B-181264, SEP 12, 1974, 54 COMP GEN 206

B-181264: Sep 12, 1974

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BIDS - UNBALANCED - RESPONSIVENESS OF BID FACT THAT LOW BIDDER HAS UNBALANCED ITS BID BY BIDDING "NO CHARGE" FOR OVER 50 PERCENT OF THE 505 LINE ITEMS BEING PROCURED IS NOT SUFFICIENT REASON TO REJECT BID AS NONRESPONSIVE WHERE: INVITATION FOR BIDS DID NOT PROHIBIT "NO CHARGE" BIDS. BID IS OTHERWISE ACCEPTABLE. BIDDER IS RESPONSIBLE. BIDS - PRICES - UNPROFITABLE ALLEGATION BY SECOND LOW BIDDER THAT ACCEPTANCE OF UNBALANCED BID WILL RESTRICT ABILITY OF CONTRACTING OFFICER TO OBTAIN REQUIRED SERVICES BECAUSE OF LOSSES CONTRACTOR WOULD INCUR ON "NO CHARGE" ITEMS IS REFUTED BY STATEMENT OF LOW BIDDER THAT ALL WORK ORDERS WILL BE HONORED AND. POSSIBILITY OF UNPROFITABLE BID IS NO BASIS FOR REJECTION OF OTHERWISE ACCEPTABLE BID.

B-181264, SEP 12, 1974, 54 COMP GEN 206

BIDS - UNBALANCED - RESPONSIVENESS OF BID FACT THAT LOW BIDDER HAS UNBALANCED ITS BID BY BIDDING "NO CHARGE" FOR OVER 50 PERCENT OF THE 505 LINE ITEMS BEING PROCURED IS NOT SUFFICIENT REASON TO REJECT BID AS NONRESPONSIVE WHERE: INVITATION FOR BIDS DID NOT PROHIBIT "NO CHARGE" BIDS; BIDDER HAS VERIFIED BID; BID IS OTHERWISE ACCEPTABLE; AND, BIDDER IS RESPONSIBLE. BIDS - PRICES - UNPROFITABLE ALLEGATION BY SECOND LOW BIDDER THAT ACCEPTANCE OF UNBALANCED BID WILL RESTRICT ABILITY OF CONTRACTING OFFICER TO OBTAIN REQUIRED SERVICES BECAUSE OF LOSSES CONTRACTOR WOULD INCUR ON "NO CHARGE" ITEMS IS REFUTED BY STATEMENT OF LOW BIDDER THAT ALL WORK ORDERS WILL BE HONORED AND, ALSO, POSSIBILITY OF UNPROFITABLE BID IS NO BASIS FOR REJECTION OF OTHERWISE ACCEPTABLE BID. MOREOVER, GOVERNMENT HAS RIGHT TO DEFAULT CONTRACTOR FOR IMPROPER SERVICES. BIDS - COMPETITIVE SYSTEM - UNBALANCED BIDS CONTENTION BY SECOND LOW BIDDER THAT LOW BIDDER VIOLATED COMPETITIVE BIDDING SYSTEM BY RELYING ON PAST EXPERIENCE IN UNBALANCING BID AND IGNORING GOVERNMENT ESTIMATES INCLUDED IN INVITATION FOR BIDS (IFB) IS NOT SUFFICIENT REASON TO CANCEL IFB AND READVERTISE WHEN PROCURRING AGENCY BELIEVES THAT ESTIMATES ARE CORRECT AND PROPERLY REFLECT WORK WHICH WILL BE REQUIRED UNDER CONTRACT. BIDS - "BUYING IN" - NOT BASIS FOR BID REJECTION WHERE BIDDER INCREASED ITS PRICES FOR SECOND AND THIRD YEAR OPTIONS 700 TO 900 PERCENT OVER BASE PRICES BUT ONLY FIRST YEAR PRICES WERE CONSIDERED IN EVALUATION, CHARGE BY SECOND LOW BIDDER OF "BUYING-IN" IS INSUFFICIENT REASON TO REJECT LOW BID SINCE THERE IS NO GUARANTEE THAT OPTIONS WILL BE EXERCISED; ALSO, CONTRACTING OFFICER WILL DETERMINE REASONABLENESS OF OPTION PRICES UNDER ARMED SERVICES PROCUREMENT REGULATION 1-1505(D). CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SIZE - CONCLUSIVENESS OF DETERMINATION GENERAL ACCOUNTING OFFICE IS WITHOUT JURISDICTION TO QUESTION SMALL BUSINESS STATUS OF BIDDER SINCE 15 U.S.C. 637(B)(6) MAKES THE DETERMINATION OF THE SMALL BUSINESS ADMINISTRATION OF SUCH MATTERS CONCLUSIVE.

