B-177763(1), APR 10, 1973

B-177763(1): Apr 10, 1973

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WIENER & ROSS: REFERENCE IS MADE TO YOUR PROTEST FILED IN THIS OFFICE ON JANUARY 9. THE SUBJECT IFB WAS ISSUED BY THE NAVY PURCHASING OFFICE. BIDS WERE OPENED ON NOVEMBER 14. A TOTAL OF THREE BIDS WERE RECEIVED AS FOLLOWS: YARDNEY ELECTRIC COMPANY $1. YOU PROTESTED TO THIS OFFICE CONTENDING THAT YARDNEY WAS IMPROPERLY DETERMINED THE LOW BIDDER BECAUSE THE EVALUATION DID NOT INCLUDE THE ADDITION OF TRANSPORTATION COSTS. IT IS YOUR POSITION THAT THE NAVY WAS REQUIRED TO INCLUDE IN THE EVALUATION THE TRANSPORTATION COSTS OF THE BATTERIES TO THEIR ULTIMATE DESTINATIONS. THAT WHEN SUCH COSTS ARE ADDED MOLECULAR IS THE LOW EVALUATED BIDDER. BIDS ARE ON AN F.O.B. YOU CONTEND THAT THE NAVY IS IN POSSESSION OF THE INFORMATION.

B-177763(1), APR 10, 1973

PRECIS-UNAVAILABLE

TO WACHTEL, WIENER & ROSS:

REFERENCE IS MADE TO YOUR PROTEST FILED IN THIS OFFICE ON JANUARY 9, 1973, AND SUBSEQUENT CORRESPONDENCE, ON BEHALF OF MOLECULAR ENERGY CORPORATION, LIVINGSTON, NEW JERSEY, AGAINST AWARD OF A CONTRACT PURSUANT TO INVITATION FOR BIDS (IFB) NO. N00017-73-B-1107 TO ANY FIRM OTHER THAN ITSELF.

THE SUBJECT IFB WAS ISSUED BY THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., ON SEPTEMBER 11, 1972, FOR A QUANTITY OF 305 MK 67 MOD 1 TORPEDO BATTERIES (INCLUDING 5 FIRST ARTICLE UNITS), F.O.B. ORIGIN, PURSUANT TO A REQUIREMENT OF THE NAVAL ORDNANCE SYSTEMS COMMAND. BIDS WERE OPENED ON NOVEMBER 14, 1972, AND A TOTAL OF THREE BIDS WERE RECEIVED AS FOLLOWS:

YARDNEY ELECTRIC COMPANY $1,094,035.00

MOLECULAR ENERGY CORPORATION 1,094,950.00

GOULD, INCORPORATED 1,862,075.85

UPON LEARNING ON JANUARY 8, 1973, THAT THE NAVY INTENDED TO AWARD A CONTRACT TO YARDNEY AS THE LOW RESPONSIVE BIDDER, YOU PROTESTED TO THIS OFFICE CONTENDING THAT YARDNEY WAS IMPROPERLY DETERMINED THE LOW BIDDER BECAUSE THE EVALUATION DID NOT INCLUDE THE ADDITION OF TRANSPORTATION COSTS. IT IS YOUR POSITION THAT THE NAVY WAS REQUIRED TO INCLUDE IN THE EVALUATION THE TRANSPORTATION COSTS OF THE BATTERIES TO THEIR ULTIMATE DESTINATIONS, AS WELL AS THE COSTS OF SHIPPING GOVERNMENT FURNISHED SILVER FOR INCLUSION IN THE BATTERIES TO THE RESPECTIVE BIDDERS' PLANTS, AND THAT WHEN SUCH COSTS ARE ADDED MOLECULAR IS THE LOW EVALUATED BIDDER. ALTHOUGH THE INVITATION INCLUDES NO SPECIFIC REFERENCE TO THE EVALUATION OF TRANSPORTATION COSTS, NO LISTING OF DESTINATION POINTS FOR DELIVERIES, OR A GROSS SHIPPING WEIGHT AND DIMENSIONS CLAUSE, YOU CONTEND THAT THE STATUTORY AND INVITATION REQUIREMENT FOR AWARD TO THE LOW BIDDER, "PRICE AND OTHER FACTORS CONSIDERED," AS IMPLEMENTED BY APPLICABLE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION, REQUIRES THE EVALUATION OF TRANSPORTATION COSTS. IN THIS CONNECTION, YOU POINT OUT THAT ASPR 19 301.1(A) AND (B), RESPECTIVELY, PROVIDE THAT IN THE EVALUATION OF F.O.B. ORIGIN BIDS THE CONTRACTING OFFICER "SHALL" CONSIDER BOTH THE TRANSPORTATION COSTS FOR THE ITEM BEING PROCURED AND ANY GOVERNMENT FURNISHED PROPERTY; AND THAT ASPR 2-407.5(I), "OTHER FACTORS TO BE CONSIDERED," PROVIDES:

*** IF, PURSUANT TO 19-301.1, BIDS ARE ON AN F.O.B. ORIGIN BASIS, TRANSPORTATION COSTS TO THE DESIGNATED DESTINATION POINTS SHALL BE CONSIDERED ***.

FURTHERMORE, YOU CONTEND THAT THE NAVY IS IN POSSESSION OF THE INFORMATION, INCLUDING TRANSPORTATION COSTS, NECESSARY TO A PROPER EVALUATION OF THE BIDS WITHOUT OBTAINING ADDITIONAL INFORMATION FROM THE BIDDERS. IN THIS REGARD, YOU POINT OUT THAT THE DESTINATION POINTS ARE KNOWN BECAUSE THE LARGE QUANTITY OF BATTERIES PURCHASED SINCE 1962 HAVE ALL BEEN SHIPPED TO SEVEN LOCATIONS; THAT THE QUANTITIES TO BE SHIPPED TO EACH OF THE SEVEN LOCATIONS ARE RELATIVELY CERTAIN; AND THAT THE WEIGHT OF THE BATTERIES IS EASILY ASCERTAINABLE AND WILL NOT VARY MATERIALLY BECAUSE OF THE PRECISE AND RIGID SPECIFICATIONS. MOREOVER, YOU CONTEND THAT BECAUSE MOLECULAR IS GEOGRAPHICALLY CLOSER TO ALL OF THE DESTINATION POINTS, ADDITION OF THE TRANSPORTATION COSTS TO ITS BID PRICE RESULTS IN IT BECOMING THE LOW BIDDER "NO MATTER WHICH OF THE CONTEMPLATED DESTINATION POINTS IS CHOSEN" AND REGARDLESS OF THE QUANTITIES SHIPPED TO THE DESTINATION POINTS. YOU ALSO CONTEND THAT WHEN THE COST OF TRANSPORTING THE SILVER IS CONSIDERED MOLECULAR'S BID IS EVEN MORE ADVANTAGEOUS.

FINALLY, YOU CONTEND THAT, CONTRARY TO ITS PRESENT POSITION, THE NAVY INITIALLY BELIEVED THE TRANSPORTATION COSTS WERE A REQUIRED EVALUATION FACTOR. IN THIS CONNECTION, YOU HAVE FURNISHED AFFIDAVITS FROM TWO MOLECULAR EMPLOYEES TO THE EFFECT THAT THE CONTRACTING OFFICER TOLD THEM ON SEVERAL OCCASIONS THAT HE WAS IN THE PROCESS OF EVALUATING TRANSPORTATION COSTS TO DETERMINE THE LOW BIDDER. THESE EMPLOYEES WERE REPORTEDLY TOLD THAT THE EVALUATION WAS BASED UPON THE ASSUMPTION THAT AN EQUAL NUMBER OF BATTERIES WOULD BE SHIPPED TO BOTH THE EAST AND WEST COASTS AND THAT THE WEIGHT WAS FIXED AT 835 POUNDS BY AVERAGING THE WEIGHT OF 17 BATTERIES IN STOCK.

