B-154449, OCT. 30, 1964

B-154449: Oct 30, 1964

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THIS MATTER WAS THE SUBJECT OF A REPORT FROM YOUR DEPARTMENT TO THIS OFFICE DATED JULY 21. THE FIRST PHASE OF THIS TWO-STEP FORMAL ADVERTISEMENT WAS ISSUED UNDER DATE OF JANUARY 30. STEP II WAS ISSUED TO THESE SIX FIRMS ON APRIL 16. BY AMENDMENT THE REQUIREMENT WAS FIXED AT 38 SETS (ITEM 1) WITH OPTION QUANTITIES OF 6. BIDS WERE OPENED ON APRIL 30. THE TWO LOW BIDS WERE $2. THE GOVERNMENT'S ORIGINAL ESTIMATE FOR THE PROCUREMENT WAS $100. HE ASKED THE PRD REPRESENTATIVE WHO WAS PRESENT TO CONFIRM HIS BID. THE BIDDER STATED THAT ITS CORRECT UNIT PRICE FOR EACH OF THE 38 SETS (ITEM 1) WAS $53. A PROPORTIONATE INCREASE WAS ALSO INDICATED FOR THE OPTION UNITS AND THE PREPRODUCTION SAMPLE.

B-154449, OCT. 30, 1964

TO THE HONORABLE SECRETARY OF THE ARMY:

WE REFER TO THE BID PROTESTS BY PRD ELECTRONICS, INCORPORATED, AND GENERAL MICROWAVE CORPORATION, AGAINST THE DECISION OF THE CONTRACTING OFFICER, FRANKFORD ARSENAL, TO CANCEL INVITATION FOR BIDS NO AMC (A) 36- 038-64-560/M), STEP II, AND READVERTISE THE PROCUREMENT. THIS MATTER WAS THE SUBJECT OF A REPORT FROM YOUR DEPARTMENT TO THIS OFFICE DATED JULY 21, 1964.

THE FIRST PHASE OF THIS TWO-STEP FORMAL ADVERTISEMENT WAS ISSUED UNDER DATE OF JANUARY 30, 1964, AND REQUESTED TECHNICAL PROPOSALS FOR APPROXIMATELY FIFTY (50) EACH OF AN IMPROVED VERSION OF THE MICROWAVE CALIBRATION TEST SET AN/USM-129 SET FORTH IN ENGINEERING DESCRIPTION AMCED NO. 7, DATED DECEMBER 6, 1963. SIX FIRMS SUBMITTED ACCEPTABLE PROPOSALS, AND STEP II WAS ISSUED TO THESE SIX FIRMS ON APRIL 16, 1964. BY AMENDMENT THE REQUIREMENT WAS FIXED AT 38 SETS (ITEM 1) WITH OPTION QUANTITIES OF 6, 12, OR 18 SETS (ITEMS 1A THROUGH 1C), A PREPRODUCTION SAMPLE (ITEM 2) AND FOUR AUXILIARY ITEMS (ITEMS 3, 4, 5 AND 6). BIDS WERE OPENED ON APRIL 30, 1964. UNIT PRICES RECEIVED ON THE 38 SETS INCLUDED THE LOW BID OF $44,700 FROM PRD ELECTRONICS, INCORPORATED, THE NEXT LOW OF $65,205.66 FROM GENERAL MICROWAVE CORPORATION, AND A THIRD AND FOURTH LOW OF $71,050 AND $83,350, RESPECTIVELY. FOR THE OVERALL REQUIREMENT, PRD'S BID TOTALLED $1,879,600 WHILE GENERAL MICROWAVE'S SECOND LOW BID TOTALLED $2,707,830.50, A DIFFERENCE OF OVER $825,000. (INCLUDING THE 18 OPTION SETS, THE TWO LOW BIDS WERE $2,678,800 AND $3,814,874, RESPECTIVELY.) THE GOVERNMENT'S ORIGINAL ESTIMATE FOR THE PROCUREMENT WAS $100,000 PER SET.

