B-176346, MAR 29, 1973, 52 COMP GEN 614

B-176346, MAR 29, 1973, 52 COMP GEN 614

BIDS - EVALUATION - DELIVERY PROVISIONS - RATES SECURED AFTER BID OPENING IN THE EVALUATION OF BIDS ON TRUCKS SOLICITED BY THE FEDERAL SUPPLY SERVICE OF THE GENERAL SERVICES ADMINISTRATION (GSA) FOR THE UNITED STATES POSTAL SERVICE, GSA PROPERLY DID NOT CONSIDER THE LOWER BI-LEVEL LOADING FREIGHT RATES SECURED BY A BIDDER PURSUANT TO SECTION 22(1) OF THE INTERSTATE COMMERCE ACT AFTER BID OPENING SINCE SECTION 1-19.203-3 OF THE FEDERAL PROCUREMENT REGULATIONS PROHIBITS THE USE OF FREIGHT RATES THAT BECOME AVAILABLE AFTER BID OPENING UNLESS NO APPLICABLE RATES ARE AVAILABLE AT BID OPENING TIME, FOR TO PERMIT BIDDERS TO SHOP FOR SPECIAL RATES AFTER BID OPENING TIME WOULD BE INCONSISTENT WITH COMPETITIVE BIDDING REQUIREMENTS. MOREOVER, ALTHOUGH THERE WERE NO RATES FOR THE MOVEMENT OF TRUCKS IN MULTI-LEVEL FLAT CARS AT BID OPENING TIME, THERE WERE RATES PUBLISHED ON THE SAME COMMODITY LOADED ON OTHER TRANSPORT VEHICLES, AND THE LOWEST AVAILABLE RATES IN EFFECT AT BID OPENING TIME WERE USED BY GSA. BIDS - EVALUATION - DISCOUNT PROVISIONS - DEVIATION FROM TERMS OF INVITATION THE PROVISION IN AN INVITATION FOR BIDS (IFB) PROHIBITING CONSIDERATION OF DISCOUNTS FOR PAYMENT WITHIN LESS THAN 20 DAYS DOES NOT BECOME INAPPLICABLE BECAUSE A BIDDER REQUESTED PROGRESS PAYMENTS IF AWARDED A CONTRACT AND, THEREFORE, A PROMPT PAYMENT DISCOUNT OF 2 PERCENT FOR PAYMENT WITHIN A 10-DAY PERIOD WAS PROPERLY DISREGARDED IN THE EVALUATION OF BIDS PURSUANT TO SECTION 1-2.407-3(C) OF THE FEDERAL PROCUREMENT REGULATIONS, WHICH PROHIBITS THE EVALUATION OF PROMPT PAYMENT DISCOUNTS FOR TIME PERIODS LESS THAN SPECIFIED IN THE IFB. ALTHOUGH THE GOVERNMENT IS ENTITLED TO A DISCOUNT ON ANY PART OF DELIVERY PAYMENTS APPLIED IN LIQUIDATION OF PROGRESS PAYMENTS, BIDS UNDER COMPETITIVE BIDDING REQUIREMENTS MUST BE VALUATED ON THE BASIS PRESCRIBED IN THE INVITATION. BIDS - EVALUATION - DISCOUNT PROVISIONS APPLICABLE REGULATION UNDER A SOLICITATION FOR TRUCKS CONDUCTED PURSUANT TO AN AGREEMENT BETWEEN THE FEDERAL SUPPLY SERVICE OF THE GENERAL SERVICES ADMINISTRATION (GSA) AND THE UNITED STATES POSTAL SERVICE, WHICH PROVIDES THAT GSA PROCUREMENT REGULATIONS SHALL APPLY TO THE PROCUREMENT, THE OFFER BY A BIDDER OF A PROMPT PAYMENT DISCOUNT OF $20 PER VEHICLE FOR PAYMENT WITHIN 21 DAYS WAS PROPERLY EVALUATED BY GSA PURSUANT TO SECTION 1-2.407-3 OF THE FEDERAL PROCUREMENT REGULATIONS, NOTWITHSTANDING SUCH DISCOUNTS ARE PROHIBITED BY THE POSTAL SERVICE PROCUREMENT REGULATIONS. BIDS - EVALUATION - OPTIONS - EVALUATION EXCLUSIVE OF OPTION WHERE AN INVITATION FOR BIDS CONTAINED "OPTION TO INCREASE QUANTITIES" AND "METHOD OF AWARD" CLAUSES, BUT DID NOT PROVIDE FOR THE EVALUATION OR EXERCISE OF AN OPTION AT THE TIME OF CONTRACT AWARD, THE CONTRACTING AGENCY PROPERLY DID NOT EVALUATE OPTION PRICES IN DETERMINING THE LOW BID. FURTHERMORE, THE LACK OF ANY REFERENCE TO THE EVALUATION OR EXERCISE OF THE OPTION AT THE TIME OF AWARD WAS SUFFICIENT TO INFORM BIDDERS THAT OPTION PRICES WERE NOT TO BE CONSIDERED IN THE EVALUATION OF BIDS, AND IN ANY EVENT IF A BIDDER IS UNSURE AS TO THE MEANING OF A PROVISION IN AN INVITATION, THE PROPER TIME FOR RAISING A QUESTION IS PRIOR TO BID OPENING.

