B-163630, APR. 22, 1968

B-163630, APR. 22, 1968

TO IDEAL PRECISION METER CO., INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED FEBRUARY 8, 1968, WITH ENCLOSURE, PROTESTING AGAINST THE AWARD OF A CONTRACT TO PHAOSTRON INSTRUMENT AND ELECTRONIC CO. UNDER REQUEST FOR PROPOSALS NO. DAAG-31-68-R -0274, ISSUED BY THE U.S. ARMY CINCINNATI PROCUREMENT DETACHMENT ON OCTOBER 17, 1967, FOR 2,500 AMMETERS.

IN YOUR LETTER OF NOVEMBER 22, 1967, TO THE CHIEF PROCUREMENT OFFICER, DEPARTMENT OF THE ARMY, YOU STATE THAT YOU BELIEVE "THAT A THOROUGH INVESTIGATION IS WARRANTED AS TO THE POSSIBLE EXISTENCE OF COLLUSION, AS TO WHETHER OR NOT THERE HAS BEEN AN ILLEGAL DIVULGENCE OF OUR BID, AS TO THE REASON WHY A BIDDER WHOSE ORIGINAL BID, ALLEGEDLY REFLECTING A MINIMUM REASONABLE PROFIT, SHOULD DEFLATE HIS PRICE SO SUBSTANTIALLY AND TO AN AMOUNT SO EXACT, AS TO EDGE US OUT OF THIS AWARD BY A ONE PENNY DIFFERENCE, WHEN THEY HAD BEEN $2.76 HIGHER ALL ALONG.' YOU IMPLY THAT YOU SHOULD HAVE BEEN ADVISED THAT YOUR OFFER WAS THE LOWEST RECEIVED WHEN DISCUSSIONS WERE HAD FOLLOWING THE SUBMISSION OF PROPOSALS AND THAT, IN EFFECT, AUCTION TECHNIQUES WERE EMPLOYED DURING THESE DISCUSSIONS.

DUE TO THE URGENCY OF THE PROCUREMENT, THE RFP WAS ISSUED WITHOUT SYNOPOSIZING ON OCTOBER 17, 1967, WITH DATE OF RECEIPT OF OFFERS SET FOR OCTOBER 31, 1967. ALTHOUGH THERE WAS NO PRICING HISTORY AVAILABLE, FIVE SOURCES WERE SOLICITED AND FIVE OFFERS WERE RECEIVED WITH THE RESULT THAT YOUR COMPANY SUBMITTED THE ORIGINAL LOW OFFER OF $8.35 PER UNIT. OTHER OFFERS WERE IN THE AMOUNTS OF $8.88, $10.50, $11.25, AND $13.25 PER UNIT.

ON NOVEMBER 3, 1967, TELEPHONE NEGOTIATIONS WERE CONDUCTED WITH EACH OF THE FIVE OFFERORS, TWO OFFERORS HOLDING FIRM ON PRICE AND THREE OFFERORS REDUCING THEIR PRICE AS FOLLOWS:

SOLICITATION NEGOTIATED RESULTANT

OFFER OFFER REDUCTION

------------ ---------- -------- IDEAL $8.35

$ 7.75 $ .60 WACLINE 8.88 8.70 .18 PHAESTRON 10.50 7.74 2.67 WESTEN 11.25

11.25 NO CHANGE INTERNATIONAL 13.25 13.25 NO CHANGE

REGARDING THE NEGOTIATIONS CONDUCTED WITH YOUR COMPANY, THE RECORD SHOWS THAT YOUR FIRM WAS CALLED ON NOVEMBER 3, 1967, BY A CONTRACT SPECIALIST WHO ADVISED THAT YOUR FIRM WAS BEING CONSIDERED ON THE BASIS OF THE OFFER AS SUBMITTED AND THAT IF YOU WISHED TO REVISE YOUR OFFER YOU MIGHT DO SO. IN REPLY, YOUR VICE PRESIDENT REDUCED YOUR ORIGINAL PRICE BY ?60 PER UNIT TO $7.75 PER UNIT, AND ADVISED THAT A TELEGRAM OF CONFIRMATION WOULD BE SENT. YOUR VICE PRESIDENT ALSO ASKED IF HE WAS LOW OR WHO WAS LOW, AS TO WHICH HE WAS ADVISED THAT INFORMATION OF THIS TYPE IS NOT RELEASED TO ANYONE UNTIL AFTER AWARD OF THE CONTRACT. IT IS CLEAR FROM THE RECORD THAT THE REDUCTION OF PRICE WAS GIVEN AT ONCE WITHOUT ANY HESITATION.

