B-182066, DEC 9, 1974, 54 COMP GEN 476

B-182066: Dec 9, 1974

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BIDS - OPTIONS - PRICE HIGHER THAN BASIC BID BID SUBMITTED WHICH CONTAINED PRICE FOR BASE QUANTITY AND GREATER PRICE FOR OPTION QUANTITY IN DEROGATION OF INVITATION FOR BIDS PROVISION IMPOSING CEILING LIMITATION ON OPTION QUANTITY (OPTION PRICE WAS NOT TO EXCEED PRICE BID ON BASE QUANTITY) MAY NOT BE CONSIDERED FOR AWARD SINCE DEVIATION WOULD BE PREJUDICIAL TO ALL BIDDERS WHO SUBMITTED BIDS IN CONFORMANCE WITH OPTION CEILING PROVISION. DAAB07-74-B-0915 WAS ISSUED BY THE UNITED STATES ARMY ELECTRONICS COMMAND (ECOM). SECTION J.1C STATED "EVALUATION OF BIDS OR OFFERS RECEIVED WILL BE MADE ON THE BASIS OF PRICES QUOTED FOR THE SUPPLIES OR SERVICES EXCLUSIVE OF THE OPTION.". FIFTY SOURCES WERE SOLICITED.

B-182066, DEC 9, 1974, 54 COMP GEN 476

BIDS - OPTIONS - PRICE HIGHER THAN BASIC BID BID SUBMITTED WHICH CONTAINED PRICE FOR BASE QUANTITY AND GREATER PRICE FOR OPTION QUANTITY IN DEROGATION OF INVITATION FOR BIDS PROVISION IMPOSING CEILING LIMITATION ON OPTION QUANTITY (OPTION PRICE WAS NOT TO EXCEED PRICE BID ON BASE QUANTITY) MAY NOT BE CONSIDERED FOR AWARD SINCE DEVIATION WOULD BE PREJUDICIAL TO ALL BIDDERS WHO SUBMITTED BIDS IN CONFORMANCE WITH OPTION CEILING PROVISION.

IN THE MATTER OF ABL GENERAL SYSTEMS CORPORATION, DECEMBER 9, 1974:

ON JUNE 10, 1974, INVITATION FOR BIDS (IFB) NO. DAAB07-74-B-0915 WAS ISSUED BY THE UNITED STATES ARMY ELECTRONICS COMMAND (ECOM), FORT MONMOUTH, NEW JERSEY. THE IFB CALLED FOR THE FABRICATION AND DELIVERY OF 400 EACH MULTIPLEXER SUBASSEMBLY FSN 5805-944-8146, FIRST ARTICLE TEST REPORT, AND TECHNICAL DATA COVERING STANDARDIZATION COMPONENTS SELECTION AND CONTROL. PURSUANT TO "SECTION J - SPECIAL PROVISIONS," THE GOVERNMENT RETAINED THE OPTION TO INCREASE THE QUANTITY OF SUPPLIES CALLED FOR BY UP TO BUT NOT EXCEEDING 100 PERCENT OF THE QUANTITY OF ITEM 0001, THE MULTIPLEXER SUBASSEMBLY. SECTION J.1C STATED "EVALUATION OF BIDS OR OFFERS RECEIVED WILL BE MADE ON THE BASIS OF PRICES QUOTED FOR THE SUPPLIES OR SERVICES EXCLUSIVE OF THE OPTION."

FIFTY SOURCES WERE SOLICITED, FROM WHICH TEN BIDS WERE RECEIVED. BIDS WERE OPENED ON JULY 19, 1974, WITH THE APPARENT LOW BID OF $181.03 FOR ITEM 0001 BEING SUBMITTED BY ABL GENERAL SYSTEMS, CORPORATION (ABL). HOWEVER, ABL SUBMITTED AN OPTION PRICE, AS CALLED FOR IN SECTION "J" OF THE IFB, IN THE AMOUNT OF $292.66. THE APPARENT SECOND LOW BID WAS SUBMITTED BY ALLIED RESEARCH ASSOCIATES INC. (ARA), ITS BID ON BOTH ITEM 0001 AND THE OPTION QUANTITY BEING $284.27.

SECTION J.1 OF THE IFB, WHICH SECTION PERTAINS TO THE OPTION FOR AN INCREASED QUANTITY, STATES AS FOLLOWS WITH REGARD TO THE PRICING OF THE OPTION:

A. THE GOVERNMENT MAY INCREASE THE QUANTITY OF SUPPLIES CALLED FOR HEREIN BY UP TO BUT NOT EXCEEDING 100% OF QUANTITY OF ITEM 0001 AT THE UNIT PRICE SPECIFIED IN THE SCHEDULE OR THE LESSER PRICE IF SPECIFIED BELOW BY THE OFFEROR. ***

C. EVALUATION OF BIDS OR OFFERS RECEIVED WILL BE MADE ON THE BASIS OF PRICES QUOTED FOR THE SUPPLIES OR SERVICES EXCLUSIVE OF THE OPTION.

