B-161875, OCT. 13, 1967

B-161875: Oct 13, 1967

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TERMINATION OF CONTRACT FOR CONVENIENCE OF GOVERNMENT WAS PROPER ADMINISTRATIVE ACTION WHEN IT WAS FOUND THAT UNREALISTIC ESTIMATED QUANTITIES FOR BOTH LABOR AND MATERIAL HAD BEEN USED SO THAT NO EQUITABLE AWARD COULD HAVE RESULTED FROM THE IMPROPER EVALUATION. ALTHOUGH ACTUAL QUANTITIES MAY VARY FROM ESTIMATED QUANTITIES USED IN EVALUATION SUCH ESTIMATED QUANTITIES ARE NOT IRRELEVANT AND WHEN THERE ARE SEVERAL ITEMS REALISTIC ESTIMATES MUST BE USED IN EVALUATION. TO STARK AND CHAMPLIN: FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 4. THE CONTRACT WAS AWARDED TO DEL CHEMICAL AND SUPPLY COMPANY ON MAY 1. UNDER ITEM 7 OFFERORS WERE TO QUOTE A PRICE PER GALLON ON AN ESTIMATED 32. OFFERORS WERE TO FURNISH QUOTATIONS ON VARIOUS ITEMS OF EQUIPMENT RENTAL AND MATERIALS.

B-161875, OCT. 13, 1967

CONTRACTS - TERMINATION DECISION PROTESTING ON BEHALF OF DEL CHEMICAL AND SUPPLY CO. TERMINATION OF NEGOTIATED CONTRACT WITH NAVAL SUPPLY CENTER, OAKLAND, CAL. FOR REMOVAL OF OIL SPILLS IN SAN FRANCISCO BAY. TERMINATION OF CONTRACT FOR CONVENIENCE OF GOVERNMENT WAS PROPER ADMINISTRATIVE ACTION WHEN IT WAS FOUND THAT UNREALISTIC ESTIMATED QUANTITIES FOR BOTH LABOR AND MATERIAL HAD BEEN USED SO THAT NO EQUITABLE AWARD COULD HAVE RESULTED FROM THE IMPROPER EVALUATION. ALTHOUGH ACTUAL QUANTITIES MAY VARY FROM ESTIMATED QUANTITIES USED IN EVALUATION SUCH ESTIMATED QUANTITIES ARE NOT IRRELEVANT AND WHEN THERE ARE SEVERAL ITEMS REALISTIC ESTIMATES MUST BE USED IN EVALUATION.

TO STARK AND CHAMPLIN:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 4, 1967, PROTESTING ON BEHALF OF DEL CHEMICAL AND SUPPLY COMPANY AGAINST THE TERMINATION OF CONTRACT NO. N00286-67-C-2430 WITH THE NAVAL SUPPLY CENTER, OAKLAND, CALIFORNIA.

THE CONTRACT WAS AWARDED TO DEL CHEMICAL AND SUPPLY COMPANY ON MAY 1, 1967, AS A RESULT OF REQUEST FOR PROPOSALS NO. N00228-67-R-5091 ISSUED ON MARCH 3, 1967, REQUESTING PROPOSALS FOR FURNISHING LABOR, EQUIPMENT AND MATERIALS FOR REMOVAL OF OIL SPILLS IN SAN FRANCISCO BAY FOR A PERIOD ENDING MARCH 31, 1968. THE REQUEST FOR PROPOSALS REQUESTED OFFERORS TO QUOTE STRAIGHT TIME AND OVERTIME PER HOUR RATES FOR LABOR, LABORERS FOR ALL WORK EXCEPT WASHING DOWN, ITEM 1; LABORERS FOR WASHING DOWN, ITEM 2; FOREMAN, ITEM 3; OPERATOR FOR POWER BOAT, ITEM 4; OPERATOR FOR TOW BOAT, ITEM 5 AND OPERATOR FOR TRUCK, ITEM 6. UNDER ITEM 7 OFFERORS WERE TO QUOTE A PRICE PER GALLON ON AN ESTIMATED 32,000 GALLONS OF OIL SPILL ELIMINATOR. ALSO, OFFERORS WERE TO FURNISH QUOTATIONS ON VARIOUS ITEMS OF EQUIPMENT RENTAL AND MATERIALS, ITEMS 8 THROUGH 14. EXCEPT FOR ITEM 7 NO ESTIMATED QUANTITIES WERE LISTED FOR THE VARIOUS ITEMS. HOWEVER, THE REQUEST FOR PROPOSALS, PAGE 2, CONTAINED THE FOLLOWING PROVISIONS: "FOR PURPOSES OF EVALUATION IT IS ESTIMATED THAT THE TOTAL LABOR HOURS (ITEMS 1 AND 3) WILL BE 5100 HOURS STRAIGHT TIME.'

