B-162914, JAN. 30, 1968

B-162914, JAN. 30, 1968

BIDS DECISION TO OHIO TOOL AND MANUFACTURING COMPANY DENYING PROTEST AGAINST CANCELLATION AND READVERTISEMENT OF SMALL BUSINESS SET ASIDE PROCUREMENT BY ARMY TANK-AUTOMOTIVE COMMAND FOR EXCESSIVE PRICES. ALTHOUGH A PROCURING AGENCY DELAYED FOR APPROXIMATELY ONE YEAR THE CANCELLATION OF AN INVITATION BECAUSE OF EXCESSIVE PRICES, SUCH DELAY, IN AND OF ITSELF, DOES NOT RENDER LEGALLY QUESTIONABLE THE DETERMINATION TO CANCEL THE INVITATION BECAUSE OF EXCESSIVE PRICES. CANCELLATION OF AN INVITATION BECAUSE THE QUANTITIES WERE EXCESS TO GOVERNMENT NEEDS IS PROPER. MOREOVER, A CONTRACTING OFFICER WOULD BE DERELICT IN HIS DUTY IF HE AWARDED A CONTRACT KNOWING THE QUANTITIES WERE NOT NEEDED.

TO OHIO TOOL AND MANUFACTURING CO., INC.:

REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 10 AND 20, 1967, WITH ENCLOSURES, PROTESTING AGAINST THE CANCELLATION, AFTER BID OPENING, OF INVITATIONS FOR BIDS NOS. DAAE07-67-B-0420 AND DAAE07-67-B-1807, AND READVERTISEMENT OF THE PROCUREMENTS UNDER NOS. DAAE07-68-B-0356 AND DAAE07 -68-B-0270, RESPECTIVELY, BY THE DEPARTMENT OF THE ARMY, U.S. ARMY TANK- AUTOMOTIVE COMMAND, WARREN, MICHIGAN.

INVITATION NO. -0420, A 100 PERCENT SMALL-BUSINESS SET ASIDE, ISSUED ON AUGUST 18, 1966, SOLICITED BIDS UNDER ITEMS 1 THROUGH 3 FOR 137,330 "CONNECTOR, LINK, TRACK SHOE," AND UNDER ITEMS 4 AND 5 FOR 127,910 "WEDGE, TRACK SHOE CONNECTOR.' BIDS WERE INVITED ON BOTH AN F.O.B. ORIGIN AND F.O.B. DESTINATION BASIS.

IT IS REPORTED THAT YOUR UNIT PRICE ORIGIN BID WAS THE LOWEST OF THE SIX BIDS RECEIVED IN RESPONSE TO THE INVITATION, AS INDICATED BELOW.

ITEMS 1 THROUGH 3 ORIGIN DESTINATION

----------------- ------ ----------- OHIO TOOL AND MFG. CO., INC. $2.49

$2.55 HORST MFG. CO. 2.53 2.58 AFFILIATED METAL PRODUCTS CO. 3.21 3.51 TRIPPLE "E" MFG. CO. N/B N/B WAYNE BOLT AND NUT CO.

3.45 3.64 INDUSTRIAL PROCUREMENT, INC. 3.54 3,662.32

ITEMS 4 AND 5 ORIGIN DESTINATION

------------- ------ ----------- OHIO TOOL AND MFG. CO., INC. $0.28

$0.29 AFFILIATED METAL PRODUCTS CO..314 .318 HORST MFG. CO. .34 .35 TRIPLE "E" MFG. CO. 1.79 1.82 WAYNE BOLT AND NUT CO.

