B-167785, DEC. 19, 1969

B-167785: Dec 19, 1969

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PROPRIETY CONCERNING SOLICITATION FOR FEDERAL SUPPLY SCHEDULE CONTRACT FOR FURNITURE FOR USE IN HOSPITALS WHERE FABRIC WEIGHT FACTORS ARE BASED ON PAST AGENCY PROCUREMENT EXPERIENCE REGARDING PERCENTAGES OF UNITS PURCHASED WITHIN CLASS AND ITEM WEIGHT FACTORS ARE PREDICATED ON ESTIMATED QUANTITIES OF PROCUREMENTS DURING CONTRACT PERIOD ON BASIS OF PAST EXPERIENCE. IT IS NOT WITHIN PROVINCE OF GAO TO FORMULATE BASES FOR CONSIDERING AND EVALUATING PRICES UNLESS INVITATION DOES NOT GIVE ALL BIDDERS EQUAL OPPORTUNITY TO COMPETE FOR GOVERNMENT BUSINESS AND DOES NOT SECURE TO U.S. AGENCY'S DETERMINATION OF RESPONSIBILITY IN LIGHT OF PREVIOUS FRAUDULENT ACTS IS CONCLUSIVE. TO ROYALMETAL CORPORATION: FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 21.

B-167785, DEC. 19, 1969

FEDERAL SUPPLY SCHEDULE--BID EVALUATION FACTORS--PROPRIETY CONCERNING SOLICITATION FOR FEDERAL SUPPLY SCHEDULE CONTRACT FOR FURNITURE FOR USE IN HOSPITALS WHERE FABRIC WEIGHT FACTORS ARE BASED ON PAST AGENCY PROCUREMENT EXPERIENCE REGARDING PERCENTAGES OF UNITS PURCHASED WITHIN CLASS AND ITEM WEIGHT FACTORS ARE PREDICATED ON ESTIMATED QUANTITIES OF PROCUREMENTS DURING CONTRACT PERIOD ON BASIS OF PAST EXPERIENCE, IT IS NOT WITHIN PROVINCE OF GAO TO FORMULATE BASES FOR CONSIDERING AND EVALUATING PRICES UNLESS INVITATION DOES NOT GIVE ALL BIDDERS EQUAL OPPORTUNITY TO COMPETE FOR GOVERNMENT BUSINESS AND DOES NOT SECURE TO U.S. BENEFITS OF FULL AND OPEN COMPETITION; AGENCY'S DETERMINATION OF RESPONSIBILITY IN LIGHT OF PREVIOUS FRAUDULENT ACTS IS CONCLUSIVE, ABSENT CLEAR ABUSE OF DISCRETION.

TO ROYALMETAL CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF AUGUST 21, 1969, PROTESTING AWARD TO ANOTHER BIDDER UNDER INVITATION FOR BIDS NO. FPNFN 27812-A, ISSUED BY THE GENERAL SERVICES ADMINISTRATION (GSA) ON MAY 21, 1969.

THE SOLICITATION WAS FOR A FEDERAL SUPPLY SCHEDULE CONTRACT FOR FSC GROUP 71, CLASSES 7105 AND 7110, METAL FURNITURE, FOR USE IN HOSPITALS. BIDS WERE OPENED AS SCHEDULED ON JUNE 20, 1969, AND BIDS ON GROUP 16 (UPHOLSTERED FURNITURE FOR RECEPTION ROOM AND LOBBY) WERE RECEIVED FROM THREE FIRMS. THE TECKFAB DIVISION OF ALSCO, INC. (TECKFAB) WAS LOW AS TO ALL DELIVERY ZONES EXCEPT ZONE 3. ROYALMETAL WAS LOW BIDDER AS TO THE LATTER ZONE. CONSEQUENTLY, CONTRACTS WERE AWARDED THOSE FIRMS ON AUGUST 21 AND 13, 1969, RESPECTIVELY.

