B-172714, AUG 24, 1971

B-172714: Aug 24, 1971

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WHETHER A BID IS UNREASONABLE AS TO PRICE IS A MATTER FOR DETERMINATION BY THE PROCURING ACTIVITY AND INTERVENTION BY GAO IS NOT WARRANTED UNLESS BAD FAITH IS SHOWN. WHERE THE COST ESTIMATE WAS $175. 000 AND LATE BID OF GENERAL CABLE CORPORATION WAS $178. CANNOT BE SAID TO HAVE BEEN IN BAD FAITH. THE CONTRACTING OFFICER'S DETERMINATION THAT BID WAS NONRESPONSIVE WAS JUSTIFIED. TO SIMPLEX WIRE AND CABLE COMPANY: REFERENCE IS MADE TO YOUR LETTER OF JUNE 18. BOTH SOLICITATIONS WERE ISSUED BY THE DEPARTMENT OF AGRICULTURE. TELEGRAPHIC OFFERS WERE SOLICITED ON A QUANTITY OF SUBMARINE POWER CABLE. THE ONLY TIMELY BID SUBMITTED WAS THAT OF SIMPLEX WIRE AND CABLE COMPANY IN THE AMOUNT OF $659. WAS FROM $150.

B-172714, AUG 24, 1971

BID PROTEST - UNREASONABLE BID - NONRESPONSIVE BID DECISION DENYING PROTEST OF SIMPLEX WIRE AND CABLE COMPANY, SOLE TIMELY BIDDER, AGAINST THE REJECTION OF ITS BID AND THE CANCELLATION AND RESOLICITATION OF THE INVITATION FOR SUBMARINE POWER CABLE BY THE DEPARTMENT OF AGRICULTURE. WHETHER A BID IS UNREASONABLE AS TO PRICE IS A MATTER FOR DETERMINATION BY THE PROCURING ACTIVITY AND INTERVENTION BY GAO IS NOT WARRANTED UNLESS BAD FAITH IS SHOWN. DEPARTMENT'S REJECTION OF BID OF $659,970, WHERE THE COST ESTIMATE WAS $175,000 AND LATE BID OF GENERAL CABLE CORPORATION WAS $178,932, CANNOT BE SAID TO HAVE BEEN IN BAD FAITH. FURTHER, THE CONTRACTING OFFICER'S DETERMINATION THAT BID WAS NONRESPONSIVE WAS JUSTIFIED. INCLUSION OF RENT-FREE CLAUSE ON USE OF GOVERNMENT FACILITIES MADE THE BID BASIS DIFFERENT FROM THE REQUEST OF THE SOLICITATION WHICH DID NOT CONTAIN PROVISIONS FOR EQUALIZING SUCH BIDS WITH OTHERS THAT DID NOT PROPOSE USE OF GOVERNMENT FACILITIES.

TO SIMPLEX WIRE AND CABLE COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 18, 1971, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE REJECTION OF YOUR BID UNDER INVITATION FOR BIDS (IFB) NO. ARS-59-B-71; THE CANCELLATION OF THAT IFB; AND THE READVERTISEMENT OF THE PROCUREMENT UNDER SOLICITATION NO. ARS-70-B -71. BOTH SOLICITATIONS WERE ISSUED BY THE DEPARTMENT OF AGRICULTURE.

THE PROCUREMENT AGENCY ADVISES THAT BECAUSE OF AN EMERGENCY, TELEGRAPHIC OFFERS WERE SOLICITED ON A QUANTITY OF SUBMARINE POWER CABLE. THE ONLY TIMELY BID SUBMITTED WAS THAT OF SIMPLEX WIRE AND CABLE COMPANY IN THE AMOUNT OF $659,970 FOR BOTH THE BASIC AND ALTERNATE ITEMS OF THE SCHEDULE. THE GOVERNMENT'S COST ESTIMATE, HOWEVER, WAS FROM $150,000 TO $175,000 AND AN UNACCEPTABLE LATE TELEGRAPHIC BID WAS RECEIVED FROM THE GENERAL CABLE CORPORATION IN THE AMOUNT OF $178,932. ACCOMPANYING THE SIMPLEX BID WAS A LETTER WHICH REFERENCED THE SOLICITATION AND STATED:

"THE PRICES SHOWN IN THE ENCLOSED IFB AND THE ABOVE ALTERNATE ARE BASED ON THE RENT-FREE, NON-INTERFERENCE USE OF U.S. NAVY OWNED FACILITIES LOCATED AT SIMPLEX PLANT, NEWINGTON, N. H. AND ADMINISTERED UNDER CONTRACT NOBS3612. PERMISSION FOR THEIR USE MAY BE OBTAINED FROM: *** "

AFTER COMPARING THE BID PRICE OFFERED BY SIMPLEX WITH THE GOVERNMENT'S COST ESTIMATE, THE CONTRACTING OFFICER CONCLUDED THAT THE SIMPLEX BID WAS UNREASONABLE AS TO PRICE AND, THEREFORE, SHOULD BE REJECTED UNDER SECTION 1-2.404-2(C) OF THE FEDERAL PROCUREMENT REGULATIONS (FPR) WHICH PERMITS THE REJECTION OF INDIVIDUAL BIDS THAT ARE UNREASONABLE AS TO PRICE. WAS ALSO THE CONTRACTING OFFICER'S VIEW THAT THE SIMPLEX BID WAS NONRESPONSIVE UNDER FPR SEC. 1-2.404-2(B) BECAUSE THE ABOVE-QUOTED LANGUAGE HAD THE EFFECT OF QUALIFYING ITS BID BY SHIFTING PRODUCTION AND SCHEDULING RESPONSIBILITY FROM SIMPLEX TO THE GOVERNMENT. IN VIEW OF ALL THESE CIRCUMSTANCES, THE TELEGRAPHIC PROCUREMENT WAS CANCELED. FPR SEC. 1 -2.404-1(B)(5), ALLOWING AN IFB TO BE CANCELED WHERE ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE UNREASONABLY PRICED, WAS CITED AS THE AUTHORITY FOR CANCELLATION. UPON RESOLICITATION, WHEREUNDER TELEGRAPHIC OFFERS WERE REQUESTED, BOTH GENERAL AND SIMPLEX SUBMITTED THE SAME BIDS AS BEFORE. HOWEVER, THIS TIME THE GENERAL BID WAS RECEIVED IN A TIMELY MANNER AND THAT COMPANY WAS EVENTUALLY AWARDED THE CONTRACT.

