B-164779, SEP. 25, 1968

B-164779, SEP. 25, 1968

TO WESTINGHOUSE AIR BRAKE COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JULY 1, 1968, INQUIRING AS TO THE PROPRIETY OF THE GUARANTEED TOTAL COST OF REPAIRS REQUIREMENT IN INVITATION FOR BIDS NO. DABD05-68-B-0139, ISSUED ON MAY 24, 1968.

THE SUBJECT INVITATION, FOR THE PROCUREMENT OF CERTAIN CONSTRUCTION EQUIPMENT, PROVIDED THAT THE GOVERNMENT WOULD BE RESPONSIBLE FOR ALL REPAIRS NOT COVERED BY COMMERCIAL WARRANTY OR GUARANTEE UP TO A SPECIFIED AMOUNT AND THAT THE CONTRACTOR WOULD BEAR THE COST OF ALL REPAIRS ABOVE THAT AMOUNT FOR A GUARANTEED MAXIMUM TOTAL COST FOR A PERIOD OF 9,000 HOURS OF OPERATION AS RECORDED BY ENGINE HOUR METER OR FOR FIVE YEARS FROM DATE OF DELIVERY, WHICHEVER COMES FIRST. THE INVITATION ALSO PROVIDED THAT THE BID PRICES FOR BOTH THE EQUIPMENT AND THE GUARANTEED MAXIMUM REPAIR COST WOULD BE ADDED FOR THE PURPOSE OF EVALUATING BIDS FOR AWARD OF A CONTRACT. IN CONNECTION WITH PERFORMANCE OF THE GUARANTEED TOTAL COST OF REPAIRS REQUIREMENT, THE INVITATION PROVIDED THAT THE CONTRACTOR FURNISH A SURETY BOND IN THE PENAL SUM OF $5,000 FOR EACH PIECE OF EQUIPMENT FOR WHICH AN AWARD WAS MADE.

YOU STATE THAT YOU DID NOT SUBMIT A BID BECAUSE OF THE REQUIREMENT UNDER CONSIDERATION AND INQUIRE AS TO WHETHER SUCH A PROVISION IS PROPER UNDER THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) AND THE FEDERAL PROCUREMENT REGULATIONS (FPR). YOU ALSO STATE THAT THERE IS ONLY ONE MOTOR GRADER MANUFACTURER IN THE UNITED STATES FINANCIALLY ABLE TO COMPLY WITH SUCH A REQUIREMENT.

THE ARMY REPORTS THAT TWO RESPONSIVE BIDS WERE RECEIVED FROM DEALERS REGULARLY ENGAGED IN THE SALE AND SERVICING OF EQUIPMENT OF THE TYPE INVOLVED AND THAT THE TWO BIDS RECEIVED WERE COMPETITIVE AS TO THE PRICES FOR BOTH THE EQUIPMENT AND THE GUARANTEED REPAIR COST. THEREFORE, A CONTRACT WAS AWARDED TO THE LOW BIDDER.

HOWEVER, THE ARMY CONCEDES THAT THE REQUIREMENT AS WRITTEN MAY HAVE HAD THE EFFECT OF LIMITING COMPETITION BECAUSE "IT DOES NOT PROVIDE PROSPECTIVE BIDDERS WITH INFORMATION AS TO (A) HOW COSTS WILL BE COMPUTED (LABOR, MATERIALS AND ANY INDEPENDENT COST ELEMENT NOT INCLUDED IN LABOR AND MATERIALS); (B) EXPERIENCE REQUIREMENTS OF THE PERSONNEL WHO WILL OPERATE THE EQUIPMENT; AND (C) THE ENVIRONMENTAL CONDITIONS UNDER WHICH THE EQUIPMENT IS EXPECTED TO OPERATE.' THEREFORE, IT IS REPORTED THAT INSTRUCTIONS HAVE BEEN ISSUED TO CORRECT THESE DEFICIENCIES IN FUTURE PROCUREMENTS.

WITH REGARD TO THE SPECIFIC QUESTION YOU RAISE, WE KNOW OF NO STATUTE OR REGULATION WHICH WOULD PRECLUDE THE USE OF SUCH A PROVISION AS INVOLVED HERE. HOWEVER, THE USE OF SUCH A PROVISION MUST BE CONSISTENT WITH THE BASIC PRINCIPLE OF FORMAL ADVERTISING THAT ALL BIDDERS MUST BE AFFORDED AN OPPORTUNITY TO COMPETE FOR GOVERNMENT CONTRACTS ON EQUAL TERMS IN ORDER TO SECURE FOR THE GOVERNMENT THE BENEFITS WHICH FLOW FROM FREE AND FULL COMPETITION. 36 COMP. GEN. 380. TO PERMIT BIDDERS TO COMPETE ON EQUAL TERMS, THE INVITATION MUST BE SUFFICIENTLY DEFINITE TO PERMIT THE PREPARATION AND EVALUATION OF BIDS ON A COMMON BASIS AND THE BASIS OF EVALUATION SHOULD BE STATED IN ADVANCE AND SHOULD BE AS CLEAR, PRECISE AND EXACT AS POSSIBLE.

AS NOTED ABOVE, A CONTRACT WAS AWARDED AFTER THE RECEIPT OF TWO RESPONSIVE AND COMPETITIVE BIDS. THE ARMY RECOGNIZES THAT THE CLAUSE USED IN THE INSTANT PROCUREMENT WAS DEFICIENT IN CERTAIN RESPECTS AND HAS TAKEN STEPS TO CORRECT SUCH DEFICIENCIES. IN THESE CIRCUMSTANCES, WE DO NOT BELIEVE THAT WE WOULD BE JUSTIFIED IN DISTURBING THE CONTRACT AND PERFORMANCE THEREUNDER. HOWEVER, USE OF THIS REQUIREMENT IN FUTURE PROCUREMENTS SHOULD BE CONSISTENT WITH THE PRINCIPLES ENUNCIATED ABOVE.