B-175968, OCT 17, 1972

B-175968, OCT 17, 1972

BID PROTEST - CHANGE IN REQUIREMENTS - NON-NOTIFICATION OF CHANGES DECISION UPHOLDING THE PROTEST OF ACTA CORPORATION AGAINST AWARD OF A CONTRACT TO UNIVERSAL FUEL, INC., UNDER AN RFP ISSUED BY THE DEFENSE FUEL SUPPLY CENTER FOR ALONGSIDE AIRCRAFT FUEL DELIVERY AND DEFUELING OPERATIONS AT LAWSON ARMY AIRFIELD, FORT BENNING, GA. ASPR, 3-505(C) AND 3-805.1(E) PROVIDE THAT NO AWARD CAN BE MADE IF A SUBSTANTIAL MODIFICATION OF THE REQUIREMENTS OF THE SOLICITATION IS MADE AND NO WRITTEN AMENDMENT IS ISSUED TO THE OFFERORS. A REDUCTION IN THE CAPACITY OF FIVE VEHICLES FROM 4,000 GALLONS TO 3,000 GALLONS IS A SUBSTANTIAL MODIFICATION. THE PROTESTOR IN SUCH A CASE NEED NOT SHOW THAT HE WOULD HAVE BEEN THE LOW OFFEROR BUT FOR THE REQUIREMENT CHANGE OF WHICH IT WAS NOT NOTIFIED SINCE HE WAS NOT GIVEN AN EQUAL OPPORTUNITY TO COMPETE AND HIS POSITION IS THEREBY PREJUDICED. ACCORDINGLY, NEGOTIATIONS SHOULD BE REOPENED TO ALL OFFERORS FOR THE REMAINING REQUIREMENTS OF THE CONTRACT.

TO LT. GENERAL WALLACE H. ROBINSON, JR.:

WE REFER TO LETTERS OF JUNE 15 AND JULY 24, 1972, FROM THE ASSISTANT COUNSEL, DEFENSE SUPPLY AGENCY, FURNISHING OUR OFFICE REPORTS RELATIVE TO THE PROTEST OF ACTA CORPORATION UNDER SOLICITATION NO. DSA600-72-R 0301, ISSUED BY THE DEFENSE FUEL SUPPLY CENTER (DFSC).

THE SOLICITATION WAS ISSUED BY DFSC ON JANUARY 10, 1972, CALLING FOR PROPOSALS FOR ALONGSIDE AIRCRAFT FUEL DELIVERY AND DEFUELING OPERATIONS AT LAWSON ARMY AIRFIELD, FORT BENNING, GEORGIA, DURING THE PERIOD JULY 1, 1972, TO JUNE 30, 1973. THE PROCUREMENT WAS MADE ON A NEGOTIATED BASIS FOLLOWING DETERMINATION AND FINDINGS BY THE CONTRACTING OFFICER THAT THE PROPOSED CONTRACT WAS FOR SERVICES FOR WHICH IT WAS IMPRACTICABLE TO OBTAIN COMPETITION BY FORMAL ADVERTISING.

NINETEEN FIRMS WERE SOLICITED AND TWO RESPONDED. ACTA CORPORATION (ACTA), THE INCUMBENT CONTRACTOR, AND UNIVERSAL FUEL, INC., (UFI) BOTH OFFERED PRICES BELOW THE MAXIMUM PRICE OBJECTIVE AND BOTH WERE DETERMINED TO BE RESPONSIBLE.

PRIOR TO OPENING NEGOTIATIONS, THE CONTRACTING OFFICER EXAMINED BOTH OFFERS FOR CONFORMANCE WITH THE REQUIREMENTS IN THE RFP. THE OFFER OF ACTA WAS FOUND TO CONFORM IN ALL RESPECTS, WHILE UFI OFFERED TO FURNISH FIVE 3,000-GALLON VEHICLES INSTEAD OF THE FIVE 4,000-GALLON VEHICLES REQUIRED BY THE RFP. THE CONTRACTING OFFICER INQUIRED OF THE U.S. ARMY PETROLEUM CENTER, THE INVENTORY CONTROL POINT FOR THIS PROCUREMENT, ABOUT THIS REDUCTION OF CAPACITY AND WAS ADVISED THAT IT WAS ACCEPTABLE. AFTER RECEIVING THIS INFORMATION, THE CONTRACTING OFFICER DETERMINED THAT THE REDUCTION IN CAPACITY WAS A MINOR DEVIATION WHICH WOULD NOT AFFECT THE QUALITY OR PRICE OF THE SERVICES REQUIRED AND OPENED NEGOTIATIONS.

