B-175586, FEB 20, 1973

B-175586: Feb 20, 1973

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THE USE OF A FIXED READING FEE IS NOT INCONSISTENT WITH COMPETITIVE BIDDING REQUIREMENTS WHERE BIDDERS ARE PROVIDED WITH REASONABLE QUANTITY ESTIMATES FOR THE REST OF THE REQUIREMENTS. THE RECORD DOES NOT INDICATE THAT THE IFB WAS MISLEADING. GAO WILL NOT SUBSTITUTE ITS JUDGMENT IN THE ABSENCE OF EVIDENCE THAT SUCH A DETERMINATION WAS ARBITRARY. THE SUBJECT IFB WAS ISSUED BY THE FEDERAL SUPPLY SERVICE ON MARCH 8. THE PROCUREMENT WAS A TOTAL SMALL BUSINESS SET-ASIDE AND PROVIDED FOR THE PRESS-CLIPPING REQUIREMENTS OF A NUMBER OF FEDERAL AGENCIES IN ADDITION TO GSA. BIDS WERE OPENED ON JUNE 22. ALTHOUGH PRESS WAS THE APPARENT LOW BIDDER. IT WAS CONCLUDED ON THE BASIS OF A PLANT FACILITIES REPORT DATED JULY 15.

B-175586, FEB 20, 1973

BID PROTEST - COMPETITIVE BIDDING REQUIREMENTS RESPONSIBILITY DECISION DENYING THE PROTEST OF PRESS INTELLIGENCE, INC, AGAINST REJECTION OF ITS BID UNDER AN IFB ISSUED BY THE GENERAL SERVICES ADMINISTRATION FOR PRESS-CLIPPING SERVICES. THE USE OF A FIXED READING FEE IS NOT INCONSISTENT WITH COMPETITIVE BIDDING REQUIREMENTS WHERE BIDDERS ARE PROVIDED WITH REASONABLE QUANTITY ESTIMATES FOR THE REST OF THE REQUIREMENTS. ALSO, THE RECORD DOES NOT INDICATE THAT THE IFB WAS MISLEADING, REQUIRED SERVICES IN EXCESS OF THE GOVERNMENT'S NEEDS, OR LIMITED SMALL BUSINESS PARTICIPATION IN VIOLATION OF 15 U.S.C. 631. FINALLY, THE CONTRACTING OFFICER HAS CONSIDERABLE DISCRETION IN DETERMINING THE RESPONSIBILITY OF A BIDDER, AND GAO WILL NOT SUBSTITUTE ITS JUDGMENT IN THE ABSENCE OF EVIDENCE THAT SUCH A DETERMINATION WAS ARBITRARY, CAPRICIOUS OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. SEE 45 COMP. GEN. 4 (1965).

TO ARNOLD AND PORTER:

WE REFER TO YOUR LETTER DATED MARCH 29, 1972, AND SUBSEQUENT CORRESPONDENCE, WRITTEN ON BEHALF OF PRESS INTELLIGENCE, INCORPORATED (PRESS), IN WHICH YOU PROTEST THE PROCUREMENT OF PRESS-CLIPPING SERVICES PURSUANT TO INVITATION FOR BIDS NO. 3FP-A2-R-3091-4-11-72 ISSUED BY THE GENERAL SERVICES ADMINISTRATION (GSA).

