B-153188, MAR. 9, 1964

B-153188: Mar 9, 1964

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LOUIS: FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 30. WE HAVE ALSO RECEIVED LETTERS DATED JANUARY 30. INVITATION FOR BIDS NO. 383-373-64 WAS ISSUED BY THE AVIATION SUPPLY OFFICE UNDER DATE OF OCTOBER 12. SEVEN BIDS WERE RECEIVED. THEY WERE OPENED ON NOVEMBER 20. THE LOW RESPONSIVE BIDDER WAS THE BE LOCK INSTRUMENT CORPORATION. 256 WAS NEXT LOWEST. YOU ALLEGED THAT THE GRANTING OF THIS REQUEST IS REQUIRED BY OUR DECISION OF OCTOBER 7. THAT SUCH METHOD WAS NOT SANCTIONED BY DECISION B-151854. THAT YOU ARE NOT REQUESTING THE GOVERNMENT TO PERMIT RENT-FREE USE OF GOVERNMENT FACILITIES. THAT IF AWARDED THIS CONTRACT YOU WILL USE GOVERNMENT FACILITIES AND PAY RENT FOR THE USE OF THE FACILITIES.

B-153188, MAR. 9, 1964

TO EMERSON ELECTRIC OF ST. LOUIS:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 30, 1963, WITH ENCLOSURES, PROTESTING AGAINST THE AWARD OF A CONTRACT TO ANY BIDDER OTHER THAN YOUR FIRM UNDER INVITATION FOR BIDS NO. 383-373-64 ISSUED BY THE DEPARTMENT OF THE NAVY. WE HAVE ALSO RECEIVED LETTERS DATED JANUARY 30, FEBRUARY 18 AND 20, AND MARCH 2, 1964, FROM YOUR ATTORNEYS IN THE SAME MATTER.

INVITATION FOR BIDS NO. 383-373-64 WAS ISSUED BY THE AVIATION SUPPLY OFFICE UNDER DATE OF OCTOBER 12, 1963, AND SOLICITED BIDS FOR VARIOUS QUANTITIES OF 15 OF THE COMPONENTS OF THE AN/AP8-88 RADAR SET, TOGETHER WITH CHANGE PAGES TO TECHNICAL MANUALS, REVISION DRAWINGS, DESIGN DATA AND PROVISIONING DATA. SEVEN BIDS WERE RECEIVED, AND THEY WERE OPENED ON NOVEMBER 20, 1963. THE LOW RESPONSIVE BIDDER WAS THE BE LOCK INSTRUMENT CORPORATION, COLLEGE POINT, NEW YORK, WITH A TOTAL BID PRICE OF $1,557,089.06. YOUR BID OF $1,565,256 WAS NEXT LOWEST.

BY LETTER OF DECEMBER 14, 1963, YOU REQUESTED THAT AN AMOUNT OF $40,695 REPRESENTING RENT PAYABLE FOR THE USE OF GOVERNMENT FACILITIES WHICH YOU ALLEGE WOULD BE AVAILABLE TO YOUR COMPANY FOR USE IN THIS PROCUREMENT, BE DEDUCTED FROM YOUR BID, THEREBY MAKING YOU THE LOW BIDDER. YOU ALLEGED THAT THE GRANTING OF THIS REQUEST IS REQUIRED BY OUR DECISION OF OCTOBER 7, 1963, B-151854. BY LETTER OF DECEMBER 19, 1963, THE CONTRACTING OFFICER DENIED YOUR REQUEST SAYING, AMONG OTHER THINGS, THAT ALLOWING YOU TO SUBTRACT $40,695 FROM YOUR BID AS THE RENTAL OF GOVERNMENT FACILITIES WOULD, IN EFFECT, PERMIT YOU THE RENT FREE USE OF GOVERNMENT FACILITIES; THAT THE METHOD OF BID EVALUATION SUGGESTED BY YOU WOULD BE CONTRARY TO PROCUREMENT REGULATIONS IN AN ADVERTISED PROCUREMENT; AND THAT SUCH METHOD WAS NOT SANCTIONED BY DECISION B-151854.

