B-180437, MAY 6, 1974

B-180437: May 6, 1974

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LATE CHANGE FROM A NEGOTIATED TO AN ADVERTISED PROCUREMENT MAY HAVE RESULTED IN APPARENT CONFUSION TO BIDDERS AND DEPRIVED THE GOVERNMENT OF FULL AND FREE COMPETITION. IN PART: "PAGE 1 (STANDARD FORM 33) OF SOLICITATION IS HEREBY AMENDED AS FOLLOWS: "(A) BLOCK 2 . THE THREE LOWEST WERE AS FOLLOWS: AIRESEARCH MANUFACTURING CO. $287. 363 ATTACHED TO AIRESEARCH'S BID WAS A TRANSMITTAL LETTER WHICH INCLUDED THE STATEMENT: "THE TERMS AND CONDITIONS OF THE BID PACKAGE ARE ACCEPTABLE. IT IS REQUESTED THAT A PROGRESS PAYMENTS CLAUSE BE INCLUDED IN ANY CONTRACT RESULTING FROM THIS IFB. ***" ROSEMOUNT'S BID INCLUDED AN UNNUMBERED PAGE ENTITLED "TERMS AND CONDITIONS" WHICH PROVIDED: "ROSEMOUNT HAS REVIEWED THE TERMS AND CONDITIONS PROVIDED BY THE FAA IFB AC73-4-1069.

B-180437, MAY 6, 1974

CANCELLATION OF IFB AND RESOLICITATION OF BIDS JUSTIFIED WHERE INITIAL SOLICITATION DID NOT INCLUDE PROGRESS PAYMENT CLAUSE, SEE 46 COMP. GEN. 368 (1966) AND B-161608, AUGUST 23, 1967, AND LATE CHANGE FROM A NEGOTIATED TO AN ADVERTISED PROCUREMENT MAY HAVE RESULTED IN APPARENT CONFUSION TO BIDDERS AND DEPRIVED THE GOVERNMENT OF FULL AND FREE COMPETITION. B-180345, APRIL 23, 1974.

TO AIRESEARCH MANUFACTURING COMPANY; BELL & HOWELL COMPANY:

ON OCTOBER 23, 1973, THE FEDERAL AVIATION ADMINISTRATION (FAA) CONTRACTING BRANCH, OKLAHOMA CITY, OKLAHOMA, ISSUED REQUEST FOR PROPOSALS (RFP) NO. AC73-4-1069 FOR A QUANTITY OF ALTITUDE SETTING INDICATORS, INSTRUCTION BOOKS, TECHNICAL DOCUMENTATION AND SPARE PARTS. AMENDMENTS 1 AND 2 TO THE SOLICITATION INCORPORATED SPECIFICATION CHANGES AND EXTENDED THE DATE FOR RECEIPT OF OFFERS. AMENDMENT NO. 3 DATED DECEMBER 11, 1973, PROVIDED, IN PART:

"PAGE 1 (STANDARD FORM 33) OF SOLICITATION IS HEREBY AMENDED AS FOLLOWS:

"(A) BLOCK 2 ---- CHANGE FROM 'NEGOTIATED (RFP)' TO 'ADVERTISED (IFB).'"

AMENDMENT NO. 3 ALSO MADE CHANGES TO THE DELIVERY SCHEDULE AND GENERAL PROVISIONS, AND ESTABLISHED THE BID OPENING TIME AS 3:00 PM, DECEMBER 21, 1973.

OF THE SEVEN BIDS RECEIVED AS OF THE BID OPENING, THE THREE LOWEST WERE AS FOLLOWS:

AIRESEARCH MANUFACTURING CO. $287,140

ROSEMOUNT, INC. 295,020

BELL & HOWELL CO. 350,363

ATTACHED TO AIRESEARCH'S BID WAS A TRANSMITTAL LETTER WHICH INCLUDED THE STATEMENT:

"THE TERMS AND CONDITIONS OF THE BID PACKAGE ARE ACCEPTABLE. THE FOLLOWING PROVISIONS FORM A PART OF THE AIRESEARCH QUOTATION:

"1. IT IS REQUESTED THAT A PROGRESS PAYMENTS CLAUSE BE INCLUDED IN ANY CONTRACT RESULTING FROM THIS IFB. ***"

ROSEMOUNT'S BID INCLUDED AN UNNUMBERED PAGE ENTITLED "TERMS AND CONDITIONS" WHICH PROVIDED:

"ROSEMOUNT HAS REVIEWED THE TERMS AND CONDITIONS PROVIDED BY THE FAA IFB AC73-4-1069. THESE CONDITIONS HAVE BEEN FOUND ACCEPTABLE WITH THE FOLLOWING EXCEPTIONS AND ADDITIONS:

"(2) DOT P-7, CLAUSE 42. BECAUSE CERTAIN FEATURES OF THE PROPOSED EQUIPMENT ARE CONSIDERED PROPRIETARY, ROSEMOUNT MUST TAKE EXCEPTION TO THE UNLIMITED RIGHTS IN DATA PROVISION. A PREDETERMINATION OF RIGHTS PRIOR TO CONTRACT AWARD IS ACCEPTABLE.

"(3) WARRANTY. ROSEMOUNT'S STANDARD WARRANTY CLAUSE SHALL BE APPLICABLE TO THIS CONTRACT. ***"

HOWEVER, ROSEMOUNT DID NOT ATTACH TO ITS BID A COPY OF ITS "STANDARD WARRANTY CLAUSE."

BELL & HOWELL STATES THAT ON JANUARY 15, 1974, IT WAS ADVISED BY THE "FAA *** THAT IT INTENDED TO REJECT THE BID OF AIRESEARCH BUT THAT IT MIGHT ACCEPT THE BID OF ROSEMOUNT." BELL & HOWELL PROTESTED TO OUR OFFICE BY TELEGRAM, WHICH WE RECEIVED ON JANUARY 16, ALLEGING THAT THE BIDS OF AIRESEARCH AND ROSEMOUNT SHOULD BE REJECTED AS NONRESPONSIVE. HOWEVER, SUBSEQUENT TO BELL & HOWELL'S PROTEST, THE PROCURING ACTIVITY CANCELED THE SOLICITATION AND READVERTISED THE PROCUREMENT BY IFB NO. AC 73-4-1207. SUBSEQUENT PROTESTS FILED WITH OUR OFFICE, AIRESEARCH SUPPORTED THE RESOLICITATION AND BELL & HOWELL OPPOSED IT. BID OPENING UNDER IFB AC 73-4 -1207 HAS BEEN POSTPONED PENDING OUR DECISION.

THE PROCURING AGENCY HAS OFFERED FOUR REASONS FOR THE RESOLICITATION: (1) THE USE OF AN AMENDMENT TO CHANGE A NEGOTIATED TO A FORMALLY ADVERTISED PROCUREMENT, WITH BID OPENING SCHEDULED A WEEK THEREAFTER, CONFUSED BIDDERS AND LED TO NONRESPONSIVE BIDS; (2) THE SOLICITATION SHOULD HAVE MADE PROVISION FOR PROGRESS PAYMENTS UNDER THE CRITERION OF FPR 1-30.504- 1(A)(1)(I); (3) THE INITIAL SOLICITATION OMITTED A WARRANTY CLAUSE DESIRED BY THE GOVERNMENT; AND (4) SUBSTANTIAL CHANGES WERE REQUIRED IN THE SPECIFICATIONS.

ONE GROUND ADVANCED FOR THE NECESSITY OF READVERTISING THIS PROCUREMENT, IS THAT THE ORIGINAL SOLICITATION SHOULD HAVE CONTAINED A CLAUSE PERMITTING PROGRESS PAYMENTS, IN VIEW OF FPR 1-30.504-1(A)(1)(I) WHICH PROVIDES THEREFOR WHEN THE CONTRACTING OFFICER:

"CONSIDERS THAT THE PERIOD BETWEEN THE BEGINNING OF WORK AND THE REQUIRED FIRST PRODUCTION DELIVERY WILL EXCEED 6 MONTHS ***."

