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THE RECORD SHOWS THAT THE SUBJECT NIP WAS ISSUED ON JULY 25. ESTIMATED QUANTITY WAS SET FORTH ON EACH ITEM. THE ORIGINAL CLOSING DATE FOR QUOTATIONS ON THE WALTER REED PROCUREMENT WAS AUGUST 12. TWO OFFERS WERE RECEIVED AND EVALUATED AS FOLLOWS: CHART HARVEY DAIRY$188. 961.58 IT IS REPORTED THAT ON AUGUST 19. THE CONTRACTING AUTHORITY WAS ADVISED THAT EMBASSY DAIRY HAD BEEN PURCHASED BY LARGE BUSINESS AND WAS THEREFORE INELIGIBLE FOR AWARD. PARTICULARLY WHEN . . . (2) THIS SOLE OFFER WAS EXCESSIVELY HIGH. D. THE CONTRACTING OFFICER CONSIDERED RENEGOTIATION WITH HARVEY DAIRY TO EFFECT A SATISFACTORY OFFER AS AUTHORIZED BY ASPR 3-101 (VII) AND DSSCOM 3 -511B (G) BUT DEEMED SUCH ACTION INAPPROPRIATE IN THIS PARTICULAR INSTANCE AS (1) HARVEY HAD BEEN FURNISHED PRICE INFORMATION AS A PRESUMED UNSUCCESSFUL OFFEROR BEFORE THE EMBASSY DAIRY WAS DISQUALIFIED.

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B-152360, OCT. 23, 1963

TO HARVEY DAIRY, INCORPORATED:

THIS REFERS TO YOUR LETTERS OF AUGUST 26, 1963 AND OCTOBER 2, 1963, WITH ENCLOSURES, PROTESTING AGAINST THE WITHDRAWAL OF THE TOTAL SMALL BUSINESS SET-ASIDE UNDER NOTICE OF INTENT TO PURCHASE NO. RICH 20-64, THE RESOLICITATION OF THE ITEMS ON AN UNRESTRICTED BASIS, AND THE SUBSEQUENT AWARD TO EMBASSY DAIRY.

THIS PROCUREMENT IN QUESTION COVERS THE DAIRY PRODUCTS REQUIREMENTS FOR WALTER REED ARMY MEDICAL CENTER, WASHINGTON, D.C., FOR THE PERIOD SEPTEMBER 25, 1963 THROUGH MARCH 24, 1964. THE RECORD SHOWS THAT THE SUBJECT NIP WAS ISSUED ON JULY 25, 1963, BY THE DEFENSE SUBSISTENCE SUPPLY CENTER, RICHMOND, VIRGINIA, AS A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS, PURSUANT TO THE NEGOTIATING AUTHORITY OF 10 U.S.C. 2304 (A) (9) AND ASPR 3-209 (FOR PERISHABLE OR NONPERISHABLE SUBSISTENCE SUPPLIES). ESTIMATED QUANTITY WAS SET FORTH ON EACH ITEM, BUT THE CONTRACTOR WOULD BE REQUIRED TO FURNISH THE ACTUAL NEEDS OF THE INSTALLATION DURING THE CONTRACT PERIOD.

THE ORIGINAL CLOSING DATE FOR QUOTATIONS ON THE WALTER REED PROCUREMENT WAS AUGUST 12, 1963. ON THAT DATE, TWO OFFERS WERE RECEIVED AND EVALUATED AS FOLLOWS:

CHART

HARVEY DAIRY$188,756.90

EMBASSY DAIRY 178,961.58

IT IS REPORTED THAT ON AUGUST 19, 1963, PRIOR TO AWARD OF A CONTRACT, THE CONTRACTING AUTHORITY WAS ADVISED THAT EMBASSY DAIRY HAD BEEN PURCHASED BY LARGE BUSINESS AND WAS THEREFORE INELIGIBLE FOR AWARD. ON AUGUST 22, 1963, THE CONTRACTING OFFICER AND THE LOCAL SMALL BUSINESS ADMINISTRATION REPRESENTATIVE IN RICHMOND AGREED TO A WITHDRAWAL OF THE 100 PERCENT SMALL BUSINESS SET-ASIDE ON THE FOLLOWING BASIS:

"/1) THE SOLE RESPONSIVE BIDDER SITUATION DID NOT MAKE FOR A FAVORABLE PROCUREMENT CONSISTENT WITH THE PUBLIC INTEREST, PARTICULARLY WHEN . . .

