B-173703, FEB 7, 1972, 51 COMP GEN 479

B-173703, FEB 7, 1972, 51 COMP GEN 479

CONTRACTS - NEGOTIATION - COMPETITION - DISCUSSION WITH ALL OFFERORS REQUIREMENT - PROPOSAL REVISIONS THE DETERMINATION BY A CONTRACTING OFFICER UPON REVIEWING THE PROCUREMENT FOR A SET OF WATER DISTILLATION UNITS AND ASSOCIATED MANUALS, DRAWINGS, AND PROVISIONING LIST IN CONNECTION WITH A PROTEST, THAT THE AWARD TO THE OFFEROR WHO REDUCED THE PRICE OF THE LIST TO BECOME THE LOW OFFEROR WAS IMPROPER BECAUSE THE OTHER OFFERORS WITHIN THE COMPETITIVE RANGE WERE NOT GIVEN AN OPPORTUNITY TO REVIEW THEIR OFFERS AND PERHAPS MODIFY THEIR PRICES WAS IN ACCORD WITH 10 U.S.C. 2304(G). AN OPPORTUNITY TO REVISE OR MODIFY A PROPOSAL, REGARDLESS OF WHETHER THE OPPORTUNITY RESULTS FROM ACTION INITIATED BY THE GOVERNMENT OR OFFEROR, CONSTITUTES DISCUSSION AND, THEREFORE, THE AWARD BASED ON A PRICE REDUCTION WITHOUT DISCUSSION WITH OTHER OFFERORS WAS IMPROPER, BUT THE IMPROPRIETY DOES NOT REQUIRE THE SEVERE REMEDY OF CONTRACT CANCELLATION, AND THE CANCELLATION MAY BE MODIFIED TO A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT.

TO MURRAY SCHAFFER, FEBRUARY 7, 1972:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 4, 1971, AND PRIOR CORRESPONDENCE, ON BEHALF OF MECHANICAL EQUIPMENT CO., INC. (MECO), PROTESTING AGAINST THE CANCELLATION OF CONTRACT DSA700-71-C-9173, AWARDED BY THE DEFENSE CONSTRUCTION SUPPLY CENTER, COLUMBUS, OHIO.

THE REQUEST FOR PROPOSALS (RFP) INITIATING THE PROCUREMENT SOLICITED OFFERS ON A SET OF WATER DISTILLATION UNITS AND ASSOCIATED MANUALS, DRAWINGS AND PROVISIONING LIST. THREE OFFERS WERE TIMELY RECEIVED AND OPENED ON JUNE 10, 1971. APPROXIMATELY $6,000 SEPARATED EACH OF THE THREE OFFERS WITH MECO'S BEING THE LOWEST. ALL OFFERORS WERE CONSIDERED TO BE WITHIN THE COMPETITIVE RANGE.

ON JUNE 15, THE BUYER FOR THE PROCUREMENT REQUESTED MECO, INTER ALIA, TO "PLEASE REVIEW PRICE FOR PROVISIONING LIST." THIS REQUEST WAS THE RESULT OF A COMPARISON OF MECO'S PRICE OF $1,230 FOR THE ITEM WITH PRICES OF $50 AND $100 SUBMITTED BY THE TWO OTHER OFFERORS, RESPECTIVELY. MECO'S REPLY, WHICH EFFECTED A $230 REDUCTION IN THE PRICE OF THIS ITEM AND ITS TOTAL PRICE STATED "REVIEW OF OFFER INDICATES WE CAN ACCEPT ITEM 0005, SEQUENCE A004, SHORT FORM PROVISIONING AT $1,000.00." THEREAFTER, MECO'S PRICE WAS DETERMINED TO BE FAIR AND REASONABLE AND IT WAS AWARDED THE CONTRACT FOR $39,200.

AFTER THE AWARD HAD BEEN MADE, THE PROCUREMENT WAS REVIEWED IN CONNECTION WITH A PROTEST FILED BY THE SECOND LOW OFFEROR. ALTHOUGH THIS PROTEST WAS ULTIMATELY DENIED, IT WAS NOTED THAT TWO OFFERORS HAD NOT BEEN GIVEN THE OPPORTUNITY TO REVIEW THEIR OFFERS AND PERHAPS MODIFY THEIR PRICES. AS A RESULT, THE CONTRACT AWARDED TO MECO WAS CANCELED PRIOR TO DELIVERY AND ACCEPTANCE OF ANY UNIT BUT AFTER MECO HAD INCURRED ALLEGED COSTS TOTALING APPROXIMATELY $7,000.

THE CONTRACTING OFFICER MAINTAINS THAT AS ALL OFFERORS WERE CONSIDERED TO BE WITHIN THE COMPETITIVE RANGE, DISCUSSIONS SHOULD HAVE BEEN HELD WITH ALL OFFERORS AS REQUIRED BY 10 U.S.C. 2304(G) AND NOT JUST WITH MECO. THE CONTRACTING OFFICER FURTHER REFINES THE SITUATION BY NOTING THAT MECO'S PRICE REDUCTION CANNOT BE CONSIDERED A VOLUNTARY MODIFICATION FROM AN OTHERWISE SUCCESSFUL OFFEROR UNDER PARAGRAPH 3 506(G) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) SINCE MECO'S PRICE WAS NOT DETERMINED TO BE FAIR AND REASONABLE UNTIL AFTER THE MODIFICATION WAS RECEIVED AND, IN ADDITION, THE PRICE REDUCTION, BEING THE RESULT OF A SOLICITATION BY THE PROCURING ACTIVITY, CANNOT BE CONSIDERED AS VOLUNTARY.

