B-181558, DEC 10, 1974

B-181558: Dec 10, 1974

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REJECTION OF BID FOR TWO ITEMS UNDER INVITATION FOR BIDS WAS PROPER WHERE CONTRACTING OFFICER'S PRICE ANALYSIS SUPPORTS DETERMINATIONS THAT ONLY BID FOR SUCH ITEMS WAS UNREASONABLE AS TO PRICE SINCE ASPR 2-404.2(E) AUTHORIZES REJECTION OF UNREASONABLY PRICED BIDS. 2. ALTHOUGH BID OF DEFAULTED CONTRACTOR FOR REPROCUREMENT CONTRACT AT HIGHER PRICE THAN HE WAS BOUND UNDER DEFAULTED CONTRACT SHOULD BE REJECTED. SUCH RULE DOES NOT APPLY TO OTHER THAN ACTUAL REPROCUREMENT EVEN THOUGH SUBSEQUENT PROCUREMENTS ARE FOR SAME ITEM. THE SUPPLIES COVERED BY NSN 2146 ARE NATURAL COLOR NYLON CORD. THE SUPPLIES COVERED BY NSN 2154 ARE NATURAL COLOR NYLON CORD. OPENING DATE THE FOLLOWING BIDS WERE RECEIVED AND OPENED: ITEM NO.

B-181558, DEC 10, 1974

1. REJECTION OF BID FOR TWO ITEMS UNDER INVITATION FOR BIDS WAS PROPER WHERE CONTRACTING OFFICER'S PRICE ANALYSIS SUPPORTS DETERMINATIONS THAT ONLY BID FOR SUCH ITEMS WAS UNREASONABLE AS TO PRICE SINCE ASPR 2-404.2(E) AUTHORIZES REJECTION OF UNREASONABLY PRICED BIDS. 2. ALTHOUGH BID OF DEFAULTED CONTRACTOR FOR REPROCUREMENT CONTRACT AT HIGHER PRICE THAN HE WAS BOUND UNDER DEFAULTED CONTRACT SHOULD BE REJECTED, SINCE ACCEPTANCE OF SUCH BID WOULD BE TANTAMOUNT TO MODIFICATION OF DEFAULTED CONTRACT FOR AN INCREASE IN CONTRACT PRICE WITHOUT ANY CONSIDERATION TO GOVERNMENT, SUCH RULE DOES NOT APPLY TO OTHER THAN ACTUAL REPROCUREMENT EVEN THOUGH SUBSEQUENT PROCUREMENTS ARE FOR SAME ITEM.

WESTERN FILAMENT, INC.:

ON APRIL 26, 1974, THE DEFENSE INDUSTRIAL SUPPLY CENTER (DISC) ISSUED INVITATION FOR BIDS (IFB) DSA500-74-B-4034 (IFB 4034) FOR A FIRM-FIXED PRICE REQUIREMENTS TYPE CONTRACT FOR TWO NATIONAL STOCK NUMBERS OF NYLON CORD, NSN 4020-00-240-2146 (NSN 2146) AND NSN 4020-00-240-2154) (NSN 2154). THE SUPPLIES COVERED BY NSN 2146 ARE NATURAL COLOR NYLON CORD, 700 YARDS PER SPOOL, CONFORMING TO MIL-C-5040E DATED APRIL 19, 1972, WITH AMENDMENT NO. 1 DATED JUNE 1, 1973, TYPE 3. THE SUPPLIES COVERED BY NSN 2154 ARE NATURAL COLOR NYLON CORD, 500 YARDS PER SPOOL, CONFORMING TO MIL- C-5040E DATED APRIL 19, 1972, WITH AMENDMENT NO. 1 DATED JUNE 1, 1973, TYPE 1. THE INVITATION LISTS TWO LINE ITEMS FOR EACH NSN; ITEMS 0001 AND 0002 FOR NSN 2146, AND ITEMS 0003 AND 0004 FOR NSN 2154. ITEMS 0001 AND 0003 COVER REQUIREMENTS FOR THE NSNS EAST OF THE MISSISSIPPI RIVER AND ITEMS 0002 AND 0004 COVER NSN REQUIREMENTS WEST OF THE MISSISSIPPI RIVER.

ON THE MAY 21, 1974, OPENING DATE THE FOLLOWING BIDS WERE RECEIVED AND OPENED:

ITEM NO. ITEM NO. ITEM NO. ITEM NO.

0001 0002 0003 0004

BIDDER (PER SPOOL) (PER SPOOL) (PER SPOOL) (PER SPOOL)

WESTERN FILAMENT,, INC.* $38.00 $36.00 $ 9.53 $8.97

GENTEX CORP.** NO BID NO BID $10.25 NO BID

*DISCOUNT - NET ** DISCOUNT 1/2 OF 1% - 20 DAYS

BY LETTER DATED JUNE 5, 1974, TO THE CONTRACTING OFFICER, MILTEX INDUSTRIES, INC. (MILTEX), PROTESTED AGAINST THE AWARD OF A CONTRACT UNDER THE SUBJECT INVITATION, IN PART, BECAUSE MILTEX CONTENDED THAT THE PRICES BID WERE EXCESSIVE. THE CONTRACTING OFFICER REPORTS THAT THE PROTEST ON THIS BASIS MAY HAVE BEEN MOTIVATED BY MILTEX'S BELIEF THAT THE SOLICITATION INVOLVED A REPROCUREMENT OF THE SUPPLIES CALLED FOR UNDER ITS RECENTLY DEFAULTED CONTRACT.

