B-179926, FEB 19, 1974

B-179926: Feb 19, 1974

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REJECTION OF BID AS BEING UNREASONABLE IN PRICE WAS NOT IMPROPER IN VIEW OF PROVISIONS OF ASPR 2-404.1(B)(VI). CONSIDERING THAT ORIGINAL BID PRICE WAS 13 PERCENT OVER LOW NONRESPONSIVE BID. OFFER IN CONFIRMING BID TO REDUCE PRICE QUOTED IN TELEGRAPHIC BID BY CHANGING DELIVERY TERMS WHICH WAS RECEIVED BY CONTRACTING OFFICE AFTER BID OPENING IS NOT FOR CONSIDERATION SINCE REJECTED TELEGRAPHIC BID WAS DETERMINED TO BE UNREASONABLY HIGH AND CANNOT BE CONSIDERED TO BE BID OF "OTHERWISE SUCCESSFUL" OFFEROR WITHIN MEANING OF PARAGRAPH 8(A) OF SOLICITATION INSTRUCTIONS AND ASPR 2-305. DSA700-74-B-0458 WAS ISSUED BY THE DEFENSE CONSTRUCTION SUPPLY CENTER. BIDS WERE REQUESTED ON AN F.O.B. SIX BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 11.

B-179926, FEB 19, 1974

1. REJECTION OF BID AS BEING UNREASONABLE IN PRICE WAS NOT IMPROPER IN VIEW OF PROVISIONS OF ASPR 2-404.1(B)(VI), AND IN INVITATION'S INSTRUCTIONS AND CONDITIONS, AND CONSIDERING THAT ORIGINAL BID PRICE WAS 13 PERCENT OVER LOW NONRESPONSIVE BID. SEE CASES CITED. 2. OFFER IN CONFIRMING BID TO REDUCE PRICE QUOTED IN TELEGRAPHIC BID BY CHANGING DELIVERY TERMS WHICH WAS RECEIVED BY CONTRACTING OFFICE AFTER BID OPENING IS NOT FOR CONSIDERATION SINCE REJECTED TELEGRAPHIC BID WAS DETERMINED TO BE UNREASONABLY HIGH AND CANNOT BE CONSIDERED TO BE BID OF "OTHERWISE SUCCESSFUL" OFFEROR WITHIN MEANING OF PARAGRAPH 8(A) OF SOLICITATION INSTRUCTIONS AND ASPR 2-305.

TO COLONIAL FORD TRUCK SALES, INC.:

ON AUGUST 17, 1973, INVITATION FOR BIDS (IFB) NO. DSA700-74-B-0458 WAS ISSUED BY THE DEFENSE CONSTRUCTION SUPPLY CENTER, DEFENSE SUPPLY AGENCY, COLUMBUS, OHIO. THE IFB REQUESTED BIDS FOR FURNISHING 2,780 STEERING WHEELS, FSN 2530-277-2689, IN ACCORDANCE WITH THE SPECIFICATIONS CITED IN THE SCHEDULE. BIDS WERE REQUESTED ON AN F.O.B. ORIGIN BASIS.

SIX BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 11, 1973. THE LOWEST BID IN THE AMOUNT OF $5.26 PER STEERING WHEEL WAS SUBMITTED BY THE SHELLER- GLOBE CORPORATION, THE MANUFACTURER OF THE REQUIRED STEERING WHEEL. THE BID OF SHELLER-GLOBE, HOWEVER, WAS REJECTED AS NONRESPONSIVE BECAUSE THE CORPORATION FAILED TO SIGN ITS BID WHICH WAS NOT ACCOMPANIED BY OTHER MATERIAL INDICATING THE BIDDER'S INTENTION TO BE BOUND BY THE UNSIGNED BID. THE NEXT LOWEST BID, SUBMITTED BY COLONIAL FORD TRUCK SALES, INC. (COLONIAL), IN A TELEGRAM DATED SEPTEMBER 21, 1973, QUOTED AN F.O.B. ORIGIN PRICE OF $6.04 PER STEERING WHEEL. IN ITS CONFIRMING BID IT INDICATED THAT ITS UNIT PRICE OF $6.04 WAS FOR DELIVERY F.O.B. DESTINATION. COLONIAL BECAME THE LOWEST RESPONSIVE BIDDER WHEN SHELLER- GLOBE'S BID WAS REJECTED AS NONRESPONSIVE. IT IS REPORTED THAT IN VIEW OF THE LOW BID OF $5.26 BY SHELLER-GLOBE, ALL OTHER BIDS, INCLUDING THAT OF COLONIAL, WERE REJECTED AS UNREASONABLE AND THAT PURSUANT TO PARAGRAPH 2- 404.1(B)(VI) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), IFB - 0458 WAS CANCELED. IT ALSO IS REPORTED THAT SINCE ALL PREVIOUS PROCUREMENTS ON RECORD AT THE PROCURING ACTIVITY HAD BEEN FROM SHELLER- GLOBE OR ITS DEALERS OFFERING THE PRODUCT OF SHELLER-GLOBE, IT WAS DETERMINED THAT THE RESOLICITATION SHOULD BE NEGOTIATED UNDER 10 U.S.C. 2304(A)(10) AND ASPR 3-210.2(I) BECAUSE THE SUPPLIES WERE AVAILABLE (AT A REASONABLE PRICE) ONLY FROM ONE SOURCE. ON OCTOBER 9, 1973, REQUEST FOR PROPOSALS NO. DSA700-74-R-1536 WAS ISSUED AS THE RESOLICITATION FOR THE STEERING WHEELS.

