B-171289, APR 28, 1971

B-171289: Apr 28, 1971

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WHILE NEITHER LARGE NOR SMALL BUSINESS REFINERS CAN DETERMINE THE QUANTITY OR POINT OF DELIVERY OF THE PRODUCT UPON WHICH THEY ARE BIDDING. THIS UNCERTAINTY IS THE CONSEQUENCE OF A REQUIREMENTS TYPE CONTRACT AND THE MINIMUM COST SOLUTION USED TO ALLOCATE AWARDS TO THE VARIOUS BIDDERS. ALL BIDDERS ARE SUBJECT TO THE SAME UNCERTAINTY AND THE PROCEDURES RESULT IN THE LOWEST COST TO THE GOVERNMENT. TO EDGINGTON OIL COMPANY: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 13. IT IS YOUR CONTENTION THAT UNDER THE PRESENT PROCEDURES (EXPLAINED IN DETAIL IN OUR DECISION OF TODAY. COPY ENCLOSED) NEITHER LARGE NOR SMALL BUSINESS REFINERS CAN DETERMINE THE QUANTITY OR POINT OF DELIVERY OF THE PRODUCT UPON WHICH THEY ARE BIDDING.

B-171289, APR 28, 1971

BID PROTEST - SMALL BUSINESS SET ASIDE - PRICE DENYING PROTEST OF EDGINGTON OIL COMPANY AGAINST THE PROCEDURES BY WHICH THE DEFENSE FUEL SUPPLY CENTER (DFSC) DETERMINES THE PRICE AND QUANTITIES FOR SMALL BUSINESS SET-ASIDE AWARDS FOR JET FUEL. WHILE NEITHER LARGE NOR SMALL BUSINESS REFINERS CAN DETERMINE THE QUANTITY OR POINT OF DELIVERY OF THE PRODUCT UPON WHICH THEY ARE BIDDING, THIS UNCERTAINTY IS THE CONSEQUENCE OF A REQUIREMENTS TYPE CONTRACT AND THE MINIMUM COST SOLUTION USED TO ALLOCATE AWARDS TO THE VARIOUS BIDDERS. ALL BIDDERS ARE SUBJECT TO THE SAME UNCERTAINTY AND THE PROCEDURES RESULT IN THE LOWEST COST TO THE GOVERNMENT.

TO EDGINGTON OIL COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 13, 1970, WITH ENCLOSURES, RELATING TO THE METHODS AND PROCEDURES BY WHICH THE DEFENSE FUEL SUPPLY CENTER (DFSC) DETERMINES THE PRICE FOR SMALL BUSINESS SET ASIDE QUANTITIES OF JET FUELS.

IT IS YOUR CONTENTION THAT UNDER THE PRESENT PROCEDURES (EXPLAINED IN DETAIL IN OUR DECISION OF TODAY, B-168576(2), TO U.S. OIL AND REFINING CO., COPY ENCLOSED) NEITHER LARGE NOR SMALL BUSINESS REFINERS CAN DETERMINE THE QUANTITY OR POINT OF DELIVERY OF THE PRODUCT UPON WHICH THEY ARE BIDDING. YOU STATE THAT THIS CONFUSING CONDITION EXISTS NOT ONLY BEFORE BUT AFTER BID OPENING. YOU CONTEND THAT THE EVALUATION PROCEDURE DEFEATS THE CONGRESSIONAL PURPOSE AND INTENT IN ESTABLISHING THE SMALL BUSINESS SET ASIDE PROCEDURE, AND THAT IT IS CONTRARY TO THE REQUIREMENT OF FORMALLY ADVERTISED PROCUREMENTS THAT BIDDERS BE NOTIFIED IN ADVANCE OF THE BASIS ON WHICH THEIR BIDS WILL BE EVALUATED. ALSO, YOU CONTEND THAT THE PRESENT PROCEDURES ARE CONTRARY TO DFSC'S STATED POLICY THAT "THE PRICE AT WHICH AWARDS SHALL BE MADE TO SMALL BUSINESS CONCERNS IS DETERMINED WITHOUT REFERENCE TO THE PRICE OR PRICES AT WHICH AWARDS ARE MADE ON THE NON-SET-ASIDE PORTION."

