B-158062, JAN. 20, 1966, 45 COMP. GEN. 433

B-158062: Jan 20, 1966

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CONTRACTS - REQUIREMENTS - ALTERNATIVE METHOD OF PROCUREMENT THE ACCEPTANCE OF AN ALTERNATE BID SUBMITTED AFTER BIDS WERE OPENED BY THE SECOND LOW BIDDER WHO OFFERED TO PERFORM A REQUIREMENTS CONTRACT FOR DATA PROCESSING AND PROGRAMMING SERVICES AT A FIXED. PROVIDED CERTAIN RECORD KEEPING WAS ELIMINATED. EVEN HAD THE INITIAL BID OF THE OFFEROR BEEN THE LOWEST RECEIVED BECAUSE THE REDUCTION WAS CONDITIONED UPON A REDUCTION IN THE REQUIRED SERVICES. - A HIGHLY SPECULATIVE FACTOR THAT WAS NOT PROVIDED IN THE INVITATION. - WAS NOT INCLUDED IN THE EVALUATION OF BIDS. SEVEN BIDS FOR THIS PROCUREMENT WERE OPENED ON SEPTEMBER 8. THE TWO LOWEST WERE AS FOLLOWS: DATA PROCESSING SERVICES OF VIRGINIA.

B-158062, JAN. 20, 1966, 45 COMP. GEN. 433

CONTRACTS - REQUIREMENTS - ALTERNATIVE METHOD OF PROCUREMENT THE ACCEPTANCE OF AN ALTERNATE BID SUBMITTED AFTER BIDS WERE OPENED BY THE SECOND LOW BIDDER WHO OFFERED TO PERFORM A REQUIREMENTS CONTRACT FOR DATA PROCESSING AND PROGRAMMING SERVICES AT A FIXED, REDUCED PRICE IN AN AMOUNT LESS THAN THAT OF THE LOW BIDDER UNDER THE INVITATION, PROVIDED CERTAIN RECORD KEEPING WAS ELIMINATED, WOULD BE IMPROPER, EVEN HAD THE INITIAL BID OF THE OFFEROR BEEN THE LOWEST RECEIVED BECAUSE THE REDUCTION WAS CONDITIONED UPON A REDUCTION IN THE REQUIRED SERVICES; HOWEVER, SHOULD THE ALTERNATIVE METHOD PROPOSED MEET THE NEEDS OF THE GOVERNMENT, A DETERMINATION SHOULD BE MADE WHETHER A RESOLICITATION OF THE PROCUREMENT WOULD BE PRACTICABLE AND WOULD RESULT IN A SUBSTANTIAL REDUCTION IN PRICE, BUT IN THE EVENT OF A NEGATIVE DETERMINATION, AN AWARD OF THE REQUIREMENTS CONTRACT TO THE LOW BIDDER, FOUND SATISFACTORY IN A PREAWARD SURVEY, WOULD NOT BE PREJUDICIAL TO OTHER BIDDERS, EVEN THOUGH THE COST OF CHANGING CONTRACTORS--- A HIGHLY SPECULATIVE FACTOR THAT WAS NOT PROVIDED IN THE INVITATION--- WAS NOT INCLUDED IN THE EVALUATION OF BIDS.

TO ERNEST E. BLANCHE AND ASSOCIATES, INC., JANUARY 20, 1966:

IN YOUR LETTER OF NOVEMBER 18, 1965, YOU PROTEST AGAINST A PROPOSED AWARD OF A REQUIREMENTS CONTRACT BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., FOR DATA PROCESSING AND PROGRAMMING SERVICES PURSUANT TO INVITATION FOR BIDS 600-186-66. SEVEN BIDS FOR THIS PROCUREMENT WERE OPENED ON SEPTEMBER 8, 1965, AND AFTER EVALUATION BASED UPON ESTIMATED HOUR REQUIREMENTS, THE TWO LOWEST WERE AS FOLLOWS:

DATA PROCESSING SERVICES OF VIRGINIA, INC. (DPS) $93,288

ERNEST E. BLANCHE ASSOCIATES, INC. 93,852

YOU MAINTAIN THAT DPS DOES NOT HAVE SUFFICIENT EXPERIENCE OR SUFFICIENT ACTIVE PROGRAMMING PERSONNEL TO BEGIN ADEQUATE PROCESSING FOR SEVERAL MONTHS, AND THAT THEIR SPACE AND OPERATING FACILITIES ARE INADEQUATE. YOU ASSERT THAT THE PREAWARD ON-SITE INSPECTION, WHICH WAS MADE IN ORDER TO DETERMINE DPS'S RESPONSIBILITY, WAS CONDUCTED BY A PERSON NOT FAMILIAR WITH DATA PROCESSING. YOU ALSO STATE THAT SINCE PORTIONS OF THE WORK ARE CLASSIFIED, CLEARANCE WOULD HAVE TO BE OBTAINED FOR NEW OR UNCLEARED PERSONNEL, THEREBY CAUSING ADDITIONAL DELAYS.

