B-151770, AUG. 15, 1963, 43 COMP. GEN. 159

B-151770: Aug 15, 1963

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TO BID LOW ON THOSE ITEMS THE GOVERNMENT WAS UNLIKELY TO ORDER AND HIGH ON ITEMS FREQUENTLY ORDERED IS AN INVITATION THAT DOES NOT GIVE BIDDERS AN EQUAL OPPORTUNITY TO COMPETE AND WOULD RESULT IN SPECULATIVE RATHER THAN IN FAIR AND REASONABLE PRICES. 1963: REFERENCE IS MADE TO LETTER DATED JULY 25. PRICES WERE ALSO REQUIRED TO BE QUOTED ON VARIOUS PAPERS. PRICES WERE REQUIRED TO BE QUOTED UNDER ITEM 2 FOR CERTAIN EXTRA CHARGES. THE INVITATION REQUIRED THE SUBMISSION OF MATERIAL SAMPLES AND PROVIDED THAT "THE SAMPLES SUBMITTED WILL BE TESTED IN ACCORDANCE WITH THESE SPECIFICATIONS TO DETERMINE THE TYPE AND QUALITY OF THE MATERIAL OFFERED AND THE REPRODUCIBILITY OF THE PRINTING OFFERED UNDER THE ENSUING CONTRACT.

B-151770, AUG. 15, 1963, 43 COMP. GEN. 159

BIDS - EVALUATION - PRICE REASONABLENESS AN INVITATION FOR FURNISHING PRINTED FORMS IN VARIOUS SIZES, PARTS, AND QUANTITIES CONTAINING A PRICING SCHEDULE AND AN EVALUATION FORMULA WHICH PERMITTED BIDDERS WITH KNOWLEDGE OF PRIOR ORDERS, OR BASED ON SPECULATION, TO BID LOW ON THOSE ITEMS THE GOVERNMENT WAS UNLIKELY TO ORDER AND HIGH ON ITEMS FREQUENTLY ORDERED IS AN INVITATION THAT DOES NOT GIVE BIDDERS AN EQUAL OPPORTUNITY TO COMPETE AND WOULD RESULT IN SPECULATIVE RATHER THAN IN FAIR AND REASONABLE PRICES; THEREFORE, THE INVITATION SHOULD BE CANCELED AND THE BIDS REJECTED.

TO THE SECRETARY OF THE NAVY, AUGUST 15, 1963:

REFERENCE IS MADE TO LETTER DATED JULY 25, 1963, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, CONCERNING THE PROTEST OF AUTOGRAPHIC BUSINESS FORMS, INC., IN CONNECTION WITH INVITATION FOR BIDS NO. IFB600-1254-63 ISSUED BY THE UNITED STATES NAVY PURCHASING OFFICE, WASHINGTON, D.C., ON MAY 27, 1963.

THE INVITATION, A SMALL BUSINESS SET-ASIDE, REQUESTED BIDS FOR FURNISHING HECTOGRAPH AND DIRECT IMAGE OFFSET MASTERS AS PART OF CARBON INTERLEAVED FORMS FOR NAVY-WIDE USE TO BE ORDERED AS NEEDED BY THE NAVY PUBLICATION AND PRINTING SERVICE. THE PRICING SCHEDULE ATTACHED TO THE INVITATION REQUIRED BIDDERS TO QUOTE ON FIVE SEPARATE STUB WIDTH SIZE GROUPS, FIFTEEN SEPARATE DEPTH SIZES AND TWELVE SEPARATE PARTS (PER SET)FOR FIVE WIDTH SIZE GROUPS. PRICES WERE ALSO REQUIRED TO BE QUOTED ON VARIOUS PAPERS, CARBONS, OFFSET, AND HECTOGRAPH MASTERS TO BE USED IN MAKING UP THE SETS. FURTHERMORE, PRICES WERE REQUIRED TO BE QUOTED UNDER ITEM 2 FOR CERTAIN EXTRA CHARGES. THE INVITATION PROVIDED THAT THE AWARD WOULD BE MADE TO ONE BIDDER FOR THE ENTIRE SCHEDULE AND THAT THE BID PRICES SET FORTH BY THE BIDDER IN THE SCHEDULE OF PRICES WOULD BE EVALUATED ON AN AGGREGATE BID PRICE WHICH WOULD BE COMPUTED PERCENTAGE WISE AS FOLLOWS:

