B-164384, APRIL 23, 1969, 48 COMP. GEN. 685

B-164384, APRIL 23, 1969, 48 COMP. GEN. 685

CONTRACTS--SPECIFICATIONS--FURNISHING MORE THAN CONTRACT REQUIREMENTS UNDER A FEDERAL SUPPLY SCHEDULE CONTRACT FOR ONE-SPEED RECORDERS AWARDED PURSUANT TO AN INVITATION SOLICITING BIDS ON FOUR SPEED CLASSES, THE APPROVAL AS ACCEPTABLE OF A TWO-SPEED RECORDER PREPRODUCTION SAMPLE, THE DELIVERY OF THE SUPERIOR TWO-SPEED EQUIPMENT AT NO ADDITIONAL COST TO THE GOVERNMENT, AND A SUBSEQUENT PRICE REDUCTION UNDER THE TERMS OF THE CONTRACT TO MATCH THE PRICE OF THE SUCCESSFUL BIDDER ON TWO-SPEED RECORDERS IS NOT LEGALLY OBJECTIONABLE. EVEN THOUGH THE TWO-SPEED EQUIPMENT IS SUPERIOR TO THE ONE-SPEED RECORDER, IF THE BIDDER HAD INDICATED INTENT TO SUPPLY TWO-SPEED EQUIPMENT FOR THE ONE-SPEED EQUIPMENT BID ON, IT WOULD NOT HAVE BEEN ENTITLED TO AN AWARD AT A BID PRICE HIGHER THAN THAT OFFERED BY THE TWO SPEED EQUIPMENT BIDDER, AND IT IS BY VIRTUE OF THE INVITATION AND AWARD THAT THE BIDDER MAY BE CONSIDERED A CONTRACTOR FOR TWO-SPEED EQUIPMENT.

TO HEDRICK AND LANE, APRIL 23, 1969:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 5, 1968, PROTESTING ON BEHALF OF FIDELITY SOUND COMPANY, INC; THAT THE 3M COMPANY IS BEING PERMITTED TO FURNISH TWO-SPEED PORTABLE TAPE RECORDERS UNDER A FEDERAL SUPPLY SCHEDULE CONTRACT WHEN ITS BID UNDER GENERAL SERVICES ADMINISTRATION (GSA) INVITATION FPNHO-K-27628-A-5-10-68, UPON WHICH THE CONTRACT IS BASED, WAS FOR ONE-SPEED PORTABLE TAPE RECORDERS.

THE INVITATION SOLICITED BIDS FOR FURNISHING INTERCOMMUNICATION SETS AND SOUND RECORDING AND REPRODUCING EQUIPMENT FOR THE PERIOD JULY 1, 1968, THROUGH JUNE 30, 1969. AMONG THE ITEMS UPON WHICH BIDS WERE SOLICITED WERE SEMIPROFESSIONAL, GRADE "B," DUAL TRACK, PORTABLE TAPE RECORDERS IN ACCORDANCE WITH INTERIM FEDERAL SPECIFICATION W-R 00168AGSA-FSS) OF DECEMBER 12, 1966, AND INTERIM AMENDMENT NO. 2 OF MARCH 29, 1968. PARAGRAPH 1.2.1 OF THE INTERIM SPECIFICATION PROVIDES THAT THE EQUIPMENT FURNISHED UNDER THE SPECIFICATION SHALL BE OF THE FOLLOWING CLASSES:

CLASS 1--- SINGLE SPEED

CLASS 2--- DUAL SPEED

CLASS 3--- THREE SPEED

CLASS 4--- FOUR SPEED PARAGRAPH 3.7.3 OF THE SPECIFICATION STATES: TAPE SPEEDS. UNLESS OTHERWISE SPECIFIED (SEE 6.1) TAPE SPEEDS SHALL BE AS FOLLOWS:

GRADE B

CLASS 1--- 7-1/2

CLASS 2--- 3-3/4, 7-1/2

CLASS 3--- 1-7/8, 3-3/4, 7-1/2

CLASS 4--- 15/16, 1-7/8, 3-3/4, 7-1/2. PARAGRAPH 6.1 (F) PROVIDES THAT TAPE SPEED OR SPEEDS DIFFERENT FROM THOSE SET OUT IN 3.7.3 MAY BE SPECIFIED BY THE GOVERNMENT.

THE INVITATION SOLICITED BIDS ON EACH OF THE FOUR CLASSES OF TAPE RECORDERS LISTED IN THE SPECIFICATION. THE INVITATION SPECIFIED THE SPEEDS PROVIDED IN THE SPECIFICATION FOR EACH CLASS.

THE 3M COMPANY BID THE SAME PRICE ON CLASS 1 AND CLASS 2 EQUIPMENT, BUT DID NOT BID ON CLASS 3 AND CLASS 4 EQUIPMENT. THE PRICE WAS $144 PER UNIT FOR DELIVERY IN THE 48 CONTIGUOUS STATES AND THE DISTRICT OF COLUMBIA AND $145.44 PER UNIT FOR DELIVERY TO ALASKA, HAWAII AND PUERTO RICO. THE 3M COMPANY STATED NO EXCEPTION IN ITS BID TO THE INVITATION REQUIREMENTS.

FIDELITY SOUND COMPANY, INC; BID ON CLASS 2 AND CLASS 3 EQUIPMENT. THE RESPECTIVE PRICES WERE $118.25 AND $118.95 PER UNIT DELIVERED TO ANY OF THE PLACES SPECIFIED IN THE INVITATION. FIDELITY SOUND DID NOT BID ON CLASS 1 AND CLASS 4 EQUIPMENT.

ON JUNE 19, 1968, A CONTRACT WAS AWARDED TO THE 3M COMPANY FOR CLASS 1 EQUIPMENT AND TO FIDELITY SOUND FOR CLASS 2 AND CLASS 3 EQUIPMENT. THE AWARD NOTICES PROVIDED, AS REQUIRED IN THE INVITATION FOR BIDS, THAT THE CONTRACTORS FURNISH PREPRODUCTION SAMPLES FOR INSPECTION AND DETERMINATION AS TO COMPLIANCE WITH THE SPECIFICATIONS. THE 3M COMPANY FURNISHED A PREPRODUCTION SAMPLE OF A TWO-SPEED TAPE RECORDER WHICH WAS APPROVED. THEREAFTER, IT DELIVERED TWO-SPEED EQUIPMENT UNDER ITS CONTRACT FOR CLASS 1 EQUIPMENT.

IN SEPTEMBER 1968, AFTER LEARNING THAT THE 3M COMPANY WAS FURNISHING TWO- SPEED EQUIPMENT IN LIEU OF ONE-SPEED EQUIPMENT, YOU PROTESTED THAT THE AWARD SHOULD NOT HAVE BEEN MADE TO THAT COMPANY. YOU STATED THAT THE AWARD WAS DESTRUCTIVE OF THE COMPETITIVE PROCESS IN THAT THE INVITATION SOLICITED BIDS FOR FOUR DIFFERENT RECORDERS AND FIDELITY WAS LED INTO NOT BIDDING FOR CLASS 1 EQUIPMENT ON THE ASSUMPTION THAT ONLY A SINGLE-SPEED MACHINE COULD MEET THAT REQUIREMENT. YOU STATED FURTHER THAT THE 3M COMPANY BID UNDER CLASS 1 OF A MACHINE MEETING THE REQUIREMENTS OF ANOTHER CLASS WAS NONRESPONSIVE AND THAT THE AWARD TO IT WAS THEREFORE ILLEGAL.

