B-173141, OCT 14, 1971

B-173141: Oct 14, 1971

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INSTEAD TO ISSUE A NEW IFB FOR CURRENT REQUIREMENTS (UNDER WHICH PROTESTANT IS THIRD LOW BIDDER) AND ALSO DENYING THE PROTEST AGAINST THE PROCUREMENT PROCEDURES FOLLOWED BY THE OKLAHOMA CITY AIR MATERIEL AREA. WHEN THE CONTRACTING OFFICER RECEIVED INFORMATION THAT BETTER PRICES THAN THOSE IN THE OPTION WERE AVAILABLE. IT IS THE OPINION OF THE COMP. THAT THE CONTRACTING OFFICER WAS PRECLUDED BY ASPR 1-1505(C)(III) FROM EXERCISING THE OPTION AND HE HAD NO ALTERNATIVE BUT TO ISSUE A NEW IFB FOR THE REQUIREMENTS. THE PROTEST IS DENIED. THE INVITATION IN QUESTION WAS ISSUED ON MAY 18. THE CONTRACT PERIOD SET FORTH IN THE INVITATION IS FOR TWELVE MONTHS AFTER RECEIPT BY THE CONTRACTOR OF A WRITTEN NOTICE OF AWARD UNLESS THE GOVERNMENT ELECTS TO EXERCISE ITS RIGHTS UNDER OPTION J-1 TO EXTEND THE ORDERING PERIOD 90 DAYS.

B-173141, OCT 14, 1971

BID PROTEST - OPTION CLAUSES - NEW IFB DECISION DENYING PROTEST BY HOLDER OF FORMER CONTRACT AGAINST THE PROCUREMENT AGENCY'S FAILURE TO EXERCISE THE OPTION CLAUSE, BUT INSTEAD TO ISSUE A NEW IFB FOR CURRENT REQUIREMENTS (UNDER WHICH PROTESTANT IS THIRD LOW BIDDER) AND ALSO DENYING THE PROTEST AGAINST THE PROCUREMENT PROCEDURES FOLLOWED BY THE OKLAHOMA CITY AIR MATERIEL AREA, TINKER AFB. WHEN THE CONTRACTING OFFICER RECEIVED INFORMATION THAT BETTER PRICES THAN THOSE IN THE OPTION WERE AVAILABLE, IT IS THE OPINION OF THE COMP. GEN. THAT THE CONTRACTING OFFICER WAS PRECLUDED BY ASPR 1-1505(C)(III) FROM EXERCISING THE OPTION AND HE HAD NO ALTERNATIVE BUT TO ISSUE A NEW IFB FOR THE REQUIREMENTS. IN LIGHT OF THE ABOVE, AND BECAUSE PROTESTANT'S OTHER ALLEGATIONS DO NOT PROVIDE A BASIS FOR OBJECTION TO THE ACTIONS OF THE PROCURING AGENCY, THE PROTEST IS DENIED.

TO EMERSON ELECTRIC CO.:

WE REFER TO YOUR LETTERS OF JUNE 9 AND AUGUST 20, 1971, CONCERNING YOUR PROTEST AGAINST THE ISSUANCE OF IFB NO. F34601-71-B-0504 BY THE OKLAHOMA CITY AIR MATERIEL AREA (OCAMA), TINKER AIR FORCE BASE, OKLAHOMA CITY, OKLAHOMA.

THE INVITATION IN QUESTION WAS ISSUED ON MAY 18, 1971, AND CALLED FOR BIDS FOR A REQUIREMENTS TYPE CONTRACT FOR NEW BASIC TECHNICAL ORDERS AND REVISIONS TO EXISTING TECHNICAL ORDERS REQUIRED FOR THE OPERATION AND MAINTENANCE OF AIRCRAFT, ENGINES, MISSILES, INSTRUMENTS, ASSOCIATED EQUIPMENT AND GROUND EQUIPMENT AND GROUND COMMUNICATIONS-ELECTRONICS METEOROLOGICAL EQUIPMENT, AND REPRODUCTION OF CHECK OUT TAPES. THE CONTRACT PERIOD SET FORTH IN THE INVITATION IS FOR TWELVE MONTHS AFTER RECEIPT BY THE CONTRACTOR OF A WRITTEN NOTICE OF AWARD UNLESS THE GOVERNMENT ELECTS TO EXERCISE ITS RIGHTS UNDER OPTION J-1 TO EXTEND THE ORDERING PERIOD 90 DAYS, OPTION J-2 FOR A SECOND YEAR AND/OR OPTION J-3 FOR A THIRD YEAR.

