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.