B-180996, AUG 2, 1974, 54 COMP GEN 84

B-180996: Aug 2, 1974

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ACCEPTANCE IS PROPER. AS FACT THAT OFFER MAY BE UNBALANCED DOES NOT RENDER IT UNACCEPTABLE NOR OF ITSELF INVALIDATE AWARD OF CONTRACT TO LOW OFFEROR IN ABSENCE OF EVIDENCE OF IRREGULARITY OR SUBSTANTIAL DOUBT THAT AWARD WILL IN FACT RESULT IN LOWEST COST TO GOVERNMENT. CONTRACTS - NEGOTIATION - PRICES - REDUCTION LOW OFFEROR'S SUBSTANTIAL REDUCTION OF ORIGINAL PRICES FOLLOWING NEGOTIATIONS PROVIDES NO REASONABLE BASIS TO CONCLUDE THAT OFFEROR WAS SUPPLIED WITH ADDITIONAL INFORMATION BY AGENCY. FOR IT IS NOT UNCOMMON FOR OFFERORS TO OFFER SUBSTANTIAL PRICE REDUCTIONS IN FINAL STAGES OF NEGOTIATIONS. EACH OFFEROR WAS REQUIRED TO SUBMIT A PRICE FOR EACH OF FOUR QUANTITY RANGES WITHIN THIRTEEN LINE ITEMS LISTED IN THE RFP.

B-180996, AUG 2, 1974, 54 COMP GEN 84

CONTRACTS - NEGOTIATION - OFFERS - UNBALANCED - NOT AUTOMATICALLY PRECLUDED UPON CONFIRMATION OF APPARENTLY UNBALANCED OFFER FOR PREPARATION OF TECHNICAL PUBLICATION DATA, ACCEPTANCE IS PROPER, AS FACT THAT OFFER MAY BE UNBALANCED DOES NOT RENDER IT UNACCEPTABLE NOR OF ITSELF INVALIDATE AWARD OF CONTRACT TO LOW OFFEROR IN ABSENCE OF EVIDENCE OF IRREGULARITY OR SUBSTANTIAL DOUBT THAT AWARD WILL IN FACT RESULT IN LOWEST COST TO GOVERNMENT. CONTRACTS - NEGOTIATION - OFFERS - PRICES - UNPROFITABLE NO PROVISION OF LAW PREVENTS AWARD OF CONTRACT TO LOW OFFEROR EVEN THOUGH QUOTED PRICES MAY BE UNREALISTICALLY LOW OR RESULT IN UNPROFITABLE CONTRACT. CONTRACTS - NEGOTIATION - PRICES - REDUCTION LOW OFFEROR'S SUBSTANTIAL REDUCTION OF ORIGINAL PRICES FOLLOWING NEGOTIATIONS PROVIDES NO REASONABLE BASIS TO CONCLUDE THAT OFFEROR WAS SUPPLIED WITH ADDITIONAL INFORMATION BY AGENCY, FOR IT IS NOT UNCOMMON FOR OFFERORS TO OFFER SUBSTANTIAL PRICE REDUCTIONS IN FINAL STAGES OF NEGOTIATIONS, EVEN WITHOUT CHANGE IN GOVERNMENT'S REQUIREMENTS.

IN THE MATTER OF GLOBAL GRAPHICS, INC., AUGUST 2, 1974:

REQUEST FOR PROPOSALS (RFP) NO. DAAJO1-74-R-0120 (PIG), ISSUED BY THE ARMY AVIATION SYSTEMS COMMAND (AVSCOM), ST. LOUIS, MISSOURI, SOLICITED PROPOSALS FOR THE PREPARATION OF TECHNICAL PUBLICATION DATA IN REPRODUCIBLE FORM.

EACH OFFEROR WAS REQUIRED TO SUBMIT A PRICE FOR EACH OF FOUR QUANTITY RANGES WITHIN THIRTEEN LINE ITEMS LISTED IN THE RFP. IN ADDITION, THE SOLICITATION AT PARAGRAPH D.2 ADVISED PROSPECTIVE OFFERORS THAT THE CONTRACT WAS TO BE AWARDED TO THE LOWEST RESPONSIVE, RESPONSIBLE OFFEROR, AND THAT FOR PURPOSES OF EVALUATION ONLY, THE LOWEST TOTAL COST TO THE GOVERNMENT WAS TO BE OBTAINED BY TAKING THE SUBTOTAL OF THE FOUR RANGES WITHIN EACH ITEM AND THEN SUMMING THE THIRTEEN LINE ITEMS. THE ACTUAL QUANTITIES TO BE ORDERED WERE NOT LISTED OR ESTIMATED IN THE RFP BUT WERE TO BE ESTABLISHED BY INDIVIDUAL DELIVERY ORDERS ISSUED DURING THE REMAINDER OF FISCAL YEAR 1974.

