B-156220, MAY 7, 1965

B-156220: May 7, 1965

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TO ALLOYS AND FINISHING CORPORATION: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED FEBRUARY 24. THE INVITATION WAS ISSUED ON NOVEMBER 30. THE ONLY BID RECEIVED WAS SUBMITTED BY YOUR COMPANY. THE INVITATION WAS ISSUED FOR 870. YOUR BID OF $0.2390 PER POUND WAS REJECTED AFTER A DETERMINATION WAS MADE BY THE CONTRACTING OFFICER THAT THE PRICE WAS UNREASONABLE. THE DETERMINATION OF UNREASONABLE PRICE WAS BASED ON THE PREVAILING MARKET PRICE AT THE TIME WHICH WAS COMPUTED TO BE $0.1575 PER POUND ON THE COMMERCIAL COUNTERPART KNOWN AS SPECIAL HIGH GRADE. THIS PRICE WAS BASED ON THE QUOTATION FROM "MCGRAW-HILL NATIONAL NEWSPAPER PURCHASING WEEK" DATED JANUARY 25. THE QUANTITY IN THE INVITATION WAS CONSIDERED LARGE ENOUGH TO COMMEND SUCH A PRICE.

B-156220, MAY 7, 1965

TO ALLOYS AND FINISHING CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED FEBRUARY 24, 1965, WITH ENCLOSURE, AND SUBSEQUENT CORRESPONDENCE, PROTESTING THE REJECTION OF YOUR BID UNDER ARMY INVITATION FOR BIDS NO. AMC/T) 23-195-65-89.

THE INVITATION WAS ISSUED ON NOVEMBER 30, 1964, AND THE ONLY BID RECEIVED WAS SUBMITTED BY YOUR COMPANY. THE INVITATION WAS ISSUED FOR 870,500 POUNDS OF ZINC SLB, MINIMUM 99 PERCENT ZINC, 100-POUND SLABS, IN ACCORDANCE WITH FEDERAL SPECIFICATION QQ-Z-351S WITH AMENDMENT 1, DATED NOVEMBER 29, 1943, WITH PROVISION FOR AN ADDITIONAL 870,500 POUND SET- ASIDE QUANTITY FOR BIDDERS IN LABOR SURPLUS AREAS OR FOR SMALL BUSINESS. YOUR BID OF $0.2390 PER POUND WAS REJECTED AFTER A DETERMINATION WAS MADE BY THE CONTRACTING OFFICER THAT THE PRICE WAS UNREASONABLE.

THE DETERMINATION OF UNREASONABLE PRICE WAS BASED ON THE PREVAILING MARKET PRICE AT THE TIME WHICH WAS COMPUTED TO BE $0.1575 PER POUND ON THE COMMERCIAL COUNTERPART KNOWN AS SPECIAL HIGH GRADE. THIS PRICE WAS BASED ON THE QUOTATION FROM "MCGRAW-HILL NATIONAL NEWSPAPER PURCHASING WEEK" DATED JANUARY 25, 1965, AND THE QUANTITY IN THE INVITATION WAS CONSIDERED LARGE ENOUGH TO COMMEND SUCH A PRICE. THE REASON FOR NOT RECEIVING BIDS AT THE MARKET PRICE WAS ADMINISTRATIVELY CONSIDERED TO BE A TEMPORARY SITUATION WHERE NO COMPANY WAS WILLING TO SELL ZINC BECAUSE OF THE SHORT SUPPLY OF ZINC AT THE TIME. IT WAS DETERMINED THAT IF AWARD WAS MADE FOR THE TOTAL QUANTITY OF1,741,000 POUNDS AT $0.2390 PER POUND THE PRICE PAID WOULD BE$416,099. THE EXCESS COST TO THE GOVERNMENT AT THIS RATE WOULD BE $0.0815 PER POUND ABOVE CURRENT MARKET PRICE WHICH WOULD AMOUNT TO $141,891.50 ON THIS PURCHASE. IT WAS BELIEVED THAT RATHER THAN PAY $141,891.50 ABOVE THE CURRENT MARKET PRICE ATTEMPTS COULD BE MADE TO OBTAIN ZINC FROM THE NATIONAL STOCK PILE IN LIGHT OF NEW INFORMATION OF POSSIBLE AVAILABILITY OR READVERTISE OR NEGOTIATE A NEW PROCUREMENT.

