BNUMBER:  B-270651.2
DATE:  April 25, 1996
TITLE:  Martin Warehousing & Distribution, Inc.

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Matter of:Martin Warehousing & Distribution, Inc.

File:     B-270651.2

Date:April 25, 1996

Dennis J. Hwang, Esq., Watanabe, Ing & Kawashima, for the protester.
Ronald R. Sakamoto, Esq., and David M. K. Lum, Esq., Char Sakamoto 
Ishii & Lum, for Windward Moving & Storage Co., Inc., an intervenor.
Elizabeth Rivera Bagwell, Esq., and Anita LeBlanc, Esq., Department of 
the Navy, for the agency.
Jeanne W. Isrin, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protester's proposal was properly rejected as unacceptable where 
moving services solicitation contemplated award of primary and 
secondary contracts and specifically warned that a conditioned offer 
would not be eligible for award, and protester's proposal was 
conditioned to state that it was for primary award only.

DECISION

Martin Warehousing & Distribution, Inc. (MWD) protests the award of a 
contract to Windward Moving & Storage, Inc. (WMS) under request for 
proposals (RFP)       No. N00604-95-R-0151, issued by the Fleet and 
Industrial Supply Center, Pearl Harbor, Hawaii, for household goods 
packing and crating services (Schedule III) on the island of Oahu.

We deny the protest.

BACKGROUND

The RFP contemplated the award of one or more indefinite delivery 
requirements contracts for a 1-year period, based on both technical 
and price evaluations.  The schedule set forth estimated quantities 
for each line item, and offerors were required to provide unit and 
extended prices based on the estimates.  The schedule provided the 
government's minimum and maximum daily requirements expressed in terms 
of "net hundred weight" (NCWT) units; offers had to be based on at 
least the 200 NCWT minimum daily guaranteed quantity and were 
permitted to be based on a daily quantity guarantee up to the 
government's 1,300 NCWT estimated maximum.  Under the contracts 
awarded, the agency would place orders for services with the firm 
awarded the primary contract up to its guaranteed maximum daily 
capacity.  Orders for additional requirements then would be placed in 
a like manner with the next higher-priced, secondary contractor to the 
extent of its guaranteed maximum capacity, and so on, until the 
agency's total daily requirement is fulfilled.

The agency received nine offers from six offerors, including three 
from MWD, one of which was the lowest priced.  However, only WMS' 
proposal (the third lowest) was found technically acceptable.  The 
other eight proposals, including all three of MWD's, were found 
technically unacceptable for failure to provide required information 
regarding key personnel, quality assurance plan, and past performance.  
In addition, since MWD's low-priced proposal (the only one relevant 
here) stated that "This offer is for primary only," and the other two 
proposals were similarly limited to the secondary award, the agency 
found that the proposals contained unacceptable conditions that 
rendered them unacceptable.  A single award thus was made to WMS. 

ARGUMENT

MWD argues that the rejection of its low-priced proposal was improper 
because    (1) the perceived deficiencies in its technical proposal 
were unjustified and could have been rectified through discussions, 
and (2) the "primary only" condition was permitted under the RFP.  MWD 
concludes that it should have received award in light of its low price 
and higher (than WMS') guaranteed capacity.

ANALYSIS

The RFP contained the following provision at section L100B.2(5):

     "OFFERORS SHALL NOT CONDITION THEIR PRICING PROPOSAL.  ANY 
     OFFEROR WHO DOES WILL NOT BE EVALUATED OR CONSIDERED FOR AWARD."
 
The Navy explains that section L100B.2(5) was included in the 
solicitation to prevent firms from offering only for the primary award 
because this practice previously had been permitted and had undercut 
the agency's ability to make the series of awards most beneficial to 
the government.  For example, while a secondary award might ordinarily 
be made to the second low offeror, if the offer contained a primary 
only condition, such an award could not be made.  Such conditions also 
create the possibility that firms might offer only on the primary 
contract (since, as the contract of first resort, it likely would 
result in the greatest volume for the contractor); this could result 
in limited offers for the secondary and tertiary awards, making it 
impossible for the agency to make reasonably priced secondary and 
tertiary awards.

