B-182861, MAY 8, 1975

B-182861: May 8, 1975

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SINCE ACCEPTANCE OF PROTESTER'S BEST AND FINAL OFFER COULD HAVE OBLIGATED GOVERNMENT TO PAY PRICE IN EFFECT AT TIME OF DELIVERY UP TO A STATED CEILING. EVALUATION OF PROTESTER'S OFFER AT CEILING RATHER THAN BASE PRICE WAS FAIR TO OTHER OFFERORS WHO COMPETED ON FIRM FIXED PRICE BASIS. 2. CONTENTION THAT PROCURING ACTIVITY SHOULD HAVE USED AN ECOMOMIC PRICE ADJUSTMENT CLAUSE IN ITS RFP IS REJECTED BECAUSE USE OF SUCH A CLAUSE IS DISCRETIONARY WITH AGENCY AND NO ABUSE OF DISCRETION WAS FOUND. 3. ALLEGATION THAT AIR FORCE REPEATEDLY REQUESTED BEST AND FINAL OFFERS TO THE EXTENT THAT AN "AUCTION" WAS CREATED IS WITHOUT MERIT WHERE ALL CHANGES TO RFP WERE SUBSTANTIAL. THERE HAS BEEN NO ALLEGATION THAT THE AGENCY ADVISED ANY OFFEROR OF A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION OR INFORMED ANY FIRM THAT ITS PRICE WAS NOT LOW IN RELATION TO ANOTHER OFFEROR. 4.

B-182861, MAY 8, 1975

1. CONTRACTING OFFICER REASONABLY CONSTRUED PROTESTER'S BEST AND FINAL OFFER AS CLEARLY TAKING EXCEPTION TO REQUIREMENT FOR FIRM FIXED PRICE THROUGH INSERTION OF A PRICE ESCALATION PROVISION. SINCE ACCEPTANCE OF PROTESTER'S BEST AND FINAL OFFER COULD HAVE OBLIGATED GOVERNMENT TO PAY PRICE IN EFFECT AT TIME OF DELIVERY UP TO A STATED CEILING, EVALUATION OF PROTESTER'S OFFER AT CEILING RATHER THAN BASE PRICE WAS FAIR TO OTHER OFFERORS WHO COMPETED ON FIRM FIXED PRICE BASIS. 2. CONTENTION THAT PROCURING ACTIVITY SHOULD HAVE USED AN ECOMOMIC PRICE ADJUSTMENT CLAUSE IN ITS RFP IS REJECTED BECAUSE USE OF SUCH A CLAUSE IS DISCRETIONARY WITH AGENCY AND NO ABUSE OF DISCRETION WAS FOUND. 3. ALLEGATION THAT AIR FORCE REPEATEDLY REQUESTED BEST AND FINAL OFFERS TO THE EXTENT THAT AN "AUCTION" WAS CREATED IS WITHOUT MERIT WHERE ALL CHANGES TO RFP WERE SUBSTANTIAL, IMPARTIAL AND RESULTED IN NO PREJUDICE TO ANY OFFEROR. ADDITIONALLY, THERE HAS BEEN NO ALLEGATION THAT THE AGENCY ADVISED ANY OFFEROR OF A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION OR INFORMED ANY FIRM THAT ITS PRICE WAS NOT LOW IN RELATION TO ANOTHER OFFEROR. 4. MODIFICATION OF OFFER RECEIVED 45 DAYS AFTER DATE ESTABLISHED FOR RECEIPT OF BEST AND FINAL OFFERS WAS PROPERLY EXCLUDED UNDER THE TERMS OF RFP AND ASPR SEC. 7-2002.4(1974).

PATTY PRECISION PRODUCTS COMPANY:

REQUEST FOR PROPOSALS (RFP) F09603-74-R-4430, ISSUED BY THE WARNER ROBINS AIR LOGISTICS CENTER, WARNER ROBINS AIR FORCE BASE, GEORGIA, SOLICITED PROPOSALS FOR A QUANTITY OF BOMB EJECTION RACKS AT FIRM FIXED PRICE. FOLLOWING SEVERAL AMENDMENTS TO THE RFP, THE AIR FORCE SET AN OCTOBER 22, 1974, CLOSING DATE FOR RECEIPT OF BEST AND FINAL OFFERS. BY THE PRESCRIBED CLOSING DATE THREE PROPOSALS WERE RECEIVED AND EVALUATED. BASED ON ITS LOW OFFER, OREGON TECHNICAL PRODUCTS (OREGON) WAS SELECTED AS THE SUCCESSFUL OFFEROR.