AT THE CONCLUSION OF NEGOTIATIONS, ACTA REDUCED ITS ORIGINAL OFFER BY $4,724 WITHOUT ANY KNOWLEDGE THAT THE CAPACITY REQUIREMENTS OF FIVE VEHICLES HAD BEEN REDUCED. UFI'S FINAL EVALUATED PRICE, INCLUDING THE DISCOUNT, REMAINED UNCHANGED AND WAS $7,635 LOWER THAN ACTA'S PRICE. THE CONTRACTING OFFICER MADE THE AWARD TO UFI ON APRIL 12, 1972.

UPON LEARNING THAT THE CONTRACT AWARDED TO UFI DEVIATED FROM THE REQUIREMENTS IN THE SOLICITATION, ACTA PROTESTED TO THE CONTRACTING OFFICER BY LETTER OF APRIL 26, 1972, POINTING OUT THAT THE SOLICITATION CONTAINED NO PROVISION FOR SUBMISSION OF AN ALTERNATE OFFER AND UFI'S OFFER WAS CONTRARY TO PARAGRAPH 3-501(B) SEC. (C)(IV) OF THE ARMED SERVICES PROCUREMENT REGULATION. ACTA FURTHER PROTESTED THAT IT WAS NEVER NOTIFIED OF THE REDUCTION IN VEHICLE CAPACITY AND WAS THEREBY DISCRIMINATED AGAINST SINCE ITS PRICE COULD HAVE BEEN REDUCED CONSIDERABLY IF IT HAD KNOWN OF THE REDUCED CAPACITY REQUIREMENTS.

THE CONTRACTING OFFICER DENIED ACTA'S PROTEST BY LETTER OF MAY 8, 1972. ALTHOUGH HE ACKNOWLEDGED THAT FAILURE TO ISSUE A WRITTEN MODIFICATION OF THE SPECIFICATION TO PERMIT USE OF 3,000-GALLON VEHICLES WAS AN ERROR, THE CONTRACTING OFFICER STATED THAT HE DETERMINED THAT SAVINGS IN LEASING COSTS FOR THE SMALLER VEHICLES WOULD BE OFFSET TO A DEGREE BY INCREASED OPERATING COSTS RESULTING FROM MORE FREQUENT ROUND TRIPS BY THE SMALLER VEHICLES. THE DEGREE OF THIS OFFSET WAS NOT STATED. IN ANY EVENT, THE CONTRACTING OFFICER STATED THAT THE SAVING OF $4,800 IN LEASING COSTS, AS INDICATED BY ACTA, WAS INSUFFICIENT TO OVERCOME THE PRICE ADVANTAGE OF UFI. THE CONTRACTING OFFICER THEREFORE DID NOT CONSIDER THAT ACTA HAD BEEN PREJUDICED BY HIS ADMITTEDLY ERRONEOUS ACTION.

BY LETTER OF MAY 10, 1972, ACTA REQUESTED RECONSIDERATION OF THE DENIAL OF ITS PROTEST, POINTING OUT THAT THE $4,800 SAVING IN LEASING COSTS WAS ONLY ONE OF A NUMBER OF POTENTIAL SAVINGS IT COULD HAVE PROPOSED HAD IT KNOWN THAT THE SOLICITATION DID NOT SET FORTH FIRM MINIMUM REQUIREMENTS FOR THE EQUIPMENT. IT WAS ALLEGED THAT BY USING FOUR FEWER TRACTOR- TRAILER REFUELING UNITS THAN SPECIFIED IN THE RFP, ADDITIONAL SAVINGS OF APPROXIMATELY $22,000, BASED ON ITS EXPERIENCE IN PREVIOUS CONTRACTS, COULD ALSO HAVE BEEN PROPOSED BY ACTA IF IT HAD BEEN ADVISED THAT THE SERVICES TO BE PERFORMED WERE PARAMOUNT AND THE EQUIPMENT SPECIFIED WAS SUBJECT TO NEGOTIATION.

THE REQUEST OF MAY 10 FOR RECONSIDERATION WAS NOT ANSWERED SINCE ACTA FORMALLY PROTESTED TO THIS OFFICE ON MAY 15, 1972, REPEATING THE SAME BASES FOR THE PROTEST.

