Matter of: Federal Contracting, Inc. File: B-250304.2 Date: June 23, 1993

PROCUREMENT Sealed Bidding Contract awards Propriety Line items Agency reasonably determined, prior to issuing solicitation, that it was likely to award a contract for all line items where the agency's estimate of funds available for this project exceeded the government's independent cost estimate. PROCUREMENT Sealed Bidding Bids Evaluation Prices Options Where solicitation provided that bids would be evaluated on the basis of all contract line items, including options, agency properly awarded a contract to offeror whose total bid for all line items was low.

Attorneys

DECISION Federal Contracting, Inc. (FCI) protests the award of a contract by the Department of the Army, Corps of Engineers, to Schauer Construction Company, Inc. under invitation for bids (IFB) No. DACA45-92-B-0105. The IFB sought bids to provide the plant, labor, materials, and equipment to construct a child development center at Peterson Air Force Base in Colorado. FCI protests that the agency failed to reasonably determine prior to issuing the solicitation that it was likely to exercise all options; that the agency was obligated to evaluate offers on the basis of only those line items for which a contract was awarded; and that the solicitation included an improper evaluation clause.

We dismiss the protest in part and deny it in part.

BACKGROUND

The IFB, issued on July 31, 1992, by the Corps of Engineers called for lump-sum bids for five contract line items,[1] and provided for award to the responsible bidder submitting the responsive bid that was most advantageous to the government, considering only price and price-related factors. Regarding evaluation of prices, section 16 of the IFB stated:

"Evaluation of Options

"16.1. Except when it is determined in accordance with FAR Sec. 17.206(b) not to be in the Government's best interest, the Government will evaluate offers for award purposes by adding the total price for all options to the total price for the basic requirement. Evaluation of options will not oblige the Government to exercise the options."

The IFB also provided that the agency could award a contract for any line item or combination of line items, and reserved the government's right to exercise any of the options within 120 days after issuing a notice to proceed to the awardee.

On or before the September 1 bid opening date, the agency received nine bids, including those of FCI and Schauer. The bids of FCI and Schauer, by line item, were as follows.

Line Item FCI Schauer

1 $2,823,000 $2,838,000 A-1 92,400 72,400 A-2 100,800 99,800 A-3 27,400 29,000 A-4 4,800 3,400 Total $3,048,400 $3,042,600

Schauer's bid offered the lowest total price and Schauer was selected for award on that basis; a contract was executed on February 4. Because of funding limitations then present, the contract awarded to Schauer on February 4 included only line item numbers 1, A-3 and A-4; FCI's aggregate bid for those particular line items was lower than Schauer's bid.[2] This protest followed.

DISCUSSION

FCI maintains that the agency failed to comply with Federal Acquisition Regulation (FAR) Sec. 17.206, which was specifically incorporated into the IFB here; this FAR section states:

"(a) In awarding the basic contract, the contracting officer shall, except as provided in paragraph (b) of this section, evaluate offers for any option quantities or periods contained in a solicitation when it has been determined prior to soliciting offers that the Government is likely to exercise the options. (See 17.208.)

"(b) The contracting officer need not evaluate offers for any option quantities when it is determined that evaluation would not be in the best interests of the government and this determination is approved at a level above the contracting officer. An example of a circumstance that may support a determination not to evaluate offers for option quantities is when there is a reasonable certainty that funds will be unavailable to permit exercise of the option."

FCI first protests that the agency violated FAR Sec. 17.206(a) by failing to determine, prior to issuing the solicitation, that it was likely to exercise all of the options; alternatively, FCI argues that, if such a determination was made, it was unreasonable.[3]

FCI notes that the agency's independent cost estimate for the project was $2,757,000. FCI then refers to various internal agency funding documents obtained in response to its FOIA request, several of which indicate that the "programmed amount" for this solicitation was only $2,712,000. FCI argues that, since the amount programmed for this project was less than the agency's cost estimate, the contracting officer could not have reasonably believed at the time the solicitation was issued that exercise of all options was likely.

The agency responds that, in fact, the contracting officer made the determination required by FAR Sec. 17.206(a); the contracting officer has submitted an affidavit stating: "Prior to issuance of the solicitation, I had determined, based on the government estimate and funds available, that there was a reasonable likelihood that the basic item and all options would be exercised." The agency further maintains that the contracting officer's determination was reasonable in light of the agency's internal estimates regarding the level of funding expected to be available for this procurement. Specifically, the agency notes that the very documents on which FCI bases its protest also state that the agency's "current working estimate" (CWE) of available funding for this project was slightly more than $3 million. The agency explains that the difference between the CWE and the lower "programmed amount" reflects the fact that, in military construction projects, agencies are permitted to administratively reprogram up to 120 percent of "programmed amounts,"[4] and that the "programmed amount" here was established when the project was only 35 percent designed and, thus, was reasonably considered subject to revision. Based on the agency's CWE, which was greater than its cost estimate, the agency maintains it was reasonable to believe at the time the solicitation was issued that all options would be exercised.

On the record here, we do not question that the determination required by FAR Sec. 17.206(a) was made as stated in the contracting officer's affidavit.[5] Further, that determination appears to have had a reasonable basis since, at the time the solicitation was issued, the agency's internal funding estimate indicated that available funding for this project would exceed $3 million.

