B-148019, APRIL 20, 1962, 41 COMP. GEN. 682

B-148019: Apr 20, 1962

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BIDS - QUALIFIED - ALL OR NONE - COMBINATION OF PROCUREMENTS - EVALUATION - OPTIONS - ADDITIONAL QUANTITIES - LIMITATIONS AN "ALL OR NONE" RESTRICTION IN A BID FOR THE NON-SET-ASIDE PORTION OF A PROCUREMENT WHICH REFERRED TO BOTH THE NON-SET-ASIDE PROCUREMENT AND THE LABOR SURPLUS AND SMALL BUSINESS SET-ASIDE PORTION THAT WAS TO BE AWARDED SEPARATELY. MUST BE CONSTRUED IN THE LIGHT OF THE CONTEXT AND CIRCUMSTANCES AS COMBINING THE TWO PROCUREMENTS AND AGAINST THE BIDDER WHO CONTENDS ON THE BASIS OF A GRAMMARIAN'S POINT OF VIEW THAT THE ALL OR NONE RESTRICTION WAS TO BE APPLIED SEPARATELY AND. AN INVITATION WHICH PROVIDES FOR AWARD OF A CONTRACT FOR MINIMUM QUANTITIES WITH OPTION RESERVED IN THE GOVERNMENT FOR ONE YEAR AFTER AWARD TO INCREASE THE QUANTITIES BY 300 PERCENT NOT ONLY RESULTS IN INCREASED COSTS TO THE GOVERNMENT IF BIDDERS HAVE HAD TO BASE PRICES ON POSSIBLE INCREASES IN PRODUCTION COSTS OR.

B-148019, APRIL 20, 1962, 41 COMP. GEN. 682

BIDS - QUALIFIED - ALL OR NONE - COMBINATION OF PROCUREMENTS - EVALUATION - OPTIONS - ADDITIONAL QUANTITIES - LIMITATIONS AN "ALL OR NONE" RESTRICTION IN A BID FOR THE NON-SET-ASIDE PORTION OF A PROCUREMENT WHICH REFERRED TO BOTH THE NON-SET-ASIDE PROCUREMENT AND THE LABOR SURPLUS AND SMALL BUSINESS SET-ASIDE PORTION THAT WAS TO BE AWARDED SEPARATELY, LATER, UNDER NEGOTIATED PROCEDURES, MUST BE CONSTRUED IN THE LIGHT OF THE CONTEXT AND CIRCUMSTANCES AS COMBINING THE TWO PROCUREMENTS AND AGAINST THE BIDDER WHO CONTENDS ON THE BASIS OF A GRAMMARIAN'S POINT OF VIEW THAT THE ALL OR NONE RESTRICTION WAS TO BE APPLIED SEPARATELY AND, THEREFORE, SUCH AN ALL OR NONE RESTRICTION MAKES THE BID NONRESPONSIVE TO THE INVITATION FOR THE NON-SET-ASIDE PROCUREMENT. AN INVITATION WHICH PROVIDES FOR AWARD OF A CONTRACT FOR MINIMUM QUANTITIES WITH OPTION RESERVED IN THE GOVERNMENT FOR ONE YEAR AFTER AWARD TO INCREASE THE QUANTITIES BY 300 PERCENT NOT ONLY RESULTS IN INCREASED COSTS TO THE GOVERNMENT IF BIDDERS HAVE HAD TO BASE PRICES ON POSSIBLE INCREASES IN PRODUCTION COSTS OR, CONVERSELY, IS UNFAIR TO BIDDERS WHO BASED THEIR PRICES ON THE POSSIBILITY OF THE GOVERNMENT'S EXERCISE OF ITS OPTION, BUT, MORE SIGNIFICANT, SUCH AN OPTION PROVISION DOES NOT GIVE THE GOVERNMENT ANY ASSURANCE THAT THE PRICES OBTAINED BY COMPETITIVE ADVERTISEMENT WILL REMAIN THE LOWEST OBTAINABLE AFTER A YEAR; THEREFORE, IN FUTURE PROCUREMENTS BOTH THE QUANTITIES COVERED BY THE OPTION AND THE TIME WITHIN WHICH THE OPTION MAY BE EXERCISED SHOULD BE LIMITED.