WHETHER A BID IS UNREASONABLE AS TO PRICE IS A MATTER FOR DETERMINATION BY THE PROCURING ACTIVITY AND INTERVENTION BY OUR OFFICE IS NOT WARRANTED ABSENT A SHOWING THAT THE DETERMINATION WAS ARRIVED AT ARBITRARILY, CAPRICIOUSLY OR IN BAD FAITH. IN THIS INSTANCE, THE TOTAL SIMPLEX BID PRICE WAS AT LEAST 300 PERCENT GREATER THAN THE GOVERNMENT TOTAL COST ESTIMATE, THE REASONABLENESS OF WHICH IS SUBSTANTIATED BY THE PRICE OFFERED BY GENERAL. THEREFORE, NO BASIS EXISTS FOR OUR OFFICE TO QUESTION THE ADMINISTRATIVE DETERMINATION TO CANCEL THE ORIGINAL SOLICITATION AND READVERTISE THE PROCUREMENT.

YOU HAVE RAISED CERTAIN QUESTIONS CONCERNING THE "RESPONSIVENESS" OF YOUR BID, CONDITIONED AS IT WAS UPON THE RENT-FREE USE OF GOVERNMENT OWNED FACILITIES IN YOUR POSSESSION. YOU HAVE A CONTRACT WITH THE NAVY WHICH PERMITS THE RENT-FREE USE OF CERTAIN NAVY FACILITIES IN THE PERFORMANCE OF PRIME CONTRACTS WITH THE GOVERNMENT, PROVIDED SUCH CONTRACTS SPECIFICALLY AUTHORIZE RENT-FREE USE.

SOLICITATIONS DO SOMETIMES AUTHORIZE THE RENT-FREE USE OF GOVERNMENT OWNED FACILITIES. HOWEVER, WHEN THIS IS AUTHORIZED, SOME PROVISION IS REQUIRED FOR EQUALIZATION OF THE COMPETITIVE COST ADVANTAGE THEREBY CONFERRED. IT WOULD BE PATENTLY UNFAIR TO GIVE ONE BIDDER FREE USE OF GOVERNMENT-OWNED FACILITIES WHICH WERE NOT AVAILABLE ON THE SAME TERMS TO ALL BIDDERS. CONSEQUENTLY, WHEN RENT-FREE USE IS AUTHORIZED, THE SOLICITATION REQUIRES INFORMATION AS TO JUST WHAT FACILITIES WILL BE USED AND THE PROPOSED PERIOD OF USE SO THAT A THEORETICAL RENTAL CHARGE MAY BE COMPUTED AND ADDED TO THE "RENT-FREE" BID TO OFFSET THE COMPETITIVE ADVANTAGE WHICH WOULD OTHERWISE BE GAINED. SEE SECTIONS 13 501 THROUGH 13 -506, ARMED SERVICES PROCUREMENT REGULATION.

THIS TYPE OF ARRANGEMENT IS ORDINARILY LIMITED TO THE USE OF FACILITIES OWNED BY ONE BRANCH OF THE DEPARTMENT OF DEFENSE IN PERFORMING A CONTRACT FOR THAT OR ANOTHER BRANCH OF DOD. THERE IS SOME QUESTION WHETHER SIMILAR ARRANGEMENTS BETWEEN AN AGENCY OF THE DEFENSE DEPARTMENT AND AN AGENCY OUTSIDE DOD SUCH AS THE DEPARTMENT OF AGRICULTURE WOULD BE PROPER WITHOUT SOME INTERDEPARTMENTAL FINANCIAL AGREEMENT.

IN ANY EVENT, THE REASON FOR REQUIRING PRIOR AUTHORIZATION FOR RENT FREE USE, EITHER BY THE FACILITIES CONTRACTING OFFICER OR IN THE SOLICITATION FOR THE CONTRACT TO BE PERFORMED, IS TO SECURE INFORMATION NECESSARY TO COMPUTE THE THEORETICAL RENTAL CHARGE WHICH MUST BE ADDED TO THE "RENT- FREE" BID FOR EVALUATION PURPOSES.

YOUR BID DID NOT FURNISH INFORMATION AS TO THE QUANTITY OF NAVY FACILITIES YOU PROPOSED TO USE OR THE USE PERIOD. CONSEQUENTLY, IT COULD NOT BE EVALUATED AGAINST BIDS WHICH DID NOT PROPOSE RENT-FREE USE OF GOVERNMENT FACILITIES. SINCE YOUR BID WAS ON A BASIS DIFFERENT FROM THAT REQUESTED BY THE SOLICITATION, AND THE SOLICITATION DID NOT CONTAIN PROVISIONS FOR EQUALIZING BIDS LIKE YOURS WITH BIDS NOT PROPOSING SIMILAR USE OF GOVERNMENT FACILITIES, YOUR BID WAS "NON RESPONSIVE" IN THE SENSE THAT IT ADDED CONDITIONS NOT COVERED BY THE SOLICITATION.

WE TRUST THIS ANSWERS YOUR QUESTIONS ON THIS POINT.