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B-164735, OCT. 31, 1968

B-164735 Oct 31, 1968
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TO WESTRIC BATTERY COMPANY: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 8. RELEVANT FACTS CONCERNING THE CANCELLATION OF THE PROCUREMENT WERE SET FORTH IN OUR DECISION B-164735 DATED OCTOBER 4. THE INVITATION WAS CANCELLED JUNE 24. PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-404.1 (B) (VI) BECAUSE "ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE AT UNREASONABLE PRICES.'. IT IS RECOGNIZED THAT WHILE THE INTEREST OF THE GOVERNMENT AND THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM REQUIRE THAT INVITATIONS BE CANCELLED AFTER OPENING ONLY FOR COGENT AND COMPELLING REASONS. THERE NECESSARILY IS RESERVED IN THE CONTRACTING OFFICIALS A SUBSTANTIAL AMOUNT OF DISCRETION IN DETERMINING WHETHER AN INVITATION SHOULD BE CANCELLED.

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B-164735, OCT. 31, 1968

TO WESTRIC BATTERY COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 8, 1968, REQUESTING RECONSIDERATION OF THE FINDINGS SET FORTH IN OUR DECISION OF OCTOBER 4, 1968, WHICH DENIED YOUR PROTEST OF THE CANCELLATION OF INVITATION FOR BIDS NO. DAAE07-68-B-1713, BY THE ARMY-TANK AUTOMOTIVE COMMAND (ATAC), OR AWARD TO ANY OTHER FIRM UNDER SUCH INVITATION. YOU STATE THAT ALL PERTINENT INFORMATION HAD NOT BEEN MADE AVAILABLE TO OUR OFFICE PRIOR TO THE DECISION.

YOU STATE THAT THE SUN BATTERY COMPANY'S LOW BID INFLUENCED THE CONTRACTING OFFICER TO REGARD YOUR BID AND THAT OF THE UNIVERSAL BATTERY COMPANY AS UNREASONABLE IN PRICE. YOU STATE THAT APART FROM THE "ILLEGAL SUN BID NEITHER ATAC NOR YOUR DECISION CITES ANY BASIS FOR CONSIDERING THE VERY CLOSE BIDS OF OUR COMPANY AND UNIVERSAL BATTERY UNREASONABLE, EXCEPT FOR ATAC'S LAST PROCUREMENT OF THESE ITEMS IN APRIL 1967.' AS TO THIS PRIOR NEGOTIATED PROCUREMENT, YOU CONTEND THAT IT CANNOT SERVE AS A VALID CRITERION OF REASONABLENESS ON A FORMALLY ADVERTISED PROCUREMENT ON THE PRESENT DAY MARKET. ALSO, YOU REFER TO INFORMATION FROM THE SMALL BUSINESS ADMINISTRATION (SBA) REGARDING AN INDEPENDENT CHECK OF A NUMBER OF BATTERY MANUFACTURERS IN VARIOUS PARTS OF THE COUNTRY WHICH SHOWED THAT ON THIS PARTICULAR BATTERY THERE CAN BE NO FURTHER "PRICE BREAK" BEYOND A PRODUCTION RUN OF 200 TO 500 UNITS. THIS INFORMATION, YOU STATE, CASTS DOUBT ON THE ATAC POSITION WITH RESPECT TO THE LACK OF PRICE COMPARABILITY OVER WIDELY VARYING QUANTITIES. YOU REQUEST THAT WE DIRECT ATAC TO SUSPEND REPROCUREMENT ACTION UNTIL SBA, WASHINGTON, HAS HAD AN OPPORTUNITY TO PRESENT WHAT YOU REGARD AS ESSENTIAL ADDITIONAL DATA IN SUPPORT OF YOUR POSITION. FOR THE FOLLOWING REASONS, YOUR REQUEST MUST BE DENIED.

RELEVANT FACTS CONCERNING THE CANCELLATION OF THE PROCUREMENT WERE SET FORTH IN OUR DECISION B-164735 DATED OCTOBER 4, 1968, AND NEED NOT BE REPEATED HERE. THE INVITATION WAS CANCELLED JUNE 24, 1968, PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-404.1 (B) (VI) BECAUSE "ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE AT UNREASONABLE PRICES.'

