B-146260, SEP. 8, 1961

B-146260, SEP. 8, 1961

TO THE INDIANA STEEL TANK CORP.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 26, 1961, PROTESTING AGAINST CONSIDERATION BY THE FEDERAL AVIATION AGENCY OF THE REDUCTION IN PRICE OFFERED BY THE EMPIRE PACIFIC CONSTRUCTION COMPANY IN ITS BID FOR AN AWARD ON THE COMBINATION OF SCHEDULES UNDER INVITATION NO. 4-61-1045. THE CORRECT NAME OF THE FIRM TO WHICH YOU REFER IN YOUR LETTER IS THE IMPERIAL PACIFIC COMPANY.

THE FEDERAL AVIATION AGENCY, LOS ANGELES, CALIFORNIA, BY THE REFERRED-TO INVITATION REQUESTED BIDS FOR FURNISHING LABOR AND MATERIALS AND FOR PERFORMING THE WORK NECESSARY FOR THE CONSTRUCTION OF RADAR MICRO-WAVE LINK FACILITIES FROM LAS VEGAS, NEVADA, TO LOS ANGELES, CALIFORNIA. THE WORK TO BE PERFORMED WAS DESCRIBED IN 10 SCHEDULES, ONE FOR EACH SITE AND EACH SCHEDULE CONTAINED VARIOUS ITEMS OF WORK. PARAGRAPH 1 OF THE "ADDITIONAL INSTRUCTIONS TO BIDDERS" PROVIDES AS FOLLOWS:

"1. INCOMPLETE BIDS: IF THE ITEM ON WHICH QUOTATIONS ARE HEREBY SOLICITED ARE GROUPED INTO SCHEDULES, A BID NOT QUOTING ON EACH AND EVERY ITEM OF A SCHEDULE SHALL BE CONSIDERED INCOMPLETE AS TO THAT SCHEDULE AND MAY, IN THE DISCRETION OF THE GOVERNMENT, BE CAUSE FOR REJECTION OF THE BID FOR THAT SCHEDULE.'

SEVEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. YOUR BIDS ON SCHEDULES I AND X WERE CONSIDERED TO BE NONRESPONSIVE TO THE INVITATION BECAUSE OF YOUR FAILURE TO QUOTE ON ITEM 5 OF EACH SCHEDULE. ALSO, YOUR BIDS ON THE OTHER SCHEDULES WERE CONSIDERED TO BE NONRESPONSIVE TO THE INVITATION FOR THE REASON THAT THEY WERE SUBMITTED ON AN "ALL OR NONE" BASIS. THE IMPERIAL PACIFIC COMPANY SUBMITTED BIDS ON ALL 10 SCHEDULES AND ITS BIDS ON SCHEDULES I AND X WERE CONSIDERED TO BE NONRESPONSIVE TO THE INVITATION BECAUSE OF ITS FAILURE TO QUOTE ON ITEM 5 OF EACH SCHEDULE. IT IS REPORTED THAT THE COMPANY ATTACHED THE FOLLOWING RIDER TO ITS BIDS:

"THE FOLLOWING DISCOUNTS MAY BE TAKEN FROM THE TOTAL CONTRACT, IF AWARDED MULTIPLES OF ANY OF THE FOLLOWING SCHEDULES:

"SCHEDULES I, II, III, IV, VII, VIII, IX AND X

"ANY 2 SCHEDULES ABOVE DEDUCT $8000

ANY 3 SCHEDULES ABOVE DEDUCT $12,000

ANY 4 SCHEDULES ABOVE DEDUCT $16,000"

THE PACKAGE DISCOUNT OFFERED BY THE IMPERIAL PACIFIC COMPANY, IF AWARDED MULTIPLE SCHEDULES, DID NOT INCLUDE SCHEDULES V AND VI. THE COMPANY'S BID ON SCHEDULE VI, HOWEVER, WAS LOW WITHOUT APPLICATION OF THE DISCOUNT AND, THEREFORE, THAT SCHEDULE WAS AWARDED TO IT. IT IS REPORTED THAT BY APPLYING THE $8,000 DISCOUNT OFFERED BY THE COMPANY FOR A COMBINATION AWARD ON TWO SCHEDULES, TO SCHEDULE VII AND SCHEDULE IX TOTALING $48,106, ITS BID FOR THE TWO SCHEDULES AMOUNTED TO $40,106 WHICH WAS LOWER THAN THE TOTAL OF $40,402 OF THE TWO LOWEST RESPONSIVE BIDS FOR SCHEDULES VII AND IX. THE RECORD INDICATES THAT AWARD WAS MADE TO IMPERIAL PACIFIC COMPANY ON SCHEDULES VI, VII AND IX.

