B-182225, MAR 5, 1975

B-182225: Mar 5, 1975

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IFB PROVISION PERMITTING GOVERNMENT TO DISREGARD MULTI-YEAR BID WHEN ONLY ONE RESPONSIVE MULTI-YEAR BID IS RECEIVED IS APPLICABLE WHERE ONE OF TWO MULTI-YEAR BIDS RECEIVED WAS WITHDRAWN BECAUSE OF MISTAKE. 2. SINCE IFB'S ESCALATION CLAUSE GEARED TO CONTRACTOR'S ACTUAL COSTS AND PERMITTING ESCALATION TO RATE OF 25 PERCENT PER YEAR WAS INAPPROPRIATE FOR FORMALLY ADVERTISED PROCUREMENT AND MIGHT HAVE SUBJECTED GOVERNMENT TO UNREASONABLE COSTS IN EVENT OF MULTI-YEAR AWARD. 3. SEC. 20.5 (1974) IS A PROCEDURAL MATTER WHICH PROVIDES NO BASIS FOR DISREGARDING SUBSTANTIVE INFORMATION CONTAINED THEREIN. IT IS VBM'S POSITION THAT DSA'S FAILURE TO MAKE AWARD TO IT ON A MULTI-YEAR BASIS WAS NOT IN THE BEST INTEREST OF THE GOVERNMENT AND IMPROPER IN VIEW OF THE FACT THAT IT HAD SUBMITTED A LOWER PER UNIT BID FOR THE MULTI-YEAR REQUIREMENT THAN IT HAD FOR THE SINGLE-YEAR PORTION OF THE INVITATION.

B-182225, MAR 5, 1975

1. IFB PROVISION PERMITTING GOVERNMENT TO DISREGARD MULTI-YEAR BID WHEN ONLY ONE RESPONSIVE MULTI-YEAR BID IS RECEIVED IS APPLICABLE WHERE ONE OF TWO MULTI-YEAR BIDS RECEIVED WAS WITHDRAWN BECAUSE OF MISTAKE. 2. CONTRACTING OFFICER ACTED IN BEST INTEREST OF GOVERNMENT IN AWARDING SINGLE-YEAR QUANTITY TO ONLY RESPONSIVE BIDDER DESPITE THAT FIRM'S LOWER UNIT PRICE ON MULTI-YEAR QUANTITY, SINCE IFB'S ESCALATION CLAUSE GEARED TO CONTRACTOR'S ACTUAL COSTS AND PERMITTING ESCALATION TO RATE OF 25 PERCENT PER YEAR WAS INAPPROPRIATE FOR FORMALLY ADVERTISED PROCUREMENT AND MIGHT HAVE SUBJECTED GOVERNMENT TO UNREASONABLE COSTS IN EVENT OF MULTI-YEAR AWARD. 3. FAILURE OF AGENCY TO FURNISH ADMINISTRATIVE REPORT WITHIN 20-DAY PERIOD PRESCRIBED BY 4 C.F.R. SEC. 20.5 (1974) IS A PROCEDURAL MATTER WHICH PROVIDES NO BASIS FOR DISREGARDING SUBSTANTIVE INFORMATION CONTAINED THEREIN.

VBM CORPORATION:

VBM CORPORATION (VBM) PROTESTED THE FAILURE OF THE DEFENSE SUPPLY AGENCY (DSA) TO AWARD IT THE MULTI-YEAR REQUIREMENT FOR DUCT-TYPE PORTABLE HEATERS UNDER INVITATION FOR BIDS (IFB) NO. DSA 700-74-B 3048. WHILE IT RECEIVED AWARD OF THE SINGLE-YEAR REQUIREMENT UNDER THAT INVITATION, IT IS VBM'S POSITION THAT DSA'S FAILURE TO MAKE AWARD TO IT ON A MULTI-YEAR BASIS WAS NOT IN THE BEST INTEREST OF THE GOVERNMENT AND IMPROPER IN VIEW OF THE FACT THAT IT HAD SUBMITTED A LOWER PER UNIT BID FOR THE MULTI-YEAR REQUIREMENT THAN IT HAD FOR THE SINGLE-YEAR PORTION OF THE INVITATION.