IT IS THE CONTENTION OF THE NAVY THAT "IT WAS IMPRACTICABLE TO DETERMINE EITHER GENERAL OR TENTATIVE DELIVERY POINTS FOR THE MK 97 MOD 1 TORPEDO BATTERIES AT THE TIME THE REFERENCED SOLICITATION WAS ISSUED" AND, THEREFORE, TRANSPORTATION COSTS WERE NOT INCLUDED AS AN EVALUATION FACTOR IN ACCORDANCE WITH ASPR 19-208.4(B), WHICH STATES:

WHEN THE PURCHASING OFFICE AND THE REQUIRING ACTIVITY DETERMINE THAT IT IS IMPRACTICABLE TO ESTIMATE ANY TENTATIVE OR GENERAL DELIVERY POINTS FOR THE PURPOSE OF EVALUATING TRANSPORTATION COSTS, PROPOSALS SHALL BE SOLICITED F.O.B. ORIGIN ONLY *** AND EVALUATION WILL BE MADE WITHOUT REGARD FOR TRANSPORTATION COST. ***

THE NAVY POINTS OUT THAT WHILE HISTORICALLY THERE HAVE BEEN SEVEN DESTINATION POINTS TO WHICH THESE TORPEDO BATTERIES HAVE BEEN SHIPPED, THEIR ULTIMATE DESTINATIONS ARE TOO SPECULATIVE TO PROVIDE A BASIS FOR A REASONABLY ACCURATE EVALUATION OF TRANSPORTATION COSTS. IN THIS REGARD, THE NAVY NOTES THAT, AT THE TIME THE IFB WAS ISSUED, FLEET NEEDS WERE AS FOLLOWS:

UNITS

YORKTOWN, VIRGINIA 50

EARLE, NEW JERSEY 50

KEYPORT, WASHINGTON 150

CONCORD, CALIFORNIA 50

IT IS REPORTED, HOWEVER, THAT 2 DAYS AFTER MOLECULAR'S PROTEST WAS FILED WITH THIS OFFICE THE FLEET'S REQUIREMENTS HAD CHANGED AS FOLLOWS:

UNITS

YORKTOWN, VIRGINIA 50

CHARLESTON, SOUTH CAROLINA 65

EARLE, NEW JERSEY 50

KEYPORT, WASHINGTON 60

SAN DIEGO, CALIFORNIA 25

CONCORD, CALIFORNIA 50

IT IS, THEREFORE, THE NAVY POSITION THAT "*** FROM A COMPARATIVE ANALYSIS OF THESE FIGURES THAT THE COMMAND WAS NOT (AND IS NOT) IN A POSITION TO ESTIMATE WITH SUFFICIENT ACCURACY THE ULTIMATE DESTINATION POINTS OF THESE BATTERIES AS THEY WERE AND ARE CONTINUALLY SUBJECT TO SUBSTANTIAL CHANGE." THE NAVY ALSO NOTES THAT SIGNIFICANT AND VARYING NUMBERS OF BATTERIES HAVE BEEN SHIPPED TO THESE SEVEN DESTINATION POINTS UNDER PRIOR PROCUREMENTS. FURTHERMORE, THE NAVY POINTS OUT THAT AT LEAST FOR THE LAST THREE PROCUREMENTS, TRANSPORTATION COSTS WERE NOT INCLUDED IN THE EVALUATION BECAUSE DESTINATIONS WERE UNKNOWN AT THE TIME OF SOLICITATION AND AWARD.

THE NAVY ALSO CONTENDS THAT IT IS DIFFICULT TO ESTIMATE REALICTICALLY GENERAL DELIVERY POINTS BECAUSE OF AN 8- TO 22-MONTH DELIVERY PERIOD AND THE FOLLOWING VARIABLES:

(A) SUBMARINE FORCE LEVELS AS DETERMINED BY NAVAL OPERATIONS. THESE FORCE LEVELS ARE OFTEN DICTATED, AND THEREFORE CHANGED, BY NEW CONSTRUCTION SCHEDULES AND BUDGET CONSTRAINTS. SUCH DETERMINATIONS ARE OFTEN MADE ON SHORT NOTICE. (B) INTER-FLECT AND INTRA-COAST TRANSFERS OF SUBMARINES. SUCH TRANSFERS ARE OFTEN MADE ON SHORT NOTICE. (C) CONTINUAL CHANGES IN STOCKING LEVELS OF THE SUBJECT BATTERIES AS A CONSEQUENCE OF (I) BATTERY USAGE RATES, (II) NUMBER OF REQUIRED EXERCISE FIRINGS, (III) WEAPON SYSTEM ACCEPTANCE TESTS TORPEDO SHOTS, (IV) NUMBER OF TORPEDO PROOFING RUNS CONDUCTED, (V) BATTERY UNITS NEEDED FOR SURVEILLANCE TESTING, (VI) UNPREDICTED BATTERY PROBLEM AREAS REQUIRING CORRECTION AND (VII) FLUCTUATIONS IN TRAINING REQUIREMENTS OF THE SEVERAL FLEETS, NECESSITATING REVISIONS IN LOCAL USAGE RATES OF THE SUBJECT BATTERIES.