YOU PROTEST THAT THE GOVERNMENT TOOK TOO LONG TO MAKE ITS DETERMINATION OF UNREASONABLE PRICE AND THAT THE CONTRACTING OFFICER COULD HAVE REACHED THE CONCLUSION THAT THE BID WAS "NOT REASONABLE" WITHIN A WEEK INSTEAD OF PUTTING YOU TO THE EXPENSE, TIME AND TROUBLE, PRESUMABLY OF A PREAWARD SURVEY AND OTHER ADMINISTRATIVE INVESTIGATIONS. IT IS NOTED THAT BY OMITTING THE FIGURES IN THE DESIGNATED SPACE IN YOUR BID, YOU CHOSE A BID ACCEPTANCE PERIOD OF 60 DAYS FROM THE DATE OF BID OPENING. THEREFORE, YOU CANNOT COMPLAIN OF COSTS INVOLVED IN MAINTAINING PERFORMANCE CAPABILITY FOR THE AGREED BID ACCEPTANCE TIME. FURTHER, AFTER A DETERMINATION OF RESPONSIVENESS OF YOUR BID WAS MADE, EVALUATION AS TO YOUR RESPONSIBILITY AND REASONABLENESS OF PRICE WAS BEGUN SIMULTANEOUSLY IN THE INTEREST OF TIME. A PREAWARD SURVEY WAS CONDUCTED BY THE NEW YORK PROCUREMENT DISTRICT AND THE CONTRACTING OFFICER DETERMINED THAT YOUR COMPANY WAS NOT RESPONSIBLE BASED ON AN UNSATISFACTORY FINANCIAL ABILITY. THE RESULTS OF THE PREAWARD SURVEY WERE NOT RECEIVED UNTIL FEBRUARY 1, 1965. THEREAFTER IT WAS NECESSARY TO REQUEST A CERTIFICATE OF COMPETENCY (COC) FROM THE SMALL BUSINESS ADMINISTRATION (SBA). AS SOON AS THE PRICE WAS DETERMINED TO BE UNREASONABLE ATTEMPTS TO OBTAIN A COC WERE DISCONTINUED. NOTIFICATION OF THE REJECTION OF YOUR BID WAS SENT TO YOU BY LETTER DATED FEBRUARY 10, 1965. THIS WAS NOT A SITUATION WHERE THE GOVERNMENT DELIBERATELY DELAYED ACTION ON YOUR BID WHILE AWAITING BETTER MARKET PRICES. DURING THE PERIOD BETWEEN RECEIPT OF YOUR BID AND THE DETERMINATION OF ITS UNREASONABLENESS THE GOVERNMENT WAS MOVING TOWARD COMPLETING EVALUATION OF YOUR RESPONSIBILITY AS WELL AS EVALUATING THE REASONABLENESS OF THE PRICE.

YOUR LETTER OF APRIL 8, 1965, CONTAINS THE ADVICE THAT YOU HAVE BEEN AWARDED A CONTRACT BY THE DEPARTMENT OF THE NAVY AT CORPUS CHRISTI, TEXAS, ON A BID FOR ZINC ALLEY INGOTS AT A PRICE OF $0.229 PER POUND AND THAT OTHER BIDDERS BID $0.2765, $0.2687 AND $0.2540 PER POUND. YOU STATE THE BELIEF THAT THIS INDICATES THAT THE GOVERNMENT AGENCY WHICH REJECTED YOUR LOW BID IN THE PROTESTED SITUATION WAS IN ERROR, THAT YOUR BID WAS EQUITABLE AND THAT YOUR PROTEST SHOULD BE GRANTED, THE BID REINSTATED AND A CONTRACT AWARDED YOU.

