B-181637, JAN 22, 1975

B-181637, JAN 22, 1975

1. DETERMINATION TO CANCEL IFB FOR STERILIZERS AFTER BID OPENING BECAUSE DECENTRALIZED REQUIREMENTS CONTRACTS WERE AWARDED AFTER BID OPENING WILL NOT BE DISTURBED, SINCE DETERMINATION APPEARS TO HAVE BEEN CONSISTENT WITH LITERAL REQUIREMENTS OF VA PROCUREMENT REGULATIONS WHICH GIVE PRECEDENCE TO DECENTRALIZED CONTRACTS. 2. DETERMINATION TO PROCURE STERILIZERS BY NEGOTIATED DECENTRALIZED CONTRACTS SHOULD BE REVIEWED AND STUDIED FURTHER BY VA BEFORE FUTURE NEGOTIATED CONTRACTS ARE LET, SINCE REASONS RELIED UPON IN DETERMINATION AND FINDINGS (NEED FOR TECHNICAL ADVICE AND ONSITE SERVICE; INTENTION NOT TO USE FEDERAL SPECIFICATIONS; AND DESIRE TO REVIEW WIDE RANGE OF EQUIPMENT BEFORE DECIDING ON EQUIPMENT NEEDED) DO NOT PRECLUDE PROCUREMENT BY FORMAL ADVERTISING AND OBVIATING NECESSITY TO FORMALLY ADVERTISE PROCUREMENT IS NOT SUFFICIENT REASON TO JUSTIFY NEGOTIATION.

BOB MILNER & ASSOCIATES CO.:

BOB MILNER & ASSOCIATES CO. (MILNER) PROTESTED THE CANCELLATION OF INVITATION FOR BIDS (IFB) 665-80-74, BY THE VETERANS ADMINISTRATION (VA) HOSPITAL, SEPULVEDA, CALIFORNIA.

THE IFB SOLICITED BIDS TO TRADE IN OLD STERILIZER EQUIPMENT AND TO FURNISH AND INSTALL NEW STERILIZERS. BIDS WERE OPENED JUNE 4, 1974, AND MILNER WAS THE LOW BIDDER. AFTER BIDS WERE OPENED, THE VA MARKETING DIVISION FOR MEDICAL EQUIPMENT, HINES, ILLINOIS (THE CENTRAL PURCHASING AGENT FOR ALL OF VA), AWARDED ON JUNE 5, 1974, THREE DECENTRALIZED CONTRACTS TO STERILIZER MANUFACTURERS FOR THE PERIOD COMMENCING WITH THE DATE OF AWARD THROUGH APRIL 30, 1975. THE AWARDS RESULTED FROM REQUEST FOR PROPOSALS (RFP) M2-Q143-74. UPON LEARNING OF THE AWARDS, THE CONTRACTING OFFICER AT THE SEPULVEDA VA HOSPITAL ISSUED A LETTER TO ALL BIDDERS CANCELING THE IFB ON THE BASIS THAT THE DECENTRALIZED CONTRACTS ESTABLISHED MANDATORY SOURCES OF SUPPLY.

FEDERAL PROCUREMENT REGULATIONS (FPR) SEC. 1-2.404-1 (1964 ED. CIRC. PROVIDES FOR CANCELLATION OF AN IFB AFTER BIDS ARE OPENED WHERE THERE IS A COMPELLING REASON TO REJECT ALL BIDS. OUR OFFICE WILL NOT QUESTION A CONTRACTING OFFICER'S DECISION TO CANCEL AN IFB WHERE THERE IS A REASONABLE BASIS FOR THE ACTION. B-178134, MAY 29, 1973.

IN THIS CASE, THE CONTRACTING OFFICER RELIED UPON VA PROCUREMENT REGULATIONS (VAPR) 8-1.302-1(A), 41 C.F.R. SEC. 8-1.302-1(A) (1974), FOR THE CANCELLATION ACTION. THAT REGULATION PROVIDES:

"(A) GENERAL. PROCUREMENT WILL BE EFFECTED FROM THE FOLLOWING SOURCES IN THE DESCENDING ORDER OF PRIORITY INDICATED:

(1) VA EXCESS.

(2) VA SUPPLY DEPOT STOCKS.

(3) OTHER GOVERNMENT AGENCIES' EXCESS.

(4) GSA STOCK.

(5) VA DECENTRALIZED CONTRACTS.

(8) COMMERCIAL CONCERNS, EDUCATIONAL OR NONPROFIT INSTITUTIONS, AS APPLICABLE."

THE FOREGOING IMPLEMENTS FPR SEC. 1-1.302-1(A) (1964 ED. AMEND. 83) WHICH PROVIDES:

"BEFORE TAKING PROCUREMENT ACTION, IN ACCORDANCE WITH THIS CHAPTER, AGENCIES SHALL HAVE COMPLIED WITH APPLICABLE LAWS AND REGULATIONS RELATIVE TO OBTAINING SUPPLIES OR SERVICES FROM GOVERNMENT SOURCES AND FROM CONTRACTS OF OTHER GOVERNMENT AGENCIES. ***"

IN THE CIRCUMSTANCES, THE ACTION OF THE CONTRACTING OFFICER APPEARS TO HAVE BEEN CONSISTENT WITH THE LITERAL REQUIREMENTS OF VAPR AND WE THEREFORE WILL NOT INTERFERE WITH THE ACTION. ALTHOUGH MILNER HAS CONTENDED THAT THE SCOPE OF THE IFB WENT BEYOND THE DECENTRALIZED CONTRACTS AND COULD THEREFORE HAVE BEEN VIEWED AS A DIFFERENT REQUIREMENT WHICH COULD HAVE BEEN AWARDED WITHOUT BEING IN CONTRAVENTION OF THE DECENTRALIZED CONTRACT, THE FACT REMAINS THAT THE IFB IS ESSENTIALLY FOR FURNISHING AND INSTALLING STERILIZER EQUIPMENT WHICH IS THE ESSENCE OF THE DECENTRALIZED CONTRACTS.

