B-175621, APR 3, 1973

B-175621, APR 3, 1973

BID PROTEST - REJECTION OF BIDS - UNREASONABLE PRICE - DISCLOSURE OF GOVERNMENT ESTIMATES DENIAL OF PROTEST ON BEHALF OF R.R. HENSLER INC., AGAINST THE ADMINISTRATIVE DETERMINATION TO REJECT ALL BIDS UNDER AN IFB ISSUED BY THE U.S. ARMY ENGINEER DISTRICT, LOS ANGELES, CALIF., FOR CERTAIN WORK AT THE SAN ANTONIO DAM IN CALIFORNIA. ASPR 2-404.1(B) PROVIDES THAT ANY BID MAY BE REJECTED IF THE CONTRACTING OFFICER DETERMINES IN WRITING THAT IT IS UNREASONABLE AS TO PRICE OR FOR OTHER REASONS CANCELLATION IS CLEARLY IN THE BEST INTEREST OF THE GOVERNMENT. THE REJECTION OF BIDS IS A MATTER OF ADMINISTRATIVE DISCRETION, AND A REQUEST FOR BIDS DOES NOT IMPORT AN OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CONFORMING ONE. SEE B- 170588, AUGUST 28, 1970. SINCE THESE BIDS WERE NOT ONLY IN EXCESS OF THE GOVERNMENT'S ESTIMATE OF PROJECT COSTS, BUT ALSO FAR IN EXCESS OF THE MONEY REASONABLY CONSIDERED ALLOCABLE TO THIS PROJECT FROM THE FISCAL YEAR FUNDS, IT MUST BE CONCLUDED THAT THE ACTIONS OF THE CONTRACTING OFFICER WERE IN GOOD FAITH AND IN ACCORDANCE WITH THE APPLICABLE LAW AND REGULATIONS. SEE B-167972, OCTOBER 31, 1969. FURTHER, THE COMP. GEN. WILL GIVE EFFECT TO THE REQUEST BY THE CORPS OF ENGINEERS THAT THE REVISED ESTIMATES NOT BE MADE PUBLIC. B-173038, SEPTEMBER 7, 1971.

TO R. R. HENSLER, INCORPORATED:

REFERENCE IS MADE TO THE LETTER FROM YOUR ATTORNEYS DATED FEBRUARY 26, 1973, AND PRIOR CORRESPONDENCE, CONCERNING YOUR PROTEST AGAINST THE ADMINISTRATIVE DETERMINATION TO REJECT ALL BIDS UNDER INVITATION FOR BIDS NO. DACW 09-72-B-000., ISSUED ON FEBRUARY 3, 1972, BY THE UNITED STATES ARMY ENGINEER DISTRICT, LOS ANGELES, CALIFORNIA, FOR CERTAIN WORK AT THE SAN ANTONIO DAM IN CALIFORNIA.

THE FOLLOWING THREE ITEMS WERE INCLUDED IN THE BIDDING SCHEDULE:

ITEM 1 - CLEAR SITE AND REMOVE OBSTRUCTIONS

ITEM 2 - DIVERSION AND CONTROL OF WATER

ITEM 3 - EXCAVATION

THE SPECIFICATIONS PROVIDED DETAILS WITH RESPECT TO EACH ITEM AND INCLUDED A DESCRIPTION OF THE EXCAVATION SITE. BIDS FOR ITEMS 1 AND 2 WERE REQUESTED ON A JOB BASIS. BIDS FOR ITEM 3 WERE SOLICITED ON THE BASIS OF A UNIT PRICE PER CUBIC YARD AND A TOTAL PRICE FOR THE ESTIMATED QUANTITY OF THE MATERIAL TO BE EXCAVATED. THE BIDDING SCHEDULE, AS AMENDED, STATED THAT THE ESTIMATED QUANTITY OF MATERIAL COVERED BY ITEM 3 WAS 2,550,000 CUBIC YARDS.

BIDS WERE OPENED ON MARCH 2, 1972, AND FIVE BIDS WERE RECEIVED. THREE OF THE BIDS CONTAINED SEPARATE PRICES FOR EACH ITEM AND TWO OF THE BIDS SUBMITTED OFFERED A TOTAL PRICE FOR THE WORK WITHOUT ANY BREAKDOWN FOR INDIVIDUAL ITEMS. THE PROCURING ACTIVITY COMPARED THE THREE LOW BIDS WITH THE GOVERNMENT'S ESTIMATE, WHICH WAS OPENED WITH THE BIDS, WITH THE FOLLOWING RESULT:

GOVERNMENT'S L. S. HAWLEY

ESTIMATE R. R. HENSLER SALATA INC. CORP.

