B-180248, AUG 16, 1974

B-180248: Aug 16, 1974

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IS NOT OBJECTIONABLE. SINCE IT IS SUFFICIENT REASON TO REJECT OFFER WHERE FUNDS ARE NOT AVAILABLE FOR CONTRACT OBLIGATION AND 8(A) CONTRACT NOT FOR SPECIFIC SERVICES CONTRACTING AGENCY LET TO COMPETITION DOES NOT VIOLATE FPR 1-1.713-2(E) GENERAL PROVISION THAT 8(A) CONTRACTS NOT BE CONSIDERED FOR SPECIFIC WORK SYNOPSIZED IN COMMERCE BUSINESS DAILY OR SOLICITED FROM INDUSTRY. 2. CLAIM FOR PROPOSAL PREPARATION COSTS FOR OFFER REJECTED BECAUSE IT EXCEEDED AVAILABLE FUNDS IS DENIED SINCE THERE IS NO INDICATION IN RECORD THAT OFFER WAS NOT SOLICITED IN GOOD FAITH OR THAT IT WAS NOT CONSIDERED FAIRLY AND HONESTLY FOR AWARD. THE RFP WAS SENT TO SEVEN FIRMS. IT WAS SYNOPSIZED IN THE COMMERCE BUSINESS DAILY.

B-180248, AUG 16, 1974

1. DECISION BY CONTRACTING AGENCY TO CANCEL RFP FOR DEVELOPMENT OF COMPUTER SOFTWARE BECAUSE SOLE OFFER EXCEEDED AVAILABLE FUNDS AND TO ORDER SERVICES FOR PERFORMANCE WITHIN BUDGETARY AMOUNT FROM GSA, WHICH ACCEPTED ORDER AND UTILIZED SECTION 8(A) INDEFINITE REQUIREMENTS CONTRACT, IS NOT OBJECTIONABLE, SINCE IT IS SUFFICIENT REASON TO REJECT OFFER WHERE FUNDS ARE NOT AVAILABLE FOR CONTRACT OBLIGATION AND 8(A) CONTRACT NOT FOR SPECIFIC SERVICES CONTRACTING AGENCY LET TO COMPETITION DOES NOT VIOLATE FPR 1-1.713-2(E) GENERAL PROVISION THAT 8(A) CONTRACTS NOT BE CONSIDERED FOR SPECIFIC WORK SYNOPSIZED IN COMMERCE BUSINESS DAILY OR SOLICITED FROM INDUSTRY. 2. CLAIM FOR PROPOSAL PREPARATION COSTS FOR OFFER REJECTED BECAUSE IT EXCEEDED AVAILABLE FUNDS IS DENIED SINCE THERE IS NO INDICATION IN RECORD THAT OFFER WAS NOT SOLICITED IN GOOD FAITH OR THAT IT WAS NOT CONSIDERED FAIRLY AND HONESTLY FOR AWARD.

OCEAN DATA SYSTEMS, INC.:

REQUEST FOR PROPOSALS (RFP) N62306-74-R-0009, ISSUED AUGUST 7, 1973, BY THE NAVAL OCEANOGRAPHIC OFFICE (NAVOCEANO), WASHINGTON, D.C., SOLICITED OFFERS ON A FIXED-PRICE BASIS FOR THE PREPARATION OF AN APPLICATION PROGRAM AND SYSTEM SOFTWARE FOR THE HYSURCH SHIPBOARD COLLECTION EQUIPMENT. THE RFP WAS SENT TO SEVEN FIRMS. IN ADDITION, IT WAS SYNOPSIZED IN THE COMMERCE BUSINESS DAILY, WHICH RESULTED IN 21 ADDITIONAL COMPANIES REQUESTING THE RFP. OCEAN DATA SYSTEMS, INC. (ODSI), WAS THE ONLY COMPANY TO SUBMIT ANY PROPOSALS: ONE IN THE AMOUNT OF $322,349, AND AN ALTERNATE IN THE AMOUNT OF $245,034.

ALTHOUGH ODSI'S PROPOSAL WAS DETERMINED TO BE TECHNICALLY ACCEPTABLE, ITS PRICE EXCEEDED THE $100,000 IN FUNDS WHICH WERE AVAILABLE FOR THE PROCUREMENT. THE NEGOTIATION TEAM CONCLUDED THAT NEGOTIATIONS SHOULD BE HELD WITH ODSI SINCE THE TEAM THOUGHT THERE WERE SEVERAL AREAS OF COST OPEN TO LARGE REDUCTIONS. NEGOTIATIONS WERE HELD WITH ODSI ON OCTOBER 11, 1973, AND THE PROCURING ACTIVITY VERIFIED CERTAIN ITEMS OF INFORMATION BY A TELEPHONE CALL TO ODSI ON OCTOBER 24, 1973. ON THE LATTER DATE, ODSI SUBMITTED ITS REVISED PROPOSAL IN THE AMOUNT OF $195,153. BY TELEPHONE AND BY LETTER OF DECEMBER 11, 1973, FROM THE CONTRACTING OFFICER, ODSI WAS ADVISED THAT THE RFP WAS CANCELED BECAUSE THE PROPOSAL EXCEEDED THE BUDGET FOR THE PROJECT AND THAT THE GOVERNMENT WOULD PURSUE THE TASK WITH AVAILABLE IN-HOUSE RESOURCES.

