B-167281, NOV. 13, 1969

B-167281: Nov 13, 1969

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SECOND LOW OFFEROR WHICH SUBMITTED MODIFIED PROPOSAL CONSIDERABLY LOWER IN PRICE THAN OTHERWISE LOW OFFER AFTER SPECIFIED DEADLINE AND QUESTIONED USE OF NEGOTIATION AUTHORITY WHEN CONTRACTING OFFICER (CO) DID NOT USE DISCUSSION PROCEDURES AWARD AS MADE IS LEGAL BECAUSE CO'S AUTHORITY TO NEGOTIATE IS FINAL AND. LATE MODIFICATIONS OF PROPOSALS CAN BE CONSIDERED ONLY WHEN IMPORTANT TECHNICAL OR SCIENTIFIC BREAKTHROUGHS ARE OFFERED AND CO DID NOT ABUSE DISCRETION BY CONCLUDING ON BASIS OF PRIOR COST EXPERIENCE UNDER ASPR 3-805 THAT ACCEPTANCE OF INITIAL OFFER WOULD RESULT IN FAIR PRICE TO GOVERNMENT. INCORPORATED: REFERENCE IS MADE TO YOUR LETTERS OF JUNE 20. THE RFP WAS ISSUED ON APRIL 16. THE CLOSING DATE SPECIFIED IN THE RFP FOR RECEIPT OF PROPOSALS WAS MAY 16.

B-167281, NOV. 13, 1969

NEGOTIATION--COMPETITION--AWARD UNDER INITIAL PROPOSALS UNDER REQUEST FOR PROPOSALS FOR LABORATORY EQUIPMENT SERVICE, SECOND LOW OFFEROR WHICH SUBMITTED MODIFIED PROPOSAL CONSIDERABLY LOWER IN PRICE THAN OTHERWISE LOW OFFER AFTER SPECIFIED DEADLINE AND QUESTIONED USE OF NEGOTIATION AUTHORITY WHEN CONTRACTING OFFICER (CO) DID NOT USE DISCUSSION PROCEDURES AWARD AS MADE IS LEGAL BECAUSE CO'S AUTHORITY TO NEGOTIATE IS FINAL AND, UNDER ARMED SERVICES PROCUREMENT REG. (ASPR) 3 506, LATE MODIFICATIONS OF PROPOSALS CAN BE CONSIDERED ONLY WHEN IMPORTANT TECHNICAL OR SCIENTIFIC BREAKTHROUGHS ARE OFFERED AND CO DID NOT ABUSE DISCRETION BY CONCLUDING ON BASIS OF PRIOR COST EXPERIENCE UNDER ASPR 3-805 THAT ACCEPTANCE OF INITIAL OFFER WOULD RESULT IN FAIR PRICE TO GOVERNMENT. RECOMMENDATION HAS BEEN MADE THAT ASPR 3-506 BE AMENDED TO PROVIDE WHERE LATE PROPOSALS OR MODIFICATIONS OFFER EXTRAORDINARY MONETARY SAVINGS MATTER BE REFERRED TO SERVICE SECRETARIES OR DIRECTOR OF DSA.

TO HALIFAX ENGINEERING, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTERS OF JUNE 20, 1969, SEPTEMBER 15, 1969, AND OCTOBER 24, 1969, PROTESTING THE AWARD OF A CONTRACT TO TECHNOLOGY/SCIENTIFIC SERVICES, INCORPORATED (TECHNOLOGY/SERVICES), UNDER REQUEST FOR PROPOSALS (RFP) NO. F33601-69-R-0712 ISSUED BY THE PROCUREMENT DIVISION, 2750TH ABW, WRIGHT-PATTERSON AIR FORCE BASE, OHIO.

