B-139877, JULY 15, 1959, 39 COMP. GEN. 38

B-139877: Jul 15, 1959

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CONTRACTOR'S PLANT OR NEAREST SHIPPING POINT BASIS IS DETERMINED ON THE BASIS OF THE DELIVERED COST RATHER THAN THE NET PRICE. WHO MET CERTAIN REQUIREMENTS INCLUDING THE SUBMISSION OF A BID ON THE UNRESERVED PORTION AT A UNIT PRICE OF NOT MORE THAN 120 PERCENT OF THE PRICE ON WHICH AWARD WAS MADE ON SUCH UNRESERVED PART. THE SPECIFIC PROBLEM WHICH HAS ARISEN IS THE DETERMINATION OF THE BIDDER TO WHOM A CONTRACT FOR THE THIRD-SET-ASIDE QUANTITY SHOULD FIRST BE OFFERED. WHEN THE COST TO THE GOVERNMENT OF SHIPMENT TO INITIAL POINT OF DESTINATION IS INCLUDED. BOTH ARE SMALL BUSINESS FIRMS ELIGIBLE FOR AWARD UNDER THE CRITERIA ESTABLISHED IN THE INVITATION. IF NEGOTIATION IS TO BE CONDUCTED WITH ELIGIBLE BIDDERS IN THE ORDER OF NET PRICES OFFERED.

B-139877, JULY 15, 1959, 39 COMP. GEN. 38

CONTRACTS - AWARDS - LABOR SURPLUS AREAS - PRECEDENCE OF BIDDERS' FREIGHT COST INCLUSION IN ESTABLISHING THE ORDER OF PRECEDENCE OF BIDS FOR AWARD OF PORTIONS OF A PROCUREMENT SET-ASIDE FOR BIDDERS IN LABOR SURPLUS AREAS, ELIGIBLE BIDDERS SHOULD FIRST BE RANKED IN THE ORDER IN WHICH THEY WOULD BE CONSIDERED FOR AWARD ON THE NON-SET-ASIDE PORTION, AND, WHEN THE LOW RESPONSIBLE BID FOR THE NON-SET-ASIDE PORTION UNDER AN INVITATION WHICH SOLICITED BIDS ON AN F.O.B. CONTRACTOR'S PLANT OR NEAREST SHIPPING POINT BASIS IS DETERMINED ON THE BASIS OF THE DELIVERED COST RATHER THAN THE NET PRICE, THE FREIGHT COSTS SHOULD ALSO BE CONSIDERED IN DETERMINING THE ORDER OF PRECEDENCE FOR NEGOTIATION OF THE SET-ASIDE PORTIONS.

TO THE SECRETARY OF THE AIR FORCE, JULY 15, 1959:

WE REFER TO A LETTER OF JUNE 29, 1959, WITH ENCLOSURES, SIGNED BY THE ASSISTANT DEPUTY FOR PROCUREMENT AND PRODUCTION, RELATIVE TO QUESTIONS RAISED BY THE PROTEST OF IRVING AIR CHUTE COMPANY, INC., IN CONNECTION WITH CONTRACTS TO BE NEGOTIATED WITH QUALIFYING FIRMS IN LABOR SURPLUS AREAS FOR A SET-ASIDE QUANTITY OF PARACHUTES UNDER INVITATION FOR BIDS NO. 36-600-59-202 ISSUED BY THE MIDDLETOWN AIR MATERIAL AREA ON FEBRUARY 26, 1959.

THE INVITATION SOLICITED BIDS FOR 7,301 PARACHUTE ASSEMBLIES IN ACCORDANCE WITH SPECIFICATION NO. MIL-P-6645D ( USAF), F.O.B. CONTRACTOR'S PLANT OR NEAREST SHIPPING POINT. PARAGRAPH N OF THE SCHEDULE PROVIDED FOR THE PROCUREMENT OF AN ADDITIONAL QUANTITY OF 21,903 UNITS (3 ADDITIONAL QUANTITIES OF 7,301 EACH) FOR NEGOTIATION WITH FIRMS IN AREAS OF SUBSTANTIAL SURPLUS, WHO MET CERTAIN REQUIREMENTS INCLUDING THE SUBMISSION OF A BID ON THE UNRESERVED PORTION AT A UNIT PRICE OF NOT MORE THAN 120 PERCENT OF THE PRICE ON WHICH AWARD WAS MADE ON SUCH UNRESERVED PART.