TO WILLIAMS & JENSEN, MARCH 29, 1973:

WE REFER TO YOUR LETTER DATED JUNE 26, 1972, AND SUBSEQUENT CORRESPONDENCE, PROTESTING ON BEHALF OF WARD SCHOOL BUS MANUFACTURING, INCORPORATED, AGAINST THE AWARD OF CONTRACT NO. GS-OOS-13551 TO AM GENERAL (AM), A SUBSIDIARY OF AMERICAN MOTORS, BY THE GENERAL SERVICES ADMINISTRATION (GSA).

THIS PROCUREMENT WAS CONDUCTED BY GSA FOR THE UNITED STATES POSTAL SERVICE (POSTAL SERVICE) PURSUANT TO "INTERIM AGREEMENT BETWEEN GENERAL SERVICES ADMINISTRATION AND THE UNITED STATES POSTAL SERVICE COVERING REAL AND PERSONAL PROPERTY RELATIONSHIPS AND ASSOCIATED SERVICES" DATED JULY 1, 1971.

INVITATION FOR BIDS EPNML-T1-44048-A, WHICH WAS ISSUED ON MARCH 2, 1972, BY THE FEDERAL SUPPLY SERVICE OF GSA, SOLICITED BIDS FOR A DEFINITE QUANTITY CONTRACT FOR ONE-HALF TON, RIGHT-HAND-DRIVE, LIGHT TRUCKS. THE INVITATION CALLED FOR BIDS TO BE SUBMITTED ON AN "F.O.B. CONTRACTOR'S SHIPPING DOCK" BASIS FOR ALTERNATE QUANTITIES. FOR EVALUATING BIDS, THE FOLLOWING BASING POINTS WERE LISTED FOR THE QUANTITY EVENTUALLY AWARDED:

QUANTITY

ALTERNATE ITEM

BASING POINTS 3

CHICAGO, ILLINOIS 2,385

PHILADELPHIA, PENNSYLVANIA 2,472

NEW YORK, NEW YORK 104

MEMPHIS, TENNESSEE 1,643

SAN FRANCISCO, CALIFORNIA 1,369

TOTAL 7,973 IOUSLY MENTIONED FIRMS WERE RECEIVED, AND IT WAS DECIDED TO MAKE AWARD FOR ALTERNATE ITEM 3 QUANTITIES. TRANSPORTATION COSTS WERE ADDED TO THE BASIC ALTERNATE ITEM 3 UNIT PRICES OF $2,570 BY AM AND $2,560.61 BY WARD, AND AM WAS THEREBY EVALUATED THE LOW BIDDER. UNDER THE EVALUATION AM'S TOTAL VEHICLE PRICE INCLUDING DISCOUNT ($20.00 PER VEHICLE) WAS $20,331,150 PLUS $808,582.97 FREIGHT COSTS, FOR A TOTAL OF $21,139,732.97. WARD'S VEHICLE PRICE WAS $20,415,743.53 PLUS A FREIGHT COST OF $965,369.78, RESULTING IN A TOTAL COST OF $21,381,113.31. (WARD'S OFFERED DISCOUNT OF 2 PERCENT, 10 DAYS, WAS NOT INCLUDED IN THE EVALUATION.) THE CONTRACT WAS AWARDED TO AM AS LOW BIDDER ON JUNE 23, 1972.

