B-154542, JAN. 12, 1965, 44 COMP. GEN. 392

B-154542, JAN. 12, 1965, 44 COMP. GEN. 392

BIDS - EVALUATION - METHOD OF EVALUATION DEFECTIVE - "MODEL JOB" A "MODEL JOB" METHOD OF EVALUATING A FEW OF THE MOST FREQUENTLY USED ITEMS OF THE MANY ITEMS LISTED IN THE INVITATION, BIDDERS TO SUBMIT PRICES FOR MINIMUM QUANTITIES AND ON A VOLUME BASIS, WHERE ESTIMATED QUANTITIES WERE OMITTED TO AVOID UNBALANCED BIDDING AND THE LOWEST AGGREGATE PRICE IS TO BE CONSIDERED THE LOWEST BID, CONTRAVENES THE REQUIREMENTS OF 10 U.S.C. 2305 FOR FULL AND FREE COMPETITION AND THE INVITATION SHOULD BE CANCELED, THE "MODEL JOB" METHOD OF EVALUATION UNDER WHICH BIDDERS ARE NOT ADVISED FULLY AS TO THE BASES UPON WHICH THEIR BIDS WILL BE EVALUATED FOR AWARD NOT MEETING THE CRITERIA CONTEMPLATED BY 36 COMP. GEN. 380 AS TO OBJECTIVITY OF BID EVALUATION, AND ALTHOUGH THE SPECULATION INVOLVED IN UNBALANCED BIDDING SHOULD BE DISCOURAGED, THE USE OF THE "MODEL JOB" METHOD OF EVALUATION WILL NOT PER SE ELIMINATE SUCH BIDDING, NOR DOES THE FACT THAT A BIDDER IS LOW ON A "MODEL JOB" BID ASSURE THAT THE AWARD WILL BE MADE TO THE LOWEST AGGREGATE BIDDER.

TO THE SECRETARY OF THE AIR FORCE, JANUARY 12, 1965:

BY LETTER DATED DECEMBER 18, 1964, WITH ENCLOSURES, THE CHIEF, PROCUREMENT OPERATIONS DIVISION, DIRECTORATE, PROCUREMENT POLICY, DEPUTY CHIEF OF STAFF FOR SYSTEMS AND LOGISTICS, MADE REFERENCE TO OUR LETTER OF OCTOBER 8, 1964, WHEREIN WE ADVISED MCGREGOR AND WERNER, INCORPORATED, OF YOUR DEPARTMENT'S DETERMINATION TO CANCEL INVITATION FOR BIDS NO. 19-628- 348 AND READVERTISE THE PROCUREMENT. HE REQUESTS OUR DECISION AS TO WHETHER THE "MODEL JOB" METHOD OF EVALUATION PRESCRIBED BY THE INVITATION IS ACCEPTABLE IN VIEW OF THE STATUTORY REQUIREMENTS OF FULL AND FREE COMPETITION AND THAT AWARD BE MADE TO THE LOWEST BIDDER.

THE INVITATION, ISSUED ON JUNE 5, 1964, BY THE ELECTRONIC SYSTEMS DIVISION, AIR FORCE SYSTEMS COMMAND, REQUESTED BIDS ON CLASSIFIED AND UNCLASSIFIED GRAPHIC ART WORK, TYPESETTING, PRINTING AND BINDING SERVICES AS MAY BE REQUIRED AND CALLED FOR DURING THE PERIOD JULY 1, 1964, OR DATE OF AWARD, THROUGH JUNE 30, 1965. THE INVITATION SCHEDULE CONSISTS OF SOME 328 BID ITEMS WITH RESPECT TO WHICH IT IS PROVIDED ON PAGE 24 AS FOLLOWS:

METHOD OF AWARD: AWARD SHALL BE MADE TO BUT ONE RESPONSIBLE BIDDER WHO BIDS ON ALL ITEMS (IN THE EVENT NO CHARGE IS TO BE MADE FOR ANY ITEM "N/C" WILL BE ENTERED FOR THAT ITEM) AND WHOSE PRICES ARE THE LOWEST AS DETERMINED BY THE FOLLOWING: BECAUSE OF THE NUMBER OF ITEMS INVOLVED AND THE IMPRACTICABILITY OF SHOWING QUANTITIES OF EACH OF THE ITEMS LISTED IN THE SPECIFICATIONS, THE GOVERNMENT HAS, FOR PURPOSES OF DETERMINING THE LOWEST RESPONSIBLE BIDDER, PREPARED A "MODEL JOB" WHICH INCLUDES BUT A FEW OF THE ITEMS LISTED IN THE SPECIFICATIONS. THIS MODEL JOB SHALL BE SEALED AND REMAIN SEALED UNTIL THE BID OPENING, AT THAT TIME THE APPLICABLE UNIT PRICES SHOWN ON EACH BID WILL BE APPLIED TO THE CORRESPONDING ITEM IN THE MODEL JOB. THE LOWEST AGGREGATE PRICE ARRIVED AT THEREBY WILL BE CONSIDERED THE LOWEST BID.

IT IS REPORTED THAT THE ITEMS SELECTED FOR THE "MODEL JOB" PACKAGE WERE NOT CHOSEN AT RANDOM, BUT RATHER, THE SELECTION WAS KEYED TO THE COLLECTIVE EXPERIENCE OF THE MOST FREQUENTLY USED ITEMS REQUIRED TO MEET PRINTING NEEDS. UNDER THE INVITATION, BIDDERS WERE GIVEN AN OPPORTUNITY TO SUBMIT PRICES FOR MINIMUM QUANTITIES AND ON A VOLUME BASIS. ESTIMATED QUANTITIES, HOWEVER, WERE NOT STATED IN THE INVITATION BUT WERE INTENTIONALLY OMITTED BECAUSE (1) ESTIMATED QUANTITIES FOR THE PERIOD COVERED BY THE INVITATION WERE UNKNOWN; AND (2) WHEN ESTIMATED QUANTITIES ARE SHOWN, BIDDERS ARE PRONE TO UNBALANCE THEIR BIDS, THEREBY INCREASING THE FINAL COSTS TO THE GOVERNMENT UNDER A CALL-TYPE CONTRACT.

BIDS WERE OPENED ON JUNE 25, 1964, AND IT APPEARED THAT GOODWAY PRINTING COMPANY, INC., SUBMITTED THE LOWEST EVALUATED BID UNDER THE ABOVE-QUOTED PARAGRAPH OF THE INVITATION ENTITLED ,METHOD OF AWARD.' HOWEVER, NO AWARD HAS BEEN MADE UNDER THE INVITATION. DOUBT AS TO WHETHER AWARD MAY BE MADE UNDER THE EVALUATION BASIS SET FORTH IN THE INVITATION ARISES BY REASON OF OUR DECISION AT 36 COMP. GEN. 380, 385 (B-127801), WHERE WE STATED:

THE "BASIS" OF EVALUATION WHICH MUST BE MADE KNOWN IN ADVANCE TO THE BIDDERS SHOULD BE AS CLEAR, PRECISE AND EXACT AS POSSIBLE. IDEALLY, IT SHOULD BE CAPABLE OF BEING STATED AS A MATHEMATICAL EQUATION. IN MANY CASES, HOWEVER, THAT IS NOT POSSIBLE. AT THE MINIMUM, THE "BASIS" MUST BE STATED WITH SUFFICIENT CLARITY AND EXACTNESS TO INFORM EACH BIDDER PRIOR TO BID OPENING, NO MATTER HOW VARIED THE ACCEPTABLE RESPONSES, OF OBJECTIVELY DETERMINABLE FACTORS FROM WHICH THE BIDDER MAY ESTIMATE WITHIN REASONABLE LIMITS THE EFFECTS OF THE APPLICATION OF SUCH EVALUATION FACTOR ON HIS BID IN RELATION TO OTHER POSSIBLE BIDS. BY THE TERM "OBJECTIVELY DETERMINABLE FACTORS" WE MEAN FACTORS WHICH ARE MADE KNOWN TO OR WHICH CAN BE ASCERTAINED BY THE BIDDER AT THE TIME HIS BID IS BEING PREPARED. FACTORS WHICH ARE BASED ENTIRELY OR LARGELY ON A SUBJECTIVE DETERMINATION TO BE ANNOUNCED BY REPRESENTATIVES OF THE CONTRACTING AGENCY AT THE TIME OF OR SUBSEQUENT TO THE OPENING OF BIDS VIOLATE THE PRINCIPLE FOR THE REASON THAT THEY ARE NOT DETERMINABLE BY THE BIDDER AT THE TIME HIS BID IS BEING PREPARED.

