B-151910, AUG. 20, 1963

B-151910, AUG. 20, 1963

TO HILLSIDE METAL PRODUCTS, INCORPORATED:

WE REFER TO YOUR LETTER OF JULY 3, 1963, WITH ENCLOSURES AND SUBSEQUENT CORRESPONDENCE RELATING TO YOUR PROTEST CONCERNING THE FAILURE OF THE GENERAL SERVICES ADMINISTRATION TO MAKE AWARD TO YOU AS LOW BIDDER PURSUANT TO INVITATION FOR BIDS NO. FPNFO-P-26830-A-5-8-63, DATED MARCH 29, 1963, WITH AMENDMENT 1 DATED APRIL 15, 1963, AND AMENDMENT 2 DATED MAY 3, 1963.

THE INVITATION INVOLVED IN THIS CASE SOLICITED BIDS FOR FURNISHING CERTAIN L-UNIT DESKS, L-UNIT TABLES, AND ACCESSORY ITEMS TO OSA. THE INVITATION DIVIDED THIS PROCUREMENT INTO FOUR GROUPS OF WHICH GROUP I THROUGH GROUP III ARE MATERIAL TO THE ISSUES INVOLVED IN THIS CASE. EACH OF THE ABOVE GROUPS WAS GIVEN A GENERAL CATEGORICAL TITLE IN THE INVITATION WHICH WERE LISTED AS FOLLOWS: GROUP I--- L-UNIT DESKS; GROUP II --- L-UNIT TABLES; GROUP III--- ACCESSORY ITEMS. UNDER THE GENERAL CATEGORICAL TITLES THE SPECIFIC ITEMS REQUIRED WERE LISTED AND DESCRIBED. GROUP I WAS COMPRISED OF ITEMS 1 THROUGH 16; GROUP II WAS COMPRISED OF ITEMS 17 THROUGH 36; GROUP III WAS COMPRISED OF ITEMS 37, 38, 39. FOR EACH ITEM THE INVITATION PROVIDED 10 SPACES FOR THE BIDDERS' UNIT PRICES WHICH SPACES CORRESPONDED TO THE 10 REGIONS INTO WHICH THE 48 CONTIGUOUS STATES WERE DIVIDED FOR THE PURPOSES OF THIS PROCUREMENT AND THE BIDDER WAS TO QUOTE A UNIT PRICE FOR FURNISHING AS DELIVERED EACH OF THE ITEMS TO THE REGIONS SPECIFIED. IN THIS REGARD ARTICLE IV OF THE SPECIAL PROVISIONS OF THIS INVITATION PROVIDED THAT AWARD WOULD BE MADE IN THE AGGREGATE ON A REGIONAL AREA BASIS FOR GROUPS I THROUGH III. THE BIDDER WAS REQUIRED TO QUOTE PRICES FOR ALL ITEMS IN THESE GROUPS WITHIN A REGIONAL AREA BEFORE BEING CONSIDERED FOR AWARD FOR SUCH AREA. THE LOW AGGREGATE BIDDER WAS TO BE DETERMINED BY MULTIPLYING THE TOTAL UNIT PRICE FOR EACH REGION IN EACH GROUP BY THE APPLICABLE WEIGHT FACTORS FOR THAT GROUP WHICH WERE LISTED IN THE INVITATION AS 54, 43, AND 3, FOR GROUPS I, II AND III, RESPECTIVELY. AMENDMENT 2, ISSUED MAY 3, 1963, CHANGED THESE GROUP WEIGHT FACTORS TO 55 FOR GROUP I, 43 FOR GROUP II, AND 2 FOR GROUP III. ON PAGE 4, THE INVITATION LISTED GSA ESTIMATED REQUIREMENTS FOR THE ITEMS INVOLVED IN THIS PROCUREMENT. IN RESPONSE TO THIS INVITATION THREE BIDS WERE RECEIVED AND OPENED ON MAY 16, 1963, AND ON THE BASIS OF THE EVALUATION FORMULA SET FORTH IN THIS INVITATION YOUR BID WAS DETERMINED TO BE THE LOW AGGREGATE BID FOR ALL REGIONAL AREAS. ON JULY 1, 1963, GSA INFORMED YOU BY LETTER THAT THE WEIGHT FACTORS USED FOR ITEMS 1 THROUGH 38 WERE ERRONEOUS AND DEFECTIVE, AND THAT ALL BIDS WOULD BE REJECTED AND THE PROCUREMENT READVERTISED USING UNIT WEIGHT FACTORS AS A BASIS FOR EVALUATION. ON JULY 3, 1963, YOU PROTESTED THIS ACTION BY GSA TO OUR OFFICE.

