B-168522, JUN. 2, 1970

B-168522: Jun 2, 1970

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WHERE AWARD IS MADE NOT TO LOWEST OFFEROR ON WHICH INDIVIDUAL ITEM BUT TO OFFEROR WITH LOWEST OVERALL EVALUATED QUOTATION. UNNECESSARY COSTS ARE BEING INCURRED AS RESULT OF SUCH METHODS WHICH ARE ULTIMATELY BORNE BY GOVERNMENT. SINCE IT IS NOT BELIEVED THAT SUCH EVALUATION PROCEDURES PROMOTE GOVERNMENT'S BEST INTERESTS. SECRETARY OF NAVY IS ADVISED THAT MATTER MAY BE WORTHY OF REVIEW AND EVALUATION. SECRETARY: FURTHER REFERENCE IS MADE TO A REPORT DATED JANUARY 29. THAT FIRM DESIRED TO KNOW WHY IT WAS NOT RECEIVING CONTRACTS FROM THE RCA SERVICE CORPORATION (RCA) FOR CERTAIN SUBSISTENCE ITEMS AS TO WHICH IT ALLEGES IT WAS THE LOW OFFEROR. SUBSISTENCE ITEMS OF THE TYPE WHICH CHANTICLEER IS IN THE BUSINESS OF SUPPLYING.

B-168522, JUN. 2, 1970

BIDS--EVALUATION--METHOD OF EVALUATION DEFECTIVE, ETC.--AGGREGATE V SEPARABLE ITEMS, PRICES, ETC. ALTHOUGH NO LEGAL BASIS EXISTS UPON WHICH TO OBJECT TO PRIME CONTRACTOR'S METHOD OF EVALUATING QUOTATIONS FOR SUBCONTRACTS FOR CERTAIN ITEMS, WHERE AWARD IS MADE NOT TO LOWEST OFFEROR ON WHICH INDIVIDUAL ITEM BUT TO OFFEROR WITH LOWEST OVERALL EVALUATED QUOTATION, UNNECESSARY COSTS ARE BEING INCURRED AS RESULT OF SUCH METHODS WHICH ARE ULTIMATELY BORNE BY GOVERNMENT, APPARENTLY WITHOUT SUFFICIENT JUSTIFICATION. SINCE IT IS NOT BELIEVED THAT SUCH EVALUATION PROCEDURES PROMOTE GOVERNMENT'S BEST INTERESTS, SECRETARY OF NAVY IS ADVISED THAT MATTER MAY BE WORTHY OF REVIEW AND EVALUATION. SEE COMP. GEN. DECS. CITED.

TO MR. SECRETARY:

FURTHER REFERENCE IS MADE TO A REPORT DATED JANUARY 29, 1970, FROM THE ACTING DIRECTOR OF CONTRACTS, NAVAL SHIP SYSTEMS COMMAND, IN RESPONSE TO AN INQUIRY BY CHANTICLEER, INC. THAT FIRM DESIRED TO KNOW WHY IT WAS NOT RECEIVING CONTRACTS FROM THE RCA SERVICE CORPORATION (RCA) FOR CERTAIN SUBSISTENCE ITEMS AS TO WHICH IT ALLEGES IT WAS THE LOW OFFEROR.

THE REPORT ADVISES THAT RCA HOLDS A COST-PLUS-AWARD-FEE CONTRACT WITH THE NAVY WHICH OBLIGATES RCA TO MANAGE AND OPERATE THE NAVY'S ATLANTIC UNDERSEA TEST AND EVALUATION CENTER (AUTEC) AT ANDROS ISLAND. TO FULFILL ITS PRIME CONTRACT, RCA ENTERS INTO SUBCONTRACTS FOR, AMONG OTHER THINGS, SUBSISTENCE ITEMS OF THE TYPE WHICH CHANTICLEER IS IN THE BUSINESS OF SUPPLYING.

THE PROCUREMENTS TO WHICH CHANTICLEER OBJECTS WERE INITIATED BY RCA QUOTATION REQUESTS. THE QUOTATIONS, WHEN RECEIVED, WERE EVALUATED IN ACCORDANCE WITH RCA'S PROCUREMENT SYSTEM AND AWARD MADE TO THE FIRM OFFERING THE LOWEST OVERALL EVALUATED QUOTATION. THIS EVALUATION SYSTEM OPERATES IN SUCH A MANNER THAT WHERE AN OFFEROR "NO-BIDS" A PARTICULAR ITEM, A FACTOR EQUAL TO THE LOWEST PRICE QUOTED BY ANY OFFEROR FOR THAT ITEM IS APPLIED TO THE OFFEROR'S NO-BID ITEM IN ORDER TO EVALUATE ALL BIDS ON A COMMON BASIS. THE NET EFFECT OF THIS PROCEDURE IS THAT AWARD IS NOT MADE TO THE LOWEST OFFEROR ON EACH INDIVIDUAL SUBSISTENCE ITEM; RATHER, AWARD IS MADE TO THE OFFEROR WITH THE LOWEST OVERALL EVALUATED QUOTATION. ALTHOUGH CHANTICLEER WAS LOW OFFEROR ON SOME ITEMS, IT WAS NOT THE LOWEST OVERALL EVALUATED OFFEROR; HENCE, IT NEVER RECEIVED ANY OF RCA'S SUBSISTENCE SUBCONTRACTS.

WE NOTE THAT RCA'S GENERAL PROCUREMENT SYSTEM WAS APPROVED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION, PHILADELPHIA (DCASR). THE EFFECT OF THIS APPROVAL, WE ARE INFORMALLY ADVISED, IS TO OBVIATE THE NECESSITY OF OBTAINING THE CONTRACTING OFFICER'S CONSENT, AS REQUIRED BY THE PRIME CONTRACT, PRIOR TO PLACING OF CERTAIN SUBCONTRACTS.

