B-175606, JUN 29, 1972

B-175606, JUN 29, 1972

BID PROTEST - PERFORMANCE BOND - EVALUATION FACTORS DENIAL OF PROTEST ON BEHALF OF HATCH, INC; AGAINST THE POSSIBLE AWARD OF A CONTRACT TO DIETZ ELECTRICAL MFG. CORP; UNDER IFB NO. DS-6932, ISSUED BY THE U.S. DEPARTMENT OF INTERIOR, BUREAU OF RECLAMATION, ENGINEERING AND RESEARCH CENTER, DENVER, COLO. SINCE THERE WAS NOTHING IN HATCH'S BID TO INDICATE WHETHER IT DID OR DID NOT INCLUDE AN AMOUNT TO COVER THE PERFORMANCE BOND PREMIUM, THE COMP. GEN. IS UNABLE TO CONCLUDE THAT THE CONTRACTING OFFICER ACTED UNREASONABLY IN APPLYING AN EVALUATION FACTOR TO ADD IN THE AMOUNT OF THE PREMIUM. ACCORDINGLY, THE PROTEST IS DENIED.

TO KEMP, SMITH, WHITE, DUNCAN & HAMMOND:

REFERENCE IS MADE TO YOUR LETTERS DATED MARCH 30 AND APRIL 25, 1972, PROTESTING, ON BEHALF OF HATCH, INCORPORATED (HATCH), THE POSSIBLE AWARD OF A CONTRACT TO DIETZ ELECTRICAL MFG. CORP. (DIETZ) UNDER INVITATION FOR BIDS NO. DS-6932, ISSUED JANUARY 31, 1972, BY THE UNITED STATES DEPARTMENT OF INTERIOR, BUREAU OF RECLAMATION, ENGINEERING AND RESEARCH CENTER, DENVER, COLORADO (INTERIOR).

THE INVITATION ASKED FOR BIDS FOR FURNISHING CONTROL EQUIPMENT FOR THE GRAND COULEE THIRD POWERPLANT AND THE 500-KV SWITCHYARD, COLUMBIA BASIN PROJECT, WASHINGTON. FOUR BIDS WERE RECEIVED AND OPENED ON THE SCHEDULED OPENING DATE, MARCH 9, 1972. THE BIDS WERE EVALUATED AS FOLLOWS:

KEYSTONE

BUMSTEAD-WOOLFORD ELECTRICAL

DIETZ HATCH CO MFG. CO.

ITEMS

1-13 $223,050.00 $225,000.00 $250,412.00 $271,420.00

LESS DISCOUNT

AND ALLOWANCES * 2,250.00 1,252.06 *

PLUS EVALUATION

FACTORS NOT

INCLUDED IN BID

PRICE * 450.00 * *

TOTAL: $223,050.00 $223,200.00 $249,159.94 $271,420.00

THE INVITATION (SPECIAL CONDITIONS A-1) REQUIRED OF ALL BIDDERS, IN PERTINENT PART, THE FOLLOWING:

"A. GUARANTEE OF OFFER. - IF THE OFFER EXCEEDS $2,000, THE OFFEROR SHALL FURNISH GUARANTEE WITH HIS OFFER IN AN AMOUNT NOT LESS THAN 20 PERCENT OF THE AMOUNT OF THE OFFER.

FAILURE TO FURNISH A GUARANTEE OF OFFER IN THE PROPER FORM AND AMOUNT, BY THE TIME SET FOR OPENING OF OFFERS, MAY BE CAUSE FOR REJECTION OF THE OFFER.

THE GUARANTEE SHALL BE IN THE FORM OF A FIRM COMMITMENT *** .

IF THE SUCCESSFUL OFFEROR, UPON ACCEPTANCE OF HIS OFFER BY THE GOVERNMENT WITHIN THE PERIOD SPECIFIED THEREIN FOR ACCEPTANCE (60 DAYS IF NO PERIOD IS SPECIFIED) FAILS TO EXECUTE SUCH FURTHER CONTRACTUAL DOCUMENTS, IF ANY, AND GIVE SUCH BONDS) AS MAY BE REQUIRED BY THE TERMS OF THE OFFER AS ACCEPTED WITHIN THE TIME SPECIFIED (10 DAYS IF NO PERIOD IS SPECIFIED) AFTER RECEIPT OF THE FORMS BY HIM, HIS CONTRACT MAY BE TERMINATED FOR DEFAULT. ***

