BNUMBER:  B-274773.2
DATE:  February 11, 1997
TITLE:  News Printing, Inc.

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Matter of:News Printing, Inc.

File:     B-274773.2

Date:February 11, 1997

William H. Spriggs, Esq., Spriggs & Hollingsworth, and Edward W. Gray, 
Esq., and Christopher E. George, Esq., Gray Manuel & Lafalce, for the 
protester.
Richard D. Lieberman, Esq., Sullivan & Worcester, for Graphic Data 
LLC, an intervenor.
Kerry L. Miller, Esq., Government Printing Office, for the agency.
Behn Miller, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Contracting agency properly canceled invitation for bids after bid 
opening where agency reasonably determined that solicitation's 
quantity estimate no longer represented the using agency's actual 
needs.

DECISION

News Printing, Inc. (NPI) protests the cancellation of invitation for 
bids (IFB) No. D306-S, issued by the Government Printing Office (GPO) 
for patent printing, production and distribution services required by 
the United States Patent and Trademark Office (PTO).  NPI contends 
that GPO's reason for canceling the solicitation after bid opening--a 
deficient quantity estimate--does not constitute a compelling basis 
for cancellation. 

We deny the protest.

The PTO's patents are issued and distributed to each customer by means 
of an annual "soft" package or paper set.  On July 26, 1996, 
GPO--which is responsible for procuring all the PTO's patent printing 
and associated production/distribution needs--issued the IFB, which 
contemplated the award of a 1-year requirements contract to the 
lowest-priced, responsive, responsible bidder for printing, producing 
and distributing an estimated quantity of 40 soft patent sets.

By the August 26 bid opening date, eight bids were received.  NPI was 
the apparent low bidder; GraphicData LLC--the incumbent--submitted the 
next low bid.  On October 4, the PTO advised GPO of a 25- to 
30-percent reduction (at least 21,091,200 pages) in its patent 
printing requirements.  On October 21, because of the substantial 
decrease in the PTO's printing/distribution needs, the contracting 
officer canceled the procurement.[1]  On November 4, NPI filed this 
protest against the cancellation.

Although GPO, as a legislative branch agency, is not subject to the 
Federal Acquisition Regulation (FAR), including the requirement that a 
compelling reason exist to cancel an IFB after bid opening, FAR  sec.  
14.404-1, the applicable provision of GPO's Printing Procurement 
Regulation likewise requires a compelling reason to cancel an IFB 
after bid opening.  Printing Procurement Regulation, Chapter XI, 
Section 2; City Wide Press, Inc., B-231469, Aug. 10, 1988, 88-2 CPD  para.  
127 at note 1.  Determining whether a compelling reason exists 
involves the exercise of the contracting agency's judgment; we review 
such a determination only to ensure that it is reasonable.  HLC 
Indus., B-265700, Nov. 17, 1995, 95-2 CPD  para.  227.

NPI contends that because the IFB contemplated award of a 
requirements-type contract, GPO was not obligated to order any 
particular quantity--and consequently, the 25- to 30-percent reduction 
in the PTO's patent printing/distribution needs did not provide a 
compelling reason to cancel the IFB.

The agency reports that in May of 1996, PTO determined that its 1997 
patent printing requirements would be substantially lower than 
initially reported to GPO because numerous foreign customers had 
canceled their soft package subscriptions and opted instead for PTO's 
CD-ROM patent sets.  However, PTO's change in customer needs was not 
communicated to GPO until after bid opening.

GPO states that the significant decrease in its estimated quantity 
provided a cogent and compelling reason to cancel because of the 
government's obligation to use due care in determining estimated 
quantity needs and because of the possibility of government liability 
for the knowing use of an inaccurate estimate.  In this regard, GPO 
reports that a recent opinion by the GPO Board of Contract Appeals 
(BCA), GraphicData, Inc., GPO BCA No. 35-94 (June 14, 1996), found GPO 
liable for inaccurate estimates set forth in this procurement's 
predecessor solicitation.

