B-183114, MAY 19, 1975, 54 COMP GEN 967

B-183114: May 19, 1975

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BID MAY NEVERTHELESS BE ACCEPTED IF OTHERWISE PROPER UNDER ANALOGOUS RATIONALE APPLICABLE TO SINGLE YEAR PROCUREMENT WITH OPTION PROVISIONS BECAUSE NO OTHER BIDDER WAS PREJUDICED. SINCE BID WAS LOW ON ALL PROGRAM YEARS AND LOW OVERALL. WILL NO LONGER BE FOLLOWED TO THE EXTENT IT IS INCONSISTENT WITH RATIONALE HEREIN. CONTRACTS - PROTESTS - TIMELINESS PROTEST FILED BY HIGH BIDDER - DURING CONSIDERATION OF PROTEST OF LOW BIDDER AGAINST DETERMINATION OF BID NONRESPONSIVENESS BY AGENCY - AGAINST POSSIBLE ACCEPTANCE OF SECOND LOW BID BASED ON ALLEGED NONRESPONSIVENESS ON FACE OF BID IS UNTIMELY AND WILL NOT BE CONSIDERED ON MERITS BECAUSE HIGH BIDDER. BIDS WERE PERMITTED ONLY ON MULTIYEAR BASIS WITH EITHER FIRST ARTICLE TESTING (LOT I.

B-183114, MAY 19, 1975, 54 COMP GEN 967

BIDS - EVALUATION - ALTERNATE BASES BIDDING - FISCAL V. MULTI-YEAR PROCUREMENT BECAUSE IT INCLUDED NONRECURRING COSTS IN FIRST PROGRAM YEAR, MULTIYEAR BID DEVIATED FROM REQUIREMENT THAT LIKE ITEMS BE PRICED SAME FOR EACH PROGRAM YEAR. BID MAY NEVERTHELESS BE ACCEPTED IF OTHERWISE PROPER UNDER ANALOGOUS RATIONALE APPLICABLE TO SINGLE YEAR PROCUREMENT WITH OPTION PROVISIONS BECAUSE NO OTHER BIDDER WAS PREJUDICED, SINCE BID WAS LOW ON ALL PROGRAM YEARS AND LOW OVERALL. B-161231, JUNE 2, 1967, WILL NO LONGER BE FOLLOWED TO THE EXTENT IT IS INCONSISTENT WITH RATIONALE HEREIN. CONTRACTS - PROTESTS - TIMELINESS PROTEST FILED BY HIGH BIDDER - DURING CONSIDERATION OF PROTEST OF LOW BIDDER AGAINST DETERMINATION OF BID NONRESPONSIVENESS BY AGENCY - AGAINST POSSIBLE ACCEPTANCE OF SECOND LOW BID BASED ON ALLEGED NONRESPONSIVENESS ON FACE OF BID IS UNTIMELY AND WILL NOT BE CONSIDERED ON MERITS BECAUSE HIGH BIDDER, AT LATEST, KNEW OF NONRESPONSIVENESS DETERMINATION AND LOW BIDDER'S PROTEST ALMOST 1 MONTH PRIOR TO FILING OF PROTEST. BIDS - OPTIONS - PROVISIONS - CORRECTION OPTION PROVISION SHOULD BE CORRECTED TO: (1) WARN BIDDERS OF CONSEQUENCES OF FAILURE TO ABIDE BY ITS TERMS; (2) CLARIFY WHETHER REQUIREMENT THAT OPTION PRICES BE NO HIGHER THAN INITIAL QUANTITY REFERS TO FIRST PROGRAM YEAR OR EACH YEAR; AND (3) EXCLUDE CONTINGENCY IN OPTION PRICE THAT COVERS POSSIBILITY THAT OPTION MAY BE EXERCISED WHEN COSTS EXCEED BID PRICE THEREBY AVOIDING PAYMENT OF PREMIUM BY GOVERNMENT IN COST OF FIRM QUANTITY.