YOUR FIRM HELD THE FORMER CONTRACT FOR THE SAME WORK DURING THE PERIOD FROM SEPTEMBER 28, 1970, TO JUNE 30, 1971, WHICH CONTRACT ALSO CONTAINED OPTION CLAUSES SIMILAR TO THOSE OUTLINED ABOVE. THE CONTRACTING OFFICER CHOSE NOT TO EXERCISE ANY OF THE OPTIONS BUT INSTEAD ISSUED A NEW INVITATION FOR THE CURRENT REQUIREMENTS.

YOUR PROTEST IS BASED ON YOUR BELIEF THAT IT WOULD HAVE BEEN IN THE BEST INTEREST OF THE GOVERNMENT TO EXERCISE THE FIRST YEAR OPTION TO EXTEND YOUR CONTRACT AND YOU REQUEST A DECISION ON THE PROPRIETY AND LEGALITY OF THE SOLICITATION FOR THE CURRENT REQUIREMENTS. IN SUPPORT OF YOUR PROTEST AGAINST THE ISSUANCE OF IFB NO. F34601-71-B-0504 YOU ALLEGE THAT THE INVITATION IS SO STRUCTURED THAT NEITHER FREE AND FULL COMPETITION NOR AN AWARD MOST ADVANTAGEOUS TO THE GOVERNMENT WILL BE POSSIBLE FOR THE FOLLOWING REASONS:

1. THE INVITATION FAILS TO DISCOURAGE UNBALANCED BIDS.

2. THE OPTION QUANTITY IS NOT LIMITED IN THE J-1 OPTION.

3. THE INVITATION PROVIDES FOR EVALUATION OF THE BASIC QUANTITY EXCLUSIVE OF THE OPTIONS.

4. THE INVITATION DOES NOT PROVIDE FOR MULTI-YEAR PROCUREMENT.

5. BUYING-IN IS NOT DISCOURAGED.

IN ADDITION, YOU CONTEND THE INVITATION IS DEFECTIVE IN THAT COMPETITION WAS RESTRICTED BY THE FACT THAT THE SYNOPSIS OF THE PROCUREMENT WAS NOT PUBLISHED IN THE COMMERCE BUSINESS DAILY UNTIL TEN DAYS AFTER THE INVITATION WAS ISSUED, AND THAT LIMITING PERFORMANCE TO A 25 MILE RADIUS OF TINKER AIR FORCE BASE ALSO RESTRICTED COMPETITION.

YOU FURTHER ALLEGE THAT OCAMA DISCRIMINATED AGAINST YOUR FIRM BY ARBITRARILY REFUSING TO EXERCISE ITS OPTION TO EXTEND THE CONTRACT PERIOD ALTHOUGH IT HAD EXERCISED SUCH OPTIONS IN PREVIOUS YEARS AND BY WITHHOLDING ORDERS FROM YOUR FIRM DURING THE FINAL WEEKS OF THE CONTRACT.

YOU FURTHER ALLEGE THAT THE BIDS RECEIVED IN RESPONSE TO THE INVITATION ARE EVIDENCE OF MATERIAL DEFECTS IN THE INVITATION. YOU INSIST THAT THE LOW BID IN RESPONSE TO THE INVITATION, WHICH WAS $30,437 LESS THAN YOUR BID, IS A BUY-IN PRICE. YOU ALSO ALLEGE THAT THE SECOND LOW BID, WHICH IS $6,939 LESS THAN YOUR BID, WOULD ACTUALLY COST THE GOVERNMENT MORE THAN YOUR BID IF EVALUATED ON THE BASIS OF THE ACTUAL QUANTITIES ORDERED DURING THE FIRST EIGHT MONTHS OF YOUR CONTRACT.