We think GPO properly canceled the procurement.  It is undisputed that 
the canceled IFB's quantity estimate was overstated by 25- to 
30-percent, representing  more than 21 million pages, clearly more 
than a de minimis amount.  Although the nature and use of a 
requirements contract presupposes--to some extent--uncertainty about 
the quantity of actual purchases, accurate estimates are essential to 
enable bidders to prepare reasonable, intelligent bids, and, often, to 
ensure the lowest cost to the government.  Respiratory & Convalescent 
Specialties Inc., B-255176, Feb. 14, 1994, 94-1 CPD  para.  101.  Because 
the risks associated with variance between actual  and estimated 
purchase quantities are borne by the contractor, the government is 
obligated to use its best information in preparing quantity estimates 
so bidders can appropriately assess and apportion risk and other 
contract performance costs into their unit prices.  In this regard, 
the Court of Federal Claims has found a contractor under a 
requirements contract entitled to recover damages arising from 
reliance on overestimated and therefore defective solicitation 
estimates, where, as here, the estimates were not verified before the 
solicitation containing them was issued.  Crown Laundry and Dry 
Cleaners, Inc. v. United States, 29 Fed. Cl. 506, 523 (Cl. Ct. 1993).  
Additionally, as pointed out by the agency, in GraphicData, Inc., 
supra, the GPO BCA held that even where the government exercised due 
care in preparing the estimates, a contractor is entitled to recover 
damages arising from defective estimates if the contractor establishes 
that a substantial variance between the government's actual needs and 
the stated solicitation estimates caused it to incur unbargained for 
costs as a result of its reliance on the inaccurate estimates in 
preparing its bid price.  Given the government's obligation to use 
accurate estimates, we think the overstated estimate in this case 
provided a cogent and compelling basis for cancellation.

NPI nonetheless contends that instead of canceling and resoliciting, 
GPO could cure the solicitation's inclusion of a defective estimate by 
treating the reduction as a permissible contract variation.  In this 
regard, in addition to requiring bidders to propose a unit price for 
the estimated quantity of 40 soft patent sets, the canceled IFB also 
required a separate unit price for each additional 5 patent sets or 
fraction thereof.  NPI argues that GPO could regard the reduction in 
its estimated quantity as a "variation in quantity" pursuant to 
Printing Procurement Regulation, Chapter I, Paragraph 9(a)(2), which 
provides as follows:

     "When it is determined that quantity variation will be permitted, 
     provision shall be made in the [IFB] to that effect and the 
     extent of the allowable variation shall be specified.  Where the 
     specifications allow a quantity variation, the contractor's 
     offered additional rate or running rate, as applicable, shall be 
     used to increase or decrease the invoice amount in accordance 
     with any allowable variation."

In essence, NPI argues that by referring to the bidders' prices for 
the additional sets of five copies, GPO could calculate the prices it 
would have received had the accurate estimate (27 sets) been included 
in the IFB.  We find this argument unpersuasive.

First, the cited "variation in quantity" clause only applies where the 
solicitation expressly permits a variation in quantity under the 
contract.  Printing Procurement Regulation, Chapter I, Paragraph 9(a) 
(clause applies "[i]f variation in quantity is permitted").  The IFB 
here does not do so--and in fact could not reasonably be expected to 
include the clause given that, as GPO reports, the variation in 
quantity provision is only used in contracts calling for fixed 
quantities which also allow for variations in the precise ordered 
quantity--not to requirements contracts which, by nature, do not 
specify any precise ordered quantity.  Moreover, by its terms the IFB 
specified that the bid prices for additional copies applied to those 
copies in excess of 40; it is not reasonable to conclude, as NPI 
urges, that those prices were intended by the IFB--or understood by 
the bidders--to be used to adjust the bidders' prices for the basic 
estimated quantity of 40 sets.

In any event, NPI's theory of price adjustment ignores the fundamental 
flaw in the canceled IFB--the use of a materially defective estimate, 
and the potential agency liability which could inure from the 
estimate's use.  Without correction of the estimate--the only basis 
upon which bidders can intelligently prepare their bids--the 
government would have conducted a competition rooted in other than its 
actual requirements, contrary to the fundamental obligation to obtain 
full and open competition.  See Site Support Servs., Inc., B-270229, 
Feb. 13, 1996, 96-1 CPD  para.  74; Heritage Reporting Corp., B-248860.2, 
Oct. 23, 1992, 92-2 CPD  para.  276.  In this regard,  the inclusion of a 
general variance in quantity provision does not toll or excuse the 
government's liability for failing in its obligation to use accurate 
and reliable estimates.  Womack v. United States, 389 F.2d 793, 801 
(Ct. Cl. 1968).

The protest is denied.

Comptroller General
of the United States

1. In accordance with the GPO's Printing Procurement Regulation, 
Chapter XI, Section 2, Paragraph 1(b), the contracting officer 
obtained the GPO Contract Review Board's full concurrence in the 
cancellation decision.