BY LETTER DATED JUNE 26, 1974, THE CONTRACTING OFFICER DENIED MILTEX'S CONTENTION THAT THE PRICES BID ON ITEMS 0003 AND 0004 WERE UNREASONABLE, AND INDICATED THAT A DETERMINATION HAD NOT BEEN MADE CONCERNING THE REASONABLENESS OF THE PRICES BID ON ITEMS 0001 AND 0002. ON JULY 31, 1974, A CONTRACT WAS AWARDED TO WESTERN AS THE LOW BIDDER FOR ITEMS 0003 AND 0004. AFTER FURTHER CONSIDERATION THE CONTRACTING OFFICER CONCLUDED THAT THE PRICES BID BY WESTERN ON ITEMS 0001 AND 0002 WERE UNREASONABLY HIGH AND THAT PORTION OF THE INVITATION WAS CANCELLED. WESTERN WAS INFORMED OF THIS DETERMINATION BY LETTER DATED AUGUST 8, 1974.

BY MAIL GRAM DATED AUGUST 13, 1974, WESTERN PROTESTED TO OUR OFFICE AGAINST THE CANCELLATION OF ITEMS 0001 AND 0002. IN GENERAL IT IS WESTERN'S POSITION THAT THE CONTRACTING OFFICER'S DETERMINATION THAT WESTERN'S PRICES ON ITEMS 0001 AND 0002 WERE UNREASONABLY HIGH WAS BASED ON "UNREALISTIC AND IMPROPER" CRITERIA. WESTERN INSISTS THAT THE SUBJECT DETERMINATION WAS BASED ON OBSOLETE HISTORICAL PRICE DATA AND EVIDENCES A GENERAL LACK OF UNDERSTANDING OF THE PREVAILING ECONOMIC CONDITIONS AND WORLDWIDE PETRO CHEMICAL/TEXTILE SHORTAGES. FURTHER, IN THIS CONNECTION, WESTERN ARGUES THAT CANCELLATION OF THESE ITEMS IS NOT IN THE GOVERNMENT'S BEST INTERST SINCE AWARD UNDER IFB 4034 WOULD GUARANTEE A SOURCE OF SUPPLY, AT A FIXED PRICE, OVER A 12 MONTH PERIOD, OF MATERIALS WHICH ARE CURRENTLY SUBJECT TO UNPREDICTABLE PRICE ESCALATIONS.

AS A RESULT OF THE PARTIAL CANCELLATION OF IFB 4034, IFB DSA500-75-B 0709 (IFB 0709) WAS ISSUED ON AUGUST 14, 1974, BY DISC REQUESTING BIDS ON A FIXED QUANTITY OF 7,125 SPOOLS OF NSN 2146, IDENTICAL TO THE SUPPLIES DESCRIBED UNDER ITEMS 0001 AND 0002 OF IFB 4034. ALSO INCLUDED IN IFB 0709 IS A QUANTITY OF 7,125 SPOOLS IDENTIFIED AS A LABOR SURPLUS AREA SET- ASIDE. WESTERN HAS ALSO PROTESTED AGAINST ANY AWARD UNDER IFB 0709 BECAUSE WESTERN INSISTS THAT AN AWARD THEREUNDER WOULD JEOPARDIZE ITS POSITION UNDER IFB 4034. ALTHOUGH BIDS HAVE BEEN OPENED UNDER IFB 0709 AWARD HAS NOT BEEN MADE.

FOR THE FOLLOWING REASONS, THE PROTEST IS DENIED.

THE CONTRACTING OFFICER'S FINAL DETERMINATION THAT WESTERN'S PRICES BID ON THE SUBJECT ITEMS WERE UNREASONABLY HIGH WAS THE RESULT OF THREE SEPARATE STUDIES OF THE PRICES; ONE CONDUCTED BY DISC'S COST AND PRICE ANALYSIS BRANCH (PCB), AND THE OTHER TWO CONDUCTED BY THE CONTRACTING OFFICER.

AS A RESULT OF MILTEX'S PROTEST THE CONTRACTING OFFICER REQUESTED THAT THE PCB CONDUCT A PRICE ANALYSIS OF WESTERN'S BID UNDER IFB 4034. ACCORDINGLY, THE PCB ISSUED A REPORT, DATED JULY 11, 1974, TO THE CONTRACTING OFFICER WHICH CONCLUDES AS FOLLOWS:

"*** WESTERN FILAMENT HAS BID WITHIN A COMPETITIVE AND ACCEPTABLE RANGE ON ALL FOUR ITEMS BEING PROCURED. IT IS RECOMMENDED THAT ITEMS 0001 AND 0002 NOT BE CANCELLED FOR EXCESS COSTS SINCE THE PRICES FOR THESE ITEMS ARE WITHIN A CURRENT COMPETITIVE RANGE. ITEMS 0003 AND 0004 ARE DEFINITELY LOW COMPETITIVE PRICES."