THE SUBJECT IFB WAS ISSUED BY THE FEDERAL SUPPLY SERVICE ON MARCH 8, 1972, SEEKING BIDS FOR AN ANNUAL REQUIREMENTS-TYPE CONTRACT COVERING THE FURNISHING OF PRESS-CLIPPING SERVICES DURING THE PERIOD JULY 1, 1972, OR DATE OF AWARD, IF LATER, THROUGH JUNE 30, 1973. THE PROCUREMENT WAS A TOTAL SMALL BUSINESS SET-ASIDE AND PROVIDED FOR THE PRESS-CLIPPING REQUIREMENTS OF A NUMBER OF FEDERAL AGENCIES IN ADDITION TO GSA. BIDS WERE OPENED ON JUNE 22, 1972. ALTHOUGH PRESS WAS THE APPARENT LOW BIDDER, IT WAS CONCLUDED ON THE BASIS OF A PLANT FACILITIES REPORT DATED JULY 15, 1972, THAT PRESS DID NOT MEET THE MINIMUM STANDARDS UNDER FPR 1-1.1203 FOR A RESPONSIBLE PROSPECTIVE CONTRACTOR. PURSUANT TO FPR 1-1.708 THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR CONSIDERATION OF THE ISSUANCE OF A CERTIFICATE OF COMPETENCY.

ON AUGUST 8, 1972, SBA ADVISED GSA THAT IT WAS CLOSING ITS FILE RELATING TO PRESS SINCE THAT FIRM HAD DECLINED TO SUBMIT REQUIRED INFORMATION IN CONNECTION WITH THE POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY. (YOU EXPLAIN THAT THE INFORMATION REQUIRED BY SBA PERTAINED TO FINANCIAL DATA OF THE FIRM AND PRESS WAS CONCERNED, BASED ON PAST EXPERIENCE, THAT SBA WOULD BE UNABLE TO SAFEGUARD THE INFORMATION FROM EXPOSURE TO PRESS' COMPETITORS). SUBSEQUENTLY, PRESS, IN A FURTHER EFFORT TO ESTABLISH ITS RESPONSIBILITY, FORWARDED INFORMATION TO THE FSS REGIONAL OFFICE, TOGETHER WITH A DOCUMENT FROM ITS SUBCONTRACTOR, REFLECTING A PROPOSED NEW ARRANGEMENT RELATING TO ITS PERFORMANCE ABILITY. UNDER THE NEW ARRANGEMENT, ALLEN'S PRESS CLIPPING BUREAU, AS THE PROSPECTIVE SUBCONTRACTOR, WOULD UNDERTAKE TO PERFORM PRESS-CLIPPING SERVICES FOR PRESS WITH RESPECT TO TEN WESTERN STATES. ON AUGUST 15, 1972, THE CONTRACTING OFFICER REQUESTED THAT THE QUALITY CONTROL DIVISION MAKE A REDETERMINATION ON THE BASIS OF THE ADDITIONAL DOCUMENTARY MATERIALS. AUGUST 21, 1972, THE QUALITY CONTROL DIVISION ADVISED THAT PRESS WAS STILL NOT CONSIDERED CAPABLE OF PERFORMING THE SERVICES.

IN VIEW OF THIS DEVELOPMENT, THE FSS REGIONAL OFFICE ON AUGUST 28, 1972, REQUESTED THAT SBA REOPEN THE CASE AND GIVE CONSIDERATION TO THE NEW DOCUMENTARY MATERIALS. PRESS, HOWEVER, AGAIN REFUSED TO FURNISH NECESSARY INFORMATION, AND SBA ONCE MORE CLOSED ITS FILE WITHOUT ISSUING A COC. ALTHOUGH AWARD OF THE CONTRACT HAD BEEN DELAYED PENDING THE OUTCOME OF THE PROTEST BY PRESS, WE WERE ADVISED THAT THE CONTRACT FOR PRESS-CLIPPING SERVICES IS BEING AWARDED TO THE SECOND LOW BIDDER, INTERNATIONAL PRESS CLIPPING BUREAU, INC., EFFECTIVE DECEMBER 15, 1972, PURSUANT TO AN URGENCY "FINDINGS AND DETERMINATION," IN ACCORDANCE WITH FPR 1-2.407-8(B).

