B-170913, NOV. 17, 1970

B-170913, NOV. 17, 1970

BID PROTEST - OPTION V NEW ADVERTISEMENT DENIAL OF PROTEST OF CALTEX ENGINEERING COMPANY AGAINST AWARD TO WEBSTER CONTRACTORS, INC., FOR FURNISHING REFUSE COLLECTION SERVICES AT SANDIA AND MANZANO BASES, AND SUSTAINING PROTEST OF WEBSTER AGAINST ALLOWING CALTEX TO REDUCE ITS CONTRACT PRICE UNDER AN OPTION CLAUSE. AN OFFER BY A CURRENT CONTRACTOR TO REDUCE THE PRICE UNDER AN OPTION CONTRACT AFTER PROCURING AGENCY HAD SUBMITTED THE MATTER TO COMPETITIVE BIDDING AND THE INVITATION PRODUCED A BETTER PRICE THAN THAT OFFERED BY THE OPTION WOULD BE TANTAMOUNT TO ALLOWING THE UNSUCCESSFUL BIDDER (THE CURRENT CONTRACTOR) TO CHANGE HIS BID AFTER OPENING IN ORDER TO DISPLACE THE LOW BID. THEREFORE AWARD TO THE LOW BIDDER UNDER THE COMPETITION IS PROPER.

TO ADMIRAL MUST IN:

WE REFER TO A LETTER OF OCTOBER 13, 1970, FROM DR. JOHN W. WATSON, CHIEF, CONTRACT DIVISION, DEFENSE ATOMIC SUPPORT AGENCY, WHICH FORWARDED A REPORT ON THE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. DASA02-71-B-0021 FOR REFUSE COLLECTION SERVICES AT SANDIA AND MANZANO BASES, ALBUQUERQUE, NEW MEXICO, WHICH LED TO PROTESTS FROM CALTEX ENGINEERING COMPANY, OXNARD, CALIFORNIA, AND WEBSTER CONTRACTORS, INC., SHREVEPORT, LOUISIANA.

ON SEPTEMBER 24, 1969, CONTRACT DASA02-70-C-0042 WAS AWARDED TO CALTEX ENGINEERING COMPANY IN THE AMOUNT OF $98,088.00 FOR REFUSE COLLECTION SERVICES AT SANDIA AND MANZANO BASES FOR THE PERIOD OF ONE YEAR FROM OCTOBER 1, 1969, THROUGH SEPTEMBER 30, 1970. THE CONTRACT CONTAINED THE FOLLOWING PROVISION:

"OPTION TO EXTEND THE TERM OF THE CONTRACT (JAN. 1961)

THIS CONTRACT IS RENEWABLE, AT THE OPTION OF THE GOVERNMENT, BY THE CONTRACTING OFFICER GIVING WRITTEN NOTICE OF RENEWAL TO THE CONTRACTOR WITHIN THE PERIOD SPECIFIED IN THE SCHEDULE; PROVIDED, THAT THE CONTRACTING OFFICER SHALL HAVE GIVEN PRELIMINARY NOTICE OF THE GOVERNMENT'S INTENTION TO RENEW AT LEAST SIXTY (60) DAYS BEFORE THIS CONTRACT IS TO EXPIRE. (SUCH A PRELIMINARY NOTICE WILL NOT BE DEEMED TO COMMIT THE GOVERNMENT TO RENEWALS). IF THE GOVERNMENT EXERCISES THIS OPTION FOR RENEWAL, THE CONTRACT AS RENEWED SHALL BE DEEMED TO INCLUDE THIS OPTION PROVISION. HOWEVER, THE TOTAL DURATION OF THIS CONTRACT, INCLUDING THE EXERCISE OF ANY OPTIONS UNDER THIS CLAUSE, SHALL NOT EXCEED THREE YEARS."

ON JULY 16, 1970, THE CONTRACTING OFFICER NOTIFIED CALTEX OF HIS INTENTION TO EXERCISE THIS OPTION TO RENEW. IN AUGUST 1970, THE CONTRACTING OFFICER COMPARED THE PRICES OF CALTEX FOR SIMILAR REFUSE COLLECTION SERVICES AT KIRTLAND AIR FORCE BASE, ADJACENT TO SANDIA BASE, AND FOUND THE PRICES FOR THE KIRTLAND CONTRACT WERE SUBSTANTIALLY LOWER. THE CONTRACTING OFFICER THEN REQUESTED CALTEX TO REDUCE ITS PRICES IF THE OPTION WAS EXERCISED UNDER THE EXISTING SANDIA CONTRACT SO AS TO BRING THEM INTO LINE WITH ITS PRICES AT KIRTLAND. WHEN CALTEX DECLINED TO REDUCE ITS PRICES, THE CONTRACTING OFFICER ISSUED INVITATION FOR BIDS NO. DASA02-71-B-0021 FOR REFUSE COLLECTING SERVICES FOR SANDIA AND MANZANO FOR THE PERIOD OCTOBER 1, 1970, THROUGH SEPTEMBER 30, 1971, IN ORDER TO TEST THE MARKET IN ACCORDANCE WITH ASPR 1-1505.

THREE BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 15, 1970, AS FOLLOWS:

UNITED SERVICES, INC. $ 9,450.00

WEBSTER CONTRACTORS, INC. 93,402.72

CALTEX ENGINEERING CO. 102,300.00

THE BID OF UNITED SERVICES WAS APPARENTLY ERRONEOUS AND WHEN REQUESTED TO VERIFY ITS BID, UNITED SERVICES ADVISED THAT IT HAD SUBMITTED A MONTHLY FIGURE RATHER THAN A YEARLY FIGURE. THE CONTRACTING OFFICER ALLOWED UNITED SERVICES TO WITHDRAW ITS ERRONEOUS BID FROM CONSIDERATION, LEAVING WEBSTER CONTRACTORS THE LOW BIDDER AT A PRICE OF $93,402.72.

