B-194088, APRIL 26, 1979, 58 COMP.GEN. 451

B-194088: Apr 26, 1979

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DISTRICT COURT CONCERNING LITIGATION WHOSE SUBJECT MATTER IS NOT INVOLVED IN ANY PENDING GENERAL ACCOUNTING OFFICE (GAO) CASE. WHETHER AUDIT RESOURCES SHOULD BE USED IS MATTER FOR INTERNAL GAO DETERMINATION. CONTRACTS - PROTESTS - COURT ACTION - PRELIMINARY INJUNCTION - GRANTED - COURT REQUEST FOR GAO OPINION GAO AGREES WITH PLAINTIFF THAT IN FURNISHING OPINION TO COURT ON MATTER WHICH IS NOT SUBJECT OF ANY GAO CASE. CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - CANCELLATION - GUIDELINES - AVAILABILITY EXAMINING PROPRIETY OF RFP CANCELLATIONS IS ESSENTIALLY ACCOMPLISHED ON CASE-BY-CASE BASIS. CIRCULAR - JUDICIAL ENFORCEMENT GAO VIEW IS THAT OMB CIRCULAR A-76. STATEMENT OF EXECUTIVE BRANCH POLICY WHICH DOES NOT HAVE FORCE AND EFFECT OF LAW- DOES NOT CREATE RIGHT OF ACTION IN DISAPPOINTED BIDDER TO SUE IN FEDERAL COURTS TO ENFORCE ITS PROVISIONS.

B-194088, APRIL 26, 1979, 58 COMP.GEN. 451

CONTRACTS - PROTESTS - COURT SOLICITED AID - NO PROTEST PENDING IN RESPONSE TO REQUEST BY U.S. DISTRICT COURT CONCERNING LITIGATION WHOSE SUBJECT MATTER IS NOT INVOLVED IN ANY PENDING GENERAL ACCOUNTING OFFICE (GAO) CASE, GAO FURNISHES OPINION TO COURT AS TO WHETHER COMMERCE DEPARTMENT VIOLATED APPLICABLE LAW AND REGULATIONS IN CANCELING REQUEST FOR PROPOSALS. GENERAL ACCOUNTING OFFICE - JURISDICTION - CONTRACTS - COURT-SOLICITED ASSISTANCE - SCOPE OF REVIEW - NO PROTEST PENDING IN REGARD TO COURT'S REQUEST FOR GAO OPINION ON ISSUES IN LAWSUIT, GAO SEES NO OBLIGATION TO KEEP PLAINTIFF INFORMED OF STAFF RESOURCES USED BY GAO IN ARRIVING AT OPINION. WHETHER AUDIT RESOURCES SHOULD BE USED IS MATTER FOR INTERNAL GAO DETERMINATION. CONTRACTS - PROTESTS - COURT ACTION - PRELIMINARY INJUNCTION - GRANTED - COURT REQUEST FOR GAO OPINION GAO AGREES WITH PLAINTIFF THAT IN FURNISHING OPINION TO COURT ON MATTER WHICH IS NOT SUBJECT OF ANY GAO CASE, COURT'S FINDINGS AND CONCLUSIONS IN ISSUING PRELIMINARY INJUNCTI4N SHOULD BE CAREFULLY CONSIDERED. CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - CANCELLATION - GUIDELINES - AVAILABILITY EXAMINING PROPRIETY OF RFP CANCELLATIONS IS ESSENTIALLY ACCOMPLISHED ON CASE-BY-CASE BASIS, AS FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 AND FEDERAL PROCUREMENT REGULATIONS PROVIDE VIRTUALLY NO SPECIFIC GUIDANCE AS TO WHEN RFP CAN OR SHOULD BE CANCELED. CONTRACTS NEGOTIATION - REQUESTS FOR PROPOSALS - CANCELLATION - IN-HOUSE GOVERNMENT PERFORMANCE SECTION 601 OF ECONOMY ACT DOES NOT APPEAR TO BE APPLICABLE TO COMMERCE DEPARTMENT'S CANCELLATION OF RFP AND DETERMINATION TO PROCEED WITH WORK IN -HOUSE, AS RECORD DOES NOT INDICATE ANY INTER- OR INTRA DEPARTMENTAL ORDERS FOR WORK AND SERVICES INVOLVED. DEPARTMENTS AND ESTABLISHMENTS - COMMERCIAL ACTIVITIES - PRIVATE V. GOVERNMENT PROCUREMENT - COST COMPARISON SECTION 601 OF ECONOMY ACT DOES NOT REQUIRE COMMERCE DEPARTMENT TO PERFORM COMPARATIVE COST ANALYSIS OF PLAINTIFF'S PROPOSAL VERSUS COST OF DOING WORK VIA COMMERCE-U.S. POSTAL SERVICE AGREEMENT, BECAUSE ECONOMY ACT DOES NOT APPLY TO AGREEMENT FOR FURNISHING PROPERTY OR SERVICES BETWEEN POSTAL SERVICE AND EXECUTIVE AGENCIES. OFFICE OF MANAGEMENT AND BUDGET - CIRCULARS - .NO. A-76 - STATUTE V. CIRCULAR - JUDICIAL ENFORCEMENT GAO VIEW IS THAT OMB CIRCULAR A-76, MARCH 3, 1966, AS REVISED-- STATEMENT OF EXECUTIVE BRANCH POLICY WHICH DOES NOT HAVE FORCE AND EFFECT OF LAW- DOES NOT CREATE RIGHT OF ACTION IN DISAPPOINTED BIDDER TO SUE IN FEDERAL COURTS TO ENFORCE ITS PROVISIONS. CONTRACTS - NEGOTIATION - REQUESTS FOR PROPOSALS - CANCELLATION - REASONABLE BASIS CHANGED CONDITIONS, NEEDS, ETC. GAO DOES NOT AGREE WITH BELIEF AGENCY ACTED WHOLLY WITHOUT REASONABLE BASIS IN CANCELLING RFP WHERE COST DATA UNDERLYING SOLE OFFEROR'S PROPOSAL HAD NEVER BEEN FULLY AUDITED, REQUIREMENTS WERE REDUCED, AGENCY MADE SOME ATTEMPT TO ASCERTAIN IF REDUCED WORK COULD BE PREFORMED AT LESS COST IN- HOUSE, AGENCY BELIEVED IN-HOUSE COSTS WOULD BE LOWER THAN COSTS OF INFORMAL "OFFERS" IT WAS RECEIVING FOR REDUCED WORK SUBMITTED BY SOLE OFFEROR, AND AGENCY WAS CONCERNED OVER AMOUNT OF TIME BEING CONSUMED IN RESOLVING HOW WORK WOULD BE PERFORMED. CONTRACTS - NEGOTIATION - CHANGES, ETC. - WRITTEN AMENDMENT REQUIREMENT - NONCOMPLIANCE - NOT PREJUDICIAL SUBSTANTIAL CHANGES IN SCOPE OF WORK PRIOR TO TERMINATION OF NEGOTIATIONS SHOULD HAVE BEEN ISSUED AS WRITTEN AMENDMENT TO RFP. HOWEVER, IT IS DIFFICULT TO SEE PREJUDICE TO SOLE OFFEROR WHERE IT WAS ON ACTUAL NOTICE OF CHANGES IN REQUIREMENTS. FPR 1-3.805-1(D) DID NOT REQUIRE AGENCY TO AMEND RFP AND SEEK REVISED PROPOSAL BASED ON FURTHER CHANGES IN REQUIREMENTS AFTER NEGOTIATIONS WITH SOLE OFFEROR HAD BEEN TERMINATED AND GOVERNMENT HAD DECIDED TO PERFORM WORK IN-HOUSE. FEDERAL PROCUREMENT REGULATIONS - APPLICABILITY - SERVICES "PROCURED" FROM POSTAL SERVICE GAO DOES NOT AGREE WITH PLAINTIFF'S CONTENTIONS IN U.S. DISTRICT COURT LITIGATION THAT COMMERCE DEPARTMENT, IN CANCELING RFP, VIOLATED NUMEROUS PROVISIONS OF FEDERAL PROCUREMENT REGULATIONS (41 C.F.R. 1-1.000 ET SEQ. (1978)) INCLUDING SECTIONS 1-1.009-1(E), 1-1.1001, 1-2.404-1, 1-3.210, 1-3.804, 1-3.805-1(B), AND 1-3.802C)(2).

IN THE MATTER OF UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, APRIL 26, 1979: (TABLE OMITTED)

I. INTRODUCTION

IN AN ORDER DATED MARCH 20, 1979, IN THE CASE OF ADVO-SYSTEM, INC. V. JUANITA M. KREPS, ET AL., CIVIL ACTION NO. 79-0257, WHICH PRELIMINARILY ENJOINED THE DEPARTMENT OF COMMERCE (DOC) FROM PROCEEDING WITH CERTAIN WORK PERTAINING TO THE 1980 CENSUS, THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA (GESELL, J.) REQUESTED OUR OFFICE--

* * * TO INQUIRE INTO AND DETERMINE WHETHER OR NOT THE DEPARTMENT OF COMMERCE, THROUGH THE BUREAU OF THE CENSUS, HAS COMPLIED WITH ALL APPLICABLE STATUTES AND REGULATIONS IN ITS REJECTION OF PLAINTIFF'S PROPOSAL GOVERNING AN APOC (ADVANCED POST OFFICE CHECK) FOR THE 1980 CENSUS AND IN ITS SUBSEQUENT DECISION TO PERFORM ALL OR PART OF THE APOC ITSELF OR IN COMBINATION WITH THE UNITED STATES POSTAL SERVICE.

THE PLAINTIFF'S JANUARY 25, 1979, COMPLAINT HAD ESSENTIALLY SOUGHT DECLARATORY AND INJUNCTIVE RELIEF IN 2 AREAS-- THE FIRST, RELATING TO DOC'S ALLEGEDLY UNLAWFUL CANCELLATION OF A REQUEST FOR PROPOSALS (RFP) FOR APOC AND DETERMINATION TO PROCEED WITH THE WORK WITHIN THE GOVERNMENT, AND SECOND RELATING TO DOC'S ALLEGED MISAPPROPRIATION OF PROPRIETARY INFORMATION WHICH ADVO HAD REVEALED IN ITS PROPOSAL OR DURING DISCUSSIONS. IT APPEARS THAT THE ULTIMATE RELIEF SOUGHT AS TO THE FIRST OF THESE AREAS IS A PERMANENT INJUNCTION COMPELLING DOC TO RETRACT ITS CANCELLATION OF THE RFP AND RESUME NEGOTIATIONS IN GOOD FAITH WITH THE PLAINTIFF.

THE PRELIMINARY INJUNCTION WAS GRANTED ONLY AS TO THE FIRST AREA, AND, AS WE UNDERSTAND THE COURT'S ORDER AND ACCOMPANYING MEMORANDUM OPINION, IT IS ONLY AS TO THIS AREA THAT OUR VIEWS ARE REQUESTED. THIS MATTER IS NOT THE SUBJECT OF ANY PROTEST OR OTHER CASE BEFORE OUR OFFICE. THIS OPINION HAS BEEN PREPARED SOLELY IN RESPONSE TO THE COURT'S REQUEST.