WHILE THE DEPARTMENT OF THE NAVY MAY HAVE AWARDED YOUR COMPANY A CONTRACT FOR ZINC AT NEARLY THE SAME BID PRICE AS THAT DEEMED UNREASONABLE BY THE DEPARTMENT OF THE ARMY, IT IS NOT BELIEVED THAT THIS FACT IN ITSELF IS MATERIAL TO OR INDICATIVE OF ERROR IN THE CONCLUSION REACHED BY THE ARMY. ASIDE FROM THE FACT THAT THESE ARE TWO SEPARATE PROCUREMENTS INVOLVING DIFFERENT SIZES AND AMOUNTS OF THE COMMODITY TOBE PROCURED IN DIFFERENT GEOGRAPHICAL LOCATIONS, WE HAVE NO KNOWLEDGE OF THE URGENCY OF THE NEEDS OF THE NAVY OR WHAT FACTS IT WAS REQUIRED TO CONSIDER IN MAKING AN AWARD AT THIS TIME. THEREFORE, THE CITED NAVY PROCUREMENT FURNISHES NO CRITERION FOR A CONCLUSION AS TO THE APPLICABILITY OR ACCURACY OF THE ARMY CONTRACTING OFFICER'S DETERMINATION IN THIS CASE.

THE ACTION OF THE CONTRACTING OFFICER IN REJECTING YOUR BID UPON HIS DETERMINATION THAT YOU BID WAS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO PROCURE THE ZINC SLABS, WAS AUTHORIZED BY 10 U.S.C. 2305/C) WHICH PROVIDES THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST. ALSO, PARAGRAPH 2-404.1/B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) PROVIDES, IN EFFECT, THAT AFTER BIDS ARE OPENED, AWARD MUST BE MADE TO THAT RESPONSIBLE BIDDER WHO SUBMITTED THE LOWEST RESPONSIVE BID, UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND CANCEL THE INVITATION. SUBPARAGRAPH 2-404.1/B) (VI) PROVIDES, IN EFFECT, THAT AFTER BIDS ARE OPENED BUT PRIOR TO AWARD INVITATIONS FOR BIDS MAY BE CANCELED WHERE SUCH ACTION IS CONSISTENT WITH THE PROVISIONS OF SUBPARAGRAPH (A) AND WHEN THE CONTRACTING OFFICER DETERMINES IN WRITING THAT "ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE AT UNREASONABLE PRICES.' IT IS FURTHER PROVIDED IN PARAGRAPH 2-404.2/E) THAT ANY BID MAY BE REJECTED IF THE CONTRACTING OFFICER DETERMINES IN WRITING THAT IT IS UNREASONABLE AS TO PRICE. THE CONTRACTING OFFICER REPORTED THAT IT WAS PURSUANT TO THE CITED LAW AND REGULATIONS THAT HE DETERMINED TO REJECT YOUR BID.

THEREFORE, IT APPEARS THAT THE CONTRACTING OFFICER ACTED WITHIN HIS AUTHORITY IN REJECTING YOUR BID WITH THE VIEW OF OBTAINING THE COMMODITY FROM OTHER SOURCES, OR BY READVERTISEMENT OR NEGOTIATION. IN THIS CONNECTION, SEE 10 U.S.C. 2304/A) (15). WE HAVE CONSISTENTLY HELD THAT SUCH A DETERMINATION IS NOT SUBJECT TO REVIEW BY OUR OFFICE EXCEPT UPON A CLEAR SHOWING OF FRAUD OR BAD FAITH AMOUNTING TO FRAUD. B-118013, DATED MARCH 31, 1954; B-128422, DATED AUGUST 30, 1956. WE HAVE ALSO HELD THAT A SUBSTANTIAL PROSPECTIVE SAVING, SUCH AS APPEARS TO BE INVOLVED IN THIS CASE, MAY CONSTITUTE A COGENT REASON FOR REJECTING A BID AND READVERTISING THE PROCUREMENT. B-143263, DATED DECEMBER 22, 1960. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES AND SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND READVERTISING OF THE INVITATION IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT. 36 COMP. GEN. 364.

UNDER THE CIRCUMSTANCES, IT MUST BE CONCLUDED THAT THE ACTION OF THE PROCURING OFFICE WAS TAKEN IN GOOD FAITH AND IN ACCORDANCE WITH THE APPLICABLE LAW AND REGULATIONS THERE BEING A REASONABLE BASIS FOR REGARDING YOUR BID AS EXCESSIVE. ACCORDINGLY, THERE APPEARS NO VALID REASON FOR OBJECTION BY OUR OFFICE TO THE REJECTION OF YOUR BID AND YOUR PROTEST IS DENIED.