B-164039, JUL. 15, 1968

B-164039: Jul 15, 1968

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CAVALARI: REFERENCE IS MADE TO YOUR LETTER DATED MAY 15. A BIDDER RESPONDING TO A FUEL OIL SOLICITATION WAS PERMITTED TO SUBMIT EITHER A FIRM PRICE OR A BID PRICE WHICH WOULD ESCALATE DURING THE 6-MONTH ORDERING PERIOD BASED UPON THE FLUCTUATIONS OF A REFERENCED (POSTED) PRICE. IF AN ESCALATED BID WAS SUBMITTED. WHEREVER AN ESCALATED PRICE IS OFFERED ON AN ITEM. ESCALATED PRICES OFFERED WILL BE EVALUATED IN THE LIGHT OF MARKET CONDITIONS AT THE TIME OF EVALUATION AND OF INDICATED MARKET TRENDS DURING THE PERIOD OF THE CONTRACT. FACTORS THAT WILL BE CONSIDERED IN SUCH EVALUATION INCLUDE THE FOLLOWING: (A) THE AMOUNT OF THE OFFERED PRICE. (B) WHETHER THE OFFERED PRICE IS FIRM OR SUBJECT TO ESCALATION.

B-164039, JUL. 15, 1968

TO MR. ALFRED F. CAVALARI:

REFERENCE IS MADE TO YOUR LETTER DATED MAY 15, 1968, PROTESTING ON BEHALF OF THE MID-VALLEY PETROLEUM CORPORATION AGAINST THE AWARD TO ANY OTHER BIDDER OF ITEMS NOS. 770-46 AND 3635-46 UNDER INVITATION FOR BIDS NO. DSA600-68-B-0111, ISSUED BY THE DEFENSE FUEL SUPPLY CENTER.

THE INVITATION, ISSUED ON JANUARY 15, 1968, SOLICITED BIDS FOR ABOUT 1,200 ITEMS OF ESTIMATED QUANTITIES OF GASOLINE, KEROSENE, DIESEL FUELS AND HEATING FUELS FOR USE OF MILITARY INSTALLATIONS IN NEW ENGLAND, NEW YORK, NEW JERSEY, PENNSYLVANIA, MARYLAND, DELAWARE, DISTRICT OF COLUMBIA, VIRGINIA AND WEST VIRGINIA DURING THE PERIOD MAY 1, 1968, THROUGH OCTOBER 31, 1968. PRIOR TO THE ISSUANCE OF THIS INVITATION, A BIDDER RESPONDING TO A FUEL OIL SOLICITATION WAS PERMITTED TO SUBMIT EITHER A FIRM PRICE OR A BID PRICE WHICH WOULD ESCALATE DURING THE 6-MONTH ORDERING PERIOD BASED UPON THE FLUCTUATIONS OF A REFERENCED (POSTED) PRICE. THE INSTANT INVITATION, FOR THE FIRST TIME, REQUIRED BIDS TO BE SUBMITTED ON A FIRM- PRICE BASIS, OR, IF AN ESCALATED BID WAS SUBMITTED, A SECOND BID ON A FIRM BASIS HAD TO BE SUBMITTED ON A SEPARATE PRICE DATA CARD. IN THIS REGARD, PARAGRAPH 24 OF THE SUBJECT INVITATION READ: "PRICES. -- PRICES MAY BE OFFERED EITHER ON A FIRM BASIS FOR THE CONTRACT PERIOD OR ON AN ESCALATED BASIS. HOWEVER, WHEREVER AN ESCALATED PRICE IS OFFERED ON AN ITEM, A FIRM PRICE FOR SUCH ITEM MUST ALSO BE SUBMITTED. SUCH FIRM PRICE MAY OR MAY NOT BE THE SAME AS THE ESCALATED PRICE. ESCALATED PRICES OFFERED WILL BE EVALUATED IN THE LIGHT OF MARKET CONDITIONS AT THE TIME OF EVALUATION AND OF INDICATED MARKET TRENDS DURING THE PERIOD OF THE CONTRACT. FACTORS THAT WILL BE CONSIDERED IN SUCH EVALUATION INCLUDE THE FOLLOWING:

(A) THE AMOUNT OF THE OFFERED PRICE;

(B) WHETHER THE OFFERED PRICE IS FIRM OR SUBJECT TO ESCALATION;

(C) WHETHER THE OFFERED PRICE IS SUBJECT TO DOWNWARD ESCALATION ONLY OR IS SUBJECT TO A MAXIMUM ABOVE WHICH THE PRICE MAY NOT INCREASE;

