B-167216, DEC. 9, 1969

B-167216: Dec 9, 1969

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BEST INTEREST OF GOVERNMENT WHERE PROVISION IN FIRST STEP OF FORMALLY ADVERTISED TWO-STEP PROCUREMENT ADVISING BIDDERS THAT GOVERNMENT PROPERTY WOULD BE FURNISHED CONTRACTOR WAS DELETED IN STEP TWO AND BIDDERS WERE REQUIRED TO BID ON ALL NEW EQUIPMENT. PROPERTY WAS DISCOVERED WHICH WOULD BE OFFERED TO PROSPECTIVE BIDDERS ON EXCHANGE/SALE BASIS. WAS PROPER. BECAUSE WHERE IT IS DETERMINED THAT SPECIFICATIONS FAIL TO STATE OR OVERSTATE NEEDS OF THE GOVT. IN THIS MATTER STEP TWO MADE NO PROVISION FOR USE OF SURPLUS EQUIPMENT WHICH IS A CONSIDERATION OF SOME MAGNITUDE. INCORPORATED: REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 30 AND NOVEMBER 10. WHICH WAS A 100 PERCENT SMALL BUSINESS SET-ASIDE.

B-167216, DEC. 9, 1969

BIDS--DISCARDING ALL BIDS--SPECIFICATIONS REVISION--BEST INTEREST OF GOVERNMENT WHERE PROVISION IN FIRST STEP OF FORMALLY ADVERTISED TWO-STEP PROCUREMENT ADVISING BIDDERS THAT GOVERNMENT PROPERTY WOULD BE FURNISHED CONTRACTOR WAS DELETED IN STEP TWO AND BIDDERS WERE REQUIRED TO BID ON ALL NEW EQUIPMENT, DECISION TO CANCEL INVITATION, WHEN ADDITIONAL GOVT. PROPERTY WAS DISCOVERED WHICH WOULD BE OFFERED TO PROSPECTIVE BIDDERS ON EXCHANGE/SALE BASIS, WAS PROPER, BECAUSE WHERE IT IS DETERMINED THAT SPECIFICATIONS FAIL TO STATE OR OVERSTATE NEEDS OF THE GOVT; THE COMPTROLLER GENERAL HAS HELD A COGENT REASON EXISTS FOR REJECTING ALL BIDS AND READVERTISING, AND IN THIS MATTER STEP TWO MADE NO PROVISION FOR USE OF SURPLUS EQUIPMENT WHICH IS A CONSIDERATION OF SOME MAGNITUDE, CONSIDERING THE "COST TO THE GOVERNMENT."

TO NAVIGATE, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 30 AND NOVEMBER 10, 1969, PROTESTING AGAINST THE CANCELLATION OF INVITATION FOR BIDS (IFB) NO. N00600-69-B-0129, ISSUED BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C. IN YOUR LETTER OF PROTEST YOU REQUEST THAT THE CANCELLATION BE WITHDRAWN AND AWARD BE MADE TO YOU AS THE LOW RESPONSIVE, RESPONSIBLE BIDDER.

STEP ONE OF THIS FORMALLY ADVERTISED TWO-STEP PROCUREMENT, WHICH WAS A 100 PERCENT SMALL BUSINESS SET-ASIDE, REQUESTED TECHNICAL PROPOSALS FOR THE FURNISHING AND INSTALLATION OF AN EXTENSION TO THE AUTOMATED MATERIALS HANDLING SYSTEM AT THE NAVAL SUPPLY CENTER, NORFOLK, VIRGINIA. THE SOLICITATION ADVISED PROSPECTIVE BIDDERS THAT THE GOVERNMENT PROPOSED TO FURNISH TO THE CONTRACTOR A SUBSTANTIAL QUANTITY OF USABLE CONVEYOR EQUIPMENT FOR INCORPORATION INTO THE SYSTEM, AN ITEMIZED LIST OF WHICH WAS ATTACHED.

