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B-157411, NOV. 4, 1965, 45 COMP. GEN. 228

B-157411 Nov 04, 1965
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THE REDUCED PRICES EXCEEDING THE LOW BID OF THE ONLY OTHER BIDDER WHO WAS DETERMINED NOT TO BE A SMALL BUSINESS CONCERN. IS CONTRARY TO SECTIONS 3-215.1 AND 3.215.2 OF THE ARMED SERVICES PROCUREMENT REGULATION IMPLEMENTING 10 U.S.C. 2304 (A) (15) TO AUTHORIZE THE NEGOTIATION OF A CONTRACT WHERE THE "BID PRICES RECEIVED AFTER FORMAL ADVERTISING ARE UNREASONABLE. THE PRICE NEGOTIATED IS LOWER THAN THE LOWEST REJECTED BID. IS THE LOWEST OFFERED BY A RESPONSIBLE SUPPLIER. THE PRINCIPLE THAT THE GOVERNMENT MAY ACCEPT THE BENEFIT OF A VOLUNTARY REDUCTION IN THE PRICE OF AN OTHERWISE ACCEPTABLE RESPONSIVE BID IS NOT FOR APPLICATION WHERE THE BID PRICES RECEIVED AFTER FORMAL ADVERTISING ARE UNREASONABLY HIGH AND NEGOTIATION OF A LOWER PRICE WITH ONLY ONE BIDDER WOULD BE CONTRARY TO STATUTE AND REGULATION.

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B-157411, NOV. 4, 1965, 45 COMP. GEN. 228

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - NEGOTIATION - TO OBTAIN REASONABLE PRICES. THE NEGOTIATION TO OBTAIN PRICE REDUCTIONS UNDER TWO INVITATIONS FOR BIDS ON TOTAL SET-ASIDES ISSUED TO NUMEROUS SMALL BUSINESS CONCERNS WITH THE ONLY RESPONSIVE BIDDER, THE REDUCED PRICES EXCEEDING THE LOW BID OF THE ONLY OTHER BIDDER WHO WAS DETERMINED NOT TO BE A SMALL BUSINESS CONCERN, IS CONTRARY TO SECTIONS 3-215.1 AND 3.215.2 OF THE ARMED SERVICES PROCUREMENT REGULATION IMPLEMENTING 10 U.S.C. 2304 (A) (15) TO AUTHORIZE THE NEGOTIATION OF A CONTRACT WHERE THE "BID PRICES RECEIVED AFTER FORMAL ADVERTISING ARE UNREASONABLE," PROVIDED EACH RESPONSIBLE BIDDER HAS A REASONABLE OPPORTUNITY TO NEGOTIATE, THE PRICE NEGOTIATED IS LOWER THAN THE LOWEST REJECTED BID, AND IS THE LOWEST OFFERED BY A RESPONSIBLE SUPPLIER, AND THE PRINCIPLE THAT THE GOVERNMENT MAY ACCEPT THE BENEFIT OF A VOLUNTARY REDUCTION IN THE PRICE OF AN OTHERWISE ACCEPTABLE RESPONSIVE BID IS NOT FOR APPLICATION WHERE THE BID PRICES RECEIVED AFTER FORMAL ADVERTISING ARE UNREASONABLY HIGH AND NEGOTIATION OF A LOWER PRICE WITH ONLY ONE BIDDER WOULD BE CONTRARY TO STATUTE AND REGULATION. OVERRULES ANY INCONSISTENT DECISIONS. CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - NEGOTIATION - TO OBTAIN REASONABLE PRICES NOTWITHSTANDING RELIANCE ON THE NEGOTIATING AUTHORITY IN 10 U.S.C. 2304 (A) (17) TO RESTRICT BIDDING TO SMALL BUSINESS CONCERNS, THE RULES GOVERNING FORMALLY ADVERTISED PROCUREMENTS ARE ALSO FOR APPLICATION IN TOTAL SMALL BUSINESS SET-ASIDES, THEREFORE, WHEN THE USE OF A SMALL BUSINESS RESTRICTED ADVERTISING PROCEDURE RESULTED IN UNREASONABLE BIDS, NEGOTIATION WITH THE ONLY SMALL BUSINESS CONCERN RESPONDING TO THE INVITATION FOR BIDS TO OBTAIN REASONABLE PRICES WAS IMPROPER AND THE INVITATION SHOULD BE CANCELED, AND TIME PERMITTING, IN THE ABSENCE OF A REASONABLE EXPECTATION THAT BIDS WILL BE RECEIVED FROM A SUFFICIENT NUMBER OF SMALL BUSINESS CONCERNS TO ENSURE REASONABLE PRICES, THE PROCUREMENT SHOULD BE ADVERTISED ON AN UNRESTRICTED BASIS. CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SET-ASIDES - ADMINISTRATIVE DETERMINATION WHILE THE DETERMINATION OF WHETHER THERE IS A REASONABLE EXPECTATION OF RECEIVING A SUFFICIENT NUMBER OF BIDS UNDER A TOTAL SET-ASIDE TO ASSURE REASONABLE PRICES IS WITHIN ADMINISTRATIVE DISCRETION, THE VALIDITY OF A SET-ASIDE UNDER THE AUTHORITY IN SECTION 15 OF THE SMALL BUSINESS ACT IS NOT ESTABLISHED BY THE FACT THAT 20 AND 33 SOURCES WERE SOLICITED UNDER TWO INVITATIONS FOR BIDS, ABSENT A REASONABLE BASIS FOR EXPECTING RESPONSIVE BIDS FROM MORE THAN TWO SOURCES, THEREFORE, IN FUTURE PROCUREMENTS, THE DECISION TO MAKE A TOTAL SET-ASIDE SHOULD BE CAREFULLY CONSIDERED, POTENTIAL SOURCES OF SMALL BUSINESS INTEREST THOROUGHLY INVESTIGATED, AND THE BASIS OF THE DETERMINATION FOR THE TOTAL SET-ASIDE FULLY EXPLAINED AND DOCUMENTED.