UPON INITIAL EVALUATION OF THE THIRTY-ONE PROPOSALS RECEIVED, THE FIVE FIRMS WITH THE LOWEST INITIAL AGGREGATE PRICES WERE DETERMINED TO BE WITHIN THE COMPETITIVE RANGE. EACH OF THESE FIRMS WAS SENT LETTERS INVITING "BEST AND FINAL" OFFERS AND IN RESPONSE THERETO EACH FIRM EITHER AFFIRMED OR REVISED ITS INITIAL PRICES. AFTER AN AFFIRMATIVE PREAWARD SURVEY WAS CONCLUDED, THE CONTRACT WAS AWARDED TO NHA TECHNICAL SERVICES, INCORPORATED (NHA) BASED ON ITS SUBMISSION OF THE LOWEST AGGREGATE PRICE.

GLOBAL GRAPHICS, INCORPORATED (GLOBAL), A FIRM NOT FOUND BY THE PROCURING ACTIVITY TO BE WITHIN THE COMPETITIVE RANGE, PROTESTED AGAINST THE AWARD OF THE CONTRACT TO NHA ON THE GROUNDS THAT ITS PROPOSAL DID NOT OFFER THE GOVERNMENT REALISTIC PRICES FOR EACH OF THE FOUR RANGES OF THE THIRTEEN LINE ITEMS TO BE PRICED. GLOBAL CONTENDS THAT NHA, HAVING PREVIOUS CONTRACTS WITH AVSCOM FOR ESSENTIALLY THE SAME REQUIREMENT, "KNEW FROM HISTORICAL DATA WHAT RANGES OF EACH ITEM, IF ANY, WOULD BE REQUIRED AND PRICED EACH RANGE AND ITEM ACCORDINGLY." MOREOVER, GLOBAL ALLEGES THAT OFTEN THE PRICES SUBMITTED BY NHA DID NOT REFLECT ITS ACTUAL COSTS SHOULD THE SERVICES BE REQUIRED, IN VIEW OF THE FACT THAT MANY OF THE PRICES OFFERED WOULD NOT EQUAL THE COST OF THE RAW MATERIALS, LET ALONE THE COST OF ANY OF THE SERVICES TO BE PERFORMED. FURTHERMORE, GLOBAL ARGUES THAT A SUBSTANTIAL PRICE REDUCTION BETWEEN THE ORIGINAL PRICES QUOTED BY NHA AND THOSE SUBMITTED IN ITS "BEST AND FINAL" OFFER WAS THE RESULT OF SOME ADDITIONAL INFORMATION SUPPLIED NHA BY THE PROCURING ACTIVITY.

IT IS THE ADMINISTRATIVE POSITION THAT ALTHOUGH THE PRICES QUOTED BY NHA WERE CONCEDEDLY UNBALANCED AT THE TIME OF AWARD, THEY WERE FAIR AND REASONABLE COMPARED TO THE PRICES AVSCOM HAD PREVIOUSLY PAID FOR ESSENTIALLY THE SAME REQUIREMENT. FURTHERMORE, IT IS AVSCOM'S POSITION THAT THE SUBJECT PROCUREMENT WAS CONDUCTED IN AN ATMOSPHERE IN WHICH ADEQUATE PRICE COMPETITION EXISTED AMONG ALL PROSPECTIVE OFFERORS. FINALLY, AVSCOM OBSERVES THAT NHA HAS CONFIRMED THE PRICES QUOTED IN ITS PROPOSAL.

AS TO THE MATTER OF UNBALANCED BIDS GENERALLY, IT IS OUR VIEW THAT IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO DISCOURAGE, THROUGH APPROPRIATE INVITATION SAFEGUARDS, THE SUBMISSION OF UNBALANCED BIDS OR OFFERS BASED ON SPECULATION AS TO WHICH ITEMS ARE PURCHASED IN GREATER QUANTITIES. COMP. GEN. 335 (1969); B-173487(4), DECEMBER 10, 1971. MOREOVER, IN SITUATIONS IN WHICH AN EVALUATION FORMULA PERMITS BIDDERS TO BID LOW ON ITEMS KNOWN FROM PAST EXPERIENCE OR ON THE BASIS OF SPECULATION TO BE PURCHASED INFREQUENTLY AND HIGH ON ITEMS FREQUENTLY PURCHASED, OUR OFFICE HAS HELD THAT SUCH EVALUATION FORMULAS VIOLATE THE REQUIREMENTS OF FREE AND OPEN COMPETITION AND THAT SOLICITATIONS CONTAINING SUCH FORMULAS SHOULD BE CANCELED. SEE 47 COMP. GEN. 768 (1968); 43 ID. 159 (1963). HOWEVER, SINCE THE SUBJECT CONTRACT HAS BEEN EITHER COMPLETELY OR SUBSTANTIALLY PERFORMED AND THE PROCURING ACTIVITY HAS ADVISED OUR OFFICE THAT, TO DISCOURAGE UNBALANCED BIDDING IN FUTURE SIMILAR PROCUREMENTS, ESTIMATED QUANTITIES WILL BE SET FORTH AND THERE WILL BE EXCLUDED RANGES FOR ITEMS WHERE THERE IS LITTLE LIKELIHOOD THAT SUBSTANTIAL QUANTITIES WILL BE ORDERED, IT IS THE OPINION OF THIS OFFICE THAT CANCELLATION OF THE CONTRACT WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT.

