B-181082, NOV 18, 1974, 54 COMP GEN 395

B-181082: Nov 18, 1974

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BIDS - ALL OR NONE - PROHIBITION IN INVITATION - COST INCREASE PROHIBITION IN INVITATION FOR BIDS OF ALL-OR-NONE BIDS TO ENCOURAGE COMPETITION IN SITUATION WHERE CONTRACTING OFFICER BELIEVES ONE SUPPLIER HAS A MONOPOLY AND IS ACTING IN RESTRAINT OF COMPETITION THROUGH USE OF ALL-OR-NONE BIDS IS IMPROPER SINCE NET EFFECT IS SIMPLY TO INCREASE COST TO GOVERNMENT OF ITEMS ON WHICH COMPETITION EXISTS. BY NRPO FOR PONTOON ACCESSORIES IS ILLUSTRATIVE OF THE SOLICITATIONS CONTAINING THIS PROHIBITION. THE FOLLOWING CLAUSE WAS ADDED TO SECTION "D. " "EVALUATION & AWARD FACTORS": D-1 ALL OR NONE QUALIFICATION OF BIDS WILL RENDER SUCH BIDS NON RESPONSIVE. OR UNLESS THE BID IS LOW ON AN ITEM BY ITEM BASIS.

B-181082, NOV 18, 1974, 54 COMP GEN 395

BIDS - ALL OR NONE - PROHIBITION IN INVITATION - COST INCREASE PROHIBITION IN INVITATION FOR BIDS OF ALL-OR-NONE BIDS TO ENCOURAGE COMPETITION IN SITUATION WHERE CONTRACTING OFFICER BELIEVES ONE SUPPLIER HAS A MONOPOLY AND IS ACTING IN RESTRAINT OF COMPETITION THROUGH USE OF ALL-OR-NONE BIDS IS IMPROPER SINCE NET EFFECT IS SIMPLY TO INCREASE COST TO GOVERNMENT OF ITEMS ON WHICH COMPETITION EXISTS. COMPETITIVE ITEMS SHOULD BE READVERTISED. SOLE-SOURCE ITEMS SHOULD BE SUBJECT OF SEPARATE NEGOTIATED PROCUREMENT.

IN THE MATTER OF MARTIN & TURNER SUPPLY COMPANY, NOVEMBER 18, 1974:

MARTIN & TURNER SUPPLY COMPANY (M&T) HAS PROTESTED VARIOUS SOLICITATIONS ISSUED BY THE NAVAL REGIONAL PROCUREMENT OFFICE (NRPO), LONG BEACH, CALIFORNIA, BECAUSE THEY PROHIBIT "ALL OR NONE" BIDS.

INVITATION FOR BIDS (IFB) N00123-74-B-2372, ISSUED ON JUNE 6, 1974, BY NRPO FOR PONTOON ACCESSORIES IS ILLUSTRATIVE OF THE SOLICITATIONS CONTAINING THIS PROHIBITION. BY AMENDMENT 0001 TO THE SOLICITATION, THE FOLLOWING CLAUSE WAS ADDED TO SECTION "D," "EVALUATION & AWARD FACTORS":

D-1 ALL OR NONE QUALIFICATION OF BIDS WILL RENDER SUCH BIDS NON RESPONSIVE, OR UNLESS THE BID IS LOW ON AN ITEM BY ITEM BASIS, IN WHICH EVENT AWARD MAY BE MADE ON ALL THE ITEMS.

M&T (BIDDING UNDER THE NAME OF THE HOLLOWAY COMPANY), ALFAB, INC., AND ADAMS MANUFACTURING AND ENGINEERING COMPANY (ADAMS) SUBMITTED THE FOLLOWING BIDS IN RESPONSE TO THE IFB:

ITEM # QUANTITY HOLLOWAY (M&T) ADAMS ALFAB

1 13 $105.00 $50.00

2 400 10.00 19.50 $20.00

3 16 149.00 240.00

4 19 110.00 125.00

5 2 625.00

6 16 84.00 112.00 68.75

M&T'S BID WAS ON AN ALL-OR-NONE BASIS. THE TOTAL BID OF M&T FOR ALL SIX ITEMS WAS $12,433 AND THE TOTAL BID OF ADAMS FOR FIVE ITEMS WAS $16,257.

THE CONTRACTING OFFICER PROPOSES TO REJECT THE BID OF M&T, BECAUSE IT INCLUDED THE ALL-OR-NONE QUALIFICATION AND WAS NOT LOW ON ALL ITEMS, AND MAKE AWARD ON AN ITEM BASIS EXCLUDING THE ALL-OR-NONE BID. M&T CONTENDS THE ALL-OR-NONE PROHIBITION IS NOT IN THE BEST INTEREST OF THE GOVERNMENT BECAUSE IT RESULTS IN HIGHER PRICES THAN THE GOVERNMENT WOULD OTHERWISE HAVE TO PAY.

