B-181050, SEP 27, 1974, 54 COMP GEN 242

B-181050: Sep 27, 1974

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"KNOWN REQUIREMENT" FOR OPTION YEARS WAS NOT ESTABLISHED NOR WAS THERE REASONABLE CERTAINTY THAT FUNDS WOULD BE AVAILABLE TO PERMIT EXERCISE OF OPTIONS. BIDS - UNBALANCED - PROOF OF COLLUSION OR FRAUD - NOT ESSENTIAL ELEMENT PROOF OF COLLUSION OR FRAUD ON PART OF BIDDER OFFERING MATHEMATICALLY UNBALANCED BID IS NOT ESSENTIAL ELEMENT IN DETERMINING TO REJECT BID. BIDS - PREPARATION - OPTION BIDS WARNING IN SOLICITATION THAT MATERIALLY UNBALANCED BIDS MAY BE REJECTED AS NONRESPONSIVE IS NOT SUFFICIENT TO APPRISE BIDDERS HOW OPTION BIDS SHOULD BE PREPARED BECAUSE PROVISION LACKS GUIDELINES OR STANDARDS AS TO WHAT CONSTITUTES "MATERIALLY UNBALANCED.". WAS THE SOLE BIDDER. THE IFB WAS CANCELED AFTER BID OPENING BECAUSE OF THE "*** INADVERTENT INCLUSION OF DAVIS-BACON WAGES RATE REQUIREMENTS *** AS WELL AS AMBIGUITIES CREATED BY AN INCREMENTAL FUNDING PROVISION.".

B-181050, SEP 27, 1974, 54 COMP GEN 242

CONTRACTS - REQUIREMENTS - NOT ESTABLISHED - OPTION YEARS IN PROCUREMENT FOR RENTAL OF RELOCATABLE OFFICE BUILDINGS WITH 2-YEAR BASE PERIOD AND THREE 1-YEAR OPTIONS WHERE AGENCY ESTIMATES THAT IT MAY TAKE 2 TO 5 YEARS TO FUND AND CONSTRUCT MORE PERMANENT FACILITIES, "KNOWN REQUIREMENT" FOR OPTION YEARS WAS NOT ESTABLISHED NOR WAS THERE REASONABLE CERTAINTY THAT FUNDS WOULD BE AVAILABLE TO PERMIT EXERCISE OF OPTIONS. BIDS - UNBALANCED - PROOF OF COLLUSION OR FRAUD - NOT ESSENTIAL ELEMENT PROOF OF COLLUSION OR FRAUD ON PART OF BIDDER OFFERING MATHEMATICALLY UNBALANCED BID IS NOT ESSENTIAL ELEMENT IN DETERMINING TO REJECT BID. BIDS - PREPARATION - OPTION BIDS WARNING IN SOLICITATION THAT MATERIALLY UNBALANCED BIDS MAY BE REJECTED AS NONRESPONSIVE IS NOT SUFFICIENT TO APPRISE BIDDERS HOW OPTION BIDS SHOULD BE PREPARED BECAUSE PROVISION LACKS GUIDELINES OR STANDARDS AS TO WHAT CONSTITUTES "MATERIALLY UNBALANCED." CONTRACTS - AWARDS - IMPROPER - CORRECTIVE ACTION - NOT RECOMMENDED - COMPETITION NOT AVAILABLE NO CORRECTIVE ACTION RECOMMENDED ON CONTRACT AWARDED IMPROPERLY WHERE DUE TO NATURE OF ITEM PROCURED (LEASE OF RELOCATABLE OFFICE BUILDING) AND CIRCUMSTANCES PRESENTLY EXISTING (PRINCIPALLY FACT THAT INCUMBENT CONTRACTOR HAS ALREADY RECEIVED PAYMENT FOR TRANSPORTING, SETTING UP AND TAKING DOWN BUILDINGS) THERE APPEARS TO BE LITTLE ROOM FOR PRICE COMPETITION ON ANY REPROCUREMENT.

