B-169258, MAY 8, 1970

B-169258: May 8, 1970

Additional Materials:

Contact:

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

 

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

BEST INTEREST OF GOVERNMENT UPON CANCELLATION OF INVITATION FOR CUSTODIAL SERVICES ON BASIS SPECIFICATIONS WERE INADEQUATE FOR GOVERNMENT'S ACTUAL NEEDS AND OF SECOND INVITATION BECAUSE BIDS WERE CONSIDERED EXCESSIVE IN AMOUNT. PROTEST OF LOW BIDDER UNDER BOTH INVITATIONS TO AWARD TO LOW BIDDER ON THIRD INVITATION IS DENIED FOR. GAO WILL NOT OBJECT TO CANCELLATION UNLESS CLEAR ABUSE OF ADMINISTRATIVE DISCRETION HAS BEEN SHOWN AND GAO BELIEVES CONTRACTING OFFICER'S DETERMINATION TO CANCEL INVITATION AS BEING IN BEST INTEREST OF GOVERNMENT WAS PROPER. TO BUILDING MAINTENANCE CORPORATION: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 6. RECEIPT IS ALSO ACKNOWLEDGED OF YOUR LETTER OF APRIL 7.

B-169258, MAY 8, 1970

BIDS--DISCARDING ALL BIDS--SPECIFICATIONS REVISION--BEST INTEREST OF GOVERNMENT UPON CANCELLATION OF INVITATION FOR CUSTODIAL SERVICES ON BASIS SPECIFICATIONS WERE INADEQUATE FOR GOVERNMENT'S ACTUAL NEEDS AND OF SECOND INVITATION BECAUSE BIDS WERE CONSIDERED EXCESSIVE IN AMOUNT, PROTEST OF LOW BIDDER UNDER BOTH INVITATIONS TO AWARD TO LOW BIDDER ON THIRD INVITATION IS DENIED FOR, WHILE GOVERNMENT'S INTEREST AND INTEGRITY OF COMPETITIVE BIDDING SYSTEM REQUIRE INVITATION CANCELLATION ONLY FOR COGENT REASONS, GAO WILL NOT OBJECT TO CANCELLATION UNLESS CLEAR ABUSE OF ADMINISTRATIVE DISCRETION HAS BEEN SHOWN AND GAO BELIEVES CONTRACTING OFFICER'S DETERMINATION TO CANCEL INVITATION AS BEING IN BEST INTEREST OF GOVERNMENT WAS PROPER. SEE COMP. GEN. DECS. CITED.

TO BUILDING MAINTENANCE CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 6, 1970, WITH ENCLOSURES, PROTESTING THE ACTION OF THE SOUTHEAST DIVISION, NAVAL FACILITIES ENGINEERING COMMAND, CHARLESTON, SOUTH CAROLINA, IN CANCELING INVITATION FOR BIDS (IFB) NO. N62467-70-C-0068 (REV.), ISSUED ON JANUARY 14, 1970. RECEIPT IS ALSO ACKNOWLEDGED OF YOUR LETTER OF APRIL 7, 1970, WHEREIN YOU COMMENT UPON THE NAVY REPORT TO OUR OFFICE.

THE ORIGINAL INVITATION, ISSUED ON OCTOBER 22, 1969, REQUESTED BIDS FOR FURNISHING CUSTODIAL SERVICES AT THE BACHELOR ENLISTED QUARTERS FOR THE SUPERVISOR OF SHIPBUILDING, CONVERSION AND REPAIR, USN, PASCAGOULA, MISSISSIPPI, FOR A PERIOD OF 7 MONTHS. FOUR BIDS WERE RECEIVED AND OPENED ON NOVEMBER 18, 1969. THE LOWEST RESPONSIVE BID IN THE AMOUNT OF $3,731 WAS SUBMITTED BY YOUR FIRM. IT IS REPORTED THAT ALL BIDS WERE REJECTED FOR THE REASON THAT THE SCOPE OF THE ORIGINAL SPECIFICATIONS WAS DETERMINED TO BE INADEQUATE FOR THE ACTUAL CUSTODIAL NEEDS OF THE GOVERNMENT. THE ORIGINAL INVITATION WAS CANCELED AND THE PROCUREMENT READVERTISED ON JANUARY 14, 1970, UNDER AN INVITATION BEARING THE SAME IFB NUMBER, WHICH PROVIDED FOR A BID OPENING DATE OF FEBRUARY 12, 1970. ADDITION TO INCREASING THE SCOPE OF THE WORK, THE NEW INVITATION EXTENDED THE TERM OF THE SERVICES FROM 7 TO 12 MONTHS.

