B-163321, FEBRUARY 15, 1968, 47 COMP. GEN. 459

B-163321: Feb 15, 1968

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THE AWARD TO THE NEXT HIGHEST OFFEROR WITHOUT NEGOTIATION IN ACCORDANCE WITH THE RIGHT RESERVED TO THE GOVERNMENT TO MAKE AN AWARD "BASED ON INITIAL OFFERS RECEIVED WITHOUT DISCUSSION OF SUCH OFFERS" WAS PROPER ALTHOUGH THE STRICT APPLICATION OF THE LATE ADDENDUM RULE IS NOT APPROPRIATE IN EVERY CASE INVOLVING A NEGOTIATED PROCUREMENT. THE CONTRACT AWARDED IS NOT SUBJECT TO QUESTION. WAS FORWARDED TO OUR OFFICE FOR DECISION BY THE DEPARTMENT OF THE ARMY. THE SUBJECT SOLICITATION WAS ISSUED UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (2) AND ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3 202.2 (VI). THE EXCEPTION TO THE FORMAL ADVERTISING REQUIREMENT WHICH PERMITS NEGOTIATION WHERE THE PUBLIC EXIGENCY WILL NOT PERMIT THE DELAY INCIDENT TO ADVERTISING.

B-163321, FEBRUARY 15, 1968, 47 COMP. GEN. 459

CONTRACTS - NEGOTIATION - ADDENDA ACKNOWLEDGMENT REQUIREMENT WHERE THE FIRST TWO LOW OFFERORS UNDER A SOLICITATION ISSUED PURSUANT TO 10 U.S.C. 2304 (A) (2) FAILED TO ACKNOWLEDGE AN AMENDMENT, THE AWARD TO THE NEXT HIGHEST OFFEROR WITHOUT NEGOTIATION IN ACCORDANCE WITH THE RIGHT RESERVED TO THE GOVERNMENT TO MAKE AN AWARD "BASED ON INITIAL OFFERS RECEIVED WITHOUT DISCUSSION OF SUCH OFFERS" WAS PROPER ALTHOUGH THE STRICT APPLICATION OF THE LATE ADDENDUM RULE IS NOT APPROPRIATE IN EVERY CASE INVOLVING A NEGOTIATED PROCUREMENT, THE CONTRACT HAVING BEEN NEGOTIATED UNDER THE PUBLIC EXIGENCY EXCEPTION TO FORMAL ADVERTISING IN VIEW OF THE URGENCY OF THE PROCUREMENT, AND THE OFFERORS HAVING BEEN ADVISED THAT FAILURE TO ACKNOWLEDGE RECEIPT OF AN AMENDMENT "MAY RESULT IN REJECTION OF YOUR OFFER," AND THAT AWARD OF A CONTRACT MAY BE BASED ON INITIAL OFFERS, THE CONTRACT AWARDED IS NOT SUBJECT TO QUESTION.

TO INFRARED INDUSTRIES, INC., FEBRUARY 15, 1968:

YOUR PROTEST OF THE AWARD OF A CONTRACT TO A HIGHER OFFEROR UNDER SOLICITATION NO. DAAG25-67-R-1618, ISSUED BY THE U.S. ARMY NEW YORK PROCUREMENT DETACHMENT, WAS FORWARDED TO OUR OFFICE FOR DECISION BY THE DEPARTMENT OF THE ARMY, HEADQUARTERS UNITED STATES ARMY MATERIEL COMMAND ON JANUARY 15, 1968, PURSUANT TO YOUR REQUEST.

THE SUBJECT SOLICITATION WAS ISSUED UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (2) AND ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3 202.2 (VI), THE EXCEPTION TO THE FORMAL ADVERTISING REQUIREMENT WHICH PERMITS NEGOTIATION WHERE THE PUBLIC EXIGENCY WILL NOT PERMIT THE DELAY INCIDENT TO ADVERTISING, AND REQUESTED PROPOSALS FOR OPTICAL LENSES DESCRIBED AS "LENS, ORD. PART NO. 8270606" AND "LENS, ORD. PART NO. 8270606.' THE ORIGINAL CLOSING DATE FOR THE SUBMISSION OF PROPOSALS WAS JUNE 12, 1967. THIS DATE WAS SUBSEQUENTLY EXTENDED TO JULY 17, 1967, BECAUSE OF AN AMENDMENT TO THE SOLICITATION (AMENDMENT NO. 003) MODIFYING CERTAIN SPECIFICATION DRAWINGS.

