B-182384, APR 23, 1975, 54 COMP GEN 901

B-182384, APR 23, 1975, 54 COMP GEN 901

BIDS - EVALUATION - ERRONEOUS - CONTRARY TO TERMS OF SOLICITATION AGENCY'S EVALUATION OF TRANSPORTATION COSTS BASED ON OTHER THAN MOST ECONOMICAL METHOD OF SHIPMENT WAS CONTRARY TO TERMS OF SOLICITATION. GENERAL ACCOUNTING OFFICE RECOMMENDS THAT AGENCY CONSIDER FEASIBILITY OF PARTIAL TERMINATION FOR CONVENIENCE OF AWARD MADE ON BASIS OF ERRONEOUS EVALUATION AND OF AWARDING ANY REMAINING QUANTITIES TO PROTESTER.

IN THE MATTER OF THE ELLINOR CORPORATION, APRIL 23, 1975:

THE ELLINOR CORPORATION (ELLINOR) HAS FILED A PROTEST AGAINST THE ACTION OF THE DEPARTMENT OF THE AIR FORCE IN AWARDING A CONTRACT TO THE PANEL CORPORATION OF AMERICA (PANCOA) FOR AERIAL TOW TARGETS. IT IS ELLINOR'S POSITION THAT THE GOVERNMENT'S EVALUATION OF TRANSPORTATION COSTS IS INCONSISTENT WITH THE SOLICITATION AND THAT IT SHOULD HAVE RECEIVED THE AWARD AS LOW BIDDER UNDER THE TERMS OF THE SOLICITATION. FOR THE REASONS STATED BELOW, THE PROTEST IS SUSTAINED.

INVITATION FOR BIDS (IFB) NO. F42600-74-B-9044 WAS ISSUED ON JUNE 14, 1974, BY THE DEPARTMENT OF THE AIR FORCE, HILL AIR FORCE BASE, UTAH, FOR 4,558 TARGETS. PURSUANT TO THE IFB, DELIVERY TERMS WERE F.O.B. ORIGIN. BIDDERS WERE ADVISED THAT EACH BID WOULD BE EVALUATED BY ADDING TO THE F.O.B. ORIGIN PRICE ALL TRANSPORTATION COSTS TO THE TENTATIVE DESTINATION. AS THE AIR FORCE WAS NOT CERTAIN OF THE FINAL DESTINATION OR DESTINATIONS OF THE TARGETS (BUT WOULD FURNISH THEM LATER), FOR PURPOSES OF EVALUATION THE DESTINATION FOR ALL TARGETS WAS STATED TO BE HILL AIR FORCE BASE.

ON BID OPENING DATE, JULY 16, 1974, FOUR BIDS WERE RECEIVED, WITH THE BIDS OF BOTH ELLINOR AND PANCOA TIED AT THE LOW UNIT BID PRICE OF $285. BOTH BIDDERS OFFERED IDENTICAL PROMPT PAYMENT DISCOUNTS. ELLINOR PROPOSED TO SHIP TARGETS FROM ITS STOCKTON, CALIFORNIA, PLANT WHILE PANCOA PROPOSED TO SHIP FROM ITS DENVER, COLORADO, FACILITY. ELLINOR'S PREVIOUS CONTRACT WORK WAS PERFORMED AT ITS DALLAS, TEXAS, PLANT AND THE AIR FORCE THEREFORE REQUESTED A PREAWARD SURVEY ON ELLINOR'S STOCKTON FACILITY. THE PREAWARD SURVEY RESULTS VERIFIED THAT ELLINOR COULD MANUFACTURE TARGETS AT ITS STOCKTON PLANT.

IMMEDIATELY AFTER BID OPENING, THE AIR FORCE REQUESTED AN EVALUATION OF TRANSPORTATION COST FACTORS UNDER BOTH BIDS SO AS TO DETERMINE THE LOW BIDDER. SINCE FIRST ARTICLE TESTING WOULD BE WAIVED FOR BOTH BIDDERS, THEY BID ON THE BASIS OF DELIVERING 500 UNITS 180 DAYS AFTER RECEIPT OF WRITTEN NOTICE OF AWARD AND 500 UNITS EVERY 30 DAYS THEREAFTER FOR THE REMAINING QUANTITY.