IN YOUR LETTER OF NOVEMBER 11, 1970, TO DFSC YOU DESCRIBE A PROCEDURE FOR THE AWARD OF SET-ASIDES WHICH YOU CLAIM WAS USED UP UNTIL A COUPLE OF YEARS AGO. THE PROCEDURE YOU DESCRIBE APPEARS TO BE SIMILAR TO THE REVISED PROCEDURE SUGGESTED BY U.S. OIL AND REFINING CO., IN ITS LETTER OF OCTOBER 21, 1970, WHICH WAS REJECTED BY DFSC FOR THE REASONS SET OUT IN THE ENCLOSED COPY OF OUR DECISION OF TODAY. MOREOVER, DFSC STATES THAT THE PRESENT PROCEDURES HAVE BEEN IN USE SINCE 1961 AND WHILE THESE PROCEDURES WERE EXPLAINED AT THE MEETING OF MARCH 18, 1969, DISCUSSED IN YOUR NOVEMBER 11 LETTER, NO NEW PROCEDURES WERE ADOPTED AT THAT TIME.

ADMITTEDLY UNDER THE PRESENT PROCEDURES NEITHER LARGE NOR SMALL BUSINESS REFINERS ARE ABLE TO DETERMINE THE EXACT QUANTITY OF FUEL UPON WHICH THEY ARE BIDDING, DUE TO THE FACT THAT UNDER A REQUIREMENTS TYPE CONTRACT THE PROCURING ACTIVITY DOES HAVE THE OPTION OF REDUCING THE QUANTITY SHOULD ITS REQUIREMENTS DECLINE. HOWEVER, IT IS WELL ESTABLISHED THAT REQUIREMENTS TYPE CONTRACTS ARE PROPER UNDER APPROPRIATE CIRCUMSTANCES, AND WE DO NOT BELIEVE THAT IT WOULD BE IN THE GOVERNMENT'S BEST INTEREST IN THE PROCUREMENT OF JET FUEL TO REQUIRE THE PROCURING ACTIVITY TO ACCEPT IN ALL INSTANCES THE AMOUNT OF FUEL SET OUT IN THE IFB.

IT IS ALSO TRUE THAT NEITHER LARGE NOR SMALL REFINERS CAN DETERMINE THE POINT OF DELIVERY OF THE FUEL UPON WHICH THEY BID. HOWEVER, UNDER THE PRESENT PROCEDURES THE IFB APPRISES ALL BIDDERS OF THE QUANTITY OF FUEL REQUIRED (SUBJECT, OF COURSE, TO CHANGES IN REQUIREMENTS) AND UNLIKE THE "FLOATING SET-ASIDE" PROCEDURES COMPLAINED OF IN OUR DECISION PUBLISHED AT 41 COMP. GEN. 306 (1961), THE BIDDERS ARE INFORMED OF THE LOCATION AND QUANTITIES OF THE SMALL BUSINESS SET ASIDES. WHILE IT IS TRUE THAT UNDER THE PRESENT PROCEDURES BIDDERS HAVE NO WAY OF KNOWING WHERE THEIR PRODUCTS WILL BE ULTIMATELY LAID DOWN OR ALLOCATED, SINCE THE MINIMUM COST SOLUTION DETERMINES THE LOWEST LAID DOWN COST FOR FUEL AT THE VARIOUS LOCATIONS, IT WOULD APPEAR THAT ALL BIDDERS ARE SUBJECT TO THE SAME UNCERTAINTIES, AND THAT BID EVALUATIONS ARE FAIR AND EQUITABLE AND DO RESULT IN AWARDS AT THE LOWEST COST TO THE GOVERNMENT.