TO THE SECRETARY OF THE NAVY, APRIL 20, 1962:

REFERENCE IS MADE TO A LETTER DATED JANUARY 23, 1962 ( RL .1), WITH ENCLOSURES, FROM COMMANDER M. BARTON WILSON, SC, U.S. NAVY, ACTING ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, REQUESTING OUR DECISION AS TO WHETHER THE CONDITIONS SET FORTH IN A BID SUBMITTED BY THE ROFLAN COMPANY UNDER INVITATION FOR BIDS NO. 104-1351 62, DATED DECEMBER 22, 1961, AS AMENDED ON DECEMBER 28, 1961, ARE SUCH AS TO MAKE THE BID NONRESPONSIVE.

THE RECORD SHOWS THAT BY THE CITED INVITATION THE SHIPS PARTS CONTROL CENTER AT MECHANICSBURG, PENNSYLVANIA, REQUESTED BIDS FOR FURNISHING CERTAIN STATED QUANTITIES OF HAND LANTERN ASSEMBLIES ( LOTS 1 AND 2) AND CERTAIN QUANTITIES OF HANDLES ( LOTS 3 AND 4), ALL IN ACCORDANCE WITH THE PRESCRIBED SPECIFICATIONS, THE BIDS TO BE OPENED AT 2:00 P.M. ON JANUARY 8, 1962. UNDER PARAGRAPH 30.20 OF THE ADDITIONAL TERMS AND CONDITIONS ADDITIONAL QUANTITIES OF LANTERN ASSEMBLIES AND HANDLES WERE SET ASIDE FOR AWARD ONLY TO ONE OR MORE LABOR SURPLUS AREA CONCERNS, AND, TO A LIMITED EXTENT, TO SMALL BUSINESS CONCERNS NOT QUALIFYING AS LABOR SURPLUS AREA CONCERNS. THE CITED PARAGRAPH CONTAINS THE FOLLOWING LANGUAGE:

* * * NEGOTIATIONS FOR AWARD OF THE SET-ASIDE PORTION WILL BE CONDUCTED ONLY WITH RESPONSIBLE LABOR SURPLUS AREA CONCERNS (AND SMALL BUSINESS CONCERNS TO THE EXTENT INDICATED BELOW) WHO HAVE SUBMITTED RESPONSIVE BIDS OR PROPOSALS ON THE NON-SET-ASIDE PORTION AT A UNIT PRICE WITHIN120 PERCENT OF THE HIGHEST AWARD MADE ON THE NON-SET-ASIDE PORTION. * * *

IT WAS PROVIDED FURTHER THAT NEGOTIATIONS FOR THE SET-ASIDE PORTION WOULD BE CONDUCTED WITH SUCH BIDDERS IN THE ORDER OF PRIORITY SET FORTH IN THE INDICATED PARAGRAPH.

WITH THE LETTER OF JANUARY 23, 1962, THERE WAS ENCLOSED AN ABSTRACT OF BIDS SHOWING THAT FIVE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION, ALTHOUGH TWO OF THE BIDDERS DID NOT BID ON LOTS 3 AND 4. THE LOWEST BID WAS THAT SUBMITTED BY THE ROFLAN COMPANY AT UNIT PRICES OF $3.03 FOR THE FIXED QUANTITY OF 6,000 HAND LANTERN ASSEMBLIES CALLED FOR UNDER LOT 1, $3.03 FOR THE QUANTITY OF ASSEMBLIES CALLED FOR UNDER LOT 2, $1.59 FOR THE FIXED QUANTITY OF 2,000 HANDLES CALLED FOR UNDER LOT 3, AND $1.59 FOR THE QUANTITY OF HANDLES CALLED FOR UNDER LOT 4.

HOWEVER, THE BID OF THE ROFLAN COMPANY CONTAINED THE FOLLOWING LANGUAGE:

PRICES QUOTED FOR LOTS 1 AND 2, AND THE SET-ASIDE PORTION OF LOT 2, ARE QUOTED ON AN ALL OR NONE BASIS. ( ITALICS SUPPLIED.)

SIMILAR LANGUAGE WAS INCLUDED IN ROFLAN'S BID ON LOTS 3 AND 4.

