B-164931, SEPT. 5, 1968

B-164931: Sep 5, 1968

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THE SOLICITATION WAS PRECEDED BY A MARCH 12. ADVANCE NOTICE TO BIDDERS WHICH ADVISED THAT THE GOVERNMENT'S ESTIMATED COST FOR THE PROJECT WAS $1. THE FOLLOWING BID PRICES WERE DISCLOSED: BID PRICE EVALUATED PRICE . SINCE THESE TERMS WERE NOT THOSE OFFERED TO ALL BIDDERS. IT WAS ACCORDINGLY REJECTED. IT TOO WAS REJECTED AS NONRESPONSIVE WITHOUT DETERMINING AN EVALUATED BID PRICE. IT WAS DETERMINED THAT THE GOVERNMENT'S INTEREST WOULD BE BEST SERVED BY CANCELLING THE SUBJECT SOLICITATION AND ISSUING A NEW ONE IN ITS PLACE. IS PRESENTLY SCHEDULED FOR OPENING ON SEPTEMBER 5. YOU CONTEND THAT THE PROCUREMENT REGULATIONS AUTHORIZE REJECTION OF THE LOW RESPONSIVE BID IF IT IS DETERMINED TO BE UNREASONABLE AND NOT MERELY BECAUSE IT IS HIGHER IN PRICE THAN A NONRESPONSIVE BID WHICH INCLUDES EXCEPTIONS TO THE SOLICITATION TERMS SUBSTANTIALLY REDUCING THE COST OR RISK OF PERFORMANCE.

B-164931, SEPT. 5, 1968

TO GENERAL ELECTRIC COMPANY:

WE REFER TO YOUR LETTERS OF JULY 25 AND AUGUST 23 AND 17, 1968, PROTESTING THE CONTRACTING OFFICER'S DETERMINATION TO REJECT ALL BIDS AND READVERTISE THE PROCUREMENT CONCERNED IN SOLICITATION NO. DACA17-68 B- 0015, ISSUED APRIL 3, 1968, BY THE UNITED STATES ARMY ENGINEER DISTRICT AT JACKSONVILLE, FLORIDA, FOR THE CONSTRUCTION AND INSTALLATION OF 33,000 KW TURBINE GENERATING EQUIPMENT AND ACCESSORIES FOR FORT CLAYTON, PANAMA CANAL ZONE.

THE SOLICITATION WAS PRECEDED BY A MARCH 12, 1968, ADVANCE NOTICE TO BIDDERS WHICH ADVISED THAT THE GOVERNMENT'S ESTIMATED COST FOR THE PROJECT WAS $1,350,000.00. ON MAY 22, 1968, THE AMENDED BID OPENING DATE, THE FOLLOWING BID PRICES WERE DISCLOSED:

BID PRICE EVALUATED PRICE

--------- --------------- DELAVAL TURBINE, INC. $1,015,590.00 $1,086,090.00 GENERAL ELECTRIC CO. 1,278,867.00 1,320,867.00 WESTINGHOUSE ELECTRIC CORP. 1,219,210.00 NONE

DELAVAL'S BID CONTAINED A NUMBER OF COMMENTS "TO CLARIFY CERTAIN PORTIONS OF THE SPECIFICATION" . BY LETTER OF JULY 19, 1968, THE CONTRACTING OFFICER ADVISED DELAVAL THAT TWO OF ITS COMMENTS, IF ACCEPTED, WOULD AFFECT THE GOVERNMENT'S RIGHT TO ASSESS LIQUIDATED DAMAGES UNDER THE CONTRACT, WHILE A THIRD COMMENT WOULD PLACE THE LIABILITY FOR TAXES UPON THE GOVERNMENT RATHER THAN THE CONTRACTOR. SINCE THESE TERMS WERE NOT THOSE OFFERED TO ALL BIDDERS, THE CONTRACTING OFFICER CONCLUDED THAT THE COMMENTS RENDERED DELAVAL'S BID NONRESPONSIVE, AND IT WAS ACCORDINGLY REJECTED. THE SECOND LOW BID, SUBMITTED BY WESTINGHOUSE, TOOK NUMEROUS EXCEPTIONS TO THE TERMS AND CONDITIONS OF THE SOLICITATION. FOR THIS REASON,IT TOO WAS REJECTED AS NONRESPONSIVE WITHOUT DETERMINING AN EVALUATED BID PRICE. BY LETTER OF JULY 19, 1968, THE CONTRACTING OFFICER ADVISED YOUR FIRM THAT "IN VIEW OF THE MONETARY DIFFERENCE BETWEEN YOUR BID AND THE OTHER BIDS RECEIVED" , IT WAS DETERMINED THAT THE GOVERNMENT'S INTEREST WOULD BE BEST SERVED BY CANCELLING THE SUBJECT SOLICITATION AND ISSUING A NEW ONE IN ITS PLACE.