IT IS RECOGNIZED THAT WHILE THE INTEREST OF THE GOVERNMENT AND THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM REQUIRE THAT INVITATIONS BE CANCELLED AFTER OPENING ONLY FOR COGENT AND COMPELLING REASONS, THERE NECESSARILY IS RESERVED IN THE CONTRACTING OFFICIALS A SUBSTANTIAL AMOUNT OF DISCRETION IN DETERMINING WHETHER AN INVITATION SHOULD BE CANCELLED. THE NECESSITY FOR THIS DISCRETION IS NOWHERE BETTER EVIDENCED THAN IN THE SITUATION WHERE A DETERMINATION AS TO THE ,REASONABLENESS" OF BID PRICES MUST BE MADE. IN MAKING HIS DETERMINATION, THE CONTRACTING OFFICER MUST RELY ON ALL RELEVANT CONSIDERATIONS. THE FOLLOWING STATEMENT, WHICH WE CONSIDER TO BE APPLICABLE TO THIS CASE, WAS MADE IN 36 COMP. GEN. 364, AT PAGE 365:

"* * * WE HAVE * * * CONSTANTLY SOUGHT TO PROTECT AND MAINTAIN THE PRINCIPLES OF IMPARTIALITY AND FAIR PLAY UPON WHICH THE COMPETITIVE BIDDING SYSTEM DEPENDS, AND HAVE NEVER COUNTENANCED THE REJECTION OF BIDS MERELY FOR THE PURPOSE OF AFFORDING THE BIDDERS AN OPPORTUNITY TO BETTER THE PRICES OF THEIR COMPETITORS. WE CANNOT, HOWEVER, CONSIDER THE MATTER OF COMPETITIVE BIDDING FOR GOVERNMENT CONTRACTS SOLELY AS A GAME, IN WHICH THE CONTRACT MUST AUTOMATICALLY GO TO THE LOWEST BIDDER WITHOUT REGARD TO THE REASONABLENESS OF HIS PRICE OR TO OTHER ATTEMPTED BIDS WHICH CANNOT FOR TECHNICAL REASONS BE ACCEPTED. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THESE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES OR SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND READVERTISING OF THE CONTRACT IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT. * * *.'

IN MAKING THE DETERMINATION THAT THE BIDS OF THE TWO SMALL BUSINESS FIRMS WERE UNREASONABLE, THE CONTRACTING OFFICER TOOK INTO CONSIDERATION THAT 13,671 OF THE BATTERIES WERE PROCURED BY COMPETITIVE NEGOTIATION FOR $22.50 EACH, EXCLUSIVE OF TAX, AND 24,348 WERE SIMILARLY PROCURED AT $24.30 EACH, INCLUSIVE OF TAX. COMPARISON OF THE PRICES RECEIVED UNDER THE INSTANT PROCUREMENT -- WITHOUT CONSIDERATION OF THE SUN BID -- WOULD INDICATE A PRICE INCREASE OF $4.32 (APRIL 1967 PRICE OF $22.50 AS COMPARED TO YOUR BID OF $26.82) OR 16 PERCENT. IN OUR OPINION, THE SIGNIFICANT PRICE DIFFERENTIAL OF $122,064.14 BETWEEN THE BID OF SUN BATTERY AND THE CURRENT PRICES PROPOSED BY THE TWO SMALL BUSINESS CONCERNS, TOGETHER WITH THE DIFFERENTIAL BETWEEN THE CURRENT BID PRICES AND THE PRICES RECEIVED UNDER THE MOST RECENT NEGOTIATED PROCUREMENTS OF THE SAME ITEM, SUPPORTS THE CONTRACTING OFFICER'S DETERMINATION THAT AWARD UNDER THE SET-ASIDE INVITATION WOULD BE AT AN UNREASONABLE PRICE.

