B-168557, JAN. 23, 1970

B-168557: Jan 23, 1970

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CANCELLATION OF INVITATION AND REJECTION OF ONLY BID BECAUSE INITIAL PRICE WAS NOT REASONABLE IS UPHELD IN ABSENCE OF ANY INDICATION OF IMPROPER EXERCISE OF ADMINISTRATIVE DISCRETION. UNDER REPROCUREMENT THE WAIVER OF FIRST ARTICLE LISTING FOR LOW BIDDER WHO LISTED A COMPONENT BY A COMPANY NO LONGER MANUFACTURING THE ITEM IS APPROVED SINCE RECORD INDICATED CONTRACTING OFFICER HAD KNOWLEDGE OF CURRENT CONTRACT FOR SIMILAR EQUIPMENT. TO THE TRANE COMPANY: REFERENCE IS MADE TO YOUR TELEGRAM DATED DECEMBER 5. THE TELEGRAM STATES THAT YOUR PROTEST IS BASED ON THE FOLLOWING PREMISES: "A. THE TRANE COMPANY BID WAS LOW ON THE BASE BID WHICH INCLUDED 'FIRST ARTICLE TESTING AND APPROVAL'. "B. THE TRANE COMPANY WAS THE ONLY BIDDER QUALIFIED FOR WAIVER OF 'FIRST ARTICLE TESTING AND APPROVAL' AS OF THE DATE FOR RECEIPT OF OFFERS.

B-168557, JAN. 23, 1970

BID PROTEST--READVERTISEMENT--FIRST ARTICLE TESTING REQUIREMENT DECISION DENYING PROTEST OF THE TRANE CO. AGAINST AWARD TO KECO INDUSTRIES, INC; BY DEFENSE CONSTRUCTION SUPPLY CENTER FOR AIR CONDITIONERS. CANCELLATION OF INVITATION AND REJECTION OF ONLY BID BECAUSE INITIAL PRICE WAS NOT REASONABLE IS UPHELD IN ABSENCE OF ANY INDICATION OF IMPROPER EXERCISE OF ADMINISTRATIVE DISCRETION. UNDER REPROCUREMENT THE WAIVER OF FIRST ARTICLE LISTING FOR LOW BIDDER WHO LISTED A COMPONENT BY A COMPANY NO LONGER MANUFACTURING THE ITEM IS APPROVED SINCE RECORD INDICATED CONTRACTING OFFICER HAD KNOWLEDGE OF CURRENT CONTRACT FOR SIMILAR EQUIPMENT. FIRST ARTICLE TESTING DECISIONS DISTINGUISHED FROM QUALIFIED PRODUCT LISTING DECISIONS.

TO THE TRANE COMPANY:

REFERENCE IS MADE TO YOUR TELEGRAM DATED DECEMBER 5, 1969, AND YOUR LETTER OF DECEMBER 31, 1969, PROTESTING THE AWARD OF ANY CONTRACT UNDER INVITATION FOR BIDS NO. DSA 700-70-B-1071 ISSUED BY THE DEFENSE CONSTRUCTION SUPPLY CENTER AT COLUMBUS, OHIO, TO OTHER THAN THE TRANE COMPANY.

THE TELEGRAM STATES THAT YOUR PROTEST IS BASED ON THE FOLLOWING PREMISES:

"A. THE TRANE COMPANY BID WAS LOW ON THE BASE BID WHICH INCLUDED 'FIRST ARTICLE TESTING AND APPROVAL'.

"B. THE TRANE COMPANY WAS THE ONLY BIDDER QUALIFIED FOR WAIVER OF 'FIRST ARTICLE TESTING AND APPROVAL' AS OF THE DATE FOR RECEIPT OF OFFERS, OCTOBER 30, 1969.

"C. THEREFORE THE TRANE COMPANY BID WAS LOW WITH RESPECT TO BOTH THE BASE BID PRICE AND THE 'FIRST ARTICLE TESTING AND APPROVAL' WAIVED FOR ALL BIDDERS THEN QUALIFIED FOR SUCH WAIVER."