YOUR PROTEST IS BASED PRIMARILY ON THE ARGUMENT THAT CONTRACTING OFFICER IMPROPERLY EVALUATED WARD'S BID AND THAT WARD'S BID IS, IN FACT, THE MOST ADVANTAGEOUS TO THE GOVERNMENT. INITIALLY, YOU URGE THAT GSA SHOULD HAVE EVALUATED WARD'S BID IN ACCORDANCE WITH THE LOWER FREIGHT RATES WHICH WARD HAD OBTAINED PURSUANT TO SECTION 22(1) OF THE INTERSTATE COMMERCE ACT OF 1887(49 U.S.C. 22), AND THE LOWER FREIGHT RATES FOR BI-LEVEL LOADING. THESE FREIGHT RATES HAD BEEN INCLUDED IN THE EVALUATION, IT IS ALLEGED THAT WARD WOULD HAVE BEEN DETERMINED AS THE LOW BIDDER.

SECTION 1-19.203-3 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR) PRESCRIBES THE STANDARDS FOR EVALUATION OF FREIGHT COSTS AS FOLLOWS:

THE LOWEST AVAILABLE FREIGHT RATES AND RELATED ACCESSORIAL AND INCIDENTAL COSTS IN EFFECT ON, OR TO BECOME EFFECTIVE PRIOR TO, THE EXPECTED DATE OF INITIAL SHIPMENT AND ON FILE OR PUBLISHED AT THE DATE OF THE BID OPENING SHALL BE USED IN THE EVALUATION OF BIDS. WHEN RATES OR RELATED COSTS BECOME AVAILABLE AFTER THE BID OPENING, SUCH RATES OR COSTS SHALL NOT BE USED IN THE EVALUATION UNLESS THEY COVER TRAFFIC FOR WHICH NO APPLICABLE RATES OR ACCESSORIAL OR INCIDENTAL COSTS WERE IN EXISTENCE AT THE TIME OF BID OPENING.

WE ARE ADVISED THAT WARD SUCCEEDED IN HAVING SECTION 22, BI-LEVEL (DOUBLE DECKED FREIGHT CARS) RATES PUBLISHED BY THE RAILROAD FROM CONWAY TO SAN FRANCISCO ON JUNE 9, 1972, EFFECTIVE JUNE 1, 1972, AND TO MEMPHIS AND CHICAGO PUBLISHED ON JUNE 15, 1972, EFFECTIVE MAY 18, 1972. ALTHOUGH THESE RATES WERE PUBLISHED PRIOR TO THE AWARD AND DURING THE BID EVALUATION PERIOD, THEY WERE NOT AVAILABLE UNTIL AFTER THE MAY 3 BID OPENING DATE.

IN AN ATTEMPT TO OVERCOME THE GENERAL FPR PROHIBITION AGAINST THE EVALUATION OF FREIGHT RATES WHICH ARE NOT AVAILABLE AT THE TIME OF BID OPENING, YOU HAVE NOTED THAT THE REGULATION PERMITS THE EVALUATION OF FREIGHT RATES THAT HAVE NOT BEEN AVAILABLE AT THE TIME OF BID OPENING IF AT THAT TIME THERE ARE NO APPLICABLE RATES IN EXISTENCE. IN THIS CONNECTION, YOU CONTEND THAT AT THE TIME OF BID OPENING THERE EXISTED NO APPLICABLE RATES BETWEEN THE SUBJECT POINTS. ACCORDINGLY, IT IS YOUR POSITION THAT WARD'S REDUCED RATES WHICH BECAME EFFECTIVE DURING THE EVALUATION PERIOD WERE THE PROPER RATES TO BE CONSIDERED.