OUR OPINION IS BASED UPON THE PLEADINGS AND SUPPORTING PAPERS FILED WITH THE COURT AS WELL AS THE FOLLOWING SUBMISSIONS: (1) A LETTER FROM DOC DATED MARCH 30, 1979, ACCOMPANIED BY A LEGAL MEMORANDUM AND COPIES OF SOME 31 SUPPORTING DOCUMENTS, AND A LETTER DATED APRIL 13, 1979, FROM DOC INCLUDING AN ADDITIONAL LEGAL MEMORANDUM, AND (2) LETTERS FROM ADVO'S COUNSEL DATED MARCH 28, 1979, WITH ENCLOSURES, APRIL 4, 1979, WITH ENCLOSURES INCLUDING A PARTIAL TRANSCRIPT OF THE HEARING BEFORE THE COURT ON MARCH 16, 1979, AND APRIL 23, 1979, WITH ENCLOSURES.

FINALLY, THE COURT'S OPINION STATES THAT THE ISSUES MUST BE RESOLVED WITH THE UPMOST DISPATCH AND DOC HAS URGED OUR OFFICE TO EXPEDITE OUR OPINION.

II. SCOPE OF REVIEW

ADVO HAS PRESENTED SEVERAL ARGUMENTS RELATING TO HOW OUR OFFICE SHOULD GO ABOUT FURNISHING A RESPONSE TO THE COURT. A SUMMARY OF THESE POINTS AND OUR COMMENTS ON EACH FOLLOW.

ADVO: THE COURT'S MEMORANDUM OPINION CLEARLY STATES THAT THE COURT'S KNOWLEDGE OF ONGOING GAO AUDIT WORK IN THIS AREA WAS ONE OF THE REASONS THIS MATTER WAS REFERRED TO GAO. THE COURT CLEARLY CONTEMPLATED THAT GAO'S REPORT WOULD CONSIST IN PART OF AN AUDIT FINDING. YET, AT AN INFORMAL CONFERENCE CALLED BY GAO ON MARCH 27, 1979, THE GAO ATTORNEY HANDLING THE CASE INDICATED THAT THE COURT'S REQUEST IS BEING HANDLED IN A MANNER SIMILAR TO A BID PROTEST AND AS AN ENTIRELY SEPARATE MATTER FROM ONGOING GAO AUDIT WORK. TO FOLLOW THIS APPROACH WOULD REPRESENT A FAILURE BY GAO TO DISCHARGE ITS FULL RESPONSIBILITIES UNDER THE DOCTRINE OF PRIMARY JURISDICTION.

COMMENT: AT THE MARCH 27, 1979, MEETING, WHICH INCIDENTALLY WAS ATTENDED BY A GAO AUDITOR FAMILIAR WITH THE APOC PROCUREMENT, EXCLUDED FROM OUR VIEW, WAS REQUESTING A LEGAL OPINION AND THAT WHATEVER ASSISTANCE OUR AUDITORS COULD PROVIDE TO OUR LEGAL STAFF IN THIS CONNECTION WAS PURELY AN INTERNAL GAO MATTER. WE SEE NOTHING IN THE COURT'S ORDER AND OPINION SUGGESTING THAT WE SHOULD KEEP ADVO INFORMED OF HOW WE GO ABOUT ARRIVING AT OUR RESPONSE TO THE COURT. NEITHER DO WE FIND ANY SPECIFIC INDICATION THAT THE COURT IS REQUESTING A GAO AUDIT "REPORT" OR "FINDING."

ADVO: AS A MATTER OF JUDICIAL-ADMINISTRATIVE COMITY UNDER THE DOCTRINE OF PRIMARY JURISDICTION, GAO SHOULD CAREFULLY CONSIDER THE PRELIMINARY FINDINGS AND CONCLUSIONS WHICH THE COURT REACHED IN ISSUING THE PRELIMINARY INJUNCTION.

COMMENT: IN 52 COMP.GEN. 198(1972) WE ADVISED THE COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT OF OUR INDEPENDENT VIEWS AND CONCLUSIONS ON A PROTEST NOTWITHSTANDING CERTAIN PRE-EXISTING FINDINGS AND CONCLUSIONS OF THE U.S. DISTRICT COURT IN THE SAME CASE. HOWEVER, THERE THE COURT OF APPEALS ORDER MADE IT PLAIN THAT THE DISTRICT COURT'S OPINION ON THE MERITS SHOULD NOT BE CONSIDERED BY OUR OFFICE. IN THE PRESENT CASE, WE AGREE WITH ADVO THAT THE COURT'S FINDINGS AND CONCLUSIONS SHOULD BE CAREFULLY CONSIDERED AND WE HAVE SO CONSIDERED THEM.

ADVO: THE COURT IS NOT ASKING GAO TO DETERMINE WHETHER DOC'S VIOLATION OF OMB CIRCULAR A-76 WOULD GIVE A DISAPPOINTED BIDDER OR OFFEROR A LEGAL CAUSE OF ACTION. RATHER, IT IS ASKING WHETHER DOC COMPLIED WITH THE CIRCULAR. IT IS ULTIMATELY UP TO THE COURT TO DECIDE THE LEGAL ISSUES.

COMMENT: THE COURT'S ORDER ASKS OUR OFFICE TO INQUIRE INTO AND DETERMINE WHETHER DOC HAS COMPLIED WITH ALL APPLICABLE STATUTES AND REGULATIONS. ADDITION, ADVO BASES ITS CASE IN LARGE MEASURE ON DOC'S ALLEGED VIOLATION OF THE CIRCULAR. WE SEE NO SPECIFIC INDICATION IN THE COURT'S ORDER AND MEMORANDUM OPINION THAT OUR INQUIRY IS TO EXCLUDE LEGAL QUESTIONS RELATED TO THIS POINT.

III. BACKGROUND

ONE OF THE MAJOR DIFFICULTIES IN THIS CASE IS THAT THE VARIOUS NEGOTIATION SESSIONS BETWEEN DOC AND ADVO APPARENTLY WERE NOT TRANSCRIBED AND THERE IS NOT MUCH IN THE WAY OF DETAILED CONTEMPORANEOUS MEMORANDA OR NOTES MEMORIALIZING WHAT TRANSPIRED IN THESE MEETINGS. THE CONTROVERSY THUS HAS BEEN REDUCED TO A DISAGREEMENT BETWEEN THE PARTIES WITH EACH SIDE RELYING TO A LARGE EXTENT ON AFTER-THE-FACT RECOLLECTION OF WHAT WAS SAID OR DONE MONTHS EARLIER. WHILE IT COULD BE SAID THAT MANY OF THE FACTS ARE CONTROVERTED, IT MIGHT BE AS ACCURATE TO SAY THAT THE FACTS ARE SIMPLY UNCLEAR OR CONFUSED. IN THIS REGARD, ADVO CHARGES DOC WITH TAKING INCONSISTENT POSITIONS IN ITS VARIOUS SUBMISSIONS AND SEES DOC'S FAILURE TO ADEQUATELY SUBSTANTIATE CERTAIN FACTS-- PARTICULARLY ITS COST ESTIMATES -- AS CRITICAL TO THE OUTCOME OF THE CASE. TO SOME DEGREE, AT LEAST, THE COURT AGREED WITH ADVO'S VIEW IN ISSUING THE PRELIMINARY INJUNCTION.

IN CONTRAST, AFTER REVIEWING THE RECORD WE BELIEVE THE LEGAL ISSUES ARE OF OVERRIDING IMPORTANCE. ACCORDINGLY, WE THINK THAT FOR THE PURPOSES OF THIS OPINION, A VERY GENERAL DESCRIPTION OF THE FACTUAL SITUATION AND THE PARTIES' FACTUAL ALLEGATIONS IS SUFFICIENT.

RFP NO. 7-35030, ISSUED AUGUST 1, 1977, SOUGHT PROPOSALS FOR RESIDENTIAL MAILING LISTS (ABOUT 52 MILLION ADDRESSES) AND FOR OTHER WORK, DESCRIBED AS "(OPTIONAL) UPDATING ACTIVITIES, INCLUDING VERIFICATION OF LISTS WITH U.S. POSTAL SERVICE." THE LATTER WAS, OR EVOLVED INTO, THE APOC WORK IN CONTROVERSY HERE. THE OVERALL EFFORT PROCURED UNDER THE RFP IS IN SUPPORT OF DOC'S PLANS TO CONDUCT PART OF THE 1980 CENSUS BY MAILING QUESTIONNAIRES TO RESPONDENTS.

SEVERAL PROPOSALS WERE RECEIVED IN SEPTEMBER 1977. EXACTLY WHAT TRANSPIRED OVER THE NEXT YEAR IS NOT ENTIRELY CLEAR. ADVO ALLEGES A SUBSTANTIAL, UNWARRANTED DELAY BY DOC IN EVALUATING THE PROPOSALS. IN ANY EVENT, CONTRACTS FOR THE FIRST PART OF THE WORK WERE AWARDED IN OCTOBER 1978 TO ADVO AND TWO OTHER COMPANIES. IN THE MEANTIME, DOC HAD PROVIDED ADVO IN AUGUST 1978 WITH WHAT IT DESCRIBES AS A "BRIEFING PACKAGE"-- A DESCRIPTION OF THE APOC WORK. THIS APPARENTLY WAS NOT ISSUED IN THE FORM OF AN AMENDMENT TO THE RFP. ALSO, BY LETTER DATED SEPTEMBER 12, 1978, DOC TOLD ADVO THAT IT WAS THE ONLY OFFEROR INTERESTED IN AND QUALIFIED TO PERFORM THE APOC WORK. IN THIS REGARD, THE COURT'S MEMORANDUM OPINION DESCRIBES ADVO AS THE COUNTRY'S LARGEST BULK MAILER WHICH THROUGH ITS LONG EXPERIENCE HAS DEVELOPED A METHOD TO MAINTAIN AND UPDATE ITS NATIONAL ADDRESS LIST THROUGH THE USE OF POSTAL CARRIER ROUTES.

DOC STATES THAT ITS REPRESENTATIVES CONFERRED FREQUENTLY WITH ADVO OVER THE NEXT SEVERAL MONTHS ADVO SUBMITTED A PROPOSAL DATED DECEMBER 1, 1978, TO PERFORM THE APOC WORK.

ON DECEMBER 12, 1978, THERE WAS A MEETING BETWEEN THE PARTIES. THE FULL SCOPE OF WHAT WAS DISCUSSED IS NOT CLEAR. DOC INDICATES THAT, AS A RESULT OF THE MEETING, IT HAD INCREASED CONCERN ABOUT ADVO'S COST AND SCHEDULE FOR PERFORMING APOC. DOC ALSO INDICATES THAT AT THIS TIME IT WAS RECONSIDERING ITS APOC PLANS AND WAS REDUCING THE APOC WORKLOAD BY ABOUT 40 PERCENT. THE AGENCY STATES THAT ADVO WAS PROVIDED WITH A 4 PAGE "PRELIMINARY OUTLINE" OF THE REDUCED REQUIREMENTS ON DECEMBER 19, 1978. ADVO ADMITS THIS. THERE IS NO INDICATION THAT THIS DOCUMENT WAS ISSUED AS AN AMENDMENT TO THE RFP.

ALSO, AT ABOUT THIS TIME, DOC UNDERTOOK TO VISIT ADVO'S PLANT TO AUDIT COST DATA. HOWEVER, A DISPUTE DEVELOPED. ADVO MAINTAINED IN A LETTER FROM ITS COUNSEL DATED DECEMBER 22, 1978, THAT DOC WAS DEMANDING ACCESS TO UNRELATED COST INFORMATION RATHER THAN AUDITING THE COST DATA CONTAINED IN THE DECEMBER 1, 1978, PROPOSAL. THERE WAS A DELAY OF SEVERAL WEEKS BEFORE THE AUDIT WAS RESUMED ON OR ABOUT JANUARY 8, 1979.

