Matter of: General Metals, Inc. File: B-249259; B-249716; B-249717; B-249718 Date: November 3, 1992 72 Comp.Gen. 54

Matter of: General Metals, Inc. File: B-249259; B-249716; B-249717; B-249718 Date: November 3, 1992 72 Comp.Gen. 54

Under small purchase procedures, where the request for quotations (RFQ) states that price and delivery are the evaluation factors and that award may be based on earliest possible delivery, the Defense Logistics Agency may quantify the value to the government of each day of delivery in order to objectively evaluate quotations for the best value to the government, considering price and delivery, and need not announce in the RFQ the quantification of the delivery evaluation factor.

Attorneys

Decision General Metals, Inc. protests the awards of orders under four requests for quotations (RFQ) issued by the Defense Logistics Agency (DLA) for fabricated metal items. [1] General Metals asserts that DLA determined the awardees by using an evaluation factor that was not stated in the RFQ.

We deny the protests in part and dismiss them in part.

DLA conducted these procurements pursuant to the small purchase procedures of part 13 of the Federal Acquisition Regulation (FAR). DLA requested quotations from vendors on Standard Form 18 (REV. 10-83) "Request for Quotations." Each RFQ requested delivery in a specified number of days and stated that "[d]elivery will be an evaluation factor in award" and "[p]rice and delivery will be considered as award factors. Preference may be given for earliest possible delivery." [2] General Metals quoted a lower price in response to each RFQ than did the awardees, but stated a longer delivery schedule in each instance.

DLA evaluated the quotations by determining the value to the government of each vendor's delivery schedule and then adding this evaluated delivery value to the vendor's price to get the total evaluated cost to the government for each vendor's quotation. DLA determined the value of delivery schedules by applying a daily production leadtime (PLT) dollar value to each day of delivery. DLA's use of the PLT dollar value is a recent approach to best value buying implemented by DLA in an effort to reduce the waste associated with long delivery leadtimes. [3]

See Defense Inventory: Defense Logistics Agency Needs to Better Manage Procurement Leadtimes, GAO/NSIAD-90-124, May 2, 1990. DLA calculates the daily PLT dollar value by determining the average daily forecasted requirement for the current quarterly forecasted need for the item being procured and then multiplying this average daily total by DLA's cost per unit of the item.

Under this evaluation scheme, the requested delivery date in the RFQs is DLA's estimate of delivery time based on its current experience. If a vendor quotes a delivery schedule in excess of the delivery date, DLA increases the quoted price by the PLT dollar value for each day in excess of the requested delivery date. If a vendor quotes a delivery schedule shorter than the RFQ delivery period, then DLA decreases the quoted price by the PLT dollar value for each day the quoted delivery betters the requested RFQ delivery period. If the quoted delivery is the same as that requested by the RFQ, the quoted price remains unchanged.

DLA evaluates the adjusted quotation values and awards a purchase order to the vendor with the lowest adjusted value. Under this evaluation plan, the vendor quoting the lowest price and shortest delivery will always receive the purchase order. In all other cases, the evaluation plan weighs price against delivery to determine the best value. In all four procurements protested here, DLA determined that General Metals's quotations did not represent the best value, primarily for the reason that General Metals's low-priced quotes offered longer delivery times than offered by the awardees.

General Metals asserts that the evaluation factors or significant sub factors actually used by DLA were not adequately disclosed in the RFQs because the RFQs did not allow for or suggest that the PLT dollar value adjustments would be made in determining the awardees. General Metals also complains that the pertinent PLT dollar values were not disclosed in the RFQs.

The Competition in Contracting Act of 1984 (CICA) requires simplified procedures for small purchases of property and services in order to promote efficiency and economy in contracting, and to avoid unnecessary burdens for agencies and contractors. 10 U.S.C. Sec. 2304(g)(1) (1988); FAR subpart 13.1. Consistent with this requirement, small purchases are expressly exempted from the requirement that solicitations issued by the Department of Defense include a statement of all significant evaluation factors and subfactors which the agency reasonably expects to consider, including cost or price, cost-or price-related factors, and noncost- or nonprice-related factors. 10 U.S.C. Sec. 2305(a) (2) (A) (Supp. III 1991).

Nevertheless, all procurements, including small purchases, must be conducted consistent with the concern for a fair and equitable competition that is inherent in any procurement. Vocational Resources, Inc., B-242396, Apr. 29, 1991, 91-1 CPD Para. 414; Ann Riley & Assocs., Ltd., B-241309.2, Feb. 8, 1991, 91-1 CPD Para. 142. In this regard, an agency must evaluate quotations on the basis set forth in the RFQ. Ronald S. Yacisin, B-245803, Nov. 20, 1991, 91-2 CPD Para. 486. The RFQs clearly stated that quotations would be evaluated on the basis of price and delivery, and further instructed vendors that the earliest quoted delivery could be the basis for award. DLA weighed the value to the government of a quoted price against the value to the government of the quoted delivery schedule in order to determine the total value to the government of each vendor's quote. DLA then compared the total value to the government of all the quotes to determine which quote would provide the best value. Just as a lower price represents a better value to the government when singly considered as an evaluation factor, so too is a shorter delivery schedule a better value when considered individually. [4] Thus, an evaluation method, whereby quoted delivery times are quantified into dollars and then added to the quoted prices, is not inconsistent with the RFQs' evaluation schemes.