PROPOSALS WERE RECEIVED FROM FIVE SOURCES. THE PROPOSAL OF INFRARED INDUSTRIES, INC. WAS LOW, BUT WAS REJECTED AS NONRESPONSIVE FOR FAILURE TO ACKNOWLEDGE RECEIPT OF AMENDMENT NO. 003 AS REQUIRED BY PARAGRAPH 4 OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS AND BY STANDARD FORM 30, THE FORM USED TO NOTIFY OFFERORS OF AMENDMENTS. SEE, ALSO, ASPR 3-505. THE PROPOSAL OF THE SECOND LOW OFFEROR, MANAGEMENT AND TECHNOLOGY, INC. WAS REJECTED FOR THE SAME REASON, AND ON AUGUST 22, 1967, AWARD WAS MADE TO BUHL OPTICAL COMPANY AT A PRICE WHICH WAS $7,470.40 HIGHER THAN THE PRICE PROPOSED BY INFRARED. THE AWARD TO BUHL OPTICAL COMPANY WAS MADE WITHOUT ANY NEGOTIATIONS IN ACCORDANCE WITH INSTRUCTIONS TO OFFERORS WHICH RESERVED THE RIGHT TO THE GOVERNMENT TO MAKE AWARD ,BASED ON INITIAL OFFERS RECEIVED, WITHOUT DISCUSSION OF SUCH OFFERS.'

YOU PROTESTED THE AWARD TO BUHL OPTICAL COMPANY BY A TELEGRAM TO THE PROCURING ACTIVITY DATED SEPTEMBER 6, 1967, ON THE GROUND THAT YOUR FAILURE TO ACKNOWLEDGE THE AMENDMENT MODIFYING THE SPECIFICATIONS DID NOT MAKE YOUR OFFER NONRESPONSIVE BECAUSE CONFORMANCE WITH THE AMENDMENT WOULD NOT HAVE SIGNIFICANTLY INCREASED YOUR COSTS. IN SUBSTANTIATION OF YOUR CONTENTION, YOU CITED OUR DECISION B-161832, AUGUST 17, 1967, IN WHICH IT WAS HELD THAT A FAILURE TO ACKNOWLEDGE A SPECIFICATION AMENDMENT IN A FORMALLY ADVERTISED PROCUREMENT, WHICH HAD ONLY A NEGLIGIBLE AFFECT ON THE PRICE, QUANTITY OR QUALITY OF THE PROCUREMENT WAS NOT SUFFICIENT TO RENDER A BID NONRESPONSIVE. WHEN YOUR PROTEST WAS DENIED BY THE PROCURING ACTIVITY, YOU REQUESTED BY LETTER DATED SEPTEMBER 27, 1967, THAT THE MATTER BE REFERRED TO OUR OFFICE FOR DECISION.

THE ADMINISTRATIVE REPORT MAINTAINS THAT, CONTRARY TO YOUR CONTENTION, THE SUBJECT AMENDMENT HAD A SIGNIFICANT EFFECT ON THE COST OF THE PROPOSED PROCUREMENT AND THAT THEREFORE THE FAILURE TO ACKNOWLEDGE RECEIPT OF THE AMENDMENT RENDERED THE INFRARED PROPOSAL NONRESPONSIVE TO THE INVITATION. IN SUBSTANTIATION, A LETTER DATED NOVEMBER 15, 1967, FROM FRANKFORD ARSENAL, THE COGNIZANT TECHNICAL ACTIVITY, HAS BEEN FURNISHED ADVISING THAT THE SPECIFICATION CHANGE COVERED BY THE AMENDMENT WILL RESULT IN AN ESTIMATED COST INCREASE OF $10 PER LENS, OR AN ESTIMATED PRICE INCREASE OF $9,200 FOR THE 920 UNITS CALLED FOR IN THE SOLICITATION. THE PROCUREMENT AGENCY IN ITS REPORT TO OUR OFFICE MAKES REFERENCE TO THE GENERAL RULE STATED IN B 161832, CITED BY YOU, TO THE EFFECT THAT THE FAILURE TO ACKNOWLEDGE AN ADDENDUM TO AN INVITATION SIGNIFICANTLY AFFECTING THE PRICE, QUANTITY OR QUALITY OF THE PROCUREMENT RENDERS THE BID NONRESPONSIVE, AND ALSO MAKES REFERENCE TO 44 COMP. GEN. 753; B-162071, JULY 31, 1967; AND 37 COMP. GEN. 785. THE LATTER CASES WERE CITED BY THE PROCUREMENT ACTIVITY FOR THE PROPOSITION THAT THE "DE MINIMIS" RULE IS NOT FOR APPLICATION IN A CASE INVOLVING AS LARGE AN AMOUNT OF MONEY AS IS INVOLVED HERE.