IN THE MATTER OF KECO INDUSTRIES, INC., MAY 19, 1975:

KECO INDUSTRIES, INC. (KECO), SUBMITTED THE LOW BID ON THE NAVAL AIR ENGINEERING CENTER (NAVY) MULTIYEAR INVITATION FOR BIDS (IFB) N00156-74 B- 0250 FOR MOBILE AIR CONDITIONING UNITS. BIDS WERE PERMITTED ONLY ON MULTIYEAR BASIS WITH EITHER FIRST ARTICLE TESTING (LOT I, ITEMS 0001 0004) OR WAIVER OF FIRST ARTICLE TESTING (LOT II, ITEMS 0007-0010). BIDS WERE RECEIVED ONLY ON THE BASIS OF ITEMS 0001-0004 (FIRST ARTICLE TESTING). ITEM 0001, THE FIRST PROGRAM YEAR, WAS FOR 27 UNITS; ITEM 0002 WAS CERTAIN TECHNICAL DATA AND FIRST ARTICLE TESTS (NONRECURRING COSTS); ITEM 0003 WAS 22 UNITS FOR THE SECOND PROGRAM YEAR; AND ITEM 0004 WAS 30 UNITS FOR THE THIRD PROGRAM YEAR.

BIDS WERE TIMELY RECEIVED BY NOVEMBER 26, 1974, FROM KECO, AMERICAN AIR FILTER (AAF), ACL-FILCO CORP. (ACL), AND UNITED AIRCRAFT PRODUCTS, INC. (UAP), AS FOLLOWS:

UNIT PRICE 0001 0002 0003 0004

KECO $43,523 (*) $41,694 $41,694

AAF 49,900 $43,940 49,900 49,900

ACL 50,868 58,193 50,868 50,868

UAP 89,992 27,610 89,992 89,992

*KECO INDICATED IN ITS BID THAT COSTS OF ITEM 0002 WERE "INCLUDED IN ITEM 0001."

PARAGRAPH 2 OF THE SPECIAL EVALUATION FACTORS, SECTION "D," REQUIRES THAT "*** THE UNIT PRICE OF EACH LIKE ITEM SHALL BE THE SAME FOR ALL PROGRAM YEARS INCLUDED HEREIN."

BY TELEGRAM DATED NOVEMBER 26, 1974, RECEIVED BY THE NAVY AFTER BID OPENING, KECO ATTEMPTED TO CHANGE ITS PRICES FOR VARIOUS ITEMS. WITH REGARD TO ITEM 0002, THE TELEGRAM REFLECTED KECO'S INTENTION TO DELETE THE NOTATION THAT THE PRICES WERE INCLUDED IN ITEM 0001. INSTEAD, SEPARATE PRICES FOR EACH REQUIREMENT OF ITEM 0002 WERE LISTED AS PROVIDED IN THE BIDDING SCHEDULE. SINCE THE TELEGRAM WAS RECEIVED AFTER THE TIME SET FOR BID OPENING, IT WAS NOT CONSIDERED BY THE NAVY.

ON DECEMBER 3, 1974, THE NAVY RECEIVED A PROTEST FROM AAF (THE SECOND LOW BIDDER) THAT KECO'S BID WAS NONRESPONSIVE FOR FAILING TO BID THE SAME PRICE FOR LIKE ITEMS FOR EACH PROGRAM YEAR. BY CORRESPONDENCE OF DECEMBER 5, 1974, TO THE NAVY, KECO INDICATED THAT ALTHOUGH THE BID PRICE FOR ITEM 0001 WAS NOT ON ITS FACE THE SAME AS ITEMS 0003 AND 0004, IT WAS IN FACT THE SAME. THAT IS, THE TOTAL PRICE FOR ITEM 0001, $43,523, REFLECTS A BID OF $41,694 PER UNIT AS BID FOR ITEMS 0003 AND 0004, PLUS $1,829 PER UNIT FOR THE NONRECURRING TOOLING AND DATA ITEMS APPLICABLE TO ITEM 0002.

