B-241916, Mar 1, 1991, 91-1 CPD 239

B-241916: Mar 1, 1991

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PROCUREMENT - Competitive Negotiation - Offers - Evaluation errors - Prices DIGEST Protest is sustained where contracting officer in making his best value determination has no reasonable justification for award to an offeror on the Quality Vendor List at a price higher than the price offered by the low. Non-listed offeror which was improperly found to have had a past performance deficiency. Retrac argues that it is entitled to the award because it submitted the lowest price. Included a Clause M20 entitled "Quality Vendor Program (QVP) (Competition for Performance)." /1/ This clause provided that the agency would pay up to 20 percent price premium for contractors who have demonstrated dependable quality and delivery performance and are listed on the Quality Vendor List (QVL) for a particular federal supply class.

B-241916, Mar 1, 1991, 91-1 CPD 239

PROCUREMENT - Competitive Negotiation - Offers - Evaluation errors - Prices

DIGEST

Attorneys

Retrac:

Retrac, a division of Luverne Truck Equipment, Inc., protests the award of a contract to Lo-Mar Corporation under request for proposals (RFP) No. DLA740-90-R-0053, issued by the Defense Construction Supply Center for a requirements contract for rearview mirror assemblies, National Stock Number (NSN) 2540-01-151-4516. Retrac argues that it is entitled to the award because it submitted the lowest price.

We sustain the protest.

The solicitation, issued June 6, 1990, included a Clause M20 entitled "Quality Vendor Program (QVP) (Competition for Performance)." /1/ This clause provided that the agency would pay up to 20 percent price premium for contractors who have demonstrated dependable quality and delivery performance and are listed on the Quality Vendor List (QVL) for a particular federal supply class. The QVL is composed of contractors who, through an application process, demonstrate dependable quality and delivery performance of Department of Defense (DOD) contracts during the 12 months prior to a particular procurement. Applicants must have demonstrated a 95 percent or higher on-time delivery on DOD award documents and delivered at least 95 percent of all identified DOD award documents without valid Quality Deficiency Records and Reports of Discrepancy charged against the applicants. Offerors not listed on the QVL may participate in the procurement and are still considered for award.

In determining whether to apply the evaluation preference in the award decision, the contracting officer was required by the RFP to consider the following factors: (1) whether the item is used in a weapon system; (2) delivery and quality history of the item; (3) the inventory supply status of the item; (4) required delivery schedule; (5) whether supply sources are limited; (6) absolute dollar difference of offers; (7) industrial base considerations; and (8) new offerors. If the determination is made to use the QVP, the contracting officer is authorized to make an award to an offeror on the QVL at a price higher than the price offered by the low, non-listed offeror, if it is determined by the contracting officer that the additional expenditure will result in the government receiving the best value because of the enhanced level of probable quality and timely delivery by that offeror. A QVL application was included with the solicitation.

Four offers were received by the closing date of July 6. Two of the offers were withdrawn prior to receipt of best and final offers (BAFOs). BAFOs were received from both Retrac and Lo-Mar. Retrac was low with an average unit price of $24.81 (total of approximately $269,000 with options), while Lo-Mar offered an average unit price of $27.62 (total of approximately $300,000). Lo-Mar was listed on the QVL.

Retrac submitted an application for inclusion on the QVL on August 13. Retrac's application was denied because the agency determined that Retrac failed to deliver at least 95 percent of all identified DOD contract awards within the previous 12 months without valid quality complaints against them. In reviewing Retrac's previous 12 month DOD procurement history, seven awards were identified by the agency. One award made by the Defense Industrial Supply Center had a quality complaint for shipping without source inspection as required by the contract. This gave Retrac a 14 percent quality deficiency rate which precluded it from qualifying for the QVL. Since Lo-Mar was listed on the QVL and its average unit price was less than 20 percent higher (11.3 percent) than Retrac's lower price, the agency determined that award to Lo-Mar provided the best value to the government. Award was made to Lo-Mar on October 22. This protest followed, and a stop work order was issued pending a decision on the protest.

Retrac argues that it should receive the award because it submitted the lowest price, that it is the original equipment manufacturer currently producing the item, and that the alleged quality defect was merely a "paperwork problem" on a very small order.

Here, we will examine whether the selection of Lo-Mar's offer, instead of Retrac's, was reasonably based and consistent with the established evaluation criteria. Grey Advertising, Inc., 55 Comp. Gen 1111 (1976), 76-1 CPD Para. 325.

As stated above, in making a decision to award to an offeror on the QVL at a price higher than the price offered by the low, nonlisted offeror, the contracting officer must determine that the additional expenditure will result in the government receiving the best value because of the enhanced level of probable quality and timely delivery by that offeror. The record shows that there were seven contracts awarded to Retrac for the period subject to the quality performance evaluation. The total amount of the contracts awarded to Retrac was approximately $11,246.00. The contract for which Retrac received a quality deficiency report was a small purchase order for a nut worth only $112. Before receiving this order, Retrac submitted a quotation on the basis of inspection at destination. The purchase order was apparently improperly awarded by the agency on the basis of inspection at origin. A contract modification was subsequently issued to correct the discrepancy. The agency does not rebut the protester's showing that the alleged discrepancy was a minor clerical error under an insignificant order.

The QVP program as implemented by the solicitation clause allows the contracting officer to consider past performance in making a best value analysis. The solicitation specifically provided that offerors not listed on the QVL were allowed to participate in the procurement. Consequently, whether or not a firm qualifies for the QVL, its offer must be given the proper consideration with respect to the best value determination. Here, Retrac's offer was over 11 percent lower than the awardee's. Retrac is the original equipment manufacturer for the part being procured and is currently producing the part under another ongoing contract. We find it unreasonable for the agency to pay over 11 percent more for an item (an additional $31,000) simply because of a minor paperwork problem on a $112 small purchase order. In our view, such a determination, without proper consideration of the nature of the alleged discrepancy in past performance makes the decision unreasonable and arbitrary. In short, we find the record does not justify the award to Lo-Mar at such a higher price.

The protest against award to Lo-Mar is sustained. We recommend that the agency terminate for convenience the award to Lo-Mar and award the contract to Retrac, if otherwise appropriate. Further, we find Retrac entitled to the costs of pursuing the protest, including attorneys' fees. 4 C.F.R. Sec. 21.6 (d)(1) (1990); See Falcon Carriers, Inc., 68 Comp.Gen. 206 (1989), 89-1 CPD 96.

/1/ Retrac has not protested the question of whether the QVP is consistent with the Small Business Act, 15 U.S.C. Sec. 637(b)(7)(A) (1988), or is otherwise improper. Thus, our decision is limited to the propriety of the selection decision.