B-170141, FEB 12, 1971

B-170141, FEB 12, 1971

BID PROTEST - DEFAULT ON ORIGINAL CONTRACT - REPROCUREMENT DECISION DENYING PROTEST BY TECHNOLOGY SYSTEMS, INC., FOURTH LOW BIDDER, AGAINST THE AWARD OF A CONTRACT ISSUED BY POST OFFICE DEPARTMENT FOR LUMINESCENT INDICIA DETECTOR MODIFICATION KITS TO DEFENSE ELECTRONICS, SECOND LOW BIDDER. THE STATEMENT THAT THE SUBJECT SOLICITATION WAS A REPROCUREMENT OF THAT PORTION OF A FORMER CONTRACT FOR WHICH THE CONTRACTOR WAS DECLARED IN DEFAULT IS SUFFICIENT NOTICE TO PROSPECTIVE BIDDERS AND IT IS NOT NECESSARY TO SET OUT THE STATUS OF THE DEFAULTED CONTRACTOR'S EQUIPMENT AND INVENTORY. FURTHER, IT WOULD NOT BE CONSISTENT WITH THE DUTY OF THE CONTRACTING OFFICER TO MITIGATE DAMAGES FOR HIM TO HAVE ACCEPTED PROTESTANT'S HIGHER BIDS IN THE HOPE OF ACHIEVING SAVINGS IN THE AMOUNT OF PROTESTANT'S ESTIMATE AT THE END OF THE CONTRACT.

TO TECHNOLOGY SYSTEMS, INC.:

WE REFER TO YOUR LETTERS OF JULY 13, 1970, AND NOVEMBER 18, 1970, RELATING TO YOUR PROTEST UNDER POST OFFICE DEPARTMENT SOLICITATION NO. 2209, ISSUED ON MAY 14, 1970.

YOUR PROTEST POINTED OUT THAT THE SOLICITATION RESULTED WHEN A PREVIOUS CONTRACT WAS TERMINATED BECAUSE OF THE CONTRACTOR'S FINANCIAL INABILITY TO CONTINUE AND, AS A RESULT, THE MAJORITY OF THE MATERIAL SUPPLIERS HAVE NOT BEEN PAID. IN ADDITION, THE SMALL BUSINESS ADMINISTRATION HAD LIENS AGAINST ALL OF THE RAW INVENTORY AND WORK-IN PROCESS AND ALL OF THE MATERIAL WHICH WAS OFFERED IN THE PRESENT SOLICITATION AS GOVERNMENT FURNISHED EQUIPMENT.

AS A RESULT, YOU CONTEND: (A) THAT IF THE SOLICITATION HAD INDICATED THESE FACTS, PROSPECTIVE BIDDERS COULD HAVE EXAMINED AND EVALUATED THE SITUATION AND THE BIDS WOULD PROBABLY HAVE REFLECTED SUBSTANTIAL SAVINGS TO THE GOVERNMENT AND THE MAXIMUM BENEFIT TO BOTH THE SMALL BUSINESS ADMINISTRATION AND THE POST OFFICE DEPARTMENT; (B) THAT BASED ON THEIR EXPERIENCE IN THE DEFAULTED CONTRACT, MANY OF THE UNPAID SUPPLIERS WOULD BE UNWILLING TO SHIP MATERIAL EXCEPT ON A C.O.D. BASIS, PLACING AN UNFAIR BURDEN ON THE SMALL BUSINESS FIRM; (C) THAT MOST OF THE DISCRETE COMPONENTS AND ALL OF THE WORK-IN-PROCESS UNITS ARE PECULIAR TO THE EQUIPMENT TO BE MANUFACTURED UNDER THIS SOLICITATION, AND THAT THE SBA COULD RECOVER MORE THAN SCRAP PRICE ONLY THROUGH SALE TO THE MANUFACTURER UNDER THE SOLICITATION; AND (D) THAT IF THE SOLICITATION HAD BEEN ISSUED IN THE FORM OF A TWO-STEP PROCUREMENT THE EXISTENCE OF A LABOR POOL AND IDLE PLANT COULD HAVE BEEN MADE KNOWN TO INTERESTED PROSPECTIVE BIDDERS, TO THE BENEFIT OF THE POST OFFICE DEPARTMENT, THE SBA AND THE DISTRESSED LABOR AREA, CUMBERLAND, MARYLAND, WHERE THE DEFAULTED CONTRACTOR'S PLANT IS LOCATED. IN SUMMATION OF THE FOREGOING, YOU CONTEND THAT THE SOLICITATION WAS NEITHER SUFFICIENTLY INFORMATIVE NOR PROPERLY WORDED TO PROVIDE EITHER TRULY RESPONSIVE BIDS OR THE MOST ECONOMICALLY ADVANTAGEOUS PROCUREMENT. YOU FURTHER CONTEND THAT AWARD SHOULD NOT BE MADE ON THE BASIS OF BID PRICE ALONE, AND THAT A PROPER EVALUATION OF YOUR BID WOULD SHOW THAT YOUR BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.