YOU FURTHER CONTEND THAT THE ONLY OTHER BIDDER, KECO INDUSTRIES, INCORPORATED, LISTED A CONTRACT, CITED AS A BASIS FOR WAIVER, THAT USED A CONDENSER AND EVAPORATOR COILS MANUFACTURED FOR KECO BY A COMPANY THAT NO LONGER MANUFACTURED THE COILS. YOU STATE THAT "THESE COILS ARE MAJOR COMPONENTS WHICH AFFECT UNIT PERFORMANCE AND THEREFORE, * * * KECO WAS NOT QUALIFIED FOR SUCH WAIVER AS OF THE DATE FOR RECEIPT OF OFFERS." YOU ALSO CONTEND THAT:

"* * * THE SUBJECT SOLICITATION WAS A READVERTISEMENT OF SOLICITATION NO. DSA 700-69-B-3689, WHICH WAS CANCELLED AFTER OFFERS WERE RECEIVED DUE TO A DETERMINATION OF UNREASONABLE PRICE. THE BID PRICES IN THE SUBSEQUENT SOLICITATION WERE NOT SIGNIFICANTLY LOWER THAN THE TRANE COMPANY BID PRICE IN THE ORIGINAL SOLICITATION, INDICATING THAT THE INITIAL PRICE WAS NOT UNREASONABLE."

INVITATION FOR BIDS NO. DSA 700-69-B-3689 WAS ISSUED, AS A RESULT OF A MILITARY INTERDEPARTMENTAL PURCHASE REQUEST FROM SAN ANTONIO AIR MATERIEL AREA (SAAMA), ON MAY 16, 1969, FOR OPENING JUNE 17, 1969, AND CALLED FOR BIDS ON VARIOUS QUANTITIES OF AIR CONDITIONERS AND DATA AS THEREIN DESCRIBED. THE ONLY BID RECEIVED, FROM THE TRANE COMPANY, OFFERED A QUANTITY OF 39 UNITS AT A UNIT PRICE OF $2,547 WITH FIRST ARTICLE TESTING OR A UNIT PRICE OF $2,470 WITH FIRST ARTICLE TESTING WAIVED. ON JULY 23, 1969, THE REQUISITIONER (SAAMA) DETERMINED THAT THE QUANTITY OF 39 UNITS WAS REQUIRED.

ON JUNE 23, 1969, SIX DAYS AFTER BID OPENING, A TELEGRAM FROM KECO INDUSTRIES, INCORPORATED, WAS RECEIVED BY THE CONTRACTING OFFICER, STATING THAT KECO HAD MISPLACED THE INVITATION AND FURTHER THAT IT HAD A CURRENT CONTRACT WITH DEFENSE GENERAL SUPPLY CENTER (DGSC), RICHMOND, VIRGINIA, FOR THE SAME ITEM AND WOULD ACCEPT AN ORDER FOR ADDITIONAL 39 UNITS AT THE CONTRACT PRICE OF $2,147. THEREAFTER, THE CONTRACTING OFFICER CONTACTED DGSC FOR CONFIRMATION OF THE PRICE AND ADVICE AS TO WHETHER AN OPTION FOR ADDITIONAL UNITS WAS AVAILABLE UNDER THE CONTRACT. IT WAS LEARNED THAT THE CITED DGSC CONTRACT WAS FOR A QUANTITY OF 65 UNITS AT A UNIT PRICE OF $2,147 AND THAT NO OPTION WAS AVAILABLE.

IT IS REPORTED THAT BECAUSE OF THE DIFFERENCE IN PRICE (A TOTAL OF $12,597 ON 39 UNITS) AND THE FACT THAT ONLY ONE BID HAD BEEN RECEIVED, IT WAS DETERMINED THAT THE TRANE COMPANY BID WAS UNREASONABLE AND THE INVITATION FOR BIDS WAS CANCELLED ON SEPTEMBER 16, 1969.

