B-174771, MAR 24, 1972

B-174771, MAR 24, 1972

BID PROTEST - REDUCTION IN QUANTITIES AVAILABLE - RECOMPUTATION OF RENTAL EVALUATION FACTOR DECISION DENYING PROTEST OF CHAMBERLAIN MANUFACTURING CORPORATION AGAINST THE PROPOSED AWARD OF A CONTRACT TO ANOTHER FIRM UNDER AN IFB ISSUED BY THE ARMY MUNITIONS COMMAND (MUCOM), JULIET, ILL. PROTESTANT'S LOW BID WAS DISPLACED AS THE RESULT OF A POST-BID OPENING REDUCTION IN THE QUANTITIES AVAILABLE FOR AWARD AND A RECOMPUTATION OF CHAMBERLAIN'S PROPOSED RENTAL EVALUATION FACTOR. THE SOLICITATION EXPLICITLY REQUIRED THAT THE AWARD WOULD BE BASED ON THE QUANTITY AVAILABLE AT THE TIME OF BID OPENING AND MUCOM'S ERRONEOUS ANNOUNCEMENT CANNOT BE CONSIDERED CONTROLLING SINCE IT HAD NO EFFECT ON THE PRICES BID. IT IS THE OPINION OF THE COMP. GEN. THAT PROCUREMENT BY SOLICITATION OF RANGES OF QUANTITIES ACTUALLY DIVESTS, RATHER THAN IMPLEMENTS, THE CONTRACTING OFFICER'S DISCRETIONARY POWER TO FIX QUANTITIES AFTER BID OPENING. B-170168, SEPTEMBER 10, 1970. FURTHER, THE SUBJECT IFB PROPERLY PROVIDED FOR OPTION INCREASES AT THE TIME OF AWARD PURSUANT TO THE PROVISIONS OF PARAGRAPH 1-1504(C), ASPR. B-166138, APRIL 11, 1969. FINALLY, IT IS NOTED THAT MUCOM'S RECOMPUTATION OF THE RENTAL EVALUATION FACTOR IS PRECISELY IN ACCORD WITH THE PROVISIONS OF THE IFB, WHILE PROTESTANT'S METHOD OF EVALUATION IS BASED ON HIGHLY SPECULATIVE FACTORS. IN VIEW OF THE FOREGOING, THERE EXISTS NO LEGAL BASIS FOR OBJECTION TO THE PROPOSED AWARD AND THE PROTEST IS DENIED.

TO CHAMBERLAIN MANUFACTURING CORPORATION:

REFERENCE IS MADE TO YOUR LETTER DATED DECEMBER 22, 1971, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE PROPOSED AWARD OF A CONTRACT TO ANOTHER FIRM UNDER INVITATION FOR BIDS (IFB) NO. DAAA09-71-B-0229, ISSUED BY THE UNITED STATES ARMY MUNITIONS COMMAND (MUCOM), JULIET, ILLINOIS.

FOR THE REASONS HEREINAFTER STATED, THE PROTEST IS DENIED.

THE IFB, ISSUED ON AUGUST 2, 1971, SOLICITED BIDS FOR PROJECTILES. BIDDERS WERE REQUIRED TO QUOTE UNIT PRICES FOR SIX QUANTITY RANGES IN ASCENDING ORDER (E.G., 125,000 TO 175,000 - 175,001 TO 225,000), TOGETHER WITH UNIT PRICES IN THE SIX RANGES FOR OPTION QUANTITIES NOT TO EXCEED 50 PERCENT OF THE VARIOUS BASE QUANTITIES. IN ADDITION, THE IFB CONTAINED THE FOLLOWING "AWARD NOTE":

"THE QUANTITY TO BE AWARDED AS A RESULT OF THIS SOLICITATION SHALL BE THAT QUANTITY AVAILABLE FOR PROCUREMENT AT THE U.S. ARMY MUNITIONS COMMAND, JOLIET, ILLINOIS AT THE TIME WHEN BIDS ARE PUBLICLY OPENED."

IMMEDIATELY PRIOR TO THE SCHEDULED BID OPENING ON NOVEMBER 18, 1971, MUCOM ANNOUNCED THAT THE QUANTITY AVAILABLE FOR PROCUREMENT WAS 232,000 UNITS. BID OPENING THEN OCCURRED AND YOUR FIRM WAS THE APPARENT LOW BIDDER BASED ON THE ANNOUNCED QUANTITY OF 232,000 UNITS. HOWEVER, BY MESSAGE DATED DECEMBER 14, 1971, MUCOM ADVISED ALL BIDDERS THAT:

"DUE TO ADMINISTRATIVE ERROR, AT THE TIME OF BID OPENING, THE BID OPENING OFFICER INCORRECTLY STATED THE QUANTITY TO BE PURCHASED WAS 232,000 EACH OR RANGE C WHEN HE SHOULD HAVE STATED A QUANTITY OF 220,600 EACH OR RANGE B."

THE EFFECT OF THIS REDUCTION IN THE QUANTITY AVAILABLE FOR AWARD WAS TO MAKE TWO BIDDERS, WHO HAD NOT BID IN THE ORIGINALLY ANNOUNCED QUANTITY RANGE, ELIGIBLE FOR CONSIDERATION. IN THE MEANTIME, MUCOM FOUND IT NECESSARY TO RECOMPUTE AN ALLEGED ERRONEOUS RENTAL EVALUATION FACTOR PROPOSED BY CHAMBERLAIN FOR RENT-FREE USE OF GOVERNMENT PROPERTY. THE COMBINATION OF THE MUCOM QUANTITY REDUCTION OF ITEMS AVAILABLE FOR AWARD AND THE RECOMPUTED RENTAL EVALUATION FACTOR TO BE ADDED TO CHAMBERLAIN'S UNIT PRICE PRECLUDE CHAMBERLAIN FROM BEING THE LOWEST EVALUATED BIDDER.

YOU CONTEND THAT "THE PROPER QUANTITY TO BE EVALUATED IS THE QUANTITY ANNOUNCED AT THE BID OPENING TO WIT, 232,000 OR, IN THE ALTERNATIVE, THAT THE ALLEGED ADMINISTRATIVE ERROR MADE BY SUCH ANNOUNCEMENT IS SUBSTANTIVE IN NATURE AND THEREFORE PROPER GROUNDS TO REJECT ALL BIDS AND RE- SOLICIT." IT IS REGRETTABLE THAT MUCOM ERRONEOUSLY ANNOUNCED IMMEDIATELY PRIOR TO BID OPENING THE QUANTITY AVAILABLE FOR AWARD WHICH YOU URGE. BUT, THE FACT REMAINS THAT THE ABOVE-QUOTED AWARD NOTE IN THE IFB SPECIFICALLY PRESCRIBED THAT THE QUANTITY UPON WHICH THE AWARD WAS TO BE BASED WOULD BE THE QUANTITY AVAILABLE FOR PROCUREMENT AT THE TIME OF BID OPENING AND THE CORRECT QUANTITY HAS BEEN DETERMINED TO BE 220,600.

MUCOM HAS SUPPLIED OUR OFFICE WITH THE PREBID OPENING CONTEMPORANEOUS FUNDING DOCUMENTS, WHICH EXPLICITLY EVIDENCE THE FACT THAT ONLY 220,600 UNITS WERE AVAILABLE FOR PROCUREMENT AT BID OPENING. IN OUR OPINION, THAT DOCUMENTATION REFUTES ANY IMPLICATION TO THE EFFECT THAT THE REDUCTION BY MUCOM OF THE QUANTITY TO BE AWARDED WAS MADE TO EITHER IMPROPERLY PERMIT OTHER BIDDERS TO BE CONSIDERED FOR AWARD OR TO PRECLUDE YOUR FIRM FROM OBTAINING THE AWARD. WE FIND NO BASIS UPON WHICH TO QUESTION THE DETERMINATION THAT 220,600 UNITS WILL BE PROCURED UNDER THE IFB.