THE POST OFFICE DEPARTMENT'S REPORT ON YOUR PROTEST STATES THAT SOLICITATION NO. 2209 REQUESTED BIDS FOR FIVE ITEMS OF TWO TYPES OF LUMINESCENT INDICIA DETECTOR MODIFICATION KITS AND SPARE PARTS. ALTERNATIVE BIDS WERE REQUESTED FOR PRODUCTION OF THE FIVE ITEMS WITH AND WITHOUT GOVERNMENT FURNISHED PARTS. SEVENTEEN BIDS WERE RECEIVED AND OPENED ON JUNE 15, 1970, WITH THE FOUR LOWEST BIDS AS FOLLOWS:

WITH GOVERNMENT WITHOUT GOVERNMENT

FURNISHED PARTS FURNISHED PARTS

1. M.B.S., INC. $318,793.60 $381,641.45

ROCKVILLE, MD.

2. DEFENSE ELECTRONICS 367,514.60 416,639.40

ROCKVILLE, MD.

3. ROBOTIC SYSTEMS, INC. 385,161.05 448,008.90

PERRY HALL, MD.

4. TECHNOLOGY SYSTEMS, INC. 394,707.05 425,759.40

COCKEYSVILLE, MD. THE REMAINING BIDS RANGED UP TO THE HIGH BID OF $981,824.00 WITH GOVERNMENT FURNISHED PARTS AND $1,038,788.00 WITHOUT, WHICH WAS SUBMITTED BY THE BURROUGHS CORPORATION.

AFTER A PREAWARD SURVEY THE CONTRACTING OFFICER DETERMINED THAT THE LOW BIDDER WAS A NEWLY ORGANIZED CORPORATION WITHOUT MANUFACTURING FACILITIES. THE CONTRACTING OFFICER THEREFORE REJECTED THE LOW BID AS NOT BEING FROM A RESPONSIBLE PROSPECTIVE CONTRACTOR.

YOUR PROTEST WAS SUBMITTED UNDER DATE OF JULY 13, 1970, AND ON JULY 29 THE CONTRACTING OFFICER DETERMINED THAT THE LUMINESCENT INDICIA KITS WERE URGENTLY NEEDED, THAT YOUR PROTEST PRESENTED NO FACTS WHICH WERE NOT PREVIOUSLY CONSIDERED, AND THAT NO LEGAL BASIS EXISTED FOR REJECTION OF A LOWER RESPONSIVE BID IN ORDER TO MAKE AWARD TO YOUR COMPANY. YOU WERE ADVISED OF THE CONTRACTING OFFICER'S ACTIONS AND OF THE AWARD TO THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER BY LETTER OF JULY 29, 1970, FROM THE DEPUTY ASSISTANT POSTMASTER GENERAL.

THE AWARD WAS MADE ON THE BASIS OF DEFENSE ELECTRONICS' BID TO PERFORM THE CONTRACT WITH GOVERNMENT FURNISHED PARTS FOR THE AMOUNT OF $367,514.40. THE ADMINISTRATIVE REPORT EXPRESSED THE OPINION THAT THIS PRICE WAS REASONABLE, THAT THE SEVENTEEN BIDS RECEIVED PROVIDED ADEQUATE COMPETITION, THAT THE SPECIFICATIONS WERE NOT DEFICIENT, AND THAT ALL FACTORS OF COST TO THE GOVERNMENT WERE COVERED IN THE SOLICITATION. THE POST OFFICE DEPARTMENT DID NOT AGREE THAT A COMPLETE STATEMENT OF ALL THE DETAILS YOU SUGGESTED REGARDING THE DEFAULTED CONTRACTOR WAS PROPER FOR INCLUSION IN THE PRESENT SOLICITATION, AND THE STATEMENT THAT THIS WAS A REPROCUREMENT OF THAT PORTION OF A FORMER CONTRACT FOR WHICH THE CONTRACTOR WAS DECLARED IN DEFAULT WAS CONSIDERED SUFFICIENT NOTICE TO PROSPECTIVE BIDDERS. THE REPORT POINTED OUT THAT YOUR BID WAS SUBMITTED WITH FULL KNOWLEDGE OF THE DETAILS OF THE DEFAULTED CONTRACT AND YET WAS NOT LOWEST, WHICH CONTRADICTED YOUR ASSERTION THAT INCLUSION OF THOSE DETAILS IN THE SOLICITATION WOULD HAVE RESULTED IN SAVINGS TO THE GOVERNMENT.