AS RECOGNIZED IN YOUR LETTER OF NOVEMBER 4, THE DETERMINATIVE ISSUE IS WHETHER THE REQUEST MADE TO MECO CONSTITUTES DISCUSSIONS AS THAT TERM IS USED IN 10 U.S.C. 2304(G). OUR OFFICE HAS EQUATED DISCUSSIONS WITH NEGOTIATIONS (SEE 51 COMP. GEN. 102 (1971)), WHICH HAVE BEEN DEFINED IN 47 COMP. GEN. 29 (1967), AT PAGE 52, AS FOLLOWS:

THE TERM "NEGOTIATION" GENERALLY IMPLIES A SERIES OF OFFERS AND COUNTEROFFERS UNTIL A MUTUALLY SATISFACTORY AGREEMENT IS CONCLUDED BY THE PARTIES. 10 U.S.C. 2304(G) IMPLEMENTS AND CLARIFIES THE DEFINITION OF "NEGOTIATE" IN 10 U.S.C. 2302(2) AND IT IS OUR VIEW THAT THE TERM "NEGOTIATE" MUST BE READ IN CONJUNCTION WITH 10 U.S.C. 2304(G) TO INCLUDE THE SOLICITATION OF PROPOSALS AND THE CONDUCT OF WRITTEN OR ORAL DISCUSSIONS, WHEN REQUIRED, AS WELL AS THE MAKING AND ENTERING INTO A CONTRACT. ***

WE HAVE NOTED, HOWEVER, THAT A SERIES OF OFFERS AND COUNTEROFFERS ARE NOT DENOTED IN THE ABOVE STATUTORY PROVISIONS AND THAT IT DOES NOT SEEM THEY ARE ESSENTIAL TO COMPLIANCE WITH THE REQUIREMENTS OF THOSE PROVISIONS. SEE B-164688, OCTOBER 2, 1968. OBVIOUSLY, ONCE THE SOLID FOOTINGS OF THE OFFER-COUNTEROFFER SITUATION IS LEFT, THE DEFINITION OF WHAT DOES OR DOES NOT CONSTITUTE NEGOTIATION REFLECTS AN UNDESIRABLE VAGUENESS.

WE HAVE REVIEWED SEVERAL OF OUR MORE RECENT DECISIONS BEARING ON THE QUESTION OF WHAT CONSTITUTES DISCUSSIONS AND CONCLUDE THAT RESOLUTION OF THE QUESTION HAS DEPENDED ULTIMATELY ON WHETHER AN OFFEROR HAS BEEN AFFORDED AN OPPORTUNITY TO REVISE OR MODIFY ITS PROPOSAL, REGARDLESS OF WHETHER SUCH OPPORTUNITY RESULTED FROM ACTION INITIATED BY THE GOVERNMENT OR THE OFFEROR. CONSEQUENTLY, AN OFFEROR'S LATE CONFIRMATION AS TO THE RECEIPT OF AN AMENDMENT AND ITS PRICE CONSTITUTED DISCUSSIONS (50 COMP. GEN. 202 (1970)), AS DOES A REQUESTED "CLARIFICATION," WHICH RESULT IN A REDUCTION OF OFFER PRICE (48 COMP. GEN. 663 (1969)) AND THE SUBMISSION OF REVISIONS IN RESPONSE TO AN AMENDMENT TO A SOLICITATION (50 COMP. GEN. 246 (1970)). ON THE OTHER HAND, AN EXPLANATION BY AN OFFEROR OF THE BASIS FOR ITS PRICE REDUCTIONS WITHOUT ANY OPPORTUNITY TO CHANGE ITS PROPOSAL WAS HELD NOT TO CONSTITUTE DISCUSSIONS (B-170989, B-170990, NOVEMBER 17, 1971). WE BELIEVE, THEREFORE, THAT A DETERMINATION THAT CERTAIN ACTIONS CONSTITUTE DISCUSSIONS MUST BE MADE WITH REFERENCE TO THE OPPORTUNITY FOR REVISION AFFORDED TO OFFERORS BY THOSE ACTIONS. IF THE OPPORTUNITY IS PRESENT, THE ACTIONS CONSTITUTE DISCUSSIONS.

APPLYING THIS RULE TO THE SPECIFIC SITUATION AT HAND, WE ARE OF THE OPINION THAT MECO'S OFFER OF A PRICE REDUCTION, COUPLED WITH ITS ACCEPTANCE BY THE GOVERNMENT, PROVIDED MECO WITH THE OPPORTUNITY TO CHANGE ITS PROPOSAL AND, THUS, CONSTITUTED DISCUSSIONS. SINCE IT IS OUR POSITION THAT DISCUSSIONS WITH ONE OFFEROR NECESSITATE DISCUSSIONS WITH ALL OFFERORS WITHIN THE COMPETITIVE RANGE (SEE 50 COMP. GEN. 202, SUPRA), THE CONTRACTING OFFICER'S CONTENTION ON THIS POINT IS WELL TAKEN AND YOUR PROTEST IN THIS REGARD IS DENIED.

ALTHOUGH WE CONCLUDE THAT THE CONTRACT AWARDED TO MECO WAS IMPROPER, WE DO NOT BELIEVE THAT THE IMPROPRIETY WAS SUCH AS TO REQUIRE THE SEVERE REMEDY OF OUTRIGHT CANCELLATION OF ITS CONTRACT. ACCORDINGLY, WE ARE RECOMMENDING TO THE DIRECTOR, DEFENSE SUPPLY AGENCY, BY LETTER OF TODAY, A COPY OF WHICH IS ENCLOSED, THAT THE CANCELLATION BE MODIFIED TO A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT.