF PROPOSAL MODIFICATIONS HAD EXPIRED, AND THAT ON MAY 5TH THE CONTRACTING OFFICER AGREED IN A TELEPHONE CONFERENCE TO ACCEPT A PROPOSAL MODIFICATION BUT LATER REVERSED HIMSELF.

THE SACRAMENTO AIR MATERIEL AREA NOW PROPOSES TO AWARD THE CONTRACT TO ANOTHER OFFEROR. YOUR COMPANY ARGUES THAT THE CONTRACTING OFFICER IMPROPERLY REFUSED TO INCLUDE THE DISCOUNT IN HIS COMPUTATION OF THE AMOUNT OF YOUR OFFER AND THAT, HAD HE DONE SO, NEGOTIATIONS WOULD HAVE HAD TO BE UNDERTAKEN SOLELY WITH INTERNATIONAL FERMONT AS SUCCESSFUL OFFEROR WITHIN THE MEANING OF ARMED SERVICES PROCUREMENT REGULATION 3 505 (G). YOU ARGUE THAT THE AWARD OF THE SUBJECT CONTRACT, BY THE TERMS OF THE SOLICITATION, WAS TO BE MADE SOLELY ON THE BASIS OF THE LOWEST PRICE DETERMINED UNDER THE ASSUMPTION THAT THE MAXIMUM QUANTITY WOULD BE ORDERED. YOU CONTEND THAT BY OVERLOOKING YOUR OFFERED DISCOUNT THE CONTRACTING OFFICER VIOLATED THE RULE THAT A PROPOSAL MUST BE EVALUATED ONLY ON THE BASIS OF THE FACTORS SET OUT IN THE REQUEST FOR PROPOSALS.

IT IS OUR UNDERSTANDING THAT YOUR OFFER, AS CLARIFIED BY YOUR TELEGRAM OF APRIL 10, 1964, WAS AND IS INTENDED TO PERMIT THE 27 PERCENT DISCOUNT ONLY IN THE EVENT THE GOVERNMENT ORDERS 2140 UNITS, THE MAXIMUM QUANTITY ON WHICH PROPOSERS WERE ASKED TO QUOTE. THIS POINT ALONE, IN OUR OPINION, MAKES YOUR DISCOUNTED OFFER NONRESPONSIVE TO THE REQUEST FOR PROPOSALS, AND MAKES IT UNNECESSARY TO CONSIDER THE FURTHER RESTRICTION OF THE DISCOUNT TO "ALL WHEEL MOUNTED" GENERATOR SETS. YOUR ASSUMPTION THAT EVALUATION WAS TO BE MADE SOLELY ON THE BASIS THAT THE MAXIMUM QUANTITY WOULD BE ORDERED IS ERRONEOUS. PROSPECTIVE CONTRACTORS WERE TOLD SPECIFICALLY THAT UNIT PRICES MUST BE QUOTED FOR EACH OF THE QUANTITY INCREMENTS UP TO THE MAXIMUM OF 2140 SETS. THE 27 PERCENT DISCOUNT OFFERED IN YOUR PROPOSAL IS NOT APPLICABLE TO ANY QUANTITIES LESS THAN 2140 UNITS. YOUR ONLY QUOTATION, THEREFORE, ON INCREMENTS LESS THAN 2140 SETS IS YOUR PRICE WITHOUT DISCOUNT, AND ON THIS BASIS YOURS IS NOT THE LOW PROPOSAL. YOUR OFFER OF 27 PERCENT DISCOUNT APPLIES ONLY TO 2140 SETS AND IS, THEREFORE, EQUIVALENT TO AN ALL-OR-NONE BID ON THAT QUANTITY. IS TOO CLEAR FOR CONTENTION THAT AN OTHERWISE LOW PROPOSAL CONDITIONED ON AWARD OF 2140 SETS WOULD NOT BE RESPONSIVE. IT MAY ALSO BE NOTED THAT THE STATED BASIS OF EVALUATION NECESSARILY MUST BE READ IN CONJUNCTION WITH THE RIGHT OF THE GOVERNMENT TO ORDER ONLY THE GUARANTEED MINIMUM QUANTITY, OR ANY QUANTITY LESS THAN THE MAXIMUM. IN EFFECT, THE STATED BASIS OF EVALUATION GAVE EQUAL WEIGHT TO THE POSSIBILITY THAT ANY OF THE LISTED QUANTITY INCREMENTS MIGHT BE ORDERED. YOUR DISCOUNT PROPOSAL SEEKS TO HAVE THE DISCOUNT APPLIED FOR EVALUATION PURPOSES TO ALL INCREMENTS LESS THAN THE MAXIMUM, EVEN THOUGH YOU WOULD BE UNDER NO OBLIGATION TO GIVE SUCH DISCOUNT ON THOSE INCREMENTS. IT SEEMS DOUBTFUL TO US THAT ANY PROSPECTIVE OFFEROR COULD REASONABLY ASSUME THAT SUCH A PROPOSITION WOULD BE ACCEPTABLE OR RESPONSIVE, ALTHOUGH WE AGREE THAT YOU SHOULD HAVE BEEN SO INFORMED BY THE CONTRACTING OFFICER IF, AS IS NOT QUITE CLEAR, HE SO UNDERSTOOD YOUR OFFER.

