B-128023, JUNE 11, 1956, 35 COMP. GEN. 689

B-128023: Jun 11, 1956

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WARRANTS READVERTISEMENT OF THE PROCUREMENT IN ORDER TO OBTAIN MORE COMPETITIVE PRICES BY ADVISING BIDDERS THAT SLIDING SCALE BIDS WILL NOT BE ACCEPTED AND THAT UNIT PRICES ARE TO COVER ALL CONTRACT REQUIREMENTS. 1956: REFERENCE IS MADE TO YOUR LETTER OF JUNE 4. THE ESTIMATED QUANTITIES OF THE PROPOSED WORK WERE SET FORTH IN TERMS OF THE NUMBER OF GALLONS OF AIRCRAFT FUEL AND OIL WHICH WOULD BE INVOLVED IN FUELING AND REFUELING OPERATIONS AND SPACES WERE PROVIDED IN THE BID SCHEDULE FOR THE INSERTION OF UNIT PRICES AND TOTAL AMOUNTS WHICH THE BIDDERS PROPOSED TO CHARGE ON THE BASIS OF THE ESTIMATED QUANTITIES OF WORK. THE FOLLOWING ESTIMATES WERE INCLUDED IN THE BID SCHEDULE: AIRCRAFT ENGINE FUEL.

B-128023, JUNE 11, 1956, 35 COMP. GEN. 689

BIDS - ACCEPTANCE OR REJECTION - ESTIMATED QUANTITIES - READVERTISEMENT THE IMPOSSIBILITY OF PROPERLY EVALUATING SLIDING SCALE BIDS SUBMITTED IN RESPONSE TO AN INVITATION FOR ESTIMATED QUANTITIES OF WORK, INCIDENT TO THE SERVICING OF AIRCRAFT WITH GOVERNMENT-FURNISHED FUEL AND OIL, WARRANTS READVERTISEMENT OF THE PROCUREMENT IN ORDER TO OBTAIN MORE COMPETITIVE PRICES BY ADVISING BIDDERS THAT SLIDING SCALE BIDS WILL NOT BE ACCEPTED AND THAT UNIT PRICES ARE TO COVER ALL CONTRACT REQUIREMENTS.

TO SECRETARY OF THE AIR FORCE, JUNE 11, 1956:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 4, 1956, INVITING ATTENTION TO CERTAIN DIFFICULTIES CONCERNING PROPOSED AIR FORCE CONTRACTS FOR SERVICING OF AIRCRAFT WITH GOVERNMENT-FURNISHED FUEL AND OIL AT THE SCOTT AIR FORCE BASE, ILLINOIS, AND AT THE VANCE AIR FORCE BASE, ENID, OKLAHOMA, DURING THE PERIOD JULY 1, 1956, THROUGH JUNE 30, 1957 ( SCOTT AIR FORCE BASE INVITATION FOR BIDS NO. 11-601-56-63 AND VANCE AIR FORCE BASE INVITATION FOR BIDS NO. 34-600-56-33).

ON INVITATION NO. 11-601-56-63, THE ESTIMATED QUANTITIES OF THE PROPOSED WORK WERE SET FORTH IN TERMS OF THE NUMBER OF GALLONS OF AIRCRAFT FUEL AND OIL WHICH WOULD BE INVOLVED IN FUELING AND REFUELING OPERATIONS AND SPACES WERE PROVIDED IN THE BID SCHEDULE FOR THE INSERTION OF UNIT PRICES AND TOTAL AMOUNTS WHICH THE BIDDERS PROPOSED TO CHARGE ON THE BASIS OF THE ESTIMATED QUANTITIES OF WORK. THE FOLLOWING ESTIMATES WERE INCLUDED IN THE BID SCHEDULE: AIRCRAFT ENGINE FUEL--- 13,300,000 GALLONS; AIRCRAFT ENGINE FUEL ISSUED FROM HYDRANT SYSTEM--- 2,100,000 GALLONS; AIRCRAFT ENGINE LUBRICATING OIL--- 92,500 GALLONS; REFUEL--- 120,000 GALLONS.