(A) 80 PERCENT OF AGGREGATE RUNNING CHARGES

(B) 20 PERCENT OF AGGREGATE OF EXTRA CHARGES

NOTE: RUNNING CHARGES INCLUDE ALL PRICES APPEARING IN THE PRICE SCHEDULE.

EXTRA CHARGES INCLUDE ALL PRICES APPEARING IN ITEM II, A THROUGH M.

THE INVITATION REQUIRED THE SUBMISSION OF MATERIAL SAMPLES AND PROVIDED THAT "THE SAMPLES SUBMITTED WILL BE TESTED IN ACCORDANCE WITH THESE SPECIFICATIONS TO DETERMINE THE TYPE AND QUALITY OF THE MATERIAL OFFERED AND THE REPRODUCIBILITY OF THE PRINTING OFFERED UNDER THE ENSUING CONTRACT. SAMPLES, WHICH, WHEN TESTED, FAIL IN THE OPINION OF THE CONTRACTING OFFICER TO MEET SPECIFIED REQUIREMENTS, WILL BE DEEMED UNSATISFACTORY AND BIDDER WILL NOT BE FURTHER CONSIDERED.'

UPON THE ISSUANCE OF THE INVITATION, AUTOGRAPHIC BUSINESS FORMS, INC., RAISED OBJECTIONS TO SEVERAL PROVISIONS OF THE INVITATION AND MOST OF THEM WERE ELIMINATED BY AMENDMENTS TO THE INVITATION. ONE OF THE OBJECTIONS WAS THE FAILURE OF THE INVITATION TO INFORM BIDDERS OF THE QUANTITY AND SIZES OF THE FORMS ORDERED UNDER THE PRIOR CONTRACT. SUCH INFORMATION WAS NOT FURNISHED FOR THE REPORTED REASONS THAT PAST USAGE INFORMATION WAS NOT CONSIDERED MEANINGFUL FOR BID PURPOSES ON FUTURE CONTRACTS AND THAT SUCH INFORMATION COULD BE MISLEADING DUE TO THE DEVELOPMENT OF NEW FORMS OR REVISIONS OF CURRENT FORMS. HOWEVER, AUTOGRAPHIC BUSINESS FORMS, C., ALLEGED THAT, DUE TO THE PRICING SCHEDULE FORMAT AND THE BASIS OF AWARD FORMULA, THE CURRENT SUPPLIER BY HAVING SUCH INFORMATION COULD BID HIGH ON THOSE SIZES HE DEEMED MOST LIKELY TO BE PROCURED IN QUANTITY AND LOW ON OTHER SIZES WHERE HE THOUGHT THERE WOULD BE LITTLE OR NO BUYING ACTIVITY.

THREE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE LOW EVALUATED BID WAS SUBMITTED BY MCGREGOR PRINTING CORPORATION, THE FIRM THAT HAD THE PRECEDING CONTRACT. THE TWO OTHER BIDS WERE SUBMITTED BY MCGREGOR AND WERNER, INC., AND AUTOGRAPHIC BUSINESS FORMS, INC.

