BNUMBER:  B-265740; B-265741
DATE:  December 21, 1995
TITLE:  Sawadi Corporation

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Matter of:Sawadi Corporation

File:     B-265740; B-265741

Date:     December 21, 1995

Dennis M. Dayton, Esq., for the protester.
Newton L. Klements, Esq., Army Corps of Engineers, for the agency.
Mary G. Curcio, Esq., and David A. Ashen, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Apparent low bids were properly rejected as materially unbalanced 
where the bids, which were for contracts to satisfy the same general 
mowing requirements for each of a 5-month base period and 4 option 
years, included a front-loaded base period price and did not become 
low until the third of 4 option years, thereby raising a reasonable 
doubt that the bids would result in the lowest actual cost to the 
government.

DECISION

Sawadi Corporation protests the rejection of the bids it submitted in 
response to invitation for bids (IFB) Nos. DACW31-95-B-0043 (IFB-0043) 
and DACW31-95-B-0044 (IFB-0044), issued by the Army Corps of Engineers 
for grass mowing services.  The bids were rejected as materially 
unbalanced.

We deny the protests.  

The solicitations requested offerors to provide per-acre unit prices 
for mowing specified areas for a base period of 5 months, with four 
1-year option periods.  For example, Item 0001AA of IFB-0043 requested 
a price for one mowing of one acre of an estimated total quantity of 
546 acres in specific Type I areas during the base period, calculated 
as 39 acres per mowing, times an estimated 14 mowings, for a total of 
546 acres to be mowed.  The solicitations incorporated Federal 
Acquisition Regulation (FAR)  52.217-5, which advises bidders that 
the government may reject an unbalanced bid.  The Corps rejected 
Sawadi's apparent low bids under both solicitations as unbalanced. 

A bid that is based on nominal prices for some work and enhanced 
prices for other work is mathematically unbalanced.  A mathematically 
unbalanced bid cannot be accepted if it is also materially unbalanced, 
that is, if there is reasonable doubt that an award based on the bid 
will result in the lowest cost to the government.  DGS Contract 
Servs., Inc., B-250306, Jan. 15, 1993, 93-1 CPD  49.

Here, although the solicitations established the same general mowing 
requirements for each of the base periods and 4 option years, Sawadi 
bid substantially lower prices for the option years than for the base 
year.   The relevant bids under the two solicitations were as follows:        

                               IFB-0043

         Base     First
                  Option   Second
                           Option   Third
                                    Option   Fourth
                                             Option   Total

Sawadi   $59,372  $41,969  $30,627  $32,742  $31,147  $195,857

Next Low
Bid      
         $41,381  
                  $41,381  
                           $41,381  
                                    $41,381  
                                             $41,381  
                                                      $206,906

Govern-ment
Estimate 
         $39,208  
                  $39,208  
                           $39,208  
                                    $39,208  
                                             $39,208  
                                                      $196,040
 
                               IFB-0044

         Base     First
                  Option   Second
                           Option   Third
                                    Option   Fourth
                                             Option   Total

Sawadi   $85,620  $40,840  $42,632  $36,004  $34,752  $239,848

Next Low
Bid      
         $55,745  
                  $55,745  
                           $55,745  
                                    $55,745  
                                             $55,745  
                                                      $278,725

Govern-ment
Estimate 
         $51,432  
                  $51,432  
                           $51,432  
                                    $51,432  
                                             $51,432  
                                                      $257,160
 
The Corps determined that Sawadi's bids were mathematically unbalanced 
based on the substantial discrepancy between the base and option 
period prices and the fact that the other bidders bid the same or very 
similar prices for all periods.  The Corps further determined that 
Sawadi's bids were materially unbalanced because the bids would not 
become low until the third option years.  Based on a potential for 
reductions in funding and a history of past performance problems 
resulting in default terminations, the agency had "serious 
reservations about the eventual duration of the contracts" and was 
concerned that it might not exercise the options, in which case 
awarding a contract to Sawadi would not result in the lowest cost to 
the government.

Sawadi explains in its protest that its base period prices were higher 
than its option year prices because it included start-up costs in the 
base periods, including the purchase of lawn mowers, training, and a 
factor for the inefficiencies associated with starting a new contract.  
It concludes that its bids should not have been rejected as 
unbalanced.

Whatever business reasons are offered to justify a particular bid, the 
government may not pay more for an item or service than its reasonable 
value.  Westbrook Indus., Inc., 71 Comp. Gen. 139 (1992), 92-1 CPD  
30.[1]  Thus, while start-up costs may be factored into a base period 
price so that a front-loaded base price does not automatically mean 
that the bid is unbalanced, the base period price may not carry a 
disproportionate share of the total contract price.  Eastex Maritime, 
Inc., B-256164, May 19, 1994, 94-1 CPD  340.  Except in cases where a 
contractor could have no use for equipment following contract 
performance, equipment and start-up costs are expected to be 
apportioned over the evaluated contract period, i.e., base and option 
periods together.  Accordingly, where a contractor acquires the 
equipment necessary to perform a service contract, which contract will 
require the same level of services in each year of performance, and 
front-loads those costs, we have not considered the bidder's business 
reasons for front-loading costs as relevant to the question of 
unbalanced bidding unless the unique nature of the contract or of the 
equipment would leave the typical bidder with valueless equipment in 
the event of early termination.  See  id.; Residential Refuse Removal, 
Inc., 72 Comp. Gen. 68 (1992), 92-2 CPD  444; Westbrook Indus., Inc., 
supra.

Here, although Sawadi argues that there is no resale market for used 
commercial lawn mower equipment, this does not establish that the 
equipment will be of no value to Sawadi if the contract is terminated 
early since nothing in the record demonstrates that Sawadi would not 
be able to use the equipment on lawn mowing contracts in the future.  
Thus, Sawadi was required to amortize the cost of the lawn mowing 
equipment over the evaluated contract period and could not simply seek 
to recover its costs at the beginning of the contract, and the agency 
reasonably determined that Sawadi's bids were front-loaded for failing 
to do so. 

In view of the fact that Sawadi's bids did not become low until the 
third option years, and given the Corps' doubts about whether the 
option years would be exercised, since intervening events such as a 
loss of contract funding, a change in mowing requirements or a 
termination for default could result in the Corps not exercising 
options, we think the Corps reasonably determined that there was 
reasonable doubt that an award to Sawadi would result in the lowest 
overall cost to the government.  The Corps therefore properly rejected 
Sawadi's bids as materially unbalanced.  Professional Waste Sys., 
Inc.; Tri-State Servs. of Texas, 67 Comp. Gen. 68 (1987), 87-2 CPD  
477.

The protests are denied.

Comptroller General
of the United States

1. Sawadi also claims that its prices for the base periods were 
substantially higher than for the option periods because the base 
period is only 5 months, while the option periods are 12 months, and 
to account for variations in site conditions and in demand over the 
life of the contract, which would affect its cost of performance.  
These explanations are unconvincing since, again, the solicitations 
established the same general mowing requirements for each of the 
performance periods.  To the extent that Sawadi is questioning the 
solicitation estimates, Sawadi was required to protest prior to bid 
opening in order to be timely under our Bid Protest Regulations.  4 
C.F.R.  21.2(a)(1) (1995).  In addition, while unanticipated changes 
in demand or site conditions may occur over time, Sawadi does not 
explain why this risk was greater at the beginning of the contracts, 
and it is not apparent to us why this would be the case.