B-172635, SEP 22, 1971

B-172635, SEP 22, 1971

BID PROTEST - MONOPOLY - CONTRACTOR QUALIFICATIONS - PRICE AS CONTROLLING FACTOR DENIAL OF PROTEST BY UNITED STEVEDORING COMPANY, LTD., AGAINST THE AWARD OF A CONTRACT TO EXPRESS TRANSPORTATION ORGANIZATION OF THAILAND (ETO), AN INSTRUMENTALITY OF THE ROYAL THAI GOVERNMENT, UNDER A SOLICITATION ISSUED BY THE U.S. ARMY PROCUREMENT OFFICE, USARSUPTHAI. UNDER THE FACTS REPORTED, IT DOES NOT APPEAR THAT A MONOPOLY HAS PURPOSELY BEEN CREATED IN FAVOR OF ETO. GAO KNOWS OF NO STATUTE OR REGULATION WHICH PROHIBITS THE GOVERNMENT FROM CONTRACTING OVERSEAS WITH FOREIGN GOVERNMENT CORPORATIONS WHICH OTHERWISE QUALIFY AS POTENTIAL CONTRACTORS. THE PREAWARD DETERMINATIONS OF THE QUALIFICATIONS OF CONTRACTORS ARE PRIMARILY THE RESPONSIBILITY OF THE CONTRACTING OFFICIALS CONCERNED, AND GAO WILL NOT INTERFERE WITH SUCH DETERMINATIONS UNLESS IT IS CLEARLY ESTABLISHED THAT THE AGENCY'S ACTIONS WERE ARBITRARY, OR WERE NOT SUPPORTED BY THE RECORD. THE COMP. GEN. IS OF THE BELIEF THAT IF, AS IS APPARENTLY THE SITUATION HERE, THERE IS NO SUBSTANTIAL BASIS FOR DISTINGUISHING BETWEEN THE TECHNICAL EXCELLENCE OF TWO PROPOSALS MEETING THE GOVERNMENT'S REQUIREMENTS, PRICE SHOULD GENERALLY BE THE CONTROLLING FACTOR.

TO UNITED STEVEDORING COMPANY, LTD.:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF A CONTRACT TO EXPRESS TRANSPORTATION ORGANIZATION OF THAILAND (ETO) UNDER SOLICITATION NO. DAJB29-71-R-0033, ISSUED ON FEBRUARY 5, 1971, BY THE U.S. ARMY PROCUREMENT OFFICE, USARSUPTHAI, APO, SAN FRANCISCO, CALIFORNIA.

THE INSTANT PROCUREMENT SOLICITED OFFERS FOR STEVEDORING AND OTHER RELATED SERVICES AT THE PORTS OF KLONG TOI, SATTAHIP AND VAYAMA, THAILAND, FOR THE PERIOD APRIL 1, 1971, THROUGH MARCH 31, 1972.

BY FEBRUARY 12, 1971, THE DATE SET FOR CLOSING OF THE RECEIPT OF OFFERS, SIX OF THE NINE FIRMS SOLICITED PRESENTED OFFERS. A TECHNICAL EVALUATION BOARD WAS CONVENED TO DETERMINE THE CAPABILITY OF THE OFFERORS. UNITED STEVEDORING COMPANY (JSC), THE INCUMBENT CONTRACTOR FOR APPROXIMATELY FIVE YEARS, WAS NOT REQUESTED TO APPEAR BEFORE THE BOARD INASMUCH AS IT WAS CONSIDERED FULLY RESPONSIBLE BASED UPON ITS PAST SATISFACTORY PERFORMANCE OF THE STEVEDORING CONTRACT. BASED UPON THE RECOMMENDATION OF THE BOARD, THE CONTRACTING OFFICER DETERMINED THAT NEGOTIATIONS WOULD BE CONDUCTED WITH THE FOLLOWING OFFERORS:

U.S.C.