IN HIS REPORT TO THIS OFFICE ON THE PROTEST, THE CONTRACTING OFFICER STATES HIS OPINION THAT THE DEVIATION PERMITTED UFI WAS MINOR, SINCE ONLY FIVE OF SIXTEEN VEHICLES WERE INVOLVED AND ONLY 5,333 TRUCK MOVEMENTS OF A TOTAL OF 21,506 WERE INVOLVED. HOWEVER, CONTRARY TO HIS STATEMENT IN HIS LETTER OF MAY 8 TO ACTA THAT SAVINGS BY USING SMALLER VEHICLES WOULD BE OFFSET TO A DEGREE BY MORE FREQUENT ROUND TRIPS, HE NOW STATES THAT USE OF THE SMALLER VEHICLES WOULD NOT AFFECT THE BASIC TRUCK MOVEMENT REQUIREMENT NOR WOULD IT REQUIRE ANY ADJUSTMENT IN THE MAXIMUM EQUIPMENT RESPONSE TABLE. DESPITE HIS VIEW THAT THE DEVIATION IS MINOR, THE CONTRACTING OFFICER RECOGNIZES THAT IT WOULD HAVE BEEN "ADVISABLE" TO ISSUE A WRITTEN AMENDMENT TO THE SOLICITATION REFLECTING THE 25 PERCENT REDUCTION IN THE MINIMUM CAPACITY OF THE FIVE VEHICLES.

THE CONTRACTING OFFICER FURTHER STATES THAT ACTA WAS FULLY AWARE FROM PRIOR NEGOTIATIONS, AND ITS EXPERIENCE IN PROVIDING THE SERVICES, THAT THE CAPACITY OF THE UNITS IN QUESTION WAS GREATER THAN NECESSARY AND THAT THE ARMY WOULD PREFER SMALLER UNITS AND ANY RESULTANT COST DECREASES. THE BASIS FOR THIS KNOWLEDGE IN CONNECTION WITH THE PRESENT PROCUREMENT IS NOT SET FORTH. THE EXAMPLES CITED BY THE CONTRACTING OFFICER TO SHOW THAT ACTA WAS AWARE THAT MINOR CHANGES CAN OCCUR IN NEGOTIATIONS, THE FACT THAT ACTA WAS ALLOWED TO USE A 4,000-GALLON UNIT IN LIEU OF A 1,500-GALLON UNIT, AND THAT THE ARMY SUGGESTED USE OF 2,500-GALLON UNITS IN THE PREVIOUS YEAR'S NEGOTIATIONS, DO NOT, IN OUR OPINION, LEAD TO A CONCLUSION ON ACTA'S PART THAT THE PRESENT SOLICITATION OVERSTATED THE CAPACITIES REQUIRED FOR THE FORTHCOMING YEAR.

IT IS NOT NECESSARY TO CONSIDER IN DETAIL ALL THE VARIOUS ADDITIONAL ARGUMENTS ADVANCED BY ACTA IN RESPONSE TO THE CONTRACTING OFFICER'S REPORT. THE CONTRACTING OFFICER'S STATEMENT ITSELF IS SUFFICIENT TO ESTABLISH THAT THERE WERE SERIOUS DEFICIENCIES IN THE PROCUREMENT PROCESS IN THIS INSTANCE.

ASPR 1-1201(A) REQUIRES THAT ONLY THE MINIMUM NEEDS OF THE GOVERNMENT BE SET FORTH IN THE SPECIFICATIONS. SINCE THE CONTRACTING OFFICER STATES THAT THE CAPACITY OF THE VEHICLES IN QUESTION WAS GREATER THAN NECESSARY, THE USE OF SUCH CAPACITY IN THE SPECIFICATIONS IS DIRECTLY CONTRARY TO THE REGULATION. WHILE WE AGREE WITH THE CONTRACTING OFFICER THAT HE HAD AUTHORITY TO CURE THIS DEFICIENCY DURING NEGOTIATIONS PURSUANT TO ASPR 3- 805.1(E), THIS SECTION OF THE REGULATION REQUIRES THAT A DECISION TO RELAX OR MODIFY A STATEMENT OF REQUIREMENTS SHALL BE MADE IN WRITING IN THE FORM OF AN AMENDMENT TO THE RFP, AND A COPY SHALL BE FURNISHED TO EACH PROSPECTIVE CONTRACTOR. THUS IT IS NOT MERELY "ADVISABLE," AS THE CONTRACTING OFFICER STATES, BUT MANDATORY THAT EACH PROSPECTIVE CONTRACTOR BE NOTIFIED IN WRITING OF A REDUCTION IN THE REQUIREMENTS. THE CONTRACTING OFFICER ADMITS THAT HE DID NOT FOLLOW THE REGULATION WHEN HE FAILED TO GIVE NOTICE OF ANY KIND TO ACTA THAT THE REQUIREMENTS IN THE SOLICITATION HAD BEEN REDUCED.