IN THE MATTER OF THE MOBILEASE CORPORATION, SEPTEMBER 27, 1974:

INVITATION FOR BIDS (IFB) N62472-74-B-0143, ISSUED BY THE NAVAL FACILITIES ENGINEERING COMMAND, SOLICIATED BIDS FOR THE RENTAL OF RELOCATABLE OFFICE BUILDINGS FOR THE NAVAL AIR STATION, LAKEHURST, NEW JERSEY. MOBILEASE CORP. WAS THE SOLE BIDDER. HOWEVER, THE IFB WAS CANCELED AFTER BID OPENING BECAUSE OF THE "*** INADVERTENT INCLUSION OF DAVIS-BACON WAGES RATE REQUIREMENTS *** AS WELL AS AMBIGUITIES CREATED BY AN INCREMENTAL FUNDING PROVISION."

SUBSEQUENTLY, THE PROCUREMENT WAS READVERTISED IN IFB N62472-74-B 0245, WHICH SOLICITED BIDS ON THE FOLLOWING ITEMS:

0001 - RENTAL OF RELOCATABLE OFFICE BUILDING AT THE NAVAL AIR STATION, LAKEHURST, N.J. COMPLETE AND READY FOR OCCUPANCY IN ACCORDANCE WITH NAVFAC SPEC. NO. 04-74-0245 FOR A PERIOD OF TWO (2) YEARS.

0002 - OPTION 1 - SAME AS ITEM 0001 EXCEPT THE GOVERNMENT HAS THE OPTION TO RENEW THE LEASE FOR A THIRD YEAR UPON EXPIRATION OF THE SECOND YEAR.

0003 - OPTION 2 - SAME AS ITEM 0001 EXCEPT THE GOVERNMENT HAS THE OPTION TO RENEW THE LEASE FOR A FOURTH YEAR UPON EXPIRATION OF THE THIRD YEAR.

0004 - OPTION 3 - SAME AS ITEM 0001 EXCEPT THE GOVERNMENT HAS THE OPTION TO RENEW THE LEASE FOR A FIFTH YEAR UPON EXPIRATION OF THE FOURTH YEAR.

THE IFB ALSO GAVE THE NAVY THE OPTION TO PURCHASE THE ITEM AT A PRICE NOT TO EXCEED THE 5-YEAR RENTAL RATE (LESS THE COST OF DISMANTLING AND REMOVING THE BUILDINGS AND THE COST FOR SITE RESTORATION). EIGHTY-FIVE PERCENT OF THE RENTAL PAID UP TO THE TIME THE NAVY EXERCISES ITS OPTION WOULD BE APPLIED TO THE PURCHASE PRICE. BIDDERS WERE ALSO ADVISED THAT FUNDS WERE UNAVAILABLE FOR THE TOTAL AMOUNT REQUIRED FOR ITEM 0001. FOUR BIDS WERE RECEIVED AS FOLLOWS:

ITEM 0001 ITEM 0002 ITEM 0003 ITEM 0004

(YEARS 1 (YEAR (YEAR (YEAR

AND 2) 3) 4) 5) TOTAL

WILLIAMS MOBILE OFFICES, INC. $1,575,000 $145,000 $100,000 $75,000 $1,895,000

THE ATLANTIC MOBILE CORP 1,580,000 185,000 135,000 70,000 1,970,000

SPACE RENTALS 1,276,272 256,310 256,310 256,310 2,045,000

MOBILEASE CORP. 1,160,000 297,000 297,000 297,000 2,051,000

AS WE UNDERSTAND THE PROCUREMENT, A NAVY ACTIVITY IS BEING RELOCATED AT THE LAKEHURST AIR STATION AND THE MOVE WILL BE COMPLETED BY DECEMBER 1974. IT IS THE NAVY'S BEST ESTIMATE THAT IT WILL TAKE BETWEEN 2 AND 5 YEARS TO FUND AND CONSTRUCT PERMANENT FACILITIES TO HOUSE THE ACTIVITY. THE NAVY BELIEVES THAT IT WOULD BE QUITE IMPOSSIBLE TO COMPLETE CONSTRUCTION WITHIN 2 YEARS BUT THAT A CLEAR NEED EXISTS FOR THE RELOCATABLE BUILDINGS FOR AT LEAST 2 YEARS. HOWEVER, THE NAVY FEELS THAT EVENTS RELATING TO CONSTRUCTION MIGHT OCCUR WHICH WOULD EXTEND UTILIZATION FOR 5 YEARS.

