B-180560, MAY 14, 1974

B-180560: May 14, 1974

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CONTENTION THAT AGENCY WAS NEGLIGENT IN NOT ATTEMPTING TO ASCERTAIN THAT UNDER INDUSTRY PRACTICE WORD "NET" IN CONJUNCTION WITH PRICE IN BEST AND FINAL OFFER DID NOT CONNOTE EXCLUSION OF PROMPT PAYMENT DISCOUNT AS OFFERED IN INITIAL PROPOSAL IS WITHOUT MERIT SINCE EVIDENCE DOES NOT ESTABLISH EXISTENCE OF SUCH INDUSTRY PRACTICE AND AGENCY REASONABLY ASCRIBED ORDINARY MEANING TO WORD "NET" IN EXCLUDING CONSIDERATION OF DISCOUNT IN EVALUATION. FOR THE REASONS STATED BELOW THE PROTEST IS DENIED. PROPOSALS WERE RECEIVED FROM ELECTRIC REGULATOR COMPANY (ERC) AND DYNASTAT ON AUGUST 2. ERC OFFERED A UNIT PRICE OF $57.99 FOR BOTH THE MINIMUM AND THE MAXIMUM LESS MINIMUM QUANTITY AND THE WORD "NET" WAS INSERTED IN THE PROMPT PAYMENT DISCOUNT PROVISION ON PAGE 1.

B-180560, MAY 14, 1974

CONTENTION THAT AGENCY WAS NEGLIGENT IN NOT ATTEMPTING TO ASCERTAIN THAT UNDER INDUSTRY PRACTICE WORD "NET" IN CONJUNCTION WITH PRICE IN BEST AND FINAL OFFER DID NOT CONNOTE EXCLUSION OF PROMPT PAYMENT DISCOUNT AS OFFERED IN INITIAL PROPOSAL IS WITHOUT MERIT SINCE EVIDENCE DOES NOT ESTABLISH EXISTENCE OF SUCH INDUSTRY PRACTICE AND AGENCY REASONABLY ASCRIBED ORDINARY MEANING TO WORD "NET" IN EXCLUDING CONSIDERATION OF DISCOUNT IN EVALUATION.

TO DYNASTAT, INC.:

DYNASTAT, INCORPORATED (DYNASTAT), HAS PROTESTED THE AWARD OF A CONTRACT TO ANOTHER FIRM UNDER REQUEST FOR PROPOSALS NO. DSA-400-74-R 0551, ISSUED ON JULY 13, 1973, BY THE DIRECTORATE OF PROCUREMENT AND PRODUCTION, DEFENSE GENERAL SUPPLY CENTER, DEFENSE SUPPLY AGENCY (DSA), RICHMOND, VIRGINIA. FOR THE REASONS STATED BELOW THE PROTEST IS DENIED.

THE RFP SOLICITED OFFERS FOR AN INDEFINITE QUANTITY OF REGULATOR ASSEMBLIES WITH A MAXIMUM QUANTITY OF 1,104 UNITS COMPRISED OF A MINIMUM QUANTITY OF 276 UNITS AND A MAXIMUM LESS MINIMUM QUANTITY OF 828 UNITS. PROPOSALS WERE RECEIVED FROM ELECTRIC REGULATOR COMPANY (ERC) AND DYNASTAT ON AUGUST 2, 1973, THE CLOSING DATE FOR RECEIPT OF PROPOSALS. ERC OFFERED A UNIT PRICE OF $57.99 FOR BOTH THE MINIMUM AND THE MAXIMUM LESS MINIMUM QUANTITY AND THE WORD "NET" WAS INSERTED IN THE PROMPT PAYMENT DISCOUNT PROVISION ON PAGE 1, PARAGRAPH 16, OF ERC'S OFFER. DYNASTAT'S PRICES WERE AS FOLLOWS:

"276 TO 499 $64.50

500 TO 749 60.00

750 TO 999 56.50

1,000 AND OVER 55.00

"QUANTITY PRICES APPLY TO EACH INDIVIDUAL ORDER. AFTER PLACEMENT OF MINIMUM ORDER OF 276 PIECES, THE PRICE OF $64.50 WILL APPLY TO QUANTITIES OF 68 TO 499 PIECES. LARGER QUANTITIES WILL BE PRICED AS ABOVE."