IT IS GSA'S POSITION THAT AS OF THE BID OPENING DATE THERE WERE IN EXISTENCE APPLICABLE FREIGHT RATES FROM CONWAY TO THE THREE BASING POINTS. GSA STATES THAT SINGLE DECK RAIL CAR RATES ON A COMMODITY BASIS WERE APPLICABLE TO FREIGHT TRUCKS. ACCORDING TO GSA, IF A CARLOAD OF FREIGHT TRUCKS, I.E., POSTAL VEHICLES, HAD BEEN TENDERED TO THE RAILROAD AT CONWAY ON THE BID OPENING DATE THE SINGLE-DECK RATES WOULD HAVE BEEN APPLICABLE. IN THE EVALUATION, THEREFORE, GSA STATES THAT IT UTILIZED THE LOWEST AVAILABLE FREIGHT RATES IN EFFECT ON THE DATE OF BID OPENING, CONSISTING OF A COMBINATION OF SINGLE DRIVE-AWAY CHARGES TO LITTLE ROCK, AND BI-LEVEL RAIL CHARGES TO THE BASING POINTS BEYOND. SINCE AN APPLICABLE RATE WAS IN EXISTENCE AT THE TIME OF BID OPENING, IT IS GSA'S POSITION THAT UNDER PROPER INTERPRETATION OF THE FPR USE OF THE SECTION 22, BI-LEVEL RATES IN THE EVALUATION WOULD HAVE BEEN IMPROPER.

WITH REGARD TO YOUR CONTENTION THAT THE EXCEPTION TO THE REGULATION IS FOR APPLICATION HERE BECAUSE NO RATES WERE IN EFFECT AT THE TIME OF BID OPENING, GSA REPORTS THAT ALTHOUGH THE SAME COMMODITY IS OFTEN ASSESSED DIFFERENT TRANSPORTATION CHARGES DEPENDING ON THE MANNER IN WHICH IT IS PACKAGED OR SHIPPED OR THE TYPE OF CONVEYANCE ON OR IN WHICH IT IS PACKAGED OR SHIPPED, IT IS THE BASIC COMMODITY WHICH IS RATED, NOT THE CONTAINER OR TRANSPORT VEHICLE. THEREFORE, GSA POINTS OUT THAT WHILE THERE WERE NO RATES PUBLISHED FROM CONWAY TO THE THREE BASING POINTS UNDER SECTION 22 OR FOR THE MOVEMENT OF TRUCKS IN MULTI LEVEL FLAT CARS, THERE WERE RATES PUBLISHED ON THE SAME COMMODITY LOADED ON OTHER TRANSPORT VEHICLES, AND THAT THE LOWEST AVAILABLE RATES IN EFFECT AT THE TIME OF BID OPENING WERE USED BY GSA IN EVALUATING WARD'S BID.

AS GSA STATES, FPR 1-19.202-3 WAS DESIGNED TO PRECLUDE BIDDERS FROM SEEKING SPECIAL RATES AFTER THE OPENING OF BIDS, THEREBY AVOIDING CONFUSION IN THE EVALUATION OF BIDS. TO PERMIT BIDDERS TO SHOP FOR SPECIAL RATES AFTER BID OPENING WOULD BE INCONSISTENT WITH COMPETITIVE BIDDING REQUIREMENTS. 39 COMP. GEN. 774, 775(1960).

ALTHOUGH YOU HAVE ARGUED THAT THE REGULATION COULD BE INTERPRETED AS PERMITTING THE USE OF THE LOWER RATES PUBLISHED AFTER BID OPENING ON THE THEORY THAT THE RATES IN EXISTENCE AT THE TIME OF BID OPENING WERE NOT APPLICABLE TO THE MODE OF TRANSPORTATION COVERED BY THE LATER RATES, WE BELIEVE THAT GSA'S INTERPRETATION OF THE REGULATION TO THE CONTRARY IS REASONABLE AND CONSISTENT WITH THE LANGUAGE THEREIN. ACCORDINGLY, WE MUST CONCLUDE THAT WARD'S BID WAS PROPERLY EVALUATED WITHOUT REGARD TO THE SECTION 22 BI-LEVEL RATES. SEE B-162881, JANUARY 9, 1968.

YOU ALSO CONTEND THAT GSA'S FREIGHT EVALUATION WAS DEFECTIVE IN SEVERAL OTHER RESPECTS. IN THIS CONNECTION, YOU HAVE SUBMITTED FREIGHT EVALUATIONS PREPARED ON WARD'S BEHALF BY TRANSPORTATION EXPERTS TO ILLUSTRATE ERRORS IN THE GSA EVALUATION.