(D) WHETHER THE OFFERED PRICE ESCALATES WITH A PRICE (I) PUBLISHED IN A TRADE PRICE SERVICE OR A COMMERCIAL JOURNAL, (II) POSTED BY A COMPANY OTHER THAN THE OFFEROR, (III) POSTED BY THE FFEROR;

(E) THE COMMODITY, LOCATION AND METHOD OF DELIVERY APPLICABLE TO THE POSTED OR PUBLISHED PRICE. ANY OFFER WHICH IS SUBMITTED UPON AN ESCALATED BASIS WITHOUT AN ACCOMPANYING FIRM PRICE FOR THAT ITEM WILL BE CONSIDERED NON-RESPONSIVE AND WILL NOT BE CONSIDERED. A SEPARATE PRICE DATA CARD SHOULD BE PREPARED FOR THE ESCALATED PRICE OFFERED, AND FOR THE FIRM PRICE OFFERED. AN INDIVIDUAL ITEM WILL BE AWARDED UPON EITHER A FIRM PRICE BASIS OR AN ESCALATED PRICE BASIS, BUT NOT UPON BOTH.'

SINCE THIS CONSTITUTED A NEW REQUIREMENT WHEN BIDDING UPON AN ESCALATED BASIS, A FLYER WAS ATTACHED TO THE FRONT OF THE INVITATION WHICH STATED: "THIS SOLICITATION REQUIRES THAT UPON EACH ITEM FOR WHICH AN ESCALATED PRICE IS OFFERED, A FIRM PRICE MUST ALSO BE OFFERED FOR THAT ITEM.' THE 146 CONCERNS SUBMITTING BIDS ON THE OPENING DATE OF FEBRUARY 15, 1968, WERE CATEGORIZED AS FOLLOWS:

(1) BIDDERS OFFERING PRICES SUBJECT TO ESCALATION WITH NO CEILING OR MAXIMUM PRICE, BUT WITHOUT AN ALTERNATE FIRM PRICE.

(2) BIDDERS OFFERING PRICES SUBJECT TO ESCALATION, WITH A CEILING OR MAXIMUM PRICE, BUT WITHOUT AN ALTERNATE FIRM PRICE.

(3) BIDDERS OFFERING PRICES SUBJECT TO ESCALATION AND SUBMITTING AN ALTERNATE FIRM PRICE.

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(4) BIDDERS OFFERING FIRM PRICES ONLY.

THE CONTRACTING OFFICER DETERMINED UNDER PARAGRAPH 24 OF THE INVITATION THAT BIDS WHICH WERE SUBJECT TO ESCALATION WITHOUT A CEILING AND WHICH WERE SUBMITTED WITHOUT FIRM-PRICE OFFERS WERE NONRESPONSIVE. THIS DETERMINATION EXCLUDED THE OFFERS OF 39 FIRMS AS INDICATED ABOVE. THE REMAINING 107 BIDS WERE CONSIDERED TO BE RESPONSIVE TO THE INVITATION.

BIDS SUBMITTED BY 25 CONCERNS, WHOSE ESCALATED BID PRICES DID CONTAIN A CEILING BEYOND WHICH THE PRICE WOULD NOT ESCALATE, AND WHICH BIDS WERE NOT ACCOMPANIED BY AN ALTERNATE FIRM-PRICED OFFER, WERE CONSIDERED RESPONSIVE TO THE TERM OF THE INVITATION ON THE BASIS THAT (1) THE CEILING PRICE OFFERED THE SAME PROTECTION TO UPWARD ESCALATION AS A FIRM PRICE; (2) A FIRM PRICE EQUAL TO CEILING PRICE COULD HAVE BEEN OFFERED WITHOUT ANY ADDITIONAL RISK BY THE BIDDER SINCE THE CEILING PRICE ALREADY ESTABLISHES THE MAXIMUM UPWARD ESCALATION AND A FIRM PRICE WOULD MERELY REMOVE THE POSSIBILITY OF DOWNWARD ESCALATION; AND (3) ALL BIDDERS DESIRING TO OFFER FIRM PRICES COULD ALSO HAVE OFFERED PRICES SUBJECT TO ESCALATION IF SUCH ESCALATION WAS DEEMED A COMPETITIVE ADVANTAGE.