THE FOREGOING LANGUAGE WAS UNDERSTOOD BY THE PROCURING ACTIVITY TO MEAN THAT ROFLAN'S BID PRICES WERE CONTINGENT UPON ITS BEING AWARDED LOTS 1 AND 2 AND ALSO THE SET-ASIDE PORTION OF LOT 2. INDEED, IT WAS DOUBT AS TO THE RESPONSIVENESS AND ACCEPTABILITY OF A BID SO COMBINING THE SET-ASIDE AND NON-SET-ASIDE PORTIONS OF THE PROCUREMENT WHICH CAUSED SUBMISSION OF THE MATTER TO US BY NAVY FOR DECISION.

IT IS NOW CONTENDED BY ROFLAN, BY LETTER OF APRIL 6, 1962, FROM COUNSEL, THAT THE LANGUAGE IN QUESTION IS NOT SUSCEPTIBLE OF THIS MEANING. THE ONLY MEANING OF THE LANGUAGE, SAYS ROFLAN, IS THAT THE PRICES QUOTED FOR LOTS 1 AND 2 ARE ON AN ALL OR NONE BASIS, AND THAT THE PRICES QUOTED FOR THE SET-ASIDE PORTION OF LOT 2 ARE ALSO ON AN ALL OR NONE BASIS, BUT THAT THE ALL OR NONE RESTRICTION DOES NOT COMBINE THE SET-ASIDE WITH LOTS 1 AND 2. IN SUPPORT OF THIS POSITION, IT IS ARGUED THAT AN INTENT TO COMBINE ALL THREE QUANTITIES WOULD HAVE DICTATED USE OF THE FOLLOWING LANGUAGE AND PUNCTUATION:

PRICES QUOTED FOR LOTS 1, 2 AND THE SET-ASIDE PORTION OF LOT 2, ARE QUOTED ON ALL OR NONE BASIS.

IT IS POINTED OUT THAT THE LANGUAGE AND PUNCTUATION ACTUALLY USED COMBINE LOTS 1 AND 2 WITHOUT THE USE OF A COMMA, BUT THAT THE PHRASE "AND THE SET- ASIDE PORTION OF LOT 2" IS SET OFF BY COMMAS. FROM THIS IT IS ARGUED THAT AN INTENT IS CLEARLY REVEALED TO MAKE THE "ALL OR NONE" RESTRICTION APPLICABLE SEPARATELY TO " LOTS 1 AND 2" AND TO "THE SET-ASIDE PORTION OF LOT 2.' LETTERS FROM THE ENGLISH DEPARTMENTS OF TWO COLLEGES HAVE BEEN SUBMITTED IN SUPPORT OF THIS POSITION.

IT SEEMS TO US THAT IT IS NOT SUFFICIENT TO DEMONSTRATE A MEANING WHICH THE WORDS USED MAY HAVE SOLELY FROM A GRAMMARIAN'S POINT OF VIEW. WE ARE CONCERNED WITH THE MEANING WHICH THE LANGUAGE REASONABLY CONVEYS IN THE LIGHT OF THE CIRCUMSTANCES IN WHICH IT WAS USED. THE APPARENT MEANING OF THE LANGUAGE ON FIRST READING IS THAT THE PRICES QUOTED ARE ON AN ALL OR NONE BASIS COVERING LOT 1 AND BOTH THE SET ASIDE AND NON-SET-ASIDE PORTIONS OF LOT 2. THIS VIEW FINDS SUPPORT IN THE FACT THAT THE MEANING NOW CONTENDED FOR DID NOT SUGGEST ITSELF TO ANY OF THE MANY GOVERNMENT PEOPLE WHO HAVE CONSIDERED THE BID. CERTAINLY, IT CANNOT BE CONTENDED THAT THE MEANING ASSUMED BY THESE PEOPLE IS NOT A POSSIBLE AND REASONABLE MEANING. OF COURSE, THIS DOES NOT PROVE THE BIDDER'S INTENT, BUT IT DOES DEMONSTRATE RATHER CLEARLY THAT THE LANGUAGE USED, WHEN CONSIDERED IN THE CONTEXT OF THE INVITATION AS A WHOLE, FAILS TO CONVEY TO THE AVERAGE READER THE INTENTION NOW CONTENDED FOR.