YOU CONTEND THAT THE ORIGINAL SOLICITATION WAS DEFECTIVE BECAUSE IT STIPULATED A FIXED READING FEE PER ORDER PER MONTH AND REQUIRED SERVICES THAT FAR EXCEEDED THE REQUIREMENTS OF THE GOVERNMENT AND THE CAPABILITY OF SMALL BUSINESS CONCERNS. ADDITIONALLY, YOU MAINTAIN THAT GSA'S DETERMINATION THAT PRESS WAS NOT A RESPONSIBLE BIDDER WAS UNFOUNDED AND CONSTITUTED HARASSMENT.

INITIALLY, YOU HAD ALSO PROTESTED THAT THE ORIGINAL SOLICITATION WAS DEFECTIVE IN FAILING TO PROVIDE A REASONABLE QUANTITY ESTIMATE FOR THE NUMBER OF PRESS-CLIPPINGS THAT WOULD BE REQUIRED. HOWEVER, THE GSA AMENDED THE SOLICITATION EFFECTIVE APRIL 11, 1972, TO PROVIDE SUCH AN ESTIMATE IN THE FORM OF INFORMATION AS TO THE DOLLAR VALUE AND THE NUMBER OF ORDERS AND PRESS-CLIPPINGS UNDER THE THEN CURRENT CONTRACT.

IN CONNECTION WITH YOUR CONTENTION CONCERNING THE ESTABLISHMENT OF A FIXED READING FEE, THE GSA SOLICITATION PRESCRIBED THE FOLLOWING:

READING FEE: A MONTHLY READING FEE OF $25.00 HAS BEEN ESTABLISHED FOR THIS SOLICITATION COVERING PRESS CLIPPING SERVICE.

THE READING FEE WILL NOT BE EVALUATED FOR DETERMINING THE LOW BID, HOWEVER, ANYONE QUOTING A READING FEE IN EXCESS OF THE ESTABLISHED MONTHLY FEE OF $25.00 WILL BE DEEMED TO BE UNREASONABLE BY THE CONTRACTING OFFICER AND WILL BE SUFFICIENT CAUSE FOR REJECTION OF THE BID.

YOU CONTEND THAT THE SOLICITATION IS DEFECTIVE IN STIPULATING THE READING FEE TO BE PAID SINCE IT RESTRICTS COMPETITION BY ELIMINATING A FIRM THAT CANNOT AFFORD TO READ AT THAT PRICE, EVEN THOUGH IT MAY BE IN A POSITION TO OFFER A PRICE PER CLIP WHICH, IN COMBINATION WITH THE HIGHER READING FEE, WOULD REPRESENT THE MOST ADVANTAGEOUS PRICE TO THE GOVERNMENT. YOU MAINTAIN THAT THE READING FEE IS DICTATED BY THE DIRECT LABOR AND OVERHEAD EXPENSES OF A GIVEN BIDDER AND THAT BY FIXING THE ONE VARIABLE THAT REFLECTS OPERATIONAL COSTS, BIDDING IS TURNED INTO A CLEAR AUCTION, WITH EACH BIDDER KNOWING THAT HE MUST BID BELOW THE PRICE PER CLIP ON THE LAST CONTRACT SIMPLY TO BE CONSIDERED FOR THE CURRENT PROCUREMENT. YOU BELIEVE THAT THE NET EFFECT OF THE STIPULATED READING FEE IS TO UNDULY RESTRICT COMPETITION IN VIOLATION OF 41 U.S.C. 253(A).

GSA ASSERTS THAT THE ESTABLISHMENT OF A FIXED READING FEE DOES NOT TEND TO DIMINISH COMPETITION. IT MAINTAINS THAT SO LONG AS THE READING FEE REFLECTS A REASONABLE AMOUNT, EACH BIDDER MAY EASILY AND APPROPRIATELY CALCULATE THE AMOUNT OF ITS BID BY FIXING THE AMOUNT IT WILL CHARGE PER CLIP IN RELATION TO THE FIXED READING FEE TO BE PAID TO THE CONTRACTOR BY THE GOVERNMENT. ADDITIONALLY, GSA MAINTAINS THAT THE COMPENSATION FOR THE READING FEE CONSTITUTES BUT A SMALL PORTION OF THE ENTIRE COMPENSATION (ABOUT ONE SEVENTH UNDER THE PRIOR CONTRACT), TO BE PAID TO THE CONTRACTOR, AND THUS BELIEVES THAT THE ESTABLISHMENT BY THE GOVERNMENT OF A FIXED REASONABLE READING FEE WILL NOT RESTRICT COMPETITION.

