B-180199, MAY 1, 1975, 54 COMP GEN 937

B-180199: May 1, 1975

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BIDS - PREPARATION - COSTS - RECOVERY COSTS INCURRED BY FIRM IN ATTEMPT TO PERSUADE AGENCY TO EXPAND SPECIFICATIONS ARE NOT PROPERLY TO BE CONSIDERED AS BID PREPARATION COSTS. CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - UNSOLICITED PREPARATION COSTS SUBMISSION OF UNSOLICITED PROPOSAL WHERE OFFEROR KNEW THAT CONSIDERATION OF PROPOSAL WAS CONTINGENT UPON ITEM OFFERED COMPLYING WITH AGENCY REQUIREMENTS DOES NOT GIVE RISE TO COMPENSABLE BID PREPARATION COST CLAIM WHERE AGENCY HAD NOT ADVISED OFFEROR THAT ITEM WOULD MEET AGENCY'S NEEDS. THE NAVY RELATES THAT ALTHOUGH THE MODEL 3700B MAY HAVE MET THE SPECIFICATIONS SET FORTH IN THE AUTONETICS SUBCONTRACT WITH BELL & HOWELL. THE NAVY ISSUED THE FOLLOWING CHANGE ORDER: THE CONTRACTOR IS HEREBY REQUIRED TO PROVIDE TEN HONEYWELL TAPE TRANSPORTS MODEL 96 IN LIEU OF BELL & HOWELL TAPE TRANSPORTS FOR CONTRACT ITEMS 0008A.

B-180199, MAY 1, 1975, 54 COMP GEN 937

BIDS - PREPARATION - COSTS - RECOVERY COSTS INCURRED BY FIRM IN ATTEMPT TO PERSUADE AGENCY TO EXPAND SPECIFICATIONS ARE NOT PROPERLY TO BE CONSIDERED AS BID PREPARATION COSTS. CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - UNSOLICITED PREPARATION COSTS SUBMISSION OF UNSOLICITED PROPOSAL WHERE OFFEROR KNEW THAT CONSIDERATION OF PROPOSAL WAS CONTINGENT UPON ITEM OFFERED COMPLYING WITH AGENCY REQUIREMENTS DOES NOT GIVE RISE TO COMPENSABLE BID PREPARATION COST CLAIM WHERE AGENCY HAD NOT ADVISED OFFEROR THAT ITEM WOULD MEET AGENCY'S NEEDS. EXPENSES INCURRED IN PREPARING PROPOSAL CANNOT BE RECOUPED FOR FAILURE OF ABOVE-NOTED CONTINGENCY, FOR UNDER CIRCUMSTANCES, SUBMISSION OF UNSOLICITED PROPOSAL DID NOT GIVE RISE TO ANY OBLIGATION TO FAIRLY AND HONESTLY CONSIDER PROPOSAL.

IN THE MATTER OF BELL & HOWELL COMPANY, MAY 1, 1975:

THE NAVY AIR DEVELOPMENT CENTER (NADC), WARMINSTER, PENNSYLVANIA, ENTERED INTO A PRIME CONTRACT WITH THE AUTONETICS DIVISION OF NORTH AMERICAN ROCKWELL FOR THE DESIGN, DEVELOPMENT FABRICATION AND TEST OF FAST TIME ANALYZER SYSTEMS. THE CONTRACT SPECIFICATIONS PERMITTED THE PRIME CONTRACTOR TO FURNISH A TAPE TRANSPORT "ESSENTIALLY SIMILAR TO MINNEAPOLIS HONEYWELL MODEL 7625C." FOR THE FIRST 2 YEARS OF ITS CONTRACT, AUTONETICS FURNISHED BELL & HOWELL MODEL VR 3700B. THE NAVY RELATES THAT ALTHOUGH THE MODEL 3700B MAY HAVE MET THE SPECIFICATIONS SET FORTH IN THE AUTONETICS SUBCONTRACT WITH BELL & HOWELL, THE 3700B DID NOT, IN FACT, MEET THE REQUIREMENTS OF THE PRIME CONTRACT.

