B-182323, APR 14, 1975, 54 COMP GEN 853

B-182323: Apr 14, 1975

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AWARD TO SUCH CONTRACTOR-BIDDER IS PROPER IF ITS BID IS LOW AND NOT IN EXCESS OF ITS DEFAULTED CONTRACT PRICE. CONTRACTS - DEFAULT - REPROCUREMENT - GOVERNMENT PROCUREMENT STATUTES - NOT FOR CONSIDERATION WHERE REPROCUREMENT IS FOR ACCOUNT OF DEFAULTED CONTRACTOR. PRINCIPLES GOVERNING FORMAL ADVERTISING ARE NOT APPLICABLE. RESPONSIBLE BIDDER - THE PREVIOUSLY DEFAULTED CONTRACTOR - IS PROPER SINCE AWARD PRICE IS NOT IN EXCESS OF ITS DEFAULTED CONTRACT PRICE. BOTH INVITATIONS WERE ISSUED IN ORDER THAT REPROCUREMENTS. ALTHOUGH OHIO PIPE WAS ORIGINALLY NOT SOLICITED. A COPY OF THE INVITATION WAS SUBSEQUENTLY SENT TO IT WITH ADVICE THAT IT COULD NOT RECEIVE AWARD IF ITS BID PRICE EXCEEDED THE DEFAULTED CONTRACT PRICE AND IF IT WAS UNABLE TO PROVE ITSELF A RESPONSIBLE BIDDER.

B-182323, APR 14, 1975, 54 COMP GEN 853

BIDDERS - QUALIFICATIONS - DEFAULTED CONTRACTOR - REPLACEMENT CONTRACT DEFAULTED CONTRACTOR MAY PROPERLY COMPETE ON REPROCUREMENT, SINCE GOVERNMENT OWES PARAMOUNT DUTY TO DEFAULTED CONTRACTOR TO MITIGATE DAMAGES, AND AWARD TO SUCH CONTRACTOR-BIDDER IS PROPER IF ITS BID IS LOW AND NOT IN EXCESS OF ITS DEFAULTED CONTRACT PRICE. CONTRACTS - DEFAULT - REPROCUREMENT - GOVERNMENT PROCUREMENT STATUTES - NOT FOR CONSIDERATION WHERE REPROCUREMENT IS FOR ACCOUNT OF DEFAULTED CONTRACTOR, PRINCIPLES GOVERNING FORMAL ADVERTISING ARE NOT APPLICABLE. AND AWARD TO LOW RESPONSIVE, RESPONSIBLE BIDDER - THE PREVIOUSLY DEFAULTED CONTRACTOR - IS PROPER SINCE AWARD PRICE IS NOT IN EXCESS OF ITS DEFAULTED CONTRACT PRICE.

IN THE MATTER OF THE R.H. PINES CORPORATION, APRIL 14, 1975:

THE R.H. PINES CORPORATION (PINES) PROTESTS THE AWARDS MADE TO ANOTHER FIRM BY THE DEFENSE CONSTRUCTION SUPPLY CENTER, DEFENSE SUPPLY AGENCY (DSA), UNDER INVITATIONS FOR BIDS NOS. DSA700-75-B-0292 AND 0801. BOTH INVITATIONS WERE ISSUED IN ORDER THAT REPROCUREMENTS, NECESSITATED BY THE TERMINATION FOR DEFAULT OF REQUIREMENTS CONTRACT NO. DSA700-74-D-0009, MIGHT BE MADE. THE DEFAULTED CONTRACTOR, OHIO PIPE, VALVES AND FITTINGS, INC. (OHIO PIPE), RECEIVED BOTH AWARDS AS LOW BIDDER UNDER EACH SOLICITATION.

INVITATION -0292, ISSUED JULY 25 FOR OPENING ON AUGUST 15, 1974, COVERED FIXED QUANTITIES OF STEEL PIPE. ALTHOUGH OHIO PIPE WAS ORIGINALLY NOT SOLICITED, A COPY OF THE INVITATION WAS SUBSEQUENTLY SENT TO IT WITH ADVICE THAT IT COULD NOT RECEIVE AWARD IF ITS BID PRICE EXCEEDED THE DEFAULTED CONTRACT PRICE AND IF IT WAS UNABLE TO PROVE ITSELF A RESPONSIBLE BIDDER. AT BID OPENING, THE OHIO PIPE BID WAS FOUND TO BE LOW. HOWEVER, WHEN THE VALUE OF THE GOVERNMENT-FURNISHED ZINC - NOT PREVIOUSLY PROVIDED FOR IN THE DEFAULTED CONTRACT - WAS ADDED TO THE OHIO PIPE BID PRICE, ITS BID BECAME HIGHER THAN THE DEFAULTED CONTRACT PRICE. OHIO PIPE THEREAFTER CONFIRMED THAT IT DID NOT EXPECT TO BE FURNISHED THE ZINC UNDER ANY RESULTANT CONTRACT AND THAT THE VALUE OF THE ZINC ($10,559.42) SHOULD NOT BE ADDED TO ITS BID. IT ALSO AGREED TO A 30-DAY DISCOUNT PERIOD AS OPPOSED TO THE 20 DAY PERIOD IT INADVERTENTLY OFFERED IN ITS BID. ON THE BASIS OF THESE CHANGES, THE PRICE OFFERED BY OHIO PIPE DID NOT EXCEED THE PRICE OF ITS DEFAULTED CONTRACT, AND OHIO PIPE WAS ADVISED BY LETTER OF SEPTEMBER 20, 1974, THAT IFB -0292 WOULD BE CANCELED AND THE AWARD WOULD BE MADE TO IT. AWARD OF A FIXED-PRICE CONTRACT WAS MADE TO OHIO PIPE ON OCTOBER 16, 1974.