PATTY PRECISION PRODUCTS COMPANY (PATTY) THEN PROTESTED THE SELECTION OF OREGON. AS ITS BASES FOR CLAIMING THAT OREGON SHOULD NOT RECEIVE THE AWARD, PATTY CONTENDS IN ESSENCE THAT THE AIR FORCE SHOULD HAVE USED A PRICE ADJUSTMENT CLAUSE IN ANY RESULTING CONTRACT; THAT PATTY'S PROPOSAL OF SEPTEMBER 17, 1974, WAS THE LOWEST OFFER RECEIVED; THAT THE AGENCY CONDUCTED A PROHIBITED "AUCTION" BY REPEATED REQUESTS FOR BEST AND FINAL OFFERS; THAT THE AIR FORCE IMPROPERLY EVALUATED PATTY'S BEST AND FINAL OFFER OF OCTOBER 18, 1974; AND THAT THE AGENCY ERRED IN NOT ACCEPTING A DECEMBER 6, 1974, AMENDMENT TO PATTY'S PROPOSAL.

CONCERNING THE PROTESTER'S ALLEGATION THAT THE AIR FORCE CONDUCTED AN AUTION, WE NOTE THAT THE RFP WAS AMENDED ON FIVE OCCASIONS. AMENDMENT 1, EFFECTIVE MAY 7, 197J, EXTENDED THE DATE FOR RECEIPT OF INITIAL OFFERS FROM MAY 29, 1974, TO JUNE 14, 1974. THE SECOND AMENDMENT WITH AN EFFECTIVE DATE OF MAY 24, 1974, WAS ISSUED TO INCORPORATE DRAWINGS WHICH WERE ERRONEOUSLY OMITTED FROM THE ORIGINAL SOLICITATION. THE THIRD CHANGE WAS PASSED ON TO OFFERORS IN A LETTER DATED AUGUST 29, 1974, WHEREIN THE CONTRACTING OFFICER NOTIFIED PROSPECTIVE CONTRACTORS OF THE DELETION OF ONE TYPE OF BOMB RACK AND REQUESTED BEST AND FINAL OFFERS FOR THE REVISED REQUIREMENTS BY SEPTEMBER 18, 1974. THE FOURTH CHANGE IN THE RFP OCCURRED WHEN THE AIR FORCE MAILED ALL OFFERORS A LETTER OF OCTOBER 2, 1974, WHICH ADDED A PROGRESS PAYMENT CLUASE, AUTHORIZED THE ACQUISITION OF PARTS AND MATERIALS PRIOR TO APPROVAL OF THE FIRST ARTICLE AND ALLOWED EACH OFFEROR AN ADDITIONAL 20 DAYS WITHIN WHICH TO RESUBMIT ITS PROPOSAL. THE FINAL AMENDMENT, DATED OCTOBER 9, 1974, INCREASED THE QUANTITY OF ]OMB RACKS WHILE LEAVING THE PROPOSAL DUE DATE AT OCTOBER 22, 1974.

NORMALLY, WHETHER A SOLICITATION SHOULD BE REVISED IS A DISCRETIONARY MATTER WHICH THE AGENCY MUST RESOLVE IN LIGHT OF ALL OF THE CIRCUMSTANCES OF THE CASE. B-173482, OCTOBER 1, 1971. OUR REVIEW OF THE ENTIRE RECORD REVEALS THAT ALL OFFERORS WERE TREATED IMPARTIALLY AND FAIRLY DURING THE PERIOD NEGOTIATIONS WERE REOPENED AND WERE AFFORDED EQUAL OPPORTUNITIES TO OFFER PROPOSAL OR PRICE REVISIONS. EACH CHANGE WAS IN WRITTEN FORM; CLEARLY SET FORTH A SUBSTANTIAL REVISION; AND PROVIDED EACH OFFEROR A SUFFICIENT AND EQUAL TIME TO RESPOND. ALTHOUGH PATTY COMPLAINS OF A IMPROPER "AUCTION," THE PROTESTER DOES NOT ALLEGE THE AIR FORCE EVER TOLD ANY OFFEROR A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION, OR INFORMED ANY FIRM THAT ITS PRICE WAS NOT LOW IN RELATION TO ANOTHER OFFEROR. IN THE INSTANT SITUATION, THEREFORE, THE PROTESTER'S ALLEGATION THAT AN "AUCTION" OCCURRED IS WITHOUT FOUNDATION.