IN REBUTTAL OF THE ADMINISTRATIVE REPORT, YOUR ATTORNEYS ARGUE, IN EFFECT, THAT YOU ARE NOT REQUESTING THE GOVERNMENT TO PERMIT RENT-FREE USE OF GOVERNMENT FACILITIES; THAT IF AWARDED THIS CONTRACT YOU WILL USE GOVERNMENT FACILITIES AND PAY RENT FOR THE USE OF THE FACILITIES; THAT YOU MERELY REQUEST THAT THE GOVERNMENT AWARD THE CONTRACT AFTER WEIGHING ALL ASCERTAINABLE, REALISTIC, AND NONSPECULATIVE COSTS; AND THAT RENTAL PAYMENTS FOR THE USE OF GOVERNMENT FACILITIES ARE SUCH A COST FACTOR. THIS CONNECTION YOUR ATTORNEYS REFER TO AN AFFIDAVIT DATED FEBRUARY 18, 1964, EXECUTED BY RICHARD B. LEYND, VICE PRESIDENT, EMERSON ELECTRIC COMPANY, STATING THAT THE PERFORMANCE OF WORK CALLED FOR BY INVITATION FOR BIDS NO. 383-373-64 WILL, IF AWARDED TO EMERSON ELECTRIC COMPANY, REQUIRE THE USE BY EMERSON OF GOVERNMENT FACILITIES HELD BY IT UNDER CONTRACT AF 33/600/-42678 AND THE PAYMENT OF RENTAL TO THE UNITED STATES PURSUANT TO SUCH CONTRACT. ALSO, WE RECEIVED A LETTER DATED FEBRUARY 18, 1964, APPARENTLY WRITTEN BY THE CONTRACTING OFFICER HAVING COGNIZANCE OF YOUR FACILITIES CONTRACT, AF 33/600/ 42678, WHICH ADVISES THAT THE CONTRACT IN QUESTION ESTABLISHED A METHOD FOR DETERMINATION OF RENTAL CHARGES FOR USE OF GOVERNMENT FACILITIES IN THE PERFORMANCE OF A CONTRACT, AND THAT YOUR RENTAL ESTIMATE OF $40,695, PAYABLE IN THE EVENT OF AN AWARD UNDER INVITATION FOR BIDS NO. 383-373-64, IS CONSIDERED REASONABLE.

IN ADDITION YOUR ATTORNEYS HAVE FURNISHED EVIDENCE TO ESTABLISH THAT BY LETTER OF JULY 25, 1962, THE ADMINISTRATIVE CONTRACTING OFFICER AUTHORIZED YOUR FIRM TO USE THE FACILITIES HELD UNDER FACILITIES CONTRACT AF 33/600/- 42678, IN THE PERFORMANCE OF CONTRACTS ON A RENTAL BASIS, TOGETHER WITH WORKSHEETS AND AFFIDAVITS INDICATING THAT AN ESTIMATED RENTAL OF $42,695 WAS INCLUDED BY YOUR FIRM IN COMPUTING ITS BID PRICE UNDER THE INVITATION HERE INVOLVED. YOUR ATTORNEYS FURTHER URGE THAT THE INTRINSIC COMPETITIVE ADVANTAGE WHICH EMERSON ENJOYS IN THIS PROCUREMENT IS THE AVAILABILITY OF GOVERNMENT FACILITIES SUITABLE FOR PERFORMANCE OF THE CONTRACT, AND THAT OUR DECISION B-151854 HOLDS THAT THE GOVERNMENT NEED NOT ELIMINATE SUCH AN ADVANTAGE AT ITS OWN EXPENSE.

CLAUSE 100-1.8 OF THE INVITATION FOR BIDS HERE INVOLVED PROVIDES AS FOLLOWS:

"100-1.8 USE OF GOVERNMENT PROPERTY IN BIDDERS POSSESSION

IF THE BIDDER PLANS TO USE, IN PERFORMING THE WORK BID UPON, ANY ITEMS OF GOVERNMENT PROPERTY IN THE BIDDER'S POSSESSION UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT INDEPENDENT OF THE INVITATION FOR BIDS, THE BIDDER SHALL SO STATE IN THE BID; AND THE BIDDER AGREES, IN THE EVENT HE DOES SO PLAN, THAT UPON REQUEST OF THE CONTRACTING OFFICER THE BIDDER WILL SUBMIT EVIDENCE THAT A FACILITIES CONTRACT OR OTHER SEPARATE AGREEMENT AUTHORIZES THE BIDDER TO USE EACH ITEM OF SUCH GOVERNMENT PROPERTY FOR PERFORMING THE WORK BID UPON.'