THE PROCUREMENT WAS READVERTISED ON OCTOBER 7, 1969, UNDER IFB NO. DSA 700-69-B-1071, WITH BID OPENING ON OCTOBER 23, 1969, WHICH CALLED FOR 39 AIR CONDITIONERS AND RELATED DATA, AS DESCRIBED THEREIN. THE TRANE BID, WITHOUT TESTING, NET 30 DAYS, AND WITH TRANSPORTATION COSTS OF $16.76 PER UNIT TOTALLED $2,396.76 PER UNIT. THE KECO BID, LESS 1/2 OF 1% - 20 DAYS PROMPT PAYMENT DISCOUNT, PLUS $11.85 PER UNIT TRANSPORTATION COSTS, AMOUNTED TO $2,250.60 PER UNIT. THE TOTAL NET DELIVERED CONTRACT PRICE FOR EACH BIDDER, INCLUDING DATA COSTS, AND WITHOUT FIRST ARTICLE TESTING, IS: KECO - $90,268.86 AND TRANE $93,482.64. BY MESSAGE DATED DECEMBER 12, 1969, CONFIRMING A DECEMBER 3, 1969, TELEPHONE REPORT, THE ENGINEERING SUPPORT ACTIVITY AT SAN ANTONIO MATERIEL AREA ADVISED THE CONTRACTING OFFICER THAT:

"* * * KECO INDUSTRIES, INC; IS CURRENTLY ELIGIBLE FOR WAIVER OF PREPRODUCTION TESTING ON THE A/E 32C-17 AIR CONDITIONER." THIS REPORT WAS PREDICATED ON A CURRENT KECO CONTRACT WITH THE DEFENSE GENERAL SUPPLY CENTER AT RICHMOND, VIRGINIA. IN THIS CONNECTION IT MUST BE NOTED THAT IN ITS BID FORM, KECO REFERRED TO A 1968 CONTRACT, NO. DSA 700-68-C-9213, DATED MARCH 22, 1968, WITH THE DEFENSE CONTRACT SUPPLY CENTER AT COLUMBUS, OHIO. IT IS THIS CONTRACT THAT TRANE REFERS TO IN ITS PROTEST AND NOT THE CURRENT CONTRACT WITH THE DGSC AT RICHMOND, UNDER WHICH A WAIVER OF FIRST ARTICLE TESTING IS GRANTED TO KECO.

WITH RESPECT TO THE REJECTION OF ALL BIDS UNDER THE EARLIER SOLICITATION, 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(1945), 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

THE RIGHT TO REJECT ALL BIDS IS RESERVED TO THE GOVERNMENT IS PROPER UNDER THE REGULATION, SHOULD BE UPHELD. 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.

HERE THE CONTRACTING OFFICER ENVISIONED A SAVINGS TO THE GOVERNMENT BY READVERTISING THE PROCUREMENT AND, AS INDICATED ABOVE, THIS IS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION, ABSENT FRAUD OR BAD FAITH, NEITHER OF WHICH IS ALLEGED. IN THIS CONNECTION ALSO, IT MAY BE POINTED OUT THAT ON THE ORIGINAL SOLICITATION, WHERE TRANE WAS THE ONLY BIDDER, IT WOULD HAVE BEEN POSSIBLE FOR THE CONTRACTING OFFICER TO HAVE DETERMINED THAT COMPETITION DID NOT EXIST.

YOU ALSO CONTEND KECO WAS NOT QUALIFIED FOR WAIVER OF FIRST ARTICLE TESTING UNDER CLAUSE 2.107 OF THE SOLICITATION SINCE THE PRIOR CONTRACT LISTED BY KECO AS WARRANTING A WAIVER INVOLVED A PRODUCT CONTAINING CONDENSER AND EVAPORATOR COILS FROM A COMPANY NO LONGER MANUFACTURING COILS. THE CONTRACTING OFFICER APPROVED THE WAIVER ON THE BASIS OF A DIFFERENT CONTRACT FOR AIR CONDITIONERS BEING PROCURED BY THE DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA.