ITEM 1 $ 43,000 $ 209,000 $ 20,000 $ 30,000

ITEM 2 142,000 10,00020,000 40,000

ITEM 3 1,275,000 2,167,500 2,422,500 2,856,000

TOTAL $1,460,000 $2,386,500 $2,462,000 $2,926,000

UNIT PRICE $0.50 $0.85 $0.95 $1.12

FOR ITEM 3

(PER CUBIC

YARD)

THE TWO BIDS SUBMITTED ON A TOTAL PRICE BASIS WERE $3,095,000 AND $3,942,500, RESPECTIVELY.

THE CONTRACTING OFFICER DETERMINED THAT YOUR LOW BID WAS UNREASONABLE AS TO PRICE AND THAT ALL BIDS SHOULD BE REJECTED IN ACCORDANCE WITH CORPS OF ENGINEERS' REGULATIONS, SINCE THEY WERE MORE THAN 25 PERCENT HIGHER THAN THE GOVERNMENT'S ESTIMATE. FURTHER, THE CONTRACTING OFFICER DETERMINED THAT THE PROJECT WOULD BE REDUCED IN SCOPE AND READVERTISED. YOU WERE SO ADVISED BY LETTER OF MARCH 27, 1972. ON MARCH 28, 1972, THE CONTRACTING OFFICER RESPONDED TO YOUR PROTEST OF MARCH 8, 1972, AGAINST THE REASONABLENESS OF THE GOVERNMENT'S ESTIMATE. THIS LETTER STATED THAT WHILE THE GOVERNMENT'S ESTIMATE WAS INCREASED CONSIDERABLY AFTER REVIEW YOUR BID WAS STILL MORE THAN 25 PERCENT HIGHER THAN THE ESTIMATE AS REVISED. THE LETTER ALSO STATED THAT HAD YOU PROTESTED AGAINST THE REASONABLENESS OF THE GOVERNMENT'S ESTIMATE WITHIN 5 DAYS AFTER BID OPENING YOU WOULD HAVE BEEN PERMITTED TO PARTICIPATE IN THE REVIEW OF THE ESTIMATE UNDER THE CORPS OF ENGINEERS' REGULATIONS, BUT THAT THIS WAS NOW ACADEMIC SINCE THE FUNDS AVAILABLE FOR THE PROJECT WERE CONSIDERABLY LESS THAN THE BIDS RECEIVED AND, THEREFORE, "AN AWARD COULD NOT HAVE BEEN MADE REGARDLESS OF THE EXTENT TO WHICH THE GOVERNMENT ESTIMATE WAS INCREASED."

YOUR PROTEST HAS POINTED OUT FOUR AREAS WHERE YOU BELIEVE THAT THE GOVERNMENT'S ESTIMATE WAS ERRONEOUS:

(1) THE ESTIMATE WAS BASED UPON THE DESIGN OF A HAUL RAMP WHICH WAS TOO STEEP FOR THE CONTEMPLATED HAULING UNITS TO NEGOTIATE;

(2) THE ESTIMATE FAILED TO CONSIDER WEIGHT LIMITS IMPOSED ON VEHICLES USING PUBLIC HIGHWAYS;

(3) THE ESTIMATE FAILED TO CONSIDER THE INCREASE IN VOLUMETRIC QUANTITY WHICH RESULTS FROM MOVING THE MATERIAL ("SWELL" FACTOR); AND

(4) THE ESTIMATE FAILED TO CONSIDER LOCAL GOVERNMENT REQUIREMENTS FOR COMPACTION AND CERTIFICATION OF MATERIALS DEPOSITED IN OFFSITE DISPOSAL AREAS.

WITH RESPECT TO POINTS 1 AND 2, THE ENGINEERS DETERMINED THAT THE HAUL COULD BE ACCOMPLISHED WITHOUT TRAVERSING PUBLIC HIGHWAYS THEREBY MAKING IT POSSIBLE TO ACCOMPLISH THE HAUL MORE ECONOMICALLY BY THE USE OF "OFF- HIGHWAY" EQUIPMENT WHICH CAN NEGOTIATE CONSIDERABLY STEEPER GRADES. SINCE THE HAUL COULD BE ACCOMPLISHED OFF PUBLIC HIGHWAYS THERE WAS NO NEED TO CONSIDER WEIGHT LIMITS.

