B-181704, APR 22, 1975

B-181704, APR 22, 1975

1. TERMINATION OF CONTRACT CONTAINING TERMINATION FOR CONVENIENCE CLAUSE DOES NOT CONSTITUTE BREACH OF CONTRACT BY GOVERNMENT. 2. PRIOR DECISION RECOMMENDING THAT CONTRACT BE TERMINATED FOR CONVENIENCE IS AFFIRMED FOR FOLLOWING REASONS: (1) REQUIREMENT IN NAVY MESS ATTENDANT REQUEST FOR PROPOSALS DID NOT PERMIT ACCEPTANCE OF OFFER PROPOSING MANNING LEVEL BELOW NAVY'S INITIAL MANNING CUTOFF POINT WITHOUT SUBSTANTIATION AND CONTRACTING OFFICER'S WAIVER OF REQUIREMENT CANNOT BE CONSIDERED "VALID EXERCISE OF DISCRETION;" (2) ADEQUATE PERFORMANCE AT REDUCED MANNING LEVEL UNDER CONTRACT PROVES THAT ACTUAL OR MINIMUM MANNING LEVEL NEEDS IN REQUEST FOR PROPOSALS WERE OVERSTATED; AND (3) ALL OFFERORS SHOULD HAVE BEEN GIVEN OPPORTUNITY TO SUBMIT NEW OR AMENDED PROPOSALS RESPONSIVE TO REDUCED MANNING NEEDS. 3. ARGUMENT THAT IT WOULD BE INEQUITABLE TO TERMINATE CONTRACT OF SUCCESSFUL OFFEROR FOR CONVENIENCE OF GOVERNMENT, OR THAT GOVERNMENT IS ESTOPPED TO TERMINATE DUE TO IMPROPER ACTS OF CONTRACTING OFFICER IN AWARDING CONTRACT IS NOT PERSUASIVE SINCE CONTRACTING OFFICER DOES NOT HAVE AUTHORITY TO AWARD TO OFFEROR NOT ACTUALLY ENTITLED TO AWARD BECAUSE OF FAILURE TO FULFILL RFP REQUIREMENT, AND CONTRACT ENTERED INTO BEYOND SCOPE OF CONTRACTING OFFICER'S ACTUAL AUTHORITY IS ILLEGAL ALTHOUGH HERE NOT PALPABLY ILLEGAL SO AS TO REQUIRE CANCELLATION.

BROKEN LANCE ENTERPRISES, INC.:

THIS IS A REQUEST FOR RECONSIDERATION OF OUR DECISION MATTER OF DYNETERIA, INC., B-181704, JANUARY 16, 1975, 54 COMP. GEN. , FILED BY BROKEN LANCE ENTERPRISES, INC. THE DECISION HELD THAT THE NEGOTIATED CONTRACT AWARDED TO BROKEN LANCE BY THE DEPARTMENT OF THE NAVY WAS IMPROPER AND RECOMMENDED THAT THE CONTRACT BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT AND THE REMAINING PORTION THEREOF RECOMPETED.

THE PERTINENT FACTS AS QUOTED FROM THE DECISION ARE AS FOLLOWS:

"*** REQUEST FOR PROPOSALS (RFP) N00140-74-R-0703 *** CALLED FOR THE PERFORMANCE OF MESS ATTENDANT SERVICES AT THE NAVAL SUPPORT ACTIVITY, PHILADELPHIA, PENNSYLVANIA, FOR THE PERIOD OF JULY 1, 1974, TO JUNE 30, 1975. ***

"ON JUNE 17, 1974, THE CONTRACTING OFFICER REQUESTED THAT BEST AND FINAL OFFERS BE SUBMITTED BY 4:00 P.M. ON JUNE 20, 1974. FIVE OFFERORS LOWERED THEIR PRICES AFTER RECEIPT OF THIS MESSAGE. DYNETERIA'S OFFER IN THE AMOUNT OF $280,960.16 REMAINED UNCHANGED, WHILE BROKEN LANCE ***, ULTIMATELY THE SUCCESSFUL CONTRACTOR, LOWERED ITS PRICE FROM $238,843 TO $196,163.04. AWARD WAS MADE ON JUNE 24, 1974, AND PERFORMANCE COMMENCED AS REQUIRED ON JULY 1, 1974.

