B-176046(1), DEC 19, 1972

B-176046(1): Dec 19, 1972

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A BID WHICH DOES NOT PROVIDE SUCH RIGHT TO THE GOVERNMENT IS NON-RESPONSIVE. ALTHOUGH THIS OPTION COULD BE EXERCISED IN A MANNER THAT IS UNFAIR TO THE CONTRACTOR. THE POSSIBILITY OF THIS OCCURRENCE IS SO REMOTE THERE IS NO REASON TO RECOMMEND CANCELLATION OF THE IFB. THE INVITATION WAS ISSUED ON MAY 12. CONSOLIDATED WAS FOUND TO BE THE APPARENT LOW BIDDER AT A UNIT PRICE OF $270 FOR INCREMENTS ONE AND TWO AND $265 FOR INCREMENT THREE. THE BID WAS CONSIDERED NONRESPONSIVE BECAUSE CONSOLIDATED ENCLOSED A LETTER WITH ITS BID WHICH READS AS FOLLOWS: "THE BIDDER SUBMITS ITS BID ON THE UNDERSTANDING THAT IT IS NOT OFFERING THE GOVERNMENT THE OPTION CLAUSE SET FORTH ON PAGE 23 OF THE SUBJECT INVITATION.

B-176046(1), DEC 19, 1972

BID PROTEST - OPTION QUANTITIES - NON-RESPONSIVE BID DECISION DENYING THE PROTEST OF CONSOLIDATED AIRBORNE SYSTEMS, INC., AGAINST AWARD OF A CONTRACT TO THE NEXT LOW BIDDER UNDER AN IFB ISSUED AT WRIGHT-PATTERSON AFB, OHIO, BY THE DEPARTMENT OF THE AIR FORCE FOR LIQUID OXYGEN INDICATORS. ASPR 1-1504(G) MERELY REQUIRES THAT THE OPTION QUANTITY OF SUPPLIES WHICH MAY BE EXERCISED UNDER A CONTRACT BE STATED IN THE SOLICITATION, AND DOES NOT REQUIRE A MINIMUM OPTION QUANTITY SHOULD SUCH OPTION BE EXERCISED. ALSO, AN AGENCY MAY PROVIDE IN A SOLICITATION THAT OPTION PRICES MAY NOT EXCEED THE BASIC CONTRACT PRICES, AND A BID WHICH DOES NOT PROVIDE SUCH RIGHT TO THE GOVERNMENT IS NON-RESPONSIVE. B-174575, FEBRUARY 23, 1972. ALTHOUGH THIS OPTION COULD BE EXERCISED IN A MANNER THAT IS UNFAIR TO THE CONTRACTOR, THE POSSIBILITY OF THIS OCCURRENCE IS SO REMOTE THERE IS NO REASON TO RECOMMEND CANCELLATION OF THE IFB.

TO JACOB H. FISHMAN:

WE REFER TO YOUR LETTER DATED AUGUST 21, 1972, AND PRIOR CORRESPONDENCE, FROM CONSOLIDATED AIRBORNE SYSTEMS, INCORPORATED (CONSOLIDATED), PROTESTING AGAINST THE OPTION PROVISION CONTAINED IN INVITATION FOR BIDS F33657-72-B-0895, ISSUED AT WRIGHT-PATTERSON AIR FORCE BASE, OHIO, BY THE DEPARTMENT OF THE AIR FORCE.

THE INVITATION WAS ISSUED ON MAY 12, 1972, FOR LIQUID OXYGEN INDICATORS IN THREE PRICE INCREMENTS, RANGING IN QUANTITY FROM A MINIMUM OF 80 UNITS THROUGH 260 UNITS. AT BID OPENING, ON JUNE 2, 1972, CONSOLIDATED WAS FOUND TO BE THE APPARENT LOW BIDDER AT A UNIT PRICE OF $270 FOR INCREMENTS ONE AND TWO AND $265 FOR INCREMENT THREE. HOWEVER, THE BID WAS CONSIDERED NONRESPONSIVE BECAUSE CONSOLIDATED ENCLOSED A LETTER WITH ITS BID WHICH READS AS FOLLOWS:

"THE BIDDER SUBMITS ITS BID ON THE UNDERSTANDING THAT IT IS NOT OFFERING THE GOVERNMENT THE OPTION CLAUSE SET FORTH ON PAGE 23 OF THE SUBJECT INVITATION. IT IS OUR CONTENTION THAT SINCE THIS IS AN OPTION WHICH MAY NEVER BE EXERCISED AND WHICH IS NOT TO BE CONSIDERED IN EVALUATING THE CONTRACTOR'S BID, IT DOES NOT GO TO THE RESPONSIVENESS OF OUR BID. WE ARE TOTALLY AND COMPLETELY RESPONSIVE TO PARAGRAPH 36 OF PAGE 19 OF THE IFB."

THE OPTION CLAUSE STATES THAT "THE GOVERNMENT IS HEREBY GRANTED AN OPTION TO INCREASE THE QUANTITY OF SUPPLIES CALLED FOR HEREIN BY AN AMOUNT NOT TO EXCEED 100 PERCENT OF THE QUANTITY OF INDICATORS INITIALLY AWARDED." THE CLAUSE FURTHER STATES THAT "THE UNIT PRICE OR PRICES FOR THE RESPECTIVE OPTION EXERCISE SHALL BE DETERMINED ON THE BASIS OF THE COMBINED TOTAL QUANTITY OF THE INITIAL AWARD AND ALL OPTION QUANTITIES ***." FINALLY, THE CLAUSE PROVIDES THAT BIDS ARE TO BE EVALUATED ON THE BASIS OF THE QUANTITY TO BE INITIALLY AWARDED EXCLUSIVE OF THE OPTION QUANTITY.

YOU ASSERT THAT THIS OPTION CLAUSE IS CONTRARY TO THE PROVISIONS OF ASPR 1-1503 AND 1-1504(G) BECAUSE IT IS INDEFINITE AS TO THE NUMBER OF UNITS WHICH THE GOVERNMENT MAY ORDER AND ITS USE COULD RESULT IN PRICES UNFAIR TO THE CONTRACTOR.

IN REGARD TO ASPR 1-1504(G), YOU POINT OUT THAT THIS SECTION OF THE REGULATION STATES THAT OPTION QUANTITIES MUST BE EXPRESSED IN TERMS OF A (1) PERCENTAGE OF SPECIFIC CONTRACT LINE ITEMS, OR (2) A NUMBER OF ADDITIONAL UNITS OF SPECIFIC CONTRACT LINE ITEMS OR (3) ADDITIONAL NUMBERED LINE ITEMS IDENTIFIED AS THE OPTION QUANTITY. YOU CONTEND THAT THIS OPTION PROVISION FAILS TO SPECIFY ANY DEFINITE QUANTITIES AS REQUIRED BY SECTION 1504(G).

WE NOTE THAT THE OPTION QUANTITY IN THIS CASE IS EXPRESSED AS A PERCENTAGE (NOT TO EXCEED 100 PERCENT) OF THE BASIC CONTRACT QUANTITY TO BE AWARDED. WE DO NOT BELIEVE THIS OPTION PROVISION IS CONTRARY TO ASPR 1 -1504(G) MERELY BECAUSE THE GOVERNMENT IS PERMITTED TO EXERCISE THE OPTION FOR A LESSER QUANTITY. AS AIR FORCE STATES, BY THEIR VERY NATURE OPTIONS ARE INDEFINITE AS TO BOTH QUANTITY AND CERTAINTY OF USE. ASPR 1-1504(G) MERELY REQUIRES THAT THE OPTION QUANTITY OF SUPPLIES WHICH MAY BE EXERCISED UNDER A CONTRACT SHALL BE STATED IN THE SOLICITATION SCHEDULE. THERE IS NO REQUIREMENT IN THE REGULATION TO PROVIDE FOR A MINIMUM OPTION QUANTITY SHOULD THE GOVERNMENT ELECT TO EXERCISE OPTION QUANTITIES.