THE NAVY INSISTS THAT THE PROVISIONS OF THE INVITATION ARE CONSISTENT WITH THE DECISION NOT TO INCLUDE TRANSPORTATION COSTS IN THE EVALUATION. IT IS POINTED OUT THAT SECTION D, EVALUATION FACTORS FOR AWARD, PROVIDES THAT THE CONTRACT WILL BE AWARDED TO THE RESPONSIBLE BIDDER WHOSE BID WILL BE THE MOST ADVANTAGEOUS, PRICE AND OTHER FACTORS CONSIDERED, AND "'OTHER FACTORS' SHALL INCLUDE ALL OF THOSE EVALUATION FACTORS WHICH ARE DESCRIBED IN THIS SECTION D." ALTHOUGH TWO FACTORS ARE LISTED THEREAFTER, TRANSPORTATION COSTS ARE NOT INCLUDED. IT IS ALSO NOTED THAT THIS PROVISION CONFORMS TO ASPR 2-201(A), SECTION DI), WHICH REQUIRES THE INCLUSION OF A STATEMENT OF THE EXACT BASIS UPON WHICH BIDS WILL BE EVALUATED AND AWARD MADE, INCLUDING ANY GOVERNMENT COSTS TO BE ADDED AS FACTORS FOR EVALUATION. FURTHERMORE, THE NAVY POINTS OUT THAT NO DESTINATION POINTS WERE LISTED AND THAT SECTION H ADVISED THAT BIDS WERE TO BE ON AN F.O.B. ORIGIN BASIS, WITH ALLOCATION INSTRUCTIONS TO BE ISSUED AT LEAST 8 WEEKS BEFORE THE TIME OF DELIVERY. AS FURTHER EVIDENCE OF ITS POSITION, THE NAVY POINTS OUT THAT THE INVITATION DID NOT INCLUDE THE GUARANTEED SHIPPING WEIGHT AND DIMENSIONS CLAUSE REQUIRED BY ASPR 19-210.

THE CRUX OF YOUR POSITION IS THAT THE PROVISIONS OF THE INVITATION AND APPLICABLE REGULATIONS REQUIRE THE CONTRACTING OFFICER TO INCLUDE CONSIDERATION OF TRANSPORTATION COSTS IN DETERMINING THE LOW BIDDER. YOU CORRECTLY POINT OUT, THE INVITATION DOES NOT SPECIFICALLY STATE THAT TRANSPORTATION COSTS WOULD BE EXCLUDED FROM THE EVALUATION, AND CITED PROVISIONS OF ASPR SPECIFICALLY CALL FOR THE CONSIDERATION OF SUCH FACTOR. FURTHERMORE, YOU HAVE CITED DECISIONS OF THIS OFFICE WHICH STATE THAT, AS A GENERAL PROPOSITION, THE COST OF TRANSPORTATION FROM THE F.O.B. ORIGIN DELIVERY POINT TO DESTINATION IS A MATTER FOR CONSIDERATION BY THE GOVERNMENT IN EVALUATING THE BID MOST ADVANTAGEOUS TO IT, AND WHICH REJECT THE ARGUMENT THAT THE FAILURE TO SPECIFICALLY MENTION TRANSPORTATION COSTS AS AN EVALUATION FACTOR IN THE SOLICITATION PRECLUDE ITS CONSIDERATION IN THE EVALUATION. 10 COMP. GEN. 402 (1931); 37 COMP. GEN. 162 (1957); B- 155312, JANUARY 15, 1965; B-156207, MARCH 24, 1965; B-162881, JUNE 9, 1968.