ARTICLE V OF IFB NO. AC 73-4-1069, ENTITLED "TIME OF DELIVERY," STATED THAT THE GOVERNMENT "DESIRES" DELIVERY OF A PREPRODUCTION UNIT OF ITEMS 1A, 1B, 1C AND 1D SEVENTY CALENDAR DAYS AFTER ISSUANCE OF A WRITTEN NOTICE OF AWARD. THE FIRST PRODUCTION UNITS OF ITEMS 1A AND 1B AND DELIVERY OF ITEMS 1C AND 1D WERE DESIRED WITHIN 120 CALENDAR DAYS AFTER ISSUANCE OF WRITTEN NOTICE OF AWARD. AMENDMENT NO. 3 TO THE IFB PERMITTED BIDDERS WHO WERE UNABLE TO MEET THE DESIRED DELIVERY TIME TO PROPOSE ALTERNATE DELIVERY SCHEDULES. THE AMENDMENT FURTHER ADVISED THAT BIDS WOULD BE REJECTED AS NONRESPONSIVE "IF THE PROPOSED DELIVERY SCHEDULE EXCEEDS THE GOVERNMENT'S DESIRED DELIVERY BY MORE THAN ONE HUNDRED TWENTY (120) CALENDAR DAYS." UNDER THIS PROVISION THE PREPRODUCTION UNITS AND FIRST PRODUCTION DELIVERIES COULD BE MADE 190 AND 240 DAYS, RESPECTIVELY, AFTER ISSUANCE OF A WRITTEN NOTICE OF AWARD. EVEN IF APPROVED PREPRODUCTION UNITS SUBSEQUENTLY FORMED PART OF THE INITIAL PRODUCTION DELIVERY, THE CONTRACTOR WOULD HAVE NO OBLIGATION TO DELIVER AN ITEM IN LESS THAN 190 DAYS.

CLEARLY, THE GOVERNMENT'S "DESIRED" DELIVERY SCHEDULE DID NOT SATISFY THE CRITERION OF FPR 1-30.504-1(A)(1)(I) FOR INCLUSION OF A PROGRESS PAYMENTS PROVISION. HOWEVER, AMENDMENT NO. 3 TO THE IFB PERMITTED BIDDERS TO PROPOSE ALTERNATE DELIVERY SCHEDULES UNDER WHICH THE GOVERNMENT COULD NOT REQUIRE DELIVERY OF PRODUCTION ITEMS IN LESS THAN 240 DAYS. SINCE THE "PERIOD BETWEEN THE BEGINNING OF WORK AND THE REQUIRED FIRST PRODUCTION DELIVERY (WOULD) EXCEED SIX MONTHS," WE AGREE WITH THE PROCURING AGENCY THAT A PROGRESS PAYMENTS CLAUSE WAS APPROPRIATE FOR INCLUSION IN THE INSTANT PROCUREMENT.

THE QUESTION THEN ARISES AS TO WHETHER THE OMISSION OF THE PROGRESS PAYMENTS CLAUSE CONSTITUTED A COMPELLING REASON FOR THE CANCELLATION OF THE INITIAL IFB AFTER BIDS HAVE BEEN EXPOSED.

IN 46 COMP. GEN. 368 (1966), AN IFB PROVIDED FOR PAYMENT ONLY UPON DELIVERY AND ACCEPTANCE OF THE SUPPLIES BEING PROCURED, AND ERRONEOUSLY LACKED A PROGRESS PAYMENTS CLAUSE. TWO BIDS WERE RECEIVED. THE "SUBSTANTIALLY LOWER" BID WAS SUBMITTED UNDER COVER OF A LETTER WHICH REQUESTED THAT A PROGRESS PAYMENTS CLAUSE BE INSERTED INTO ANY RESULTING CONTRACT. WE CONCLUDED WITH RESPECT TO THAT BID, AS THE FAA CONCLUDED WITH RESPECT TO AIRESEARCH'S BID IN THE INSTANT CASE, THAT THE REQUEST FOR PROGRESS PAYMENTS RENDERED THE BID NONRESPONSIVE. THE DECISION CONCLUDED:

"ALTHOUGH NOT EVERY DEFECT IN AN INVITATION WILL REQUIRE REJECTION OF BIDS AND READVERTISEMENT OF THE REQUIREMENT, WE BELIEVE THE CIRCUMSTANCES OF THIS CASE DICTATE SUCH ACTION. SINCE NO CONTRACT HAS BEEN AWARDED, WE ARE NOT FACED WITH THE QUESTION OF THE LEGALITY OF A CONTRACT. THE PRIMARY QUESTION APPEARS TO BE WHETHER THE GOVERNMENT HAS OBTAINED ADVANTAGE OF THE FULL AND FREE COMPETITION CONTEMPLATED BY FORMAL ADVERTISING PROCEDURES. THE AMOUNT OF THIS PROCUREMENT, THE LENGTH OF TIME BETWEEN PRODUCTION AND DELIVERY, THE RECEIPT OF ONLY TWO BIDS, AND THE SUBSTANTIALLY LOWER BID FROM THE BIDDER ANTICIPATING PROGRESS PAYMENTS, INDICATE THAT THE FAILURE OF THE PROCURING ACTIVITY TO COMPLY WITH THE MANDATORY REQUIREMENTS OF THE APPLICABLE REGULATION PREVENTED FULL AND FREE COMPETITION TO THE GOVERNMENT'S DISADVANTAGE. CF. B-149730, OCTOBER 12, 1962."