ON JANUARY 11, 1979, THE PARTIES MET AGAIN. DOC ASSERTS THAT AT THIS TIME IT PRESENTED A COMPLETE OUTLINE OF THE REDUCED APOC REQUIREMENTS TO ADVO. IT DOES NOT APPEAR FROM THE RECORD THAT THIS WAS ISSUED IN THE FORM OF AN AMENDMENT TO THE RFP. ADVO CONTENDS IT WAS TOLD, FOR THE FIRST TIME, THAT IT WAS IN COMPETITION WITH THE CENSUS BUREAU TO PERFORM THE APOC WORK. ADVO EVIDENTLY MADE AN ORAL OFFER TO PERFORM THE REDUCED APOC WORK AT A FIGURE VARIOUSLY DESCRIBED AS AN ESTIMATED $6.3 TO $6.7 MILLION (DOC) OR A COST SLIGHTLY IN EXCESS OF $6 MILLION (ADVO). DOC STATES THAT ADVO WAS TOLD ITS COST WAS CONSIDERED BY DOC TO BE HIGH OR TOO HIGH.

THERE IS A DISPUTE AS TO WHO TERMINATED THE MEETING AND HOW. IN GENERAL, ADVO MAINTAINS THAT DOC REFUSED TO NEGOTIATE IN GOOD FAITH. DOC CONTENDS ADVO TERMINATED THE MEETING. ALSO, DOC STATES THAT ON JANUARY 11, 1979, IT TERMINATED ITS AUDIT AT ADVO'S PLANT PRIOR TO ITS COMPLETION.

ON JANUARY 12, 1979, DOC APPARENTLY ADVISED ADVO IN A TELEPHONE CALL THAT DOC ESTIMATED IT COULD DO THE APOC WORK IN-HOUSE FOR ABOUT $5 MILLION. ADVO ASSERTS IT WAS TOLD THAT, UNLESS IT AGREED TO PERFORM THE WORK FOR $5 MILLION, DOC WOULD TERMINATE NEGOTIATIONS. ADVO STATES IT TRIED TO ASCERTAIN WHAT THE $5 MILLION ESTIMATE WAS COMPOSED OF AND TO ARRANGE ANOTHER MEETING, BUT THAT DOC WAS NOT RESPONSIVE TO THESE REQUESTS.

DOC FURTHER STATES THAT ON JANUARY 12, 1979, ADVO WAS TELEPHONICALLY REQUESTED BY THE CONTRACTING OFFICER TO SUBMIT ITS "BEST PRICE" BY 3 P.M. ON THAT DATE AND THAT ADVO DID NOT RESPOND BY 3 P.M. THERE ARE ALSO STATEMENTS IN THE RECORD BY DOC THAT ADVO FAILED TO FURNISH A REVISED OFFER WITHIN 2 DAYS OR WITHIN 1 WEEK AFTER THE JANUARY 11, 1979, MEETING. THERE IS NO INDICATION IN THE RECORD THAT DOC AT ANY TIME SENT ADVO A WRITTEN REQUEST FOR ITS "BEST AND FINAL" OFFER BY A SPECIFIC CUTOFF TIME. ADVO STATES THAT IT MADE AN ORAL, REVISED OFFER (F $5.9 MILLION IN A TELEPHONE CONVERSATION WITH A CENSUS BUREAU OFFICIAL ON JANUARY 14, 1979.

BY MESSAGE DATED JANUARY 18, 1979, THE CONTRACTING OFFICER ADVISED ADVO THAT NEGOTIATIONS WITH IT FOR THE APOC WORK WERE BEING TERMINATED IN ORDER THAT PREPARATIONS FOR GOVERNMENT PERFORMANCE OF THE EFFORT COULD PROCEED.

YET ANOTHER MEETING BETWEEN THE PARTIES WAS HELD ON JANUARY 22, 1979. ADVO STATES THE DOC AGAIN REFUSED TO EXPLAIN HOW ITS $5 MILLION ESTIMATE WAS CALCULATED.

BY LETTER DATED JANUARY 24, 1979, ADVO'S COUNSEL SUBMITTED WHAT HE DESCRIBED AS A "NEW AND FINAL OFFER" OF $5,792,315. THIS 3-PAGE LETTER DOES NOT MAKE ANY REFERENCE TO THE RFP OR STATE THAT IT IS BEING FURNISHED IN RESPONSE TO ANY DOC DOCUMENT. RATHER, IT MAKES REFERENCE TO PRIOR ADVO OFFERS AND CONVERSATIONS WITH DOC OFFICIALS. IT CONTAINS A VERY BRIEF DESCRIPTION OF SOME APOC WORK AND A DOLLAR FIGURE BROKEN DOWN INTO SEVERAL PRICE AND COST ELEMENTS AND PROFIT. THIS OFFER WAS REJECTED BY A DOC LETTER DATED FEBRUARY 1, 1979.

ALSO, IN JANUARY 1979, TWO BASIC DOCUMENTS WERE GENERATED BY DOC CONCERNING ITS ESTIMATE OF THE COST OF PERFORMING THE APOC WORK WITHIN THE GOVERNMENT-- A 1-PAGE MEMORANDUM DATED JANUARY 10, 1979, AND A 2 PAGE MEMORANDUM DATED JANUARY 30, 1979. EACH CONTAINS AN ESTIMATE BROKEN DOWN INTO CERTAIN ELEMENTS OF WORK.

ADVO'S POSITION IS ESSENTIALLY THAT THESE ESTIMATES ARE NOTHING MORE THAN NUMBERS ON A PIECE OF PAPER DERIVED FROM ORAL STATEMENTS OF VARIOUS INDIVIDUALS AND UNSUPPORTED BY ANY DOCUMENTARY EVIDENCE. A DEPOSITION OF THE INDIVIDUAL WHO COMPILED THE JANUARY 10 ESTIMATE DOES INDICATE THAT THERE WAS VERY LITTLE IN THE WAY OF DOCUMENTARY BACK-UP AT THAT TIME. DOC FOR ITS PART MAINTAINS THAT THE JANUARY 10 ESTIMATE WAS THE PRODUCT OF A SYSTEMATIC, COORDINATED EFFORT IN THAT VARIOUS OPERATING AREAS WITHIN THE CENSUS BUREAU WHICH WOULD BE RESPONSIBLE FOR PERFORMING THE APOC WORK WERE REQUIRED TO SUBMIT COST FIGURES TO A CENTRAL POINT, I.E., THE INDIVIDUAL WHO ASSEMBLED THEM INTO THE ESTIMATE. DOC ALSO POINTS OUT THAT THE JANUARY 10 ESTIMATE WAS BASED ON THE SAME REDUCED REQUIREMENTS WHICH WERE DISCUSSED WITH ADVO AT THE JANUARY 11, 1979, MEETING. IN ADDITION TO CHALLENGING SPECIFIC COST ELEMENTS, ADVO ATTACKS THE JANUARY 10 AND JANUARY 30 ESTIMATES AS BEING INCONSISTENT IN THAT BOTH ARRIVE AT TOTALS OF ABOUT $5 MILLION WHEREAS (ADVO CONTENDS) THE LATTER WAS BASED ON A FURTHER REDUCTION IN THE REQUIREMENTS REFLECTED IN A JANUARY 29, 1979, SCENARIO WHICH LENGTHENED THE WORK SCHEDULE. ADVO STATES IT CAN PERFORM THE WORK PER THIS SCENARIO FOR LESS THAN $5 MILLION. DOC DOES NOT DISPUTE THE BASIS OF THE JANUARY 30 ESTIMATE BUT DOES DISPUTE ADVO'S CONTENTION THAT IT CAN PERFORM THE WORK FOR LESS THAN $5 MILLION.

ALSO, ADVO HAS CALLED ATTENTION TO AN AUDIT REPORT BY OUR OFFICE (B-78395, NOVEMBER 9, 1978, GGD-79-7) WHICH WAS CRITICAL OF THE CENSUS BUREAU'S PLANNING FOR THE 1980 CENSUS IN CERTAIN RESPECTS, SUCH AS BUDGETING FOR CERTAIN WORK BASED UPON INACCURATE OR INADEQUATE DATA.

FINALLY, THERE IS ALSO A DISPUTE OVER THE URGENCY OF THE PROCUREMENT. DOC MAINTAINS, ESSENTIALLY, THAT IT IS OPERATING UNDER A TIGHT SCHEDULE IN TRYING TO CONDUCT THE 1980 CENSUS AND THAT THE APOC WORK IS INTERRELATED WITH THE SCHEDULE OF OTHER NECESSARY OPERATIONS AND PROCEDURES. IN AN APRIL 11, 1979, AFFIDAVIT, THE ACTING DIRECTOR OF THE CENSUS BUREAU STATES THAT THERE IS A GRAVE RISK INHERENT IN ANY FURTHER DELAY IN IMPLEMENTING THE APOC. ADVO QUESTIONS DOC'S ASSERTION OF URGENCY CONTENDING THAT THE AGENCY HAS MADE NO SHOWING WHY THE SCHEDULING OF VARIOUS OPERATIONS CANNOT BE RELAXED. IN ADDITION, THE PLAINTIFF MAINTAINS THAT AS OF JANUARY 1979 URGENCY COULD NOT HAVE BEEN A VALID BASIS FOR CANCELING THE RFP SINCE THE AGENCY WAS AT THAT TIME RELAXING THE APOC SCHEDULE BY SEVERAL MONTHS. ADVO ALSO CLAIMS THAT, WHILE THE AGENCY NOW ASSERTS URGENCY, IT HAS NOT PREVIOUSLY MADE THIS ARGUMENT BEFORE THE COURT.

IV. CANCELLATION OF AN RFP-- GENERAL PRINCIPLES

THE GENERAL STATUTORY REQUIREMENTS FOR PROCUREMENTS CONDUCTED BY EXECUTIVE AGENCIES ARE SET FORTH IN TITLE III OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 251 ET SEQ. (1976). 41 U.S.C. 252(C) DESCRIBES THE CIRCUMSTANCES IN WHICH CONTRACTS MAY BE NEGOTIATED AND 41 U.S.C. 254 DESCRIBES CERTAIN OTHER REQUIREMENTS PERTAINING TO NEGOTIATED CONTRACTS. HOWEVER, THE STATUTE DOES NOT ADDRESS THE CIRCUMSTANCES IN WHICH A SOLICITATION IN A NEGOTIATED PROCUREMENT CAN OR SHOULD BE CANCELED. SIMILARLY, THE FEDERAL PROCUREMENT REGULATIONS (FPR), WHICH IMPLEMENT THE PROCUREMENT PROVISIONS OF THE 1949 ACT, PROVIDE VIRTUALLY NO SPECIFIC GUIDANCE ON THE SUBJECT OF CANCELING AN RFP. (ALL REFERENCES TO THE FPR IN THIS OPINION ARE TO THE PROVISIONS CONTAINED IN 41 C.F.R. 1-1.000 ET SEQ. (1978) EXCEPT AS OTHERWISE NOTED.)

THE LAW CONCERNING CANCELING RFP'S THUS CONSISTS OF CASE LAW. GENERAL, OUR OFFICE HAS SAID THAT WE WILL NOT OBJECT TO AN AGENCY'S DECISION TO CANCEL AN RFP UNLESS THE PROTESTER SHOWS THAT THE DECISION, IN LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR PROCUREMENT, CLEARLY LACKED A REASONABLE BASIS. SEE FEDERAL LEASING, INC., ET AL., 54 COMP.GEN. 872(1975), 75-2 CPD 236; SEMICONDUCTOR EQUIPMENT CORPORATION, B-187159, FEBRUARY 18, 1977, 77-1 CPD 120, AFFIRMED MAY 4, 1977, 77-1 CPD 301. THE UNITED STATES COURT OF APPEALS FOR THE DISTRICT OF COLUMBIA CIRCUIT HAS HELD THAT THE CANCELLATION OF AN RFP IS OBJECTIONABLE IF IT IS FOUND TO BE "IRRATIONAL." AIR TERMINAL SERVICES, INC. V. DEPARTMENT OF TRANSPORTATION, 515 F.2D 1014(1975).