FINALLY, YOU CONTEND THAT WHILE THE FOREGOING ALLEGED INSTANCES OF IRREGULARITY MAY NOT APPEAR TO BE SIGNIFICANT IN AND OF THEMSELVES, THE RESULT IS ELIMINATION OF COMPETITION AND UNDERMINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. IT IS YOUR OPINION, THEREFORE, THAT THE INVITATION SHOULD BE CANCELLED.

THE REPORT RECEIVED FROM THE DEPARTMENT OF THE AIR FORCE DISCLOSES THAT IN MARCH 1970, OCAMA RECEIVED LETTERS FROM TWO PROSPECTIVE BIDDERS STATING THAT THEY WERE IN A POSITION TO OFFER BETTER PRICES THAN THOSE AVAILABLE TO THE GOVERNMENT UNDER THE OPTION CLAUSE OF THE CONTRACT IN EFFECT AT THAT TIME. THE CONTRACTING OFFICER THEREFORE DETERMINED THAT IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO COMPETE THE REQUIREMENT AT THE EXPIRATION OF THE BASIC CONTRACT RATHER THAN TO EXERCISE THE OPTION TO EXTEND THAT CONTRACT. THIS DETERMINATION IS IN ACCORDANCE WITH ASPR 1- 1505(C)(III) WHICH PROVIDES THAT AN OPTION SHOULD BE EXERCISED ONLY IF IT IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS LIKEWISE IN ACCORD WITH THE POSITION THAT OUR OFFICE HAS CONSISTENTLY TAKEN, THAT THE BEST METHOD OF DETERMINING THE MOST ADVANTAGEOUS PRICE TO THE GOVERNMENT IS TO SUBMIT THE REQUIREMENT TO THE TEST OF COMPETITIVE BIDDING. 41 COMP. GEN. 682 (1962); B-170913, NOVEMBER 17, 1970.

IN THE INSTANT CASE, IT IS OUR OPINION THAT AFTER THE CONTRACTING OFFICER RECEIVED INFORMATION THAT BETTER PRICES THAN THOSE IN THE OPTION WERE AVAILABLE, HE WAS PRECLUDED BY ASPR 1-1505(C)(III) FROM EXERCISING THE OPTION AND HE HAD NO ALTERNATIVE BUT TO ISSUE A NEW INVITATION FOR THE REQUIREMENTS. THE CORRECTNESS OF HIS ACTION IS FURTHER SUBSTANTIATED BY THE AMOUNT OF COMPETITION GENERATED BY THE INVITATION AND BY THE LOWER BIDS RECEIVED FROM THREE BIDDERS. THE RECORD SHOWS THAT THE OPTION PRICE FOR EXTENDING YOUR CONTRACT WAS $160,892.00 WHILE THE SIX BIDS RECEIVED IN RESPONSE TO THE INVITATION ARE AS FOLLOWS:

LEAR SIEGLER, INC. $127,401.00

HAYES INTERNATIONAL CORP. $150,899.00

EMERSON ELECTRIC $157,838.47

PILLSBURY & MARTIGNONI $188,752.00

MILMANCO CORP. $321,858.00

NHA INC. $409,220.37

SINCE WE CONSIDER THAT THE CONTRACTING OFFICER ACTED PROPERLY IN DECIDING NOT TO EXERCISE THE OPTION UNDER THE FORMER CONTRACT, AND TO COMPETE THE REQUIREMENTS FOR THE CURRENT YEAR, THERE REMAINS ONLY THE QUESTION OF THE PROPRIETY AND LEGALITY OF THE INVITATION ISSUED ON MAY 18, 1971. WE WILL CONSIDER THE OBJECTIONS YOU HAVE RAISED TO THIS INVITATION IN THE ORDER PRESENTED.

IN SUPPORT OF YOUR PRIMARY CONTENTION THAT NEITHER FREE AND FULL COMPETITION NOR AN AWARD MOST ADVANTAGEOUS TO THE GOVERNMENT IS POSSIBLE UNDER THE INVITATION, YOU ALLEGE FIRST THAT THE INVITATION FAILS TO DISCOURAGE UNBALANCED BIDS. WHILE WE AGREE WITH YOUR STATEMENT OF THE GENERAL PRINCIPLE THAT UNBALANCED BIDS SHOULD BE DISCOURAGED, THE MERE RECITATION OF SUCH A GENERALITY DOES NOT INSURE THAT IT HAS ANY APPLICATION TO THE FACTS OF A PARTICULAR CASE.