THE CASES CITED BY YOU IN SUPPORT OF THE CONTRACTING OFFICER'S DUTY TO CONSIDER THE DISCOUNT, B-150014 DATED NOVEMBER 20, 1962, AND B 148046 DATED APRIL 25, 1962, ARE DISTINGUISHABLE ON THE GROUND THAT IN BOTH CASES DEFINITE KNOWN QUANTITIES OF SUPPLIES WERE INVOLVED, AND IT WAS CLEAR FROM THE TIME OF BID OPENING IN EACH CASE THAT THE DISCOUNTS OFFERED WOULD ACTUALLY SAVE THE GOVERNMENT MONEY. THE CONTRACT HERE INVOLVED IS AN INDEFINITE QUANTITY CONTRACT AND THE OFFERED DISCOUNT, ASIDE FROM THE FACT THAT IT MADE YOUR PROPOSAL NONRESPONSIVE, REPRESENTS A THEORETICAL SAVING RATHER THAN A KNOWN SAVING.

YOUR ARGUMENT THAT IN THE EVENT THE DISCOUNT WAS NOT TO BE CONSIDERED THE CONTRACTING OFFICER SHOULD HAVE ACCORDED YOU AN OPPORTUNITY THEREAFTER TO REVISE YOUR PROPOSAL, SEEMS LIKEWISE TO US TO LACK MERIT. AFTER EXPIRATION OF THE DEADLINE, PROCUREMENT OFFICIALS PROPERLY DID NOT REGARD YOU AS AN "OTHERWISE SUCCESSFUL OFFEROR" WITHIN THE MEANING OF ARMED SERVICES PROCUREMENT REGULATION 3-505 (G) AND THEREFORE WERE BOUND BY SECTION 3-505 (A) NOT TO ACCEPT ANY FURTHER REVISIONS.

WITH REFERENCE TO YOUR CONTENTION THAT THE USE OF AN INDEFINITE QUANTITY CONTRACT WAS CONTRARY TO SECTION 3-409 (C) (2) OF ASPR, WE ARE ADVISED THAT IT WAS DECIDED BEFORE SOLICITATION THAT THE GENERATOR SETS INVOLVED WERE MODIFIED COMMERCIAL UNITS. WE ARE NOT DISPOSED TO QUESTION THE CORRECTNESS OF THIS DETERMINATION AS A FACTUAL MATTER. SEE 31 COMP. GEN. 288; 37 ID. 568, 570. FURTHERMORE, EVEN IF WE SHOULD ASSUME OTHERWISE, WE DO NOT CONSIDER THIS TO AFFECT THE VALIDITY OF THE PROCUREMENT. SECTION 3 -409 (C) (2) OF ASPR STATES ONLY THAT INDEFINITE QUANTITY CONTRACTS SHOULD, NOT SHALL, BE USED ONLY FOR COMMERCIAL OR MODIFIED COMMERCIAL TYPE ITEMS. WE DO NOT CONSIDER SUCH AN ADMINISTRATIVE REGULATION AS CONFERRING ANY RIGHTS ON OFFERORS.

THE SAME MAY BE SAID OF YOUR CONTENTION THAT PROPOSALS AND NEGOTIATIONS PRECEDED THE EXECUTION OF AN APPROPRIATE DETERMINATION AND FINDING AS TO THE AUTHORITY FOR NEGOTIATION OF THE PROCUREMENT.