TWO BIDDERS RESPONDED TO THE INVITATION. HUNTER MANUFACTURING COMPANY (HUNTER) WAS LOW, HAVING BID $819 AND $775 PER UNIT RESPECTIVELY ON THE SINGLE AND MULTI-YEAR REQUIREMENTS, WHILE VBM BID $945 AND $928 PER UNIT RESPECTIVELY. HOWEVER, UPON DSA'S REFUSAL TO PERMIT CORRECTION OF ITS BID TO $899.75 AND $879.75 PER UNIT RESPECTIVELY, HUNTER WAS PERMITTED TO WITHDRAW ITS BID, LEAVING VBM THE SOLE RESPONSIVE BIDDER.

THE IFB CONTAINS TWO CLAUSES DEALING WITH AWARD. INCLUDED AMONG THE GENERAL INSTRUCTIONS IS THE FOLLOWING:

"1. GENERAL: THIS SOLICITATION INVITES BIDS ON A SINGLE-YEAR BASIS (CLIN 0001) AND/OR A MULTI-YEAR BASIS (CLIN 0002). BIDS ON A MULTI YEAR BASIS (CLIN 0002) MUST OFFER THE SAME UNIT PRICE FOR ALL THREE (3) PROGRAM YEARS. BIDS WILL BE EVALUATED AND AWARD MADE ON A SINGLE-YEAR OR ON A MULTI-YEAR BASIS, WHICHEVER IS DETERMINED TO BE IN THE BEST INTEREST OF THE GOVERNMENT BUT IF THE GOVERNMENT DETERMINES, PRIOR TO AWARD, THAT ONLY THE FIRST PROGRAM YEAR QUANTITY IS REQUIRED, BIDS WILL BE EVALUATED AND AWARD MADE ON CLIN 0001 ONLY. IN NO EVENT WILL AWARD BE MADE FOR LESS THAN THE TOTAL QUANTITY OF 299 UNITS REQUIRED FOR THE FIRST PROGRAM YEAR (CLIN 0001)."

ADDITIONALLY, THE FOLLOWING PROVISION IS INCLUDED IN THE SCHEDULE: "THIS SOLICITATION INVITES OFFERS ON A SINGLE-YEAR (CLIN 0001) AND MULTI-YEAR (CLIN 0002) BASIS. ATTENTION IS DIRECTED TO THE LIMITATION OF PRICES AND CONTRACTOR OBLIGATION CLAUSE, THE CANCELLATION CEILINGS SET FORTH IN SECTION C. BIDS MAY BE SUBMITTED FOR THE TOTAL SINGLE-YEAR QUANTITY AND THE MULTI-YEAR QUANTITY. AWARD WILL NOT BE MADE FOR LESS THAN THE TOTAL QUANTITY FOR THE SINGLE-YEAR. BIDS ON THE MULTI-YEAR QUANTITY ONLY WILL BE REJECTED AS NON-RESPONSIVE. IF ONLY ONE RESPONSIVE BID IS RECEIVED FOR THE MULTI-YEAR QUANTITY THE GOVERNMENT RESERVES THE RIGHT TO DISREGARD THE BID ON THE MULTI-YEAR QUANTITY AND MAKE AWARD FOR THE SINGLE-YEAR QUANTITY ONLY."

THE CONTRACTING OFFICER REPORTS THAT THE SINGLE-YEAR RATHER THAN MULTI- YEAR AWARD WAS MADE BASED ON THE RIGHT OF REJECTION RESERVED TO THE GOVERNMENT UNDER THE SCHEDULE CLAUSE QUOTED IMMEDIATELY ABOVE. EXPLAINING THE RATIONALE FOR HIS AWARD TO VBM ON A SINGLE-YEAR RATHER THAN A MULTI-YEAR BASIS, THE CONTRACTING OFFICER REPORTS THAT RELIANCE WAS PLACED ON THE FACTS THAT:

"A. THE POTENTIAL PRICE ESCALATION UNDER CLAUSE L33 ON PAGE 32 OF THE INVITATION FOR THE EXTENDED PERIOD OF PERFORMANCE THAT A MULTI-YEAR AWARD WOULD INVOLVE WOULD BE TOO GREAT.

"B. ALTHOUGH THE LOWER BID SUBMITTED BY HUNTER MANUFACTURING COMPANY WAS WITHDRAWN BECAUSE OF A MISTAKE, HUNTER MANUFACTURING COMPANY ORIGINALLY REQUESTED THAT ITS BID BE CORRECTED TO $899.75 EACH FOR CLIN 0001 AND $879.75 EACH FOR CLIN 0002. HUNTER SUBSEQUENTLY REQUIRED THAT ITS BID BE WITHDRAWN BECAUSE IT COULD NOT ESTABLISH THE INTENDED BID PRICES BUT THERE IS A DEFINITE POSSIBILITY THAT RESOLICITATION OF SUBSEQUENT REQUIREMENTS MAY RESULT IN LOWER UNIT PRICES THAN VBM OFFERED ON CLIN 0002."