"THE RFP AS AMENDED STATED THAT ALL OFFERS WERE TO BE EVALUATED IN ACCORDANCE WITH SECTION D OF THE SOLICITATION. THAT SECTION READ AS FOLLOWS:

"'SECTION D - EVALUATION AND AWARD FACTORS

"'EVALUATION OF OFFEROR'S MANNING AND PRICES

"'(A) MANNING LEVELS OFFERED MUST BE SUFFICIENT TO PERFORM THE REQUIRED SERVICES. FOR THE PURPOSE OF EVALUATING PROPOSALS THE GOVERNMENT ESTIMATES THAT SATISFACTORY PERFORMANCE DURING THE CONTRACT PERIOD OF 365 DAYS WILL REQUIRE A TOTAL OF 80,676 MANNING HOURS (INCLUDING MANAGEMENT/SUPERVISION). *** SUBMISSION OF MANNING CHARTS WHOSE TOTAL HOURS FALL BELOW THE TOTAL OF 80,732.50 HOURS FOR THE TOTAL OF 365 DAYS DURING THE CONTRACT PERIOD AS STATED ABOVE MAY RESULT IN REJECTION OF THE OFFER UNLESS THE OFFEROR CLEARLY SUBSTANTIATES THE MANNING DIFFERENCE WITH SPECIFIC DOCUMENTATION DEMONSTRATING THAT THE OFFEROR CAN PERFORM THE REQUIRED SERVICES SATISFACTORILY WITH FEWER HOURS. SUCH DOCUMENTATION SHOULD ACCOMPANY THE OFFER.'

"THE RECORD SHOWS THAT THE ORIGINAL OFFER FROM BROKEN LANCE INDICATED THAT 80,676 HOURS (THE GOVERNMENT'S ESTIMATE) WOULD BE PROVIDED AND ACCORDINGLY THE OFFER CONTAINED MANNING CHARTS REFLECTING MANHOURS IDENTICAL TO THE GOVERNMENT ESTIMATES ***. HOWEVER, BROKEN LANCE'S BEST AND FINAL OFFER STATED ITS BELIEF THAT SATISFACTORY SERVICE COULD BE ACCOMPLISHED WITH TOTAL MANNING OF ONLY 52,004.5 HOURS ***. ACCORDINGLY, THE TOTAL MANHOURS PROPOSED BY BROKEN LANCE WAS ONLY 64.15 PERCENT OF THE GOVERNMENT'S ESTIMATE BUT MORE IMPORTANTLY WAS SUBMITTED WITH NO DETAILED DOCUMENTATION TO JUSTIFY THE PROPOSED USE OF LESS THAN THE GOVERNMENT'S ESTIMATE. THE CONTRACTING OFFICER STATES THAT: 'NO SUCH DOCUMENTATION WAS FURNISHED BECAUSE THE REVISED OFFER WAS SUBMITTED BY TELEGRAM.'

"NOTWITHSTANDING THIS FAILURE TO JUSTIFY, THE CONTRACTING OFFICER CONCLUDED, THAT SATISFACTORY PERFORMANCE OF THE CONTRACT WOULD BE POSSIBLE WITH SUBSTANTIALLY FEWER HOURS THAN THOSE CONTAINED IN THE GOVERNMENT ESTIMATE. THIS POSITION WAS BASED PRIMARILY ON THE FACT THAT THE INCUMBENT CONTRACTOR PROPOSED 59,598 HOURS (73.9 PERCENT OF THE GOVERNMENT ESTIMATE) AND HAD INCLUDED IN ITS PROPOSAL A STATEMENT THAT IT WAS CURRENTLY PERFORMING THE CONTRACT WITHIN THOSE MANHOUR LEVELS.