MOBILEASE PROTESTED TO OUR OFFICE ALLEGING: (1) IFB-0245 CONTAINED A FUNDING PROVISION OF $800,000 WHICH IS INSUFFICIENT TO FUND THE PROJECT; (2) IFB-0143, WHICH ALSO CONTAINED AN INSUFFICIENT FUNDING PROVISION OF $400,000, WAS THEREFORE UNNECESSARILY CANCELED (AND MOBILEASE'S BID UNNECESSARILY EXPOSED); (3) THE IFB PROVISION RELATIVE TO PURCHASE OPTION DID NOT PROVIDE FOR A SET PURCHASE PRICE WHILE MOBILEASE ALLEGES THAT THE PURCHASE PRICE SHOULD ALSO REQUIRE AN ITEMIZED TOTAL FOR DISMANTLING AND SITE RESTORATION; AND (4) THE TWO LOWEST BIDS ON IFB-0245 WERE MATERIALLY UNBALANCED AND THEREFORE NONRESPONSIVE TO THE IFB.

THE QUESTION IMPLICITLY RAISED BY THE PROTEST IS WHETHER THE EVALUATION OF THE OPTION YEARS WAS PERMISSIBLE UNDER THE FACTS OF THIS PROCUREMENT. THE EVALUATION OF OPTIONS IN MAKING AN AWARD IS PERMITTED UNDER CERTAIN CIRCUMSTANCES IF IN THE BEST INTERESTS OF THE GOVERNMENT. THE PROCEDURES IMPLEMENTING THIS POLICY ARE FOUND IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1504(D). THESE PROVISIONS PERMIT THE EVALUATION OF OPTION PRICES WHEN -

*** IT HAS BEEN DETERMINED AT A LEVEL HIGHER THAN THE CONTRACTING OFFICER THAT:

(I) THERE IS A KNOWN REQUIREMENT WHICH EXCEEDS THE BASIC QUANTITY TO BE AWARDED, BUT *** DUE TO THE UNAVAILABILITY OF FUNDS, THE OPTION CANNOT BE EXERCISED AT THE TIME OF AWARD OF THE BASIC QUANTITY PROVIDED THAT IN THIS LATTER CASE THERE IS REASONABLE CERTAINTY THAT FUNDS WILL BE AVAILABLE THEREAFTER TO PERMIT EXERCISE OF THE OPTION; AND

(II) REALISTIC COMPETITION FOR THE OPTION QUANTITY IS IMPRACTICABLE ONCE THE INITIAL CONTRACT IS AWARDED AND HENCE IT IS IN THE BEST INTERESTS OF THE GOVERNMENT TO EVALUATE OPTIONS IN ORDER TO ELIMINATE THE POSSIBILITY OF A "BUY-IN" (1-311). THIS DETERMINATION SHALL BE BASED ON FACTORS SUCH AS, BUT NOT LIMITED TO, SUBSTANTIAL STARTUP OR PHASE-IN COSTS ***.

IN CONSONANCE WITH ASPR 1-1504(D)(2), SECTION "D" OF THE IFB STATED:

***BIDS WILL BE EVALUATED FOR PURPOSES OF AWARD BY ADDING THE TOTAL PRICE FOR ALL OPTION BID ITEMS TO THE TOTAL PRICE FOR THE BASE BID, BID ITEM 0001. EVALUATION OF OPTIONS WILL NOT OBLIGATE THE GOVERNMENT TO EXERCISE THE OPTIONS. BIDDERS SHALL BID ON ALL BID ITEMS, FAILURE TO DO SO MAY BE CAUSE FOR REJECTION OF THE BID AS NON-RESPONSIVE. ANY BID WHICH IS MATERIALLY UNBALANCED AS TO PRICES FOR BID ITEM 0001 AND THE OTHER BID ITEMS MAY BE REJECTED AS NON-RESPONSIVE.

FROM THE RECORD BEFORE US, WE CANNOT CONCLUDE THAT THE ASPR CRITERIA WERE MET. WE FIND NOTHING TO INDICATE THAT THERE WAS A "KNOWN REQUIREMENT" FOR THE OPTION YEARS; NEITHER WAS THERE EVIDENCE OF A REASONABLE CERTAINTY THAT FUNDS WOULD BE AVAILABLE TO PERMIT EXERCISE OF THE OPTIONS. WHILE IT MAY BE THAT THE OPTION YEARS DO NOT LEND THEMSELVES TO "REALISTIC COMPETITION," ASPR 1-1503(A) LIMITS THE EVALUATION OF OPTIONS TO SITUATIONS WHEREIN CONTINUED PERFORMANCE OF THE REQUIREMENT IS FORESEEABLE, THAT IS, PROBABLE OR LIKELY, BEYOND THE ORIGINAL CONTRACT TERM.