ITEM 5 OF THE BID SCHEDULE REQUIRED " CLAUSE 12 OF SPECIAL PROVISIONS TO BE FILLED IN BY CONTRACTOR.' UNDER SUCH CLAUSE 12 IT WAS INTENDED THAT BIDDERS SHOULD FURNISH A PRICE PER GALLON TO BE CHARGED TO THE GOVERNMENT FOR THE USE OF THEIR EQUIPMENT FOR A PERIOD NOT EXCEEDING 90 DAYS ,IN THE EVENT CONTRACTOR'S FAILURE TO PERFORM ARISES OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR.'

CONCERNING THE ESTIMATED REQUIREMENTS, CLAUSE 31 OF THE GENERAL PROVISIONS OF THE PROPOSED CONTRACT PROVIDES:

THE AMOUNT OF SUPPLIES AND SERVICES WHICH WILL BE REQUIRED DURING THE PERIOD COVERED BY THIS CONTRACT WILL DEPEND UPON THE NEEDS OF THE GOVERNMENT ESTABLISHMENT ISSUING THIS CONTRACT. QUANTITIES OF SUPPLIES AND SERVICES SPECIFIED HEREIN ARE BASED ON THE BEST INFORMATION AVAILABLE AS TO THOSE REQUIREMENTS, BUT ARE NOT DEFINITELY PURCHASED HEREBY. NOTWITHSTANDING THE FOREGOING, THE CONTRACTOR AGREES TO FURNISH AT THE PRICES HEREIN SPECIFIED ALL SUPPLIES AND SERVICES OF THE KIND HEREIN DESCRIBED WHICH THE CONTRACTING OFFICER MAY CALL FOR DURING THE ABOVE MENTIONED PERIOD AND THE GOVERNMENT WILL CALL ON THE CONTRACTOR FOR ALL SUCH SUPPLIES AND SERVICES WHICH THE GOVERNMENT ESTABLISHMENT ISSUING THIS CONTRACT MAY REQUIRE DURING SUCH PERIOD. AFTER THE EXPIRATION OF THE CONTRACT PERIOD, NO FURTHER SUPPLIES OR SERVICES WILL BE CALLED FOR OR FURNISHED.

TWO BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE MAYTAG AIRCRAFT CORPORATION, COLORADO SPRINGS, COLORADO, QUOTED A UNIT PRICE OF $0.0145 PER GALLON FOR EACH OF THE REQUIRED SERVICES, OR A TOTAL ESTIMATED PRICE OF $226,381.25. MERCURY SERVICE, LOS ANGELES, CALIFORNIA, QUOTED A PRICE OF $3.50 PER GALLON FOR THE FIRST 5,000,000 GALLONS, A PRICE OF $0.8999 PER GALLON FOR THE NEXT 5,000,000 GALLONS AND INDICATED THAT NO CHARGE WOULD BE MADE FOR THE NEXT 5,612,500 GALLONS. ON THE BASIS OF THE TOTAL ESTIMATED QUANTITIES, THIS SHOWN AS AMOUNTING TO $219,995. MAYTAG AIRCRAFT CORPORATION INSERTED A PRICE OF $0.01 PER GALLON FOR THE GOVERNMENT'S USE OF ITS EQUIPMENT UNDER THE CONDITIONS OF CLAUSE 12 OF THE SPECIAL PROVISIONS, BUT MERCURY SERVICE FAILED TO INSERT ANY PRICE FOR THE USE OF ITS EQUIPMENT UNDER SUCH CONDITIONS.