AFFRON FUEL OIL INC., WHICH WAS ONE OF THESE 25 CONCERNS, WAS AWARDED ITEMS NOS. 770-46 AND 3635-46 ON APRIL 10, 1968, AS THE LOWEST BIDDER ON THE ITEMS. AFFRON'S BIDS AND MID-VALLEY'S BIDS UNDER THESE ITEMS WERE AS FOLLOWS:

MID-VALLEY PETROLEUM CORP. AFFRON FUEL OIL INC.

ITEM NO. 770-46 ITEM NO. 770-46

FIRM PRICE $0.1197ESCALATED PRICE $0.1118

MAXIMUM PRICE $0.1118

ITEM NO. 3635-46

FIRM PRICE $0.1197 ITEM NO. 3635-46

ESCALATED PRICE $0.1218

MAXIMUM PRICE $0.1218

(BOTH ITEM PRICES SUBJECT TO

A $0.102 PER GALLON POSTED OR

PUBLISHED PRICE BY WHICH THE

BID IS TO FLUCTUATE)

IN VIEW OF THE INVITATION REQUIREMENTS QUOTED ABOVE, YOU CONCLUDE THAT THE AFFRON BID WAS NONRESPONSIVE AND THUS INELIGIBLE FOR AWARD. IN OTHER WORDS, AFFRON'S FAILURE TO QUOTE A FIRM PRICE EVEN THOUGH IT QUOTED AN ESCALATED PRICE WHICH WAS ALSO THE MAXIMUM ESCALATED PRICE WOULD, IN YOUR OPINION, RENDER ITS BID NONRESPONSIVE APPARENTLY BECAUSE IT WAS NOT FIRM.

WE FIND NO BASIS TO OBJECT TO THE AWARD OF ITEM 770-46 TO AFFRON. IT IS APPARENT THAT AFFRON'S ESCALATED PRICE AND MAXIMUM PRICE, BEING IDENTICAL, MUST BE CONSIDERED AS A FIRM BID ON THE ITEM. SINCE ITS PRICE WAS THE LOWEST RECEIVED FOR ITEM 770-46, WHETHER ESCALATED OR MAXIMUM, ITS ACCEPTANCE WORKED NO SUBSTANTIAL PREJUDICE TO OTHER BIDDERS EVEN THOUGH THE BID DEVIATED IN SOME RESPECTS FROM PARAGRAPH 24 ABOVE. IN THIS REGARD, WE HAVE HELD THAT AN AUTOMATIC REJECTION OF A BID BECAUSE OF A FAILURE TO CONFORM TO A PURELY TECHNICAL OR OVERLITERAL READING OF THE STATED REQUIREMENTS MAY BE AS ARBITRARY AS A WAIVER OF NONRESPONSIVENESS TO A MATERIAL AND SUBSTANTIAL REQUIREMENT. IF THE PURPOSE IS REASONABLY CLEAR AND APPEARS TO BE SUBSTANTIALLY MET BY THE BID, WE DO NOT BELIEVE THAT THE INTERESTS OF THE GOVERNMENT OR OF THE COMPETING BIDDERS REQUIRE THAT A BID BE REJECTED BECAUSE OF DEFICIENCIES OF FORM.

TURNING TO ITEM 3635-46, MID-VALLEY BID $0.1197 PER GALLON FIRM, AND AFFRON BID $0.1218 ESCALATED WITH A $0.1218 CEILING. HOWEVER, AFFRON SHOWED A PRICE OF $0.102 PER GALLON AS THE POSTED OR PUBLISHED PRICE BY WHICH ITS BID WAS TO FLUCTUATE. BUT THE SIGNIFICANCE OF THIS $0.102 PRICE WAS DISSIPATED, AS IN THE CASE OF ITEM 770-46, IN VIEW OF AFFRON'S $0.1218 CEILING PRICE WHICH WAS THE SAME AS ITS ESCALATED PRICE. AS STATED ABOVE, AFFRON'S $0.1218 CEILING PRICE COULD BE EVALUATED AGAINST ANY OTHER FIRM PRICE FOR THE ITEM SINCE FOR EVALUATION PURPOSES IT WAS FIRM. THE EVALUATION PROCEDURE EMPLOYED WHICH WAS AUTHORIZED BY THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) DEVIATION 57-108 FROM THE REQUIREMENTS IN ASPR 2-104.2 (IDENTICAL ESCALATION CEILING APPLICABLE TO ALL BIDDERS) WAS AS FOLLOWS: THE BUYER'S MARKET ANALYSIS INDICATED THAT THE PRICE OF ITEM 3635-46 WOULD REDUCE $0.005 DURING THE ORDERING PERIOD MAY 1 THROUGH OCTOBER 31, 1968, OR BE ON THE AVERAGE $0.0025 LOWER DURING THAT PERIOD. THEREFORE, AFFRON'S $0.1218 PRICE WAS EVALUATED BY DEDUCTING THEREFROM $0.0025 WHICH RESULTED IN AN EVALUATED BID PRICE OF $0.1193 PER GALLON OR LESS THAN THE FIRM BID PRICE OF MID-VALLEY. AWARD OF THIS ITEM WAS MADE TO AFFRON UNDER THE CITED ASPR DEVIATION. IN OUR OPINION, THIS PROCEDURE DID NOT RESULT IN THE EVALUATION OF THE BIDS ON A COMMON BASIS OR AS CONTEMPLATED BY THE INVITATION.

