B-157540, DEC. 29, 1965

B-157540: Dec 29, 1965

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TO THE SECRETARY OF THE ARMY: WE HAVE A REPORT FROM THE DIRECTOR OF PROCUREMENT AND PRODUCTION. THE RELATIVELY EARLY ISSUANCE OF THE IFB APPEARS TO HAVE BEEN INTENDED TO FACILITATE THE AWARDING OF THE CONTRACT SUFFICIENTLY PRIOR TO JULY 1. BIDS WERE RECEIVED ON MAY 10. ALTHOUGH MCWHIRTER'S BID WAS LOWER THAN THE PRICE OF ITS CURRENT CONTRACT. IT WAS NOT AS LOW AS MANN'S BID. THE CONTRACTING OFFICER SUBSEQUENTLY WAS ADVISED BY HIS LEGAL COUNSEL AT THE ARSENAL THAT THE DEFICIENCIES IN MANN'S BID WERE RELATED TO RESPONSIBILITY RATHER THAN RESPONSIVENESS. THAT CERTAIN OTHER IFB PROVISIONS SHOULD BE INTERPRETED AS ADVICE TO BIDDERS THAT REQUIRED DESCRIPTIVE LITERATURE WAS ALSO TO HAVE BEEN SUBMITTED WITH THE BID.

B-157540, DEC. 29, 1965

TO THE SECRETARY OF THE ARMY:

WE HAVE A REPORT FROM THE DIRECTOR OF PROCUREMENT AND PRODUCTION, ARMY MATERIEL COMMAND (AMC), DATED OCTOBER 15, 1965, IN WHICH HE RECOMMENDS THAT WE DENY A PROTEST BY MCWHIRTER MATERIAL HANDLING CO., INC., AGAINST THE REJECTION OF ITS BID ON A CONTRACT FOR REFUSE COLLECTION AND SALVAGE SERVICES AT REDSTONE ARSENAL FOR THE PERIOD OF JULY 1, 1965 THROUGH JUNE 30, 1966.

THE RECORD SHOWS THAT THE PROCURING ACTIVITY ISSUED THE SUBJECT INVITATION FOR BIDS NO. AMC (Z/-01-021-65-185 (IFB 185) ON APRIL 9, 1965. THE RELATIVELY EARLY ISSUANCE OF THE IFB APPEARS TO HAVE BEEN INTENDED TO FACILITATE THE AWARDING OF THE CONTRACT SUFFICIENTLY PRIOR TO JULY 1, 1965, TO PERMIT ANY SUCCESSFUL COMPETITOR OF THE CURRENT CONTRACTOR TO PURCHASE, RENT OR ALLOCATE NECESSARY EQUIPMENT FOR TIMELY COMMENCEMENT OF PERFORMANCE, AND THUS TO INSURE UNINTERRUPTED DISPOSAL SERVICES AT THE ARSENAL.

BIDS WERE RECEIVED ON MAY 10, 1965, FROM MCWHIRTER, THE CURRENT CONTRACTOR, AND FROM MANN EQUIPMENT COMPANY, IN THE RESPECTIVE AMOUNTS OF $144,000 AND $139,500. ALTHOUGH MCWHIRTER'S BID WAS LOWER THAN THE PRICE OF ITS CURRENT CONTRACT, IT WAS NOT AS LOW AS MANN'S BID. HOWEVER, THE CONTRACTING OFFICER AND THE CONTRACTOR SELECTION BOARD PROPOSED TO REJECT MANN'S LOW BID, PRESUMABLY BECAUSE MANN HAD NOT COMPLIED WITH IFB PROVISIONS STIPULATING THAT BIDDERS SUBMIT WITH THEIR BIDS CERTAIN SECURITY CLEARANCE DATA AND A TENTATIVE SCHEDULE OF PROPOSED PICK-UP ROUTES. ON MAY 25, 1965, MANN PROTESTED THE DECISION, AND THE CONTRACTING OFFICER SUBSEQUENTLY WAS ADVISED BY HIS LEGAL COUNSEL AT THE ARSENAL THAT THE DEFICIENCIES IN MANN'S BID WERE RELATED TO RESPONSIBILITY RATHER THAN RESPONSIVENESS, AND THEREFORE COULD BE WAIVED IF CORRECTED AFTER THE OPENING OF BIDS.

