B-172789, JUL 19, 1971

B-172789: Jul 19, 1971

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ALTHOUGH SEMLINE'S BID PRICE ON PAPER WAS BELOW COST. SUCH AN AWARD WILL IN FACT RESULT IN THE LOWEST COST TO THE GOVERNMENT. IF A MISTAKE IS ALLEGED. THE BURDEN IS ON THE CONTRACTOR TO SUBMIT CLEAR AND CONVINCING EVIDENCE OF THE MISTAKE AND THE INTENDED BID. RELIEF IS NOT AUTOMATICALLY GRANTED. SINGMAN AND RAUH: REFERENCE IS MADE TO YOUR TELEFAX DATED APRIL 29. THE SOLICITATION IS FOR AN "ORDERING" TYPE CONTRACT FOR THE PRODUCTION OF NAVAL TRAINING PUBLICATIONS FOR THE PERIOD MAY 1. UNDER THE INVITATION BIDDERS WERE TO BID ON THE BASIS OF DISCOUNTS FROM OR PREMIUMS IN ADDITION TO "PAR PRICES" SET OUT IN THE SOLICITATION. ALSO THE BIDDER WAS REQUIRED TO SUBMIT PRICES FOR PAPER. BIDS WERE TO BE EVALUATED ON THE BASIS OF AN ESTIMATE OF ORDERS FOR TWO MONTHS PLUS CERTAIN SHIPPING COSTS TO BE BORNE BY THE GOVERNMENT.

B-172789, JUL 19, 1971

BID PROTEST - UNBALANCED BID DECISION DENYING PROTEST BY SECOND LOW BIDDER AGAINST AWARD OF A CONTRACT TO SEMLINE, INC., LOW BIDDER UNDER A SOLICITATION ISSUED BY THE GOVERNMENT PRINTING OFFICE FOR THE PRODUCTION OF NAVAL TRAINING PUBLICATIONS. ALTHOUGH SEMLINE'S BID PRICE ON PAPER WAS BELOW COST, SUCH AN UNBALANCED BID MAY BE CONSIDERED FOR AWARD WHERE, AS HERE, SUCH AN AWARD WILL IN FACT RESULT IN THE LOWEST COST TO THE GOVERNMENT. FURTHER, THERE HAS BEEN NO ALLEGATION OF AN ERROR IN BID, AND IF A MISTAKE IS ALLEGED, THE BURDEN IS ON THE CONTRACTOR TO SUBMIT CLEAR AND CONVINCING EVIDENCE OF THE MISTAKE AND THE INTENDED BID, AND RELIEF IS NOT AUTOMATICALLY GRANTED. FOR THE FOREGOING REASONS, THE PROTEST MUST BE DENIED.

TO LANDIS, COHEN, SINGMAN AND RAUH:

REFERENCE IS MADE TO YOUR TELEFAX DATED APRIL 29, 1971, AND YOUR SUPPLEMENTAL LETTERS DATED MAY 14 AND JUNE 1, 1971, IN WHICH YOU PROTEST ON BEHALF OF CRAFTSMAN PRESS, INCORPORATED, THE PROPOSED AWARD TO SEMLINE, INCORPORATED, UNDER A SOLICITATION ENTITLED "PROGRAM NO. 159-S" ISSUED BY THE UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON, D.C.

THE SOLICITATION IS FOR AN "ORDERING" TYPE CONTRACT FOR THE PRODUCTION OF NAVAL TRAINING PUBLICATIONS FOR THE PERIOD MAY 1, 1971 THROUGH APRIL 30, 1972. UNDER THE INVITATION BIDDERS WERE TO BID ON THE BASIS OF DISCOUNTS FROM OR PREMIUMS IN ADDITION TO "PAR PRICES" SET OUT IN THE SOLICITATION. ALSO THE BIDDER WAS REQUIRED TO SUBMIT PRICES FOR PAPER, EXCEPT COVER STOCK, AND SHIPPING CONTAINERS. BIDS WERE TO BE EVALUATED ON THE BASIS OF AN ESTIMATE OF ORDERS FOR TWO MONTHS PLUS CERTAIN SHIPPING COSTS TO BE BORNE BY THE GOVERNMENT.