"MOREOVER, THE CONTRACTING OFFICER PRIOR TO AWARD (1) RECEIVED INFORMATION FROM REPRESENTATIVES OF THE SMALL BUSINESS ADMINISTRATION WHICH 'ASSURED HER THAT BROKEN LANCE'S REVISED OFFER WAS ENTIRELY VALID AND BASED ON A THOROUGH AND KNOWLEDGEABLE REVIEW OF PERFORMANCE REQUIREMENTS'; AND (2) KNEW THAT BROKEN LANCE WAS CURRENTLY A SATISFACTORY SUBCONTRACTOR TO SBA FOR MESS ATTENDANT SERVICES. ON THE ABOVE NOTED BASES, THE CONTRACTING OFFICER MADE AWARD TO BROKEN LANCE. THE CONTRACTING OFFICER'S REPORT DOES NOTE, HOWEVER, THAT 'IF MORE TIME HAD BEEN AVAILABLE FOR THE CONDUCT OF NEGOTIATIONS IT MIGHT HAVE BEEN DESIRABLE TO CONSIDER WHETHER THE GOVERNMENT ESTIMATE OF NECESSARY MANHOURS SHOULD HAVE BEEN REVISED IN LIGHT OF THE RESPONSES RECEIVED."

ON THESE FACTS, OUR CONCLUSION THAT THE AWARD WAS IMPROPER WAS BASED ON THE FACT THAT THE BROKEN LANCE OFFER, BY PROPOSING ONLY 64.5 PERCENT OF THE GOVERNMENT MAN-HOUR ESTIMATE WITHOUT JUSTIFICATION, COULD NOT BE ACCEPTED UNDER THE TERMS OF THE RFP. BECAUSE OF THIS, THE BELIEF OF THE CONTRACTING OFFICER THAT THE GOVERNMENT ESTIMATE MIGHT HAVE BEEN IN NEED OF DOWNWARD REVISION, AND THE FAILURE TO REOPEN NEGOTIATIONS ON AN AMENDED ESTIMATE IN VIOLATION OF ASPR SEC. 3-805.4(C) (DPC #110, MAY 30, 1973), WE RECOMMENDED THAT THE BROKEN LANCE CONTRACT BE TERMINATED FOR CONVENIENCE AND RECOMPETED SINCE ALL OFFERORS DID NOT COMPETE ON AN EQUAL BASIS.

BROKEN LANCE ARGUES THAT OUR DECISION WAS ERRONEOUS FOR THE FOLLOWING REASONS:

1. THE GOVERNMENT'S TERMINATION OF THE CONTRACT FOR CONVENIENCE WOULD CONSTITUTE A BREACH OF CONTRACT;

2. SECTION "D" OF THE RFP DID NOT REQUIRE BROKEN LANCE TO FURNISH DOCUMENTATION JUSTIFYING ITS LOWER MAN-HOUR ESTIMATE AS A CONDITION OF AWARD;

3. THE CONTRACTING OFFICER'S ACCEPTANCE OF BROKEN LANCE'S OFFER WITHOUT REQUIRING SUBSTANTIATION REPRESENTED A VALID EXERCISE OF DISCRETION;

4. IN ANY EVENT, IT WOULD BE INEQUITABLE TO PENALIZE BROKEN LANCE BY TERMINATING ITS CONTRACT FOR AN IMPROPER ACT OF THE CONTRACTING OFFICER; AND THE GOVERNMENT IS ESTOPPED TO TERMINATE IN VIEW OF BROKEN LANCE'S EXPENDITURE OF TIME AND MONEY; AND

5. BROKEN LANCE HAS PERFORMED ADEQUATELY AT ITS MANNING LEVEL AND THUS ANY FAILURE FOR THE CONTRACTING OFFICER TO REQUIRE SUBSTANTIATION IS NOW MOOT.

TERMINATION OF A CONTRACT FOR THE CONVENIENCE OF THE GOVERNMENT IS NOT A BREACH OF CONTRACT WHERE THE CONTRACT CONTAINS, AS DID BROKEN LANCE'S, A CLAUSE PERMITTING THIS ACTION. THEREFORE, BROKEN LANCE'S FIRST ARGUMENT IS WITHOUT MERIT.