IT IS OUR VIEW THAT THE USE OF A FIXED READING FEE IS NOT INCONSISTENT WITH OR CONTRARY TO COMPETITIVE BIDDING REQUIREMENTS WHERE AS HERE, BIDDERS ARE PROVIDED WITH REASONABLE QUANTITY ESTIMATES. FROM THIS INFORMATION A BIDDER CAN DETERMINE THE APPROXIMATE COMPENSATION FOR THE WORK AND, WITH KNOWLEDGE OF HIS DIRECT LABOR AND OVERHEAD EXPENSES, CAN DETERMINE HIS PER CLIPPING RATE ACCORDINGLY. WE DO NOT BELIEVE THE PROCUREMENT BECOMES AN "AUCTION" MERELY BECAUSE A FIXED READING FEE IS IMPOSED BY THE GOVERNMENT.

YOU ALSO CONTEND THAT THE SOLICITATION IS DEFECTIVE IN THAT IT REQUIRES SERVICES FAR IN EXCESS OF THE REQUIREMENTS OF THE GOVERNMENT. YOU STATE THAT DURING THE PAST TWO YEARS, UNDER TWO SEPARATE CONTRACTS, GSA HAS REQUIRED THE CONTRACTOR TO CLIP ARTICLES FROM 300 TO 350 MAJOR DAILY NEWSPAPERS, FROM ALL MAGAZINES AND PERIODICALS, AND FROM THE WEEKLY AND DAILY NEGRO PRESS, WHEREAS UNDER THE PRESENT SOLICITATION CLIPPINGS WOULD BE TAKEN FROM APPROXIMATELY 1,800 DAILIES, 9000 WEEKLIES AND 4000 MAGAZINES AND PERIODICALS, INCLUDING THE WEEKLY AND DAILY NEGRO PRESS. YOU MAINTAIN THAT GSA'S JUSTIFICATION FOR THE INCREASED REQUIREMENTS - THAT USING AGENCIES REQUIRE "NATIONAL COVERAGE RATHER THAN LOCAL COVERAGE TO SATISFY CURRENT NEEDS" - AND THE CHARACTERIZATION OF THEIR NEEDS AS "NEW REQUIREMENTS ON COVERAGE" LACK FACTUAL BASIS SINCE PAST GOVERNMENT CONTRACTS FOR PRESS CLIPPING SERVICES, INCLUDING GSA'S PAST CONTRACT AND THOSE PERFORMED BY PRESS, HAVE ALWAYS REQUIRED NATIONAL COVERAGE AND NOT A SINGLE PRIOR SOLICITATION HAS EVER RESTRICTED COVERAGE TO ANY LOCALITY OR REGION AS IMPLIED BY GSA.

FURTHER, YOU POINT OUT THAT THIS IS A TOTAL SMALL BUSINESS SET-ASIDE AND, THEREFORE, ANY REQUIREMENT THAT LIMITS THE ABILITY OF A SMALL BUSINESS TO COMPETE FOR THE CONTRACT NOT ONLY IS CONTRARY TO THE FEDERAL PROCUREMENT REGULATIONS, BUT ALSO IS CONTRARY TO THE PRINCIPLES OF THE SMALL BUSINESS ACT, 15 U.S.C. 631, AND ITS IMPLEMENTING PROGRAMS.

