B-164429, AUG. 21, 1968

B-164429: Aug 21, 1968

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TO AIRWAYS RENT-A-CAR: REFERENCE IS MADE TO YOUR TELEGRAM OF MAY 24 AND LETTER OF JUNE 3. METHOD OF AWARD: AWARDS WILL BE MADE ON THE BASIS OF THE LOWEST AGGREGATE BID FOR EACH SERVICE AREA AND FOR ALL RENTAL PERIODS SPECIFIED. THE LOW AGGREGATE BIDDER WILL BE DETERMINED BY MULTIPLYING THE UNIT PRICE BID BY RENTAL WEIGHT FACTOR. SINCE YOUR RENTAL PERIOD PRICES WERE SO SIGNIFICANTLY LOWER THAN CORRESPONDING BIDS RECEIVED FOR THE BURBANK AND LOS ANGELES AREAS. YOU WERE REQUESTED BY THE CONTRACTING OFFICER TO VERIFY YOUR BID. MY LOGIC ON THE BID WAS TO DETERMINE THE LOWEST FIXED COST POSSIBLE FOR OWNING THE VEHICLE. MAINTENANCE IS DIRECTLY RELATED TO THE MILEAGE DRIVEN. THE OBVIOUS ANSWER TO THIS LOGIC IS TO HAVE A LOW FIXED COST AND CHARGE FOR THE NON-FIXED ITEMS WITHIN THE MILEAGE RATE.

B-164429, AUG. 21, 1968

TO AIRWAYS RENT-A-CAR:

REFERENCE IS MADE TO YOUR TELEGRAM OF MAY 24 AND LETTER OF JUNE 3, 1968, PROTESTING THE CANCELLATION OF INVITATION FOR BIDS SFA-FSS-45-68 AND THE SUBSEQUENT READVERTISEMENT OF THE PROCUREMENT BY THE GENERAL SERVICES ADMINISTRATION, REGION 9.

THE INVITATION, ISSUED MARCH 29, 1968, SOLICITED BIDS FOR CAR AND TRUCK RENTALS FOR DESIGNATED SERVICE AREAS IN CALIFORNIA, NEVADA AND HAWAII, FROM AUGUST 1, 1968, THROUGH JULY 31, 1969. PARAGRAPH 6 OF THE "SPECIAL PROVISIONS" OF THE INVITATION ADVISED PROSPECTIVE BIDDERS THAT BIDS SUBMITTED IN RESPONSE TO THE INVITATION WOULD BE EVALUATED FOR AWARD IN THE FOLLOWING MANNER:

"6. METHOD OF AWARD: AWARDS WILL BE MADE ON THE BASIS OF THE LOWEST AGGREGATE BID FOR EACH SERVICE AREA AND FOR ALL RENTAL PERIODS SPECIFIED, (I.E., HOURLY, 12-HOUR, 24-HOUR, 5 AND 7-DAY WEEKS, AND 30 DAY MONTH) FOR EACH OF THE FOLLOWING GROUPS:

GROUP I SEDANS

GROUP II STATION WAGONS

GROUP III TRUCKS TO RECEIVE CONSIDERATION, BIDDER MUST BID ON ALL RENTAL PERIODS AND A RATE OR RATES PER MILE FOR EACH TYPE OF VEHICLE UNDER ANY ONE GROUP. THE LOW AGGREGATE BIDDER WILL BE DETERMINED BY MULTIPLYING THE UNIT PRICE BID BY RENTAL WEIGHT FACTOR; MULTIPLYING RATE PER MILE BID BY MILEAGE COST FACTOR AND ADDING THE RESULTANT EXTENSIONS. TO OBTAIN TOTAL AGGREGATE BID, ADD TOTAL COST SUM FOR EACH TYPE OF VEHICLE LISTED UNDER ANY ONE GROUP.