THE CONTRACTING OFFICER CONSIDERED THAT THE OSTENSIBLE LOW BID OF MERCURY SERVICE SHOULD BE REJECTED, SINCE IT SUBMITTED AN ALTERNATE PRICE SCHEDULE AND FAILED TO COMPLY WITH ITEM 5 OF THE BID SCHEDULE REQUIRING " CLAUSE 12 OF SPECIAL PROVISIONS TO BE FILLED IN BY CONTRACTOR.' MERCURY SERVICE THEN PROTESTED THE PROPOSED AWARD TO MAYTAG AIRCRAFT CORPORATION AND WE WERE ADVISED OF THIS PROTEST BY LETTER DATED MAY 18, 1956, FROM MERCURY SERVICE.

ON INVITATION NO. 34-600-56-33, THE VANCE AIR FORCE BASE INVITED BIDS FOR FURNISHING SIMILAR SERVICES BASED UPON A TOTAL ESTIMATED QUANTITY OF 13,675,000 GALLONS OF AIRCRAFT FUEL AND OIL TO BE HANDLED IN THE SERVICE OF AIRCRAFT AT THAT BASE. PROVISION WAS MADE FOR THE USE OF CONTRACTOR'S EQUIPMENT UNDER CERTAIN CONDITIONS BUT BIDDERS WERE NOT REQUIRED TO INSERT ANY PRICE FOR SUCH USE. THE SPECIAL PROVISIONS OF THE INVITATION CONTAINED A CLAUSE RESPECTING THE ESTIMATED QUANTITY OF WORK WHICH IS SIMILAR TO CLAUSE 31 OF THE GENERAL PROVISIONS OF SCOTT AIR FORCE BASE INVITATION NO. 11-601-56-63.

FIVE BIDS WERE RECEIVED IN RESPONSE TO INVITATION NO. 34-600-56-33, INCLUDING BIDS RECEIVED FROM THE MAYTAG AIRCRAFT CORPORATION AND MERCURY SERVICE. THREE OF THE BIDDERS SUBMITTED SLIDING SCALE BIDS OF WHICH THE BID OF MOORE SERVICE, EL PASO, TEXAS, WAS THE LOWEST BASED UPON THE ESTIMATED AMOUNT OF THE SERVICES INVOLVED. MOORE SERVICE QUOTED A PRICE OF $0.018 PER GALLON FOR THE FIRST 5,000,000 GALLONS, A PRICE OF $0.007 PER GALLON FOR THE NEXT 3,300,000 GALLONS AND INDICATED THAT NO CHARGE WOULD BE MADE FOR THE BALANCE OF 5,375,000 GALLONS. BASED ON THE ESTIMATED QUANTITY OF 13,675,000 GALLONS, THE TOTAL BID PRICE WAS $113,100. OF THE TWO BIDS WHICH DID NOT OFFER SLIDING SCALE PRICES, THE BID OF THE TRANSPORT COMPANY OF TEXAS, CORPUS CHRISTI, TEXAS, WAS THE LOWEST. THIS COMPANY QUOTED A UNIT PRICE OF $0.008854, OR A TOTAL ESTIMATED PRICE OF $121,078.45. THE THREE BIDS SUBMITTED ON A SLIDING SCALE BASIS, INCLUDING THE BID SUBMITTED BY MERCURY SERVICE, WERE CONSIDERED AS BEING PROPERLY FOR REJECTION AND BOTH MOORE SERVICE AND MERCURY SERVICE PROTESTED SUCH DETERMINATION OF THE CONTRACTING OFFICER.

