B-150393, MAR. 21, 1963

B-150393: Mar 21, 1963

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TO THE REDMANSON CORPORATION: REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 30 AND DECEMBER 7. THE INVITATION CALLED FOR FURNISHING OPTION ITEMS OF REPAIR PARTS FOR WHICH PRICES WERE NOT TO BE QUOTED BUT FOR WHICH PRICES WERE TO BE ESTABLISHED AS PROVIDED FOR IN THE INVITATION AND RESULTING CONTRACT. THAT ARE NEEDED AND UPON EXERCISE OF THE OPTION. BIDS WERE SOLICITED ON OPTIONS FOR ADDITIONAL QUANTITIES OF AIR CONDITIONERS OF 10 (OPTION 1). THE FIRM ITEMS AND QUANTITIES OF AIR CONDITIONERS AND TECHNICAL DATA WERE TO BE AWARDED TO ONE BIDDER AND THE ITEMS OF REPAIR PARTS WERE TO BE FURNISHED IF AND TO THE EXTENT THAT THE OPTION THEREFOR WERE EXERCISED. WERE NOT REQUIRED TO. IT ALSO ADVISED BIDDERS THAT IF SUCH OPTION WERE EXERCISED IN THE AWARD FOR ITEMS FOR WHICH A BIDDER HAD NOT QUOTED PRICES.

B-150393, MAR. 21, 1963

TO THE REDMANSON CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 30 AND DECEMBER 7, 1962, AND MARCH 6, 1963, PROTESTING THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER INVITATION FOR BIDS NO. 600-528-63'S ISSUED BY THE U.S. NAVY PURCHASING OFFICE ON OCTOBER 9, 1962.

THE CITED INVITATION SOLICITED BIDS--- TO BE OPENED NOVEMBER 16, 1962--- FOR FURNISHING VARIOUS FIRM ITEMS AND QUANTITIES OF VARIOUS SIZES OF AIR CONDITIONERS, TOGETHER WITH FIRM ITEMS AND QUANTITIES OF TECHNICAL DATA. ALSO, THE INVITATION CALLED FOR FURNISHING OPTION ITEMS OF REPAIR PARTS FOR WHICH PRICES WERE NOT TO BE QUOTED BUT FOR WHICH PRICES WERE TO BE ESTABLISHED AS PROVIDED FOR IN THE INVITATION AND RESULTING CONTRACT, AFTER RECEIPT OF PROVISIONING TECHNICAL DOCUMENTATION AND AFTER DETERMINATION BY THE GOVERNMENT OF THE KINDS AND QUANTITIES OF REPAIR PARTS, IF ANY, THAT ARE NEEDED AND UPON EXERCISE OF THE OPTION, THEREFOR, ALL NECESSARILY SUBSEQUENT TO AWARD. BIDS WERE SOLICITED ON OPTIONS FOR ADDITIONAL QUANTITIES OF AIR CONDITIONERS OF 10 (OPTION 1), 20 (OPTION 2) OR 30 (OPTION 3) OF EACH OF THE FOUR SIZES, TOGETHER WITH MANUALS THEREFOR (ITEMS 15 THROUGH 19), WITH PROVISION FOR EXERCISE OF THE OPTION IN THE AWARD OR WITHIN 90 DAYS AFTER AWARD. THE FIRM ITEMS AND QUANTITIES OF AIR CONDITIONERS AND TECHNICAL DATA WERE TO BE AWARDED TO ONE BIDDER AND THE ITEMS OF REPAIR PARTS WERE TO BE FURNISHED IF AND TO THE EXTENT THAT THE OPTION THEREFOR WERE EXERCISED. HOWEVER, WITH RESPECT TO THE OPTION ITEMS OF ADDITIONAL EQUIPMENT (OPTIONS 1, 2 AND 3), THE INVITATION STATED THAT BIDDERS SHOULD, BUT WERE NOT REQUIRED TO, QUOTE UNIT PRICES FOR SUCH OPTION ITEMS, AND IT ALSO ADVISED BIDDERS THAT IF SUCH OPTION WERE EXERCISED IN THE AWARD FOR ITEMS FOR WHICH A BIDDER HAD NOT QUOTED PRICES,AWARD COULD NOT BE MADE TO THAT BIDDER.

