BNUMBER:  B-274781; B-275081
DATE:  January 6, 1997
TITLE:  Lankford-Sysco Food Services, Inc.; Sysco Food Services of
Arizona,     Inc.

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Matter of:Lankford-Sysco Food Services, Inc.; Sysco Food Services of 
          Arizona,     Inc.

File:     B-274781; B-275081

Date:January 6, 1997

Richard B. Oliver, Esq., and Laura O. Doyle, Esq., McKenna & Cuneo, 
for the protester.
Steve B. Hilkowitz, Esq., Defense Logistics Agency, 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

Solicitations for acquisition of commercial food distribution services 
are neither ambiguous nor inconsistent with customary commercial 
practice where the protested terms of the solicitation considered as a 
whole have only one reasonable interpretation, which is not 
inconsistent with customary commercial practice.

DECISION

Lankford-Sysco Food Services, Inc. and Sysco Food Services of Arizona, 
Inc.[1] protest the terms of request for proposals (RFP) No. 
SPO300-96-R-4025 and SPO300-96-R-4016, respectively, issued by the 
Defense Logistics Agency, Defense Personnel Support Center (DPSC), for 
full service food distribution support for Navy ships at Norfolk 
Station, Virginia, and for military installations, hospitals and Job 
Corps centers in Arizona.  

We deny the protests.

The terms of the RFPs, as relevant to these protests, are identical.  
The RFPs contemplate award of firm, fixed-price with economic price 
adjustment, indefinite quantity/indefinite-delivery contracts for a 
base year with 3 option years.  The RFPs list the commercial food 
items to be supplied under the contracts and the estimated quantity of 
each item, and require offerors to provide the "delivered price," 
"distribution price," and "unit price" for each item.  These terms are 
defined in the RFPs.  The RFPs also include a price changes clause 
allowing for changes in the delivered price on a weekly basis, 
inasmuch as this component of the unit price may fluctuate as a result 
of "commercial market forces, such as supply and demand, and 
competition among suppliers."  This clause further stated that:

     "The offeror also warrants that its unit prices are equal to or 
     lower than those offered its most favored customer for similar 
     quantities under comparable terms and conditions while taking 
     into account the requirements of the price adjustment schedule of 
     this clause."

The RFPs also included the following price-related provision:

     "III.  REBATES/DISCOUNTS

        (1) Rebates and discounts are to be returned to DPSC when they 
     are directly attributable to sales resulting from orders 
     exclusively submitted by DPSC or its customers.  Additionally any 
     rebates and discounts offered to any commercial customer or to 
     other Governmental organizations shall be returned to the DPSC or 
     its customers in the form of an up-front price reduction and/or 
     lump sum reimbursement.  Additional rebates over and above those 
     cited above may be offered to the DPSC to enhance one's proposal 
     but will not be mandated for return to the DPSC or its customers.

        (2) The Prime Vendor shall be as aggressive as possible in 
     pursuing all rebates and discounts for the customers supported 
     under this contract.  Notwithstanding the requirements included 
     herein, the offeror warrants, at a minimum, that the DPSC and its 
     customers will receive rebates and discounts equal to or better 
     than the offeror's most favored commercial or other Governmental 
     customer.  The offeror will provide a description of those 
     rebates and discounts meeting the requirements herein as part of 
     their offer in accordance with the provisions outlined [in this 
     solicitation].  The rebates and discounts proposal will be 
     reviewed and if found acceptable, shall become part of the 
     resulting contract(s).  A rebate report shall be provided to the 
     Contracting Officer on a quarterly basis as a minimum. . . ."

The RFPs require offerors to propose procurement/pricing plans 
explaining the offerors' purchasing methods and pricing methodology, 
including an explanation of the proposed discounts and rebates.[2]

The protesters allege that the Rebates/Discounts provision in the RFPs 
contains insufficient detail and is ambiguous and contrary to 
customary commercial practice.  In particular, the protesters are 
concerned that this provision could be interpreted to include a firm's 
"earned income" generated by the firm's performance of merchandising 
services for its suppliers as a rebate or discount payable to the 
government.  The protesters explain that while it is customary in the 
industry for distributors to pass discounts and rebates from suppliers 
on to the customer, it is not customary to pass earned income through 
to the customer nor practical to account for earned income related to 
specific customer accounts, and that to require such accounting would 
be unduly burdensome on the contractor and inconsistent with customary 
commercial practice.  The protesters also allege that the solicitation 
language is otherwise ambiguous as to the meaning of a variety of RFP 
terms:  discounts, rebates, and related terms (e.g., "directly 
attributable to sales" and "most favored customer").
 