V. PLAINTIFF'S CONTENTIONS AND GAO COMMENTS

THE PLAINTIFF HAS PRESENTED NUMEROUS CONTENTIONS OF ERRORS ON THE PART OF DOC BUTTRESSED BY SCORES OF CITATIONS TO WHAT IT SEES AS THE APPLICABLE LAW AND PRECEDENT. WHILE WE HAVE CONSIDERED THE ENTIRE RECORD, WE BELIEVE THE FOLLOWING DISCUSSION-- CONSISTING OF SUMMARIES OF THE PLAINTIFF'S KEY CONTENTIONS AND OUR COMMENTS ON EACH-- IS SUFFICIENT.

ADVO: THE ECONOMY ACT OF 1932, JUNE 30, 1932, 47 STAT. 382, IMPLICITLY REQUIRED DOC TO PERFORM A COMPARATIVE ANALYSIS OF THE COSTS OF THE ADVO PROPOSAL VERSUS THE COSTS OF PERFORMING THE WORK WITHIN THE GOVERNMENT.

COMMENT: SECTION 601 OF THE ECONOMY ACT OF 1932, 31 U.S.C. 686(A)(1976), STATES ESSENTIALLY THAT AN EXECUTIVE DEPARTMENT OR ANY BUREAU OR OFFICE THEREOF, MAY PLACE ORDERS FOR CERTAIN SUPPLIES OR SERVICES WITH ANY OTHER SUCH ENTITY IF VARIOUS CONDITIONS ARE SATISFIED AND PROVIDED, "THAT IF SUCH WORK OR SERVICES CAN BE AS CONVENIENTLY OR MORE CHEAPLY PERFORMED BY PRIVATE AGENCIES SUCH WORK SHALL BE LET BY COMPETITIVE BIDS TO SUCH PRIVATE AGENCIES." SECTION 601 COVERS BOTH THE INTER- AND INTRA- DEPARTMENTAL FURNISHING OF WORK OR SERVICES ON A REIMBURSABLE BASIS WHEN NOT OTHERWISE SPECIFICALLY AUTHORIZED BY STATUTE. SEE GENERALLY WASHINGTON NATIONAL AIRPORT, ET AL., 57 COMP.GEN. 674(1978). HAS NO APPLICABILITY TO THE PRESENT CASE. AS FAR AS PERFORMANCE OF WORK WITHIN DOC IS CONCERNED, THERE IS NO INDICATION IN THE RECORD THAT THIS IS BEING ACCOMPLISHED BY INTRA DEPARTMENTAL ORDER ON A COST-REIMBURSABLE BASIS. (IN OTHER WORDS, THE CENSUS BUREAU HAS NOT ISSUED A PURCHASE ORDER TO SOME OTHER BUREAU OR OFFICE WITHIN DOC FOR THE PERFORMANCE OF THE APOC WORK IN LIEU OF PROCURING THE SAME WORK FROM THE PRIVATE SECTOR BY COMPETITIVE BIDDING. DOC'S ATTEMPT TO CONDUCT A COMPETITIVE PROCUREMENT UNDER RFP 7- 35030 HAS SHOWN THAT THERE IS ONLY ONE INTERESTED PROSPECTIVE CONTRACTOR FOR THE APOC WORK-- ADVO. SUSTAINING ADVO'S POSITION BASED UPON THE SECTION 601 PROVISO WOULD NOT RESULT IN THE COMPETITION ENVISIONED BY THE STATUTE, BUT IN A DE FACTO SOLE-SOURCE AWARD.

FURTHER, INSOFAR AS ANY AGREEMENT BETWEEN DOC AND THE POSTAL SERVICE IS CONCERNED, IT MUST BE NOTED THAT SECTION 601 DOES NOT APPLY TO THE POSTAL SERVICE. SEE 39 U.S.C. 410(1976), WHICH PROVIDES IN PART THAT " * * * NO FEDERAL LAW DEALING WITH PUBLIC OR FEDERAL CONTRACTS, PROPERTY, WORKS, OFFICERS, EMPLOYEES, BUDGETS, OR FUNDS * * * SHALL APPLY TO THE EXERCISE OF THE POWERS OF THE POSTAL SERVICE." 39 U.S.C. 410 INCLUDES CERTAIN EXCEPTIONS TO THIS BROAD EXEMPTION BUT SECTION 601 OF THE ECONOMY ACT IS NOT AMONG THEM.

FURTHER, 39 U.S.C. 411(1976) PROVIDES:

EXECUTIVE AGENCIES * * * ARE AUTHORIZED TO FURNISH PROPERTY, BOTH REAL AND PERSONAL, AND PERSONAL AND NONPERSONAL SERVICES TO THE POSTAL SERVICE, AND THE POSTAL SERVICE IS AUTHORIZED TO FURNISH PROPERTY AND SERVICES TO THEM. THE FURNISHING OF PROPERTY AND SERVICES UNDER THIS SECTION SHALL BE UNDER SUCH TERMS AND CONDITIONS, INCLUDING REIMBURSABILITY, AS THE POSTAL SERVICE AND THE HEAD OF THE AGENCY CONCERNED SHALL DEEM APPROPRIATE.

THE STATUTORY LANGUAGE MAKES NO REFERENCE TO A REQUIREMENT FOR COMPARISON OF THE COSTS OF AN EXECUTIVE AGENCY-- POSTAL SERVICE AGREEMENT FOR THE FURNISHING OF PROPERTY OR SERVICES AND THE COSTS OF PROCURING SUCH PROPERTY OR SERVICES FROM THE PRIVATE SECTOR. IT APPEARS TO CONFER BROAD DISCRETION ON EXECUTIVE AGENCIES INSOFAR AS DETERMINING THE APPROPRIATENESS OF ENTERING INTO SUCH ARRANGEMENTS WITH THE POSTAL SERVICE IS CONCERNED.

FOR THE FOREGOING REASONS, WE SEE NO MERIT IN THE PLAINTIFF'S ARGUMENT THAT DOC IS VIOLATING 31 U.S.C. 686(A).

ADVO: FPR SEC. 1-2,404-1 GOVERNS THE CANCELLATION OF GOVERNMENT CONTRACT SOLICITATIONS. ALTHOUGH FPR SEC. 1-2.404-1 BY ITS TERMS ADDRESSES CANCELLATIONS OF INVITATIONS FOR BIDS, GAO DECISIONS RECOGNIZE THAT IT ALSO GOVERNS CANCELLATIONS OF NEGOTIATED PROCUREMENT SOLICITATIONS.

COMMENT: AS ADVO RECOGNIZES, THE LANGUAGE OF FPR SEC. 1-2.494-1 IS DIRECTED ONLY AT CANCELLATIONS OF SOLICITATIONS IN FORMALLY ADVERTISED PROCUREMENTS. OUR OFFICE HAS NOTED IN VARIOUS CASES THAT THE PRINCIPLES REFLECTED IN FPR SEC. 1-2.404-1 (AND THE CORRESPONDING PROVISION IN THE ARMED SERVICES PROCUREMENT REGULATION (ASPR)) MAY BE EQUALLY APPLICABLE TO CANCELLATIONS OF RFP'S. SEE, FOR EXAMPLE, CALIFORNIA STEVEDORE AND BALLAST COMPANY, B-186873, JANUARY 24, 1977, 77-1 CPD 47 (RFP CANCELLATION CONSIDERED IN LIGHT OF ASPR SEC. 2 404.1(1975) PRINCIPLE THAT IFB CAN BE CANCELLED WHERE ALL BIDS ARE AT UNREASONABLE PRICES) AND MICROFILM COMMUNICATION SYSTEMS, INCORPORATED, B-180465, SEPTEMBER 4, 1974, 74-2 CPD 140 (FPR SEC. 1-2.404-1(B)(2) PRINCIPLE THAT IFB CAN BE CANCELED WHERE SUPPLIES OR SERVICES ARE NO LONGER REQUIRED APPLIED TO RFP CANCELLATION).

ADVO'S ASSERTION, HOWEVER, THAT FPR SEC. 1-2.404-1 "GOVERNS" THE CANCELLATION OF RFP'S IS AN OVERSTATEMENT. AS ALREADY NOTED, THE FPR'S ARE SILENT OF THE SPECIFIC SUBJECT OF CANCELING RFP'S. THE PROPRIETY OF SUCH CANCELLATIONS IS REVIEWED ON A CASE-BY-CASE BASIS. WE HAVE INDICATED THAT THE POSSIBLE JUSTIFICATIONS FOR CANCELING AN RFP ARE NOT NECESSARILY LIMITED TO THE GROUNDS STATED IN FPR SEC 1-2.404-1 OR ASPR SEC 2-404.1 SEE FEDERAL LEASING, INC., 54 COMP.GEN.,SUPRA, AT 377.

ADVO: FPR SEC. 1-2.404-1 AND NUMEROUS GAO DECISIONS MAKE CLEAR THAT THE GOVERNMENT MUST ESTABLISH A "COMPELLING REASON" IN ORDER TO JUSTIFY CANCELING A SOLICITATION.

COMMENT: THE GOVERNMENT IS REQUIRED TO HAVE A COMPELLING REASON TO REJECT ALL BIDS IN A FORMALLY ADVERTISED PROCUREMENT BASICALLY BECAUSE OF THE EVILS INHERENT IN THE PUBLIC EXPOSURE OF BIDDERS PRICES AND THE RESULTANT CREATION OF AN AUCTION ATMOSPHERE IN A RESOLICITATION FOR THE SAME OR SIMILAR REQUIREMENTS. SEE GENERALLY 52 COMP.GEN. 285(1972).

IN A NEGOTIATED PROCUREMENT THERE IS NORMALLY NO PUBLIC DISCLOSURE OF THE PROPOSALS WHICH ARE RECEIVED. IN ADDITION, IN THE PRESENT CASE THE GOVERNMENT PLANS TO PERFORM THE WORK IN-HOUSE AND THERE IS NO RESOLICITATION IN WHICH ADVO MIGHT BE DISADVANTAGED VIS-A-VIS OTHER COMPETITORS. ADVO'S REPEATED CITATION, THEREFORE, OF CASES APPLYING THE "COMPELLING REASON" STANDARD TO CANCELLATIONS OF IFB'S IS NOT GERMANE TO THE INQUIRY WHETHER DOC ACTED UNREASONABLY OR IRRATIONALLY IN CANCELING THE PRESENT RFP.

ADVO: FPR SECTIONS 1-2.404-1(B), 1-3.302(C) AND 1-3.305 REQUIRED DOC, PRIOR TO CANCELING THE RFP, TO MAKE A WRITTEN DETERMINATION SETTING OUT THE FACTS AND CIRCUMSTANCES JUSTIFYING THE DECISION TO CANCEL. NO SUCH WRITTEN DETERMINATION WAS MADE.