IN ITS REPORT THE PCB USED IFB DSA500-74-B-4937 (IFB 4937) TO GAUGE THE REASONABLENESS OF WESTERN'S PRICES BID ON ITEMS 0001 AND 0002. IFB 4937, WHICH WAS OPENED ON JUNE 26, 1974, COVERED THE PROCUREMENT (FOR THE REPUBLIC OF CHINA) OF 1,175 UNITS OF NSN 2146, IDENTICAL TO THE SUPPLIES DESCRIBED UNDER ITEMS 0001 AND 0002 OF IFB 4034. HOWEVER, SINCE THE SUPPLIES COVERED BY IFB 4937 WERE FOR THE REPUBLIC OF CHINA UNDER THE MILITARY ASSISTANCE PROGRAM THEY WERE EXCLUDED FROM THE SCOPE OF IFB 4034. BIDS UNDER IFB 4937 WERE REQUESTED ON THE BASIS OF DELIVERY, WITHIN 240 DAYS AFTER DATE OF AWARD, F.O.B. LYNWOOD, CALIFORNIA. IN RESPONSE THERETO, FIVE BIDS WERE RECEIVED, AS FOLLOWS:

BIDDER PLANT LOCATION UNIT PRICE

MILTEX INDUSTRIES, INC. ASHEVILLE, N.C. $29.40

HOPE WEBBING CO. PAWTUCKET, R.I. $30.50

GENTEX CORP. CARBONDALE, PA. $32.76

GLADDING CORP.PAWTUCKET, R.I. $35.00

WESTEN FILAMENT, INC. GLENDALE, CA. $40.10

AS NOTED BY DISC, UNDER IFB 4937 WESTERN HAD A FREIGHT ADVANTAGE OF APPROXIMATELY $1.38 PER SPOOL OVER THE FOUR OTHER BIDDERS IN VIEW OF ITS PROXIMITY TO LYNWOOD, CALIFORNIA.

IN DETERMINING THAT WESTERN'S PRICES FOR ITEMS 0003 AND 0004 WERE REASONABLE THE PCB RELIED ON THE FACT THAT GENTEX BID A PRICE HIGHER THAN WESTERN'S ON ITEM 0003. ALTHOUGH GENTEX DID NOT BID ON ITEM 0004, ITEMS 0003 AND 0004 ARE FOR IDENTICAL SUPPLIES, ONLY DELIVERY POINTS DIFFER. WITH RESPECT TO ITEMS 0001 AND 0002 THE PCB REPORT NOTES THAT IFB 4034 CALLS FOR A ONE YEAR REQUIREMENTS CONTRACT; THAT DELIVERY ORDERS COULD BE ISSUED FROM THE EFFECTIVE DATE OF THE AWARD THROUGH A DATE EXACTLY ONE YEAR THEREAFTER; THAT DELIVERY WAS TO BE MADE WITHIN 180 DAYS FROM THE DATE OF EACH ORDER; AND THAT, THEREFORE, IF AN ORDER WAS PLACED ON THE LAST DAY OF THE EFFECTIVE PERIOD OF THE CONTRACT, DELIVERY WOULD BE REQUIRED ON THAT ORDER WITHIN 545 DAYS AFTER THE DATE OF THE AWARD OF THE AWARD OF THE REQUIREMENTS CONTRACT. ACCORDINGLY, THE PCB DETERMINED THAT A 20 PERCENT FACTOR SHOULD BE ADDED TO ALL PRICES BID UNDER IFB 4937 "FOR CONTINGENCIES INHERENT IN A 545 DAY DELIVERY" UNDER "EXISTING ECONOMIC CONDITIONS." USING THE ABOVE-CITED ADJUSTMENT FACTOR AND THE $1.38 FREIGHT DIFFERENTIAL THE PCB ESTIMATED THAT THE LOW BIDDER (MILTEX) AND THE THIRD LOW BIDDER (GENTEX) WOULD HAVE BID THE FOLLOWING PRICES FOR ITEMS 0001 AND 0002 UNDER IFB 4034:

ITEM 0001 ITEM 0002

MILTEX $32.62 $35.28

GENTEX 37.66 39.31

ON THIS BASIS THE PCB CONCLUDED THAT WESTERN'S PRICES OF $38.00 AND $36.00 WERE "WITHIN A COMPETITIVE AND ACCEPTABLE RANGE."

THE CONTRACTING OFFICER ACCEPTED THE PCB'S CONCLUSION CONCERNING ITEMS 0003 AND 0004, BUT DISAGREED WITH THE PCB'S OPINION AS TO THE REASONABLENESS OF WESTERN'S PRICES BID ON ITEMS 0001 AND 0002. WESTERN DOES NOT QUESTION THE AUTHORITY OF THE CONTRACTING OFFICER TO REJECT THE ADVICE OF THE PCB AND ARRIVE AT AN INDEPENDENT DETERMINATION UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-404.1 (1974 ED.), WHICH SETS FORTH THE CRITERIA FOR THE CANCELLATION OF AN INVITATION AND SPECIFICALLY PROVIDES THAT THE CONTRACTING OFFICER IS TO DETERMINE THE REASONABLENESS OF THE PRICES, BUT DISPUTES THE RATIONALE UNDERLYING THAT DETERMINATION.

THE CONTRACTING OFFICER'S RATIONALE IS CONTAINED IN TWO MEMORANDA, THE FIRST OF WHICH IS DATED JULY 31, 1974. IN THIS MEMORANDUM THE CONTRACTING OFFICER COMPARED THE PRICES BID BY WESTERN ON ITEMS 0003 AND 0004 WITH PRICES AT WHICH THESE SAME SUPPLIES WERE AWARDED UNDER REQUIREMENTS CONTRACTS FOR THE PRECEDING ONE-YEAR PERIOD (1973), WITH THE FOLLOWING RESULTS:

CURRENT SOLICITATION PREVIOUS PROCUREMENTS

EST. WEST. EST.