ADDITIONALLY, THE WARNING AGAINST UNBALANCED BIDS WHICH WAS INCLUDED IN THE PRIOR SOLICITATION, AND WHICH YOU INSIST SHOULD HAVE BEEN INCLUDED IN THE PRESENT INVITATION, IS NOT APPROPRIATE IN THE PRESENT CASE. CLAUSE D- 3 OF THE PRIOR SOLICITATION, TO WHICH YOU REFER, CONTAINS A WARNING THAT A BID WHICH IS MATERIALLY UNBALANCED AS TO PRICES FOR BASIC AND OPTION QUANTITIES WILL BE REJECTED. THIS TYPE OF WARNING WAS APPROPRIATE TO THE PRIOR SOLICITATION WHICH PROVIDED FOR EVALUATION OF THE OPTIONS AS WELL AS THE BASIC QUANTITY, BUT HAS NO APPLICABILITY TO THE PRESENT INVITATION WHICH SPECIFICALLY PROVIDES FOR EVALUATION OF THE BASIC QUANTITY ONLY.

YOUR SECOND CONTENTION IS THAT THE CURRENT INVITATION IS DEFECTIVE IN THAT IT FAILS TO LIMIT THE OPTION QUANTITY. HOWEVER, THAT PORTION OF ASPR 1-1504(A) AND OUR FORMER DECISIONS TO WHICH YOU REFER, 36 COMP. GEN. 62 (1956) AND 47 ID. 156 (1967), DEAL WITH OPTIONS IN FIXED QUANTITY CONTRACTS, WHEREAS THE PRESENT INVITATION CONTEMPLATES A REQUIREMENTS TYPE CONTRACT WHICH STATES NO FIXED QUANTITIES BUT INSTEAD FIXES THE PERIOD OF PERFORMANCE. IN SUCH CIRCUMSTANCE, ASPR 1-1504(A) REQUIRES ONLY A LIMIT TO THE DURATION OF THE PERIOD FOR WHICH PERFORMANCE OF THE CONTRACT MAY BE EXTENDED UNDER AN OPTION. THE CURRENT INVITATION COMPLIES WITH THE PROVISIONS OF THIS SECTION OF ASPR BY FIXING THE OPTION PERIODS AT NINETY DAYS FOR THE FIRST OPTION AND ONE YEAR FOR EACH OF THE OTHER TWO OPTIONS.

YOU NEXT CONTEND THAT FAILURE TO PROVIDE FOR EVALUATION OF OPTIONS IS DETRIMENTAL TO THE INTERESTS OF THE UNITED STATES AND IS UNFAIR AND PREJUDICIAL TO PROSPECTIVE BIDDERS. HOWEVER, IN SUPPORT OF YOUR CONTENTION YOU SUBMIT THAT EVALUATION OF THE OPTIONS IN THE PRIOR PROCUREMENT RESULTED IN AN AWARD TO YOUR FIRM AT A PRICE SOME $35,000 HIGHER FOR THE BASIC PERIOD THAN THE PRICE OF ANOTHER BIDDER. THE LOGIC OF YOUR CONTENTION, AS IT RELATES TO THE BEST INTERESTS OF THE GOVERNMENT, IS NOT READILY APPARENT, NOR DOES IT APPEAR THAT AN AWARD TO OTHER THAN THE LOW BIDDER FOR THE BASIC PERIOD IS FAIR TO BIDDERS GENERALLY. CERTAINLY THE REMEDY FOR THIS SITUATION IS NOT TO REPEAT AN EVALUATION PROCEDURE WHICH LED TO SUCH A RESULT, BUT IS RATHER TO CHANGE THE METHOD OF EVALUATION IN THE LIGHT OF THAT EXPERIENCE AND THE DIFFERENT COMPETITIVE CONDITIONS WHICH NOW PREVAIL.