DYNASTAT STATED IN PARAGRAPH 16, PAGE 1 OF ITS PROPOSAL THAT IT WAS OFFERING A PROMPT PAYMENT DISCOUNT OF 0.5 PERCENT-20 CALENDAR DAYS.

NEGOTIATIONS WERE OPENED ON NOVEMBER 21, 1973. BOTH ERC AND DYNASTAT WERE CONTACTED AND EACH OFFEROR WAS GIVEN THE OPPORTUNITY TO SUBMIT A BEST AND FINAL OFFER. ERC'S BEST AND FINAL OFFER OF $57.99 PER UNIT FOR BOTH THE MINIMUM AND MAXIMUM LESS MINIMUM QUANTITY WAS THE SAME AS IN ITS INITIAL PROPOSAL. DYNASTAT'S BEST AND FINAL OFFER WAS TRANSMITTED TO THE PROCURING ACTIVITY BY LETTER OF NOVEMBER 21, 1973, WHICH STATED AS FOLLOWS WITH RESPECT TO PRICE:

"MINIMUM QUANTITY 276 EA. 58.00 EA. NET

ADDITIONAL QUANTITIES FROM

67 PIECES EA. TO 828 PIECES EA. 58.00 EA. NET"

SINCE DYNASTAT'S BEST AND FINAL OFFER USED THE WORD "NET" IN EXPRESSING THE PRICE, WITHOUT ANY INDICATION THAT THE DISCOUNT IN ITS INITIAL OFFER REMAINED IN EFFECT, THE CONTRACTING OFFICER CONCLUDED THAT THE DISCOUNT OFFERED IN DYNASTAT'S INITIAL PROPOSAL HAD BEEN SUPERSEDED. ON THIS BASIS THE CONTRACTING OFFICER DETERMINED THAT ERC WAS THE LOWEST OFFEROR AND AWARD WAS MADE TO THAT FIRM ON DECEMBER 13, 1973. DYNASTAT WAS SO NOTIFIED ON DECEMBER 27, 1973, AND ITS PROTEST TO OUR OFFICE IS DATED JANUARY 4, 1974.

DYNASTAT ARGUES THAT THE PROMPT PAYMENT DISCOUNT OFFERED IN ITS INITIAL PROPOSAL SHOULD HAVE BEEN CONSIDERED IN THE EVALUATION OF ITS BEST AND FINAL OFFER IN WHICH EVENT ITS OFFER WOULD HAVE BEEN LOW. IN THIS REGARD, DYNASTAT REFERS TO AN INDUSTRY PRACTICE OF STATING THE PRICING CONDITIONS SEPARATELY FROM THE TERMS OF PAYMENT AND IT IS ARGUED THAT A "NET PRICE" IS ONE WHERE ALL TRADE OR QUANTITY DISCOUNTS HAVE BEEN TAKEN IN RELATION TO PRICING BUT THIS DOES NOT INCLUDE PROMPT PAYMENT DISCOUNTS WHICH INVOLVE CREDIT AND METHOD OF PAYMENT. DYNASTAT URGES THAT ITS CHANGE TO THE PRICING STRUCTURE IN ITS BEST AND FINAL OFFER IS DISTINCT FROM THE PROMPT PAYMENT DISCOUNT STATED ON PAGE 1 OF ITS INITIAL OFFER. DYNASTAT HAS FORWARDED QUOTATION SHEETS FROM SEVERAL FIRMS TO ILLUSTRATE THAT PRICING CONDITIONS ARE STATED SEPARATELY FROM TERMS OF PAYMENT. DYNASTAT ASSERTS THAT THE CONTRACTING ACTIVITY WAS NEGLIGENT IN NOT OBTAINING INFORMATION AS TO THE INDUSTRY PRACTICE AND THAT THE ASSUMPTION MADE BY THE AGENCY IN EVALUATING DYNASTAT'S OFFER WAS IN ERROR. DYNASTAT STATES THAT IT IS NOT AWARE OF ANY REGULATION THAT WOULD SUPPORT THE AGENCY'S POSITION. THEREFORE, IT IS REQUESTED THAT THE AWARD TO ERC BE CANCELLED AND THAT IT BE AWARDED THE CONTRACT AS THE LOW OFFEROR.