.62 .67 INDUSTRIAL PROCUREMENT, INC. N/B N/B

SUBSEQUENT TO BID OPENING, AND PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-905.4, THE CONTRACTING OFFICER REQUESTED A PREAWARD SURVEY ON YOUR FIRM IN ORDER TO DETERMINE WHETHER IT POSSESSED THE DEGREE OF RESPONSIBILITY NECESSARY TO SUCCESSFULLY PERFORM THE ANTICIPATED CONTRACT. THE SURVEY DATED OCTOBER 6, 1966, CONCLUDED THAT YOUR FIRM WAS A RESPONSIBLE BIDDER AND RECOMMENDED THAT AWARD BE MADE TO IT, PROVIDED THAT YOUR FIRM WAS AUTHORIZED TO USE CERTAIN IDENTIFIED GOVERNMENT PROPERTY IN ITS POSSESSION NECESSARY FOR THE FABRICATION OF ITEMS 1, 2 AND 3. HOWEVER, PARAGRAPH 8 OF THE INVITATION BIDDING INSTRUCTIONS PRECLUDED THE USE OF GOVERNMENT-OWNED PROPERTY UNLESS OTHERWISE AUTHORIZED, AND NOTHING WAS CONTAINED IN THE SCHEDULE PROVIDING SPECIFICALLY FOR SUCH USE. IN THIS REGARD, WE ARE ADVISED THAT, IN CONNECTION WITH THE EXISTING FACILITIES CONTRACT WITH YOUR FIRM, NEGOTIATIONS WERE BEING CONDUCTED WITH YOUR FIRM COVERING THE UNAUTHORIZED USE OF SUCH FACILITIES UNDER A CONTRACT CLAUSE REQUIRING PAYMENT FOR SUCH USE. YOUR FIRM HAS CONTENDED THAT THE PAYMENT PROVISION PERMITTED ANY USE SUBJECT ONLY TO SUBSEQUENT PAYMENT THEREFOR. THE PROCUREMENT AGENCY OBSERVED THAT THE FOREGOING SUGGESTS THAT YOUR FIRM MAY NOT HAVE BEEN CONCERNED OVER THE LACK OF AUTHORIZATION FOR USE; BUT RESOLUTION OF THE MATTER WAS NEVER ACHIEVED SINCE THE DETERMINATION TO CANCEL THE INVITATION AS TO ITEMS 1, 2 AND 3 WAS PREDICATED ON UNREASONABLENESS OF PRICE.

ON OCTOBER 18, 1966, THE CONTRACTING OFFICER WAS ADVISED BY THE CHIEF, PRICE ANALYST SECTION, THAT YOUR LOW BID UNDER INVITATION NO. -0420 WAS EXCESSIVE. IN THIS REGARD, THE PRICE ANALYSIS REPORT STATED THAT YOUR FIRM HAD, AS RECENTLY AS JANUARY 1966, MANUFACTURED FOR PRIME TRACK MANUFACTURERS ITEMS 1 THROUGH 3 FOR $1.62 EACH AND ITEMS 4 AND 5 FOR ?18 EACH. THE REPORT CONCLUDED THAT "THE PRICE DIFFERENTIAL BETWEEN THESE PRICES AND PRESENT BID CANNOT BE ACCOUNTED FOR BY PACKAGING OR ECONOMIC INCREASES. CONTRACTOR WOULD STILL BE IN PRODUCTION * * * THERE WOULD BE NO SET UP CHARGES TO AMORTIZE.'

PREDICATED UPON THE CONTRACTING OFFICER'S DETERMINATION THAT ALL OF THE BIDS RECEIVED UNDER ITEMS 1 THROUGH 3 OF THE INVITATION WERE UNREASONABLE AS TO PRICE, THOSE ITEMS OF THE INVITATION WERE CANCELLED ON AUGUST 15, 1967, PURSUANT TO ASPR 2-404.1 (B) (VI). THE BID PRICES RECEIVED UNDER ITEMS 4 AND 5 OF THE INVITATION WERE DETERMINED NOT TO BE EXCESSIVE AND, ACCORDINGLY, AWARD OF THOSE ITEMS WAS MADE TO YOUR FIRM ON AUGUST 17, 1967, IN THE AMOUNT OF $35,814.73. WE FIND NO BASIS TO DISTURB THE ACTIONS TAKEN HERE.

INVITATION NO. -1807, A 100 PERCENT SMALL-BUSINESS SET ASIDE, ISSUED APRIL 1, 1967, SOLICITED BIDS FOR 124,884 TRACK CONNECTOR KITS. THE RECORD INDICATES THAT THE FOLLOWING THREE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION:

BIDDER ORIGIN DESTINATION

------ ------ ----------- OHIO TOOL $3.98

N/B HORST MFG. CO. 4.345 $4.635 HURON TOOL AND MFG. CO. 7.28 7.38

IN VIEW OF THE FACT THAT YOUR FIRM WAS THE APPARENT LOW BIDDER, A PREAWARD SURVEY WAS REQUESTED BY THE CONTRACTING OFFICER TO AGAIN DETERMINE IF YOUR FIRM HAD THE NECESSARY RESPONSIBILITY TO PERFORM THE ANTICIPATED CONTRACT. THE RESULTS OF THE SURVEY INDICATED THAT YOUR FIRM WAS A RESPONSIBLE BIDDER AND WAS QUALIFIED TO FULLY PERFORM THE CONTRACT.

