BNUMBER:  B-271009
DATE:  May 8, 1996
TITLE:  Eastman Kodak Company

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Matter of:Eastman Kodak Company

File:     B-271009

Date:     May 8, 1996

John A. Howell, Esq., Ross & Hardies, for the protester.
Terence W. Carlson, Esq., Department of Transportation, for the 
agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Contracting agency reasonably canceled a request for quotations where 
it determined--after reviewing an agency-level protest, the 
solicitation's specifications, and the quotations received--that the 
specifications might not reflect the agency's minimum needs, and where 
relaxed specifications might result in cost savings, as well as 
increased competition.

DECISION

Eastman Kodak Company protests that request for quotations (RFQ) No. 
DTOS59-96-Q-3030, issued by the Department of Transportation (DOT) for 
copier equipment, was unreasonably canceled. 

We deny the protest.

The RFQ requested quotations for copier equipment and maintenance 
under a multiple award Federal Supply Schedule contract.  Firms were 
to provide pricing for 10 high-speed copier machines in accordance 
with various minimum specifications, as well as pricing for 
maintaining the copiers over a 60-month period.  One component of the 
maintenance pricing was a basic copy allowance, expressed in terms of 
cents per page at a given number of pages--this component would be 
evaluated on the basis of 150,000 copies per machine, per month.  
Award would be made to the firm quoting the lowest overall price.  

DOT determined that three of the seven quotations submitted did not 
meet the RFQ's minimum specifications.  Of the remaining four 
quotations, Kodak's was the lowest-priced.  The contracting officer 
prepared and signed a purchase order to Kodak but, on that same day, 
DOT received an agency-level protest from one of the unsuccessful 
vendors complaining that certain specifications unduly restricted 
competition.[1]  The director of acquisition services instructed the 
contracting officer not to make award to Kodak, and began a review of 
the matter.  After meeting with the program office and procurement 
staff, and reviewing the protest and the RFQ's specifications, he 
concluded that those specifications might be too restrictive; that the 
stated method of evaluating the copy usage cost was not in the best 
interest of the government; and that the agency should have used a 
best value approach to the acquisition.  After the solicitation was 
canceled, Kodak filed this protest.

A contracting agency need only establish a reasonable basis to support 
a decision to cancel an RFQ.  Shasta Transfer & Storage, B-261172, 
July 28, 1995, 95-2 CPD  para.  48; Tony Ingoglia Salami and Cheese, Inc., 
B-244452, Sept. 23, 1991, 91-2 CPD  para.  268.  A reasonable basis to 
cancel exists when a new solicitation presents the potential for 
increased competition or cost savings.  G.K.S. Inc., 68 Comp. Gen. 589 
(1989), 89-2 CPD  para.  117; Bell Indus., Inc., B-233029, Jan. 25, 1989, 
89-1 CPD  para.  81.  The fact that the cancellation occurred after Kodak 
was identified as the awardee does not by itself evidence that the 
cancellation was improper; an agency may properly cancel a 
solicitation no matter when the information precipitating the 
cancellation first surfaces or should have been known, even if the 
solicitation is not canceled until after quotations have been 
submitted and evaluated.[2]  See PAI Corp. et al., 
B-244287.5 et al., Nov. 29, 1991, 91-2 CPD  para.  508.  The record shows 
that the agency's justifications for canceling the solicitation were 
reasonably based.

An agency may cancel a solicitation if it materially overstates the 
agency's requirements and the agency desires to obtain enhanced 
competition by relaxing the requirements.  HBD Indus., Inc., 
B-242010.2, Apr. 23, 1991, 91-1 CPD  para.  400.  DOT's review of the 
agency-level protest and the RFQ's specifications raised concerns that 
those specifications might overstate the agency's minimum needs.  The 
unsuccessful vendor questioned the justification for requiring the 
copiers to have an automatic computer forms feeder, considering that 
they will be used in a walk-up copy center environment, as well as the 
requirement that the copiers produce 85 copies per minute--the vendor 
asserted that DOT's copier manager had told the firm that 75 copies 
per minute met the agency's needs.  DOT concluded that a customer 
survey of the agency's users was needed to determine the agency's 
actual minimum needs.[3]  Kodak does not address the materiality of 
these requirements, and we have no basis to discount the agency's 
concern that they may be overstated.  