MOREOVER, THE GENERAL RULE REGARDING EVALUATION OF OPTIONS, AS STATED IN ASPR 1-1504(B), IS THAT EVALUATION WILL BE EXCLUSIVE OF THE OPTIONS. CERTAIN EXCEPTIONS TO THE GENERAL RULE ARE PROVIDED IN SUBPARAGRAPHS (C), (D) AND (E). ASPR 1-1504(C) AND (E) REFER TO OTHER TYPES OF CONTRACTS AND ARE NOT FOR APPLICATION HERE. THE EXCEPTION IN ASPR 1-1504(D), WHICH YOU QUOTE AT LENGTH, IS PERMISSIVE BUT NOT MANDATORY, AND PROVIDES THAT OPTIONS MAY BE CONSIDERED IF A DETERMINATION IS MADE THAT REALISTIC COMPETITION FOR THE OPTION QUANTITY IS IMPRACTICAL ONCE THE INITIAL CONTRACT IS AWARDED. HOWEVER, THE EXCEPTION TO THE GENERAL RULE WAS NOT INVOKED IN THIS CASE SINCE NO SUCH DETERMINATION WAS MADE. IT IS OUR OPINION THAT THE FACTS OF RECORD SUPPORT A CONCLUSION THAT ADEQUATE COMPETITION IS AVAILABLE FOR THE OPTION PERIODS AND THEREFORE OCAMA WAS REQUIRED TO APPLY THE BASIC RULE SET FORTH IN ASPR 1-1504(B) AND EVALUATE THE BIDS EXCLUSIVE OF THE OPTIONS.

WE DO NOT REGARD THE EVALUATION OF THE BIDS AS UNFAIR OR PREJUDICIAL TO PROSPECTIVE BIDDERS, SINCE SECTION D-2 ON PAGE 21 OF THE INVITATION ADVISED ALL PROSPECTIVE BIDDERS THAT THE EVALUATION FOR AWARD WILL BE ON THE BASIS OF THE QUANTITIES TO BE AWARDED EXCLUSIVE OF THE OPTION QUANTITIES. THIS SECTION PROVIDES A COMMON BASIS FOR EVALUATION OF ALL BIDS AND THEREFORE CANNOT BE CONSTRUED AS UNFAIR OR PREJUDICIAL, AS YOU CONTEND.

WITH REGARD TO YOUR CONTENTION THAT A MULTI-YEAR PROCUREMENT SHOULD HAVE BEEN USED IN LIEU OF A CONTRACT FOR A BASIC PERIOD OF ONE YEAR WITH OPTIONS, ASPR 1-322.2(J) PROVIDES THAT MULTI-YEAR PROCUREMENT SHALL NOT BE USED WHEN ANY ONE OF THE CRITERIA SET FORTH IN SECTION (A) IS NOT PRESENT. ASPR 1-322.2(A) SETS FORTH THAT REDUCED UNIT PRICES MUST REASONABLY BE ANTICIPATED OVER ANNUAL BUYS, A CONDITION WHICH IS NOT PRESENT HERE. IN VIEW THEREOF, WE THINK THE ADMINISTRATIVE DECISION, THAT A CONTRACT FOR A PERIOD OF ONE YEAR WITH OPTIONS WAS BEST SUITED TO THE NEEDS OF THE GOVERNMENT, WAS REASONABLE AND PROPER.

YOUR SUBSIDIARY CONTENTION THAT THE GOVERNMENT INDUCED YOUR FIRM TO RELY ON THE IDEA THAT THE PRIOR SOLICITATION WAS TO BE FOR A THREE-YEAR REQUIREMENT, AND HAVING RECEIVED BIDS THEREON SHOULD THEREAFTER BE REQUIRED TO CONTINUE TO CONTRACT WITH YOUR FIRM, IS WITHOUT FOUNDATION IN FACT. THE INVITATION OF AUGUST 26, 1970, CLEARLY STATED IN SECTION D-3 ON PAGE 21 THAT EVALUATION OF OPTIONS WILL NOT OBLIGATE THE GOVERNMENT TO EXERCISE THE OPTION OR OPTIONS. THERE IS NO AMBIGUITY IN THIS PROVISION, AND WE THEREFORE ARE UNABLE TO FIND THAT YOU COULD HAVE BEEN MISLED THEREBY.