ITEM # QTY. FIL. GENTEX QTY. CONTRACTOR PRICE DATE

0003 2,943 $9.53 $10.25 3072 GENTEX $7.40 4/73

3071 WEST. FIL.** $7.75 5/73

0004 2,408 $8,.97 1654 GENTEX $7.80 4/73

1654 WEST. FIL.* $7.80 4/73

* SET-ASIDE AWARD

** READVERTISED AWARD ON DISSOLVED SET-ASIDE (LOWEST OF 3 BIDS RECEIVED)

BASED ON THIS COMPARISON THE CONTRACTING OFFICER CONCURRED IN THE PCB'S CONCLUSION REGARDING THE PRICES BID BY WESTERN ON ITEMS 0003 AND 0004.

WITH RESPECT TO ITEMS 0001 AND 0002, THE CONTRACTING OFFICER MADE THE FOLLOWING COMPARISON OF THE PRICES BID BY WESTERN AND PRICES AT WHICH THE SAME ITEMS WERE AWARDED UNDER FOUR REQUIREMENTS CONTRACTS FOR THE PRECEDING ONE-YEAR PERIOD.

CURRENT SOLICITATION PREVIOUS PROCUREMENTS

EST. WESTERN EST.

ITEM # QTY. FILAMENT QTY. CONTRACTOR PRICE DATE

0001 4.650 $38.00 3250 GLADDING $18.90 4/73

3250 MILTEX * $18.90 4/73

0002 3,100 $36.00 3250 WEST. FIL. $19.95 4/73

3250 MILTEX * $19.95 4/73

* LABOR SURPLUS AREA SET-ASIDE

THE CONTRACTING OFFICER NOTED THAT WESTERN'S PRICE OF $38.00 PER SPOOL BID FOR ITEM 0001 REPRESENTED AN INCREASE OF APPROXIMATELY 100 PERCENT OVER THE AWARD PRICE OF THE PRECEDING YEAR AND THAT WESTERN'S PRICE OF $36.00 PER SPOOL FOR ITEM 0002 REPRESENTED AN INCREASE OF APPROXIMATELY 80 PERCENT OVER THE $19.95 PRICE PAID THE PRECEDING YEAR.

THE PRICES BID UNDER IFB 4937 WERE THEN COMPARED TO WESTERN'S PRICES. THIS ANALYSIS THE CONTRACTING OFFICER TOOK EXCEPTION TO THE 20 PERCENT FACTOR APPLIED TO THE PRICES BID ON IFB 4937 BY THE PCB IN ITS REPORT. INSTEAD OF THE 20 PERCENT FACTOR THE CONTRACTING OFFICER DETERMINED THAT TWO MAJOR FACTORS SHOULD BE CONSIDERED IN USING PRICES BID ON IFB 4937 AS A GAUGE OF THE REASONABLENESS OF PRICES BID ON IFB 4034. IN THE CONTRACTING OFFICER'S OPINION THESE FACTORS WERE (1) AN UPWARD ADJUSTMENT IN THE FORM OF A CONTINGENCY BECAUSE OF THE UNCERTAINTIES ASSOCIATED WITH A REQUIREMENTS CONTRACT IN THE PRESENT ECONOMIC CLIMATE AND (2) A DOWNWARD ADJUSTMENT BECAUSE OF THE QUANTITY DIFFERENCE BETWEEN THE ESTIMATES IN IFB 4034 (4,650 FOR ITEM 0001 AND 3,1000 FOR ITEM 0002) AND THE FIRM QUANTITY OF 1,175 UNDER IFB 4937. THESE TWO FACTORS, WHICH THE CONTRACTING OFFICER ESTIMATED WOULD AMOUNT TO A 10 PERCENT DECREASE FROM IFB 4937 PRICES DUE TO THE INCREASED QUANTITY UNDER IFB 4034 AND A 20 PERCENT INCREASE OVER THE IFB 4937 PRICES BECAUSE OF CONTINGENCIES DUE TO IFB 4034'S LONGER DELIVERY SCHEDULE, RESULTED IN THE APPLICATION OF AN OVERALL UPWARD ADJUSTMENT OF 10 PERCENT WHICH WAS APPLIED TO THE IFB 4937 PRICES.

BASED ON THE CONTRACTING OFFICER'S COMPARISON OF WESTERN'S PRICES TO PRICES BID ON PREVIOUS PROCUREMENTS AND TO PRICES BID ON IFB 4937, HE DETERMINED, CONTRARY TO THE PCB FINDINGS, THAT THE PRICES WESTERN BID ON ITEMS 0001 AND 0002 WERE UNREASONABLY HIGH. IN REACHING THIS CONCLUSION THE CONTRACTING OFFICER NOTED IN HIS MEMORANDUM THAT THE NUMBER OF BIDDERS RESPONDING TO IFB 4937 INDICATED THAT COMPETITION SEEMED TO BE AVAILABLE FOR RELATIVELY SMALL QUANTITY BUYS. IN THIS REGARD, THE CONTRACTING OFFICER CONCLUDED THAT COMPETITION HAD BEEN SERIOUSLY HAMPERED UNDER IFB 4034 BY HIS ATTEMPT TO PROCURE LARGER QUANTITIES BY A ONE YEAR REQUIREMENTS CONTRACT.