ETO

JFB COMPANY

CENTRAL NAVIGATION AND TRADING COMPANY (CNT)

AFTER THE WITHDRAWAL OF CNT'S OFFER ON FEBRUARY 22, 1971, NEGOTIATIONS WERE CONDUCTED WITH THE THREE REMAINING RESPONSIVE AND RESPONSIBLE OFFERORS. IT IS REPORTED THAT THE PRINCIPAL OBJECTIVE OF THE NEGOTIATIONS WAS TO OBTAIN A REDUCTION ON COMMODITY RATES OFFERED. ALL THREE OFFERORS REDUCED THEIR INITIAL OFFERED PRICES DURING NEGOTIATIONS. HOWEVER, THE RELATIVE STANDING OF THE OFFERORS DID NOT CHANGE FROM THEIR INITIAL POSITIONS OF ETO, FIRST, USC, SECOND AND JFB, THIRD. CONSEQUENTLY, THE CONTRACT WAS AWARDED TO ETO ON MARCH 16, 1971, AS THE LOWEST (ON ALL ITEMS) RESPONSIBLE OFFEROR, IT HAVING BEEN FOUND THROUGH A PREAWARD SURVEY THAT ETO POSSESSED THE NECESSARY EXPERTISE, PERSONNEL, EQUIPMENT AND ORGANIZATION TO SATISFACTORILY PERFORM THE REQUIRED SERVICES.

WHILE YOU HAVE RAISED SEVERAL OBJECTIONS TO THE PROCUREMENT PROCEDURES HERE EMPLOYED, WE THINK YOUR OWN SUMMARY OF YOUR PROTEST, AS CONTAINED IN YOUR LETTER OF JULY 13, 1971, BEST DESCRIBES YOUR PRINCIPAL CONTENTIONS AS FOLLOWS:

"TO BRIEFLY SUMMARIZE: OUR PROTEST CENTERS ON THE FACT THAT THE AWARD OF THIS CONTRACT DID NOT PROPERLY CONSIDER OTHER PERTINENT, FORSEEABLE FACTORS BUT ONLY CONSIDERED 'BID PRICE,' WHICH IS CLEARLY A CONTRADICTION TO PREVIOUSLY STATED ASPR POLICY (SECTION 1-902, 3-101 AND 3-801.1). THIS HAS CLEARLY RESULTED IN ADDITIONAL COSTS, INCONVENIENCE, AND POOR QUALITY SERVICE TO THE U.S. GOVERNMENT AS WELL AS THE INJUSTICE OF THE ACTUAL LOW BIDDER, 'LOWEST ULTIMATE OVERALL COST CONSIDERED,' NOT RECEIVING AWARD. OTHER FACTORS TO BE INVESTIGATED ARE POSSIBLE IRREGULARITIES IN NEGOTIATION AND THE DANGERS OF POTENTIAL MONOPOLY."

YOUR REFERENCE TO A POTENTIAL MONOPOLY RELATES TO THE FACT THAT, WHILE ETO ACTS IN ITS OPERATIONS AS A PRIVATE COMPANY, IT IS AN INSTRUMENTALITY OF THE ROYAL THAI GOVERNMENT, AND IT CURRENTLY HOLDS CONTRACTS FOR THE TRUCK LINE HAUL OF U.S. MILITARY CARGO AND THE GREATER PORTION OF ALL OPERATION OF MATERIAL HANDLING EQUIPMENT (MHE) AT U.S. MILITARY SUPPLY POINTS AND CARGO HANDLING POINTS IN THAILAND. YOU ALLEGE THAT IF ETO IS NOW AWARDED THE STEVEDORING CONTRACT IT WILL VIRTUALLY ELIMINATE PRIVATE ENTERPRISE PARTICIPATION IN THE MOVEMENT AND HANDLING OF THE U.S. GOVERNMENT'S CARGO IN THAILAND.