DUE TO A TRANSFER OF RESPONSIBILITY FOR PROCUREMENTS OVER $100,000 FROM THE NAVAL AIR ENGINEERING CENTER (THE ISSUING ACTIVITY) TO THE NAVAL REGIONAL PROCUREMENT OFFICE IN PHILADELPHIA, NO ACTION WAS TAKEN ON EITHER AAF'S PROTEST OR KECO'S LETTER UNTIL JANUARY 24, 1975. AT THAT TIME, THE PURCHASE DIVISION OFFICER INFORMED KECO THAT THE CONTRACTING OFFICER HAD DETERMINED KECO'S BID NONRESPONSIVE BECAUSE ITS PRICES FOR LIKE ITEMS WERE NOT THE SAME FOR EACH PROGRAM YEAR. THE LETTER STATES THAT THE NONRECURRING COSTS - ITEM 0002 - SHOULD EITHER HAVE BEEN PRICED SEPARATELY, AS PROVIDED FOR IN THE BIDDING SCHEDULE, OR APPORTIONED EQUALLY AMONG ALL THREE PROGRAM YEARS.

ON JANUARY 27, 1975, KECO PROTESTED THE PROPOSED REJECTION OF ITS BID. ALTERNATIVELY, KECO ARGUES THAT: (A) ITS BID PRICE WAS THE SAME FOR ALL THREE PROGRAM YEARS, BUT, ADDITIONALLY, THE FIRST PROGRAM YEAR INCLUDED THE NONRECURRING COSTS ASSOCIATED WITH ITEM 0002; (B) THE IFB WAS DEFECTIVE BECAUSE THE REQUIREMENT THAT LIKE ITEMS BE EQUALLY PRICED IN ALL PROGRAM YEARS WAS NOT SUFFICIENTLY CONSPICUOUS TO PUT BIDDERS ON NOTICE; AND (C) THE INTENT OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) SEC. 1- 322.2(B)(IV) (1974 ED.) HAS NOT BEEN VIOLATED SINCE KECO'S BID WAS LOW EVEN IF THE PROCUREMENT IS CANCELED AFTER THE FIRST YEAR. IN PART, KECO ASSERTS THAT ASPR SEC. 1-322.2(B)(IV) (1974 ED.) IS DESIGNED TO PREVENT A BIDDER FROM SUBMITTING AN UNREALISTICALLY HIGH FIRST PROGRAM YEAR PRICE AND LOWER SUBSEQUENT YEAR PRICES, THEREBY GAMBLING THAT THE PROGRAM WOULD BE DISCONTINUED BEFORE COMPLETION.

THE NAVY HAS RESPONDED THAT IT CONSIDERS KECO'S BID NONRESPONSIVE FOR FAILING TO COMPLY WITH A MATERIAL PROVISION OF THE IFB. RELIANCE FOR THIS PROPOSED ACTION IS FOUND IN OUR DECISION B-161231, JUNE 2, 1967. THAT CASE CONCERNED A MULTIYEAR IFB REQUIRING THAT UNIT PRICES BID FOR EACH MATCHING ITEM UNDER THE MULTIYEAR REQUIREMENT BE THE SAME FOR ALL PROGRAM YEARS. THE ELECTROSOLIDS CORPORATION WAS REJECTED AS NONRESPONSIVE BECAUSE ITS PRICES FOR ONE UNIT WERE NOT THE SAME FOR BOTH PROGRAM YEARS. AS KECO DID IN THIS INSTANCE, IN THE SPACE PROVIDED TO SEPARATELY PRICE CERTAIN NONRECURRING ITEMS, ELECTROSOLIDS NOTED THAT THE COSTS WERE INCLUDED IN THE FIRST PROGRAM YEAR ITEM. ELECTROSOLIDS ALSO SUBMITTED A POST-BID OPENING EXPLANATION OF THE DISCREPANCY WHICH WAS NOT ACCEPTED. UNDER THOSE CIRCUMSTANCES, WE HELD THAT THE REQUIREMENT THAT LIKE ITEMS BE PRICED THE SAME FOR ALL PROGRAM YEARS WAS A MATERIAL PROVISION OF THE IFB THAT COULD NOT BE DISREGARDED OR WAIVED AS A MINOR INFORMALITY.

