B-179045, MAR 5, 1974

B-179045: Mar 5, 1974

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CONTINUED USAGE OF EQUIPMENT UNDER ORIGINAL CONTRACT AFTER EXPIRATION DATE IS NOT RECOMMENDED. SINCE ALTHOUGH THERE WAS OPTION IN CONTRACT TO CONTINUE BEYOND ORIGINAL PERFORMANCE PERIOD. THERE WAS NO OBLIGATION TO DO SO AND DETERMINATION THAT EXERCISE OF OPTION IS CONTRARY TO GOVERNMENT'S INTEREST IS NOT SUBJECT TO LEGAL OBJECTION. 2. PROTESTER WHO IS DISSATISFIED WITH GAO DECISION MAY SUBMIT REQUEST FOR RECONSIDERATION. THERE IS NO LEGAL REQUIREMENT THAT AGGRIEVED PARTY FILE PROTEST WITH GAO BEFORE SEEKING JUDICIAL RELIEF. THE CONTRACT PRICE SUBSEQUENTLY WAS INCREASED BY AMENDMENT TO $219. ARTICLE II OF THE CONTRACT SCHEDULE ESTABLISHES MINIMUM AND MAXIMUM IMPLEMENTATIONS AND PROVIDES THAT PRICES ARE BINDING FOR 5 YEARS.

B-179045, MAR 5, 1974

1. CONTRACTING AGENCY HAVING REEVALUATED NEEDS FOR ADP TERMINAL NETWORK AND DECIDED LESS COSTLY REPLACEMENT EQUIPMENT AVAILABLE FOR REVISED NEEDS, CONTINUED USAGE OF EQUIPMENT UNDER ORIGINAL CONTRACT AFTER EXPIRATION DATE IS NOT RECOMMENDED, SINCE ALTHOUGH THERE WAS OPTION IN CONTRACT TO CONTINUE BEYOND ORIGINAL PERFORMANCE PERIOD, THERE WAS NO OBLIGATION TO DO SO AND DETERMINATION THAT EXERCISE OF OPTION IS CONTRARY TO GOVERNMENT'S INTEREST IS NOT SUBJECT TO LEGAL OBJECTION. 2. PROTESTER WHO IS DISSATISFIED WITH GAO DECISION MAY SUBMIT REQUEST FOR RECONSIDERATION; HOWEVER, THERE IS NO LEGAL REQUIREMENT THAT AGGRIEVED PARTY FILE PROTEST WITH GAO BEFORE SEEKING JUDICIAL RELIEF.

TO THE NATIONAL CASH REGISTER COMPANY:

ON JUNE 27, 1972, THE DEPARTMENT OF LABOR (DOL) AWARDED CONTRACT NO. L-72 -159 TO THE NATIONAL CASH REGISTER COMPANY (NCR) IN THE TOTAL AMOUNT OF $200,000 FOR THE RENTAL AND MAINTENANCE OF DATA PROCESSING EQUIPMENT (ADP) FOR A TERMINAL NETWORK DURING THE PERIOD FROM JULY 1, 1972, TO JUNE 30, 1973. THE CONTRACT PRICE SUBSEQUENTLY WAS INCREASED BY AMENDMENT TO $219,500.

ARTICLE II OF THE CONTRACT SCHEDULE ESTABLISHES MINIMUM AND MAXIMUM IMPLEMENTATIONS AND PROVIDES THAT PRICES ARE BINDING FOR 5 YEARS. ARTICLE III STATES, "THE PERIOD OF PERFORMANCE UNDER THIS CONTRACT WILL EXTEND FROM 1 JULY 1972 THROUGH 30 JUNE 1973." ARTICLE IV PROVIDES FOR RENEWAL OF THE CONTRACT ON AN ANNUAL BASIS IN INCREMENTS OF 1 YEAR AT THE OPTION OF THE GOVERNMENT. THE ARTICLE PROVIDES FURTHER THAN THE TOTAL DURATION OF THE CONTRACT, INCLUDING THE EXERCISE OF ANY OPTIONS, SHALL NOT EXCEED 5 YEARS. PROVISION IS MADE IN THE ARTICLE FOR NOTICE TO THE CONTRACTOR 60 DAYS IN ADVANCE OF JULY 1 OF EACH YEAR IN WHICH THERE IS ANY INTENTION TO RENEW THE CONTRACT. ARTICLE VI PROVIDES THAT THE GOVERNMENT MAY BY WRITTEN NOTICE DISCONTINUE USE AND RENTAL UNDER THE CONTRACT 30 DAYS AFTER RECEIPT BY THE CONTRACTOR OF THE NOTICE OF DISCONTINUANCE. THE ARTICLE PROVIDES FURTHER THAT PAYMENT AND MAINTENANCE CHARGES THROUGH THE END OF THE 30-DAY NOTICE PERIOD SHALL FULFILL THE GOVERNMENT'S OBLIGATION TO THE CONTRACTOR.

DURING THE INITIAL YEAR OF THE CONTRACT, DOL REEVALUATED THE PLAN FOR IMPLEMENTING THE TERMINAL NETWORK AND DECIDED TO MODIFY THE PLAN. DOL NOTIFIED NCR OF THE DECISION BY LETTER OF MARCH 28, 1973, AND THE CONTRACT ENDED UPON EXPIRATION OF THE CONTRACT PERIOD ON JUNE 30, 1973.