THE CONTRACTING OFFICER REPORTS THAT AFTER EXAMINING THE BIDS AT THE BID OPENING, HE ASKED THE PRD REPRESENTATIVE WHO WAS PRESENT TO CONFIRM HIS BID; AND THAT THE PRD REPRESENTATIVE THEN ORALLY CONFIRMED THE BID. THE CONTRACTING OFFICER THEN ASKED THAT PRD SUBMIT A LETTER OF CONFIRMATION. BY LETTER OF MAY 8, 1964, PRD RESPONDED THAT IT HAD MADE ERRORS IN BID COMPUTATION, AND ASKED THAT ITS BID BE MODIFIED TO REFLECT ITS "CORRECT" BID. THE BIDDER STATED THAT ITS CORRECT UNIT PRICE FOR EACH OF THE 38 SETS (ITEM 1) WAS $53,628. A PROPORTIONATE INCREASE WAS ALSO INDICATED FOR THE OPTION UNITS AND THE PREPRODUCTION SAMPLE.

THE BIDDER WAS ASKED TO FURNISH EVIDENCE IN SUPPORT OF THE CORRECTION AND ALSO TO REQUEST A WITHDRAWAL IF CORRECTION WERE NOT AUTHORIZED. BY LETTER OF MAY 19, 1964, PRD SUBMITTED WORK SHEETS AND NOTARIZED STATEMENTS FROM ITS OFFICIALS AND EMPLOYEES CONCERNING ITS ALLEGED ERRORS. THE UNIT PRICES STATED BY THE BIDDER WERE SOMEWHAT LOWER THAN THE UNIT PRICES PREVIOUSLY INDICATED BY THE BIDDER IN ITS LETTER OF MAY 8. IN THIS CONNECTION, THE LETTER OF MAY 19 STATED THAT:

"THE FOLLOWING BID PRICES SUPERSEDE THE PRICES IN OUR LETTER OF MAY 8, 1964 PDS 516 AND VARY SLIGHTLY BECAUSE AT THAT TIME THE PRICES WERE NOT REDUCED TO REFLECT PURCHASING EFFICIENCY AS COMPUTED IN THE IFB.'

PRD STATED THAT IT HAD MADE FOUR ERRORS IN COMPUTING ITS PRICE: (1) IN PRICING A PHASE TASK SYNCHRONIZER ASSEMBLY, IT HAD ERRONEOUSLY EXTENDED A PRICE OF $6,700 PER SET BASED ON USING A DYMEC UNIT RATHER THAN $10,000 FOR THE INTENDED LFE TYPE 243 UNIT (AN ERROR OF $3,300); (2) IN PRICING OUT THE KAY 159A OSCILLATOR, IT HAD FAILED TO MULTIPLY THE UNIT PRICE OF $795 BY THE QUANTITY OF TWO REQUIRED PER SYSTEM (ERROR OF $795); (3) IT HAD NEGLECTED TO INCLUDE THE PRICE OF TWO EACH NUVISTOR BROADBAND POWER AMPLIFIERS M1000 SERIES PER SYSTEM, AT A UNIT PRICE OF $1,000 (ERROR OF $2,000); AND (4) IT HAD DEVELOPED AN INCORRECT DIVISION OF "SYSTEM QUANTITIES" INSTEAD OF "CASES PER SYSTEM" (ERROR OF $2,600). PRD'S ALLEGED CORRECTED BID ALSO INCLUDED CERTAIN OVERALL UPWARD AND DOWNWARD ADJUSTMENTS, SO THAT ITS TOTAL PRICE WAS INCREASED FROM $1,879,600 TO $2,214,610 FOR 39 SETS, AND FROM$2,678,800 TO $3,168,430 ON 57 SETS. THE BIDDER STATED, HOWEVER, THAT IT DID NOT WISH TO WITHDRAW ITS BID.

THE CONTRACTING OFFICER CONCLUDED THAT THE BIDDER HAD MADE A MISTAKE IN BID BUT THAT THE EVIDENCE OF RECORD DID NOT CLEARLY AND CONVINCINGLY ESTABLISH THAT PRD HAD INTENDED TO BID ITS INDICATED "CORRECTED" FIGURES. AFTER PRD WAS ADVISED THAT CORRECTION WOULD NOT BE PERMITTED, THE BIDDER REQUESTED AN AWARD AT THE ORIGINAL BID PRICE "SUBJECT TO CORRECTION BY THE GENERAL ACCOUNTING OFFICE.' THE CONTRACTING OFFICER CONCLUDED THAT PRD'S BID MUST BE DISREGARDED; BUT HE DETERMINED THAT IN LIGHT OF THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, THE LOWEST ACCEPTABLE BID (THE GENERAL MICROWAVE BID) "WAS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE REQUIREMENTS SOUGHT UNDER THE TWO- STEP PROCUREMENT PROCEDURES.'