FOUR BIDS RANGING FROM $11,196 TO $12,794.16 WERE RECEIVED IN RESPONSE TO THE SECOND INVITATION, AND IT APPEARED THAT THE LOWEST BID WAS SUBMITTED BY YOUR FIRM. IT IS REPORTED THAT BASED ON A DETAILED GOVERNMENT ESTIMATE FOR THE WORK WHICH WAS IN THE AMOUNT OF $6,500, ALL BIDS WERE CONSIDERED TO BE EXCESSIVE IN AMOUNT AND WERE REJECTED ACCORDINGLY. THE SECOND INVITATION WAS CANCELED AND THE PROCUREMENT WITH REVISED WORK REQUIREMENTS WAS READVERTISED UNDER A THIRD INVITATION IN ORDER TO OBTAIN A MORE FAIR AND REASONABLE PRICE FOR THE SERVICES INVOLVED. BIDS RECEIVED IN RESPONSE TO THE THIRD INVITATION WERE OPENED ON MARCH 27, 1970. THE LOWEST BID IN THE AMOUNT OF $3,076.80, WHICH WAS SUBMITTED BY TURNER FOOD SERVICES, WAS REJECTED BECAUSE THE COMPANY HAD FAILED TO SUBMIT A BID BOND AS REQUIRED BY THE INVITATION. THE SECOND LOWEST BID IN THE AMOUNT OF $8,388 WAS SUBMITTED BY H. R. MORGAN, INC; AND THE CONTRACTING OFFICER CONTEMPLATES MAKING AN AWARD TO THAT CORPORATION. AWARD IS BEING WITHHELD PENDING A DECISION ON YOUR PROTEST BY OUR OFFICE.

YOU ALLEGE THAT THE FIRST TWO INVITATIONS WERE CANCELED AND THE PROCUREMENT READVERTISED FOR THE PURPOSE OF GIVING THE INCUMBENT CONTRACTOR, I. V. COMPANY OF PASCAGOULA, MISSISSIPPI, ANOTHER CHANCE AT THE JOB. YOU CONTEND THAT THE SECOND INVITATION REVISED THE SPECIFICATIONS FOR THE ORIGINAL INVITATION BY ADDING THE CLEANING OF TWO BATHROOMS, BY INCREASING THE TERM OF SERVICE FROM 7 TO 12 MONTHS AND BY MAKING SOME OTHER MINOR CHANGES. YOU STATE THAT SINCE THE CHANGE IN THE SPECIFICATIONS WAS SO MINOR AS TO COST, IT IS OBVIOUS THAT THE PROCURING ACTIVITY WANTS TO DO BUSINESS WITH ONLY THE I. V. COMPANY, THEREBY GRANTING THAT FIRM PREFERENTIAL TREATMENT. YOU STATE THAT YOUR FIRM HAS INCURRED STARTUP COSTS AMOUNTING TO $500 AND THAT IF THE DEPARTMENT OF THE NAVY IS PERMITTED TO ARBITRARILY REJECT ALL BIDS, BIDDERS WILL BE RELUCTANT TO UNDERWRITE STARTUP COSTS ON FUTURE PROCUREMENTS.