ALTHOUGH THE GSA HAS INCREASED THE PUBLICATION COVERAGE SUBSTANTIALLY, AS COMPARED TO PREVIOUS SOLICITATIONS FOR PRESS-CLIPPING SERVICES, WE ARE UNABLE TO SAY, ON THE BASIS OF THE RECORD, THAT GSA ACTED IN AN ARBITRARY MANNER. THE RECORD INDICATES THAT PRIOR TO ISSUANCE OF THE SUBJECT SOLICITATION A SURVEY OF VARIOUS AGENCIES WAS MADE AND RESPONSES FROM THOSE AGENCIES TO SPECIFIC INQUIRIES DISCLOSED THAT THEY REQUIRED NATIONAL COVERAGE, AS WELL AS A GREATER NUMBER AND VARIETY OF PUBLICATIONS, TO MEET THE NEEDS OF THEIR TECHNICAL AND SOCIAL PROGRAMS.

WE DO NOTE, HOWEVER, AS YOU POINT OUT, THAT THE SOLICITATION PROVIDES THAT:

ARTICLES CONTAINING KEYWORDS DESIGNATED IN THE PURCHASE ORDERS SHALL BE CLIPPED FROM APPROXIMATELY 1800 DAILIES, 9000 WEEKLIES AND 4000 MAGAZINES AND PERIODICALS, INCLUDING THE WEEKLY AND DAILY NEGRO PRESS. IN ORDER TO BE CONSIDERED FOR AWARD, BIDDER MUST BE CAPABLE OF READING AT LEAST 70 PERCENT OF EACH OF THE ABOVE FIGURES.

IT IS REPORTED THAT THE SENTENCE "... BIDDER MUST BE CAPABLE OF READING AT LEAST 70 PERCENT ..." MEANS THAT THE BIDDER IS REQUIRED TO FURNISH CLIPPINGS FROM AT LEAST 70 PERCENT OF THE NUMBER OF PUBLICATIONS LISTED FOR EACH CATEGORY AND THAT 70 PERCENT REFLECTED A MANDATORY MINIMUM IN COVERAGE. SINCE 70 PERCENT OF THE FIGURES LISTED IN THE SOLICITATION REPRESENT THE ACTUAL MINIMUM NEEDS OF THE GOVERNMENT, WE AGREE THAT THE SOLICITATION SHOULD HAVE LISTED 70 PERCENT OF THE FIGURES, THAT IS, "APPROXIMATELY 1260 DAILIES, 6300 WEEKLIES, 2800 MAGAZINES & PERIODICALS. ..." HOWEVER, WE DO NOT BELIEVE THAT THIS REQUIRES CANCELLATION OF THE SOLICITATION AS THE ABOVE INTERPRETATION APPEARS TO BE THE ONLY REASONABLE ONE AND IT WAS NOT THEREFORE MISLEADING.

WITH REGARD TO YOUR CONTENTION CONCERNING THE SUITABILITY OF THIS PROCUREMENT FOR SMALL BUSINESS PARTICIPATION, THE APPLICABLE REGULATION PROVIDES FOR PLACING A FAIR PROPORTION OF THE TOTAL GOVERNMENT PURCHASES WITH SUCH CONCERNS. SEE FPR 1-1.702. FURTHERMORE, FPR 1 1.706-5 PROVIDES FOR THE TOTAL SET-ASIDE OF A PROCUREMENT WHERE THERE IS A REASONABLE EXPECTATION THAT BIDS WILL BE RECEIVED FROM A SUFFICIENT NUMBER OF SMALL BUSINESS CONCERNS SO THAT AWARD WILL BE AT A REASONABLE PRICE.

IN THE INSTANT PROCUREMENT, FIVE BIDS WERE RECEIVED FROM FIRMS REPRESENTING THEMSELVES AS SMALL BUSINESS. ALTHOUGH TWO FIRMS WERE LATER DETERMINED TO BE OTHER THAN SMALL, WE SEE NO BASIS FOR CONCLUDING THAT THE COMPETITION WAS INADEQUATE TO ASSURE REASONABLENESS OF PRICE.