B. PERFORMANCE BOND. - THE CONTRACTOR MAY BE REQUIRED TO FURNISH PERFORMANCE BOND, WITH APPROVED SURETY, OR SURETIES, AND WITH A PENAL SUM EQUAL TO 100 PERCENT OF THE CONTRACT PRICE AT THE TIME OF AWARD. OFFERORS SHALL INCLUDE AMOUNTS FOR PERFORMANCE BOND PREMIUMS IN THEIR OFFERS. THE CONTRACTING OFFICER LATER DECIDES TO WAIVE THE PERFORMANCE BOND REQUIREMENT, A PREMIUM AMOUNT OF TWO DOLLARS ($2) PER THOUSAND DOLLARS, OR ANY FRACTION THEREOF, OF CONTRACT PRICE WILL BE DEDUCTED FROM THE CONTRACT AMOUNT AT THE TIME OF AWARD."

WITH THE EXCEPTION OF HATCH, ALL OTHER BIDDERS FURNISHED A 20 PERCENT BID BOND. AS A BID GUARANTEE, HATCH SUBMITTED A STATE NATIONAL BANK CASHIER'S CHECK IN THE AMOUNT OF $45,000. IN A COVER LETTER TO ITS BID, HATCH CONDITIONED ITS BID AS FOLLOWS:

"SUBMITTED HEREWITH IS THE BID OF HATCH, INCORPORATED, IN RESPONSE TO THE ABOVE SOLICITATION, TOGETHER WITH OUR CASHIER'S CHECK IN THE AMOUNT OF $45,000.00 AS THE BID GUARANTEE. THIS BID AND THE BID GUARANTEE ARE CONDITIONED UPON THE GOVERNMENT WAIVING ANY REQUIREMENT FOR A PERFORMANCE OR PAYMENT BOND AS A CONDITION PRECEDENT TO THE FORMATION OF THE CONTRACT. HATCH, INCORPORATED, IS UNABLE TO FURNISH A PERFORMANCE OR PAYMENT BOND IN CONNECTION WITH THE PROPOSED CONTRACT AND SUBMITS THIS BID ON THE CONDITION THAT ITS FAILURE TO FURNISH ANY SUCH BOND WILL NOT RESULT IN THE FORFEITURE OF THE BID GUARANTEE, AND WHETHER SUCCESSFUL OR NOT IN OUR BID IT MUST BE AGREED THAT THE $45,000.00 CASHIER'S CHECK BE RETURNED TO US WITHIN 30 TO 45 DAYS FROM BID OPENING DATE.

HATCH, INCORPORATED, IS A SMALL BUSINESS AS DEFINED BY THE SMALL BUSINESS ADMINISTRATION (SBA) AND HAS OBTAINED A LOAN GUARANTEED BY THE SBA. UPON APPLYING TO OUR BONDING COMPANY FOR BID AND PERFORMANCE BONDS IN CONNECTION WITH THIS SOLICITATION, WE WERE INFORMED THAT THE COMPANY COULD NOT WRITE SUCH BONDS SINCE THE SBA WOULD BE A PREFERRED CREDITOR AND CANNOT SUBORDINATE ITS SECURITY INTEREST IN FAVOR OF THE SURETY. SHORT, WE ARE UNABLE TO FURNISH A BOND BECAUSE WE ARE A SMALL BUSINESS AND HAVE AVAILED OURSELVES OF AN SBA LOAN."

INTERIOR HAS REPORTED THAT IN VIEW OF THIS QUALIFICATION REGARDING ITS INABILITY TO FURNISH A PERFORMANCE BOND, AND IN THE ABSENCE OF ANY STATEMENTS THAT A PERFORMANCE BOND PREMIUM WAS IN FACT INCLUDED IN ITS OFFER, IT WAS ADMINISTRATIVELY DECIDED THAT HATCH MUST HAVE FAILED TO INCLUDE THE PERFORMANCE BOND PREMIUM. FURTHER, INTERIOR REPORTS THAT SINCE THE OTHER THREE BIDDERS DID NOT TAKE EXCEPTION TO THE PERFORMANCE BOND REQUIREMENTS, IT WAS CONCLUDED THAT THEY HAD INCLUDED THE PREMIUM IN THEIR OFFERS. BASED ON THIS PREMISE, INTERIOR DETERMINED THAT A FAIR AND EQUITABLE EVALUATION OF BIDS REQUIRED THAT A $2 PER $1,000 EVALUATION FACTOR, OR $450.00 BE ADDED TO HATCH'S BID, THUS MAKING IT SECOND LOW.