THE NECESSITY FOR ISSUING A WRITTEN AMENDMENT FOR MODIFICATION OF REQUIREMENTS IS ALSO CONTAINED IN ASPR 3-505, AND IN SUBSECTION (C) IT IS PROVIDED THAT:

"NO AWARD SHALL BE MADE ON A REQUEST FOR PROPOSALS UNLESS SUCH AMENDMENT THERETO HAS BEEN ISSUED IN SUFFICIENT TIME TO PERMIT PROSPECTIVE OFFERORS TO CONSIDER SUCH INFORMATION IN SUBMITTING OR MODIFYING THEIR PROPOSALS."

WE READ THIS PROVISION TO MEAN THAT NO AWARD SHOULD HAVE BEEN MADE IN THIS INSTANCE SINCE NO AMENDMENT WAS ISSUED, AND ACTA THEREFORE HAD NO CHANCE TO CONSIDER THE CHANGE IN ORDER TO MODIFY ITS PROPOSAL.

IN 48 COMP. GEN. 583 (1969) WE HAD OCCASION TO CALL TO THE ATTENTION OF THE DEFENSE SUPPLY AGENCY SERIOUS DEFICIENCIES IN A PROCUREMENT SIMILAR TO THE PRESENT INSTANCE. WE STATED THAT WE WOULD SCRUTINIZE FUTURE PROCUREMENTS TO DETERMINE WHETHER ALL SUBSTANTIAL CHANGES OCCURRING DURING NEGOTIATIONS ARE TREATED IN ACCORDANCE WITH ASPR 3 805.1(E). IN THE PRESENT CASE, WE ARE NOT PERSUADED BY THE CONTRADICTORY STATEMENTS OF THE CONTRACTING OFFICER THAT A REDUCTION IN THE CAPACITY OF FIVE VEHICLES FROM 4,000 TO 3,000 GALLONS WAS MINOR. ON THE CONTRARY, WE CONSIDER SUCH A CHANGE TO BE SUBSTANTIAL. THE FACT THAT THE MAJOR PORTION OF THE WORK WOULD NOT BE AFFECTED IS MERELY INDICATIVE OF THE SCOPE OF THE CHANGE, AND IS NOT NECESSARILY DETERMINATIVE OF THE CHARACTER OF THE CHANGE. 161405, OCTOBER 2, 1967.

THE ADMINISTRATIVE POSITION APPEARS TO REST PRINCIPALLY ON THE ARGUMENT THAT THE CHANGES GAVE NO ADVANTAGE TO UFI, AND THAT ACTA HAS NOT SHOWN THAT IT HAS BEEN PREJUDICED SINCE IT HAS NOT SHOWN THAT IT WOULD HAVE BEEN LOW OFFEROR IF IT HAD BEEN PERMITTED TO OFFER ON THE LESSER REQUIREMENTS.

WE HAVE PREVIOUSLY REJECTED THIS ARGUMENT IN 48 COMP. GEN. 663 (1969). AT PAGE 668 OF THAT DECISION WE SAID:

"*** WE DO NOT BELIEVE IT WAS PROPER TO MAKE AWARD TO LINK ON THE BASIS OF THIS MODIFICATION WITHOUT NOTICE TO YOU THAT LINK WAS BEING OFFERED AN OPPORTUNITY TO BID ON THE BASIS OF SUCH MODIFICATION, AND WITHOUT GIVING YOU AN OPPORTUNITY TO MODIFY YOUR BID PRICE IN THE LIGHT OF SUCH KNOWLEDGE, NOTWITHSTANDING THAT YOU MAY NOT HAVE BEEN ELIGIBLE TO SUBMIT A NEW PRICE BASED UPON WAIVER OF FIRST ARTICLE TESTING OR MAINTAINABILITY AND RELIABILITY TESTING."

IN 48 COMP. GEN. 583, SUPRA, WE STATED:

"GOVERNMENT PROCUREMENT BY NEGOTIATION, LIKE PROCUREMENT BY FORMAL ADVERTISING, REQUIRES THAT CONTRACTING OFFICERS OBSERVE ELEMENTAL IMPARTIALITY TOWARD ALL OFFERORS. WHILE NEGOTIATION PROCEDURES ARE MORE FLEXIBLE THAN ADVERTISED PROCEDURES, SUCH FLEXIBILITY DEMANDS A GREATER DEGREE OF CARE ON THE PART OF THE CONTRACTING OFFICER TO INSURE THAT ALL COMPETITIVE OFFERORS ARE TREATED EQUALLY. ***"

IN THE CIRCUMSTANCES OF THE ABOVE CITED CASE WE FOUND THAT THE PROTESTANT WAS NOT GIVEN AN EQUAL OPPORTUNITY TO COMPETE AND ITS POSITION WAS THEREBY PREJUDICED. SUCH IS THE CASE HERE.