WESTERN ATTACKS THIS PORTION OF THE CONTRACTING OFFICER'S RATIONALE AS ARBITRARY AND ERRONEOUS. SPECIFICALLY, WESTERN ARGUES THAT ANY COMPARISON WITH PRICES RECEIVED UNDER CONTRACTS EXECUTED IN APRIL AND MAY OF 1973 IS INVALID SINCE AT THAT TIME PRICES FOR MATERIAL AND LABOR WERE CONTROLLED BY PHASES I THROUGH IV OF THE PRESIDENTIAL GUIDELINES, WHILE NO SUCH CONTROLS WERE APPLICABLE TO PRICES WHEN WESTERN DEVELOPED ITS BID FOR IFB 4034.

WE DO NOT BELIEVE THE FACT THAT PRICE GUIDELINES WERE EFFECTIVE DURING THE PERIOD (1973) COVERED BY THE PRIOR PROCUREMENTS NECESSARILY INVALIDATES THE CONTRACTING OFFICER'S USE OF THOSE PRICES AS A GUIDE TO THE REASONABLENESS OF WESTERN'S PRESENT PRICES. BY COMPARING 1973 PRICES FOR THE SUPPLIES REPRESENTED BY ITEMS 0003 AND 0004, AS WELL AS ITEMS 0001 AND 0002, THE CONTRACTING OFFICER DISCOVERED THAT WESTERN'S BID PRICES ON ITEMS 0001 AND 0002 INCREASED BY A MUCH GREATER PERCENTAGE OVER THE 1973 PRICES THAN ITS PRICES BID ON ITEMS 0003 AND 0004. SINCE THE 1973 PRICE GUIDELINES AFFECTED THE SUPPLIES REPRESENTED BY ITEMS 0001 AND 0002, AS WELL AS THOSE SUPPLIES REPRESENTED BY ITEMS 0003 AND 0004, WE BELIEVE THE CONTRACTING OFFICER'S USE OF A COMPARISON OF THE RELATIVE INCREASES OF THE TWO SETS OF ITEMS TO BE REASONABLE. WESTERN ATTEMPTS TO DISCREDIT ANY COMPARISON BETWEEN THE TWO SETS OF ITEMS BY NOTING THAT ITEMS 0003 AND 0004 CALL FOR CORD OF 1/8 INCH IN DIAMETER, WHILE ITEMS 0001 AND 0002 CALL FOR CORD OF 3/16 INCH IN DIAMETER. IT IS WESTERN'S POSITION IN THIS REGARD THAT SINCE ITEMS 0003 AND 0004 INVOLVE LESS MATERIAL THEY ARE LESS SUBJECT TO PRICE INCREASES. WE DO NOT DISPUTE WESTERN'S PREMISE THAT THE SUPPLIES PROCURED UNDER ITEMS 0001 AND 0002 CONTAIN CONSIDERABLY MORE MATERIAL THAN THE SUPPLIES REPRESENTED BY ITEMS 0003 AND 0004. IN VIEW OF THE DIFFERENCE IN THE PRICES BID ON ITEMS 0001 AND 0002 AS COMPARED TO THE PRICES BID ON ITEMS 0003 AND 0004, AND CONSIDERING THE FACT THAT THE CONTRACTING OFFICER TREATED EACH SET OF ITEMS SEPARATELY, IT SEEMS THAT THE CONTRACTING OFFICER WAS AWARE THAT THESE SETS OF ITEMS REPRESENT DIFFERING QUANTITIES OF MATERIALS. IN ANY EVENT, IT IS CLEAR THAT A "ONE TO ONE" COMPARISON WAS NOT USED AS THE SOLE SUPPORT OF THE CONTRACTING OFFICER'S DETERMINATION, BUT THE RELATIONSHIP OF THE INCREASES WAS CONSIDERED ALONG WITH OTHER FACTORS IN THE PRICE ANALYSIS. WE DO NOT BELIEVE THE CONTRACTING OFFICER ACTED UNREASONABLY IN CONSIDERING THE ABOVE-CITE PRICE COMPARISON IN HIS OVERALL PRICE ANALYSIS.

WESTERN ALSO TAKES ISSUE WITH THE CONTRACTING OFFICER'S COMPARISON OF THE PRICES BID ON IFB 4937 AND THOSE BID BY WESTERN ON ITEMS 0001 AND 0002 OF IFB 4034. WESTERN ARGUES THAT THE CONTRACTING OFFICER IGNORED THE DIFFERENCE IN QUANTITY BETWEEN THE TWO PROCUREMENTS. IT IS CONTENDED BY WESTERN IN THIS REGARD THAT ONLY ONE MILLION YARDS OF MATERIAL WAS PROCURED UNDER IFB 4937, AS OPPOSED TO 10 MILLION YARDS WHICH WILL BE PROCURED UNDER IFB 4034. SIMILARILY, WESTERN ATTACKS THE REASONABLENESS OF THE CONTRACTING OFFICER'S POSITION BY ASSERTING THAT HIS ANALYSIS ALSO IGNORED THE FACT THAT THE DELIVERY PERIOD OF IF 4937 IS MERELY 240 DAYS, WHEREAS THE DELIVERY PERIOD OF IFB 4037 EXTENDS FOR 545 DAYS. FINALLY, WESTERN NOTES THAT THE CONTRACTING OFFICER FAILED TO CONSIDER THE FACT THAT IFB 4937 PROVIDES FOR A FIXED DELIVERY OF A SPECIFIC QUANTITY, THEREBY ENABLING THE CONTRACTOR TO USE A FIXED BUDGET SCHEDULE AND LUMP SUM PURCHASING OF MATERIALS, RESULTING IN LOWER COSTS THAN ARE POSSIBLE UNDER THE INDEFINITE TYPE CONTRACT CONTEMPLATED UNDER IFB 4034.

AS PREVIOUSLY NOTED IN OUR DISCUSSION OF THE CONTRACTING OFFICER'S PRICE ANALYSIS, AND CONTRARY TO WESTERN'S CONTENTION, HE DID CONSIDER BOTH THE INCREASE IN QUANTITY AND THE DIFFERENCES IN THE DELIVERY SCHEDULES BETWEEN IFB 4937 AND IFB 4034 IN DEVELOPING HIS 10 PERCENT ADJUSTMENT FACTOR. FURTHER, WE DO NOT BELIEVE THE FACT THAT CERTAIN COST ADVANTAGES MAY BE INHERENT IN THE DEFINITE QUANTITY PROCUREMENT UNDER IFB 4937 RENDERS ANY PRICE COMPARISON WITH THAT PROCUREMENT UNREASONABLE. IT APPEARS FROM THE RECORD THAT THIS FACTOR WAS CONSIDERED BY THE CONTRACTING OFFICER IN DEVELOPING THAT PORTION OF THE 10 PERCENT ADJUSTMENT FACTOR TO COMPENSATE FOR "CONTINGENCY BECAUSE OF UNCERTAINTIES ASSOCIATED WITH A REQUIREMENTS CONTRACT."

BEFORE REACHING HIS FINAL DETERMINATION THE CONTRACTING OFFICER CONDUCTED A FURTHER ANALYSIS OF THE PRICES. IN THIS FINAL STUDY, REPORTED IN A MEMORANDUM DATED AUGUST 7, 1974, THE CONTRACTING OFFICER EXPANDED ON THE CONCLUSION REACHED IN HIS INITIAL MEMORANDUM TO THE EFFECT THAT COMPETITION WOULD BE AVAILABLE FOR SEVERAL SMALLER, FIXED QUANTITY BUYS. THE CONTRACTING OFFICER ATTEMPTED TO PROJECT THE GOVERNMENT'S PROCUREMENT OF ITS REQUIREMENTS FOR ITEMS 0001 AND 0002 DURING THE COMING YEAR (1) BASED ON A REQUIREMENTS CONTRACT AT PRICES BID BY WESTERN UNDER IFB 4034 AND (2) BASED ON INDIVIDUAL FIRM QUANTITY BUYS AT PRICES WHICH IN THE CONTRACTING OFFICER'S OPINION REASONABLY COULD BE ANTICIPATED IN THE FUTURE, JUDGING FROM THE PRICES RECEIVED UNDER IFB 4937 FOR THE FIRM QUANTITY OF 1,175 UNITS. IN MAKING THIS ANALYSIS THE CONTRACTING OFFICER ASSUMED THAT PURCHASES DURING THE ONE YEAR PERIOD WOULD TOTAL 9,300 SPOOLS FOR ITEM 0001 AND 6,200 SPOOLS FOR ITEM 0002; THAT PURCHASE REQUIREMENTS WOULD BE RECEIVED EVERY TWO MONTHS IN EQUAL AMOUNTS OF ONE-SIXTH OF THE TOTAL ESTIMATED QUANTITIES; AND THAT NYLON PRICES WOULD ESCALATE AT A RATE OF 1 PERCENT PER MONTH. THE CONTRACTING OFFICER CALCULATED THAT IF THE QUANTITIES WERE ORDERED UNDER A REQUIREMENTS CONTRACT AWARDED UNDER IFB 4034 AT THE PRICES BID BY WESTERN, THE TOTAL COST OF ITEM 0001 WOULD BE $353,400.00 AND THE TOTAL COST FOR ITEM 0002 WOULD BE $223,128.00. IN HIS PROJECTION OF ANTICIPATED COST BASED ON INDIVIDUAL PROCUREMENTS, THE CONTRACTING OFFICER'S CALCULATIONS SHOW A PROJECTED SAVINGS OVER THE REQUIREMENTS CONTRACT APPROACH, AS FOLLOWS:

IFB 4937 PROJECTED SAVINGS

BID BASE ITEM 0001 ITEM 0002

(MILTEX) $74,586 (27%) $28,149.25 (14%)

(HOPE) $63,705 (22%) $20,856.27 (10%)

(GENTEX) $41,166 (13%) $ 5,960.51 ( 3%)

ON THE BASIS OF THIS PROJECTION THE CONTRACTING OFFICER AGAIN CONCLUDED THAT REASONABLE PRICES HAD NOT BEEN RECEIVED IN RESPONSE TO ITEMS 0001 AND 0002 OF IFB 4034.

WESTERN BASES ITS CRITICISM OF THIS FINAL PROJECTION PRIMARILY ON THE CONTRACTING OFFICER'S USE OF THE 1 PERCENT INFLATION FACTOR. WESTERN INSISTS THAT SINCE THIS FACTOR WAS DEVELOPED FROM A FORECAST APPARENTLY CONTAINED IN A TRADE PERIODICAL IT MUST BE INVALID. IN THIS REGARD, IT IS WESTERN'S POSITION THAT THE CONTRACTING OFFICER SHOULD HAVE CONTACTED SUPPLIERS OF NYLON TO OBTAIN A PROPER BASE FOR THE PROJECTION OF NYLON PRICING TRENDS. WESTERN ALSO NOTES THAT THE CONTRACTING OFFICER FAILED TO COMPOUND THE 1 PERCENT PER MONTH PROJECTED RATE OVER THE 12 MONTH PERIOD AS REQUIRED BY "COMMON ORDINARY ACCOUNTING PRACTICES."

IT MAY BE, AS WESTERN CONTENDS, THAT OTHER MORE RELIABLE SOURCE THAN THAT USED BY THE CONTRACTING OFFICER ARE AVAILABLE FOR INFORMATION CONCERNING NYLON PRICE TRENDS. ON THE OTHER HAND, WESTERN HAS PROVIDED THIS OFFICE WITH NO EVIDENCE TO INDICATE THAT THE INFLATION FACTOR USED IN THE CASE IS NOT A REASONABLE PROJECTION OF NYLON PRICE INCREASES. IN SUCH AN AREA, WHERE THERE IS WIDE DISAGREEMENT EVEN AMONG EXPERTS AS TO WHAT PRICE INCREASES THE FUTURE WILL BRING, WE MUST DEFER TO THE CONTRACTING OFFICER'S JUDGMENT UNLESS THAT JUDGMENT CAN BE SHOWN TO BE WITHOUT A REASONABLE BASIS. THIS HAS NOT BEEN DONE HERE. IN RESPONSE TO WESTERN'S POSITION CONCERNING THE CONTRACTING OFFICER'S FAILURE TO COMPOUND THE INFLATION RATE, THE ADMINISTRATIVE REPORT INDICATES THAT THE CONTRACTING OFFICER'S CALCULATIONS WERE INTENTIONALLY BASED ON THE PREMISE THAT PRICES WOULD NOT ESCALATE BY MORE THAN 1 PERCENT PER MONTH COMPUTED ON THE BASE PRICE RATHER THAN ON A COMPOUND BASE. AGAIN WE HAVE NO BASIS TO DISPUTE THE CONTRACTING OFFICER'S JUDGMENT IN THIS REGARD.

10 U.S.C. 2305(C) PROVIDES THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST, AND THIS RIGHT IS ALSO RESERVED BY PARAGRAPH 10 OF THE INVITATION'S INSTRUCTIONS AND CONDITIONS. ASPR 2-404.2(E) (1974 ED.), IMPLEMENTING THE AUTHORITY TO REJECT BIDS, PROVIDES THAT ANY BID MAY BE REJECTED IF THE CONTRACTING OFFICER DETERMINES IN WRITING THAT IT IS UNREASONABLE AS TO PRICE. OUR OFFICE AND THE COURTS HAVE HELD THAT THE REJECTION OF BIDS IS A MATTER OF ADMINISTRATIVE DISCRETION AND THAT AN INVITATION FOR BIDS DOES NOT IMPORT AN OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CONFORMING ONE. SEE 50 COMP. GEN. 177, 179-180 (1970); 36 COMP. GEN. 364, 365 (1956). WE BELIEVE IT IMPORTANT TO EMPHASIZE THAT AN ADMINISTRATIVE DETERMINATION AS TO THE REASONABLENESS OF PRICES BID IS A DETERMINATION WHICH REQUIRES THE EXERCISE OF REASONED JUDGMENT. IN THIS INSTANCE THE CONTRACTING OFFICER PROPERLY, WE THINK, BASED HIS ANALYSIS ON THE MOST RECENT PRICES BID ON PROCUREMENTS OF SUPPLIES IDENTICAL TO THOSE IN QUESTION. ALTHOUGH IT MAY BE THAT THE CONTRACTING OFFICER'S METHODOLOGY IN DEVELOPING HIS CONCLUSIONS FROM THOSE BASE PRICES COULD HAVE BEEN DIFFERENT, WE ARE NOT CONVINCED THAT THE CONTRACTING OFFICER ACTED UNREASONABLY IN DETERMINING THAT WESTERN'S PRICES BID ON ITEMS 0001 AND 0002 WERE UNREASONABLE AND IN CANCELING THAT PORTION OF IFB 4034.

IN ADDITION TO ITS OBJECTIONS RAISED CONCERNING THE VALIDITY OF THE CONTRACTING OFFICER'S PRICE ANALYSIS, WESTERN CHARGES THAT THE REJECTION OF ITS BID FOR ITEMS 0001 AND 0002 EVIDENCES A DESIRE ON THE PART OF THE CONTRACTING OFFICER TO PROTECT MILTEX WITH REGARD TO THE ASSESSMENT OF ANY REPROCUREMENT COSTS AS A RESULT OF THE RECENT DEFAULT TERMINATION OF MILTEX'S CONTRACT. IT APPEARS THAT WESTERN'S POSITION IN THIS REGARD IS THAT THE CANCELLATION OF ITEMS 0001 AND 0002 OF IFB 4034 WILL PREVENT THE GOVERNMENT FROM GOVERNMENT FROM ASSESSING REPROCUREMENT COSTS AGAINST MILTEX. WESTERN ALSO OBJECTS TO THE AWARD OF A CONTRACT TO MILTEX UNDER IFB 4937 FOR THE SAME TYPE OF SUPPLIES BECAUSE IN ITS VIEW THIS AWARD "WAS TANTAMOUNT TO A MODIFICATION OF A DEFAULTED CONTRACT WITHOUT CONSIDERATION TO THE GOVERNMENT." WESTERN ALSO OBJECTS TO ANY AWARD TO MILTEX UNDER IFB 0709, IFB DSA500-75-B 1494 AND IFB YP17427003028 FOR THE SAME REASON. (WESTERN'S PROTEST UNDER IFB YP17427003028, RECEIVED BY THIS OFFICE ON OCTOBER 30, 1974, WAS ASSIGNED FILE NO. B-182551. HOWEVER, SINCE IT RAISES THE SAME ISSUE AS IS INVOLVED IN THE INSTANT PROTEST IT IS TREATED AS A PART OF THE SUBJECT DECISION).