FURTHERMORE, WE UNDERSTAND IT TO BE THE BIDDER'S POSITION THAT THE LANGUAGE AND PUNCTUATION USED WERE DELIBERATELY CHOSEN TO EXPRESS AN INTENTION NOT TO TIE TOGETHER THE SET-ASIDE AND NON-SET-ASIDE PORTIONS OF THE PROCUREMENT. AS WE HAVE INDICATED, IT SEEMS TO US THAT THE MEANING THIS LANGUAGE WOULD CONVEY TO THE AVERAGE READER, AT LEAST IN THE ABSENCE OF SOMETHING FURTHER, IS PRECISELY THE OPPOSITE. IN SHORT, IT APPEARS THAT ROFLAN DELIBERATELY BUT UNWISELY CHOSE LANGUAGE TO EXPRESS A CERTAIN MEANING WHICH IN FACT CONVEYS EXACTLY THE CONTRARY MEANING TO THE AVERAGE PERSON. IN SUCH CASE, IT IS OUR VIEW THAT ROFLAN MUST BEAR THE CONSEQUENCES OF ITS POOR CHOICE OF WORDS TO EXPRESS ITS INTENTION.

THERE ARE LOGICAL REASONS WHICH MAY NOT HAVE BEEN CONSIDERED BY THE ENGLISH DEPARTMENTS REFERRED TO WHICH ARGUE FOR AN INTERPRETATION OF THE LANGUAGE AS AN ALL OR NONE RESTRICTION ON THE TOTAL PROCUREMENT, REGARDLESS OF THE PLACEMENT OF THE COMMAS. IN THE FIRST PLACE, THE SET ASIDE PORTION OF LOT 2 WAS NOT AND COULD NOT BE IDENTIFIED AS A NUMBERED LOT. FURTHERMORE, SINCE IT WAS TO BE AWARDED BY NEGOTIATION SUBSEQUENT TO AND SEPARATE FROM THE AWARD ON LOTS 1 AND 2, IT SEEMS ONLY NATURAL TO DESCRIBE IT AS ROFLAN DID AND TO SET OFF ITS DESCRIPTION BY COMMAS FROM LOTS 1 AND 2.

CONSIDERATION MUST ALSO BE GIVEN TO THE FACT THAT THE ONLY REASON FOR THE USE BY A BIDDER OF AN ,ALL OR NONE" RESTRICTION IS TO PROTECT HIMSELF AGAINST AN AWARD OF LESS THAN THE QUANTITY COVERED BY THE "ALL OR NONE" RESTRICTION AT THE UNIT PRICES WHICH WERE BASED ON THE LARGER QUANTITY. WHILE IT IS TRUE THAT PARAGRAPH 8 (C) OF THE TERMS OF THE INVITATION RESERVED TO THE GOVERNMENT THE RIGHT TO MAKE AN AWARD AT THE UNIT PRICES QUOTED FOR LESS THAN THE TOTAL QUANTITY OF ANY ITEM BID UPON (UNLESS THE BIDDER SPECIFIED OTHERWISE IN HIS BID), THIS RESERVATION APPLIED ONLY TO THE ITEMS TO BE AWARDED UNDER THE INVITATION, NOT TO THE QUANTITY TO BE AWARDED SEPARATELY UNDER THE SET ASIDE NEGOTIATIONS. ROFLAN'S INTERPRETATION OF ITS LANGUAGE IS THAT IT WISHED TO PROTECT ITSELF AGAINST POSSIBLE AWARD UNDER THE SET-ASIDE NEGOTIATIONS OF LESS THAN THE TOTAL QUANTITY SET ASIDE. HOWEVER, NO BIDDER WAS REQUESTED OR EXPECTED TO MAKE AN OFFER ON THE SET-ASIDE QUANTITY IN HIS RESPONSE TO THE INVITATION, WHICH ASKED FOR BIDS ON THE NON-SET-ASIDE QUANTITY ONLY. NO BIDDER NEEDED PROTECTION AGAINST THE AWARD OF LESS THAN THE TOTAL OF THE SET-ASIDE QUANTITY. UNDER NEGOTIATIONS FOR THE SET-ASIDE ALL BIDDERS WOULD HAVE THE RIGHT TO REFUSE TO ACCEPT AWARD FOR WHATEVER QUANTITY MIGHT BE OFFERED TO THEM, WHETHER FOR THE TOTAL QUANTITY OR ONLY A PART THEREOF. CONSEQUENTLY, ROFLAN'S ALL OR NONE RESTRICTION IS SUPERFLUOUS SO FAR AS THE SET-ASIDE PORTION IS CONCERNED UNLESS IT APPLIES TO ALL THREE QUANTITIES MENTIONED. ON THE OTHER HAND, IF GIVEN THE MEANING WE BELIEVE IT SHOULD, THE RESTRICTION WOULD PROTECT ROFLAN AGAINST THE POSSIBILITY THAT SOME OTHER BIDDER MIGHT BE IN A HIGHER PRIORITY CLASSIFICATION AND THUS BE GIVEN FIRST CHANCE AT THE SET-ASIDE QUANTITY.

