BNUMBER: B-274347; B-274347.2
DATE: December 3, 1996
TITLE: MCI Constructors, Inc.
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Matter of:MCI Constructors, Inc.
File: B-274347; B-274347.2
Date:December 3, 1996
Steven J. Weber, Esq., Watt, Tieder & Hoffar, for the protester.
Christopher M. Bellomy, Esq., George N. Brezna, Esq., and Robert M.
Roylance, Esq., Department of the Navy, for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of
the General Counsel, GAO, participated in the preparation of the
decision.
DIGEST
Where solicitation states that option prices will be evaluated in
determining which bid offers the lowest overall price for a
construction contract, a bid, which is only low if the option is
considered, is not materially unbalanced where the agency reasonably
expects to exercise the option.
DECISION
MCI Constructors, Inc. protests an award to Danis Heavy Construction
Company under invitation for bids (IFB) No. N62470-94-B-4124, issued
by the Department of the Navy, Naval Facilities Engineering Command,
for the wastewater treatment plant upgrade of the French Creek
Wastewater Treatment Facilities, Marine Corps Base, Camp Lejeune,
North Carolina. MCI contends that Danis's bid should be rejected as
unbalanced.
We deny the protest in part and dismiss it in part.
The existing wastewater treatment facilities at Camp Lejeune do not
comply with National Pollution Discharge Elimination System (NPDES)
Permit No. NC0063029. Camp Lejeune is currently permitted to operate
these facilities under a Special Order of Consent agreement entered
into between Camp Lejeune and the North Carolina Environmental
Management Commission. Under this agreement, compliance with the
NPDES Permit is required by December 31, 1998.
The IFB, issued on May 1, 1996, contemplated award of a firm,
fixed-price construction contract for phases II and III of the
three-phase wastewater treatment plant upgrade project.[1] Phase II
of the project covers the construction of a Sludge Treatment System.
Phase III of the project covers the construction of a Biological
Nutrient Removal (BNR) System. Completion of all three phases of this
project is necessary in order to bring Camp Lejeune's wastewater
treatment facilities into compliance with the NPDES Permit.
The IFB bid schedule contained the following four bid items:
"BID ITEM DESCRIPTION AMOUNT
"0001A Price for entire work (including the total construction
cost for the selected Sludge Treatment System), complete
and in accordance with the drawings & specifications, but
EXCLUDING BID ITEMS 0001B, 0001C AND 0002.
$________
"0001B Price for the present worth of guaranteed total
electrical power consumption for the selected BNR System.
$________
"0001C Price for the present worth of guaranteed total
electrical power consumption for the selected Sludge
Treatment System.
$________
"0002 OPTION ITEM 0001
Price for all work associated with the selected BNR
System (except for associated power consumption covered in
Bid Item 0001B), complete and in accordance with the
drawings and specifications.
$________"
Bid item No. 0002 (phase III of the project) was an option item
because, when the IFB was issued, funds for the military construction
budget had not yet been appropriated. Funds were previously
appropriated for phase I in fiscal year 1994, and for phase II in
fiscal year 1996. Phase III funding was in the fiscal year 1997
military construction budget submitted to Congress.
The IFB required bids on an all-or-none basis for all four bid items.
The base contract would cover only bid item No. 0001A, and the
government reserved the right to exercise the option for bid item No.
0002 within 300 calendar days after contract award.[2] The IFB
incorporated by reference the clause at Federal Acquisition Regulation sec.
52.217-5, Evaluation of Options (July 1990), which states that the
government will include the price of options in its evaluation of
total price for award purposes. The IFB also provided that the low
bid for purposes of award shall be the bid with the lowest total price
for all four bid items.
Bid opening was held on June 11. The Navy received the following
bids:
Bid Item No. MCI Danis Gov't Est.
0001A $42,559,498 $41,261,000[3] $38,350,000[4]
0001B 3,981,140 3,921,140 5,100,000
0001C 686,362 2,403,532 3,600,000
0002 8,500,000 1,300,000 3,150,000
Total $55,727,000 $48,945,672 $50,200,000
On June 18, MCI filed an agency-level protest. On August 16, the Navy
denied this protest and awarded the contract to Danis. This protest
followed on August 26. The Navy suspended contract performance
pending resolution of this protest.
