B-164795, OCTOBER 30, 1968, 48 COMP. GEN. 256

B-164795: Oct 30, 1968

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CONSIDERATION OF A QUANTITY DISCOUNT WHICH MADE THE BID CONTAINING THE OFFER LOW WAS PROPER. RESULTS IN AN AWARD THAT IS ADVANTAGEOUS TO THE GOVERNMENT. 1968: FURTHER REFERENCE IS MADE TO YOUR LETTER OF JULY 5. THE INVITATION WAS ISSUED ON MAY 8. THE BIDS WERE OPENED AS SCHEDULED ON MAY 23. THE TWO LOWEST BIDS WERE THOSE SUBMITTED BY ROYAL OFFICE TYPEWRITER (/ROYAL). JANET'S BID WAS IN THE SUM OF $30 WITH A 1 PERCENT 20-DAY PROMPT PAYMENT DISCOUNT RESULTING IN A NET PRICE OF $29.70. WHICH WOULD RESULT IN A NET PRICE OF $28.26 IF A SUFFICIENT NUMBER OF MACHINES WERE PLACED UNDER MAINTENANCE. FURTHER QUANTITY DISCOUNTS WERE OFFERED BY ROYAL OF 10 PERCENT FOR 20-49 MACHINES. AWARD WAS MADE TO ROYAL ON JUNE 14.

B-164795, OCTOBER 30, 1968, 48 COMP. GEN. 256

BIDS - EVALUATION - DISCOUNT PROVISIONS - ABSENCE OF PROVISION IN INVITATION NOTWITHSTANDING AN INVITATION REQUESTING BIDS FOR A REQUIREMENTS CONTRACT FOR THE REPAIR, MAINTENANCE, AND RECONDITIONING OF ELECTRIC TYPEWRITERS DID NOT SOLICIT A QUANTITY DISCOUNT, CONSIDERATION OF A QUANTITY DISCOUNT WHICH MADE THE BID CONTAINING THE OFFER LOW WAS PROPER. THE FAILURE TO MAKE SPECIFIC PROVISION FOR EVERY POSSIBLE METHOD OF PRICE QUOTATION SHOULD NOT DEPRIVE THE GOVERNMENT OF THE RIGHT TO TAKE ADVANTAGE OF A BENEFIT WHICH DOES NOT CONTRAVENE ANY STATED REQUIREMENT OR PROHIBITION, AND RESULTS IN AN AWARD THAT IS ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

TO JANET'S TYPEWRITER SERVICE, OCTOBER 30, 1968:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JULY 5, 1968, PROTESTING AGAINST AN AWARD TO ANOTHER BIDDER UNDER INVITATION FOR BIDS. NO. WA ND- 1864-5-23-68.

THE INVITATION WAS ISSUED ON MAY 8, 1968, BY THE GENERAL SERVICES ADMINISTRATION REQUESTING BIDS FOR A REQUIREMENTS CONTRACT FOR REPAIR, MAINTENANCE AND RECONDITIONING OF ELECTRIC TYPEWRITERS FOR THE PERIOD JULY 1, 1968, THROUGH JUNE 30, 1969.

THE BIDS WERE OPENED AS SCHEDULED ON MAY 23, 1968, AND THE TWO LOWEST BIDS WERE THOSE SUBMITTED BY ROYAL OFFICE TYPEWRITER (/ROYAL), A DIVISION OF LITTON BUSINESS SYSTEMS, INC., AND BY YOUR COMPANY (JANET-S).

JANET'S BID WAS IN THE SUM OF $30 WITH A 1 PERCENT 20-DAY PROMPT PAYMENT DISCOUNT RESULTING IN A NET PRICE OF $29.70. ROYAL SUBMITTED A BID PRICE OF $29.75 AND INSERTED A 5 PERCENT QUALITY DISCOUNT FOR 5 19 MACHINES, WHICH WOULD RESULT IN A NET PRICE OF $28.26 IF A SUFFICIENT NUMBER OF MACHINES WERE PLACED UNDER MAINTENANCE. FURTHER QUANTITY DISCOUNTS WERE OFFERED BY ROYAL OF 10 PERCENT FOR 20-49 MACHINES; 15 PERCENT FOR 50-149 MACHINES; AND 20 PERCENT FOR 150 OR MORE MACHINES. AWARD WAS MADE TO ROYAL ON JUNE 14, 1968, AS THE LOW RESPONSIVE, RESPONSIBLE BIDDER.

YOUR COMPANY'S PROTEST IS BASED ON THE CONTENTION THAT SINCE THE SOLICITATION CONTAINED NO PROVISIONS FOR, OR ANY MENTION OF, A QUALITY DISCOUNT, AND SINCE THE BID OF ROYAL DID NOT EXPLAIN WHETHER THE QUANTITY DISCOUNTS WOULD APPLY FOR THE NUMBER OF MACHINES IN A PARTICULAR AREA OR TO THE NUMBER OF MACHINES ON EACH PURCHASE ORDER, THE DISCOUNT PROVISION OF ROYAL'S BID SHOULD NOT HAVE BEEN CONSIDERED.