IN THE ALTERNATIVE, YOU ARGUE THAT THE ERRONEOUS ANNOUNCEMENT, AS SUBSEQUENTLY CORRECTED, REQUIRES THAT ALL BIDS BE REJECTED AND THE REQUIREMENTS READVERTISED. WE DO NOT AGREE. BIDS UNDER AN IFB MAY BE REJECTED AFTER OPENING ONLY FOR COGENT AND COMPELLING REASONS. SINCE THE ANNOUNCEMENT OF THE QUANTITY TO BE PROCURED AFTER THE RECEIPT OF BIDS AND IMMEDIATELY BEFORE THE OPENING OF BIDS COULD NOT HAVE HAD ANY INFLUENCE UPON THE PRICES BID AND SINCE THE AWARD PROCEDURE IS NOT LEGALLY OBJECTIONABLE, NO BASIS FOR REJECTION OF ALL BIDS EXISTS.

YOU NEXT CONTEND THAT "THE PROCUREMENT PRACTICE OF SOLICITING A SERIES OF BIDS FOR RANGES OF QUANTITIES IS SUCH AS TO JEOPARDIZE THE INTEGRITY OF THE BIDDING SYSTEM, AND THEREFORE, SHOULD BE REJECTED." EXPANDING ON THIS YOU STATE THAT, IN THIS TYPE OF SOLICITATION -

" *** THE QUANTITY TO BE AWARDED REMAINS FOR THE ULTIMATE DETERMINATION OF THE GOVERNMENT AT A TIME DETERMINED MOST SUITABLE BY THE PROCUREMENT OFFICER.

"FURTHER, THE SOLICITATIONS INCLUDE, INVARIABLY, OPTIONS EXCERISABLE DURING THE LIFE OF THE PRODUCTION PERIOD. THE INCLUSION OF THE OPTION PROVISION, TOGETHER WITH THE CIRCUMSTANCES ABOVE DESCRIBED, MAKES AVAILABLE TO GOVERNMENT PROCUREMENT PERSONNEL A POWERFUL SET OF TOOLS WITH WHICH SUBJECTIVE DETERMINATION OF AWARDEES CAN BE MADE. THIS PRACTICE OR THE AVAILABILITY OF THE PROCEDURAL TOOLS, SERVES TO DEGRADE, IF NOT COMPLETELY JEOPARDIZE THE INTEGRITY OF THE BIDDING SYSTEM PRESCRIBED BY LAW.

" *** IT IS CHAMBERLAIN'S CONTENTION THAT THIS FORM OF SOLICITATION, BY ITS VERY NATURE, IS SUSCEPTIBLE TO SUBJECTIVE DETERMINATION OF THE AWARDEE BY GOVERNMENT PERSONNEL AND AS SUCH IS CONTRARY TO THE LAWS MADE AND PROVIDED UNDER THE ARMED SERVICES PROCUREMENT ACT. *** "

THE INCLUSION IN A SOLICITATION OF A STATEMENT SIMILAR TO THAT FOUND IN THE INSTANT IFB'S AWARD NOTE DIVESTS CONTRACTING OFFICIALS OF DISCRETION IN FIXING THE PARTICULAR QUANTITIES TO BE PROCURED AFTER BID OPENING WHEN IT WILL DISPLACE AN OTHERWISE LOW BIDDER. B-170168, SEPTEMBER 10, 1970. SUCH BEING THE CASE WE DO NOT BELIEVE THAT THIS METHOD OF PROCUREMENT BRINGS ABOUT RESULTS STATED ABOVE.