THE HYSURCH PROGRAM MANAGER HAD ANTICIPATED THAT NEGOTIATIONS WITH ODSI MIGHT NOT RESULT IN A SUFFICIENT REDUCTION IN PRICE TO COME WITHIN THE AMOUNT OF AVAILABLE FUNDS. CONSEQUENTLY, ON OCTOBER 5, 1973, GENERAL SERVICES ADMINISTRATION (GSA) REGION 4 IN HUNTSVILLE, ALABAMA, WAS CONTACTED TO ASCERTAIN WHETHER IT HAD THE CAPABILITY TO DEVELOP THE REQUIRED SOFTWARE IN ACCORDANCE WITH THE NAVOCEANO SPECIFICATIONS. NOVEMBER 9, 1973, REGION 4 ADVISED THAT IT COULD PROVIDE THE SOFTWARE WITHIN THE $100,000 BUDGET. ON NOVEMBER 13, 1973, NAVOCEANO ISSUED A PROJECT ORDER IN THE AMOUNT OF $90,000 TO THE FEDERAL DATA PROCESSING CENTER (FDPC), GSA REGION 4. ON NOVEMBER 30, 1973, THE PROJECT ORDER WAS ACCEPTED BY GSA REGION 4.

ON OCTOBER 17, 1973, THE FEDERAL SUPPLY SERVICE, GSA, AWARDED AN INDEFINITE REQUIREMENTS TERM SERVICE CONTRACT TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR TECHNICAL SUPPORT SERVICES FOR THE FDPC, HUNTSVILLE, ALABAMA, FROM NOVEMBER 1, 1973, THROUGH OCTOBER 31, 1974. SUBCONTRACT UNDER THE ABOVE-REFERENCED CONTRACT WAS AWARDED ON OCTOBER 17, 1973, BY SBA TO D.P. ASSOCIATES, INC. (DPAI), A SECTION 8(A) CONTRACTOR. THE WORK UNDER THE PROJECT ORDER SUBMITTED BY NAVOCEANO WAS PERFORMED BY DPAI UNDER THE SUBCONTRACT. THE WORK FOR NAVOCEANO REPRESENTS ONLY A SMALL PORTION OF THE ENTIRE SUBCONTRACT, THE TOTAL ESTIMATED AMOUNT OF THE SUBCONTRACT BEING $1,364,093.35.

PRIOR TO THE ISSUANCE OF THE PROJECT ORDER TO FDPC, THE HYSURCH PROJECT MANAGER ALSO SUBMITTED A REQUEST FOR ADP SERVICES, DATED OCTOBER 25, 1973, TO GSA REGION 3 TO HAVE THE HYSURCH PROJECT WORK "PERFORMED BY REGION 3 PERSONNEL (LOCALLY)." ON NOVEMBER 6, 1973 THE ASSISTANT ADP COORDINATOR, GSA REGION 3, INFORMED NAVOCEANO THAT THERE WERE "NO KNOWN GOVERNMENT SOURCES AVAILABLE AT THIS TIME" WHICH COULD MEET THE REQUEST.

BY LETTER DATED APRIL 3, 1974, AND PREVIOUS CORRESPONDENCE, COUNSEL FOR ODSI PROTESTED THE REFUSAL OF NAVOCEANO TO MAKE AN AWARD UNDER THE ABOVE- REFERENCED RFP. COUNSEL REQUESTED OUR OFFICE TO INSTRUCT THE DEPARTMENT OF THE NAVY AND GSA TO CANCEL WHATEVER ARRANGEMENTS HAD BEEN MADE WITH DPAI AND TO AWARD A CONTRACT TO ODSI PURSUANT TO THE TERMS OF THE SOLICITATION. IN THE ALTERNATIVE, A CLAIM WAS MADE FOR PROPOSAL PREPARATION EXPENSES IN THE AMOUNT OF $5,277.