IN ITS REPORT TO OUR OFFICE, A COPY OF WHICH WAS MADE AVAILABLE TO YOU, THE DEPARTMENT OF THE ARMY ADVISES THAT THE ETO CONTRACT FOR TRUCK LINE HAUL WAS AWARDED ON A SOLE SOURCE BASIS BECAUSE THE ROYAL THAI GOVERNMENT HAS DECREED THAT ONLY ETO IS AUTHORIZED TO CARRY MILITARY CARGO ON PUBLIC HIGHWAYS IN THAILAND. AS TO THE MHE CONTRACT, IT IS REPORTED THAT ETO WAS AWARDED THAT CONTRACT AS A RESULT OF ITS LOW OFFER IN A HIGHLY COMPETITIVE PROCUREMENT. LIKEWISE, UNDER THE CONTESTED PROCUREMENT FOR STEVEDORING SERVICES, IT WAS FELT THAT THERE WAS ADEQUATE COMPETITION INVOLVING BOTH PRIVATE ENTERPRISE FIRMS AND THIS ONE GOVERNMENT INSTRUMENTALITY, BEFORE AWARD WAS MADE TO THE LATTER BASED ON ITS LOW PRICE. THE DEPARTMENT OF THE ARMY REPORTS THAT IT INTENDS TO CONTINUE TO PROCURE BOTH THE MHE AND STEVEDORING SERVICE REQUIREMENTS BY COMPETITIVE SOLICITATIONS.

UNDER THESE REPORTED FACTS WE FAIL TO FIND THAT A MONOPOLY HAS PURPOSELY BEEN CREATED IN FAVOR OF ETO. WHILE IT IS THE GENERAL POLICY OF THE EXECUTIVE BRANCH OF THE UNITED STATES GOVERNMENT TO FAVOR PROCUREMENT OF ITS DOMESTIC NEEDS FROM PRIVATE ENTERPRISE, WE KNOW OF NO AMERICAN STATUTE OR REGULATION WHICH PROHIBITS THE GOVERNMENT FROM CONTRACTING OVERSEAS WITH FOREIGN GOVERNMENT CORPORATIONS WHICH OTHERWISE QUALIFY AS POTENTIAL CONTRACTORS AND WHICH OFFER THE PROPOSAL FOUND TO BEST SERVE THE INTEREST OF THE U.S. GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IN VIEW THEREOF WE DO NOT BELIEVE THE MERE FACT THAT ETO IS A GOVERNMENT INSTRUMENTALITY AND HELD ONE CONTRACT BY ROYAL THAI GOVERNMENT EDICT AND ANOTHER CONTRACT AS A RESULT OF ITS LOW OFFER, SHOULD DISQUALIFY ETO FROM COMPETING ON THE INSTANT PROCUREMENT. AS STATED BY THE CONTRACTING OFFICER IN HIS LETTER OF MARCH 31, 1971, IN DENIAL OF YOUR PROTEST TO HIM, "THE FACT THAT U.S.C. HAS HAD THE STEVEDORING CONTRACT FOR A PERIOD OF OVER FIVE YEARS, WITH A RECORD OF SATISFACTORY PERFORMANCE, DOES NOT PER SE ENTITLE U.S.C. TO SPECIAL CONSIDERATION. TO GIVE SPECIAL CONSIDERATION TO U.S.C. WOULD IN EFFECT ESTABLISH THEM AS A SOLE SOURCE WITHOUT PROPER JUSTIFICATION."

ONE OF YOUR REMAINING CONTENTIONS CENTERS AROUND YOUR ALLEGATION THAT ETO IS OFFERING POOR QUALITY SERVICE. INASMUCH AS THE VALIDITY OF THE CONTRACT AWARDED ETO MUST BE DETERMINED ON THE BASIS OF THE RECORD BEFORE THE CONTRACTING OFFICER AT THE TIME OF AWARD, YOUR OBJECTIONS TO THE CONTRACTOR'S PERFORMANCE MUST NECESSARILY GO TO THE ADMINISTRATION OF THE CONTRACT, THE CONTROL OF WHICH DOES NOT REST IN OUR OFFICE. IN THIS CONNECTION IT SHOULD BE UNDERSTOOD THAT PREAWARD DETERMINATIONS OF THE QUALIFICATIONS OF PROSPECTIVE CONTRACTORS ARE PRIMARILY THE RESPONSIBILITY OF THE CONTRACTING OFFICIALS CONCERNED, AND WE WILL NOT INTERFERE WITH SUCH DETERMINATIONS UNLESS IT IS CLEARLY ESTABLISHED THAT THE AGENCY'S ACTIONS WERE ARBITRARY OR NOT SUPPORTED BY THE RECORD. IT APPEARS FROM THE RECORD THAT THE PROCEDURES FOLLOWED IN THE PREAWARD SURVEY AND IN REVIEWING ETO'S QUALIFICATIONS AS A PROSPECTIVE CONTRACTOR WERE PROPER, AND NO BASIS THEREFORE EXISTS FOR THIS OFFICE TO TAKE EXCEPTION TO THE PREAWARD DETERMINATION THAT ETO WAS SUFFICIENTLY QUALIFIED TO RECEIVE THE AWARD.

YOU ALSO QUESTION YOUR RELATIVE POSITION DURING THE NEGOTIATION PROCEDURES, AND EXPRESS A SUSPICION THAT YOUR POSITION (APPARENTLY PRICE) WAS REVEALED TO ETO. FROM OUR REVIEW OF THE RECORD IT APPEARS THAT THE RELATIVE POSITION OF THE THREE OFFERORS REMAINED THE SAME THROUGHOUT THE PERIOD OF NEGOTIATION, AND YOU ARE ALREADY IN POSSESSION OF THE COST COMPARISON BETWEEN USC'S AND ETO'S OFFER. THERE IS NO EVIDENCE WHATEVER TO SUGGEST THAT ANY OFFEROR WAS ADVISED OF HIS COMPETITOR'S PRICES. WHILE THE CLOSENESS OF PRICES MAY SUGGEST IMPROPRIETY, WE THINK A NARROW PRICE RANGE IS NOT UNUSUAL IN VIEW OF THE NATURE OF THE SERVICES BEING PROCURED AND THE CONCOMITANT COMPETITIVE PRICING OF SUCH SERVICES.

YOU SUGGEST THAT A TECHNICAL FACTOR TO CONSIDER IN DETERMINING THE CORRECTNESS OF THE AWARD TO ETO IS THAT WHILE THE SOLICITATION AT PARAGRAPH BC-2 REQUIRED OFFERORS TO LIST THE NAMES OF ALL SUBCONTRACTORS TO BE ENGAGED IN THE PERFORMANCE OF ANY PORTION OF THE WORK, ETO ONLY LISTED ONE SUCH PROPOSED SUBCONTRACTOR, WHERE IN FACT IT IS PRESENTLY USING THREE. SUBPARAGRAPH (B) OF PARAGRAPH GC-2 PROVIDED:

"(B) PERFORMANCE OF ANY PORTION OF THE WORK AND THE FURNISHING OF SUPPLIES OR SERVICES BY SUBCONTRACTORS, NOT LISTED ABOVE, SHALL BE SUBJECT TO THE PRIOR WRITTEN APPROVAL OF THE CONTRACTING OFFICER."

WE THINK THIS PARAGRAPH ENVISIONS THE POSSIBILITY THAT ADDITIONAL SUBCONTRACTORS MAY BE EMPLOYED AFTER AWARD OF THE CONTRACT AND MERELY REQUIRES THAT PRIOR APPROVAL OF SUCH EMPLOYMENT MUST BE GIVEN BY THE CONTRACTING OFFICER. IN ANY EVENT, THE QUESTION OF HOW MANY SUBCONTRACTORS ARE BEING CURRENTLY USED ALSO GOES TO THE ADMINISTRATION OF THE CONTRACT AND HAS NO BEARING UPON YOUR PROTEST. IN THIS REGARD, THE DEPARTMENT OF THE ARMY REPORTED IN EARLY JULY 1971 THAT THE ONLY KNOWN SUBCONTRACTOR WAS TRAILER TRANSPORT COMPANY, THE COMPANY LISTED BY ETO IN ITS PROPOSAL.