VBM FIRST TAKES ISSUE WITH THE CONTRACTING OFFICER'S RELIANCE UPON THE REJECTION RIGHT RESERVED TO THE GOVERNMENT UNDER THE SCHEDULE PROVISION, UPON THE BASIS THAT VBM'S WAS NOT THE SOLE RESPONSIVE BID RECEIVED.

THE SCHEDULE PROVISION QUOTED ABOVE IMPLEMENTS SECTION 1-322.4(B)(II) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), WHICH STATES THAT WHERE THE SOLICITATION REQUIRES SUBMISSION OF BIDS IN ACCORDANCE WITH ASPR SEC. 1-322.2(C)(III)(A), AND WHERE ONLY ONE RESPONSIVE BID IS RECEIVED ON THE MULTI-YEAR PORTION, THE GOVERNMENT WILL HAVE THE RIGHT TO AWARD ON A SINGLE-YEAR BASIS EVEN THOUGH THE MULTI-YEAR BID MAY REPRESENT THE LOWEST EVALUATED PRICE SUBMITTED. ASPR SEC. 1 322.2(C)(III)(A), REFERENCED ABOVE, IS SPECIFICALLY ADDRESSED TO THE SITUATION IN WHICH THERE HAS BEEN NO PREVIOUS COMPETITION FOR THE PARTICULAR REQUIREMENT. DSA HAD OBTAINED COMPETITION FOR ITS PREVIOUS PROCUREMENT OF PORTABLE DUCT-TYPE HEATERS, AND THEREFORE THE SCHEDULE CLAUSE QUOTED ABOVE WAS NOT WHOLLY APPROPRIATE. NEVERTHELESS, NO BIDDER PROTESTED ITS INCLUSION IN THE IFB.

THE SCHEDULE CLAUSE PERMITS THE GOVERNMENT TO MAKE AWARD FOR THE SINGLE- YEAR QUANTITY "IF ONLY ONE RESPONSIVE BID IS RECEIVED FOR THE MULTI-YEAR QUANTITY ***." OF THE TWO BIDS SUBMITTED, ONE WAS WITHDRAWN ON THE BASIS OF MISTAKE, LEAVING ONLY VBM'S BID FOR CONSIDERATION. WE THINK THIS SATISFIES THE REQUIREMENT OF THE CLAUSE.

WE BELIEVE THERE IS ADEQUATE JUSTIFICATION FOR THE CONTRACTING OFFICER'S DECISION THAT THE GOVERNMENT SHOULD EXERCISE ITS RIGHT TO DISREGARD THE MULTI-YEAR BID. FIRST, WE DO NOT THINK IT WAS ARBITRARY FOR THE CONTRACTING OFFICER TO CONCLUDE THAT SUBSEQUENT ANNUAL RESOLICITATIONS COULD RESULT IN LOWER UNIT PRICES THAN OFFERED IN VBM'S MULTI-YEAR BID. SECOND, RELYING UPON THE POTENTIALLY LARGE COSTS TO WHICH THE GOVERNMENT WOULD SUBJECT ITSELF UNDER THE ESCALATION CLAUSE CONTAINED IN THE INVITATION, THE CONTRACTING OFFICER IN EFFECT FOUND, AS PROVIDED AT ASPR SEC. 1-322.4(C) (1974 ED.), THAT AWARD OF THE MULTI YEAR QUANTITY TO VBM WOULD SUBJECT THE GOVERNMENT TO PAYMENT OF AN UNREASONABLE PRICE.

WE RECOGNIZE THAT ASPR SEC. 2-407.4 (1974 ED.), APPLICABLE TO FORMAL ADVERTISING, PROVIES FOR ECONOMIC PRICE ADJUSTMENT TO BE DISREGARDED FOR EVALUATION PURPOSES. NONETHELESS, WE CONCUR WITH THE CONTRACTING OFFICER'S VIEW THAT THE PARTICULAR ESCALATION CLAUSE INCORPORATED IN THE INVITATION FOR BIDS WAS INAPPROPRIATE FOR USE IN A FORMALLY ADVERTISED PROCUREMENT AND CONCLUDE THAT ITS IMPACT WAS PROPERLY CONSIDERED BY THE CONTRACTING OFFICER.

