B-235136, Jul 20, 1989, 89-2 CPD 68

B-235136: Jul 20, 1989

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Claim for bid preparation and protest costs is denied since mere negligence or lack of due diligence by the agency. The IFB was canceled after bid opening due to the lack of sufficient funds. The IFB was issued September 12. Bids were opened on February 9. Because there were no purchase records in existence for the landing mat sets being procured by the procuring activity. The Army acknowledges that its estimate was "grossly understated. The Army states that it did not know that its estimate was flawed until bids were opened. Hac asserts the government's estimate for the procurement grossly understates the actual cost of the items and that it would not have submitted a bid had it known the limited amount of funds available for the procurement.

B-235136, Jul 20, 1989, 89-2 CPD 68

PROCUREMENT - Sealed Bidding - Bids - Preparation costs PROCUREMENT - Bid Protests - GAO procedures - Preparation costs DIGEST: Where agency negligently prepares government estimate for a procurement which results in agency cancellation of invitation for bids after bid opening due to lack of sufficient funds to make purchase, claim for bid preparation and protest costs is denied since mere negligence or lack of due diligence by the agency, standing alone, does not provide a basis for the recovery of bid preparation and protest costs.

Hac Corporation:

Hac Corporation protests agency actions under invitation for bids (IFB) No. DAAK01-88-B-0211, issued by the U.S. Army Troop Support Command for a landing mat set and related items. The IFB was canceled after bid opening due to the lack of sufficient funds. Hac contends that, because of an unreasonably low government estimate, the Army failed to ensure that proper funds would be available and thus improperly induced HAC to submit a bid for a project which later had to be canceled due to insufficient funds. The protester requests that it be awarded its bid preparation and protest costs.

We deny the protest and claim.

The IFB was issued September 12, 1988, as a total small business set aside, and bids were opened on February 9, 1989. Hac submitted the low responsive bid of the three bids received. However, because its price of $10,497,250 far exceeded the $833,304 committed and available to the government for this procurement, the Army, on March 27, canceled the solicitation in its entirety. This protest followed. The Army states that it established an estimated price for the solicitation in accordance with the Federal Acquisition Regulation (FAR) by considering historical pricing information plus cost indexing to allow for inflation, budgetary considerations, and the complexity of the item. The agency, however, points out that, because there were no purchase records in existence for the landing mat sets being procured by the procuring activity, the activity used a 1973 Department of the Army Supply Bulletin, "Army Adopted and Other Items of Material Selected for Authorization," which listed a landing mat set for $673,711. After some adjustment for inflation, the Army committed $730,711 for the primary item and $833,304.40 for the total procurement.

The Army acknowledges that its estimate was "grossly understated," and "less than adequate." However, the Army states that it did not know that its estimate was flawed until bids were opened. It states that it had a need for the item, that it honestly intended to make an award when it issued the IFB, and that the agency did not issue the solicitation in bad faith.

Hac does not dispute these statements and specifically states that it does not allege that the Army acted in bad faith. Rather, Hac asserts the government's estimate for the procurement grossly understates the actual cost of the items and that it would not have submitted a bid had it known the limited amount of funds available for the procurement. Hac alleges that the Army failed to comply with FAR provisions regarding advance planning and government estimate preparation. For example, the protester alleges that the Army did not comply with FAR Sec. 1.602-2(a) (FAC 84-33), which provides that in preparing for a procurement, "contracting officers shall ... ensure that sufficient funds are available for obligation." Hac argues that because our authority to allow recovery of bid preparation and protest costs is predicated on a determination by our Office that a solicitation, proposed award, or award does not comply with statute or regulation, it is entitled to recover its protest and bid preparation costs. See Competition in Contracting Act of 1984, 31 U.S.C. Sec. 3554(c)(1) (Supp. IV 1986); 4 C.F.R. Sec. 21.6(d) (1988).

While we agree that the FAR confers certain responsibilities on agencies to conduct their procurements using advance procurement planning and to ensure that sufficient funds are available for obligation, the issue, in our view, is whether the agency should be required to pay the protester's costs where it negligently prepares a government estimate. Here, the record shows that the government estimate was prepared in good faith and that the agency issued the solicitation clearly with the intent to award a contract. However, the agency does apparently concede that the government estimate was prepared negligently. Under these circumstances, we do not think that the protester should be awarded its costs. Such negligence or lack of diligence provides no basis on which to allow recovery of bid preparation costs where, as here, there is no indication of bad faith, or that the agency arbitrarily or capriciously failed to obtain full and open competition. See Interstate Diesel Service, Inc., B-229622, Feb. 12, 1988, 88-1 CPD Para. 144; Computer Resource Technology Corp., B-218292.2, July 2, 1985, 85-2 CPD Para. 14; Northwest Regional Educational Laboratory -- Request for Proposal Preparation Costs, B-213464.2, July 24, 1984, 84-2 CPD Para. 99.

Accordingly, the protest and claim are denied.