THE COPY OF THE PRICING SCHEDULE SHOWS MCGREGOR PRINTING CORPORATION SUBMITTED A COMPLETELY UNBALANCED BID FOR THE OBVIOUS PURPOSE OF OBTAINING AN ADVANTAGE IN THE EVALUATION. FOR INSTANCE, ON THE PRICING SCHEDULE FOR STUB WIDTHS OVER 8 1/2 INCHES INCLUDING 11 INCHES, MCGREGOR PRINTING CORPORATION QUOTED THE FOLLOWING PRICES FOR RUNNING CHARGES PER THOUSAND ON 9-PART FORMS: $54.12 FOR BOTH 8 INCHES AND 8 1/2 INCHES DEPTHS; $7.20 FOR 7 INCHES DEPTH; $8.10 FOR 9 INCHES DEPTH; $7.05 FOR 10 INCHES DEPTH; AND $7.10 FOR 10 1/2 INCHES DEPTH. ALSO, ON STUB WIDTHS OF 11 INCHES INCLUDING 14 INCHES, MCGREGOR PRINTING CORPORATION QUOTED THE FOLLOWING PRICES FOR RUNNING CHARGES PER THOUSAND ON 8 1/2 INCHES DEPTHS: 1-PART FORMS $12.90; 2-PARTS, $19.10; 3-PARTS, $24.66; 4-PARTS, $4.20; AND 5- PARTS, $6.00. FURTHERMORE, THE PRICE QUOTED FOR HECTOGRAPH AND OFFSET MASTERS ARE SIMILARLY UNBALANCED. THERE IS A DEFINITE LACK OF PRICE PROGRESSION IN RELATION TO THE SIZE OF THE FORMS, AND/OR THE NUMBER OF PARTS. PARTICULARLY, THE PRICES QUOTED FOR SIZES WITHIN THE RANGE OF 8 INCHES TO 11 INCHES BY 8 INCHES TO 11 INCHES ARE OUT OF ALL PROPORTION TO PRICES FOR OTHER SIZES. IT MAY WELL BE THAT THE REASON FOR SUCH PRICE DIFFERENTIALS WAS THE THE BIDDER'S KNOWLEDGE OF THE SIZE OF THE FORMS PREVIOUSLY PURCHASED AND THE EXPECTATION THAT MOST OF THE FORMS TO BE ORDERED UNDER THE INSTANT CONTRACT WOULD ALSO FALL WITHIN SUCH SIZE RANGES.

THE BID OF MCGREGOR AND WERNER, INC., IS SIMILARLY UNBALANCED, BUT TO A LESSER EXTENT. THE BID OF AUTOGRAPHIC BUSINESS FORMS, INC., IS ALSO UNBALANCED, NOT IN RELATION TO THE SIZE OF THE FORMS, BUT IN ITS RUNNING CHARGES FOR 4-PART FORMS WHICH ARE ALMOST DOUBLE THE CHARGES FOR 12-PART FORMS OF THE SAME SIZE. IT IS REPORTED THAT SAMPLES A, B, D, E AND F SUBMITTED WITH AUTOGRAPHIC'S BID WERE FOUND NOT TO COMPLY WITH SPECIFICATION REQUIREMENTS. AUTOGRAPHIC DISPUTES THE VALIDITY OF SUCH TESTING; HOWEVER, FOR REASONS HEREINAFTER STATED IT IS UNNECESSARY TO CONSIDER THIS PHASE OF THE PROTEST.