PATTY NEXT CONTENDS THAT THE AIR FORCE ERRED IN NOT INCLUDING AN ECONOMIC PRICE ADJUSTMENT CLAUSE IN THE SOLICITATION AS PATTY HAD REPEATEDLY SUGGESTED TO THE CONTRACTING OFFICER. DEFENSE PROCUREMENT CIRCULAR NO. 120, 11 MARCH 1974, CLEARLY PROVIDES THAT THE USE OF AN ECONOMIC PRICE ADJUSTMENT PROVISION IS DISCRETIONARY WITH THE PROCURING ACTIVITY. THIS REGARD, THE CONTRACTING OFFICER WITHIN HIS DISCRETION DECIDED THAT SUCH A CLAUSE WAS NOT APPROPRIATE FOR THE SUBJECT PROCUREMENT. AS NOTED ABOVE, THE FOURTH AMENDMENT TO THE RFP AUTHORIZED THE SUCCESSFUL OFFEROR TO PURCHASE MATERIALS PRIOR TO FIRST ARTICLE ACCEPTANCE AS A PROTECTIVE MEASURE AGAINST INFLATION. WHILE PATTY DISAGREES WITH THE AIR FORCE CONCERNING THE EFFECTIVENESS OF SUCH A MEASURE, AND PATTY WOULD HAVE PREFERRED AN ECONOMIC PRICE ADJUSTMENT CLAUSE, WE HAVE BEEN UNABLE TO CONCLUDE THAT THE AIR FORCE'S EXERCISE OF ITS DISCRETION WAS IN ANY WAY ARBITRARY OR CAPRICIOUS.

PATTY'S PRINCIPAL ARGUMENT IS THAT THE AIR FORCE IMPROPERLY EVALUATED ITS BEST AND FINAL OFFER OF OCTOBER 18, 1974. THE PROTESTER CONTENDS THAT TI SUBMITTED THE LOWEST OFFER IN ITS PROPOSAL OF SEPTEMBER 17, 1974, AND THAT IN ITS FINAL OFFER OF OCTOBER 18, IT SIMPLY REITERATED ITS EARLIER LOW PROPOSAL WITH A CONTINGENCY CEILING PRICE IN THE EVENT THE AGENCY DECIDED TO USE AN ECONOMIC PRICE ADJUSTMENT CLAUSE.

IN ITS SEPTEMBER 17 OFFER, PATTY PROPOSED A UNIT PRICE OF $3,545 FOR THE SUPPLIES TO BE DELIVERED UNDER THE CONTRACT, OTHER THAN THE FIRST ARTICLE TESTING AND DATA, AND URGED THE GOVERNMENT TO PLACE IN THE SOLICITATION AN ECONOMIC PRICE ADJUSTMENT CLAUSE. THIS SUGGESTION WAS REJECTED BY THE CONTRACTING OFFICER. ON OCTOBER 18 PATTY SUBMITTED A BEST AND FINAL OFFER IN WHICH THE BOMB RACKS WERE PRICED AT "*4,431.25" PER UNIT, AND AT THE CONCLUSION OF WHICH PATTY STATED:

"WE CANNOT UNDERSTAND THE GOVERNMENT'S RELUCTANCE TO INCLUDE THE FULL PROVISIONING OF DPC 120, ITEM 1, REGARDING ECONOMIC PRICE ADJUSTMENTS TO THIS PROCUREMENT; AND SINCE WE ARE NOT ABLE TO OBTAIN DEFINITE PRICES FROM OUR SUPPLIERS AT THIS TIME FOR THE MATERIALS REQUIRED IN THE PERFORMANCE OF THIS CONTRACT, WE THEREFORE FEEL THAT WE CANNOT SUBMIT A REALISTIC FIXED PRICE TO THE GOVERNMENT. LINE ITEM PRICES MARKED THUSLY (*) ARE MAXIMUM AMOUNTS FOR ACTUAL PRICES TO BE DETERMINED AT TIME OF DELIVERY. OUR BASE PRICE OF $3,545.00 IS THE ESTABLISHED "FLOOR" TO WHICH COST INCREASES WILL BE ADDED.