TECHNICALLY ACCEPTABLE PROPOSALS WERE SUBMITTED BY YOUR FIRM, RAPISTAN, INCORPORATED AND THE A.J. BAYER COMPANY. YOUR TECHNICAL PROPOSAL OFFERED "THE NEW LOGAN COMPANY -FEATHER TOUCH- DESIGN * * *" AS DESCRIBED IN LITERATURE ATTACHED TO YOUR PROPOSAL. ON MAY 2, 1969, STEP TWO OF THE IFB WAS ISSUED SOLICITING BIDS FROM THE THREE TECHNICALLY ACCEPTABLE SOURCES; HOWEVER, THE LIST OF GOVERNMENT FURNISHED EQUIPMENT CONTAINED IN STEP ONE WAS DELETED FROM STEP TWO, THUS REQUIRING BIDDERS TO BID ON ALL NEW EQUIPMENT. BIDS WERE OPENED ON MAY 19, 1969, AND WERE TABULATED AS FOLLOWS:

NAVIGATE, INC. $ 978,000.00 - LESS 1/2 PERCENT 20 DAYS

RAPISTAN, INC. 989,432.00 - NET

A.J. BAYER 1,140,822.00 - NET A PARTIAL PRE-AWARD SURVEY OF YOUR FIRM, CONDUCTED ON MAY 28, 1969, BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES OFFICE (DCASO), ORLANDO, FLORIDA, RECOMMENDED "COMPLETE AWARD" TO YOU. THE TWO REPRESENTATIVES OF THE NAVAL SUPPLY SYSTEMS COMMAND (NAVSUP) ASSIGNED TO THE PRE-AWARD SURVEY TEAM RECOMMENDED AWARD "SUBJECT TO THE FURNISHING OF A QUOTATION FROM A CONVEYOR MANUFACTURER/VENDOR CITING EQUIPMENT DELIVERY CONSONANT WITH THE DELIVERY REQUIREMENTS OF THE PROPOSED CONTRACT.' THIS QUALIFICATION REFLECTED THE NAVSUP REPRESENTATIVES' CONCERN WHETHER YOU COULD MEET THE CONTRACT DELIVERY REQUIREMENT OF 240 DAYS AFTER DATE OF CONTRACT, SINCE THE LOGAN COMPANY'S QUOTATION TO YOU PROMISED DELIVERY 210 DAYS AFTER RECEIPT OF ORDER.

AFTER THE DEPARTURE OF THE NAVSUP REPRESENTATIVES FROM THE PRE-AWARD SURVEY TEAM, BUT BEFORE THE DATE OF THE SURVEY REPORT, YOU FURNISHED DCASO A TELEGRAM IN WHICH A. J. BAYER QUOTED DELIVERY OF ITS EQUIPMENT TO YOU WITHIN SIX MONTHS OF RECEIPT OF ORDER. SINCE IT APPEARED THAT THE FAVORABLE PRE-AWARD SURVEY REPORT MAY HAVE BEEN BASED ON THE USE OF BAYER EQUIPMENT, THE CONTRACTING OFFICER INQUIRED OF THE NAVSUP REPRESENTATIVES WHETHER BAYER EQUIPMENT CONFORMED TO THE LOGAN COMPANY'S ,FEATHER TOUCH" DESIGN. THE REPLY WAS NEGATIVE. THE CONTRACTING OFFICER ALSO ASCERTAINED THAT THE PRE-AWARD SURVEY TEAM HAD MADE NO TECHNICAL EVALUATION AS TO THE ACCEPTABILITY OF THE BAYER CONVEYORS. ON JUNE 10, 1969, IN A TELEPHONE CONVERSATION WITH THE CONTRACTING OFFICER, YOU STATED YOU HAD A FIRM COMMITMENT FROM THE LOGAN COMPANY FOR THE NECESSARY EQUIPMENT WITHIN 20 WEEKS AFTER RECEIPT OF ORDER. HOWEVER, IT LATER APPEARED THE COMMITMENT RELATED ONLY TO THE ACCUMULATION CONVEYORS. SUBSEQUENTLY, LOGAN MADE A COMMITMENT TO YOU FOR DELIVERY OF ALL THE REQUIRED EQUIPMENT WITHIN 24 WEEKS AFTER RECEIPT OF ORDER. A PARTIAL PRE-AWARD SURVEY OF THE LOGAN COMPANY WAS MADE BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT, CINCINNATI, OHIO, AND "COMPLETE AWARD" WAS RECOMMENDED. IN VIEW OF THE ABOVE, THE CONTRACTING OFFICER PROPOSED AWARD TO YOU.

