Matter of: Premiere Building Services, Inc. File: B-255858 Date: April 12, 1994 94-1 CPD 252

Matter of: Premiere Building Services, Inc. File: B-255858 Date: April 12, 1994 94-1 CPD 252

PROCUREMENT Sealed Bidding Invitations for bids Terms Actual costs Liability In a procurement for janitorial and recycling services, a procuring agency may properly provide that a contractor will be liable for the government's actual costs of reinspection, after the government's initial inspection and first reinspection, that are directly related to the contractor's unsatisfactory performance or nonperformance of the contract requirements.

Attorneys

DECISION

We deny the protest.

The IFB, issued as a total small business set-aside, sought bids for janitorial services for a base and 4 option years. The IFB included Federal Acquisition Regulation (FAR) Sec. 52.246-4 entitled "Inspection of Services--Fixed-Price," which reserves the government's right to inspect all services at all times during the contract and, when defects in service cannot be corrected by reperformance, to reduce the contract price for services that do not conform with the contract requirements. In this regard, the IFB set forth a "deduction table" that specified liquidated damages to be applied when required services were not satisfactorily performed. The IFB also provided that the government's initial inspection of services and first reinspection of services due to a contractor's unsatisfactory performance or nonperformance would be at no cost to the contractor, but that the reinspection costs incurred by the government for second and, if required, subsequent reinspections would be charged to the contractor.[1]

The IFB also provided that:

"The Government will institute a customer complaint program as a means of assisting in documenting certain kinds of service problems. The Occupant Complaint Program will be considered in evaluating the Contractor's performance and in taking deductions."

PBS challenges the IFB's provision for contractor liability for second and subsequent government reinspection costs, arguing that charging the contractor for reinspection costs, in addition to the liquidated damages for unsatisfactory performance, amounts to "double dipping." PBS does not protest the IFB's provision for liquidated damages.

Generally, a procuring agency may contractually provide for deductions from the contract price for losses and administrative costs, such as reinspection costs, associated with a contractor's delivery of nonconforming supplies or services. FAR Secs. 12.202(a), 46.407(b), 52.246-4; see also Oakland Constr. Co., Inc., General Services Board of Contract Appeals No. 3557, Sept. 14, 1972, 72-2 BCA Para. 9675 (contract deductions for reinspection costs). An agency may assess a deduction for reinspection costs unless it is unreasonable or constitutes an improper penalty.

Contrary to the protester's argument, the provision for liquidated damages in this case does not compensate the government for its reinspection costs. Liquidated damages provisions compensate the government for the reduced value that it receives as a result of services performed in an unsatisfactory manner, even when the services are satisfactorily reperformed. See Sunrise Maintenance Sys., B-219763.2, Nov. 26, 1985, 85-2 CPD Para. 603. Contract deductions for administrative costs, such as reinspection costs, associated with unsatisfactory performance are intended to reimburse the government for its increased costs beyond what was contractually contemplated.

We find reasonable the solicitation's assessment of a deduction for reinspection costs associated with the contractor's continued unsatisfactory performance or nonperformance. As noted above, the IFB provides that the government will bear the costs of the initial inspection and first reinspection; it is only the second and subsequent reinspections if required by continued unsatisfactory performance, which will result in contract deductions. Since it is not disputed that there will be additional costs associated with performing second or subsequent government reinspections, and given that these costs are not part of the damages included in the liquidated damages, we know of no reason that the government cannot contractually assess these additional costs to the contractor, whose unsatisfactory performance or nonperformance required the reinspections. See Oakland Constr. Co., Inc., supra.

The protest is denied.[2]

1. Reinspection costs are defined by the IFB as costs incurred by the government directly related to the reinspection of services due to the contractor's unsatisfactory performance or nonperformance of contract requirements. "Reinspection costs typically include travel costs and labor costs (overtime paid or the cost of diverting labor from normal duties)."

2. PBS also objects to the establishment of a customer complaint program for documenting contractor performance, asserting that building tenants are not trained as contract inspectors. Contracting agencies are required to verify whether supplies and services conform to contract quality requirements and to maintain records regarding a contractor's performance. See FAR Sec. 46.104. There is no basis to object to this program, which merely establishes a system for collecting tenant complaints regarding the contractor's performance.