HONEYWELL SUBSEQUENTLY DEVELOPED AN UPDATED VERSION OF THE 7625C - ITS MODEL 96N. ON OCTOBER 19, 1973, THE NAVY ISSUED THE FOLLOWING CHANGE ORDER:

THE CONTRACTOR IS HEREBY REQUIRED TO PROVIDE TEN HONEYWELL TAPE TRANSPORTS MODEL 96 IN LIEU OF BELL & HOWELL TAPE TRANSPORTS FOR CONTRACT ITEMS 0008A, 0010 & 0010A. ***

PENDING NEGOTIATION OF THE PRICE ADJUSTMENT FOR THIS CHANGE, THE GOVERNMENT SHALL NOT BE OBLIGATED IN EXCESS OF $317,648.

BELL & HOWELL CONTENDS THAT IT HAD A NEW MODEL - THE VR-3700D - WHICH ALSO MET THE OBJECTIVES OF THE INSTANT CONTRACT SPECIFICATIONS. IN THIS REGARD, THE NAVY STATES THAT BELL & HOWELL WAS GIVEN TWO OPPORTUNITIES TO TEST THE VR-3700D AT NADC ON OCTOBER 4 AND OCTOBER 10, 1973, TO SUBSTANTIATE ITS CLAIMS AS TO THE ESSENTIAL EQUALITY OF ITS VR 3700D WITH THE HONEYWELL 96N. THE AGENCY FURTHER ADVISES THAT:

BELL & HOWELL POSTPONED THE 4TH OF OCTOBER DATE TO THE 10TH OF OCTOBER DUE TO TECHNICAL DIFFICULTIES WITH THEIR TAPE TRANSPORT AND ALLOWED THE TESTING APPOINTMENT SCHEDULED FOR OCT. 10TH TO LAPSE WITHOUT NOTIFICATION OR REASON GIVEN ***.

BELL & HOWELL RELATES THAT, UPON LEARNING OF THE SOLE-SOURCE PROCUREMENT, IT CONDUCTED DISCUSSIONS ON SEPTEMBER 26, 1973, WITH A WASHINGTON-BASED OFFICIAL OF NADC WHO STATED THAT, IF TEST DATA ON THE BELL & HOWELL VR- 3700D DEMONSTRATED COMPLIANCE WITH PRESENT REQUIREMENTS, BELL & HOWELL EQUIPMENT WOULD BE COMPETITIVELY CONSIDERED FOR THE THIRD-YEAR BUY.

IN RELIANCE UPON THIS AGENCY POSITION, BELL & HOWELL STATES THAT IT SHIPPED A VR-3700D TO AUTONETICS FOR TESTING. BELL & HOWELL RELATES THAT IT SPECIFICALLY INVITED REPRESENTATIVES OF NADC TO WITNESS THE TESTS BUT THAT THE NAVY DECLINED. HOWEVER, IT WAS ASSURED BY THE MANAGER OF THE TECHNICAL STAFF AT NADC THAT THE TEST DATA WOULD BE ACCEPTED AS VALID DATA ON THE PERFORMANCE CAPABILITIES OF THE 3700D. ON OCTOBER 12, 1973, BELL & HOWELL SUBMITTED A PROPOSAL TO THE NAVY.

BELL & HOWELL FURTHER STATES THAT, ON OCTOBER 15, 1973, 4 DAYS PRIOR TO THE ISSUANCE OF THE CHANGE ORDER, IT PRESENTED NADC WITH THE AUTONETICS TEST DATA BUT THEN IT WAS ADVISED THAT THE MATTER WAS A "CLOSED ISSUE" AND THE DATA WAS NOT REVIEWED BY NADC.

NADC OFFICIALS AT A CONFERENCE HELD IN OUR OFFICE STATED THAT IT IS AND WAS THE POSITION OF THE COGNIZANT PROCUREMENT OFFICIALS THAT PRIME CONTRACTOR DATA FROM AUTONETICS WAS NOT ACCEPTABLE. INDEED, THE NAVY RELATES THAT IN THE PAST THE AUTONETICS TEST RESULTS HAVE BEEN DISCOUNTED AS BEING OUTSIDE NAVY TEST GUIDELINES. MOREOVER, THE NAVY FURTHER STATES THAT THE MANAGER OF THE TECHNICAL STAFF AT NADC DID NOT HAVE THE ACTUAL AUTHORITY TO CONCLUDE THAT PRIME CONTRACTOR TESTING WAS ACCEPTABLE.