"WEIGHT FACTORS FOR ALL GROUPS RENTAL PERIOD RENTAL WEIGHT MILEAGE COST

FACTOR WEIGHT FACTOR A. PER HOUR 7 4 B. PER 12-HOUR DAY 10 60 C. PER 24- HOUR DAY 68 400 D. PER 5-DAY WEEK 6 180 E. PER 7-DAY WEEK 8 340 F. PER 30- DAY MONTH 1

180"

AT THE BID OPENING ON APRIL 19, 1968, IT APPEARED THAT AIRWAYS HAD SUBMITTED THE LOWEST PRICES FOR THE BURBANK AND LOS ANGELES SERVICE AREAS. SINCE YOUR RENTAL PERIOD PRICES WERE SO SIGNIFICANTLY LOWER THAN CORRESPONDING BIDS RECEIVED FOR THE BURBANK AND LOS ANGELES AREAS, YOU WERE REQUESTED BY THE CONTRACTING OFFICER TO VERIFY YOUR BID. BY LETTER OF MAY 1, 1968, YOU ADVISED: "I WOULD LIKE TO ANSWER YOUR LETTER DATED APRIL 29, 1968, AND CONFIRM OUR TELEPHONE CONVERSATION OF APRIL 30, 1968, RELATIVE TO OUR BID ON THE AUTO AND TRUCK RENTAL CONTRACT REFERENCED ABOVE. "AFTER CAREFUL STUDY OF THE REQUIREMENTS OF THE INVITATION, I FELT THAT THE RATE FORMULA THAT I SUBMITTED BEST SERVED THE INTERESTS OF THE GOVERNMENT AND OUR COMPANY. MY LOGIC ON THE BID WAS TO DETERMINE THE LOWEST FIXED COST POSSIBLE FOR OWNING THE VEHICLE. I FEEL THAT THE COST OF INSURANCE, GASOLINE, AND MAINTENANCE IS DIRECTLY RELATED TO THE MILEAGE DRIVEN. THE OBVIOUS ANSWER TO THIS LOGIC IS TO HAVE A LOW FIXED COST AND CHARGE FOR THE NON-FIXED ITEMS WITHIN THE MILEAGE RATE. THIS IS THE CONCEPT OF OUR BID. "I WISH TO CONFIRM MY BID AS SUBMITTED AND ADVISE YOU THAT I UNDERSTAND MY COMPANY'S OBLIGATION TO PROVIDE THE SERVICE AS STATED IN THE BID, FOR THE ENTIRE CONTRACT PERIOD.'

FOLLOWING THE CONFIRMATION OF THE BID, A FURTHER EVALUATION OF YOUR BID REVEALED THAT AIRWAYS HAD OFFERED AN UNUSUALLY LOW RENTAL RATE AND AN EXTREMELY HIGH MILEAGE RATE, WHEN COMPARED WITH OTHER BIDS, WITH USUAL COMMERCIAL RATES, AND WITH THE CURRENT CONTRACT FOR THE LOS ANGELES SERVICE AREA. FOR EXAMPLE, THE BID PRICES SUBMITTED BY AIRWAYS WITH RESPECT TO GROUP I (SEDANS), AND THE CURRENT CONTRACT RATES, IN THAT AREA FOR SEDANS, WERE AS FOLLOWS:

BID SUBMITTED BY AIRWAYS CURRENT CONTRACT

ON GROUP I (SEDANS -- TYPE I) FOR LOS ANGELES AREA RENTAL PERIOD RENTAL RATE MILEAGE RATE RENTAL RATE MILEAGE RATE PER HOUR $ 0.25 .21 $ 1.50

.03 PER 12-HOUR DAY0.50 .21 5.00 .03 PER 24-HOUR DAY 0.50

.21 9.50 .03 PER 5-DAY WEEK 2.50 .21 44.00

.03 PER 7-DAY WEEK 3.50 .21 44.00 .03 PER 30-DAY MONTH 15.00

.21 132.00 .03 A SIMILAR DISPARITY EXISTED BETWEEN AIRWAYS' BID ON THE OTHER GROUPS (II AND III) IN THE LOS ANGELES SERVICE AREA AND CURRENT CONTRACT PRICES ON THOSE GROUPS.

