B-174294, JAN 17, 1972, 51 COMP GEN 411

B-174294: Jan 17, 1972

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BY THE LOW OFFEROR WHO PRIOR TO THE ISSUANCE OF THE AMENDMENT HAD CONFIRMED ITS OFFER DID NOT INCLUDE ROYALTIES WAS ERRONEOUSLY WAIVED ON THE BASIS THE AMENDMENT DID NOT GO TO THE SUBSTANCE OF THE OFFER AND WAS NOT PREJUDICIAL TO OTHER OFFERORS. THE ISSUANCE OF THE AMENDMENT WAS A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY IN THE ABSENCE OF A STATUTORY OR REGULATORY PROVISION ESTABLISHING CRITERIA FOR THE DETERMINATION OF WHAT CONSTITUTES A SUBSTANTIAL CHANGE TO JUSTIFY REOPENING NEGOTIATIONS AFTER THEY HAVE BEEN TERMINATED BY A CALL FOR THE BEST AND FINAL OFFERS. 1972: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 21. WHICH WAS ESTABLISHED BY AMENDMENT NO. 0005 TO THE RFP. DSA STATES THAT THE ABSTRACT OF THE ORIGINAL OFFERS RECEIVED BY THIS CLOSING DATE WAS SUBSEQUENTLY RELEASED THROUGH ADMINISTRATIVE ERROR FOR EXAMINATION BY ANY INTERESTED PARTY ON OR ABOUT MARCH 29.

B-174294, JAN 17, 1972, 51 COMP GEN 411

CONTRACTS - NEGOTIATION - CHANGES, ETC. - REOPENING NEGOTIATIONS - ADMINISTRATIVE DETERMINATION ALTHOUGH THE LATE ACKNOWLEDGMENT OF AN AMENDMENT WHICH PROVIDED IN THE EVENT OF A DISCREPANCY BETWEEN SOLICITATION REQUIREMENTS AND THE SAMPLE DISPLAY KIT, THE SOLICITATION WOULD GOVERN, AND ADDED A CLAUSE TO THE REQUEST FOR PROPOSALS (RFP) FOR SURVIVAL KITS REGARDING ROYALTIES, BY THE LOW OFFEROR WHO PRIOR TO THE ISSUANCE OF THE AMENDMENT HAD CONFIRMED ITS OFFER DID NOT INCLUDE ROYALTIES WAS ERRONEOUSLY WAIVED ON THE BASIS THE AMENDMENT DID NOT GO TO THE SUBSTANCE OF THE OFFER AND WAS NOT PREJUDICIAL TO OTHER OFFERORS, THE ISSUANCE OF THE AMENDMENT WAS A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY IN THE ABSENCE OF A STATUTORY OR REGULATORY PROVISION ESTABLISHING CRITERIA FOR THE DETERMINATION OF WHAT CONSTITUTES A SUBSTANTIAL CHANGE TO JUSTIFY REOPENING NEGOTIATIONS AFTER THEY HAVE BEEN TERMINATED BY A CALL FOR THE BEST AND FINAL OFFERS.

TO EAST/WEST INDUSTRIES, INC., JANUARY 17, 1972:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 21, 1971, PROTESTING THE AWARD OF A CONTRACT TO FRAASS SURGICAL MANUFACTURING COMPANY, INC. (FSM), UNDER REQUEST FOR PROPOSALS (RFP) DSA700-71-R 1534, ISSUED BY THE DEFENSE SUPPLY AGENCY (DSA) ON NOVEMBER 30, 1970, FOR A REQUIREMENT OF 14,575 SURVIVAL KITS.

FIVE OFFERORS, INCLUDING YOUR CONCERN AND FSM, SUBMITTED PROPOSALS BY FEBRUARY 19, 1971, THE CLOSING DATE SET FOR RECEIPT OF PROPOSALS, WHICH WAS ESTABLISHED BY AMENDMENT NO. 0005 TO THE RFP. DSA STATES THAT THE ABSTRACT OF THE ORIGINAL OFFERS RECEIVED BY THIS CLOSING DATE WAS SUBSEQUENTLY RELEASED THROUGH ADMINISTRATIVE ERROR FOR EXAMINATION BY ANY INTERESTED PARTY ON OR ABOUT MARCH 29, 1971, AND THAT YOU RECEIVED A COPY OF THIS ABSTRACT.