ON SEPTEMBER 16, 1970, THE DAY AFTER BID OPENING, A REPRESENTATIVE OF CALTEX DELIVERED A LETTER TO THE CONTRACTING OFFICER OFFERING A VOLUNTARY REDUCTION OF $2400 IN ITS BASE PRICE UNDER THE EXISTING CONTRACT, WHICH, TOGETHER WITH A DISCOUNT OF 5 PERCENT FOR PAYMENT WITHIN 20 DAYS, MADE A NET YEARLY PRICE OF $90,903.60.

BY LETTER OF SEPTEMBER 28, 1970, CALTEX PROTESTED TO OUR OFFICE AGAINST AWARD TO WEBSTER UNDER THE INVITATION FOR BIDS AND BY TELEGRAM OF SEPTEMBER 30, 1970, WEBSTER ALSO PROTESTED AGAINST ALLOWING CALTEX TO REDUCE ITS CONTRACT PRICE AFTER DISCLOSURE OF THE BID PRICES.

YOUR AGENCY'S REPORT OF OCTOBER 13 INDICATES THAT AN AWARD IS BEING HELD IN ABEYANCE PENDING OUR DECISION ON THE PROTESTS.

PARAGRAPH 1-1505(D) OF ASPR PROVIDES, IN EFFECT, THAT AN OPTION SHALL NOT BE EXERCISED UNLESS AND UNTIL THE CONTRACTING OFFICER DETERMINES, BY TESTING THE MARKET BY ONE OR MORE OF THE METHODS SET OUT IN SUBPARAGRAPHS (1) THROUGH (4), THAT EXERCISE OF THE OPTION IS THE MOST ADVANTAGEOUS METHOD TO THE GOVERNMENT OF PROCURING THE SERVICES IN QUESTION, PRICE AND OTHER FACTORS CONSIDERED. WHERE, AS IN THE INSTANT CASE, THE PRICE AT WHICH THE CONTRACTOR WAS PERFORMING SUCH SERVICES AT ANOTHER BASE INDICATED THAT THE OPTION PRICES MIGHT NOT BE REASONABLE, IT IS OUR OPINION THAT THE CONTRACTING OFFICER COULD NOT PROPERLY EXERCISE THE OPTION, BUT WAS REQUIRED TO SOLICIT COMPETITIVE BIDS AND TO AWARD A CONTRACT TO THE LOWEST RESPONSIBLE BIDDER, PRICE AND OTHER FACTORS CONSIDERED, IF THE BIDS RECEIVED OFFERED MORE REASONABLE PRICES THAN THE OPTION PRICES. SEE 41 COMP. GEN. 682, 688 (1962) WHEREIN WE EXPRESSED OUR VIEW THAT "THE BEST METHOD OF DETERMINING THE MOST ADVANTAGEOUS PRICE IS BY SUBMITTING THE REQUIREMENT TO THE TEST OF COMPETITIVE BIDDING."

SINCE THE REQUIREMENT IN THE INSTANT CASE WAS, IN FACT, SUBMITTED TO THE TEST OF COMPETITIVE BIDDING AND THE INVITATION PRODUCED A BETTER PRICE THAN THAT OFFERED BY THE OPTION AT THE TIME OF BID OPENING, IT WOULD APPEAR THAT PARAGRAPH 1-1505(D) PRECLUDED EXERCISE OF THE OPTION AND REQUIRED AN AWARD TO BE MADE TO THE LOW BIDDER UNDER THE INVITATION.

THE SUBSEQUENT OFFER OF CALTEX WAS DESIGNATED AS AN OFFER TO REDUCE THE PRICE UNDER THE ORIGINAL CONTRACT IN ORDER TO MAKE THE OPTION PRICE LOWER THAN THE LOW BID OF WEBSTER CONTRACTORS. HOWEVER, IN OUR OPINION, TO PERMIT ACCEPTANCE OF SUCH AN OFFER WOULD BE TANTAMOUNT TO ALLOWING AN UNSUCCESSFUL BIDDER TO CHANGE HIS BID AFTER BID OPENING IN ORDER TO DISPLACE AN OTHERWISE ACCEPTABLE LOW BID. AS WE STATED IN 37 COMP. GEN. 251 (1957), "ONE OF OUR PRIMARY PURPOSES IN THE FIELD OF PROCUREMENT IS TO MAINTAIN THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. WE CANNOT LOOK WITH FAVOR UPON ANY CONTRAVENTION OF THE SYSTEM EVEN IN THOSE INSTANCES WHERE A MERITORIOUS AWARD WOULD THEREBY BE ACCOMPLISHED." IN THE PRESENT CASE, IT IS OF FAR GREATER IMPORTANCE TO MAINTAIN CONFIDENCE IN THE INTEGRITY OF THE COMPETITIVE BIDDING PROCEDURES THAN TO ACHIEVE A TOKEN REDUCTION IN THE PRICE OF THE SERVICES REQUIRED.

FOR THE REASONS STATED, THE PROTEST OF CALTEX AGAINST AWARD TO WEBSTER CONTRACTORS UNDER THE INVITATION MUST BE DENIED AND THE PROTEST BY WEBSTER AGAINST EXERCISE OF THE OPTION MUST BE SUSTAINED.

A COPY OF THIS LETTER HAS BEEN FORWARDED TO EACH OF THE PROTESTING BIDDERS.

THE FILE RECEIVED WITH YOUR AGENCY'S REPORT OF OCTOBER 13 IS RETURNED.