FINALLY, YOU CONTEND THAT GSA'S DETERMINATION THAT PRESS IS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR IS UNFOUNDED AND CONSTITUTES HARASSMENT. YOU MAINTAIN THAT THE GSA PLANT FACILITIES REPORT CONCLUSIVELY ESTABLISHES THE ABSENCE OF ANY VALID GROUND FOR GSA'S DETERMINATION OF NONRESPONSIBILITY. YOU ALSO CONTEND THAT GSA'S DETERMINATION THAT PRESS IS NOT RESPONSIBLE IS BASED ON CONJECTURE, UNRELATED IN ANY WAY TO FACTORS WHICH WOULD ACTUALLY GOVERN PRESS' CAPABILITY TO PERFORM. FURTHERMORE, YOU STATE THAT THE NEGATIVE DETERMINATION IS WHOLLY INCONSISTENT WITH PRESS' PAST PERFORMANCE ON NUMEROUS GOVERNMENT CONTRACTS FOR THE SAME SERVICES, AND IN VIOLATION OF THE PRINCIPLES OF THE FEDERAL PROCUREMENT REGULATIONS APPLICABLE TO THE MINIMUM STANDARDS FOR DETERMINING RESPONSIBILITY.

YOU ALSO CONTEND THAT GSA DISREGARDED THE FAVORABLE SUBJECTIVE COMMENTS (WELL OPERATED, STABLE AND THRIVING) OF THE QUALITY CONTROL REPRESENTATIVE AND MADE PRESS' AGREEMENT WITH THE SUBCONTRACTOR THE SOLE CRITERION FOR RESPONSIBILITY. YOU ALSO ASSERT THAT A SATISFACTORY AGREEMENT WAS ENTERED INTO WITH THE SUBCONTRACTOR AND THAT ONLY AFTER THAT AGREEMENT WAS REACHED WAS THE MATTER OF PERFORMANCE IN THE EASTERN AND CENTRAL STATES (NOT COVERED IN THE AGREEMENT) RAISED.

OUR OFFICE HAS CONSISTENTLY HELD THAT IN DETERMINING THE RESPONSIBILITY OF A BIDDER THE CONTRACTING OFFICER IS VESTED WITH A CONSIDERABLE DEGREE OF DISCRETION AND THAT WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR HIS IN THE ABSENCE OF EVIDENCE THAT SUCH DETERMINATION IS SHOWN TO BE ARBITRARY, CAPRICIOUS, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. SEE 45 COMP. GEN. 4 (1965); 43 COMP. GEN. 257 (1963). WE HAVE REVIEWED AND CONSIDERED THE QUALITY CONTROL REPRESENTATIVE'S REPORT UPON WHICH IT WAS DETERMINED THAT PRESS WAS NOT A RESPONSIBLE BIDDER FOR PURPOSES OF THIS PROCUREMENT. ALTHOUGH IT IS STATED IN THE REPORT THAT PRESS IS "WELL OPERATED, STABLE AND THRIVING," THERE IS ALSO CONSIDERABLE EXPRESSION OF DOUBT AS TO PRESS' ABILITY TO PERFORM THE CONTRACT BECAUSE OF THE SIZE OF ITS STAFF AND RELATIVELY SMALL PRIOR CONTRACTS, WITHOUT THE BENEFIT OF A SATISFACTORY SUBCONTRACT ARRANGEMENT. THE REPORT CONCLUDES THAT BECAUSE OF THOSE "CONSIDERATIONS WE HAVE LESS THAN A REASONABLE ASSURANCE THAT THIS BIDDER WOULD PERFORM THE SUBJECT REQUIREMENTS SATISFACTORILY." SINCE A SATISFACTORY SUBCONTRACT WAS NOT ARRANGED AND SBA WAS UNABLE TO ISSUE A COC, WE FIND NO BASIS UPON WHICH OUR OFFICE WOULD BE JUSTIFIED IN CONCLUDING THAT THERE WAS AN ABUSE OF ADMINISTRATIVE DISCRETION.

IN VIEW OF THE FOREGOING, THE PROTEST IS DENIED.