B-200075, JAN 8, 1981

B-200075, JAN 8, 1981

DIGEST: 1. BID "REQUESTING" ADVANCE PAYMENT TO SECURE NEEDED SUPPLIES IN ACCORDANCE WITH APPENDIX E-407 WAS IMPROPERLY REJECTED AS NONRESPONSIVE; HOWEVER, OFFER WHICH "REQUIRED" ADVANCE PAYMENT TO RESERVE AND ACQUIRE MATERIALS WAS PROPERLY EXCLUDED FROM CONSIDERATION SINCE ADVANCE PAYMENT COULD NOT BE GRANTED AND AWARD WAS MADE ON INITIAL PROPOSAL BASIS AS AUTHORIZED IN RFP. CONTRACTING ACTIVITY WAS UNDER NO OBLIGATION TO AFFORD OFFEROR OPPORTUNITY TO SUBMIT REVISED PROPOSAL WITHOUT ADVANCE PAYMENT CONDITION GIVEN AWARD BASIS. 2. PROCURING ACTIVITY'S SILENCE IN RESPONSE TO PROTESTER'S INQUIRIES REGARDING ACCEPTABILITY OF DEMANDS FOR ADVANCE PAYMENTS DOES NOT AFFECT PROPRIETY OF PROTESTED AWARDS SINCE, UNDER CIRCUMSTANCES, PROTESTER WAS AWARE THAT DEMANDS MIGHT NOT BE GRANTED; HENCE, PROTESTER ASSUMED RISK THAT ITS BID AND OFFER MIGHT NOT BE ACCEPTED BECAUSE OF DEMANDS.

POTOMAC IRON WORKS, INC.:

POTOMAC IRON WORKS, INC. (POTOMAC), PROTESTS THE REJECTION OF ITS BID FOR "EQUALIZERS" UNDER INVITATION FOR BIDS (IFB) N62472-80-R-1657 AND THE REJECTION OF ITS OFFER FOR "PROJECTILE ANCHOR ASSEMBLIES" UNDER REQUEST FOR PROPOSALS (RFP) N62472-80-R-1652. BOTH SOLICITATIONS WERE ISSUED BY THE NAVAL FACILITIES ENGINEERING COMMAND (NAVY), DAVISVILLE, RHODE ISLAND. BASED ON OUR REVIEW OF THE RECORD, THE PROTEST AGAINST THE REJECTION OF THE BID IS SUSTAINED; HOWEVER, THE REJECTION OF POTOMAC'S OFFER WAS PROPER AND, THEREFORE, THAT PROTEST IS DENIED.

POTOMAC SUBMITTED THE LOW BID OF $99,000 ON IFB-1657 UNDER A BID OPENING DATE OF JULY 28, 1980. HOWEVER, THE NAVY REJECTED POTOMAC'S LOW BID AS NONRESPONSIVE ON THE GROUND THAT THE BID WAS CONDITIONED ON THE RECEIPT OF ADVANCE PAYMENTS BY MEANS OF THE FOLLOWING HANDWRITTEN NOTATION CONTAINED IN POTOMAC'S BID:

"DUE TO NATURE AND SUPPLY OF SPECIFIED ALLOY, ADVANCE PAYMENT REQUEST IN THE AMOUNT OF $1,800 EACH TO SECURE SUPPLY. ADVANCE PAYMENT LIQUIDATED IN 1 MONTH OR LESS. ALL IN ACCORDANCE WITH APP. E OF DAR. SEPARATE BANK ACCOUNT FOR NAVFAC ALREADY ESTABLISHED."

THE NAVY REFERS TO THE DOCUMENTING AND PROCESSING REQUIREMENTS INVOLVED IN CONSIDERING APPLICATIONS FOR ADVANCE PAYMENTS AND STATES THAT THE PROCESSING COULD NOT HAVE BEEN ACCOMPLISHED GIVEN THE SEPTEMBER 2, 1980, DELIVERY DATE FOR THE CONTRACT. THE NAVY ALSO TAKES THE POSITION THAT THE PHRASE "TO SECURE SUPPLY" IN THE NOTATION CLEARLY IMPLIED THAT IN THE ABSENCE OF SUCH ADVANCE PAYMENTS, POTOMAC COULD NOT SECURE THE NECESSARY MATERIALS.

