B-155785, JAN. 7, 1965

B-155785: Jan 7, 1965

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WHICH WAS DISTRIBUTED TO 14 PROSPECTIVE BIDDERS. A BRIEFING SESSION FOR BIDDERS WAS HELD AT THE PARK. IN ATTENDANCE WERE REPRESENTATIVES OF 3 FIRMS. BIDDERS WERE INFORMED OF POSSIBLE FUTURE CONSTRUCTION PLANS FOR THE ZOO AND OF CURRENT APPROVED PRICES FOR FOOD AND NOVELTIES SOLD AT THE PRESENT ZOO RESTAURANT. THEY WERE ALSO FURNISHED OTHER PERTINENT INFORMATION IN RESPONSE TO THEIR QUESTIONS. YOU CONTEND THAT THE NILON BROTHERS' BID IS IN ERROR. OR AT LEAST IS OF SUCH SPECULATIVE NATURE THAT IT IS IRRESPONSIBLE AS WELL AS NONRESPONSIVE. YOU ASSERT THAT IN THE RESTAURANT INDUSTRY IT IS AN ACKNOWLEDGED FACT THAT THE RENT PAID ON BUSINESS PROPERTY BASED ON A PERCENTAGE OF GROSS SALES RECEIPTS RUNS BETWEEN 4 PERCENT AND 10 PERCENT.

B-155785, JAN. 7, 1965

TO ROSS, STARK, MATZKIN AND DAY, ATTORNEYS AT LAW:

YOUR LETTER DATED DECEMBER 14, 1964, ADDRESSED TO THE DIRECTOR, SMITHSONIAN INSTITUTION, WASHINGTON, D.C., PROTESTING ON BEHALF OF LEECH AND LEECH, INCORPORATED, AGAINST AWARD OF A CONTRACT TO NILON BROTHERS OF MARYLAND, INCORPORATED, UNDER INVITATION FOR BIDS NO. NZP 65-3, DATED NOVEMBER 17, 1964, HAS BEEN FORWARDED TO OUR OFFICE FOR DECISION IN COMPLIANCE WITH YOUR REQUEST.

THE IFB, WHICH WAS DISTRIBUTED TO 14 PROSPECTIVE BIDDERS, SOLICITED BIDS, ON A PERCENTAGE OF GROSS SALES RECEIPTS BASIS, FOR THE OPERATION OF THE RESTAURANT CONCESSION IN THE NATIONAL ZOOLOGICAL PARK FOR THE 5 YEAR PERIOD JANUARY 1, 1965 TO DECEMBER 31, 1969. AS SCHEDULED IN THE IFB, ON NOVEMBER 25, 1964, A BRIEFING SESSION FOR BIDDERS WAS HELD AT THE PARK. IN ATTENDANCE WERE REPRESENTATIVES OF 3 FIRMS, INCLUDING THE FIRM OF LEECH AND LEECH, INCORPORATED, THE THEN CURRENT CONCESSIONAIRE. BIDDERS WERE INFORMED OF POSSIBLE FUTURE CONSTRUCTION PLANS FOR THE ZOO AND OF CURRENT APPROVED PRICES FOR FOOD AND NOVELTIES SOLD AT THE PRESENT ZOO RESTAURANT. THEY WERE ALSO FURNISHED OTHER PERTINENT INFORMATION IN RESPONSE TO THEIR QUESTIONS.

ON DECEMBER 9, AT THE SCHEDULED PUBLIC OPENING OF BIDS, ONLY TWO BIDS HAD BEEN RECEIVED, THE NILON BROTHERS' BID OFFERING A GROSS SALES PERCENTAGE OF 21.7 AND THE LEECH BID OFFERING A GROSS SALES PERCENTAGE OF 11.25.

IN YOUR LETTER OF DECEMBER 14, YOU CONTEND THAT THE NILON BROTHERS' BID IS IN ERROR, OR AT LEAST IS OF SUCH SPECULATIVE NATURE THAT IT IS IRRESPONSIBLE AS WELL AS NONRESPONSIVE, IN VIEW OF THE HIGH PERCENTAGE OFFERED. YOU ASSERT THAT IN THE RESTAURANT INDUSTRY IT IS AN ACKNOWLEDGED FACT THAT THE RENT PAID ON BUSINESS PROPERTY BASED ON A PERCENTAGE OF GROSS SALES RECEIPTS RUNS BETWEEN 4 PERCENT AND 10 PERCENT, AND YOU STATE THAT THE CONCESSION PAYMENTS FOR THE YEARS 1962, 1963 AND 1964 AT THE NATIONAL ZOOLOGICAL PARK RESTAURANT HAS AMOUNTED TO APPROXIMATELY 6 PERCENT OF THE GROSS SALES RECEIPTS.