COMMENT: AS ALREADY DISCUSSED, FPR SEC. 1-2.404-1 APPLIES BY ITS TERMS ONLY TO CANCELLATIONS OF IFB'S. FPR SEC. 1-3.302 STATES IN PERTINENT PART:

* * * (THE FOLLOWING DETERMINATIONS IN CONNECTION WITH NEGOTIATION OF CONTRACTS ARE REQUIRED TO BE MADE IN WRITING SUPPORTED BY WRITTEN FINDINGS AS SPECIFIED IN SEC. 1-3.305:

(C) THE DETERMINATION REQUIRED BY SECTION 303(B) OF THE ACT (41 U.S.C. 253(B)) THAT IS IN THE PUBLIC INTEREST TO REJECT ALL BIDS; * * *

WE BELIEVE FPR SEC. 1-3.214. THIS HAS NOTHING TO DO WITH THE SITUATION IN THE PRESENT CASE WHERE A NEGOTIATED PROCUREMENT WAS INITIATED AND THE AGENCY ULTIMATELY DECIDED TO TERMINATE NEGOTIATIONS WITH THE SOLE REMAINING OFFEROR AND CANCEL THE RFP. WE SEE NO VIOLATION BY DOC OF THE AFOREMENTIONED SECTIONS OF THE FPR'S IN THE PRESENT CASE.

ADVO: AN AGENCY'S FAILURE TO COMPLY WITH OMB CIRCULAR A-76 IS AN INDEPENDENT BASIS FOR JUDICIAL REVIEW WHEN RAILED BY A DISAPPOINTED BIDDER.

COMMENT: OMB CIRCULAR NO. A-76, ISSUED MARCH 3, 1966, REVISED AUGUST 30, 1967, OCTOBER 18, 1976, AND JUNE 13, 1977, DESCRIBES ITSELF AS CONTAINING:

* * * BASIC POLICIES TO BE APPLIED BY EXECUTIVE AGENCIES IN DETERMINING WHETHER COMMERCIAL AND INDUSTRIAL PRODUCTS AND SERVICES USED BY THE GOVERNMENT ARE TO BE PROVIDED BY PRIVATE SUPPLIERS OR BY THE GOVERNMENT ITSELF * * *

BY WAY OF BACKGROUND, OUR OFFICE'S POSITION ON PROTESTS ALLEGING VIOLATIONS OF THE CIRCULAR WAS STATED AS FOLLOWS IN B-161862, SEPTEMBER 14, 1967:

THE QUESTION WHETHER A DEPARTMENT OR ESTABLISHMENT OF THE EXECUTIVE BRANCH OF THE GOVERNMENT MAY PROPERLY PERFORM "IN HOUSE" THE TYPE OF ? OPERATIONS HERE CONCERNED, OR SHOULD CONTRACT WITH COMMERCIAL COMPANIES FOR SUCH SERVICES, IS NOT COVERED BY ANY SPECIFIC STATUTE OF WHICH WE ARE AWARE, OR REGULATION OR INSTRUCTION ISSUED PURSUANT THERETO, WHICH WOULD PLACE THE RESOLUTION OF SUCH QUESTIONS WITHIN THE DECISION FUNCTIONS OF THE GENERAL ACCOUNTING OFFICE. THE DIRECTIVES INCORPORATED IN BUREAU OF THE BUDGET CIRCULAR NO. A-76, ARE MATTERS OF EXECUTIVE POLICY, PRESCRIBED BY THE BUREAU OF THE BUDGET AS THE AGENT OF THE PRESIDENT DESIGNATED BY EXECUTIVE ORDER NO. 8248 OF SEPTEMBER 8, 1939, TO ASSIST THE PRESIDENT IN THE FORMULATION AND ADMINISTRATION OF THE FISCAL PROGRAM OF THE GOVERNMENT AND TO ADVISE THE EXECUTIVE DEPARTMENTS AND AGENCIES IN THE AREAS OF ADMINISTRATIVE ORGANIZATION AND PRACTICE. SEE 43 COMP.GEN. 217; ALSO 42 COMP.GEN. 640, WHEREIN WE CONCLUDED, IN REFERENCE TO THE PREDECESSOR BUREAU OF THE BUDGET BULLETIN NO. 60-2, AS FOLLOWS:

"THUS, THE PROPRIETY OF A DETERMINATION BY AN EXECUTIVE AGENCY AS TO WHETHER SERVICES OR PRODUCTS SHOULD BE OBTAINED UNDER CONTRACT WITH PRIVATE ENTERPRISE OR THROUGH THE USE OF GOVERNMENT-OWNED FACILITIES IS NOT A MATTER PERMITTING OF A RULING IN TERMS OF LEGAL RIGHTS AND RESPONSIBILITIES. WE THEREFORE FIND NO LEGAL BASIS FOR OBJECTION TO THE PROPOSED ADMINISTRATIVE ACTION, AND WE MUST DECLINE TO RULE UPON THE POLICY QUESTION INVOLVED, WHICH WE DEEM TO BE A MATTER FOR RESOLUTION WITHIN THE EXECUTIVE BRANCH."

TO OUR KNOWLEDGE, THE FEDERAL COURTS HAVE NOT EXPLICITLY HELD THAT OMB CIRCULAR A-76 IS ENFORCEABLE IN A PRIVATE CIVIL ACTION FILED BY A DISAPPOINTED BIDDER OR OFFEROR. NONE OF THE AUTHORITIES CITED BY ADVO DIRECTLY SO HOLD. AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES V. DUNN, 561 F.2D 1310 (9TH. CIR., 1977) AND AMERICAN FEDERATION OF GOVERNMENT EMPLOYEES V. HOFFMANN, 427 F.SUPP. 1048 (N.D. ALA., 1976) WERE UNSUCCESSFUL SUITS BY LABOR ORGANIZATIONS ATTEMPTING TO PREVENT CONTRACTING OUT OF SERVICES. IN DUNN, THE COURT POINTED OUT THAT, UNLIKE A DISAPPOINTED BIDDER, THE APPELLANTS WERE NOT WITHIN THE ZONE OF INTEREST PROTECTED BY THE SERVICE CONTRACT ACT AND THEREFORE LACKED STANDING. HOFFMANN, THE COURT POINTED OUT THAT CASES INVOLVING COMPLAINTS BY DISAPPOINTED BIDDERS CONCERNING THE BIDDING AND AWARD PROCESS PRESCRIBED BY ASPR WERE AN EXCEPTION TO THE NORMAL PROSCRIPTION AGAINST JUDICIAL INTERFERENCE IN THE PROCUREMENT PROCESS, BUT THAT THE FACTS OF THE PLAINTIFF'S CASE DID NOT INVOLVE DISAPPOINTED BIDDERS OR ANY FAIRLY COMPARABLE SITUATION. IN ADDITION, ADVO CITES THE APPARENTLY UNREPORTED OPINION IN J.E.T.S. WAESCHERIE-GMBH V. STETSON, CIVIL ACTION NO. 77-1901 (D.D.C., NOVEMBER 11, 1977), AS STATING MERELY THAT, IN THE EVENT OF A FAILURE TO FOLLOW "OMB AND DOD REGULATIONS" BY THE AIR FORCE IN THE FUTURE, THE COURT WOULD HAVE JURISDICTION TO ENJOIN THE PROVIDING OF MESS ATTENDANT SERVICES IN-HOUSE. IT APPEARS TO US THAT THESE PRECEDENTS OFFER ONLY VERY LIMITED SUPPORT-- EITHER BY IMPLICATION OR POSSIBLY IN DICTA-- FOR THE PROPOSITION THAT A DISAPPOINTED BIDDER OR OFFEROR HAS A CAUSE OF ACTION FOR VIOLATION OF THE CIRCULAR.

ADVO HAS ARGUED THAT THE CIRCULAR MUST BE READ IN CONJUNCTION WITH THE ECONOMY ACT, SUPRA, AND THE OFFICE OF FEDERAL PROCUREMENT POLICY (OFPP) ACT, 41 U.S.C. 401(1976). AS DISCUSSED SUPRA, THE ECONOMY ACT IS NOT APPLICABLE TO THE PRESENT MATTER. AS FAR AS THE OFPP ACT IS CONCERNED, THE 1966 CIRCULAR AND THE FIRST REVISION IN 1967 WERE ISSUED PRIOR TO THE EXISTENCE OF OFPP. THE OFPP ACT WAS ENACTED IN 1974 AND AUTHORIZES THE OFPP ADMINISTRATOR TO PRESCRIBE POLICIES, REGULATIONS, PROCEDURES, AND FORMS IN ACCORDANCE WITH APPLICABLE LAW WHICH SHALL BE FOLLOWED BY EXECUTIVE AGENCIES IN THEIR PROCUREMENT OF CERTAIN GOODS AND SERVICES. SEE 41 U.S.C. 405. THE 1976 AND 1977 REVISIONS TO THE CIRCULAR FOLLOWED, WHICH ESSENTIALLY DEALT WITH RETIREMENT COSTS OF FEDERAL EMPLOYEES AS A FACTOR IN COMPARATIVE COST ANALYSES. TO OUR KNOWLEDGE, THE ADMINISTRATOR HAS NEVER ISSUED THE 1966 CIRCULAR, AS REVISED, AS A BINDING POLICY OR REGULATION UNDER THE AUTHORITY OF 41 U.S.C. 405.

WE NOTE THAT ON MARCH 29, 1979, A COMPLETE REVISION OF THE CIRCULAR, REPLACING THE 1966 CIRCULAR AND ALL SUBSEQUENT AMENDMENTS, WAS ANNOUNCED BY OFPP AND OMB AND WILL PRESUMABLY BECOME EFFECTIVE IN THE NEAR FUTURE. IT IS UNNECESSARY TO CONSIDER THE LEGAL STATUS OF THE NEW CIRCULAR AS THE EVENTS AT ISSUE HERE PRECEDED IT. HOWEVER, AS A MATTER OF INFORMATION SECTION 11 OF THE NEW CIRCULAR PROVIDES A PROCEDURE FOR APPEALING DETERMINATIONS MADE BY AGENCIES UNDER IT, AND STATES IN PART: "THIS PROCEDURE DOES NOT AUTHORIZE AN APPEAL OUTSIDE THE AGENCY OR A JUDICIAL REVIEW."

IN OUR OPINION, THE EDITION OF THE CIRCULAR IN QUESTION HERE DOES NOT CREATE A PRIVATE RIGHT OF ACTION IN A DISAPPOINTED BIDDER OR OFFEROR. INITIALLY, OUR OFFICE'S VIEW, AS INDICATED SUPRA, HAS CONSISTENTLY BEEN THAT EXECUTIVE ORDERS OR DIRECTIVES WHICH ARE NOT SPECIFICALLY AUTHORIZED BY STATUTE AND WHICH ARE ESSENTIALLY DIRECTED AT INSURING THE EFFICIENT OPERATION OF THE EXECUTIVE BRANCH ARE MATTERS OF EXECUTIVE POLICY AND DO NOT HAVE THE FORCE AND EFFECT OF LAW. IN ACCORD WITH THIS VIEW IS INDEPENDENT MEAT PACKERS ASS'N. V. BUTZ, 526 F.2D 228 (8TH CIR., 1975), CERT. DENIED, 424 U.S. 966(1976), WHERE IT WAS HELD THAT A DISTRICT COURT ERRED IN HOLDING THAT THE SECRETARY OF AGRICULTURE HAD AN EXECUTIVE ORDER WHICH THE COURT FOUND WAS NOT AUTHORIZED BY STATUTE BUT RATHER WAS INTENDED PRIMARILY AS A MANAGERIAL TOOL TO IMPLEMENT THE PRESIDENT'S PERSONAL ECONOMIC POLICIES.