THE ADMINISTRATIVE REPORT INDICATES THAT MILTEX WAS AWARDED A 1 YEAR REQUIREMENTS CONTRACT (NO. DSA500-73-D-0605) FOR SUPPLIES IDENTICAL TO THOSE REPRESENTED BY ITEMS 0001 AND 0002 OF IFB 4034. IT IS FURTHER REPORTED THAT BECAUSE OF ESCALATING COSTS MILTEX REFUSED TO PERFORM DELIVERY ORDERS 0003 AND 0004 ISSUED AGAINST ITS REQUIREMENTS CONTRACT AND THAT THE GOVERNMENT TERMINATED THOSE DELIVERY ORDERS FOR DEFAULT. MILTEX HAS APPEALED THIS TERMINATION TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA NO. 19449). THE REPORT INDICATES THAT A QUANTITY OF 5648 SPOOLS WAS INOLVED IN THE MILTEX TERMINATION. IT IS THE CONTRACTING OFFICER'S POSITION THAT NONE OF THE GOVERNMENT'S RIGHTS UNDER THE TERMINATION CLAUSE WOULD BE WAIVED BY THE CANCELLATION OF ITEMS 0001 AND 0002 SINCE THE TOTAL REPROCUREMENT QUANTITY IS TO BE INCLUDED IN ITEMS 0001 THRU 0006 OF IFB 0709 ISSUED TO REPLACE ITEMS 0001 AND 0002 OF IFB 4034. THE CONTRACTING OFFICER FURTHER REPORTS THAT AWARD TO WESTERN UNDER ITEMS 0001 AND 0002 OF IFB 4034 MAY WELL HAVE GIVEN MILTEX A DEFENSE AGAINST THE COLLECTION OF EXCESS COSTS SINCE THE GOVERNMENT IS UNDER AN OBLIGATION TO MITIGATE DAMAGES AND THE PRICES BID BY WESTERN ON ITEMS 0001 AND 0002 APPEAR TO BE IN EXCESS OF OPEN MARKET PRICES FOR THESE SUPPLIES. IN VIEW OF THE FACT THAT THE REPROCUREMENT QUANTITY IS TO BE PICKED UP UNDER ITEMS 0001 THRU 0006 OF IFB 0709, WE FAIL TO FIND ANY MERIT IN WESTERN'S ARGUMENT THAT THE CANCELLATION OF ITEMS 0001 AND 0002 UNDER IFB 4034 WILL COMPROMISE THE GOVERNMENT'S RIGHT TO ASSESS EXCESS COSTS AGAINST MILTEX. FURTHER, WE NOTE THAT WESTERN IS CONCERNED THAT MILTEX MAY RECEIVE AN AWARD UNDER IFB 0709 AS THE LOW LABOR SURPLUS AREA BIDDER FOR REPROCUREMENT SUPPLIES. ALTHOUGH IT APPEARS THAT MILTEX MAY QUALIFY FOR AWARD OF THE SET-ASIDE PORTION OF IFB 0709, WHICH INCLUDES ITEMS 0001 THRU 0006, THE AGENCY HAS REPORTED THAT THESE ITEMS WILL BE EXCLUDED FROM ANY SET ASIDE AWARD TO MILTEX.

AS FAR AS WESTERN'S OBJECTIONS TO AWARDS UNDER THE REMAINING INVITATIONS ARE CONCERNED, WE ARE INFORMED THAT WHILE THESE INVITATIONS ARE FOR THE SAME TYPE OF SUPPLIES THAT WERE THE SUBJECT OF THE MILTEX TERMINATION NONE REPRESENTS THE REPROCUREMENT OF THE TERMINATED QUANTITY. ALTHOUGH WE HAVE HELD THAT WHERE A DEFAULTED CONTRACTOR SUBMITS A BID FOR A REPURCHASE CONTRACT AT A PRICE HIGHER THAT THE PRICE FOR WHICH HE WAS BOUND UNDER THE DEFAULTED CONTRACT HIS BID SHOULD NOT BE ACCEPTED SINCE THE 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, WE HAVE NEVER HELD THAT SUCH A PROHIBITION EXTENDS BEYOND THE ACTUAL REPROCUREMENT. SEE MATTER OF AEROSPACE AMERICA, INC., B-181553, 54 COMP. GEN. (1974); 27 COMP. GEN. 343 (1947); B 165884, MAY 28, 1969. ACCORDINGLY, WE FIND NO BASIS TO OBJECT TO THE RECEIPT OF BIDS FROM OR THE AWARD OF A CONTRACT TO MILTEX AT PRICES WHICH MAY EXCEED THOSE UNDER ITS DEFAULTED CONTRACT UNDER INVITATIONS WHICH REPRESENT SEPARATE AND DISTINCT PROCUREMENTS OF THE SAME TYPE OF SUPPLIES AS THOSE REPRESENTED BY THE DEFAULTED CONTRACT. SINCE WE ARE UNABLE TO CONCLUDE THAT THE CONTRACTING OFFICER'S CANCELLATION OF THE SUBJECT ITEMS UNDER IFB 4034 WAS UNREASONABLE, WE HAVE NO BASIS TO OBJECT TO AN AWARD UNDER IFB 7079, WHICH REPRESENTS A READVERTISEMENT OF THE SAME REQUIREMENT.