BNUMBER:  B-270275
DATE:  February 21, 1996
TITLE:  Aztec Development Co.

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Matter of:Aztec Development Co.

File:     B-270275

Date:     February 21, 1996

Troy M. Deal, Jr. for the protester.
Nilza F. Velazquez, Esq., Department of Transportation, United States 
Coast Guard, for the agency.
Susan K. McAuliffe, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Irrespective of whether protester's bid for a fixed-price contract for 
survey and dredging services may have been mathematically unbalanced, 
the bid was not materially unbalanced where, in view of the short 
(14-day) contract performance period and the solicitation's payment 
provisions, award to the protester would have resulted in the lowest 
overall cost to the government, and acceptance of the bid would not 
have led to improper advance payments.

DECISION

Aztec Development Co. protests the rejection of its bid as materially 
unbalanced under invitation for bids (IFB) No. DTCGG1-95-B-3WK331, 
issued by the Department of Transportation, United States Coast Guard, 
for survey and dredging services at the entry channel to the United 
States Coast Guard Station Eatons Neck, Northport, New York.

We sustain the protest.

The IFB required bidders to submit prices for two line items.  Line 
item No. 0001AA was to "[p]rovide pre-dredge and post-dredge 
hydrographic surveys"; the bid schedule provided a space for the 
bidder to enter its lump-sum price for the item.  Line item No. 0001AB 
was to "[p]erform dredging and dispose of dredged material" at an 
estimated quantity of 10,000 cubic yards; the bid schedule provided 
spaces for the bidder to enter its unit (cubic yard) price and total 
(extended) price for the item.  The bid schedule also had a space for 
the bid's total lump-sum price.  The contractor was to furnish all 
labor, material, equipment, supervision, and transportation necessary 
for the entrance channel dredging.  The IFB provided that performance 
of the contract was to be completed within 14 days after the 
contractor's receipt of the notice to proceed.  The IFB also provided 
that the government would issue progress payments on a monthly basis, 
or at more frequent intervals as determined by the contracting 
officer, to the successful contractor based on the work accomplished 
within that period.

Five bids were received in response to the IFB by bid opening on 
August 23, 1995.  Aztec submitted the apparent low total bid of 
$112,300, consisting of $69,200 for the required pre/post-dredge 
hydrographic surveys (line item No. 0001AA) and $4.31 per cubic yard 
for the required dredging and disposal of dredged materials (line item 
No. 0001AB).  The apparent second low bid (at $122,700, with a bid of 
$15,700 for line item No. 0001AA and $10.70 per cubic yard for line 
item No. 0001AB) was rejected as nonresponsive for providing less than 
the required 90 days for acceptance of the bid.  Bristol Construction 
Corporation submitted the apparent next low bid at $130,000 (with a 
bid of $10,000 for line item No. 0001AA and $12.00 per cubic yard for 
line item No. 0001AB).

Aztec's bid was rejected as materially unbalanced for grossly 
overstating its price for line item No. 0001AA (the pre/post-dredge 
surveys) and offering a nominal price for line item No. 0001AB 
(dredging and disposal).  The agency determined that acceptance of the 
Aztec bid would be tantamount to allowing an improper advance payment 
since upon completion of the pre-dredge survey, Aztec could submit an 
invoice for progress payments amounting, at least, to more than one 
third (approximately $34,600, or one half of its lump-sum line item 
0001AA price) of its total bid price (of $112,300) before it even 
began dredging.[1]   Award was made to Bristol on September 25.  This 
protest followed.

