B-203780, SEP 28, 1981

B-203780: Sep 28, 1981

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AN AGENCY'S DECISION TO CANCEL A SMALL BUSINESS SET-ASIDE PROCUREMENT ON THE BASIS THAT ALL BIDS RECEIVED FROM SMALL BUSINESS CONCERNS WERE UNREASONABLY HIGH. IS UNOBJECTIONABLE WHERE THE LOWEST SMALL BUSINESS BID WAS 4.3 TIMES GREATER THAN THE GOVERNMENT ESTIMATE AND THERE IS NO ALLEGATION OR INDICATION THAT THE ESTIMATE WAS ERRONEOUS. 2. PRICES PREVIOUSLY PAID A LARGE BUSINESS FOR A SIMILAR ITEM MAY BE CONSIDERED IN DETERMINING WHETHER PRICES OFFERED BY SMALL BUSINESS CONCERNS UNDER A SET-ASIDE ARE REASONABLE. BASED ON ITS DETERMINATION THAT THE TWO RESPONSIVE BIDS RECEIVED WERE UNREASONABLY HIGH. AINSLIE WAS THE LOW RESPONSIVE BIDDER ON THE SOLICITATION AND CONTENDS THERE WAS NO COMPELLING REASON FOR THE CANCELLATION.

B-203780, SEP 28, 1981

DIGEST: 1. AN AGENCY'S DECISION TO CANCEL A SMALL BUSINESS SET-ASIDE PROCUREMENT ON THE BASIS THAT ALL BIDS RECEIVED FROM SMALL BUSINESS CONCERNS WERE UNREASONABLY HIGH, IS UNOBJECTIONABLE WHERE THE LOWEST SMALL BUSINESS BID WAS 4.3 TIMES GREATER THAN THE GOVERNMENT ESTIMATE AND THERE IS NO ALLEGATION OR INDICATION THAT THE ESTIMATE WAS ERRONEOUS. 2. PRICES PREVIOUSLY PAID A LARGE BUSINESS FOR A SIMILAR ITEM MAY BE CONSIDERED IN DETERMINING WHETHER PRICES OFFERED BY SMALL BUSINESS CONCERNS UNDER A SET-ASIDE ARE REASONABLE.

AINSLIE CORPORATION:

AINSLIE CORPORATION PROTESTS THE CANCELLATION OF INVITATION FOR BIDS (IFB) NO. 10-0093-1, ISSUED AS A TOTAL SMALL BUSINESS SET-ASIDE BY THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION'S (NASA) KENNEDY SPACE CENTER IN FLORIDA. NASA CANCELED THE SOLICITATION, WHICH CALLED FOR DELIVERY OF 12 HIGH-PERFORMANCE MICROWAVE PARABOLIC ANTENNAS, BASED ON ITS DETERMINATION THAT THE TWO RESPONSIVE BIDS RECEIVED WERE UNREASONABLY HIGH. AINSLIE WAS THE LOW RESPONSIVE BIDDER ON THE SOLICITATION AND CONTENDS THERE WAS NO COMPELLING REASON FOR THE CANCELLATION. WE DENY THE PROTEST.

THE FOLLOWING THREE BIDS WERE OPENED ON MAY 15, 1981:

ANDREW CORPORATION $ 16,870 (13,496 IF ALL ITEMS WERE PURCHASED AS A PACKAGE)

AINSLIE 97,000

UB CORPORATION 123,500

ANDREW CORPORATION IS NOT A SMALL BUSINESS AND ITS BID WAS REJECTED AS "NONRESPONSIVE TO THE SMALL BUSINESS SET-ASIDE." ALTHOUGH AINSLIE WAS THUS THE LOW RESPONSIVE BIDDER, THE CONTRACTING OFFICER DETERMINED THAT THE AINSLIE AND UB CORPORATION BIDS WERE UNREASONABLY HIGH. THE CONTRACTING OFFICER ACCORDINGLY REJECTED BOTH BIDS AND, BY LETTER DATED JUNE 11, ADVISED THE BIDDERS THAT THE SOLICITATION HAD BEEN CANCELED AND THAT THE REQUIREMENT WOULD BE RESOLICITED. A NEW SOLICITATION WAS ISSUED ON JUNE 23 TO BOTH LARGE AND SMALL BUSINESSES. NASA REPORTS THAT BIDS HAVE BEEN OPENED BUT THAT AWARD HAS BEEN POSTPONED PENDING RESOLUTION OF THIS PROTEST.

CANCELLATION OF AN IFB AFTER BID OPENING IS AUTHORIZED WHEN ALL THE ACCEPTABLE BIDS RECEIVED ARE UNREASONABLE AS TO PRICE. FEDERAL PROCUREMENT REGULATIONS (FPR) SEC. 1-2.404(B)(5) (1964 ED.); MCNAMARA LUNZ VANS & WAREHOUSES, INC., B-198259, AUGUST 11, 1980, 80-2 CPD 107. SIMILARLY, FPR SEC. 1-1.706.3 AUTHORIZES THE WITHDRAWAL OF A SMALL BUSINESS SET-ASIDE BASED ON A PROPER DETERMINATION THAT THE BIDS RECEIVED FROM SMALL BUSINESS CONCERNS ARE UNREASONABLE. IN THIS REGARD, WHILE AN AWARD CAN BE MADE ON A SMALL BUSINESS SET-ASIDE AT A PRICE ABOVE THAT OBTAINABLE ON THE OPEN MARKET FROM LARGE BUSINESS FIRMS, AN EXCESSIVE AND UNREASONABLE PRICE MAY NOT BE PAID. NORTH AMERICAN SIGNAL COMPANY, B-190972, MAY 19, 1978, 78-1 CPD 387; SOCIETY BRAND, INC., ET AL., 55 COMP.GEN. 475 (1975), 75-2 CPD 327.

IT IS FOR THE CONTRACTING OFFICER TO DETERMINE WHETHER THE PRICES SUBMITTED BY SMALL BUSINESSES ARE UNREASONABLE, AND WE WILL NOT DISTURB SUCH A DETERMINATION WHERE IT IS SUPPORTED BY A RATIONAL BASIS. SCHOTTEL OF AMERICA, INC., B-190546, MARCH 21, 1978, 78-1 CPD 220; MCNAMARA-LUNZ VANS & WAREHOUSES, INC., SUPRA. WE HAVE RECOGNIZED THAT THIS DETERMINATION MAY BE BASED UPON A GOVERNMENT ESTIMATE, PAST PROCUREMENT HISTORY, CURRENT MARKET CONDITIONS, OR OTHER RELEVANT FACTORS, INCLUDING ANY WHICH MAY HAVE BEEN DISCLOSED BY THE BIDDING. SCHOTTEL OF AMERICA, INC., SUPRA.

HERE, THE CONTRACTING OFFICER APPARENTLY CONCLUDED THAT THE AINSLIE AND UB PRICES WERE UNREASONABLY HIGH BECAUSE THEY WERE AT LEAST SEVEN TIMES THE AMOUNT OF ANDREW'S BID. THE CONTRACTING OFFICER'S FORMAL DETERMINATION TO CANCEL THE IFB RECITES AS THE REASON THEREFOR "THE DISPARITY IN THE PRICES BID."

AINSLIE QUESTIONS THE PROPRIETY OF THE DETERMINATION, NOTING THAT ANDREW HAD ENTERED ITS OWN PART NUMBERS ON THE IFB SCHEDULE FOLLOWING THE DESCRIPTION OF EACH ITEM. AINSLIE CONTENDS THAT THE INSERTION OF THESE PART NUMBERS RENDERED ANDREW'S BID NONRESPONSIVE AND THAT IT WAS UNFAIR TO COMPARE AINSLIE'S PRICES FOR THE SPECIFICATION ITEMS WITH ANDREW'S LOWER PRICES BASED UPON ITS OWN PART NUMBERS.

THE CONTRACTING OFFICER, ON THE OTHER HAND, ASSERTS THAT APART FROM THE FACT THAT IT WAS SUBMITTED BY A LARGE BUSINESS, "ANDREW'S BID WAS FULLY RESPONSIVE TO THE IFB, INCLUDING THE SPECIFICATION." MOREOVER, THE CONTRACTING OFFICER STATES, AINSLIE'S AND UB'S BIDS WOULD HAVE BEEN REJECTED AS UNREASONABLY HIGH EVEN IF ANDREW HAD NOT BID, BECAUSE THE GOVERNMENT'S ESTIMATE OF THE COST OF THE ANTENNAS WAS $20,500 - A SMALL FRACTION OF THE PRICE OFFERED BY THE TWO SMALL BUSINESS BIDDERS.

AS WE PREVIOUSLY INDICATED, AT THE TIME THE CONTRACTING OFFICER REJECTED THE SMALL BUSINESS BIDS AS UNREASONABLY HIGH, THE ONLY REASON HE GAVE WAS "THE DISPARITY IN THE PRICES BID." HIS CONCLUSION WOULD NOT BE REASONABLE, OF COURSE, IF ITS ONLY SUPPORT WAS A COMPARISON OF SMALL BUSINESSES' PRICES FOR SPECIFICATION ITEMS WITH A LARGE BUSINESS' PRICE FOR DISSIMILAR ITEMS. WE CANNOT SAY THAT IS WHAT OCCURRED HERE. NASA CONCLUDED THAT ANDREW WAS OFFERING ITEMS FULLY CONFORMING TO THE SPECIFICATIONS EVEN THOUGH IT ALSO INCLUDED ITS OWN PART NUMBERS IN ITS BID. ALTHOUGH NASA HAS SUBMITTED NO EVIDENCE DOCUMENTING THE MANNER IN WHICH IT REACHED THIS CONCLUSION, AINSLIE HAS OFFERED NO EVIDENCE REFUTING IT. CERTAINLY, AINSLIE HAS NOT AFFIRMATIVELY PROVEN THE AGENCY'S POSITION AS TO THE RESPONSIVENESS OF ANDREW'S BID WAS IN ERROR. SEE A.R.&S.ENTERPRISES, INC., B-197303, JULY 8, 1980, 80-2 CPD 17.

AS AN ADDITIONAL BASIS FOR REJECTING THE SMALL BUSINESS BIDS AS UNREASONABLY HIGH, NASA STATES THAT ITS ESTIMATE OF THE COST OF THE PROCUREMENT WAS $20,500. THE RECORD IS VAGUE AS TO WHEN THE GOVERNMENT ESTIMATE WAS PREPARED, AND IF IT WAS RELIED UPON BY THE CONTRACTING OFFICER AT THE TIME OF HIS DETERMINATION TO REJECT ALL BIDS, THAT FACT WAS NOT MEMORIALIZED. NEVERTHELESS, THE FILE SHOWS THAT THE FIGURE OF $20,500 WAS DERIVED BY APPLYING "INFLATION ADJUSTMENTS AND OTHER CONTINGENCY COSTS" TO THE PRICES PAID A LARGE BUSINESS FOR LIKE ITEMS UNDER TWO PRIOR PROCUREMENTS AND TO PRICES CONTAINED IN AN ANDREW SALES BULLETIN.

AINSLIE'S BID WAS APPROXIMATELY 4.3 TIMES GREATER THAN THE GOVERNMENT ESTIMATE. WE HAVE FOUND CANCELLATION TO BE JUSTIFIED WHERE THE LOW BID UNDER AN INVITATION WAS AS LITTLE AS 7.2 PERCENT GREATER THAN WHAT THE GOVERNMENT ESTIMATED IT SHOULD PAY FOR THE GOODS OR SERVICES. BUILDING MAINTENANCE SPECIALISTS, INC., B-186441, SEPTEMBER 10, 1976, 76-2 CPD 233; SEE ALSO THE HALLOWAY COMPANY, B-197557, AUGUST 18, 1980, 80-2 CPD 128 (LOWEST BID APPROXIMATELY 1.8 TIMES GREATER THAN ESTIMATE). AINSLIE HAS NOT CHALLENGED THE ACCURACY OF THE GOVERNMENT ESTIMATE, WHICH WAS LARGELY BASED ON PAST CONTRACTS WITH A LARGE BUSINESS, AND WE FIND NO REASON TO QUESTION IT. WE HAVE REPEATEDLY STATED THAT BIDS SUBMITTED BY LARGE BUSINESSES ON PAST PROCUREMENTS MAY BE USED IN DETERMINING THE REASONABLENESS OF SMALL BUSINESS BIDS FOR THE SAME OR SIMILAR ITEMS. CUSTOM MARINE, INC., B-200126, FEBRUARY 19, 1981, 81-1 CPD 111; NORTH AMERICAN SIGNAL COMPANY, SUPRA; G.S.E.DYNAMICS, INC., B-189329, FEBRUARY 15, 1978, 78-1 CPD 127. THUS, IN VIEW OF THE GREAT DISPARITY BETWEEN AINSLIE'S PRICE AND THE GOVERNMENT ESTIMATE, WE FIND NO BASIS FOR OBJECTING TO THE CONTRACTING OFFICER'S DETERMINATION THAT ALL RESPONSIVE BIDS WERE UNREASONABLE, AND HIS ENSUING DECISION TO CANCEL THE SOLICITATION WAS THUS UNOBJECTIONABLE.

THE PROTEST IS DENIED.