B-181553, AUG 29, 1974, 54 COMP GEN 161

B-181553: Aug 29, 1974

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CONTRACTS - DEFAULT - REPROCUREMENT - GOVERNMENT PROCUREMENT STATUTES - NOT FOR CONSIDERATION WHEN REPROCUREMENT IS FOR ACCOUNT OF DEFAULTED CONTRACTOR. STATUTES GOVERNING PROCUREMENTS BY GOVERNMENT ARE NOT APPLICABLE. QUESTIONS CONCERNING PROCUREMENT POLICY AND REGULATIONS ARE NOT PROPERLY FOR CONSIDERATION. WHO WAS FURNISHED REPROCUREMENT SOLICITATION BECAUSE OF FREEDOM OF INFORMATION ACT. BIDS - PREPARATION - COSTS - RECOVERY - PREREQUISITE REQUIREMENTS WHILE FEDERAL COURTS HAVE GRANTED RECOVERY OF PROPOSAL PREPARATION COSTS WHEN PROPOSALS HAVE NOT BEEN FAIRLY AND HONESTLY CONSIDERED FOR AWARD. THEY HAVE DONE SO ONLY WHEN ARBITRARY OR CAPRICIOUS ACTIONS HAVE BEEN ESTABLISHED. (AAI) WAS AWARDED CONTRACT NO.

B-181553, AUG 29, 1974, 54 COMP GEN 161

CONTRACTS - DEFAULT - REPROCUREMENT - GOVERNMENT PROCUREMENT STATUTES - NOT FOR CONSIDERATION WHEN REPROCUREMENT IS FOR ACCOUNT OF DEFAULTED CONTRACTOR, STATUTES GOVERNING PROCUREMENTS BY GOVERNMENT ARE NOT APPLICABLE; THEREFORE, QUESTIONS CONCERNING PROCUREMENT POLICY AND REGULATIONS ARE NOT PROPERLY FOR CONSIDERATION. CONTRACTORS - DEFAULTED - REPROCUREMENT - STANDING DEFAULTED CONTRACTOR, WHO WAS FURNISHED REPROCUREMENT SOLICITATION BECAUSE OF FREEDOM OF INFORMATION ACT, HAS NO STANDING TO BE CONSIDERED FOR AWARD, AS AWARD AT INCREASED PRICE WOULD BE TANTAMOUNT TO MODIFICATION OF DEFAULTED CONTRACT WITHOUT ANY CONSIDERATION THEREFOR TO GOVERNMENT. BIDS - PREPARATION - COSTS - RECOVERY - PREREQUISITE REQUIREMENTS WHILE FEDERAL COURTS HAVE GRANTED RECOVERY OF PROPOSAL PREPARATION COSTS WHEN PROPOSALS HAVE NOT BEEN FAIRLY AND HONESTLY CONSIDERED FOR AWARD, THEY HAVE DONE SO ONLY WHEN ARBITRARY OR CAPRICIOUS ACTIONS HAVE BEEN ESTABLISHED, AND FAILURE TO SO ESTABLISH THESE PREREQUISITES BARS RECOVERY.

IN THE MATTER OF AEROSPACE AMERICA, INC., AUGUST 29, 1974:

ON JUNE 28, 1973, AEROSPACE AMERICA, INC. (AAI) WAS AWARDED CONTRACT NO. DACW87-73-C-9049 TO FURNISH CHUTES FOR THE UNITED STATES POSTAL SERVICE BULK MAIL CENTERS. HOWEVER, A PORTION OF THE CONTRACT WAS TERMINATED FOR DEFAULT ON MARCH 12, 1974, AFTER AAI STATED THAT IT WOULD NOT PERFORM THE SPIRAL CHUTE LINE ITEMS IN ITS CONTRACT. SUBSEQUENT TO THIS ACTION, THE CONTRACTING OFFICER BY FINAL DECISION DATED MAY 1, 1974, TERMINATED FOR DEFAULT AAI'S RIGHT TO PROCEED WITH PERFORMANCE OF THE BALANCE OF THE CONTRACT. THIS TERMINATION RESULTED FROM AAI'S FAILURE TO MAKE FURTHER PROGRESS AND ITS UNSATISFACTORY RESPONSE TO THE GOVERNMENT'S "SHOW CAUSE" LETTER. THE GOVERNMENT DID, HOWEVER, OFFER TO ACCEPT IN MITIGATION "ANY COMPLETED AND ACCEPTABLE QUANTITIES THAT CAN BE SHIPPED, PRIOR TO THE CLOSE OF BUSINESS 6 MAY 1974." AAI ELECTED TO REFRAIN FROM MAKING FURTHER SHIPMENTS AND BY LETTER DATED MAY 7, 1974, APPEALED FROM THE FINAL DECISION.

SOLICITATION DACW87-74-R-9024 WAS ISSUED BY THE ARMY CORPS OF ENGINEERS FOR REPROCUREMENT OF THE DEFAULTED ITEMS FOR THE ACCOUNT OF THE UNITED STATES POSTAL SERVICE. PROPOSALS WERE SOLICITED FROM ALL BIDDERS (EXCEPT AAI) WHO SUBMITTED BIDS IN RESPONSE TO THE INVITATION FOR BIDS WHICH RESULTED IN THE EARLIER AWARD TO AAI. BY TELEGRAM DATED MAY 2, 1974, AAI REQUESTED A COPY OF THE SOLICITATION. THE CONTRACTING OFFICER, AFTER CONSIDERATION OF THE PROPRIETY OF RELEASING A COPY TO AAI, DETERMINED THAT HE COULD NOT WITHHOLD THE SOLICITATION UNDER THE FREEDOM OF INFORMATION ACT. HOWEVER, NO ENCOURAGEMENT WAS EXTENDED FOR AAI TO SUBMIT AN OFFER.

FIVE PROPOSALS, INCLUDING THAT OF AAI, WERE TIMELY SUBMITTED. SUBSEQUENTLY, AMENDMENT 0001, WHICH DELETED THE QUANTITIES SHIPPED BY AAI PRIOR TO TERMINATION, WAS ISSUED ON MAY 10, 1974. THE CONTRACTING OFFICER DETERMINED THAT THE AMENDMENT SHOULD BE FORWARDED TO AAI BECAUSE IF AAI BECAME AWARE OF THE AMENDMENT "(A) A SUBSEQUENT REQUEST FOR IT WOULD BE HONORED UNDER THE FREEDOM OF INFORMATION ACT AND (B) AEROSPACE MIGHT QUESTION ITS EXCLUSION AND FILE A PROTEST, THUS FURTHER DELAYING THE PROCUREMENT OF ITEMS CRITICALLY NEEDED AT THE CONSTRUCTION SITES."

ALL OFFERORS SUBMITTED THEIR BEST AND FINAL OFFERS TIMELY. AAI WAS THE LOW OFFEROR UNDER SCHEDULES I AND IV, AND BECAME THE LOW OFFEROR UNDER SCHEDULES II AND III WHEN THE DOCUTEL CORPORATION WITHDREW ITS OFFER. THE CONTRACTING OFFICER, HOWEVER, DETERMINED THAT AAI'S OFFERS COULD NOT BE ACCEPTED AND PROCEEDED TO CONDUCT PREAWARD SURVEYS WITH THE NEXT LOW OFFEROR UNDER EACH SCHEDULE. THIS ACTION RESULTED IN A SPLITTING OF THE AWARD, BY SCHEDULES, TO ACHIEVE THE LOWEST AGGREGATE COST TO THE GOVERNMENT. ALL AWARDS WERE MADE ON MAY 20, 1974.

