B-143983, NOV. 23, 1960

B-143983, NOV. 23, 1960

TO THE SECRETARY OF THE ARMY:

WE ARE IN RECEIPT OF A LETTER DATED OCTOBER 7, 1960, FROM THE FAB WELD CORPORATION, REQUESTING RECONSIDERATION OF OUR DECISION OF SEPTEMBER 28, 1960, TO YOU, WHERE IN WE DENIED THE PROTEST OF THE CORPORATION AGAINST THE AWARD OF CONTRACT NO. DA-23-204-TC-1153 DATED JUNE 16, 1960, TO UNITED STEEL FABRICATORS, INC.

INVITATION FOR BIDS NO. TC-23-204-60-159 DATED APRIL 22, 1960, REQUESTED BIDS FOR FURNISHING 5,000 METAL SHIPPING BOXES, F.O.B. CARRIER'S EQUIPMENT AT THE BIDDER'S SHIPPING POINT. PAGES 2 AND 3 OF THE INVITATION PROVIDED, IN PERTINENT PART, THAT:

"THE ATTENTION OF BIDDERS IS CALLED TO PARAGRAPH 8 (C) ON THE REVERSE SIDE OF STANDARD FORM 30 AND TO ARTICLE 1. IN VIEW OF THE DESTINATIONS OF ITEM 1 FOR EVALUATION PURPOSES, AND THE PARTIAL SMALL BUSINESS SET-ASIDE, IT IS UNLIKELY THAT ONE CONTRACT WILL BE AWARDED FOR THE TOTAL QUANTITY TO BE PROCURED. IN APPLYING THESE EVALUATION FACTORS AND AWARDING, IT IS NOT IMPROBABLE THAT AS MANY AS THREE CONTRACTS MAY BE AWARDED AS A RESULT OF THIS INVITATION FOR BIDS. BIDDERS SHOULD TAKE THESE FACTORS INTO CONSIDERATION IN SUBMITTING BIDS.'

PARAGRAPH 8 (C) REFERRED TO ABOVE, PROVIDED:

"/C) THE GOVERNMENT MAY ACCEPT ANY ITEM OR GROUP OF ITEMS OF ANY BID, UNLESS THE BIDDER QUALIFIES HIS BID BY SPECIFIC LIMITATIONS. UNLESS OTHERWISE PROVIDED IN THE SCHEDULE, BIDS MAY BE SUBMITTED FOR ANY QUANTITIES LESS THAN THOSE SPECIFIED; AND THE GOVERNMENT RESERVES THE RIGHT TO MAKE AN AWARD ON ANY ITEM FOR A QUANTITY LESS THAN THE QUANTITY BID UPON AT THE UNIT PRICES OFFERED UNLESS THE BIDDER SPECIFIES OTHERWISE IN HIS BID.'

THE INVITATION FURTHER PROVIDED THAT AWARD WOULD BE MADE ON THE BASIS OF THE LOWEST-OVER-ALL COST TO THE GOVERNMENT, AND BIDS WOULD BE EVALUATED ON THE BASIS OF BID PRICE, PLUS CHARGES FOR BLOCKING, BRACING AND TIEDOWN, AND TRANSPORTATION COST TO THE GOVERNMENT FROM THE F.O.B. POINT OF ORIGIN TO NAMED DESTINATIONS. FOR THE PURPOSE OF EVALUATING BIDS, IT WAS PROVIDED THAT 3,500 UNITS WOULD BE CONSIGNED TO NEW CUMBERLAND, PENNSYLVANIA, AND 1,500 UNITS TO LATHROP, CALIFORNIA.