THE POST OFFICE DEPARTMENT REGARDED POINTS (A) AND (B) IN YOUR PROTEST LETTER AS MERE SPECULATION SINCE YOU WERE UNABLE UNDER (A) TO SUBMIT THE LOWEST BID EVEN WITH THE INFORMATION YOU SAID SHOULD HAVE BEEN INCLUDED IN THE SOLICITATION AND UNDER (B) THE FOUR LOWEST BIDS WERE SUBMITTED BY SMALL BUSINESS FIRMS. THE ADMINISTRATIVE REPORT FURTHER CONCLUDED THAT YOUR POINT (C) WAS NOT RELEVANT SINCE THE SOLICITATION DID NOT PRECLUDE DISPOSAL OF THE ASSETS OF THE DEFAULTED CONTRACTOR AS YOU SUGGESTED. WITH REGARD TO POINT (D) THE REPORT STATED THAT THIS PROCUREMENT WAS NOT APPROPRIATE FOR TWO-STEP ADVERTISING PROCEDURES UNDER FPR 1-2.502.

YOUR LETTER OF NOVEMBER 18, 1970, DISAGREES WITH THE POST OFFICE DEPARTMENT'S RESPONSES TO YOUR PROTEST AND REPEATS YOUR PRIMARY CONTENTION THAT SOLICITATION NO. 2209 WAS DEFECTIVE AND THE AWARD MADE THEREUNDER WAS IMPROPER. YOU AGAIN ASSERT THAT A PROPER EVALUATION OF YOUR BID WOULD HAVE SHOWN THAT IT OFFERED A FAIR PRICE FOR THE SUBJECT PROCUREMENT, AND THAT YOUR BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT. YOU STATE THAT THE POST OFFICE DEPARTMENT PAID APPROXIMATELY $34,000.00 TO A BANK TO OBTAIN RELEASE OF LIENS ON GOVERNMENT FURNISHED PARTS, AND YOU SUGGEST THAT ADDING THIS COST TO THE CONTRACT PRICE BRINGS THE ACTUAL COST OF THE CONTRACT TO THE POST OFFICE DEPARTMENT TO OVER $400,000.00. IN THIS REGARD, YOU ALSO STATED THAT IT WAS INEXPLICABLE TO YOU THAT THE BIDS WERE EVALUATED ONLY ON THE BASIS OF THE PRICE WITH GOVERNMENT FURNISHED PARTS.

ALL OF YOUR CONTENTIONS MUST BE CONSIDERED IN CONNECTION WITH THE STATEMENT THAT APPEARS ON PAGE 5 OF THE SOLICITATION:

"THIS IS A REPROCUREMENT OF THAT PORTION OF CONTRACT 8-1-01622 DATED JUNE 28, 1968 (SOLICITATION NO. 1315) FOR WHICH THE CONTRACTOR WAS DECLARED IN DEFAULT." FPR 1-8.602-6(B) PROVIDES THAT IF A REPURCHASE IS FOR A QUANTITY NOT IN EXCESS OF THE UNDELIVERED QUANTITY TERMINATED FOR DEFAULT, THE SITUATION WHICH OBTAINED HERE, THE LEGAL REQUIREMENTS FOR FORMAL ADVERTISING ARE NOT APPLICABLE. SUCH A REPURCHASE IS TAKEN OUTSIDE THE NORMAL RULES BY THE FACT THAT THE REPURCHASE CONTRACT IS FOR THE ACCOUNT OF THE DEFAULTED CONTRACTOR AND NOT FOR THE ACCOUNT OF THE GOVERNMENT. THE EXCESS COSTS INVOLVED IN A REPROCUREMENT, IF ANY, ARE PART OF THE DAMAGES RESULTING FROM THE DEFAULTED CONTRACT. IN CASES INVOLVING SUCH REPURCHASES FOR THE ACCOUNTS OF DEFAULTED CONTRACTORS, WE HAVE HELD THAT CONTRACTING OFFICERS HAVE CONSIDERABLE LATITUDE, SUBJECT ONLY TO THE RESTRICTION THAT WHATEVER ACTIONS THEY TAKE MUST BE REASONABLE IN DECIDING THE COURSE THE REPURCHASE PROCUREMENT SHALL TAKE AND CONSISTENT WITH THEIR DUTY TO MITIGATE DAMAGES. B-168671, MARCH 2, 1970; B-165884, MAY 28, 1969; 42 COMP. GEN. 493 (1963).