IN LIGHT OF THIS PROVISION, AND AFTER EVALUATION AND CONSIDERATION OF THE OTHER BIDS SUBMITTED, ECOM, ON AUGUST 16, 1974, INDICATED TO ABL THAT ITS BID WAS NONRESPONSIVE BECAUSE IT HAD TAKEN EXCEPTION TO SECTION J.1 IN THAT THE OPTION PRICE QUOTED WAS IN EXCESS OF THE PRICE QUOTED FOR THE BASE QUANTITY. (A SECOND EXCEPTION, ABL'S LIMITATION ON THE TIME THAT ECOM COULD EXERCISE THE OPTION, WAS INITIALLY INDICATED, BUT HAS SINCE BEEN DROPPED BY ECOM.)

ONCE ABL BECAME AWARE OF ECOM'S POSITION, IT PROTESTED TO OUR OFFICE, ON AUGUST 19, 1974, CONTENDING THAT ITS BID WAS THE LOWEST RESPONSIVE BID SUBMITTED. ARA, ON THE OTHER HAND, CONTENDS THAT ABL'S BID CLEARLY DEVIATED FROM THE EXPRESS PROVISION CITED ABOVE, AND THEREFORE, MUST BE FOUND TO BE NONRESPONSIVE.

IN A REPORT ON THIS MATTER, ECOM REFERS TO OUR DECISIONS IN 44 COMP. GEN. 581 (1965) AND B-176356, NOVEMBER 8, 1972, WHICH INVOLVED SITUATIONS SOMEWHAT SIMILAR TO THE INSTANT CASE. IN 44 COMP. GEN. 581, SUPRA, THE ADMIRAL CORPORATION (ADMIRAL) WAS THE LOW BIDDER ON THE BASE QUANTITY. ADMIRAL WAS ALSO THE LOW BIDDER ON THE OPTION QUANTITY, ALTHOUGH ITS PRICE FOR THE OPTION DID EXCEED THE BASE PRICE QUOTED. OUR DECISION HELD THAT:

*** ADMIRAL DOES NOT SEEM TO HAVE GAINED ANY MATERIAL ADVANTAGE IN PRICE, SINCE CONSIDERING ITS BASIC PRICE ALONE OR TOTALED TOGETHER WITH THE OPTION PRICES IT IS STILL THE LOW BIDDER AND IT IS NOT CONCEIVABLE IN THESE CIRCUMSTANCES THAT ANY BIDDER WAS PREJUDICED BY ADMIRAL'S MANNER OF BIDDING. THEREFORE, THE FAILURE OF ADMIRAL TO CONFIRM TO THE OPTION PRICE CEILING IN ITS BID DOES NOT APPEAR TO HAVE BEEN A MATERIAL DEVIATION, SINCE BY THE LIMITATION THE GOVERNMENT WAS SEEKING TO OBTAIN THE BEST POSSIBLE OPTION PRICES AND WHILE ADMIRAL EXCEEDED THE LIMITATION IT DID NOT PREJUDICE ANY OTHER BIDDER. IN THESE CIRCUMSTANCES, WE BELIEVE THAT THE GOVERNMENT COULD PROPERLY WAIVE THE LIMITATION.

SUBSEQUENTLY, IN B-176356, SUPRA, OUR OFFICE CONSIDERED THE PROTEST OF GULL AIRBORNE INSTRUMENTS, INCORPORATED (GULL). GULL HAD BID IN THE SAME MANNER AS ADMIRAL HAD DONE IN THAT IT WAS THE LOW BIDDER ON BOTH THE BASE AND OPTION QUANTITIES AND, SIMILARLY, ITS OPTION PRICE EXCEEDED ITS BASIC QUANTITY PRICE. IN THIS CASE, HOWEVER, THE CONTRACTING OFFICER DETERMINED:

*** THAT GULL'S SPECIFIC EXCEPTION TO THE OPTION CLAUSE WOULD DEFEAT THE PURPOSE OF THAT CLAUSE BY FORCING THE GOVERNMENT TO BUY OPTION UNITS AFTER AWARD AT PRICES ABOVE THE LOWER BASIC QUANTITY UNIT PRICE. FURTHERMORE, *** THE BID QUALIFICATION *** WAS SUCH A SIGNIFICANT DEVIATION THAT IT COULD NOT BE DISREGARDED AS A MINOR INFORMALITY ***.