MEMORANDA AND AFFIDAVITS IN SUBSTANTIATION OF THE ACTIONS TAKEN REVEAL THAT NEGOTIATIONS WERE CONDUCTED WITH ALL FIVE OFFERORS, BEGINNING WITH THE HIGH OFFER IN SEQUENCE DOWN TO THE LOW OFFER. OFFERORS WERE GIVEN THE SAME OPPORTUNITY AND WERE ADVISED THAT THEY WERE IN THE AREA OF CONSIDERATION AND THAT IF THEY WISHED, THE CONTRACTING OFFICE WOULD ACCEPT FOR CONSIDERATION ANY CHANGE IN THEIR ORIGINAL OFFERS THAT THEY CARED TO MAKE, SUCH AS PRICE, DELIVERY, ETC.

MR. W.R. HANSON REPRESENTED PHAOSTRON INSTRUMENT IN NEGOTIATIONS. WHEN OFFERED AN OPPORTUNITY ON NOVEMBER 3, 1967, TO REVISE ITS OFFER, MR. HANSON LATER THAT DAY REDUCED THE UNIT PRICE FROM $10.50 TO $7.74. SPECIFICALLY, MR. HANSON ADVISED THAT "THEY HAD REFIGURED THEIR COST AND BASED ON THE FACT THAT THE SOLICITATION CONTAINED A 100 PERCENT OPTION THEY WOULD OFFER $7.74 EACH UNIT, ALL OTHER PROVISIONS WOULD REMAIN THE SAME - TELEGRAM OF CONFIRMATION TO FOLLOW.' AS A RESULT OF THESE NEGOTIATIONS, PHAOSTRON INSTRUMENT DISPLACED YOUR COMPANY AS THE LOWEST PRICED OFFEROR BY EXACTLY ONE CENT. THEREAFTER, ON NOVEMBER 8, 1967, A TRANSPORTATION F.O.B. ORIGIN EVALUATION FACTOR WAS APPLIED TO THE PHAOSTRON INSTRUMENT OFFER IN THE AMOUNT OF $125.40 AND $134.50 WAS APPLIED TO YOUR COMPANY'S OFFER. THIS EVALUATION FURTHER INCREASED THE COST DIFFERENTIAL IN FAVOR OF PHAOSTRON INSTRUMENT BY AN ADDITIONAL $9.30. THE EVALUATED OFFER OF PHAOSTRON INSTRUMENT THEREBY BECAME $19,475.40 AND THAT OF YOUR COMPANY BECAME $19,509.70, OR A NET DIFFERENCE OF $34.30.

RELATIVE TO THE NEGOTIATION PROCEDURES REQUIRED TO BE FOLLOWED BY THE CONTRACTING OFFICE, 10 U.S.C. 2304 (G) PROVIDES, IN PART, AS FOLLOWS:

"WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED * * *.'

IMPLEMENTING THIS STATUTORY PROVISION, ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-804 PROVIDES, IN PART, THAT "ORAL DISCUSSIONS OR WRITTEN COMMUNICATIONS SHALL BE CONDUCTED WITH OFFERORS TO THE EXTENT NECESSARY TO RESOLVE UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID * * *. COST AND PROFIT FIGURES OF ONE OFFEROR OR CONTRACTOR SHALL NOT BE REVEALED TO OTHER OFFERORS OR CONTRACTORS.'

CONCERNING THE SELECTION OF OFFERORS FOR NEGOTIATION AND AWARD, ASPR 3- 805.1 (B) PROVIDES: ,WHENEVER NEGOTIATIONS ARE CONDUCTED WITH MORE THAN ONE OFFEROR, AUCTION TECHNIQUES ARE STRICTLY PROHIBITED; AN EXAMPLE WOULD BE INDICATING TO AN OFFEROR A PRICE WHICH MUST BE MET TO OBTAIN FURTHER CONSIDERATION, OR INFORMING HIM THAT HIS PRICE IS NOT LOW IN RELATION TO THAT OF ANOTHER OFFEROR. ON THE OTHER HAND, IT IS PERMISSIBLE TO INFORM AN OFFEROR THAT HIS PRICE IS CONSIDERED BY THE GOVERNMENT TO BE TOO HIGH. AFTER RECEIPT OF PROPOSALS, NO INFORMATION REGARDING THE NUMBER OR IDENTITY OF THE OFFERORS PARTICIPATING IN THE NEGOTIATIONS SHALL BE MADE AVAILABLE TO THE PUBLIC OR TO ANY ONE WHOSE OFFICIAL DUTIES DO NOT REQUIRE SUCH KNOWLEDGE. WHENEVER NEGOTIATIONS ARE CONDUCTED WITH SEVERAL OFFERORS, WHILE SUCH NEGOTIATIONS MAY BE CONDUCTED SUCCESSIVELY, ALL OFFERORS SELECTED TO PARTICIPATE IN SUCH NEGOTIATIONS * * * SHALL BE OFFERED AN EQUITABLE OPPORTUNITY TO SUBMIT SUCH PRICE, TECHNICAL, OR OTHER REVISIONS IN THEIR PROPOSALS AS MAY RESULT FROM THE NEGOTIATIONS. ALL SUCH OFFERORS SHALL BE INFORMED OF THE SPECIFIC DATE (AND TIME IF DESIRED) OF THE CLOSING OF NEGOTIATIONS AND THAT ANY REVISIONS TO THEIR PROPOSALS MUST BE SUBMITTED BY THAT DATE.'