BEFORE CONTRACT AWARD, HOWEVER, A PROTEST WAS MADE BY RAPISTAN, INCORPORATED BY LETTER OF JUNE 10, 1969. THE BASIS OF RAPISTAN'S PROTEST WAS THAT YOU HAD CONTACTED RAPISTAN AND THE BAYER COMPANY WITH THE INTENTION OF SUPPLYING CONVEYOR EQUIPMENT OTHER THAN THE LOGAN "FEATHER TOUCH" DESIGN SPECIFIED IN YOUR TECHNICAL PROPOSAL. RAPISTAN ASSERTED THAT ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-503.2 (III) PROHIBITED ACCEPTANCE OF AN OFFER BY YOU BASED ON OTHER THAN THE LOGAN COMPANY PRODUCT. AWARD WAS WITHHELD PENDING OUR DECISION ON THIS PROTEST.

HOWEVER, BY LETTER OF SEPTEMBER 25, 1969, THE DEPARTMENT OF THE NAVY ADVISED OUR OFFICE THAT IFB NO. NOO600-69-B-0129 HAD BEEN CANCELLED AND THAT THE PROCUREMENT WOULD BE READVERTISED. IT WAS REPORTED THAT ADDITIONAL GOVERNMENT PROPERTY WHICH COULD BE USED IN CONNECTION WITH THE MATERIALS HANDLING SYSTEM HAD BEEN DISCOVERED, AND THAT THE NAVY HAD DECIDED TO OFFER THE USED GOVERNMENT PROPERTY TO PROSPECTIVE BIDDERS ON AN EXCHANGE/SALE BASIS PURSUANT TO ASPR SECTION IV, PART 2. IN ORDER TO INCREASE COMPETITION AND OBTAIN THE MOST ADVANTAGEOUS PRICE FOR THE EXCHANGE/SALE PROPERTY THE NAVY HAD ALSO DECIDED TO WITHDRAW THE SMALL BUSINESS SET-ASIDE.

IN YOUR LETTER OF SEPTEMBER 30, 1969, YOU REQUEST THAT AWARD BE MADE TO YOU UNDER STEP TWO OF IFB NO. N00600-69-B-0129, AND YOU OFFER TO NEGOTIATE, AFTER AWARD, AN APPROPRIATE CONTRACT MODIFICATION TO REFLECT THE USE OF GOVERNMENT-FURNISHED PROPERTY.