BIDS WERE OPENED ON APRIL 8, 1971 AT 11:00 A.M. ELEVEN BIDS WERE SUBMITTED. THE LOW EVALUATED PRICE WAS SUBMITTED BY SEMLINE; CRAFTSMAN WAS NEXT LOW. CRAFTSMAN'S BID OFFERED A HIGHER DISCOUNT FROM THE PAR PRICES (33 PERCENT COMPARED TO 10 PERCENT) AND A LOWER PRICE ON SHIPPING CONTAINERS. HOWEVER, SEMLINE'S BID PRICE ON PAPER WAS SUFFICIENTLY LOW TO OVERCOME THE EVALUATION ADVANTAGE ACHIEVED BY CRAFTSMAN ON THE OTHER FACTORS. ON THE BASIS OF THE EVALUATION FORMULA SET FORTH IN THE INVITATION, SEMLINE'S BID WAS LOW. SINCE, IN THE OPINION OF THE CONTRACTING OFFICER, THE LOW BID WAS RESPONSIVE AND THE BIDDER RESPONSIBLE, HE PROPOSED TO AWARD THE CONTRACT TO SEMLINE.

IN SUPPORT OF YOUR PROTEST AGAINST THE PROPOSED ACTION, YOU SET OUT THREE BASIC CONTENTIONS. THEY ARE:

1. SEMLINE'S BID FOR THE PAPER WAS "UNREASONABLY" LOW AND THE BID MUST BE REJECTED AS UNREASONABLE, CITING FPR 1-2.404-2(C);

2. ACCEPTANCE OF SEMLINE'S "UNBALANCED BID" WOULD NOT RESULT IN THE LOWEST PRICES TO THE GOVERNMENT. IN THE ALTERNATIVE YOU CONTEND THAT TO AWARD A CONTRACT TO SEMLINE WOULD BE TO GIVE AN UNFAIR ADVANTAGE TO THE "UNBALANCED" BID;

3. SINCE SEMLINE'S PRICE ON THE PAPER WAS EXTREMELY LOW, THE CONTRACTING OFFICER WOULD BE REQUIRED TO OBTAIN CONFIRMATION OF SEMLINE'S PRICE, GIVING THAT FIRM AN OPPORTUNITY AFTER BID OPENING TO ALLEGE ERROR AND OBTAIN A "SECOND BITE AT THE APPLE."

WITH REGARD TO YOUR FIRST ALLEGATION, THE PROCURING AGENCY ADMITS THAT SEMLINE'S PAPER PRICE (72[ PER THOUSAND LEAVES) IS IN FACT BELOW COST. HOWEVER, SEMLINE'S TOTAL BID WAS ONLY SLIGHTLY BELOW CRAFTSMAN'S AND THE AGENCY DOES NOT CONSIDER SEMLINE'S OVERALL PRICE TO BE UNREASONABLE.

WITH REGARD TO THE UNBALANCING OF BIDS, WE HAVE STATED IN 48 COMP. GEN. 62, 66 (1968), IN PART AS FOLLOWS:

"IN THE PAST THIS OFFICE HAS FOUND COGENT REASON FOR REJECTING ALL BIDS AND CANCELING AN INVITATION WHERE AN INVITATION TENDED TO PRODUCE SERIOUS UNBALANCING OF BIDS BY REASON OF CLEARLY ERRONEOUS WEIGHT FACTORS SO MATERIAL AS TO MAKE IT DOUBTFUL THAT AN AWARD TO THE LOW BIDDER WOULD RESULT IN THE LOWEST COST TO THE GOVERNMENT. *** "

IN FRANK STAMATO & COMPANY V CITY OF NEW BRUNSWICK, 90 A. 2D 34, 36 (1952), THE COURT STATED:

"AN UNBALANCED BID COMPREHENDS A BID BASED ON NOMINAL PRICES FOR SOME WORK AND ENHANCED PRICES FOR OTHER WORK. THE MERE FACT THAT A BIDDER HAS SUBMITTED AN UNBALANCED BID, DOES NOT AUTOMATICALLY OPERATE TO INVALIDATE AN AWARD OF THE CONTRACT TO SUCH BIDDER. THERE MUST BE PROOF OF COLLUSION OR OF FRAUDULENT CONDUCT ON THE PART OF SUCH BIDDER AND THE CITY OR ITS ENGINEER OR OTHER AGENT, OR PROOF OF OTHER IRREGULARITY OF SUCH SUBSTANTIAL NATURE AS WILL OPERATE TO AFFECT FAIR AND COMPETITIVE BIDDING. *** IN THE ABSENCE OF FRAUD, CORRUPTION OR ABUSE OF DISCRETION, THE DETERMINATION OF THE PROPER OFFICERS IN MAKING AN AWARD OF A CONTRACT WILL NOT BE DISTURBED BY THE COURT. *** "