IT SHOULD BE NOTED AT THE OUTSET THAT THE SUBCONTRACT WITH HONEYWELL PURSUANT TO THE CONTRACT MODIFICATION HAS LONG SINCE BEEN FULLY PERFORMED. IN LIGHT OF THIS, WE BELIEVE ANY DISCUSSION OF THE ISSUES SURROUNDING THE AWARD OF THE SUBCONTRACT WOULD SERVE NO USEFUL PURPOSE.

BELL & HOWELL HAS SUBMITTED A CLAIM FOR PROPOSAL PREPARATION EXPENSES IN THE AMOUNT OF $223,000 FOR "*** ALL OF ITS COSTS AND EXPENSES INCURRED IN CONNECTION WITH AND RELATED TO ITS EFFORTS REGARDING THE SUBJECT SUBCONTRACT AND THE BELL & HOWELL PROPOSAL WITH RESPECT THERETO."

COUNSEL FOR BELL & HOWELL CRYSTALLIZES THE ISSUE PRESENTED IN THE CASE AS FOLLOWS:

THE BASIS OF THIS PROTEST IS THAT THE NAVY AFFIRMATIVELY ENCOURAGED BELL & HOWELL TO PARTICIPATE IN THE SUBJECT SUBCONTRACT PROCUREMENT AND TO MODIFY ITS EQUIPMENT AND SUBMIT A PROPOSAL WITH RESPECT THERETO AND THEN REFUSED TO CONSIDER OR PERMIT AUTONETICS TO CONSIDER BELL & HOWELL EQUIPMENT FOR SUCH PROCUREMENT.

BELL & HOWELL ARGUES THAT THE NAVY'S CONDUCT DID NOT AMOUNT TO THE FAIR AND HONEST CONSIDERATION OF ITS PROPOSAL TO WHICH IT WAS ENTITLED.

THE CONCEPT OF ADJUDICATING AGGRIEVED BIDDERS' CLAIMS FOR THEIR EXPENSES OF BIDDING HAS BEEN CONSIDERED BY THE COURTS. SEE HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 140 F. SUPP. 409, 135 CT. CL. 63 (1956); KECO INDUSTRIES, INC. V. UNITED STATES, 428 F.2D 1233, 192 CT. CL. 773 (1970) (KECO I); CONTINENTAL BUSINESS ENTERPRISES, INC. V. UNITED STATES, 452 F.2D 1016, 196 CT. CL. 627 (1971); ARMSTRONG & ARMSTRONG, INC. V. UNITED STATES, 356 F. SUPP. 514 (E.D. WASH. 1973); KECO INDUSTRIES, INC. V. UNITED STATES, 492 F.2D 1200 (CT. CL. 1974) (KECO II); THE MCCARTY CORPORATION V. UNITED STATES, 499 F.2D 633, 204 CT. CL. 768 (1974). THOSE CASES WERE PROMISED ON THE EXISTENCE OF A GOVERNMENTAL OBLIGATION TO FAIRLY CONSIDER A BID WHERE IN FACT THE GOVERNMENT HAD SOLICITED BIDS. INDEED, IN EACH OF THE CITED CASES, THE GOVERNMENT FORMALLY ADVERTISED FOR BIDS. THEREFORE, THE ENCOURAGEMENT OR INDUCEMENT TO POTENTIAL BIDDERS TO SUBMIT BIDS IN RESPONSE TO THE GOVERNMENT'S REQUEST FOR BIDS WAS DIRECT, PUBLIC AND MADE WITH THE INTENTION THAT ANY BIDDER MEETING GOVERNMENT- IMPOSED CONDITIONS COULD, IF FOUND TO BE LOW, BE AWARDED THE CONTRACT PURSUANT TO PROCUREMENT STATUTES AND THE IMPLEMENTING REGULATIONS.

THE INSTANT CASE IS SOMEWHAT SIMILAR AND YET QUITE DIFFERENT, FOR THIS IS A SUBCONTRACT SITUATION IN WHICH NO SOLICITATION WAS EVER ISSUED. HOWEVER, WE DO NOT FEEL COMPELLED TO ANSWER THE QUESTION OF WHETHER A SUBCONTRACTOR CAN BE AWARDED BID PREPARATION COSTS.