SECTION 10 (B) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS FOR THE INSTANT PROCUREMENT SPECIFICALLY RESERVED TO THE GOVERNMENT THE RIGHT TO REJECT ANY AND ALL BIDS. THIS PROVISION CONFORMS TO 10 U.S.C. 2305 (C), WHICH STATES IN PERTINENT PART "ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST.' UNDER 10 U.S.C. 2311 THE HEAD OF THE AGENCY MAY DELEGATE THE AUTHORITY TO MAKE SUCH A DETERMINATION "TO ANY OTHER OFFICER OR OFFICIAL OF THAT AGENCY * * *.' INSOFAR AS IT IS RELEVANT TO YOUR PROTEST, THAT AUTHORITY HAS BEEN DELEGATED TO THE CONTRACTING OFFICER BY ASPR 2-404.1 (B) (II) AND (VIII), WHICH RESPECTIVELY PROVIDE FOR CANCELLATION OF INVITATIONS WHEN "SPECIFICATIONS HAVE BEEN REVISED," AND "CANCELLATION IS CLEARLY IN THE BEST INTEREST OF THE GOVERNMENT.' SUCH AUTHORITY IS EXTREMELY BROAD, AND INVOLVES PRIMARILY THE EXERCISE OF ADMINISTRATIVE JUDGMENT, WHICH OUR OFFICE DOES NOT QUESTION IN THE ABSENCE OF A CLEAR SHOWING OF ABUSE OF THE ADMINISTRATIVE DISCRETION. WE HAVE OFTEN OBSERVED THAT THE CANCELLATION OF AN INVITATION, AFTER BID OPENING, AND AFTER EACH BIDDER OR PROSPECTIVE BIDDER HAS LEARNED HIS COMPETITORS' PRICES, IS A SERIOUS MATTER AND SUCH CANCELLATION SHOULD BE MADE ONLY FOR COGENT REASONS. HOWEVER, WHERE IT IS DETERMINED THAT THE SPECIFICATIONS AS ADVERTISED FAIL TO ACCURATELY STATE THE ACTUAL NEEDS OF THE GOVERNMENT (B-165302, DECEMBER 12, 968; B 162067 (2), OCTOBER 24, 1967; B-161622, AUGUST 7, 1967) OR OVERSTATE THOSE NEEDS (B-139196, JUNE 4, 1959; B-134424, DECEMBER 19, 1957) WE HAVE HELD A COGENT REASON EXISTS FOR REJECTING ALL BIDS AND READVERTISING.

YOU STATE THAT OUR DECISION B-167769, SEPTEMBER 30, 1969, SUPPORTS YOUR CONTENTION THAT NO COGENT REASON EXISTS FOR READVERTISING. IN THAT CASE, AN IFB FOR "200 RATIO" WIRE ELICITED FOUR BIDS RANGING FROM $96,590 TO $117,000. HOWEVER, THE LOW BID WAS BASED UPON LESS EXPENSIVE "180 RATIO" WIRE. IN VIEW OF A DETERMINATION THAT THE 180 WIRE WOULD SATISFY THE GOVERNMENT'S NEEDS, AND THAT THE 200 WIRE WAS APPROXIMATELY $373 HIGHER IN PRICE THAN 180 WIRE, THE PROCURING ACTIVITY CONCLUDED THAT THE INVITATION SHOULD BE CANCELED AND READVERTISED ON SPECIFICATIONS CALLING FOR 180 WIRE. IN HOLDING THAT AWARD SHOULD BE MADE UNDER THE ORIGINAL IFB, WE STATED:

"WE CAN APPRECIATE THAT THE GOVERNMENT'S NEEDS, AT A MINIMUM, MIGHT BE SATISFIED BY SPECIFYING 180-RATIO WIRE AT A SLIGHTLY LESSER COST BUT WE FEEL THAT READVERTISING THE PROCUREMENT AFTER BIDS HAVE BEEN EXPOSED WOULD BE FAR MORE PREJUDICIAL TO THE COMPETITIVE BIDDING SYSTEM THAN AN AWARD UNDER THE 200-RATIO SPECIFICATION. WHILE THE ATTORNEYS FOR (THE THIRD LOW BIDDER) ARGUE THAT REINSTATEMENT OF THE INITIAL SOLICITATION WOULD BE IMPROPER UNLESS THERE IS COGENT EVIDENCE TO SHOW THAT THE DOLLAR SAVINGS ON READVERTISEMENT WOULD BE RELATIVELY SMALL, WE ARE OF THE VIEW THAT THE SAVINGS POSSIBLE ON READVERTISEMENT WHICH, AT THE BEST, ARE PURELY SPECULATIVE, ARE NOT FOR CONSIDERATION UNDER CIRCUMSTANCES SUCH AS INVOLVED HERE. RATHER, THE PRIMARY CONSIDERATION IN THIS TYPE OF SITUATION SHOULD BE THE COST TO THE GOVERNMENT IN THE EVENT OF AN AWARD UNDER THE INITIAL SOLICITATION. SINCE ADEQUATE COMPETITION WAS OBTAINED IN THIS CASE; SINCE THE DIFFERENCE BETWEEN THE TWO LOW BIDS IS RELATIVELY SMALL; AND SINCE THERE IS NO EVIDENCE TO INDICATE THAT THE REQUIREMENT FOR WIRE OF 200 RATIO PRECLUDED OTHER POTENTIAL BIDDERS FROM SUBMITTING RESPONSIVE BIDS, WE BELIEVE THAT THE CIRCUMSTANCES REQUIRE AN AWARD UNDER THE INITIAL SOLICITATION.'

