B-179231, JAN 22, 1974

B-179231: Jan 22, 1974

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PROTEST AGAINST AWARD OF EITHER SET-ASIDE OR NON-SET-ASIDE PORTION TO LOW BIDDER FOR FAILURE TO PROVIDE INFORMATION REQUIRED BY DPSC CLAUSE 56 CONCERNING ELIGIBILITY FOR SET-ASIDE NEGOTIATIONS FOR PACKETS OF TOILET PAPER DENIED BECAUSE CLAUSE 56 RELATES ONLY TO SET-ASIDE AND PROTEST IS ACADEMIC IN THAT REGARD SINCE NO AWARD WAS MADE FOR SET ASIDE. PROTEST THAT LIQUIDATED DAMAGES SHOULD HAVE BEEN SPECIFIED IN SOLICITATION RATHER THAN CLAUSE IMPOSING LIABILITY ON CONTRACTOR FOR DELAY IS DENIED BECAUSE CONDITION IN ASPR 1-310(A) THAT DAMAGES MAY NOT BE SUSCEPTIBLE OF PROOF OR ASCERTAINMENT HAS NOT BEEN MET. IT IS RECOMMENDED THAT THE CONTRACT BE MONITORED IN ACCORDANCE WITH ASPR 1-311 PERTAINING TO "BUYING IN.".

B-179231, JAN 22, 1974

PROTEST AGAINST AWARD OF EITHER SET-ASIDE OR NON-SET-ASIDE PORTION TO LOW BIDDER FOR FAILURE TO PROVIDE INFORMATION REQUIRED BY DPSC CLAUSE 56 CONCERNING ELIGIBILITY FOR SET-ASIDE NEGOTIATIONS FOR PACKETS OF TOILET PAPER DENIED BECAUSE CLAUSE 56 RELATES ONLY TO SET-ASIDE AND PROTEST IS ACADEMIC IN THAT REGARD SINCE NO AWARD WAS MADE FOR SET ASIDE. PROTEST THAT LIQUIDATED DAMAGES SHOULD HAVE BEEN SPECIFIED IN SOLICITATION RATHER THAN CLAUSE IMPOSING LIABILITY ON CONTRACTOR FOR DELAY IS DENIED BECAUSE CONDITION IN ASPR 1-310(A) THAT DAMAGES MAY NOT BE SUSCEPTIBLE OF PROOF OR ASCERTAINMENT HAS NOT BEEN MET. PROTEST THAT FAILURE TO PROVIDE INFORMATION CONCERNING REPRESENTATION THAT BIDDER DID NOT PAY OR AGREE TO PAY CONTINGENT FEE DENIED SINCE REPRESENTATION DOES NOT MODIFY COVENANT AGAINST CONTINGENT FEES AND MAY BE PROVIDED AFTER BID OPENING. WHILE PROTEST AGAINST ALLEGED "BUY-IN" DOES NOT AFFORD A BASIS TO QUESTION LEGALITY OF AWARD, IN VIEW OF LOW BIDDER'S REFUSAL TO ACCEPT SET- ASIDE PORTION AT NON-SET-ASIDE PRICE AND HIGHER PRICE BID ON RESOLICITATION, IT IS RECOMMENDED THAT THE CONTRACT BE MONITORED IN ACCORDANCE WITH ASPR 1-311 PERTAINING TO "BUYING IN."

TO WEXLER PAPER PRODUCTS:

INVITATION FOR BIDS (IFB) DSA 13H-73-B-0630 CONTAINED A 50 PERCENT LABOR SURPLUS SET-ASIDE OF THE APPROXIMATELY 31.25 MILLION PACKAGES OF PAPER TOILET TISSUE REQUIRED. THE TISSUE WAS REQUIRED AS GOVERNMENT FURNISHED MATERIAL AS A COMPONENT OF A MEAL, COMBAT, RATION KIT BEING ASSEMBLED BY ANOTHER CONTRACTOR. CONSEQUENTLY, CLAUSE H-4, NOTING THE IMPORTANCE OF TIMELY DELIVERIES, WAS MODIFIED BY AMENDMENT 0004 TO PROVIDE:

"THE CONTRACTOR AGREES TO REIMBURSE THE GOVERNMENT FOR ANY CLAIM OF THE ASSEMBLY CONTRACTOR DUE TO FAILURE OF THE GOVERNMENT TO COMPLY WITH ITS OBLIGATION TO FURNISH THE COMPONENTS HEREIN CALLED FOR IN ACCORDANCE WITH THE DELIVERY SCHEDULE."