THE RFP WAS ISSUED ON APRIL 16, 1969, PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (9) (10), AS IMPLEMENTED BY PARAGRAPH 3-210.2 (IX) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), AND COVERED A REQUIREMENT FOR SERVICES NECESSARY TO MAINTAIN, REPAIR, MODIFY, ALIGN, AND CALIBRATE CERTAIN ELECTRONIC AND ELECTRO-ANALYTICAL LABORATORY EQUIPMENT FOR THE PERIOD JULY 1, 1969, THROUGH JUNE 30, 1970. THE CLOSING DATE SPECIFIED IN THE RFP FOR RECEIPT OF PROPOSALS WAS MAY 16, 1969. SIX FIRMS SUBMITTED PROPOSALS, WITH TECHNOLOGY/SERVICES AS THE LOW PROPOSER AT A PRICE OF $234,476. AS THE INCUMBENT CONTRACTOR, YOU PROPOSED THE NEXT LOWEST OFFER AT $241,250.20. ON JUNE 2, 1969, PRE AWARD SURVEY BY DCASD, DAYTON, OHIO, RECOMMENDED AWARD TO TECHNOLOGY/SERVICES, AND ON JUNE 6, 1969, THE PROPOSED CONTRACT WAS DEEMED LEGALLY SUFFICIENT BY THE BASE STAFF JUDGE ADVOCATE.

ON JUNE 6, 1969, YOU WIRED A MODIFIED PROPOSAL WHICH REDUCED THE INITIAL PROPOSAL OF HALIFAX TO $201,884.80, $32,591.20 BELOW THE AWARD OFFER. THIS MODIFICATION WAS CONFIRMED BY LETTER DATED JUNE 9, 1969, RECEIVED BY THE CONTRACTING OFFICER ON THE SAME DATE. THE CONTRACTING OFFICER DETERMINED THE PROPOSED REDUCTION TO BE A LATE MODIFICATION UNACCEPTABLE PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3 506.

IN YOUR ABOVE-REFERENCED LETTERS OF PROTEST, YOU URGE THAT YOUR WIRE OF JUNE 5, 1969, CONTAINING THE PROPOSED MODIFICATION, PUT THE CONTRACTING OFFICER ON NOTICE THAT "RECOURSE TO NEGOTIATION WOULD SAVE THE GOVERNMENT SUBSTANTIAL MONEY" AND CONTEND THAT, AFTER INVOKING NEGOTIATION AUTHORITY, HE FAILED TO ADHERE TO THE SPIRIT AND INTENT OF ASPR 3-805.1 BY NOT CONDUCTING DISCUSSIONS WITH HALIFAX AFTER RECEIVING THE PROPOSED MODIFICATION APPROXIMATELY ONE WEEK PRIOR TO THE CONTRACT AWARD. YOU SAY THAT IN PREVIOUS YEARS THIS CONTRACT HAS BEEN THE SUBJECT OF DISCUSSIONS AND CONTEND THAT IF THE AIR FORCE DID NOT INTEND TO NEGOTIATE, IT SHOULD HAVE USED FORMAL ADVERTISING PROCEDURES AND MADE THE AWARD ON THE BASIS OF THE LOWEST SEALED BID.

IN SUPPORT OF THESE CONTENTIONS YOU CITE 47 COMP. GEN. 279 (1967) (UNITEC) AND QUOTE THE FOLLOWING STATEMENT CONTAINED IN THAT DECISION AT PP. 283 - 284:

"WHILE THE PROVISIONS OF ASPR 3-506 OPERATE TO PRECLUDE, IN THE SPECIFIED CIRCUMSTANCES, ACCEPTANCE OF A LATE OFFER OR MODIFICATION AS SUCH, THEY DO NOT, AND WERE NEVER INTENDED TO PRECLUDE THE OPENING UP OF NEGOTIATIONS WITH ALL OFFERORS COMPETITIVELY SITUATED UPON THE RECEIPT OF A LATE MODIFICATION TO A TIMELY OFFER WHICH FAIRLY INDICATES THAT SUCH NEGOTIATIONS WOULD PROVE TO BE HIGHLY ADVANTAGEOUS TO THE GOVERNMENT. THAT CONNECTION, IT SHOULD BE NOTED THAT THE PROVISIONS OF ASPR 3-506 HAVE NO GREATER WEIGHT OR FORCE THAN THOSE OF ASPR 3 805.1. NEGOTIATION PROCEDURES, UNLIKE THOSE REQUIRED FOR FORMAL ADVERTISING, ARE DESIGNED TO BE FLEXIBLE AND FORMAL.'

IN HIS STATEMENT, THE CONTRACTING OFFICER JUSTIFIES THE ACTIONS TAKEN ON THE FOLLOWING GROUNDS:

FIRST, AWARD WAS MADE IN ACCORDANCE WITH ASPR 3-805.1 WHICH PROVIDES THAT AWARDS MAY BE MADE UNDER NEGOTIATION AUTHORITY ON THE BASIS OF INITIAL PROPOSALS WITHOUT DISCUSSION WHEN BASED ON ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE, PROVIDED THAT ALL OFFERORS ARE GIVEN NOTICE OF SUCH A POSSIBILITY.