IN CONSIDERING THE "COST TO THE GOVERNMENT" OF AN AWARD PURSUANT TO STEP 2 OF THE INSTANT INVITATION, IT MUST BE KEPT IN MIND THAT THE SPECIFICATIONS THEREUNDER MAKE NO PROVISION FOR THE USE OF SURPLUS EQUIPMENT KNOWN TO BE IN THE GOVERNMENT'S POSSESSION. THIS IS A CONSIDERATION OF SOME MAGNITUDE. FOR EXAMPLE, IN YOUR LETTER OF SEPTEMBER 30, 1969, YOU ESTIMATE THAT THE UTILIZATION OF THE USED EQUIPMENT INVOLVES "ABOUT A TEN PERCENT CONSIDERATION IN TERMS OF THE TOTAL CONTRACT TASK," WHICH IN THE CASE OF YOUR BID OF $978,000 WOULD BE $97,800. WE BELIEVE THIS FACTUALLY DISTINGUISHES THE INSTANT CASE FROM OUR DECISION B-167769, SEPTEMBER 30, 1969.

A RELATED SUGGESTION IS MADE IN YOUR LETTER OF SEPTEMBER 30, IN WHICH YOU STATE:

"NAVIGATE REMAINS WILLING TO INCORPORATE THE GOVERNMENT FURNISHED CONVEYOR EQUIPMENT IN THE SYSTEM AS PROPOSED IN ITS TECHNICAL PROPOSAL AND TO NEGOTIATE THE DOLLAR AMOUNT OF THE CONTRACT ACCORDINGLY. WE ARE ALSO WILLING TO EXPAND THE NEGOTIATIONS TO INCLUDE ANY ADDITIONAL GOVERNMENT FURNISHED EQUIPMENT AVAILABLE AND SUITABLE FOR INCORPORATION INTO THE SYSTEM.' YOU THUS SUGGEST THAT THE GOVERNMENT MAKE AWARD TO YOU ON THE BASIS OF SUPPLYING ALL NEW EQUIPMENT, WITH THE INTENTION, AT THE TIME OF AWARD, OF SUBSEQUENTLY MODIFYING THE CONTRACT TO PROVIDE FOR THE USE OF A SUBSTANTIAL AMOUNT OF GOVERNMENT-FURNISHED PROPERTY.

OUR DECISION B-145109, MAY 1, 1961, WAS CONCERNED WITH A SITUATION ANALOGOUS TO YOURS IN THAT AFTER BID OPENING, BUT BEFORE AWARD, THE PROCURING ACTIVITY PROPOSED THREE SIGNIFICANT CHANGES IN THE CONTRACT SPECIFICATIONS. THE PROCURING ACTIVITY REQUESTED OUR ADVICE AS TO WHETHER AWARD COULD BE MADE TO THE LOW BIDDER UNDER THE ADVERTISED SPECIFICATIONS AND THE CHANGES NEGOTIATED AFTER AWARD OR WHETHER THE PROCUREMENT SHOULD BE READVERTISED UNDER SPECIFICATIONS INCORPORATING THE THREE PROPOSED CHANGES. IN HOLDING THAT READVERTISEMENT WAS REQUIRED, WE SAID:

"IT IS WELL ESTABLISHED THAT THE AWARD OF A CONTRACT PURSUANT TO THE ADVERTISING STATUTES MUST BE MADE UPON THE SAME SPECIFICATIONS OFFERED TO ALL BIDDERS. 37 COMP. GEN. 524, 527 (1959), AND CASES THERE CITED. CONSIDERING WHETHER ADDITIONAL WORK REQUIRED IN CONNECTION WITH A CONTRACT COULD BE AWARDED BY NEGOTIATION TO THE CONTRACTOR, WE STATED IN 5 COMP. GEN. 508, 512 (1926):