THE INVITATION FURTHER PROVIDED THAT ANY BID OFFERING LESS THAN 30 DAYS FOR ACCEPTANCE BY THE GOVERNMENT FROM THE DATE OF OPENING WOULD BE CONSIDERED NONRESPONSIVE AND WOULD BE REJECTED. IT ALSO CONTAINED AN "ASSUMPTION DATE" FOR AWARD BY DECEMBER 17, 1962, BY PROVIDING THAT IF AWARD WAS MADE LATER THAN SUCH DATE, THE DELIVERY TIMES STATED IN TERMS OF CALENDAR DAYS WOULD BE EXTENDED BY THE NUMBER OF DAYS THAT THE AWARD WAS LATER THAN DECEMBER 17, 1962. AMENDMENT NO. 2 TO THE INVITATION STATED THAT DELIVERY WAS "CRITICAL" AND THAT THE GOVERNMENT RESERVED THE RIGHT TO MAKE AWARD ON THE BASIS OF TIME OF DELIVERY. BIDS WERE THEREFORE INVITED ON AN ACCELERATED DELIVERY DATE (BID A) AND A MAXIMUM DELIVERY DATE (BID B). THE GOVERNMENT RESERVED THE RIGHT TO AWARD ON THE BASIS OF EITHER DELIVERY SCHEDULE.

IT IS REPORTED THAT THE AIRTEMP DIVISION, CHRYSLER CORPORATION, AND YOUR FIRM MET THE MINIMUM BID ACCEPTANCE TIME BY OFFERING 30 DAYS. BOTH CHRYSLER AND YOU QUOTED UNIT PRICES ON EACH OF THE OPTION ITEMS OF ADDITIONAL EQUIPMENT AS WELL AS ON THE BASIS OF FURNISHING ALL QUANTITIES OF ALL OTHER ITEMS. ALSO, CHRYSLER AND YOU BID THE SAME PRICES FOR EACH DELIVERY SCHEDULE. OTHER BIDDERS QUOTED HIGHER PRICES FOR THE ACCELERATED SCHEDULE OF DELIVERY THAN FOR THE MAXIMUM SCHEDULE. YOU WERE THE LOW BIDDER ON THE BASIC QUANTITIES AND ALSO ON THE QUANTITIES INVOLVED IF THE OPTION QUANTITIES OF 10 OR 20 EACH OF THE FOUR SIZES OF AIR CONDITIONERS WERE TO BE EXERCISED AT THE TIME OF AWARD. CHRYSLER WAS THE LOW BIDDER ON THE QUANTITIES IF THE OPTION QUANTITY OF 30 EACH OF THE FOUR SIZES WAS TO BE EXERCISED AT THE TIME OF AWARD.

IT IS REPORTED THAT IT IS THE STANDARD POLICY AND PRACTICE OF THE BUREAU OF SHIPS, WHERE BIDS ARE SOLICITED ON A STEPLADDER BASIS OR WITH OPTIONS FOR EQUIPMENT EXERCISABLE IN THE AWARD, TO DETERMINE PRIOR TO BID OPENING THE QUANTITY TO BE AWARDED. IN LINE WITH THIS POLICY A DECISION WAS MADE ON NOVEMBER 14, 1962, TWO DAYS BEFORE BID OPENING, TO EXERCISE THE OPTION IN THE AWARD FOR 30 EACH OF THE FOUR SIZES OF AIR CONDITIONERS.

SECTION 1-1504 (B) OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES IN EFFECT THAT, WHERE AN INVITATION CONTAINS AN OPTION FOR ADDITIONAL QUANTITIES EXERCISABLE AT OR AFTER THE TIME OF AWARD, THE INVITATION SHALL STATE THAT, IF THE OPTION IS TO BE EXERCISED IN THE AWARD, EVALUATION WILL BE ON THE BASIS OF THE TOTAL QUANTITY TO BE AWARDED, INCLUDING THE OPTION QUANTITY, BUT IF THE OPTION IS NOT EXERCISED IN THE AWARD, EVALUATION WILL BE ON THE BASIS OF THE QUANTITY TO BE AWARDED EXCLUSIVE OF THE OPTION QUANTITY. THE PROVISION OF THE INSTANT INVITATION (PAGE 6) EFFECTIVELY COMPLIED WITH THE REGULATIONS SINCE IT PROVIDED THAT AWARD WOULD BE MADE ONLY TO ONE BIDDER FOR ALL UNITS OF ITEMS 1, 3, 5, 7 AND 9 THROUGH 13 AND FOR ITEMS 2, 4, 6, 8 AND 14 SUBJECT TO THE EXERCISE OF THE OPTION FOR REPAIR PARTS (E AND M) "AND FOR THE QUANTITIES, IF ANY, OF ALL BUT NOT PART OF OPTION 1, 2 OR 3 (ITEMS 15 THRU 19) FOR WHICH OPTION FOR EQUIPMENT IS EXERCISED IN THE AWARD.'