THE PROCURING ACTIVITY SENT A NEW ADVANCE NOTICE TO BIDDERS ON THAT SAME DATE, JULY 19, 1968, ADVISING PROSPECTIVE CONTRACTORS OF ITS INTENTION TO PROCURE SUBSTANTIALLY THE SAME EQUIPMENT AS THAT DESCRIBED IN THE PRECEDING SOLICITATION AND REVISING THE ESTIMATED COST OF THE PROJECT DOWNWARD FROM THE EARLIER $1,350,000.00 TO $1,000,000.00. THE SECOND SOLICITATION, ISSUED JULY 19, 1968, BY THE JACKSONVILLE DISTRICT, CORPS OF ENGINEERS, IS PRESENTLY SCHEDULED FOR OPENING ON SEPTEMBER 5, 1968.

IN YOUR LETTERS OF JULY 25, 1968, AND AUGUST 23, 1968, YOU SEEK REINSTATEMENT OF THE ORIGINAL SOLICITATION AND AWARD UNDER IT AS THE ONLY RESPONSIVE, RESPONSIBLE BIDDER. YOU CONTEND THAT THE PROCUREMENT REGULATIONS AUTHORIZE REJECTION OF THE LOW RESPONSIVE BID IF IT IS DETERMINED TO BE UNREASONABLE AND NOT MERELY BECAUSE IT IS HIGHER IN PRICE THAN A NONRESPONSIVE BID WHICH INCLUDES EXCEPTIONS TO THE SOLICITATION TERMS SUBSTANTIALLY REDUCING THE COST OR RISK OF PERFORMANCE. THE CONTRACTING OFFICER, THEREFORE, IS SAID TO HAVE ACTED IN AN UNREASONABLE AND ARBITRARY MANNER WHEN HE DETERMINED THAT YOUR BID PRICE WAS TOO HIGH, WHILE DELAVAL'S NONRESPONSIVE BID PRICE WAS REASONABLE. YOU POINT OUT IN THIS REGARD THAT THE GOVERNMENT'S ORIGINAL COST ESTIMATE EXCEEDED YOUR BID PRICE BOTH AS EVALUATED AND AS SUBMITTED, AND THAT YOUR BID PRICE WAS BASED ON PUBLISHED CATALOG PRICES AT WHICH LIKE EQUIPMENT HAS BEEN SOLD TO NUMEROUS PURCHASERS INCLUDING THE GOVERNMENT. ACCORDING TO YOUR ANALYSIS, THE EXCEPTIONS TAKEN BY DELAVAL TO THE INITIAL SOLICITATION WOULD HAVE A SUBSTANTIAL EFFECT UPON ITS BID PRICE, TO THE EXTENT THAT DELAVAL'S PRICE, WHEN ADJUSTED TO TAKE INTO ACCOUNT THE COST OF THE ITEMS WHICH RENDERED IT NONRESPONSIVE, WOULD BE COMPARABLE TO THE PRICES OF GE, WESTINGHOUSE AND THE ORIGINAL COST ESTIMATE.

WITH RESPECT TO THE DOWNWARD REVISION OF THE GOVERNMENT'S COST ESTIMATE A MEMORANDUM FROM THE ACTING CHIEF, ENGINEERING DIVISION, TO THE CONTRACTING OFFICER, DATED AUGUST 1, 1968, OFFERS THIS EXPLANATION:

"THERE IS NO COVERT MEANING IN THE FACT THAT THE APPROXIMATE COST OF THE EQUIPMENT BEING ADVERTISED UNDER SOLICITATION NO. DACA17-69-B 0003 IS $1,000,000 WHEREAS ESSENTIALLY THE SAME EQUIPMENT ADVERTISED UNDER SOLICITATION NO. DACA17-68-B-0015 APPROXIMATELY 4 MONTHS AGO WAS $1,350,000. THIS DIFFERENCE IN THE APPROXIMATE COST OF THE ADVERTISED EQUIPMENT IS THE RESULT OF TWO DIFFERENT PERSONS MAKING THE ESTIMATE. * * *" WHILE THIS EXPLANATION LEAVES SOMETHING TO BE DESIRED, THE BID PRICE RECEIVED FROM DELAVAL, DOES PROVIDE SOME SUPPORT FOR THE DOWNWARD REVISION OF THE GOVERNMENT'S COST ESTIMATE TO $1,000,000.