GSA REPORTED ON THE PROTEST IN A LETTER OF MARCH 14, 1969. GSA STATED THAT THE INVITATION REQUIREMENT FOR A SINGLE-SPEED MACHINE WAS A MINIMUM REQUIREMENT THAT COULD BE EXCEEDED BY MULTIPLE-SPEED MACHINES. IN THAT CONNECTION, GSA REFERS TO OUR DECISIONS IN 38 COMP. GEN. 830 AND B-155733, JANUARY 4, 1965, WHICH HELD THAT A BIDDER IS NOT PRECLUDED FROM OFFERING A PRODUCT SUPERIOR TO SPECIFICATION REQUIREMENTS. GSA RECOGNIZED THAT THE INVITATION WAS SILENT IN THIS RESPECT AND STATES THAT THIS WILL BE CLARIFIED IN FUTURE INVITATIONS. IT IS POINTED OUT THAT IT IS UNLIKELY THAT FIDELITY SOUND WAS NOT AWARE THAT IT COULD FURNISH MORE SPEEDS THAN WERE CALLED FOR BY THE SPECIFICATION SINCE IT HAS CONSTRUED A SIMILAR SPECIFICATION IN THE SAME MANNER AS THE 3M COMPANY IN THAT, UNDER A PREVIOUS CONTRACT AND THE IMMEDIATE CONTRACT, IT HAS FURNISHED THREE-SPEED EQUIPMENT FOR FEDERAL STOCK NO. 5835-895-1875 EQUIPMENT THAT IS DESCRIBED AS TWO SPEED EQUIPMENT. FURTHER, GSA STATED THAT THE 3M COMPANY BID WAS RESPONSIVE SINCE IT STATED NO EXCEPTIONS TO THE INVITATION. HOWEVER, GSA HAS INDICATED THAT AFTER THE SITUATION CAME TO ITS ATTENTION, IT REALIZED THAT A SAVINGS COULD ACCRUE TO THE GOVERNMENT BY PURCHASING FIDELITY SOUND EQUIPMENT INSTEAD OF THE 3M COMPANY EQUIPMENT. THEREFORE, ON DECEMBER 26, 1968, IT ISSUED A NOTICE POINTING OUT SUCH FACT TO ORDERING OFFICES. ALSO, IT REQUESTED THE 3M COMPANY TO MODIFY THE EQUIPMENT TO OPERATE AT ONE SPEED. THE 3M COMPANY DECLINED TO DO THIS AND HAS PROPOSED TO MATCH THE FIDELITY SOUND PRICE BY FURNISHING CLASS 2 EQUIPMENT AT $118.25 PER UNIT. GSA PROPOSES TO ACCEPT THE OFFER.

IN B-160318, FEBRUARY 16, 1967, IT WAS STATED:

THE TEST TO BE APPLIED IN DETERMINING THE RESPONSIVENESS OF A BID IS WHETHER THE BID AS SUBMITTED IS AN OFFER TO PERFORM, WITHOUT EXCEPTION, THE EXACT THING CALLED FOR IN THE INVITATION, AND UPON ACCEPTANCE WILL BIND THE CONTRACTOR TO PERFORM IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS THEREOF. UNLESS SOMETHING ON THE FACE OF THE BID, OR SPECIFICALLY A PART THEREOF, EITHER LIMITS, REDUCES OR MODIFIES THE OBLIGATION OF THE PROSPECTIVE CONTRACTOR TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE INVITATION, IT IS RESPONSIVE. * * * AS NOTED ABOVE, THE 3M COMPANY BID DID NOT VARY FROM THE TERMS OF THE INVITATION. IT WAS, THEREFORE, RESPONSIVE AND UPON ACCEPTANCE CONSUMMATED A VALID CONTRACT.