Under the circumstances, the procurements were conducted with adequate concern for fair and equitable competition. See Ronald S. Yacisin, supra; Sterling Inst., B-223729, Oct. 3, 1986, 86-2 CPD Para. 390; cf. Le Prix Elec. Distribs., Ltd., B-207106, Sept. 21, 1982, 82-2 CPD Para. 249 (agency need not consider expedited delivery as an evaluation factor under a RFQ where it was not stated to be one). While it may be that DLA could have more fully disclosed in the RFQs how delivery would be evaluated, [5] we do not find the vendors were misled, given the RFQs' clearly announced preferences for "earliest possible delivery." See Brennan Assocs., Inc., B-23l554, Sept. 1, 1988, 88-2 CPD Para. 203. Furthermore, DLA advised all vendors on its solicitation mailing list when it began implementing its best value buying approach that vendors should submit their best prices and best delivery schedules. [6]

General Metals asserts that DLA was required to disclose in the RFQs the specific PLT dollar values that would be used in the delivery evaluation. For basically the same reasons as stated above, we find that DLA need not provide such details on procurements conducted under small purchase procedures. See 10 U.S.C. Sec. 2305(a) (2) (A) (Supp. III 1991) In addition, DLA apparently has good reasons for not disclosing the PLT dollar figures in RFQs, since the figures reportedly tend to fluctuate depending on shifting government needs. In this regard, DLA reports that the PLT dollar value can fluctuate weekly due to the updating of forecasts, and DLA has instructed its procurement officials to check the weekly forecast updates and use only current PLT dollar values for evaluating quotations. Since the PLT dollar values actually used for evaluation could change from figures announced in the RFQs when issued, any resulting amendment of the RFQs to provide precise PLT dollar values, and the resultant possible resubmission of quotes, may unduly burden, and possibly inject delay, that would be inconsistent with the purpose of the simplified small purchase process.

General Metals also challenges the reasonableness of the PLT dollar values actually used in the evaluations because, in at least one case, the dollar value is significantly higher than a reasonable rate of return on investments as calculated by General Metals. However, the PLT dollar values do not represent the possible rate of return of money otherwise committed to a purchase order. Rather, the PLT dollar value considers and quantifies the cost of waste that DLA incurs with longer delivery schedules due to the lesser accuracy in forecasting supply requirements as the forecasting period increases. Since a forecast is a projection of requirements and is not an actual requirement, the value of DLA's forecasts only quantifies a potential waste resulting from procuring supplies that are never actually needed; the actual value of this waste from current forecasts will only become known in the future. Although the PLT dollar value may not be the only possible method of evaluating the value of waste resulting from inaccurate forecasts, we cannot find it unreasonable because it is reflective of the forecast and the actual dollar value of the forecasted supply. Accordingly, DLA's calculation and use of the PLT dollar value provides an objective evaluation of each vendor's delivery schedule which we cannot say is unreasonable.

General Metals finally asserts that the vendors receiving purchase orders under these procurements are not regular dealers under the Walsh-Healey Act. We have no jurisdiction to consider this issue. Under our Bid Protest Regulations, 4 C.F.R. Sec. 21.3(m) (9) (1992), our Office does not consider the legal status of a firm as a regular dealer or manufacturer under the Walsh-Healey Act. By law this matter is to be decided by the contracting agency, in the first instance, subject to review by the Small Business Administration, where a small business is involved, and the Secretary of Labor. The Pratt & Whitney Co., Inc.; Onsrud Mach. Corp., B-232190; B-232190.2, Dec. 13, 1988, 88-2 CPD Para. 588.

The protests are denied in part and dismissed in part.

1. RFQ No. DLA500-92-Q-GW62 requested quotes on aluminum alloy structural angles; RFQ No. DLA500-92-Q-KV27 requested quotes on aluminum alloy structural sections; RFQ No. DLA500-91-Q-TS41 requested quotes on steel sheets; and RFQ No. DLA500-92-Q-JZ73 requested quotes on aluminum alloy structural angles.

2. RFQ No. DLA500-91-Q-TS41, as originally issued, did not indicate that delivery would be an evaluation factor. However, DLA orally amended the RFQ via telephone conversations with the vendors, which included the addition of delivery as an evaluation factor. The protester does not dispute that this amendment was made.

3. The leadtime in a procurement is the length of time between the initiation of a procurement and the receipt of the supply or service by the activity with the requirement. Procurement leadtime consists of administrative leadtime, i.e., the time DLA requires to prepare and issue an RFQ (or other type of solicitation), etc., and production leadtime, i.e., the time a vendor needs to deliver the supply after DLA issues a purchase order. DLA forecasts future requirements for supplies and procures these services in advance, so that the inventory is sufficient to provide supplies promptly when they are needed. Historically, DLA procurement officials acquired supplies well in advance of the projected need so that the activities that use the supplies would not experience delays due to inadequate inventory levels. This practice has resulted in unnecessary cost to the government because forecast inaccuracies have resulted in DLA buying supplies that are never used; the longer the forecast period, the less accurate the forecast. The cost to the government is not only the loss of the use of funds tied up in inventory, but also the cost of buying supplies that are never used. DLA has attempted to reduce the delivery component procurement leadtime through "best value" buying by requiring objective evaluation of vendors' delivery schedules, as implemented in the RFQs in question here.

4. The RFQ here requested delivery "within" the specified time and indicated that "earliest possible delivery" was desired. Absent a stated minimum delivery schedule, it is reasonable to conclude that the shorter the delivery schedule, the better.

5. We note that if this procurement had been conducted under sealed bid or negotiated procedures, DLA would likely have been obligated to more fully disclose the method it used in quantifying delivery into dollars and applying to offered prices. See 31 Comp.Gen. 378 (1956); HJ Group Ventures, Inc., B-246139, Feb. 19, 1992, 92-1 CPD Para. 203.

6. General Metals does not deny being so notified.