IT IS REPORTED FURTHER THAT ANOTHER COMPANY, SCHOUTEN CONSTRUCTION COMPANY, OFFERED A DISCOUNT OF $3,835 FROM THE TOTAL PRICE OF SCHEDULE V IF IT WAS AWARDED SCHEDULES I, II AND IV. THE RECORD INDICATES THAT THE COMPANY'S BIDS ON SCHEDULES II, III, IV AND V WERE THE LOWEST RESPONSIVE BIDS RECEIVED EVEN BEFORE APPLYING THE DISCOUNT OFFERED AND THAT ITS BID ON SCHEDULE I WAS THIRD LOW, BUT THAT BY APPLYING THE DISCOUNT OFFERED IF AWARDED THE FIVE SCHEDULES UPON WHICH THEY BID, IT BECAME THE LOW AGGREGATE BIDDER FOR SCHEDULES I THROUGH V.

YOU STATE THAT THE SPECIFICATIONS DO NOT INDICATE WHETHER THE 10 SCHEDULES ARE TO BE AWARDED SEPARATELY TO INDIVIDUAL LOW BIDDERS ON EACH SCHEDULE OR IF THE CONTRACT IS TO BE AWARDED TO THE CONTRACTOR SUBMITTING THE LOWEST GROSS AGGREGATE PRICE FOR THE 10 SCHEDULES. IN THAT CONNECTION, PARAGRAPH 11 OF STANDARD FORM 22,"INSTRUCTIONS TO BIDDERS" PROVIDES AS FOLLOWS:

"11. AWARD OF CONTRACT. (A) THE CONTRACT WILL BE AWARDED AS SOON AS PRACTICABLE TO THE LOWEST RESPONSIBLE BIDDER, PRICE AND OTHER FACTORS CONSIDERED, PROVIDED HIS BID IS REASONABLE AND IT IS TO THE INTEREST OF THE GOVERNMENT TO ACCEPT IT.

"/B) THE GOVERNMENT RESERVES THE RIGHT TO WAIVE ANY INFORMALITY IN BIDS RECEIVED WHEN SUCH WAIVER IS IN THE INTEREST OF THE GOVERNMENT. IN CASE OF ERROR IN THE EXTENSION OF PRICES, THE UNIT PRICE WILL GOVERN.

"/C) THE GOVERNMENT FURTHER RESERVES THE RIGHT TO ACCEPT OR REJECT ANY OR ALL ITEMS OF ANY BID, UNLESS THE BIDDER QUALIFIES SUCH BID BY SPECIFIC LIMITATION; ALSO TO MAKE AN AWARD TO THE BIDDER WHOSE AGGREGATE BID ON ANY COMBINATION OF BID ITEMS IS LOW.'

THERE IS NOTHING IN THE ABOVE-QUOTED PARAGRAPH FROM WHICH IT MAY BE INFERRED THAT SEPARATE CONTRACTS WERE NECESSARILY TO BE AWARDED ON EACH SCHEDULE. ALSO, THERE IS NOTHING IN THAT PARAGRAPH WHICH PROHIBITS "COMBINATION" BIDS.

IN YOUR LETTER THERE ARE GIVEN FOUR REASONS WHY THE PACKAGE DISCOUNT METHOD OF BIDDING EMPLOYED BY THE IMPERIAL PACIFIC COMPANY SHOULD NOT BE PERMITTED. WE BELIEVE THAT THE OFFER OF PACKAGE DISCOUNT IS, FOR ALL INTENTS AND PURPOSES, NO DIFFERENT FROM A BID MADE ON AN "ALL OR NONE" BASIS. THE RULE IS THAT BIDS ON AN "ALL OR NONE" BASIS ARE RESPONSIVE AND MUST BE ACCEPTED IF THEY OFFER THE LOWEST AGGREGATE PRICE IN THE ABSENCE OF A PROVISION IN THE INVITATION TO THE CONTRARY. 35 COMP. GEN. 383; 37 ID. 814; 38 ID. 550. NONE OF THE PROVISIONS IN THIS INVITATION PROHIBIT THE SUBMISSION OF "COMBINATION" BIDS.

YOU CONTEND THAT THE PACKAGE DISCOUNT METHOD OF BIDDING EMPLOYED BY THE IMPERIAL PACIFIC COMPANY PLACES AN ARBITRARY RESPONSIBILITY ON THE CONTRACTING OFFICER AT HIS OWN DISCRETION TO SELECT ANY TWO, THREE OR FOUR SITES OF THE EIGHT SITES LISTED IN THE RIDER ATTACHED TO THE BID OF THE COMPANY. IN EVALUATING THE BIDS FOR AWARD PURPOSES, THE CONTRACTING OFFICER CANNOT ARBITRARILY SELECT THE SITES UPON WHICH THE PACKAGE DISCOUNT IS TO BE APPLIED SINCE HE HAS TO FIRST CONSIDER THE OTHER BIDS, INCLUDING THEIR QUALIFYING CONDITIONS, AND SINCE SUCH DISCOUNT MUST BE DEDUCTED FROM THE GROSS AGGREGATE TOTAL PRICE FOR THE SELECTED GROUP RATHER THAN FROM THE TOTAL PRICE OF ANY PARTICULAR SCHEDULE. IN THE PRESENT CASE, THE $8,000 PACKAGE DISCOUNT OFFERED BY THE IMPERIAL PACIFIC COMPANY FOR A COMBINED AWARD ON TWO SCHEDULES WAS DEDUCTED FROM THE GROSS AGGREGATE TOTAL PRICE FOR SCHEDULES VII AND IX AND NOT FROM TOTAL PRICE OF ANY ONE SCHEDULE. CONSEQUENTLY, WE DO NOT BELIEVE THIS METHOD INVOLVED ANY IRREGULARITY IN THE BID EVALUATION AND AWARD PROCESS USED BY THE AGENCY.