UPON REVIEW OF THE PROCUREMENT, WE CONCLUDE THAT THE NEGOTIATIONS WERE CONDUCTED IN ACCORDANCE WITH LAW AND REGULATION, ESPECIALLY SINCE ALL OFFERORS WERE GIVEN THE SAME OPPORTUNITY TO REVIEW AND REVISE THEIR OFFERS. WHILE THE CONTRACT SPECIALIST DID NOT SET A SPECIFIC DATE FOR THE CLOSING OF NEGOTIATIONS PURSUANT TO ASPR 3-805.1 (B), HE DID, HOWEVER, STATE "THAT AT THE TIME EACH OFFEROR WAS CONTACTED, HE REQUESTED THAT DUE TO THE URGENCY OF THE PROCUREMENT, HE BE ADVISED IF AT ALL POSSIBLE, THE SAME DAY, 3 NOVEMBER 1967, OF ANY REVISION THE OFFEROR WISHED TO MAKE.' WHILE PRICE NEGOTIATIONS WERE COMPLETED ON SUCCESSIVE BUSINESS DAYS, THE ACTION TAKEN TO SECURE PROMPT PRICE REVISIONS MAY BE REGARDED AS EQUIVALENT TO DESIGNATING A CUTOFF DATE SINCE NO FURTHER PRICE NEGOTIATIONS OCCURED THEREAFTER TO THE PREJUDICE OF ANY OFFEROR. SEE B- 160976, MAY 29, 1967, WHERE WE HELD THAT:

"* * * WHILE OFFERORS MUST BE AFFORDED A REASONABLE OPPORTUNITY TO REVISE THEIR PROPOSALS AFTER NEGOTIATIONS, THERE COMES A TIME IN A NEGOTIATED PROCUREMENT WHEN NEGOTIATIONS MUST CEASE, PROPOSALS EVALUATED AND AWARD MADE IN ORDER TO MEET DELIVERY OR PERFORMANCE REQUIREMENTS. THE DESIGNATION OF AN EQUITABLE CLOSING DATE FOR SUBMISSION OF FINAL PRICES SERVES SUCH PURPOSE AND HELPS TO INSURE AGAINST CHARGES OF FAVORITISM. THE MAIN OBJECTIVE OF CONTRACT NEGOTIATIONS, HOWEVER, IS THE COMPLETE AGREEMENT OF THE PARTIES ON ALL BASIC ISSUES, BY RESOLVING UNCERTAINTIES RELATING TO THE PURCHASE OR THE PRICE TO BE PAID. SEE ASPR 3-804. ALTHOUGH MORE DISCUSSIONS WERE REQUIRED WITH ACL THAN WITH YOUR FIRM, THE RECORD SHOWS THAT THE OBJECTIVE OF THE NEGOTIATIONS WAS ACCOMPLISHED BY OBTAINING PROPOSALS FROM YOU AND ACL THAT WERE UNIFORM WITH RESPECT TO ALL BASIC SERVICES TO BE FURNISHED AND CONTAINED EACH FIRM'S FINAL PRICE FOR SUCH SERVICES. WHILE YOUR FINAL PRICES WERE RECEIVED ON JANUARY 24 AND ACL SUBMITTED ITS FINAL PRICES ON FEBRUARY 6, THE RECORD CONTAINS NO EVIDENCE WHATSOEVER OF YOUR PRICES HAVING BEEN DISCLOSED TO ACL OR THAT AUCTION TECHNIQUES WERE USED IN THE NEGOTIATIONS CONDUCTED WITH THAT FIRM. FURTHER, ALTHOUGH YOU WERE CONTRACTED BY THE CONTRACTING OFFICER ON JANUARY 31 CONCERNING YOUR PRICES, YOU EXPRESSED NO DESIRE TO REVISE YOUR PRICES DOWNWARD, NOR DOES THE RECORD INDICATE THAT YOU WOULD HAVE ADJUSTED YOUR PRICES HAD THE CONTRACTING OFFICER ESTABLISHED FEBRUARY 6 AS THE CLOSING DATE FOR PRICE REVISIONS IN ACCORDANCE WITH ASPR 3-805.1 (B), AND SO ADVISED YOU ON FEBRUARY 3. WE CANNOT CONCLUDE THEREFORE THAT YOU WERE PREJUDICED BY THE CONTRACTING OFFICER'S FAILURE TO ESTABLISH A CUTOFF DATE AS REQUIRED BY THE REGULATION, OR THAT SUCH FAILURE RESULTED IN THE GOVERNMENT NOT OBTAINING THE LOWEST PRICES WHICH EACH OFFEROR WISHED TO SUBMIT FOR EVALUATION.'