ALSO, WE CANNOT AGREE WITH ROFLAN'S COUNSEL IN HIS ASSUMPTION THAT CERTAIN LANGUAGE IN AN OPTIONAL LONG-FORM SET-ASIDE CLAUSE (PAR. 1 804.2 (C), ASPR) WHICH WAS NOT USED IN THE INSTANT INVITATION, IS PERTINENT TO THE PRESENT QUESTION. IT MAY BE NOTED THAT WHEN SUCH CLAUSE IS USED BIDDERS ARE REQUIRED TO FILL OUT AN ADDITIONAL " STATEMENT OF SET-ASIDE QUANTITY DESIRED" WHICH WAS NOT INCLUDED IN THE PRESENT INVITATION.

IT IS OUR VIEW THAT ROFLAN'S BID IS THEREFORE AN "ALL OR NONE" BID WHICH MUST BE CONSIDERED NONRESPONSIVE TO THE INVITATION. INDEED, ROFLAN'S COUNSEL AGREES THAT SUCH AN ALL OR NONE BID WOULD BE NONRESPONSIVE, CITING PARAGRAPH 2-404.2 (D) (IV), ARMED SERVICES PROCUREMENT REGULATION. UNDER USUAL CIRCUMSTANCES, AN INCREASE IN THE QUANTITY OF ITEMS MANUFACTURED RESULTS IN A DECREASE IN UNIT PRODUCTION COST. BY SUBMITTING A BID CONDITIONED ON AWARD OF BOTH THE SET-ASIDE AND THE NON-SET-ASIDE PORTIONS OF THE PROCUREMENT, ROFLAN WAS IN A POSITION TO QUOTE A LOWER PRICE THAN IT MIGHT HAVE OFFERED ON THE NON SET-ASIDE PORTION ALONE. ONE OF THE ESSENTIAL ELEMENTS OF ANY SYSTEM OF COMPETITIVE SEALED BIDS IS THAT COMPETITION BE ON AN EQUAL BASIS. IN OTHER WORDS, ALL BIDDERS MUST BE GIVEN AN OPPORTUNITY TO BID ON THE SAME REQUIREMENTS, BOTH AS TO QUALITY AND QUANTITY.

IT IS NOTED THAT THE BID SUBMITTED BY THE SECOND LOW BIDDER EXCEEDED ROFLAN'S BID BY ONLY THREE CENTS PER UNIT ON LOTS 1 AND 2, AND WAS HIGHER OVERALL BY ONLY $2,107.81. IT SEEMS ENTIRELY POSSIBLE, CONSIDERING THE PRESUMED REDUCTION IN UNIT COSTS RESULTING FROM THE MANUFACTURE OF LARGER QUANTITIES, THAT THIS BIDDER MIGHT HAVE UNDERBID ROFLAN IF IT HAD BEEN PERMITTED TO BID ON THE SAME QUANTITY.

FOR THE FOREGOING REASONS, WE CONCLUDE THAT THE ROFLAN BID MUST BE DISREGARDED AS NONRESPONSIVE TO THE INVITATION.

