B-153445, MAR. 5, 1964

B-153445, MAR. 5, 1964

TO ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO A LETTER DATED FEBRUARY 5, 1964, FROM THE COMMISSIONER, FEDERAL SUPPLY SERVICE, REQUESTING A DECISION AS TO THE PROPRIETY OF THE ACTION PROPOSED TO BE TAKEN IN THE AWARDS OF CONTRACTS UNDER INVITATION FOR BIDS NO. FPNFO-Z-54699-A-12-5-63.

THE INVITATION SOLICITED BIDS FOR FURNISHING VARIOUS ESTIMATED QUANTITIES OF FILING CABINETS DURING THE PERIOD FROM MARCH 1, 1964, THROUGH FEBRUARY 28, 1965. THE REQUIREMENT WAS DIVIDED INTO TWO GROUPS, WITH AWARD IN THE AGGREGATE TO BE MADE FOR EACH GROUP. THE QUESTION PRESENTED DEALS ONLY WITH GROUP 2, AS TO WHICH THE STANDARD PRESSED STEEL COMPANY IS THE APPARENT LOW BIDDER FOR ALL 10 ZONES.

GROUP 2 COMPRISES VARIOUS ITEMS OF BOTH 2-DRAWER AND 5-DRAWER CABINETS WITH VARYING WEIGHT FACTORS ASSIGNED TO EACH ITEM. ARTICLE 4 (PAGE 4 OF THE INVITATION) PROVIDES AS FOLLOWS:

"BIDDER SHALL INDICATE IN THE SPACES PROVIDED BELOW THE NUMBER OF UNITS WHICH HE AGREES TO ALLOCATE AND FURNISH THE GOVERNMENT MONTHLY (HEREINAFTER CALLED "MONTHLY ALLOCATION") DURING THE CONTRACT PERIOD. BIDDER NEED NOT LIMIT HIS MONTHLY ALLOCATION TO THE ESTIMATED QUANTITIES SHOWN SINCE ADDITIONAL UNANTICIPATED NEEDS MAY OCCUR DURING THE PERIOD OF THE CONTRACT. HOWEVER, THE GOVERNMENT CANNOT PLACE ORDERS DURING ANY ONE MONTH IN EXCESS OF THE MONTHLY ALLOCATION QUANTITY OFFERED BY THE SUCCESSFUL BIDDER AWARDED A CONTRACT PURSUANT TO ARTICLE 5. * * *"

ARTICLE 5 (PAGES 5 AND 6) OF THE INVITATION PROVIDES IN PERTINENT PART AS FOLLOWS:

"/A) AWARD WILL BE MADE IN THE AGGREGATE TO THE LOWEST RESPONSIVE BIDDER FOR EACH GROUP OF ITEMS DELIVERED IN EACH REGIONAL AREA. PRICES MUST BE QUOTED FOR EACH ITEM WITHIN A GROUP TO BE CONSIDERED FOR AWARD FOR SUCH GROUP. THE LOW AGGREGATE BIDDER FOR EACH GROUP WILL BE DETERMINED BY MULTIPLYING THE UNIT PRICE QUOTED BY THE APPLICABLE WEIGHT FACTOR SHOWN AFTER EACH ITEM IN THE SCHEDULE, AND ADDING ALL RESULTANT EXTENSIONS. FAILURE TO BID ON ANY ITEM WITHIN A GROUP WILL REQUIRE REJECTION OF THE BID FOR THAT GROUP.

"/D) THE GOVERNMENT RESERVES THE RIGHT TO MAKE PROGRESSIVE AWARDS TO SATISFY ITS ESTIMATED NEEDS UNDER THE INVITATION. ADDITIONAL AWARDS WILL ALSO BE MADE IN SERIES, AT TIME OF AWARD, SO AS TO SATISFY FURTHER REQUIREMENTS IF AND WHEN THE NEED ARISES DURING THE PERIOD OF THE CONTRACT. IN THE EVENT PROGRESSIVE AWARDS ARE MADE, NO PURCHASE ORDERS WILL BE ISSUED AGAINST SUCH CONTRACTS UNTIL THE FULL ALLOCATION OF THE PRIME CONTRACTOR HAS BEEN EXHAUSTED.'

