B-161797, SEP. 6, 1967

B-161797: Sep 6, 1967

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

A CONTRACTING OFFICER'S DETERMINATION TO REJECT ONLY TWO BIDS RECEIVED FOR BLOWTORCHES ON BASIS OF EXCESSIVE PRICES WHICH DETERMINATION WAS BASED ON A PRICE ANALYSIS THAT FAILED TO CONSIDER DISCOUNT OFFERED BY LOW BIDDER THEREBY BRINGING BID WITHIN PRICE RANGE CONSIDERED EQUITABLE IS A DETERMINATION OF DOUBTFUL VALIDITY. NOTHING IN THE RECORD SHOW THAT THE CONTRACTING OFFICER'S DETERMINATION THAT A DIFFERENCE BETWEEN 1966 AND 1967 PRICES OF $0.7195 PER UNIT AS UNREASONABLE WAS MADE IN BAD FAITH SO AS TO BE REGARDED AS AN ABUSE OF CONTRACTING OFFICER'S DISCRETION. CANCELLATION OF INVITATION WILL NOT BE QUESTIONED. SINCE THERE IS QUESTION OF ADEQUACY OF JUSTIFICATION TO NEGOTIATE MATTER IS CALLED TO THE ATTENTION OF GSA TO AVOID REPETITION OF SITUATION.

B-161797, SEP. 6, 1967

BIDS - CANCELLATION AND READVERTISEMENT - JUSTIFICATION DECISION TO GSA CONCERNING PROTEST AGAINST REJECTION OF BIDS FOR REQUIREMENTS-TYPE CONTRACT FOR BLOWTORCHES ON BASIS OF EXCESSIVE PRICES. A CONTRACTING OFFICER'S DETERMINATION TO REJECT ONLY TWO BIDS RECEIVED FOR BLOWTORCHES ON BASIS OF EXCESSIVE PRICES WHICH DETERMINATION WAS BASED ON A PRICE ANALYSIS THAT FAILED TO CONSIDER DISCOUNT OFFERED BY LOW BIDDER THEREBY BRINGING BID WITHIN PRICE RANGE CONSIDERED EQUITABLE IS A DETERMINATION OF DOUBTFUL VALIDITY. HOWEVER, NOTHING IN THE RECORD SHOW THAT THE CONTRACTING OFFICER'S DETERMINATION THAT A DIFFERENCE BETWEEN 1966 AND 1967 PRICES OF $0.7195 PER UNIT AS UNREASONABLE WAS MADE IN BAD FAITH SO AS TO BE REGARDED AS AN ABUSE OF CONTRACTING OFFICER'S DISCRETION. THEREFORE, CANCELLATION OF INVITATION WILL NOT BE QUESTIONED. SINCE THERE IS QUESTION OF ADEQUACY OF JUSTIFICATION TO NEGOTIATE MATTER IS CALLED TO THE ATTENTION OF GSA TO AVOID REPETITION OF SITUATION.

TO MR. KNOTT:

WE REFER TO YOUR LETTER OF JULY 17, 1967, IN CONNECTION WITH THE PROTEST FROM THE CLAYTON AND LAMBERT MANUFACTURING COMPANY AGAINST THE DETERMINATION TO REJECT ALL BIDS UNDER INVITATION FOR BIDS NO. FPNTT-E9 56313-A-5-8-67, ISSUED BY THE PROCUREMENT OPERATIONS DIVISION, FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION.

THE INVITATION FOR BIDS COVERS A REQUIREMENTS CONTRACT, WITH A GUARANTEED MINIMUM QUANTITY, FOR FSC 5120, BLOWTORCH, GASOLINE (HAND) FROM SEPTEMBER 1, 1967, OR DATE OF AWARD, WHICHEVER IS LATER, THROUGH AUGUST 31, 1968. THE INVITATION WAS ISSUED APRIL 6, 1967, AND BIDS WERE OPENED ON MAY 8, 1967. TWO BIDS WERE RECEIVED--ONE FROM CLAYTON AND LAMBERT AND THE OTHER FROM THE TURNER CORPORATION. CLAYTON AND LAMBERT WAS THE LOW BIDDER AT $9.35 PER UNIT LESS 3 PERCENT DISCOUNT FOR PAYMENT IN 30 DAYS. TURNER'S BID WAS $9.49 PER UNIT LESS A DISCOUNT OF 2 PERCENT FOR PAYMENT IN 30 DAYS. BOTH BIDS WERE REJECTED ON THE GROUND THAT THE BID PRICES WERE EXCESSIVE.