THE METHOD OF AWARD DESCRIBED ON PAGE 7 OF THE "SPECIAL PROVISIONS" OF THE INVITATION READS AS FOLLOWS: "THE LOW AGGREGATE BIDDER WILL BE DETERMINED BY MULTIPLYING THE SUB-UNIT PRICES, IF ANY, BY THE WEIGHT FACTORS APPLICABLE TO THE UPHOLSTERED ITEMS AND THEN TOTALING EACH ADJUSTED SUB-UNIT PRICE AND DIVIDING BY THE TOTAL OF THE WEIGHT FACTORS FOR UPHOLSTERY. * * * THE WEIGHTED UNIT PRICE WILL BE MULTIPLIED BY THE ADDITIONAL DESIGNATED ITEM WEIGHT FACTORS AND WILL BE TOTALED TO DETERMINE THE AGGREGATE PRICE. * * *"

THE STATED REASONS FOR YOUR PROTEST ARE:

"THE FABRIC WEIGHT FACTOR HAS NO RELATIONSHIP TO THE ITEM WEIGHT FACTOR THAT IS CITED IN THE BID INVITATION. THE ITEM WEIGHT FACTORS DO NOT EVEN EQUAL 100 AND ASSIGNING THE ITEM WEIGHT FACTORS IS NOT LOGICAL BECAUSE IT IS ARBITRARILY ESTABLISHED ON THE PREVIOUS DOLLAR PURCHASES. OUTSTANDING EXAMPLE OF THIS ARBITRARY ASSIGNMENT OF THE ITEM WEIGHT FACTOR IS ILLUSTRATED ON PAGE 68 OF THE SCHEDULE: ITEMS 30 254 AND 30-255; BOTH ITEMS CARRY AN ITEM WEIGHT FACTOR OF 8. THE PREVIOUS DOLLAR PURCHASES OF EACH ITEM VARY APPROXIMATELY $7,000; THEREFORE, IN ANALYZING THE ITEM WEIGHT FACTORS, ITEM BY ITEM, THERE SHOULD BE A VARIANCE IN THE WEIGHT FACTOR, AND THERE SHOULD BE A LOGICAL ESTABLISHED ITEM WEIGHT FACTOR IN RELATIONSHIP TO THE ESTABLISHED FABRIC WEIGHT FACTOR. WE SUBMIT THIS TO BE ARBITRARY AND CAPRICIOUS, AND IN OUR PARTICULAR CASE, DISCRIMINATORY AGAINST US.'

THE METHOD HERE EMPLOYED OF APPLYING WEIGHT FACTORS WAS IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 5A-2.201-54 OF THE GSA PROCUREMENT REGULATIONS (41 CFR 5A-2.201-54), WHICH PROVIDES:

"5A-2.201-54 WEIGHTING OF ITEMS FOR AGGREGATE AWARDS (INDEFINITE QUANTITY CONTRACTS).

"/A) EACH ITEM IN A GROUP OF ITEMS TO BE AWARDED IN THE AGGREGATE UNDER A SOLICITATION FOR BIDS FOR INDEFINITE QUANTITY CONTRACTS SHALL BE ASSIGNED A WEIGHT IN ACCORDANCE WITH 5-2.201-54 AND THIS SECTION.

"/B) (1) THE ASSIGNMENT OF A WEIGHT TO EACH ITEM IN A GROUP TO BE AWARDED IN THE AGGREGATE IS TO ESTABLISH A BASIS FOR SELECTING FOR AWARD THE BID WHICH IS LIKELY TO RESULT IN THE LOWEST OVERALL COST TO THE GOVERNMENT. SINCE THE ACTUAL COSTS TO THE GOVERNMENT WILL DEPEND UPON THE QUANTITIES OF EACH ITEM PURCHASED UNDER THE RESULTING CONTRACT, IT IS IMPERATIVE THAT THE WEIGHT ASSIGNED TO EACH ITEM REPRESENT THE BEST ESTIMATE OF THE QUANTITY WHICH WILL BE PURCHASED DURING THE CONTRACT PERIOD.

"/2) UNDER NO CIRCUMSTANCES SHOULD WEIGHTS BE BASED ON THE ESTIMATED DOLLAR VALUE OF PURCHASES. WEIGHTS BASED ON DOLLAR VALUES ARE MORE LIKELY TO DISTORT BID EVALUATION AND RESULT IN THE MAKING OF AWARDS WHICH WILL NOT BE AT THE LOWEST OVERALL COST TO THE GOVERNMENT; AND SUCH DISTORTION WILL BECOME GREATER AS THE VARIATION AMONG THE PRICES OF THE ITEMS COMPOSING THE AGGREGATE BECOMES GREATER. HOWEVER, IF THE DOLLAR VALUES OF PREVIOUS PURCHASES (E.G., TOTAL DOLLAR VALUE OF ORDERS UNDER RECENT CONTRACT) ARE THE ONLY DATA AVAILABLE, SATISFACTORY ESTIMATES OF THE QUANTITIES WHICH WILL BE REQUIRED MAY BE ARRIVED AT BY DIVIDING THE TOTAL DOLLAR VALUE OF PURCHASES OF AN ITEM BY THE UNIT PRICE PAID TO DETERMINE THE QUANTITY PURCHASED AND THEN ADJUSTING THAT QUANTITY TO REFLECT ANY EXPECTED INCREASE OR DECREASE.