FIVE PROPOSALS WERE RECEIVED BY THE TIME SPECIFIED. THE TWO LOWEST PROPOSALS WERE SUBMITTED BY DEL CHEMICAL AND SUPPLY COMPANY AND MERIDIAN MARINE SHIP SERVICE, INCORPORATED. THE PRICES QUOTED BY THESE TWO FIRMS ON ITEMS 1, 3 AND 7 WERE AS FOLLOWS:

OFFEROR (1) DEL CHEMICAL (2) MERIDIAN MARINE ITEM 1. LABORERS

STRAIGHT TIME PER HOUR $3.50 $3.75

OVERTIME PER HOUR 7.50 7.00 ITEM 3. FOREMAN

STRAIGHT TIME PER HOUR 4.00 5.00

OVERTIME PER HOUR 8.25 8.00 ITEM 7. OIL SPILL ELIMINATOR

32,000 GALS. (ESTIMATED) PER GAL. .70 .50

(1) DISCOUNT 2 PERCENT - 30 DAYS

(2) DISCOUNT 1/2 OF 1 PERCENT - 10; 1/4 OF 1 PERCENT - 20

DAYS

THE PROPOSALS WERE EVALUATED BY MULTIPLYING THE STRAIGHT TIME RATE PER HOUR FOR LABOR UNDER ITEM 1 BY 5100 HOURS, BY MULTIPLYING THE STRAIGHT TIME RATE PER HOUR FOR FOREMAN UNDER ITEM 3 BY 5100 HOURS, BY MULTIPLYING THE UNIT PRICE FOR OIL SPILL ELIMINATOR UNDER ITEM 7 BY THE STATED ESTIMATED QUANTITY OF 32,000 GALLONS TOTALLING THE THREE ARITHMETICAL PRODUCTS AND APPLYING DISCOUNT TERMS. SUCH EVALUATION RESULTED IN A TOTAL COST OF $59,437 UNDER THE PROPOSAL OF DEL CHEMICAL AND SUPPLY COMPANY, AND $60,473.44 UNDER THE PROPOSALS OF MERIDIAN MARINE SHIP SERVICE, INCORPORATED. THE AWARD WAS MADE TO DEL CHEMICAL AND SUPPLY COMPANY AS THE LOWEST EVALUATED RESPONSIVE OFFEROR ON MAY 1, 1967, BY CONTRACT NO. N00228-67-C-2430.

UPON LEARNING OF THE DETAILS OF THE AWARD, MERIDIAN MARINE SHIP SERVICE PROTESTED THE AWARD. THE PROTEST WAS PREMISED ON THE CONTENTION THAT THE PROPOSALS HAD NOT BEEN EVALUATED IN ACCORDANCE WITH CRITERIA STATED IN THE SOLICITATION, AND THAT MERIDIAN MARINE WOULD BE THE LOWEST EVALUATED OFFER IF A TOTAL OF 5100 STRAIGHT TIME HOURS FOR BOTH LABORERS AND FOREMAN UNDER ITEMS 1 AND 3 (REGARDLESS OF HOW DIVIDED) WERE USED INSTEAD OF 5100 STRAIGHT TIME HOURS FOR EACH OF SUCH ITEMS.