THERE IS ANOTHER ASPECT OF THE INVITATION WHICH WE FEEL COMPELLED TO DISCUSS. LOTS 2 AND 4 LIST BOTH A "MINIMUM" AND A "MAXIMUM" QUANTITY. THE MAXIMUM IS FOUR TIMES THE MINIMUM QUANTITY. IT IS STATED TO BE THE INTENTION OF THE GOVERNMENT TO OBLIGATE ITSELF TO PURCHASE THE MINIMUM QUANTITY ONLY, AND BIDDERS ARE SPECIFICALLY TOLD TO BID ONLY ON THIS QUANTITY. THEY ARE FURTHER ADVISED THAT BIDS ARE NOT DESIRED ON THE MAXIMUM QUANTITY AS SUCH,"AS THIS QUANTITY REPRESENTS ONLY AN ESTIMATE OF THE NUMBER OF UNITS THE GOVERNMENT WILL ORDER DURING THE LIFE OF THE CONTRACT.' HOWEVER, BIDDERS ARE TOLD BY PARAGRAPH 4.6 ON PAGE 8 OF THE INVITATION THAT THE GOVERNMENT HAS THE RIGHT, FOR A PERIOD OF ONE YEAR AFTER AWARD, TO ORDER ADDITIONAL QUANTITIES UP TO THE STATED MAXIMUM, WHICH THE CONTRACTOR WILL BE OBLIGATED TO FURNISH AT THE SAME PRICES. SIMPLY STATED, THE INVITATION PROVIDES FOR THE AWARD OF A CONTRACT FOR THE MINIMUM QUANTITIES WITH AN OPTION RESERVED IN THE GOVERNMENT FOR ONE YEAR AFTER AWARD TO INCREASE THOSE QUANTITIES BY 300 PERCENT.

THIS FEATURE OF THE INVITATION MAY BE THE RESULT OF THE PROVISIONS OF PARAGRAPH 1-350.1, NAVY PROCUREMENT DIRECTIVES, WHICH READS AS FOLLOWS:

(A) TO ASSURE FLEXIBILITY FOR CHANGING PROGRAMS, IT IS THE GENERAL POLICY OF THE NAVY TO HOLD TO A MINIMUM THE AMOUNT OF FUNDS UNDER CONTRACT OBLIGATION, AT ANY ONE TIME, FOR THE SUPPLIES THE NAVY MUST BUY.

(B) * * * CONSISTENT WITH THE OBTAINING OF REASONABLE PRICES, WIDE USE SHOULD BE MADE OF ,INDEFINITE (SIC) QUANTITY" OR "OPEN END" CONTRACTS OR OTHER METHODS FOR OBTAINING INITIAL QUANTITIES OR REORDERS, WITHOUT OBLIGATING FUNDS FOR THE QUANTITIES FOR WHICH TOTAL REQUIREMENTS MAY BE KNOWN, OR FOR WHICH FUNDS MAY BE AVAILABLE. * * *

(C) IT IS NOT DESIRED THAT PURCHASES BE MADE IN QUANTITIES SO SMALL THAT PRICES ARE THEREBY INCREASED * * *. ( ITALICS SUPPLIED.)

IT SEEMS TO US THAT THE MAKING OF PURCHASES IN SUCH A MANNER AS TO OBLIGATE THE GOVERNMENT FOR LESS THAN KNOWN QUANTITY REQUIREMENTS OF AN ITEM TENDS INEVITABLY TO RESULT IN HIGHER UNIT PRICES THAN COULD BE OBTAINED FOR LARGER QUANTITIES OF THE ITEM. AN OPTION OF THE CHARACTER HERE INVOLVED IS NOT, IN OUR OPINION, IN THE BEST INTEREST OF THE GOVERNMENT IF THE KNOWN REQUIREMENTS EXCEED THE MINIMUM QUANTITIES UPON WHICH BIDS ARE SOLICITED. THE EFFECT OF SUCH AN OPTION IS TO REQUIRE BIDDERS TO GUARANTEE FIRM PRICES FOR ONE YEAR, WITH NO GUARANTEE THAT ORDERS WILL BE PLACED. FACED WITH SUCH A REQUIREMENT, BIDDERS MUST EITHER INCLUDE A "CUSHION" IN THEIR PRICES TO TAKE CARE OF POSSIBLE INCREASES IN PRODUCTION COST, OR GAMBLE THAT ADDITIONAL ORDERS WILL BE PLACED AND FIGURE THEIR BID PRICES ON MORE THAN THE MINIMUM QUANTITIES. THE FIRST ALTERNATIVE RESULTS IN UNNECESSARY INCREASED COST TO THE GOVERNMENT, AND THE SECOND ALTERNATIVE IS UNFAIR TO BIDDERS.

