B-181701, NOV 6, 1974

B-181701: Nov 6, 1974

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ALLEGING THAT CONTRACTING OFFICER EMPLOYED AUCTION TECHNIQUES DURING NEGOTIATIONS BY TELLING OFFEROR THAT HE WAS NOT LOW. THAT GOVERNMENT WAS SEEKING DISQUALIFICATION OF LOW OFFEROR AND. IS NOT SUPPORTED BY RECORD. THE SOLICITATION WAS A REPURCHASE FOLLOWING A TERMINATION FOR DEFAULT OF THE PREVIOUS CONTRACTOR. THREE FIRMS WERE SOLICITED AND FIVE FIRMS SUBMITTED INITIAL OFFERS ON APRIL 18. INITIALLY IT WAS DETERMINED TO RESTRICT NEGOTIATIONS TO KINGS POINT AND CLINE AS THE ONLY OFFERORS WITHIN THE COMPETITIVE RANGE PRICE WISE. IT WAS ADMINISTRATIVELY DETERMINED THAT DUE TO A "PRELIMINARY INDICATION OF NONRESPONSIBILITY ON THE PART OF CLINE" (THE LOW OFFEROR AND ALSO "AN INDICATION THAT KINGS POINT WOULD MAKE AN UPWARD REVISION OF ITS PRICE UPON REQUEST FOR BEST AND FINAL OFFER.

B-181701, NOV 6, 1974

PROTEST UNDER REPURCHASE PROCUREMENT, NECESSITATED BY CONTRACTOR DEFAULT, ALLEGING THAT CONTRACTING OFFICER EMPLOYED AUCTION TECHNIQUES DURING NEGOTIATIONS BY TELLING OFFEROR THAT HE WAS NOT LOW; THAT GOVERNMENT WAS SEEKING DISQUALIFICATION OF LOW OFFEROR AND; THAT $16.00 PRICE WOULD BE "IN-LINE", IS NOT SUPPORTED BY RECORD.

AIRFLOTE, INC.:

REQUEST FOR PROPOSALS DSA100-74-R-1347, ISSUED ON MARCH 29, 1974, BY THE DEFENSE PERSONNEL SUPPORT CENTER (DPSC), PHILADELPHIA, PENNSYLVANIA, SOLICITED OFFERS FOR SUPPLYING 11,184 PAIRS OF EXTREME COLD WEATHER, INSULATED, CLOTH MITTENS ON A FOB DESTINATION BASIS. THE SOLICITATION WAS A REPURCHASE FOLLOWING A TERMINATION FOR DEFAULT OF THE PREVIOUS CONTRACTOR, CLINE & ASSOCIATES, INC. THREE FIRMS WERE SOLICITED AND FIVE FIRMS SUBMITTED INITIAL OFFERS ON APRIL 18, 1974, AS FOLLOWS:

UNIT PRICE TOTAL PRICE DISCOUNT

KINGS POINT MFG. CO. INC. $15.86 $177,378.24 2%-20 DAYS

LITE INDUSTRIES, INC. 25.00 279,600.00 2%-20 DAYS

FREDRICK RUBBER CO. 24.58 274,902.72 1%-30 DAYS

CLINE & ASSOCIATES, INC. 13.65 152,661.60 1/2%-10 DAYS

AIRFLOTE INC. 21.30/21.40 238,742.40 1/10%-20 DAYS

ALTHOUGH THE COST AND PRICE ANALYSIS BRANCH FURNISHED A PRICE OBJECTIVE RANGING FROM $14.88 TO $17.93, THE CONTRACTING OFFICER ADOPTED A PRICE OBJECTIVE FROM $11.75, THE TERMINATED CONTRACT PRICE, UP TO $15.86. INITIALLY IT WAS DETERMINED TO RESTRICT NEGOTIATIONS TO KINGS POINT AND CLINE AS THE ONLY OFFERORS WITHIN THE COMPETITIVE RANGE PRICE WISE. HOWEVER, IT WAS ADMINISTRATIVELY DETERMINED THAT DUE TO A "PRELIMINARY INDICATION OF NONRESPONSIBILITY ON THE PART OF CLINE" (THE LOW OFFEROR AND ALSO "AN INDICATION THAT KINGS POINT WOULD MAKE AN UPWARD REVISION OF ITS PRICE UPON REQUEST FOR BEST AND FINAL OFFER," AIRFLOTE SHOULD BE INCLUDED IN THE NEGOTIATION PROCESS. FINAL OFFERS, DUE ON MAY 7, 1974, WERE AS FOLLOWS:

UNIT PRICE DISCOUNT CHANGE

CLINE $11.75 0.5% - 10 DAYS REDUCTION TO TERMINATED

CONTRACT PRICE

KINGS POINT 16.74 2.00% - 20 DAYS INCREASE OF $0.88 PAIR AIRFLOTE 21.15 - 21.25 1.00 - 20 DAYS DECREASE OF .15 PAIR

ON JUNE 28, 1974 AWARD WAS MADE TO KINGS POINT AS THE LOWEST RESPONSIBLE OFFEROR.

IN ITS JULY 13, 1974, PROTEST TO GAO, AIRFLOTE ALLEGES THAT THE CONTRACTING OFFICER AND THE PROCUREMENT AGENT VIOLATED THE ASPR PROVISION, RELATING TO AUCTION TECHNIQUES IN NEGOTIATED PROCUREMENTS, BY STATING THAT:

"(1) AIR FLOTE WAS NOT THE LOW BIDDER;

"(2) THE GOVERNMENT WAS SEEKING DISQUALIFICATIONS OF A LOWER BIDDER; AND

"(3) MR. PORITSKY THE CONTRACTING OFFICER SUGGESTED THAT THE OFFERING PRICES WERE TOO HIGH AND THAT A PRICE OF ABOUT $16.00 WOULD BE 'IN LINE'."