"/C) ALTHOUGH USING THE FULL ESTIMATED QUANTITIES AS WEIGHTS WOULD GIVE THE MOST ACCURATE RESULTS, THE ESTIMATED QUANTITY FIGURES MAY BE REDUCED TO SMALLER NUMBERS TO SIMPLIFY THE COMPUTATIONS INVOLVED IN EVALUATING BIDS. HOWEVER, IN REDUCING THE FIGURES CARE SHOULD BE TAKEN TO ASSURE THAT THE REDUCED FIGURES ARE SUBSTANTIALLY IN THE SAME PROPORTION AS THE ESTIMATED QUANTITIES SO THAT THE RESULTS WILL NOT BE DISTORTED. FOR EXAMPLE, USING THE REDUCED FIGURES IN COLUMN B, BELOW, AS WEIGHTS IN LIEU OF THE QUANTITIES IN COLUMN A WOULD NOT MATERIALLY DISTORT THE RESULTS AND WOULD SIMPLIFY THE EVALUATION PROCESS.

COLUMN A COLUMN B

756,000 ---------------------------------- 76

272,000 ---------------------------------- 27

176,000 ---------------------------------- 18

"/D) NO ATTEMPT SHOULD BE MADE TO ADJUST WEIGHTS SO THAT THEY TOTAL A SET FIGURE (E.G., 100). NOT ONLY ARE SUCH TOTALS OF NO CONSEQUENCE, BUT THE ADJUSTMENTS MADE FOR THAT PURPOSE CAN INTRODUCE ERRORS WHICH RESULT IN A DISTORTION OF THE RELATIVE PROPORTIONS.'

THUS THE FABRIC WEIGHT FACTORS ARE BASED UPON PAST EXPERIENCE WITH RESPECT TO AGENCY PROCUREMENTS, I.E., WHAT PERCENTAGE OF ITEMS OR UNITS WERE PREVIOUSLY PURCHASED WITHIN A PARTICULAR CLASS.

THE ITEM WEIGHT FACTORS ARE PREDICATED, NOT ON THE DOLLAR VOLUME OF PRIOR PROCUREMENTS, BUT ON THE ESTIMATED QUANTITIES OF PROCUREMENTS TO BE MADE DURING THE CONTRACT PERIOD, WHICH ESTIMATES ARE BASED UPON PAST EXPERIENCE. AS CAN BE NOTED FROM THE QUOTED REGULATION, THERE IS NO REQUIREMENT THAT THE ITEM WEIGHT FACTORS TOTAL 100.

WITH RESPECT TO THE SPECIFIC ITEMS MENTIONED IN YOUR LETTER AS BEING ILLUSTRATIVE OF AN ARBITRARY ASSIGNMENT OF THE ITEM WEIGHT FACTORS, GSA IN ITS REPORT TO OUR OFFICE STATED IN PART:

"* * * ALTHOUGH IT IS TRUE THAT THERE IS A DIFFERENCE OF ABOUT $7,000 IN THE FIGURES IN THE COLUMN HEADED, -PREVIOUS PURCHASES' * * *, THE ESTIMATED QUANTITIES FOR THE TWO ITEMS ARE THE SAME. FOR THAT REASON, THE ITEM WEIGHT FACTORS ARE THE SAME. IN THIS CONNECTION, HOWEVER, WE HAVE FOUND THAT THE FIGURE GIVEN FOR THE PREVIOUS PURCHASES OF ITEM 30-255 SHOULD HAVE BEEN -$30,455,- RATHER THAN -$39,445.- IN ANY CASE, THE DISCREPANCY, WHICH WAS THE RESULT OF A TYPOGRAPHICAL ERROR, IN NO WAY AFFECTED BID EVALUATION.'