THE COURT OF CLAIMS IN KECO I, SUPRA, AT 1245, STATED THAT IF THE CLAIMANT'S BID WAS NOT FAIRLY AND HONESTLY CONSIDERED, THEN THE CLAIMANT SHOULD BE ALLOWED TO RECOVER ONLY THOSE COSTS INCURRED IN PREPARING ITS BID. SEE ALSO, THE MCCARTY CORPORATION V. UNITED STATES, SUPRA, AT 637. IF THE OBLIGATION TO FAIRLY AND HONESTLY CONSIDER IS BREACHED AND THE CLAIMANT "*** IS PUT TO NEEDLESS EXPENSE IN PREPARING ITS BID, IT IS ENTITLED TO RECOVER SUCH EXPENSES." HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, SUPRA, AT 413, 414. KECO II, SUPRA, AT 1203, REFERS TO "*** THE (CLAIMANT'S) RIGHT TO BE COMPENSATED FOR THE EXPENSE OF UNDERTAKING THE BIDDING PROCESS."

ASIDE FROM THESE GENERAL JUDICIAL STATEMENTS, THERE HAS BEEN A LACK OF JUDICIAL STANDARDS OR GUIDANCE AS TO WHAT COSTS ARE TO BE INCLUDED WITHIN THE PARAMETER OF BID PREPARATION. IN THOSE CASES WHERE CLAIMS FOR BID PREPARATION COSTS HAVE BEEN DENIED, THE QUESTION AS TO WHAT COSTS COULD PROPERLY HAVE BEEN INCLUDED IN THE JUDGMENT WAS NOT DISCUSSED, APPARENTLY FOR THE REASON THAT THE COURTS NEVER REACHED THE ISSUE OF QUANTUM. MOREOVER, THE ONLY CASES TO DATE WHERE BID PREPARATION COSTS HAVE BEEN RECOVERED PROVIDE NO STANDARDS OR GUIDANCE FOR IN BOTH SITUATIONS THE PARTIES STIPULATED TO THE AMOUNT. THE MCCARTY CORPORATION V. UNITED STATES, SUPRA; ARMSTRONG & ARMSTRONG, INC. V. UNITED STATES, SUPRA.

ON THE OTHER HAND, THERE HAVE BEEN DECISIONS, BOTH JUDICIAL AND ADMINISTRATIVE, INDICATING WHAT IS NOT TO BE CONSIDERED COMPENSABLE AS BID PREPARATION COSTS. MORE SPECIFICALLY, IN MATTER OF IONICS, INC., 53 COMP. GEN. 909 (1974), WE STATED THAT RECOVERY OF DAMAGES AND REWARD FOR VALUABLE SUGGESTION WAS NOT COMPENSABLE. SIMILARLY, IN DESCOMP, INC. V. SAMPSON, 377 F. SUPP. 254 (1974), THE COURT FOUND THAT THE COSTS OF PURSUING A BID PROTEST WERE NONCOMPENSABLE. SEE MATTER OF FREQUENCY ELECTRONICS, INC., B-178164, JULY 5, 1974. ALSO, IN HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, SUPRA, AND ITS PROGENY, ARGUMENTS FOR RECOVERY OF ANTICIPATED PROFITS HAVE CONTINUALLY BEEN REJECTED.