WE TURN THEN TO THE GRAVAMEN OF YOUR PROTEST, WHICH IS THAT THE CONTRACTING OFFICER NEGLECTED TO CONSIDER FACTORS OTHER THAN PRICE IN MAKING THE INSTANT AWARD.

PARAGRAPH 10(A) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS MADE A PART OF THIS PROCUREMENT PROVIDED:

"10. AWARD OF CONTRACT.

(A) THE CONTRACT WILL BE AWARDED TO THAT RESPONSIBLE OFFEROR WHOSE OFFER CONFORMING TO THE SOLICITATION WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED."

IN A SIMILAR VEIN PARAGRAPH GC-1 OF THE GENERAL CONDITIONS PROVIDED:

"GC-1 SUBMISSION OF BEST OFFERS

"(A) IT IS POSSIBLE THAT AWARD MAY BE MADE ON THE BASIS OF THE INITIAL PROPOSALS RECEIVED WITHOUT ORAL OR WRITTEN DISCUSSION OR NEGOTIATION. ACCORDINGLY ALL OFFERORS ARE ADVISED THAT THEIR PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS POSSIBLE, BOTH FROM A PRICE STANDPOINT AND WITH RESPECT TO TECHNICAL ADHERENCE TO SPECIFICATIONS.

"(B) PROPOSALS WILL BE EVALUATED TO DETERMINE THE OFFER OR OFFERS MOST ADVANTAGEOUS TO THE GOVERNMENT, ON THE BASIS OF LOWEST OVERALL COST AND OTHER FACTORS, FOR DELIVERY OF THE CONTRACT ITEM TO THE SPECIFIED DESTINATION."

THESE INSTRUCTIONS AND CONDITIONS ARE IN KEEPING WITH THE UNITED STATES STATUTES AND PROCUREMENT REGULATIONS WHICH FOSTER THE POLICY THAT THE PRIMARY PURPOSE OF GOVERNMENT PROCUREMENT PROCEDURES IS TO GIVE TO ALL BIDDERS OR OFFERORS AN EQUAL OPPORTUNITY TO COMPETE FOR GOVERNMENT BUSINESS AND TO SECURE TO THE UNITED STATES THE BENEFITS OF FULL AND OPEN COMPETITION.

THUS, WE ARE OF THE BELIEF THAT IF, AS IS APPARENTLY THE SITUATION HERE, THERE IS NO SUBSTANTIAL BASIS FOR DISTINGUISHING BETWEEN THE TECHNICAL EXCELLENCE OF TWO PROPOSALS MEETING THE GOVERNMENT'S REQUIREMENTS, PRICE SHOULD GENERALLY BECOME THE CONTROLLING FACTOR. UNDER SUCH CIRCUMSTANCES, WE BELIEVE THAT THE LOWER PRICED OFFER REPRESENTS AN ADVANTAGE TO THE GOVERNMENT WHICH SHOULD NOT BE IGNORED. WE THEREFORE VIEW THE AWARD TO ETO AS EVIDENCING A DETERMINATION THAT THE COST PREMIUM INVOLVED IN MAKING AN AWARD TO USC, BASED ON THE FACT THAT YOUR FIRM WAS THE INCUMBENT CONTRACTOR, WOULD NOT BE JUSTIFIED IN LIGHT OF THE ACCEPTABLE LEVEL OF EFFORT AND PERFORMANCE EXPECTED OF ETO AT A LOWER COST.

UNDER THE CIRCUMSTANCES HERE INVOLVED, WE BELIEVE THE CONTRACTING OFFICER'S BASIS OF EVALUATION WAS PROPER UNDER THE APPLICABLE STATUTES AND REGULATIONS.

ACCORDINGLY, FOR ALL OF THE FOREGOING REASONS, YOUR PROTEST IS DENIED.