A SOMEWHAT SIMILAR RESULT OCCURRED IN MANHATTAN-BRONX POSTAL UNION V. GRONOUSKI, 350 F.2D 451 (D.C. CIR., 1965), CERT. DENIED, 382 U.S. 978(1966), WHERE POSTAL EMPLOYEES TRIED UNSUCCESSFULLY TO ENFORCE AN EXECUTIVE ORDER NOT ISSUED PURSUANT TO STATUTE WHICH DIRECTED AGENCIES TO RECOGNIZE EMPLOYEE ORGANIZATIONS SELECTED BY A MAJORITY OF EMPLOYEES. THE COURT HELD THAT THE EXECUTIVE ORDER REPRESENTED A FORMULATION OF BROAD POLICY WHICH IMPOSED NO HARD AND FAST DIRECTIVES ON THE MANY DIFFERENT KINDS OF FEDERAL EMPLOYEES, FOUND NO VIOLATION OF THE ORDER IN THE WAY THE POSTMASTER GENERAL APPLIED IT IN THE PARTICULAR CIRCUMSTANCES INVOLVED, AND SAID THAT, EVEN IF THE POSTMASTER GENERAL'S ACTION WAS NOT IN COMPLIANCE WITH THE ORDER, IT DID NOT FOLLOW THAT THE APPELLANTS COULD OBTAIN JUDICIAL INTERVENTION.

MOREOVER, IN THE PRESENT CASE, EVEN IF OMB CIRCULAR A-76 HAD THE FORCE AND EFFECT OF LAW, IT DOES NOT EXPRESSLY GRANT A PRIVATE RIGHT OF ACTION AND THE INFERENCE OF SUCH A RIGHT IS NOT UNDERTAKEN LIGHTLY. ACEVEDO V. NASSAU COUNTY, NEW YORK, 500 F.2D 1078(2D, CIR., 1974). THE CIRCULAR CONTAINS SEEMINGLY MANDATORY PROVISIONS AS TO WHAT WORK IN HOUSE OR CONTRACT OUT AND GOES INTO SOME DETAIL AS TO HOW COST COMPARISONS ARE TO BE CONDUCTED. NOTWITHSTANDING THIS OSTENSIBLY PRECISE AND BINDING QUALITY, THE CIRCULAR, LIKE THE EXECUTIVE ORDER CONSIDERED IN MANHATTAN- BRONX POSTAL UNION, IS OBVIOUSLY A BROAD POLICY FORMULATION, CONTAINING CONSIDERABLE PRECATORY LANGUAGE AND LEAVING A RANGE OF DISCRETION TO INDIVIDUAL AGENCIES TO HOW ITS PROVISIONS SHOULD BE APPLIED IN ANY PARTICULAR SITUATION. FOR EXAMPLE, IN THE CIRCULAR'S VARIOUS DIRECTIONS TO EXECUTIVE AGENCIES, THE WORD "SHOULD" APPEARS IN EXCESS OF 40 TIMES AND THE WORD "MAY" IN EXCESS OF 10 TIMES.

IT IS OUR VIEW THAT TO HOLD THE CIRCULAR GIVES A DISAPPOINTED OFFEROR AN IMPLIED RIGHT OF ACTION WOULD BE A HIGHLY SIGNIFICANT DEVELOPMENT, THE CONSEQUENCES OF WHICH CANNOT BE ACCURATELY PREDICTED. SINCE THE CIRCULAR'S PREFERENCE IS FOR CONTRACTING OUT AS OPPOSED TO IN HOUSE PERFORMANCE, NUMEROUS SUITS BY PRIVATE PARTIES ASSERTING THAT VARIOUS IN- HOUSE GOVERNMENT ACTIVITIES SHOULD BE CONTRACTED OUT ARE CERTAINLY CONCEIVABLE.

CONSIDERING ALL THE FOREGOING CIRCUMSTANCES, IT IS OUR OPINION THAT ADVO DOES NOT HAVE A RIGHT OF ACTION UNDER OMB CIRCULAR A-76.

ADVO: DOC'S VIOLATION OF OMB CIRCULAR A-76 IS THE BEST EVIDENCE OF THE UNLAWFUL CANCELLATION OF THE RFP IN VIOLATION OF FPR SEC 1-2.404-1, BECAUSE, IN THE ABSENCE OF A PROPER COST ANALYSIS, THERE IS SIMPLY NO BASIS FOR CONCLUDING THAT ADVO'S PROPOSED PRICE WAS UNREASONABLE. THE FACTUAL ISSUE WHETHER A VALID COST ANALYSIS PRECEDED THE CANCELLATION HAS ALREADY BEEN DECIDED, BECAUSE THE COURT HAS STATED IT CERTAINLY APPEARS THAT AN ADEQUATE DETERMINATION WAS NOT MADE THAT THE WORK COULD BE PERFORMED AT LESS EXPENSE WITHIN THE GOVERNMENT.

COMMENT: FPR SEC. 1-2.404-1, AS ALREADY INDICATED, IS NOT DIRECTLY APPLICABLE. MOREOVER, WHETHER A "VIOLATION" OF THE CIRCULAR OCCURED IS NOT THE ISSUE. THE ISSUE IS WHETHER, IN LIGHT OF PERTINENT PRECEDENT, DOC'S ACTION IN TERMINATING NEGOTIATIONS WITH ADVO AND CANCELING THE RFP IS SHOWN TO BE TOTALLY UNREASONABLE OR IRRATIONAL. THIS IS A HEAVY BURDEN FOR A PLAINTIFF OR PROTESTER TO BEAR, BECAUSE THE AGENCY RESERVED THE RIGHT IN THE RFP TO REJECT ANY AND ALL OFFERS AND IT IS WELL ESTABLISHED THAT THE CONTRACTING AGENCY ENJOYS A BROAD RANGE OF DISCRETION IN DECIDING WHETHER TO CANCEL AN RFP.

ADVO'S CASE IS BASED IN LARGE, MEASURE, ON THE THEORY THAT, SINCE DOC HAS FAILED TO SUBSTANTIATE ITS $5 MILLION ESTIMATE FOR DOING THE WORK WITHIN THE GOVERNMENT, IT NECESSARILY FOLLOWS THAT DOC HAS NO REASONABLE BASIS FOR DETERMINING THAT ADVO'S OFFER OF ABOUT $5.8 MILLION WAS UNREASONABLY HIGH AND THEREFORE THAT THE AGENCY ERRED IN TERMINATING NEGOTIATIONS. THIS THEORY IS BASED UPON SEVERAL FAULTY PREMISES.

THE FIRST PREMISE IS THAT ADVO AND DOC ARE IN COMPETITION TO PERFORM THE APOC WORK AND THAT, WHILE ADVO HAS SUBSTANTIATED THE MERITS OF ITS PROPOSAL, DOC HAS NOT SUBSTANTIATED THE MERITS OF ITS. DOC, HOWEVER, IS THE CONTRACTING AGENCY, NOT AN OFFEROR. IT IS FUNDAMENTAL IN NEGOTIATED PROCUREMENT THAT THE BURDEN IS, INITIALLY, ON EACH OFFEROR TO AFFIRMATIVELY DEMONSTRATE THE MERITS OF ITS PROPOSAL. THE MERITS OF A PROPOSAL ARE NOT AUTOMATICALLY ASSUMED AND IT IS NOT UP TO THE CONTRACTING AGENCY TO PROVE THAT THE PROPOSAL IS UNSATISFACTORY OR THAT SOME OTHER ALTERNATIVE IS BETTER THAN THE PROPOSAL. SEE JULIE RESEARCH LABORATORIES, INC., 55 COMP.GEN. 374, 383-384(1975), 75-2 CPD 232. WHAT ADVO HAS DONE IN THE PRESENT CASE IS TO REVERSE THIS BURDEN AND TO ASSERT THAT IT IS UP TO DOC TO PROVE BY A PREPONDERANCE OF THE EVIDENCE THAT ITS "PROPOSAL" IS BETTER THAN ADVO'S.

RELATED TO THIS IS THE ERRONEOUS PREMISE THAT THE ONLY POSSIBLE JUSTIFICATION FOR TERMINATING NEGOTIATIONS WITH ADVO IN THE PRESENT CASE WOULD BE A FULLY SUPPORTED DETERMINATION BY DOC WHICH DEMONSTRATES CONVINCINGLY THAT ADVO'S PROPOSAL IS UNREASONABLY HIGH IN PRICE. IN THIS CONNECTION, WE BELIEVE IT IS EXTREMELY IMPORTANT TO BEAR IN MIND ADVO'S POSTURE IN THIS PROCUREMENT-- THAT OF THE SOLE OFFEROR TO PERFORM THE APOC WORK. ADVO IS A PARTY SEEKING A DE FACTO SOLE-SOURCE AWARD.

IN THIS REGARD, OUR DECISION IN TELECTRO-MEK, INC., B-185892, JULY 26, 1976, 76-2 CPD 81, IS PERTINENT. THERE, THE NAVY EXPERIENCED DIFFICULTY IN OBTAINING "COST OR PRICING DATA" (A BREAKDOWN OF AN OFFEROR'S PRICE INTO SEPARATE COST ELEMENTS CHECKED BY THE AGENCY TO VERIFY PRICE REASONABLENESS) FROM A SOLE-SOURCE SUPPLIER. ULTIMATELY, THE NAVY INVESTIGATED AND FOUND ANOTHER SUPPLIER OFFERING A LOWER PRICE AND AWARDED IT A SOLE-SOURCE CONTRACT. WE DENIED THE PROTEST AND TELECTRO-MEK WAS UNSUCCESSFUL IN SUBSEQUENT LITIGATION (TELECTRO-MEK, INC. V. MIDDENDORF, D.D.C., CIVIL ACTION NO. 76-736, UNREPORTED OPINION, DECEMBER 9, 1976).

ADVO POINTS OUT THAT ITS SEPTEMBER 1977 PROPOSAL WAS PREPARED IN A COMPETITIVE ENVIRONMENT AND THAT IT FURNISHED COST OR PRICING DATA IN ITS DECEMBER 1, 1978, PROPOSAL. IN ADDITION, DOC IN THE PRESENT CASE DOES NOT HAVE A LOWER-PRICED OFFER FROM ANOTHER SUPPLIER. BALANCED AGAINST THESE CONSIDERATIONS, HOWEVER, IS THE FACT THAT ADVO HAS NEVER, AS FAR AS WE CAN DETERMINE, PRESENTED ANYTHING WHICH COULD BE DESCRIBED AS A GENUINE PROPOSAL FOR THE REDUCED APOC REQUIREMENTS. THE DECEMBER 1, 1978, PROPOSAL, WHICH IS IN EXCESS OF $12 MILLION, WAS SUBMITTED BEFORE THE SCOPE OF THE WORK WAS REDUCED. THE PURPORTED "OFFERS" FOR THE REDUCED WORK OF ABOUT $6 MILLION ON JANUARY 11, 1979, AND $5.9 MILLION ON JANUARY 14, 1979, WERE MERE ORAL STATEMENTS. AS FOR THE WRITTEN OFFER OF ABOUT $5.8 MILLION DATED JANUARY 24, 1979, IN OUR OPINION IT IS IMPOSSIBLE TO TELL WHAT DOC WOULD HAVE BEEN CONTRACTING FOR AND ON WHAT TERMS AND CONDITIONS HAD IT ACCEPTED THIS "PROPOSAL." THE LETTER DOES NOT STATE IT IS BEING FURNISHED IN RESPONSE TO THE RFP OR ANY IDENTIFIABLE STATEMENT OF DOC REQUIREMENTS.