UNDER THE CONTRACT, THE 3M COMPANY WAS REQUIRED TO FURNISH A PREPRODUCTION SAMPLE FOR GOVERNMENT APPROVAL. THE COMPANY FURNISHED A TWO -SPEED MACHINE WHICH WAS APPROVED AS ACCEPTABLE SINCE IT EXCEEDED THE SPECIFICATION REQUIREMENT FOR ONE SPEED. THE TWO-SPEED EQUIPMENT APPARENTLY COULD DO EVERYTHING THE ONE-SPEED EQUIPMENT WAS REQUIRED TO DO AND MORE--- IT COULD OPERATE AT AN ADDITIONAL SPEED. IF A CONTRACTOR CHOOSES TO FURNISH SUPERIOR EQUIPMENT AT NO ADDITIONAL CHARGE TO THE GOVERNMENT AND IT IS DETERMINED TO BE ACCEPTABLE, IT IS CERTAINLY IN THE GOVERNMENT'S INTEREST TO ACCEPT IT. THEREFORE, IT WAS NOT OBJECTIONABLE FROM A LEGAL STANDPOINT TO PERMIT THE 3M COMPANY TO FURNISH TWO-SPEED EQUIPMENT IN LIEU OF ONE-SPEED EQUIPMENT AT ITS BID PRICE FOR CLASS 1 EQUIPMENT. SINCE FIDELITY SOUND TWO-SPEED EQUIPMENT COULD BE OBTAINED AT A LOWER PRICE THAN THE 3M COMPANY EQUIPMENT, IT WOULD NOT BE PRACTICAL TO ORDER SUCH EQUIPMENT FROM THE 3M COMPANY. HOWEVER, AS INDICATED ABOVE, THE 3M COMPANY HAS NOW OFFERED TO MEET THE FIDELITY SOUND PRICE FOR TWO- SPEED MACHINES.

ARTICLE 34, THE PRICE REDUCTION CLAUSE OF THE SUPPLEMENTAL PROVISIONS OF THE CONTRACT, GSA FORM 1424, PROVIDES AS FOLLOWS:

* * * (A) IF AT ANY TIME AFTER THE DATE OF THE BID OR OFFER THE CONTRACTOR MAKES A GENERAL PRICE REDUCTION IN THE COMPARABLE PRICE OF ANY ARTICLE OR SERVICE COVERED BY THE CONTRACT TO CUSTOMERS GENERALLY, AN EQUIVALENT PRICE REDUCTION BASED ON SIMILAR QUANTITIES AND/OR CONSIDERATIONS SHALL APPLY TO THE CONTRACT FOR THE DURATION OF THE CONTRACT PERIOD (OR UNTIL THE PRICE IS FURTHER REDUCED). SUCH PRICE REDUCTION SHALL BE EFFECTIVE AT THE SAME TIME AND IN THE SAME MANNER AS THE REDUCTION IN THE PRICE TO CUSTOMERS GENERALLY. FOR PURPOSE OF THIS PROVISION, A "GENERAL PRICE REDUCTION" SHALL MEAN ANY HORIZONTAL REDUCTION IN THE PRICE OF AN ARTICLE OR SERVICE OFFERED (1) TO CONTRACTOR'S CUSTOMERS GENERALLY, OR (2) IN THE CONTRACTOR'S PRICE SCHEDULE FOR THE CLASS OF CUSTOMERS; I.E; WHOLESALERS, JOBBERS, RETAILERS, ETC; WHICH WAS USED AS THE BASIS FOR BIDDING ON THIS CONTRACT. (FOR PURPOSES OF DETERMINING A "GENERAL PRICE REDUCTION" UNDER THIS CLAUSE, SALES TO STATES, INCLUDING THE DISTRICT OF COLUMBIA, AND OTHER POLITICAL SUBDIVISIONS BY A CONTRACTOR, OR REDUCTIONS IN PRICE SCHEDULES OF THE CONTRACTOR TO SUCH AGENCIES, SHALL HAVE NO APPLICATION.) AN OCCASIONAL SALE AT A LOWER PRICE, OR SALE OF DISTRESSED MERCHANDISE AT A LOWER PRICE, WOULD NOT BE CONSIDERED A "GENERAL PRICE REDUCTION" UNDER THIS PROVISION. THE CONTRACTOR SHALL INVOICE THE ORDERING OFFICES AT SUCH REDUCED PRICES INDICATING ON THE INVOICE THAT THE REDUCTION IS PURSUANT TO THE "PRICE REDUCTION" ARTICLE OF THE CONTRACT PROVISIONS. THE CONTRACTOR, IN ADDITION, SHALL WITHIN 10 DAYS OF ANY GENERAL PRICE REDUCTION NOTIFY THE GENERAL SERVICES ADMINISTRATION'S CONTRACTING OFFICER OF SUCH REDUCTION BY LETTER. FAILURE TO DO SO MAY REQUIRE TERMINATION OF THE CONTRACT, AS PROVIDED IN THE "DEFAULT" CLAUSE OF THE GENERAL PROVISIONS. UPON RECEIPT OF ANY SUCH NOTICE OF A GENERAL PRICE REDUCTION ALL ORDERING OFFICES WILL BE DULY NOTIFIED BY THE CONTRACTING OFFICER.