WE HAVE RECOGNIZED THAT THE CONTRACTING PRACTICES AND PROCEDURES EMPLOYED BY PRIME CONTRACTORS OF THE UNITED STATES IN THE AWARD OF SUBCONTRACTS GENERALLY ARE NOT SUBJECT TO THE STATUTORY AND REGULATORY REQUIREMENTS WHICH GOVERN DIRECT PROCUREMENTS BY THE GOVERNMENT. 41 COMP. GEN. 424 (1961); 47 ID. 223 (1967). WE CONCLUDE, THEREFORE, THAT NO LEGAL BASIS EXISTS TO OBJECT TO THE METHODS USED BY RCA IN AWARDING ITS SUBSISTENCE SUBCONTRACTS.

THIS IS NOT TO SAY, HOWEVER, THAT ON THE RECORD BEFORE US THERE EXISTS A BASIS FOR US TO CONCLUDE THAT THE METHOD OF EVALUATION USED BY RCA AND THE ULTIMATE AWARD OF THE SUBCONTRACTS TO OTHER THAN THE LOW OFFEROR ON AN INDIVIDUAL ITEM BASIS WERE IN THE BEST INTERESTS OF THE UNITED STATES. ONLY A FEW SUBSISTENCE PROCUREMENTS HAVE BEEN BROUGHT TO OUR ATTENTION, BUT IT IS EVIDENT FROM JUST THIS SMALL SAMPLING THAT UNNECESSARY COSTS ARE BEING INCURRED UNDER RCA'S PRESENT PROCUREMENT METHODS. FURTHERMORE, THESE ADDITIONAL COSTS ARE ULTIMATELY BORNE BY THE GOVERNMENT, APPARENTLY, WITHOUT SUFFICIENT JUSTIFICATION.

ON THE MATTER OF JUSTIFICATION, THE REPORT WOULD SEEM TO INDICATE THAT RCA'S EVALUATION METHOD HAD RECEIVED THE SPECIFIC APPROVAL OF DCASR AT THE TIME RCA'S GENERAL PROCUREMENT SYSTEM WAS APPROVED. WE WERE SUBSEQUENTLY INFORMALLY ADVISED, HOWEVER, THAT SUCH AN INFERENCE WAS NOT INTENDED. ADDITION, WE ARE UNABLE TO FIND SPECIFIC MENTION OF THE RCA EVALUATION PROCEDURE IN THAT COMPANY'S PURCHASING MANUAL WHICH WAS FURNISHED TO OUR OFFICE. WE CAN ONLY CONCLUDE, THEREFORE, THAT THE METHOD OF EVALUATION USED IN THE AWARD OF THE SUBSISTENCE SUBCONTRACTS HAS NOT BEEN SPECIFICALLY SANCTIONED BY THE NAVY OR DCASR, NOTWITHSTANDING ANY APPROVAL GIVEN TO RCA'S PROCUREMENT SYSTEM BY THE LATTER ORGANIZATION.

FURTHER INFORMAL ADVICE IS TO THE EFFECT THAT AWARD TO THE LOWEST EVALUATED OFFEROR ON AN AGGREGATE BASIS IS NECESSITATED BY STAGING PROBLEMS CAUSED BY A LIMITED DELIVERY AREA AND A DESIRE ON RCA'S PART TO PLACE AN AWARD IN A QUANTITY SUFFICIENT TO MAKE THE SUBCONTRACT WORTHWHILE TO SUPPLIERS. WE HAVE INSUFFICIENT INFORMATION ABOUT THE STAGING AREA AND THE METHODS USED FOR TRANSFERRING THE SUBSISTENCE ITEMS FROM TRUCK TO SHIP TO ARRIVE AT ANY CONCLUSION AS TO WHETHER THE STAGING PROBLEMS SUFFICIENTLY JUSTIFY THE METHODS OF EVALUATION AND AWARD UTILIZED BY RCA. NONETHELESS, NOTHING HAS BEEN BROUGHT TO OUR ATTENTION, FORMALLY OR OTHERWISE, WHICH CONVINCES US THAT THE PHYSICAL LIMITATIONS OF THE STAGING AREA CAN BE OVERCOME BY MAKING AN AGGREGATE AWARD TO ONE OFFEROR. ADDITIONALLY, WE BELIEVE THE DETERMINATION OF WHETHER A SUPPLIER WOULD ACCEPT A SUBCONTRACT FOR LESS THAN ALL OF THE ITEMS SOLICITED IS A MATTER BEST LEFT TO THE SUPPLIER WHO MAY BE LOW ON INDIVIDUAL ITEMS, BUT HIGH ON AN AGGREGATE EVALUATED BASIS.

THE REPORT RECEIVED FROM THE NAVAL SHIP SYSTEMS COMMAND WAS FULLY RESPONSIVE TO CHANTICLEER'S ORIGINAL INQUIRY. IT DID NOT, HOWEVER, ADDRESS ITSELF TO THE QUESTION WHETHER THE BEST INTERESTS OF THE GOVERNMENT ARE SERVED THROUGH THE USE OF THE RCA PROCEDURES DISCUSSED ABOVE. ON THE RECORD, WE DO NOT BELIEVE THAT RCA'S EVALUATION PROCEDURES PROMOTE THE GOVERNMENT'S BEST INTERESTS. WE THINK, THEREFORE, THAT THIS MATTER MAY BE WORTHY OF REVIEW AND EVALUATION. IF SUCH A REVIEW IS UNDERTAKEN, WE WOULD APPRECIATE RECEIVING A REPORT ON ITS RESULTS. WE ARE RETURNING THE RCA PROCUREMENT MANUAL SUPPLIED OUR OFFICE.