IT IS ALSO YOUR POSITION THAT THE OPTION PRICING SCHEME IS UNFAIR TO THE CONTRACTOR AND THUS CONTRARY TO ASPR 1-1503(A), WHICH STATES THAT THE IMPROPER USE OF OPTIONS COULD RESULT IN PRICES WHICH ARE UNFAIR TO EITHER THE GOVERNMENT OR THE CONTRACTOR. YOU POINT OUT THAT UNDER THIS SOLICITATION THE GOVERNMENT COULD MAKE AN AWARD FOR 80 UNITS, WITH DELIVERY OF 40 UNITS WITHIN 150 DAYS AFTER AWARD AND 40 UNITS ONE MONTH THEREAFTER. IF THE GOVERNMENT THEN CHOSE TO EXERCISE ITS OPTION ON THE 179TH DAY (SINCE IT HAS THE RIGHT TO EXERCISE THE OPTION IN WHOLE OR IN PART WITHIN 180 DAYS AFTER AWARD), IT COULD ON THAT DAY MERELY ORDER 1 UNIT, FOR FUTURE DELIVERY, WITH THE COST OF THAT UNIT "DISPROPORTIONATELY IN EXCESS OF THE COST TO SUPPLY ONE UNIT OF THE ORIGINAL 80 UNITS ***. THIS IS SELF-EVIDENT SINCE ALL OF THE COMPONENTS AND SUBCOMPONENTS AND MANUFACTURING WOULD HAVE BEEN COMPLETED ON THE ORIGINAL ORDERED 80 UNITS AND THEREFORE THE ONE OPTIONAL UNIT COULD NOT BE TAGGED ON TO PRODUCTION OF THE ORIGINAL UNITS."

THE CONTRACTING OFFICER STATES THAT THE CURRENT OPTION PROVISION WAS DESIGNED TO PROTECT THE GOVERNMENT AGAINST PAYING HIGHER PRICES FOR OPTION QUANTITIES THAN THOSE PAID ON THE INITIAL AWARD. HE CITES ASPR 1-1503(A), WHICH STATES THAT SUCH A PROVISION MAY BE INSERTED IN AN OPTION CLAUSE.

WE RECOGNIZED IN B-174575, FEBRUARY 23, 1972, THAT AN AGENCY MAY ELECT TO PROVIDE IN A SOLICITATION THAT OPTION PRICES MAY NOT EXCEED THE BASIC CONTRACT PRICES AND THAT A BID WHICH DID NOT PROVIDE SUCH A REQUIRED OPTION RIGHT TO THE GOVERNMENT WOULD BE NONRESPONSIVE SINCE THE GOVERNMENT WOULD BE DEPRIVED OF A VALUABLE BENEFIT BY ACCEPTANCE OF THE BID. ALTHOUGH IT IS REPORTED THAT THE OPTION PROVISION USED IN THE PRIOR PROCUREMENT OF THIS ITEM PERMITTED SEPARATE PRICING FOR THE OPTION UNITS, WE BELIEVE THE GOVERNMENT IS JUSTIFIED IN INSISTING FOR THIS PROCUREMENT THAT THE OPTION PRICES BE LIMITED TO THE SCHEDULE BID PRICES. THEREFORE, WE MUST REGARD CONSOLIDATE'S BID AS NON-RESPONSIVE TO THE SOLICITATION.

WE RECOGNIZE THAT THE SITUATION DESCRIBED IN YOUR LETTER COULD OCCUR UNDER THE CONTRACT. SINCE WE BELIEVE THE POSSIBILITY OF SUCH AN OCCURRENCE IS REMOTE, WE SEE NO COMPELLING REASON TO RECOMMEND REJECTION OF ALL BIDS AND CANCELLATION OF THE SOLICITATION. HOWEVER, BY LETTER OF TODAY, COPY ENCLOSED, WE ARE RECOMMENDING TO THE SECRETARY OF THE AIR FORCE THAT HE MAY WISH TO CONSIDER AMENDING THE OPTION PROVISION IN FUTURE PROCUREMENTS OF THIS ITEM TO PERMIT APPROPRIATE RELIEF TO A CONTRACTOR IN THE EVENT THE SITUATION YOU DESCRIBE SHOULD ARISE.

FOR THE REASONS STATED ABOVE, YOUR PROTEST AGAINST AN AWARD TO THE NEXT LOW BIDDER IS DENIED.