YOUR PROTEST AGAINST THE AWARD OF THE CONTRACT TO CHRYSLER IS BASED ON THE FACT THAT CHRYSLER HAD STATED IN ITS BID THAT "OPTIONS ARE QUOTED BASED UPON AWARD FOR OPTIONS BEING RECEIVED PRIOR TO MARCH 1, 1963," THE OPTIONS REFERRED TO BEING THOSE IN CONNECTION WITH ITEM 15 THROUGH 19. THIS STATEMENT COULD NOT AND DID NOT AFFECT THE OBLIGATION OF THE GOVERNMENT TO EVALUATE THE BIDS ON THE BASIS OF THE TOTAL QUANTITY, PREVIOUSLY DETERMINED UPON, TO BE AWARDED AND ON THAT EVALUATION CHRYSLER WAS THE LOWEST BIDDER. IF, HOWEVER, THE OPTIONS FOR ADDITIONAL AIR CONDITIONERS HAD NOT BEEN EXERCISED IN THE AWARD, THE EFFECT OF CHRYSLER'S STATEMENT CONCERNING OPTION QUOTES WOULD HAVE BEEN TO REDUCE THE 90-DAY OPTION PERIOD BY THE NUMBER OF DAYS THAT ANY AWARD TO CHRYSLER WAS MADE SUBSEQUENT TO NOVEMBER 30, 1962. HOWEVER, IN THAT EVENT, EVALUATION WOULD HAVE BEEN ON A DIFFERENT BASIS AND CHRYSLER WOULD NOT HAVE BEEN THE LOW BIDDER.

IN YOUR LETTER OF DECEMBER 7, 1962, YOU STATE THAT AN AWARD TO YOUR FIRM WOULD SAVE THE GOVERNMENT MONEY ON REPAIR PARTS SINCE, BASED ON PRIOR EXPERIENCE IN FURNISHING SUCH PARTS, CHRYSLER WILL CHARGE SUBSTANTIALLY MORE THAN YOU WOULD CHARGE THEREFOR. THIS ALLEGED SAVING COULD NOT BE TAKEN INTO ACCOUNT IN BID EVALUATION SINCE THE TYPES AND QUANTITIES OF PARTS COULD NOT AND WERE NOT TO BE DETERMINED UNTIL WELL AFTER AWARD BUT BIDS HAD TO BE SUBMITTED ON THE BASIS OF FURNISHING THE PARTS ITEMS SUBJECT TO EXERCISE OF OPTION THEREFOR SUBSEQUENT TO AWARD. IN CONTRAST, BIDDERS WERE NOT REQUIRED TO BID ON THE OPTION ITEMS OF ADDITIONAL AIR CONDITIONERS AND SINCE THE GOVERNMENT DETERMINED PRIOR TO BID OPENING TO EXERCISE THESE OPTIONS FOR THE MAXIMUM, THE TYPES, QUANTITIES AND PRICES OF THE ADDITIONAL AIR CONDITIONERS WERE KNOWN SO EVALUATION NOT ONLY COULD BUT WAS REQUIRED TO BE MADE ON THE BASIS OF THE TOTAL QUANTITY.

THE ADMINISTRATIVE OFFICE HAS STATED THAT IT CONSIDERS THAT IT IS A SOUND PROCUREMENT PRACTICE NOT TO REQUIRE BIDDERS TO BID ON OPTIONS FOR ADDITIONAL EQUIPMENT (AS OPPOSED TO OPTIONS FOR REPAIR PARTS) SUBJECT TO EXERCISE AFTER AWARD AS A CONDITION OF BIDDING SINCE SUCH OPTIONS MAY NEVER BE EXERCISED AND, IF NOT EXERCISED IN THE AWARD, CANNOT BE TAKEN INTO ACCOUNT IN THE EVALUATION OF BIDS. BY NOT REQUIRING QUOTES ON SUCH OPTIONS, BIDDERS ARE GIVEN A FLEXIBILITY IN BIDDING WHICH IS DEEMED DESIRABLE IN THAT, WHERE SUCH OPTIONS ARE NOT EXERCISED IN THE AWARD, IT MAKES NO DIFFERENCE WHETHER A BIDDER BIDS DIFFERENT PRICES FOR THE ITEM DEPENDING ON THE TIME OF OPTION EXERCISE, SHORTENS THE OPTION PERIOD OR DOES NOT BID AT ALL. NONE OF THESE OR SIMILAR FACTORS COULD BE TAKEN INTO ACCOUNT IN EVALUATION, SO THE LOW, RESPONSIBLE BIDDER ON THE BASIC ITEMS AND QUANTITIES WOULD BE ENTITLED TO AWARD REGARDLESS OF HIS QUOTE, OR LACK OF A QUOTE, ON THE OPTION ITEMS OF ADDITIONAL EQUIPMENT. BRIEFLY, THE GOVERNMENT WILL ACCEPT THE ADVANTAGE OF AN OPTION FOR EQUIPMENT EXCERCISABLE AFTER AWARD IF A BIDDER OFFERS IT, BUT WILL NOT REQUIRE AND CANNOT EVALUATE IT.