Aztec contends that its bid was not unbalanced.  Aztec explains that, 
contrary to "industry practice," the IFB failed to provide a separate 
line item for a lump-sum price for the "very expensive" mobilization 
and demobilization costs involved in performing the contract.  Aztec 
states that it chose to include its mobilization/demobilization costs 
in its lump-sum price for the surveys (line item No. 0001AA), rather 
than spreading those costs over the course of the contract in the 
firm's price for the dredging and disposal requirement (line item No. 
0001AB).  The protester contends that it would have been improper to 
include its mobilization/demobilization costs in its price for line 
item No. 0001AB, as the other bidders did, because that item referred 
only to the actual dredging and disposal of the dredged material, and 
not the transport of equipment or other mobilization costs.  Aztec 
states that "[b]ecause of the short (14-day) dredging time allowance, 
[the protester] accepted this departure from industry standard of 
payment of [m]obilization costs in advance of dredging" since "payment 
was not due until job completion."  Aztec states that due to the IFB's 
provision for progress payments on a monthly basis, its bid cannot 
result in an improper advance payment for the pre-dredging survey, as 
the agency contends, since full performance of the contract (within 
the required 14-day period) would be completed prior to any monthly 
progress payment.

An examination of bid unbalancing has two aspects.  First, the bid 
must be evaluated mathematically to determine whether each item 
carries its share of the cost of the work, plus overhead and profit; 
if the bid is based on nominal prices for some work and inflated 
prices for other work, it is mathematically unbalanced.  The second 
aspect--material unbalancing--involves an assessment of the cost 
impact of a mathematically unbalanced bid.  A bid is materially 
unbalanced if there is a reasonable doubt that award to the bidder 
submitting the mathematically unbalanced bid will result in the lowest 
ultimate cost to the government, or where the bid is so grossly 
front-loaded that its acceptance would be tantamount to allowing an 
advance payment.  Federal Acquisition Regulation (FAR)  sec.  14.404-2(g), 
15.814(b)(2); Rust Int'l Corp.; ABB Susa, Inc./Brown & Root, a Joint 
Venture, 
B-256886.2 et al., Aug. 30, 1994, 94-2 CPD  para.  84; ACC Constr. Co., 
Inc., B-250688, Feb. 16, 1993, 93-1 CPD  para.  142.

Here, a single award is contemplated by the IFB for the two line 
items, the performance period is only 14 days, and the contractor 
ultimately was to be paid on the basis of its overall low, fixed 
price.  In our view, then, irrespective of whether Aztec's bid is 
mathematically unbalanced, there is no doubt that the bid represents 
the lowest overall cost to the government compared to the other bids 
received.  See Rust Int'l Corp.; ABB Susa, Inc./Brown & Root, a Joint 
Venture, supra.[2] 

Further, acceptance of Aztec's bid would not lead to an improper 
advance payment since payment under the contract is expected to be 
made after full performance.  As the protester points out, the 
required contract performance period is 14 days.  The IFB's terms 
provide no basis under which the contractor would be entitled to 
receipt of any payments prior to the scheduled completion of the work.  
The agency posits no scenario under which contract performance could 
be delayed to the point where progress payments would be made.  In 
this connection, as stated above the IFB provides that progress 
payments will be issued on a monthly basis (more 
frequently only as determined by the contracting officer); full 
performance of the contract thus would be completed prior to the 
issuance of any required monthly progress payment.  

Accordingly, we find that the agency improperly rejected Aztec's bid, 
and we sustain the protest on that basis.

The agency has advised our Office that Bristol has completed 
performance of its contract under the IFB.  Under the circumstances, 
we recommend that Aztec be reimbursed the costs of filing and pursuing 
this protest, and its bid preparation costs.  Bid Protest Regulations, 
section 21.8(d), 60 Fed. Reg. 40,737, 40,743 (Aug. 10, 1995) (to be 
codified at 4 C.F.R.  sec.  21.8(d)).  Aztec should submit its detailed and 
certified claim for costs directly to the agency within 90 days after 
receipt of this decision.  Bid Protest Regulations, section 
21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

1. An advance payment occurs when a payment under a contract to 
provide services or deliver an article is more than the value of the 
services already provided or the article already delivered.  See  F&E 
Erection Co., B-234927, June 19, 1989, 89-1 CPD  para.  573.

2. Even under the remote possibility that the contract would have to 
be terminated for default after the pre-dredging survey (i.e., after 
partial completion of line item No. 0001AA), Aztec, not the 
government, would be responsible for any costs to complete the work 
above Aztec's low total bid.  See FAR  sec.  52.249-10.