IN A LETTER TO THE CONTRACTING OFFICER, DATED JUNE 3, 1965, MCWHIRTER PROTESTED ANY AWARD TO MANN ON THE BASIS THAT THE ABOVE DESCRIBED DEFICIENCIES DID AFFECT THE RESPONSIVENESS OF MANN'S BID. MCWHIRTER ALSO IMPLIED, AND LATER EXPLICITLY ARGUED, THAT CERTAIN OTHER IFB PROVISIONS SHOULD BE INTERPRETED AS ADVICE TO BIDDERS THAT REQUIRED DESCRIPTIVE LITERATURE WAS ALSO TO HAVE BEEN SUBMITTED WITH THE BID. THE RECORD INDICATES AND THE PROCURING ACTIVITY REPORTS, THAT MANN SATISFIED ALL OF THE ABOVE REQUIREMENTS, INCLUDING THE ONE FOR SECURITY DATA, AFTER BID OPENING.

THE CONTRACTING OFFICER HAD RECEIVED CROSS ALLEGATIONS OF IMPROPRIETIES AGAINST MCWHIRTER AND MANN, AND ON JUNE 10, HE REFERRED THESE ALLEGATIONS TO THE PROVOST MARSHALL FOR INVESTIGATION. DURING THE COURSE OF THE INVESTIGATION, THE CONTRACTING OFFICER HAD REQUESTED AND RECEIVED EXTENSIONS OF THE MCWHIRTER AND MANN BIDS UNTIL JULY 31, 1965. IN A LETTER DATED JUNE 15, 1965, MANN AGREED TO ACCEPT AN AWARD UNDER IFB 185 FOR 11 MONTHS BEGINNING AUGUST 1, 1965. MCWHIRTER, IN ADDITION TO EXTENDING ITS BID ACCEPTANCE DATE, HAD OFFERED TO EXTEND ITS CURRENT CONTRACT FOR 30, 60 OR 90 DAYS, AND HAD AGREED TO ACCEPT A CONTRACT UNDER IFB 185 FOR LESS THAN ONE YEAR. THE CONTRACTING OFFICER EXTENDED MCWHIRTER'S CURRENT CONTRACT FOR ONE MONTH, TO JULY 31, 1965.

ON OR ABOUT JULY 12, THE PROVOST MARSHALL CONCLUDED THAT THERE WERE NO CLEAR VIOLATIONS OF LAW OR REGULATION BY MANN OR MCWHIRTER. ON JULY 14, IN RESPONSE TO THE CONTRACTING OFFICER'S QUESTION AS TO WHEN MANN COULD BEGIN SERVICING THE BASE IF IT WERE AWARDED A CONTRACT ON JULY 16, MANN STATED THAT IT COULD NOT BE READY BEFORE SEPTEMBER 1, 1965. WE PRESUME FROM THIS RESPONSE THAT MANN WAS WILLING TO ACCEPT A 10 MONTH CONTRACT AT THE PRICES IT HAD BEEN ON THE ORIGINAL 12 MONTH REQUIREMENT.

THE CONTRACTING OFFICER REPORTS THAT MCWHIRTER WOULD NOT OFFER ANOTHER EXTENSION OF ITS CURRENT CONTRACT FOR THE MONTH OF AUGUST ALONE, BUT INSISTED ON AN EXTENSION OF NO LESS THAN TWO MONTHS. MCWHIRTER APPEARED TO BE THE ONLY FEASIBLE SOURCE FOR PROVIDING THE BASE WITH UNINTERRUPTED DISPOSAL SERVICES DURING AUGUST, SINCE NEITHER MANN NOR THE PROCURING ACTIVITY COULD OBTAIN NECESSARY EQUIPMENT IN TIME FOR AUGUST REQUIREMENTS. THEREFORE, THE CONTRACTING OFFICER DECIDED HE HAD NO ALTERNATIVE TO ACCEPTING MCWHIRTER'S OFFER OF AN EXTENSION THROUGH BOTH AUGUST AND SEPTEMBER.