IN CONNECTION WITH POINT 3, YOU HAVE FURNISHED THE REPORT OF A PRIVATE ENGINEERING CONCERN WHICH MADE TESTS AT 5 LOCALITIES IN THE WORK AREA. THE REPORT CONCLUDES THAT THE ANTICIPATED SWELL FOR THE MATERIAL IS IN A RANGE BETWEEN 9 PERCENT AND 31 PERCENT DEPENDING ON THE SPECIFIC LOCALITY. A REPORT BY THE CORPS OF ENGINEERS STATES THAT THE SWELL FACTOR OF THE MATERIAL IS IN THE NEIGHBORHOOD OF 10 PERCENT BASED ON PRIOR EXPERIENCE. A SWELL FACTOR WHICH IS IN LINE WITH THE ENGINEERS' PRIOR EXPERIENCE HAS BEEN INCLUDED IN THE REVISED ESTIMATE.

IN ANSWER TO POINT 4, THE CONTRACTING OFFICER'S REPORT STATES THAT THE GOVERNMENT'S ESTIMATE AS REVISED DID TAKE INTO CONSIDERATION THE COST OF COMPLYING WITH LOCAL REQUIREMENTS FOR OFF-SITE DISPOSAL AREAS.

REGARDING THE TABULATION OF HISTORICAL PRICING ON OTHER EXCAVATION TYPE PROJECTS IN THE LOS ANGELES AREA WHICH YOU FURNISHED TO OUR OFFICE, THE ENGINEERS HAVE REVIEWED THIS TABULATION AND STATE THAT IT DOES NOT ESTABLISH THE REASONABLENESS OF YOUR BID FOR THE SUBJECT PROJECT AS THERE WERE VARIABLES IN EACH OF THOSE PROJECTS WHICH WERE NOT COMMON TO ALL OF THE PROJECTS OR TO THE SAN ANTONIO PROJECT.

YOU HAVE ASSERTED THAT THE CONTRACTING OFFICER'S REFERENCE TO THE BIDS EXCEEDING THE FUNDS AVAILABLE WAS MERELY AN ATTEMPT TO COVER UP THE ERRORS IN THE GOVERNMENT'S ESTIMATE. IN THIS CONNECTION, YOU POINT OUT THAT AT THE TIME THAT THE SCOPE OF THE WORK AND SPECIFICATIONS WERE DRAFTED THE ENGINEERS CALCULATED THAT $742,000 WOULD BE AVAILABLE FOR THE PROJECT FROM FUNDS APPROPRIATED FOR 1972 AND THAT ADDITIONAL FUNDS WOULD BE AVAILABLE FROM APPROPRIATIONS IN SUBSEQUENT FISCAL YEARS. SINCE THIS INFORMATION WAS INCLUDED IN THE INVITATION, YOU STATE THAT BIDS WERE PREPARED WITH THIS KNOWLEDGE AND THERE IS NO INDICATION THAT THE FISCAL STATUS OF THE PROJECT HAS CHANGED.

SINCE IT WAS CONTEMPLATED THAT THIS PROJECT WOULD CONTINUE INTO THE NEXT FISCAL YEAR, THE CORPS OF ENGINEERS REPORTS THAT IT PLANNED TO USE $742,000 FROM 1972 FISCAL YEAR FUNDS AND AN APPROXIMATELY EQUAL AMOUNT FROM APPROPRIATIONS IN SUBSEQUENT YEARS TO COMPLETE THE PROJECT BASED UPON ITS ESTIMATED COST OF $1,460,000. WHEN ALL OF THE BID PRICES SUBSTANTIALLY EXCEEDED THE GOVERNMENT'S ESTIMATE, EVEN AS UPWARDLY REVISED, IT BECAME APPARENT THAT THE FUNDS BUDGETED FOR 1972 WERE INSUFFICIENT AT THE PRICES OFFERED TO ACCOMPLISH THE PORTION OF THE WORK THAT WAS CONTEMPLATED AT THE TIME THE INVITATION WAS ISSUED. THEREFORE, TO COMPLETE THE PROJECT SPECIFIED IN THE INVITATION, IT WOULD HAVE BEEN NECESSARY TO ALLOCATE A LARGER AMOUNT FROM SUBSEQUENT APPROPRIATIONS WHICH MIGHT AFFECT THE AVAILABILITY OF FUNDS FOR OTHER PROJECTS IN THOSE YEARS. FACED WITH THIS SITUATION, IT WAS DECIDED TO REJECT ALL OF THE BIDS AND READVERTISE AFTER RESTUDYING THE SCOPE OF WORK AND MAKING REVISIONS AS NECESSARY.