NOTWITHSTANDING THE SIMILARITY OF THE ELECTROSOLIDS CASE TO KECO'S AND DESPITE THE FAILURE TO COMPLY WITH THE LEVEL PRICING REQUIREMENT OF THE IFB, THE KECO BID MAY BE ACCEPTED FOR AWARD IF OTHERWISE PROPER. FOR THE REASONS THAT FOLLOW, WE WILL NO LONGER ADHERE TO THE RULE IN THE ELECTROSOLIDS CASE. RATHER, UPON REEXAMINATION, THE RATIONALE OF ANALOGOUS CASES CONCERNING SINGLE YEAR PROCUREMENTS WITH OPTION PROVISIONS MORE ACCURATELY REPRESENTS THE PHILOSOPHY OF OUR OFFICE ON THIS MATTER.

ABL GENERAL SYSTEMS, CORPORATION, 54 COMP. GEN. 476 (1974), INVOLVED AN IFB WHICH CONTAINED A REQUIREMENT THAT THE OPTION PRICE BE BID NO HIGHER THAN THE BASIC QUANTITY. BIDDERS WERE NOT FOREWARNED WHAT THE PENALTY WOULD BE FOR FAILING TO COMPLY WITH THE BID INSTRUCTIONS. THE LOW BIDDER ON THE FIRM QUANTITY BID A HIGHER PRICE FOR THE OPTION QUANTITY. UPHOLDING THE REJECTION OF THE ABL BID, WE STATED:

*** THE DETERMINATIVE ISSUE IS WHETHER OR NOT THIS DEVIATION (FROM THE MANNER OF BIDDING SPECIFIED IN THE IFB) WORKED TO THE PREJUDICE OF OTHER BIDDERS FOR THE AWARD.

OUR OFFICE FOUND THE DEVIATION FROM THE BIDDING REQUIREMENT PREJUDICIAL TO OTHER BIDDERS WHO ADHERED TO THE BID INSTRUCTIONS. IT WAS CONCEIVABLE UNDER THOSE CIRCUMSTANCES THAT ANOTHER BIDDER THAT DISREGARDED THE OPTION PRICING INSTRUCTIONS COULD HAVE LOWERED ITS BASIC QUANTITY PRICE BELOW ABL'S.

IN 44 COMP. GEN. 581 (1965) A BIDDER DEVIATED FROM THE IFB REQUIREMENT THAT THE OPTION AND BASIC QUANTITY, LOW ON THE OPTION AND LOW OVERALL. HELD THE FAILURE TO BID LEVEL PRICES COULD BE WAIVED AS A MINOR INFORMALITY SINCE IT WAS NOT CONCEIVABLE THAT ANY BIDDER, UNDER THOSE CIRCUMSTANCES, WAS PREJUDICED. THIS RATIONALE WAS FOLLOWED IN B-176356, NOVEMBER 8, 1972, WHICH ALSO INVOLVED A DEVIANT BIDDER WHICH WAS LOW ON THE BASIC QUANTITY, LOW ON THE OPTION AND LOW OVERALL. WE NOTE THAT WHILE THESE CASES ARE COMPATIBLE WITH ABL GENERAL SYSTEMS, CORPORATION, SUPRA, THEY ARE DISTINGUISHABLE ON THEIR FACTS.