THE PURPOSE OF THESE PROVISIONS IS TO MAXIMIZE COMPETITION BY MAKING IT POSSIBLE FOR SMALLER FIRMS TO COMPETE FOR THE GOVERNMENT'S REQUIREMENTS AND BY PERMITTING LARGER FIRMS TO RESERVE SOME PORTION OF THEIR OUTPUT FOR NON-GOVERNMENT ACCOUNTS.

GROUP 2 OF THE SCHEDULE COMPRISES EIGHT ITEMS OF 2-DRAWER FILES AND EIGHT ITEMS OF 5-DRAWER FILES. THE ORDER IN WHICH THESE ITEMS APPEAR ON THE SCHEDULE SHOWS FIRST THE FOUR ITEMS OF 2-DRAWER FILES AND THEN FOUR ITEMS OF 5-DRAWER FILES. THIS ORDER IS REPEATED FOR THE NEXT EIGHT ITEMS. TO THE FIRST FOUR ITEMS OF 2-DRAWER FILES WITH A TOTAL ESTIMATED REQUIREMENT OF 21,784 FILES STANDARD QUOTED PRICES FOR THE 10 ZONES WHICH ARE CONSIDERABLY LOWER THAN THAT OFFERED BY THE NEXT LOW BIDDER AND IN SOME CASES THESE PRICES ARE ABOUT 20 PERCENT LOWER AS WELL AS BEING 30 PERCENT LOWER THAN THE PRICES PAID UNDER THE LAST CONTRACT FOR THESE 2- DRAWER FILES. HOWEVER, AS TO THE FIRST FOUR ITEMS OF 5-DRAWER FILES WITH A TOTAL ESTIMATED REQUIREMENT OF 134,151 FILES STANDARD QUOTED PRICES FOR THE 10 ZONES WHICH IN SOME CASES EXCEED THE LOWEST BIDS RECEIVED. IN ITS BID STANDARD LIMITS ITS MONTHLY ALLOCATION OF 2-DRAWER FILES TO 200 PER MONTH OR A POSSIBLE TOTAL OF 2,400 AS COMPARED WITH THE ESTIMATED REQUIREMENT OF 21,784. AS TO THE 5-DRAWER FILES IT LIMITS ITS MONTHLY ALLOCATION TO 16,800 OR A POSSIBLE TOTAL OF 201,600 AS COMPARED WITH THE ESTIMATED REQUIREMENT OF 134,151. IN OTHER WORDS, IT SHARPLY LIMITS ITS MONTHLY ALLOCATION OF THE 2-DRAWER FILE ORDERS AS TO WHICH IT QUOTED A LOW PRICE BUT IT INDICATES THAT IT WILL BE ABLE TO FILL THE GOVERNMENT'S ENTIRE ESTIMATED NEEDS FOR 5-DRAWER FILES WHERE THE PRICES ARE MORE IN LINE WITH THE OTHER BIDS. IT IS INDICATED THAT THE APPLICATION OF THE WEIGHT FACTOR TO THE BIDS ON THE 2-DRAWER CABINETS WOULD BE COMPLETELY UNREALISTIC IN EVALUATING THE BID OF STANDARD AND IT IS CONCLUDED THAT NO AWARD CAN EQUITABLY BE MADE TO STANDARD.