STRAUBEL PAPER COMPANY (STRAUBEL) AND WEXLER PAPER PRODUCTS (WEXLER) SUBMITTED THE ONLY BIDS WHICH WERE OPENED ON JUNE 29, 1973. FREE-ON BOARD DESTINATION PRICES FOR TWO DIFFERENT LOCATIONS WERE REQUIRED FOR NON-SET- ASIDE ITEM 1, 12,064,275 PACKAGES, AND NON-SET-ASIDE ITEM 3, 3,560,909 PACKAGES. STRAUBEL'S LOW BID FOR ITEM 1 WAS $0.00434 PER UNIT AND FOR ITEM 3 WAS $0.004745 PER UNIT. WEXLER'S UNIT PRICES FOR ITEM 1 VARIED BETWEEN $0.00555 AND $0.00580. FOR ITEM 3 WEXLER BID $0.00642 AND $0.00680 FOR THE VARIOUS MONTHLY QUANTITIES LISTED IN THE SCHEDULE.

BECAUSE THE GOVERNMENT WAS SUBJECT TO LIABILITY FOR DELIVERIES OF GOVERNMENT-FURNISHED MATERIAL UNDER THE ASSEMBLY CONTRACT AFTER OCTOBER 1, 1973, AWARD OF THE NON-SET-ASIDE PORTION TO STRAUBEL WAS AUTHORIZED ON AUGUST 15, 1973.

REGARDING THE SET-ASIDE PORTION, BOTH STRAUBEL AND WEXLER SUBMITTED CERTIFICATES OF ELIGIBILITY CERTIFYING THEY WERE ENTITLED TO FIRST PREFERENCE STATUS TO PARTICIPATE IN THE LABOR SURPLUS AREA SET-ASIDE PORTION OF THE PROCUREMENT. HOWEVER, NEITHER BIDDER PROVIDED THE INFORMATION REQUESTED BY DPSC CLAUSE 56 CONCERNING ELIGIBILITY FOR LABOR SURPLUS AREA SET-ASIDE NEGOTIATIONS. THEREFORE, THE CONTRACTING OFFICER DETERMINED THAT NEITHER FIRM WAS ENTITLED TO A NEGOTIATION PREFERENCE AS A LABOR SURPLUS AREA CONCERN.

SINCE BOTH BIDDERS WERE SMALL BUSINESS CONCERNS, THE CONTRACTING OFFICER DETERMINED THAT THEY WERE ENTITLED TO NEGOTIATION STATUS UNDER THE FOURTH PREFERENCE GROUP RESERVED IN THE SOLICITATION FOR SMALL BUSINESS CONCERNS WHICH ARE NOT LABOR SURPLUS AREA CONCERNS. STRAUBEL AND WEXLER WERE CONTACTED IN TURN FOR THE SET-ASIDE PORTION AND EACH REFUSED TO ACCEPT IT. THEREFORE, THE SET-ASIDE PORTION WAS DISSOLVED. THE REQUIREMENT WAS RESOLICITED UNDER REQUEST FOR PROPOSALS (RFP) 13H 74-R-0311, TELEGRAPHICALLY ISSUED ON AUGUST 24, 1973, TO FIVE FIRMS. OFFERS WERE REQUIRED BY SEPTEMBER 5, 1973. THE QUANTITIES REMAINED THE SAME BUT THE DELIVERY SCHEDULE WAS EXTENDED ONE MONTH. ALSO, CLAUSE H 4 OF AMENDMENT 0004 WAS DELETED AND THE FOLLOWING SUBSTITUTED:

"IF THE CONTRACTOR FAILS TO DELIVER THE SUPPLIES OR PERFORM THE SERVICES WITHIN THE TIME SPECIFIED IN THE CONTRACT, OR ANY EXTENSION THEREOF, THE GOVERNMENT MAY INCUR LIABILITY TO THE ASSEMBLY CONTRACTORS, BY REASON OF SUCH DELINQUENCY, WHICH AMOUNTS THE CONTRACTOR AGREES TO REIMBURSE THE GOVERNMENT. THE CONTRACTOR SHALL NOT BE CHARGED FOR ANY AMOUNTS WHEN THE DELAY ARISES OUT OF CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, AS DEFINED IN PARAGRAPH (C) OF THE DEFAULT CLAUSE, AND IN SUCH EVENT, SUBJECT TO THE 'DISPUTES' CLAUSE, THE CONTRACTING OFFICER SHALL ASCERTAIN THE FACTS AND EXTENT OF THE DELAY AND SHALL EXTEND THE TIME FOR PERFORMANCE OF THE CONTRACT WHEN IN HIS JUDGMENT THE FINDINGS OF FACT JUSTIFY AN EXTENSION."

THE RFP WAS AMENDED BY TELEGRAM OF SEPTEMBER 5, 1973, TO EXTEND THE CLOSING DATE FOR RECEIPT OF PROPOSALS TO SEPTEMBER 7, 1973. ALSO, THE DELIVERY SCHEDULE, PREDICATED UPON AWARD BY SEPTEMBER 17, 1973, WAS EXTENDED ANOTHER HALF MONTH. ORAL PROPOSALS RECEIVED TELEPHONICALLY ON SEPTEMBER 7, 1973, FROM STRAUBEL AND WEXLER, SUBSEQUENTLY WERE CONFIRMED BY LETTER.

FOR THE TWO F.O.B. DESTINATION LOCATIONS STRAUBEL OFFERED $0.00538 AND $0.00579 PER PACKET. FOR THE FIRST LOCATION WEXLER OFFERED PRICES BETWEEN $0.00591 AND $0.00608, AND FOR THE SECOND $0.00707. WEXLER ALSO SUBMITTED AN ALTERNATE PROPOSAL OF $0.0035 BASED UPON FURNISHING A DIFFERENT TYPE OF TISSUE WHICH DID NOT MEET THE ABSORPTION REQUIREMENTS OF THE SPECIFICATION. AFTER IT WAS DETERMINED THAT WEXLER'S ALTERNATE SAMPLE DID NOT CONFORM TO THE TECHNICAL REQUIREMENTS AND WOULD NOT BE AN ACCEPTABLE SUBSTITUTE, AWARD FOR THE RFP WAS MADE TO STRAUBEL ON SEPTEMBER 17, 1973, FOR $85,523.46.

WEXLER PROTESTS ANY AWARD TO STRAUBEL UNDER THE ORIGINAL SOLICITATION BECAUSE IT FAILED TO PROVIDE THE INFORMATION CALLED FOR BY DPSC CLAUSE 56 CONCERNING ELIGIBILITY FOR LABOR SURPLUS SET-ASIDE NEGOTIATIONS. HOWEVER, DPSC CLAUSE 56 RELATES ONLY TO THE SET-ASIDE PORTION OF THE IFB AND IS NOT AN ELIGIBILITY REQUIREMENT FOR PARTICIPATION ON THE NON SET-ASIDE PORTION. THEREFORE, THE FAILURE TO PROVIDE THE INFORMATION HAS NO EFFECT ON THE RESPONSIVENESS OF THE BID ON THE NON-SET-ASIDE PORTION. TO THE EXTENT THAT THE PROTEST RELATES TO THE SET-ASIDE PORTION, IT IS ACADEMIC, SINCE NO AWARD WAS MADE TO STRAUBEL UNDER THE SET-ASIDE PORTION OF THE IFB.

