B-170534, OCT. 6, 1970

B-170534: Oct 6, 1970

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THE ESTIMATED PRICE QUOTED BY THE OFFEROR DOES NOT CONTROL THE AMOUNT THAT THE CONTRACTOR WILL BE REIMBURSED. SINCE GAO CAN NOT IN SUCH CASES SUPPLANT CONTRACTING OFFICER'S TECHNICAL JUDGEMENT AS TO WHICH PROPOSAL IS IN BEST INTEREST OF GOVERNMENT. A REQUEST FOR PROPOSALS FOR THIS ECONOMIC FEASIBILITY STUDY WAS SENT TO EIGHT FIRMS AFTER PREQUALIFICATION OF THOSE FIRMS BY AID. WEITZ HETTELSATER AND WALDMAN WERE TWO OF THE FIRMS SOLICITED. THE TECHNICAL PROPOSALS SUBMITTED BY OFFERORS WERE OPENED FIRST AND EVALUATED PURSUANT TO PREVIOUSLY ESTABLISHED CRITERIA. THE COST PROPOSALS WERE OPENED AND EVALUATED. SELECTED WEITZ-HETTELSATER AS THE OFFEROR WHOSE PROPOSAL WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.

B-170534, OCT. 6, 1970

BID PROTEST - NEGOTIATIONS - COST-PLUS-A-FIXED-FEE DENIAL OF PROTEST ON BEHALF OF WILDMAN AGRICULTURAL RESEARCH, INC., AGAINST AWARD OF CONTRACT BY AID TO WEITZ-HETTELSATER ENGINEERS FOR THE "INDONESIA RICE STORAGE, HANDLING AND MARKETING FEASIBILITY STUDY." SINCE UNDER A COST-PLUS-A-FIXED-FEE NEGOTIATED CONTRACT, THE ESTIMATED PRICE QUOTED BY THE OFFEROR DOES NOT CONTROL THE AMOUNT THAT THE CONTRACTOR WILL BE REIMBURSED, OFFERS SHOULD NOT BE EVALUATED ON A STRICTLY PRICE BASIS. SINCE GAO CAN NOT IN SUCH CASES SUPPLANT CONTRACTING OFFICER'S TECHNICAL JUDGEMENT AS TO WHICH PROPOSAL IS IN BEST INTEREST OF GOVERNMENT, PROTEST AGAINST AWARD MUST BE DENIED.

TO MESSRS. PAUL THUNFORS AND RAYMOND C. PELON:

THIS CONCERNS YOUR LETTER OF AUGUST 4, 1970, PROTESTING ON BEHALF OF WILDMAN AGRICULTURAL RESEARCH, INCORPORATED, AND OTHER QUALIFIED CONTRACTING FIRMS THE CONTRACT AWARD BY THE AGENCY FOR INTERNATIONAL DEVELOPMENT TO WEITZ-HETTELSATER ENGINEERS FOR THE "INDONESIA RICE STORAGE, HANDLING AND MARKETING FEASIBILITY STUDY."

A REQUEST FOR PROPOSALS FOR THIS ECONOMIC FEASIBILITY STUDY WAS SENT TO EIGHT FIRMS AFTER PREQUALIFICATION OF THOSE FIRMS BY AID. WEITZ HETTELSATER AND WALDMAN WERE TWO OF THE FIRMS SOLICITED. THE REQUEST FOR PROPOSALS SOLICITED BOTH A TECHNICAL PROPOSAL AND A COST PROPOSAL IN SEPARATE ENVELOPES FOR PERFORMING THIS STUDY ON THE BASIS OF A COST PLUS-A -FIXED-FEE CONTRACT. THE TECHNICAL PROPOSALS SUBMITTED BY OFFERORS WERE OPENED FIRST AND EVALUATED PURSUANT TO PREVIOUSLY ESTABLISHED CRITERIA. AFTER RANKING THE FIRMS ON THE BASIS OF THE TECHNICAL PROPOSALS, THE COST PROPOSALS WERE OPENED AND EVALUATED. ON THE BASIS OF THESE EVALUATIONS AID DECIDED TO CONDUCT DISCUSSIONS CONCERNING THE COST AND TECHNICAL PROPOSALS WITH THE THREE OFFERORS RANKING HIGHEST IN THEIR TECHNICAL PROPOSALS. THESE 3 OFFERORS SUBMITTED REVISED TECHNICAL AND COST PROPOSALS AS A RESULT OF THE DISCUSSIONS AND THE SELECTION PANEL, AFTER EVALUATING THE REVISED PROPOSALS, SELECTED WEITZ-HETTELSATER AS THE OFFEROR WHOSE PROPOSAL WAS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. ON SEPTEMBER 18, 1970, WE WERE ADVISED BY AID THAT AWARD WILL BE MADE TO THAT FIRM NOTWITHSTANDING YOUR PROTEST PURSUANT TO FPR 1-2.407-8 DUE TO "CLEAR AND URGENT NEED."