HOWEVER, UNDER THIS INVITATION, THE RENT-FREE USE OF GOVERNMENT PROPERTY WAS AUTHORIZED, BUT YOU DID NOT INDICATE IN YOUR BID THAT SUCH USE WAS REQUIRED AND YOU DID NOT FURNISH THE NECESSARY INFORMATION CALLED FOR BY APPENDIX I OF THE INVITATION. DURING THE TIME YOUR FIRM WAS BEING CONSIDERED FOR AWARD, THE SECRETARY OF THE ARMY INSTITUTED AN INVENTORY REDUCTION PROGRAM WHEREBY ALL MILITARY REQUIREMENTS WERE IMMEDIATELY REVIEWED TO ESTABLISH MAXIMUM NECESSARY STOCK QUANTITIES. IN VIEW OF THE GREAT NUMBER OF STOCK ITEM REQUIREMENTS THAT WERE REVIEWED, IT WAS NECESSARY TO CONDUCT THE STUDY BY COMPUTER OPERATION. AS A RESULT OF THIS STUDY, THE QUANTITY OF ITEMS ADVERTISED UNDER INVITATION NO. -1807 WAS DETERMINED TO BE EXCESSIVE TO THE NEEDS OF THE GOVERNMENT. ACCORDINGLY, THE INVITATION WAS CANCELLED IN ITS ENTIRETY ON JULY 17, 1967, UNDER ASPR 2-404.1 (B) (III).

ON AUGUST 28, 1967, THE PROCUREMENT ACTIVITY ISSUED INVITATION NO. 0356, FOR THE PURCHASE OF 140,320 ITEMS, IDENTICAL TO THOSE ORIGINALLY ADVERTISED UNDER INVITATION NO. -0420. THE RECORD INDICATES THE TWELVE BIDS WERE RECEIVED IN RESPONSE TO INVITATION NO. -0356. YOUR FIRM SUBMITTED THE FIFTH LOWEST BID IN THE AMOUNT OF $2.59 EACH ON AN ORIGIN BASIS AND $2.61 EACH ON A DESTINATION BASIS. THE APPARENT LOW BID OF $1.73 EACH ON AN ORIGIN BASIS WAS SUBMITTED BY THE WADSWORTH MANUFACTURING COMPANY. UNDER THIS INVITATION, YOUR FIRM BID ON THE BASIS OF USING GOVERNMENT-OWNED PROPERTY IN YOUR POSSESSION ON A RENT FREE BASIS.

AS A RESULT OF FURTHER STUDY UNDER THE INVENTORY REDUCTION PROGRAM, IT WAS DETERMINED THAT A REDUCED REQUIREMENT EXISTED FOR THE PROCUREMENT ITEM ORIGINALLY ADVERTISED UNDER CANCELED INVITATION NO. 1807. IN VIEW THEREOF, ON AUGUST 22, 1967, THE PROCUREMENT ACTIVITY ISSUED INVITATION NO. -0270 FOR 114,968 KITS PREVIOUSLY ADVERTISED UNDER INVITATION NO. - 1807. THE RECORD INDICATES THAT YOUR FIRM BID $4.40 EACH ON AN ORIGIN BASIS AND THAT THE WADSWORTH MANUFACTURING COMPANY SUBMITTED THE LOW BID OF $4.39 EACH ON AN ORIGIN BASIS. ON NOVEMBER 6, 1967, TWO CONTRACTS WERE AWARDED TO THE WADSWORTH MANUFACTURING COMPANY AS THE LOW RESPONSIVE RESPONSIBLE BIDDER UNDER INVITATIONS NOS. -0356 AND -0270. WE FIND NO LEGAL BASIS TO QUESTION THESE AWARDS WHICH WERE MADE IN ACCORDANCE WITH 10 U.S.C. 2305 (C).

YOUR PROTEST CHALLENGES THE LEGALITY OF THE CANCELLATION, AFTER BID OPENING, OF INVITATIONS NOS. -0420 AND -1807 ON THE GROUNDS THAT THE CANCELLATIONS WERE CONTRARY TO THE APPLICABLE SECTIONS OF ASPR, AND THAT THE EXPOSURE OF YOUR BID PRICES GAVE YOUR COMPETITORS AN UNFAIR ADVANTAGE IN THE SUBSEQUENT PROCUREMENTS TO THE DETRIMENT OF THE COMPETITIVE BIDDING SYSTEM.

WITH RESPECT TO THE TWO CANCELLED INVITATIONS DISCUSSED ABOVE, YOUR ATTENTION IS INVITED TO ASPR 2.404-1, WHICH PROVIDES IN PERTINENT PART, AS FOLLOWS:

"/A) THE PRESERVATION OF THE INTEGRITY OF THE COMPETITIVE BID SYSTEM DICTATES THAT AFTER BIDS HAVE BEEN OPENED, AWARD MUST BE MADE TO THAT RESPONSIBLE BIDDER WHO SUBMITTED THE LOWEST RESPONSIVE BID, UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND CANCEL THE INVITATION * *

"/B) * * * INVITATION FOR BIDS MAY BE CANCELED AFTER OPENING BUT PRIOR TO AWARD WHERE SUCH ACTION IS CONSISTENT WITH (A) ABOVE AND THE CONTRACTING OFFICER DETERMINES IN WRITING THAT -

