B-173015, AUG 18, 1971

B-173015: Aug 18, 1971

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WHERE THE SOLICITATION WHICH WAS RESTRICTED TO SMALL BUSINESSES RESULTED IN ONLY TWO BIDS AND THE LOW BID WAS FOUND NONRESPONSIVE. IT WAS PROPER TO CANCEL THE INVITATION AFTER AN ADMINISTRATIVE DETERMINATION THAT COMPETITION HAD BEEN RESTRICTED TO THE EXTENT THAT NEITHER ADEQUATE COMPETITION NOR A FAIR AND REASONABLE PRICE HAD BEEN RETAINED. HAS CONSISTENTLY ACKNOWLEDGED THE STATUTORY RIGHT UNDER 10 U.S.C. 2305(C) OF AN AGENCY TO REJECT ALL BIDS WHEN SUCH ACTION IS DETERMINED TO BE IN THE PUBLIC INTEREST AND SINCE PROTESTANT'S BID WAS 32.6 PERCENT HIGHER THAN THE REJECTED BID. TO CAVITRON CORPORATION: REFERENCE IS MADE TO YOUR TELEGRAM OF MAY 20. THE REFERENCED IFB WAS ISSUED ON MARCH 11.

B-173015, AUG 18, 1971

BID PROTEST - CANCELLED IFB - INADEQUATE COMPETITION DECISION DENYING PROTEST AGAINST CANCELLATION OF AN IFB ISSUED BY THE NAVY, AVIATION SUPPLY OFFICE, PHILA., PA., FOR VARYING QUANTITIES OF TWO TYPES OF ACCELEROMETERS. WHERE THE SOLICITATION WHICH WAS RESTRICTED TO SMALL BUSINESSES RESULTED IN ONLY TWO BIDS AND THE LOW BID WAS FOUND NONRESPONSIVE, IT WAS PROPER TO CANCEL THE INVITATION AFTER AN ADMINISTRATIVE DETERMINATION THAT COMPETITION HAD BEEN RESTRICTED TO THE EXTENT THAT NEITHER ADEQUATE COMPETITION NOR A FAIR AND REASONABLE PRICE HAD BEEN RETAINED. THE COMP. GEN. HAS CONSISTENTLY ACKNOWLEDGED THE STATUTORY RIGHT UNDER 10 U.S.C. 2305(C) OF AN AGENCY TO REJECT ALL BIDS WHEN SUCH ACTION IS DETERMINED TO BE IN THE PUBLIC INTEREST AND SINCE PROTESTANT'S BID WAS 32.6 PERCENT HIGHER THAN THE REJECTED BID, THE COMP. GEN. VIEWS THE CANCELLATION OF THE IFB AS A REASONABLE EXERCISE OF THE ADMINISTRATIVE DISCRETION VESTED IN THE CONTRACTING OFFICER.

TO CAVITRON CORPORATION:

REFERENCE IS MADE TO YOUR TELEGRAM OF MAY 20, 1971, AND SUBSEQUENT LETTERS, PROTESTING THE CANCELLATION OF INVITATION FOR BIDS (IFB) N00383- 71-B-0721, ISSUED BY THE DEPARTMENT OF THE NAVY, AVIATION SUPPLY OFFICE, PHILADELPHIA, PENNSYLVANIA.

THE REFERENCED IFB WAS ISSUED ON MARCH 11, 1971, AS A 100 PERCENT SET ASIDE FOR SMALL BUSINESS CONCERNS. BIDS WERE REQUESTED ON VARYING QUANTITIES OF TWO TYPES OF ACCELEROMETERS WHICH ARE DESIGNED TO INDICATE AN AIRCRAFT'S ACCELERATION AND GRAVITATIONAL FORCE IN MANEUVERS AND ROUGH AIR.

INVITATIONS WERE ISSUED TO TWENTY-FIVE POTENTIAL SUPPLIERS IN ANTICIPATION THAT BIDS WOULD BE RECEIVED FROM A SUFFICIENT NUMBER OF SMALL BUSINESS CONCERNS TO ASSURE ADEQUATE COMPETITION AND AN AWARD AT REASONABLE PRICES. TWO BIDS WERE RECEIVED AND OPENED ON MARCH 25, 1971, REVEALING THE FOLLOWING PRICES:

MILHARD ENGINEERING CO., INC.