YOUR NEXT ALLEGATION IS THAT THE INVITATION FAILS TO DISCOURAGE "BUYING- IN." IN SUPPORT THEREOF, YOU REFER TO THE GENERAL POLICY STATEMENT IN ASPR 1-311 THAT THE OPPORTUNITY FOR "BUYING-IN" SHOULD BE MINIMIZED. YOU HAVE APPARENTLY OVERLOOKED THE FACT THAT ASPR 1 311(B)(2) SETS FORTH, AS ONE PROCUREMENT TECHNIQUE TO MINIMIZE SUCH OPPORTUNITY, THE OBTAINING OF PRICED OPTIONS FOR ADDITIONAL QUANTITIES, WHICH WAS DONE IN THIS INSTANCE. WE THEREFORE FIND THIS ALLEGATION TO BE UNSUPPORTED BY THE RECORD.

YOU ALSO ALLEGE THAT COMPETITION WAS RESTRICTED IN THIS INSTANCE BY FAILURE TO PUBLISH A SYNOPSIS IN THE COMMERCE BUSINESS DAILY UNTIL TEN DAYS AFTER THE INVITATION WAS ISSUED, AND BY LIMITING PERFORMANCE TO A TWENTY-FIVE MILE RADIUS OF TINKER AIR FORCE BASE. REGARDING THE FIRST PORTION OF YOUR ALLEGATION, ASPR 1-1003.2, TO WHICH YOU REFER, SETS A MINIMUM REQUIREMENT THAT A PURCHASING OFFICE SHALL SYNOPSIZE A PROPOSED PROCUREMENT NOT LATER THAN THE DATE OF ISSUANCE OF THE SOLICITATION. THE AIR FORCE REPORT IN THIS CASE REVEALS THAT A SYNOPSIS WAS MADE AND SENT BY AIR MAIL TO THE COMMERCE BUSINESS DAILY ON THE DATE THE INVITATION WAS ISSUED IN COMPLIANCE WITH THE ABOVE REGULATION. THE ACTUAL DATE OF PUBLICATION THEREAFTER WAS NOT WITHIN THE CONTROL OF THE PURCHASING OFFICE AND IN ANY EVENT IS NOT DETERMINATIVE ON THE ISSUE OF WHETHER FULL AND FREE COMPETITION WAS OBTAINED. NEITHER YOUR SUBMISSION NOR THE ADMINISTRATIVE RECORD CONTAIN ANY INDICATION THAT ANY INTERESTED PROSPECTIVE BIDDER WAS EXCLUDED FROM BIDDING, BUT EVEN IF THIS WERE THE CASE, WE HAVE HELD THAT THE PROPRIETY OF A PROCUREMENT MUST BE DETERMINED FROM THE GOVERNMENT'S POINT OF VIEW ON THE BASIS OF WHETHER ADEQUATE COMPETITION AND REASONABLE PRICES ARE OBTAINED, AND NOT ON WHETHER EVERY POSSIBLE PROSPECTIVE BIDDER IS AFFORDED AN OPPORTUNITY TO BID. B-167847, DECEMBER 11, 1969. IN THE PRESENT CASE, THE RECORD SHOWS BOTH ADEQUATE COMPETITION AND REASONABLE PRICES. THE SECOND PORTION OF YOUR ALLEGATION THAT COMPETITION WAS RESTRICTED BY LIMITING PERFORMANCE TO A TWENTY-FIVE MILE RADIUS OF TINKER AIR FORCE BASE IS QUITE OBVIOUSLY TRUE. HOWEVER, NEITHER YOUR FIRM NOR ANY OF THE OTHER FIVE BIDDERS FOUND THIS TO BE AN EXCLUSIONARY FACTOR. MOREOVER, WE HAVE HELD THAT A DECISION TO RESTRICT PERFORMANCE TO A SPECIFIC GEOGRAPHIC AREA IS A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY WHEN CONDITIONS WARRANT SUCH RESTRICTION. SEE B- 161807, SEPTEMBER 7, 1967; B-150703, FEBRUARY 15, 1963.