THE MATTER OF DAMAGES IS ALSO PROTESTED. IT IS WEXLER'S POSITION THAT SINCE THE EXTENT AND AMOUNT OF DAMAGES FOR DELAY IS UNKNOWN A LIQUIDATED DAMAGES CLAUSE SHOULD HAVE BEEN USED. DPSC NOTES THAT CLAUSE H-4 OF AMENDMENT 0004 REQUIRED THE CONTRACTOR TO REIMBURSE THE GOVERNMENT FOR ALL CLAIMS OF THE ASSEMBLY CONTRACTOR DUE TO DELAY IN FURNISHING COMPONENTS. HOWEVER, IT WAS RECOGNIZED THAT THE EXTENT OF LIABILITY IMPOSED ON THE CONTRACTOR WAS BEYOND THAT ENVISIONED IN THE DEFAULT CLAUSE. CONSEQUENTLY, THE CLAUSE WAS AMENDED IN THE RESOLICITATION TO REFLECT THE GOVERNMENT'S INTENTION TO HOLD CONTRACTORS LIABLE ONLY FOR THOSE NONEXCUSABLE DELAYS AS DEFINED IN THE DEFAULT CLAUSE.

CONCERNING WEXLER'S CONTENTION THAT LIQUIDATED DAMAGES SHOULD HAVE BEEN SPECIFIED, ASPR 1-310(A) STATES:

"*** LIQUIDATED DAMAGES PROVISIONS MAY BE USED WHEN BOTH (I) THE TIME OF DELIVERY OR PERFORMANCE IS SUCH AN IMPORTANT FACTOR THAT THE GOVERNMENT MAY REASONABLY EXPECT TO SUFFER DAMAGES IF THE DELIVERY OR PERFORMANCE IS DELINQUENT, AND (II) THE EXTENT OR AMOUNT OF SUCH DAMAGES WOULD BE DIFFICULT OR IMPOSSIBLE OF ASCERTAINMENT OR PROOF ***."

THERE IS NO QUESTION THAT THE IMPORTANCE OF TIMELY DELIVERY, SPECIFIED IN THE SOLICITATIONS AT CLAUSE H-4, SATISFIES THE FIRST REQUIREMENT. HOWEVER, WHILE THE EXACT AMOUNT OF THE DAMAGES AS A RESULT OF DELAY MAY NOT HAVE BEEN KNOWN IN ADVANCE, THE AMOUNT IS SUSCEPTIBLE OF PROOF ON THE BASIS OF PRODUCTION RECORDS, LABOR COSTS, OVERHEAD, LENGTH OF DELAY, ETC. THEREFORE, SINCE BOTH CRITERIA IN ASPR 1-310(A) NEED BE PRESENT, IT IS OUR VIEW THAT DPSC ACTED PROPERLY BY NOT INCLUDING A LIQUIDATED DAMAGES CLAUSE IN THE SOLICITATIONS.

IT IS NEXT CONTENDED THAT STRAUBEL'S BID ON THE NON-SET-ASIDE PORTION WAS A BUY-IN. THIS CONTENTION IS SUPPORTED BY THE FACT THAT STRAUBEL REFUSED TO ACCEPT THE SET-ASIDE PORTION AT ITS NON-SET-ASIDE PRICE.

ASPR 1-311 DOES NOT SPECIFICALLY PROHIBIT "BUY-IN" BIDS. RATHER, IT PROVIDES CERTAIN STEPS TO BE TAKEN TO AVOID ANY RECOUPMENT OF COSTS THROUGH CHANGE ORDERS OR FOLLOW-ON PROCUREMENTS. IN ANY EVENT, AN ALLEGED "BUY-IN" DOES NOT AFFORD A BASIS TO QUESTION THE LEGALITY OF AN AWARD. SEE 50 COMP. GEN. 50, 54 (1970), AND CASES CITED THEREIN. HOWEVER, IN VIEW OF THE BIDDING PATTERN, WE RECOMMEND THAT THE CONTRACTING OFFICER CLOSELY MONITOR THE CONTRACT TO ASSURE THAT THE PROVISIONS OF ASPR 1-311 ARE FOLLOWED.