WITH FIRST ARTICLE TESTS WAIVED $64,008

BURTON DIVISION OF CAVITRON CORPORATION

WITH FIRST ARTICLE TESTS REQUIRED $91,660

WITH FIRST ARTICLE TESTS WAIVED $84,900

YOUR LETTER TO THE CONTRACTING OFFICER OF MARCH 26, 1971, PROTESTED THE PROSPECTIVE AWARD OF A CONTRACT TO THE APPARENT LOW BIDDER, MILHARD ENGINEERING COMPANY, INC. (MILHARD), ALLEGING THAT MILHARD WAS NOT A SMALL BUSINESS CONCERN. UPON RECEIPT OF YOUR TIMELY PROTEST, THE CONTRACTING OFFICER FORWARDED THE MATTER TO THE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE, LOS ANGELES, CALIFORNIA, FOR A SIZE DETERMINATION PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-703(B)-(1)(A). IT WAS CONCLUDED BY THE SBA REGIONAL OFFICE THAT, BY VIRTUE OF MILHARD'S AFFILIATION WITH EDCLIFF INSTRUMENTS, WHICH WAS AFFILIATED WITH SYSTRON- DONNER CORPORATION, A LARGE BUSINESS CONCERN, MILHARD WAS A LARGE BUSINESS CONCERN WITHIN THE SBA RULES AND REGULATIONS. THIS SBA SIZE DETERMINATION WAS TRANSMITTED TO MILHARD AND THE CONTRACTING OFFICER BY LETTERS DATED APRIL 20, 1971. CONSEQUENTLY, MILHARD'S BID WAS REJECTED AS NONRESPONSIVE.

SINCE YOUR BID WAS 32.6 PERCENT HIGHER THAN MILHARD'S IT WAS ADMINISTRATIVELY DETERMINED THAT THE DECISION TO RESTRICT THE SOLICITATION TO SMALL BUSINESS CONCERNS HAD LIMITED COMPETITION TO THE EXTENT THAT NEITHER ADEQUATE COMPETITION NOR A FAIR AND REASONABLE PRICE WAS OBTAINED BY THE SOLICITATION. ACCORDINGLY, THE CONTRACTING OFFICER WITHDREW THE SET ASIDE PURSUANT TO ASPR 1-706.3(A) AND CANCELLED THE IFB PURSUANT TO ASPR 2-404.1(B)(VIII). THE BIDDERS WERE ADVISED OF THE CANCELLATION BY LETTERS DATED MAY 14, 1971, AND WERE INFORMED THAT THE PROCUREMENT WAS TO BE READVERTISED IN THE NEAR FUTURE, AND THAT THEY WOULD BE SOLICITED AT THAT TIME.

THE PROCUREMENT WAS READVERTISED UNDER UNRESTRICTED IFB N00383-71-B 0969, ISSUED MAY 25, 1971. UPON OPENING OF BIDS ON JUNE 8, 1971, THE FOLLOWING PRICES WERE RECORDED:

MILHARD

WITH FIRST ARTICLE TESTS WAIVED $62,342.20

BURTON

WITH FIRST ARTICLE TESTS REQUIRED $91,360.00

WITH FIRST ARTICLE TESTS WAIVED $84,600.00

BENDIX CORP., INST. & LIFE SUPPORT DIV.

WITH FIRST ARTICLE TESTS REQUIRED $140,242.38

WE ARE INFORMED THAT THE QUANTITIES REQUESTED UNDER THE LATTER IFB WERE IDENTICAL TO THOSE OF THE FORMER INVITATION. IT IS NOTED THAT YOUR PRICE AND MILHARD'S PRICE ARE LESS THAN THOSE QUOTED UNDER THE FIRST IFB, AND THE PRICE DIFFERENTIAL BETWEEN THE BIDS IS EVEN GREATER THAN THAT OF THE PREVIOUS BIDS.

THE ESSENCE OF YOUR PROTEST IS THAT THERE WERE NO COMPELLING REASONS TO CANCEL THE ORIGINAL IFB AND THAT THE ONLY JUSTIFICATION PROVIDED BY THE PROCURING ACTIVITY WAS THE CITATION OF ASPR 2-404.1(B)(VIII), WHICH PERMITS CANCELLATION WHEN DETERMINED TO BE CLEARLY IN THE BEST INTERESTS OF THE GOVERNMENT FOR REASONS OTHER THAN THOSE LISTED IN ASPR 2-404.1(B)(I -VII). YOU CONTEND THAT THE FAILURE TO ENUMERATE THE SPECIFIC REASONS VIOLATES THE PROVISION IN ASPR 2-404.1(B) REQUIRING THAT DETERMINATIONS TO CANCEL IFBS STATE THE REASONS THEREFOR. YOU FURTHER ALLEGE THAT THE CONTRACTING OFFICER HAS NOT SHOWN THAT YOUR ORIGINAL BID PRICE WAS UNREASONABLE, ONLY THAT IT WAS 32.6 PERCENT HIGHER THAN MILHARD'S.