INITIALLY, THE AIR FORCE EVALUATED THE BIDS USING THE MOST ECONOMICAL RATES ON THE BASIS OF SHIPMENTS OF 500 TARGETS A MONTH AT ONE TIME TO HILL AIR FORCE BASE. ON THIS BASIS, THE LOWEST TRANSPORTATION RATES FROM STOCKTON TO HILL WOULD BE BY FULL RAIL CARLOAD SHIPMENTS TO THE EXTENT POSSIBLE AT A TOTAL COST OF $22,564 (37 SHIPMENTS OF 120 TARGETS FOR $21,979.85 PLUS ONE SHIPMENT OF 118 TARGETS FOR $584.15). THE LOWEST RATES FROM DENVER TO HILL ARE OBTAINED BY FULL TRUCKLOAD SHIPMENTS AT A TOTAL COST OF $25,920.18 (56 SHIPMENTS OF 80 TARGETS WITH A 6 PERCENT DIFFERENTIAL FOR $25,465.44 PLUS ONE SHIPMENT OF 78 TARGETS WITH A 6 PERCENT DIFFERENTIAL FOR $454.74). ON THIS BASIS ELLINOR IS THE LOW BIDDER.

THE CONTRACTING OFFICER, HOWEVER, WAS ADVISED BY THE ITEM MANAGER THAT TARGETS ACTUALLY WOULD BE SHIPPED TO SEVERAL DIFFERENT LOCATIONS AND THAT QUANTITIES TO BE SHIPPED AT ANY ONE TIME TO A PARTICULAR PLACE WOULD BE LESS THAN 80, THAT IS, LESS THAN A FULL TRUCKLOAD OR CARLOAD. THE CONTRACTING OFFICER REVIEWED THE HISTORY OF SHIPMENTS TO VARIOUS LOCATIONS ON RECENT CONTRACTS FOR TOW TARGETS AND ON THE BASIS OF THIS REVIEW PROJECTED THAT 80 PERCENT OF ALL SHIPMENTS WOULD CONTAIN LESS THAN CARLOAD OR LESS THAN TRUCKLOAD QUANTITIES. WHEN TRANSPORTATION COSTS ARE EVALUATED ON THE BASIS OF SHIPMENTS TO HILL AIR FORCE BASE IN LESS THAN FULL TRUCKLOAD OR CARLOAD QUANTITIES 80 PERCENT OF THE TIME, PANCOA IS THE LOW BIDDER. AWARD WAS MADE TO PANCOA ON THE BASIS OF SUCH AN EVALUATION.

ARMED SERVICES PROCUREMENT REGULATION (ASPR) SEC. 2-201(A)(D)(I) (1974 ED.) REQUIRES THAT THE EXACT BASIS UPON WHICH BIDS WILL BE EVALUATED AND AWARD MADE BE STATED IN THE SOLICITATION. GENERALLY, SOLICITATIONS FOR SUPPLIES WHICH WILL OR MAY BE PURCHASED F.O.B. ORIGIN ARE REQUIRED TO PROVIDE FOR DELIVERY IN CARLOAD OR TRUCKLOAD LOTS. ASPR 19-208.2(A) (1974 ED.). IF THE PURCHASING OFFICE AND REQUESTING ACTIVITY HOWEVER, HAVE DETERMINED THAT IT IS IMPRACTICABLE TO ESTIMATE ANY TENTATIVE OR GENERAL DELIVERY POINTS FOR THE PURPOSE OF EVALUATING TRANSPORTATION COSTS, ASPR 19-208.4(B) (1974 ED.) REQUIRES THAT BIDS BE SOLICITED F.O.B. ORIGIN ONLY AND THAT BIDDERS BE ADVISED THAT BID EVALUATION WILL BE MADE WITHOUT REGARD FOR TRANSPORTATION COSTS. IF THE EXACT DESTINATION FOR THE PURCHASE IS NOT KNOWN BUT THE GENERAL LOCATION OF THE EXPECTED USERS CAN BE REASONABLY ESTABLISHED, ASPR 19 208.4(A) (1974 ED.) REQUIRES THAT THE PURCHASE REQUEST DESIGNATE A PLACE OR PLACES AS THE TENTATIVE POINTS TO WHICH TRANSPORTATION COSTS WILL BE COMPUTED, STATING ESTIMATED QUANTITIES FOR EACH TENTATIVE DESTINATION. THAT REGULATION ALSO REQUIRES THAT THE FOLLOWING CLAUSES BE INCLUDED IN THE SOLICITATION:

7-2003.24 EVALUATION FACTORS FOR AWARD.

(A) DESTINATION UNKNOWN. IN ACCORDANCE WITH 2-201(A) SEC. DVII), INSERT THE FOLLOWING PROVISION.

DESTINATION UNKNOWN (1968 JUN)

FOR THE PURPOSE OF EVALUATING BIDS (OR PROPOSALS), AND FOR NO OTHER PURPOSE, THE FINAL DESTINATIONS FOR THE SUPPLIES WILL BE CONSIDERED TO BE AS FOLLOWS:

(END OF PROVISION)

(B) F.O.B. ORIGIN - CARLOAD AND TRUCKLOAD SHIPMENTS. IN ACCORDANCE WITH 2-201(A) SEC. DVIII), INSERT THE FOLLOWING PROVISION.

F.O.B. ORIGIN - CARLOAD AND TRUCKLOAD SHIPMENTS (1968 JUN)

THE CONTRACTOR AGREES THAT SHIPMENT SHALL BE MADE IN CARLOAD OR TRUCKLOAD LOTS WHEN THE QUANTITY TO BE DELIVERED TO ANY ONE DESTINATION IN ANY DELIVERY PERIOD PURSUANT TO THE CONTRACT SCHEDULE OF DELIVERIES IS SUFFICIENT TO CONSTITUTE A CARLOAD OR TRUCKLOAD SHIPMENT, EXCEPT AS MAY OTHERWISE BE PERMITTED OR DIRECTED, IN WRITING, BY THE CONTRACTING OFFICER. FOR BID (OR PROPOSAL) EVALUATION PURPOSES, THE AGREED WEIGHT OF A CARLOAD OR TRUCKLOAD WILL BE THE HIGHEST APPLICABLE MINIMUM WEIGHT WHICH WILL RESULT IN THE LOWEST FREIGHT RATE (OR PER CAR CHARGE) ON FILE OR PUBLISHED IN COMMON CARRIER TARIFFS OR TENDERS AS OF THE DATE OF BID OPENING (OR THE CLOSING DATE) SPECIFIED FOR RECEIPT OF PROPOSALS. FOR PURPOSES OF ACTUAL DELIVERY, THE AGREED WEIGHT OF A CARLOAD OR TRUCKLOAD WILL BE THE HIGHEST APPLICABLE MINIMUM WEIGHT WHICH WILL RESULT IN THE LOWEST FREIGHT RATE (OR PER CAR CHARGE) ON FILE OR PUBLISHED AS OF DATE OF SHIPMENT. IF THE TOTAL WEIGHT OF ANY SCHEDULED QUANTITY TO A DESTINATION IS LESS THAN THE HIGHEST CARLOAD/TRUCKLOAD MINIMUM WEIGHT USED FOR BID (OR PROPOSAL) EVALUATION, THE CONTRACTOR AGREES TO SHIP SUCH SCHEDULED QUANTITY IN ONE SHIPMENT. THE CONTRACTOR SHALL BE LIABLE TO THE GOVERNMENT FOR ANY INCREASED COSTS TO THE GOVERNMENT RESULTING FROM FAILURE TO COMPLY WITH THE ABOVE REQUIREMENTS.