IN A LETTER DATED OCTOBER 16, 1973, COLONIAL CONTENDED THAT IFB -0458 SHOULD NOT HAVE BEEN CANCELED BECAUSE OF UNREASONABLE PRICES SINCE AN AWARD HAD PREVIOUSLY BEEN MADE TO IT UNDER CONTRACT NO. DSA700-73-C 6174 AT A UNIT PRICE OF $6.05 - ONE CENT MORE THAN THE PRICE IT QUOTED UNDER CANCELED IFB -0458. SUBSEQUENTLY, AFTER RECEIVING A COPY OF THE DSA REPORT ON ITS PROTEST IN WHICH IT WAS EXPLAINED THAT THE LAST CONTRACT COLONIAL RECEIVED FOR FURNISHING 6,548 STEERING WHEELS WAS BASED ON AN ERROR BY THE GOVERNMENT BUYER IN COMPUTING THE ESTIMATES PACKAGING COSTS INCIDENT TO SHELLER-GLOBE'S BID, COLONIAL ADVISED BY LETTER DATED DECEMBER 4, 1973, THAT WHILE IT MUST ASSUME FROM THE EXPLANATION GIVEN BY DSA THAT THE LAST CONTRACT IT RECEIVED WAS AWARDED IN ERROR, IT COULD NOT ASSUME THAT THE FIVE CONTRACTS AWARDED PRIOR TO THE AWARDING OF THE LAST CONTRACT WERE AWARDED TO THE FIRM AT UNREASONABLE PRICES. COLONIAL MAINTAINS THAT THE CONTRACTING OFFICER CANCELED IFB -0458 SOLELY FOR THE PURPOSE OF GRANTING SHELLER-GLOBE ANOTHER OPPORTUNITY TO SUBMIT A RESPONSIVE BID. COLONIAL HAS REQUESTED THAT THE SOLICITATION BE REINSTATED AND AN AWARD BE MADE TO IT THEREUNDER.

IN REGARD TO THE CONTRACTS PREVIOUSLY AWARDED TO COLONIAL FOR FURNISHING STEERING WHEELS TO DSA, THE RECORD INDICATES THAT CONTRACTS NOS. DSA700-73 -C-6174, DSA700-71-C-1006, DSA700-72-C-3921, AND DSA700 71-C-2601 WERE AWARDED TO COLONIAL AT UNIT PRICES OF $6.05, $6.21, $5.29, $5.71, AND $6.31, RESPECTIVELY. THE FOREGOING CONTRACTS WERE AWARDED TO COLONIAL BECAUSE IT SUBMITTED THE LOWEST RESPONSIVE BIDS UNDER THE SOLICITATIONS INVOLVED. WHILE THESE CONTRACTS SHOW THAT THE GOVERNMENT HAS IN THE PAST PAID UNIT PRICES FOR THE SUBJECT ITEM WHICH WERE HIGHER THAN COLONIAL'S PRESENT BID PRICE, THE GOVERNMENT SHOULD NOT PAY A PRICE UNDER IFB -0458 WHICH CURRENT INFORMATION INDICATES IS EXCESSIVE. THE CONTRACTING OFFICER REJECTED COLONIAL'S BID AS UNREASONABLY HIGH BECAUSE CURRENT MARKET CONDITIONS INDICATED THAT THE MANUFACTURER, SHELLER-GLOBE, WOULD SUPPLY THE ITEM AT A SUBSTANTIALLY LOWER PRICE. THE FACT THAT THE GOVERNMENT MAY HAVE PAID HIGHER, AS WELL AS LOWER, PRICES FOR THE ITEM UNDER DIFFERENT MARKET CONDITIONS DURING THE PAST 3 YEARS IS NOT CONTROLLING SINCE GREATER WEIGHT SHOULD BE GIVEN TO MARKET CONDITIONS EXISTING AT THE TIME BIDS WERE OPENED UNDER IFB -0458.

ASPR 2-404.1(A) PROVIDES, IN SUBSTANCE, THAT AFTER BIDS HAVE BEEN OPENED AWARD MUST BE MADE TO THE LOWEST RESPONSIBLE BIDDER UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND READVERTISE. HOWEVER, UNDER ASPR 2-404.1(B)(VI) THE INVITATION MAY BE CANCELED AFTER OPENING IF THE PRICES ON ALL OTHERWISE ACCEPTABLE BIDS ARE UNREASONABLE. THE ISSUE HERE IS WHETHER THE CONTRACTING OFFICER'S DETERMINATION THAT COLONIAL'S BID PRICE IS UNREASONABLE, AND THEREFORE THAT CANCELLATION OF THE INVITATION IS PROPER UNDER THE REGULATION, SHOULD BE DISTURBED.

