B-172586, AUG 23, 1971, 51 COMP GEN 119

B-172586: Aug 23, 1971

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THE CONTRACT WAS SUBJECT TO CONFLICTING. THAT AN ELECTION - WHICH IS THE SOLE RIGHT OF THE OPTIONEE MUST BE POSITIVE. THE EXERCISE OF THE OPTION WAS A COUNTEROFFER THAT HAVING BEEN ACCEPTED IS BINDING. 1971: REFERENCE IS MADE TO THE COPY OF YOUR LETTER OF JUNE 3. PRICES WERE SOLICITED FOR ALTERNATE QUANTITIES FROM 8. INCLUDED IN THE RFP WERE THE FOLLOWING PROVISIONS: SET-ASIDE ITEMS A QUANTITY EQUIVALENT TO TWICE THE QUANTITY AWARDED UNDER ITEM 1 AND OPTION ITEM 3 WILL BE AWARDED UNDER THE PROVISIONS SET FORTH IN SECTION C- 29 *** . NEGOTIATIONS FOR AWARD OF THE SET-ASIDE PORTION WILL BE CONDUCTED WITH ALL CONCERNS WHO HAVE SUBMITTED RESPONSIVE BIDS OR PROPOSALS ON THE NON-SET-ASIDE PORTION. *** J-1.

B-172586, AUG 23, 1971, 51 COMP GEN 119

CONTRACTS - OPTIONS - MORE THAN ONE AWARD - EQUAL OPTION QUANTITIES ALTHOUGH THE TERMS CONTAINED IN A REQUEST FOR PROPOSALS AND THE CONTRACTS NEGOTIATED FOR EQUAL QUANTITIES UNDER THE SET-ASIDE AND NON SET-ASIDE PORTIONS OF A PROCUREMENT FOR DISPENSERS INDICATED INTENT TO EXERCISE THE OPTION EQUALLY BETWEEN AWARDEES, AND THE CONTRACT WAS SUBJECT TO CONFLICTING, ALBEIT REASONABLE INTERPRETATION TO BE RESOLVED AGAINST THE DRAFTER, SINCE THE EXERCISE OF THE OPTION BY THE GOVERNMENT IN A MANNER VARIANT FROM THE TERMS SPECIFIED DID NOT MEET THE REQUIREMENTS OF PARAGRAPH 1-1502, ARMED SERVICES PROCUREMENT REGULATION, THAT AN ELECTION - WHICH IS THE SOLE RIGHT OF THE OPTIONEE MUST BE POSITIVE, UNAMBIGUOUS, AND IN EXACT COMPLIANCE WITH THE TERMS OF THE OPTION, THE EXERCISE OF THE OPTION WAS A COUNTEROFFER THAT HAVING BEEN ACCEPTED IS BINDING. HOWEVER, IN SIMILAR FUTURE SITUATIONS, THE QUANTITATIVE EQUALITY OF BOTH CONTRACTORS SHOULD BE PRESERVED.

TO MONNFIELD INDUSTRIES, INC., AUGUST 23, 1971:

REFERENCE IS MADE TO THE COPY OF YOUR LETTER OF JUNE 3, 1971, TO THE CONTRACTING AGENCY, AND PRIOR CORRESPONDENCE, PROTESTING THE AWARD OF OPTION UNITS TO ANOTHER FIRM WITHOUT YOUR FIRM BEING AWARDED AN EQUAL QUANTITY OF UNITS UNDER CONTRACT NO. F42600-71-C-1264 WITH HILL AIR FORCE BASE, UTAH.

REQUEST FOR PROPOSALS (RFP) NO. F42600-70-R-3374, ISSUED JULY 2, 1970, CALLED FOR PROPOSALS ON SUU 30B/B DISPENSERS, PART NUMBER 66E6042, REVISION "F." PRICES WERE SOLICITED FOR ALTERNATE QUANTITIES FROM 8,100 UNITS THROUGH 39,000 UNITS (ITEM 1) AND FOR OPTIONS ON IDENTICAL QUANTITY INCREMENTS (ITEM 3).

INCLUDED IN THE RFP WERE THE FOLLOWING PROVISIONS:

SET-ASIDE ITEMS

A QUANTITY EQUIVALENT TO TWICE THE QUANTITY AWARDED UNDER ITEM 1 AND OPTION ITEM 3 WILL BE AWARDED UNDER THE PROVISIONS SET FORTH IN SECTION C- 29 *** .

C-29. NOTICE OF PARTIAL SET-ASIDE TO MAINTAIN A MOBILIZATION BASE.