THE "BASIS" OF EVALUATION WHICH MUST BE MADE KNOWN IN ADVANCE TO THE BIDDERS SHOULD BE AS CLEAR, PRECISE AND EXACT AS POSSIBLE. IDEALLY, IT SHOULD BE CAPABLE OF BEING STATED AS A MATHEMATICAL EQUATION. IN MANY CASES, HOWEVER, THAT IS NOT POSSIBLE. AT THE MINIMUM, THE BASIS" MUST BE STATED WITH SUFFICIENT CLARITY AND EXACTNESS TO INFORM EACH BIDDER PRIOR TO BID OPENING, NO MATTER HOW VARIED THE ACCEPTABLE RESPONSES, OF OBJECTIVELY DETERMINABLE FACTORS FROM WHICH THE BIDDER MAY ESTIMATE WITHIN REASONABLE LIMITS THE EFFECT OF THE APPLICATION OF SUCH EVALUATION FACTOR ON HIS BID IN RELATION TO OTHER POSSIBLE BIDS. BY THE TERM "OBJECTIVELY DETERMINABLE FACTORS" WE MEAN FACTORS WHICH ARE MADE KNOWN TO OR WHICH CAN BE ASCERTAINED BY THE BIDDER AT THE TIME HIS BID IS BEING PREPARED. FACTORS WHICH ARE BASED ENTIRELY OR LARGELY ON A SUBJECTIVE DETERMINATION TO BE ANNOUNCED BY REPRESENTATIVES OF THE CONTRACTING AGENCY AT THE TIME OF OR SUBSEQUENT TO THE OPENING OF BIDS VIOLATE THE PRINCIPLE FOR THE REASON THAT THEY ARE NOT DETERMINABLE BY THE BIDDER AT THE TIME HIS BID IS BEING PREPARED. HOWEVER, IN VIEW OF THE PRACTICAL CONSIDERATIONS HERE INVOLVED, APPLICATION OF THESE PRINCIPLES TO THE INSTANT AWARDS WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT.

ALTHOUGH THE BID OF AFFRON UNDER THE INSTANT INVITATION WAS EVALUATED UNDER STANDARDS NOT CLEARLY PROVIDED FOR IN THE INVITATION AND ON BASES SOMEWHAT DIFFERENT FROM THOSE APPLIED TO OTHER BIDDERS, WE DO NOT BELIEVE THAT THE AWARDS UNDER THE INVITATION NEED BE DISTURBED AT THIS DATE. HOWEVER, WE ARE ADVISED THAT THE DEFENSE FUEL SUPPLY CENTER HAS BEEN INSTRUCTED TO DISCONTINUE THIS METHOD OF EVALUATION IN FORMALLY ADVERTISED PROCUREMENTS FOR FUEL OILS, AND WHEN IT IS ADMINISTRATIVELY DETERMINED THAT A REQUIREMENT FOR FIRM BIDS WILL UNNECESSARILY RESTRICT COMPETITION OR UNREASONABLY INCREASE BID PRICES, AN ESCALATION CLAUSE WILL BE USED WHICH WILL PROVIDE AN ESCALATION CEILING IDENTICAL FOR ALL BIDDERS AND THE BIDS WILL BE EVALUATED AS PROVIDED IN ASPR 2-201 (A) (XXI).

WITH REFERENCE TO THE REQUIREMENT IN PARAGRAPH 24 FOR THE FURNISHING OF SEPARATE PRICE DATA CARDS FOR EACH ESCALATED AND FIRM PRICE OFFERED, WE FEEL THAT THIS RELATES TO A MATTER OF FORM AND ADMINISTRATIVE CONVENIENCE WHICH UNDER ASPR 2-405 MAY BE WAIVED IN THE CASE OFA BIDDER WHO FAILS TO SUBMIT SEPARATE DATA CARDS.