B-202966.3,L/M, APR 23, 1982

B-202966.3,L/M: Apr 23, 1982

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THE SECRETARY OF THE NAVY: WE HAVE RECENTLY BEEN ADVISED OF CERTAIN ACTION TAKEN BY THE NAVAL SUPPLY CENTER. IN RESPONSE TO WHICH WE FOUND THAT THE LOW BID OF B&M MARINE REPAIRS WAS MATHEMATICALLY UNBALANCED BECAUSE EACH OF 48 LINE ITEMS. WE FOUND THAT THE NAVY'S ESTIMATES WERE NOT ACCURATE ENOUGH TO INSURE THAT ACCEPTANCE OF B&M'S BID WOULD RESULT IN THE LOWEST COST TO THE GOVERNMENT. RATHER WAS BASED ON DATA WHICH THE NAVY AND/OR B&M COULD HAVE SUBMITTED TO US DURING DEVELOPMENT OF THE PROTEST. TWI NOW HAS FORWARDED TO US A LETTER FROM THE DIRECTOR OF THE REGIONAL CONTRACTING DEPARTMENT AT THE NAVAL SUPPLY CENTER WHICH STATES THAT THE SOLICITATION IS BEING CANCELED BECAUSE ALL SIX BIDS SUBMITTED IN RESPONSE TO IT WERE MATHEMATICALLY UNBALANCED.

B-202966.3,L/M, APR 23, 1982

PRECIS-UNAVAILABLE

JOHN F. LEHMAN, THE SECRETARY OF THE NAVY:

WE HAVE RECENTLY BEEN ADVISED OF CERTAIN ACTION TAKEN BY THE NAVAL SUPPLY CENTER, NORFOLK, VIRGINIA, IN CONNECTION WITH A PROCUREMENT FOR REPAIR OF WATERTIGHT CLOSURES ABOARD SHIPS, WHICH APPEARS TO BE INAPPROPRIATE.

THIS MATTER ARISES OUT OF A PROTEST BY TWI, INCORPORATED, CONCERNING INVITATION FOR BIDS NO. N00189-81-B-0037, ISSUED BY THE NAVAL SUPPLY CENTER, IN RESPONSE TO WHICH WE FOUND THAT THE LOW BID OF B&M MARINE REPAIRS WAS MATHEMATICALLY UNBALANCED BECAUSE EACH OF 48 LINE ITEMS, REPRESENTING A MIX OF LABOR AND MATERIALS, DID NOT APPEAR TO CARRY ITS SHARE OF WORK PLUS PROFIT. IN ADDITION, WE FOUND THAT THE NAVY'S ESTIMATES WERE NOT ACCURATE ENOUGH TO INSURE THAT ACCEPTANCE OF B&M'S BID WOULD RESULT IN THE LOWEST COST TO THE GOVERNMENT. WE THEREFORE RECOMMENDED THAT THE NAVY REJECT B&M'S BID AND AWARD A CONTRACT TO THE NEXT LOWEST BIDDER WHO HAD SUBMITTED A MATHEMATICALLY BALANCED BID. SEE TWI INCORPORATED, B-202966, NOVEMBER 24, 1981, 61 COMP.GEN. , 81-2 CPD 424. BY LETTER OF THE SAME DATE, WE ASKED YOU TO ADVISE US OF THE ACTION TAKEN.

WE DENIED B&M'S SUBSEQUENT REQUEST FOR RECONSIDERATION BECAUSE IT CONTAINED NO INFORMATION WHICH WE HAD NOT PREVIOUSLY CONSIDERED, BUT RATHER WAS BASED ON DATA WHICH THE NAVY AND/OR B&M COULD HAVE SUBMITTED TO US DURING DEVELOPMENT OF THE PROTEST. NOR DID B&M DEMONSTRATE ANY ERRORS OF LAW IN OUR INITIAL DECISION. B&M MARINE REPAIRS, INC. - REQUEST FOR RECONSIDERATION, B-202966.2, FEBRUARY 16, 1982, 82-1 CPD 131.