DURING THE PROCESS OF ANALYZING THE PROTEST, IT WAS REALIZED THAT UNREALISTIC ESTIMATED QUANTITIES FOR BOTH LABOR AND MATERIAL HAD BEEN USED IN SOLICITING AND AWARDING THE CONTRACT, AND THAT OTHER FACTORS SHOULD HAVE BEEN CONSIDERED. IN VIEW THEREOF IT WAS CONSIDERED THAT NO EQUITABLE OR JUSTIFIABLE AWARD COULD HAVE RESULTED FROM THE IMPROPER EVALUATION FACTORS AND, THEREFORE, IT WAS DETERMINED THAT THE CONTRACT SHOULD BE TERMINATED FOR CONVENIENCE IN THE BEST INTEREST OF THE GOVERNMENT. ACCORDINGLY, BY LETTER DATED JUNE 8, 1967, THE CONTRACTING OFFICER NOTIFIED DEL CHEMICAL AND SUPPLY COMPANY THAT PURSUANT TO PROVISIONS OF PARAGRAPH 6.2, PAGE 8, THE CONTRACT WAS TERMINATED IN ITS ENTIRETY FOR CONVENIENCE OF THE GOVERNMENT EFFECTIVE AT MIDNIGHT ON JULY 31, 1967.

A NEW REQUEST FOR PROPOSALS WAS ISSUED ON JUNE 30, 1967, PROVIDING FOR THE PROPOSALS TO BE OPENED ON JULY 17, 1967. IT IS REPORTED THAT THE ESTIMATED QUANTITIES SPECIFIED IN THE NEW SOLICITATION WERE BASED UPON THE ACTUAL QUANTITIES PAID FOR DURING THE PREVIOUS CONTRACT YEAR. ESTIMATED QUANTITIES WERE INCLUDED FOR SEVERAL ADDITIONAL ITEMS OF LABOR, EQUIPMENT AND SUPPLIES, AND THE SOLICITATION PROVIDED THAT ALL ITEMS FOR WHICH ESTIMATED QUANTITIES WERE SHOWN WOULD BE USED FOR EVALUATION PURPOSES AND THE NEW CONTRACT TO BE AWARDED ACCORDINGLY, TO BE EFFECTIVE AUGUST 1, 1967, FOR A PERIOD OF 12 MONTHS. THE ESTIMATED QUANTITIES FOR SOME OF THE ITEMS OF THE REVISED SOLICITATION ARE AS FOLLOWS:

LABORER ITEM 1. STRAIGHT TIME 404 HOURS

ITEM 2. OVERTIME 1963 HOURS

FOREMANITEM 3. STRAIGHT TIME 165 HOURS

ITEM 4. OVERTIME 663 HOURS

OPERATOR OF POWER BOAT ITEM 5. STRAIGHT TIME

--- ITEM 6. OVERTIME ---

OPERATOR FOR TOW BOAT ITEM 7. STRAIGHT TIME

74 HOURS ITEM 8. OVERTIME 156

HOURS

OPERATOR FOR TRUCK ITEM 9. STRAIGHT TIME

66 HOURS ITEM 10 OVERTIME 278

HOURS

ITEM 11. OIL SPILL ELIMINATOR 85,955 GALLONS

YOU PROTEST THE TERMINATION OF THE CONTRACT AWARDED TO DEL CHEMICAL AND SUPPLY COMPANY ON THE BASIS THAT THE CONTRACT WAS LET IN SUBSTANTIALLY THE SAME FORM FOR APPROXIMATELY SIX YEARS AND THAT THE AWARD WAS MADE ON THE BASIS OF THE LOWEST COMPETITIVE PROPOSAL. IT IS CONTENDED THAT THE CORRECTION OF THE BASIS OF THE EVALUATION AND THE INCLUSION OF ADDITIONAL LABOR AND RENTAL COST FACTORS IN THE EVALUATION SHOULD HAVE BEEN DEFERRED UNTIL THE ISSUANCE OF THE SOLICITATION FOR THE NEXT YEAR'S REQUIREMENTS AND THAT THE FAILURE TO DO SO WAS ARBITRARY AND AN ABUSE OF DISCRETION. IT IS FURTHER CONTENDED THAT QUANTITIES ARE TOTALLY IRRELEVANT IN A REQUIREMENTS CONTRACT SUCH AS IS HERE INVOLVED.