SECTION 2305(C) OF TITLE 10, U.S.C., PROVIDES THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST, AND SUCH RIGHT IS ALSO RESERVED IN PARAGRAPH 10(B) OF THE INVITATION INSTRUCTIONS AND CONDITIONS. ASPR 2-404.2(E), IMPLEMENTING THE AUTHORITY TO REJECT BIDS, PROVIDES THAT ANY BID MAY BE REJECTED IF THE CONTRACTING OFFICER DETERMINES IN WRITING THAT IT IS UNREASONABLE AS TO PRICE. OUR OFFICE AND THE COURTS HAVE HELD THAT THE REJECTION OF BIDS IS A MATTER OF ADMINISTRATIVE DISCRETION AND THAT A REQUEST FOR BIDS DOES NOT IMPART AN OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CONFORMING ONE. SEE 36 COMP. GEN. 364 (1956).

CONSISTENT WITH THE FOREGOING WE STATED IN 36 COMP. GEN. 364, 365:

"*** WE CANNOT, HOWEVER, CONSIDER THE MATTER OF COMPETITIVE BIDDING FOR GOVERNMENT CONTRACTS SOLELY AS A GAME, IN WHICH THE CONTRACT MUST AUTOMATICALLY GO TO THE LOWEST BIDDER WITHOUT REGARD TO THE REASONABLENESS OF HIS PRICE OR TO OTHER ATTEMPTED BIDS WHICH CANNOT FOR TECHNICAL REASONS BE ACCEPTED. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES OR SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND READVERTISING OF THE CONTRACT IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT. UPON SUCH REJECTION AND READVERTISING THE ORIGINAL BIDS ARE NO LONGER MATERIAL OR EFFECTIVE FOR ANY PURPOSE WHATSOEVER. IT IS NO DOUBT REGRETTABLE THAT ALL BIDDERS ARE AWARE OF THE AMOUNTS ORIGINALLY QUOTED BY THEIR COMPETITORS, BUT THEY ALSO ARE BETTER ADVISED AS TO WHAT PRICE RANGE IS CONSIDERED REASONABLE BY THE GOVERNMENT'S REPRESENTATIVES, AND ALL HAVE EQUAL OPPORTUNITIES TO SUBMIT SUCH NEW BIDS AS THEY WILL.

AS STATED ABOVE, CONTRACTING OFFICERS ARE CLOTHED WITH BROAD POWERS OF DISCRETION IN DECIDING WHETHER AN INVITATION SHOULD BE CANCELED, AND OUR OFFICE WILL NOT INTERFERE WITH SUCH DETERMINATION UNLESS IT IS ARBITRARY OR CAPRICIOUS. 39 COMP. GEN. 396 (1959).

WE HAVE HELD THAT THE BID OF A NONRESPONSIVE BIDDER IS RELEVANT TO THE DETERMINATION OF WHAT IS A REASONABLE PRICE. B-168972, APRIL 14, 1970; B- 173334, AUGUST 19, 1971. IN THIS CONNECTION, IT IS NOTED THAT THE BID OF SHELLER-GLOBE WAS DETERMINED TO BE NONRESPONSIVE TO THE SOLICITATION BECAUSE IT FAILED TO SIGN ITS BID AND NOT BECAUSE OF ANY EXCEPTION TO THE SPECIFICATIONS WHICH WOULD AFFECT THE PRICE, QUANTITY, QUALITY, OR DELIVERY OF THE ITEM OFFERED.

AS POINTED OUT ABOVE, COLONIAL ORIGINALLY QUOTED AN F.O.B. ORIGIN PRICE OF $6.04 IN ITS TELEGRAPHIC BID AND SUBSEQUENTLY IN ITS CONFIRMING BID CHANGED THE TERMS OF DELIVERY FROM F.O.B. ORIGIN TO F.O.B. DESTINATION, WHICH AMOUNTED TO A PRICE REDUCTION AND REDUCED THE DIFFERENCE BETWEEN ITS BID PRICE AND THAT QUOTED BY SHELLER-GLOBE. SUCH A REDUCTION IS NOT FOR CONSIDERATION BECAUSE PARAGRAPH 8(A) OF THE SOLICITATION INSTRUCTIONS AND CONDITIONS, AS WELL AS ASPR 2-305, CONTEMPLATES MODIFICATIONS BY OFFERORS UNDER ADVERTISED SOLICITATIONS WHO ARE OTHERWISE IN LINE FOR AWARD BEFORE THE MODIFICATION IS RECEIVED. CLEARLY, A BID DETERMINED BY THE CONTRACTING OFFICER TO BE UNREASONABLY HIGH AND THEREFORE FOR REJECTION CANNOT BE SAID TO BE THAT OF THE "OTHERWISE SUCCESSFUL OFFEROR." SEE ALECK LEITMAN V. UNITED STATES, 104 CT. CL. 324 (1945); 45 COMP. GEN. 228 (1965); 52 ID. 40 (1972); B-167299, AUGUST 11, 1969.

ACCORDINGLY, THE PROTEST OF COLONIAL AGAINST REJECTION OF ITS BID IS DENIED.