BOTH 10 U.S.C. 2305(C) AND PARAGRAPH 10(B) OF THE SOLICITATION INSTRUCTIONS TO BIDDERS, PROVIDE THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST. WHILE IT IS TRUE, AS YOU POINT OUT, THAT ARMED SERVICES PROCUREMENT REGULATION 2 -404.1(A), IMPLEMENTING THE STATUTORY AUTHORITY, PROVIDES THAT AFTER BIDS HAVE BEEN OPENED AWARD MUST BE MADE TO THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND READVERTISE, SUBPARAGRAPH (B) PROVIDES THAT ANY BID MAY BE REJECTED IF THE CONTRACTING OFFICER DETERMINES IN WRITING THAT IT IS UNREASONABLE AS TO PRICE OR FOR OTHER REASONS CANCELLATION IS CLEARLY IN THE BEST INTEREST OF THE GOVERNMENT. THE CONTRACTING OFFICER PROCEEDED UNDER THE CITED REGULATION AS FURTHER IMPLEMENTED BY THE ENGINEERS' INTERNAL REGULATIONS.

OUR OFFICE HAS HELD THAT THE REJECTION OF BIDS IS A MATTER OF ADMINISTRATIVE DISCRETION, AND THAT A REQUEST FOR BIDS DOES NOT IMPORT AN OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CONFORMING ONE. SEE B-170588, AUGUST 28, 1970, AND B-158749, APRIL 21, 1966. WHILE THE INITIAL GOVERNMENT ESTIMATE DID CONTAIN CERTAIN ERRORS, THE ESTIMATE WAS UPWARDLY REVISED TO ADJUST FOR SUCH ERRORS. EVEN SO, YOUR BID REMAINED MORE THAN 25 PERCENT HIGHER THAN THE REVISED ESTIMATE. FURTHERMORE, YOUR BID WAS NOT ONLY IN EXCESS OF WHAT THE GOVERNMENT ESTIMATED THE PROJECT SHOULD COST, BUT WAS FAR IN EXCESS OF THE MONEY REASONABLY CONSIDERED ALLOCABLE TO THIS PROJECT FROM THE FISCAL YEAR FUNDS AVAILABLE. IN THESE CIRCUMSTANCES, WE CONCLUDE THAT THE ACTIONS OF THE CONTRACTING OFFICER WERE IN GOOD FAITH AND IN ACCORDANCE WITH THE APPLICABLE LAW AND REGULATIONS. SEE B-167972, OCTOBER 31, 1969, AND CASES CITED THEREIN.

IN A LETTER OF FEBRUARY 26, 1973, IT IS REQUESTED THAT WE RECONSIDER OUR DECISION DENYING YOUR REQUEST TO EXAMINE THE GOVERNMENT'S REVISED ESTIMATES. IT IS STATED IN THE LETTER THAT THE FIRST REVISED GOVERNMENT ESTIMATE MADE SOMETIME DURING MARCH 1972 HAS NOT BEEN DESIGNATED "FOR OFFICIAL USE ONLY" AND IS NOT THEREFORE ENTITLED TO PROTECTION, AND THAT THE ONLY REASON FOR DENYING YOU PERMISSION TO EXAMINE THIS ESTIMATE WAS BASED UPON THE ERRONEOUS CONCLUSION THAT THE PROTEST WAS NOT SUBMITTED WITHIN 5 DAYS AFTER BID OPENING. YOU ALSO ARGUE THAT THE GOVERNMENT'S SECOND AND THIRD REVISED ESTIMATES ARE NOT RELEVANT TO THIS PROCEEDING SINCE THOSE ESTIMATES WERE MADE AFTER YOUR BID WAS REJECTED. FINALLY, YOU ARGUE THAT IF ANY OF THE ESTIMATES ARE CONSIDERED IN REVIEWING THE REASONABLENESS OF YOUR BID, DUE PROCESS REQUIRES THAT YOU BE PERMITTED TO EXAMINE SUCH ESTIMATES.

WE RECOGNIZE THAT THE ESTIMATES AND REVISIONS THERETO MAY WELL HAVE A BEARING ON THE VALIDITY OF THE DETERMINATION THAT YOUR BID WAS UNREASONABLE. HOWEVER, AS WE PREVIOUSLY POINTED OUT, WE MUST ALSO RECOGNIZE THE VALIDITY OF THE CORPS' POSITION THAT THE ESTIMATES ARE NOT FOR DISCLOSURE OUTSIDE THE GOVERNMENT, WHETHER SO MARKED OR NOT, PURSUANT TO ASPR 18-108, BECAUSE OF THE CONTEMPLATED RESOLICITATION OF THE REQUIREMENT. IN THIS REGARD, AS WE PREVIOUSLY ADVISED YOU, WE BELIEVE THAT WE SHOULD GIVE EFFECT TO THE REQUEST BY THE CORPS OF ENGINEERS, AS THE AGENCY HAVING THE PRIMARY INTEREST IN THE GOVERNMENT'S REVISED ESTIMATES, THAT WE DO NOT MAKE THESE ESTIMATES AVAILABLE. SEE B-173038, SEPTEMBER 7, 1971.

FOR THE FOREGOING REASONS, YOUR PROTEST IS DENIED.