Protest of Contract Modification

B-200718: Aug 17, 1981

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A firm protested contract modifications and contended that the Army should have resolicited its requirement for refuse collection and disposal at a base housing area. The protester argued that modifications to the contract so substantially changed the contractor's conditions of performance that the competition for the contract was undermined. It asserted that the Army awarded the contract to another firm because it intended to modify the contract materially. On two of the items in the invitation for bids (IFB), the offerors were permitted to elect between bidding to provide backyard service and curbside collection. The IFB was modified to indicate that some of the containers which the Army had been using for refuse would be replaced with mobile toters which could be wheeled to the street. Subsequent to the award of the contract based on curbside pickup, the base commander issued a modification to the contract to continue backyard service until the time mobile toters became available for all of the dwellings. Ordinarily, GAO will not consider a protest concerning contract modification because it involves contract administration. However, GAO has consistently stated that the integrity of the competitive procurement system dictates that contracting parties may not employ changes in the terms of a contract that have the effect of circumventing the competitive procurement statutes. In this case, the record suggests that the contracting officer should have known before the award that a significantly increased number of toters was likely to become available shortly after performance was scheduled to begin. Also, the record indicates that the contracting officer, who was handling both procurements, was aware that the availability of toters, and presumably a change in the number of toters to be furnished, were material to calculating bid prices. GAO was persuaded by the protester that the more toters available, the lower the contractor's labor costs. Since labor costs are a substantial factor in the cost of performing these services, a competition based on the imminent availability of more toters may have yielded a substantial reduction in the bid prices. GAO held that the award was improper. Accordingly, it was recommended that the instant contract renewal option not be exercised and that the Army conduct a new procurement and award a new contract for the fiscal year 1982 requirement. Accordingly, the protest was sustained.