MCI contends that Danis's bid prices are unbalanced because its price
for bid item No. 0001A allegedly includes work associated with
construction of the BNR System that would only be performed if the
Navy exercises the option for bid item No. 0002. MCI also alleges
that, since the funds for phase III of the project had not been
appropriated at the time of award, the exercise of the option is
uncertain and thus should not be considered in determining the lowest
bid price.[5]
To be rejected as unbalanced, a bid must be both mathematically and
materially unbalanced. DGS Contract Servs., Inc.; Inventory
Accounting Servs., Inc., B-258429; B-258429.2, Jan. 19, 1995, 95-1 CPD para.
27; Star Brite Constr. Co., Inc., B-244122, Aug. 20, 1991, 91-2 CPD para.
173. A bid is mathematically unbalanced where it contains both
understated prices for some items and overstated prices for other
items. Star Brite Constr. Co., Inc., supra. A mathematically
unbalanced bid is considered materially unbalanced, and cannot be
accepted, where there is a reasonable doubt that acceptance of the bid
will result in the lowest overall cost to the government. Id.; K.P.
Food Servs., Inc., 60 Comp. Gen. 1 (1980), 82-1 CPD para. 289. Except in
cases of extreme price front-loading not applicable here,[6] a bid
which is mathematically unbalanced due to the pricing of base and
option items is not materially unbalanced where the record shows that
the option requirement is certain to exist and that there is a
reasonable expectation that funds will be available to permit exercise
of the option. International Shelter Sys., Inc., 64 Comp. Gen. 519
(1985), 85-1 CPD para. 549; K.P. Food Servs., Inc., supra; see F&E
Erection Co., B-234927, June 19, 1989, 89-1 CPD para. 573.
Here, even if we assumed that Danis's bid is mathematically
unbalanced, it is not materially unbalanced because there was no
reasonable doubt at the time of award that the Navy would exercise the
option for bid item No. 0002, and thus there was no doubt that the
award to Danis will result in the lowest overall cost to the
government. Camp Lejeune's wastewater treatment facilities must be
brought into compliance with the requirements of the NPDES Permit.
Such compliance cannot occur without completion of the work under this
option item. The requirement thus presently exists and will continue
to exist until such work is completed. The funds for this option item
were in the military construction budget for the 1997 fiscal year
budget which had been submitted to Congress for appropriation, and the
agency had no reason to suspect that the funds would not be
appropriated. Indeed, during the course of this protest, the funds
for phase III of the project were appropriated and the Navy states
that, at the conclusion of this protest when contract performance
resumes, it will exercise the option. Accordingly, Danis's bid will
result in the lowest cost to the government and is not materially
unbalanced. See K.P. Food Servs., Inc., supra.
MCI also essentially alleges that the IFB instructions were latently
ambiguous regarding the distribution of work to be priced under bid
items No. 0001A and No. 0002. MCI alleges that it priced more work
under the optional bid item No. 0002 than the agency did in the
government estimate, thus causing a higher overall bid price than MCI
would have been able to offer if it had priced the work in question
under bid item 0001A. However, even if we assume that the IFB is
ambiguous, we would not sustain MCI protest because it has failed to
demonstrate that it suffered competitive prejudice.
Competitive prejudice is an essential element of a viable protest.
Colonial Storage Co.--Recon., B-253501.8, May 31, 1994, 94-1 CPD para.
335. Our Office will not assume the existence of prejudice where such
prejudice can be relatively easily established by the protester and it
fails to do so, relying instead on general allegations of prejudice.
Id.; Labrador Airways Ltd., B-241608, Feb. 13, 1991, 91-1 CPD para. 167.