ON THE OTHER HAND, THE NAVY CORRECTLY POINTS OUT THAT ASPR AND THE DECISIONS OF OUR OFFICE RECOGNIZE THAT TRANSPORTATION COSTS SHOULD BE DISREGARDED WHERE IT IS IMPRACTICABLE TO ESTIMATE ANY TENTATIVE OR GENERAL DELIVERY POINTS. ASPR 19-208.4(B); B-150656, MARCH 20, 1963, FROM WHICH THE FOLLOWING IS QUOTED:

THE RECORD CLEARLY INDICATES THAT THE DEPARTMENT OF THE NAVY WAS FULLY AWARE OF OUR DECISIONS ***. HOWEVER, IT IS REPORTED THAT IN THE INSTANT CASE THE BUREAU OF SHIPS, THE REQUIRING ACTIVITY, WAS AND STILL IS UNABLE TO ANTICIPATE EVEN THE GENERAL LOCATIONS WHERE THE MATERIAL WOULD BE USED BECAUSE OF THE PROBABILITY THAT THE UNITS MAY BE INSTALLED IN VESSELS AT ANY OF NUMEROUS SHIPYARDS. IT IS OBVIOUS THAT TRANSPORTATION COSTS CANNOT BE INCLUDED AS A BID EVALUATION FACTOR WHERE DESTINATIONS ARE UNKNOWN.

WE BELIEVE IT IS CLEAR FROM THE RECORD THAT AT THE TIME THIS INVITATION WAS ISSUED THE NAVY CONCLUDED THAT IT WAS IMPRACTICABLE TO DETERMINE TENTATIVE OR GENERAL DELIVERY POINTS AND THAT THE LOW BIDDER WOULD BE DETERMINED ON THE BASIS OF THE LOW F.O.B. ORIGIN PRICE WITHOUT REGARD TO TRANSPORTATION COSTS. IN THIS CONNECTION, THE NAVY HAS FURNISHED OUR OFFICE A SUPPLEMENTAL REPORT CONCERNING YOUR CONTENTION THAT THE CONTRACTING OFFICER ADVISED MOLECULAR AFTER BID OPENING THAT HE WAS EVALUATING TRANSPORTATION COSTS TO DETERMINE THE LOW BIDDER. NAVY PERSONNEL DENY THAT ANY SUCH STATEMENT WAS MADE. HOWEVER, IT IS REPORTED THAT AN EVALUATION OF TRANSPORTATION COSTS WAS MADE SOLELY TO DETERMINE WHETHER THE CONSIDERATION OF SUCH COSTS WOULD IN FACT CHANGE THE RELATIVE STANDING OF THE BIDDERS IN ORDER FOR THE NAVY TO DETERMINE WHETHER TO ADDRESS THE MERITS OF YOUR PROTEST. IN THE CIRCUMSTANCES, WE BELIEVE SUCH ACTION IS NOT OF ANY PARTICULAR SIGNIFICANCE.

WE HAVE REVIEWED THE CITED CASES. THE UNDERLYING PRINCIPLE IN THESE CASES IS THAT TRANSPORTATION COSTS SHOULD BE EVALUATED ON F.O.B. ORIGIN BIDS WHENEVER POSSIBLE. WE HAVE URGED CONTRACTING AGENCIES TO INDICATE DESTINATION POINTS IN SOLICITATIONS CALLING FOR ORIGIN BIDS SO THAT BIDDERS WOULD BE IN A BETTER POSITION TO PREPARE THEIR BID PRICES. EVEN WHERE SOLICITATIONS HAVE FAILED TO SPECIFICALLY PROVIDE THAT THE GOVERNMENT WOULD EVALUATE TRANSPORTATION COSTS TO DESTINATION POINTS WE HAVE APPROVED THE EVALUATION OF SUCH COSTS UNDER CERTAIN CIRCUMSTANCES. THUS, IN B-155312, SUPRA, WE FOUND IT WAS PROPER FOR THE AGENCY TO CONSIDER THE GOVERNMENT'S COST OF SHIPMENT IN THE BID EVALUATION ALTHOUGH THE SOLICITATION DID NOT SPECIFICALLY LIST TRANSPORTATION COSTS AS AN EVALUATION FACTOR, SINCE THE SOLICITATION DID CALL FOR ORIGIN POINT SHIPPING INFORMATION FOR THE OBVIOUS PURPOSE OF COMPUTING TRANSPORTATION COSTS. SEE ALSO B-156207, SUPRA.

