B-162173, SEP. 29, 1967

B-162173: Sep 29, 1967

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A BIDDER WHO SUBMITTED HIGHER BID ON ALTERNATE CATEGORY OF WORK THAN HE DID ON ITEM REQUIRING LESS WORK IS NOT REQUIRED TO HAVE BID CONSIDERED UNBALANCED SINCE ESTIMATE OF WHAT COSTS SHOULD BE DEPENDS IN LARGE MEASURE UPON BUSINESS JUDGMENT OF BIDDERS AND TWO OTHER BIDDERS SUBMITTED SIMILAR ESTIMATES THEREFORE AWARD TO THE LOW BIDDER IS NOT IMPROPER. PRESIDENT: REFERENCE IS MADE TO YOUR LETTER OF JULY 28. THE PROTEST WITH RESPECT TO INVITATION -0200 IS COVERED IN A SEPARATE LETTER OF TODAY TO THE SECRETARY OF THE NAVY. BIDS WERE SOLICITED ON TWO BASES. THE DIFFERENCE BETWEEN THE TWO ITEMS WAS THAT ITEM 2 PROVIDED FOR THE OMISSION OF A "C" UNIT. WITHIN THE 5-FOOT LINE WHICH IT IS REPORTED SHOULD HAVE RESULTED IN A REDUCTION IN THE OTHER WORK CATEGORY BESIDE A REDUCTION IN THE WORK TO THE 5-FOOT LINE CATEGORY.

B-162173, SEP. 29, 1967

BIDS - UNBALANCED DECISION TO FRED A. ARNOLD, INC. CONCERNING PROTEST AGAINST AWARD OF CONTRACT TO CONSTRUCT BACHELOR OFFICER'S QUARTERS WITH MESS AT PORT HUENAME, CALIFORNIA, BY NAVY DEPT. A BIDDER WHO SUBMITTED HIGHER BID ON ALTERNATE CATEGORY OF WORK THAN HE DID ON ITEM REQUIRING LESS WORK IS NOT REQUIRED TO HAVE BID CONSIDERED UNBALANCED SINCE ESTIMATE OF WHAT COSTS SHOULD BE DEPENDS IN LARGE MEASURE UPON BUSINESS JUDGMENT OF BIDDERS AND TWO OTHER BIDDERS SUBMITTED SIMILAR ESTIMATES THEREFORE AWARD TO THE LOW BIDDER IS NOT IMPROPER. IN FUTURE INVITATIONS TO AVOID CONFUSION IN BIDS FOR CONSTRUCTION HAVING STATUTORY COST LIMITATIONS, NAVY PLANS TO INCLUDE STATEMENT THAT STATUTORY LIMITATION MAY BE WAIVED.

TO MR. FRED A. ARNOLD, PRESIDENT:

REFERENCE IS MADE TO YOUR LETTER OF JULY 28, 1967, PROTESTING AGAINST AWARDS TO THE CARDAN COMPANY, INC., UNDER DEPARTMENT OF THE NAVY INVITATION FOR BIDS N62473-67-B-0200 AND N62473-67-B-0057.

THE PROTEST WITH RESPECT TO INVITATION -0200 IS COVERED IN A SEPARATE LETTER OF TODAY TO THE SECRETARY OF THE NAVY, COPY ENCLOSED FOR YOUR INFORMATION.

WITH RESPECT TO INVITATION -0057, AS AMENDED, IT SOLICITED BIDS FOR THE CONSTRUCTION OF BACHELOR OFFICERS' QUARTERS WITH MESS AT PORT HUENEME, CALIFORNIA. BIDS WERE SOLICITED ON TWO BASES, ITEM 1 AND ITEM 2. THE DIFFERENCE BETWEEN THE TWO ITEMS WAS THAT ITEM 2 PROVIDED FOR THE OMISSION OF A "C" UNIT, WITHIN THE 5-FOOT LINE WHICH IT IS REPORTED SHOULD HAVE RESULTED IN A REDUCTION IN THE OTHER WORK CATEGORY BESIDE A REDUCTION IN THE WORK TO THE 5-FOOT LINE CATEGORY. SECTION 1A.19 OF THE SPECIFICATIONS PROVIDED THAT THE COST LIMIT FOR THE WORK TO THE 5-FOOT LINE WAS $490,00, FOR ITEM 1 AND $309,500 FOR ITEM 2. AS IN INVITATION -0200, BIDDERS WERE FURNISHED AN APPENDIX "A" FOR PROVIDING FOR BOTH ITEMS 1 AND 2 A COST BREAKDOWN OF BIDS TO SHOW THE COST OF WORK TO THE 5-FOOT LINE AND THE COST OF ALL OTHER WORK.