WITH REGARD TO YOUR CONTENTION THAT CHRYSLER GAINED AN UNFAIR ADVANTAGE BY REDUCING THE 90-DAY OPTION PERIOD BY A POSSIBLE 17 DAYS, THE LETTER FROM YOUR PROSPECTIVE SUPPLIER DATED OCTOBER 15, 1962, DOES NOT SET OUT ANY QUOTATIONS AND STATES THAT THE PRICES QUOTED WOULD REMAIN IN EFFECT FROM 60 TO 75 DAYS. THIS WOULD INDICATE THAT THE PRICES QUOTED WOULD REMAIN FIRM NO LONGER THAN DECEMBER 30, 1962. EVEN IF YOU HAD REDUCED THE OPTION PERIOD TO MARCH 1, 1963, THERE IS NO SHOWING THAT THE PRICES QUOTED WERE APPLICABLE UP TO MARCH 1, 1963. IF YOU FELT THAT YOU HAD TO PAY HIGHER PRICES TO YOUR PROSPECTIVE SUPPLIER BY REASON OF THE GOVERNMENT EXERCISING ITS OPTION AT A LATE DATE IN THE 90-DAY OPTION PERIOD YOU COULD HAVE QUOTED DIFFERENT PRICES FOR DIFFERENT TIMES OF EXERCISE OF THE OPTION. HOWEVER, AS STATED HEREINABOVE, SINCE THE GOVERNMENT MADE THE DETERMINATION, PRIOR TO OPENING OF BIDS, TO EXERCISE THE OPTION FOR THE MAXIMUM AT TIME OF AWARD, THERE WAS NO OPPORTUNITY FOR POSSIBLE FAVORITISM AND THE GOVERNMENT HAD NO CHOICE TO EVALUATE ON ANY OTHER BASIS BUT ON THE TOTAL QUANTITY AWARDED.

IN YOUR LETTER OF MARCH 6, 1963, YOU RECOGNIZE THAT UNDER THE INVITATION BIDDERS WERE NOT REQUIRED TO BID ON ITEMS 15 THROUGH 19 BUT IF IT WAS DECIDED BEFORE THE OPENING OF BIDS TO MAKE AN AWARD FOR THE OPTIONAL QUANTITIES, A BIDDER WHO HAD NOT QUOTED PRICES FOR SUCH QUANTITIES WAS NOT ENTITLED TO AWARD. ON THE OTHER HAND, A LOW BIDDER ON THE FIXED QUANTITIES COULD QUOTE UNUSUALLY HIGH PRICES ON THESE OPTIONAL ITEMS AND IF THE OPTION WAS NOT EXERCISED AT TIME OF AWARD BUT AT A LATER DATE, THE GOVERNMENT MIGHT PAY A HIGHER PRICE FOR THE ENTIRE QUANTITY (FIXED AND OPTIONAL QUANTITIES) THAN IF THE OPTION WAS EXERCISED AT TIME OF AWARD. SINCE UNDER THE INVITATION A BID WAS NOT CONSIDERED NONRESPONSIVE IF THE BIDDER FAILED TO QUOTE ON THE OPTIONAL QUANTITIES (ITEMS 15 THROUGH 19) WHEN THE OPTION WAS NOT EXERCISED AT TIME OF AWARD, A BID QUOTING PRICES ON THE OPTIONAL QUANTITIES SUBJECT TO THE EXERCISE OF THE OPTION BY MARCH 1, 1963, AND THE OPTION IS NOT EXERCISED AT TIME OF AWARD SHOULD NOT BE CONSIDERED IN ANY DIFFERENT LIGHT. HOWEVER, IF AS HERE THE DECISION TO EXERCISE THE OPTION IS MADE BEFORE THE BIDS ARE OPENED, THE QUESTION AS TO WHETHER LIMITING THE EXERCISE OF THE OPTION TO MARCH 1, 1963, MAKES THE BID NONRESPONSIVE BECOMES A MOOT ONE.

IN VIEW OF THE FOREGOING, WE DO NOT FIND ANY BASIS FOR QUESTIONING THE PROPRIETY OF THE AWARD.