THE PRIMARY PURPOSE OF THE STATUTES REQUIRING COMPETITION IN PROCUREMENTS IS TO GIVE ALL OFFERORS AN EQUAL OPPORTUNITY TO COMPETE FOR THE GOVERNMENT BUSINESS AND TO SECURE TO THE UNITED STATES THE BENEFITS OF FREE AND OPEN COMPETITION. TO ACCOMPLISH SUCH PURPOSE REQUESTS FOR PROPOSALS MUST DESCRIBE THE ITEM OR SERVICES BEING PROCURED AND PROVIDE A BASIS FOR EVALUATING THE PROPOSALS RECEIVED IN ORDER TO DETERMINE WHICH OFFER IS MOST FAVORABLE TO THE GOVERNMENT. WHERE THE QUANTITIES FOR THE VARIOUS ITEMS THAT MAY BE REQUIRED ARE NOT KNOWN, THE REQUEST FOR PROPOSALS MUST PROVIDE SOME BASIS FOR EVALUATION. THIS IS NORMALLY ACCOMPLISHED BY PROVIDING ESTIMATED QUANTITIES FOR THE VARIOUS ITEMS. SUCH ESTIMATES SHOULD BE MADE ON THE BASIS OF ALL KNOWN FACTS; FOR EXAMPLE THE QUANTITIES MAY BE ESTIMATED FROM PREVIOUS REQUIREMENTS. SEE 3-409.2 (A) OF THE ARMED SERVICES PROCUREMENT REGULATION REQUIRING THE STATING OF ESTIMATED QUANTITIES FOR THE INFORMATION OF PROSPECTIVE CONTRACTORS. ALSO, SEE 42 COMP. GEN. 257, 43 ID. 159.

AS SHOWN ABOVE THE PROPOSALS SUBMITTED UNDER THE REQUEST FOR PROPOSALS ISSUED ON MARCH 3, 1967, WERE EVALUATED SOLELY ON THE BASIS OF 5100 HOURS OF STRAIGHT TIME FOR LABORERS AND FOREMEN (ITEMS 1 AND 3) AND AN ESTIMATED 32,000 GALLONS OF OIL SPILL ELIMINATOR. ON SUCH BASIS DEL CHEMICAL'S PROPOSAL AMOUNTED TO $59,437 AND THE NEXT LOWEST PROPOSAL WAS $60,473.44. HOWEVER, AS POINTED OUT BY THE SECOND LOW OFFEROR, IT WAS NOT CLEAR WHETHER THE 5100 HOURS SPECIFIED FOR EVALUATION PURPOSES WAS THE TOTAL TIME FOR BOTH LABORERS AND FOREMEN OR FOR EACH, PARTICULARLY SINCE IT WOULD SEEM THAT THERE WOULD BE MORE HOURS FOR LABORERS THAN FOREMEN. THE 5100 HOURS REPRESENTED THE TOTAL HOURS FOR BOTH LABORERS AND FOREMEN, DEL CHEMICAL'S PROPOSAL WOULD NOT HAVE BEEN THE LOWEST, REGARDLESS OF HOW SUCH TOTAL TIME WAS DIVIDED BETWEEN THE TWO. ALSO, IF ANY CONSIDERATION WERE GIVEN TO THE OVERTIME RATES WHICH UNDOUBTEDLY WOULD BE INVOLVED, OR IF THE ESTIMATED 32,000 GALLONS OF OIL SPILL ELIMINATOR WERE AN UNDERESTIMATE BY ONLY A SLIGHT MARGIN THE PROPOSAL OF DEL CHEMICAL WOULD NOT HAVE BEEN LOW.

