B-162541, DEC. 28, 1967

B-162541: Dec 28, 1967

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REJECTION OF BIDS ON BASIS OF PRICE UNREASONABLENESS SINCE ALL WERE IN EXCESS OF 15 PERCENT OF GOVT.'S ESTIMATE WAS REASONABLE EXERCISE OF ADMINISTRATIVE DISCRETION. INCORPORATED: REFERENCE IS MADE TO YOUR TELEGRAM OF SEPTEMBER 21 AND LETTER OF SEPTEMBER 28. BIDS WERE OPENED ON SEPTEMBER 7. YOURS WAS THE LOWEST AT $116. THREE OTHER BIDS RECEIVED WERE IN THE RANGE BETWEEN $117. THE GOVERNMENT'S ESTIMATE FOR THE PROJECT WAS $83. AFTER A REVIEW OF THE BIDS RECEIVED AND THE GOVERNMENT'S ESTIMATE IT WAS DETERMINED THAT ALL BIDS WERE UNREASONABLE SINCE THEY WERE ALL IN EXCESS OF 15 PERCENT OF THE GOVERNMENT'S ESTIMATE. WHICH WAS LOW. IT WAS ADMINISTRATIVELY DETERMINED THAT ALL BIDS SHOULD BE REJECTED PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2 404.1 (B) (VI).

B-162541, DEC. 28, 1967

BIDS - REJECTION AND READVERTISEMENT - PRICE REASONABLENESS DECISION TO INTERSTATE GENERAL CONTRACTORS, INC. RE PROTEST AGAINST REJECTION OF BIDS AND READVERTISEMENT OF INVITATION FOR CONSTRUCTION OF AREA FENCING AT KENNEDY SPACE CENTER BY ARMY CORPS OF ENGINEERS. REJECTION OF BIDS ON BASIS OF PRICE UNREASONABLENESS SINCE ALL WERE IN EXCESS OF 15 PERCENT OF GOVT.'S ESTIMATE WAS REASONABLE EXERCISE OF ADMINISTRATIVE DISCRETION. FACT THAT PROTESTANT'S BID EXCEEDED 25 PERCENT THE ADMINISTRATIVELY ESTABLISHED 15 PERCENT OVER GOVT-S. ESTIMATE TENDS TO SUPPORT ADMINISTRATIVE DETERMINATION OF PRICE UNREASONABLENESS. FOUR DECISIONS DISTINGUISHED 45 COMP. GEN. 537; 44 ID 204; 40 ID 671; 43 ID 591.

TO INTERSTATE GENERAL CONTRACTORS, INCORPORATED:

REFERENCE IS MADE TO YOUR TELEGRAM OF SEPTEMBER 21 AND LETTER OF SEPTEMBER 28, 1967, PROTESTING AGAINST THE DETERMINATION TO REJECT ALL BIDS UNDER INVITATION FOR BIDS NO. DACA18-68-B-9018, ISSUED ON AUGUST 18, 1967, BY THE CORPS OF ENGINEERS, CANAVERAL DISTRICT, DEPARTMENT OF THE ARMY, FOR CONSTRUCTION OF AREA FENCING FOR LAUNCH COMPLEX 39 AT KENNEDY SPACE CENTER, FLORIDA.

BIDS WERE OPENED ON SEPTEMBER 7, 1967, AND YOURS WAS THE LOWEST AT $116,770. THREE OTHER BIDS RECEIVED WERE IN THE RANGE BETWEEN $117,806 AND $192,542. THE GOVERNMENT'S ESTIMATE FOR THE PROJECT WAS $83,485. AFTER A REVIEW OF THE BIDS RECEIVED AND THE GOVERNMENT'S ESTIMATE IT WAS DETERMINED THAT ALL BIDS WERE UNREASONABLE SINCE THEY WERE ALL IN EXCESS OF 15 PERCENT OF THE GOVERNMENT'S ESTIMATE. THIS PERCENTAGE HAS BEEN ESTABLISHED BY THE CORPS OF ENGINEERS FOR ITS PROCUREMENTS AS THE MAXIMUM PERMISSIBLE LIMIT BY WHICH BIDS MAY EXCEED THE GOVERNMENT'S ESTIMATE. YOUR BID, WHICH WAS LOW, EXCEEDED THE GOVERNMENT'S ESTIMATE BY APPROXIMATELY 40 PERCENT. IN THE CIRCUMSTANCES, IT WAS ADMINISTRATIVELY DETERMINED THAT ALL BIDS SHOULD BE REJECTED PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2 404.1 (B) (VI), WHICH PROVIDES FOR THE CANCELLATION OF AN INVITATION AFTER BID OPENING WHERE ALL OTHERWISE ACCEPTABLE BIDS ARE AT UNREASONABLE PRICES. ALL BIDDERS WERE NOTIFIED BY LETTER OF SEPTEMBER 14, 1967, THAT ALL BIDS WERE BEING REJECTED, THE REASONS THEREFOR, AND THAT THE PROCUREMENT WOULD BE READVERTISED.