(A) GENERAL.

A PORTION OF THIS PROCUREMENT, AS IDENTIFIED ELSEWHERE IN THE SCHEDULE, HAS BEEN SET ASIDE FOR AWARD ONLY TO ONE OR MORE CONCERNS (TO PROVIDE PRODUCTION BY A MINIMUM OF THREE (3) SEPARATE CONCERNS, INCLUDING CONCERNS) AWARDED CONTRACTS FOR THE NON-SET-ASIDE PORTION OF THIS PROCUREMENT) IN FURTHERANCE OF A PROGRAM TO ASSURE CONTINUED AVAILABILITY OF THE ITEMS) TO MEET CURRENT URGENT REQUIREMENTS AND TO MAINTAIN A MOBILIZATION BASE FOR RAPID ACCELERATED PRODUCTION IN CASE OF EMERGENCIES. NEGOTIATIONS FOR AWARD OF THE SET-ASIDE PORTION WILL BE CONDUCTED WITH ALL CONCERNS WHO HAVE SUBMITTED RESPONSIVE BIDS OR PROPOSALS ON THE NON-SET-ASIDE PORTION. ***

J-1. OPTION FOR INCREASED QUANTITIES:

(1) THE GOVERNMENT MAY INCREASE THE QUANTITY OF SUPPLIES CALLED FOR HEREIN BY REQUIRING THE DELIVERY OF ONE OF THE ALTERNATES OF OPTION LINE ITEM 3 *** .

(2) IF THE GOVERNMENT ELECTS TO EXERCISE AN OPTION SIMULTANEOUSLY WITH AWARD, OFFERS WILL BE EVALUATED FOR THE PURPOSES OF AWARD ON THE BASIS OF THE TOTAL PRICE FOR THE BASIC QUANTITY PLUS THE OPTION QUANTITY UNDER OPTION 1 EXERCISED WITH THE AWARD.

SUBSEQUENTLY, BY AMENDMENT, THE SET-ASIDE WAS REDUCED TO "A QUANTITY EQUIVALENT TO THE QUANTITY AWARDED UNDER ITEM 1 AND OPTION ITEM 3" AND THE MINIMUM NUMBER OF CONCERNS TO RECEIVE AWARDS WAS REDUCED FROM THREE TO TWO.

LANSON, INC., WAS AWARDED THE NON-SET-ASIDE PORTION ON OCTOBER 23, 1970, FOR 22,799 UNITS AT $178.71 EACH. ON THE SAME DATE, MONNFIELD INDUSTRIES, INC., WAS AWARDED THE SET-ASIDE PORTION IN THE SAME QUANTITY AT A UNIT PRICE OF $178.95. IDENTICAL DELIVERY SCHEDULES WERE ESTABLISHED TO COMPLETE PRODUCTION IN MAY 1971. THE UNITS WERE REQUIRED TO BE PACKED TWO PER CONTAINER, MONNFIELD'S CONTAINERS BEING WOOD, LANSON'S WOOD AND STYROFOAM.

IN MARCH 1971, A PURCHASE REQUEST WAS ISSUED FOR AN ADDITIONAL QUANTITY OF 33,604 DISPENSERS. IT WAS DETERMINED THAT IN ORDER TO MEET THE DELIVERY SCHEDULE ACCOMPANYING THE REQUEST, EXERCISE OF THE OPTIONS WITH MONNFIELD AND LANSON WAS THE ONLY FEASIBLE ALTERNATIVE. THEREFORE, ON MARCH 25, 1971, AMENDMENT NO. P00004 WAS ISSUED EXERCISING THE OPTION PROVISION. MONNFIELD WAS AWARDED 9,602 UNITS TO BE DELIVERED IN SIX EQUAL INSTALLMENTS OF 1,600 UNITS PER MONTH FROM JULY 11, 1971, THROUGH DECEMBER 11, 1971. THE OPTION QUANTITY TO LANSON WAS 24,002, TO BE DELIVERED IN SIX EQUAL MONTHLY INCREMENTS OF 4,000 UNITS FROM JUNE 30, 1971, THROUGH NOVEMBER 30, 1971.