TO THE SECRETARY OF THE NAVY, NOVEMBER 4, 1965:

REFERENCE IS MADE TO THE LETTER OF SEPTEMBER 10, 1965, AND ENCLOSURES, FROM THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, REPORTING ON THE PROTEST OF WESTERN MOLDED FIBRE PRODUCTS, INCORPORATED, AGAINST AWARD OF A CONTRACT TO DODGE CORK COMPANY, INCORPORATED, UNDER INVITATIONS FOR BIDS NOS. 104-3-66 (215) AND 104-18-66 (211), ISSUED BY THE SHIPS PARTS CONTROL CENTER, MECHANICSBURG, PENNSYLVANIA.

BOTH INVITATIONS, CALLING FOR BIDS ON STATED QUANTITIES OF CORK PLUGS FOR CARTRIDGE CASES, ARE TOTAL SET-ASIDES FOR SMALL BUSINESS. ALTHOUGH 20 AND 33 SOURCES WERE SOLICITED ON THE RESPECTIVE INVITATIONS, BIDS WERE RECEIVED FROM ONLY TWO COMPANIES, WESTERN MOLDED FIBRE PRODUCTS AND DODGE CORK COMPANY. THE BIDS OF THESE TWO COMPANIES ARE AS FOLLOWS:

IFB104-3-66

BIDDER ITEM QTY U/P TOTAL

WESTERN MOLDED FIBRE 1 95,800 EA. $0.938 $ 89,860.00

DODGE CORK COMPANY 1 95,800 EA. 1.32 126,456.00

IFB104-18-66-FIRST PROGRAM YEAR

WESTERN MOLDED FIBRE 1 116,600 EA. 2.104 245,326.40

DODGE CORK COMPANY 1 116,600 EA. 2.57 299,662.00

IFB104-18-66-MULTI-YEAR (FIRST AND SECOND PROGRAM YEAR)

WESTERN MOLDED FIBRE 1 150,000 EA. 2.056 308,400.00

DODGE CORK COMPANY 1 150,000 EA. 2.39 358,500.00

SUBSEQUENT TO OPENING OF THE BIDS IT WAS DETERMINED BY THE SMALL BUSINESS ADMINISTRATION THAT WESTERN MOLDED FIBRE PRODUCTS WAS NOT A SMALL BUSINESS FOR PURPOSES OF THESE PROCUREMENTS, AND ITS BIDS WERE REJECTED AS NONRESPONSIVE. SINCE THE CONTRACTING OFFICER CONSIDERED THE BID PRICES OF DODGE UNREASONABLE, HE UNDERTOOK NEGOTIATIONS WITH DODGE RESULTING IN REDUCTION OF ITS BID PRICES AS FOLLOWS:

IFB 104-3-66

DODGE CORK COMPANY 1 95,800 EA. 1.003 96,087.40

IFB 104-18-66-FIRST PROGRAM YEAR

DODGE CORK COMPANY 1 116,600 EA. 2.210 257,686.00

IFB 104-18-66-MULTI-YEAR (FIRST AND SECOND PROGRAM YEAR)

DODGE CORK COMPANY 1 150,000 EA. 2.163 324,450.00

AWARDING OF CONTRACTS IS BEING WITHHELD PENDING THE DECISION OF OUR OFFICE ON THE PROTEST BY WESTERN AGAINST ANY AWARDS TO DODGE AT ITS REDUCED BID PRICES.

ALTHOUGH WESTERN MADE NO OBJECTION TO THE SET-ASIDE ACTION PRIOR TO OPENING OF THE BIDS BECAUSE OF THE BELIEF THAT IT WAS SMALL BUSINESS, IT NOW PROTESTS THE SET-ASIDE ON THE GROUNDS THAT SUCH ACTION WAS MOTIVATED BY A DESIRE ON THE PART OF SBA PERSONNEL TO FAVOR DODGE AND ELIMINATE OTHER COMPETITION, AND FURTHER PROTESTS AWARD OF A CONTRACT TO DODGE BECAUSE THE TOTAL OF THE DODGE BIDS UNDER BOTH IFB'S IS $86,695.60 HIGHER THAN THE TOTAL OF ITS BIDS UNDER THE SUBJECT IFB-S. ALSO, WESTERN OBJECTS TO THE PURCHASE OF THE ITEMS UNDER IFB NO. 104-3 66 (215) FROM ANY OTHER SOURCE BECAUSE THE NAVY HAS THE OPTION TO PURCHASE 95,811 OF THESE SAME ITEMS FROM WESTERN UNDER CONTRACT NO. 104 4959A.

WITH RESPECT TO THIS LATTER POINT, WE ARE ADVISED THAT, SINCE THE FUNDS ARE NOW AVAILABLE UNDER THE CITED CONTRACT TO PURCHASE THE 95,800 UNITS CALLED FOR UNDER IFB 104-3-66 (215), THE INVITATION WILL BE CANCELED AND THE UNITS PURCHASED FROM WESTERN AT THE CONTRACT PRICE OF $ .841 PER UNIT. SINCE SUCH ACTION IS IN THE BEST INTEREST OF THE GOVERNMENT AND ALSO SATISFIES WESTERN'S PROTEST ON THIS POINT, IT WOULD NOT APPEAR TO BE NECESSARY FOR OUR OFFICE TO COMMENT FURTHER THEREON.

CONCERNING WESTERN'S PROTEST AGAINST THE DETERMINATION TO MAKE THESE PROCUREMENTS TOTAL SET-ASIDES FOR SMALL BUSINESS CONCERNS, SECTION 15 OF THE SMALL BUSINESS ACT, 15 U.S.C. 644, PROVIDES THAT SMALL BUSINESS CONCERNS SHALL RECEIVE ANY AWARD OR CONTRACT OR ANY PART THEREOF AS TO WHICH IT IS DETERMINED TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL BUSINESS CONCERNS. UNDER SECTION 15 OF THE ACT THE DETERMINATION AS TO WHETHER A PARTICULAR PROCUREMENT SHOULD BE SET ASIDE IS WITHIN THE JURISDICTION OF THE PROCURING AGENCY AND THE SMALL BUSINESS ADMINISTRATION. IMPLEMENTING THE STATUTORY MANDATE AS FAR AS THE DEFENSE ESTABLISHMENT IS CONCERNED IS SECTION 1, PART 7, OF THE ARMED SERVICES PROCUREMENT REGULATION. WITH RESPECT TO TOTAL SET-ASIDES, ASPR 1-706.5 (A) (1) PROVIDES AS FOLLOWS:

1-706.5 TOTAL SET-ASIDES

(A) (1) SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET- ASIDES AS PROVIDED IN 1-803 (A) (II), THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR A CLASS OF PROCUREMENTS, INCLUDING BUT NOT LIMITED TO CONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION, SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE 1-701.1) IF THE CONTRACTING OFFICER DETERMINES THAT THERE IS REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. TOTAL SET-ASIDES SHALL NOT BE MADE UNLESS SUCH A REASONABLE EXPECTATION EXISTS. * * *

WHILE IT HAS BEEN HELD THAT THE DETERMINATION OF WHETHER THERE IS REASONABLE EXPECTATION OF RECEIVING A SUFFICIENT NUMBER OF BIDS UNDER A TOTAL SET-ASIDE TO ASSURE REASONABLE PRICES IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION AND WILL NOT ORDINARILY BE QUESTIONED BY OUR OFFICE, B-150048, DECEMBER 12, 1962, WE BELIEVE THE RECORD RAISES SERIOUS QUESTION AS TO THE VALIDITY OF THE SET-ASIDE DETERMINATION IN THE INSTANT CASE. THUS, ALTHOUGH 20 AND 33 SOURCES WERE SOLICITED ON THE RESPECTIVE IFB-S, WE DO NOT BELIEVE THIS ALONE ESTABLISHES THE VALIDITY OF THE REQUIRED DETERMINATION WHEN IT IS REPORTED THAT:

THESE PROCUREMENTS WERE SET ASIDE 100 PERCENT FOR SMALL BUSINESS ON THE BASIS THAT THE PREVIOUS SUPPLIER, WESTERN MOLDED FIBRE PRODUCTS, INC., GARDENA, CALIFORNIA IN THE PAST WAS CONSIDERED A SMALL BUSINESS AND THAT AT LEAST ONE OTHER SMALL BUSINESS WAS INTERESTED.

IT SEEMS IMPLICIT FROM THIS STATEMENT THAT, BUT FOR THE MISTAKEN BELIEF THAT WESTERN WAS SMALL BUSINESS, THESE PROCUREMENTS WOULD NOT HAVE BEEN SET-ASIDE. NOTHING APPEARS IN YOUR DEPARTMENT'S REPORTS OF SEPTEMBER 10 AND OCTOBER 12 TO INDICATE THAT THERE WAS ANY REASONABLE BASIS FOR EXPECTING RESPONSIVE BIDS FROM MORE THAN TWO OF THE 20 AND 33 SOURCES SOLICITED, AND THERE IS NOTHING TO INDICATE THE BASIS FOR SELECTING THE PARTICULAR SOURCES THAT WERE SOLICITED. ALTHOUGH IT NOW APPEARS THAT THESE PROCUREMENTS PROBABLY SHOULD NOT HAVE BEEN SET ASIDE FOR SMALL BUSINESS CONCERNS, WE ARE RELUCTANT TO SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER IN THE ABSENCE OF A CLEAR SHOWING OF ABUSE OF THE DISCRETION PERMITTED HIM. HOWEVER, WE DO RECOMMEND THAT ANY NECESSARY ACTION BE TAKEN TO ASSURE THAT IN FUTURE PROCUREMENTS THE DECISION TO MAKE A TOTAL SET-ASIDE BE CAREFULLY CONSIDERED, POTENTIAL SOURCES OF SMALL BUSINESS INTEREST BE THOROUGHLY INVESTIGATED, AND THE BASIS OF THE DETERMINATION BE FULLY EXPLAINED AND DOCUMENTED.

REMAINING FOR CONSIDERATION IS THE PROPRIETY OF THE CONTRACTING OFFICER'S ACTION IN CONDUCTING NEGOTIATIONS WITH DODGE IN AN EFFORT TO REDUCE ITS BID PRICE, WHICH THE CONTRACTING OFFICER ,CONSIDERED UNREASONABLE IN COMPARISON WITH PREVIOUS PRICES PAID AND THE BID PRICES SUBMITTED BY WESTERN MOLDED FIBRE PRODUCTS COMPANY," RATHER THAN WITHDRAWING THE SET- ASIDE PURSUANT TO ASPR 1-706.3 (A), WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS:

IF, PRIOR TO AWARD OF A CONTRACT INVOLVING AN INDIVIDUAL OR CLASS SET- ASIDE, THE CONTRACTING OFFICER CONSIDERS THAT PROCUREMENT OF THE SET-ASIDE FROM A SMALL BUSINESS CONCERN WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G., BECAUSE OF UNREASONABLE PRICE), HE MAY WITHDRAW A SET-ASIDE DETERMINATION. * * *