WITH REGARD TO THE SECTION "D" REQUIREMENT OF SUBSTANTIATION AND THE CONTRACTING OFFICER'S FAILURE TO REQUIRE ITS SUBMISSION, AS WE STATED IN THE DECISION, THE OPERATIVE LANGUAGE OF SECTION "D" HAS BEEN INTERPRETED PREVIOUSLY BY THIS OFFICE AS REQUIRING THE SUBMISSION OF JUSTIFICATION WHENEVER AN OFFEROR PROPOSES A MANNING LEVEL BELOW THE NAVY'S INITIAL MANNING CUTOFF POINT (HERE 100 PERCENT OF THE ESTIMATE; IN PAST YEARS 95 PERCENT OF THE ESTIMATE). SEE MATTER OF ABC MANAGEMENT SERVICES, INC., 53 COMP. GEN. 711, 715-716 (1974), DISCUSSED AT LENGTH IN THE DECISION. VIEW OF THIS SPECIFIC RFP REQUIREMENT, WE DO NOT FEEL THAT ITS WAIVER CAN BE CONSIDERED A "VALID EXERCISE OF DISCRETION."

BROKEN LANCE ARGUES THAT IT WOULD BE INEQUITABLE TO PENALIZE IT THROUGH A TERMINATION FOR ANY IMPROPER ACT OF THE CONTRACTING OFFICER AND CLAIMS THE GOVERNMENT IS ESTOPPED FROM TERMINATING THE CONTRACT. IT MUST BE NOTED THAT A CONTRACTING OFFICER DOES NOT HAVE AUTHORITY TO AWARD A CONTRACT TO AN OFFEROR, SUCH AS BROKEN LANCE, WHICH, FOR THE REASONS SUMMARIZED FROM THE DECISION ABOVE, IS NOT ACTUALLY ENTITLED TO AWARD. ANY CONTRACT ENTERED INTO BEYOND THE SCOPE OF THE CONTRACTING OFFICER'S ACTUAL AUTHORITY IS ILLEGAL. SEE MATTER OF FINK SANITARY SERVICE, INC., 53 COMP. GEN. 502 (1974), AND CASES CITED THEREIN.

OUR OFFICE HAS HELD, HOWEVER, THAT:

"*** WE ARE IN AGREEMENT WITH THE POSITION OF THE COURT OF CLAIMS THAT 'THE BINDING STAMP OF NULLITY' SHOULD BE IMPOSED ONLY WHEN THE ILLEGALITY OF AN AWARD IS 'PLAIN.' JOHN REINER & CO. V. UNITED STATES, 325 F.2D 438, 440 (163 CT. CL. 381) OR 'PALPABLE,' WARREN BROTHERS ROADS CO. V. UNITED STATES, 355 F.2D 612, 615 (173 CT. CL. 714). IN DETERMINING WHETHER AN AWARD IS PLAINLY OR PALPABLY ILLEGAL, WE BELIEVE THAT IF THE AWARD WAS MADE CONTRARY TO STATUTORY OR REGULATORY REQUIREMENTS BECAUSE OF SOME ACTION OR STATEMENT BY THE CONTRACTOR (PRESTEX, INC. V. UNITED STATES, 320 F.2D 367 (162 CT. CL. 620)), OR IF THE CONTRACTOR WAS ON DIRECT NOTICE THAT THE PROCEDURES BEING FOLLOWED WERE VIOLATIVE OF SUCH REQUIREMENTS (SCHOENBROD V. UNITED STATES, 410 F.2D 400 (183 CT. CL. 627)), THEN THE AWARD MAY BE CANCELED WITHOUT LIABILITY TO THE GOVERNMENT EXCEPT TO THE EXTENT RECOVERY MAY BE HAD ON THE BASIS OF QUANTUM MERUIT. ON THE OTHER HAND, IF THE CONTRACTOR DID NOT CONTRIBUTE TO THE MISTAKE RESULTING IN THE AWARD AND WAS NOT ON DIRECT NOTICE BEFORE AWARD THAT THE PROCEDURES BEING FOLLOWED WERE WRONG, THE AWARD SHOULD NOT BE CONSIDERED PLAINLY OR PALPABLY ILLEGAL, AND THE CONTRACT MAY ONLY BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT. JOHN REINER & CO. V. UNITED STATES, SUPRA; BROWN & SON ELECTRIC CO. V. UNITED STATES, 325 F.2D 446 (163 CT. CL. 465)." 52 COMP. GEN. 215, 218 (1972).