HERE, THE SPREAD BETWEEN KECO AND AAF WAS SO SIGNIFICANT THAT WE ARE CONVINCED THAT EVEN HAD AAF BEEN PERMITTED TO BID IN THE MANNER KECO DID, IT WOULD NOT HAVE BEEN LOW. WE REACH THIS CONCLUSION IN VIEW OF THE FACT THAT KECO'S BID WAS $6,377 LOWER PER UNIT THAN AAF'S BID WHICH DID NOT INCLUDE THE COSTS OF ITEM 0002. KECO'S BID WAS LOW ON ALL ALTERNATIVES: FIRST PROGRAM YEAR (INCLUDING ITEM 0002), SECOND PROGRAM YEAR, THIRD PROGRAM YEAR AND AGGREGATE AMOUNT. IF THE PROCUREMENT IS CANCELED AFTER THE FIRST PROGRAM YEAR, KECO'S BID WOULD BE LOWER THAN AAF'S BID BY $216,119; LOWER THAN ACL'S BID BY $256,508; AND LOWER THAN UAP'S BID BY $1,280,383. THESE FIGURES ALL INCLUDE THE COST IMPACT OF ITEM 0002. THE PROGRAM RUNS THE FULL 3 YEARS, THE SAVINGS GENERATED BY KECO'S BID WILL AMOUNT TO $642,831 OVER AAF'S BID $733,556 OVER ACL'S BID; AND $3,788,239 OVER UAP'S BID.

AT A CONFERENCE HELD AT OUR OFFICE ON MARCH 18, 1975, ATTENDED BY REPRESENTATIVES OF THE NAVY, KECO, AAF, UAP AND OUR OFFICE, COUNSEL FOR UAP, IN EFFECT, FILED AN ORAL PROTEST WHICH WAS REDUCED TO A FORMAL WRITTEN PROTEST BY LETTER OF MARCH 19, 1975. UAP HAD SUBMITTED THE HIGHEST BID. COUNSEL AGREED WITH THE NAVY'S PROPOSED ACTION TO REJECT KECO'S BID. FURTHER, UAP ALLEGED THAT THE NEXT LOW BID, AAF, WAS NONRESPONSIVE DUE TO THE MANNER IT BID ON THE "OPTION FOR INCREASED QUANTITY" CLAUSE OF SECTION "J," SPECIAL PROVISIONS. THAT PROVISION RESERVED THE OPTION TO THE GOVERNMENT TO INCREASE THE QUANTITY UP TO 50 PERCENT FOR EACH PROGRAM YEAR "*** AT A PRICE NO HIGHER THAN THAT FOR THE INITIAL QUANTITY, EXCLUDING THOSE EXPENSES INCURRED BY THE PRIME CONTRACTOR OR HIS SUBCONTRACTOR WHICH HAVE BEEN EQUITABLY AMORTIZED IN THE UNIT PRICES FOR THE ENTIRE MULTI-YEAR CONTRACT PERIOD." FOR THE OPTION, AAF BID THE SAME PRICES AS THOSE SUBMITTED FOR THE BASIC MULTIYEAR REQUIREMENTS. WE OBSERVE HERE THAT, FOR THE OPTION, KECO BID IN A SIMILAR MANNER. ESSENTIALLY, UAP CONTENDS THAT AAF MUST HAVE INCLUDED CERTAIN NONRECURRING COSTS IN THE OPTION PRICE SINCE NOTHING HAD BEEN EXCLUDED AS EQUITABLY AMORTIZED.