YOU STATE THAT PARAGRAPHS 2-404.1 (B) (II) AND (VI) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), WHICH WERE RELIED UPON BY THE CONTRACTING OFFICER AS AUTHORITY FOR REJECTION OF ALL BIDS, WERE NOT INTENDED TO ALLOW THE GOVERNMENT TO REJECT BIDS IN BAD FAITH. YOU ALLEGE THAT IT IS OBVIOUS THAT THE HISTORY OF THIS PROCUREMENT INDICATES SOMETHING LESS THAN GOOD FAITH ON THE PART OF THE PROCURING ACTIVITY AND VIOLATES MOST BLATANTLY THE INTEGRITY OF THE FORMAL ADVERTISING SYSTEM. YOU MAINTAIN THAT THE THIRD INVITATION DOES NOT CONTAIN SUCH A CHANGE IN THE SPECIFICATIONS AS WOULD JUSTIFY A $3,000 REDUCTION IN PRICE BY H. R. MORGAN, THE LOWEST RESPONSIVE BIDDER UNDER THAT INVITATION, AND THAT MORGAN'S BID WAS BASED UPON A REEVALUATION OF THE COMPETITIVE FACTORS INVOLVED RATHER THAN THE CHANGE IN THE SPECIFICATIONS. YOU REQUEST THAT A CONTRACT BE AWARDED TO YOUR FIRM AS THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER UNDER THE SECOND INVITATION WHICH SPECIFIED A BID OPENING DATE OF FEBRUARY 12, 1970.

IN OUR OPINION, THE ACTION TAKEN BY THE CONTRACTING OFFICER IN REJECTING ALL BIDS RECEIVED UNDER THE FIRST INVITATION ISSUED ON OCTOBER 22, 1969, WAS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION UNDER 10 U.S.C. 2305 (C), WHICH PROVIDES FOR REJECTION OF ALL BIDS WHEN SUCH ACTION IS DETERMINED TO BE IN THE GOVERNMENT'S INTEREST, AND UNDER APPLICABLE REGULATIONS (ASPR 2-404.1 (B) (II)) WHICH PROVIDE THAT INVITATIONS FOR BIDS MAY BE CANCELED AFTER OPENING BUT PRIOR TO AWARD WHEN THE CONTRACTING OFFICER DETERMINES IN WRITING THAT THE SPECIFICATIONS HAVE BEEN REVISED. ON THE RECORD BEFORE US, WE CANNOT AGREE THAT THE CONTRACTING OFFICER ACTED ARBITRARILY AND CAPRICIOUSLY.

OUR OFFICE HAS CONSISTENTLY HELD THAT, WHILE THE INTEREST OF THE GOVERNMENT AND THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM REQUIRE THAT INVITATIONS BE CANCELED ONLY FOR COGENT REASONS, THERE NECESSARILY IS RESERVED IN THE CONTRACTING OFFICIALS A SUBSTANTIAL AMOUNT OF DISCRETION IN DETERMINING WHETHER OR NOT AN INVITATION SHOULD BE CANCELED. WE WILL, THEREFORE, NOT OBJECT TO THE CANCELLATION OF AN INVITATION UNLESS THERE HAS BEEN A CLEAR SHOWING OF ABUSE OF ADMINISTRATIVE DISCRETION. SEE B- 165206, JANUARY 8, 1969; B-164520, SEPTEMBER 24, 1968; B-162382, MAY 17, 1968; B-159287, JULY 26, 1966. WE MUST CONCLUDE THAT THERE HAS BEEN NO ABUSE OF DISCRETION HERE. THE CONTRACTING OFFICER DETERMINED AFTER BID OPENING THAT THE SCOPE OF THE ORIGINAL SPECIFICATIONS WAS INADEQUATE FOR THE ACTUAL CUSTODIAL NEEDS OF THE GOVERNMENT. THE REVISED SPECIFICATIONS PROVIDED FOR THE EXTENSION OF CUSTODIAL SERVICES TO ALL PARTS OF THE BACHELOR ENLISTED QUARTERS AND INCREASED FREQUENCY OF CLEANING OF SOME AREAS. IN ADDITION, THE TERM OF THE CONTRACT SERVICES WAS EXTENDED FROM 7 TO 12 MONTHS.

IT IS REPORTED THAT A DETAILED ESTIMATE WAS PREPARED FOR THE REVISED WORK UNDER THE SECOND INVITATION ISSUED ON JANUARY 14, 1970, AND THAT AN ESTIMATE OF $6,500 WAS ESTABLISHED FOR THAT WORK; THAT BIDS RANGING FROM $11,196 TO $12,794.16 WERE RECEIVED IN RESPONSE TO THE SECOND INVITATION; AND THAT BECAUSE THE BID PRICES SEEMED UNREASONABLE WHEN COMPARED WITH THE GOVERNMENT'S ESTIMATE, THE CONTRACTING OFFICER DETERMINED TO REJECT ALL BIDS IN ACCORDANCE WITH ASPR 2-404.1 (B) (VI) FOR UNREASONABLENESS OF PRICE.

