Matter of: Stocker & Yale, Inc. File: B-249466.2 Date: January 29, 1993

B-249466.2: Jan 29, 1993

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

PROCUREMENT Competitive Negotiation Unbalanced offers Materiality Determination Criteria Protest that awardee's offer should have been rejected as unbalanced is denied where offer does not contain enhanced prices for any item. The RFP is for the acquisition of unmounted. Argues that the Army should have rejected Cammenga's offer as materially unbalanced. The contractor is required to make deliveries directly to the end user and is required to maintain a minimum and maximum inventory in a secure storage area until the contractor is authorized to ship the items. Offerors were warned that a proposal could be rejected as unacceptable if it is materially unbalanced as to prices offered for contract line items.

Matter of: Stocker & Yale, Inc. File: B-249466.2 Date: January 29, 1993

PROCUREMENT Competitive Negotiation Unbalanced offers Materiality Determination Criteria Protest that awardee's offer should have been rejected as unbalanced is denied where offer does not contain enhanced prices for any item.

Attorneys

DECISION Stocker & Yale, Inc. (S&Y) protests the award of a contract to Cammenga & Associates, Inc. under request for proposals (RFP) No. DAAK01- 92-R-0090, issued by the Department of the Army, Army Troop Support Command. The RFP is for the acquisition of unmounted, lensatic, magnetic compasses identified by National Stock Number 6605-01-196-6971. S&Y, the incumbent contractor, argues that the Army should have rejected Cammenga's offer as materially unbalanced.

We deny the protest.

The RFP contemplated the award of a firm, fixed-price, indefinite quantity contract for a base year and option periods totaling 5 years to the qualified low offeror. The solicitation identified the total estimated contract quantity over the 5 year period as 96,000 minimum and 358,400 maximum. The solicitation includes provisions of the direct vendor delivery/just-in-time inventory (DVD/JITI) program. Under this program, the contractor is required to make deliveries directly to the end user and is required to maintain a minimum and maximum inventory in a secure storage area until the contractor is authorized to ship the items.

The RFP schedule solicited unit prices for 16 contract line items (CLINS), each with its own sub-line items. Offerors were warned that a proposal could be rejected as unacceptable if it is materially unbalanced as to prices offered for contract line items.

Two firms submitted offers by the May 19 closing date. The agency evaluated the pricing of each offer based on the total price of the following: (1) the total price of any data items; (2) the total price for any first article, initial production models, and/or maintenance capability models and (3) the total price for the remaining estimated total production quantities distributed over the ordering periods as-- 96,000 each, first ordering period; 67,200 each, second ordering period; 67,200 each, third ordering period; 67,200 each, fourth ordering period and 60,800 each, fifth ordering period.

On May 27, the agency opened discussions with both offerors. S&Y was notified that its proposal was included in the competitive range and was invited to submit a best and final offer (BAFO). Cammenga, the ultimate awardee, was asked to clarify its pricing for several CLINS. After reviewing Cammenga's revised proposal, the agency requested and received a BAFO submission from the firm.

On August 31, the contracting officer reopened discussions with Cammenga seeking further clarification of its BAFO because the firm's price for first article (FA) units appeared to be excessive. In addition, suspecting that Cammenga's proposed price of $0.25 for DVD/JITI program charges (CLIN 0002AA) was a mistake (the historical price for the CLIN was $2.77), the contracting officer requested that Cammenga verify its price. In a letter dated September 1, Cammenga responded that it had reviewed all of its costs related to the work, including the costs related to CLIN 0002AA and verified its unit price of $0.25. Further, Cammenga stated that since all FA units would be made with the actual tools and equipment to be used during production, its FA unit price included "most of the tooling costs and other non-recurring costs." As requested, Cammenga provided a breakdown of these tooling costs with its response.