THE PROCUREMENT WAS READVERTISED UNDER INVITATION FOR BIDS NO. DACA18-68- B-9069, ISSUED SEPTEMBER 22, 1967; BIDS WERE OPENED ON OCTOBER 5, 1967, AND THE THREE LOWEST OF THE SEVEN BIDS RECEIVED WERE AS FOLLOWS:

ALLIED ENGINEERING COMPANY $ 86,965

FRANK A. KENNEDY, INCORPORATED 89,869

INTERSTATE GENERAL CONTRACTORS, INCORPORATED 107,770 WE ARE ADVISED THAT A DETERMINATION HAS BEEN MADE UNDER ASPR 2-407.9 (B)(3) (III) THAT A PROMPT AWARD WILL BE ADVANTAGEOUS TO THE GOVERNMENT.

YOU ALLEGE THAT THE CANCELLATION OF THE ORIGINAL INVITATION WAS IMPROPER AND THAT YOUR BID PRICE OF $116,770 UNDER THE ORIGINAL INVITATION WAS A FAIR AND REASONABLE PRICE. YOU HAVE CITED FOUR OF OUR DECISIONS WHICH YOU ALLEGE SUPPORT YOUR POSITION. EACH OF THESE DECISIONS IS DISCUSSED BELOW.

THE FIRST DECISION CITED BY YOU IS B-153101, FEBRUARY 3, 1964 (43 COMP. GEN. 537). THAT CASE CONCERNED AN INVITATION WHICH SOLICITED BIDS F.O.B. ORIGIN AND PROVIDED THAT TRANSPORTATION COSTS TO THE GOVERNMENT FROM POINT OF ORIGIN TO THERETICAL DESIGNATED DESTINATIONS WOULD BE INCLUDED IN THE EVALUATION OF BIDS. THE INVITATION DID NOT REQUIRE BIDDERS TO FURNISH TRANSPORTATION DATA WITH THE BIDS; CONSEQUENTLY, AFTER BID OPENING IT WAS ADMINISTRATIVELY DETERMINED THAT THE INVITATION WAS DEFECTIVE AND IT WAS CANCELLED. THE RECORD SHOWED THAT BY THE APPLICATION OF THE GOVERNMENT'S ESTIMATE REASONABLE WEIGHTS FOR THE ITEMS IN A MANNER MOST DISADVANTAGEOUS TO THE LOW BIDDER AND MOST FAVORABLE TO THE SECOND LOW BIDDER, THE LOW BIDDER WAS STILL SOME $400 LOWER THAN THE NEXT LOW BID IN A PROCUREMENT OF APPROXIMATELY $85,000. THE ONLY REASON FOR READVERTISING THE PROCUREMENT IN THAT CASE WAS TO OBTAIN TRANSPORTATION DATA WITH THE BIDS. IT WAS OUR VIEW THAT THERE WERE NO COMPELLING OR COGENT REASONS REQUIRING CANCELLATION SINCE EVEN IF BIDDERS HAD FURNISHED TRANSPORTATION DATA AND AN EVALUATION HAD BEEN MADE PURSUANT TO THE DATA FURNISHED, IT WAS HIGHLY IMPROBABLE THAT ANY BIDDER WOULD BE LOWER THAN THE BIDDER FOUND TO BE LOW ON THE BASIS OF THE GOVERNMENT'S ESTIMATED WEIGHTS.