In this case, MCI alone has the information showing whether it could
reduce its price by the nearly $7 million dollar margin existing
between its bid and Danis's bid by shifting work from item 0002 to
item 0001A. Such a large reduction appears improbable and MCI has not
shown that such a restructuring could in fact produce a price
reduction of this magnitude. Therefore, we will not assume that
prejudice exists. See Colonial Storage Co.--Recon., supra; Labrador
Airways Ltd., supra.
In MCI's initial protest, it alleged that Danis's bid took exception
to the terms of the energy efficiency guarantees under bid items No.
0001B and No. 0001C. The Navy's report submitted in response to the
protest provided a copy of Danis's bid and demonstrated that Danis's
bid did not take exception to the terms of the IFB. In its comments
on the agency report, MCI requested that we decide this issue on the
record but did not refute the agency's position. We have reviewed the
record and find no merit to this protest allegation.
On November 8, MCI filed a supplemental protest, based on documents
provided by the agency to MCI on October 17 (delivered on October 18),
alleging that Danis is not responsible and that the agency should not
have evaluated bid items 0001B and 0001C. We will not consider this
protest, inasmuch as it was untimely filed. Under our Bid Protest
Regulations, protests not based on alleged improprieties apparent in a
solicitation must be filed no later than 10 calendar days after the
protester knew, or should have known, of the basis for protest,
whichever is earlier.[7] Section 21.2(a)(2), 61 Fed. Reg. 39039,
39043 (to be codified at 4 C.F.R. sec. 21.2(a(2). The November 8 protest
does not meet this requirement.
The protest is denied.
Comptroller General
of the United States
1. A contract for phase I, which included demolition of old wastewater
treatment plants and construction of a sanitary sewer distribution
system, was previously awarded to Danis.
2. Bid items 0001B and 0001C represent guaranteed energy consumption
rates of a bidder's systems. As such, the bid prices for these bid
items do not represent a contract price to be paid to the contractor,
but rather the energy cost which the government will incur to operate
the systems. If the installed systems exceed the guaranteed energy
consumption rates represented by these bid items, the IFB/contract
provides for cash penalties to be paid by the contractor to the
government to compensate the government for such additional energy
expense.
3. Danis's bid for this item, as submitted, was $39,300,000. After
bid opening, Danis requested, and the
Navy approved, correction of a mistake
in the price for this bid item. The
mistake was attributed to Danis
double-counting a pre-bid price
reduction by its supplier for Sludge
Treatment System equipment. The
double-counting of the reduction
resulted in this bid item being
understated by $1,961,000, which the
Navy determined was clearly and
convincingly evidenced on the worksheets
used by Danis to prepare its bid. MCI
does not specifically protest the
propriety of this correction.
4. The government estimate was originally $34,400,000 and $7,100,000
for bid items No. 0001A
and No. 0002,
respectively. After bid
opening, the Navy
determined that it had
included in bid item No.
0002 the price of work
which was to be performed
under bid item No. 0001A.
The agency corrected the
government estimate to
the prices shown in the
table by shifting the
price of this work,
$3,950,000, from bid item
No. 0002 to bid item No.
0001A. The total of the
government estimate did
not change as a result of
this correction.
5. To the extent MCI alleges that it was improper for the Navy to
include in the IFB provisions for the evaluation of option prices, the
protest is untimely as alleged solicitation defects apparent on the
face of an IFB must be raised prior to bid opening. Bid Protest
Regulations, section 21.2(a)(1), 61 Fed. Reg. 39039, 39043 (July 26,
1996) (to be codified at 4 C.F.R. sec. 21.2(a)(1); see Crowley Co., Inc.,
B-258967, Feb. 21, 1995, 95-1 CPD para. 105.
6. MCI does not protest that Danis's bid is extremely front-loaded.
In any case, Danis's price for item No. 0001A is less than MCI's price
for this item.
7. In this letter, MCI also complains that it has not received an
appropriate response to the document request made in its protest.
While the agency report did not respond to MCI's request, the agency
did provide various documents after MCI submitted its response to the
agency report in the above mentioned October 17 response. Since MCI
did not complain of its failure to receive all relevant requested
documents prior to its November 8 submission it will not be
considered.