TWI NOW HAS FORWARDED TO US A LETTER FROM THE DIRECTOR OF THE REGIONAL CONTRACTING DEPARTMENT AT THE NAVAL SUPPLY CENTER WHICH STATES THAT THE SOLICITATION IS BEING CANCELED BECAUSE ALL SIX BIDS SUBMITTED IN RESPONSE TO IT WERE MATHEMATICALLY UNBALANCED; THE LETTER INDICATES THAT THE REQUIREMENT WILL BE RESOLICITED.

TO ARRIVE AT THE CONCLUSION THAT ALL BIDS WERE MATHEMATICALLY UNBALANCED, THE CONTRACTING OFFICER DETERMINED THAT EACH BIDDER'S UNIT PRICES SHOULD REFLECT THAT BIDDER'S STANDING WITH REGARD TO TOTAL BID PRICES. THUS, THE LOW BIDDER WAS EXPECTED TO BE LOW AND THE SECOND-LOW BIDDER TO BE SECOND- LOW ON EACH LINE ITEM FOR BOTH THE BASE AND OPTION YEARS. NO BIDDER SUBMITTED UNIT PRICES WHICH MET THIS CRITERION.

IN OUR OPINION, THIS METHOD OF DETERMINING THAT BIDS WERE MATHEMATICALLY UNBALANCED HAS NO RELATION TO WHETHER A PARTICULAR UNIT PRICE ACCURATELY REFLECTS THE BIDDER'S COST PLUS A PROPORTIONATE SHARE OF PROFIT AND OVERHEAD. NOT ALL BIDDERS WILL HAVE THE SAME COSTS FOR THE SAME ITEMS, NOR WILL THEIR MARGINS OF PROFIT AND OVERHEAD BE IDENTICAL. MOREOVER, A SINGLE BIDDER SUBMITTING UNBALANCED UNIT PRICES COULD MAKE ALL OTHER PRICES APPEAR TO BE UNBALANCED.

CANCELLATION AND RESOLICITATION AFTER BIDS HAVE BEEN OPENED AND PRICES EXPOSED CREATES AN AUCTION ATMOSPHERE AND - AS A MATTER OF LAW - REQUIRES A COMPELLING REASON. SEE DEFENSE ACQUISITION REGULATION SEC. 2-404.1 (1976 ED.). WE DO NOT BELIEVE SUCH A REASON HAS BEEN SHOWN HERE.

FURTHER, DELAYS BY THE NAVY HAVE PERMITTED B&M, THE INCUMBENT CONTRACTOR, TO CONTINUE PERFORMING FOR AN ADDITIONAL YEAR UNDER EXTENSIONS TO ITS ORIGINAL CONTRACT. AS OUR FIRST DECISION INDICATES, BIDS WERE OPENED ON APRIL 15, 1981, AND THE PROTEST ON THE ISSUE OF UNBALANCING TIMELY FILED WITHIN 10 DAYS THEREAFTER. WE REQUESTED A REPORT FROM YOUR DEPARTMENT ON APRIL 23, 1981; ALTHOUGH WE GENERALLY EXPECT TO RECEIVE SUCH REPORTS WITHIN 25 WORKING DAYS, THE NAVY'S REPORT WAS NOT COMPLETED UNTIL JUNE 30 AND WAS NOT RECEIVED BY THE PROTESTER UNTIL JULY 16. WE RECEIVED A SUPPLEMENTAL REPORT FROM THE NAVY ON SEPTEMBER 3 AND, AS INDICATED ABOVE, ISSUED OUR DECISION IN NOVEMBER. DESPITE OUR CLEAR RECOMMENDATION, THE NAVAL SUPPLY CENTER WAITED FOR OUR DECISION ON RECONSIDERATION BEFORE DECIDING TO CANCEL AND RESOLICIT. THESE ACTIONS - OR LACK OF ACTION - WE VIEW AS DETRIMENTAL TO THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM.

WE WOULD APPRECIATE YOUR REVIEWING THIS MATTER AND TAKING APPROPRIATE ACTION TO HAVE THE BIDS EVALUATED IN A MEANINGFUL WAY. WE WOULD FURTHER APPRECIATE YOUR ADVISING US OF THE ACTION TAKEN.