IN THE MATTER OF R & R INVENTORY SERVICE, INC., SEPTEMBER 12, 1974:

INVITATION FOR BIDS (IFB) N00600-74-B-0113 WAS ISSUED ON FEBRUARY 8, 1974, BY THE NAVAL SUPPLY SYSTEMS COMMAND, WASHINGTON, D.C., FOR INVENTORY, VALIDATION AND SUPPLY OVERHAUL ASSISTANCE SERVICES TO BE PERFORMED FOR ACTIVE AND INACTIVE FLEET AND SHORE STATION CUSTOMERS. THE IFB CONTEMPLATED A ONE YEAR FIRM-FIXED PRICE INDEFINITE QUANTITY CONTRACT WITH TWO ONE-YEAR OPTIONS. HOWEVER, ONLY THE FIRST YEAR WAS TO BE EVALUATED FOR THE PURPOSES OF AWARD. THE IFB SOLICITED BIDS FOR LOTS I, II, III, IV, AND V, EACH LOT DENOTING A GEOGRAPHICAL AREA AND COMPOSED OF 169 LINE ITEMS OF DIFFERENT TYPES OF SERVICES OF WHICH PRICES WERE REQUESTED FOR 101 ITEMS. AWARD BY LOT WAS CONTEMPLATED BUT THE RIGHT WAS RESERVED TO AWARD BY ITEM IF ADVANTAGEOUS TO THE GOVERNMENT.

ON APRIL 30, 1974, FIVE BIDS WERE OPENED. THE BID OF MANUFACTURER'S PACKAGING COMPANY, INC. (PACKAGING) WAS LOW ON ALL LOTS. AWARD OF ALL LOTS WAS MADE TO PACKAGING ON MAY 22, 1974, DUE TO THE URGENCY OF THE PROCUREMENT.

ON MAY 1, 1974, R & R INVENTORY SERVICE, INC. (R & R), THE APPARENT SECOND LOW BIDDER, PROTESTED TO THE CONTRACTING OFFICER THE AWARD OF ANY CONTRACTS ON THE GROUND THAT THE BID OF PACKAGING WAS UNBALANCED AND NONRESPONSIVE. BY LETTER DATED MAY 13, 1974, THE CONTRACTING OFFICER DENIED R & R'S PROTEST AND BY ITS LETTER OF MAY 17, 1974, R & R PROTESTED TO OUR OFFICE.

THE BASIS FOR R & R'S PROTEST IS THAT OF THE 505 LINE ITEMS TO BE PRICED WITHIN THE FIVE LOTS, PACKAGING BID "NO CHARGE" FOR OVER 50 PERCENT OF THE ITEMS. FROM THIS FAILURE TO BID PRICES, R & R ADVANCES NUMEROUS GROUNDS TO SUPPORT ITS POSITION THAT THE BID OF PACKAGING SHOULD HAVE BEEN REJECTED.

FIRST, R & R CONTENDS THAT THE BID OF PACKAGING IS NONRESPONSIVE BECAUSE IT GROSSLY ABUSES THE CRITERIA FOR THE EVALUATION OF BIDS ESTABLISHED BY THE CONTRACTING OFFICER AND BY THE LARGE NUMBER OF "NO CHARGE" ITEMS, PACKAGING HAS RENDERED THE EVALUATION CRITERIA USELESS. THERE WAS NOTHING IN THE IFB CONCERNING THE INSERTION OF "NO CHARGE" FOR ITEMS. IT APPEARS THAT THE PURPOSE OF INCLUDING SO MANY LINE ITEMS IN THE SOLICITATION WAS TO FACILITATE PAYMENT TO THE CONTRACTOR FOR EACH DIFFERENT TYPE OF SERVICE. THEREFORE, THE ONLY EVALUATION CRITERIA OTHER THAN A DETERMINATION THAT A BIDDER WAS RESPONSIBLE WAS ITS TOTAL LOT PRICES AND INDIVIDUAL ITEM PRICES.

AS A GENERAL RULE, THE FACT THAT A BID MAY BE UNBALANCED DOES NOT RENDER IT NONRESPONSIVE, NOR DOES SUCH FACTOR INVALIDATE AN AWARD OF A CONTRACT TO SUCH A BIDDER. WHERE A BIDDER HAS CONFIRMED A BID WHICH APPEARS TO BE UNBALANCED, WHICH PACKAGING HAS DONE, AND THERE IS NO INDICATION THAT THE BID WAS NOT AS INTENDED OR EVIDENCE OF IRREGULARITY, THE BID MAY BE ACCEPTED IF IT IS OTHERWISE THE LOWEST BID AND THE BIDDER IS RESPONSIBLE. 49 COMP. GEN. 335, 343 (1969). IT IS OUR VIEW THAT THE ASSERTED UNBALANCING OF THE BID DID NOT RENDER IT NONRESPONSIVE.