"ALL OTHER TERMS AND CONDITIONS REMAIN UNCHANGED FROM OUR ORIGINAL BID."

THE AIR FORCE HAS DESCRIBED AS FOLLOWS ITS REACTION TO PATTY'S BEST AND FINAL OFFER:

"*** PATTY'S PROPOSAL DATED 17 SEPTEMBER 1974, WHICH WAS RESPONSIVE TO THE ROBINS' LETTER OF 29 AUGUST 1974, WAS, IN FACT, THE LOWEST PROPOSAL RECEIVED. THAT OFFER WAS SUPERSEDED BY PATTY'S BEST AND FINAL OFFER OF 18 OCTOBER 1974 WHICH CONTAINED BOTH A FLOOR AND A CEILING PRICE. WITH THEIR SUBMISSION, PATTY, IN FACT, SUBMITTED A PROPOSAL WHICH INCLUDED THE FEATURES OF THE ECONOMIC ADJUSTMENT PROVISION AND WHICH WAS NOT AUTHORIZED BY THE RFP. THE NORMAL PROCEDURE IN A NEGOTIATED PROCUREMENT SUCH AS THIS WOULD HAVE BEEN TO SEEK A CLARIFICATION OF THE OFFEROR, POINTING OUT THAT THE RFP DID NOT CONTEMPLATE THE USE OF ECONOMIC ADJUSTMENT PROVISIONS. HERE, HOWEVER, THAT DUTY TO NEGOTIATE CAN BE EXCUSED BY THE FACT THAT THE CONTRACTOR CLEARLY UNDERSTOOD THAT OTHER THAN A FIRM, FIXED PRICE WAS NOT ALLOWED. THIS UNDERSTANDING IS EVINCED IN ITS 18 OCTOBER 1974 OFFER: 'WE CANNOT UNDERSTAND THE GOVERNMENT'S RELUCTANCE TO INCLUDE THE FULL PROVISIONING OF DPC 120, ITEM 1, REGARDING ECONOMIC PRICE ADJUSTMENTS TO THIS PROCUREMENT ***' BECAUSE THE OFFEROR UNDERSTOOD THE GOVERNMENT'S POSITION AND BECAUSE THE OFFER WAS UNAMBIGUOUS, THE CONTRACTING OFFICER DID NOT HAVE TO UNDERTAKE FURTHER NEGOTIATIONS AS WOULD HAVE BEEN REQUIRED IN MOST NEGOTIATED PROCUREMENTS. ***"

THE RECORD CLEARLY INDICATES THAT THE AIR FORCE HAD NO OPTION BUT TO REGARD PATTY'S PROPOSAL OF SEPTEMBER 17, 1974 AS SUPERSEDED BY ITS BEST AND FINAL OFFER OF OCTOBER 18, 1974. THE LATER PROPOSAL WAS IN RESPONSE TO THE AIR FORCE'S LETTERS OF OCTOBER 2 AND 9, 1974, AND IN NO WAY SUGGESTED THE GOVERNMENT HAD THE OPTION OF SELECTING EITHER PROPOSAL. VIEW OF PATTY'S REFERENCE TO DEFENSE PROCUREMENT CIRCULAR NO. 120; ITS STATEMENT THAT IT COULD NOT "SUBMIT A REALISTIC FIXED PRICE"; ITS REFERENCE TO "ACTUAL PRICES TO BE DETERMINED AT TIME OF DELIVERY"; AND ITS ASSERTION THAT ANY COST INCREASES "WILL" BE ADDED TO ITS BASE PRICE, WE THINK THE CONTRACTING OFFICER REASONABLY REGARDED PATTY AS TAKING A DELIBERATE AND SUBSTANTIVE EXCEPTION TO THE FIXED PRICE TERMS OF THE RFP.

IN EVALUATING PATTY'S PROPOSAL, THE AIR FORCE RELIED UPON ASPR SEC. 2 407.4(A) (1974) WHICH STATES IN PART:

"WHEN AN INVITATION FOR BIDS DOES NOT CONTAIN AN ECONOMIC PRICE ADJUSTMENT CLAUSE, BIDS RECEIVED, WHICH QUOTE A PRICE AND CONTAIN AN ECONOMIC PRICE ADJUSTMENT PROVISION WITH A CEILING WHICH THE PRICE WILL NOT EXCEED, WILL BE EVALUATED ON THE MAXIMUM POSSIBLE ECONOMIC PRICE ADJUSTMENT OF THE QUOTED PRICE."

