B-175284, MAY 2, 1972

B-175284, MAY 2, 1972

BID PROTEST - NONRESPONSIVENESS - ALLEGED "BUY IN" BID - NONRESPONSIBILITY DECISION DENYING THE PROTEST OF HOUSTON PHOTO PRODUCTS, INC., AGAINST AWARD OF A CONTRACT TO TECHNOLOGY, INC., AND JORDAN & NOBLES CONSTRUCTION CO. UNDER AN IFB ISSUED BY THE FORT WORTH, TEX., CORPS OF ENGINEERS. PROTESTANT CONTENDS THAT TECHNOLOGY CANNOT COMPLETE THE CONTRACT WORK AT ITS BID PRICE AND, THEREFORE, THE BID SHOULD BE REJECTED AS NONRESPONSIVE AND THE BIDDER SHOULD BE CONSIDERED NONRESPONSIBLE. THE COMP. GEN. IS NOT AWARE OF ANY STATUTORY PROHIBITION AGAINST THE INTENTIONAL SUBMISSION OF AN UNPROFITABLE BID. 50 COMP. GEN. 50 (1970). FURTHER, IT APPEARS THAT THE CONTRACTING OFFICER PROPERLY DETERMINED TECHNOLOGY TO BE A RESPONSIBLE BIDDER AND ABSENT CONVINCING EVIDENCE TO INDICATE THAT HIS FINDING WAS MADE IN AN ARBITRARY OR CAPRICIOUS MANNER, GAO WOULD NOT BE JUSTIFIED IN QUESTIONING THE AWARD. ACCORDINGLY, THE PROTEST IS DENIED.

TO HOUSTON PHOTO PRODUCTS, INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 21, 1972, PROTESTING AGAINST THE AWARD OF A CONTRACT TO TECHNOLOGY INCORPORATED, HF PHOTO SYSTEMS DIVISION, AND JORDAN & NOBLES CONSTRUCTION CO., A JOINT VENTURE, UNDER INVITATION FOR BIDS (IFB) NO. DACA63-72-B-0023, COVERING THE CONSTRUCTION OF THE PHOTO PROCESSING FACILITY AT THE WHITE SANDS MISSILE RANGE, NEW MEXICO.

THE IFB, ISSUED BY THE DISTRICT ENGINEER, FORT WORTH DISTRICT, CORPS OF ENGINEERS, DEPARTMENT OF THE ARMY, FORT WORTH, TEXAS, SOLICITED A BASE BID (ITEMS 1 AND 2) ON THE PROJECT PLUS A BID ON EACH OF SIX ADDITIVE ITEMS. PURSUANT TO PARAGRAPH 2-201(B)(XLI) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), NOTE 5 OF THE INVITATION CONTAINED THE CLAUSE ENTITLED "ADDITIVE OR DEDUCTIVE ITEMS," READING AS FOLLOWS:

"THE LOW BIDDER FOR PURPOSES OF AWARD SHALL BE THE CONFORMING RESPONSIBLE BIDDER OFFERING THE LOW AGGREGATE AMOUNT FOR THE BASE BID, PLUS OR MINUS (IN THE ORDER OF PRIORITY LISTED IN THE SCHEDULE) THOSE ADDITIVE OR DEDUCTIVE BID ITEMS PROVIDING THE MOST FEATURES OF THE WORK WITHIN THE FUNDS DETERMINED BY THE GOVERNMENT TO BE AVAILABLE BEFORE BIDS ARE OPENED. IF ADDITION OF ANOTHER BID ITEM IN THE LISTED ORDER OF PRIORITY WOULD MAKE THE AWARD EXCEED SUCH FUNDS FOR ALL BIDDERS, IT SHALL BE SKIPPED AND THE NEXT SUBSEQUENT ADDITIVE BID ITEM IN A LOWER AMOUNT SHALL BE ADDED IF AWARD THEREON CAN BE MADE WITHIN SUCH FUNDS. FOR EXAMPLE, WHEN THE AMOUNT AVAILABLE IS $100,000 AND A BIDDER'S BASE BID AND FOUR SUCCESSIVE ADDITIVES ARE $85,000, $10,000, $8,000, $6,000, AND $4,000, THE AGGREGATE AMOUNT OF THE BID FOR PURPOSES OF AWARD WOULD BE $99,000 FOR THE BASE BID PLUS THE FIRST AND FOURTH ADDITIVES, THE SECOND AND THIRD ADDITIVES BEING SKIPPED BECAUSE EACH OF THEM WOULD CAUSE THE AGGREGATE BID TO EXCEED $100,000. IN ANY CASE ALL BIDS SHALL BE EVALUATED ON THE BASIS OF THE SAME ADDITIVE OR DEDUCTIVE BID ITEMS, DETERMINED AS ABOVE PROVIDED. THE LISTED ORDER OF PRIORITY NEED BE FOLLOWED ONLY FOR DETERMINING THE LOW BIDDER. AFTER DETERMINATION OF THE LOW BIDDER AS STATED, AWARD IN THE BEST INTERESTS OF THE GOVERNMENT MAY BE MADE TO HIM ON HIS BASE BID AND ANY COMBINATION OF HIS ADDITIVE OR DEDUCTIVE BID FOR WHICH FUNDS ARE DETERMINED TO BE AVAILABLE AT THE TIME OF THE AWARD, PROVIDED THAT AWARD ON SUCH COMBINATION OF BID ITEMS DOES NOT EXCEED THE AMOUNT OFFERED BY ANY OTHER CONFORMING RESPONSIBLE BIDDER FOR THE SAME COMBINATION OF BID ITEMS."