IT IS REPORTED BY THE AIR FORCE THAT A DETERMINATION OF THE MOST ECONOMICAL SPLIT OF THE 33,604 UNITS WAS CONCLUDED TO BE 24,002 UNITS TO ONE CONTRACTOR AND 9,602 UNITS TO THE OTHER CONTRACTOR. UNDER THE OPTION AWARD, IT WAS NECESSARY TO CONSIDER THAT 11,846 OF THE SUU 30B/B DISPENSERS WOULD BE PACKED IN CNU-180 METAL CONTAINERS AS GOVERNMENT FURNISHED PROPERTY INSTEAD OF THE WOOD OR STYROFOAM. THESE METAL CONTAINERS ARE CURRENTLY BEING PRODUCED BY LANSON UNDER SEPARATE CONTRACT WITH EGLIN AIR FORCE BASE. IN DETERMINING WHICH CONTRACTOR SHOULD RECEIVE A PARTICULAR PORTION OF THE OPTIONAL QUANTITY, THERE WAS TAKEN INTO CONSIDERATION THAT IF LANSON RECEIVED THE 9,602 UNIT PORTION THEN, SINCE 11,846 UNITS ARE TO BE PACKED IN METAL CONTAINERS, 1,122 METAL CONTAINERS (2 DISPENSERS ARE PACKED IN A CONTAINER) WOULD HAVE TO BE FURNISHED TO MONNFIELD AT A FREIGHT COST OF $8.73 A CONTAINER FOR A TOTAL COST OF $9,795.06. IT WAS DETERMINED THAT BY PLACING THE LARGER QUANTITY WITH LANSON THE GOVERNMENT WOULD SAVE FREIGHT COSTS OF $9,795.06, THE AVERAGE COST PER UNIT FOR THE 33,604 UNITS HAVING OTHERWISE BEEN DETERMINED TO BE PRACTICALLY THE SAME REGARDLESS WHETHER ONE CONTRACTOR OR THE OTHER RECEIVED THE LARGER PORTION.

HOWEVER, MONNFIELD HAS ALLEGED THAT THE OPTION QUANTITY AS AWARDED IS INCONSISTENT WITH THE ABOVE-QUOTED CONTRACT PROVISIONS. SPECIFICALLY, YOU CONTEND THAT THE SECTION ENTITLED "SET-ASIDE ITEMS" AND SECTION C 29 DICTATE EQUAL QUANTITY AWARDS TO SET-ASIDE AND NON-SET-ASIDE CONTRACTORS UNDER BOTH THE BASIC CONTRACT AND OPTION PROVISIONS. YOU CITE IN FURTHERANCE OF YOUR POSITION THE LETTER FROM THE CONTRACTING OFFICER TO MONNFIELD OF SEPTEMBER 25, 1970, REQUESTING OPTION PRICE REDUCTIONS "IN ORDER TO RECEIVE EQUAL CONSIDERATION FOR ANY FUTURE OPTION AWARDS."

IT IS THE POSITION OF THE DEPARTMENT OF THE AIR FORCE, AS OUTLINED IN THE CONTRACTING OFFICER'S REPORT OF APRIL 28, 1971, THAT "THE INTENT OF SPECIFYING THAT AN EQUAL QUANTITY WOULD BE AWARDED OF ITEM 1 AND OPTION ITEM 3 WAS TO MAINTAIN A PARITY BETWEEN CONTRACTORS UNDER SECTION C-29 IN THE EVENT THAT THE OPTION ITEM WOULD BE AWARDED SIMULTANEOUSLY WITH AWARD OF THE BASIC QUANTITY." IT IS ALSO CONTENDED BY THE AIR FORCE THAT THE LETTER OF SEPTEMBER 25, 1970, FROM THE CONTRACTING OFFICER TO MONNFIELD, WAS INTENDED TO MEAN THAT MONNFIELD'S OFFER WOULD BE WEIGHED EQUALLY IN ARRIVING AT A DETERMINATION TO EXERCISE THE OPTION AND NOT THAT EQUAL OPTION QUANTITY AWARDS WOULD BE EFFECTED UNDER BOTH CONTRACTS.

IT IS OUR VIEW THAT THE REPORTED CIRCUMSTANCES AND THE RECORD BEFORE US RAISE AN INFERENCE THAT TWO CONTRACT INTERPRETATIONS ARE POSSIBLE. IT IS A WELL RECOGNIZED PRINCIPLE OF CONTRACT LAW THAT IN THE EVENT AN INSTRUMENT CREATES CONFLICTING INTERPRETATIONS THAT ARE BOTH REASONABLE, THE DOUBT OCCASIONED THEREBY SHOULD BE RESOLVED AGAINST THE DRAFTER OF THE INSTRUMENT. B-146750, APRIL 14, 1964; WPC INTERPRISES, INC., V UNITED STATES, 323 F. 2D 874 (1964), 163 CT. CL. 1, WHEREIN THE CONFLICT REVOLVED ABOUT THE INTERPRETATION OF CONTRACT PROVISIONS, STATES:

*** BOTH PLAINTIFF'S AND DEFENDANT'S INTERPRETATIONS LIE WITHIN THE ZONE OF REASONABLENESS; NEITHER APPEARS TO REST ON AN OBVIOUS ERROR IN DRAFTING, A GROSS DISCREPANCY, OR AN INADVERTENT BUT GLARING GAP; THE ARGUMENTS, RATHER, ARE QUITE CLOSELY IN BALANCE. IT IS PRECISELY TO THIS TYPE OF CONTRACT THAT THIS COURT HAS APPLIED THE RULE THAT IF SOME SUBSTANTIVE PROVISION OF A GOVERNMENT-DRAWN AGREEMENT IS FAIRLY SUSCEPTIBLE OF A CERTAIN CONSTRUCTION AND THE CONTRACTOR ACTUALLY AND REASONABLY SO CONSTRUES IT, IN THE COURSE OF BIDDING OR PERFORMANCE, THAT IS THE INTERPRETATION WHICH WILL BE ADOPTED - UNLESS THE PARTIES' INTENTION IS OTHERWISE AFFIRMATIVELY REVEALED. *** ALTHOUGH THE POTENTIAL CONTRACTOR MAY HAVE SOME DUTY TO INQUIRE ABOUT A MAJOR PATENT DISCREPANCY, OR OBVIOUS OMISSION, OR A DRASTIC CONFLICT IN PROVISIONS *** , HE IS NOT NORMALLY REQUIRED (ABSENT A CLEAR WARNING IN THE CONTRACT) TO SEEK CLARIFICATION OF ANY AND ALL AMBIGUITIES, DOUBTS, OR POSSIBLE DIFFERENCES IN INTERPRETATION. THE GOVERNMENT, AS THE AUTHOR, HAS TO SHOULDER THE MAJOR TASK OF SEEING THAT WITHIN THE ZONE OF REASONABLENESS THE WORDS OF THE AGREEMENT COMMUNICATE THE PROPER NOTIONS - AS WELL AS THE MAIN RISK OF A FAILURE TO CARRY THAT RESPONSIBILITY. IF THE DEFENDANT CHAFES UNDER THE CONTINUED APPLICATION OF THIS CHECK, IT CAN OBTAIN A LOOSER REIN BY A MORE METICULOUS WRITING OF ITS CONTRACTS AND ESPECIALLY OF THE SPECIFICATIONS.

THUS, IT APPEARS THAT "REASONABLENESS" OF INTERPRETATION OF A CONTRACT PROVISION IS THE CRITERION TO ESTABLISH A CONTRACT AMBIGUITY. THE QUESTION FOR RESOLUTION BECOMES WHETHER MONNFIELD'S INTERPRETATION THAT EQUAL AWARDS WERE MANDATED BY THE CONTRACT IS REASONABLE IN LIGHT OF THE CONTRACT LANGUAGE AND SURROUNDING CIRCUMSTANCES.

IT IS NOTED THAT THE SOLE PROVISIONS IN THE CONTRACT CONCERNING THE EXERCISE OF THE OPTION ARE THOSE VERY PROVISIONS WHICH HAVE GIVEN RISE TO AN AMBIGUITY. HENCE, RESORT TO THOSE PROVISIONS WOULD NOT RESOLVE THE AMBIGUITY. IT IS FURTHER NOTED THAT THIS PROCUREMENT WAS NEGOTIATED, AND SINCE NEGOTIATIONS OCCURRED WITH RESPECT TO THE OPTION, IT WOULD SEEM THAT THE AIR FORCE HAD AMPLE OPPORTUNITY TO CLARIFY ITS INTENTION CONCERNING THE OPTION AWARDS.

IF MONNFIELD INTERPRETED THE PROVISIONS OF THE RFP AS DICTATING EQUAL AWARDS, IT SEEMS THE LANGUAGE OF THE LETTER OF SEPTEMBER 25, 1970, WOULD BUTTRESS SUCH A CONCLUSION. WE CANNOT SAY THAT SUCH LETTER DOES NOT SUPPORT THE CONCLUSION THAT BY AGREEING TO THE REQUESTED PRICES, MONNFIELD WOULD BE ASSURED OF AN EQUAL AWARD UNDER THE OPTION PROVISION. FURTHER, THE FACT THAT THE PROCUREMENT WAS AWARDED EQUALLY BETWEEN MONNFIELD AND LANSON LENDS CREDENCE TO MONNFIELD'S INTERPRETATION OF EQUAL OPTION AWARDS, EVEN THOUGH THE OPTION WAS EXERCISED SUBSEQUENT TO AWARD.