IT IS REPORTED THAT AS OF AUGUST 2, 1963, THE NAVY PUBLICATION AND PRINTING SERVICE HAD NINE PENDING ORDERS FOR THE TYPE OF FORMS HERE INVOLVED. IT IS SHOWN THAT SUCH ORDERS ARE FOR FORMS OF THE FOLLOWING BIDDER'S KNOWLEDGE OF THE SIZE OF THE FORMS PREVIOUSLY PURCHASED AND SIZES: 1, 8 INCHES BY 10 1/2 INCHES; 6, 8 INCHES BY 11 INCHES AND 2, 8 1/2 INCHES BY 11 INCHES. THUS, THE FORMS COVERED BY THE PENDING ORDERS ALL FALL WITHIN THE SIZE RANGES IN WHICH TWO OF THE BIDDERS HAVE QUOTED HIGH PRICES. A TABULATION FURNISHED SHOWS THAT UNDER MCGREGOR PRINTING CORPORATION'S BID THE COST OF SUCH PENDING ORDERS WOULD AMOUNT TO $117,213.10 AND UNDER MCGREGOR AND WERNER'S BID TO $121,093.54. HOWEVER, THE VALIDITY OF SUCH COMPARISON IS SUSPECT SINCE BOTH FIRMS QUOTED EXTREMELY HIGH PRICES WITHIN THE SIZE RANGE INVOLVED IN THE PENDING ORDERS. ALTHOUGH MOST OF AUTOGRAPHIC'S SAMPLES WERE DETERMINED NOT TO COMPLY WITH SPECIFICATION REQUIREMENTS AND THEREFORE IT MAY NOT BE FAIR TO COMPARE ITS PRICES WITH THE OTHER TWO BIDDERS, IT IS NOTED THAT THE TOTAL COST UNDER AUTOGRAPHIC'S BID FOR THE SIX PENDING ORDERS WOULD BE $79,941.56.

THE PRIMARY PURPOSE OF THE ADVERTISING STATUTES IS TO GIVE ALL BIDDERS AN EQUAL OPPORTUNITY TO COMPETE FOR THE GOVERNMENT BUSINESS AND TO SECURE TO THE UNITED STATES THE BENEFITS OF FREE AND OPEN COMPETITION. THE FORMAT OF THE PRICING SCHEDULE, WHICH IS REPORTED TO HAVE BEEN DESIGNED TO PROVIDE WIDE FLEXIBILITY IN DETERMINING SIZE OR NUMBER OF COPIES FOR BOTH THE DEVELOPMENT OF NEW FORMS AND THE REVISION OF IN-USE FORMS, APPARENTLY WOULD HAVE ADEQUATELY ACHIEVED SUCH PURPOSE PROVIDED BIDDERS HAD QUOTED PRICES WHICH REFLECTED COST FOR THE PARTICULAR SIZES,NUMBER OF PARTS, ETC. HOWEVER, DUE TO THE EVALUATION FORMULA PROVIDED, IN ORDER TO BE DETERMINED THE LOW BIDDER, A BIDDER COULD BID LOW ON ITEMS KNOWN FROM PAST EXPERIENCE, OR ON SPECULATION, TO BE PURCHASED INFREQUENTLY AND HIGH ON ITEMS FREQUENTLY PURCHASED. THIS APPARENTLY IS WHAT HAPPENED HERE, AND WHETHER THE PRIOR CONTRACTOR'S KNOWLEDGE OF THE PRIOR ORDERS HAD ANY BEARING ON HIS METHOD OF BIDDING IS A MATTER OF SPECULATION. HOWEVER, SUCH KNOWLEDGE CERTAINLY WAS NOT DETRIMENTAL AND SUCH INFORMATION WAS NOT MADE AVAILABLE TO OTHER BIDDERS FOR WHATEVER VALUE IT MIGHT HAVE HAD.

ON THE BASIS OF THE BIDS INVOLVED IT IS NOT BELIEVED POSSIBLE TO DETERMINE WHAT PRICES ARE FAIR AND REASONABLE OR WHETHER A CONTRACT AWARDED TO ANY OF THE BIDDERS WOULD RESULT IN FAIR PRICES TO THE GOVERNMENT. RATHER THE PRICES APPARENTLY ARE BASED UPON SPECULATION AS TO WHAT THE GOVERNMENT IS MOST LIKELY TO ORDER AND AN ATTEMPT AT THE SAME TIME TO BECOME THE LOW BIDDER UNDER THE EVALUATION FORMULA.

IN THE CIRCUMSTANCES IT IS OUR OPINION THAT ALL BIDS RECEIVED IN RESPONSE TO THE INVITATION SHOULD BE REJECTED IN THE INTERESTS OF THE UNITED STATES AS NOT COMPLYING WITH THE ADVERTISING REQUIREMENTS OF FREE AND OPEN COMPETITION.