(2) THIS SOLE OFFER WAS EXCESSIVELY HIGH.

D. THE CONTRACTING OFFICER CONSIDERED RENEGOTIATION WITH HARVEY DAIRY TO EFFECT A SATISFACTORY OFFER AS AUTHORIZED BY ASPR 3-101 (VII) AND DSSCOM 3 -511B (G) BUT DEEMED SUCH ACTION INAPPROPRIATE IN THIS PARTICULAR INSTANCE AS (1) HARVEY HAD BEEN FURNISHED PRICE INFORMATION AS A PRESUMED UNSUCCESSFUL OFFEROR BEFORE THE EMBASSY DAIRY WAS DISQUALIFIED, AND . . . (2) PRICE INFORMATION FOR WALTER REED SITUATION AVAILABLE AT TIME OF DECISION DID NOT PROVIDE A REASONABLE BASIS FOR NEGOTIATION IN A SINGLE BIDDER SITUATION.'

THEREAFTER, BY ADDENDUM 3 TO THE NIP, QUOTATIONS FOR THE WALTER REED INSTALLATION WERE RESOLICITED, WITHOUT RESTRICTION AS TO SIZE, FOR SUBMISSION BY AUGUST 28, 1963. ON THAT DATE QUOTATIONS WERE RECEIVED AND EVALUATED AS FOLLOWS:

"OFFERORS GROSS AMOUNT (6 MOS)

(5) THOMPSON'S DAIRY (LB) $200,879.14

(4) SEALTEST (LB) 197,600.06

(3) EXCELSIOR DAIRY (SB) 191,282.70 LESS DISCOUNT 1/2 PERCENT- DAYS)

(2) HARVEY DAIRY (SB) 188,756.90

(1) EMBASSY DAIRY (LB) 177,487.98

DIFFERENTIAL (1) AND (2) $11,268.92"

ON SEPTEMBER 17, 1963, WHILE YOUR PROTEST WAS PENDING, AWARD WAS MADE TO EMBASSY DAIRY. JUSTIFICATION FOR SUCH ACTION WAS PRESENTED TO THE COMMANDER, DEFENSE SUBSISTENCE SUPPLY CENTER, CHICAGO, ILLINOIS, BY THE CONTRACTING OFFICER, AS FOLLOWS:

"THE ITEMS ARE URGENTLY NEEDED. THE CURRENT CONTRACT EXPIRES 24 SEPTEMBER. A MINIMUM OF ONE WEEK IS REQUIRED FOR THE SUCCESSFUL VENDOR TO ARRANGE FOR CONTINUATION OF SERVICE.

"THERE IS SOME RISK IN DELAYING AWARD. CLOSING DATE WAS 28 AUGUST 1963. WITH EACH DAY THAT PASSES AFTER THE TENTH DAY PAST CLOSING, THE GOVERNMENT INCURS INCREASING RISK OF WITHDRAWAL OF THE LOW OFFER. IF THIS WERE DONE IT WOULD MEAN A LOSS OF $11,268.92 OR MORE TO THE GOVERNMENT.'

(HARVEY HELD THE PRIOR CONTRACT).

IN ITS REPORT THE DSA EXPLAINS THAT AWARD PRICES UNDER THE TWO PREVIOUS CONTRACTS FOR WALTER REED, THE FIRST TO EMBASSY AND THE SECOND TO HARVEY, WERE CONSIDERED TO BE REASONABLE; THAT HARVEY'S BID ON THE SET-ASIDE WAS CONSIDERED UNREASONABLE PRIMARILY BECAUSE OF ITS UNIT BIDS ON TWO ITEMS WHICH CONSTITUTE MORE THAN HALF OF THE PROCUREMENT DOLLAR-WISE: INDIVIDUAL HALF-GALLONS OF MILK AND HALF-GALLONS IN SIX PACKS. (IT APPEARS THAT $6,681.60 OF THE $9,795.32 BID DIFFERENTIAL BETWEEN HARVEY AND EMBASSY AROSE FROM THE INDIVIDUAL HALF-GALLONS, AND $1,665.60 FROM THE HALF-GALLON SIX-PACKS).