OUR OFFICE, FOLLOWING ADMIRAL, CRITICIZED THE PROCURING ACTIVITY FOR NOT ALLOWING GULL TO CURE THE DEVIATION OR FOR NOT HAVING WAIVED IT, SINCE IT WOULD HAVE BEEN TO THE ADVANTAGE OF THE GOVERNMENT AND NOT PREJUDICIAL TO THE OTHER BIDDERS AS IT WOULD NOT HAVE AFFECTED THEIR RELATIVE STANDING.

OUR OFFICE, FOLLOWING ADMIRAL, CRITICIZED THE PROCURING ACTIVITY FOR NOT ALLOWING GULL TO CURE THE DEVIATION OR FOR NOT HAVING WAIVED IT, SINCE IT WOULD HAVE BEEN TO THE ADVANTAGE OF THE GOVERNMENT AND NOT PREJUDICIAL TO THE OTHER BIDDERS AS IT WOULD NOT HAVE AFFECTED THEIR RELATIVE STANDING.

ECOM NEXT POINTS OUT THAT IN 51 COMP. GEN. 439 (1972) AND IN MATTER OF BRISTOL ELECTRONICS, INC., 54 COMP. GEN. 16 (1974) (BRISTOL), OUR OFFICE CONSIDERED TWO SITUATIONS THAT WERE SIMILAR TO ADMIRAL AND GULL EXCEPT FOR A SLIGHT VARIATION. IN 51 COMP. GEN. 439 THE CONTRACTING OFFICER MADE THE DETERMINATION THAT THE BID SUBMITTED BY FOURDEE, INCORPORATED (FOURDEE), ALTHOUGH LOW ON THE BASE QUANTITY, WAS HIGHER THAN THE NEXT LOW BIDDER ON THE OPTION QUANTITY. THIS RESULTED IN THE AGGREGATE OF FOURDEE'S BID EXCEEDING THE SUM QUOTED BY THE NEXT LOW BIDDER FOR THESE ITEMS AND THE BID WAS REJECTED AS NONRESPONSIVE. OUR OFFICE SUSTAINED THE REJECTION.

IN BRISTOL, THE LOW OFFEROR ON THE BASE ITEM, E-SYSTEMS, QUOTED AN AMOUNT ON THE OPTION QUANTITY THAT EXCEEDED BOTH ITS BASE OFFER AND THE OFFER BY BRISTOL ON THE BASE AND OPTION ITEMS. AS IN FOURDEE, E SYSTEMS' OFFER WAS, IN THE AGGREGATE, GREATER IN AMOUNT THAT THE SUM QUOTED BY BRISTOL. THEREFORE, SINCE THE PROCURING ACTIVITY HAD ALREADY ACCEPTED E-SYSTEMS' OFFER, OUR OFFICE RECOMMENDED THAT CORRECTIVE ACTION BE TAKEN TO REMEDY THE IMPROPER AWARD.

IN BOTH OF THE LATTER CASES, OUR POSITION WAS BASED UPON THE FACT THAT SHOULD THE GOVERNMENT EXERCISE THE FULL OPTION, IT WOULD INCUR GREATER COSTS IF IT ACCEPTED THE LOW OFFER WHICH WAS IN AN AGGREGATE AMOUNT GREATER THAN THE NEXT LOW OFFER SUBMITTED.

ECOM ASSERTS THAT ABL'S SITUATION IS UNIQUE AND PRESENTS A CASE OF FIRST IMPRESSION IN THAT ABL'S BID FALLS SQUARELY BETWEEN THE TWO SETS OF CASES DISCUSSED ABOVE. ABL'S BID WAS LOW ON THE BASE QUANTITY (AS IN ALL FOUR CASES), HIGH ON THE OPTION QUANTITY (AS IN FOURDEE AND BRISTOL), BUT REMAINED LOW FOR THE AGGREGATE OF ALL ITEMS (AS IN ADMIRAL AND GULL). THEREFORE, ECOM STATES THAT IF WE CONTINUE TO FOLLOW THE ADMIRAL DECISION BY LOOKING ONLY AT THE LOW AGGREGATE BID, ABL WOULD BE ENTITLED TO THE AWARD. HOWEVER, ECOM HAS "SERIOUS RESERVATIONS" CONCERNING THE ADMIRAL DECISION, IN THAT IT SEEMS TO REWARD A BIDDER WHO DELIBERATELY DEVIATES FROM A REQUIREMENT IN THE IFB TO THE PREJUDICE OF THOSE BIDDERS WHO BALANCED THEIR BID PRICES. AWARD IS BEING UPHELD PENDING RESOLUTION OF THE PROTEST.