SECTION 20.2(A) OF OUR INTERIM BID PROTEST PROCEDURES AND STANDARDS (4 C.F.R. PART 20 (1974)) REQUIRES THAT A PROTEST BE FILED WITHIN 5 DAYS OF THE DATE THE BASIS FOR PROTEST WAS KNOWN, OR SHOULD HAVE BEEN KNOWN, WHICHEVER IS EARLIER. BIDS WERE OPENED ON NOVEMBER 26, 1974 (OVER 3 1/2 MONTHS BEFORE THE CONFERENCE), AND REPRESENTATIVES OF UAP WERE PRESENT AT BID OPENING. VIEWING THE MATTER IN A LIGHT MOST FAVORABLE TO UAP, ANY POSSIBLE PROTEST AGAINST THE MANNER IN WHICH THE SECOND LOW BIDDER BID WOULD NOT HAVE TO BE FILED UNTIL IT WAS KNOWN THAT SOME BASIS EXISTED TO CHALLENGE THE LOW BID. THEREFORE, WE THINK UAP WAS JUSTIFIED IN NOT FILING A PROTEST AGAINST THE ACCEPTANCE OF THE AAF BID UNTIL IT BECAME AWARE OF THE FACT THAT THE LOW KECO BID HAD BEEN REJECTED AS NONRESPONSIVE, AND THE SUBSEQUENT PROTEST FILED BY KECO. AT THE LATEST, UAP WAS AWARE OF THE DETERMINED NONRESPONSIVENESS OF THE KECO BID, THE KECO PROTEST AND THE BASES THEREFOR ON FEBRUARY 21, 1975, WHEN A COPY OF THE PROTEST WAS FURNISHED TO REPRESENTATIVES OF UAP BY OUR OFFICE. INCLUDED IN THAT PACKAGE WAS A COPY OF OUR BID PROTEST PROCEDURES. THEREFORE, ANY POSSIBLE PROTEST TO BE FILED AGAINST AN AWARD TO AAF SHOULD HAVE BEEN IMMEDIATELY PURSUED. THIS WAS NOT THE CASE HERE. THE ENTIRE BID PROTEST FILE (EXCLUDING ANY INFORMATION PROTECTED FROM DISSEMINATION UNDER THE FREEDOM OF INFORMATION ACT, 5 U.S.C. SEC. 552) WAS AVAILABLE FOR INSPECTION AT OUR OFFICE. MOREOVER, ON MARCH 7, 1975, COUNSEL FOR UAP REQUESTED AN OPPORTUNITY TO AND EVENTUALLY DID INSPECT THE BIDS AT OUR OFFICE. IN THESE CIRCUMSTANCES, THE ORAL PROTEST MENTIONED ON MARCH 18, 1975, AT THE CONFERENCE, AND THE WRITTEN PROTEST FILED ON MARCH 19, 1975, ARE UNTIMELY AND WILL NOT BE CONSIDERED ON THE MERITS SINCE NOT BROUGHT TO OUR ATTENTION WITHIN 5 DAYS AFTER THE BASIS FOR PROTEST SHOULD HAVE BEEN OR WAS ACTUALLY KNOWN.

SECTION 20.2(B) OF OUR PROCEDURES PROVIDES THAT AN OTHERWISE UNTIMELY PROTEST MAY BE CONSIDERED IF IT IS DETERMINED THAT THE PROTEST WAS UNTIMELY FILED FOR GOOD CAUSE OR IT PRESENTS ISSUES SIGNIFICANT TO PROCUREMENT PRACTICES OR PROCEDURES. "GOOD CAUSE" REFERS TO SOME COMPELLING REASON BEYOND THE PROTESTER'S CONTROL WHICH PREVENTED THE FILING OF A TIMELY PROTEST. 52 COMP. GEN. 20 (1972). "ISSUES SIGNIFICANT TO PROCUREMENT PRACTICES OR PROCEDURES" REFERS TO THE PRESENCE OF A PRINCIPLE OF WIDESPREAD INTEREST. 52 COMP. GEN., SUPRA. THE ISSUE RAISED BY COUNSEL FOR UAP FALLS WITHIN NEITHER EXCEPTION. UAP HAS NOT ALLEGED THAT ANY CIRCUMSTANCES EXISTED WHICH PREVENTED IT FROM FILING TIMELY. FURTHER, THE FACT THAT UAP HAS RAISED AN ISSUE THAT RELATES TO BID RESPONSIVENESS IN AN ISOLATED SITUATION IS NOT SUFFICIENT TO RAISE IT TO THE STATUS OF A SIGNIFICANT ISSUE. EMERSON S. ELLETT, INCORPORATED, B- 181925, SEPTEMBER 4, 1974.