THIS OFFICE HELD IN B-154631, DECEMBER 21, 1964, ON PAGE 8 AND 9 AS FOLLOWS:

"THE QUESTION WHETHER A BID SHOULD BE REJECTED AS NOT BEING IN THE INTEREST OF THE GOVERNMENT IS ONE PRIMARILY FOR DETERMINATION BY THE CONTRACTING OFFICIALS. HOWEVER, AS POINTED OUT IN DECISION OF DECEMBER 19, 1962, B-150379, A DETERMINATION TO REJECT IN A SITUATION SUCH AS HERE INVOLVED WOULD HAVE TO BE BASED UPON A FINDING THAT THE INCONSISTENT OR UNREALISTIC METHOD OF BIDDING MIGHT RESULT IN HIGHER COSTS TO THE GOVERNMENT OR MAKE IT IMPRACTICABLE TO DETERMINE WHAT THE PROBABLE COSTS WOULD BE UNDER SUCH A BID. *** "

IN APPLYING THE ABOVE DECISION TO YOUR CASE, THE ADMINISTRATIVE REPORT STATES IN PART AS FOLLOWS:

"UPON REVIEW OF ALL THE INFORMATION ON HAND, WE HAVE DETERMINED THAT THE TWO MONTH PRODUCTION REQUIREMENTS USED TO EVALUATE BIDS ARE AS ACCURATE AS THIS AGENCY CAN MAKE THEM. THOSE FIGURES ARE BASED UPON ACTUAL ORDERS PLACED UNDER THE LAST CONTRACT, AND THE NAVY HAS CONFIRMED THAT INFORMATION. WE BELIEVE WE HAVE ESTABLISHED A FAIR AND REASONABLE MEANS OF EVALUATING BIDS FOR ADMITTEDLY ESTIMATED REQUIREMENTS SINCE IN OUR OPINION THE EVALUATION FACTORS ARE BASED UPON REASONABLY ANTICIPATED NEEDS OF THE GOVERNMENT.

"HOWEVER, SINCE THE QUESTION IS A CLOSE ONE, AND SO AS TO ASSURE OURSELVES THAT THE GOVERNMENT WAS NOT BECOMING A PARTY TO AN IMPROVIDENT CONTRACT WE ATTEMPTED TO DETERMINE AT WHAT POINT IN PRODUCTION THE PROTESTANT'S OFFER WOULD BE MORE ADVANTAGEOUS TO THE GOVERNMENT THAN THAT OF THE APPARENT LOW BIDDER, SINCE THERE WAS SUCH A DISPARITY IN PRODUCTION COSTS VIS A VIS PAPER COSTS. OUR BEST ESTIMATE IS THAT MOST PRODUCTION RUNS ABOVE 5,000 COPIES WOULD BE MORE ECONOMICALLY PRODUCED AT THE PRICES OFFERED BY SEMLINE, INC. THE AVERAGE NUMBER OF COPIES ORDERED IN THE LAST 25 ORDERS PLACED ON THE CURRENT CONTRACT WAS 18,000 COPIES, WITH A HIGH OF 125,000 COPIES AND A LOW OF 3,409 COPIES. ONLY TWO OTHER ORDERS (4,409 COPIES AND 4,924 COPIES) FELL BELOW 5,000, AND THREE OTHER FELL BELOW 5,500 COPIES.

"WE BELIEVE THEREFORE THAT THE EVALUATION FACTORS WERE ACCURATE AND THAT THE GOVERNMENT WOULD IN FACT HAVE THE BENEFIT OF LOWER PRICES FOR THE TOTAL PRODUCTION ANTICIPATED." IN 49 COMP. GEN. 335 (1969), AFTER CITING THE STAMATO CASE, WE STATED THE FOLLOWING AT PAGES 343, 344:

" *** WHERE A BIDDER HAS CONFIRMED A BID WHICH APPEARS TO BE UNBALANCED AND THERE IS NO INDICATION THAT THE BID IS NOT AS INTENDED OR EVIDENCE OF ANY IRREGULARITY, WE HAVE HELD THAT THE BID MAY BE ACCEPTED IF IT IS OTHERWISE THE LOWEST ACCEPTABLE BID AND THE BIDDER IS RESPONSIBLE. COMP. GEN. 572, 574 (1959); B-161928, AUGUST 8, 1967; B-164736, DECEMBER 2, 1968, AFFIRMED JUNE 10, 1969. SEE, ALSO, OUR DECISION 48 COMP. GEN. 330 OF TODAY (ON THE DOVER CASE) TO THE SECRETARY OF THE AIR FORCE."

