B-238672, Jun 25, 1990, 90-1 CPD 590

B-238672, Jun 25, 1990, 90-1 CPD 590

PROCUREMENT - Specifications - Minimum needs standards - Risk allocation - Performance specifications PROCUREMENT - Sealed Bidding - Invitations for bids - Terms - Risks DIGEST: Protest that solicitation for indefinite quantity repair to firing ranges subjects contractor to unreasonable risk due to requirement for aggregate pricing for several ranges, rather than separate prices for each range, is denied where, although estimate of work to be ordered on all ranges is considered reasonably accurate, quantities for each individual range are impossible to estimate due to unpredictability of range use; without accurate estimates, individual range prices would not permit an accurate determination of which bid ultimately would result in the lowest cost to the government.

Attorneys

Neil Gardis & Associates, Inc.:

Neil Gardis & Associates, Inc., the incumbent contractor, protests any award under invitation for bids (IFB) No. N68711-90-B-1086, issued by the Navy for an indefinite quantity contract to repair firing ranges at the Marine Corps Base, Camp Pendleton, California. Gardis maintains that the IFB is defective because it unjustifiably imposes unnecessary risk on the contractor and thus unduly restricts competition.

We sustain the protest.

The IFB called for repair (excavation and removal of spent ammunition) of the impact areas of several rifle and pistol ranges and requested bids on a price per cubic yard basis. The work was divided into three line items covering eight (item 0001), two (item 0002) and six (item 0003) ranges. Each line item specified a maximum quantity in terms of total cubic yards for all ranges under the item (11,000, 2,300 and 8,700 yards, respectively), and requested a unit and extended price; the three extended prices then were to be added for a single total price.

Gardis timely protested the structure of the IFB before bid opening, but the Navy proceeded with the opening as scheduled and received 11 bids. The low bid was $238,530. Gardis submitted the fourth low bid of $291,650.

Gardis contends that the IFB exposes the contractor to unwarranted risk, and likely will not result in the lowest cost to the government, due to the failure to allow bids for each different range. Gardis explains in this regard that the work at some ranges is more difficult than at others- - and thus is more costly to perform-- due to such factors as accessibility and terrain; the Navy anticipated that the costs could range from $9.50 to $12 per cubic yard. This being the case, Gardis continues, if, in order to be competitive, a bidder averaged its true costs for the different ranges to arrive at a single aggregate price, it would be subjecting itself to the risk that the government would elect to order work only on the most expensive ranges during the performance period; on the other hand, if the government ordered more work on the inexpensive ranges, the government would end up paying a higher price than necessary. Gardis concludes that the IFB should be canceled and revised to permit prices for each range.

The Navy states that it structured the solicitation in this manner to allow it greater flexibility to schedule work on the individual ranges to include increasing quantities, if required, without affecting the unit prices for the work. While recognizing that there would be some variation in the unit prices for the different ranges, the Navy did not consider the potential negative impact on bidders to be sufficient to overcome its interest in scheduling flexibility.

A solicitation is not defective merely because it may put contractors at risk in terms of, for example, the possibility that payments under the contract will not cover the cost of performance. S.P.I.R.I.T. Specialist Unlimited, Inc., B-237114.2, Mar. 8, 1990, 90-1 CPD Para. 257. There is some amount of risk inherent in any procurement, and offerors are expected to use their professional expertise and business judgment in taking these risks into account in computing their offers. Agencies may decide to impose reasonable risks on contractors in order to limit the burdens on the government. Id.; KCA Corp., B-236260, Nov. 27, 1989, 89-2 CPD Para. 498.

We find that the pricing structure in the IFB here does not meet the test of reasonableness. While scheduling flexibility generally might be a legitimate basis for imposing certain kinds of risks on bidders, there is no indication that aggregating several ranges under single unit prices will achieve this end. The Navy, aside from its assertion that this result will be achieved, has presented no explanation or examples of how this can be expected to occur. As we review the IFB, there appears to be no connection between scheduling flexibility and pricing; the indefinite quantity contract to be awarded under the IFB would allow the contracting officer to place delivery orders based on actual range availability, no matter how prices were broken down. Thus, if bidders were permitted to offer prices for individual ranges, based on quantity estimates for each range, we see no reason (and the Navy has presented none) why the Navy would not be able to order all work necessary for each range at the offered price.

We see no other legitimate purpose to be served by requiring aggregate prices. We can, however, envision two obvious results from such pricing that would be detrimental either to the contractor or to the government if, as Gardis suggests, bidders offered a single average price: (1) if the Navy ultimately ordered additional work at the most expensive ranges, the contractor would be required to perform at a lower price than it would have offered had it been permitted to price the ranges separately; or (2) if the Navy ordered more work at the least expensive ranges, the government would pay a higher price for the work than if individual range pricing had been permitted. A third possibility, if bidders offered their highest price instead of an average (to totally eliminate the risk of having to perform at the expensive ranges at a low price), would be that the government would pay a much higher price for any work ordered at the less expensive ranges.

Given that the above potential problems can be eliminated by permitting bids for each range without any apparent negative effect on the agency, and that aggregate pricing may tend to restrict competition and has not been shown to serve any legitimate government interest, we agree with Gardis that the IFB is defective. Accordingly, by letter of today to the Secretary, we are recommending that the IFB be canceled and that the requirement be resolicited based on estimated quantities and prices for each range. We also find that Gardis is entitled to reimbursement of its costs of pursuing its protest.

The protest is sustained.