IN SUPPORT OF THE PROTEST AND CLAIM, IT IS CONTENDED (1) THAT NAVOCEANO AND GSA CONSPIRED IN BAD FAITH AND CONTRARY TO LAW TO SECRETLY WITHDRAW THE REQUIREMENTS IN THE SOLICITATION AND TO AWARD THE WORK COVERED BY THE SOLICITATION TO AN "8A" FIRM THAT DID NOT RESPOND TO THE SOLICITATION, AND THAT THE WORK WILL BE PERFORMED OUTSIDE OF THE AREA OF PERFORMANCE INDICATED IN THE RFP; (2) THAT THE AWARD OF THE WORK TO THE "8A" FIRM WAS A DELIBERATE CIRCUMVENTION OF REGULATIONS AND POLICY GOVERNING THE SELECTION OF "8A" CONTRACTORS; (3) THAT THE NAVY WILL EVENTUALLY SPEND FAR IN EXCESS OF ODSI'S OFFERED PRICE, AND THAT CONSEQUENTLY, THE "EXCESSIVE PRICE" ARGUMENT OF THE NAVY IS SPURIOUS, AND, IN ADDITION, THE FACT THAT GOVERNMENT-FURNISHED EQUIPMENT HAS BEEN MOVED TO HUNTSVILLE IS A FURTHER INDICATION THAT THE COST ESTIMATES OF NAVOCEANO ARE DEVOID OF MERIT; AND (4) THAT ODSI'S PROPRIETARY PROPOSAL MAY HAVE BEEN DISCLOSED TO DPAI.

AS INDICATED ABOVE, NAVOCEANO DECIDED TO UTILIZE THE AUSPICES OF GSA BECAUSE IT WAS DETERMINED THAT THE ODSI OFFERED PRICE FOR THE PROJECT EXCEEDED THE NAVOCEANO BUDGET AND GSA INDICATED THAT IT COULD MEET THE REQUIREMENTS WITHIN THE BUDGET. PARAGRAPH 10(B) OF THE RFP "SOLICITATION INSTRUCTIONS AND CONDITIONS" STATED THAT THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY OR ALL OFFERS. SECTION 665 OF 31 U.S.C. PROHIBITS EXPENDITURES OF CONTRACT OBLIGATIONS IN EXCESS OF APPROPRIATED FUNDS OR APPORTIONMENTS OF APPROPRIATIONS MADE TO ACHIEVE THE MOST EFFECTIVE AND ECONOMICAL USE OF FUNDS. OUR OFFICE HAS HELD THAT WHERE AN ADMINISTRATIVE AGENCY OF THE GOVERNMENT HAS DETERMINED THAT FUNDS ARE NOT AVAILABLE FOR CONTRACT OBLIGATION, THAT IS A SUFFICIENT REASON TO REJECT THE OFFERS RECEIVED AND IT IS NOT FOR OUR OFFICE TO OBJECT TO THE UNAVAILABILITY OF FUNDS. B-166710, JULY 24, 1969. FURTHER, NAVOCEANO NEGOTIATED WITH ODSI IN AN ATTEMPT TO REDUCE THE COST OF ITS PROPOSAL WITHIN ACCEPTABLE LIMITS. WE ARE NOT AWARE OF ANYTHING THAT REQUIRED NAVOCEANO TO INDICATE TO ODSI DURING THOSE NEGOTIATIONS THAT IT WAS EXPLORING WITH GSA THE POSSIBILITY OF USING ITS RESOURCES FOR THE PERFORMANCE OF THE WORK IN THE EVENT IT WAS UNSUCCESSFUL IN ARRIVING AT AN ACCEPTABLE PRICE WITH ODSI. WE ARE THEREFORE UNABLE TO CONCLUDE THAT NAVOCEANO AND GSA ACTED IN BAD FAITH IN THE CIRCUMSTANCES. MOREOVER, THE CHANGE OF THE AREA OF CERTAIN PERFORMANCE AND THE AWARD OF THE WORK TO A FIRM THAT DID NOT RESPOND TO THE SOLICITATION, BUT WHICH HAD A CONTRACT TO PERFORM SERVICES OF THE NATURE REQUIRED, WAS NECESSITATED BY THE FACT THAT ODSI WAS UNABLE TO PERFORM WITHIN THE AGENCY BUDGET AND IS THEREFORE UNOBJECTIONABLE.

FEDERAL PROCUREMENT REGULATIONS (FPR) 1-1.713-2(E) PROVIDES:

"GENERALLY, SECTION 8(A) CONTRACTS BETWEEN A PROCURING AGENCY AND THE SBA WILL NOT BE CONSIDERED FOR SPECIFIC ITEMS OR WORK AFTER SUCH ITEMS OR WORK HAVE BEEN SYNOPSIZED IN THE COMMERCE BUSINESS DAILY OR PUBLICIZED TO OR SOLICITED FROM INDUSTRY."