THE COSTS OF BELL & HOWELL FOR WHICH RECOVERY IS CLAIMED, AS WE UNDERSTAND THEM, WERE INCURRED IN AN ATTEMPT TO PERSUADE THE NAVY TO EXPAND OR BROADEN THE NEEDS OF THE GOVERNMENT FROM WHAT WAS ESSENTIALLY A BRAND NAME, SOLE-SOURCE SPECIFICATION INTO A BRAND NAME OR EQUAL SPECIFICATION. THE RECORD DISCLOSES THAT BELL & HOWELL WAS AWARE THAT THE NAVY WAS IN THE PROCESS OF REQUIRING THE PRIME CONTRACTOR TO PROVIDE THE HONEYWELL 96N, BUT STILL EXPENDED ITS EFFORTS AND MONEY IN AN ATTEMPT TO DEVELOP ITS MODEL VR-3700D TO SHOW ESSENTIAL EQUALITY WITH THE HONEYWELL 96N. WE RECOGNIZE THAT THE NAVY DID NOT DISCOURAGE THIS EFFORT. NEVERTHELESS, COSTS INCURRED IN AN ATTEMPT TO EXPAND OR BROADEN THE NEEDS OF THE GOVERNMENT ARE NOT, IN OUR VIEW AND IN THE ABSENCE OF DEFINITIVE JUDICIAL GUIDELINES, PROPERLY TO BE CONSIDERED AS COSTS INCURRED IN UNDERTAKING THE BIDDING PROCESS. IN THIS REGARD, WE NOTE THAT THE ONLY TWO CASES IN WHICH THE COURTS HAVE GRANTED CLAIMS FOR BID PREPARATION COSTS CONCERNED CONSTRUCTION CONTRACTS WHERE, UNLIKE HERE, COSTS OF DEVELOPMENT CONCURRENT WITH THE ATTEMPTED BROADENING OR EXPANSION OF GOVERNMENT NEEDS WERE NOT INVOLVED. SEE THE MCCARTY CORPORATION V. UNITED STATES, SUPRA, AND ARMSTRONG & ARMSTRONG, INC. V. UNITED STATES, SUPRA.

FURTHERMORE, WE RECOGNIZE THAT A PORTION OF THE AMOUNT CLAIMED BY BELL & HOWELL FOR PROPOSAL PREPARATION COSTS CONSISTED OF VARIOUS COSTS DIRECTLY RELATED TO THE PREPARATION AND SUBMISSION OF THE UNSOLICITED PROPOSAL WHICH MIGHT VERY WELL BE COMPENSABLE AS PROPOSAL PREPARATION COSTS. HOWEVER, BELL & HOWELL SUBMITTED THE UNSOLICITED PROPOSAL KNOWING THAT THE CONSIDERATION OF THE PROPOSAL WAS CONTINGENT UPON THE TEST DATA ON THE VR- 3700D DEMONSTRATING COMPLIANCE WITH THE NAVY'S REQUIREMENTS. SUCH A CONTINGENT SUBMISSION DOES NOT, WE BELIEVE, GIVE RISE TO A COMPENSABLE CLAIM FOR BID PREPARATION COSTS SINCE, PRIOR TO SUBMISSION, BELL & HOWELL HAD RECEIVED NO INDICATION FROM THE NAVY THAT ITS MODEL WOULD, IN FACT, MEET THE GOVERNMENT'S NEEDS. THEREFORE, BELL & HOWELL INCURRED COSTS IN PREPARING ITS UNSOLICITED PROPOSAL IN A SITUATION WHERE THERE WAS A DISTINCT POSSIBILITY THAT THE PROPOSAL WOULD NOT BE CONSIDERED BY THE NAVY. ACCORDINGLY, ON THE FAILURE OF THIS CONTINGENCY, FOR WHATEVER REASON, BELL & HOWELL CANNOT NOW RECOUP ITS COSTS.

AS WAS STATED IN THE MCCARTY CORPORATION V. UNITED STATES, SUPRA, AT 637:

*** IT IS AN IMPLIED CONDITION OF EVERY INVITATION FOR BIDS ISSUED BY THE GOVERNMENT THAT EACH BID SUBMITTED PURSUANT TO THE INVITATION WILL BE FAIRLY AND HONESTLY CONSIDERED (HEYER PRODUCTS CO. V. UNITED STATES, 140 F. SUPP. 407, 412, 135 CT. CL. 63, 69 (1956)) AND IF SUCH OBLIGATION WAS BREACHED AND HE WAS PUT TO NEEDLESS EXPENSE IN PREPARING HIS BID, HE IS ENTITLED TO HIS BID PREPARATION COSTS.

WHERE THE CLAIMANT KNEW THAT CONSIDERATION OF ITS UNSOLICITED PROPOSAL WAS CONTINGENT ON GOVERNMENT DETERMINATION OF ACCEPTABILITY OF THE CLAIMANT'S PRODUCT, WE CANNOT SAY THAT THE SUBMISSION OF THE UNSOLICITED PROPOSAL GAVE RISE TO ANY OBLIGATION ON THE PART OF THE GOVERNMENT TO FAIRLY AND HONESTLY CONSIDER THE PROPOSAL.

ACCORDINGLY, BELL & HOWELL'S CLAIM MUST BE DENIED.