WHILE YOU CONTEND THAT YOUR PRICE WOULD NOT HAVE BEEN INCREASED SIGNIFICANTLY BY THE SUBJECT AMENDMENT, WE MUST ACCEPT THE DETERMINATION OF THE COGNIZANT TECHNICAL ACTIVITY THAT THE SPECIFICATION CHANGE WOULD RESULT IN A PRICE INCREASE OF ABOUT $9,200. ALSO, WE MUST AGREE WITH THE PROCUREMENT ACTIVITY THAT THE EFFECT OF SUCH A PRICE INCREASE IS SIGNIFICANT IN RELATION TO THE COST OF THE PROCUREMENT.

THE DECISIONS OF OUR OFFICE CITED ABOVE, HOWEVER, ALL HAVE REFERENCE TO RULES AFFECTING ADDENDUMS TO INVITATIONS FOR FORMALLY ADVERTISED PROCUREMENTS. IN A NEGOTIATED PROCUREMENT, SUCH AS IS INVOLVED HERE, THE RULES OF COMPETITIVE BIDDING ARE NOT GENERALLY APPLICABLE, ALTHOUGH THEY MAY SERVE AS GENERAL GUIDELINES IN CASES WHERE THEIR APPLICATION SERVES THE BEST INTEREST OF THE GOVERNMENT. IN THIS REGARD, SEE B 161782, NOVEMBER 21, 1967, 47 COMP. GEN. ----, IN WHICH THE FOLLOWING STATEMENT APPEARS: "NEGOTIATION PROCEDURES, UNLIKE THOSE REQUIRED FOR FORMAL ADVERTISING, ARE DESIGNED TO BE FLEXIBLE AND INFORMAL. THESE PROCEDURES PROPERLY PERMIT THE CONTRACTING OFFICER TO DO THINGS IN THE AWARDING OF A NEGOTIATED CONTRACT THAT WOULD BE A RADICAL VIOLATION OF THE LAW IF THE PROCUREMENT WERE BEING ACCOMPLISHED BY FORMAL ADVERTISING.' AS A GENERAL RULE, WE CANNOT AGREE THAT A FAILURE TO ACKNOWLEDGE AN ADDENDUM IN A NEGOTIATED PROCUREMENT WOULD NECESSARILY PRECLUDE CONSIDERATION OF THE AFFECTED PROPOSAL. IN THE NORMAL NEGOTIATED PROCUREMENT, THE ACKNOWLEDGMENT OF THE RECEIPT OF AN ADDENDUM AS WELL AS ANY CHANGES IN THE PROPOSAL PRICE OF A GIVEN OFFEROR BROUGHT ABOUT BY THE ADDENDUM PROPERLY MAY BE THE SUBJECT OF NEGOTIATIONS PROVIDED OTHER OFFERORS OR THE GOVERNMENT ARE NOT PREJUDICED THEREBY. THEREFORE, STRICT APPLICATION OF THE LATE ADDENDUM RULE IS NOT APPROPRIATE IN EVERY CASE INVOLVING A NEGOTIATED PROCUREMENT, DEPENDENT, OF COURSE,UPON THE PARTICULAR AND UNIQUE CIRCUMSTANCES INVOLVED.

IN THE CASE AT HAND, HOWEVER, OFFERORS WERE SPECIFICALLY ADVISED IN THE SOLICITATION THAT AMENDMENTS HAD TO BE ACKNOWLEDGED, AND STANDARD FORM 30, THE NOTIFICATION OF AMENDMENT FORM, WARNED OFFERORS THAT FAILURE TO ACKNOWLEDGE RECEIPT OF AN AMENDMENT "MAY RESULT IN REJECTION OF YOUR OFFER.' FURTHER, THE SOLICITATION PROVIDED IN PARAGRAPH 10 (G) OF THE INSTRUCTIONS AND CONDITIONS THAT: "THE GOVERNMENT MAY AWARD A CONTRACT, BASED ON INITIAL OFFERS RECEIVED, WITHOUT DISCUSSION OF SUCH OFFERS. ACCORDINGLY, EACH INITIAL OFFER SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT.'

AS STATED ABOVE, THIS CONTRACT WAS NEGOTIATED UNDER THE PUBLIC EXIGENCY EXCEPTION TO THE FORMAL ADVERTISING REQUIREMENT. IN VIEW OF THE URGENCY OF THE PROCUREMENT (SEE ASPR 3-805.1 (A) (III) (, WE ARE OF THE OPINION THAT THE ACTION OF THE CONTRACTING OFFICER IN AWARDING A CONTRACT ON THE BASIS OF THE TIMELY SUBMITTED OFFERS, AS AMENDED, IS NOT SUBJECT TO QUESTION BY OUR OFFICE. NEITHER DO WE FIND ANY LEGAL BASIS TO QUESTION THE REJECTION OF THE INFRARED OFFER AS NONRESPONSIVE SINCE NO OPPORTUNITY EXISTED FOR CURING THE DEFECTIVE PROPOSAL THROUGH NEGOTIATION.