While Kodak asserts that the agency failed to engage in advance 
planning, the contracting officer states that the requirement was 
coordinated with the program office responsible for copiers, as well 
as with procurement staff, and that technical staff reviewed the 
requirement before its issuance.  In any event, the requirement to use 
advance planning in order to obtain full and open competition does not 
mean that the government guarantees that its solicitations are 
completely free of errors that could be detected by advance planning; 
agencies are not precluded from canceling an RFQ where, as here, it 
does not reflect the agency's needs.  See Americorp, B-225667, Apr. 
14, 1987, 87-1 CPD  para.  404.  As for Kodak's objection that DOT should 
not have canceled the solicitation based on its "mere speculation" 
that it might not reflect actual agency needs, certainty in this area 
is not required.  Based on the record here, including the fact that 
three of the seven quotations received were rejected as not meeting 
the minimum specifications, relaxing the specifications presents the 
potential that competition will be increased, and therefore supports 
the cancellation.  See Xactex Corp., B-247139, May 5, 1992, 92-1 CPD  para.  
423.  Once DOT was cognizant that increased competition and cost 
savings were possible, given a revision of the solicitation's terms 
and conditions, it properly could cancel the RFQ.  G.K.S. Inc., supra. 

The agency also was concerned that the RFQ's stated basis for 
evaluating the copy usage cost would result in excessive costs to the 
agency because the figure to be used, 150,000 copies per machine, per 
month, did not accurately describe its needs.  Vendors were to provide 
a cents per page price for the basic copy allowance, and could provide 
a rate for copies in excess of 150,000 per machine, per month.  
Kodak's quotation included an excess copy charge.  The agency reviewed 
its copier machine usage data for the most recent fiscal year to 
ascertain the impact of this excess copy charge.  The data shows that 
19 of 42 copier machines averaged an annual volume in excess of 
150,000 copies per month, and that individual copiers exceeded this 
level in 242 of 504 months, often by a significant margin.  DOT 
asserts that revising the solicitation to evaluate the copy usage cost 
using the figure of 200,000 copies per machine, per month, a figure 
more reflective of its actual needs, will result in a cost savings.  

Kodak counters that only one of the specific copier machines to be 
replaced by the copier machines at issue here had an average rate of 
more than 150,000 copies in the last year.  However, in addition to 
the fact that several of these copier machines produced more than 
150,000 copies in a number of individual months, Kodak overlooks DOT's 
concern that utilizing the 150,000 copy per month level for the 
evaluation will deprive the agency of its flexibility to move copiers 
around to satisfy demand--additional cost will be incurred if the 
Kodak copiers are moved to an area where usage exceeds 150,000 copies 
per month.  Considering the heavy usage rate of a number of DOT's 
copier machines, and the likelihood that at least some of these 
machines might be moved over the 5-year period anticipated here, we 
cannot conclude that the agency's concern is unreasonable.  

Finally, DOT states that it intends to reexamine the type of 
solicitation it uses for this procurement to emphasize a "best value" 
approach in order to consider such things as cost of service and 
maintainability, commonality of supplies, and storage space.  This 
consideration provides another basis for cancellation of the RFQ since  
cancellation is also warranted where the agency determines that cost 
savings may be realized by utilizing another procurement method or 
revised solicitation terms, so long as this determination does not 
arise from a lack of procurement planning or otherwise originate as a 
result of bad faith on the agency's part (neither of which is a factor 
here).  See Budney Indus., B-252361, June 10, 1993, 93-1 CPD  para.  450.

The protest is denied.

Comptroller General
of the United States

1. This same vendor, whose quotation was rejected for failing to meet 
the RFQ's minimum specifications, had raised similar concerns prior to 
the closing date for  submission of quotations.  The contracting 
officer states that, at that time, he concluded the requirements were 
supported. 

2. Kodak incorrectly asserts that the contracting officer's mere act 
of preparing and signing the purchase order gave rise to a binding 
contract.  A quotation is not an offer and, consequently, cannot be 
accepted by the government to form a binding contract.  Federal 
Acquisition Regulation  sec.  13.108(a).  Issuance by the government of an 
order for supplies or services in response to a supplier's quotation 
does not establish a contract.  Id.  A contract comes into existence 
only after acceptance of the order by the supplier.  Federal 
Acquisition Management Training Serv., B-248871; B-248873, Sept. 28, 
1992, 92-2 CPD  para.  214.  Such acceptance did not occur here.

3. While Kodak argues that the survey is too generalized to be of 
"probative value" in determining the agency's actual minimum needs, 
our review of the survey shows that it is sufficient for its intended 
purpose.