WHILE THE ACTUAL QUANTITIES IN A REQUIREMENTS CONTRACT MAY VARY FROM THE ESTIMATED QUANTITIES USED FOR EVALUATION PURPOSES, WE CAN NOT AGREE WITH YOUR CONTENTION THAT THE ESTIMATED QUANTITIES ARE TOTALLY IRRELEVANT. BELIEVE THAT WHERE THERE ARE SEVERAL ITEMS REALISTIC ESTIMATES MUST BE USED IN ANY PROPER EVALUATION OF PROPOSALS. UNDER THE CIRCUMSTANCES HEREIN INVOLVED WE BELIEVE THAT THE CONTRACTING OFFICER'S DETERMINATION THAT THE BASIS OF EVALUATION WAS SO IMPROPER AS TO PRECLUDE ANY EQUITABLE OR JUSTIFIABLE AWARD WAS JUSTIFIED AND THAT HIS ACTION IN TERMINATING THE CONTRACT WAS NOT ARBITRARY NOR AN ABUSE OF DISCRETION.

YOU ALSO PROTEST AGAINST THE AWARD MADE TO THE LOW EVALUATED OFFEROR UNDER THE REVISED SOLICITATION. THIS IS BASED ON THE FACT THAT ESTIMATES WERE NOT GIVEN FOR ALL ITEMS OF LABOR AND EQUIPMENT AND WERE NOT TO BE INCLUDED IN THE EVALUATION. FOR EXAMPLE, THE HOURLY COST FOR THE OPERATOR OF A POWER BOAT AND THE RENTAL RATE FOR A POWER BOAT (ITEMS 5, 6 AND 12 (C) ( WERE NOT TO BE INCLUDED IN THE EVALUATION. THE ESTIMATES USED IN THE REVISED SOLICITATION FOR EVALUATION PURPOSES ARE REPORTED TO HAVE BEEN BASED UPON THE ACTUAL SERVICES REQUIRED UNDER THE PREVIOUS YEAR'S CONTRACT. THOSE ITEMS OF SERVICES FOR WHICH NO ESTIMATES WERE GIVEN AND WHICH WERE NOT TO BE INCLUDED IN THE EVALUATION, WERE NOT USED DURING THE PREVIOUS YEAR AND THERE WERE NO CRITERIA UPON WHICH TO BASE POTENTIAL REQUIREMENTS FOR SUCH ITEMS. UNDER THE CIRCUMSTANCES, WE FIND NO BASIS TO QUESTION THE CONTRACTING OFFICER'S DETERMINATION THAT EVALUATION FACTORS SET FORTH IN THE REVISED SOLICITATION WERE THE MOST REALISTIC FORECAST OF REQUIREMENTS POSSIBLE AND WERE FAIR TO ALL PARTIES AND SHOULD RESULT IN A REALISTIC CONTRACT.

FOR THE FOREGOING REASONS THE PROTESTS AGAINST THE TERMINATION OF CONTRACT NO. N00228-67-C-2430, AND AGAINST THE AWARD MADE UNDER THE REVISED SOLICITATION MUST BE DENIED.

THE FURTHER CONTENTIONS THAT SEVERAL NAVAL FACILITIES, WHICH ARE INCLUDED IN DEL CHEMICAL'S SUPPLY CONTRACT (NO. N00228-67-C-2407) FOR OIL SPILL ELIMINATOR CHEMICAL, HAVE PURCHASED SUCH MATERIAL IN THE OPEN MARKET AT A HIGHER PRICE, AND CONCERNING A POSSIBLE CONFLICT OF INTEREST, ARE BEING REFERRED TO THE DEPARTMENT OF THE NAVY FOR APPROPRIATE ACTION. SEE ATTACHED COPY OF OUR LETTER OF TODAY TO THE SECRETARY OF THE NAVY.