FURTHERMORE, DSA STATES THAT ON APRIL 16, 1971, YOU PROTESTED TO THE PROCURING ACTIVITY THAT SEVERAL SPECIFICATION REQUIREMENTS SET FORTH IN THE RFP WERE INADEQUATE AND, AS A RESULT OF SUCH COMPLAINT, AMENDMENT NO. 0006 WAS ISSUED ON JULY 15, 1971, TO CLARIFY THESE ALLEGED DISCREPANCIES. AMENDMENT NO. 0006 ALSO REQUESTED OFFERORS TO CONFIRM OR REVISE THEIR PROPOSALS BY JULY 26, 1971, AND ADVISED OFFERORS THAT ANY CONFIRMATION OR REVISION WOULD BE "CONSIDERED TO BE VALID FOR 30 DAYS ACCEPTANCE PERIOD FROM DATE OF CLOSING UNLESS OTHERWISE STATED." ON JULY 26 TIMELY RESPONSES WERE RECEIVED FROM ALL THE CONCERNS WHICH SUBMITTED PROPOSALS BY THE INITIAL CLOSING DATE.

IN THIS REGARD, DSA STATES THAT SUBSEQUENT TO THE CLOSING DATE FOR AMENDMENT NO. 0006 THE CONTRACTING OFFICER CONTACTED FSM BY TELEPHONE TO ASCERTAIN WHETHER ITS OFFER INCLUDED ANY ROYALTY COSTS. BY TELEGRAM OF AUGUST 20, 1971, FSM CONFIRMED, AMONG OTHER THINGS, THAT ITS OFFER DID NOT INCLUDE ANY ROYALTIES. THE CONTRACTING OFFICER STATES THAT HE BELIEVED THAT DISCUSSION MIGHT BE CONSIDERED "NEGOTIATION" WITH FSM, AND HE THEREFORE DECIDED TO CONDUCT A THIRD ROUND OF NEGOTIATIONS FOR THE PURPOSE OF ASSURING THAT SUCH NEGOTIATIONS WERE CONDUCTED WITH ALL OFFERORS ON AN EQUAL BASIS. ACCORDINGLY, AMENDMENT NO. 0007 WAS ISSUED ON AUGUST 24, 1971, ADVISING OFFERORS THAT IN THE EVENT OF A DISCREPANCY BETWEEN THE SOLICITATION REQUIREMENTS AND THE SAMPLE KIT ON DISPLAY AT THE NAVAL AIR DEVELOPMENT CENTER, THE SOLICITATION REQUIREMENTS WOULD GOVERN, AND ADDING CLAUSE B11 REGARDING THE REPORTING OF ROYALTIES TO THE RFP. THE AMENDMENT ALSO INVITED CONFIRMATION ON REVISION OF PREVIOUSLY QUOTED PRICES BY AUGUST 27, 1971, AND STATED THAT ANY RESPONSE RECEIVED AFTER THAT DATE WOULD BE TREATED AS A LATE PROPOSAL IN ACCORDANCE WITH THE "LATE PROPOSAL" PROVISION OF THE RFP.

FSM DID NOT RESPOND BY THE AUGUST 27 CUTOFF DATE, BUT ON AUGUST 30, 1971, THE CONCERN SUBMITTED A COPY OF A TELEGRAM TO THE CONTRACTING OFFICER AND STATED IT HAD DISPATCHED THE TELEGRAM TO THE PROCURING ACTIVITY ON AUGUST 26. THE TELEGRAM STATED THAT FSM'S UNIT PRICE TERMS REMAINED UNCHANGED AND "RECONFIRMED" THAT THERE WERE NO COSTS FOR ROYALTIES, BUT THERE IS NO RECORD IN DSA OF ITS TIMELY RECEIPT.

THE CONTRACTING OFFICER STATES THAT HE WAIVED FSM'S LATE ACKNOWLEDGMENT OF ADMENDMENT NO. 0007 ON THE BASIS THAT IT DID NOT GO TO THE SUBSTANCE OF THE OFFER, AND WAS NOT PREJUDICIAL TO THE OFFERORS FOR THE FOLLOWING REASONS:

A. FRAASS HAD PREVIOUSLY ADVISED THAT ITS PRICE DID NOT INCLUDE ANY ROYALTY PAYMENTS.

B. THE ONLY REASONABLE INTERPRETATION OF THE SOLICITATION, EVEN IN THE ABSENCE OF AMENDMENT NO. 0007, IS THAT THE SPECIFICATION REQUIREMENTS WOULD GOVERN IN THE EVENT OF ANY CONFLICT WITH THE SAMPLE UNIT.

