BNUMBER:  B-265700
DATE:  November 17, 1995
TITLE:  HLC Industries

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Matter of:HLC Industries

File:     B-265700

Date:     November 17, 1995

Ruth E. Ganister, Esq., Rosenthal and Ganister, for the protester.
Jonathan C. Cramer, Esq., and Donovan Cunningham, Esq., Department of 
Justice, for the agency.
Sylvia Schatz, Esq., and David A. Ashen, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest against cancellation of invitation for bids after bid opening 
is denied where agency had specific evidence that resolicitation would 
yield lower prices; the reasonable expectation of cost savings 
furnished a compelling basis for cancellation. 

DECISION

HLC Industries protests the cancellation of invitation for bids (IFB)                   
No. 1PI-B-1453-95, issued by the Department of Justice, Federal Prison 
Industries (known as UNICOR), for camouflage patterned cloth.  HLC 
contends that the agency lacked a compelling reason for cancellation 
after bid opening.

We deny the protest.

The IFB contemplated the award of a firm, fixed-price requirements 
contract for a base year and 4 option years for camouflage fabric, 
which was to be used to manufacture battle dress uniforms for the 
Defense Personnel Support Center (DPSC).  The IFB schedule included 
four line items, one for each of four different types of cloth; the 
solicitation required bidders to submit unit and extended prices based 
on the IFB estimates of 4,350,000 yards of cloth for each line item.  
The IFB set forth an overall minimum quantity of 4,650,000 yards of 
fabric over the 5-year contract, but did not establish guaranteed 
minimum quantities for any one type of cloth.  The IFB included 
Federal Acquisition Regulation (FAR) standard clause        52.207-4, 
entitled "Economic Purchase Quantity," which requested opinions from 
firms with respect to whether different quantities of the items would 
be more economically advantageous to the government.  This clause 
afforded firms the opportunity to recommend an "economic purchase 
quantity," defined as a "quantity at which a significant price break 
occurs"; the clause reserved to the government  "the right to amend or 
cancel the solicitation and resolicit with respect to any individual 
item in the event quotations received and the Government's 
requirements indicate that different quantities should be acquired."
   
HLC submitted the low bid of $84,216,000, while Delta Mills submitted 
the next-low bid of $90,480,000.  Delta Mills also submitted an 
alternate bid, pursuant to FAR      52.207-4, offering UNICOR a lower 
price if the contemplated contract were changed from a 5-year contract 
to a 2-year contract and a minimum order for each of the fabrics were 
established.  UNICOR subsequently decided to cancel the IFB and 
resolicit its requirements on the basis that:  (1) DPSC had notified 
UNICOR that it no longer required the product manufactured from one of 
the four types of cloth; (2) UNICOR had discovered that a second type 
of cloth was available under an option year of a current UNICOR 
contract with Delta Mills at a price that was approximately 30 percent 
less than the low price submitted by HLC under the instant 
solicitation; and (3) restructuring the solicitation to reduce the 
5-year contract period to a base and 1 option year and to establish a 
minimum quantity requirement for the remaining two types of fabric 
would result in considerable cost savings to the government.

HLC argues that UNICOR lacked a compelling reason for cancelling the 
IFB after bid opening since, in its view, the government was assured 
of satisfying its needs at the lowest overall price by accepting its 
bid as submitted.  According to the protester, since the IFB 
contemplated the award of a requirements contract which did not 
require the agency to order a minimum quantity of any particular type 
of cloth and only required an overall minimum order of 4,650,000 yards 
of cloth over the 5-year term of the contract, the agency could have 
met its needs by simply ordering whichever of the four types of cloth 
covered by the solicitation it required.  
The preservation of the integrity of the competitive bidding system 
requires that the determination to cancel an IFB after bids have been 
exposed at bid opening be supported by a compelling reason.  FAR  
14.404-1(a)(1).  Determining whether a compelling reason exists 
involves the exercise of the contracting agency's judgment; we review 
such a determination only to ensure that it is reasonable.  GS 
Elektro-Schewe GmbH, B-259103.2, Apr. 13, 1995, 95-1 CPD  196; 
Control Concepts, Inc., B-233354.3, Apr. 6, 1989, 89-1 CPD  358.  We 
have previously recognized that a compelling basis for cancellation 
exists where the agency has specific evidence that resolicitation 
would yield lower prices.  Color Dynamics, Inc.--Recon., B-236033.3, 
Dec. 22, 1989, 89-2 CPD  583; see National Linen Serv., B-257112; 
B-257312, Aug. 31, 1994, 94-2 CPD  94.

We find UNICOR's determination to cancel the IFB to be 
unobjectionable.  The agency determined that because bidders under the 
original IFB needed to maintain a large inventory of different types 
of fabric with no certainty as to how much or when within the 5-year 
contract period any particular fabric would be required, the bids it 
received were higher than might otherwise be expected if the risks 
imposed on bidders were less.  In particular, the agency anticipated 
that a substantial reduction in bid prices would result under a 
revised solicitation requiring the agency to order within a 2-year 
contract period a minimum quantity of 850,000 yards of each of the two 
types of cloth it had determined were in fact required, since offerors 
would thereby be exposed to less uncertainty as they could keep on 
hand a smaller inventory of only two kinds of cloth that the agency 
would definitely order within a shorter period of time.  In support of 
its position, the agency points to Delta Mills' alternate bid, which 
offered unit prices of $5.30 and $5.40 per yard for the two types of 
cloth required by the agency based on a minimum required order of 
1,000,000 yards per year for a 2-year period; Delta Mills' alternate 
bid unit prices were significantly lower than HLC's bid of $5.99 per 
yard for these types of cloth.  

HLC notes that Delta Mills' lower prices were contingent upon UNICOR's 
agreement to place minimum orders in each of the 2 contract years.  
The record, however, furnishes no basis for concluding that the 
minimum quantities contemplated by UNICOR would not be consistent with 
the agency's minimum needs.  Further, although the contemplated 
contract may impose different burdens on UNICOR, we think the agency's 
reasonable determination that it can obtain better prices by 
expressing its needs on a year-to-year basis furnished a compelling 
basis to cancel the IFB and resolicit its requirements.
 
The protest is denied.

Comptroller General
of the United States