AS YOU POINT OUT, ASPR 2-404.1 (A) PROVIDES IN EFFECT THAT AFTER BIDS HAVE BEEN OPENED AWARD MUST BE MADE TO THE LOWEST RESPONSIBLE BIDDER UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND READVERTISE. BOTH THE COURT OF CLAIMS IN MASSMAN CONSTRUCTION CO. V UNITED STATES, 102 CT. CL. 699, AND OUR OFFICE IN NUMEROUS DECISIONS HAVE TAKEN THE SAME POSITION. ONE OF THE REASONS LISTED IN ASPR 2 404.1 (B) AS JUSTIFYING CANCELLATION OF THE INVITATION AFTER OPENING IS THAT ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE AT UNREASONABLE PRICES. THE ISSUE HERE IS WHETHER THE CONTRACTING OFFICER'S DETERMINATION THAT YOUR BID PRICE IS UNREASONABLE, AND THEREFORE THAT CANCELLATION OF THE INVITATION IS PROPER UNDER THE REGULATION, SHOULD BE UPHELD.

THE RIGHT TO REJECT ALL BIDS IS RESERVED TO THE GOVERNMENT UNDER PARAGRAPH 10 (B) OF STANDARD FORM 33A, WHICH IS A PART OF THE SOLICITATION. IN ADDITION, THE HEAD OF THE AGENCY IS GIVEN THE RIGHT UNDER 10 U.S.C. 2305 (C) TO REJECT ALL BIDS WHEN HE DEEMS THAT ACTION TO BE IN THE PUBLIC INTEREST. ALSO IT HAS LONG BEEN HELD THAT THE ADVERTISING STATUTES WERE ENACTED FOR THE PROTECTION OF THE GOVERNMENT AND THE ISSUANCE OF AN INVITATION FOR BIDS DOES NOT CARRY WITH IT ANY LEGAL OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED INCLUDING THE LOWEST RESPONSIBLE AND RESPONSIVE BID. B-126211, JANUARY 9, 1956. CONSISTENT WITH THE FOREGOING WE HAVE HELD THAT:

"* * * WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES OR SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND READVERTISING OF THE CONTRACT IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT. * *" (36 COMP. GEN. 364, 365) SEE ALSO, B-147154, NOVEMBER 6, 1961.

AS INDICATED PREVIOUSLY, THE DETERMINATION THAT YOUR BID PRICE IS UNREASONABLE IS SUPPORTED BY A GOVERNMENT ESTIMATE MADE AFTER BID OPENING. WHILE THE BASIS FOR THIS ESTIMATE HAS NOT BEEN MADE KNOWN AND WHILE CONCEIVABLY THE LOW NONRESPONSIVE BID MIGHT BE REGARDED AS INSUBSTANTIAL SUPPORT FOR THAT ESTIMATE IN SOME QUARTERS, BARRING FRAUD OR BAD FAITH, WHICH HAS NEITHER BEEN ALLEGED NOR ESTABLISHED, WE BELIEVE THE SUPPORT IS SUFFICIENT UNDER THE CONTRACTING OFFICER'S BROAD AUTHORITY IN THIS AREA TO REQUIRE THAT HIS DETERMINATION BE SUSTAINED. SEE B-147154, NOVEMBER 6, 1961; B-126211, JANUARY 9, 1956.