ON THE OTHER HAND, WE HAVE RECOGNIZED THAT IT IS NOT FEASIBLE FOR A CONTRACTING AGENCY TO EVALUATE TRANSPORTATION COSTS WHERE THE DESTINATION POINTS ARE UNKNOWN. B-150656, SUPRA. FURTHER, WE HAVE HELD IT IS NOT PROPER TO EVALUATE TRANSPORTATION COSTS WHERE THE SOLICITATION STATES THAT SUCH COSTS WILL NOT BE EVALUATED. B-159188, SEPTEMBER 28, 1966. THIS IS IN ACCORDANCE WITH THE GENERAL RULE THAT BIDS MUST BE EVALUATED ON THE BASIS OF THE METHOD SPECIFIED IN THE SOLICITATION. B-173444, DECEMBER 21, 1971; B-172107(1), JULY 19, 1971.

IT IS THE NAVY'S POSITION THAT TRANSPORTATION COSTS CANNOT FEASIBLY BE EVALUATED BECAUSE ACTUAL OR EVEN TENTATIVE DESTINATION POINTS ARE NOT KNOWN, AND THAT THE SOLICITATION PRECLUDED SUCH AN EVALUATION BECAUSE TRANSPORTATION COSTS WERE NOT LISTED AMONG THE "OTHER FACTORS" TO BE CONSIDERED UNDER SECTION D OF THE SOLICITATION. IN THIS REGARD, YARDNEY INSISTS THAT IT BID ON THE BASIS THAT TRANSPORTATION COSTS WOULD NOT BE EVALUATED. THERE IS MERIT TO THE AGENCY'S POSITION. WE ARE NOT UNMINDFUL OF YOUR ARGUMENT THAT MOLECULAR WOULD BECOME LOW BIDDER BECAUSE OF ITS GEOGRAPHICAL LOCATION IF TRANSPORTATION COSTS WERE CONSIDERED. WE NOTE, HOWEVER, THAT NEWPORT, RHODE ISLAND, IS ONE OF THE SEVEN POSSIBLE DESTINATION POINTS. IF ALL, OR MOST, OF THE BATTERIES WERE SHIPPED TO NEWPORT, IT IS NOT CLEAR TO US THAT MOLECULAR (LOCATED IN NEW JERSEY) WOULD BE LOWER THAN YARDNEY (LOCATED IN CONNECTICUT) EVEN CONSIDERING THE COSTS OF TRANSPORTATION.

IN ANY EVENT, AS NAVY POINTS OUT, THE REGULATIONS DO NOT CALL FOR THE CONTRACTING AGENCY TO EVALUATE TRANSPORTATION COSTS IN THESE CIRCUMSTANCES AND THE INVITATION DID NOT PROVIDE FOR THE EVALUATION OF SUCH COSTS. THEREFORE, WE CANNOT CONCLUDE THAT THE NAVY'S DETERMINATION TO EVALUATE THE BIDS WITHOUT CONSIDERING TRANSPORTATION COSTS IS ARBITRARY OR OTHERWISE IMPROPER. IN VIEW OF THIS CONCLUSION, WE NEED NOT CONSIDER WHETHER THE COST OF TRANSPORTING THE GOVERNMENT FURNISHED SILVER SHOULD BE EVALUATED SINCE, AS YOU RECOGNIZE, THE RELATIVE STANDING OF BIDDERS WILL NOT BE AFFECTED IN EITHER CASE.

ACCORDINGLY, THE PROTEST IS DENIED. HOWEVER, IN ORDER TO AVOID CONFUSION ON THE PART OF BIDDERS IN THE FUTURE, WE ARE RECOMMENDING TO THE SECRETARY OF THE NAVY THAT SOLICITATIONS SHOULD STATE IN APPROPRIATE CASES THAT TRANSPORTATION COSTS WILL NOT BE CONSIDERED IN THE EVALUATION.