WE RECOMMEND THAT, IN THE FUTURE, PROCUREMENT ACTIONS INVOLVING THE EVALUATION OF OPTION YEARS SHOULD BE UNDERTAKEN IN STRICT ACCORDANCE WITH THE PROVISIONS OF ASPR 1-1501, ET SEQ.

WITH REGARD TO MOBILEASE'S CONTENTION RELATING TO UNBALANCING, WE NOTE THAT IF THE CONTRACT PERIOD RUNS FOR ONLY 2,3 OR 4 YEARS, MOBILEASE'S PRICE IS LOWER THAN ANY OTHER BIDDER'S. SPECIFICALLY, MOBILEASE'S PRICE FOR A 2-YEAR PERIOD IS 26.4 PERCENT LESS THAN WILLIAMS', 15.3 PERCENT LESS FOR A 3-YEAR PERIOD AND 3.7 PERCENT LESS FOR 4 YEARS. HOWEVER, FOR A 5- YEAR CONTRACT PERIOD, WILLIAMS' PRICE BECOMES 7.3 PERCENT LOWER THAN MOBILEASE'S. SINCE EVALUATION, AS REQUIRED BY THE IFB, WAS BASED ON THE TOTAL PRICES FOR THE 5-YEAR PERIOD, AWARD WAS MADE TO WILLIAMS AS LOWEST BIDDER.

IN MATTER OF OSWALD BROTHERS ENTERPRISES INCORPORATED, B-180676, MAY 9, 1974, OUR OFFICE RECOGNIZED THE TWO-FOLD ASPECTS OF UNBALANCING. SEE, ALSO, 49 COMP. GEN. 787, 792 (1970). THE FIRST IS A MATHEMATICAL EVALUATION OF THE BID TO DETERMINE WHETHER IT IS UNBALANCED. AS NOTED IN ARMANIACO V. BOROUGH OF CRESSKILL, 163 A.2D 379 (1960), AND FRANK STAMATO & CO. V. CITY OF NEW BRUNSWICK, 90 A.2D 34, 36 (1952), THE MATHEMATICAL ASPECTS OF IDENTIFYING AN UNBALANCED BID FOCUS ON WHETHER EACH BID ITEM CARRIES ITS SHARE OF THE COST OF THE WORK AND THE CONTRACTOR'S PROFIT OR WHETHER THE BID IS BASED ON NOMINAL PRICES FOR SOME WORK AND ENHANCED PRICES FOR OTHER WORK. THE SECOND ASPECT INVOLVES AN ASSESSMENT OF THE COST IMPACT OF A BID FOUND TO BE MATHEMATICALLY UNBALANCED. UNLESS THERE IS REASONABLE DOUBT THAT BY MAKING AWARD TO A PARTY SUBMITTING A MATHEMATICALLY UNBALANCED BID, AWARD WILL NOT RESULT IN THE LOWEST ULTIMATE COST TO THE GOVERNMENT, THE BID SHOULD NOT BE CONSIDERED MATERIALLY UNBALANCED. SEE B-180676, SUPRA; B-172789, JULY 19, 1971; 49 COMP. GEN., SUPRA; MATTER OF GLOBAL GRAPHICS, INCORPORATED, 54 COMP. GEN. 84 (1974).

WHILE IN STAMATO AND SUBSEQUENT DECISIONS OF OUR OFFICE (49 COMP. GEN., SUPRA; B-180676, SUPRA), WE SUGGEST THAT PROOF OF COLLUSION OR OF FRAUD ON THE PART OF THE BIDDER OFFERING A MATHEMATICALLY UNBALANCED BID IS AN ELEMENT IN DETERMINING WHETHER TO ACCEPT AN UNBALANCED BID, A DEMONSTRATION OF FRAUD OR COLLUSION IS NOT ESSENTIAL. OF COURSE, FRAUD OR COLLUSION IN AND OF ITSELF WOULD RENDER A BID UNACCEPTABLE IRRESPECTIVE OF THE PRICES SUBMITTED BY THE BIDDER. HOWEVER, THE MORE CRITICAL TEST OF UNBALANCING IS THE QUANTUM OF DOUBT SURROUNDING THE PRICE WHICH THE GOVERNMENT MUST ULTIMATELY PAY AS A RESULT OF ITS DECISION TO ACCEPT A MATHEMATICALLY UNBALANCED BID.