YOU PROTEST AN AWARD TO WEITZ-HETTELSATER FOR A NUMBER OF REASONS. FIRST, YOU BELIEVE WEITZ-HETTELSATER IS COMPETING FOR THIS CONTRACT ONLY TO BENEFIT FINANCIALLY BY RECEIVING THE LATER FOLLOW-UP ENGINEERING WORK. IN THIS REGARD YOU STATE THAT WEITZ-HETTELSATER IS NOT AN ECONOMIC GROUP BUT AN ENGINEERING FIRM AND THAT PRIOR ECONOMIC STUDIES BY WEITZ- HETTELSATER WERE CARRIED OUT BY PERSONNEL NOW WITH WILDMAN, IN PARTICULAR DR. SHARP. ALSO YOU HAVE REFERRED TO CERTAIN PRIOR STUDIES BY WEITZ- HETTELSATER WHICH YOU CONTEND INFLATED THE LATER ENGINEERING WORK TO BE DONE.

AID INVESTIGATED YOUR ALLEGATION CONCERNING INFLATED ESTIMATES ON PRIOR STUDIES CONDUCTED BY WEITZ-HETTELSATER AND, AS YOU KNOW, FOUND THAT THIS ALLEGATION WAS NOT SUPPORTED BY THE EVIDENCE OF RECORD. WE ALSO NOTE THAT WEITZ-HETTELSATER WOULD BE BARRED FROM CONSIDERATION FOR ANY SUBSEQUENT ENGINEERING WORK THAT AID MIGHT FINANCE ON THE BASIS OF THIS STUDY. AID MANUAL ORDER 1443.1 (III)(B). (AID REPORTS THAT WEITZ HETTELSATER WAS ADVISED OF THIS PROHIBITION). IN ADDITION, WE FIND THAT THE PERSONNEL WEITZ-HETTELSATER PROPOSES TO USE IN CONDUCTING THIS STUDY INCLUDES 3 PROFESSORS OF ECONOMICS. THEREFORE, EVEN IF PRIOR ECONOMIC STUDIES BY WEITZ-HETTELSATER WERE PERFORMED BY DR. SHARP AND OTHERS NOW WITH WILDMAN, WE ARE NOT PREPARED TO CONCLUDE THAT WEITZ HETTELSATER LACKS QUALIFIED PERSONNEL TO PERFORM THIS CURRENT STUDY.

ANOTHER BASIS FOR YOUR PROTEST IS THAT ALL THE DOCUMENTARY MATERIAL FURNISHED BY WILDMAN WAS NOT INCLUDED WHEN QUALIFICATIONS WERE MADE OF THE FIRMS INTERESTED IN THIS PROGRAM. THE PARTICULAR MATERIAL INVOLVED WAS A FEASIBILITY STUDY ENTITLED "ECONOMIC AND ENGINEERING STUDY FOR GRAIN STORAGE AND MARKETING SYSTEM FOR VIETNAM" CONDUCTED BY WILDMAN. THE RECORD SHOWS, HOWEVER, THAT IT WAS THE DEFICIENCIES IN WILDMAN'S TECHNICAL PROPOSAL AND NOT THE FAILURE BY AID TO CONSIDER THE ABOVE PRIOR STUDY WHICH RESULTED IN THE CONTRACT NOT BEING AWARDED TO THAT FIRM. FURTHER, WHILE A COPY OF THE VIETNAM STUDY MAY HAVE BEEN GIVEN TO AN AID OFFICIAL, IT WAS NOT INCLUDED AS PART OF WILDMAN'S TECHNICAL PROPOSAL, NOR WAS IT GIVEN TO THE PROPER PARTY AT AID FOR INCLUSION AS PART OF THE TECHNICAL PROPOSAL. HOWEVER, AID REPORTS THAT IT IS THE USUAL PROCEDURE FOR THE SELECTION PANEL TO CHECK WITH OTHER REGIONAL BUREAUS AFTER EVALUATING THE TECHNICAL PROPOSAL TO ASCERTAIN WHAT EXPERIENCE THOSE BUREAUS HAVE HAD IN DEALING WITH THE FIRM. IN THIS CASE THE VIETNAM BUREAU REPORTED THAT WILDMAN HAD PERFORMED WELL, INCLUDING THE REPORT ON THE STUDY, AND THESE FACTS WERE CONSIDERED BY THE SELECTION PANEL.