SINCE IT BECAME APPARENT THAT THE PRICING PATTERNS WERE THE RESULT OF SOME UNUSUAL SITUATION, THE REGIONAL OFFICE CONDUCTED A REVIEW OF THE WEIGHT FACTORS UTILIZED IN THE INVITATION FOR THE PURPOSE OF ASCERTAINING WHETHER THEY WERE REASONABLY ACCURATE AND REFLECTED ANTICIPATED REQUIREMENTS DURING THE PERIOD TO BE COVERED BY THE CONTRACTS. THAT REVIEW REVEALED THAT THE WEIGHTS ACTUALLY USED IN THE INVITATION WERE COMPLETELY UNREALISTIC. IN PARTICULAR, IT REVEALED THAT THE MILEAGE WEIGHT FACTORS USED IN THE PROCUREMENT WERE FAR LOWER, IN RELATIONSHIP TO THE RENTAL WEIGHT FACTORS, THAN THEY SHOULD HAVE BEEN. CORRECTED WEIGHT FACTORS BASED UPON THE LOS ANGELES STUDY SHOULD HAVE BEEN AS FOLLOWS: RENTAL PERIOD RENTAL WEIGHT FACTOR MILEAGE WEIGHT FACTOR PER HOUR 92 544 PER 12-HOUR DAY

247 9,063 PER 24-HOUR DAY 848 138,076 PER 5-DAY WEEK 51 14,076 PER 7 DAY WEEK 169

76,275 PER 30-DAY MONTH 11 16,800

WE ARE ADVISED THAT THIS DISTORTION OF THE WEIGHTS PERMITTED AIRWAYS TO OFFER LOW PRICES ON THE FIXED RENTAL RATES, WHICH CARRIED HIGHER WEIGHTS, AND HIGH PRICES ON THE MILEAGE RATES WHICH CARRIED FAR LOWER WEIGHTS THAN WERE APPROPRIATE. IN THIS PARTICULAR INSTANCE, AIRWAYS' BID, WHEN EVALUATED, WAS VERY SUBSTANTIALLY LOWER THAN THE NEST LOW BIDDER. BASED ON ACTUAL RENTALS AND MILEAGE DRIVEN UNDER THE CURRENT CONTRACT, RENTALS IN THE LOS ANGELES AREA FOR THE REPRESENTATIVE MONTH COST THE GOVERNMENT $28,228.52. THAT COST COMPUTED ON THE BASIS OF AIRWAYS' BID WOULD HAVE BEEN $55,127.14, OR ALMOST TWICE AS MUCH. USAGE IN THE BURBANK SERVICE AREA IS BUT A SMALL FRACTION OF THAT IN THE LOS ANGELES AREA. THE GREATEST USAGE IN THE FORMER AREA UNDER THE CURRENT CONTRACT WAS DURING DECEMBER 1967, WHEN COSTS TOTALED $375.93. THE SAME USAGE BASED ON AIRWAYS' BID UNDER THE INVITATION WOULD HAVE AGGREGATED $547.31, OR 31 PERCENT MORE.

ON THE BASIS THAT THE METHOD OF AWARD CLAUSE OF THE INVITATION FOR BIDS PRESCRIBED A MISLEADING BID EVALUATION PROCEDURE; THAT AIRWAYS HAD UNBALANCED ITS BID TO TAKE ADVANTAGE OF THE FAULTY WEIGHT FACTORS TO THE DETRIMENT OF THE GOVERNMENT AND OTHER BIDDERS; AND THAT THE ESTIMATED COST TO THE GOVERNMENT OF ANY AWARD TO AIRWAYS UNDER THE INVITATION WOULD HAVE BEEN EXCESSIVE, THE INVITATION WAS CANCELED. WE ARE ADVISED THAT THE PROCUREMENT WAS SUBSEQUENTLY READVERTISED ON MAY 29, 1968, UNDER INVITATION FOR BIDS SFA-FSS-45A-68 WHICH CONTAINED REVISED BIDDING AND EVALUATION PROCEDURES DESIGNED TO CORRECT THE DEFICIENCIES IN THE CANCELED INVITATION. THE NEW INVITATION PROVIDED THAT AWARDS WOULD BE MADE ON THE BASIS OF THE BEST SINGLE DISCOUNTT OFFERED FROM THE PRICING SCHEDULE SET FORTH THEREIN FOR EACH SERVICE AREA AND FOR ALL OF THE SPECIFIED RENTAL PERIODS. THEREAFTER, ON JULY 24, 1968, AIRWAYS WAS AWARDED A PORTION OF THE PROCUREMENT AS READVERTISED.