IT HAS BEEN CONTENDED THAT THE AWARD OF THE 8(A) CONTRACT BY GSA WAS IN VIOLATION OF THE FOREGOING REGULATION. HOWEVER, SINCE THE REGULATION IS PREFACED BY THE WORD, "GENERALLY," IT IS APPARENT THAT IT IS NOT INTENDED TO APPLY IN EVERY SITUATION. FURTHER, THE 8(A) INDEFINITE REQUIREMENTS CONTRACT IS NOT IN VIOLATION OF THE REGULATION, SINCE IT IS NOT FOR THE SPECIFIC SERVICES THAT NAVOCEANO LET TO COMPETITION, ALTHOUGH IT IS BROAD ENOUGH TO PERMIT ORDERING OF THOSE SERVICES UNDER THE CONTRACT.

WITH RESPECT TO THE CONTENTION THAT THE NAVY WILL SPEND FAR IN EXCESS OF THE ODSI OFFERED PRICE, WE HAVE ASCERTAINED INFORMALLY THAT, BECAUSE OF THE LACK OF FUNDS FOR CONTINUATION OF THE PROJECT IN FISCAL YEAR 1975, THE PROJECT ORDER WAS CANCELED ON JUNE 30, 1974, AND WAS REDUCED BY $24,000. SINCE AT THE TIME THE ODSI PROPOSAL WAS UNDER CONSIDERATION THE NAVY CONSIDERED THAT THERE WAS ONLY $100,000 AVAILABLE FOR THE PROCUREMENT, THE DETERMINATION THAT THE ODSI $195,153 PROPOSAL WAS EXCESSIVE DOES NOT APPEAR TO HAVE BEEN SPURIOUS. FURTHER, THE NAVOCEANO RFP HAD LISTED CERTAIN GOVERNMENT-FURNISHED EQUIPMENT THAT THE CONTRACTOR WOULD BE REQUIRED TO USE AT SUITLAND, MARYLAND. THE MOVEMENT OF THE EQUIPMENT TO HUNTSVILLE AT AN ESTIMATED COST OF $110 IN AN ATTEMPT TO KEEP TOTAL COSTS AT A MINIMUM IS NOT OBJECTIONABLE.

BOTH THE NAVY AND GSA HAVE DENIED THAT ANY INFORMATION CONCERNING THE ODSI PROPOSAL WAS DIVULGED TO DPAI. THEREFORE, WE ARE UNABLE TO CONCLUDE THAT THERE WAS AN IMPROPER DISCLOSURE OF THE ODSI PROPOSAL.

INLAND CONTAINER, INC. V. UNITED STATES, CT. CL. NO. 350-70, MARCH 4, 1974, RELIED UPON BY COUNSEL FOR ODSI HAS NO BEARING ON THE INSTANT MATTER. IN THE INLAND CASE, THE COURT INDICATED THAT THE PLAINTIFFS "REQUIREMENTS" CONTRACTS WITH DSA WERE VIOLATED WHEN DSA OBTAINED CERTAIN OF ITS REQUIREMENTS FROM GSA UNDER REQUISITION. IN THE IMMEDIATE CASE, NO CONTRACT CAME INTO BEING BETWEEN NAVOCEANO AND ODSI BECAUSE THE RFP WAS CANCELED. THUS, NO CONTRACT OBLIGATION TO ODSI WAS BREACHED BY NAVOCEANO ORDERING THE SERVICES FROM GSA.

WITH REGARD TO ODSI'S REQUEST FOR PROPOSAL PREPARATION COSTS, THE FEDERAL COURTS HAVE RECOGNIZED THAT OFFERORS ARE ENTITLED TO HAVE THEIR PROPOSALS CONSIDERED FAIRLY AND HONESTLY FOR AWARD AND THAT THE RECOVERY OF PROPOSAL PREPARATION EXPENSES IS POSSIBLE IF IT CAN BE SHOWN THAT PROPOSALS WERE NOT SO CONSIDERED. LACK OF GOOD FAITH, ARBITRARINESS OR CAPRICIOUSNESS MUST BE ESTABLISHED AS A PREREQUISITE TO RECOVERY. SEE HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 140 F. SUPP. 409 (CT. CL. 1956); 177 F. SUPP. 251 (CT. CL. 1959). KECO INDUSTRIES, INC. V. UNITED STATES, 428 F.2D. 1233 (CT. CL. 1970); CT. CL. 173-69 (FEBRUARY 20, 1974); AND CONTINENTAL BUSINESS ENTERPRISES, INC. V. UNITED STATES, 452 F.2D. 1016 (CT. CL. 1971). HOWEVER, THERE IS NO INDICATION IN THE RECORD THAT ODSI'S PROPOSAL WAS NOT SOLICITED IN GOOD FAITH OR THAT IT WAS NOT CONSIDERED FAIRLY AND HONESTLY FOR AWARD.

ACCORDINGLY, THE PROTEST AND CLAIM FOR PROPOSAL PREPARATION COSTS ARE DENIED.