THIS OFFICE HAS APPROVED SIMILAR ACTION IN PAST PROCUREMENTS WHERE ALTHOUGH THE INFORMATION FURNISHED IN THE BID DID NOT WARRANT WAIVER, THE CONTRACTING OFFICER WAS AWARE OF OTHER INFORMATION THAT DID JUSTIFY WAIVER OF FIRST ARTICLE TESTING. IN ONE PARTICULARLY ANALOGOUS INSTANCE A BIDDER LISTED A CONTRACT, WHEREIN A WAIVER HAD BEEN GRANTED ON THE BASIS OF A THIRD CONTRACT, AS WARRANTING WAIVER OF FIRST ARTICLE TESTING IN THE CONTRACT BEING BID UPON. SEE B-160727, APRIL 4, 1967. IN THAT CASE WAIVER OF FIRST ARTICLE TESTING WAS APPROVED SINCE THE PRODUCT ACTUALLY HAD BEEN TESTED BY THE GOVERNMENT.

THE PURPOSE OF FIRST ARTICLE TESTING IS TO DETERMINE WHETHER A BIDDER HAS THE ABILITY TO PRODUCE AN ITEM MEETING THE NEEDS OF THE GOVERNMENT. THE RESPONSIBILITY FOR OBTAINING A WAIVER FROM THAT REQUIREMENT, IS PLACED UPON THE PROSPECTIVE CONTRACTOR. WHERE A BIDDER FAILS TO PROVIDE SUFFICIENT INFORMATION PRIOR TO AWARD, WE WILL NOT OBJECT TO THE AGENCY'S REFUSAL TO WAIVE FIRST ARTICLE TESTING OR THE AWARD TO ANOTHER BIDDER. SEE B-155314, DECEMBER 2, 1964. SIMILARLY, WHERE THE ADMINISTRATIVE OFFICIALS AFTER REVIEWING ALL THE INFORMATION AVAILABLE HAVE DETERMINED TO WAIVE FIRST ARTICLE TESTING, THIS OFFICE WILL QUESTION THAT DECISION ONLY IF IT IS SHOWN TO BE ARBITRARY, CAPRICIOUS OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. SEE 46 COMP. GEN. 123 (1966). AS A RESULT, WHILE THE BIDDER ASSUMES THE RISK IN FAILING TO PRESENT EVIDENCE WARRANTING A WAIVER, THE DETERMINATION WHETHER OR NOT TO GRANT SUCH A WAIVER RESTS SOLELY WITHIN THE DISCRETION OF THE PROCURING ACTIVITY.

THAT THE GOVERNMENT, NOT THE BIDDER, HAS THE POWER TO WAIVE FIRST ARTICLE TESTING IS CLEAR FROM CLAUSE 2.107 OF THE SOLICITATION AND FROM ASPR 1- 1903. THE WEIGHT TO BE GIVEN INFORMATION OR EVEN WHAT INFORMATION IS TO BE CONSIDERED BY THE AGENCY IN DETERMINING WHETHER TO GRANT A WAIVER ALSO IS LEFT TO THE JUDGMENT OF THE OFFICIALS MAKING THE DETERMINATION. ASPR 1 -1903(A) (II) STATES THE SOLICITATION SHALL PROVIDE FOR:

(II) THE SUBMISSION OF THE CONTRACT NUMBERS, IF ANY, UNDER WHICH IDENTICAL OR SIMILAR SUPPLIES WERE PREVIOUSLY ACCEPTED FROM THE BIDDER OR OFFEROR BY THE GOVERNMENT; * * *" (UNDERSCORING SUPPLIED.) THAT LANGUAGE CLEARLY ALLOWS A WAIVER EVEN THOUGH A PRIOR CONTRACT NUMBER DOES NOT EXIST AND ALSO ALLOWS A WAIVER ON THE BASIS OF CONTRACTS FOR SUPPLIES THE GOVERNMENT DETERMINES WERE SO SIMILAR IN NATURE AS TO WARRANT WAIVER. WOULD, THEREFORE, FIND IT UNTENABLE TO CONSTRUE THAT LANGUAGE AS PROHIBITING THE GOVERNMENT FROM WAIVING FIRST ARTICLE TESTING SIMPLY BECAUSE A BIDDER FAILED TO FURNISH A CONTRACT NUMBER.