THE ISSUE, THEN AS WE SEE IT, IS WHETHER DOC WAS ACTING IN A TOTALLY UNREASONABLE OR IRRATIONAL FASHION IN BREAKING OFF NEGOTIATIONS WITH ADVO IN A SITUATION WHERE

-- IT HAD RECEIVED A FORMAL PROPOSAL (DECEMBER 1, 1978) FROM A SOLE OFFEROR BUT HAD NEVER COMPLETED ITS AUDIT OF THE COST DATA ASSOCIATED WITH THAT PROPOSAL

-- IT HAD REDUCED THE WORK REQUIREMENTS

-- IT HAD MADE AT LEAST SOME ATTEMPT TO ESTIMATE WHAT IT WOULD COST TO PERFORM THE REDUCED REQUIREMENTS WITHIN THE GOVERNMENT (JANUARY 10, 1979)

-- IT HAD NEVER RECEIVED ANY FORMAL OFFER FOR THE REDUCED REQUIREMENTS FROM THE SOLE OFFEROR

-- IT BELIEVED ITS IN-HOUSE COSTS WOULD BE LOWER THAN THE COST OF THE INFORMAL "OFFERS" IT WAS RECEIVING FROM THE SOLE OFFEROR, AND

-- IT WAS BECOMING INCREASINGLY CONCERNED ABOUT THE AMOUNT OF TIME BEING CONSUMED IN DEFINITIZING WHICH PARTY WOULD PERFORM THE WORK.

WE BELIEVE IT IS DIFFICULT TO SAY THAT THE AGENCY WAS BEING TOTALLY UNREASONABLE IN DECIDING TO CANCEL THE RFP IN THESE CIRCUMSTANCES. AS FOR THE COURT'S STATEMENT THAT AN ADEQUATE DETERMINATION OF IN-HOUSE COSTS WAS NOT MADE BY DOC, WE BELIEVE THIS STATEMENT WAS MADE IN THE CONTEXT OF ADVO'S LEGAL ARGUMENTS THAT OMB CIRCULAR A-76, THE ECONOMY ACT, AND VARIOUS PROVISIONS OF THE FPR'S REQUIRED CERTAIN COST ANALYSES BY DOC. THE COURT NOTED THAT ADVO'S LEGAL ARGUMENTS WERE HIGHLY TECHNICAL AND DID NOT CONCLUSIVELY RULE ON THEM.

ADVO HAS ALSO ARGUED THAT AFTER-THE-FACT RATIONALIZATIONS ABOUT POSSIBLE ADDITIONAL GROUNDS FOR CANCELING THE RFP SHOULD NOT BE GIVEN ANY WEIGHT. OUR APPROACH IS TO LOOK TO WHETHER, IN LIGHT OF THE RECORD, THE AGENCY'S ACTION HAS ANY BASIS SUPPORTING IT, NOT SIMPLY TO EXAMINE THE BASIS WHICH THE AGENCY ADVANCED AT THE TIME IT TOOK THE ACTION. SEE, FOR EXAMPLE, TOSCO CORPORATION, B-187776, MAY 10, 1977, 77-1 CPD 329.

THE FOREGOING IS NOT TO SAY THAT DOC'S CONDUCT OF THE PROCUREMENT SHOULD BE REGARDED AS A MODEL OF EFFECTIVE NEGOTIATED PROCUREMENT PROCEDURE. THE REDUCTION OF THE SCOPE OF THE WORK APPEARS TO HAVE BEEN SUBSTANTIAL AND SHOULD HAVE BEEN ISSUED IN THE FORM OF A WRITTEN AMENDMENT TO THE RFP. THE LACK OF A WRITTEN REQUEST FOR A "BEST AND FINAL" OFFER FROM ADVO WAS ANOTHER DEFICIENCY IN THIS PROCUREMENT. ORAL REQUESTS OF THIS NATURE GENERATE MISUNDERSTANDINGS WHICH PRODUCE LITIGATION. CF. KAPPA SYSTEMS, INC., 56 COMP.GEN. 675, 684-686 (1977), 77-1 CPD 412, AND DECISIONS DISCUSSED THEREIN. IN ADDITION, A CONCLUSION THAT DOC'S CANCELLATION OF THE RFP IS NOT LEGALLY OBJECTIONABLE OR THAT IT MEETS A MINIMUM STANDARD OF LEGAL SUFFICIENCY SHOULD NOT BE CONFUSED WITH A CONCLUSION THAT THE DECISION TO PERFORM APOC WITHIN THE GOVERNMENT REPRESENTS A WISE MANAGEMENT DECISION AS A MATTER OF POLICY.

ADVO: BY NOT FOLLOWING OMB CIRCULAR A-76, DOC HAS DEVIATED FROM ESTABLISHED PROCUREMENT POLICY WITHIN THE MEANING OF FPR SEC 1-1.009 1(E) AND THERE IS NO EVIDENCE THAT DOC HAS COMPLIED WITH DEVIATIONS. COMMENT: FPR SEC. 1-1.009 DEALS WITH "DEVIATIONS," WHICH FPR SEC. 1- 1.009-1(E) DESCRIBES AS INCLUDING A SITUATION "WHEN A POLICY OR PROCEDURE IS PRESCRIBED, USE OF ANY INCONSISTENT POLICY OR PROCEDURE."

WE BELIEVE THIS PROVISION IS REFERRING TO POLICIES OR PROCEDURES CONTAINED IN THE VARIOUS SECTIONS OF THE FPR'S, NOT TO ALL OTHER PROCUREMENT POLICIES OR PROCEDURES IN EXISTENCE. THIS IS CLEAR FROM A READING OF FPR SEC. 1-1.009 AS A WHOLE AND ALSO FROM THE SPECIFIC REFERENCE IN FPR SEC. 1-1.009-2 TO " * * * DEVIATIONS FROM BE FEDERAL PROCUREMENT REGULATIONS * * * ." OMB CIRCULAR A-76 IS NOT PART OF THE FPR'S. ADVO: DOC CANNOT RELY ON A CLAIM THAT "URGENCY" PRECLUDES REOPENING NEGOTIATIONS WITH ADVO WHEN THE EXISTENCE OF ANY URGENCY WAS CREATED BY DOC'S OWN EXTENSIVE DELAY IN EVALUATING THE APOC PROPOSALS.

COMMENT: IN DATAPOINT CORPORATION, B-186979, MAY 18, 1977, 77-1 CPD 348, CITED BY ADVO IN THIS CONNECTION, THE QUESTION WAS WHETHER REOPENING NEGOTIATIONS WAS A PRACTICABLE REMEDY WHERE THE GOVERNMENT HAD MADE AN IMPROPER AWARD BY ACCEPTING A NONCONFORMING PROPOSAL. IN MINJARES BUILDING MAINTENANCE COMPANY, 55 COM.GEN. 864(1976), 76-1 CPD 168, THE QUESTION WAS WHETHER NEGOTIATIONS SHOULD HAVE BEEN REOPENED TO INCORPORATE A NEW SERVICE CONTRACT ACT WAGE DETERMINATION IN ORDER TO ASSURE THAT ALL OFFERORS COMPETING ON AN EQUAL BASIS. NEITHER CASE IS PARTICULARLY APPOSITE HERE AS THE PRESENT CASE DOES NOT INVOLVE AN IMPROPER AWARD TO ANOTHER OFFEROR OR THE QUESTION WHETHER ADVO WAS ACCORDED AN EQUAL OPPORTUNITY TO COMPETE VIS-A-VIS OTHER OFFERORS. DOC AND THE POSTAL SERVICE ARE NOT "OFFERORS."

ADVO: IT IS CLEAR THAT THE CONTRACTING OFFICER NEVER MADE ANY INDEPENDENT DETERMINATION OF THE PROPRIETY OF CANCELING THE RFP, BUT MERELY COMPLIED WITH THE CENSUS BUREAU'S DESIRES.

COMMENT: THE RECORD SHOWS THAT A CENSUS BUREAU OFFICIAL, BY MEMORANDUM DATED JANUARY 18, 1979, "REQUESTED" THE CONTRACTING OFFICER TO ADVISE ADVO THAT THE RFP WAS CANCELED. THE FACT THAT THIS MAY HAVE INITIATED THE ACTION WHICH LED TO THE CANCELLATION DOES NOT ESTABLISH THAT THE CONTRACTING OFFICER DID NOT MAKE HIS OWN INDEPENDENT DETERMINATION BEFORE CARRYING OUT THE CANCELLATION ITSELF. THE CONTRACTING OFFICER'S JANUARY 18, 1979, NOTICE OF CANCELLATION TO ADVO DOES NOT STATE THAT HE WAS TAKING THE ACTION BASED ON INSTRUCTIONS FROM SOMEONE ELSE.

ADVO: DOC FAILED TO CONDUCT MEANINGFUL DISCUSSIONS WITH ADVO IN VIOLATION OF FPR SECTIONS 1-3.804 AND 1-3.805-1(A). DOC'S ULTIMATUM THAT ADVO PERFORM THE APOC CONTRACT AT THE SAME PRICE AS DOC'S ESTIMATE WAS NOT NEGOTIATIONS BUT "PROCUREMENT BLACKMAIL."

COMMENT: THE GOVERNMENT MAY DISCLOSE ITS ESTIMATE TO AN OFFEROR DURING NEGOTIATIONS AND USE IT AS A NEGOTIATING TOOL. AIRFLOTE, INC., B-181701, NOVEMBER 6, 1974, 74-2 CPD 242. MOREOVER, THE FPR'S DO NOT PROHIBIT THE GOVERNMENT FROM TELLING AN OFFEROR ITS PRICE IS CONSIDERED TO BE TOO HIGH NOR DO THEY PROSCRIBE HARD BARGAINING BY THE GOVERNMENT. NONE OF THE DECISIONS CITED BY ADVO IN THIS CONNECTION SUPPORT ITS CONTENTION THAT DOC VIOLATED THE FPR'S.

ADVO: DOC ACTED UNREASONABLY IN GIVING ADVO LESS THAN ONE WORKING DAY WITHIN WHICH TO SUBMIT ITS OFFER ON SUBSTANTIALLY REVISED REQUIREMENTS.

COMMENT: THE PLAINTIFF'S ARGUMENT ON THIS POINT IS UNDERCUT BY SEVERAL FACTORS. FIRST, ADVO ADMITS THAT IT KNEW AS EARLY AS DECEMBER 19, 1978, THAT THE SCOPE OF THE WORK MIGHT BE REDUCED. SECOND, ADVO STATES THAT IN THE JANUARY 11, 1979, MEETING IT MADE AN OFFER TO PERFORM THE REDUCED WORK. THIRD, ADVO ON AT LEAST ONE OCCASION HAS QUESTIONED WHETHER DOC IN FACT EVER ESTABLISHED A BEST AND FINAL OFFER DEADLINE OF 3 P.M. ON JANUARY 12, 1979. FOURTH, ADVO MADE WHAT IT DESCRIBES AS REVISED OFFERS SEVERAL TIMES AFTER JANUARY 12 AND THESE WERE APPARENTLY GIVEN SOME CONSIDERATION BY THE CONTRACTING AGENCY. FIFTH, ADVO CONTINUALLY STRESSES ITS UNIQUE KNOWLEDGE AND EXPERTISE AND ALLEGES IT KNOWS MORE ABOUT PERFORMING THE APOC WORK THAN DOC DOES.

CONSIDERING ALL THESE CIRCUMSTANCES, WE HAVE DIFFICULTY SEEING ANY PREJUDICE TO ADVO. IT SHOULD BE NOTED THAT IN A NUMBER OF CASES BEST AND FINAL OFFERS HAVE BEEN REQUESTED WITHIN EXTREMELY TIGHT TIME LIMITS. SEE 50 COMP.GEN. 202, 205(1970); MARTIN WIDERKER, ENG., 55 COMP.GEN. 1295(1976), 76-2 CPD 61. FINALLY, THE CASES CITED BY ADVO ARE NOT IN POINT. 45 COMP.GEN. 651(1966) INVOLVED AN ADVERTISED PROCUREMENT. IN ABC FOOD SERVICE, INC., B-181978, DECEMBER 17, 1974, 74-2 CPD 359, THE ISSUE INVOLVED ONE OFFEROR'S FAILURE TO RECEIVE THE REQUEST FOR BEST AND FINAL OFFERS DUE TO THE GOVERNMENT'S ERROR. HERE, THOUGH THE AGENCY DID NOT FOLLOW PROPER PROCEDURES IN CLOSING OUT NEGOTIATIONS, ADVO KNEW ENOUGH TO KNOW THEY WERE BEING CLOSED OUT.