IN THE PRESENT CASE, THE SOLICITATION STATED THAT IT WAS A REPROCUREMENT OF THAT PORTION OF A FORMER CONTRACT FOR WHICH THE CONTRACTOR WAS DECLARED IN DEFAULT, AND WE CONSIDER THIS TO BE REASONABLE AND ADEQUATE NOTICE TO PROSPECTIVE BIDDERS. WE ATTACH NO PARTICULAR SIGNIFICANCE TO THE FACT THAT OTHER BIDDERS DID NOT SHARE YOUR INTEREST IN THE STATUS OF THE DEFAULTED CONTRACTOR'S EQUIPMENT AND INVENTORY. IT WAS THE OBLIGATION OF THE POST OFFICE DEPARTMENT TO OBTAIN AND SUPPLY THE GOVERNMENT FURNISHED PARTS IF AWARD WAS MADE ON THAT BASIS AND BIDDERS COULD OBTAIN THEIR SUPPLIES FROM SOURCES DESIGNATED IN THE SOLICITATION IN THE EVENT OF AWARD WITHOUT GOVERNMENT FURNISHED PARTS. IN NEITHER CASE DID ANY BIDDER HAVE AN OBLIGATION TO OBTAIN PARTS OR EQUIPMENT FROM THE DEFAULTED CONTRACTOR.

WITH RESPECT TO YOUR ASSERTION THAT PROPER EVALUATION OF YOUR BID WOULD HAVE SHOWN IT TO BE IN THE BEST INTEREST OF THE GOVERNMENT, YOU ESTIMATED THAT THERE WOULD BE A SAVING TO THE POST OFFICE DEPARTMENT OF $11,800.00, AT THE END OF THE CONTRACT, EITHER WITH OR WITHOUT GOVERNMENT FURNISHED PARTS, IF YOU HAD RECEIVED AN AWARD AND HAD PURCHASED THE INVENTORY OF THE DEFAULTED CONTRACTOR. HOWEVER, THE DIFFERENCE BETWEEN YOUR BID AND THE BID OF THE SUCCESSFUL BIDDER WAS $27,192.45 ON THE BASIS OF GOVERNMENT FURNISHED PARTS AND YOUR BID WITHOUT GOVERNMENT FURNISHED PARTS WAS $58,344.80 HIGHER THAN THE AWARD AS MADE. IT WOULD NOT HAVE BEEN CONSISTENT WITH THE DUTY OF THE CONTRACTING OFFICER TO MITIGATE DAMAGES UNDER THE DEFAULTED CONTRACT FOR HIM TO HAVE ACCEPTED EITHER OF YOUR HIGHER BIDS IN THE HOPE OF ACHIEVING SAVINGS IN THE AMOUNT OF YOUR ESTIMATE AT THE END OF THE CONTRACT.

ALTHOUGH YOU ASSERT THAT YOUR OFFER TO PURCHASE THE EQUIPMENT AND INVENTORY OF THE DEFAULTED CONTRACTOR, IF AWARD WERE MADE TO YOUR FIRM, WOULD RESULT IN GREATER BENEFITS TO THE SMALL BUSINESS ADMINISTRATION AND TO EMPLOYEES OF THE DEFAULTED CONTRACTOR, WE AGREE WITH THE POST OFFICE DEPARTMENT THAT THESE FACTORS ARE SPECULATIVE. IN ANY EVENT, WE DO NOT CONSIDER THIS TO BE A PROPER MATTER FOR EVALUATION IN CONNECTION WITH THIS REPURCHASE SINCE THERE IS NO DUTY IMPOSED ON THE CONTRACTING OFFICER, BY STATUTE OR OTHERWISE, TO CONSIDER SUCH FACTORS. MOREOVER, IF POST OFFICE DEPARTMENT FUNDS WERE EXPENDED FOR THE BENEFIT OF THE SMALL BUSINESS ADMINISTRATION, IT WOULD BE ENTIRELY INCONSISTENT WITH THE PURPOSES OF THE POST OFFICE'S APPROPRIATION AND WOULD CONSTITUTE AN ILLEGAL AUGMENTATION OF THE SMALL BUSINESS ADMINISTRATION APPROPRIATION.