BID OPENING WAS HELD ON FEBRUARY 2, 1972, AND BIDS WERE RECEIVED FROM FOUR BIDDERS, EACH BIDDER SUBMITTING A BASIC BID AND A BID ON THE SIX ADDITIVE ITEMS. THE LOWEST BASE BID IN THE AMOUNT OF $2,229,500 WAS SUBMITTED BY TECHNOLOGY INCORPORATED AND JORDAN & NOBLES CONSTRUCTION CO., A JOINT VENTURE. WITH THE ADDITION OF THE SIX ADDITIVES, THE BID AMOUNTED TO $2,543,100. THE THREE OTHER BASE BIDS RANGED FROM $2,995,000 TO $4,473,702. THE THIRD LOWEST BASE BID IN THE AMOUNT OF $3,045,300 WAS SUBMITTED BY YOUR FIRM AND N. J. RIEBE ENTERPRISES, INC., AS A JOINT VENTURE. THE GOVERNMENT'S ESTIMATE FOR THE WORK COVERED BY THE BASE BID WAS IN THE AMOUNT OF $1,690,843. PRIOR TO THE BID OPENING, THE AMOUNT OF FUNDS AVAILABLE FOR THE PURPOSE OF DETERMINING THE LOW BIDDER ON THIS PROCUREMENT WAS SET AT $1,777,000. IN VIEW OF THE AMOUNT OF THE LOW BIDDER'S BASE BID, THE CONTRACTING OFFICER TOOK STEPS IMMEDIATELY AFTER BID OPENING TO REANALYZE THE GOVERNMENT'S ESTIMATE, TO ASCERTAIN ANY ERROR IN THE ESTIMATE, AND TO DETERMINE CURRENT MARKET PRICING ON THIS PROJECT. AFTER A COMPREHENSIVE STUDY, A REVISED GOVERNMENT ESTIMATE IN THE AMOUNT OF $2,259,307 WAS PREPARED AND APPROVED FOR THE BASE WORK BY THE DIVISION ENGINEER, SOUTHWESTERN DIVISION. AFTER BEING ADVISED BY THE CONTRACTING OFFICER THAT THE GOVERNMENT ESTIMATE WAS IN ERROR, THE MISSILE RANGE PROVIDED SUFFICIENT ADDITIONAL FUNDS FOR AN AWARD TO BE MADE TO TECHNOLOGY FOR THE BASE BID AND THE SIX ADDITIVES.

ALTHOUGH YOU INITIALLY PROTESTED BEFORE AWARD, THE CONTRACTING OFFICER DETERMINED THAT THE CONSTRUCTION OF THE PHOTO PROCESSING FACILITY WAS URGENTLY REQUIRED AND CONTRACT NO. DACA63-72-C-0117 WAS AWARDED TO TECHNOLOGY INCORPORATED AND JORDAN & NOBLES CONSTRUCTION CO., A JOINT VENTURE, ON MARCH 16, 1972, BEFORE RESOLUTION OF THE PROTEST BY OUR OFFICE. SEE ASPR 2-407.8(B)(2) AND (3).