YOU CONTEND THAT EVEN THOUGH THE GOVERNMENT HAD THE LEGAL RIGHT UNDER THE TERMS OF THE INVITATION TO REJECT ALL BIDS, THE DETERMINATION IN THIS INSTANCE WAS ARBITRARY AND CAPRICIOUS, AND NOT IN THE BEST INTERESTS OF THE GOVERNMENT. SPECIFICALLY, YOU OBJECT TO THE ADMINISTRATIVE DETERMINATION THAT THE EVALUATION FORMULA PROVIDED IN THE ORIGINAL INVITATION WAS IMPROPER, SINCE THE SOLE PURPOSE OF THAT FORMULA WAS TO ARRIVE AT AGGREGATE BID PRICES FOR PURPOSES OF AWARD, WHICH PRICES NEED HAVE NO RELATION TO THE ESTIMATED COSTS OF CONTRACT PERFORMANCE. MOREOVER, YOU STATE THAT YOU SUSPECT SOME IRREGULARITY IN THE CANCELLATION OF THE ORIGINAL INVITATION SINCE THE SECOND HIGH BIDDER HAS BEEN THE CONTRACTOR FOR THE PAST 4 YEARS, AND BECAUSE THE DETERMINATION TO READVERTISE WILL PLACE THE STARTUP DATE OF CONTRACT PERFORMANCE BEYOND THE TIME CARS MUST BE ORDERED FROM THE MANUFACTURERS. HENCE, YOU CONCLUDE THAT THE CURRENT CONTRACTOR WAS GIVEN AN UNFAIR ADVANTAGE OVER OTHER BIDDERS SINCE THAT CONTRACTOR ALREADY HAS THE NECESSARY EQUIPMENT.

THE PRIMARY PURPOSE OF THE PROVISIONS OF 41 U.S.C. 253 -- THE STATUTORY AUTHORITY GOVERNING PROCUREMENT BY FORMAL ADVERTISING BY THE NONMILITARY AGENCIES OF THE GOVERNMENT -- IS TO GIVE ALL BIDDERS AN EQUAL OPPORTUNITY TO COMPETE FOR GOVERNMENT BUSINESS AND TO SECURE TO THE UNITED STATES THE BENEFIT OF FREE AND OPEN COMPETITION. REJECTION OF ALL BIDS IS PERMITTED BY 41 U.S.C. 253 (B) WHERE IT IS DETERMINED THAT REJECTION IS IN THE PUBLIC INTEREST. ALSO, SECTION 1-2.404-1 (B) OF THE FEDERAL PROCUREMENT REGULATIONS, IMPLEMENTING THE ADVERTISING STATUTE, PERMITS CANCELLATION OF AN INVITATION AFTER OPENING WHERE IT "IS IN THE BEST INTEREST OF THE GOVERNMENT.' FURTHER, THE RIGHT TO REJECT ALL BIDS WAS SPECIFICALLY RESERVED TO THE GOVERNMENT IN PARAGRAPH 10 (B) OF THE INVITATION INSTRUCTIONS AND CONDITIONS.

OUR OFFICE HAS CONSISTENTLY HELD THAT, WHILE THE INTEREST OF THE GOVERNMENT AND THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM REQUIRE THAT INVITATIONS BE CANCELED ONLY FOR THE MOST COGENT AND COMPELLING REASONS, THERE NECESSARILY IS RESERVED IN THE CONTRACTING OFFICIALS A SUBSTANTIAL AMOUNT OF DISCRETION IN DETERMINING WHETHER OR NOT AN INVITATION SHOULD BE CANCELED. OUR OFFICE, THEREFORE, WILL NOT OBJECT TO THE CANCELLATION OF AN INVITATION UNLESS THERE HAS BEEN A CLEAR SHOWING OF ABUSE OF ADMINISTRATIVE DISCRETION.