INVITATION -0801, ISSUED AUGUST 29 AND OPENED SEPTEMBER 19, WAS ALSO FOR FIXED QUANTITIES OF STEEL PIPE. THE BID SUBMITTED BY OHIO PIPE WAS THE LOWEST RECEIVED, DID NOT EXCEED THE PRICES OFFERED IN THE TERMINATED CONTRACT, AND PROVIDED FOR EQUALIZATION OF ALL OTHER COST FACTORS SUCH AS PRICE ESCALATION, WHICH WAS RESTRICTED TO 10 PERCENT, AND GOVERNMENT- FURNISHED ZINC THAT WAS NOT REQUIRED BY OHIO PIPE. AS WAS THE CASE UNDER INVITATION -0292, PINES PROTESTED ANY AWARD THAT MIGHT BE MADE TO OHIO PIPE UNDER INVITATION -0801.

PURSUANT TO PARAGRAPH 2-407.8(B)(3) OF THE ARMED SERVICES PROCUREMENT REGULATION (1974 ED.) IT WAS CONCLUDED IN A DETERMINATION AND FINDINGS, DATED OCTOBER 8, 1974, FROM THE ACTING DEPUTY DIRECTOR OF PROCUREMENT AND PRODUCTION TO THE DIRECTOR OF THE DEFENSE SUPPLY AGENCY, THAT AWARDS TO OHIO PIPE SHOULD BE MADE SINCE THE ITEMS TO BE PROCURED WERE URGENTLY REQUIRED AND DELIVERY OR PERFORMANCE WOULD BE UNDULY DELAYED BY A FAILURE TO AWARD PROMPTLY. AS REGARDS INVITATION 0292, IT WAS NOTED THAT THE PRICE OF PINES, THE NEXT LOW BIDDER, WAS CONSIDERED TO BE UNREASONABLE AS IT REPRESENTED A MARKUP OF 45 PERCENT OVER THE MILL PRICING.

PINES' PRINCIPAL CONTENTION IS THAT OHIO PIPE WAS INELIGIBLE FOR AWARD AS A DEFAULTED CONTRACTOR AND THAT THE CONTRACTING OFFICER'S ATTEMPT TO MITIGATE DAMAGES WAS CARRIED FURTHER THAN WAS REASONABLE UNDER THE CIRCUMSTANCES.

IN SUPPORT OF THIS ARGUMENT, PINES ASSERTS THAT WHEREAS THE ACTIVITY FEIGNED LEGAL PROCEDURES BY MOCK NEGOTIATION UNDER INVITATION -0292, IT DID NOT EVEN PUT ON SUCH A CHARADE UNDER INVITATION -0801, BUT RATHER SIMPLY MADE AWARD WITH NOTHING MORE. IN THIS CONTEXT, APPEAL OF ROYAL PIONEER PAPER BOX MANUFACTURING CO., INC., ASBCA NO. 13059, 69-1 BCA SEC. 7631, IS CITED FOR THE PROPOSITION THAT:

*** THE GOVERNMENT, IN USING FORMAL ADVERTISING FOR THE REPROCUREMENT, IS BOUND TO ACCEPT THE LOWEST RESPONSIBLE BID. *** WHEN IT UTILIZES THE FORMAL ADVERTISING PROCEDURES, IT HAS THE OBLIGATION TO MAINTAIN THE INTEGRITY OF THE BIDDING SYSTEM BY APPLYING THE REGULATIONS RELEVANT TO THAT PROCEDURE. ***

WE HAVE NO DIFFICULTY IN ACCEPTING THIS PRINCIPLE, FOR IN ROYAL PIONEER THE ASBCA WAS CONCERNED WITH THE GOVERNMENT'S ATTEMPT TO MITIGATE DAMAGES IN SOLICITING AND DEALING ONLY WITH THIRD PARTIES, AND NOT WITH THE DEFAULTED CONTRACTOR. HERE THE GOVERNMENT'S EFFORT TO MITIGATE DAMAGES WAS NECESSARILY GOVERNED BY THE FACT THAT THE DEFAULTED CONTRACTOR, OHIO PIPE, HAD SUBMITTED LOW BIDS AND WAS FOUND TO BE RESPONSIBLE FOR PURPOSES OF THESE PROCUREMENTS.

ALTHOUGH IT IS AN ESTABLISHED PRINCIPLE OF PROCUREMENT LAW THAT A REPROCUREMENT CONTRACT MAY NOT BE AWARDED TO A DEFAULTED CONTRACTOR AT A HIGHER PRICE THAN THE PRICE IN THE DEFAULTED CONTRACT, 27 COMP. GEN. 343 (1947), THERE IS NO PROHIBITION AGAINST THE DEFAULTED CONTRACTOR BEING CONSIDERED FOR AWARD IF IT IS OTHERWISE RESPONSIBLE. B-165884, MAY 28, 1969. SUCH CONSIDERATION IS CONSISTENT WITH THE GOVERNMENT'S OBLIGATION TO MITIGATE DAMAGES.

THEREFORE, AND SINCE OHIO PIPE WAS THE LOWEST, RESPONSIVE, RESPONSIBLE BIDDER UNDER THE REPROCUREMENTS THE PROTEST IS DENIED.