BEFORE ACCEPTING MCWHIRTER'S OFFER TO EXTEND THE CURRENT CONTRACT FOR TWO MONTHS, THE CONTRACTING OFFICER WROTE TO MANN AND ASKED THAT IT EXTEND ITS BID ACCEPTANCE THROUGH SEPTEMBER 30, AND INDICATE A WILLINGNESS TO ACCEPT THE CONTRACT FOR NINE MONTHS. IN A LETTER DATED JULY 26, 1965, MANN REPLIED THAT IT DID NOT THINK THE INCURRING OF A LARGE INDEBTEDNESS TO OBTAIN THE NECESSARY EQUIPMENT COULD BE JUSTIFIED BY A NINE MONTH CONTRACT, AND REFUSED TO EXTEND ITS BID ACCEPTANCE PERIOD BEYOND JULY 31.

ON AUGUST 6, THE BIDDERS WERE ADVISED THAT "IN THE INTEREST OF THE GOVERNMENT, NO AWARD WAS MADE ON THE ABOVE INVITATION.' BIDS WERE RESOLICITED FOUR DAYS LATER, PURSUANT TO IFB AMC (Z/-01021-66-22 (IFB 22), WITH THE OPENING SCHEDULED FOR AUGUST 25, 1965. THE SECURITY REQUIREMENTS OF IFB 185, WHICH HAD BEEN MET BY MANN AS WELL AS MCWHIRTER, WERE OMITTED AFTER A REEVALUATION OF THEIR ESSENTIALITY BY SECURITY PERSONAL. IFB 22 REQUESTED BIDS ON THE BASIS OF NINE MONTHS OF SERVICE, WITH AN OPTION RESERVED TO THE GOVERNMENT TO RENEW THE CONTRACT FOR 12 MONTHS.

WE ARE ADVISED THE PROCURING ACTIVITY SUSPECTS THAT THE THREE BIDS SUBMITTED IN RESPONSE TO IFB 22, INCLUDING THE TWO SUBMITTED BY MANN AND MCWHIRTER, HAVE PROBABLY EXPIRED. IN VIEW OF THE UNUSUALLY LONG TIME WHICH HAS ELAPSED SINCE THE TIME SCHEDULED FOR BID OPENING, AND THE REPORTED FACT THAT THE PROCURING ACTIVITY HAS NOT REQUESTED BID EXTENSIONS, THIS SUSPICION WOULD APPEAR TO BE WELL FOUNDED. WE ARE FURTHER ADVISED THAT IF BIDS ON IFB 22 HAVE EXPIRED, AND IF THIS OFFICE AGREES WITH THE ACTIVITY'S DENIAL OF MCWHIRTER'S PROTEST UNDER IFB 185, BIDS PROBABLY WILL HAVE TO BE RESOLICITED AGAIN. THEREFORE, CONSIDERING THE TIME WHICH HAS ALREADY EXPIRED SINCE THE SCHEDULED TERMINATION OF LAST YEAR'S CONTRACT FOR DISPOSAL SERVICES, THE TIME WHICH WOULD BE REQUIRED TO SOLICIT, RECEIVE AND EVALUATE NEW BIDS FOR THE THIRD TIME, AND THE TIME WHICH ANY SUCCESSFUL BIDDER OTHER THAN THE CURRENT CONTRACTOR APPARENTLY WILL REQUIRE TO OBTAIN EQUIPMENT, IT APPEARS TO US THAT THE ACTIONS THE PROCURING ACTIVITY PROPOSED TO TAKE WILL IN EFFECT CONVERT A CONTRACT FOR AN ANNUAL REQUIREMENT INTO ONE FOR A PERIOD OF FOUR MONTHS OR LESS, WITH AN OPTION FOR ANNUAL RENEWAL OF PRICES OFFERED ON A FOUR MONTHS BASIS.