SINCE THERE IS NO EVIDENCE TO SHOW THAT THE CONSIDERATION OF THE DISCOUNT OFFER WAS CONTRARY TO BID INSTRUCTIONS, A FAILURE TO CONSIDER FOR BID EVALUATION AND AWARD PURPOSES A QUANTITY DISCOUNT OFFER, WHETHER OR NOT SOLICITED IN AN INVITATION FOR BIDS, WOULD APPEAR TO BE CONTRARY TO ADVERTISING STATUTES, UNLESS THE CONTRACTING AGENCY DETERMINES THAT THE TERMS OF THE DISCOUNT OFFER CANNOT REASONABLY BE COMPLIED WITH. IN THIS CONNECTION, WE HAVE HELD THAT BIDDERS SHOULD BE APPRISED AS TO THE BASIS ON WHICH THEIR BIDS WILL BE EVALUATED WHEN THERE ARE SPECIAL FACTORS WHICH THE GOVERNMENT INTENDS TO CONSIDER IN MAKING BID EVALUATIONS, 39 COMP. GEN. 282. HOWEVER, WE DO NOT BELIEVE THAT, AS A GENERAL RULE, THE GOVERNMENT'S FAILURE TO MAKE SPECIFIC PROVISION FOR EVERY POSSIBLE METHOD OF PRICE QUOTATION SHOULD DEPRIVE IT OF THE RIGHT TO TAKE ADVANTAGE OF A CLEARLY OFFERED BENEFIT WHICH DID NOT CONTRAVENE ANY STATED REQUIREMENT OR PROHIBITION.

UNDER THE GOVERNMENT'S COMPETITIVE BIDDING SYSTEM, WE THINK THAT A BIDDER MAY PROPERLY QUOTE ITS BEST TERMS, INCLUDING PROVISIONS, IF THEY SO DESIRE, FOR ALLOWANCE OF DISCOUNTS AND OTHER PRICE REDUCTIONS WHICH MIGHT BE BASED ON THE AMOUNT OF WORK OR SUPPLIES INCLUDED IN AWARDS. IT HAS LONG BEEN AN ESTABLISHED POLICY OF THE GOVERNMENT TO CONSIDER DISCOUNT OFFERS IN EVALUATING BIDS ON CONTRACTS TO BE AWARDED UNDER FORMAL ADVERTISEMENTS, AND IN OUR OPINION THE CONSIDERATION OF DISCOUNT OFFERS IS A PROPER METHOD OF EVALUATING THE PRICE WHICH THE GOVERNMENT WILL HAVE TO PAY, IF IT REASONABLY APPEARS THAT THE CONDITION ON WHICH THE DISCOUNT IS BASED WILL BE COMPLIED WITH. SEE 40 COMP. GEN. 518.

CONCERNING YOUR CONTENTION THAT THE BID DID NOT EXPLAIN WHETHER THE QUANTITY DISCOUNT WOULD APPLY FOR THE NUMBER OF MACHINES IN THE PARTICULAR AREA OR TO THE NUMBER OF MACHINES ON EACH PURCHASE ORDER, THE EXACT LANGUAGE OF THE OFFER WAS AS FOLLOWS:

THE FOLLOWING DISCOUNTS FROM TOTAL MAINTENANCE AGREEMENT PRICES ARE OFFERED TO FEDERAL GOVERNMENT INSTALLATIONS HAVING 5 OR MORE ELECTRIC TYPEWRITERS ON MAINTENANCE AGREEMENT WITH ROYAL OFFICE TYPEWRITERS WHICH ARE INSTALLED IN BUILDINGS ON THE SAME OR ADJACENT BLOCKS, OR ALL BUILDINGS ON A CONTINUOUS TRACT OF LAND, SUCH AS A MILITARY POST.

A FEDERAL GOVERNMENT INSTALLATION MAY CONSIST OF SEVERAL SEPARATE AGENCIES OR DEPARTMENTS LOCATED IN AN AREA WITHIN THE SCOPE OF A DISCOUNT APPLICATION. ALL ELECTRIC TYPEWRITERS BELONGING TO AGENCIES OR DEPARTMENTS OF THE FEDERAL GOVERNMENT ON MAINTENANCE AGREEMENT WITH ROYAL OFFICE TYPEWRITERS WILL BE CONSIDERED AS ONE INSTALLATION WHEN DETERMINING THE CUSTOMER'S DISCOUNT QUALIFICATIONS.

IT IS OUR OPINION THAT THE FOREGOING LANGUAGE CLEARLY BASED THE QUANTITY DISCOUNT ON THE NUMBER OF MACHINES AT EACH INSTALLATION, RATHER THAN THE NUMBER OF MACHINES ON EACH PURCHASE ORDER.