WITH REGARD TO YOUR QUESTIONING THE EFFECT OF THE POST OFFICE DEPARTMENT'S PAYMENT OF APPROXIMATELY $34,000.00 TO OBTAIN RELEASE OF A LIEN ON GOVERNMENT FURNISHED PARTS, SUCH PAYMENT MUST BE REGARDED AS A PART OF THE DAMAGES RESULTING FROM THE DEFAULT AND, AS SUCH, IS A PAYMENT FOR THE ACCOUNT OF THE DEFAULTED CONTRACTOR. IT CANNOT BE CONSIDERED INCONSISTENT WITH THE CONTRACTING OFFICER'S DUTY TO MITIGATE DAMAGES TO MAKE SUCH A PAYMENT IN VIEW OF THE DIFFERENCE OF $49,124.80 BETWEEN THE ALTERNATIVE BIDS OF THE LOW BIDDER, WHEN MAKING THE PAYMENT ENABLED HIM TO ACCEPT THE LOWER ALTERNATIVE. WE ARE OF THE OPINION THAT THE CONTRACTING OFFICER'S ACTIONS WERE ENTIRELY REASONABLE IN THIS REGARD.

WE ALSO AGREE WITH THE POST OFFICE DEPARTMENT'S CONCLUSION THAT THE PROCUREMENT IN QUESTION IS NOT APPROPRIATE FOR TWO-STEP ADVERTISING PROCEDURES. THE TWO-STEP FORMAL ADVERTISING METHOD WAS DESIGNED TO PROMOTE MAXIMUM COMPETITION WHEN AVAILABLE SPECIFICATIONS ARE NOT SUFFICIENTLY DEFINITE TO PERMIT FULL AND FREE COMPETITION WITHOUT ENGINEERING EVALUATION AND DISCUSSION OF TECHNICAL ASPECTS OF THE REQUIREMENT TO INSURE MUTUAL UNDERSTANDING. SINCE THE TECHNICAL SPECIFICATIONS WERE COMPLETE BOTH FOR THE ORIGINAL PROCUREMENT AND THE REPURCHASE AND NO ENGINEERING EVALUATION WAS REQUIRED, THE CONDITIONS FOR USE OF THE TWO-STEP FORMAL ADVERTISING METHOD WERE NOT PRESENT HERE. SEE FPR 1-2.502.

IN YOUR RESPONSE TO THE ADMINISTRATIVE REPORT, YOU SUBMITTED INFORMATION CONCERNING THE SUCCESSFUL BIDDER, DEFENSE ELECTRONICS, AND EXPRESSED THE VIEW THAT THE COMPANY WAS HAVING FINANCIAL PROBLEMS AND WOULD HAVE DIFFICULTY PERFORMING THE CONTRACT. HOWEVER, SINCE YOU STATED IN YOUR LETTER THAT YOU WERE NOT CONCERNED WITH THE EXTENT OF THE PREAWARD SURVEY CONDUCTED BY THE POST OFFICE DEPARTMENT, WE DO NOT REGARD YOUR SUBMISSIONS AS QUESTIONING THE REASONABLENESS OF THE DEPARTMENT'S DETERMINATION PRIOR TO AWARD THAT DEFENSE ELECTRONICS WAS A RESPONSIBLE CONTRACTOR.

YOUR OBSERVATION THAT MANY OF THE SUPPLIERS, AS A RESULT OF THEIR EXPERIENCE WITH THE DEFAULTED CONTRACTOR, MAY BE RELUCTANT TO SHIP ANY MATERIAL EXCEPT ON A C.O.D. BASIS IS WELL FOUNDED. WE HAVE BEEN ADVISED THAT THE CONTRACTOR DID, IN FACT, EXPERIENCE DIFFICULTY OF THIS NATURE. HOWEVER, ADEQUATE FINANCIAL ARRANGEMENTS HAVE NOW BEEN EFFECTED, SUPPLIES HAVE BEEN DELIVERED AND THE CONTRACT IS BEING PERFORMED IN A MANNER SATISFACTORY TO THE POST OFFICE DEPARTMENT. SINCE IT DOES NOT APPEAR THAT ANY MODIFICATION OF THE SOLICITATION WOULD HAVE AFFECTED THIS ATTITUDE ON THE PART OF THE SUPPLIERS, YOUR OBSERVATION, ALTHOUGH VALID, DOES NOT PROVIDE ANY BASIS ON WHICH TO OBJECT TO THE FORM OF THE SOLICITATION. FOR THE REASONS STATED, IT IS OUR OPINION THAT NONE OF THE BASES YOU ASSERTED FOR YOUR PROTEST AFFORD ANY LEGAL GROUNDS FOR QUESTIONING THE AWARD IN THIS REPROCUREMENT, AND YOUR PROTEST MUST THEREFORE BE DENIED.