YOU STATE THAT YOUR PRESIDENT TELEPHONED THE BID OPENING OFFICER AND WAS ADVISED THAT THE GOVERNMENT'S ESTIMATE FOR THE WORK DESCRIBED IN THE FIRST INVITATION ISSUED ON OCTOBER 22, 1969, WAS, BY AN AMAZING COINCIDENCE, $6,500--THE SAME ESTIMATE FOR THE WORK DESCRIBED IN THE SECOND INVITATION ISSUED JANUARY 14, 1970, UNDER WHICH ALL BIDS WERE REJECTED FOR UNREASONABLENESS. YOU QUESTION THE PROPRIETY OF USING THE GOVERNMENT'S ESTIMATE FOR THE WORK DESCRIBED IN THE SECOND INVITATION AS A GUIDELINE AS TO WHETHER ALL BIDS RECEIVED IN RESPONSE TO THAT INVITATION ARE UNREASONABLE AS TO PRICE. YOU STATE THAT YOU DO NOT UNDERSTAND HOW THE GOVERNMENT'S ESTIMATES FOR THE FIRST AND SECOND INVITATIONS COULD BE IN THE SAME AMOUNT OF $6,500, SINCE THE FIRST INVITATION COVERS A PERIOD OF 7 MONTHS' SERVICE WHEREAS THE SECOND INVITATION COVERS A 12-MONTH PERIOD OF SERVICE. ALSO, YOU POINT OUT THAT MORE SERVICES ARE REQUIRED UNDER THE SECOND INVITATION THAN THE FIRST INVITATION. IN THIS CONNECTION, WE HAVE BEEN INFORMALLY ADVISED BY THE NAVAL FACILITIES ENGINEERING COMMAND THAT THE COMMAND DID NOT PREPARE A DETAILED GOVERNMENT ESTIMATE FOR THE WORK DESCRIBED IN THE FIRST INVITATION BUT THAT IT ADOPTED THE AMOUNT OF THE PREVIOUS CONTRACT FOR SIMILAR SERVICES AS ITS ESTIMATE FOR THE WORK INVOLVED. HOWEVER, IN REGARD TO THE SECOND INVITATION, THE COMMAND HAS ADVISED OUR OFFICE THAT IT DID PREPARE A DETAILED GOVERNMENT ESTIMATE FOR THE WORK COVERED BY THAT INVITATION AND THAT IT BELIEVES SUCH ESTIMATE TO BE REASONABLY ACCURATE FOR THE WORK INVOLVED.

OUR OFFICE HAS RECOGNIZED THAT THE AUTHORITY VESTED IN THE CONTRACTING OFFICER TO REJECT ANY AND ALL BIDS AND READVERTISE IS EXTREMELY BROAD. SEE 39 COMP. GEN. 396, 399 (1959). WE THINK THE CONTRACTING OFFICER'S DETERMINATION THAT THE PUBLIC INTEREST WOULD BEST BE SERVED BY A CANCELLATION OF THE SECOND INVITATION BECAUSE THE BID PRICES RECEIVED IN RESPONSE THERETO WERE UNREASONABLE IS NOT SUBJECT TO QUESTION ON THE RECORD BEFORE US. WE ALSO BELIEVE THAT THE ACCEPTANCE OF THE GOVERNMENT ESTIMATE FOR THE SECOND INVITATION AS A GUIDELINE FOR UNREASONABLENESS OF PRICE WAS BASED ON A BONA FIDE BELIEF THAT SUCH ESTIMATE FAIRLY REPRESENTED THE WORK COVERED THEREBY.

WITH REGARD TO THE BID PRICE QUOTED BY H. R. MORGAN IN RESPONSE TO THE THIRD IFB, WE HAVE NO INDEPENDENT INFORMATION THAT MORGAN IS ATTEMPTING TO "BUY IN" WITHIN THE CONTEMPLATION OF ASPR 1-311. IN ANY EVENT, THE RESPONSIBILITY FOR MINIMIZING OR AVOIDING "BUY-INS" IS THAT OF THE CONTRACTING OFFICE AS PART OF ITS CONTRACT MANAGEMENT DUTIES.