WE BELIEVE THAT THE FOREGOING ESTABLISHES OUR POSITION THAT AN UNBALANCED BID SHOULD NOT BE CONSIDERED FOR AWARD WHEN IT OFFERS EXTREMELY LOW PRICES ON SOME ITEMS AND EXCESSIVELY HIGH PRICES ON OTHERS, WITH THE RESULT THAT THE BID IS EVALUATED LOW BUT THERE IS SUBSTANTIAL DOUBT THAT AWARD TO THAT FIRM WILL RESULT IN THE LOWEST COST TO THE GOVERNMENT. THE PROCURING ACTIVITY HAS CONCLUDED, AND WE BELIEVE WITH GOOD REASON, THAT THE SITUATION CONSIDERED HERE DOES NOT COME WITHIN THE STATED RULE SINCE THE BEST INFORMATION AVAILABLE INDICATES THAT AWARD TO SEMLINE WILL IN FACT RESULT IN THE LOWEST COST TO THE GOVERNMENT. FOR THE SAME REASON WE FAIL TO SEE HOW SEMLINE'S BID WOULD GIVE THAT COMPANY A COMPETITIVE ADVANTAGE.

YOUR THIRD ALLEGATION IS BASED ON THE GENERAL RULE THAT IF A BID PRICE IS SO LOW AS TO REASONABLY PUT THE CONTRACTING OFFICER ON NOTICE OF THE PROBABILITY OF ERROR, THE CONTRACTING OFFICER IS REQUIRED TO OBTAIN CONFIRMATION OF THAT BID PRICE. YOU CONTEND THAT THIS WOULD GIVE SUCH BIDDER THE OPPORTUNITY TO WITHDRAW OR CONFIRM ITS BID AFTER IT HAS SEEN ALL THE BID PRICES.

WHERE AFTER OPENING AND BEFORE AWARD, A BIDDER ALLEGES A MISTAKE, HE MUST, IN ORDER TO OBTAIN CORRECTION, PROMPTLY SUBMIT CLEAR AND CONVINCING EVIDENCE OF THE MISTAKE AND THE INTENDED BID OR IF THE BIDDER DESIRES TO WITHDRAW ITS BID AS A RESULT OF A MISTAKE, IT NEED ONLY SHOW CLEAR AND CONVINCING EVIDENCE OF THE MISTAKE. THAT EVIDENCE IS CAREFULLY REVIEWED BEFORE CORRECTION OR WITHDRAWAL IS PERMITTED. PERMISSION TO CORRECT OR WITHDRAW IS BY NO MEANS AUTOMATIC (SEE FPR 1 2.406.3). THIS PROPOSITION IS WELL ILLUSTRATED BY THE CASES YOU CITE. THESE CASES, 39 COMP. GEN. 185 (1959) AND 35 COMP. GEN. 33 (1955), HOWEVER, ARE DISTINGUISHABLE FROM THE PRESENT CASE. IN BOTH THERE WAS CLEARLY AN ERROR SINCE THE UNIT PRICES AND EXTENSIONS DID NOT AGREE. IN BOTH CASES THE BIDDER WOULD BE LOW IF THE UNIT PRICES WERE ACCEPTED BUT NOT IF THE EXTENSIONS WERE TAKEN AS CORRECT. IN BOTH CASES THE REQUEST FOR CORRECTION WAS DENIED. IN THE CURRENT CASE THERE IS NO SHOWING THAT IN FACT AN ERROR OF ANY KIND WAS MADE. WE THINK THIS CASE IS MORE NEARLY ANALOGOUS TO 38 COMP. GEN. 572 (1959) IN WHICH WE SUSTAINED FAVORABLE CONSIDERATION OF THE "UNBALANCED" BID. SEE ALSO 49 COMP. GEN. 355, SUPRA.

IN ACCORDANCE WITH THE FOREGOING, YOUR PROTEST MUST BE DENIED.