BY LETTER DATED MAY 21, 1974, THE CONTRACTING OFFICER ADVISED AAI AS FOLLOWS:

YOU ARE HEREBY ADVISED THAT THE OFFER SUBMITTED BY YOU ON RFP DACW87 74-R -9024 CONSTITUTING THE REPURCHASE ACTION OF THE "TERMINATED FOR DEFAULT" PORTION OF YOUR CONTRACT DACW87-B-C-9049 IS CONSIDERED UNACCEPTABLE BECAUSE ACCEPTANCE WOULD BE TANTAMOUNT TO A MODIFICATION OF THE DEFAULTED CONTRACT AND PROVIDING FOR AN INCREASE IN PRICE WITHOUT CONSIDERATION TO THE GOVERNMENT.

AAI RESPONDED TO THE WIRE AS FOLLOWS:

WE ARE THE LOWEST BIDDER ON ALL FOUR SCHEDULES. YOU ARE SPENDING $902,937.57 MORE OF THE TAX PAYERS DOLLARS FOR HIGHER BIDS. YOU ARE DELAYING THE POST OFFICE CONTRACT BY AWARDING BIDS TO NEW CONTRACTORS WHEN AEROSPACE HAS STOCKPILES OF CHUTES ON HAND.

THIS PROTEST WAS DENIED ON JUNE 13, RESULTING IN THE PROTEST PRESENTLY BEFORE OUR OFFICE.

AAI CONTENDS THAT THE GOVERNMENT, IN NOT CONSIDERING ITS PROPOSAL, ACTED CONTRARY TO SOUND PROCUREMENT POLICY AND CONTRARY TO APPLICABLE PROCUREMENT REGULATIONS. THEREFORE, AAI REQUESTS THAT THE CONTRACTS AWARDED UNDER THE SUBJECT SOLICITATION BE TERMINATED, AND THAT ANY REMAINING GOVERNMENT NEEDS BE SATISFIED THROUGH AN AWARD TO AAI. IN THE ALTERNATIVE, AAI ASKS THAT IT BE AWARDED PROPOSAL PREPARATION COSTS INCURRED IN RESPONDING TO THE SUBJECT SOLICITATION, AND IN ADDITION, REQUESTS THAT OUR OFFICE RULE THAT THE GOVERNMENT IS BARRED AS A MATTER OF LAW FROM PURSUING AN ASSESSMENT AGAINST AAI FOR ALLEGED EXCESS COSTS OF REPROCUREMENT OCCASIONED BY THE TERMINATION OF CONTRACT DACW87-73-C 9049.

IN B-171659, NOVEMBER 15, 1971, OUR OFFICE RECOGNIZED THAT WHERE, AS HERE, A PROCUREMENT IS FOR THE ACCOUNT OF THE DEFAULTED CONTRACTOR THE STATUTES GOVERNING PROCUREMENTS BY THE GOVERNMENT ARE NOT APPLICABLE. SUCH, WE CANNOT RAISE ANY QUESTIONS WITH REGARD TO AAI'S CONTENTION THAT THE GOVERNMENT ACTED CONTRARY TO SOUND PROCUREMENT POLICY OR APPLICABLE PROCUREMENT REGULATIONS. SEE ALSO B-178885, NOVEMBER 23, 1973.

WITH REGARD TO THE CONTENTION THAT AAI WAS MISLED BY THE GOVERNMENT'S ACCEPTANCE OF ITS PROPOSAL AND SUBSEQUENT DEALINGS, IT MUST BE RECOGNIZED THAT THE GOVERNMENT DID NOT INITIATE THESE ACTIONS. IT WAS AAI THAT REQUESTED THE SOLICITATION. BUT THE FACT THAT AAI, THE DEFAULTED CONTRACTOR, WAS FURNISHED THE SOLICITATION DOES NOT NECESSARILY ENTITLE IT TO HAVE ITS PROPOSAL CONSIDERED FOR AWARD. B 178885, SUPRA. MORE SPECIFICALLY, OUR OFFICE, IN B-171659, SUPRA, HELD,

*** THAT WHERE A DEFAULTED CONTRACTOR SUBMITS A BID FOR A REPURCHASE CONTRACT AT A PRICE HIGHER THAN THE PRICE FOR WHICH HE WAS BOUND UNDER THE DEFAULTED CONTRACT, HIS BID SHOULD NOT BE ACCEPTED. ACCEPTANCE OF SUCH A BID WOULD BE TANTAMOUNT TO A MODIFICATION OF THE DEFAULTED CONTRACT TO PROVIDE FOR AN INCREASE IN THE CONTRACT PRICE WITHOUT ANY CONSIDERATION THEREFOR TO THE GOVERNMENT. 27 COMP. GEN. 343 (1927); B 165884, MAY 28, 1969.

ACCORDINGLY, WE FIND NO BASIS TO OBJECT TO THE CONTRACTING OFFICER'S REJECTION OF AAI'S PROPOSAL.

CONCERNING THE REQUEST FOR PROPOSAL PREPARATION COSTS, WE RECOGNIZE THAT THE FEDERAL COURTS HAVE TAKEN THE POSITION THAT OFFERORS ARE ENTITLED TO HAVE THEIR PROPOSALS CONSIDERED FAIRLY AND HONESTLY FOR AWARD AND THAT THE RECOVERY OF PROPOSAL PREPARATION EXPENSES IS POSSIBLE IF IT CAN BE SHOWN THAT PROPOSALS WERE NOT SO CONSIDERED. HOWEVER, THE COURTS HAVE REQUIRED THAT ARBITRARINESS OR CAPRICIOUSNESS BE ESTABLISHED AS A PREREQUISITE TO RECOVERY. KECO INDUSTRIES, INC. V. UNITED STATES, 492 F.2D 1200; 192 CT. CL. 773 (1974). SEE ALSO EXCAVATION CONSTRUCTION INC., V. UNITED STATES, NO. 408-71, U.S. COURT OF CLAIMS, APRIL 17, 1974. THE COURT IN KECO ALSO CAUTIONED THAT "NOT EVERY IRREGULARITY, NO MATTER HOW SMALL OR IMMATERIAL, GIVES RISE TO THE RIGHT TO BE COMPENSATED FOR THE EXPENSE OF UNDERTAKING THE BIDDING PROCESS." B-179197, JULY 18, 1974.

AFTER REVIEW OF THE RECORD, WE DO NOT BELIEVE THAT AAI IS ENTITLED TO RECOVER ITS PROPOSAL PREPARATION COSTS. AS STATED ABOVE, THE CONTRACTING OFFICER KNEW THAT IT WULD HAVE BEEN IMPROPER TO ACCEPT AAI'S PROPOSAL, BUT BELIEVED THAT HE COULD NOT LEGALLY REFUSE AAI'S REQUEST FOR THE SOLICITATION. WE DO NOT BELIEVE THAT THE SUBSEQUENT ACTIONS TAKEN BY THE CONTRACTING OFFICER ARE SUBJECT TO QUESTION OR APPEAR TO HAVE BEEN ARBITRARY OR CAPRICIOUS. THEREFORE, "NO RIGHT TO BE COMPENSATED" FOR PROPOSAL PREPARATION COSTS HAS ARISEN UNDER THE STANDARDS OF THE KECO CASE, SUPRA.

IN VIEW OF THE FOREGOING, THERE IS NO LEGAL FOUNDATION UPON WHICH OUR OFFICE COULD RULE THAT THE GOVERNMENT IS BARRED, AS A MATTER OF LAW, FROM PURSUING AN ASSESSMENT AGAINST AAI FOR ALLEGED EXCESS COSTS OF REPROCUREMENT OCCASIONED BY THE TERMINATION OF CONTRACT DACW87-73-C 9049.

ACCORDINGLY, THE PROTEST IS DENIED IN ITS ENTIRETY.