REFERENCE IS ALSO MADE TO OUR DECISION AT 43 COMP. GEN. 159 (B 151770) WHICH ALSO CONSIDERED AN INVITATION FOR FURNISHING PRINTED FORMS. IN THAT CASE, THE BID EVALUATION FORMULA ENCOURAGED THE UNBALANCING OF BIDS AND RENDERED THE INVITATION DEFECTIVE AS NOT COMPLYING WITH THE ADVERTISING REQUIREMENTS OF FREE AND FULL COMPETITION. IN PERTINENT PART, WE HELD AT PAGE 161 THAT:

THE PRIMARY PURPOSE OF THE ADVERTISING STATUTES IS TO GIVE ALL BIDDERS AN EQUAL OPPORTUNITY TO COMPETE FOR THE GOVERNMENT BUSINESS AND TO SECURE TO THE UNITED STATES THE BENEFITS OF FREE AND OPEN COMPETITION. THE FORMAT OF THE PRICING SCHEDULE, WHICH IS REPORTED TO HAVE BEEN DESIGNED TO PROVIDE WIDE FLEXIBILITY IN DETERMINING SIZE OR NUMBER OF COPIES FOR BOTH THE DEVELOPMENT OF NEW FORMS AND THE REVISION OF IN-USE FORMS, APPARENTLY WOULD HAVE ADEQUATELY ACHIEVED SUCH PURPOSE PROVIDED BIDDERS HAD QUOTED PRICES WHICH REFLECTED COST FOR THE PARTICULAR SIZES, NUMBER OF PARTS, ETC. HOWEVER, DUE TO THE EVALUATION FORMULA PROVIDED, IN ORDER TO BE DETERMINED THE LOW BIDDER, A BIDDER COULD BID LOW ON ITEMS KNOWN FROM PAST EXPERIENCE, OR ON SPECULATION, TO BE PURCHASED INFREQUENTLY AND HIGH ON ITEMS FREQUENTLY PURCHASED. THIS APPARENTLY IS WHAT HAPPENED HERE, AND HIS METHOD OF BIDDING IS A MATTER OF SPECULATION. HOWEVER, SUCH KNOWLEDGE CERTAINLY WAS NOT DETRIMENTAL AND SUCH INFORMATION WAS NOT MADE AVAILABLE TO OTHER BIDDERS FOR WHATEVER VALUE IT MIGHT HAVE HAD.

ON THE BASIS OF THE BIDS INVOLVED IT IS NOT BELIEVED POSSIBLE TO DETERMINE WHAT PRICES ARE FAIR AND REASONABLE OR WHETHER A CONTRACT AWARDED TO ANY OF THE BIDDERS WOULD RESULT IN FAIR PRICES TO THE GOVERNMENT. RATHER THE PRICES APPARENTLY ARE BASED UPON SPECULATION AS TO WHAT THE GOVERNMENT IS MOST LIKELY TO ORDER AND AN ATTEMPT AT THE SAME TIME TO BECOME THE LOW BIDDER UNDER THE EVALUATION FORMULA.

THE ELECTRONIC SYSTEMS DIVISION (ESD) ADVOCATES THE USE OF THE "MODEL JOB" METHOD FOR THE FOLLOWING REASONS:

14. THE NAVY PURCHASING OFFICE, IN THE CASE DECIDED BY GAO DECISION B- 151770, DID NOT INFORM PROSPECTIVE BIDDERS OF PAST QUANTITIES AND SIZES OF PRINTED FORMS ORDERED. THIS POINT WAS CONSIDERED BY THE GAO WITHOUT A CONCLUSIVELY STATED OPINION. THE CASE WAS DECIDED ON THE FACT THAT ALL BIDS WERE UNBALANCED. HOWEVER, THE GAO DID NOT APPEAR TO HAVE BEEN PARTICULARLY EXCITED OR ALARMED BY THE ALLEGATION THAT THE PREVIOUS CONTRACTOR, KNOWING QUANTITIES ORDERED DURING THE PREVIOUS YEAR, HAD AN ADVANTAGE OVER ITS COMPETITORS. NOTHING IN THE TENOR OF GAO DECISION B- 151770 LEADS THIS HEADQUARTERS TO BELIEVE THAT THE IFB WOULD HAVE BEEN HELD TO BE INVALID BECAUSE OF LACK OF SUCH INFORMATION.