GSA HAS ADMITTED THE VALIDITY OF SOME OF YOUR CONTENTIONS IN THIS REGARD. ACCORDINGLY, THE AGENCY CONDUCTED A RE-EVALUATION WHICH HAS RESULTED IN A REDUCTION OF THE EVALUATED FREIGHT COSTS FROM WARD'S PLANT. HOWEVER, THE STANDING OF THE BIDDERS WAS NOT CHANGED BY THE RE EVALUATION, SINCE AM'S BID WAS STILL LOW BY $240,807.71. ALTHOUGH THERE REMAIN SEVERAL AREAS OF DISAGREEMENT IN CONNECTION WITH THE EVALUATION OF TRANSPORTATION COSTS, IT IS CLEAR THAT IN THE ABSENCE OF THE APPLICATION OF SECTION 22, BI-LEVEL RATES THAT THEIR RESOLUTION IN FAVOR OF WARD WILL NOT RESULT IN THE DISPLACEMENT OF AM AS THE LOW BIDDER.

IN ADDITION, YOU CONTEND THAT GSA ERRED IN NOT CONSIDERING WARD'S PROMPT PAYMENT DISCOUNT OF 2 PERCENT FOR PAYMENT WITHIN A 10-DAY PERIOD. ALTHOUGH YOU ACKNOWLEDGE THAT PROVISIONS OF THE SUBJECT INVITATION PROHIBIT THE CONSIDERATION OF DISCOUNTS FOR PAYMENT WITHIN LESS THAN 20 DAYS, YOU CLAIM THAT THIS PROVISION IS INAPPLICABLE TO THE INSTANT CASE BECAUSE WARD HAS REQUESTED PROGRESS PAYMENTS IF IT IS AWARDED THE CONTRACT.

AS GSA STATES, ON THE FIRST PAGE OF THE INVITATION, BLOCK 9 OF SF 33, SOLICITATION, OFFER, AND AWARD, BIDDERS ARE SPECIFICALLY INFORMED THAT ALL OFFERS ARE SUBJECT TO THE "ATTACHED SOLICITATION INSTRUCTIONS AND CONDITIONS, SF 33A." PARAGRAPH 9 OF THE LATTER FORM WARNS BIDDERS THAT NOTWITHSTANDING THE FACT THAT A BLANK IS PROVIDED FOR A 10-DAY DISCOUNT, PROMPT PAYMENT DISCOUNTS OFFERED FOR LESS THAN 20 DAYS WILL NOT BE CONSIDERED IN THE EVALUATION OF OFFERS. FEDERAL PROCUREMENT REGULATIONS 1 -2.407-3(C) PROHIBITS EVALUATION OF PROMPT PAYMENT DISCOUNTS FOR TIME PERIODS LESS THAN SPECIFIED IN THE INVITATION FOR BIDS. GSA STATES THAT SINCE THE CONSIDERATION OF PAYMENT DISCOUNTS OF LESS THAN 20 DAYS WAS NOT OTHERWISE SPECIFIED IN THE INVITATION, ALL BIDDERS WERE ENTITLED TO RELY UPON PARAGRAPH 9 OF SF 33A AND THE 10-DAY DISCOUNT OFFERED BY YOUR CLIENT COULD NOT BE CONSIDERED WITHOUT PREJUDICE TO THE OTHER BIDDERS. WITH RESPECT TO YOUR ARGUMENT CONCERNING A RELATIONSHIP BETWEEN PROGRESS PAYMENTS AND DISCOUNTS, GSA TAKES THE POSITION THAT FOR PURPOSES OF BID EVALUATION THERE IS NO RELATIONSHIP WHATEVER BETWEEN DISCOUNTS AND PROGRESS PAYMENTS AND THAT THEY ARE ENTIRELY SEPARATE AND DISTINCT MATTERS.