IT IS STATED THAT IN ALL EARLIER INSTANCES, WHERE BIDDERS HAVE LIMITED THEIR MONTHLY ALLOCATIONS, THE LIMITATIONS ON EACH ITEM HAVE BEEN IN PROPORTION TO THE GOVERNMENT'S ESTIMATED REQUIREMENTS FOR EACH ITEM WITH NO EXTRAORDINARY QUANTITY LIMITATIONS PLACED ON ANY ITEM IN THE AGGREGATE GROUP; THAT STANDARD HAS UTILIZED A HIGHLY TECHNICAL AND OBSCURE DEFECT IN THE INVITATION WHICH WOULD ENABLE IT, IF AN AWARD WAS TO BE MADE, TO SECURE AN UNCONSCIONABLE ADVANTAGE OVER OTHER BIDDERS. IT IS POINTED OUT THAT THIS DEFECT, WHICH YOUR AGENCY PROPOSES TO CORRECT IN FUTURE INVITATIONS, IS THAT THE INVITATION DID NOT SPECIFICALLY REQUIRE THAT THE QUANTITY LIMITATIONS BE IN PROPORTION TO THE GOVERNMENT'S ESTIMATED REQUIREMENTS, AND THAT THE LIMITATION WHICH STANDARD PLACED ON ITS OFFER APPEARS TO HAVE BEEN DELIBERATELY DESIGNED TO FRUSTRATE THE APPLICATION OF WEIGHT FACTORS WHICH WERE INCLUDED IN THE INVITATION. YOU STATE THAT THE EFFECT OF THIS LIMITATION IS IDENTICAL TO THE EFFECT THAT WOULD HAVE BEEN CREATED IF STANDARD HAD QUALIFIED ITS BID BY CHANGING THE WEIGHT FACTORS AND THAT OBVIOUSLY ANY SUCH CHANGE WOULD HAVE MADE ITS BID NONRESPONSIVE AND ANY DEVICE WHICH ACCOMPLISHES THE SAME AND MUST BE SIMILARLY TREATED.

THE MAGNITUDE OF THE QUANTITY LIMITATION IMPOSED BY STANDARD IS EMPHASIZED BY AN EXAMINATION OF THE RELATIONSHIP OF THE REQUIREMENTS FOR 2 -DRAWER CABINETS AND 5-DRAWER CABINETS. THIS RELATIONSHIP IS IN THE RATIO OF ABOUT 1 TO 7 WHEREAS STANDARD, FOR ITS OWN PURPOSES, OFFERED THEM IN A RELATIONSHIP RATIO OF ABOUT 1 TO 84. IF STANDARD HAD FURNISHED A QUOTATION FOR EACH 2-DRAWER CABINET ITEM BUT THEN INDICATED IT WOULD SUPPLY NO CABINETS OF THIS TYPE THE BID CLEARLY WOULD NOT HAVE BEEN RESPONSIVE. ANY BID ON THE 2-DRAWER CABINETS IMPLIES THAT A REASONABLE OFFER MUST BE MADE TO FILL THE GOVERNMENT'S NEEDS. A BIDDER CAN VERY WELL QUOTE UNUSUALLY LOW PRICES IF IT DOES NOT OFFER TO FURNISH ANY ARTICLES, OR ONLY AN UNUSUALLY SMALL NUMBER, ON WHICH QUOTATIONS ARE MADE.

IT IS STATED IN THE REQUEST FOR DECISION THAT YOUR OFFICE PROPOSES TO REJECT THE STANDARD BID AS NONRESPONSIVE TO THE INVITATION AND TO MAKE AWARD TO THE SECOND LOW BIDDERS. THIS PROPOSED ACTION PRESUMABLY IS ON THE BASIS THAT WHILE THE INVITATION MIGHT HAVE VERY WELL CONTAINED A PROVISION TO PROHIBIT ACCEPTANCE OF BIDS WHERE THE QUANTITY LIMITATIONS ARE DISPROPORTIONATE TO THE GOVERNMENT'S ESTIMATED REQUIREMENTS, THE OTHER BIDDERS DID NOT RESORT TO ANY UNBALANCED BIDDING AND THE PRICES ARE FAIR AND REASONABLE.

WE AGREE THAT THE METHOD OF EVALUATION PRESCRIBED IN THE INVITATION IS DEFECTIVE SINCE IT PERMITS A BIDDER TO SECURE NOT ONLY AN ADVANTAGE OVER OTHER BIDDERS INTENDING TO FURNISH THE GOVERNMENT'S NEEDS BUT ALSO IT POSSIBLY MAY COST THE GOVERNMENT ADDITIONAL MONEY. HOWEVER, SINCE THE BID SUBMITTED BY THE STANDARD PRESSED STEEL COMPANY WAS CONSISTENT WITH THE TERMS OF THE INVITATION WE CANNOT CONCLUDE THAT ITS BID WAS NONRESPONSIVE. THIS BEING TRUE, WE THINK THAT STANDARD'S BID MAY NOT BE SUMMARILY REJECTED AS BEING NONRESPONSIVE AND THAT THEREFORE THE PROCUREMENT SHOULD BE READVERTISED ON THE BASIS THAT THE INVITATION WAS DEFECTIVE.