R & R'S SECOND CONTENTION IS THAT THE ACCEPTANCE OF PACKAGING'S BID WILL UNDULY RESTRICT THE CONTRACTING OFFICER'S ABILITY TO OBTAIN THE REQUIRED SERVICES. R & R ARGUES THAT MANY OF THE "NO CHARGE" ITEMS BID BY PACKAGING ARE COSTLY AND TIME CONSUMING TASKS WHICH PACKAGING WILL ATTEMPT TO AVOID PERFORMING DUE TO THE DRASTIC LOSSES IT WOULD INCUR BY SUCH PERFORMANCE. AS STATED PREVIOUSLY, PACKAGING HAS CONFIRMED ITS BID, INCLUDING THE "NO CHARGE" ITEMS AND ALSO IN THE TELEGRAM IN WHICH THE BID WAS VERIFIED, FURTHER STATED THAT "ALL WORK ORDER REQUESTS WILL BE HONORED." WHEN A BIDDER BIDS AND THEN VERIFIES ITS PRICES, IT MUST BE CONCLUDED THAT IT KNOWS THE COSTS INVOLVED AND THE RISKS ATTENDANT WITH PERFORMANCE. MOREOVER, THE POSSIBILITY OF A MONETARY LOSS DURING THE PERFORMANCE OF A CONTRACT IS NOT JUSTIFICATION FOR REJECTING AN OTHERWISE ACCEPTABLE BID. 49 COMP. GEN. 311, 315 (1969). IN ADDITION, WHENEVER ANY CONTRACT IS AWARDED, THERE IS THE POSSIBILITY OF A CONTRACTOR BEING UNABLE TO PERFORM, EITHER BECAUSE OF FINANCIAL OR TECHNICAL DIFFICULTIES AND IT IS PRECISELY FOR THIS REASON THAT THE GOVERNMENT HAS DEVISED THE DEFAULT PROVISIONS INCLUDED IN ITS CONTRACTS MAKING THE DEFAULTED CONTRACTOR LIABLE FOR ANY EXCESS REPROCUREMENT COSTS.

NEXT, R & R MAINTAINS THAT THE BID OF PACKAGING IS UNFAIR TO COMPETITIVE CONCERNS AND DEFEATS THE PURPOSE OF COMPETITIVE BIDDING. IT IS ALLEGED THAT PACKAGING HAS OVER 80 PERCENT OF SIMILAR CONTRACTS ISSUED BY THE NAVY, MANY OF WHICH ARE OVERLAPPING AND THEREFORE, PACKAGING HAS A COMPETITIVE ADVANTAGE WHICH IT HAS ABUSED BY RELYING ON PAST EXPERIENCE RATHER THAN THE GOVERNMENT ESTIMATES IN PRICING THE ITEMS BEING PROCURED UNDER THE INSTANT SOLICITATION. R & R CITES SEVERAL PAST DECISIONS OF OUR OFFICE IN SUPPORT OF ITS POSITION THAT THE BID OF PACKAGING SHOULD HAVE BEEN REJECTED UNDER THESE CIRCUMSTANCES.

IN 43 COMP. GEN. 159 (1963), RELIED ON BY R & R, WE HELD THAT ALL THE BIDS SUBMITTED UNDER AN INVITATION SHOULD BE REJECTED BECAUSE OF THE UNBALANCING PRESENT AND THE INABILITY TO DETERMINE IF THE PRICES WERE FAIR AND REASONABLE. HOWEVER, IN THAT CASE NO ESTIMATED QUANTITIES WERE INCLUDED IN THE INVITATION AS THERE ARE IN THE INSTANT CASE AND THEREFORE, THE CASE IS INAPPLICABLE. FOR A SIMILAR CASE IN WHICH NO QUANTITIES WERE GIVEN SEE 54 COMP. GEN. 84 (1974).

IN 47 COMP. GEN. 748 (1968), ALSO CITED BY R & R, WE CITED THE HOLDING IN 43 COMP. GEN. 159 SUPRA, AND CONCURRED WITH THE DETERMINATION OF THE CONTRACTING OFFICER THAT THE INVITATION SHOULD BE CANCELED BECAUSE OF UNBALANCED BIDDING. HERE, THE CONTRACTING OFFICER DETERMINED NOT TO CANCEL THE SOLICITATION AND READVERTISE, BECAUSE THE PRICES AND ESTIMATES ARE REASONABLE AND ACCURATE. THERE HAS BEEN NO SHOWING IN THE INSTANT CASE THAT THE CONTRACTING OFFICER'S DECISION ABUSED HIS DISCRETION IN ARRIVING AT THAT DETERMINATION.