IN THIS CONNECTION, WE ARE ADVISED BY SUPPLEMENTAL REPORT DATED OCTOBER 12, 1965, FROM THE BUREAU OF SUPPLIES AND ACCOUNTS THAT THE DOWNWARD REVISIONS IN DODGE'S BID PRICES WERE THE RESULT OF NEGOTIATIONS BETWEEN REPRESENTATIVES OF THE BIDDER AND THE CONTRACTING OFFICER; THAT THE COMPTROLLER GENERAL IS CONSIDERED TO HAVE RECOGNIZED THE RIGHT OF A CONTRACTING OFFICER TO NEGOTIATE WITH A LOW BIDDER TO OBTAIN FAIR AND REASONABLE PRICES; AND THAT ANY CONTRACT AWARD WHICH MAY RESULT IN THE INSTANT SET-ASIDE PROCUREMENT WILL BE CONSIDERED AS NEGOTIATED PURSUANT TO 10 U.S.C. 2304 (A) (17) AND SECTION 15 OF THE SMALL BUSINESS ACT. WHILE NOT SO STATED IN THE REPORT OF OCTOBER 12, WE ARE INFORMALLY ADVISED THAT THE REFERENCE TO THE COMPTROLLER GENERAL'S RECOGNITION OF THE RIGHT TO NEGOTIATE WITH THE LOW BIDDER ALLUDES TO THE PROVISIONS OF NAVY CONTRACT LAW SECTION 2.53 (2D ED. 1959). THIS SECTION PROVIDES, IN PERTINENT PART, AS FOLLOWS:

* * * WHENEVER THE CONTRACTING OFFICER IS OF THE OPINION THAT THE PRICE OF THE LOWEST BID ELIGIBLE FOR AWARD IS NOT FAIR AND REASONABLE UNDER ALL THE CIRCUMSTANCES, HE MAY ENTER INTO NEGOTIATIONS WITH THAT BIDDER TO REDUCE THE PRICE.

CITED AS THE BASIS FOR THIS AUTHORITY IS A DECISION OF OUR OFFICE, B- 74013, MARCH 9, 1948 (WHICH CITES THE CASE OF ALECK LEITMAN V. UNITED STATES, 104 CT.CL. 324, 341, IN SUPPORT OF THE PROPOSITION THAT THE GOVERNMENT MAY ACCEPT A VOLUNTARY DECREASE IN THE PRICE OF AN OTHERWISE LOW BID), AND THE CASE OF EQUIPMENT CORP. OF AMERICA V. UNITED STATES, 98 CT.CL. 159, 175, WHICH INVOLVED A REDUCTION IN A CONTRACT PRICE.

ALTHOUGH THE PROVISIONS OF NAVY CONTRACT LAW QUOTED ABOVE WOULD APPEAR TO JUSTIFY NEGOTIATION IN THE INSTANT CASE, WE BELIEVE THE OPPOSITE CONCLUSION MUST BE REACHED IN VIEW OF A CONFLICT OF SUCH PROVISION WITH SECTION 2 (C) (15) OF THE ARMED SERVICE PROCUREMENT ACT OF 1947, 10 U.S.C. 2304 (A) (15), AS IMPLEMENTED BY ARMED SERVICES PROCUREMENT REGULATIONS 3- 215.1 AND 3.215.2, WHICH AUTHORIZE NEGOTIATION OF A CONTRACT WHERE THE "BID PRICES RECEIVED AFTER FORMAL ADVERTISING ARE UNREASONABLE" AND, QUOTING FROM ASPR 3-215.2,

(I) PRIOR NOTICE OF INTENTION TO NEGOTIATE AND A REASONABLE OPPORTUNITY TO NEGOTIATE HAVE BEEN GIVEN BY A CONTRACTING OFFICER TO EACH RESPONSIBLE BIDDER WHICH SUBMITTED A BID IN RESPONSE TO THE INVITATION FOR BIDS;

(II) THE NEGOTIATED PRICE IS LOWER THAN THE LOWEST REJECTED BID PRICE OF A RESPONSIBLE BIDDER, AS DETERMINED BY THE SECRETARY; AND

(III) THE NEGOTIATED PRICE IS THE LOWEST NEGOTIATED PRICE OFFERED BY ANY RESPONSIBLE SUPPLIER.