THIS REQUIREMENT OF THE INVITATION IS IN ACCORDANCE WITH ASPR 2-201 (A) (XIV). YOU DID NOT LIST, AS PART OF YOUR ORIGINAL BID, THE FACILITIES YOU INTENDED TO USE, NOR DID YOU GIVE ANY INDICATION OF ANY CONTEMPLATED USE OF GOVERNMENT PROPERTY. YOUR LETTER OF DECEMBER 14 WAS THEREFORE IN EFFECT A MODIFICATION OF YOUR ORIGINAL BID, WHICH COULD NOT PROPERLY BE ALLOWED AFTER BID OPENING.

IN OUR DECISION OF OCTOBER 7, 1963, B-151854, AFTER DISCUSSING (FIRST) THE STATUTORY REQUIREMENT IN 10 U.S.C. 2305 (C) THAT ADVERTISED CONTRACTS BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID WILL BE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED; AND (SECOND) THE DEPARTMENT OF DEFENSE POLICY, AS SET OUT IN ASPR 13 407 (A) (3), THAT A SUITABLE METHOD FOR ELIMINATING ANY COMPETITIVE ADVANTAGE SHALL BE EMPLOYED TO INSURE THAT A CONCERN POSSESSING GOVERNMENT FACILITIES WITHOUT CHARGE IS NOT THEREBY PLACED IN A FAVORED POSITION IN COMPETING FOR GOVERNMENT BUSINESS, WE CONCLUDED AS FOLLOWS:

"AS PREVIOUSLY INDICATED, THE PROVISIONS OF 10 U.S.C. 2305 (C) REQUIRE THE AWARD OF ADVERTISED CONTRACTS TO THAT RESPONSIBLE BIDDER WHOSE BID WILL RESULT IN THE MOST ADVANTAGEOUS CONTRACT FOR THE GOVERNMENT. ELEMENTS OF COST OR SAVINGS TO THE GOVERNMENT WHICH ARE NOT INCLUDED IN THE BID PRICES, SUCH AS COST OF TRANSPORTATION OF THE CONTRACT AND ITEMS, OR COSTS IN CONNECTION WITH USE OF GOVERNMENT-OWNED EQUIPMENT, MAY PROPERLY BE CONSIDERED IN EVALUATING BID PRICES TO DETERMINE WHICH BID WILL RESULT IN THE MOST ADVANTAGEOUS CONTRACT. HOWEVER, IT IS OUR OPINION THAT ANY AMOUNTS WHICH ARE PROPERLY FOR APPLICATION IN SUCH EVALUATION MUST BE FAIRLY REPRESENTATIVE ON AN ACTUAL OR ESTIMATED BASIS, OF TRUE COSTS OR SAVINGS TO THE GOVERNMENT.