THEREFORE, WE ARE UNABLE TO CONCLUDE THAT THE CONTRACTING OFFICER WAS WRONG IN CONSIDERING THAT THE DECENTRALIZED CONTRACTS WERE FOR APPLICATION.

IN PASSING WE DO OBSERVE THAT THERE WAS NOTHING IN THE DECENTRALIZED CONTRACTS THAT DEMANDED THAT REQUIREMENTS WHICH AROSE BEFORE THE DECENTRALIZED CONTRACTS WERE AWARDED BE ORDERED UNDER THE DECENTRALIZED CONTRACTS. IN THAT CONNECTION, THE "ESTIMATED REQUIREMENTS" CLAUSE IN THE DECENTRALIZED CONTRACTS STATE THAT "ORDERS PLACED AGAINST THE CONTRACTS WILL DEPEND UPON THE REQUIREMENTS WHICH WILL DEVELOP DURING THE CONTRACT PERIOD." IN THE CIRCUMSTANCES, IT COULD JUST AS REASONABLY HAVE BEEN CONCLUDED THAT THE REQUIREMENT DID NOT HAVE TO BE OBTAINED UNDER THE DECENTRALIZED CONTRACTS. HOWEVER, IN VIEW OF THE ORDER OF PRECEDENCE CITED IN VAPR, SUPRA, WE CANNOT CONCLUDE THAT THE DETERMINATION TO CANCEL THE IFB AND MAKE AN AWARD UNDER THE DECENTRALIZED CONTRACTS WAS WITHOUT A REASONABLE BASIS.

FURTHER, WE OBSERVE THAT THE DECENTRALIZED CONTRACTS WERE NEGOTIATED UNDER THE AUTHORITY OF FPR SEC. 1-3.210(A)(13) (1964 ED. CIRC. 1), WHICH PERMITS NEGOTIATION WITHOUT FORMAL ADVERTISING WHEN IT IS IMPOSSIBLE TO DRAFT ADEQUATE SPECIFICATIONS OR ANY OTHER ADEQUATE DETAILED DESCRIPTION OF THE REQUIRED PROPERTY OR SERVICES. THE BASIS FOR NEGOTIATING IS STATED IN THE DETERMINATIONS AND FINDINGS AS FOLLOWS:

"1. TODAYS STERILIZING TECHNIQUES REQUIRE SYSTEMS WHICH ARE COMPLEX AND EXPENSIVE. IT IS INTENDED TO NEGOTIATE CONTRACTS WITH ONLY THOSE FIRMS WHO CAN NOT ONLY PROVIDE THE NECESSARY EQUIPMENT BUT TECHNICAL ADVICE AS WELL.

"2. ON SITE SERVICE TO THIS TYPE OF EQUIPMENT IS ALSO ESSENTIAL AND MUST BE IMMEDIATELY AVAILABLE.

"3. IT IS NOT INTENDED TO USE FEDERAL SPECIFICATIONS. IT HAS BEEN DETERMINED THAT PURCHASE OF CURRENT MODELS WOULD BETTER SERVE THE HOSPITALS NEEDS.

"4. SELECTION OF THE PROPER EQUIPMENT FROM MULTIPLE CONTRACTS WILL ENABLE HOSPITALS TO REVIEW A FULL RANGE OF EQUIPMENT PRIOR TO PURCHASE.

"5. AVAILABILITY OF THESE TYPES OF CONTRACTS WILL ELIMINATE THE NEED TO ISSUE A FORMALLY ADVERTISED SOLICITATION EACH TIME A HOSPITAL HAS A REQUIREMENT FOR THIS TYPE OF EQUIPMENT."

HOWEVER, TECHNICAL ADVICE AND ONSITE SERVICE CAN BE PROVIDED FOR IN FORMAL ADVERTISING JUST AS READILY AS IN NEGOTIATED PROCUREMENTS. FURTHER, AN INTENTION NOT TO USE FEDERAL SPECIFICATIONS DOES NOT PRECLUDE PROCUREMENT BY ADVERTISEMENT. ALTHOUGH THE USE OF FEDERAL SPECIFICATIONS USUALLY ARE MANDATORY, WHEN THE ESSENTIAL NEEDS OF AN AGENCY ARE NOT COVERED BY THE FEDERAL SPECIFICATIONS, APPROPRIATE DEVIATIONS CAN BE OBTAINED BEFORE THE PROCUREMENT IS ADVERTISED. FPR SEC. 1-1.305-3 (1964 ED. AMEND. 10). ALSO, WHILE IT MAY BE DESIRABLE TO REVIEW A WIDE RANGE OF EQUIPMENT BEFORE MAKING A DECISION OF THE TYPE OF EQUIPMENT NEEDED, THAT DOES NOT REQUIRE A CONCLUSION THAT FORMAL ADVERTISING IS NOT FEASIBLE. FINALLY, OBVIATING THE NECESSITY TO FORMALLY ADVERTISE A PROCUREMENT IS NOT SUFFICIENT REASON TO JUSTIFY THE USE OF NEGOTIATION PROCEDURES.

ACCORDINGLY, WE ARE RECOMMENDING IN A SEPARATE LETTER OF TODAY TO THE VA THAT THE MATTER BE REVIEWED AND STUDIED FURTHER BEFORE ANY FUTURE DECENTRALIZED CONTRACTS FOR STERILIZERS ARE LET ON A NEGOTIATED BASIS.