ALTHOUGH OUR DECISION, B-74013, WAS RENDERED SUBSEQUENT TO THE EFFECTIVE DATE OF THE ARMED SERVICES PROCUREMENT ACT, IT INVOLVED PROCUREMENT BY A CIVIL AGENCY OF THE GOVERNMENT TO WHICH NO SIMILAR PROVISIONS WERE THEN APPLICABLE. FURTHERMORE, BOTH THE ALECK LEITMANAND EQUIPMENT CORP. OF AMERICA CASES WERE DECIDED PRIOR TO ENACTMENT OF THE ARMED SERVICES PROCUREMENT ACT. AND WHILE OUR OFFICE RECOGNIZES THE PRINCIPLE THAT THE GOVERNMENT MAY ACCEPT THE BENEFIT OF A VOLUNTARY REDUCTION IN THE PRICE OF AN OTHERWISE ACCEPTABLE LOW RESPONSIVE BID, THIS PRINCIPLE IS NOT FOR APPLICATION WHERE THE BID PRICES RECEIVED AFTER FORMAL ADVERTISING ARE UNREASONABLY HIGH AND NEGOTIATION OF A LOWER PRICE WITH ONLY ONE BIDDER WOULD THEREFORE BE CONTRARY TO STATUTE OR REGULATION. TO THE EXTENT THAT ANY DECISIONS OF OUR OFFICE MAY BE INCONSISTENT WITH THE LIMITATION ON THE APPLICABILITY OF THIS PRINCIPLE, THEY SHOULD NO LONGER BE CONSIDERED CONTROLLING.

WITH RESPECT TO THE FACT THAT ANY CONTRACT WHICH MAY BE AWARDED WILL CITE 10 U.S.C. 2304 (A) (17), AND WILL THEREFORE BE CONSIDERED AS A NEGOTIATED CONTRACT, IT MUST BE NOTED THAT RELIANCE UPON SUCH AUTHORITY IS ONLY FOR THE PURPOSE OF RESTRICTING BIDDING TO SMALL BUSINESS CONCERNS, AND THAT THE RULES GENERALLY FOR APPLICATION IN FORMALLY ADVERTISED PROCUREMENTS ARE ALSO FOR APPLICATION IN TOTAL SMALL BUSINESS SET-ASIDES. SEE ASPR 1- 706.5 (B). WHERE, AS HERE, SMALL BUSINESS RESTRICTED ADVERTISING PROCEDURES RESULT IN UNREASONABLE BIDS WE MUST CONCLUDE THAT IT WOULD BE IMPROPER TO CONDUCT NEGOTIATIONS, FOR THE PURPOSE OF OBTAINING REASONABLE PRICES, WITH THE ONLY SMALL BUSINESS CONCERN WHICH RESPONDED TO THE INVITATION FOR BIDS. IN THIS CONNECTION, SEE OUR LETTER OF DECEMBER 6, 1962, B 149631ADVISING THE SECRETARY OF DEFENSE THAT NEGOTIATION WHICH WAS LIMITED TO THE ORIGINAL BIDDERS FOLLOWING FAILURE TO RECEIVE A RESPONSIVE BID UNDER SMALL BUSINESS RESTRICTED ADVERTISING PROCEDURES WAS IMPROPER.

FOR YOUR INFORMATION, WE ARE ENCLOSING A COPY OF OUR LETTER OF TODAY TO THE SECRETARY OF DEFENSE RECOMMENDING THAT ASPR BE AMENDED TO CLARIFY THIS MATTER.

IN ACCORDANCE WITH THE FOREGOING, WE MUST CONCLUDE THAT THERE WAS NO AUTHORITY OR JUSTIFICATION FOR NEGOTIATING WITH THE LOW BIDDER IN THE INSTANT CASE. IFB NO. 104-18-66 (211) SHOULD THEREFORE BE CANCELED. TIME PERMITS, AND IN THE ABSENCE OF A REASONABLE EXPECTATION THAT BIDS WILL BE RECEIVED FROM A SUFFICIENT NUMBER OF SMALL BUSINESS CONCERNS TO ENSURE REASONABLE PRICES, THE REQUIREMENT SHOULD BE READVERTISED ON AN UNRESTRICTED BASIS.

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