IT IS NOTED THAT THE BLOCK IN ITEM 3 ON PAGE 2 OF THE IFB CONCERNING STRAUBEL'S REPRESENTATION AS TO WHETHER IT HAD PAID OR AGREED TO PAY A CONTINGENT FEE WAS NOT CHECKED. HOWEVER, THE BID ALSO CONTAINED A SECOND PAGE 2 WHICH WAS HANDWRITTEN AND CHECKED THE REPRESENTATION THAT STRAUBEL HAD NOT PAID OR AGREED TO PAY A CONTINGENT FEE. THE REST OF THE BID, AS WELL AS THE UNCHECKED PAGE 2, WAS TYPEWRITTEN.

WE HAVE BEEN ADVISED THAT DPSC HAS NO RECORD OF THE CIRCUMSTANCES CONCERNING THE REASONS FOR THE TWO PAGE 2'S. HOWEVER, DPSC STATED THAT ITS STANDARD PROCEDURE WHEN AN OMISSION OF THIS NATURE IS NOTICED IS TO CONTACT THE BIDDER FOR CLARIFICATION. IT IS DPSC'S POSITION THAT THE INFORMATION DID NOT PERTAIN TO THE RESPONSIVENESS OF THE BID. THEREFORE, THE INSERTION OF THE COMPLETED PAGE 2 AFTER BID OPENING IS NOT OBJECTIONABLE.

INITIALLY WE NOTE THAT THE PROVISION IN QUESTION IS IN THE NATURE OF A REPRESENTATION. HOWEVER, ASPR 1-503 PROVIDES THAT EVERY CONTRACT SHALL CONTAIN THE CLAUSE ENTITLED "COVENANT AGAINST CONTINGENT FEES" AS SET FORTH IN ASPR 7-103.20. ASPR 7-103.20 PROVIDES:

"COVENANT AGAINST CONTINGENT FEES (1958 JAN)

"THE CONTRACTOR WARRANTS THAT NO PERSON OR SELLING AGENCY HAS BEEN EMPLOYED OR RETAINED TO SOLICIT OR SECURE THIS CONTRACT UPON AN AGREEMENT OR UNDERSTANDING FOR A COMMISSION, PERCENTAGE, BROKERAGE, OR CONTINGENT FEE, EXCEPTING BONA FIDE EMPLOYEES OR BONA FIDE ESTABLISHED COMMERCIAL OR SELLING AGENCIES MAINTAINED BY THE CONTRACTOR FOR THE PURPOSE OF SECURING BUSINESS. FOR BREACH OR VIOLATION OF THIS WARRANTY THE GOVERNMENT SHALL HAVE THE RIGHT TO ANNUL THIS CONTRACT WITHOUT LIABILITY OR IN ITS DISCRETION, TO DEDUCT FROM THE CONTRACT PRICE OR CONSIDERATION, OR OTHERWISE RECOVER, THE FULL AMOUNT OF SUCH COMMISSION, PERCENTAGE, BROKERAGE OR CONTINGENT FEE."

THIS PROVISION WAS INCLUDED IN STANDARD FORM 32 INCORPORATED BY REFERENCE AT PAGE 18 OF THE IFB.

THE COVENANT CONTAINS THE PENALITIES ATTENDANT TO ITS BREACH. THE INFORMATION REPRESENTED IN THE QUESTIONED PROVISION DOES NOT MODIFY THE CONTRACTOR'S WARRANTY UNDER ASPR 7-103.20, BUT MERELY PROVIDES A REFERENCE VEHICLE TO THE GOVERNMENT FOR ACTION TO BE TAKEN UNDER THE COVENANT. THIS SENSE, THE INFORMATION DOES NOT AFFECT THE BIDDER'S OFFER TO COMPLY FULLY WITH THE TERMS OF THE IFB AND MAY BE PROVIDED AFTER BID OPENINGS.

THEREFORE, THE PROTEST IS DENIED.