THE FINAL BASIS FOR YOUR PROTEST RELATES TO THE MANNER IN WHICH THE SUCCESSFUL OFFEROR WAS SELECTED. YOU QUESTION AN AWARD AT A PRICE HIGHER THAN $110,655 AS PROPOSED BY WILDMAN AND THE SELECTION OF ANY FIRM TO BE AWARDED THE CONTRACT ON A BASIS OTHER THAN "REASONABLE LOW BID" ACCEPTANCE. THE CONTRACT TO BE AWARDED FOR THIS STUDY IS A COST PLUS-A- FIXED-FEE TYPE CONTRACT. UNDER SUCH A CONTRACT THE PRICE SUBMITTED BY OFFERORS OR THE COST OF PERFORMING THE STUDY ARE ONLY ESTIMATES OF WHAT IT MAY ACTUALLY COST. THE SUCCESSFUL CONTRACTOR IN SUCH SITUATIONS IS REIMBURSED NOT ON THE BASIS OF HIS ESTIMATE BUT FOR THE ACTUAL COSTS INCURRED IN PERFORMING THE WORK. SINCE THE ESTIMATED PRICE QUOTED BY THE OFFEROR DOES NOT CONTROL THE AMOUNT HE WILL ACTUALLY BE REIMBURSED, OFFERS TO PERFORM WORK ON A COST-PLUS-A-FIXED FEE BASIS SHOULD NOT BE EVALUATED ON A STRICTLY PRICE BASIS. IN THIS CONNECTION, FEDERAL PROCUREMENT REGULATION 1-3.805-2 STATES:

"SEC. 1-3.805-2 COST-REIMBURSEMENT TYPE CONTRACTS.

"IN SELECTING THE CONTRACTOR FOR A COST-REIMBURSEMENT TYPE CONTRACT, ESTIMATED COSTS OF CONTRACT PERFORMANCE AND PROPOSED FEES SHOULD NOT BE CONSIDERED AS CONTROLLING, SINCE IN THIS TYPE OF CONTRACT ADVANCE ESTIMATES OF COST MAY NOT PROVIDE VALID INDICATORS OF FINAL ACTUAL COSTS. THERE IS NO REQUIREMENT THAT COST-REIMBURSEMENT TYPE CONTRACTS BE AWARDED ON THE BASIS OF EITHER (A) THE LOWEST PROPOSED COST, (B) THE LOWEST PROPOSED FEE, OR (C) THE LOWEST TOTAL ESTIMATED COST PLUS PROPOSED FEE. THE AWARD OF COST-REIMBURSEMENT TYPE CONTRACTS PRIMARILY ON THE BASIS OF ESTIMATED COSTS MAY ENCOURAGE THE SUBMISSION OF UNREALISTICALLY LOW ESTIMATES AND INCREASE THE LIKELIHOOD OF COST OVERRUNS. THE COST ESTIMATE IS IMPORTANT TO DETERMINE THE PROSPECTIVE CONTRACTOR'S UNDERSTANDING OF THE PROJECT AND ABILITY TO ORGANIZE AND PERFORM THE CONTRACT. THE AGREED FEE MUST BE WITHIN THE LIMITS PRESCRIBED BY LAW AND AGENCY PROCEDURES AND APPROPRIATE TO THE WORK TO BE PERFORMED (SEE SEC. 1-3.808). BEYOND THIS, HOWEVER, THE PRIMARY CONSIDERATION IN DETERMINING TO WHOM THE AWARD SHALL BE MADE IS: WHICH CONTRACTOR CAN PERFORM THE CONTRACT IN A MANNER MOST ADVANTAGEOUS TO THE GOVERNMENT." IN SUCH PROCUREMENTS THERE IS NO REQUIREMENT SUCH AS IN FORMAL ADVERTISING THAT AWARD BE MADE ON THE BASIS OF THE LOWEST PRICE, NOR WILL WE SUPPLANT THE CONTRACTING OFFICER'S TECHNICAL JUDGMENT WITH OUR OWN DETERMINATION AS TO WHICH PROPOSAL IS IN THE GOVERNMENT'S BEST INTEREST. CF. 40 COMP. GEN. 508 (1961); B-169831, JULY 27, 1970, AND B-161975, AUGUST 25, 1967.

ACCORDINGLY, YOUR PROTEST MUST BE DENIED.