YOU CONTEND THAT TECHNOLOGY, BY SUBMITTING A BASE BID WHICH IS APPROXIMATELY $765,000 LOWER THAN THE PRICE QUOTED BY THE NEXT LOWEST BIDDER, IS ATTEMPTING TO "BUY" A CONTRACT AND DEPEND UPON CHANGE ORDERS AND OTHER MEANS TO INCREASE THE DOLLAR VALUE TO AT LEAST A BREAK EVEN POINT. YOU MAINTAIN THAT THE CONTRACT WORK CANNOT BE COMPLETED AND ALL REQUIREMENTS OF THE SPECIFICATIONS AND DRAWINGS COMPLIED WITH AT TECHNOLOGY'S BID PRICE. IN THE CIRCUMSTANCES, YOU MAINTAIN THAT THE BID SHOULD BE REJECTED AS NONRESPONSIVE AND THAT THE BIDDER SHOULD BE CONSIDERED NONRESPONSIBLE.

A COMPARISON OF THE LOW BID OF TECHNOLOGY WITH THE REVISED GOVERNMENT ESTIMATE DOES NOT LEND ANY SUPPORT TO YOUR ALLEGATION THAT TECHNOLOGY IS ATTEMPTING A "BUY IN." IN ANY EVENT, AN ATTEMPTED "BUY IN" DOES NOT AFFORD A BASIS FOR REJECTION OF A BID.

ASPR 1-311 ADDRESSES THE SITUATION WHERE AN OFFEROR KNOWINGLY OFFERS A PRICE SUBSTANTIALLY BELOW ANTICIPATED COST WITH THE EXPECTATION OF RECOUPING THE LOSS BY AN INCREASE IN PRICE THROUGH CHANGE ORDERS DURING PERFORMANCE OR BY RECEIVING FOLLOW-ON CONTRACTS AT PRICES HIGH ENOUGH TO RECOVER THE LOSS ON THE ORIGINAL "BUY IN." THE ACT OF WILFULLY BIDDING BELOW COST IS NOT EXPRESSLY PROHIBITED. HOWEVER, WHEN THERE IS REASON TO BELIEVE THAT THIS HAS OCCURRED, THE CONTRACTING OFFICER IS REQUIRED BY THAT REGULATION TO ASSURE THAT THE DIFFERENCE IS NOT RECOVERED IN THE PRICING OF CHANGE ORDERS OR OF FOLLOW-ON PROCUREMENTS SUBJECT TO COST ANALYSES. FURTHER, SINCE THE REGULATION DOES NOT PROVIDE FOR REJECTION OF A BID WHERE A "BUY IN" IS SUSPECTED, WE HAVE RECOGNIZED THAT THERE IS NO LEGAL BASIS UPON WHICH AN AWARD MAY BE PRECLUDED OR DISTURBED MERELY BECAUSE THE LOW BIDDER SUBMITTED AN UNPROFITABLE PRICE. 50 COMP. GEN. 50 (1970).

RELATIVE TO THE RESPONSIBILITY OF TECHNOLOGY, PRIOR TO AWARD, THE CONTRACTING OFFICER EXECUTED A WRITTEN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY ON TECHNOLOGY INCORPORATED AND JORDAN & NOBLES CONSTRUCTION COMPANY, A JOINT VENTURE, AS REQUIRED BY ASPR 1-904.1. IN ARRIVING AT THIS DECISION THE CONTRACTING OFFICER RELIED ON A FAVORABLE PREAWARD SURVEY REPORT ON TECHNOLOGY WHICH WAS REQUESTED PURSUANT TO ASPR 1-905.4. THE CONTRACTING OFFICER ALSO RELIED UPON THE QUALIFICATION OF THE JOINT VENTURE AS RESPONSIBLE BIDDERS PRIOR TO THE BID OPENING PURSUANT TO THE PREQUALIFICATION OF BIDDERS PROCEDURE AUTHORIZED BY ASPR 18-209.

IT LONG HAS BEEN THE RULE OF OUR OFFICE TO ACCEPT THE CONTRACTING OFFICER'S DETERMINATION OF RESPONSIBILITY, UNLESS IT IS SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIAL EVIDENCE. 45 COMP. GEN. 4 (1965) AND B-173157, DATED OCTOBER 26, 1971 (51 COMP. GEN. ). WE FIND NO EVIDENCE IN THE RECORD, AND HAVE NO REASON TO QUESTION THE QUALIFICATIONS OF TECHNOLOGY INCORPORATED AND JORDAN & NOBLES CONSTRUCTION COMPANY, A JOINT VENTURE.

ACCORDINGLY, WE WOULD NOT BE JUSTIFIED IN QUESTIONING THE AWARD MADE. THE PROTEST IS THEREFORE DENIED.