POTOMAC CONTENDS THAT THE WORDS "TO SECURE SUPPLY" WERE NOT A QUALIFICATION OF ITS BID BUT WERE INCLUDED SO THAT THE GOVERNMENT WOULD KNOW THAT THE ADVANCE PAYMENT WAS TO BE USED FOR EXPENDITURES FOR WHICH THE GOVERNMENT WOULD HAVE LIEN RIGHTS PROTECTING ITS ADVANCE PAYMENT.

DEFENSE ACQUISITION REGULATION (DAR) APPENDIX E-407 (1976 ED.) PROVIDES IN PERTINENT PART:

"*** ADVANCE PAYMENTS MAY BE GRANTED AT OR AFTER AWARDS OF CONTRACTS MADE ON COMPETITIVE BIDS AFTER FORMAL ADVERTISING (AS WELL AS ON NEGOTIATED CONTRACTS) NOTWITHSTANDING THE ABSENCE OF PROVISIONS FOR OR WITH REGARD TO ADVANCE PAYMENTS IN THE INVITATIONS FOR BIDS. BIDS WILL BE REJECTED IF THEY ARE CONDITIONED, QUALIFIED, OR LIMITED IN SUCH WAY THAT BINDING AWARDS CAN BE MADE ONLY WITH PROVISION FOR ADVANCE PAYMENTS. BIDS SHALL NOT BE TREATED AS NONRESPONSIVE BECAUSE THEY CONTAIN, OR ARE ACCOMPANIED BY OR SUPPLEMENTED BY REQUEST FOR ADVANCE PAYMENTS OR OTHER INDICATION THAT ADVANCE PAYMENTS ARE DESIRED OR NEEDED, SO LONG AS THE ADVANCE PAYMENT ASPECT IS NOT A CONDITION, QUALIFICATION OR LIMITATION OF THE BID. ***"

IN OUR VIEW, POTOMAC'S STATEMENT REQUESTING ADVANCE PAYMENTS "TO SECURE SUPPLY" IN ACCORDANCE WITH APPENDIX E OF DAR CAN REASONABLY BE INTERPRETED ONLY TO MEAN THAT POTOMAC WAS "REQUESTING" ADVANCE PAYMENTS AND WAS NOT IN ANY WAY CONDITIONING OR QUALIFYING ITS BID. DAR E-407 PERMITS BIDDERS TO REQUEST ADVANCE PAYMENTS AND THERE IS NOTHING IN POTOMAC'S BID WHICH INDICATES THAT IT COULD NOT OBTAIN THE NECESSARY MATERIALS IN THE ABSENCE OF ADVANCE PAYMENTS. THEREFORE THE REJECTION OF POTOMAC'S BID AS NONRESPONSIVE WAS IMPROPER AND ITS PROTEST IS SUSTAINED. HOWEVER, THE RECORD DISCLOSES THAT THE CONTRACT HAS BEEN FULLY PERFORMED AND CORRECTIVE ACTION IS NOT POSSIBLE AT THIS TIME.

RFP-1652

FOUR DAYS PRIOR TO THE ISSUE DATE (JULY 15, 1980) OF THE RFP, THE NAVY INFORMED POTOMAC THAT THE ITEMS REQUIRED WOULD HAVE TO BE DELIVERED BY "AUGUST 25 TO MEET SCHEDULED SHIP DEPARTURE" AND THAT AWARD UNDER THE RFP THEREFORE WOULD HAVE TO BE MADE BY JULY 25.

THEREAFTER, ON JULY 23, 1980, POTOMAC SUBMITTED THE LOW OFFER UNDER THE RFP. HOWEVER, POTOMAC'S OFFER STATED: "REQUIRE ADVANCE PAYMENTS *** TO RESERVE AND ACQUIRE MATERIALS." THE NAVY DETERMINED THAT POTOMAC'S CONDITIONED OFFER SHOULD BE CONSIDERED UNACCEPTABLE UNDER AUTHORITY OF DAR APPENDIX E-407, ABOVE, BECAUSE THE URGENT DELIVERY SCHEDULE INVOLVED PRECLUDED THE PROCESSING OF AN ADVANCE PAYMENT REQUEST. WITHOUT CONDUCTING DISCUSSIONS WITH ANY OFFEROR, THE NAVY THEN DECIDED TO AWARD TO THE OFFEROR WHICH HAD SUBMITTED THE SECOND LOWEST OFFER ($620,945); THIS OFFER WAS CONSIDERED REASONABLE IN COMPARISON WITH THE GOVERNMENT ESTIMATE ($600,000) FOR THE ITEMS. WE ARE INFORMED THAT THE CONTRACT UNDER THE RFP HAS BEEN FULLY PERFORMED.