WE MUST CONCLUDE THAT THERE HAS BEEN NO SUCH ABUSE OF DISCRETION HERE. THE PROCURING AGENCY DETERMINED AFTER BID OPENING THAT THE ASSIGNED WEIGHT FACTORS IN THE BID EVALUATION FORMULA PROVIDED IN THE CANCELED INVITATION FAILED TO ACCURATELY REFLECT THE REQUIREMENTS OF THE PROCUREMENT WHEN APPLIED TO YOUR BID. WHILE AIRWAYS' BID WAS LOW UNDER THE INITIAL EVALUATION, ANY AWARD TO YOUR FIRM WOULD HAVE RESULTED IN SUBSTANTIALLY HIGHER CONTRACT COSTS THAN HAD AN AWARD BEEN MADE TO THE SECOND LOW BIDDER. IN THIS RESPECT, YOUR ATTENTION IS INVITED TO OUR DECISION B- 159684, OCTOBER 7, 1966, INVOLVING A SOMEWHAT ANALOGOUS SITUATION, WHEREIN WE CONCLUDED THAT AN INVITATION FOR BIDS WAS PROPERLY CANCELED, AFTER BID OPENING, IN ORDER TO PROTECT THE GOVERNMENT FROM THE CONSEQUENCES OF AN UNWISE CONTRACT SINCE THE APPARENT LOW BID WAS NOT IN FACT LOW EHEN MEASURED BY THE ACTUAL REQUIREMENTS OF THE CONTEMPLATED PROCUREMENT. SEE, ALSO, 39 COMP. GEN. 86, 88.

WITH REFERENCE TO YOUR STATEMENT THAT THE BID EVALUATION FORMULA NEED BEAR NO RELATION TO THE CONTEMPLATED COSTS OF THE PROCUREMENT, WE MUST OBSERVE THAT YOU HAVE OVERLOOKED ONE OF THE BASIC PRECEPTS OF FORMAL ADVERTISING. THE STATUTORY ADVERTISING PROVISIONS PLAINLY REQUIRE THAT THE CONTRACT SHALL BE AWARDED TO THAT RESPONSIVE, RESPONSIBLE BIDDER OFFERING THE MOST ADVANTAGEOUS PRICE TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS AXIOMATIC THAT, IN ORDER TO INSURE COMPLIANCE WITH THIS BASIC REQUIREMENT, BIDS BE EVALUATED, AS NEARLY AS POSSIBLE, IN LIGHT OF THE ANTICIPATED REQUIREMENTS AND THE COSTS ULTIMATELY TO BE BORNE BY THE UNITED STATES.

WITH RESPECT TO YOUR ALLEGATION THAT THE ORIGINAL INVITATION WAS CANCELED AND THE PROCUREMENT READVERTISED FOR THE PURPOSE OF FAVORING THE SECOND LOW BIDDER, IT IS REPORTED THAT ALL OF THE CONTRACTS AWARDED IN THE PAST HAVE BEEN TO THE LOWEST RESPONSIVE, RESPONSIBLE BIDDERS PURSUANT TO RULES AND REGULATIONS GOVERNING PROCUREMENT BY FORMAL ADVERTISING. MOREOVER, WE ARE ADVISED THAT YOUR STATEMENT THAT THE DELAY INCIDENT TO READVERTISING THE PROCUREMENT WOULD BE TO THE BENEFIT OF THE CURRENT CONTRACTOR BECAUSE AIRWAYS WOULD BE UNABLE, ON A TIME BASIS, TO ORDER VEHICLES FROM THE MANUFACTURERS IS WITHOUT FACTUAL SUPPORT. WE NOTE HERE THAT THERE WAS NO GUARANTEE UNDER THE TERMS OF THE CANCELED INVITATION THAT AWARD WOULD BE MADE IN SUFFICIENT TIME TO ENABLE YOU, OR OTHER BIDDERS, TO PLACE ORDERS FOR VEHICLES REQUIRED TO MEET THE GOVERNMENT'S NEEDS.

ACCORDINGLY, IT IS OUR OPINION THAT THE CANCELLATION OF INVITATION SFA- FSS-45-68 WAS PROPER. IN ADDITION, ON THE RECORD BEFORE US, WE FIND NO BASIS TO QUESTION THE AWARDS UNDER INVITATION SFA-FSS-45A-68. ACCORDINGLY, YOUR PROTEST IS DENIED.