THE ABOVE CLAUSES WERE CONTAINED IN THE SUBJECT SOLICITATION AND AS STATED, HILL AIR FORCE BASE WAS INSERTED AS THE ONLY TENTATIVE DESTINATION FOR PURPOSES OF EVALUATING TRANSPORTATION FOR ALL QUANTITIES TO BE DELIVERED. WITH REFERENCE TO THE ABOVE QUOTED CLAUSE, ASPR 19-209 (1974 ED.) STATES THAT IT "WILL PROVIDE AGREEMENT AS TO THE APPROPRIATE FREIGHT COSTS FOR EVALUATION OF BIDS AND ASSURE THAT CONTRACTORS PRODUCE ECONOMICAL SHIPMENTS OF AGREED SIZE." FURTHERMORE, AS TO THE EVALUATION OF TRANSPORTATION COSTS, ASPR 19-301.1(A) (1974 ED.) STATES, IN PART, THAT THE BEST AVAILABLE TRANSPORTATION RATES AND RELATED COSTS IN EFFECT OR TO BECOME EFFECTIVE PRIOR TO THE EXPECTED DATE OF INITIAL SHIPMENT AND ON FILE OR PUBLISHED AT THE DATE OF BID OPENING SHALL BE USED IN THE EVALUATION.

IN DEFENSE OF ITS EVALUATION, AIR FORCE ARGUES THAT BIDDERS KNEW THAT HILL AIR FORCE BASE WAS ONLY A TENTATIVE DESTINATION AND THAT IT WAS IMPLICIT THAT LESS THAN FULL LOAD TRANSPORTATION COSTS COULD BE EMPLOYED FOR BID EVALUATION PURPOSES SINCE LESS THAN FULL LOAD QUANTITY SHIPMENTS WERE NOT EXPRESSLY PROHIBITED BY THE SOLICITATION.

IN OUR OPINION AIR FORCE'S EVALUATION OF TRANSPORTATION COSTS WAS CONTRARY TO THE TERMS OF THE SOLICITATION. THE SOLICITATION CALLED FOR THE DELIVERY OF 500 ITEMS PER MONTH, AND HILL AIR FORCE BASE WAS SPECIFIED AS THE FINAL DESTINATION POINT FOR PURPOSE OF EVALUATING BIDS. THE SOLICITATION CLAUSE, QUOTED ABOVE, STATED THAT "FOR BID *** EVALUATION PURPOSES, THE AGREED WEIGHT OF A CARLOAD OR TRUCKLOAD WILL BE THE HIGHEST APPLICABLE MINIMUM WEIGHT WHICH WILL RESULT IN THE LOWEST FREIGHT RATE (OR PER CAR CHARGE) *** AS OF THE DATE OF BID OPENING ***." WE THINK THE ONLY REASONABLE INTERPRETATION OF THESE TERMS IS THAT THE COST OF CARLOAD OR TRUCKLOAD SHIPMENTS TO HILL AIR FORCE BASE WOULD BE COMPUTED BASED ON THE HIGHEST APPLICABLE MINIMUM WEIGHT WHICH WILL RESULT IN THE LOWEST FREIGHT RATE, NAMELY, FULL LOAD QUANTITIES FOR BOTH ELLINOR AND PANCOA.

WE ARE MINDFUL OF THE CONTRACTING OFFICERS' ARGUMENT THAT FREIGHT EVALUATION BASED ON MONTHLY SHIPMENTS OF 500 TARGETS AT ONE TIME TO ONE LOCATION IS NOT REALISTIC. HISTORICAL EXPERIENCE WITH THESE ITEMS REPORTEDLY INDICATES THAT THE MONTHLY SHIPMENTS WILL BE MADE TO SEVERAL DIFFERENT LOCATIONS MOSTLY IN LESS THAN FULL TRUCKLOAD OR CARLOAD QUANTITIES. SINCE THE PURPOSE OF THE FREIGHT EVALUATION IS TO DETERMINE AS ACCURATELY AS POSSIBLE THE TRANSPORTATION COSTS WHICH THE GOVERNMENT WILL PAY, THE CONTRACTING OFFICER BELIEVES THAT FREIGHT EVALUATION PROPERLY WAS BASED ON LESS THAN CARLOAD AND TRUCKLOAD SHIPMENTS TO HILL AIR FORCE BASE.