DSA REPORTS THAT THE BID PRICES OF EMBASSY AND HARVEY ON THE HALF GALLON MILK FOR WALTER REED OVER THE LAST THREE SOLICITATIONS WERE AS FOLLOWS:

PRICES BID FOR HALF-GALLON--- WALTER REED

EMBASSY HARVEY

1. MARCH-JUNE 30, 1963 ?30 ?3188

2. JULY-SEPTEMBER 24, 1963 .2925 .2990

3. NIP 20-64 .29 .3132

4. RESOLICITATION .29 .3132

(IT IS INDICATED THAT ALL THESE SOLICITATIONS STATED THE SAME ESTIMATED QUANTITY OF 288,000 HALF-GALLONS.)

DSA STATES THAT TWO OTHER INSTALLATIONS IN THE WASHINGTON AREA, FORT MYER AND FORT MCNAIR, HAVE GENERALLY BEEN CONSIDERED TO BE COMPARABLE TO WALTER REED AS PERTAINS TO ANTICIPATED UNIT PRICES ON DAIRY PRODUCTS. THE SUBJECT NIP ALLOWS OFFERORS TO CONDITION BIDS "ALL OR NONE" FOR FORT MCNAIR AND FORT MYER AND WALTER REED, AND POINTS OUT THAT AWARDS COVERING INDIVIDUAL HALF-GALLONS UNDER THE THREE PROCUREMENTS SINCE MARCH, 1963 HAVE NEVER EXCEEDED A UNIT PRICE OF ?30. IT IS ACKNOWLEDGED BY DSA THAT THE INDIVIDUAL HALF-GALLON AWARDS FOR CAMERON STATION HAVE EXCEEDED ?30 (AN AWARD WAS MADE TO ALEXANDRIA DAIRY IN AUGUST, 1963 AT CAMERON STATION AT A PRICE OF ?3185 ON THE HALF-GALLON MILK); AND THAT IT IS ATTEMPTING TO DETERMINE WHY BID PRICES AT CAMERON STATION ARE GENERALLY HIGHER THAN AT WALTER REED, FORT MCNAIR AND FORT MYER.

YOU DISPUTE THAT HALF-GALLON MILK PRICES ARE HISTORICALLY HIGHER AT CAMERON STATION. YOU QUOTE THE CONTRACT PRICES FOR THE HALF-GALLON MILK DURING THE PERIOD FROM 1956 TO 1962 AT WALTER REED AND CAMERON STATION. YOU SHOW THAT AT WALTER REED, AWARDS RANGED FROM ?3750 TO ?3190, WHILE CAMERON AWARDS RANGED FROM ?3523 TO ?3150. YOU CONTEND THAT IF THE AUGUST AWARD AT CAMERON AT .3185 IS REASONABLE, THEN YOUR PRICE OF ?3132 AT WALTER REED DURING THE SAME PERIOD MUST BE REASONABLE. IN THIS CONNECTION, YOU EXPLAIN THAT A NUMBER OF VARIABLES, SUCH AS DISTANCE AND DELIVERY FACILITIES, REQUIRE DIFFERENT PRICES AT DIFFERENT INSTALLATIONS; AND YOU CONCLUDE THAT YOUR PRICE OF ?3132 AT WALTER REED WAS A REASONABLE PRICE. (YOU POINT OUT THAT ON THE RESOLICITATION YOUR PRICE OF ?3132 WAS THE SECOND LOW PRICE.) HOWEVER, YOUR OWN BID, OF ?33 ON THE CURRENT CAMERON STATION PROCUREMENT WOULD APPEAR TO SUPPORT THE DSA POSITION THAT HIGHER PRICES ARE NORMALLY ENCOUNTERED AT THAT POINT.

IN THE CASE OF ADVERTISED BIDDING WE RECOGNIZE THAT ALTHOUGH BIDS SHOULD NOT BE REJECTED MERELY TO ALLOW BIDDERS TO BETTER THE PRICES OF THEIR COMPETITORS, IT IS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION TO REJECT ALL BIDS AND READVERTISE WHEN IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SUPPLIES OR SERVICES SOUGHT. SEE 36 COMP. GEN. 364, 365. WE BELIEVE THAT THIS PRINCIPLE OF ADVERTISED BIDDING IS APPLICABLE TO THIS NEGOTIATED PROCUREMENT.