THEREFORE, SINCE IN THE INSTANT CASE, BROKEN LANCE NEITHER DIRECTLY CONTRIBUTED TO THE IMPROPER ACTIONS OF THE GOVERNMENT NOR WAS ON DIRECT NOTICE OF THEM PRIOR TO AWARD, WE WERE UNABLE TO CONCLUDE THAT THE CONTRACT BETWEEN BROKEN LANCE AND THE GOVERNMENT, WHILE IMPROPER, WAS PALPABLY ILLEGAL.

THUS, RATHER THAN RECOMMENDING THAT THE CONTRACT BE CANCELED, WE RECOMMENDED THAT IT BE TERMINATED FOR CONVENIENCE. IT SHOULD BE NOTED THIS RECOMMENDATION PRESUPPOSES THAT A CONTRACTOR IS ADEQUATELY PERFORMING UNDER THE TERMS AND CONDITIONS OF ITS CONTRACT. MATTER OF DATA TEST CORPORATION, B-181199, MARCH 7, 1975, 54 COMP. GEN. .

IN THIS REGARD, WE FIND IT INTERESTING TO NOTE THAT BROKEN LANCE HAS STATED THAT THE GOVERNMENT IS GETTING ADEQUATE SERVICE AT APPROXIMATELY 64.5 PERCENT OF THE ESTIMATE CONTAINED IN THE RFP. ACCORDING TO BROKEN LANCE, THE FAILURE OF THE CONTRACTING OFFICER TO REQUIRE SUBSTANTIATION FOR THE FIRM'S LOWER ESTIMATE IS NOW MOOT. AS WE SET OUT IN OUR EARLIER DECISION, HAD ALL OFFERORS BEEN APPRISED OF THE GOVERNMENT'S NEWLY FOUND, REDUCED NEED FOR MANNING, IT MIGHT HAVE BEEN THAT EQUAL COMPETITION FOR THE GOVERNMENT'S ACTUAL AND MINIMUM NEEDS MIGHT HAVE OCCURRED. THE NEGOTIATION PROCESS DOES NOT PERMIT THE GOVERNMENT TO SOLICIT COMPETITION WITHOUT A PROPER STATEMENT OF ITS ACTUAL OR MINIMUM NEEDS. IT IS FOR THIS REASON THAT ASPR SEC. 3-805.4, SUPRA, CLEARLY REQUIRES THAT, WHEN A PROPOSAL CONSIDERED TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT INVOLVES A DEPARTURE FROM THE STATED REQUIREMENTS, ALL OFFERORS MUST BE GIVEN AN OPPORTUNITY TO SUBMIT NEW OR AMENDED PROPOSALS. THIS POINT, THEREFORE, CONTRARY TO THE ASSERTIONS OF BROKEN LANCE, IS NOT NOW MOOT. RATHER, BROKEN LANCE'S PERFORMANCE UNDER THE CONTRACT HAS PROVEN THAT THERE WAS A REDUCED NEED FOR MANNING WHICH WAS IMPROPERLY NOT COMMUNICATED TO ALL OFFERORS.

LASTLY, WHILE THE NAVY ORIGINALLY SUPPORTED THE BROKEN LANCE REQUEST THAT WE RECONSIDER OUR RECOMMENDATION TO TERMINATE THE BROKEN LANCE CONTRACT, WE HAVE BEEN INFORMALLY ADVISED BY THE NAVY THAT OUR RECOMMENDATION HAS BEEN FOLLOWED. AN AWARD OF A CONTRACT FOR THE BALANCE OF THE PERIOD ORIGINALLY COVERED BY THE BROKEN LANCE CONTRACT HAS BEEN MADE TO ANOTHER FIRM FOLLOWING A RESOLICITATION.

OUR DECISION IS, THEREFORE, AFFIRMED.