15. IN ADDITION FROM A VERY PRACTICAL AND PRAGMATIC VIEW POINT, LACKOF ESTIMATES BASED ON PAST EXPERIENCE HAS NOT PROVIDED PRIOR CONTRACTORS WITH ANY MEASURABLE ADVANTAGE. THIS IS CLEARLY SHOWN BY THE SIMPLE FACT THAT IN THE PAST FIVE YEARS FOUR SEPARATE CONTRACTORS HAVE BEEN AWARDED PRINTING CONTRACTS BY ESD.

16. FINALLY, ESTIMATES, WHETHER BASED ON PAST EXPERIENCE OR OTHER CRITERIA, SIMPLY WOULD NOT PROVIDE ESD WITH THE FLEXIBILITY NEEDED IN PLACING PRINTING ORDERS, IF SUCH ESTIMATES LIMITED ESD TO OBTAINING PRICE QUOTATIONS TO A SINGLE QUANTITY FOR EACH ITEM. THE CONTRACTOR WOULD BE BOUND TO THAT PRICE ONLY AND WOULD BE FREE TO INFLATE ITS PRICES IF ORDERS VARYING FROM THIS QUANTITY WERE PLACED. A QUOTATION OF A RANGE OF PRICES FOR VARIOUS QUANTITIES OF EACH ITEM PROVIDES ESD WITH NEEDED ORDERING FLEXIBILITY AT KNOWN PRICES THEREBY FULFILLING THE BASIC INTENT OF THE CONTRACT IN THE FIRST PLACE.

17. IN FACT, THE BASIC OBJECTIVE OF THIS CONTRACT IS TO FIRMLY ESTABLISH A RANGE OF PRICES FOR EACH ITEM WHICH IS SUFFICIENTLY BROAD TO COVER ANY SINGLE PRINTING ORDER WHICH MIGHT BE ISSUED UNDER THE TERMS OF THE CONTRACT. THEREFORE, IN ANY EVENT, SOME TYPE OF FORMULA FOR DETERMINING AWARD PRICE WOULD HAVE TO BE APPLIED. ONE METHOD OF APPROACH WOULD BE TO MULTIPLY ALL QUANTITIES OF ALL ITEMS BY THE UNIT PRICES SHOWN AND TOTAL THE RESULTS. HOWEVER, THIS WOULD RESULT IN A RATHER MEANINGLESS FIGURE BECAUSE THERE IS VIRTUALLY NO POSSIBILITY THAT ORDERS FOR ALL QUANTITIES OF ALL ITEMS WOULD BE ORDERED; IN FACT, THERE IS AN EXCELLENT CHANCE THAT FOR MANY ITEMS NO ORDERS WOULD BE PLACED AT ALL DURING ANY GIVEN YEAR. ADDITION, A METHOD OF DETERMINING AWARD PRICE WHICH TOOK INTO ACCOUNT ALL ITEMS AND QUANTITIES IN AN IFB FOR PRINTING WAS FOUND TO BE UNWORKABLE IN PRACTICE IN GAO DECISION B-151770 REFERRED TO ABOVE. THE BIDDERS, INCLUDING MCGREGOR AND WERNER, ALL STACKED THEIR BIDS TO APPLY THE HIGHEST UNIT PRICES AGAINST ITEMS WHICH THEY SUSPECTED WOULD HAVE HIGH ORDER POTENTIAL AND QUOTED LOW PRICES AGAINST THE ITEMS WHICH WERE SELDOM USED. A METHOD OF DETERMINING AN AWARD PRICE WHICH WAS BASED ON A PREDETERMINED SELECTIVE PROCESS TENDS TO MAKE UNBALANCED BIDS LESS LIKELY AND THEREBY GIVE THE GOVERNMENT A FAIRER OVERALL PRICE. THUS A PREDETERMINED SELECTIVE PROCESS OF DETERMINING AWARD PRICE HOLDS DISTINCT ADVANTAGES OVER THE OTHER MOST LOGICAL SYSTEM OF DETERMINING AWARD PRICE WHEN PRECISE QUANTITIES ARE NOT KNOWN.