CLAYTON AND LAMBERT HAS QUESTIONED THE CANCELLATION OF THE INVITATION ALLEGING THAT THE PRICE IN ITS BID WAS NOT EXCESSIVE. CLAYTON AND LAMBERT ALLEGES THAT THE TURNER CORPORATION, THE PRIOR CONTRACTOR, LOST MONEY BY SUPPLYING THE ITEMS AT A PRICE OF $8.35 PER UNIT. CLAYTON AND LAMBERT HAS FURNISHED OUR OFFICE WITH CERTAIN INFORMATION WHICH IT ALLEGES SHOULD HAVE BEEN CONSIDERED BY THE PRICE ANALYST. WE HAVE REVIEWED THIS INFORMATION AND WE DO NOT FIND IT TO BE CONTROLLING ON THE ISSUE BEFORE US; HOWEVER, THIS INFORMATION HAS BEEN FORWARDED TO YOUR AGENCY FOR SUCH CONSIDERATION AS IT MAY WARRANT. CLAYTON AND LAMBERT HAS ALSO REQUESTED THAT OUR OFFICE REVIEW WHETHER THERE IS A BASIS FOR NEGOTIATING THE PROCUREMENT PURSUANT TO SECTION 302 (C) (14) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 393, 41 U.S.C. 252 (C) (14).

THE REPORT FROM YOUR AGENCY ADVISES THAT THE DETERMINATION TO REJECT THE LOW BID AS EXCESSIVE WAS BASED UPON A REPORT DATED MAY 17, 1967, PREPARED BY A GSA PRICE ANALYST. THE PRICE ANALYSIS INDICATES THAT A COST INCREASE OF FROM 8 TO 9 PERCENT OVER THE PRIOR YEAR'S COSTS MAY BE EXPECTED TO BE REFLECTED IN THE TOTAL SELLING PRICE, BASED ON THE VARIOUS COST FACTORS LISTED. THE MAY 17 REPORT CONCLUDES THAT THE PROPOSED TOTAL PRICE FOR THE SUBJECT PROCUREMENT OF $112,761 REFLECTS A 12 PERCENT INCREASE OVER THE TERM CONTRACT AWARDED IN 1966 AND THAT BASED ON KNOWN ECONOMIC AND ESTIMATED COST FACTORS, A PRICE IN THE AREA OF $108,700 WOULD BE MORE EQUITABLE TO THE GOVERNMENT. THE SUGGESTION BY THE PRICE ANALYST WAS THAT NO AWARD SHOULD BE MADE AT THE PRICES IN THE BIDS RECEIVED.

WE FIND, HOWEVER, THAT CONSIDERING THE DISCOUNT IN CLAYTON AND LAMBERT'S BID, WHICH APPARENTLY WAS NOT CONSIDERED BY THE PRICE ANALYST, THE PROPOSED TOTAL PRICE OFFERED BY THAT BIDDER WAS $109,378.14 WHICH IS $678 OR 0.62 PERCENT MORE THAN THE $108,700 WHICH THE PRICE ANALYST DETERMINED WOULD BE AN EQUITABLE PRICE TO THE GOVERNMENT. IT IS THEREFORE OBVIOUS THAT CLAYTON AND LAMBERT'S BID WAS WITHIN THE RANGE OF PRICES WHICH WOULD BE CONSIDERED AS EQUITABLE PURSUANT TO THE REPORT OF MAY 17, 1967.

ANOTHER REPORT DATED JUNE 15, 1967, PREPARED BY THE SAME PRICE ANALYST WHO PREPARED THE MAY 17 REPORT STATES THAT THE CURRENT GENERAL TREND FOR BRASS AND COPPER IS DOWNWARD (JANUARY TO THE PRESENT). A COMPARISON OF THE DOLLAR AMOUNTS OF COSTS FOR MATERIAL, LABOR, OVERHEAD, OTHER MATERIAL, AND FREIGHT BETWEEN 1966 AND 1967 INDICATES THAT THE INCREASE IN COSTS FOR THAT PERIOD SHOULD BE ABOUT 5.5 PERCENT.