CONCERNING YOUR CONTENTION THAT DFSC'S EVALUATION PROCEDURES DEFEAT THE CONGRESSIONAL PURPOSE AND INTENT IN ESTABLISHING THE SMALL BUSINESS SET- ASIDE PROCEDURE, 15 U.S.C. 631 STATES, IN PERTINENT PART:

" *** IT IS THE DECLARED POLICY OF THE CONGRESS THAT THE GOVERNMENT SHOULD AID, COUNSEL, ASSIST AND PROTECT, INSOFAR AS IS POSSIBLE, THE INTERESTS OF SMALL-BUSINESS CONCERNS IN ORDER TO PRESERVE FREE COMPETITIVE ENTERPRISE, TO INSURE THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS OR SUBCONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT (INCLUDING BUT NOT LIMITED TO CONTRACTS OR SUBCONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION) BE PLACED WITH SMALL BUSINESS ENTERPRISES, TO INSURE THAT A FAIR PROPORTION OF THE TOTAL SALES OF GOVERNMENT PROPERTY BE MADE TO SUCH ENTERPRISES, *** " WE FAIL TO SEE HOW DFSC'S EVALUATION PROCEDURES WOULD BE CONTRARY TO THE ABOVE STATED POLICY OF CONGRESS. THE RECORD INDICATES THAT COMPETITION WAS MORE THAN ADEQUATE FOR THE JP-4 AND JP-5 FUEL PROCUREMENTS. ALSO, WE ARE ADVISED THAT UNDER PROCUREMENTS FOR BOTH JP-4 AND JP-5 JET FUEL REQUIREMENTS A SUBSTANTIAL PORTION OF THE PROCUREMENTS WERE SET ASIDE FOR SMALL BUSINESS (E.G., 35.6 PERCENT OF THE PROCUREMENT UNDER IFB DSA600-70-B-0061 AND 24 PERCENT UNDER IFB DSA600-70- B-0090, WHICH WOULD APPEAR TO BE A SUBSTANTIAL PORTION SINCE WE ARE ADVISED THAT SMALL BUSINESS REFINING CAPACITY IS ONLY ABOUT 7 PERCENT OF THE REFINING CAPACITY IN THE UNITED STATES).

IN REGARD TO YOUR ALLEGATION THAT THE PRESENT PROCEDURES ARE CONTRARY TO DFSC'S STATED POLICY THAT "THE PRICE AT WHICH AWARDS SHALL BE MADE TO SMALL BUSINESS CONCERNS IS DETERMINED WITHOUT REFERENCE TO THE PRICE OR PRICES AT WHICH AWARDS ARE MADE ON THE NON-SET-ASIDE PORTION", YOU HAVE FAILED TO SPECIFICALLY IDENTIFY SUCH A POLICY. YOU DO REFER TO A PORTION OF OUR DECISION WHICH IS PUBLISHED AT 41 COMP. GEN. 306, WHEREIN WE COMMENT ON A PROCEDURE (WEIGHTED AVERAGE) PROPOSED BY THE MILITARY PETROLEUM SUPPLY AGENCY (MPSA). HOWEVER, IN OUR COMMENT CONCERNING THE WEIGHTED AVERAGE PROCEDURE WE STATED THAT UNDER THAT PROCEDURE "THE PRICE AT WHICH AWARDS SHALL BE MADE TO SMALL BUSINESS CONCERNS IS DETERMINED WITHOUT REFERENCE TO THE PRICE OR PRICES AT WHICH AWARDS ARE MADE ON THE NON-SET-ASIDE PORTION". THAT PASSAGE WAS NOT INTENDED AS A STATEMENT OF POLICY OF THE PROCURING AGENCY. RATHER, IT WAS INTENDED AS A COMPARISON OF THE "WEIGHTED AVERAGE" APPROACH TO THOSE PROCEDURES WHEREBY AWARD IS MADE TO SMALL BUSINESS AT A PRICE NOT IN EXCESS OF THE HIGHEST UNIT PRICE AWARDED UNDER THE NON-SET-ASIDE PORTION. IN VIEW THEREOF, AND IN THE ABSENCE OF A DEFINITE IDENTIFICATION OF THE POLICY TO WHICH YOU REFER, WE SEE NO NECESSITY FOR FURTHER DISCUSSION ON THIS POINT.

FOR THE ABOVE REASONS, AND THE CONCLUSIONS SET OUT IN THE ENCLOSURE, YOUR PROTEST MUST BE DENIED.