IN ADDITION, YOU STATE THAT IT IS YOUR UNDERSTANDING NILON BROTHERS ARE PRIMARILY ENGAGED IN SALE OF FOOD BY MEANS OF VENDING MACHINES BUT ARE NOT EXPERIENCED IN THE TYPE OF RESTAURANT CONCESSION DESCRIBED IN THE IFB. YOU ASSERT THAT WHILE A RENTAL RATE OF 21.7 PERCENT OF GROSS SALES RECEIPTS MIGHT BE ACHIEVED BY THE USE OF VENDING MACHINES, IT WOULD BE IMPOSSIBLE FOR ANY RESTAURANT CONCESSION TO PAY SUCH A PERCENTAGE WITHOUT SACRIFICING QUALITY AND/OR QUANTITY IN FOOD OR SERVICES, ESPECIALLY IN VIEW OF THE NECESSARY INITIAL EQUIPMENT INVESTMENT OF APPROXIMATELY $200,000.

IN SUMMARY, YOU CONTEND THAT THERE IS CONSTRUCTIVE NOTICE OF A GROSS MISTAKE IN THE NILON BROTHERS' BID, WHICH WOULD ENTITLE THE BIDDER TO RELIEF AFTER AWARD. YOU POINT TO THE SIZEABLE DISCREPANCY BETWEEN THE TWO BIDS, AND YOU ALLEGE THAT WERE A CORRECT GOVERNMENT ESTIMATE MADE BEFORE AWARD, THERE WOULD BE A SIMILAR DISCREPANCY BETWEEN THE NILON BROTHERS' BID AND SUCH ESTIMATE. THEREFORE, YOU STATE, ACCEPTANCE OF SUCH BID COULD NOT BE CONSIDERED AS BEING IN GOOD FAITH AND WOULD NOT RESULT IN A BINDING CONTRACT. ACCORDINGLY, YOU ASSERT, REJECTION OF THE BID IS AUTHORIZED UNDER FEDERAL PROCUREMENT REGULATION 1-2.406 3(D).

THE SMITHSONIAN INSTITUTION HAS ADVISED US THAT THE FINANCIAL STATEMENTS FURNISHED BY NILON BROTHERS DISCLOSED A SATISFACTORY FINANCIAL CONDITION. ALSO, THAT SURVEYS OF SEVERAL CONCESSIONS PRESENTLY OPERATED BY THE FIRM'S PRINCIPALS AND AFFILIATES, SOME OVER PERIODS IN EXCESS OF 10 YEARS, SHOW THAT THE SERVICE AND FOOD HAVE BEEN RATED SATISFACTORY OR EXCELLENT.

FOLLOWING RECEIPT OF YOUR LETTER OF DECEMBER 14, THE CONTRACTING OFFICER CONFERRED WITH REPRESENTATIVES OF NILON BROTHERS REGARDING ITS ALLEGED OPERATION OF FOOD VENDING MACHINE CONCESSIONS AND THE POSSIBILITY OF A MISTAKE IN ITS BID. MR. ROBERT NILON, PRESIDENT OF THE FIRM, ADVISED THAT ITS VENDING MACHINE FOOD CONCESSION RIGHTS HAD BEEN SOLD TO ANOTHER FIRM AND THAT THE ONLY FOOD VENDING MACHINES NOW OPERATED BY ANY OF THE NILON ENTERPRISES ARE SOFT DRINK MACHINES AT FINGER LAKES, NEW YORK. REGARDING THE COMPUTATION OF THE 21.7 PERCENTAGE, MR. NILON STATED THERE WAS NO MISTAKE, THE BIDDER'S INTENT BEING TO "BREAK EVEN" ON THE RESTAURANT FOOD BUT TO PROFIT ON THE NOVELTY SALES.