ACCORDINGLY, ON JUNE 10, 1964, THE INVITATION WAS CANCELLED AND THE PROCUREMENT READVERTISED UNDER INVITATION FOR BIDS NO. AMC (A) 36-038 64- 1176 (M), DATED JUNE 10, 1964, WHICH MODIFIES THE EARLIER INVITATION BY ELIMINATING THE OPTION QUANTITY AND CHANGING THE FIXED REQUIREMENTS FROM 39 SETS TO 57 SETS. ALSO, PARAGRAPH 3.3 OF AMCED NO. 7 IS ELIMINATED AND A CLARIFYING "NOTE" ADDED TO THE SCHEDULE, WHICH IN EFFECT (1) STRESSES THAT NO DEVIATION FROM PROPOSAL SUBMITTED UNDER STEP I IS PERMITTED WITHOUT APPROVAL OF THE CONTRACTING OFFICER, AND (2) THE CONTRACTOR IS NOT RELIEVED FROM MEETING THE PERFORMANCE REQUIREMENTS OF AMCED NO. 7, AS AMENDED. HOWEVER, BID OPENING HAS BEEN POSTPONED PENDING RESOLUTION OF THE BID PROTESTS MADE BY PRD AND GENERAL MICROWAVE.

THE BASIS OF GENERAL MICROWAVE'S PROTEST IS, OF COURSE, THAT THE CANCELLATION OF BIDS AFTER OPENING IS DETRIMENTAL TO THE COMPETITIVE BID SYSTEM, AND SHOULD NOT BE DONE EXCEPT FOR COGENT REASONS. WE DO NOT DISAGREE WITH THIS POSITION. HOWEVER, THE LAW (10 U.S.C. 2305 (C) (, THE APPLICABLE REGULATION (ASPR 2-404.1), AND THE INVITATION ITSELF SPECIFICALLY PERMIT REJECTION OF ALL BIDS.

THE REASONS FOR REJECTION OF ALL BIDS WERE (1) THE ADMINISTRATIVE DETERMINATION THAT THE EVIDENCE SUBMITTED BY PRD IN SUPPORT OF ITS ALLEGED INTENDED BID WAS NOT SUFFICIENT TO PERMIT CORRECTION TO THAT PRICE; (2) THE DETERMINATION THAT IT WOULD COMPROMISE THE INTEGRITY OF THE ADVERTISED BIDDING SYSTEM TO PERMIT A BIDDER, AFTER DENIAL OF CORRECTION, TO HAVE A CHOICE BETWEEN WITHDRAWAL OR ACCEPTANCE AT ITS ADMITTEDLY ERRONEOUS BID PRICE SUBJECT TO SUBSEQUENT CONSIDERATION BY OUR OFFICE OF A CLAIM FOR A PRICE ADJUSTMENT; AND (3) THE CONCLUSION, FOLLOWING THESE DETERMINATIONS, THAT THE REMAINING BIDS, THE NEXT OF WHICH WAS SOME $500,000 HIGHER THAN PRD'S ALLEGED INTENDED BID, WERE UNREASONABLY HIGH. WHETHER WE WOULD HAVE REACHED THE SAME CONCLUSIONS WITH RESPECT TO PRD'S BID, WE DO NOT DECIDE. THE FACTS REMAIN THAT ALL BIDS HAVE BEEN REJECTED, AND WE CANNOT SAY THAT THE REASONS FOR DOING SO WERE NOT SUFFICIENTLY COGENT TO JUSTIFY THIS ACTION.

WE SEE NO REASON WHY PROCUREMENT UNDER THE READVERTISEMENT SHOULD NOT PROCEED. YOUR ATTACHMENTS ARE ENCLOSED.