THE COMPETITIVE BIDDING STATUTES CODIFIED AT 10 U.S.C. 2305 REQUIRES THAT (1) THE SPECIFICATIONS AND INVITATION BE SO DRAWN AS TO PERMIT FREE AND FULL COMPETITION; (2) THAT THE SPECIFICATIONS BE SUFFICIENTLY DESCRIPTIVE IN LANGUAGE AND ATTACHMENTS TO PERMIT SUCH COMPETITION; AND (3) THAT IF THE SPECIFICATIONS DO NOT CARRY THE NECESSARY DESCRIPTIVE LANGUAGE AND ATTACHMENTS OR IF SUCH ATTACHMENTS ARE NOT ACCESSIBLE TO ALL BIDDERS, THE INVITATION IS INVALID AND NO AWARD MAY BE MADE THEREUNDER.

IT IS ARGUED THAT THE "MODEL JOB" METHOD OF EVALUATION IS AN OBJECTIVE, RATHER THAN SUBJECTIVE, STANDARD FOR AWARD SINCE THE "MODEL JOB" IS SELECTED BEFORE RECEIPT OF BIDS AND ALL BIDDERS ARE ADVISED IN ADVANCE OF BIDDING OF THE BASIS ON WHICH BIDS ARE TO BE EVALUATED. THEREFORE, IT IS THE ADMINISTRATIVE VIEW THAT THE INSTANT INVITATION MEETS THE CRITERIA OF 36 COMP. GEN. 380 AS TO OBJECTIVITY OF BID EVALUATION. UPON REVIEW, WE MUST DISAGREE FOR THE REASONS SET OUT BELOW.

THE FREE AND FULL COMPETITION ENVISAGED BY THE STATUTE CAN ONLY BE OBTAINED WHEN BIDDERS ARE ADVISED FULLY AS TO THE BASES UPON WHICH THEIR BIDS WILL BE EVALUATED FOR AWARD. HOWEVER, MERITORIOUS THE "MODEL JOB" METHOD OF EVALUATION MAY BE, BIDDERS HAVE NO ALTERNATIVE BUT TO SPECULATE AS TO THE ITEM AND QUANTITY CONTENT OF THE MODEL JOB ORDER. WITHOUT KNOWLEDGE OF THE ITEMS AND QUANTITIES INVOLVED, BIDDERS MAY, BY WHATEVER METHODS ARE AVAILABLE, ATTEMPT TO GUESS THE SECRETS OF THE MODEL JOB ORDER TO ARRIVE AT MINIMUM BID PRICES FOR THE QUANTITIES OF THE FEW" ITEMS THEY BELIEVE TO BE INCLUDED THEREIN. THOSE BIDDERS WITH KNOWLEDGE OF PRIOR ORDERS COULD POSSIBLY MAKE A REASONABLY ACCURATE GUESS OF THE CONTENTS OF THE MODEL JOB ORDER, LEAVING INTACT THE INCENTIVE TO UNBALANCE THEIR BIDS. IT SEEMS TO US THAT EVALUATION FACTORS SUCH AS PARTICULAR INVITATION ITEMS AND THE QUANTITIES THEREOF ARE MINIMAL ADVERTISING REQUIREMENTS THAT MUST BE COMMUNICATED TO ALL BIDDERS TO PROVIDE EQUALITY OF COMPETITION. SEE 40 COMP. GEN. 160. THE FACT THAT BIDDERS ARE APPRISED OF THE "MODEL JOB" METHOD IN ADVANCE OF BIDDING IS NOT, IN OUR OPINION, A SUFFICIENT BASIS FOR CONCLUDING THAT SUCH EVALUATION METHOD REPRESENTS "OBJECTIVELY DETERMINABLE FACTORS * * * WHICH ARE MADE KNOWN TO OR WHICH CAN BE ASCERTAINED BY THE BIDDER AT THE TIME HIS BID IS BEING PREPARED" WITHIN THE CONTEMPLATION OF 36 COMP.GEN. 380, 385. WE THINK THAT THE "MODEL JOB" METHOD, WHEREUNDER THE SECRECY OF THE MODE OF BID EVALUATION IS AN ESSENTIAL INGREDIENT, VIOLATES THE ESSENCE OF THE STATUTORY ADVERTISING REQUIREMENTS STATED ABOVE. WHILE WE APPRECIATE THE ADMINISTRATIVE DIFFICULTIES INHERENT IN ARRIVING AT REASONABLE ESTIMATES OF THE PRINTING SERVICES REQUIRED AND THE ADMINISTRATIVE DESIRE TO ELICIT BID RESPONSES REFLECTING FAIR AND REALISTIC PRICES FOR ALL BID ITEMS IN THE INVITATION, WE HAVE NO ALTERNATIVE OTHER THAN TO ADVISE THAT SUCH EVALUATION METHOD CONTRAVENES THESE STATUTORY ADVERTISING REQUIREMENTS. COMPARE, IN THIS CONNECTION, JAMES PETROZELLO CO., INC. V. TOWNSHIP OF CHATHAM, 182 A.2D 572 (1962), WHEREIN THE COURT DISCUSSED THE STATE ADVERTISING REQUIREMENT FOR THE FURNISHING OF ESTIMATES IN ADVANCE OF BIDDING.