OUR OFFICE HAS CONSISTENTLY ACKNOWLEDGED THE STATUTORY RIGHT UNDER 10 U.S.C. 2305(C) OF AN AGENCY TO REJECT ALL BIDS WHEN SUCH ACTION IS DETERMINED TO BE IN THE PUBLIC INTEREST. THE RIGHT TO REJECT ALL BIDS IS ALSO EXPRESSLY RESERVED TO THE GOVERNMENT IN PARAGRAPH 10(B) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS. WE HAVE ALSO RECOGNIZED THE BROAD AUTHORITY VESTED IN CONTRACTING OFFICERS TO REJECT ANY OR ALL BIDS AND READVERTISE, AND WE WILL NOT QUESTION SUCH AN ADMINISTRATIVE DECISION WHEN THERE IS A COGENT REASON FOR THE ACTION TAKEN. SEE 39 COMP. GEN. 396 (1959). UNREASONABLE PRICES ARE SHOWN IN ASPR 2 404.1(B)(VI) AND 2- 404.2(E) AS CONSTITUTING AN ACCEPTABLE REASON FOR REJECTING BIDS.

WHILE YOU CONTEND THAT NO COMPELLING REASON EXISTED FOR CANCELLATION IN THE INSTANT CASE, THE RECORD SHOWS THAT THE ADVERTISEMENT OF THIS PROCUREMENT AS A 100 PERCENT SMALL BUSINESS SET ASIDE PRODUCED ONLY ONE BID FROM A SMALL BUSINESS CONCERN WHOSE PRICE WAS 32.6 PERCENT HIGHER THAN THAT OF THE ONLY OTHER BIDDER. WE HAVE HELD THAT THE BID OF A NONRESPONSIVE BIDDER IS RELEVANT TO THE DETERMINATION OF WHAT IS A REASONABLE PRICE, B-161608, AUGUST 23, 1967. SEE ALSO B-154449, OCTOBER 30, 1964, AND B-168972, APRIL 14, 1970. IN 36 COMP. GEN. 364 (1956) WE STATED:

"WE CANNOT, HOWEVER, CONSIDER THE MATTER OF COMPETITIVE BIDDING FOR GOVERNMENT CONTRACTS SOLELY AS A GAME, IN WHICH THE CONTRACT MUST AUTOMATICALLY GO TO THE LOWEST BIDDER WITHOUT REGARD TO THE REASONABLENESS OF HIS PRICE OR TO OTHER ATTEMPTED BIDS WHICH CANNOT FOR TECHNICAL REASONS BE ACCEPTED. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES OR SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND READVERTISING OF THE CONTRACT IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT."

WE HAVE ALSO CONCURRED WITH THE WITHDRAWAL OF A SMALL BUSINESS SET ASIDE WHERE THE LOW BID RECEIVED WAS BY A LARGE BUSINESS CONCERN AND THE CIRCUMSTANCES INDICATED THAT SUBSTANTIAL SAVINGS COULD BE REALIZED FROM READVERTISEMENT ON AN UNRESTRICTED BASIS. IN THAT CASE THE SECOND LOW BID WAS APPROXIMATELY ONE FIFTH MORE THAN THE PRICE OF THE BIG BUSINESS CONCERN, AND WE APPROVED THE UNRESTRICTED RESOLICITATION OVER THE OBJECTION OF THE SECOND-LOW BIDDER WHO ALLEGED, AS YOU HAVE, THAT ITS BID PRICE WAS REASONABLE AND COMPARED FAVORABLY WITH PRICES OF SIMILAR CONTRACTS.

REGARDING YOUR CONTENTION THAT THE OMISSION IN THE CONTRACTING OFFICER'S LETTERS OF MAY 14, 1971, OF THE SPECIFIC REASONS WHY CANCELLATION WAS CONSIDERED TO BE IN THE BEST INTEREST OF THE GOVERNMENT, CONSTITUTED A VIOLATION OF ASPR 2-404.1(B), IT IS NOTED THAT THE REGULATION REQUIRES IN SUCH RESPECT ONLY THAT CONTRACTING OFFICERS' WRITTEN DETERMINATIONS STATE THE REASONS FOR CANCELLATION. THE REQUIREMENT THAT CONTRACTING OFFICERS NOTIFY BIDDERS OF THE REASON FOR REJECTION OF ALL BIDS IS CONTAINED IN ASPR 2-404.3, HOWEVER, ANY NONOBSERVANCE OF SUCH REQUIREMENT FOR STATING THE REASON FOR REJECTION IS CONSIDERED TO BE IN THE NATURE OF AN AFTER-THE -FACT PROCEDURAL DEFICIENCY WHICH DOES NOT AFFECT THE PROPRIETY OF THE CONTRACTING OFFICER'S DETERMINATION OR THE ACTION TAKEN. SEE B-168972, APRIL 14, 1970.

ACCORDINGLY, WE BELIEVE THAT THE CANCELLATION OF THE INVITATION AND RESOLICITATION CONSTITUTED A REASONABLE EXERCISE OF ADMINISTRATIVE DISCRETION VESTED IN THE CONTRACTING OFFICER, AND YOUR PROTEST MUST THEREFORE BE DENIED.