THE PRIMARY PURPOSE OF THE STATUTES REQUIRING COMPETITION IN PROCUREMENTS IS TO GIVE TO ALL BIDDERS AN EQUAL OPPORTUNITY TO COMPETE FOR GOVERNMENT BUSINESS AND TO SECURE TO THE UNITED STATES THE BENEFITS OF FULL AND OPEN COMPETITION. TO ACCOMPLISH SUCH PURPOSE, AN INVITATION MUST DESCRIBE THE ITEM OR SERVICES BEING PROCURED AND PROVIDE A BASIS FOR EVALUATING THE BIDS RECEIVED IN ORDER TO DETERMINE WHICH BID IS MOST FAVORABLE TO THE GOVERNMENT. WHEN THE QUANTITIES FOR THE VARIOUS ITEMS THAT MAY BE REQUIRED ARE NOT KNOWN, THE INVITATION MUST PROVIDE SOME BASIS FOR EVALUATION. THIS IS NORMALLY ACCOMPLISHED BY PROVIDING ESTIMATED QUANTITIES FOR THE VARIOUS ITEMS. SUCH ESTIMATES SHOULD BE MADE ON THE BASIS OF ALL KNOWN FACTS, WHICH MAY WELL INCLUDE ESTIMATES BASED ON PREVIOUS REQUIREMENTS.

IT IS NOT WITHIN THE PROVINCE OF OUR OFFICE TO FORMULATE THE BASES UPON WHICH BID PRICES PROPERLY WILL BE CONSIDERED AND EVALUATED UNDER GIVEN INVITATIONS. THIS MATTER FALLS SQUARELY WITHIN THE FUNCTIONS OF THE DEPARTMENTS AND AGENCIES CONCERNED, AND WHEN AN INVITATION LENDS ITSELF TO OPEN COMPETITION AND IT IS SHOWN, WHEN CONSIDERING ALL OF THE FACTS, THAT THE GOVERNMENT'S INTEREST IS FULLY PROTECTED, OUR OFFICE WILL NOT INTERVENE. UNDER THE CIRCUMSTANCES HERE INVOLVED, WE BELIEVE THE CONTRACTING OFFICER'S BASIS OF EVALUATION WAS PROPER UNDER THE APPLICABLE STATUTES AND REGULATIONS, AND WAS IN ACCORDANCE WITH THE ACCEPTABLE FORMULA SET FORTH IN THE METHOD OF AWARD CLAUSE.

YOU ALSO OBJECT TO THE AWARD TO TECKFAB BECAUSE OF GUILTY PLEAS ENTERED BY SOME OF THE OFFICIALS OF ALSCO TO CHARGES OF CONSPIRACY TO DEFRAUD THE GOVERNMENT. ENCLOSED IS A COPY OF OUR DECISION OF OCTOBER 27, 1969, (B- 167108) TO THE PRECISION METAL WORKERS CORPORATION WHICH HAD PROTESTED A PREVIOUS AWARD TO ALSCO FOR THE IDENTICAL REASONS CONTAINED IN YOUR LETTER.

AS STATED IN THAT DECISION, PREVIOUS FRAUDULENT ACTS BY A BIDDER ARE FOR CONSIDERATION BY THE PROCUREMENT ACTIVITY IN ASCERTAINING THE BIDDER'S RESPONSIBILITY. HOWEVER, SINCE OUR OFFICE DOES NOT QUESTION A PROCURING AGENCY'S DETERMINATION OF RESPONSIBILITY IN THE ABSENCE OF A CLEAR ABUSE OF ITS DISCRETION, AND SINCE WE FOUND NO EVIDENCE OF ABUSE OF THAT DISCRETION, THE PROTEST OF PRECISION WAS DENIED.

INASMUCH AS IT APPEARS THAT THE IDENTICAL SITUATION EXISTED WITH REGARD TO THE SOLICITATION WHICH YOU HAVE PROTESTED, WE MUST REACH THE SAME RESULT. ALSO, SINCE RESPONSIBILITY DETERMINATIONS ARE MADE ON A CASE-BY- CASE BASIS BY THE ADMINISTRATIVE AGENCY CONCERNED, OUR OFFICE WOULD NOT BE JUSTIFIED IN DIRECTING THAT FUTURE AWARDS TO ALSCO BE WITHHELD PENDING THE OUTCOME OF THE CRIMINAL PROCEEDINGS PENDING AGAINST ITS FORMER OFFICIALS.