YOUR LETTERS OF MARCH 30 AND APRIL 25, 1972, PROTEST INTERIOR'S ADDITION OF A $450.00 EVALUATION FACTOR FOR A PERFORMANCE BOND PREMIUM. YOU CONTEND THAT THE LETTER ATTACHED TO HATCH'S BID DOES NOT STATE THAT HATCH DEDUCTED THE $450 PREMIUM FOR A PERFORMANCE BOND FROM ITS BID, AND THAT HATCH IN FACT PREPARED AND SUBMITTED ITS BID IN THE SAME MANNER AS IT HAS ALWAYS DONE ON OTHER GOVERNMENT CONTRACTS REQUIRING BONDS. YOU FURTHER ALLEGE THAT HATCH UNDERSTOOD FROM THE INVITATION THAT IF A BOND SHOULD BE REQUIRED, IT COULD NOT RECEIVE THE AWARD OF THE CONTRACT AND THAT IF THE BOND WAS WAIVED, THE PREMIUM AMOUNT WOULD BE DEDUCTED FROM ITS BID AS PROVIDED IN THE SPECIAL CONDITIONS AND AS WAS DONE IN PREVIOUS BIDDING SOLICITATIONS. ACCORDINGLY, YOU CONTEND THAT HATCH'S BID IS RESPONSIVE TO THE INVITATION; THAT THE GOVERNMENT IS NOT ENTITLED TO ASSUME THAT HATCH HAS ALREADY DEDUCTED THE BOND PREMIUM; AND THAT INTERIOR MUST MAKE THE SAME DEDUCTION FROM ALL THE BIDS, INCLUDING HATCH, IF IT WAIVES THE REQUIREMENT FOR A PERFORMANCE BOND, THUS MAKING HATCH'S BID THE MOST ADVANTAGEOUS TO THE GOVERNMENT.

IT IS, OF COURSE, AXIOMATIC THAT BIDS MUST BE COMPUTED, SUBMITTED AND EVALUATED ON A COMMON BASIS. IN THE INSTANT CASE NEITHER THE CONTRACTING OFFICER NOR THIS OFFICE IS IN A POSITION TO KNOW WHETHER HATCH DID, OR DID NOT, INCLUDE AN AMOUNT TO COVER THE PERFORMANCE BOND PREMIUM IN ITS BID PRICE. HOWEVER, IT IS OUR OPINION THAT SUCH INCLUSION WOULD BE SO COMPLETELY INCONSISTENT WITH THE ADVICE SET OUT IN THE COVER LETTER TO HATCH'S BID AS TO MAKE IT OBLIGATORY UPON HATCH TO SPECIFICALLY INCLUDE ADVICE TO THE EFFECT THAT A PREMIUM WAS IN FACT INCLUDED IN THE BID PRICE, BEFORE THE BID COULD BE EVALUATED ON THAT BASIS.

WHEN THE CONTRACTING OFFICER WAS UNABLE TO CONCLUDE WITH REASONABLE CERTAINTY THAT THE PREMIUM TO COVER A PERFORMANCE BOND HAD BEEN INCLUDED IN ONE OF THE BIDS, IT WAS HIS DUTY TO MAKE SUCH ADJUSTMENTS AS MIGHT BE NECESSARY TO ASSURE THAT THE EVALUATION OF ALL BID PRICES WAS ACCOMPLISHED ON A COMMON BASIS. CLEARLY, SO LONG AS THE CONTRACTING OFFICER WAS CONVINCED THAT THREE OF THE BIDDERS HAD INCLUDED A PERFORMANCE BOND PREMIUM IN THEIR BID PRICES, AS REQUIRED BY THE INVITATION, AND SO LONG AS HE HAD REASONABLE GROUNDS TO CONCLUDE THAT THE REMAINING BIDDER MAY NOT HAVE DONE SO, THE CONTRACTING OFFICER WOULD NOT HAVE BEEN JUSTIFIED IN IGNORING THAT DOUBT IN HIS COMPARATIVE EVALUATION OF THE BID PRICES. VIEW THEREOF, AND SINCE THE CONTRACTING OFFICER COULD NOT RESORT TO EXTRANEOUS EVIDENCE TO RESOLVE HIS DOUBT, WE MUST AGREE WITH HIS DECISION TO ADD $450 TO HATCH'S BID PRICE TO ASSURE THAT IT WAS NOT RECEIVING A COMPETITIVE ADVANTAGE IN THE EVALUATION PROCESS.

IN VIEW OF THE FOREGOING, YOUR PROTEST MUST BE DENIED.