THE RECORD SHOWS THAT THE CONTRACTING OFFICER'S DECISION TO REJECT ALL BIDS AND READVERTISE WAS BASED ON THE EVALUATION OF BIDS WHEN COMPARED WITH PRIOR PRICES BID ON THE SAME ITEM. IN 37 COMP. GEN. 147, WE SUSTAINED THE CONTRACTING OFFICER IN CANCELLING AN INVITATION AND WITHDRAWING THE SET-ASIDE WHEN THE BID OF THE LOW SMALL BUSINESS CONCERN WAS APPROXIMATELY 10 PERCENT HIGHER THAN PREVIOUS PRICES FOR THE SAME ITEM AND WOULD HAVE RESULTED IN PAYMENT OF A PREMIUM OF APPROXIMATELY $25,000. ALSO, SEE B-151741, DATED JULY 30, 1963, AND B 148803, MAY 29, 1962, WHERE SAVINGS OF $8,800 AND $280,800 RESULTED FROM THE CANCELLATION OF A 100 PERCENT SET-ASIDE FOR SMALL BUSINESS AND READVERTISEMENT ON AN UNRESTRICTED BASIS. THERE IS NOTHING IN THE PRESENT RECORD WHICH WOULD REQUIRE US TO CONCLUDE THAT THE CONTRACTING OFFICER, IN DETERMINING THAT THE PRICES OFFERED BY THE TWO SMALL BUSINESS BIDDERS WERE UNREASONABLE, ACTED IN BAD FAITH OR WITHOUT REASONABLE BASIS IN FACT.

ASPR 1-706.3 (A) PROVIDES FOR THE WITHDRAWAL OF A SMALL BUSINESS SET- ASIDE WHEN IT IS CONSIDERED THAT AWARD UNDER THE SET-ASIDE "WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G., BECAUSE OF UNREASONABLE PRICE)"; AND WE HAVE RECOGNIZED THAT THE DETERMINATION TO WITHDRAW A SMALL BUSINESS SET-ASIDE BECAUSE OF UNREASONABLE PRICE IS A MATTER WHICH RESTS WITHIN ADMINISTRATIVE DISCRETION, AND WHERE IT IS SHOWN THAT THE PURPOSE OF SUCH ACTION IS TO OBTAIN FOR THE GOVERNMENT THE ADVANTAGE OF MORE COMPETITIVE AND REALISTIC BIDDING AS DETERMINED BY THE GOVERNMENT'S DULY CONSTITUTED AGENTS, WE WILL NOT OBJECT TO SUCH ACTION. 37 COMP. GEN. 147.

WHILE THERE IS NO DOUBT THAT THE PROVISIONS OF THE SMALL BUSINESS ACT AUTHORIZE THE AWARD OF CONTRACTS TO SMALL BUSINESS CONCERNS AT PRICES WHICH MAY BE HIGHER THAN THOSE OBTAINABLE BY UNRESTRICTED COMPETITION, WE ARE AWARE OF NO VALID BASIS UPON WHICH IT MAY BE CONCLUDED THAT THIS ACT WAS INTENDED TO REQUIRE THE AWARD OF CONTRACTS TO SMALL BUSINESS CONCERNS AT PRICES CONSIDERED UNREASONABLE BY THE CONTRACTING AGENCY, OR THAT THE CONTRACTING AGENCY WOULD BE PROHIBITED FROM WITHDRAWING A SET-ASIDE DETERMINATION WHERE THE BIDS SUBMITTED BY SMALL BUSINESS CONCERNS WERE CONSIDERED UNREASONABLE.

UNDER THE STATED TERMS OF THE INVITATION, BIDS FROM LARGE BUSINESS CONCERNS WERE TO BE CONSIDERED AS NONRESPONSIVE AND WERE TO BE REJECTED AND NOT CONSIDERED FOR AWARD. SUCH BIDS, WHILE NONRESPONSIVE, ARE REGARDED AS COURTESY BIDS AND, AS SUCH, APPLICABLE REGULATIONS HAVE, IN THE PAST, AFFIRMATIVELY PROVIDED FOR THEIR RECORDATION FOR USE IN DETERMINING THE PROPRIETY OF EXECUTING DETERMINATIONS IN CONNECTION WITH FUTURE PROCUREMENT OF THE SAME OR SIMILAR ITEMS. IN THE PRESENT CASE, WHETHER OR NOT SUN'S BID WAS PROPERLY FOR CONSIDERATION IN DETERMINING TO WITHDRAW THE SET-ASIDE IS NOT CONTROLLING SINCE THERE WAS A VALID REASON OTHERWISE FOR THE CANCELLATION, NAMELY, THE SUBSTANTIAL DIFFERENCE BETWEEN THE LOW RESPONSIVE BID AND THE PRICES PAID UNDER PRIOR PROCUREMENTS.

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