DSA INSISTS THAT DYNASTAT'S PROPOSAL WAS EVALUATED IN ACCORDANCE WITH THE CUSTOMARY UNDERSTANDING OF WHAT IS MEANT BY THE WORD "NET" WHEN USED IN CONJUNCTION WITH A PRICE. IT IS ALSO REPORTED THAT THE CONTRACTING OFFICER WAS NOT AWARE OF ANY SUCH INDUSTRY PRACTICE AS REFERRED TO BY DYNASTAT. FURTHERMORE, IT IS POINTED OUT THAT ERC USED THE TERM "NET" TO INDICATE THAT NO PROMPT PAYMENT WAS BEING OFFERED, WHEREAS DYNASTAT DID NOT USE THE TERM IN CONJUNCTION WITH THE PRICES IN ITS INITIAL PROPOSAL WHERE A DISCOUNT WAS ALSO OFFERED.

THE AGENCY'S INTERPRETATION OF THE WORD "NET" USED IN CONJUNCTION WITH THE UNIT PRICE IN DYNASTAT'S BEST AND FINAL OFFER, TO THE EFFECT THAT ALL DISCOUNTS WERE DEDUCTED, IS IN ACCORDANCE WITH THE ORDINARY MEANING OF THAT WORD. SEE OLTEDALE V. UNITED STATES, 39 F. SUPP. 998, 1006 (DIST. CT. R.I. 1941), WHERE THE COURT GAVE THE WORD "NET" SUCH A CONSTRUCTION. SEE ALSO VOLUME 28A WORDS AND PHRASES PAGES 8-15. THERE WAS NOTHING IN DYNASTAT'S BEST AND FINAL OFFER TO INDICATE THAT IT WAS DYNASTAT'S INTENT THAT THE WORD "NET" SHOULD NOT BE GIVEN ITS ORDINARY MEANING. WHILE DYNASTAT HAS CONTENDED THAT UNDER INDUSTRY PRACTICE THE CONTRACTING OFFICER SHOULD HAVE COME TO A DIFFERENT CONCLUSION REGARDING THE USE OF THE WORD "NET", WE HAVE NOT BEEN FURNISHED WITH EVIDENCE WHICH ESTABLISHES THAT SUCH A PRACTICE EXISTS. IN THIS REGARD, THE QUOTATION SHEETS OF OTHER FIRMS SUBMITTED BY DYNASTAT ESTABLISH NOTHING MORE THAN THE RESPECTIVE FIRMS VARYING DEFINITIONS OF AND POLICIES WITH RESPECT TO PRICES AND DISCOUNTS. THIS IS NOT IN OUR VIEW ANY BASIS FOR CONCLUDING THAT THE WORD "NET" IN CONJUNCTION WITH AN OFFERED PRICE IN A GOVERNMENT NEGOTIATED PROCUREMENT IS TO BE GIVEN OTHER THAN ITS ORDINARY MEANING.

THEREFORE, WE DO NOT FIND THAT THE CONTRACTING OFFICER ACTED UNREASONABLY IN EVALUATING DYNASTAT'S PROPOSAL IN THE MANNER INDICATED. ACCORDINGLY, WE FIND NO BASIS TO QUESTION THE AWARD.