MORE SIGNIFICANT, WE THINK, IS THE FACT THAT THERE IS NO ASSURANCE THE PRICES OBTAINED BY COMPETITIVE ADVERTISEMENT WILL REMAIN THE LOWEST OBTAINABLE FOR A YEAR THEREAFTER. AS WAS STATED IN 19 COMP. GEN. 980, 983, * * * IT IS PLAINLY NOT COMPATIBLE WITH THE INTENT OF SECTION 3709, REVISED STATUTES, THAT A RIGHT BE RESERVED INDEFINITELY OR FOR AN UNREASONABLE PERIOD TO ORDER ADDITIONAL QUANTITIES WITHOUT GIVING THE GOVERNMENT THE BENEFIT OF SUCH COMPETITION AS THE INDUSTRY AFFORDS AT THE TIME THE NEED IS DEFINITELY ASCERTAINED.

CERTAINLY, THE STATUTES WHICH REQUIRE AWARD AFTER ADVERTISING TO THE LOWEST RESPONSIBLE BIDDER CONTEMPLATE REASONABLE CONTEMPORANEOUSNESS IN ADVERTISING AND AWARD. IT IS NOT A SOUND ANSWER TO SAY THAT THE OPTION WILL NOT BE EXERCISED WITHOUT A PRIOR TEST OF THE MARKET. THE SUPPLIES IN QUESTION ARE NOT READILY AVAILABLE ON THE OPEN MARKET, AND THE ONLY SURE WAY TO DETERMINE WHETHER THE CONTRACT PRICES ARE ADVANTAGEOUS IS THROUGH A READVERTISEMENT. IF SUCH ADVERTISING PRODUCES LOWER PRICES, THE OPTION HAS PROVEN UNNECESSARY. IF ADVERTISING BRINGS HIGHER PRICES, THE NEW BIDS ARE REJECTED. WE DO NOT CONSIDER IT SOUND PROCUREMENT POLICY FOR THE GOVERNMENT TO PUT ITSELF IN A POSITION WHERE BIDS ARE REQUESTED SOLELY FOR THE PURPOSE OF DETERMINING WHETHER AN AVAILABLE OPTION PRICE CAN BE BETTERED. BIDDERS ARE ENTITLED TO RELY, WE THINK, ON THE ASSUMPTION THAT AN AWARD WILL ORDINARILY BE MADE WHEN THE GOVERNMENT SOLICITS BIDS. THE PROVISIONS OF PARAGRAPH 1-309 OF THE ARMED SERVICES PROCUREMENT REGULATION ARE PERTINENT ON THIS POINT. THAT PARAGRAPH STATES IT TO BE THE GENERAL POLICY OF THE DEPARTMENT OF DEFENSE TO SOLICIT BIDS, PROPOSALS OR QUOTATIONS ONLY WHERE THERE IS A DEFINITE INTENTION TO AWARD A CONTRACT OR PURCHASE ORDER.

WE REALIZE THAT THE INCLUSION OF OPTION CLAUSES IN INVITATIONS IS SANCTIONED BY THE ARMED SERVICES PROCUREMENT REGULATION. PARAGRAPH 1 1503, ASPR, PROVIDES THAT SUCH CLAUSES MAY BE USED WHERE INCREASED REQUIREMENTS "WITHIN THE PERIOD OF CONTRACT PERFORMANCE ARE FORESEEABLE.' WE DO NOT BELIEVE THIS LANGUAGE WAS INTENDED TO APPLY IN A SITUATION WHERE INCREASED REQUIREMENTS ARE ACTUALLY KNOWN RATHER THAN FORESEEABLE. IT MAY ALSO BE NOTED THAT THE "PERIOD OF CONTRACT PERFORMANCE" UNDER THE INVITATION IN QUESTION IS CONSIDERABLY LESS THAN ONE YEAR UNDER THE DELIVERY SCHEDULE OFFERED BY ANY BIDDER.

