B-161057, MAY 5, 1967

B-161057, MAY 5, 1967

TO YOUNG METAL PRODUCTS, INC.:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 10, 1967, PROTESTING THE POSSIBLE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS (IFB) DSA-700 67-B- 3384, TO WHEELING CORRUGATING COMPANY (WHEELING) BECAUSE YOU ALLEGE THAT WHEELING HAS SUBMITTED AN UNREASONABLY LOW BID.

THE SUBJECT INVITATION WAS ISSUED ON JANUARY 18, 1967, AND COVERED THE REQUIREMENTS FOR FOUR SIZES OF NESTABLE CULVERT PIPE. ELEVEN BIDS WERE RECEIVED IN RESPONSE TO IFB-700-67-B-3384, WHEELING'S BID BEING THE LOWEST AND YOUR BID THE SECOND LOWEST. IT IS YOUR POSITION THAT, UNDER THE ADMINISTRATIVE PRICING SCHEDULE FOR STEEL, YOUR COST FOR PURCHASED PARTS WILL REPRESENT 97 PERCENT OF WHEELING'S BID PRICE, LEAVING YOU ONLY 3 PERCENT FOR DIRECT LABOR, WAGES, SALARIES, INSURANCE, TAXES, DEPRECIATION,INTEREST, AND PROFIT IF YOU ARE TO SUBMIT A COMPETITIVE BID. YOU CONTEND THAT WHEELING WILL LOSE MONEY ON THIS CONTRACT, AND SINCE YOU ARE A CAPTIVE MANUFACTURER FORCED TO BUY UNDER THE ADMINISTRATIVE PRICING SYSTEM YOU WILL BE UNABLE TO MATCH WHEELING'S PRICE WITHOUT TAKING A LOSS. YOU FURTHER CONTEND THAT WHEELING'S BID UNDER A PRIOR PROCUREMENT ,OF APPROXIMATELY 75 DAYS AGO" WAS IN LINE WITH THE BIDS OF OTHER CAPTIVE PLANTS AND SMALL BUSINESS FIRMS, BUT WHEELING'S RECENT BID IS LOWER BY A SUBSTANTIAL PERCENTAGE FOR NO POSSIBLE BUSINESSLIKE REASON.

IN RESPONSE TO YOUR PROTEST THE DEFENSE SUPPLY AGENCY (DSA) HAS ADVISED THAT THE PRICES ON THIS PROCUREMENT ARE CONSIDERED COMPETITIVE, AND THAT THERE HAS BEEN NO PATTERN OF UNREASONABLY LOW PRICES BEING BID BY WHEELING. TO SUBSTANTIATE THIS, DSA POINTS OUT THAT UNDER AN OCTOBER 14, 1966, INVITATION (WHICH IS THE PROCUREMENT OF APPROXIMATELY 75 DAYS AGO TO WHICH YOU REFER) YOUR FIRM RECEIVED TWO OF THE FOUR AWARDS UNDER THE NON- SET-ASIDE PORTION OF THE SOLICITATION AND ALL FOUR OF THE AWARDS UNDER THE SET-ASIDE PORTION OF THE SOLICITATION. IT WAS ALSO POINTED OUT THAT DUE TO YOUR MORE FAVORABLE LOCATION YOU WILL BE GIVEN FIRST OPPORTUNITY FOR THE NEGOTIATION OF THE SET-ASIDE PORTION OF THE PRESENT INVITATION.

IT IS THE OPINION OF THIS OFFICE THAT THE VARIATION OF LESS THAN 5 PERCENT BETWEEN WHEELING'S BID AND YOUR BID DOES NOT WARRANT THE CONCLUSION THAT WHEELING'S BID WAS UNREASONABLY LOW, NOR DOES THE FACT THAT WHEELING MAY HAVE QUOTED A HIGHER PRICE ON A PRIOR PROCUREMENT WARRANT SUCH A CONCLUSION. IN THIS CONNECTION IT IS REPORTED THAT WHEELING, AS A RESULT OF ITS FAILURE TO RECEIVE ANY AWARDS UNDER THE OCTOBER 14, 1966, INVITATION, LOWERED ITS BID PRICE ON THE PRESENT INVITATION IN ORDER TO SECURE BUSINESS TO KEEP ITS PRODUCTION FACILITIES IN OPERATION, WHICH WOULD APPEAR TO BE A SUFFICIENT AND PROPER REASON FOR MAKING ITS BID PRICE MORE COMPETITIVE.

IN REGARD TO YOUR CONTENTION THAT THE ARMED SERVICES PROCUREMENT REGULATION PROHIBITS A CONTRACTING OFFICER FROM ISSUING A CONTRACT WHERE HE FEELS THE VENDOR WILL LOSE MONEY, YOU HAVE FAILED TO IDENTIFY, AND WE ARE UNABLE TO LOCATE, A REGULATION TO THAT EFFECT. FURTHER, WE ARE AWARE OF NO LEGAL PRINCIPLE ON THE BASIS OF WHICH AN AWARD MAY BE PRECLUDED OR DISTURBED MERELY BECAUSE THE LOW BIDDER SUBMITTED AN UNPROFITABLE PRICE, EVEN IF WE ASSUME THAT WHEELING WILL LOSE MONEY ON THIS CONTRACT. SEE OUR DECISIONS, B-154750, NOVEMBER 17, 1964; B-149551, AUGUST 16, 1962, TO THE SAME EFFECT.

ACCORDINGLY, THE LOW BID HAVING BEEN CONFIRMED BY THE BIDDER AND ADMINISTRATIVELY DETERMINED TO BE WITHIN A COMPETITIVE RANGE, WE FIND NO LEGAL BASIS FOR QUESTIONING AN AWARD TO WHEELING AND YOUR PROTEST MUST THEREFORE BE DENIED.