THE CONTRACT OFFERED TO ACTA WAS NOT THE SAME ONE OFFERED TO UFI. THE CLEAR PRESUMPTION IS THAT THE DEVIATION ALLOWED HERE AFFECTED THE PRICE AT WHICH THE SERVICES WERE OFFERED TO THE GOVERNMENT. CF. B 160602, MARCH 7, 1967. ALTHOUGH THE CONTRACTING OFFICER STATED THAT HE FELT HE WAS FOSTERING COMPETITION BY THE COURSE OF ACTION HE USED, WE THINK HIS ACTIONS, IF ALLOWED TO STAND, ARE MORE LIKELY TO DESTROY CONFIDENCE IN THE COMPETITIVE PROCUREMENT SYSTEM AND LEAD TO RESTRICTION OF FUTURE COMPETITION IN SIMILAR PROCUREMENTS.

WE ARE NOT UNMINDFUL OF THE CONTINUING NEED FOR THE SERVICES NOW UNDER CONTRACT WITH UFI. NOR CAN WE IGNORE THE POSSIBLE FINANCIAL CONSEQUENCES OF A TERMINATION OF THE UFI CONTRACT. HOWEVER, FOR THE REASONS STATED, IT IS OUR OPINION THAT THE CONDUCT OF THE NEGOTIATIONS IN THIS INSTANCE DEVIATED SO MATERIALLY FROM THE REQUIREMENT OF 10 U.S.C. 2304(G) AND THE ELEMENTARY RULES OF FAIR PLAY ENVISIONED BY THE REGULATIONS AS TO CALL FOR REOPENING OF NEGOTIATIONS WITH BOTH OFFERORS FOR THE REMAINING REQUIREMENTS. IF THE ACTA PROPOSAL IS THEN FOUND TO BE THE MOST ACCEPTABLE, THE CONTRACT WITH UFI SHOULD BE TERMINATED FOR CONVENIENCE AND THE REMAINDER OF THE REQUIREMENT AWARDED TO ACTA.

ALSO, SINCE THE CONTRACTING OFFICER STATED THAT THE CAPACITY OF THE VEHICLES WAS GREATER THAN NECESSARY, CAREFUL CONSIDERATION SHOULD BE GIVEN TO THE ACTUAL NEEDS OF THE GOVERNMENT. IF, AS THE CONTRACTING OFFICER SUGGESTS, THE SERVICE CAN BE PERFORMED WITH 2,500-GALLON VEHICLES, OR AS ACTA SUGGESTED, WITH FEWER RESERVE VEHICLES, THESE CHANGES SHOULD BE REFLECTED IN AN APPROPRIATE WRITTEN AMENDMENT TO THE SOLICITATION WHICH SETS FORTH ONLY THE MINIMUM NEEDS OF THE GOVERNMENT PURSUANT TO ASPR 1- 1201(A).

SINCE THE PRESENT CASE INVOLVES THE SAME KIND OF DEFICIENCIES CALLED TO THE ATTENTION OF DSA IN 48 COMP. GEN. 583, WE REQUEST THAT YOU ADVISE US OF ANY ACTION YOU PROPOSE TO TAKE TO PRECLUDE FURTHER RECURRENCE OF DEFICIENCIES OF THIS TYPE.

ALSO, AS THIS DECISION CONTAINS RECOMMENDATIONS FOR CORRECTIVE ACTION TO BE TAKEN, YOUR ATTENTION IS DIRECTED TO SECTION 236 OF THE LEGISLATIVE REORGANIZATION ACT OF 1970, 84 STAT. 1140, 1171, WHICH REQUIRES THAT YOU SUBMIT WRITTEN STATEMENTS TO CERTAIN COMMITTEES OF THE CONGRESS AS TO THE ACTION TAKEN WITH RESPECT THERETO. THE STATEMENTS ARE TO BE SENT TO THE COMMITTEES ON GOVERNMENT OPERATIONS OF BOTH HOUSES NOT LATER THAN 60 DAYS AFTER THE DATE OF THIS DECISION AND TO THE COMMITTEES ON APPROPRIATIONS IN CONNECTION WITH THE FIRST REQUEST FOR APPROPRIATIONS MADE BY YOUR AGENCY MORE THAN 60 DAYS AFTER THE DATE OF THIS DECISION.

THE ENCLOSURES FURNISHED WITH THE REFERENCED LETTER ARE RETURNED.