FCI next protests that even if the agency complied with the requirements of FAR Sec. 17.206(a) prior to issuing the solicitation, the contracting officer was subsequently obligated to seek authority under FAR Sec. 17.206(b) to evaluate bids on the basis of only those line items for which the contract was actually awarded. As noted above, FAR Sec. 17.206(b) provides that the contracting officer "need not evaluate offers for any option quantities when it is determined that such evaluation would not be in the best interests of the government." FCI argues that, because the "programmed amount" for this procurement had not been increased at the time the contract was awarded, it should have been clear to the contracting officer that further funding would not be forthcoming and, therefore, that evaluation of bids on the basis of all options was not in the best interests of the government. FCI asserts that the contracting officer was, therefore, precluded from evaluating bids on the basis of all line items, and was obligated to seek authority under FAR Sec. 17.206(b) to evaluate bids on the basis of only those line items for which a contract was actually awarded.

The contracting officer responds that bids were evaluated on the basis of the total prices offered for all line items, as provided for in the IFB. The contracting officer explains that he chose not to seek authority under FAR Sec. 17.206(b) to evaluate bids on the basis of less than all of the line items because it was not clear at the time of award whether the agency would exercise the remaining options during the 120 day period following the issuance of the awardee's notice to proceed. The contracting officer notes that, if the agency had evaluated bids on the basis of less than all the line items, awarded the contract to another offeror, and subsequently exercised the options for the remaining line items, the agency would not have obtained the lowest cost for the work performed.[6] In short, the contracting officer asserts that he could not affirmatively determine under FAR Sec. 17.206(b) that it would be in the best interests of the government to alter the IFB's stated evaluation scheme; accordingly, he adhered to the stated evaluation scheme and evaluated bids consistent with FAR Sec. 17.206(a).

Prior to 1988, FAR Sec. 17.206(a) provided that procuring agencies were permitted to provide for the evaluation of options in solicitations for which that FAR section was applicable. 48 C.F.R. Sec. 17.206 (1987). In 1988, FAR Sec. 17.206(a) was substantially revised; among other things, the revised FAR Sec. 17.206(a) provided that procuring agencies are required to provide for the evaluation of options in situations where the authority had previously been permissive. 48 C.F.R. Sec. 17.206 (1988). The 1988 FAR revision established a preference for evaluating bids on the basis of all options where the agency has properly determined prior to issuing the solicitation that all options are likely to be exercised. The evaluation scheme established under FAR 17.206(a) must be altered pursuant to FAR Sec. 17.206(b) only where the contracting officer subsequently knows with "reasonable certainty" that all options will not be exercised or he or she otherwise determines that such an evaluation would not be in the government's best interest.

Here, the IFB specifically incorporated the language of FAR Sec. 17.206(a), advising offerors that bids were to be evaluated on the basis of the total prices offered for all line items absent an affirmative determination that such an evaluation would not be in the government's best interest. At the time the contract was awarded, there were indications from the agency's internal funding documents that additional funding could become available during the 120 day period following issuance of the awardee's notice to proceed. On this record, we conclude the contracting officer could not know with reasonable certainty at the time of award that the remaining options would not be exercised; accordingly, the contracting officer could not determine under FAR Sec. 17.206(b) that it would be in the government's best interest to alter the IFB's stated evaluation scheme. Absent such a determination, the agency properly evaluated bids consistent with FAR Sec. 17.206(a).

Finally, FCI protests that the agency should not have included the clause captioned "Evaluation of Options" in this solicitation. FCI asserts that the solicitation should, rather, have included either the FAR clause titled "Evaluation of Options Exercised at Time of Contract Award," FAR Sec. 52.217-4, or the Defense Federal Acquisition Regulation Supplement (DFARS) clause titled "Additive or Deductive Items," DFARS Sec. 236.303- 70.

Protests based upon alleged improprieties in an IFB which are apparent prior to bid opening must be filed before that time. 4 C.F.R. Sec. 21.2(a)(1) (1993); SAE Am. Mid-Atlantic, Inc., B-244212; B-244212.2, Sept. 26, 1991, 91-2 CPD Para. 297. Here, the alleged defect in the solicitation was clearly apparent prior to bid opening. Accordingly, this protest ground is untimely. Id.[7]

The protest is denied in part and dismissed in part.

1. Line item 1 was labeled the "basic" line item and called for completion of all work, as required by the applicable plans and specifications, except for the specific tasks identified under the remaining 4 line items, which were labeled as "options" A-1 through A-4. Line item A-1 called for construction of an additional vestibule and classroom; line item A-2 called for construction of an employee parking lot; line item A-3 called for landscaping; and line item A-4 called for construction of a facility yard sign.

2. FCI's aggregate bid for contract line item numbers 1, A-3 and A-4 was $2,855,200; Schauer's aggregate bid for line items 1, A-3 and A-4 was $2,870,400.

3. The agency argues that this portion of FCI's protest is untimely. 4 C.F.R. Sec. 21.2(a)(1). However, FCI's allegations regarding the reasonableness of the contracting officer's determination appear to be based on the agency's funding documents FCI obtained in response to a Freedom of Information Act (FOIA) request submitted shortly after contract award. Accordingly, we decline to dismiss this portion of the protest.

4. Reprogramming is the shifting of funds from one object to another within an appropriation. As a matter of law, an agency may reprogram unobligated funds within an appropriation, as long as the expenditures are within the general purpose of the appropriation and are not in violation of any other specific limitation or otherwise prohibited. GAO, Principles of Federal Appropriations Law at 2-25, 2-26 (2nd Ed. Vol. 1 1991).

5. FCI asserts that this determination was required to be made in writing prior to issuance of the IFB, but identifies no authority for this proposition.

6. The solicitation contemplated award of all work to a single offeror.

7. FCI also complains that the solicitation was ambiguous in that it referred to contract line items A-1 through A-4 as both "additives" and "options." This alleged defect was similarly apparent prior to bid opening and is similarly untimely. 4 C.F.R. Sec. 21.2(a)(1).