IN THIS CASE THE INVITATION INCORPORATED A CLAUSE WHICH PREDICATED PRICE ADJUSTMENT ON THE CONTRACTOR'S ACTUAL COST EXPERIENCE AND PRESCRIBED AN ANNUAL MAXIMUM FOR ESCALATION EQUAL TO 25 PERCENT OF THE ORIGINAL CONTRACT PRICE. IT IS OUR OPINION THAT PRICE ADJUSTMENT GEARED TO SOME EXTERNAL STANDARD, SUCH AS IS AUTHORIZED AT ASPR SEC. 3 404.3(B)(3) (1974 ED.) FOR NEGOTIATED PROCUREMENTS, MAY PROPERLY BE DISREGARDED FOR EVALUATION PURPOSES SINCE ALL BIDS AFFECTED THEREBY WILL VARY PROPORTIONALLY. THE SAME CANNOT BE SAID FOR PRICE ADJUSTMENT GEARED TO A CONTRACTOR'S ACTUAL COST EXPERIENCE. DEPENDING ON HIS PARTICULAR ARRAY OF SUBCONTRACTORS, SUPPLIERS, AND LABOR, AN OSTENSIBLY LOW BIDDER MAY, OVER THE COURSE OF CONTRACT PERFORMANCE, EXPERIENCE ESCALATION FAR IN EXCESS OF THAT TO WHICH AN APPARENTLY HIGHER BIDDER MIGHT BE SUBJECT, RENDERING THE LATTER'S BID IN FACT LOW. FURTHERMORE, THE CLAUSE USED BY DSA PERMITS ESCALATION TO THE ANNUAL RATE OF 25 PERCENT AND PROVIDES NO MEANS OF VERIFYING CLAIMED ESCALATION AGAINST ORIGINAL COSTS OF LABOR AND MATERIALS. SINCE THE CLAUSE POTENTIALLY OBLIGATES THE GOVERNMENT TO PAY 175 PERCENT OF THE TOTAL MULTI-YEAR PRICE OVER THE THREE YEAR PERIOD, WE CONCUR WITH DSA'S VIEW THAT THE PRICE ADJUSTMENT PROVISIONS CONTAINED IN THE IFB SUBJECTED THE GOVERNMENT TO POTENTIALLY EXORBITANT AND UNVERIFIABLE COSTS.

WE RECOGNIZE, AS VBM CONTENDS, THAT SEVERAL OTHER CONTRACTS RECENTLY SOLICITED OR AWARDED BY DSA HAVE CONTAINED THE CLAUSE IN QUESTION. HOWEVER, WE UNDERSTAND THAT STEPS HAVE NOW BEEN TAKEN TO ASSURE THAT FUTURE FORMALLY ADVERTISED PROCUREMENTS DO NOT INCLUDE THE CLAUSE.

UNDER THE CIRCUMSTANCES, WE BELIEVE THAT THE CONTRACTING OFFICER ACTED IN THE BEST INTERESTS OF THE GOVERNMENT IN RESTRICTING THE AWARD TO THE SINGLE-YEAR QUANTITY.

WITH RESPECT TO VBM'S SUGGESTION THAT DSA'S REPORT REGARDING ITS PROTEST SHOULD BE DISREGARDED BECAUSE THE AGENCY FAILED TO FURNISH IT WITHIN THE 20-DAY PERIOD SPECIFIED IN OUR INTERIM BID PROTEST PROCEDURES AND STANDARDS, 4 C.F.R., PART 20 (1974), WE POINT OUT THAT WITH THE EXCEPTION OF THE TIME LIMIT FOR INITIAL FILING OF PROTESTS, THE TIME LIMITATIONS SPECIFIED ARE PROCEDURAL ONLY. THE LATE RECEIPT OF AN AGENCY REPORT DOES NOT PROVIDE A BASIS TO DISREGARD THE SUBSTANTIVE INFORMATION CONTAINED THEREIN. IN THIS PARTICULAR CASE DSA REQUESTED AND WAS GRANTED AN EXTENSION IN THE 20-DAY PERIOD FOR FILING ITS REPORT. BY THE SAME TOKEN, WE NOTE THAT THE PROTESTER REQUESTED AND WAS ALSO GRANTED AN EXTENSION IN THE 10-DAY PERIOD FOR FILING ITS COMMENTS ON THAT REPORT.

IN VIEW OF THE FOREGOING, THE PROTEST IS DENIED.