IT APPEARS THAT IN CERTAIN PERVIOUS CONTRACTS FOR SERVICES OF THE TYPE HERE INVOLVED THE CONTRACTORS WERE PERMITTED TO CHARGE HIGHER RATES FOR INITIAL SERVICE THAN WOULD BE CHARGEABLE FOR THE BALANCE OF THE CONTRACT WORK. AT A RECENT CONFERENCE WE WERE ADVISED THAT THIS SITUATION PREVAILED PRINCIPALLY AS A RESULT OF THE AUTHORITY TO NEGOTIATE CONTRACTS BUT THAT, WHEN FORMAL ADVERTISING IS RESORTED TO, IT WOULD ORDINARILY BE IMPOSSIBLE TO EVALUATE A BID SUBMITTED ON A SLIDING SCALE BASIS FOR ESTIMATED QUANTITIES OF WORK AS TO WHICH THE GOVERNMENT COULD MAKE NO GUARANTEE THAT THE AMOUNT OF THE SERVICES ACTUALLY PERFORMED WOULD APPROXIMATE THE ESTIMATED QUANTITIES. YOU STATE THAT THE AIR FORCE REQUIREMENTS UNDER THE PROPOSED PROCUREMENTS ARE, OF NECESSITY, ESTIMATES AND THEREFORE NOT SUBJECT TO EXACT CALCULATION. AS AN EXAMPLE OF THE DIFFICULTY OF EVALUATING A SLIDING SCALE BID FOR SUCH REQUIREMENTS, YOU INDICATE THAT THE MERCURY SERVICE BID UNDER THE SCOTT AIR FORCE BASE INVITATION WOULD REMAIN HIGH UNTIL 97 PERCENT OF THE TOTAL ESTIMATED REQUIREMENT OF 15,612,500 GALLONS HAD BEEN DELIVERED. THEREFORE, AND SINCE THE BIDS PROVIDE NO CHARGE FOR SERVICES PERFORMED IN EXCESS OF THE ESTIMATED REQUIREMENTS, YOU STATE IT IS HIGHLY QUESTIONABLE WHETHER EVALUATION OF BIDS BASED ON THE TOTAL ESTIMATED QUANTITIES WOULD BE REALISTIC OR APPROPRIATE AND YOU EXPRESS THE VIEW THAT THE OBLIGATIONS OF THE BIDDERS WITH RESPECT TO QUANTITIES OF WORK IN EXCESS OF THE ESTIMATES SHOULD HAVE BEEN MORE CLEARLY SET FORTH IN THE INVITATIONS. IN THE CIRCUMSTANCES, YOU PROPOSE TO CANCEL ALL CURRENT PROCUREMENTS WHERE SLIDING SCALE BIDS HAVE BEEN RECEIVED AND TO READVERTISE THE REQUIREMENTS ON A FIRM UNIT PRICE BASIS WITH ADEQUATE NOTICE TO BIDDERS THAT SLIDING SCALE BIDS WILL NOT BE ACCEPTABLE. YOUR LETTER FURTHER SETS FORTH THE OPINION THAT, SINCE THE BID OF MERCURY SERVICE UNDER THE SCOTT AIR FORCE BASE INVITATION DID NOT COMPLY WITH ITEM 5 OF THE BID SCHEDULE, THAT BID MUST, IN ANY EVENT, BE CONSIDERED NON-RESPONSIVE.

THE QUESTION OF READVERTISEMENT AS SUGGESTED IN YOUR LETTER IS PRIMARILY A MATTER OF ADMINISTRATIVE DISCRETION. FURTHERMORE, THE FACT THAT THREE OF THE FIVE COMPANIES INTERESTED IN BIDDING ON THIS TYPE OF PROCUREMENT SUBMITTED ALTERNATE BIDS SUGGESTS THAT READVERTISEMENT OF THE PROCUREMENTS IN QUESTION WOULD ENABLE THE GOVERNMENT TO OBTAIN MORE COMPETITIVE PRICES IF BIDDERS WERE ADVISED THAT SLIDING SCALE BIDS WOULD NOT BE ACCEPTED AND THAT THE QUOTED UNIT PRICES ARE TO COVER ALL ACTUAL REQUIREMENTS OF THE INSTALLATIONS DURING THE PERIODS OF THE PROPOSED CONTRACTS. CONSEQUENTLY, AND SINCE THE FACTS PRESENTED OTHERWISE INDICATE A SUBSTANTIAL BASIS FOR READVERTISING THE PROCUREMENTS REFERRED TO IN YOUR LETTER, WE PERCEIVE NO OBJECTION TO SUCH ACTION.