PARAGRAPH 1-1505, ASPR, PROVIDES THAT OPTIONS SHOULD BE EXERCISED ONLY IF IT IS DETERMINED TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS OUR VIEW THAT THE BEST METHOD OF DETERMINING THE MOST ADVANTAGEOUS PRICE IS BY SUBMITTING THE REQUIREMENT TO THE TEST OF COMPETITIVE BIDDING. YET PARAGRAPH 1-1505, ASPR, STATES THAT A NEW FORMAL ADVERTISEMENT OR REQUEST FOR PROPOSALS SHOULD NOT BE USED TO TEST THE MARKET IF THE CONTRACTING OFFICER ANTICIPATES" THAT THE OPTION PRICE WILL BE THE BEST PRICE AVAILABLE. ALSO, THE USE OF A FORMAL NEW ADVERTISEMENT APPEARS TO BE PROHIBITED BY PARAGRAPH 1-309, ASPR, WHICH REQUIRES A DEFINITE INTENTION TO MAKE AN AWARD WHEN BIDS, PROPOSALS, OR QUOTATIONS ARE SOLICITED.

WE FURTHER QUESTION THE CONSISTENCY WITH THE PROVISIONS OF PARAGRAPH 1- 1503 OF CERTAIN OF THE METHODS SUGGESTED BY PARAGRAPH 1-1505 FOR TESTING THE MARKET. PARAGRAPH 1-1503 STATES THAT OPTION CLAUSES GENERALLY SHOULD NOT BE USED WHERE THE SUPPLIES BEING PURCHASED ARE READILY AVAILABLE ON THE OPEN MARKET.

HOWEVER, PARAGRAPH 1-1505 SUGGESTS AS ALTERNATIVE METHODS OF TESTING THE MARKET "AN INFORMAL INVESTIGATION OF PRICES, OR OTHER EXAMINATION OF THE MARKET," OR RELIANCE ON "READILY SCERTAINABLE" ESTABLISHED PRICES. WOULD APPEAR TO BE IMPOSSIBLE TO EXAMINE THE MARKET OR TO ASCERTAIN ESTABLISHED PRICES UNLESS THE SUPPLIES ARE READILY AVAILABLE ON THE OPEN MARKET, AND IN SUCH CASE PARAGRAPH 1-1503 INDICATES THAT AN OPTION SHOULD NOT BE USED. POSSIBLY THE CONTRACTING OFFICER COULD MAKE "AN INFORMAL INVESTIGATION OF PRICES" IN THE CASE OF SUPPLIES NOT AVAILABLE ON THE OPEN MARKET, BUT WE QUESTION THAT SUCH AN INVESTIGATION WOULD AFFORD A CLEAR OR RELIABLE INDICATION THAT THE OPTION PRICES WERE MORE ADVANTAGEOUS.

WE HAVE GIVEN APPROVAL TO THE USE OF OPTIONS IN PAST DECISIONS. THOSE CASES, HOWEVER, HAVE INVOLVED ADDITIONAL QUANTITIES FAR LESS THAN HERE INVOLVED, AND HAVE LIMITED THE TIME WITHIN WHICH THE OPTION MAY BE EXERCISED TO A MUCH SHORTER TIME THAN ONE YEAR. WE BELIEVE THAT THE QUANTITIES COVERED BY AN OPTION AND THE TIME WITHIN WHICH THE OPTION MAY BE EXERCISED SHOULD BE LIMITED. AS A PRACTICAL MATTER, IT SEEMS TO US THAT THE ADDITIONAL QUANTITIES TO BE PROCURED THROUGH THE EXERCISE OF AN OPTION SHOULD BE LIMITED TO 25 PERCENT OF THE BASIC QUANTITIES BEING PURCHASED SAVE IN EXCEPTIONAL CASES. WE FURTHER BELIEVE THAT SO FAR AS SUPPLIES TO BE SPECIALLY MANUFACTURED ARE CONCERNED, OPTIONS SHOULD NOT EXTEND MUCH MORE THAN 90 DAYS BEYOND THE DATE OF INITIAL AWARD.

IN THIS PARTICULAR CASE, WE WILL NOT OBJECT TO THE EXERCISE OF THE OPTION RESERVED TO THE GOVERNMENT WITHIN THE NEXT 60 DAYS FOR WHATEVER QUANTITIES A NEED MAY THEN EXIST. NEEDS ARISING THEREAFTER SHOULD BE MADE THE SUBJECT OF A NEW PROCUREMENT ACTION.