THE PROCURING ACTIVITY CITES 36 COMP. GEN. 62, 39 ID. 396, AND 40 ID. 671 IN RECOGNITION OF THE RULE THAT ONLY COGENT REASONS WILL JUSTIFY THE REJECTION OF OPENED BIDS, BUT MAINTAINS THAT THE SUBJECT CANCELLATION OF IFB 185 IS IN THE BEST INTEREST OF THE GOVERNMENT FOR THE FOLLOWING REASONS:

"A. AWARD FROM SUBJECT IFB WOULD BE FOR ONLY 75 PERCENT OF THE ORIGINAL REQUIREMENT.

B. AWARD CANNOT BE MADE TO THE LOW RESPONSIVE BIDDER IF CONTINUITY OF CONTRACTOR SERVICES IS TO BE PRESERVED.

C. COST OF READVERTISING WOULD BE LESS THAN COST OF AWARDING TO SECOND LOW BIDDER.

D. READVERTISING FOR NINE MONTHS SERVICE WITH OPTION TO EXTEND FOR ADDITIONAL TWELVE MONTHS WILL MAKE THE PROCUREMENT MORE ATTRACTIVE TO BIDDERS AND SHOULD REDUCE ADMINISTRATIVE COSTS TO THE GOVERNMENT.

E. ADMINISTRATIVE DELAYS BEYOND THE CONTROL OF THE CONTRACTING OFFICER HAVE GIVEN THE SECOND LOW BIDDER AN UNDUE ADVANTAGE.'

WITH RESPECT TO THE FIRST REASON, IT SHOULD BE NOTED THAT WHILE ONLY 75 PERCENT OF THE ORIGINAL REQUIREMENT COULD HAVE BEEN AWARDED TO MANN UNDER THE CANCELLED IFB, NO MORE THAN THAT AMOUNT HAS BEEN OFFERED FOR CONTRACT IN THE RESOLICITATION. FURTHERMORE, IT NOW APPEARS THAT THE CANCELLATION OF IFB 185 FOR 75 PERCENT OF THE ORIGINAL REQUIREMENT MAY RESULT IN A SECOND READVERTISEMENT FOR ONLY 1/3 OF THE ORIGINAL REQUIREMENT. INDEED, THE FIRST REASON APPEARS TO BE WITHOUT FOUNDATION UNLESS CONSIDERATION IS GIVEN TO THE 12 MONTH OPTION INCLUDED IN IFB 22. THE EFFECT OF ADVERTISING FOR 75 PERCENT OF THE ORIGINAL REQUIREMENT, PLUS THE OPTION, IS THE BASIS OF THE FOURTH REASON GIVEN FOR REJECTING MCWHIRTER'S BID, AND IS DISCUSSED BELOW.

WITH RESPECT TO THE VIEW THAT AWARD COULD NOT BE MADE TO THE LOW RESPONSIVE BIDDER, I.E. MANN, WE NEED ONLY OBSERVE THAT ONCE MANN ALLOWED ITS BID TO EXPIRE NOTWITHSTANDING AN ADMINISTRATIVE REQUEST FOR VALID REASONS THAT THE BID ACCEPTANCE PERIOD BE EXTENDED, MANN'S OFFER WAS EFFECTIVELY WITHDRAWN, AND WAS NO LONGER THE LOW RESPONSIVE BID. THE MERE EXPIRATION OF WHAT WAS ONCE THE LOW RESPONSIVE BID DOES NOT, IN OUR VIEW, JUSTIFY AN ADMINISTRATIVE REFUSAL TO FOLLOW THE BASIC COMPETITIVE BIDDING PROCEDURE OF AWARDING THE CONTRACT TO THE RESPONSIBLE BIDDER WHOSE LOW BID IS RESPONSIVE AND AVAILABLE FOR ACCEPTANCE. BIDS ORDINARILY SHOULD NOT BE REJECTED UNLESS SOME DEFICIENCY EXISTS IN THE INVITATION OR SOME FAULT WITH THE BIDS THEMSELVES, AND IN THE INSTANT CASE NO SUGGESTION APPEARS IN THE RECORD THAT THE SUBJECT INVITATION IS DEFECTIVE OR THAT MCWHIRTER'S BID IS OTHERWISE UNACCEPTABLE.

THE ASSERTION THAT THE COST OF READVERTISING WOULD BE LESS THAN THE COST OF AWARDING THE CONTRACT TO THE SECOND LOW BIDDER, WHICH IS THE THIRD REASON GIVEN FOR CANCELLING IFB 185, WOULD APPEAR TO ASSUME THAT UPON READVERTISEMENT, THE BID OF MCWHIRTER OR ONE OF ITS COMPETITORS WILL BE SUFFICIENTLY LOWER THAN MCWHIRTER'S BID ON THE INITIAL ADVERTISEMENT TO MORE THAN OFFSET THE ADMINISTRATIVE COST OF READVERTISING. HOWEVER, WE HAVE NEVER COUNTENANCED THE REJECTION OF BIDS MERELY FOR THE PURPOSE OF OFFERING THE BIDDERS AN OPPORTUNITY TO BETTER THE PRICES OF THEIR COMPETITORS. TO THE CONTRARY, WE HAVE HELD IN SUCH CIRCUMSTANCES THAT REJECTION IS JUSTIFIED ONLY WHERE THE PRICE OF THE LOW ACCEPTABLE BID IS UNREASONABLY HIGH. 36 COMP. GEN. 364. IN THE INSTANT CASE IT DOES NOT APPEAR THAT MCWHIRTER'S BID WAS CONSIDERED UNREASONABLY HIGH, SINCE THE RECORD NOWHERE EVIDENCES DISSATISFACTION WITH MCWHIRTER'S BID PRICE, AND BECAUSE SUCH BID PRICE IS BOTH LOWER THAN THAT STIPULATED IN THE CURRENT CONTRACT AND RELATIVELY CLOSE TO THE BID PRICE OF MANN, WHICH THE PROCURING ACTIVITY WANTED TO ACCEPT.

MOREOVER, WE BELIEVE THE ASSUMPTION THAT LOWER PRICES WILL BE SUBMITTED ON IFB 22 IS HIGHLY CONJECTURAL. IN THIS CONNECTION, IT MAY WELL BE THAT THE INCLUSION OF A RENEWAL OPTION HAS ENCOURAGED HIGHER PRICES THAN MCWHIRTER'S ACCEPTABLE BID PRICE ON IFB 185, SINCE BIDDERS ON IFB 22 WERE FACED WITH A REQUIREMENT THAT THEY GUARANTEE FIRM PRICES FOR 21 MONTHS, WITH NO GUARANTEE THAT THE CONTRACT TERM WOULD CONTINUE MORE THAN NINE MONTHS. IN THIS SITUATION, BIDDERS WOULD NOT KNOW WHETHER TO BASE THEIR BID PRICES ON AN EQUIPMENT AMORTIZATION SCHEDULE OF NINE OR OF 21 MONTHS, AND THEREFORE WOULD INCLUDE A "CUSHION" IN THEIR PRICES TO COVER THE POSSIBILITY THAT THE CONTRACT, AND CORRESPONDINGLY, THE AMORTIZATION OF COSTS, WOULD TERMINATE AFTER NINE MONTHS. IN ADDITION, BIDDERS WOULD ALSO PROBABLY CONSIDER THE POSSIBILITY OF SIGNIFICANT INCREASES IN LABOR AND MATERIAL COSTS OVER THE PERIOD OF A 21 MONTH CONTRACT. SEE 41 COMP. GEN. 682. THEREFORE, WE BELIEVE THAT ANY PRICE REDUCTIONS, WHICH MIGHT BE FOUND IF BIDS FOR IFB 22 WERE OPENED, WOULD MORE LIKELY AND CERTAINLY TO A GREATER EXTENT BE CAUSED BY THE BIDDERS' BELIEF EITHER THAT A COMPETITOR WOULD UNDERBID THE LOW BID ON IFB 185, OR THAT THE CONTRACT WOULD ALMOST CERTAINLY BE EXTENDED FOR THE ADDITIONAL 12 MONTHS.