SIMILARLY, IN B-161608, AUGUST 23, 1967, THE LOWEST OF FOUR BIDS WAS REJECTED AS NONRESPONSIVE FOR REQUESTING PROGRESS PAYMENTS WHEN THE IFB ERRONEOUSLY FAILED TO PROVIDE THEREFOR. THE THIRD AND FOURTH LOWEST BIDDERS ALSO WERE REJECTED AS NONRESPONSIVE FOR OTHER REASONS. THE SECOND LOW BIDDER, WHOSE BID WAS 19 PERCENT HIGHER THAN THE LOW BIDDER, PROTESTED AGAINST THE PROCURING AGENCY'S CANCELLATION OF THE IFB AFTER BID OPENING AND RESOLICITATION OF THE REQUIREMENT. IN DENYING THE PROTEST, WE STATED:

"WE ALSO ARE OF THE OPINION THAT THE ABSENCE OF A PROGRESS PAYMENTS PROVISION IN THE ORIGINAL INVITATION CONSTITUTED SUFFICIENT GROUNDS FOR ITS CANCELLATION. *** RELYING ON OUR DECISION B-160013, OCTOBER 27, 1966, 46 COMP. GEN. 368, THE CONTRACTING OFFICER DETERMINED THAT THE ABSENCE OF PROGRESS PAYMENTS PROVISIONS PRECLUDED THE 'FULL AND FREE COMPETITION CONTEMPLATED BY THE FORMAL ADVERTISING PROCEDURES.' SINCE THERE WAS ONLY ONE RESPONSIVE BID AND SINCE THE BID OF THE BIDDER REQUESTING PROGRESS PAYMENTS WAS SUBSTANTIALLY LOWER THAN THE ONE RESPONSIVE BID, WE CONCLUDE THAT THE CONTRACTING OFFICER'S DETERMINATION THAT FULL AND FREE COMPETITION WAS NOT ACHIEVED BECAUSE OF THE ABSENCE OF PROGRESS PAYMENTS ALSO WAS A VALID EXERCISE OF ADMINISTRATIVE DISCRETION AND THEREFORE NOT SUBJECT TO QUESTION BY OUR OFFICE."

IN THE INSTANT CASE, AIRESEARCH'S BID WAS APPROXIMATELY 19 PERCENT LESS THAN THAT OF THE NEXT LOW RESPONSIVE BIDDER, BELL & HOWELL. AS IN THE DECISIONS DISCUSSED ABOVE, THE GOVERNMENT HAS BEEN PRECLUDED FROM ACCEPTING A BID WHICH WAS SUBSTANTIALLY LOWER THAN THE NEXT HIGHER RESPONSIVE BID, AS THE RESULT OF A FAILURE TO INCLUDE A PROGRESS PAYMENTS CLAUSE IN AN IFB.

MOREOVER, FAA BELIEVES THAT THE LATE CHANGE FROM A NEGOTIATED TO AN ADVERTISED PROCUREMENT RESULTED IN THE APPARENT CONFUSION OF BIDDERS AND DEPRIVED THE GOVERNMENT OF FULL AND FREE COMPETITION. THE SECOND LOW BIDDER (ROSEMOUNT) CONDITIONED ITS BID BY TAKING EXCEPTION TO THE "RIGHTS IN DATA - UNLIMITED" CLAUSE IN THE SOLICITATION AND BY NOTING THAT ITS STANDARD WARRANTY CLAUSE WOULD BE APPLICABLE TO THE CONTRACT, ALTHOUGH THE BIDDER DID NOT INCLUDE A COPY OF ITS WARRANTY CLAUSE WITH THE BID. ADDITION, ANOTHER BIDDER, GARRETT MANUFACTURING LTD., A CANADIAN FIRM, PLACED UPON ITS BID THE NOTATION "U.S. DUTY IF APPLICABLE WOULD BE EXTRA." THUS, 3 OUT OF 7 - OVER 40 PERCENT - OF THE BIDS SUBMITTED UNDER THE FIRST IFB WERE QUALIFIED.

UNDER THESE CIRCUMSTANCES, WE BELIEVE THAT THE RESOLICITATION OF BIDS WAS JUSTIFIED. B-180345, APRIL 23, 1974.