PARAGRAPH 10 (B) OF STANDARD FORM 33 A, JULY 1966, UNDER THE "SOLICITATION INSTRUCTIONS AND CONDITIONS" PROVIDES THAT THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY OR ALL OFFERS. THIS PROVISION IS IN CONFORMITY WITH 41 U.S.C. 253 (B) WHICH PROVIDES THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST. BY 41 U.S.C. 257 (A) THE HEAD OF AN AGENCY MAY DELEGATE THE AUTHORITY TO MAKE SUCH DETERMINATION TO ANY OTHER OFFICER OR OFFICIAL OF THAT AGENCY. THAT AUTHORITY HAS BEEN DELEGATED TO THE CONTRACTING OFFICER BY THE TERMS OF FEDERAL PROCUREMENT REGULATIONS SECTION 1-2.404-1 (B) WHICH PROVIDES FOR CANCELLATION OF AN INVITATION WHERE SUCH ACTION IS DETERMINED TO BE IN THE BEST INTEREST OF THE GOVERNMENT. WE HAVE STATED THAT SUCH AUTHORITY TO REJECT ANY OR ALL BIDS IS EXTREMELY BROAD, INVOLVING PRIMARILY A MATTER OF ADMINISTRATIVE JUDGMENT, AND WE WILL NOT UNDERTAKE TO QUESTION ITS EXERCISE IN THE ABSENCE OF A CLEAR SHOWING OF ABUSE OF DISCRETION. SEE B-161331, MAY 15, 1967.

WE ARE ADVISED THAT THE CONTRACTING OFFICER'S DECISION TO REJECT ALL BIDS AS BEING EXCESSIVE AS TO PRICE WAS BASED ON THE REPORT OF MAY 17,1967, PREPARED BY GSA'S PRICE ANALYST. A REVIEW OF THIS REPORT DOES NOT SHOW THAT THE PRICE TO THE GOVERNMENT IN CLAYTON AND LAMBERT'S BID, AS DISCOUNTED, WOULD BE MUCH HIGHER THAN THAT WHICH WAS DETERMINED TO BE EQUITABLE. CONSEQUENTLY, THE REPORT OF MAY 17 WAS A DOUBTFUL BASIS FOR CONCLUDING THAT THE PRICE IN CLAYTON AND LAMBERT'S BID WAS EXCESSIVE.

HOWEVER, THE RECORD SHOWS THAT THE PRICE IN 1966 FOR THE BLOWTORCHES WAS $8.35 PER UNIT AND THE PRICE IN CLAYTON AND LAMBERT'S BID FOR THE 1967 REQUIREMENTS, AS DISCOUNTED, WAS $9.069 OR A DIFFERENCE OF $0.7195. THERE IS NOTHING IN THE RECORD WHICH WOULD MAKE US CONCLUDE THAT THE CONTRACTING OFFICER'S DETERMINATION THAT THIS WAS AN UNREASONABLE DIFFERENCE IN THE PRICES FOR THE 1966 AND 1967 REQUIREMENTS WAS MADE IN BAD FAITH. IN VIEW OF THE RECORD, THEREFORE, WE CANNOT SAY THE CONTRACTING OFFICER'S DETERMINATIONS, THAT THE PRICES IN THE BIDS RECEIVED WERE EXCESSIVE AND THAT ALL BIDS SHOULD BE REJECTED, WERE AN ABUSE OF THE DISCRETION VESTED IN THE CONTRACTING OFFICER. IN THESE CIRCUMSTANCES WE WILL NOT QUESTION THE ADMINISTRATIVE DETERMINATION TO CANCEL THE INSTANT INVITATION.

SINCE THERE IS A QUESTION WHETHER THERE WAS ADEQUATE JUSTIFICATION AS OF JUNE 1, 1967, FOR PURCHASING THE BLOWTORCHES BY NEGOTIATION, WE ARE BRINGING THE MATTER TO YOUR ATTENTION FOR SUCH ACTION AS MAY BE APPROPRIATE TO AVOID A REPETITION OF THE INSTANT SITUATION IN FUTURE PROCUREMENTS.

IN REGARD TO THE CONTENTION THAT TURNER CORPORATION INCURRED A LOSS IN 1966 BY FURNISHING THE BLOWTORCHES AT $8.35 PER UNIT, WE FIND THAT THE RECORD DOES NOT SUBSTANTIATE THIS ALLEGATION.