WITH RESPECT TO THE FOURTH REASON FOR REJECTING MCWHIRTER'S BID, WE CANNOT AGREE WITH THE CONTRACTING OFFICER'S OPINION THAT AMENDING THE SPECIFICATIONS TO INCLUDE THE RENEWAL OPTION "WILL MAKE THE PROCUREMENT MORE ATTRACTIVE TO BIDDERS AND SHOULD REDUCE ADMINISTRATIVE COSTS TO THE GOVERNMENT.' FOR REASONS STATED ABOVE, WE THINK THE INCLUSION OF THE RENEWAL OPTION RENDERS IFB 22 FINANCIALLY LESS ATTRACTIVE THAN IFB 185, AND SHOULD RESULT IN HIGHER OVERALL COSTS. INDEED, IN VIEW OF THE FACT THAT A FORMAL READVERTISEMENT WOULD BE THE ONLY SURE WAY FOR THE GOVERNMENT TO DETERMINE THE ADVANTAGES OF EXERCISING A 12 MONTH OPTION TO A CONTRACT AWARDED SEVERAL MONTHS PREVIOUSLY (SEE 41 COMP. GEN. 682), IT APPEARS THE ONLY REASON WHY MANN APPARENTLY FOUND IFB 22 SUFFICIENTLY MORE ATTRACTIVE TO HAVE SUBMITTED A BID, NOTWITHSTANDING THE UNATTRACTIVENESS OF AN IDENTICAL NINE MONTH CONTRACT OFFERED UNDER IFB 185, MAY BE THE BELIEF THAT ANY CONTRACT AWARDED UNDER IFB 22 WILL BE EXTENDED WITHOUT OBTAINING THE DEGREE OF COMPETITION WE BELIEVE IS CONTEMPLATED BY ASPR 1- 15. CF. B 156584, DATED JULY 14, 1965. WE ARE THEREFORE UNABLE TO AGREE THAT AMENDING THE SPECIFICATIONS TO INCLUDE THE OPTION OF RENEWAL IS A PROPER GROUND FOR CANCELLING IFB 185.

FINALLY, WITH RESPECT TO THE ALLEGATION THAT MCWHIRTER ENJOYS "UNDUE ADVANTAGES," WE RECOGNIZE THAT ADMINISTRATIVE DELAYS, COMBINED WITH THE FIRM'S REFUSAL TO EXTEND ITS CONTRACT FOR THE MONTH OF AUGUST ALONE, MAY HAVE "PREVENTED" THE PROCURING ACTIVITY FROM AWARDING MANN A CONTRACT ON SEPTEMBER 1 FOR 10 MONTHS, SINCE SUCH AWARD WOULD HAVE LEFT THE ARSENAL WITHOUT DISPOSAL SERVICES DURING AUGUST. HOWEVER, WE FIND NOTHING IMPROPER IN MCWHIRTER'S ALLEGED REFUSAL TO GRANT AN EXTENSION WHICH WOULD HAVE GRATUITOUSLY ACCOMMODATED A COMPETITOR IN HIS ATTEMPT TO REPLACE MCWHIRTER AS THE CURRENT CONTRACTOR. IN THE SAME SENSE THAT MCWHIRTER MAY HAVE "PREVENTED" AN AWARD TO MANN, MANN ITSELF "PREVENTED" THE AWARD FIRST BY BEING UNABLE TO COMMENCE PERFORMANCE ON AUGUST 1 IF IT WERE AWARDED A CONTRACT ON JULY 16, AND THEN BY REFUSING TO EXTEND ITS BID ACCEPTANCE PERIOD BEYOND JULY 31 SO THAT IT COULD BE AWARDED A CONTRACT FOR NINE MONTHS. FOR THE FOREGOING REASONS, WE MUST CONCLUDE THAT THE RECORD DOES NOT CONTAIN ADEQUATE REASONS FOR CANCELLING IFB 185. THEREFORE, WE BELIEVE THAT MCWHIRTER'S DEMAND OF ENTITLEMENT TO AWARD UNDER IFB 185 IS JUSTIFIED, AND THAT AN AWARD PURSUANT THERETO WOULD BE PROPER.