-* * * IN GENERAL, AN EXISTING CONTRACT MAY NOT BE EXPANDED SO AS TO INCLUDE ADDITIONAL WORK OF ANY CONSIDERABLE MAGNITUDE, WITHOUT COMPLIANCE WITH SECTION 3709, REVISED STATUTES, UNLESS IT CLEARLY APPEARS THAT THE ADDITIONAL WORK WAS NOT IN CONTEMPLATION AT THE TIME OF THE ORIGINAL CONTRACTING AND IS SUCH AN INSEPARABLE PART OF THE WORK ORIGINALLY CONTRACTED FOR AS TO RENDER IT REASONABLY IMPOSSIBLE OF PERFORMANCE BY OTHER THAN THE ORIGINAL CONTRACTOR. THE APPARENT PROBABILITY THAT THE ADDITIONAL WORK MAY BE DONE MORE CONVENIENTLY OR EVEN AT LESS EXPENSE BY THE ORIGINAL CONTRACTOR, BECAUSE OF BEING ENGAGED UPON THE ORIGINAL WORK OR OTHERWISE, IS NOT CONTROLLING OF THE MATTER AS TO WHETHER THE PROVISIONS OF SECTION 3709 ARE FOR APPLICATION. WHETHER THE ORIGINAL CONTRACTOR CAN DO THE WORK AT LESS EXPENSE TO THE GOVERNMENT THAN CAN ANY OTHER CONTRACTOR IS POSSIBLE OF DEFINITE DETERMINATION ONLY BY SOLICITING COMPETITIVE BIDS AS CONTEMPLATED UNDER SAID SECTION. * * *- "THE RULE, WHICH IS EQUALLY APPLICABLE TO COMPETITIVE PROCUREMENTS UNDER 10 U.S.C. 2304 (A), HAS BEEN CONSISTENTLY FOLLOWED. SEE 39 COMP. GEN. 566 (1960), AND 30 COMP. GEN. 34 (1950). THE RULE APPLIES WHETHER THE WORK IS TO BE INCREASED OR DECREASED. * * *

"* * * WHERE A CONTRACT IS REQUIRED TO BE AWARDED PURSUANT TO COMPETITIVE BIDDING, THE LOW BID MUST BE DETERMINED ON THE BASIS OF BIDS ON THE WORK ACTUALLY TO BE PERFORMED, NOT ON THE BASIS OF BIDS ON SPECIFICATIONS KNOWN TO CALL FOR MORE OR LESS WORK, OR WORK OF A DIFFERENT TYPE. THE ONLY PROPER WAY TO DETERMINE THE LOWEST BIDDER IS BY ADVERTISING THE ACTUAL WORK TO BE PERFORMED, AND THIS, IN OUR OPINION, IS WHAT THE LAW REQUIRES. 17 COMP. GEN. 427, 430 (1937); 15 ID. 573, 576 (1935). SEE ALSO 37 COMP. GEN. 183, 184, (1957). THE ADOPTION OF ANY OTHER VIEW WOULD PERMIT CIRCUMVENTION OF THE COMPETITIVE BID REQUIREMENT AND WOULD BE CONTRARY TO THE INTENT OF THE PROCUREMENT STATUTES.' THEREFORE, WE CONCLUDE THAT THERE WAS NO IMPROPRIETY IN THE DECISION TO CANCEL THE INVITATION AND TO READVERTISE FOR THIS REQUIREMENT, AND WE MUST DENY YOUR PROTEST. THE DENIAL OF YOUR PROTEST, HOWEVER, IS NOT BASED UPON ANY CONSIDERATION OF THE PROPRIETY OF THE TERMS OF THE RESOLICITATION AND IS WITHOUT PREJUDICE TO THE OBJECTIONS YOU HAVE MADE THERETO, WHICH WILL BE GIVEN FURTHER CONSIDERATION.