DISCUSSIONS BETWEEN AN EMPLOYEE OF THE CONTRACTING OFFICE AND SEVERAL AUTHORITIES ON THE RESTAURANT BUSINESS REVEALED THAT THE 21.7 PERCENTAGE FIGURE IS NOT UNREALISTIC PROVIDED THE NOVELTY AND SOUVENIR BUSINESS IS OF SIGNIFICANT MAGNITUDE. ALSO, CONVERSATIONS WITH OFFICIALS OF VARIOUS ZOOS IN THE COUNTRY DISCLOSED THAT ZOO RESTAURANT CONCESSIONS OF THE TYPE HERE INVOLVED ARE OPERATED AT A PROFIT PERMITTING PAYMENT OF COMMISSIONS RANGING FROM 20 TO 40 PERCENT OF GROSS SALES RECEIPTS.

IN ADDITION TO THE FOREGOING IT IS THE CONCLUSION OF THE CONTRACTING AGENCY THAT STATISTICS FOR OPERATION OF PUBLIC RESTAURANTS ARE NOT STRICTLY COMPARABLE TO ZOO RESTAURANT OPERATIONS, SINCE THE LATTER HAS NO ADVERTISING OR RENTAL EXPENSE, HAS NO NEARBY COMPETITORS, AND HAS A CLIENTELE WHICH SPENDS CONSIDERABLE TIME IN THE RESTAURANT AREA AND THUS IS IN NEED OF REFRESHMENT AND FOOD. ALSO, RECALCULATION OF THE OPERATING RESULTS FOR THE NATIONAL ZOOLOGICAL PARK CONCESSION DURING 1963 AND 1964 ON A PERCENTAGE BASIS INDICATES A PROFIT OF 15.8 PERCENT FOR 1963 AND 20.7 PERCENT FOR THE FIRST 10 MONTHS OF 1964, WHICH CORRESPONDS CLOSELY TO THE PERCENTAGE OFFERED BY NILON BROTHERS. FURTHERMORE, IN THE OPINION OF THE CONTRACTING AGENCY, THE NILON BROTHERS' ESTIMATE OF ANNUAL GROSS SALES OF $700,000 IS NOT FAR REMOVED FROM THE CURRENT GROSS SALES FIGURE OF $550,000, WHICH IS EXPECTED TO INCREASE AS ZOO ATTENDANCE FIGURES INCREASE.

PURSUANT TO THE REQUIREMENTS OF FPR 1-2.407-8, THE CONTRACTING AGENCY ADVISED OUR OFFICE INFORMALLY ON DECEMBER 21 OF ITS INTENT TO MAKE AWARD TO NILON BROTHERS TO PREVENT LENGTHY INTERRUPTION OF THE ZOO RESTAURANT SERVICE SINCE THE PRESENT CONTRACT WITH LEECH EXPIRES ON DECEMBER 31, 1964. AWARD HAS BEEN MADE ACCORDINGLY.

THE DETERMINATION OF THE RESPONSIBILITY OF A BIDDER IS A MATTER PRIMARILY WITHIN THE PROVINCE OF THE CONTRACTING AGENCY, AND THE ABSENCE OF EVIDENCE OF FRAUD, COLLUSION, BAD FAITH, OR LACK OF A PROPER FACTUAL BASIS, SUCH DETERMINATION WILL NOT BE QUESTIONED BY OUR OFFICE. FROM THE FACTS REPORTED CONCERNING THE BUSINESS OPERATIONS AND FINANCIAL STATUS OF THE NILON ENTERPRISES, IT IS APPARENT THAT THERE IS NO BASIS TO QUESTION THE ADMINISTRATIVE DETERMINATION THAT NILON BROTHERS OF MARYLAND, INC., IS A RESPONSIBLE BIDDER CAPABLE OF PROPERLY PERFORMING THE CONTRACT. FURTHERMORE, THE EVIDENCE OF RECORD SUPPORTS THE VIEW THAT THE PERCENTAGE OFFERED BY NILON BROTHERS IS REALISTIC. ACCORDINGLY, AND SINCE NILON BROTHERS HAD VERIFIED ITS BID, THE CONTRACTING OFFICER WAS AUTHORIZED UNDER FPR 1-2.406-3 (D) (2) TO CONSIDER THE BID AS ORIGINALLY SUBMITTED.

IN THE CIRCUMSTANCES, WE MUST CONCLUDE THAT THE AWARD OF THE CONTRACT DOES NOT CONTRAVENE THE APPLICABLE PROCUREMENT STATUTE, 41 U.S.C. 253 (B), AND REGULATION, FPR 1-2.407-1, WHICH REQUIRE THAT AWARD BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE IFB, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. ACCORDINGLY, YOUR PROTEST IS DENIED.