WITH RESPECT TO THE AVAILABILITY OF THE DISCOUNT, THE ADMINISTRATIVE REPORT TO OUR OFFICE STATED:

BASED ON PAST EXPERIENCE AND THE FACT THAT THERE WERE 330 IBM ELECTRIC TYPEWRITERS IN THE SERVICE AREA INVOLVED, 284 OF WHICH WERE LOCATED IN THE NORFOLK NAVAL SHIPYARD, IT WAS OBVIOUS THAT THE DISCOUNT OFFERED BY ROYAL IN ITS BID WOULD HAVE A DIRECT EFFECT UPON THE COST TO THE GOVERNMENT OF THE MAINTENANCE SERVICES REQUIRED. FOR EXAMPLE, SINCE THE OFFERED DISCOUNT WOULD NOT TAKE EFFECT UNLESS AT LEAST FIVE MACHINES IN ONE INSTALLATION WERE PLACED UNDER MAINTENANCE, REJECTION OF THE BID ON THE BASIS THAT THERE WAS ANY POSSIBILITY THAT LESS THAN THE REQUIRED NUMBER IN ONE INSTALLATION WOULD BE PLACED UNDER MAINTENANCE WOULD HAVE REQUIRED THAT WE ASSUME CERTAIN FACTS WHICH CONTRADICT ALL OF THE AVAILABLE EVIDENCE AND LOGIC.

DURING THE PAST CONTRACT PERIOD 148 IBM TYPEWRITERS WERE PLACED UNDER MAINTENANCE. BECAUSE ONLY 46 MACHINES IN THE SERVICE AREA ARE LOCATED OUTSIDE THE NORFOLK NAVAL SHIPYARD, AT LEAST 102 OF THOSE PLACED UNDER MAINTENANCE WERE WITHIN THE SHIPYARD. IN ADDITION, IF ONLY FIVE MACHINES WERE PLACED UNDER MAINTENANCE AT THE DISCOUNT RATE, THE GOVERNMENT COULD PUT AN ADDITIONAL 144 MACHINES UNDER MAINTENANCE WITH ROYAL WITHOUT A DISCOUNT BEFORE THE TOTAL COST WOULD EQUAL THE PRICE BID BY JANET'S TYPEWRITER SERVICE. THERE IS, OF COURSE, NO POSSIBILITY THAT 144 MACHINES LOCATED OUTSIDE THE NAVAL SHIPYARD WILL BE PLACED UNDER MAINTENANCE, SINCE THERE ARE ONLY 46 TYPEWRITERS LOCATED OUTSIDE THE SHIPYARD. EQUALLY, IT IS JUST AS IMPROBABLE THAT FEWER THAN 5 MACHINES WOULD BE PLACED UNDER MAINTENANCE AT THE SHIPYARD, IN VIEW OF THE FACT THAT 148 OF THE 284 MACHINES AT THE SHIPYARD WERE UNDER MAINTENANCE IN THE LAST CONTRACT PERIOD. THUS IT WOULD HAVE BEEN COMPLETELY UNREALISTIC TO HAVE IGNORED THE OFFERED QUANTITY DISCOUNT ON THE PREMISE THAT THERE WAS ANY POSSIBILITY THAT IT WOULD NOT HAVE BEEN REALIZED. * * *

IT THEREFORE SEEMS CLEAR THAT TO CONCLUDE THAT THE OFFERED QUANTITY DISCOUNT WOULD NOT BE APPLICABLE WOULD BE WHOLLY UNREASONABLE, AND WOULD REQUIRE THE ASSUMPTION OF THE OCCURRENCE OF EVENTS, THE LIKLIHOOD OF WHICH WOULD BE SO REMOTE AS TO BE NEGLIGIBLE. IN THIS REGARD, WE HAVE BEEN ADVISED THAT SINCE THE AWARD OF THE CONTRACT, 73 TYPEWRITERS, ALL LOCATED WITHIN THE NORFOLK NAVAL SHIPYARD, HAVE BEEN PLACED UNDER MAINTENANCE. THUS THE 15 PERCENT DISCOUNT OFFERED BY ROYAL, RATHER THAN THE 5 PERCENT USED IN EVALUATION, IS BEING REALIZED.

IT IS OUR OPINION THAT THE ACTION TAKEN BY THE CONTRACTING OFFICER IN THE PRESENT CASE WAS FULLY IN ACCORDANCE WITH THE REQUIREMENTS OF THE PROCUREMENT REGULATIONS AND STATUTES, AS WELL AS WITH THE TERMS FOR THE INVITATION FOR BIDS, THAT AN AWARD SHALL BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND "WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.'

IN VIEW OF THE FOREGOING, OUR OFFICE FINDS NO PROPER BASIS FOR OBJECTING TO THE AWARD OF THE CONTRACT TO ROYAL AND YOUR PROTEST IS THEREFORE DENIED.