"* * * (III) THE SUPPLIES OR SERVICES BEING PROCURED ARE NO LONGER REQUIRED;

"/VI) ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE AT UNREASONABLE PRICES;

WE ARE FULLY AWARE THAT THE REJECTION OF BIDS AFTER THEY ARE OPENED AND EACH BIDDER OR SUBSEQUENT PROSPECTIVE BIDDER HAS LEARNED HIS COMPETITOR'S PRICES IS A SERIOUS MATTER, AND WE HAVE HELD THAT SUCH ACTION SHOULD NOT BE TAKEN EXCEPT FOR THE MOST COGENT REASONS. B 153229, FEBRUARY 5, 1964; B-140452, NOVEMBER 9, 1959.

IN B-147154, NOVEMBER 6, 1961, WE HELD WITH RESPECT TO THE CANCELLATION OF AN INVITATION PURSUANT TO THE CONTRACTING OFFICER'S DETERMINATION THAT ALL BIDS WERE UNREASONABLE AS TO PRICE AS FOLLOWS: "* * * THE AUTHORITY TO REJECT BIDS IS NOT ORDINARLY SUBJECT TO REVIEW BY THIS OFFICE, AND WE HAVE SPECIFICALLY HELD THAT WHEN IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO PROCURE THE PARTICULAR SUPPLIES, A REJECTION OF ALL BIDS AND A SOLICITATION OF NEW BIDS IS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION. 36 COMP. GEN. 364. SINCE THE FACTS, AS OUTLINED ABOVE, APPEAR TO SUBSTANTIALLY SUPPORT THE CONTRACTING OFFICER'S DETERMINATION THAT YOUR BID PRICE WAS UNREASONABLE, WE CANNOT CONCLUDE THAT THE ACTION TAKEN IN REJECTING THE BIDS WAS UNJUSTIFIED. SEE ALSO 39 COMP. GEN. 86, 88. * * *"

IN 36 COMP. GEN. 364, SUPRA, WE HELD THAT "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.'

IT WAS REGRETTABLE THAT THE CANCELLATION OF INVITATION NO. -0420 WAS DELAYED FOR APPROXIMATELY A YEAR AFTER THE CONTRACTING OFFICER WAS APPRISED OF THE EXCESSIVE NATURE OF THE BIDS RECEIVED THEREUNDER. HOWEVER, WE DO NOT FEEL THAT THE DELAY, IN AND OF ITSELF, RENDERS LEGALLY QUESTIONABLE THE ULTIMATE DECISION TO CANCEL THE INVITATION BECAUSE OF THE EXCESSIVE PRICES BID. ALSO, CONTRIBUTING SOMEWHAT TO THE DELAY WAS THE MATTER OF GOVERNMENT PROPERTY IN YOUR POSSESSION.

WITH RESPECT TO THE LEGALITY OF THE CANCELLATION OF INVITATION NO. 1807, IT IS WELL-ESTABLISHED THAT THE GOVERNMENT SHOULD NOT BE COMPELLED TO MAKE AN AWARD FOR AN ITEM OR FOR QUANTITIES OF AN ITEM WHICH IT NO LONGER NEEDS OR WANTS. SEE B-153229, SUPRA, AND ASPR 2 404.1 (B) (VI), SUPRA. INVITATION NO. -1807 WAS CANCELLED BY THE CONTRACTING OFFICER PURSUANT TO COMPETENT ADVICE GIVEN HIM BY THE PERSONNEL INVOLVED IN THE INVENTORY REDUCTION PROGRAM WHICH CONCLUSIVELY INDICATED THAT THE PROCUREMENT ITEM WAS NO LONGER NEEDED IN THE QUANTITIES ADVERTISED. WHILE THE REVIEW OF THE PROCUREMENT ITEM MAY NOT HAVE BEEN SUFFICIENTLY COMPREHENSIVE IN ITS INITIAL STAGES TO HAVE INDICATED THAT A REDUCED QUANTITY WAS IN FACT REQUIRED, THE CONTRACTING OFFICER ACTED IN GOOD FAITH BASED ON INFORMATION FURNISHED HIM PURSUANT TO INSTRUCTIONS FROM THE SECRETARY OF THE ARMY. MOREOVER, IN THIS REGARD, WE HAVE HELD THAT CONTRACTING OFFICERS NOT ONLY HAVE THE RIGHT TO REJECT BIDS FOR SUPPLIES WHICH ARE NO LONGER NEEDED, BUT THAT THEY WOULD BE DERELICT IN THEIR DUTY IF THEY DID NOT DO SO. B-159865, OCTOBER 6, 1966.