IN VIEW OF THE POSSIBILITY THAT SPLIT AWARDS WOULD BE MADE, UNITED STEEL SUBMITTED A BID OF $236.32 EACH FOR 5,000 UNITS, $241.32 EACH FOR 1,667 UNITS, AND $238.82 FOR 3,334 (3,333) UNITS, PLUS $6.69 FOR BLOCKING, BRACING AND TIEDOWN. FAB-WELD SUBMITTED A BID OF $244.95 EACH FOR 5,000 UNITS WITH NO ADDITIONAL CHARGE FOR BLOCKING, BRACING AND TIEDOWN. FAB- WELD DESIGNATED ON ITS BID IN THE SPACE PROVIDED THEREFOR ON PAGE 9 OF THE INVITATION THAT ITS F.O.B. SHIPPING POINT WAS ,OUR PLANT, SIMPSON, LACKAWANNA CO., PA.' AND UNITED STEEL DESIGNATED WOOSTER, OHIO, AS ITS F.O.B. SHIPPING POINT. HOWEVER, IN REQUESTING THE MILITARY TRAFFIC MANAGEMENT AGENCY (MTMA) TO FURNISH FREIGHT RATES APPLICABLE TO THE LOWEST BIDS SUBMITTED BY UNITED STEEL AND FAB-WELD, THE CONTRACTING OFFICER INADVERTENTLY REQUESTED RATES FROM FAB-WELD'S PLANT AT "SIMPSON, PENNSYLVANIA" RATHER THAN AT SIMPSON, LACKAWANNA, PENNSYLVANIA, AS DESIGNATED IN ITS BID. ON THE BASIS OF SUCH INFORMATION, MTMA FURNISHED A FREIGHT RATE OF $1.33 PER CWT. FROM SIMPSON, FAYETTE COUNTY, PENNSYLVANIA, TO NEW CUMBERLAND, AND A RATE OF $6.25 PER CWT. FROM SIMPSON, FAYETTE COUNTY, PENNSYLVANIA, TO LATHROP, CALIFORNIA. WITH RESPECT TO SHIPMENTS FROM WOOSTER, OHIO, MTMA FURNISHED A RATE OF $1.58 PER CWT. TO NEW CUMBERLAND AND $5.73 PER CWT. TO LATHROP. IT SUBSEQUENTLY DEVELOPED THAT THE RATES TO LATHROP WERE CORRECT NOTWITHSTANDING THE ERRONEOUS F.O.B. ORIGIN POINT USED IN COMPUTING FAB-WELD'S RATES.

THE BIDS OF FAB-WELD AND UNITED STEEL WERE EVALUATED ON THE BASIS OF SUCH FREIGHT RATES AS FOLLOWS:

CHART

TOTAL UNIT COST

NEW CUMBERLAND LATHROP

UNITED STEEL $266.71 $328.96

FAB-WELD 264.90 338.70

HENCE, AS EVALUATED ABOVE, THE TOTAL ESTIMATED COST TO THE GOVERNMENT WAS AS FOLLOWS:

CHART

NEW CUMBERLAND LATHROP

(3,500 UNITS) (1,500 UNITS) UNITED STEEL

$933,485 $493,440 FAB-WELD 927,150 508,050

IT WAS ADMINISTRATIVELY DETERMINED THAT SINCE UNITED STEEL'S AGGREGATE BID, AS EVALUATED, IN THE GROSS AMOUNT OF $1,426,925, WAS LOWER THAN THAT OF FAB-WELD IN THE GROSS AMOUNT OF $1,435,200, AN AGGREGATE AWARD OF THE 5,000 UNITS SHOULD BE MADE TO UNITED STEEL AS THE LOWEST OVER-ALL BIDDER, TRANSPORTATION COSTS TO THE GOVERNMENT CONSIDERED. ON JUNE 16, 1960, THE CONTRACT IN THE AMOUNT OF $1,181,600 WAS AWARDED TO UNITED STEEL.

ON JUNE 29, 1960, FAB-WELD PROTESTED AGAINST THE AWARD, AND BY LETTER DATED JUNE 29, 1960, TO THE PROCUREMENT AGENCY, FAB-WELD POINTED OUT THAT A FREIGHT RATE OF $0.99 PER CWT. SHOULD APPLY TO NEW CUMBERLAND, PENNSYLVANIA, AND THAT A RATE OF $6.25 PER CWT. SHOULD APPLY TO ITS SHIPMENTS TO LATHROP. IN THAT CONNECTION, IT IS UNDERSTOOD THAT CARBONDALE, PENNSYLVANIA, WAS THE RAIL SHIPPING POINT FOR THE AREA IN WHICH FAB-WELD'S PLANT IS LOCATED. ALSO, FAB-WELD POINTED OUT THAT, BASED ON THEIR CALCULATIONS, THEIR BID WAS IN FACT THE LOWEST RECEIVED. THE PROCUREMENT AGENCY REPLIED TO THAT LETTER ON JULY 21, 1960, AND JUSTIFIED ITS AWARD TO UNITED STEEL AS THE LOWEST AGGREGATE BIDDER BY USING THE ERRONEOUS FREIGHT RATE OF $1.33 RATHER THAN $0.99 AS CONTENDED BY FAB- WELD. IT WAS ERRONEOUSLY STATED IN THE JULY 21 LETTER, IN FURTHER JUSTIFICATION OF THE AWARD AS MADE, THAT UNITED STEEL HAD PREDICATED ITS BID ON AWARD OF ALL OR NONE OF THE TOTAL QUANTITY. AGAIN, ON JULY 26, 1960, FAB-WELD ADVISED THE PROCUREMENT AGENCY THAT THE $1.33 FREIGHT RATE WAS IN ERROR, AND RECOMPUTED THE OVER-ALL COST OF THE PROCUREMENT TO THE GOVERNMENT USING THE $0.99 RATE FROM CARBONDALE, AND CONCLUDED BY STATING THAT ON SUCH BASIS ITS OVER-ALL BID WAS $9,575 LOWER THAN THAT OF UNITED STEEL. THEREAFTER, ON AUGUST 1, 1960, THE PROCUREMENT AGENCY REQUESTED MTMA TO RECOMPUTE THE FREIGHT RATE FROM SIMPSON, LACKAWANNA COUNTY, PENNSYLVANIA. ON AUGUST 3, 1960, MTMA INFORMED THE PROCUREMENT AGENCY THAT THE $0.99 RATE APPLIED FROM FAB-WELD'S F.O.B. SHIPPING POINT TO NEW CUMBERLAND. THIS ADVICE CONFIRMED THAT FAB WELD'S OVER-ALL BID WAS APPROXIMATELY $9,000 LESS THAN THAT OF UNITED STEEL AND THAT THE BIDS AS CORRECTLY EVALUATED SHOULD HAVE BEEN BASED ON THE FOLLOWING FIGURES:

TABLE

TOTAL UNIT COST

NEW CUMBERLAND LATHROP

UNITED STEEL $266.71 $328.96

FAB-WELD259.80 338.70

BY LETTER DATED SEPTEMBER 14, 1960, WITH ENCLOSURES, CHIEF, CONTRACTS BRANCH, PROCUREMENT DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, REQUESTED OUR DECISION WITH RESPECT TO THE PROTEST OF THE FAB- WELD CORPORATION AGAINST THE AWARD OF THE CONTRACT TO UNITED STEEL. WHILE THE AWARD, AS ACTUALLY MADE, WAS NOT ON THE BASIS OF THE LOWEST ACCEPTABLE BID, WE HELD IN OUR DECISION DATED SEPTEMBER 28, 1960, THAT CANCELLATION OF THE CONTRACT WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT. MENTIONED ABOVE, BY LETTER OF OCTOBER 7, 1960, FAB-WELD REQUESTED RECONSIDERATION OF THAT DECISION AND THEREAFTER ON OCTOBER 21, 1960, AT FAB-WELD'S REQUEST, A MEETING WAS HELD IN OUR OFFICE WITH REGARD TO THE PROTEST, WHICH WAS ATTENDED BY REPRESENTATIVES OF THE ARMY, AMONG OTHERS. AT THE MEETING ALL OF THE EVENTS WHICH LED UP TO THE ERRONEOUS AWARD WERE DISCUSSED, INCLUDING THE ACTIONS TAKEN BY THE ARMY WITH RESPECT TO THE PROTEST AND THE RECOMPUTATION OF APPLICABLE FREIGHT RATES. THE MATTER OF POSSIBLE DAMAGES IN THE EVENT OF CONTRACT CANCELLATION OR PARTIAL CANCELLATION WAS THE SUBJECT OF CONSIDERABLE DISCUSSION. IT WAS, THEREFORE, DECIDED TO WITHHOLD FURTHER ACTION ON THE PROTEST PENDING RECEIPT OF CURRENT INFORMATION FROM THE ARMY AS TO THE ACTUAL COST OF PERFORMANCE INCURRED BY UNITED STEEL FABRICATORS.

BY LETTER OF NOVEMBER 9, 1960, THE DEPARTMENT OF THE ARMY TRANSMITTED A "MODIFIED ADMINISTRATIVE REPORT" DATED NOVEMBER 3, 1960, STATING THAT AN INVESTIGATION CONDUCTED BY THE DEPARTMENT DISCLOSED THAT AS OF NOVEMBER 2, 1960, UNITED STEEL FABRICATORS, HAD REPORTED TOTAL SUBSTANTIAL OBLIGATIONS IN PERFORMING THE CONTRACT, PLUS FURTHER INCIDENTAL COSTS RELATING TO CONTAINERS THEN BEING CONSTRUCTED UNDER THE CONTRACT.