FROM THE RECORD, WE CANNOT FIND THAT MONNFIELD'S INTERPRETATION WAS UNREASONABLE, NOR CAN WE FIND THAT THE GOVERNMENT TOOK ANY AFFIRMATIVE ACTION BEFORE THE EXERCISE OF THE OPTION THAT CLEARLY DEFINED ITS POSITION ON THE MATTER. WE THEREFORE CONCLUDE THAT THE OPTION PROVISIONS OF THE CONTRACT WERE REQUIRED TO BE EXERCISED IN SUCH A MANNER AS TO MAINTAIN EQUALITY OF QUANTITY BETWEEN THE CONTRACTORS.

HOWEVER, ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1502 DEFINES AN OPTION CLAUSE AS "A PROVISION IN A CONTRACT UNDER WHICH, FOR A SPECIFIED TIME, THE GOVERNMENT MAY ELECT TO PURCHASE ADDITIONAL QUANTITIES OF THE SUPPLIES OR SERVICES CALLED FOR BY THE CONTRACT." THE CONTRACTOR DERIVES NO RIGHT WHATSOEVER FROM THE OPTION ITSELF, WHICH IS SUBJECT TO THE CHOICE OF THE OPTIONEE (THE GOVERNMENT) AS TO WHETHER IT WILL BE EXERCISED OR NOT. IF THE OPTIONEE ELECTS TO EXERCISE THE OPTION, SUCH ELECTION MUST BE POSITIVE, UNAMBIGUOUS AND IN EXACT COMPLIANCE WITH THE TERMS OF THE OPTION, AND ANY ELECTION DIFFERING FROM THE PRECISE REQUIREMENTS OF THE OPTION OPERATES AS A REJECTION THEREOF. CIVIC PLAZA NATIONAL BANK V FIRST NATIONAL BANK IN DALLAS, 401 F.2D 193 (1968). ONCE THE OPTION HAS BEEN EXERCISED, A BINDING CONTRACT RESULTS.

THEREFORE, WHEN THE AIR FORCE ATTEMPTED TO EXERCISE THE OPTION WITH BOTH MONNFIELD AND LANSON IN A MANNER VARIANT FROM ITS EXPRESS CONDITIONS, SUCH ACTION DID NOT CONSTITUTE AN EXERCISE OF THE OPTIONS. RATHER, IT WAS A COUNTEROFFER WHICH EITHER MONNFIELD OR LANSON WAS FREE TO ACCEPT OR REJECT INDEPENDENTLY OF ANY REFERENCE TO THE OPTION PROVISION IN THEIR CONTRACTS. HOWEVER, BOTH CONTRACTORS BECAME BOUND WHEN THEY ACCEPTED THE OFFERS AS TENDERED BY THE AIR FORCE OSTENSIBLY UNDER THE OPTION PROVISIONS. THUS, IT IS APPARENT THAT THE OPTION PROVISIONS HAVE NOT BEEN EXERCISED WITHIN THE STIPULATED TIME FOR EXERCISE THEREOF, AND WE MAY CONCLUDE THAT NO OPTION RIGHTS ACCRUED TO EITHER CONTRACTOR.

ALTHOUGH WE CONCLUDE THAT NO LEGAL RIGHTS OF EITHER CONTRACTOR HAVE BEEN VIOLATED, WE BELIEVE THAT THE AIR FORCE WAS DERELICT IN ITS DUTY WHEN IT FAILED TO PRESERVE THE QUANTITATIVE EQUALITY OF BOTH CONTRACTORS. LETTER OF TODAY, WE ARE RECOMMENDING TO THE SECRETARY OF THE AIR FORCE THAT APPROPRIATE STEPS BE INITIATED TO PRECLUDE A RECURRENCE OF THE FOREGOING DEFICIENCIES.

CONCERNING THE ANCILLARY PROCUREMENT OF CNU-180 METAL CONTAINERS WHICH ARE CURRENTLY BEING PRODUCED BY LANSON ON A SOLE-SOURCE BASIS, WE HAVE BEEN ADVISED THE AIR FORCE HAS NOW RECEIVED A PROCUREMENT DATA PACKAGE FROM LANSON WHICH IS IN THE PROCESS OF TECHNICAL EVALUATION. THE AIR FORCE ANTICIPATES THAT IT WILL BE IN A POSITION TO PROCURE THE 1972 FISCAL YEAR REQUIREMENTS ON A COMPETITIVE BASIS.