WE HAVE RECOGNIZED THAT THE GOVERNMENT IS ENTITLED TO A DISCOUNT ON ANY PART OF DELIVERY PAYMENTS APPLIED IN LIQUIDATION OF PROGRESS PAYMENTS. SEE 46 COMP GEN. 430, 433(1966). THEREFORE, WE ARE NOT PREPARED TO AGREE WITH THE GSA STATEMENT THAT THERE IS NO RELATIONSHIP WHATEVER BETWEEN DISCOUNTS AND PROGRESS PAYMENTS. ON THE OTHER HAND, IT IS A LONG- ESTABLISHED RULE OF COMPETITIVE BIDDING THAT BIDS MUST BE EVALUATED ON THE BASIS PRESCRIBED IN THE INVITATION. IN THIS CASE THE BIDS WERE EVALUATED IN ACCORDANCE WITH THE DISCOUNT PROVISION SET FORTH IN THE INVITATION. THERE IS NO LEGAL BASIS UPON WHICH WE COULD PROPERLY OBJECT TO THE AWARD WHICH RESULTED FROM THIS EVALUATION.

NEXT YOU ASSERT THAT GSA IMPROPERLY EVALUATED AM'S PROMPT PAYMENT DISCOUNT OFFER OF $20 PER VEHICLE FOR PAYMENT WITHIN 21 DAYS. IT IS YOUR POSITION THAT SUCH DISCOUNTS ARE PROHIBITED BY POSTAL SERVICE PROCUREMENT REGULATIONS AND, THEREFORE, CANNOT BE EVALUATED IN THIS PROCUREMENT SINCE IT IS BEING CONDUCTED BY GSA ON BEHALF OF THE POSTAL SERVICE. IN THIS REGARD, WE NOTE THAT THE PROCUREMENT IS BEING CONDUCTED PURSUANT TO AN AGREEMENT BETWEEN GSA AND THE POSTAL SERVICE WHICH PROVIDES THAT GSA PROCUREMENT REGULATIONS SHALL APPLY. SINCE THE INVITATION PROVIDES, PURSUANT TO FPR 1-2.407-3, THAT DISCOUNTS SUCH AS THAT OFFERED BY AM SHALL BE EVALUATED, WE CANNOT CONCLUDE THAT THE AGENCY'S EVALUATION OF AM'S DISCOUNT WAS IMPROPER.

YOU ALSO CONTEND THAT THE AGENCY FAILED TO PROPERLY EVALUATE WARD'S PRICES UNDER THE OPTION PROVISIONS OF ALTERNATE 3. IN ADDITION, YOU INSIST THAT THE INVITATION IS AMBIGUOUS REGARDING THE EVALUATION OF THE OPTION.

NEITHER THE "OPTION TO INCREASE QUANTITIES" NOR THE "METHOD OF AWARD" PROVISIONS OF THE INVITATION PROVIDED FOR EVALUATION OR EXERCISE OF THE OPTION AT THE TIME OF AWARD. IN THE ABSENCE OF SUCH PROVISIONS IN THE INVITATION, IT WOULD NOT BE PROPER TO EVALUATE THE OPTION PRICES IN DETERMINING THE LOW BID. SEE 51 COMP. GEN. 528(1972); B-159586, SEPTEMBER 23, 1966. IT IS OUR OPINION THAT THE LACK OF ANY REFERENCE TO THE EVALUATION OR EXERCISE OF THE OPTION AT THE TIME OF THE AWARD WAS SUFFICIENT TO INFORM YOU THAT OPTION PRICES WERE NOT TO BE CONSIDERED IN THE EVALUATION OF BIDS. IN ANY EVENT, IF A BIDDER IS UNSURE AS TO THE MEANING OF A PROVISION IN THE INVITATION, THE PROPER TIME FOR RAISING SUCH QUESTION IS PRIOR TO BID OPENING. SEE 50 COMP. GEN. 565, 576(1971).

IN REGARD TO YOUR CONTENTION THAT THE SUBJECT PROCUREMENT IS IN VIOLATION OF THE BUDGET AND ACCOUNTING ACT OF 1921, AS AMENDED, 31 U.S.C. 627, WE NOTE THAT THIS ACT DOES PROHIBIT THE EXECUTION OF A CONTRACT INVOLVING THE PAYMENT OF MONEY IN EXCESS OF APPROPRIATIONS MADE BY LAW. WE HAVE BEEN INFORMED BY GSA THAT THE POSTAL SERVICE HAS OBLIGATED FUNDS TO COVER THIS AWARD.

FOR THE REASONS SET FORTH ABOVE, WE FIND NO LEGAL BASIS UPON WHICH TO OBJECT TO THE AWARD TO AM. ACCORDINGLY, YOUR PROTEST IS DENIED.