THE ADMINISTRATIVE REPORT, ON THE OTHER HAD, INDICATES THAT:

"AIRFLOTE WAS TOLD THAT BASED ON A PRICE ANALYSIS PERFORMED BY DPSC, THE PRICES SUBMITTED BY AIRFLOTE WERE CONSIDERED TOO HIGH. THE CONTRACTING OFFICER ALSO STATED THAT BASED ON OUR ANALYSIS, $15.00 PER PAIR WAS CONSIDERED AN APPROPRIATE PRICE FOR THIS ITEM. (THIS WAS THE PRICE OBJECTIVE ADOPTED IN THE PRE-NEGOTIATION BRIEFING GIVEN TO THE ASSISTANT CHIEF, DIVISION OF PROCUREMENT AND PRODUCTION ON 24 APRIL 1974). THE CONTRACTING OFFICER DID NOT DISCUSS THE DISQUALIFICATION OF ANOTHER OFFEROR WITH AIRFLOTE IN THE NEGOTIATIONS. THE FACT THAT AIRFLOTE WAS NOT THE LOW OFFEROR WAS NOT MENTIONED NOR WAS ANY OTHER OFFEROR OR THE NUMBER OF OFFERS RECEIVED. HOWEVER, THE PROCUREMENT AGENT BELIEVES THAT HE STATED, DURING THE CONVERSATION, THAT THIS WAS A REPURCHASE OF A TERMINATED CONTRACT AND THE GOVERNMENT DESIRED TO MITIGATE DAMAGES. *** THE GOVERNMENT DID NOT TELL AIRFLOTE OR THE OTHER OFFERORS THAT THERE WAS A PRICE THAT 'MUST' BE MET IN ORDER TO OBTAIN FURTHER CONSIDERATION. THE ONLY STATEMENT AS TO PRICE, WHICH WAS MADE TO AIRFLOTE AND KINGS POINT, WAS THAT $15.00 WAS CONSIDERED AN APPROPRIATE PRICE FOR THE ITEM."

IN RESPONSE TO THE ADMINISTRATIVE STATEMENT OF FACTS, AIRFLOTE ADHERES TO ITS PREVIOUSLY STATED POSITION AS TO THE CONTENT OF THE DISCUSSIONS.

WITH RESPECT TO AUCTIONS, ASPR 3-805-3(C)(1973 ED.) PROVIDES THAT:

"AUCTION TECHNIQUES ARE STRICTLY PROHIBITED; AN EXAMPLE WOULD BE INDICATING TO AN OFFEROR A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION, OR INFORMING HIM THAT HIS PRICE IS NOT LOW IN RELATION TO ANOTHER OFFEROR. ON THE OTHER HAND, IT IS PERMISSIBLE TO INFORM AN OFFEROR THAT HIS PRICE IS CONSIDERED BY THE GOVERNMENT TO BE TOO HIGH."

THUS, THE REGULATION PERMITS THE CONTRACTING OFFICER TO TELL AN OFFEROR, AS WAS DONE HER, THAT HIS OFFER IS TOO HIGH, BUT DOES NOT COUNTENANCE THE CONTRACTING OFFICER TELLING THE OFFEROR THAT HE IS NOT LOW. THE CONTRACTING OFFICER DENIES THAT THIS INFORMATION WAS REVEALED OR THAT THE DISQUALIFICATION OF ANOTHER OFFEROR WAS DISCUSSED WITH AIRFLOTE DURING THE NEGOTIATIONS. WE HAVE HELD THAT THE USE OF THE GOVERNMENT'S ESTIMATE AS A NEGOTIATING TOOL IS NOT AN AUCTION TECHNIQUE, AND THAT THE DISCLOSURE OF THE ESTIMATE TO AN OFFEROR DOES NOT CONSTITUTE AND INDICATION OF A "PRICE WHICH MUST BE MET" WITHIN THE SCOPE OF THE PROHIBITION, BUT MERELY SERVES AS ADVICE TO THOSE OFFERORS THAT THEY SHOULD CONSIDER WHETHER THEIR INITIAL OFFERS MIGHT BE "TOO HIGH." 52 COMP. GEN. 425, 429 (1973). CONSEQUENTLY, THE FACT THAT THE CONTRACTING OFFICER MENTIONED THAT $15.00 PER PAIR OF MITTENS (THE AGENCY'S PRICE OBJECTIVE) WOULD BE CONSIDERED AN "APPROPRIATE PRICE" CANNOT BE HELD TO BE IN CONTRAVENTION OF PROCUREMENT POLICY.

LASTLY, THE AGENCY STATES THAT THE PROCUREMENT AGENT BELIEVED HE TOLD AIRFLOTE THAT THE SUBJECT PROCUREMENT "WAS A REPURCHASE OF A TERMINATED CONTRACT AND THAT THE GOVERNMENT DESIRED TO MITIGATE DAMAGES." UNDER THE CIRCUMSTANCES OF THIS PROCUREMENT, SUCH A STATEMENT CANNOT BE CONSIDERED AN AUCTION TECHNIQUE. SEE ASPR 8-602.6(B) (1973 ED.)

ACCORDINGLY, THE PROTEST IS DENIED.