HOWEVER, WE DO FEEL IT NECESSARY TO COMMENT ON CERTAIN MATTERS. WE NOTE THAT NOWHERE IN SECTION "D," EVALUATION FACTORS, IS THERE A PRECAUTIONARY LEGEND WARNING BIDDERS THAT THE FAILURE TO COMPLY WITH THE LIKE PRICING REQUIREMENT FOR ALL PROGRAM YEARS MAY REQUIRE REJECTION OF THE BID AS NONRESPONSIVE. IN THIS SENSE, KECO'S CONTENTION THAT THE PROVISION WAS NOT SUFFICIENTLY "FLAGGED" HAS SOME MERIT. WE ARE, THEREFORE, RECOMMENDING TO THE SECRETARY OF THE NAVY THAT CORRECTIVE MEASURES BE TAKEN TO INSERT SUCH A WARNING IN FUTURE MULTIYEAR SOLICITATIONS.

ALSO, THE OPTION PROVISION IS UNCLEAR. AS PRESENTLY PHRASED, THERE IS NO WAY THAT THE GOVERNMENT CAN DETERMINE IF COSTS ARE INCLUDED IN THE OPTION WHICH WERE EQUITABLY AMORTIZED IN THE UNIT PRICES FOR THE ENTIRE MULTIYEAR PERIOD. THE BIDDERS ARE NOT TOLD WHAT THE PENALTY WILL BE IN THE EVENT THAT A PRICE HIGHER THAN THE MULTIYEAR UNIT PRICE IS SPECIFIED. IT IS CONCEIVABLE THAT A PRICE, THE SAME AS BID ON THE MULTI-YEAR QUANTITY, MAY EXCLUDE COSTS EQUITABLY AMORTIZED, BUT INCLUDE SUCH OTHER COSTS AS TO REQUIRE THE PRICE TO BE THE SAME. IT IS ALSO UNCLEAR WHETHER THE TERM "INITIAL QUANTITY" USED IN THE OPTION REFERS TO THE INITIAL QUANTITY OF PROGRAM YEAR ONE, EACH SUCCESSIVE PROGRAM YEAR OR THAT PROGRAM YEAR IN WHICH THE OPTION IS EXERCISED. WE BELIEVE THE GOVERNMENT'S INTENT SHOULD BE CLEARLY STATED IN THESE REGARDS TO AVOID FUTURE PROBLEMS. WE NOTED IN ABL GENERAL SYSTEMS, CORPORATION, SUPRA, THAT THIS TYPE OF OPTION PROVISION MAY CAUSE A BIDDER TO INCLUDE A CONTINGENCY IN THE BID TO COVER THE POSSIBILITY THAT THE OPTION MAY BE EXERCISED AT A TIME WHEN COSTS MIGHT EXCEED THE UNIT PRICE. IF THE OPTION IS NOT THEN EXERCISED, THE GOVERNMENT MAY BE PAYING A PRICE IN EXCESS OF THAT WHICH REASONABLE COMPETITION WOULD HAVE BROUGHT. WE SUGGEST THAT THE LANGUAGE OF THESE CLAUSES BE REVIEWED TO DEVISE AN OPTION PROVISION WHICH WILL ELIMINATE THIS PROBLEM. A REVISED OPTION PROVISION AND GUIDELINES FOR ITS USE WERE DEVELOPED AND TRANSMITTED TO THE ASPR COMMITTEE FOR CONSIDERATION AS A RESULT OF OUR RECOMMENDATION IN ABL GENERAL SYSTEMS, CORPORATION, SUPRA.

WE ALSO NOTE THAT ASPR SEC. 7-104.47 (1974 ED.) PROVIDES AN OPTION PROVISION TO BE INCLUDED IN MULTIYEAR SOLICITATIONS WHICH CLEARLY SETS FORTH THE OBLIGATIONS OF THE BIDDER AND CLEARLY HOW THE GOVERNMENT INTENDS THE OPTION SITUATION TO BE CONSTRUED.