SECOND, THE LATE MODIFICATION WAS REJECTED PURSUANT TO ASPR 3-506. HALIFAX'S REDUCED OFFER WAS RECEIVED AFTER THE TIME SET IN THE SOLICITATION FOR RECEIPT OF OFFERS, AND THEREFORE MUST BE CONSIDERED A LATE MODIFICATION.

UNDER THE CIRCUMSTANCES, WE ARE OBLIGED TO CONCLUDE THAT WHILE THE PROCEDURES FOLLOWED BY THE AIR FORCE IN THE INSTANT SITUATION ARE NOT, IN OUR JUDGMENT, IN FULL ACCORD WITH THE SPIRIT AND INTENT OF 10 U.S.C. 2304 (G) (AS AMENDED 1968), THERE IS NO BASIS UPON WHICH OUR OFFICE MAY PROPERLY DISTURB THE PRESENT AWARD.

ASPR 3-805.1 (A) (V), IMPLEMENTING 10 U.S.C. 2304 (G) (AS AMENDED 1968), PROVIDES AS FOLLOWS:

"/A) AFTER RECEIPT OF INITIAL PROPOSALS, WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS * * * CONSIDERED, EXCEPT THAT THIS REQUIREMENT NEED NOT NECESSARILY BE APPLIED TO:

"/V) PROCUREMENTS IN WHICH IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT OR SERVICE THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE. (PROVIDED, HOWEVER, THAT IN SUCH PROCUREMENTS, THE REQUEST FOR PROPOSALS SHALL NOTIFY ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED AND HENCE, THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT. * * * PARAGRAPH 10 (G) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS * * * ADVISES OFFERORS THAT THE MOST FAVORABLE INITIAL PROPOSAL MAY BE ACCEPTED WITHOUT DISCUSSION.'

PARAGRAPH 10 (G), SOLICITATION INSTRUCTIONS AND CONDITIONS, AND PARAGRAPH 22, ADDITIONS TO SOLICITATIONS INSTRUCTIONS AND CONDITIONS, INCORPORATE ASPR 3-805.1 (A) (V). THEY PROVIDE AS FOLLOWS: "10 ... (G) THE GOVERNMENT MAY AWARD A CONTRACT, BASED ON INITIAL OFFERS RECEIVED, WITHOUT DISCUSSION OF SUCH OFFERS. ACCORDINGLY, EACH INITIAL OFFER SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT.

* * * * * * * "22 * * * AWARD MAY BE MADE WITHOUT DISCUSSION OF OFFERS RECEIVED, THEREFORE, OFFERS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS * * * WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT.'

ASPR 3-506 (B), INCORPORATED INTO THE ADDITIONS TO SOLICITATION AND CONDITIONS BY PARAGRAPH 29, PROVIDES THAT PROPOSALS RECEIVED AFTER THE CLOSING DATE SPECIFIED IN THE RFP WILL NOT BE CONSIDERED EXCEPT UNDER CIRCUMSTANCES NOT HERE RELEVANT.

ASPR 3-506 (C), IN PERTINENT PART, PROVIDES AS FOLLOWS: "/C) PROPOSALS WHICH ARE RECEIVED IN THE OFFICE DESIGNATED IN THE REQUESTS FOR PROPOSALS AFTER THE TIME SPECIFIED FOR THEIR SUBMISSION ARE -LATE PROPOSALS.- * * * LATE PROPOSALS SHALL NOT BE CONSIDERED FOR AWARD, EXCEPT UNDER THE FOLLOWING CIRCUMSTANCES:

* * * * * * * "/II) WHERE THE SECRETARY CONCERNED DETERMINES THAT CONSIDERATION OF A LATE PROPOSAL IS OF EXTREME IMPORTANCE TO THE GOVERNMENT, AS FOR EXAMPLE WHERE IT OFFERS SOME IMPORTANT TECHNICAL OR SCIENTIFIC BREAKTHROUGH; OR" ASPR 3-506 (G), IN PERTINENT PART, PROVIDES: "/G) MODIFICATIONS OF PROPOSALS WHICH ARE RECEIVED IN THE OFFICE DESIGNATED IN THE REQUEST FOR PROPOSALS AFTER THE TIME SPECIFIED FOR SUBMISSION OF PROPOSALS ARE LATE MODIFICATIONS.- LATE MODIFICATIONS SHALL BE SUBJECT TO THE RULES APPLICABLE TO LATE PROPOSALS SET FORTH IN THIS PARAGRAPH ...'