"WHILE THE POLICY OF COMPLETE EQUALIZATION OF COMPETITIVE ADVANTAGE, TO WHICH THE ABOVE-REFERENCED PROVISIONS OF THE ASPR ARE DIRECTED, IS A DESIRABLE OBJECTIVE IN PROCUREMENTS INVOLVING THE USE OF GOVERNMENT OWNED EQUIPMENT, TO THE EXTENT THAT SUCH POLICY MAY CONFLICT WITH 10 U.S.C. 2305 (C), THE STATUTE MUST PREVAIL. IN THE INSTANT PROCUREMENT, IT IS APPARENT THAT ADDITIONAL COSTS FOR TRANSPORTING, MODIFYING, INSTALLING, ETC., THE INDUSTRIAL FACILITIES AND SPECIAL TOOLING LOCATED IN CONTINENTAL'S PLANT WOULD NECESSARILY RESULT IF AN AWARD WERE MADE TO ANY OTHER BIDDER WHO PROPOSED TO USE SUCH FACILITIES AND TOOLING, WHILE NO SUCH COSTS WOULD RESULT FROM AN AWARD TO CONTINENTAL. IT NECESSARILY FOLLOWS THAT IN EVALUATING BIDS FOR THE PURPOSE OF DETERMINING THE MOST ADVANTAGEOUS BID UNDER 10 U.S.C. 2305 (C), THESE CIRCUMSTANCES WERE REQUIRED TO BE CONSIDERED AND RECOGNIZED IN ANY BID EVALUATION PROCEDURE. THE METHOD OF EVALUATION ADOPTED IN THE INSTANT CASE (I.E. EXCLUDING ANY ADDITIONAL COTS OF TRANSPORTING, MODIFYING, INSTALLING, ETC., FROM THE EVALUATION BY REQUIRING EACH BIDDER TO EITHER ABSORB THEM OR INCLUDE THEM IN HIS BID PRICE) WAS ONE METHOD OF ARRIVING AT EVALUATED BID PRICES WHICH WOULD REFLECT TRUE COST TO THE GOVERNMENT. CONVERSELY, IT IS OBVIOUS THAT IF THE INVITATION HAD ADVISED BIDDERS THAT THE GOVERNMENT WOULD ASSUME SUCH ADDITIONAL COSTS, A PROPER EVALUATION OF CONTINENTAL'S BID WOULD HAVE REQUIRED THE DEDUCTION OF AN AMOUNT REPRESENTING SUCH COSTS, IN EVALUATING CONTINENTAL'S BID. UNDER EITHER EVALUATION METHOD, IT IS APPARENT THAT WHILE THE LOW EVALUATED BID PRICE WOULD REPRESENT THE MOST ADVANTAGEOUS BID TO THE GOVERNMENT, A COMPETITIVE ADVANTAGE WOULD RESULT TO CONTINENTAL FROM ITS POSSESSION OF GOVERNMENT EQUIPMENT.'

IT MUST BE RECOGNIZED THAT, IN DETERMINING TRUE COST TO THE GOVERNMENT OF A PROCUREMENT IN WHICH USE OF GOVERNMENT PROPERTY IS PERMITTED SUCH USE WILL RESULT IN ADDITIONAL COST TO THE GOVERNMENT, AND ANY RENTAL FOR SUCH USE MUST THEREFORE BE RECOGNIZED AS COMPENSATION TO THE GOVERNMENT FOR SUCH ADDITIONAL COST. OUR DECISION B-151854, THEREFORE DID NOT HOLD, NOR WAS IT INTENDED TO HOLD, THAT WHERE A BIDDER PROPOSES TO USE GOVERNMENT- OWNED PROPERTY HELD UNDER A FACILITIES CONTRACT, THE AMOUNT TO BE PAID UNDER SUCH CONTRACT AS RENTAL SHOULD BE DEDUCTED FROM THE BID PRICE IN EVALUATING THE BIDS. AS A MATTER OF FACT, THE INVITATION INVOLVED IN THAT CASE SPECIFICALLY PROVIDED FOR RENT-FREE USE OF GOVERNMENT-OWNED PROPERTY, BUT REQUIRED THAT FOR THE PURPOSE OF EVALUATING BIDS THERE SHOULD BE ADDED TO EACH BID, BASED ON USE OF SUCH PROPERTY, AN AMOUNT EQUIVALENT TO A STATED RENTAL OR USE VALUE THEREFOR. OBVIOUSLY, UNDER THE RATIONALE OF THAT DECISION, HAD YOUR BID FAILED TO INCLUDE RENTAL OF APPROXIMATELY $40,000, SUCH AMOUNT WOULD HAVE TO BE ADDED TO PROPERLY EVALUATE YOUR BID IF USE OF GOVERNMENT-OWNED FACILITIES WERE TO BE PERMITTED, AND YOUR BID WOULD REMAIN SECOND LOW WHEN EVALUATED ON THAT BASIS. THUS, THERE APPEARS TO BE NO BASIS UNDER THAT DECISION OR OTHERWISE FOR REVISING YOUR BID BY DEDUCTING THE AMOUNT YOU WOULD EXPECT TO PAY FOR RENTAL OF GOVERNMENT FACILITIES IF AWARDED THE CONTRACT UNDER THE INVITATION HERE INVOLVED.