THE AWARD WITHOUT DISCUSSIONS ON AN INITIAL PROPOSAL (OFFER) BASIS WAS MADE UNDER THE AUTHORITY OF SECTION "D" GENERAL INSTRUCTIONS, EVALUATION AND AWARD FACTORS, OF THE RFP WHICH PROVIDES:

"THE GOVERNMENT MAY AWARD A CONTRACT, BASED ON THE INITIAL OFFER RECEIVED, WITHOUT DISCUSSION OF SUCH OFFER. ACCORDINGLY, EACH INITIAL OFFER SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT."

THE EXPRESS WORDING OF DAR APPENDIX E-407 PROVIDES ONLY FOR THE REJECTION OF BIDS WHICH ARE CONDITIONED ON THE FURNISHING OF ADVANCE PAYMENTS AND DOES NOT REQUIRE THE REJECTION OF SIMILARLY CONDITIONED OFFERS. NEVERTHELESS, IT IS CLEAR THAT THE GRANTING OF ADVANCE PAYMENTS UNDER THE REGULATION IS DISCRETIONARY IN NATURE. CONSEQUENTLY, POTOMAC SHOULD HAVE REALIZED THAT THE NAVY WAS NOT OBLIGATED TO CONSIDER THE COMPANY'S CONDITIONED OFFER TO BE ACCEPTABLE EVEN IF THE OFFER WAS OTHERWISE MOST ADVANTAGEOUS TO THE GOVERNMENT. MOREOVER, POTOMAC WAS ALSO ON NOTICE THAT IT WOULD NOT AUTOMATICALLY BE AFFORDED THE OPPORTUNITY TO REMOVE THE ADVANCE PAYMENT CONDITION THROUGH DISCUSSIONS IF THE NAVY INVOKED ITS RIGHT TO AWARD ON AN INITIAL OFFER BASIS WITHOUT DISCUSSIONS - A RIGHT EXPRESSLY SET FORTH IN THE RFP, AS NOTED ABOVE. SINCE THE NAVY EXERCISED ITS RESERVED RIGHT, WE SEE NO BASIS TO QUESTION THE EXCLUSION OF POTOMAC'S CONDITIONED OFFER.

FINALLY, POTOMAC ASSERTS THAT IT:

"CONTACTED THE PERSON HANDLING BOTH PROCUREMENTS ***NO LESS THAN THREE TIMES BUT WAS NEVER GIVEN ANY INDICATION THAT THE REQUESTS FOR ADVANCE PAYMENTS WOULD DISQUALIFY ITS BIDS OR IT WOULD HAVE WITHDRAWN THE REQUESTS."

WE SEE NO REASON WHY THE NAVY COULD NOT HAVE INFORMED POTOMAC IN RESPONSE TO THE COMPANY'S INQUIRIES THAT ADVANCE PAYMENTS WOULD NOT BE GRANTED UNDER THESE CONTRACTS BECAUSE OF THE TIME CONSTRAINTS INVOLVED. NEVERTHELESS, POTOMAC WAS FULLY AWARE OF THESE CONSTRAINTS AND THE POSSIBILITY THAT ADVANCE PAYMENTS MIGHT NOT BE GRANTED; THEREFORE, IN OUR VIEW, POTOMAC ASSUMED THE RISK THAT ITS OFFER MIGHT NOT BE ACCEPTED BECAUSE OF THE ADVANCE PAYMENT CONDITIONS. IN THESE CIRCUMSTANCES, THE NAVY'S SILENCE IN RESPONSE TO POTOMAC'S INQUIRIES DOES NOT AFFECT THE PROPRIETY OF THE AWARDS.

FOR THE REASONS STATED, THE PROTEST UNDER IFB N62472-80-R-1657 IS SUSTAINED BUT THE PROTEST UNDER RFP N62472-80-R-1652 IS DENIED.