We agree with the Navy that MWD impermissibly conditioned its 
offer.[1]  The primary only language in MWD's proposal indisputably 
conditioned the proposal to permit its acceptance only for the primary 
award. This is clearly inconsistent with the restriction quoted above.

In a negotiated procurement, a proposal that fails to conform to 
material terms and conditions of the solicitation is unacceptable and 
normally may not form the basis for an award.  CooperVision, Inc., 
B-231745, July 1, 1988, 88-2 CPD  para.  3; Consolidated Bell, Inc., 
B-227894, Sept. 23, 1987, 87-2 CPD  para.  292.  A proposal which fails to 
satisfy all RFP requirements may be accepted, however, where waiving 
the deficiency would not competitively prejudice other offerors.  
Corporate Jets, Inc., B-246876.2, May 26, 1992, 92-1 CPD  para.  471.  Since 
MWD's proposal was low, and therefore presumably would have been in 
line for the primary award, it is clear that accepting its offer 
conditioned to primary award only would not, as a practical matter, 
have created the difficulties cited by the agency in determining the 
most advantageous award mix.  However, accepting MWD's conditioned 
offer would be prejudicial to the other offerors which did not 
condition their proposals.  The record indicates that prices for the 
primary contract alone would be lower than those for the secondary and 
tertiary contracts, since the primary contract likely would involve 
the greatest volume; as moving volume increases, the principle of 
economies of scale leads to lower unit prices.  (This is illustrated 
by the pricing of MWD's own secondary proposals, which were 66 and 87 
percent higher than its primary proposal price.)  This analysis 
suggests that, had the other firms offered prices limited to the 
primary contract, their prices likely would have been reduced.  This 
constitutes competitive prejudice; since MWD may have gained a 
competitive advantage by virtue of its disregarding the prohibition 
against conditioning offers, its failure to comply with the 
prohibition cannot be waived.  See NR Vessel Corp., B-250925, Feb. 11, 
1993, 93-1 CPD  para.  128.

In reaching our conclusion, we have considered MWD's position that 
limiting its offer to primary award only is expressly allowed under 
Federal Acquisition Regulation  sec.  52.215-16(d), "Contract Award (JUL 
1990)--Alternate III (AUG 1991)," which was set forth in the RFP under 
section L as follows:

     "The government may accept any item or group of items of an 
     offer, unless the offeror qualifies the offer by specific 
     limitations.  Unless otherwise provided in the Schedule, offers 
     may be submitted for quantities less than those specified.  The 
     Government reserves the right to make an award on any item for a 
     quantity less than the quantity offered, at the unit cost or 
     prices offered, unless the offeror specifies otherwise in the 
     offer."

MWD asserts that the primary only condition is consistent with the 
language of the provision allowing an offeror to specify that its unit 
price is applicable only for the given estimated quantity required and 
not for any lesser amount, since the secondary and tertiary contracts 
to be awarded likely would result in lower volume than the primary 
contract.[2]  MWD's position is untenable.  First, the primary only 
condition does not have the effect of limiting MWD's prices to a 
certain quantity; the RFP's estimated primary contract quantity for 
the principal line item is 150,000 NCWT; and the primary only 
condition did not make MWD's prices inapplicable if a lesser quantity 
of moving services were ordered under the primary contract.  Moreover, 
as discussed above, the primary only condition had the effect of 
impermissibly limiting both MWD's competitive exposure and the 
agency's ability to make awards as contemplated under the RFP; thus, 
even if MWD were correct that the primary only condition effectively 
limited the applicability of its prices as contemplated by the quoted 
provision, it was inconsistent with the prohibition against 
conditioning offers, and thus rendered the proposal unacceptable. 

The protest is denied.

Comptroller General
of the United States
 
1. We therefore do not reach the issue of whether the technical 
deficiencies in MWD's proposal warranted its rejection.

2. In its comments on the agency report, MWD asserts for the first 
time its belief that WMS also indicated that its offer was primary 
only.  This argument could have been, but was not, raised in the 
initial protest; it thus is untimely.  See Ahern & Assocs., Inc., 
B-254907.4, Mar. 31, 1994, 94-1 CPD  para.  236.  In any case, we have 
reviewed WMS' offer, and it was not conditioned.