IN B-148873, AUGUST 10, 1962, A SIMILAR CLAUSE WAS CONSIDERED. OUR OFFICE STATED:

EACH FEDERAL SUPPLY SCHEDULE CONTRACT CONTAINS AN APPROPRIATE PRICE REDUCTION CLAUSE, SUCH AS IS HERE INVOLVED, WHICH REQUIRES A REDUCTION IN THE CONTRACT PRICE UNDER THE CIRCUMSTANCES LISTED IN THE CLAUSE. THE PURPOSE OF THIS CLAUSE IS TO ASSURE THAT THE GOVERNMENT RECEIVES THE BENEFIT OF ANY GENERAL PRICE REDUCTION THAT MAY OCCUR DURING THE CONTRACT PERIOD. ALSO, THE CONTRACTOR MAY MAKE VOLUNTARY PRICE REDUCTIONS AT ANY TIME AND SUCH REDUCTIONS, IN THE CASE OF MULTIPLE AWARDS, MAY IMPROVE THE COMPETITIVE POSITION OF THE CONTRACTOR. * * *

* * * THE FACT THAT THE REDUCTION IN CONTRACT PRICES MAY OPERATE TO THE ADVANTAGE OF ONE CONTRACTOR SHOULD NOT BE CONSIDERED A SUFFICIENT REASON FOR REFUSING TO CONSIDER THE APPLICABILITY OF THESE PROVISIONS. * * *

ALTHOUGH THE FOREGOING HOLDING WAS STATED WITH REGARD TO MULTIPLE AWARDS FOR THE SAME ITEM, WE BELIEVE THAT IT HAS EQUAL APPLICATION TO THE IMMEDIATE SITUATION. UNDER THE CONTRACT CLAUSE, A CONTRACTOR IS ENTITLED TO REDUCE ITS PRICE FOR ANY ARTICLE COVERED BY THE CONTRACT.

THE 3M COMPANY HAS A VALID CONTRACT AND THE PRICE REDUCTION TENDERED BY THE COMPANY IS WITHIN THE CONTEMPLATION OF THAT CONTRACT. ACCEPTANCE OF THE PRICE REDUCTION WOULD BE PROPER IN THE CIRCUMSTANCES. IN NOTIFYING ORDERING OFFICERS OF THE PRICE REDUCTION, GSA SHOULD ADVISE THEM THAT THE EQUIPMENT BEING OFFERED BY THE 3M COMPANY IS TWO-SPEED EQUIPMENT AS IS THE FIDELITY SOUND EQUIPMENT IN ORDER THAT THE ORDERING OFFICES MAY BE AWARE OF THE ACTUAL CIRCUMSTANCES IN MAKING A SELECTION OF EQUIPMENT. WE HAVE SO RECOMMENDED TO GSA TODAY.

IF THE 3M COMPANY HAD INDICATED IN ITS BID THAT IT INTENDED TO SUPPLY TWO -SPEED EQUIPMENT FOR ONE-SPEED EQUIPMENT, IT WOULD NOT HAVE BEEN ENTITLED TO AN AWARD EVEN THOUGH THE TWO-SPEED EQUIPMENT IS SUPERIOR TO ONE-SPEED EQUIPMENT SINCE ITS BID PRICE WAS HIGHER THAN THAT OFFERED BY FIDELITY SOUND FOR SIMILAR EQUIPMENT. HOWEVER, IT IS BY VIRTUE OF THE INVITATION ITSELF AND THE AWARD THEREUNDER THAT THE 3M COMPANY MAY BE CONSIDERED AS A CONTRACTOR FOR TWO-SPEED EQUIPMENT.