AGAIN OUR OFFICE, IN 48 COMP. GEN. 62 (1968), CITED WITH APPROVAL THE RATIONALE OF 43 COMP. GEN. 159 SUPRA, IN A SIMILAR UNBALANCED BID SITUATION, BUT WE FOUND THERE WAS NO BASIS FOR OBJECTING TO AN AWARD FOR THAT REASON SINCE THE AGENCY HAD CONCLUDED THAT THE AWARD WOULD PROVIDE THE REQUIRED SUPPLIES AT THE LOWEST PRICES WHICH WERE CONSIDERED REASONABLE.

HERE, THE SAME SITUATION EXISTS. THE NAVY STATES THAT THE QUANTITIES ESTIMATED IN THE SOLICITATION ARE CORRECT. WHILE PACKAGING MAY HAVE SPECULATED AS TO WHICH ITEMS WILL BE ORDERED MOST OFTEN, WE CANNOT SAY THAT THE INVITATION TENDED TO ENCOURAGE A SERIOUS UNBALANCING OF BIDS WITH THE RESULT THAT IT WOULD BE DOUBTFUL WHETHER AN AWARD TO PACKAGING WOULD RESULT IN THE LOWEST COST TO THE GOVERNMENT. CONSEQUENTLY, WE SEE NO REASON TO OBJECT TO THE CONSIDERATION OF PACKAGING'S BID.

IN ADDITION, R & R MAKES REFERENCE TO THE NAVY'S REJECTION OF CERTAIN BIDS UNDER PRIOR SOLICITATIONS, HOWEVER, THOSE EVENTS ARE IRRELEVANT TO THE CONSIDERATION OF THE PROTEST NOW BEFORE OUR OFFICE, ESPECIALLY SINCE IT APPEARS THAT THE BIDS IN QUESTION WERE REJECTED FOR REASONS OTHER THAN THE SUBMISSION OF UNBALANCED BIDS.

NEXT, R & R ALLEGES THAT THE BID OF PACKAGING CONSTITUTES "BUYING-IN" SINCE THE PRICES SUBMITTED FOR THE TWO OPTION PERIODS ARE 700 TO 900 PERCENT HIGHER THAN THE FIRST YEAR PRICES. WHILE IT IS A FACT THAT THERE IS A SIGNIFICANT INCREASE IN PACKAGING'S SECOND AND THIRD YEAR PRICES - WHICH WERE NOT EVALUATED FOR AWARD PURPOSES - THE AWARD OF THE CONTRACT DOES NOT JUSTIFY THE CONCLUSION THAT THE OPTION WILL BE AUTOMATICALLY EXERCISED. UNDER SECTION 1-1505(C)(III) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), THE CONTRACTING OFFICER MUST MAKE A DETERMINATION THAT THE EXERCISE OF THE OPTION IS THE MOST ADVANTAGEOUS METHOD OF FULFILLING THE GOVERNMENT'S NEEDS, PRICE, AND OTHER FACTORS CONSIDERED. THE NAVY HAS ADVISED OUR OFFICE THAT THESE PROVISIONS WILL BE COMPLIED WITH AND IF THE OPTION PRICE IS UNREASONABLE, THE OPTION WILL NOT BE EXERCISED. SEE ASPR 1-1505(D). THEREFORE, LARGE INCREASES IN THE OPTION PRICE IS NOT A SUFFICIENT REASON TO REJECT THE BID OF PACKAGING.

FINALLY, R & R CONTESTS THE SELF-CERTIFIED STATUS OF PACKAGING AS A SMALL BUSINESS CONCERN BECAUSE WITH THIS CONTRACT, PACKAGING WILL HOLD ALL NAVY CONTRACTS IN THIS FIELD AND THEREFORE, WILL BE DOMINANT IN ITS FIELD OF OPERATION. THE SMALL BUSINESS ADMINISTRATION HAS CONCLUSIVE AUTHORITY TO DETERMINE WHICH CONCERNS ARE "SMALL BUSINESSES" (15 U.S.C. 637(B)(6)) AND OUR OFFICE IS WITHOUT JURISDICTION TO MAKE ANY DETERMINATION IN THIS REGARD. 51 COMP. GEN. 531 (1972).

ACCORDINGLY, FOR THE FOREGOING REASONS, THE PROTEST IS DENIED.