IN THE MEANTIME, ON THE BASIS THAT THERE WAS A PROBABILITY THAT A PART OF THE CONTRACT WITH UNITED STEEL FABRICATORS MIGHT BE CANCELLED, WE WERE INFORMED BY THE ARMY ON OR ABOUT NOVEMBER 4, 1960, THAT BECAUSE OF THE DEPARTMENT'S DOUBT AS TO THE RESPONSIBILITY OF FAB-WELD TO SUCCESSFULLY PERFORM ANY OF THE ADDITIONAL WORK COVERED BY THIS PROCUREMENT IT HAD REQUESTED THE SMALL BUSINESS ADMINISTRATION TO MAKE A CERTIFICATE OF COMPETENCY SURVEY AS TO THE CAPACITY OF THAT COMPANY'S PLANT AND ITS FINANCIAL STATUS. FROM THAT DATE FORWARD WE WERE IN CONSTANT CONTACT WITH THE SMALL BUSINESS ADMINISTRATION URGING EXPEDITIOUS ACTION. TODAY, THE DEPUTY ADMINISTRATOR OF THAT AGENCY ISSUED A CERTIFICATE OF COMPETENCY TO THE FAB-WELD CORPORATION FOR 3,333 OF THE BOXES COVERED BY THIS PROCUREMENT.

CONSIDERING ALL OF THE FACTS PRESENT IN THIS CASE, INCLUDING THE EFFORTS EXERTED BY FAB-WELD TO ESTABLISH THE FREIGHT RATES FROM ITS F.O.B. ORIGIN POINT SHORTLY AFTER THE AWARD TO UNITED STEEL FABRICATORS, WE HAVE CONCLUDED THAT THE AWARD TO UNITED STEEL FABRICATORS SHOULD NOT BE ALLOWED TO STAND FOR REASON THAT IT WAS NOT IN FACT MADE TO THE LOWEST RESPONSIBLE BIDDER AS REQUIRED BY 10 U.S.C. 2305 (C) AND THEREFORE ILLEGAL. FURTHERMORE, WE NOTE NOW THAT THE BID OF UNITED STEEL WAS NOT SUBMITTED ON AN ALL OR NONE BASIS, AS INDICATED IN CORRESPONDENCE FROM THE CONTRACTING OFFICER CONTAINED IN OUR FILE ON THE CASE.

UNDER THE INVITATION, IT WAS WITHIN THE DISCRETION OF THE PROCUREMENT AGENCY TO MAKE SPLIT AWARDS AND AS STATED ABOVE UNITED STEEL BID UPON THAT POSSIBILITY, OFFERING THREE DIFFERENT MINIMUM QUANTITIES AT THREE DIFFERENT UNIT PRICES, THE FIRST SUCH QUANTITY BEING 1,667 UNITS AT $241.32 EACH PLUS A BLOCKING CHARGE. AN AWARD TO UNITED STEEL FOR THAT QUANTITY AT THAT PRICE, WITH AN AWARD TO FAB WELD FOR THE BALANCE OF 3,333 UNITS AT ITS PRICE OF $244.95 EACH, NOT ONLY WOULD REPRESENT A REDUCTION OF APPROXIMATELY $14,000 IN THE OVER ALL COST TO THE GOVERNMENT FOR THE ENTIRE QUANTITY OF 5,000 UNITS BUT ALSO WOULD BE IN CONFORMANCE WITH THE INVITATION AND APPLICABLE STATUTORY REQUIREMENTS. WE BELIEVE THIS IS LEGALLY PROPER AND REPRESENTS A COURSE OF ACTION WHICH IS THE MOST FAIR AND EQUITABLE UNDER THE CIRCUMSTANCES.

IN ADDITION, WHILE IT MAY BE THAT UNITED STEEL FABRICATORS HAS INCURRED SUBSTANTIAL OBLIGATIONS AS A RESULT OF THE ERRONEOUS AWARD OF A CONTRACT FOR 5,000 UNITS TO THAT COMPANY, WE BELIEVE THAT SETTLEMENT OF THE PROTEST OF THIS BASIS WILL ENABLE THE COMPANY TO MITIGATE ANY ADDITIONAL EXPENSES INCURRED. IN THIS CONNECTION, WE UNDERSTAND THAT THE REQUIRED PILOT MODEL WAS NOT READY FOR FINAL APPROVAL UNTIL NOVEMBER 4, 1960, WHICH INDICATES THAT THE COMPANY HAS ONLY RECENTLY COMMENCED ACTUAL PRODUCTION UNDER THE CONTRACT. THIS IN TURN INDICATES THAT ON THE BASIS OF THE DELIVERY SCHEDULE SPECIFIED IN THE INVITATION IT WOULD BE SEVERAL MONTHS AT LEAST BEFORE THE COMPANY WOULD BE REQUIRED TO COMPLETE PRODUCTION OF THE 5,000 BOXES COVERED BY THE ORIGINAL AWARD OR EVEN OF THE 1,667 BOXES TO BE COVERED BY AN AMENDED CONTRACT.

ACCORDINGLY, THE EXISTING CONTRACT WITH UNITED STEEL FABRICATORS, INC. SHOULD BE CANCELLED AND ..END :