C. THE NAVAL AIR DEVELOPMENT CENTER ADVISED THAT THE SAMPLE UNIT IN FACT FULLY COMPLIES WITH THE SPECIFICATION REQUIREMENTS.

IN VIEW THEREOF, AND INASMUCH AS FSM HAD SUBMITTED THE LOWEST OFFER FOR THE ITEMS, THE CONTRACTING OFFICER AWARDED CONTRACT NO. DSA700-72-C 8055 TO THAT CONCERN ON SEPTEMBER 2, 1971.

YOU STATE THAT YOU ARE UNABLE TO UNDERSTAND THE NECESSITY FOR THE THIRD ROUND OF NEGOTIATIONS WHICH WAS REQUIRED BY AMENDMENT NO. 0007 SINCE NO CHANGES OCCURRED IN THE REQUIREMENTS OF THE PROCURING ACTIVITY BETWEEN THE SIXTH AND SEVENTH AMENDMENTS.

IT IS APPARENT THAT THE PROCURING ACTIVITY IS OF THE OPINION THAT THE DATA SET FORTH IN AMENDMENT NO. 0007 DID CONSTITUTE CHANGES TO THE RFP REQUIREMENTS, IN THAT THE SPECIFICATIONS WERE CLARIFIED AND A ROYALTIES CLAUSE WAS ADDED TO THE RFP. MOREOVER, THE ACTIVITY THOUGHT THAT IT WAS UNDER AN OBLIGATION TO ALLOW ALL OTHER OFFERORS A FINAL CHANCE TO SUBMIT THEIR BEST PROPOSALS, SINCE THE CONTRACTING OFFICER HAD CONDUCTED DISCUSSIONS WITH FSM AFTER THE CLOSING DATE SET FOR RECEIPT OF AMENDMENT NO. 0006. IN THIS REGARD, WE HAVE NOTED THAT THERE IS NO SPECIFIC STATUTORY OR REGULATORY PROVISION ESTABLISHING THE CRITERIA TO BE APPLIED IN DETERMINING WHAT CONSTITUTES A SUBSTANTIAL CHANGE IN THE GOVERNMENT'S REQUIREMENTS SO AS TO JUSTIFY THE REOPENING OF NEGOTIATIONS AFTER THEY HAVE ONCE BEEN TERMINATED BY A CALL FOR "BEST AND FINAL" OFFERS. 173482, OCTOBER 1, 1971.

IN THE INSTANT CASE, IT IS APPARENT THAT THE ROYALTIES CLAUSE IMPOSED ADDITIONAL REQUIREMENTS ON THE CONTRACTOR, AND THAT NO BIDDER COULD HAVE BEEN REQUIRED TO COMPLY WITH SUCH REQUIREMENTS WITHOUT CONSENTING THERETO. AS INDICATED IN AMENDMENT NO. 0007, SUCH CONSENT WAS TO BE IN THE FORM OF A PRICE CONFIRMATION OR A PRICE REVISION. UNDER THE CIRCUMSTANCES, IT IS OUR OPINION IT WAS NECESSARY AND PROPER TO REOPEN PRICE NEGOTIATIONS IN CONJUNCTION WITH THE CHANGES INCORPORATED INTO AMENDMENT NO. 0007, AND YOUR PROTEST AGAINST SUCH ACTION MUST THEREFORE BE DENIED.

WITH RESPECT TO THE PROPRIETY OF THE DECISION OF THE CONTRACTING OFFICER TO ACCEPT THE LATE OFFER SUBMITTED BY FSM, WE ARE BY LETTER OF TODAY ADVISING THE DIRECTOR OF DSA OF OUR OPINION THAT SUCH ACTION VIOLATED THE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION GOVERNING THE DISPOSITION OF LATE PROPOSALS, AND THAT APPROPRIATE ACTION SHOULD BE TAKEN TO PRECLUDE SUCH ACTION IN FUTURE PROCUREMENTS. HOWEVER, INASMUCH AS THE AWARD WAS MADE TO FSM IN EARLY SEPTEMBER OF THIS YEAR, WE DO NOT BELIEVE IT WOULD BE IN THE INTEREST OF THE GOVERNMENT TO CANCEL THE SUBJECT AWARD AT THIS TIME.