PATTY'S OFFER WAS EVALUATED ON THE BASIS OF ITS CEILING PRICE, AS A RESULT OF WHICH OREGON BECAME THE LOW OFFEROR.

THE PROTESTER CORRECTLY POINTS OUT THAT ASPR SEC. 2-407.4(A) REFERS TO FORMALLY ADVERTISED PROCUREMENTS. HOWEVER, WE BELIEVE IT WAS APPROPRIATE TO APPLY THE PRINCIPLES OF THAT SECTION TO THIS FIRM FIXED PRICE NEGOTIATED PROCUREMENT. AS WE HAVE INDICATED ABOVE, IT COULD BE PERSUASIVELY ARGUED THAT UPON ACCEPTANCE OF PATTY'S BEST AND FINAL OFFER, THE GOVERNMENT WOULD HAVE BEEN OBLIGATED TO PAY PATTY'S PRICE IN EFFECT AT TIME OF DELIVERY UP TO A MAXIMUM UNIT PRICE OF $4,431.25. IT WOULD HAVE BEEN UNFAIR TO OREGON, WHOSE FIRM FIXED UNIT PRICE WAS $3,817.47, TO HAVE MADE AWARD TO PATTY ON THE BASIS OF THE LATTER'S "BASE" PRICE OF $3,545, WHEN THE ACTUAL ULTIMATE PRICE TO THE GOVERNMENT MIGHT HAVE EXCEEDED THE AMOUNT OF OREGON'S OFFER.

THE PROTESTER NEXT CONTENDS THAT IT TRIED UNSUCCESSFULLY TO COMMUNICATE WITH THE CONTRACTING OFFICER FOLLOWING ITS BEST AND FINAL SUBMISSION. ITS RESPONSE THE AIR FORCE STATES:

"*** THIS STATEMENT APPARENTLY REFERS TO CONVERSATIONS WITH MR. PATTY AFTER THE 22 OCT. 1974 CLOSING DATE FOR SUBMISSION OF REVISED PROPOSALS WHEREIN MR. PATTY TRIED TO ASCERTAIN IF HE WAS THE LOW OFFEROR AND WHETHER OR NOT WE WERE CONDUCTING A PRE-AWARD SURVEY ON ANOTHER OFFEROR. MR. PATTY WAS ADVISED THAT WE WERE EVALUATING THE PROPOSALS AND THAT NO FURTHER INFORMATION COULD BE PROVIDED TO HIM UNTIL AN AWARD WAS MADE. EACH REQUEST FOR SUBMISSION OF REVISED RPOPOSALS CONTAINED THE FOLLOWING PARAGRAPH: 'AFTER THE DATE SPECIFIED FOR CLOSING OF NEGOTIATIONS, NO INFORMATION OTHER THAN NOTICE OF ACCEPTABILITY OF PROPOSAL, IF APPLICABLE, WILL BE FURNISHED TO YOU UNTIL AWARD HAS BEEN MADE.' MR. PATTY SHOULD HAVE BEEN AWARE THAT WE COULD NOT FURNISH HIM THE TYPE OF INFORMATION THAT HE WAS SEEKING."

FINALLY, THE PROTESTER CONTENDS THAT THE AIR FORCE SHOULD HAVE ACCEPTED ITS DECEMBER 6, 1974 TELEGRAM WHICH REQUESTED DELETION OF THE PRICE ESCALATION PROVISION CONTAINED IN ITS OCTOBER 18 PROPOSAL. HOWEVER, PATTY HAS NOT SHOWN THAT ITS PROPOSAL WAS ELIGIBLE FOR CONSIDERATION UNDER THE EXCEPTIONS CONTAINED IN THE ASPR SEC. 7-2002.4 "LATE PROPOSALS" CLAUSE MADE A PART OF THE RFP. WE THEREFORE ARE OF THE OPINION THAT THE AIR FORCE CORRECTLY CONCLUDED THAT THE MODIFICATION RECEIVED 45 DAYS AFTER THE ESTABLISHED DATE WAS NOT FOR CONSIDERATION. ARTISTIC CATERERS, INC., B- 182083, APRIL 22, 1975.

THE PROTEST IS THEREFORE DENIED.