FOR THE REASONS THAT FOLLOW, OUR POSITION IN THIS AREA IS THAT WHERE A BIDDER IS LOW ON THE BASE QUANTITY, BUT HIGHER THAN THE NEXT LOW BIDDER ON THE OPTION QUANTITY, NOTWITHSTANDING THE FACT THAT THE BID REMAINS LOW IN THE AGGREGATE, SUCH A BID IS NOT PROPERLY FOR ACCEPTANCE UNDER THE TERMS AND CONDITIONS OF THE IFB. THIS BEING THE CASE, IT IS OUR OPINION THAT ABL'S BID MUST BE REJECTED AND AWARD MADE TO THE NEXT LOW RESPONSIVE, RESPONSIBLE BIDDER.

WE REACH THIS POSITION BY BEGINNING WITH THE DETERMINATION THAT ABL'S MANNER OF BIDDING CLEARLY DEVIATED FROM SECTION "J" OF THE IFB. THE DETERMINATIVE ISSUE IS WHETHER OR NOT THIS DEVIATION WORKED TO THE PREJUDICE OF OTHER BIDDERS FOR THE AWARD. IN OUR OPINION, THIS MANNER OF DEVIATION IS PREJUDICIAL TO THE PARTIES SUBMITTING BIDS IN RESPONSE TO THE IFB.

WHILE IT IS TRUE THAT ABL IS THE LOW BIDDER ON THE BASE QUANTITY, AND ONLY THE AMOUNT BID FOR THE BASE ITEM IS TO BE USED FOR EVALUATION PURPOSES, OUR OFFICE CANNOT UNQUESTIONABLY CONCLUDE THAT IF ANY OTHER BIDDER HAD BID IN THE SAME MANNER AS ABL, IT WOULD NOT HAVE DISPLACED ABL AS THE LOW BIDDER. FOR EXAMPLE, ABL BID $181.03 PER UNIT ON THE BASE QUANTITY AND $292.66 PER UNIT FOR THE OPTION QUANTITY. AS CONTEMPLATED BY THE IFB, ARA BID $284.27 PER UNIT FOR BOTH THE BASE AND OPTION QUANTITIES. HOWEVER, IF ARA HAD IGNORED THE PRICE CEILING LIMITATION CONTAINED IN THE OPTION PROVISION AND BID IN THE SAME MANNER AS ABL, IT IS QUITE POSSIBLE THAT ARA'S BASE BID COULD HAVE BEEN REDUCED BELOW ABL'S BASE BID WITH THE DOLLAR REDUCTION BEING ADDED TO THE OPTION PRICE. SINCE THE IFB PROVIDES THAT EVALUATION IS ONLY TO BE MADE ON THE BASE ITEM PRICE, ARA WOULD THEN BE THE APPARENT LOW BIDDER.

ADDITIONALLY, OUR OFFICE IS CONCERNED WITH THE USE OF AN OPTION PROVISION LIKE THE ONE CONTAINED IN SECTION "J" OF THE IFB. A CLAUSE OF THIS NATURE APPEARS TO CAUSE A "FRONT LOADING" OF COSTS ON THE BASE QUANTITY WHICH ARE TRANSFERRED FROM THE OPTION QUANTITY TO EQUALIZE THE PRICES BID, WHEN IN ACTUALITY THERE IS NO ASSURANCE THAT THE OPTION WILL EVER BE EXERCISED. WHAT THIS DOES, IN EFFECT, IS CAUSE THE GOVERNMENT TO PAY FOR A PORTION OF AN OPTIONAL ITEM EACH TIME A BASE ITEM IS PAID FOR. IF THE OPTION IS NOT EXERCISED, THE GOVERNMENT WILL PAY A PRICE IN EXCESS OF THE REASONABLE COMPETITIVE VALUE OF THE ITEM DELIVERED. MOREOVER, NOWHERE IN SECTION "J" IS THERE A CAUTIONARY NOTE WARNING BIDDERS THAT AN INSERTION OF AN OPTION PRICE IN EXCESS OF THE BASE PRICE MAY RESULT IN REJECTION OF THE BID. THEREFORE, WE RECOMMEND THAT THE LANGUAGE OF SECTION "J" BE CRITICALLY EXAMINED WITH THE VIEW OF DEVISING AN OPTION PROVISION WHICH WILL ELIMINATE THE ABOVE MENTIONED DEFICIENCIES IN FUTURE PROCUREMENTS OF THIS NATURE.

ACCORDINGLY, THE PROTEST OF ABL IS DENIED, AND AWARD SHOULD BE MADE TO THE NEXT LOW RESPONSIVE, RESPONSIBLE BIDDER.