Thereafter, the contracting officer requested a second BAFO from Cammenga noting that "a final determination on acceptability and contract award will be made based on the receipt of the requested BAFO." The contracting officer informed S&Y that discussions had been reopened and S&Y was asked to submit a second BAFO. S&Y refused, stating that a second round of BAFOs was unwarranted and only served to create an auction. After reviewing Cammenga's second BAFO, which contained a substantially reduced FA unit price, the contracting officer determined that Cammenga was the low responsible offeror and that its offer as modified was acceptable. On September 18, the Army awarded Cammenga the contract. This protest followed.

The concept of material unbalancing may apply in negotiated procurements where, as here, price constitutes a primary basis for the source selection. FAR Sec. 52.215-16(g); Virginia Mfg. Co., Inc., B-241404, Feb. 4, 1991, 91-1 CPD Para. 113. Unbalanced pricing has two aspects. First, the offer must be evaluated mathematically to determine whether each item carries its share of the cost of the work specified for that item as well as overhead and profit. If the offer is based on nominal prices for some of the work and enhanced prices for other work, it is mathematically unbalanced. The second part of the test is to evaluate the offer to determine whether award to an offeror that has submitted a mathematically unbalanced offer will result in the lowest overall cost to the government. If award to a party that submits a mathematically unbalanced offer will not result in the lowest cost to the government, the offer is materially unbalanced and can not be accepted. See Westbrook Indus., Inc., 71 Comp. Gen. 139 (1992), 92-1 CPD Para. 30.

S&Y and Cammenga submitted the following unit prices for the first to fifth years:

FA units S&Y Cammenga 0001AB (10) $199.90 $76.00

Production Units 0001AA (95,990) 24.74 25.24 0005AA (67,200) 25.73 22.55 0008AA (67,200) 26.76 23.68 0011AA (67,200) 27.83 24.86 0014AA (60,800) 28.95 24.86

DVD/JITI 0002AA 2.80 0.25 0006AA 2.91 0.25 0009AA 3.03 0.25 0012AA 3.15 0.25 0015AA 3.28 0.25 Test Reports A001 20,000 2,500 A002 15,000 500 Total 10,648,527.60 8,806,483.60

The protester contends that Cammenga's offer is materially unbalanced. It argues that the awardee's offer is based on prices significantly overstated for some work and prices which are significantly less than cost for other work. For example, S&Y alleges that Cammenga's per unit price for the production units is 99 percent higher than the per unit price for the DVD/JITI program charges, which S&Y asserts are unrealistically low. This pricing method, the protester argues, would provide the awardee with a significant up-front payment, while payment for the DVD/JITI program charges would not be made until actual DVD shipment of the compasses.

Award of a contract for supplies or services that involves evaluation of a base period and option periods will be questioned if, in terms of the pricing structure evident among the base and optional periods, it is neither internally consistent nor comparable to the other offers received. We have recognized that a large price differential between the base and option periods, or between one option period and another, may be evidence of mathematical unbalancing. See Tri-Cor Indus., Inc., B-248160 et al., July 27, 1992, 92-1 CPD Para. 56.

Here, the record does not demonstrate that Cammenga's offer was mathematically unbalanced. Although S&Y alleges that the awardee's unit prices for the production units are overstated relative to the unit prices for the DVD/JITI program charges, there is no showing that Cammenga's per unit production prices were enhanced or are internally inconsistent. In fact, as shown above, Cammenga's unit prices for 12 of the 13 CLINS are lower than the protester's. While the protester's base year unit price for the production units (CLIN 0001AA) is lower than Cammenga's, the $0.50 difference in unit price is insignificant. See Earth Eng'g and Sciences, Inc., B-248219, July 30, 1992, 92-2 CPD Para. 72. Further, the DVD/JITS CLIN is always ordered in the same quantity as the production CLIN, thus Cammenga's total base year price is, in fact, significantly lower than S&Y's, and under any ordering combination award to Cammenga results in the lowest overall cost to the government. Since there is nothing in the record to suggest that Cammenga's offer contained any prices which are enhanced, Cammenga's offer not mathematically unbalanced, and thus cannot be materially unbalanced. See OMSERV Corp., B-237691, Mar. 13, 1990, 90-1 CPD Para. 271.

The protest is denied.