THE NEXT DECISION CITED BY YOU IS B-155133, DECEMBER 4, 1964, WHICH IS A RECONSIDERATION OF OUR DECISION OF B-155133, OCTOBER 9, 1964 (44 COMP. GEN. 204). IN THE INITIAL DECISION OUR OFFICE CONSIDERED A SITUATION WHERE IT WAS FOUND AFTER A CONTRACT HAD BEEN AWARDED THAT THE AWARD HAD NOT IN FACT BEEN MADE TO THE LOW EVALUATED BIDDER SINCE AN ERRONEOUS FREIGHT RATE HAD BEEN USED IN COMPUTING THE TRANSPORTATION COSTS FOR THE APPARENT LOW BIDDER. IT WAS ALSO FOUND THAT BY REASON OF A NEW FREIGHT RATE, APPLICABLE TO THE CONTRACTOR, WHICH HAD BEEN FILED SUBSEQUENT TO THE AWARD TO THE CONTRACTOR THE ACTUAL COST TO THE GOVERNMENT WOULD IN FACT BE LESS THAN IF THE BIDS HAD BEEN PROPERLY EVALUATED IN THE FIRST INSTANCE. IT WAS OUR VIEW THAT CANCELLATION OF THE AWARD IN THAT SITUATION AND AWARD TO ANOTHER BIDDER AT AN INCREASE IN COST WOULD NOT BE IN THE GOVERNMENT'S INTEREST. A REQUEST WAS MADE FOR RECONSIDERATION OF THIS DECISION AND ONE OF THE CONTENTIONS WAS THAT IN VIEW OF THE FACTS PRESENTED, THE INVITATION SHOULD HAVE BEEN CANCELLED AND THE PROCUREMENT READVERTISED. WE HELD IN OUR DECISION OF DECEMBER 4, 1964, THAT THERE WAS NO BASIS FOR CANCELLATION OF THE INVITATION.

THE THIRD DECISION CITED BY YOU IS B-145867, JUNE 7, 1961 (40 COMP. GEN. 671). IN THAT CASE AN INVITATION WAS CANCELLED AFTER OPENING PURSUANT TO AN ADMINISTRATIVE DETERMINATION THAT A TYPOGRAPHICAL ERROR IN THE WARRANTY PROVISION IN THE INVITATION WAS MISLEADING TO BIDDERS. WE RECOGNIZED THAT THE ADMINISTRATIVE AUTHORITY TO REJECT ALL BIDS WAS EXTREMELY BROAD; HOWEVER, IT WAS OUR VIEW THAT THE ALLEGED AMBIGUITY IN REGARD TO THE WARRANTY PROVISION WAS NOT SUFFICIENT TO MISLEAD BIDDERS AND CAUSE SUBMISSION OF NONRESPONSIVE BIDS. IN THOSE CIRCUMSTANCES WE HELD THAT THE CANCELLATION OF THE INVITATION WAS NOT JUSTIFIED.

YOU HAVE ALSO CITED B-152859, MARCH 9, 1964 (43 COMP. GEN. 591). THAT CASE INVOLVED A UNIQUE SYSTEM OF PROCUREMENT DEVELOPED BY THE BIDDERS AND ACQUIESCED IN BY THE GOVERNMENT. THE GENERAL SERVICES ADMINISTRATION (GSA) HAD SOLICITED OFFERS FOR MULTIPLE AWARD OF FEDERAL SUPPLY SERVICE (FSS) CONTRACTS FOR SHREDDING MACHINES. SUBSEQUENT TO GSA'S SOLICITATION THE DEPARTMENT OF THE AIR FORCE ISSUED AN INVITATION FOR BIDS FOR THE PROCUREMENT OF A QUANTITY OF SHREDDING MACHINES WHICH WERE THE SAME TYPE AS THOSE SOLICITED BY GSA. AT THE TIME BIDS WERE OPENED UNDER AIR FORCE'S INVITATION, GSA HAD NOT AWARDED ANY FSS CONTRACTS FOR SHREDDING MACHINES. THE TWO BIDDERS UNDER AIR FORCE'S INVITATION WERE AFFORDED THE OPPORTUNITY OF BIDDING FOR GSA'S FSS CONTRACTS AND BOTH RECEIVED AWARDS FROM GSA FOR SHREDDING MACHINES WHICH MET THE SPECIFICATIONS OF AIR FORCE'S INVITATION. THE RESULT OF THIS COMPETITION WAS THAT THE PRICES IN THE FSS CONTRACTS AWARDED BY GSA WERE LOWER THAN THE BIDS UNDER AIR FORCE'S ADVERTISED SOLICITATION. IN THE CIRCUMSTANCES HIGHER AUTHORITY IN THE AIR FORCE DECIDED TO CANCEL THE INVITATION AND TO PURCHASE THE ITEMS AT THE LOWER PRICES IN THE FSS CONTRACTS. GSA MEANWHILE GAVE THE FSS CONTRACTORS THE OPPORTUNITY OF MAKING FURTHER REDUCTIONS. GSA AND THE CONTRACTORS KNEW THAT THE LOWEST FSS CONTRACTOR WOULD GET THE ORDER FOR THE AIR FORCE'S REQUIREMENTS. IT WAS OUR VIEW THAT THE ADOPTION OF SUCH A PROCEDURE WOULD UNDERMINE THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM AND THAT AN AWARD SHOULD BE MADE UNDER AIR FORCE'S INVITATION.

