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.