THE FACT THAT ONLY A ONE-CENT PRICE DIFFERENTIAL EXISTED AFTER THE CLOSE OF NEGOTIATIONS WITH ALL OFFERORS DID NOT WARRANT FURTHER NEGOTIATIONS OF AN URGENT PROCUREMENT. AWARD WAS MADE TO PHAOSTRON INSTRUMENT ON NOVEMBER 14, 1967, AND ON THE RECORD WE FIND NO LEGAL BASIS TO QUESTION THE AWARD.

WITH REGARD TO THE QUESTION WHETHER AUCTION TECHNIQUES WERE EMPLOYED, IT MAY BE POINTED OUT THAT WHERE THE GOVERNMENT BUYS BY NEGOTIATION THE RIGID AND FORMAL REQUIREMENTS APPLICABLE TO PROCUREMENT BY ADVERTISING NEED NOT BE OBSERVED. ALTHOUGH AN AWARD MAY BE MADE AS A RESULT OF COMPETITIVE NEGOTIATION WITHOUT BARGAINING BY INITIALLY ACCEPTING THE MOST FAVORABLE OFFER RECEIVED IF THE CONTRACTING OFFICER REGARDS IT TO BE FAIRLY AND REASONABLY PRICED, THE CONTRACTING OFFICER MAY ALSO NEGOTIATE A CONTRACT WITH THAT SUPPLIER WHOSE OFFER IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS FOR THIS REASON THAT OFFERORS MAY BE ALLOWED TO MAKE REVISIONS TO THEIR QUOTATIONS UP TO THE TIME NEGOTIATIONS ARE FINALLY CONCLUDED. IF YOUR PRICES WERE IN FACT DISCLOSED TO YOUR COMPETITORS, THE RECORD DOES NOT EVIDENCE ANY DISCLOSURE BY GOVERNMENT PERSONNEL.

THEREFORE, THE EXISTENCE OF POSSIBLE COLLUSION BY REASON OF ILLEGAL DIVULGENCE OF OFFERS HAS NOT BEEN SUBSTANTIATED; NEITHER IS THERE ANY INDICATION THAT PROHIBITED "AUCTION TECHNIQUES" WERE EMPLOYED.

WHILE YOU STATE THAT THE REDUCTION OF PHAOSTRON'S BID IS SO AMAZING AND INCREDIBLE AS TO CONSTITUTE UNBELIEVABLE COINCIDENCE, THE CONTRACTING OFFICER STATES IN A SWORN AFFIDAVIT THAT NEITHER HE NOR THE CONTRACT SPECIALIST KNEW OR HAD DEALINGS WITH EITHER OF THE TWO LOWEST OFFERORS OR THEIR PERSONNEL PRIOR TO THIS SOLICITATION OR THE COMMENCEMENT OF NEGOTIATIONS. THE DETERMINATION OF THE LOWEST OFFER, IN ANY EVENT, COULD NOT BE MADE UNTIL THE FREIGHT COSTS COULD BE EVALUATED. IT IS SIGNIFICANT THAT SUCH EVALUATION WAS MADE AFTER THE CLOSE OF NEGOTIATIONS WITH ALL OFFERORS. THEREFORE, WE CONCLUDE THAT THE NEGOTIATIONS WERE CARRIED OUT IN ACCORDANCE WITH LAW AND APPLICABLE REGULATIONS.