YOU NEXT CONTEND THAT EMERSON HAS BEEN DISCRIMINATED AGAINST BY OCAMA PROCUREMENT PRACTICES, FIRST BY ARBITRARY REFUSAL TO EXERCISE THE OPTION TO EXTEND YOUR CONTRACT AND SECOND BY WITHHOLDING ORDERS FOR EXISTING REQUIREMENTS AFTER YOUR OBJECTIONS TO THE ISSUANCE OF THE INVITATION WERE COMMUNICATED TO THE CONTRACTING OFFICER ON MAY 25, 1971. WE HAVE INDICATED ABOVE THAT WE BELIEVE THE CONTRACTING OFFICER'S DECISION NOT TO EXERCISE THE OPTION WAS NOT ARBITRARY, BUT WAS AMPLY JUSTIFIED AND IN FACT REQUIRED BY THE INFORMATION THAT INCREASED COMPETITION AND LOWER PRICES WERE AVAILABLE. IN THESE CIRCUMSTANCES IT APPEARS THAT ANY COURSE OF ACTION OTHER THAN THE ONE CHOSEN BY THE CONTRACTING OFFICER WOULD HAVE BEEN ARBITRARY.

YOUR SECOND CONTENTION THAT NO ORDERS WERE MADE AFTER YOUR OBJECTIONS IS REFUTED BY THE RECORD, WHICH SHOWS THAT ORDERS NUMBERED 0004 AND 0005 WERE MAILED TO YOU ON JUNE 14 AND 15, 1971.

IN CONNECTION WITH YOUR CONTENTION THAT THE BIDS RECEIVED IN RESPONSE TO THE INVITATION ARE EVIDENCE OF MATERIAL DEFECTS IN THE INVITATION, YOU SUBMIT THREE ARGUMENTS: THAT YOUR FIRM'S COMPETITIVE POSITION WAS COMPROMISED BY HAVING ANOTHER INVITATION ISSUED SUCH A SHORT TIME (NINE MONTHS) AFTER THE PREVIOUS COMPETITION; THAT THE LOW BID IS A "BUY-IN" PRICE; AND THAT THE SECOND LOW BID IS UNBALANCED.

SINCE WE HAVE INDICATED ABOVE THAT THE PRIOR INVITATION SPECIFICALLY ADVISED THAT EVALUATION OF OPTIONS WAS NOT A GUARANTEE THAT ANY OPTION WOULD BE EXERCISED, IT DOES NOT APPEAR THAT YOU HAVE SUBMITTED ANY BASIS FOR OBJECTING TO THE GOVERNMENT'S DECISION NOT TO EXERCISE ITS OPTION, NOR DOES IT APPEAR THAT YOUR COMPETITIVE POSITION WAS COMPROMISED THEREBY.

YOUR SECOND POINT IN THIS ARGUMENT IS THAT THE LOW BID IS A "BUY-IN" PRICE. A COMPARISON OF THE UNIT PRICES IN THE LOW BID WITH YOUR BID DISCLOSES THAT PRICES FOR FOURTEEN OF THE TWENTY ITEMS FOR PRODUCTION OF TECHNICAL ORDER PAGES IN THE LOW BID ARE LOWER THAN YOUR BID FOR THE SAME ITEMS, WHILE SIX ARE HIGHER. THE PRICE PER FOOT FOR THE CHECKOUT TAPES IS THE SAME IN EACH BID. SUCH A DISTRIBUTION OF UNIT PRICES DOES NOT SUPPORT A CONCLUSION THAT THE LOW BID IS A "BUY-IN." THE PRACTICE OF "BUYING-IN," AS DEFINED IN ASPR 1-311, IS ATTEMPTING TO OBTAIN A CONTRACT AWARD BY KNOWINGLY OFFERING A PRICE LESS THAN ANTICIPATED COSTS WITH THE EXPECTATION OF EITHER INCREASING THE CONTRACT PRICE DURING THE PERIOD OF PERFORMANCE OR OBTAINING A FOLLOW-ON CONTRACT AT A PRICE HIGH ENOUGH TO RECOVER ANY LOSS ON THE ORIGINAL CONTRACT. THESE CONDITIONS DO NOT APPEAR TO BE PRESENT IN THE INSTANT PROCUREMENT. OBTAINING AN INCREASE IN THE FIXED PRICE CONTRACT CONTEMPLATED HERE IS NOT A MATTER WITHIN THE CONTROL OF THE CONTRACTOR. MOREOVER, THE OPTION PRICES QUOTED BY THE LOW BIDDER ARE INCREASED BY ONLY FIVE PERCENT FOR EACH OF THE TWO YEARS COVERED BY THE OPTION PERIODS AND ARE SUBSTANTIALLY LOWER THAN YOUR BID PRICE FOR THE BASIC PERIOD.