THE SECOND GROUND FOR YOUR PROTEST IS THAT THIS TYPE OF BIDDING INVOLVES SEVERAL HUNDRED POSSIBLE COMBINATIONS AND THAT THE MATHEMATICAL PROBABILITIES OF SUCH TYPE OF BIDDING ARE SO FANTASTIC AS TO BE OBJECTIONABLE FOR THIS REASON ALONE. IT IS REPORTED THAT THIS TYPE OF BIDDING IS COMMON RATHER THAN UNUSUAL AND THAT WHILE IT INCREASES THE COMPLEXITY OF THE CONTRACTING OFFICER'S WORK IN DETERMINING AWARD, HE WOULD BE REMISS IN HIS DUTIES IF HE DID NOT ACCEPT DISCOUNTS WHICH RESULTED IN THE LOWEST PRICE TO THE GOVERNMENT. WE AGREE THAT HAD THE CONTRACTING OFFICER FAILED TO CONSIDER THE PACKAGE DISCOUNT OFFERED BY THE IMPERIAL PACIFIC COMPANY, HE WOULD HAVE BEEN REMISS IN HIS DUTIES.

THE THIRD BASIS FOR YOUR PROTEST IS THAT INASMUCH AS THE TOTAL SUM BID OF EACH SCHEDULE IS BASED UPON THE AGGREGATE TOTAL OF THE SUBITEMS IN EACH SCHEDULE AND FURTHER THAT SINCE EACH SUBITEM IS LISTED AS A SEPARATE PAY ITEM, YOU QUESTION SERIOUSLY THE VALIDITY OF THE BID OF THE IMPERIAL PACIFIC COMPANY FOR THE REASON THAT IT IS NOT APPARENT FROM WHICH OF THE SUBITEMS THE DEDUCTION IS MADE OR IN THE OVERALL AGGREGATE HOW IT CAN BE INTELLIGENTLY APPLIED. YOU CONTEND FURTHER THAT SINCE THE GOVERNMENT HAS THE AUTHORITY TO ADD TO OR DELETE ANY OF THE SUBITEMS IN EACH SCHEDULE A LUMP-SUM DEDUCTION CANNOT BE INTELLIGENTLY APPLIED. IN OUR DECISION OF JUNE 16, 1955, B-124221, INVOLVING A SIMILAR CASE WE HELD THAT THE OFFER OF A LUMP-SUM DEDUCTION DOES NOT AFFECT THE UNIT RATES STATED SO FAR AS CONCERNS THE DETERMINATION OF AMOUNTS TO BE PAID OR DEDUCTED BECAUSE OF QUANTITY VARIATIONS SINCE THE REDUCTION IS APPLICABLE TO THE AGGREGATE AMOUNT BID ON THE BASIS OF THE ESTIMATED QUANTITIES.

THE FOURTH GROUND OF YOUR PROTEST CONCERNS THE $16,000 PACKAGE DISCOUNT OFFERED BY THE IMPERIAL PACIFIC COMPANY FOR AWARD OF ANY FOUR OF THE EIGHT SCHEDULES LISTED IN THE RIDER ATTACHED TO ITS BID. YOU STATE THAT AN OBJECTIONABLE ARBITRARY SITUATION EXISTS BECAUSE OF THE FACT THAT THE CONTRACTING OFFICER COULD IN SUCH A SITUATION ARBITRARILY TAKE SUCH AMOUNTS OF THE $16,000 AS HE MAY CHOOSE FROM SUCH SCHEDULES AS HE PLEASES. YOU STATE FURTHER THAT HE MIGHT CHOOSE TO TAKE NO MONEY FROM ONE SCHEDULE, BUT TAKE $2,000 FROM ONE, $8,000 FROM ANOTHER AND $6,000 FROM ANOTHER. EVALUATING BIDS FOR AWARD PURPOSES, THE CONTRACTING OFFICER MAY NOT APPLY THE DISCOUNT IN THE MANNER YOU SUGGEST, BUT MUST APPLY IT TO THE GROSS AGGREGATE TOTAL PRICE FOR THE FOUR SCHEDULES BEING CONSIDERED.

IN VIEW OF THE FOREGOING, THERE IS NO BASIS UPON WHICH WE COULD QUESTION THE AWARD MADE TO THE IMPERIAL PACIFIC COMPANY ON SCHEDULES VII AND IX.