SIX BIDS WERE RECEIVED. THE RESUME OF INFORMATION SUBMITTED ON APPENDIX "A" WAS AS FOLLOWS:

BIDDERS ITEM 1

TO 5 FOOT LINE OTHER TOTAL

CARDAN $489,000 $425,800 $914,800

YOUNGDALE $490,000$422,000 $912,000

OBERG $487,000 $470,000 $957,000

BARRINGER AND BOTKE $490,000 $436,300 $926,300

ARNOLD $480,000 $474,243 $954,243

MONTGOMERY ROSS FISHER $455,000 $524,000 $979,000

BIDDERS ITEM 2

TO 5 FOOT LINE OTHER TOTAL

CARDAN $309,000 $449,800$758,800

YOUNGDALE $309,500 $449,500 $759,000

OBERG $307,000 $469,000 $776,000

BARRINGER AND BOTKE $309,500 $470,800 $780,300

ARNOLD $309,000 $465,243 $774,243

MONTGOMERY ROSS FISHER $305,000 $520,000 $825,000

AS THE RESUME SHOWS, CARDAN AND TWO OTHER BIDDERS SHOWED AN INCREASE IN THE COST OF THE OTHER WORK ON ITEM 2. HOWEVER, ALTHOUGH THE ADMINISTRATIVE OFFICE CONCURS WITH YOUR POSITION THAT THE CHANGE IN WORK BETWEEN ITEM 1 AND ITEM 2 SHOULD HAVE RESULTED IN A REDUCTION IN THE ALL OTHER CATEGORY OF WORK INSTEAD OF AN INCREASE, THE CARDAN BID WAS NOT CONSIDERED TO BE UNBALANCED AND AS IT WAS THE LOWEST TOTAL BID RECEIVED FOR ITEM 2, AN AWARD FOR THAT ITEM WAS MADE TO CARDAN ON MAY 25, 1967.

FROM THE FOREGOING, IT APPEARS THAT THE CONTRACTING OFFICE WAS SATISFIED THAT THE ESTIMATE FOR THE WORK WITHIN THE 5-FOOT LINE WAS REASONABLE. ALTHOUGH IT MAY BE THAT THE OMISSION OF WORK UNDER ITEM 2 WAS INTENDED TO PRODUCE A REDUCTION IN THE PRICE FOR THE OTHER WORK AS WELL, TWO BIDDERS BESIDE CARDAN APPARENTLY DID NOT SUBMIT BIDS ON THAT BASIS. MOREOVER, THE ESTIMATE OF WHAT THE COSTS SHOULD BE WOULD DEPEND, IN LARGE MEASURE, UPON THE BUSINESS JUDGMENT OF THE BIDDERS. THUS, THE FACT THAT CARDAN INCREASED ITS BID ON THE OTHER WORK AS A RESULT OF THE CHANGES BETWEEN ITEMS 1 AND 2 IS NO INDICATION THAT IT INCLUDED IN THE COST OF THE OTHER WORK, COSTS WHICH SHOULD HAVE BEEN INCLUDED IN THE 5-FOOT LINE COSTS. THE CIRCUMSTANCES, THE AWARD TO CARDAN UNDER INVITATION -0057 DOES NOT APPEAR TO HAVE BEEN IMPROPER.

IN YOUR LETTER, YOU HAVE REQUESTED COMMENT UPON YOUR STATEMENT THAT THE RULES AND REGULATIONS RELATING TO THE STATUTORY COST LIMITATIONS CREATE CONFUSION AND HARDSHIPS FOR BIDDERS BECAUSE THE COST OF BIDDING IS RISING STEADILY AND BECAUSE THE COST LIMITATIONS ARE NOT KEEPING PACE WITH THE RISING COSTS. IN OUR VIEW, THE CONFUSION MAY ARISE FROM A BELIEF BY BIDDERS THAT, IN ORDER FOR A LOW OVERALL BID TO BE ACCEPTED FOR AWARD, IT IS NECESSARY FOR THE COST OF THE WORK TO THE 5 FOOT LINE TO FALL WITHIN THE STATUTORY COST LIMITATIONS. HOWEVER, IN THAT CONNECTION, IT SHOULD BE NOTED THAT THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) 18-110 (C), PERTAINING TO STATUTORY COST LIMITATIONS, PROVIDES FOR THE WAIVER OF SUCH LIMITATIONS UPON A DETERMINATION BY THE SECRETARY OF DEFENSE THAT THE LIMITATIONS ON CONSTRUCTION COSTS IN THE ANNUAL MILITARY CONSTRUCTION ACT SHALL NOT APPLY AS IMPRACTICABLE.

OUR OFFICE HAS BEEN ADVISED INFORMALLY THAT, IN FUTURE INVITATIONS FOR BIDS ON CONSTRUCTION HAVING STATUTORY COST LIMITATIONS, THE NAVY FACILITIES ENGINEERING COMMAND PLANS TO HAVE INCLUDED IN THE INVITATIONS A STATEMENT THAT ALTHOUGH THE ADVERTISED WORK IS SUBJECT TO A STATUTORY LIMITATION, SUCH LIMITATION MAY BE WAIVED BY THE SECRETARY OF DEFENSE PURSUANT TO ASPR 18-110 (C). THIS CONTEMPLATED ADVICE MAY SERVE A USEFUL PURPOSE IN ENCOURAGING BIDDERS TO BID MORE REALISTICALLY ON THE WORK ADVERTISED AND MAY WELL ALLEVIATE TO SOME DEGREE THE CONCERN EXPRESSED.

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