FURTHERMORE, YOU CONTEND THAT YOUR OFFER IS THE ONE MOST ADVANTAGEOUS TO THE GOVERNMENT BECAUSE AN ADDITIONAL EXPENSE OF $28,000, ARISING FROM A NEW CONTRACTOR'S UNFAMILIARITY WITH EXISTING PROGRAMS, HIS HIGHER RATE OF ERROR, AND RESULTING RERUNS AND DELAYS, WOULD BE INVOLVED IN CHANGING CONTRACTORS AT THIS POINT. IT IS ALSO NOTED THAT ON OCTOBER 15, 1965, WHICH WAS OVER A MONTH AFTER BIDS WERE OPENED, YOU WROTE TO THE NAVY PURCHASING OFFICE AND, IN THE BELIEF THAT YOU WOULD BE CONSIDERED THE SUCCESSFUL BIDDER, SUBMITTED AN ALTERNATE OFFER TO PERFORM THE CONTRACT FOR A FIXED PRICE OF $72,000, PROVIDED THAT CERTAIN RECORD KEEPING REQUIREMENTS WERE ELIMINATED FROM THE CONTRACT.

THE ADMINISTRATIVE RECORD INDICATES THAT DPS WAS FOUND IN A PREAWARD SURVEY TO BE SATISFACTORY IN ALL RESPECTS, INCLUDING TECHNICAL AND PRODUCTION CAPABILITY, LABOR RESOURCES, PLANT FACILITY AND EQUIPMENT, AND SECURITY CLEARANCE. CONTRARY TO YOUR ASSERTION THAT THE PREAWARD SURVEY OF DPS'S FACILITIES WAS CONDUCTED BY A PERSON NOT FAMILIAR WITH DATA PROCESSING, THE CONTRACTING OFFICER REPORTS THAT THE SURVEY TEAM INCLUDED A REPRESENTATIVE OF THE USING ACTIVITY WHO IS QUITE FAMILIAR WITH THE REQUIREMENT SPECIFIED IN THE INVITATION. WE HAVE CONSISTENTLY HELD THAT A BIDDER'S OVERALL RESPONSIBILITY IS PRIMARILY A MATTER TO BE DETERMINED BY THE CONTRACTING OFFICER, NOT BY THE GENERAL ACCOUNTING OFFICE, AND THAT SUCH DETERMINATION OF THE SUCCESSFUL BIDDER'S RESPONSIBILITY AND CAPABILITY MUST BE ACCEPTED BY THIS OFFICE UNLESS THERE IS CLEAR EVIDENCE THAT IT IS ARBITRARY OR CAPRICIOUS. 38 COMP. GEN. 131. NO SUCH EVIDENCE HAS BEEN PRESENTED TO US IN THIS CASE.

WITH RESPECT TO YOUR CONTENTION THAT THE NAVY PURCHASING OFFICE SHOULD CONSIDER IN ITS EVALUATION OF BIDS AN ALLEGED ADDITIONAL COST OF $28,000 WHICH YOU ASSOCIATE WITH A CHANGE OF CONTRACTORS, YOUR ATTENTION IS DIRECTED TO A CARDINAL RULE OF COMPETITIVE BIDDING PROCEDURES THAT THE INVITATION FOR BIDS MUST ADVISE BIDDERS OF ANY FACTOR OTHER THAN BID PRICE WHICH IS TO BE CONSIDERED IN DETERMINING THE LOW BIDDER. SEE 38 COMP. GEN. 550. FURTHERMORE, THE CONTRACTING OFFICER ADVISES US THAT THE COST OF CHANGING CONTRACTORS WAS NOT INCLUDED IN THE INVITATION AS AN EVALUATION FACTOR BECAUSE THE PROSPECTIVE COST OF ORIENTING A NEW CONTRACTOR IS CONSIDERED HIGHLY SPECULATIVE AND WOULD VARY SUBSTANTIALLY AMONG BIDDERS, DEPENDING UPON THEIR PARTICULAR EXPERIENCE AND THE NATURE OF THEIR INDIVIDUAL OPERATIONS. SEE B-156582, DATED JULY 16, 1965, INDICATING THAT COSTS WHICH MAY BE DIFFICULT TO QUANTIFY SHOULD NOT BE USED AS A FACTOR IN BID EVALUATION EXCEPT AFTER THOROUGH STUDY AND CONSIDERATION OF THE PROS AND CONS BY ALL INTERESTED AGENCIES, ESTABLISHMENT OF PROPER CRITERIA FOR THE USE OF THIS FACTOR, AND SPECIFIC NOTICE TO BIDDERS IN INVITATIONS.