UNDER ASPR 3-805.1 THE CONTRACTING OFFICER CLEARLY HAS AUTHORITY TO MAKE AWARDS ON THE BASIS OF INITIAL PROPOSALS RECEIVED WITHOUT FURTHER DISCUSSION, WHERE ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE EXISTS, PROVIDED THE RFP NOTIFIES ALL OFFERORS OF THIS POSSIBILITY. UNDER PARAGRAPHS 10 (G) AND 22 OF THE SOLICITATION QUOTED ABOVE, SUCH NOTICE IS EXPRESSLY GIVEN.

THE CONTRACTING OFFICER, ON THE BASIS OF PRIOR COST EXPERIENCE, CONCLUDED THAT ACCEPTANCE OF THE INITIAL OFFER OF TECHNOLOGY/SERVICES WOULD RESULT IN A FAIR AND REASONABLE PRICE TO THE GOVERNMENT FOR THE SERVICES SOLICITED. SINCE IT IS NOT ALLEGED THAT THE CONTRACTING AGENCY LACKED ACCURATE PRIOR COST EXPERIENCE FOR THIS TYPE OF PROCUREMENT, OR THAT ADEQUATE COMPETITION DID NOT EXIST, SUCH A DETERMINATION BY THE CONTRACTING AGENCY WILL NOT BE QUESTIONED BY THIS OFFICE ABSENT A SHOWING OF BAD FAITH OR AN ABUSE OF ADMINISTRATIVE DISCRETION. B-165689, JANUARY 29, 1969; 37 COMP. GEN. 430, 433 (1957).

SECOND, IT SEEMS INDISPUTABLY CLEAR THAT THE INSTANT SITUATION IS GOVERNED BY THE ABOVE-QUOTED PROVISIONS OF ASPR 3-506 RELATING TO LATE PROPOSALS AND LATE MODIFICATIONS.

THE RECORD INDICATES THAT THE HALIFAX MODIFICATION SENT BY WIRE ON JUNE 5, 1969, WAS RECEIVED BY THE CONTRACTING OFFICER ON JUNE 6, 1969, 21 DAYS AFTER THE TIME SPECIFIED IN THE RFP AS THE CLOSING DATE FOR RECEIPT OF PROPOSALS AND 4 DAYS AFTER THE COMPLETION OF THE PRE-AWARD SURVEY. THE CONTRACTING OFFICER, IN ACCORDANCE WITH ASPR 3-506 (C) (II), OPENED AND EXAMINED THE LATE MODIFICATION IN ORDER TO DETERMINE WHETHER IT CONTAINED SOME TECHNOLOGICAL OR SCIENTIFIC BREAKTHROUGH WHICH WOULD HAVE PERMITTED THE SECRETARY OF THE AIR FORCE TO ALLOW CONSIDERATION OF THE PROPOSAL. WAS DETERMINED THAT THE PROPOSAL CONTAINED NO SUCH BREAKTHROUGH. CONCUR WITH THE CONTRACTING OFFICER'S TREATMENT OF YOUR MODIFIED PROPOSAL OF JUNE 5, 1969, AS A LATE OFFER, AND WITH HIS DETERMINATION THAT FURTHER CONSIDERATION OF SUCH OFFER WAS PRECLUDED UNDER THE APPLICABLE REGULATIONS. WE, THEREFORE, DO NOT ON THIS GROUND QUESTION THE LEGALITY OF THE CONTRACT AS AWARDED.