REFERRING BACK TO OUR DECISION AT 43 COMP. GEN. 159, IT IS SIGNIFICANT TO NOTE THAT WE DID NOT FIND IT NECESSARY TO DISCUSS THE EFFECT OF THE FAILURE OF THE PROCUREMENT AGENCY TO SET OUT IN THE INVITATION ESTIMATES OF QUANTITIES BASED ON PRIOR USAGE EXPERIENCE. THE ESSENTIAL QUESTION FOR CONSIDERATION THERE WAS WHETHER THE INVITATION EVALUATION FORMULA COULD BE APPLIED SO AS TO SECURE TO THE GOVERNMENT THE BENEFITS OF FREE AND FULL COMPETITION. AS INDICATED ABOVE, WE HELD THERE THAT SUCH EVALUATION FORMULA RESULTED IN UNBALANCED BIDDING WHICH FAVORED BIDDERS WHO HAD PRIOR PROCUREMENT EXPERIENCE. IN OUR VIEW IT IS IN THE BEST INTERESTS OF THE GOVERNMENT TO DISCOURAGE, THROUGH APPROPRIATE INVITATION SAFEGUARDS, THE SUBMISSION OF UNBALANCED BIDS BASED ON SPECULATION AS TO WHICH ITEMS ARE PURCHASED MORE FREQUENTLY OR IN GREATER QUANTITIES THAN OTHERS. SEE B- 151910, SEPTEMBER 17, 1963; B-154631, DECEMBER 21, 1964; 38 COMP. GEN. 572, 574. HOWEVER, WE DO NOT FEEL THAT BID UNBALANCING, PER SE, MAY BE ELIMINATED BY THE "MODEL JOB" METHOD OF BID EVALUATION. EVEN HERE, THE INCENTIVE TO SPECULATE ON LOW AND HIGH FREQUENCY ITEMS IS PRESENT. IT IS CONCEIVABLE THAT AN EXPERIENCED BIDDER COULD ANTICIPATE THE CONTENTS OF THE MODEL JOB AND SUBMIT AN UNBALANCED BID. A FURTHER SERIOUS OBJECTION IS THAT THERE WOULD BE NO ASSURANCE THAT AWARD WOULD BE MADE TO THE LOWEST AGGREGATE BIDDER SINCE A BIDDER COULD BE LOW ON THE BASIS OF THE "MODEL JOB" EVALUATION AND YET BE HIGH IN THE AGGREGATE.

WE, THEREFORE, ARE OF THE OPINION THAT THE INVITATION SHOULD BE CANCELED AS NOT COMPLYING WITH THE ADVERTISED REQUIREMENTS OF FREE AND FULL COMPETITION.

THE CONTRACTING OFFICER'S FILE FURNISHED WITH THE LETTER OF DECEMBER 18, 1964 IS RETURNED.