AS TO THE EFFECT OF PERMISSIBLE OPTION INCREASES AVAILABLE TO THE GOVERNMENT IN PROCUREMENTS OF THIS TYPE, WE NOTE THAT THE IFB, IN CONSONANCE WITH THE PROVISIONS OF PARAGRAPH 1-1504(C) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), PROVIDES THAT:

"EVALUATION OF OPTIONS:

"IF THE GOVERNMENT ELECTS TO EXERCISE AN OPTION SIMULTANEOUSLY WITH AWARD, BIDS OR PROPOSALS WILL BE EVALUATED FOR PURPOSES OF AWARD ON THE BASIS OF THE TOTAL PRICE FOR THE BASIC QUANTITY AND THE OPTION QUANTITY EXERCISED WITH AWARD."

OUR OFFICE HAS NOT OBJECTED TO SIMILAR PROVISIONS WHEREIN THE CONTRACTING AGENCY MAY CHOOSE, BASED ON ITS REQUIREMENTS, TO EXERCISE OPTIONS AT THE TIME OF AWARD. CF. B-166138, APRIL 11, 1969; AND B 165799, FEBRUARY 27, 1969. MOREOVER, SEE ASPR 1-1504(D), WHICH PERMITS OPTION PRICES TO BE EVALUATED EVEN THOUGH EXERCISE THEREOF MAY NOT OCCUR. WE QUOTE FOR YOUR INFORMATION THE MUCOM REASONS WITH WHICH WE CANNOT DISAGREE, FOR UTILIZING THIS METHOD OF PROCUREMENT:

"BECAUSE OF EVER CHANGING REQUIREMENTS, AND THE LACK OF SUFFICIENT FUNDS, AT THE TIME OF ISSUING SOLICITATIONS, A FIRM QUANTITY IS DIFFICULT TO ESTABLISH UNTIL LATE IN THE PROCUREMENT CYCLE. TO INSURE ADEQUATE COMPETITION ON A PROCUREMENT OF THIS COMPLEXITY, A NEW PRODUCER MUST BE GIVEN ADEQUATE LEAD TIME TO PREPARE FOR PRODUCTION. THEREFORE, RANGE BIDDING TECHNIQUES ARE NOT ONLY OF BENEFIT TO THE GOVERNMENT, BUT ALSO TO INDUSTRY, BY PROVIDING THE NECESSARY LEAD TIME. BY UTILIZING RANGES IN QUANTITIES, A MANUFACTURER WITHOUT THE CAPACITY TO PRODUCE A QUANTITY IN THE HIGHER RANGES, MAY BE ABLE TO BE COMPETITIVE ON THE LOWER RANGES."

YOU CLAIM THAT MUCOM IMPROPERLY FAILED TO ACCEPT THE COMPUTATIONS IN YOUR BID BY WHICH YOU ESTABLISHED THE RENTAL EVALUATION FACTOR TO BE UTILIZED IN ELIMINATING THE COMPETITIVE ADVANTAGE ATTENDANT TO THE CONTEMPLATED RENT-FREE USE OF GOVERNMENT PROPERTY IN YOUR POSSESSION. WE BELIEVE IT PERTINENT TO POINT OUT AT THIS JUNCTURE THAT THE RECOMPUTATION OF THE RENTAL EVALUATION FACTOR MADE BY MUCOM FOLLOWS PRECISELY THE PROVISIONS OF THE IFB WHICH SET FORTH EXACT FORMULAS FOR CALCULATING THE RENTAL EVALUATION FACTOR. OUR OFFICE HAS RECENTLY REEMPHASIZED THE NECESSITY FOR STRICT COMPLIANCE WITH SOLICITATION PROVISIONS DESIGNED TO ELIMINATE THE COMPETITIVE ADVANTAGE RESULTING FROM A BIDDER'S ABILITY TO USE GOVERNMENT PROPERTY IN ITS POSSESSION ON A RENT-FREE BASIS. SEE 51 COMP. GEN. (B- 174605, FEBRUARY 1, 1972).