NCR PROTESTED THE FAILURE OF DOL TO EXERCISE THE OPTION PROVIDED IN THE CONTRACT. AN ADMINISTRATIVE REPORT ON THE PROTEST WAS OBTAINED BY OUR OFFICE AND NCR WAS PROVIDED AN OPPORTUNITY TO COMMENT ON THE REPORT. IN A LETTER OF JANUARY 18, 1974, NCR CRYSTALLIZED THE ISSUE IN THE CASE AS FOLLOWS:

"WILL DOL BE PERMITTED TO INSTALL OTHER THAN NCR EDP EQUIPMENT AT THE TEN REGIONAL SITES? THESE SITES WERE BUILT TO NCR SPECIFICATIONS AND FROM NCR SPECIFICATIONS, ON THE BASIS OF A COMPETITIVE AWARD."

DOL HAS AFFIRMED THAT THE REGIONAL TERMINAL FACILITIES WERE DESIGNED AND CONSTRUCTED TO ACCOMMODATE NCR EQUIPMENT, BUT HAS INDICATED THAT, SINCE THE EQUIPMENT THAT REPLACES THE NCR EQUIPMENT IS SUBSTANTIALLY LESS COSTLY THAN THE NCR EQUIPMENT, IT WILL OFFSET THE INVESTMENT MADE IN THE FACILITIES.

AS INDICATED ABOVE, THE CONTRACT WITH NCR WAS A CONTRACT FOR 1 YEAR WITH AN OPTION ON THE PART OF DOL TO RENEW UP TO 5 YEARS. FURTHER, UNDER THE CONTRACT, THE RIGHT WAS RESERVED TO DOL TO TERMINATE THE CONTRACT AT ANY TIME UPON 30 DAYS NOTICE AND PAYMENT THROUGH THE END OF THE NOTICE PERIOD WOULD DISCHARGE DOL FROM ANY FURTHER OBLIGATION. THEREFORE, THERE WAS NO OBLIGATION FOR DOL TO CONTINUE THE CONTRACT FOR 5 YEARS. MOREOVER, WITH REGARD TO THE EXERCISE OF OPTIONS, OUR OFFICE HELD IN 36 COMP. GEN. 62, 63 -64, AS FOLLOWS:

"WITH RESPECT TO YOUR FIRST CONTENTION CONCERNING THE FAILURE OF THE CONTRACTING AGENCY TO EXERCISE ITS OPTIONS UNDER THE EXISTING CONTRACTS WITH YOUR COMPANY, IT WOULD APPEAR SUFFICIENT MERELY TO POINT OUT THAT SINCE SUCH OPTIONS WERE PURELY FOR THE INTEREST AND BENEFIT OF THE GOVERNMENT, ANY DETERMINATION THAT THE EXERCISE OF SUCH OPTION WOULD BE CONTRARY TO THE GOVERNMENT'S INTERESTS MANIFESTLY MAY NOT BE SUBJECT TO LEGAL OBJECTION - EITHER BY THIS OFFICE OR THE COURTS. IN THIS CONNECTION, ATTENTION IS INVITED TO THE CASE OF WESTERN UNION TELEGRAPH COMPANY V. BROWN, EXECUTOR OF LANGE, ET AL., 253 U.S. 101, WHEREIN THE SUPREME COURT OF THE UNITED STATES, IN TREATING OF THIS SUBJECT, EXPLAINED AS FOLLOWS:

"'AN OPTION IS A PRIVILEGE GIVEN BY THE OWNER OF PROPERTY TO ANOTHER TO BUY THE PROPERTY AT HIS ELECTION. IT SECURES THE PRIVILEGES TO BUY AND IS NOT OF ITSELF A PURCHASE. THE OWNER DOES NOT SELL HIS PROPERTY; HE GIVES TO ANOTHER THE RIGHT TO BUY AT HIS ELECTION.'"

IN VIEW OF THE FOREGOING, THERE IS NO OBJECTION TO THE REFUSAL OF DOL TO EXERCISE THE CONTRACT OPTION. THE FACT THAT THERE WAS AN OPTION IN THE CONTRACT FOR NCR EQUIPMENT AFFORDS NO BASIS FOR CONCLUDING THAT DOL MAY NOT USE OTHER THAN NCR EQUIPMENT UPON EXPIRATION OF THE INITIAL PERIOD OF CONTRACT PERFORMANCE.

ACCORDINGLY, THE NCR PROTEST IS DENIED. IN SUCH EVENT, NCR REQUESTS A STATEMENT THAT IT HAS EXHAUSTED ALL AVAILABLE ADMINISTRATIVE REMEDIES. ASSUME THE STATEMENT IS REQUESTED IN CONTEMPLATION OF POSSIBLE COURT ACTION. AS WE UNDERSTAND IT, EXHAUSTION OF ADMINISTRATIVE REMEDIES IS NOT A PREREQUISITE TO JUDICIAL CONSIDERATION OF BID PROTESTS.