GSA HAS INFORMED US THAT UPON REVIEW OF THE EVALUATION FORMULA FOR DETERMINING THE LOW BIDDER IT WAS FOUND THAT THE GROUP WEIGHT FACTORS DID NOT ACCURATELY REFLECT THE POTENTIAL REQUIREMENTS FOR THESE ITEMS AND THAT A BIDDER COULD TAKE IMPROPER ADVANTAGE OF THE GROUP WEIGHT FACTORS BY SUBMITTING A BID WHICH DID NOT REFLECT ACTUAL PRICES FOR THE ITEMS INVOLVED. IN THIS REGARD A BIDDER COULD SUBMIT HIGH PRICES FOR ITEMS WHERE ESTIMATED DEMAND WAS HIGH AND LOW PRICES FOR ITEMS WHERE ESTIMATED DEMAND WAS LOW AND BY APPLYING THE GROUP WEIGHT FACTORS SUCH BID COULD BECOME THE LOW AGGREGATE BID NOTWITHSTANDING THE USE OF UNREALISTIC PRICES. THE FOLLOWING IS ONE OF THE EXAMPLES SUBMITTED BY GSA TO ILLUSTRATE THE USE OF UNREALISTIC PRICES IN YOUR BID. ITEM 3 IN GROUP I INVOLVED A DESK, TYPE I, SIZE 2; LINOLEUM TOP; L-UNIT, SINGLE RIGHT PEDESTAL; 50 IN. W. BY 30 IN. D, ADJUSTABLE IN HEIGHT FROM 29 IN. TO 30 1/2 IN. ITEM 4 IN GROUP I INVOLVED THE EXACT DESK AS DESCRIBED IN ITEM 3 EXCEPT THAT THE DESK IN ITEM 4 WAS TO HAVE A PLASTIC TOP. THE DIFFERENCE IN PRICE IN YOUR BID FOR THESE TWO ITEMS WAS APPROXIMATELY $24 WHICH GSA FOUND WAS UNREALISTIC WHEN THE DESCRIPTIONS OF THE TWO TABLES ARE CONSIDERED. OTHER SIMILAR EXAMPLES OF PRICE DISCREPANCIES IN YOUR BID WERE DISCOVERED BY GSA IN A REVIEW OF THIS PROCUREMENT. THE PRICES IN YOUR BID FOR ITEMS 1 TO 38 IN THIS PROCUREMENT WERE COMPARED WITH THE PRICES UNDER YOUR CONTRACT OF LAST YEAR WITH GSA TO FURNISH THESE ITEMS IN WHICH BIDS WERE EVALUATED ON THE BASIS OF UNIT WEIGHT FACTORS AND IT WAS FOUND THAT IF THE PRICES IN YOUR BID WERE ACCEPTED AND YOU WERE AWARDED A CONTRACT IN THIS INSTANCE, THE COST TO THE GOVERNMENT WOULD BE APPROXIMATELY $144,000 MORE THAN IF THE ESTIMATED REQUIREMENTS WERE FURNISHED UNDER THE PRICES OF YOUR CONTRACT OF LAST YEAR. IT WAS ALSO FOUND THAT IF AWARD WERE MADE TO THE SECOND LOW BIDDER USING AS A BASIS FOR EVALUATION THE VALUE OF ESTIMATED REQUIREMENTS RATHER THAN AN EVALUATION BASED ON GROUP WEIGHT FACTORS, THE COST TO THE GOVERNMENT WOULD BE APPROXIMATELY $251,000 LESS THAN IF AWARD WERE MADE TO YOU. BASED ON THESE CONSIDERATIONS GSA DETERMINED THAT ALL BIDS SHOULD BE DISCARDED AND THAT THIS PROCUREMENT SHOULD BE READVERTISED.