WITH RESPECT TO YOUR ALTERNATIVE OFFER IN THE AMOUNT OF $72,000, THE PROPRIETY OF ACCEPTING SUCH AN OFFER WOULD HAVE BEEN QUESTIONABLE, EVEN IF YOUR BID HAD BEEN THE LOWEST RECEIVED, BECAUSE THE REDUCTION IN PRICE WAS CONDITIONED UPON A REDUCTION IN REQUIRED SERVICES. SEE 21 COMP. GEN. 56, 58, IN WHICH WE STATED THAT:

BIDDERS WOULD NOT BE IN FREE AND OPEN COMPETITION FOR GOVERNMENT BUSINESS UPON AN EQUAL BASIS IF, AFTER ADVERTISING FOR PROPOSALS, THE GOVERNMENT SHOULD ENTER INTO NEGOTIATIONS WITH ONE OR MORE BIDDERS WITH A VIEW TOWARDS THE AWARDING OF CONTRACTS ON A BASIS DIFFERING EITHER FROM THE ADVERTISEMENT FOR PROPOSALS OR FROM THE SUBMITTED COMPETITIVE BIDS.

HOWEVER, WE NEED NOT CONSIDER THIS ISSUE BECAUSE IT IS CLEAR FROM WHAT HAS ALREADY BEEN SAID THAT YOU COULD NOT PROPERLY HAVE BEEN AND WERE NOT CONSIDERED THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER FOR THIS PROCUREMENT. UNDER SUCH CIRCUMSTANCES, A HIGHER BIDDER MAY NOT BE PERMITTED TO REDUCE HIS BID PRICE BELOW THAT OF A LOWER BIDDER.

NEVERTHELESS, YOUR OFFER TO PROVIDE THE SUBJECT SERVICES FOR $72,000 INSTEAD OF $93,852 IF THE REQUIREMENTS CONTRACT IS CHANGED TO A FIXED PRICE CONTRACT (WITH THE OMISSION OF CERTAIN ACCOUNTING REQUIREMENTS), MAY PRESENT A QUESTION AS TO WHETHER IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO REJECT ALL BIDS AND RESOLICIT BIDS OR OFFERS FOR A CONTRACT FOR THESE SERVICES ON A FIXED PRICE BASIS.

WHETHER ALL BIDS SHOULD BE REJECTED, AND BIDS SHOULD BE RESOLICITED ON THE BASIS OF AN ALTERNATIVE METHOD OF PERFORMANCE SUGGESTED BY ONE OF THE BIDDERS, NECESSARILY INVOLVES A DETERMINATION OF WHETHER THE OBJECTIVES OF THE PROCURING ACTIVITY CAN BE ACCOMPLISHED BY USE OF THE ALTERNATIVE METHOD, WHETHER THE NEEDS OF THE PROCURING ACTIVITY WILL PERMIT THE DELAY INCIDENT TO REPROCUREMENT, AND WHETHER THE SOLICITATION OF BIDS OR OFFERS BASED UPON USE OF SUCH METHOD MAY REASONABLY BE EXPECTED TO RESULT IN A SUBSTANTIAL REDUCTION IN THE CONTRACT PRICE. SINCE THESE QUESTIONS INVOLVE THE CONSIDERATION OF MATTERS AND INFORMATION PECULIAR TO THE PROCURING AGENCY, THEIR DETERMINATION IN THE FIRST INSTANCE MUST BE LEFT TO THE SOUND DISCRETION OF THE AGENCY. THE PRESENT RECORD CONTAINS A STATEMENT BY THE CONTRACTING OFFICER THAT YOUR OFFER "TO PERFORM THE PROPOSED CONTRACT ON A FIXED PRICE BASIS FOR $72,000 CONTINGENT UPON THE ELIMINATION OF A PORTION OF THE EFFORT PROVIDES NO BASIS FOR CANCELLING THE INVITATION * * * (AND) READVERTISING, WITHOUT COMPROMISING THE INTEGRITY OF THE COMPETITIVE BID SYSTEM.' HOWEVER, THE RECORD DOES NOT INDICATE THAT SUCH STATEMENT IS BASED UPON A CONSIDERATION OF THE DEPARTMENT'S NEEDS, AS SET OUT ABOVE.

ACCORDINGLY, WE ARE TODAY ADVISING THE SECRETARY OF THE NAVY THAT A DETERMINATION SHOULD BE MADE WHETHER A CONTRACT OF THE TYPE PROPOSED BY YOUR ALTERNATIVE BID WOULD MEET THE DEPARTMENT'S NEEDS AND, IF SO, WHETHER A RESOLICITATION ON THAT BASIS WOULD BE PRACTICABLE AND WOULD RESULT IN A SUBSTANTIALLY LOWER CONTRACT PRICE. IN THE EVENT THE CIRCUMSTANCES ARE SUCH AS TO REQUIRE A NEGATIVE DETERMINATION ON ANY OF THESE QUESTIONS, IT WOULD APPEAR THAT AN AWARD TO DATA PROCESSING SERVICES OF VIRGINIA ON THE BASIS OF ITS PRESENT BID WILL BE PROPER.