ADVO: FPR SEC 1-3.802(C)(2) (FPR AMEND. 194, SEPTEMBER 1978) REQUIRES THAT RFP'S STATE THE RELATIVE IMPORTANCE OF COST, TECHNICAL AND OTHER FACTORS AND FAO DECISIONS HAVE HELD THAT, WHEN SUCH FACTORS ARE CHANGED, OFFERORS MUST BE GIVEN AN OPPORTUNITY TO SUBMIT REVISED PROPOSALS. THE PRESENT RFP WEIGHTED COST AT ONLY 20 PERCENT IN RELATION TO THE OTHER FACTORS. IN CANCELING THE RFP, DOC MADE COST THE SOLE EVALUATION CRITERION WITHOUT GIVING ADVO THE OPPORTUNITY TO SUBMIT A REVISED PROPOSAL.

COMMENT: THE AUTHORITIES RELIED ON BY ADVO IN THIS CONNECTION, LIKE OTHERS IT CITES, DEAL ESSENTIALLY WITH ENSURING AN EQUAL OPPORTUNITY TO COMPETE FOR ALL OFFERORS PARTICIPATING IN AN ONGOING NEGOTIATED PROCUREMENT. THE CANCELLATION OF THE RFP DID NOT RESULT IN THE EVALUATION FACTORS BEING CHANGED TO THE ADVANTAGE OF SOME OFFERORS WITHOUT ADVO HAVING THE OPPORTUNITY TO COMPETE BASED UPON THE REVISED FACTORS. WITH THE TERMINATION OF NEGOTIATIONS WITH ADVO, THERE WAS NO LONGER ANY ONGOING PROCUREMENT AND, AS DISCUSSED ELSEWHERE, DOC AND THE POSTAL SERVICE ARE NOT "OFFERORS" IN COMPETITION WITH ADVO.

ADVO: THE POSTAL SERVICE STANDS ON THE SAME FOOTING VIS-A-VIS BOTH DOC AND ADVO AS ANY PRIVATE COMPETITOR. 41 U.S.C. 23(1976). THE POSTAL REORGANIZATION ACT OF 1970, 39 U.S.C. 101 ET SEQ. (1976), MAKES CLEAR THAT CONGRESS INTENDED THE POSTAL SERVICE TO BE AN INDEPENDENT ESTABLISHMENT WITH POWERS EQUIVALENT TO A PRIVATE BUSINESS ENTERPRISE.

COMMENT: 41 U.S.C. 23 STATES IN PERTINENT PART:

ALL ORDERS OR CONTRACTS * * * PLACED WITH GOVERNMENT-OWNED ESTABLISHMENTS SHALL BE CONSIDERED AS OBLIGATIONS IN THE SAME MANNER ESTABLISHMENTS SHALL BE CONSIDERED AS OBLIGATIONS IN THE SAME MANNER A S PROVIDED FOR SIMILAR ORDERS OR CONTRACTS PALCED WITH COMMERCIAL MANUFACTURERS OR PRIVATE CONTRACTORS * * * .

THE STATUTE DEALS WITH THE SUBJECT OF WHETHER AN ORDER OR CONTRACT OF THE TYPE DESCRIBED CONSTITUTES AS OBLIGATION OF APPROPRIATED FUNDS. THE ISSUE, HOWEVER, IS NOT WHETHER A DOC ORDER TO THE POSTAL SERVICE WOULD BE AN OBLIGATION BUT THE POSTAL SERVICE'S STATUS AS A RECIPIENT OF SUCH AN ORDER. ASIDE FROM 41 U.S.C. 23, ADVO CITES DECISIONS FROM 2ND., 3RD., 7TH., AND 8TH. CIRCUITS HOLDING THAT THE POSTAL SERVICE IS NOT IMMUNE FROM STATE GARNISHMENT PROCEEDINGS. IN THIS BUSINESS ENTERPRISE FOR SOME PURPOSES DOES NOT ESTABLISH THAT IT IS LIKE THE POSTAL REORGANIZATION ACT OF 1970 HAD INTENDED THAT THE POSTAL SERVICE BE LIKE ANY PRIVATE BIDDER OR OFFEROR WHEN OFFERING TO PERFORM WORK FOR AN EXECUTIVE AGENCY, THE PROVISION IN THE ACT CODIFIED AT 39 U.S.C. 411, SUPRA, WOULD BE MEANINGLESS SURPLUSAGE. IN ADDITION, FPR 1-1.209 DEFINES "PROCUREMENT" AS THE ACQUISITION OF PROPERTY OR SERVICES FROM "NON-FEDERAL SOURCES" AND 39 U.S.C. 201 STATES THAT THE POSTAL SERVICE IS "AN INDEPENDENT ESTABLISHMENT OF THE EXECUTIVE BRANCH OF THE GOVERNMENT OF THE UNITED STATES."

ADVO: DOC VIOLATED FPR SEC. 1-3.805-1(D) BY FAILING TO GIVE ADVO THE OPPORTUNITY TO SUBMIT A REVISED PROPOSAL AFTER REDUCING THE SCOPE OF THE APOC WORK IN JANUARY 1979. THIS ACTION IS PARTICULARLY EGREGIOUS BECAUSE THE POSTAL SERVICE IS BEING GIVEN THE OPPORTUNITY TO SUBMIT A PROPOSAL ON THE REVISED REQUIREMENTS.

THE REGULATION STATES IN PERTINENT PART:

WHEN, DURING NEGOTIATIONS, A SUBSTANTIAL CHANGE OCCURS IN THE GOVERNMENT'S REQUIREMENTS OR A DECISION IS REACHED TO RELAX, INCREASE, OR OTHERWISE MODIFY THE SCOPE OF THE WORK OR STATEMENT OF REQUIREMENTS, SUCH CHANGE OR MODIFICATION SHALL BE MADE IN WRITING AS AN AMENDMENT TO THE REQUEST FOR PROPOSALS, AND A COPY SHALL BE FURNISHED TO EACH PROSPECTIVE CONTRACTOR.

AS FAR AS CHANGES IN THE GOVERNMENT'S REQUIREMENTS PRIOR TO THE TERMINATION OF NEGOTIATIONS WITH ADVO ARE CONCERNED, ADVO DOES NOT DENY THAT IT RECEIVED WHAT DOC CALLS A "PRELIMINARY OUTLINE" OF THE REVISED REQUIREMENTS ON OR ABOUT DECEMBER 19, 1978, NOR THAT IT RECEIVED WHAT DOC CALLS A "COMPLETE OUTLINE" DURING JANUARY 11, 1979, MEETING. AS DISCUSSED SUPRA, WE BELIEVE THE REDUCTION IN THE SCOPE OF THE WORK SHOULD HAVE BEEN ISSUED AS A WRITTEN AMENDMENT TO THE RFP. HOWEVER, AS ALSO PREVIOUSLY DISCUSSED, IT IS DIFFICULT TO SEE PREJUDICE TO ADVO WHERE IT WAS AWARE OF THE REVISION IN THE GOVERNMENT'S REQUIREMENTS AND SUBMITTED WHAT IT DESCRIBES AS REVISED OFFERS IN RESPONSE TO THE REVISED REQUIREMENTS. ANY EVENT, FPR SEC. 1-3.805-1(D) IS PRIMARILY DIRECTED AT INSURING AN EQUAL OPPORTUNITY TO COMPETE AMONG OFFERORS IN AN ONGOING NEGOTIATED PROCUREMENT. SEE, IN THIS REGARD, INTERNATIONAL FINANCE AND ECONOMICS, B-186939, JANUARY 27, 1977, 77-1 CPD 66 (LEVEL OF EFFORT IN RFP SUBSTANTIALLY REDUCED WITHOUT ANY AMENDMENT TO RFP OR NOTICE TO OFFERORS); COMPUTEK, INC., ET AL., 54 COMP.GEN. 1080(1975), 75-1 CPD 384 (SIGNIFICANT CHANGES IN QUANTITY AND OTHER TERMS AND CONDITIONS MADE DURING NEGOTIATIONS WITH ONE OFFEROR WERE NOT COMMUNICATED TO OTHER OFFERORS).

AS FAR AS ANY OTHER CHANGES IN THE GOVERNMENT'S REQUIREMENTS AFTER NEGOTIATIONS WITH ADVO WERE TERMINATED, THE POSTAL SERVICE, AS ALREADY INDICATED, IS NOT A PROSPECTIVE CONTRACTOR OR OFFEROR WITHIN THE MEANING OF THE REGULATIONS. THUS, THE NUMEROUS CASES CITED BY ADVO IN SUPPORT OF THE PROPOSITION THAT ALL OFFERORS IN A NEGOTIATED PROCUREMENT SHOULD HAVE AN EQUAL OPPORTUNITY TO COMPETE AND TO SUBMIT REVISED PROPOSALS IN RESPONSE TO CHANGES IN THE GOVERNMENT'S REQUIREMENTS (E.G. COMPUTEK, SUPRA) ARE INAPPOSITE. FPR SEC. 1-3.805 1(D) DOES NOT REQUIRE THAT CHANGES IN REQUIREMENTS MADE AFTER WITH A SOLE OFFEROR HAVE BEEN TERMINATED AND THE GOVERNMENT HAS DECIDED TO PROCEED WITH THE WORK IN- HOUSE BE ISSUED AS A WRITTEN AMENDMENT TO THE RFP AND THAT THE SOLE OFFEROR BE PROVIDED WITH AN OPPORTUNITY TO SUBMIT ANOTHER REVISED PROPOSAL.

ADVO: DOC IS SEEKING THE FURNISHING OF CERTAIN SERVICES BY THE POSTAL SERVICE, BUT DID NOT PUBLICIZE THIS PROCUREMENT AS REQUIRED BY FPR SEC. 1- 1.1001.

COMMENT: FOR REASONS ALREADY INDICATED, THE "PROCUREMENT" IN QUESTION IS NOT A PROCUREMENT WITHIN THE MEANING OF THE FPR'S.

ADVO: DOC'S SOLE-SOURCE PROCUREMENT FROM THE POSTAL SERVICE VIOLATES FPR SEC. 1-3.210(A)(1) BECAUSE MORE THAN ONE SOURCE IS AVAILABLE TO FURNISH THE SERVICES. DOC FAILED TO PREPARE A DETERMINATION AND FINDINGS AS REQUIRED BY FPR SEC 1-3.210(B).

COMMENT: FOR REASONS ALREADY DISCUSSED, THESE REGULATIONS AND THE NUMEROUS DECISIONS CITED BY ADVO DEALING WITH SOLE-SOURCE PROCUREMENTS ARE INAPPLICABLE TO DOC'S "PROCUREMENT" OF SERVICES FROM THE POSTAL SERVICE.

VI. CONCLUSION

BASED ON THE RECORD BEFORE US, WE FIND NO SUBSTANTIVE VIOLATIONS OF APPLICABLE LAW AND REGULATIONS BY DOC IN TERMINATING NEGOTIATIONS WITH ADVO, CANCELING THE RFP AND PROCEEDING TO PERFORM THE WORK WITHIN THE GOVERNMENT.