IN YOUR PROTEST YOU CONTEND THAT THE ACTION BY GSA IN DISCARDING ALL BIDS AND READVERTISING THIS PROCUREMENT AFTER ALL BIDS WERE OPENED WAS ARBITRARY AND CAPRICIOUS, NOT IN GOOD FAITH, AND ACCOMPLISHED WITHOUT COGENT REASONS IN APPARENT DISREGARD OF JUDICIAL PRECEDENT. TO SUPPORT THIS CONTENTION YOU CITE THE CASE OF MASSMAN CONSTRUCTION COMPANY V. UNITED STATES, 102 CT.CL. 699, IN WHICH THE COURT OF CLAIMS STATED IN PART AS FOLLOWS:

"TO HAVE A SET OF BIDS DISCARDED AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITOR'S PRICE IS A SERIOUS MATTER, AND IT SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS.'

OUR OFFICE HAS CONSISTENTLY AGREED WITH THIS DICTUM OF THE COURT OF CLAIMS IN THE MASSMAN CASE; HOWEVER, WE HAVE HELD IN OUR DECISION, B 143263, DATED DECEMBER 22, 1960, THAT A SUBSTANTIAL PROSPECTIVE SAVING MAY CONSTITUTE A "COGENT" REASON FOR REJECTING ALL BIDS AND READVERTISING A PROCUREMENT. WE HAVE ALSO STATED IN 36 COMP. GEN. 364 THAT:

"* * * WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE 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.

FROM A REVIEW OF THE FACTS AND CIRCUMSTANCES INVOLVED IN THIS PROCUREMENT IT APPEARS THAT THE GOVERNMENT WILL REALIZE A SUBSTANTIAL PROSPECTIVE SAVING FROM READVERTISEMENT. THE COMPARISON BETWEEN THE PRICES IN YOUR CONTRACT OF LAST YEAR FOR THESE ITEMS AND THE PRICES SUBMITTED IN YOUR PRESENT BID AND THE VARIOUS EXAMPLES OF PRICE DISCREPANCIES IN YOUR BID IN ADDITION TO THE SAVINGS WHICH COULD BE REALIZED IF ESTIMATED DEMANDS WERE PURCHASED FROM THE SECOND LOW BIDDER ESTABLISH THAT A PROCUREMENT FROM YOU USING THE EVALUATION FORMULA SET FORTH IN THIS INVITATION WOULD NOT BE ADVANTAGEOUS TO THE UNITED STATES. IT IS TRUE THAT THE DECISION TO DISCARD ALL BIDS WAS NOT MADE BY GSA UNTIL AFTER THE BIDS HAD BEEN OPENED; HOWEVER, IT WAS NOT POSSIBLE FOR GSA TO BE AWARE OF THE EFFECT THE USE OF GROUP WEIGHT FACTORS WOULD HAVE ON THIS PROCUREMENT UNTIL A REVIEW OF THE EVALUATION FORMULA HAD BEEN MADE, AND SUCH REVIEW OF NECESSITY COULD NOT BE MADE UNTIL AFTER THE BIDS HAD BEEN RECEIVED AND OPENED. IN THESE CIRCUMSTANCES WE FIND NO EVIDENCE OF ARBITRARY OR CAPRICIOUS ACTION BY GSA, NOR DO WE FIND ANY EVIDENCE OF BAD FAITH. WE BELIEVE THE ACTION TAKEN BY GSA IS IN THE BEST INTEREST OF THE UNITED STATES, AND CONSEQUENTLY THERE IS NO LEGAL BASIS FOR THIS OFFICE TO QUESTION THE ADMINISTRATIVE DETERMINATION TO DISCARD ALL BIDS AND READVERTISE.