IN THIS REGARD, NO CRITERIA WERE EXPRESSED IN SECTION "D" TO AID IN A DETERMINATION OF A "MATERIALLY UNBALANCED" BID. ANY DETERMINATION UNDER THIS SECTION WOULD NECESSARILY BE SUBJECTIVE IN NATURE WITHOUT REFERENCE TO STANDARDS OR COMMON GUIDELINES. CERTAINLY, FACED WITH THIS PROVISION, BIDDERS WERE UNABLE TO PREPARE THEIR BIDS WITH ANY ASSURANCE THAT THEIR BIDS WOULD NOT BE REJECTED BECAUSE OF UNBALANCING. WE RECOMMEND THAT THE LANGUAGE OF SECTION "D" BE CRITICALLY EXAMINED TO DETERMINE ITS UTILITY IN EVALUATING BIDS UNDER AN IFB SUCH AS INVOLVED HERE. IN THIS KIND OF SITUATION BETTER GUIDELINES SHOULD BE PROVIDED AS TO WHAT CONSTITUTES AN UNACCEPTABLE UNBALANCED BID. IT MIGHT HAVE BEEN PREFERABLE HERE TO HAVE ADVISED BIDDERS THAT OPTION PRICES SHOULD BE THE SAME FOR ALL OPTION PERIODS. UNLIKE THE USUAL OPTION CASE WHEREIN ADDITIONAL WORK OR SUPPLIES MAY BE FURNISHED AT LATER DATES, THE INSTANT MATTER INVOLVES MERELY THE EXTENDED USE OF PROPERTY ALREADY IN THE POSSESSION OF THE GOVERNMENT UNDER A LEASE WHERE THE COST FOR ONE EXTENSION SHOULD BE ESSENTIALLY THE SAME AS FOR OTHER OPTION PERIODS.

WE CONCLUDE THAT THE EVALUATION AND AWARD WERE CONTRARY TO THE PROVISIONS OF ASPR GOVERNING THE EVALUATION OF OPTIONS FOR PURPOSES OF AWARD AND THE SOLICITATION WAS OTHERWISE DEFICIENT. HOWEVER, SINCE WILLIAMS HAS ESSENTIALLY BEEN PAID FOR TRANSPORTING, SETTING UP AND TAKING DOWN THE BUILDINGS, NO PURPOSE WOULD BE SERVED BY TERMINATING FOR CONVENIENCE AND REPROCURING AS THERE APPEARS LITTLE ROOM FOR COMPETITION ON ANY SUCH REPROCUREMENT.

WITH REGARD TO THE PROTESTER'S OTHER CONTENTIONS, SECTION 20.2(A) OF OUR BID PROTEST PROCEDURES AND STANDARDS, 4 CFR 20.2, ET SEQ., STATES THAT:

*** PROTESTS BASED UPON ALLEGED IMPROPRIETIES IN ANY TYPE OF SOLICITATION WHICH ARE APPARENT PRIOR TO BID OPENING ***SHALL BE FILED PRIOR TO BID OPENING ***.

SINCE ALLEGED INADEQUACIES AND DEFECTS IN THE IFB'S PROVISIONS WERE APPARENT PRIOR TO BID OPENING, MOBILEASE'S PROTEST IN THOSE RESPECTS SUBSEQUENT TO THAT DATE MUST BE CONSIDERED UNTIMELY. MOREOVER, OUR REGULATIONS ALSO PROVIDE THAT "IN OTHER CASES, BID PROTESTS SHALL BE FILED NOT LATER THAN 5 (WORKING) DAYS AFTER THE BASIS FOR PROTEST IS KNOWN OR SHOULD HAVE BEEN KNOWN ***." SINCE MOBILEASE CLEARLY WAS AWARE OF A BASIS FOR PROTESTING THE NAVY'S CANCELLATION OF IFB-0143 MORE THAN 5 DAYS PRIOR TO THE DATE UPON WHICH IT FILED A PROTEST, MOBILEASE'S CONTENTIONS ARE ALSO UNTIMELY IN THIS REGARD.