THE CONTRACTING OFFICER STATES THAT THE ALL-OR-NONE PROHIBITION WAS INCLUDED IN THE SOLICITATION IN ORDER TO INCREASE COMPETITION. HE ASSERTS THAT M&T HAS BEEN ABLE TO OBTAIN LOWER FREIGHT RATES BY SHIPPING LARGER QUANTITIES RESULTING FROM ALL-OR-NONE AWARDS AND THUS HAS COME TO DOMINATE PROCUREMENTS IN THE PONTOON ACCESSORIES FIELD. THE CONTRACTING OFFICER FURTHER STATES THAT HE BELIEVES M&T HAS A MONOPOLY AND IS ACTING IN RESTRAINT OF COMPETITION. HE ASSERTS THAT THE PROHIBITION AGAINST ALL-OR- NONE BIDS HAS INDUCED COMPANIES WHICH HAD BEEN DISCOURAGED FROM BIDDING ON THESE INVITATIONS BY M&T'S SUCCESS TO RESUME BIDDING FOR THESE CONTRACTS. ALTHOUGH HE RECOGNIZES THAT THE GOVERNMENT WILL PAY HIGHER PRICES IN THE IMMEDIATE FUTURE, THE CONTRACTING OFFICER BELIEVES THAT IN THE LONG RUN LOWER PRICES WILL BE OBTAINED BY HAVING MORE COMPETITION.

WHILE THE ACTION OF THE CONTRACTING OFFICER MAY GENERATE MORE COMPETITION IN THE FUTURE, FOR THE REASONS THAT FOLLOW, WE CONCLUDE THAT IT IS IMPROPER TO PROHIBIT ALL-OR-NONE BIDS UNDER THESE CIRCUMSTANCES.

THE GENERAL RULE IS THAT IN THE ABSENCE OF A SPECIFIC PROVISION TO THE CONTRARY, IT IS ALWAYS PERMISSIBLE FOR A BIDDER TO SUBMIT AN ALL-OR NONE BID FOR ALL OR ANY COMBINATION OF ITEMS ON WHICH BIDS ARE INVITED. COMP. GEN. 383 (1956). OUR OFFICE HAS STATED THAT A PROVISION PRECLUDING ALL-OR-NONE BIDS IS TO BE EMPLOYED SPARINGLY.

IN 42 COMP. GEN. 415, 417 (1963), WE STATED:

*** WE *** CONCLUDE IN THE ABSENCE OF CIRCUMSTANCES REASONABLY ESTABLISHING THAT THE INTEREST OF THE GOVERNMENT WOULD BE SERVED BY PROHIBITING THE SUBMISSION OF BIDS ON AN ALL OR NONE OR COMBINATION BASIS, THAT SUCH PROHIBITION UNDULY RESTRICTS COMPETITION AND IS CONTRARY TO THE PURPOSE OF THE STATUTES GOVERNING PUBLIC PROCUREMENT.

PARAGRAPH 10(A) OF STANDARD FORM 33A, WHICH WAS INCLUDED AS PART OF THE INSTANT IFB, READS AS FOLLOWS:

THE CONTRACT WILL BE AWARDED TO THAT RESPONSIBLE OFFEROR WHOSE OFFER CONFORMING TO THE SOLICITATION WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

THE CONTRACTING OFFICER STATES THAT IN THE PAST HE ALWAYS CONSIDERED THE LOWEST PRICE TO BE "MOST ADVANTAGEOUS TO THE GOVERNMENT." HOWEVER, HE INTERPRETED THE PHRASE "OTHER FACTORS CONSIDERED" TO JUSTIFY PROHIBITING ALL-OR-NONE BIDS FOR THE PURPOSE OF REVIVING COMPETITION EVEN IF THE IMMEDIATE RESULT WAS HIGHER PRICES. THE LANGUAGE OF PARAGRAPH 10(A) OF STANDARD FORM 33A REQUIRES AWARD ON THE BASIS OF THE MOST FAVORABLE COST TO THE GOVERNMENT. 47 COMP. GEN. 658 (1968) AND B 180477, FEBRUARY 11, 1974. IN OUR VIEW PROHIBITING ALL-OR-NONE BIDS IS NOT THE PROPER VEHICLE TO REACH THE GOALS OF THE CONTRACTING OFFICER. IT APPEARS FROM THE RECORD THAT M&T SUPPLIES ALL OF THE ITEMS SOLICITED (SOME ON A SOLE-SOURCE BASIS), WHILE NO OTHER BIDDER FURNISHES ALL OF THE ITEMS. WE HAVE RECOGNIZED THAT ALL-OR-NONE BIDS MAY BE PROHIBITED WHERE SOME ITEMS WOULD OTHERWISE HAVE TO BE AWARDED AT AN UNREASONABLE PRICE. B-168479, DECEMBER 31, 1969. THAT DOES NOT APPEAR TO BE THE CASE HERE. THE PRICES OFFERED BY M&T SEEM TO BE LOWER THAN OTHERWISE AVAILABLE. COMPETITION AND LOW COST TO THE GOVERNMENT COULD BETTER BE ACHIEVED BY NEGOTIATING CONTRACTS FOR THE SOLE-SOURCE ITEMS AND SILICITING COMPETITIVELY FOR THE OTHER ITEMS WITHOUT AN ALL-OR-NONE PROHIBITION. B-153257, MAY 14, 1964.

AS TO THE ISSUE OF MONOPOLY AND RESTRAINT OF COMPETITION, ANY QUESTION WITH REGARD TO THE APPLICATION OF ANTITRUST LAWS IS PROPERLY FOR CONSIDERATION BY THE DEPARTMENT OF JUSTICE AND NOT OUR OFFICE. B 157145, MAY 3, 1966. SEE ASPR SEC. 1-111 (1974 ED.).

IN THE CIRCUMSTANCES WE FIND THAT THE SOLICITATION IS DEFECTIVE AND NO AWARD SHOULD BE MADE. WE RECOMMEND RESOLICITATION IN ACCORDANCE WITH THE FOREGOING. ADVICE AS TO THE ACTIONS TAKEN WILL BE APPRECIATED.