OUR CONCERN IN THESE PROCUREMENTS IS THAT ALL BIDDERS ARE PERMITTED TO COMPETE ON THE SAME BASIS, AS REQUIRED BY STATUTE. IN THIS INSTANCE ALL BIDDERS WERE ALLOWED TO SUBMIT ALTERNATE BIDS ON THE BASIS OF WAIVER OF FIRST ARTICLE TESTING BY THE GOVERNMENT. AS WE STATED, THE DECISION WHETHER SUCH WAIVER WILL BE GRANTED IS QUESTIONED BY US ONLY FOR LACK OF GOOD FAITH. SINCE KECO'S PRODUCT ACTUALLY WAS TESTED AND QUALIFIED UNDER A PRIOR CONTRACT, WE FIND NO BASIS TO OBJECT TO THE WAIVER OF FIRST ARTICLE TESTING.

WE ALSO HAVE CONSIDERED THE PARALLELS YOU HAVE DRAWN BETWEEN OUR DECISIONS INVOLVING THE USE OF QUALIFIED PRODUCTS LISTS (QPL) AND THE USE OF FIRST ARTICLE TESTING TO SUPPORT YOUR CONTENTION THAT A WAIVER OF THE TESTING REQUIREMENT SHOULD NOT HAVE BEEN GRANTED ON THE BASIS OF SOMETHING WHICH OCCURRED AFTER BID OPENING.

WE MUST REJECT THAT POSITION AND DO NOT CONSIDER OUR DECISIONS INVOLVING QPL'S APPLICABLE TO FIRST ARTICLE TESTING. QPL'S WERE APPROVED BY THIS OFFICE AS A RESTRICTION ON COMPETITION USED SIMPLY BECAUSE THE NEEDS OF THE GOVERNMENT IN THOSE INSTANCES REQUIRE QUALIFICATION OF PRODUCTS PRIOR TO THE SOLICITATION OF BIDS. SEE36 COMP. GEN. 809, 816 (1957) AND ASPR 1- 1101(A). SINCE THIS SYSTEM REQUIRES COMPANIES TO UNDERGO THE EXPENSE OF QUALIFICATION WITHOUT ANY ASSURANCE OF A CONTRACT AWARD, WE BELIEVE IT WOULD BE UNFAIR TO ALLOW ANOTHER COMPANY TO BID FOR THE SAME PROCUREMENT AND ONLY AFTER BID OPENING, WHEN THAT COMPANY COULD DETERMINE IF IT WERE IN LINE FOR AWARD, TO INCUR THE EXPENSE OF QUALIFYING ITS PRODUCT.

FIRST ARTICLE TESTING IS DESIGNED TO ASSURE THAT THE CONTRACTOR CAN FURNISH A PRODUCT THAT IS SATISFACTORY FOR ITS INTENDED USE. SEE ASPR 1- 1902(A). UNLIKE THE QPL SITUATION, BIDDERS ARE NOT REQUIRED TO INCUR THE EXPENSE OF FIRST ARTICLE TESTING TO MAKE THEMSELVES ELIGIBLE TO BID. THEREFORE, WE SEE NO BASIS TO PROHIBIT BIDDING BASED ON A WAIVER OF FIRST ARTICLE TESTING EXCEPT WHEN A BIDDER IS ELIGIBLE FOR SUCH WAIVER PRIOR TO BID OPENING. AT THE TIME OF AWARD, KECO WAS ELIGIBLE FOR WAIVER OF FIRST ARTICLE TESTING AND WAS THE LOW RESPONSIVE BIDDER.