THE SPECIFIC PROBLEM WHICH HAS ARISEN IS THE DETERMINATION OF THE BIDDER TO WHOM A CONTRACT FOR THE THIRD-SET-ASIDE QUANTITY SHOULD FIRST BE OFFERED. THE JAYVAL COMPANY OF NEW MEXICO SUBMITTED A NET UNIT PRICE OF $149.52, WHILE THE IRVING AIR CHUTE COMPANY OF LEXINGTON, KENTUCKY, SUBMITTED A NET UNIT PRICE OF $149.61. HOWEVER, WHEN THE COST TO THE GOVERNMENT OF SHIPMENT TO INITIAL POINT OF DESTINATION IS INCLUDED, THE BID PRICES BECOME $150.899 FOR JAYVAL AND $150.338 FOR IRVING. BOTH ARE SMALL BUSINESS FIRMS ELIGIBLE FOR AWARD UNDER THE CRITERIA ESTABLISHED IN THE INVITATION. IF NEGOTIATION IS TO BE CONDUCTED WITH ELIGIBLE BIDDERS IN THE ORDER OF NET PRICES OFFERED, THE AWARD SHOULD BE OFFERED FIRST TO JAYVAL. IF, HOWEVER, ORDER OF PRECEDENCE SHOULD BE BASED ON DELIVERED COST, IRVING IS ENTITLED TO PRIORITY.

SECTION 3-219 OF THE ARMED SERVICES PROCUREMENT REGULATION SETS OUT CERTAIN STANDARDS FOR APPLICATION IN THE NEGOTIATION OF SET-ASIDES FOR LABOR SURPLUS AREAS. SECTION 3-219.4 (A) PROVIDES THAT NEGOTIATION FOR SET-ASIDES WITH SMALL BUSINESS FIRMS IN LABOR SURPLUS AREAS "* * * SHALL BEGIN WITH THE BIDDER OR OFFEROR WHICH SUBMITTED THE LOWEST RESPONSIVE BID OR PROPOSAL IN CONNECTION WITH THE PROCUREMENT OF THE QUANTITIES NOT SET ASIDE.'

IT APPEARS THAT IF NEGOTIATION BEYOND THE FIRST IS NECESSARY, SUBSEQUENT BIDDERS OR OFFERORS WILL BE CONSIDERED IN THE ORDER OF THEIR BIDS OR PROPOSALS ON THE UNRESERVED QUANTITIES, SINCE SECTION 1-706.6 (D) OF THE ASPR, WHICH DEALS WITH A PARALLEL SITUATION, PARTIAL SET ASIDES FOR SMALL BUSINESS, SETS OUT THE EQUIVALENT RULE AS FOLLOWS:

* * * NEGOTIATIONS SHALL BE CONDUCTED WITH SUCH SMALL BUSINESS CONCERNS IN THE ORDER OF THEIR BIDS OR PROPOSALS ON THE NON-SET-ASIDE PORTION BEGINNING WITH THE LOWEST RESPONSIVE BID OR INITIAL PROPOSAL. * * *

WE AGREE WITH THE OPINION EXPRESSED IN THE ASSISTANT DEPUTY'S LETTER, THAT IN ESTABLISHING THE ORDER OF PRECEDENCE GOVERNING CONSIDERATION OF BIDDERS FOR AWARD ON THE QUANTITIES SET ASIDE FOR LABOR SURPLUS AREAS, OTHERWISE ELIGIBLE BIDDERS SHALL FIRST BE RANKED IN THE ORDER IN WHICH THEY WOULD BE CONSIDERED FOR AWARD ON THE NON-SET ASIDE PORTION. CF. B- 135873, JULY 29, 1958. IN DETERMINING THE LOW RESPONSIBLE BID ON THE NON- SET-ASIDE PORTION, CONSIDERATION MUST BE GIVEN TO THE GOVERNMENT'S SHIPPING COSTS TO INITIAL DESTINATION. 10 COMP. GEN. 402. THEREFORE, IT APPEARS PROPER ALSO TO CONSIDER FREIGHT COSTS IN DETERMINING ORDER OF PRECEDENCE FOR NEGOTIATION ON THE SET ASIDE PORTIONS.

A COPY OF THIS LETTER IS BEING FURNISHED TO THE ATTORNEY FOR THE IRVING AIR CHUTE COMPANY, INC. ..END :