WE AGREE WITH THE CONTRACTING OFFICER THAT THE PURPOSE OF A FREIGHT EVALUATION IS TO DETERMINE TRANSPORTATION COSTS AS ACCURATELY AS POSSIBLE. WE BELIEVE, HOWEVER, THAT THE PROPER WAY TO ACCOMPLISH THIS OBJECTIVE CONSISTENT WITH THE RULES OF COMPETITIVE BIDDING IS TO SET FORTH REALISTICALLY ESTIMATED DELIVERY POINTS IN THE SOLICITATION. ASPR 19- 208.4(B). IF THE ULTIMATE DESTINATION POINTS ARE TOO INDEFINITE TO BE REALISTICALLY ESTIMATED, ASPR 19-208.4(B) PROVIDES THAT TRANSPORTATION COSTS SHOULD NOT BE EVALUATED. B-177763, JULY 9, 1973. HERE IT APPEARS THAT AT THE TIME THE SOLICITATION WAS ISSUED THE AGENCY WAS IN A POSITION TO DETERMINE THAT THE ITEMS WOULD BE SHIPPED TO SEVERAL DIFFERENT LOCATIONS, ALTHOUGH THE EXACT QUANTITIES AND LOCATIONS OF EACH SHIPMENT WERE NOT KNOWN. APPARENTLY THE CONTRACTING OFFICER DID NOT CONSIDER WHETHER QUANTITIES AND ULTIMATE DESTINATION POINTS REALISTICALLY COULD HAVE BEEN ESTIMATED FOR INCLUSION IN THE SOLICITATION, SINCE IN PAST PROCUREMENTS OF THE ITEM TRANSPORTATION COSTS HAD NOT BEEN A SIGNIFICANT EVALUATION FACTOR IN DETERMINING THE LOW BIDDER. AS A RESULT THE SOLICITATION UNREALISTICALLY PROVIDED ONLY ONE TENTATIVE DESTINATION POINT AND DID NOT PROVIDE THAT LESS THAN FULL LOAD QUANTITIES WOULD BE UTILIZED IN THE EVALUATION.

IT IS A FUNDAMENTAL RULE OF ADVERTISED PROCUREMNT THAT BIDS MUST BE EVALUATED IN ACCORDANCE WITH THE TERMS SPECIFIED IN THE SOLICIATION. COMP. GEN. 447, 454 (1970). AS IT IS OUR VIEW THAT THE ONLY REASONABLE INTERPRETATION OF THE SOLICITATION WAS TO THE EFFECT THAT TRANSPORTATION COSTS WERE TO BE EVALUATED BASED ON THE LOWEST PER CAR OR TRUCK CHARGE TO HILL AIR FORCE BASE, WE MUST CONCLUDE THAT ELLINOR WAS THE LOW BIDDER AND THAT THE AWARD TO PANCOA WAS IMPROPER.

ACCORDINGLY, WE RECOMMEND THAT A PARTIAL TERMINATION FOR CONVENIENCE BE CONSIDERED AT THIS TIME CONSISTENT WITH THE URGENT NEEDS OF THE AIR FORCE AND THE OVERALL BEST INTERESTS OF THE GOVERNMENT, AND THAT AWARD BE MADE TO ELLINOR FOR ANY TERMINATED QUANTITIES. WE REQUEST THAT THE AIR FORCE TAKE IMMEDIATE ACTION TO DETERMINE THE FEASIBILITY OF A PARTIAL TERMINATION AND THAT IT REPORT TO US ITS FINDINGS AND ANY ACTIONS TAKEN PURSUANT TO THIS DECISION AS SOON AS POSSIBLE.

AS THIS DECISION CONTAINS A RECOMMENDATION FOR CORRECTIVE ACTION TO BE TAKEN, IT HAS BEEN TRANSMITTED BY LETTERS OF TODAY TO THE CONGRESSIONAL COMMITTEES NAMED IN SECTION 232 OF THE LEGISLATIVE REORGANIZATION ACT OF 1970, PUBLIC LAW 91-510, 84 STAT. 1170, 31 U.S.C. SEC. 1172 (1970).