YOUR FIRM COMPUTED THE RENTAL EVALUATION FACTOR BY TAKING INTO CONSIDERATION THE FACT THAT IT HAS BEEN DESIGNATED A MOBILIZATION BASE CONTRACTOR FOR 273,000 UNITS OF FOUR DIFFERENT TYPES OF PROJECTILES IN THE DEPARTMENT OF DEFENSE (DOD) MOBILIZATION PRODUCTION PLANNING PROGRAM. SUCH, YOU DEVELOPED A FORMULA BY WHICH THE 273,000 UNITS ATTRIBUTABLE TO THE MOBILIZATION BASE PLANNING PROGRAM WERE PRORATED AGAINST THE NUMBER OF UNITS TO BE PROCURED IN THE VARIOUS QUANTITY RANGES OF THE INSTANT IFB. IT CAN READILY BE SEEN THAT THE RESULT OF SUCH A PRORATION OPERATES TO SUBSTANTIALLY DECREASE THE EVALUATION FACTOR TO BE ADDED TO YOUR FIRM'S UNIT PRICES. THE IFB, AS PRESCRIBED BY ASPR 13-502.3(B) AND -502.2(III), DOES PERMIT A PRORATION OF THE RENTAL FACTOR WHERE, DURING THE PERIOD OF CONTRACT PERFORMANCE, THE BIDDER'S GOVERNMENT PROPERTY WILL BE USED ON OTHER WORK UNDER ONE OR MORE EXISTING CONTRACTS FOR WHICH USE HAS BEEN AUTHORIZED. IN THIS REGARD, THE IFB PROVIDES, AS FOLLOWS:

"IF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY IS BEING USED ON OTHER WORK UNDER ONE OR MORE EXISTING CONTRACTS FOR WHICH USE HAS BEEN AUTHORIZED, THE EVALUATION FACTOR SHALL BE DETERMINED BY PRORATING THE RENT BETWEEN THE PROPOSED CONTRACT AND SUCH OTHER WORK. *** "

IN 51 COMP. GEN., SUPRA, IN CONSTRUING A SIMILAR CLAUSE, WE INTERPRETED THE ABOVE-QUOTED IFB PROVISION AS SUGGESTING THAT THE BASIC QUESTION TO BE RESOLVED WITH RESPECT TO THE PERMISSIBILITY OF PRORATION IS "WHETHER THERE IS AN EXISTING CONTRACT." DEPARTMENT OF DEFENSE INSTRUCTION 4005.3, AS IMPLEMENTED BY THE INDUSTRIAL MOBILIZATION PRODUCTION PLANNING MANUAL (DOD 4005.3-M), PROVIDES GUIDANCE TO THE MILITARY AND OTHER EXECUTIVE DEPARTMENTS IN AREAS OF, INTER ALIA, INSURING THAT THE INDUSTRIAL BASE CAN ADEQUATELY SUPPORT THEIR EMERGENCY PRODUCTION NEEDS. AS STATED ABOVE, YOUR FIRM IS A DESIGNATED MOBILIZATION BASE CONTRACTOR. AS SUCH, THE AGREEMENT FORM, PRESCRIBED BY THE MANUAL, IN WHICH THE 273,000 UNITS WHICH YOU UTILIZED FOR PRORATION PURPOSES ARE SET FORTH, CAN IN NO WAY BE CONSTRUED TO BE AN EXISTING CONTRACT WITHIN THE AMBIT OF THE IFB. QUOTE THE FOLLOWING LANGUAGE FROM THE AGREEMENT FORM IN SUPPORT OF THIS CONSTRUCTION:

" *** THE SIGNATURE OF INDUSTRY DOES NOT OBLIGATE THE NAMED FIRM TO ACCEPT A MILITARY CONTRACT IF ONE IS OFFERED NOR IS THE GOVERNMENT OBLIGATED TO CONVERT PLANNED MOBILIZATION PRODUCTION SCHEDULES TO CONTRACTS, TO CONTRACT WITH THE NAMED FIRM IF PROCUREMENT OF THE ITEMS SPECIFIED HEREIN IS REQUIRED, OR TO REQUIRE THE CONVERSION OF PLANNED SUBCONTRACT SUPPORT TO SUBCONTRACTS IF THE PLANNED PRODUCTION IS CONVERTED TO PRIME CONTRACTS. IT IS UNDERSTOOD, HOWEVER, THAT THE NAMED FIRMS) MAY BE REQUIRED TO ACCEPT SUCH A MILITARY CONTRACTS) UNDER APPLICABLE LAWS AND REGULATIONS AS MAY BE IN EFFECT AT THE TIME."

TO PERMIT YOUR FIRM TO EFFECT A PRORATION FORMULA WHICH UTILIZES SUCH UNCERTAIN COMMITMENTS, WHICH MAY OR MAY NOT BE MADE IN THE FUTURE, IS TO RESORT TO HIGHLY SPECULATIVE FACTORS. THEREFORE, WE FIND THAT YOUR FIRM, FOR THE PURPOSES OF EVALUATING THE RENTAL FACTOR, HAS NO OTHER EXISTING CONTRACTS UNDER WHICH IT WILL BE UTILIZING YOUR GOVERNMENT FURNISHED PROPERTY DURING THE PRESCRIBED PERFORMANCE PERIOD IN THE IFB. ACCORDINGLY, MUCOM PROPERLY REFUSED TO PERMIT ANY PRORATION, TAKING YOUR STATUS AS A MOBILIZATION BASE DESIGNEE INTO ACCOUNT, WHEN RECOMPUTING THE RENTAL EVALUATION FACTOR.

AS AN ALTERNATIVE TO YOUR MOBILIZATION BASE STATUS ARGUMENT, YOU SUBMIT FOR CONSIDERATION THE FOLLOWING FACTORS WHICH, YOU ALLEGE, IF UTILIZED, WOULD SERVE TO REDUCE THE RENTAL EVALUATION FACTOR PROPOSED BY MUCOM: THE EVALUATION ON A SQUARE FOOTAGE BASIS OF REAL PROPERTY AND TOOLROOM SUPPORT FACILITIES; AND THE EFFECT THAT A FACILITIES MAINTENANCE CONTRACT HAS ON GOVERNMENT EQUIPMENT IN YOUR POSSESSION. YOU ALLEGE THAT SUCH FACTORS, IF IMPLEMENTED, ALTHOUGH YOU DO NOT PRESCRIBE AN EXACT METHOD THEREFOR, WILL SERVE TO ESTABLISH THAT LESS THAN TOTAL USAGE OF YOUR GOVERNMENT PROPERTY WILL OCCUR DURING CONTRACT PERFORMANCE.

WE NOTE THAT, PRIOR TO BIDDING, YOU REQUESTED AND RECEIVED PERMISSION TO USE, ON A RENT-FREE NONINTERFERENCE BASIS, SPECIFICALLY IDENTIFIED, GOVERNMENT FACILITIES. IN YOUR BID YOU SUBMITTED DETAILED LISTS OF THESE FACILITIES TO BE USED. AS WE STATED ABOVE, THE IFB IN CONSONANCE WITH ASPR SPECIFICALLY PROVIDES THE METHOD FOR COMPUTING THE RENTAL EVALUATION FACTOR BASED ON THE FACILITIES WITH WHICH THE BIDDER PROPOSES TO PERFORM THE CONTRACT. WE HAVE NO ALTERNATIVE BUT TO SUSTAIN THE RENTAL EVALUATION FACTOR FORMULAS PROVIDED IN THE IFB, PARTICULARLY, WHERE, AS HERE, ALL BIDDERS HAVE COMPETED ON A COMMON BASIS. WE CANNOT SUBSCRIBE TO YOUR ALTERNATIVE METHODS OF EVALUATION, EVEN IF FIXED PRECISELY, AFTER A PUBLIC BID OPENING.