FURTHERMORE, THE FACT THAT A BID MAY BE UNBALANCED DOES NOT RENDER IT NONRESPONSIVE NOR DOES THAT FACTOR OF ITSELF INVALIDATE AN AWARD OF A CONTRACT. 49 COMP. GEN. 335, 343 (1969). AS WAS STATED BY THE COURT IN FRANK STAMATO & CO. V. CITY OF NEW BRUNSWICK, 90 A. 2D. 34, 36 (1952):

THERE MUST BE PROOF OF COLLUSION OR OF FRAUDULENT CONDUCT ON THE PART OF SUCH BIDDER *** OR PROOF OF OTHER IRREGULARITY OF SUCH SUBSTANTIAL NATURE AS WILL OPERATE TO AFFECT FAIR AND COMPETITIVE BIDDING.

IN 49 COMP. GEN. 335, SUPRA, AFTER CITING STAMATO, WE STATED AT PAGE 343:

*** WHERE A BIDDER HAS CONFIRMED A BID WHICH APPEARS TO BE UNBALANCED AND THERE IS NO INDICATION THAT THE BID IS NOT AS INTENDED OR EVIDENCE OF ANY IRREGULARITY, WE HAVE HELD THAT THE BID MAY BE ACCEPTED IF IT IS OTHERWISE THE LOWEST ACCEPTABLE BID AND THE BIDDER IS RESPONSIBLE.

WHILE THE DECISIONS REFERRED TO ABOVE PERTAIN TO ADVERTISED PROCUREMENTS, WE SEE NO BASIS FOR A DIFFERENT RULE TO BE APPLIED TO NEGOTIATED PROCUREMENTS.

ALTHOUGH WE HAVE HELD THAT AN UNBALANCED BID WHICH IS EVALUATED AS LOW SHOULD NOT BE CONSIDERED FOR AWARD WHERE THERE IS SUBSTANTIAL DOUBT THAT AWARD TO THAT BIDDER WILL RESULT IN THE LOWEST COST TO THE GOVERNMENT, B- 172789, JULY 19, 1971, WE DO NOT BELIEVE THAT SUCH DOUBT EXISTS IN THIS CASE BECAUSE THE PROCURING ACTIVITY HAS DETERMINED THAT THE PRICES QUOTED BY NHA ARE FAIR AND REASONABLE COMPARED TO WHAT IT IS ACCUSTOMED TO PAYING FOR SIMILAR REQUIREMENTS. THEREFORE, WE DO NOT BELIEVE NHA'S UNBALANCED PROPOSAL GAVE THAT COMPANY A COMPETITIVE ADVANTAGE OVER OTHER OFFERORS OR WILL RESULT IN OTHER THAN THE LOWEST COST TO THE GOVERNMENT.

IN REGARD TO GLOBAL'S CONTENTION THAT THE UNREALISTIC PRICES QUOTED BY NHA FOR SOME QUANTITY RANGES DO NOT REFLECT ITS ACTUAL COSTS SHOULD ANY OF THE SERVICES BE REQUIRED, WE ARE NOT AWARE OF ANY PROVISION OF LAW PRECLUDING A FIRM FROM SUBMITTING AN OFFER WHICH WILL RESULT IN A CONTRACT BEING PERFORMED AT A PRICE WHICH OTHERS MAY CONSIDER UNREALISTICALLY LOW, OR EVEN UNPROFITABLE. B-175928, AUGUST 2, 1972.

FINALLY, GLOBAL CONTENDS THAT THE DRASTIC REDUCTION IN NHA'S PRICES FOLLOWING NEGOTIATIONS WITH AVSCOM WAS THE RESULT OF SOME ADDITIONAL INFORMATION BEING SUPPLIED NHA BY THE AGENCY. HOWEVER, WE HAVE NOTED THAT IT IS NOT UNCOMMON FOR OFFERORS TO OFFER SUBSTANTIAL PRICE REDUCTIONS IN THE FINAL STAGES OF NEGOTIATIONS, EVEN WITHOUT CHANGES IN THE GOVERNMENT'S REQUIREMENTS. SEE B-174141, JANUARY 20, 1972. GLOBAL HAS NOT ADVANCED ANY EVIDENCE TO SUPPORT ITS ALLEGATION, BUT MERELY INFERS THAT SOME ADDITIONAL INFORMATION WAS SUPPLIED FROM THE FACT THAT NHA SUBSTANTIALLY LOWERED ITS PRICES. WE DO NOT THINK THAT CONCLUSION MAY REASONABLY BE DRAWN IN THE ABOVE CIRCUMSTANCES.

ACCORDINGLY, THERE IS NO LEGAL BASIS TO QUESTION THE PROPRIETY OF THE AWARD TO NHA AND THE PROTEST OF GLOBAL IS THEREFORE DENIED.