IT IS TRUE THAT IN SOME INSTANCES WE HAVE OVERRULED THE CONTRACTING OFFICER'S DETERMINATION TO REJECT ALL BIDS AND READVERTISE. HOWEVER, IN THESE SITUATIONS THE CONTRACTING OFFICER SOUGHT TO TAKE SUCH ACTION BECAUSE OF A MINOR DEFECT IN THE INVITATION FOR BIDS WHICH WE DEEMED WAS NOT SO SIGNIFICANT AS TO AFFECT COMPETITION OR THE INTEREST OF THE GOVERNMENT IN ANY OTHER RESPECT. SEE 40 COMP. GEN. 671; 39 COMP. GEN. 396. NEITHER ONE OF THE CITED CASES INVOLVED THE QUESTION OF UNREASONABLE PRICE. IN 36 COMP. GEN. 62 THE CONTRACTING OFFICER SOUGHT TO REJECT ALL BIDS AND READVERTISE ON THE BASIS OF THE POSSIBILITY OF A MINOR ADDITIONAL PRICE CONCESSION. HIS DETERMINATION WAS OVERRULED BY THE HEAD OF THE PROCURING AGENCY. IN THE CITED CASE WE AGREED WITH THE CONCLUSION REACHED BY THE AGENCY HEAD. HOWEVER, THIS WAS NOT A CASE WHERE WE OVERRULED THE CONTRACTING OFFICER'S DETERMINATION TO REJECT A RESPONSIVE BID BECAUSE OF AN ALLEGED UNREASONABLE PRICE.

FOR THE ABOVE REASONS, WE CONCLUDE THAT THE CONTRACTING OFFICER ACTED WITHIN THE REASONABLE LIMITS OF HIS DISCRETION WHEN HE REJECTED THE ONLY RESPONSIVE BID AS UNREASONABLY HIGH, AND READVERTISED.

GE FURTHER ARGUES THAT DELAVAL DOES NOT SATISFY THE EXPERIENCE CLAUSE, WHICH WAS SET OUT IN THE ORIGINAL SOLICITATION AS FOLLOWS:

"EACH BIDDER SHALL SUBMIT WITH HIS BID A STATEMENT OF HIS EXPERIENCE WHICH MUST SHOW AT LEAST TWO YEARS OF EXPERIENCE IN DESIGN, MANUFACTURE, INSTALLATION, ERECTION AND START OF OPERATION OF EQUIPMENT COMPARABLE TO, OR OF LARGER CAPACITY THAN, THAT SPECIFIED.'

TO THIS THE PRESENT SOLICITATION ADDED THE FOLLOWING EXPLANATORY PARAGRAPHS DEFINING COMPARABLE EQUIPMENT:

"A COMPARABLE STEAM TURBINE IS DEFINED AS A CONDENSING TURBINE HAVING VOLUMETRIC DESIGN THROTTLE AND EXHAUST STEAM FLOWS EQUAL TO OR LARGER THAN THE STEAM FLOWS PROPOSED BY THE BIDDER HEREIN.

"A COMPARABLE GENERATOR IS DEFINED AS A HYDROGEN COOLED GENERATOR HAVING A KVA RATING EQUAL TO OR LARGER THAN THE KVA RATING OF THE GENERATOR PROPOSED BY THE BIDDER HEREIN.'

SO FAR AS CONCERNS THE SOLICITATION IN QUESTION, IT IS CONCEDED THAT DELAVAL'S BID IS NOT RESPONSIVE IN ANY CASE. THEREFORE, WE DO NOT BELIEVE IT WOULD SERVE ANY USEFUL PURPOSE TO ATTEMPT TO DETERMINE ITS ABILITY TO COMPLY WITH THE SPECIALIZED EXPERIENCE REQUIREMENTS QUOTED ABOVE. HOWEVER, IT SHOULD BE NOTED THAT THE EXPERIENCE REQUIREMENT IN BOTH THE ORIGINAL AND MODIFIED FORM GOES TO THE MATTER OF RESPONSIBILITY AND IT IS OUR POSITION THAT A BID MAY NOT BE REJECTED SOLELY FOR FAILURE OF THE BIDDER TO MEET SUCH REQUIREMENT; RATHER THE BIDDER'S RESPONSIBILITY SHOULD BE DECIDED OR THE BASIS OF ALL RELEVANT FACTORS. 39 COMP. GEN. 173, 177- 178. THIS DECISION, OF COURSE, IS PRIMARILY THE RESPONSIBILITY OF THE PROCURING AGENCY.

IN KEEPING WITH THE ABOVE, YOUR PROTEST AGAINST THE REJECTION OF ALL BIDS UNDER SOLICITATION NO. DACA17-68-B-0015 IS DENIED.