ON THE OTHER HAND, IF THE GOVERNMENT SHOULD CHOOSE NOT TO EXERCISE ITS OPTIONS, THE INCUMBENT CONTRACTOR ENJOYS NO PARTICULAR COMPETITIVE ADVANTAGE IN THIS SITUATION, AS YOUR EXPERIENCE HAS DEMONSTRATED. YOU WERE SUCCESSFUL IN COMPETITION WITH THE FORMER INCUMBENT IN THE PRIOR PROCUREMENT AND WERE IN TURN UNSUCCESSFUL IN THE PRESENT COMPETITION. THESE CIRCUMSTANCES, EVEN IF WE ASSUME THAT THE LOW BIDDER WOULD HAVE TO PERFORM THE BASIC PORTION OF THE CONTRACT AT A LOSS, AN ASSUMPTION NOT SUPPORTED BY ANY FACT OF RECORD, THERE IS NO MEANS AT HIS DISPOSAL TO RECOUP HIS LOSSES, AND HIS ACTIONS THEREFORE DO NOT FALL WITHIN THE DEFINITION OF "BUYING-IN" IN ASPR 1-311.

IN SUPPORT OF THE THIRD POINT OF YOUR ARGUMENT, YOU SUBMIT AN ANALYSIS OF THE SECOND LOW BID, BASED ON YOUR EXPERIENCE FOR THE FIRST EIGHT MONTHS OF YOUR CONTRACT RATHER THAN ON THE ESTIMATED QUANTITIES, WHICH PURPORTS TO SHOW THAT THE SECOND LOW BID IS UNBALANCED AND WOULD ACTUALLY COST MORE THAN YOUR BID IF YOUR EIGHT MONTHS EXPERIENCE IS PROJECTED FOR A TWELVE- MONTH PERIOD. WE DO NOT REGARD YOUR EXPERIENCE IN A SINGLE EIGHT-MONTH PERIOD AS BEING NECESSARILY TYPICAL, NOR DO WE FEEL THAT SUCH LIMITED EXPERIENCE PROVIDES A BETTER BASIS FOR ESTIMATING FUTURE REQUIREMENTS THAN THE BASIS USED BY THE PROCURING AGENCY, WHICH IS A COMBINATION OF PAST EXPERIENCE OVER A PERIOD OF SEVERAL YEARS AND PROJECTION OF FUTURE REQUIREMENTS. EVEN IF IT WERE POSSIBLE TO SHOW THAT THE SECOND LOW BID IS AN ATTEMPT TO OBTAIN A CONTRACT BY SUBMISSION OF UNBALANCED PRICES, THE MOST THAT CAN BE SAID OF SUCH ATTEMPT IS THAT IT FAILED. WE ARE NOT PERSUADED BY YOUR ARGUMENT THAT SUCH BID IS ANY EVIDENCE OF A DEFECT IN THE INVITATION.

WITH RESPECT TO YOUR OBSERVATION THAT WHILE THE FOREGOING INSTANCES OF IRREGULARITY IN AND OF THEMSELVES MAY NOT APPEAR TO BE SIGNIFICANT TO ESTABLISH COMPELLING REASONS TO CANCEL A SOLICITATION THEIR CUMULATIVE EFFECT DOES REQUIRE SUCH ACTION, IT IS OUR OPINION, AS INDICATED ABOVE, THAT NONE OF YOUR ALLEGATIONS PROVIDE A VALID BASIS FOR OBJECTION TO THE ACTIONS OF THE PROCURING AGENCY, AND WE THEREFORE ARE UNABLE TO CONCLUDE THAT THEIR CUMULATIVE EFFECT WOULD REQUIRE OR JUSTIFY SUCH ACTION.

ACCORDINGLY, YOUR PROTEST IS DENIED.