REGARDING YOUR ALLEGATION CONCERNING PAST PRACTICES OF THE CONTRACTING AGENCY IN THIS PROCUREMENT AND YOUR CONTENTION THAT IF THE AIR FORCE DID NOT INTEND TO NEGOTIATE, IT SHOULD HAVE USED FORMAL ADVERTISING PROCEDURES AND MADE THE AWARD ON THE BASIS OF THE LOWEST SEALED BID, WE POINT OUT THAT THE DECISION OF THE CONTRACTING OFFICER TO INVOKE NEGOTIATION AUTHORITY UNDER 10 U.S.C. 2304 (A) (10) IS MADE FINAL BY STATUTE (10 U.S.C. 2310 (B) ( AND THUS CANNOT BE LEGALLY QUESTIONED BY OUR OFFICE. SEE 47 COMP. GEN. 279, 282 (1967). HOWEVER, AS IN THE UNITEC CASE, WE QUESTION THE WISDOM AND NECESSITY OF INVOKING NEGOTIATION AUTHORITY IN THE FIRST INSTANCE, WHERE, AS HERE, THE CONTRACTING OFFICER SUBSEQUENTLY MADE NO USE OF THE DISCUSSION PROCEDURES PERMITTED BY THAT AUTHORITY IN A SITUATION IN WHICH THE USE OF SUCH PROCEDURES MIGHT HAVE RESULTED IN SUBSTANTIAL MONETARY SAVINGS TO THE GOVERNMENT.

IN THE UNITEC CASE, WE CRITICIZED A CONTRACTING OFFICER FOR NOT CONDUCTING NEGOTIATIONS AFTER RECEIPT OF A SIMILAR UNSOLICITED PRICE REDUCTION PRIOR TO THE CONTRACT AWARD (ALTHOUGH WE RECOGNIZED THAT THE AWARD AS MADE WAS LEGAL). IN A LETTER TO THE SECRETARY OF THE NAVY, B 161782, DATED MARCH 25, 1968, WE EXPRESSED OUR CONCERN WITH THE PRESENT PROCEDURES FOR HANDLING LATE PROPOSALS AND LATE MODIFICATIONS TO PROPOSALS. WE POINTED OUT OUR DIFFICULTY WITH THE CURRENT REGULATION, WHICH CALLS FOR THE REJECTION OF LATE PROPOSALS AND LATE MODIFICATIONS TO PROPOSALS AND, AT THE SAME TIME, CALLS FOR THE CONDUCT OF NEGOTIATIONS, WITH CERTAIN PERMISSIVE EXCEPTIONS. WE STATED (P. 3): "THERE IS AN UNCERTAINTY IN THE PRESENT PROCEDURE WHICH GIVES RISE TO THE SITUATION ENCOUNTERED IN THE UNITEC CASE. OFFERORS CANNOT BE SURE WHETHER AN UNSOLICITED PRICE REDUCTION WILL BE IGNORED ON THE BASIS OF LATENESS' OR CONSIDERED UNDER THE PROVISION PERMITTING NEGOTIATIONS. IT IS NATURAL UNDER THESE CIRCUMSTANCES TO EXPECT SOME OFFERORS TO SUBMIT LATE MODIFICATIONS, AND EVEN CONTRACTING OFFICERS MAY NOT ALWAYS BE CERTAIN AS TO WHEN NEGOTIATIONS SHOULD OR MAY BE CONDUCTED.'

THE MARCH 25TH LETTER WENT ON TO EXPRESS OUR AGREEMENT WITH A SUGGESTION BY THE SECRETARY OF THE NAVY THAT ASPR 3-506 BE AMENDED TO STATE THAT WHERE LATE PROPOSALS OR LATE MODIFICATIONS APPEAR TO OFFER EXTRAORDINARY MONETARY SAVINGS, THE MATTER SHALL BE REFERRED TO THE SERVICE SECRETARIES OR THE DIRECTOR OF DSA, AS APPROPRIATE, WHO WILL DETERMINE WHETHER THEY SHOULD OR SHOULD NOT BE CONSIDERED. IT IS OUR UNDERSTANDING THAT THE ASPR COMMITTEE IS PRESENTLY GIVING ACTIVE CONSIDERATION TO THIS PROPOSAL.

HOWEVER, INASMUCH AS THE RECORD FAILS TO INDICATE ANY CULPABILITY OR FAULT ON THE PART OF THE SUCCESSFUL OFFEROR, OR EVIDENCE THAT THE ACTION TAKEN BY THE CONTRACTING OFFICER CONSTITUTES AN ABUSE OF ADMINISTRATIVE DISCRETION OR IS IN VIOLATION OF LAW OR REGULATION AS PRESENTLY WRITTEN, WE DO NOT QUESTION THE LEGALITY OF THE CONTRACT AS AWARDED.