THE RECORD OF PRICES PAID BY THE WALTER REED INSTALLATION ON THE INDIVIDUAL HALF-GALLON MILK CONTAINER INDICATED TO THE CONTRACTING OFFICER THAT A PRICE IN EXCESS OF ?30, SPECIFICALLY, A PRICE OF ?3132, WAS HIGHER THAN THE CURRENT FAIR AND REASONABLE PRICE FOR THE ITEM. THE CONTRACTING OFFICER CONSIDERED THE PRICES WHICH HAD BEEN PAID FOR THIS ITEM BY THIS INSTALLATION AND TWO OTHER COMPARABLE INSTALLATIONS (FORT MCNAIR AND FORT MYER) OVER THE LAST TWO CONTRACTS. IN NO CASE DID THE AWARD PRICE EXCEED ?30, AND WE CANNOT AGREE THAT THE CAMERON STATION AWARD PRICE WAS NECESSARILY DETERMINATIVE AS TO WHAT WAS A FAIR AND REASONABLE PRICE FOR WALTER REED.

FROM THE RECORD, WE CANNOT SAY THAT THE CONTRACTING OFFICER HAD NO SUBSTANTIAL BASIS TO CONCLUDE AT THE TIME, THAT YOUR PRICE OF ?3132 WAS UNREASONABLE FOR WALTER REED. IN THIS CONNECTION, IT IS NOTED THAT THE SBA REPRESENTATIVE CONCURRED IN THE CONTRACTING OFFICER'S PROPOSED ACTION.

THE WALTER REED SOLICITATION WAS ORIGINALLY RESTRICTED TO SMALL BUSINESS FIRMS; ONLY TWO FIRMS SUBMITTED QUOTATIONS. THE BASIS FOR THE SET-ASIDE ACTION WAS THAT SUFFICIENT COMPETITION COULD BE OBTAINED FROM SMALL BUSINESS FIRMS. BUT SINCE EMBASSY, AS A LARGE BUSINESS, WAS INELIGIBLE FOR AWARD UNDER THE SET-ASIDE, YOUR FIRM WAS THE ONLY SMALL BUSINESS BIDDER UNDER THE ORIGINAL SOLICITATION. IN THIS SITUATION, THE CONTRACTING OFFICER DECIDED TO RESOLICIT ON A NON RESTRICTED BASIS RATHER THAN TO NEGOTIATE SOLELY WITH YOUR FIRM TO OBTAIN A REASONABLE PRICE, BECAUSE HE WANTED TO OBTAIN THE COMPETITION WHICH HAD NOT BEEN OBTAINED UNDER THE SET-ASIDE. WE THINK HIS ACTION WAS PROPER. SEE ASPR 3-102 (C), WHICH PROVIDES IN PART AS FOLLOWS:

"NEGOTIATED PROCUREMENTS SHALL BE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICAL EXTENT. WHEN A PROPOSED PROCUREMENT APPEARS TO BE NECESSARILY NONCOMPETITIVE, THE PURCHASING ACTIVITY IS RESPONSIBLE NOT ONLY FOR ASSURING THAT COMPETITIVE PROCUREMENT IS NOT FEASIBLE, BUT ALSO FOR ACTING WHENEVER POSSIBLE TO AVOID THE NEED FOR SUBSEQUENT NONCOMPETITIVE PROCUREMENTS. * * *"

YOU SAY THAT ON AUGUST 21, 1963, A REPRESENTATIVE OF THE PURCHASING ACTIVITY INDICATED TO YOU, BY TELEPHONE, THAT YOUR FIRM WOULD RECEIVE AWARD UNDER THE ORIGINAL SOLICITATION. THE DSA DENIES THAT ANY SUCH REPRESENTATION WAS MADE. BUT EVEN IF SUCH A REPRESENTATION HAD BEEN MADE, IT DOES NOT APPEAR THAT THE REPRESENTATION IMPLIED ANY MORE THAN THE POSSIBILITY THAT YOUR OFFER MIGHT BE ACCEPTED. THEREAFTER, ON AUGUST 23, 1963, AS YOU REPORT, YOU WERE ADVISED OF THE OPPORTUNITY TO BID UNDER THE RESOLICITATION.

FINALLY, THE AWARD TO EMBASSY WAS MADE ON SEPTEMBER 17, 1963--- WHILE YOUR PROTEST WAS PENDING--- ON THE BASIS THAT THE SUPPLIER MIGHT OTHERWISE HAVE WITHDRAWN ITS LOW OFFER. IN THE CIRCUMSTANCES, WE CONCLUDE THAT THERE IS NO SUBSTANTIAL GROUND TO QUESTION THIS ACTION. GROUND TO QUESTION THIS ACTION.

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