CLAUSE 10 (B) OF THE "INSTRUCTIONS TO BIDDERS" REFERRED TO IN THE INVITATION PROVIDES THAT ALL BIDS MAY BE REJECTED. ARMED SERVICES PROCUREMENT REGULATION 2-404.1 ALSO PROVIDES FOR THE CANCELLATION OF AN INVITATION AFTER OPENING. THE CASES CITED BY YOU AND CONSIDERED ABOVE INDICATE THAT THE CANCELLATION OF AN INVITATION IS A SERIOUS MATTER WHICH MUST BE JUSTIFIED BY COMPELLING OR COGENT REASONS. IT HAS BEEN HELD, HOWEVER, THAT THE CANCELLATION OF AN INVITATION AFTER BID OPENING IS JUSTIFIED WHERE ALL BIDS ARE UNREASONABLE. IN 36 COMP. GEN. 364, WE STATED ON PAGES 365, 366:"* * * WE CANNOT, HOWEVER, CONSIDER THE MATTER OF COMPETITIVE BIDDING FOR GOVERNMENT CONTRACTS SOLELY AS A GAME, IN WHICH THE CONTRACT MUST AUTOMATICALLY GO TO THE LOWEST BIDDER WITHOUT REGARD TO THE REASONABLENESS OF HIS PRICE OR TO OTHER ATTEMPTED BIDS WHICH CANNOT FOR TECHNICAL REASONS BE ACCEPTED. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES OR SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND READVERTISING OF THE CONTRACT IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT. UPON SUCH REJECTION AND READVERTISING THE ORIGINAL BIDS ARE NO LONGER MATERIAL OR EFFECTIVE FOR ANY PURPOSE WHATSOEVER. IT IS NO DOUBT REGRETTABLE THAT ALL BIDDERS ARE AWARE OF THE AMOUNTS ORIGINALLY QUOTED BY THEIR COMPETITORS, BUT THEY ALSO ARE BETTER ADVISED AS TO WHAT PRICE RANGE IS CONSIDERED REASONABLE BY THE GOVERNMENT'S REPRESENTATIVES, AND ALL HAVE EQUAL OPPORTUNITIES TO SUBMIT SUCH NEW BIDS AS THEY WILL. * * *"

THE FACT THAT YOUR BID ON THE FIRST INVITATION EXCEEDED BY 25 PERCENT THE ADMINISTRATIVELY ESTABLISHED CEILING OF 15 PERCENT OVER THE GOVERNMENT'S ESTIMATE TENDS STRONGLY TO SUPPORT THE ADMINISTRATIVE DETERMINATION THAT YOUR BID WAS UNREASONABLE. THE BIDS RECEIVED PURSUANT TO THE READVERTISEMENT CONFIRM THE REASONABLENESS OF THE GOVERNMENT'S ESTIMATE AND THAT THE ADMINISTRATIVE ACTION WAS IN THE GOVERNMENT'S BEST INTEREST. THE CASES CITED BY YOU, DISCUSSED ABOVE, PRESENTED RATHER UNIQUE FACTUAL SITUATIONS WHICH ARE DIFFERENT FROM THE FACTUAL SITUATION IN THE INSTANT CASE. IN THE CIRCUMSTANCES WE FIND THAT THE CANCELLATION OF THE INVITATION WAS A REASONABLE EXERCISE OF THE ADMINISTRATIVE DISCRETION.