A solicitation must contain sufficient information to enable offerors 
to compete intelligently and on a relatively equal basis.  Pacific 
Consol. Indus., B-250136.5, Mar. 22, 1994, 94-1 CPD  para.  206; Tucson 
Mobilephone, Inc., B-250389, Jan. 29, 1993, 93-1 CPD  para.  79.  There is 
no legal requirement that a solicitation be drafted so as to eliminate 
all performance uncertainties; the mere presence of risk does not 
render a solicitation improper.  Pacific Consol. Indus., supra; J&J 
Maintenance, Inc., B-248915, Oct. 8, 1992, 92-2 CPD  para.  232.  Agencies 
may properly impose substantial risk upon the contractor, even where 
the risk in question is financial in nature.  Tucson Mobilephone, 
Inc., supra.  In procurements involving the acquisition of commercial 
items, such as here, Federal Acquisition Regulation  sec.  12.301(a)(2) 
(FAC 90-32) requires that the contracts "shall, to the maximum extent 
practicable, include only those clauses . . . [d]etermined to be 
consistent with customary commercial practice."  

Moreover, an allegation that a solicitation is ambiguous does not make 
it so.  A solicitation term is only ambiguous if it is susceptible to 
more than one reasonable interpretation when read in the context of 
the solicitation as a whole.  Canadian Commercial Corp./Ballard 
Battery Sys. Corp., B-255642, Mar. 18, 1994, 94-1 CPD  para.  202.  Where a 
dispute exists as to the actual meaning of the terms of a 
solicitation, we will resolve the matter by reading the solicitation 
as a whole and in a manner that gives effect to all of its provisions.  
Id.; Zeta Constr. Co., Inc., B-244672, Nov. 5, 1991, 91-2 CPD  para.  428.

The agency states that it is aware of, and took into account, the 
customary commercial practice that discounts and rebates are 
considered distinct from compensation earned by distributors for 
performing actual services for suppliers and that such compensation 
generally is not passed on to customers in the form of discounts or 
rebates.  The agency asserts that no provision in the RFP could 
reasonably be interpreted as requiring such "earned income" to be 
passed through to the government.  We agree. 

Here, the RFPs as a whole unambiguously require that a minimally 
acceptable proposal offer DPSC discounts and rebates which are 
"directly attributable to sales resulting from orders exclusively 
submitted by DPSC or its customers," which must result in "unit prices 
[that] are equal to or lower than those offered [to] its most favored 
customer for similar quantities under comparable terms and 
conditions."  To accomplish this, an offeror, "at a minimum," must 
propose "rebates and discounts equal to or better than [those of] the 
offeror's most favored" customer.  Since compensation earned for 
services performed results from a contractor's performance of those 
services for a particular supplier, not from orders placed by a 
customer, such compensation cannot be said to be "directly 
attributable to sales resulting from orders exclusively placed by DPSC 
or its customers."  In other words, nothing in the RFPs requires a 
firm to alter its customary commercial practice by mandating the 
passing on of "earned income" to the government where the firm does 
not already do so or offer to do so.[3]  

Nor does the RFP require reporting on compensation which is earned 
from services performed and which is uniformly retained by the 
contractor.  The RFP only requires offerors to propose a "process for 
tracking and reporting rebates/discounts."  Since compensation earned 
for services performed which is not passed on to any customer is 
neither a discount nor rebate under these RFPs, there is no 
requirement for tracking and reporting of such compensation.

While the protester alleges that the agency failed to conduct adequate 
market research to verify the consistency of discount/rebate clauses 
with customary commercial practice, as discussed above, the RFP has 
not been shown to be inconsistent with such practice.  In any case, 
the record confirms that the agency did research the commercial 
practices of this industry and obtained input from the industry in 
drafting this provision.

As indicated, the protester contends that a variety of terms in the 
solicitation are not specifically defined and are ambiguous, in 
particular the terms "discount" and "rebate" because they are not 
specifically defined and thus could be interpreted to include "earned 
income" for services rendered.  Our discussion above demonstrates 
that, considering the solicitation as a whole, this is not a 
reasonable interpretation.  To the extent these terms are not 
specifically defined, the agency states that these terms are 
reasonably understood to be price reductions which differ only in 
terms of timing (i.e., discounts are price reductions applied to 
current prices and rebates are price reductions applicable to prices 
which have been previously accounted for and thus require 
reimbursements) and need no specific definition.  The protesters have 
not provided a contrary definition, and we are aware of no other 
reasonable interpretation of these terms.  

In their remaining allegations of ambiguity, the protesters 
essentially dismantle the solicitation into isolated words and 
phrases, and offer various "possible" interpretations of these 
isolated component parts.[4]  We have reviewed all of these 
alternative interpretations and, giving effect to all of the relevant 
portions of the solicitation, we find none of these alternative 
interpretations to be reasonable.

For example, the protesters allege that the rebate and discounts 
provision phrase "directly attributable to sales resulting from orders 
exclusively submitted by DPSC" is ambiguous.  We disagree and do not 
find the agency had any obligation to further clarify.  The protesters 
hypothecate that some vendors could narrowly interpret "directly 
attributable" to mean this phrase is applicable only to rebates 
subject to a prior agreement between the agency and the supplier, 
while other vendors could broadly interpret the phrase as including 
rebates obtained by a contractor for recruiting a stated number of new 
customers for a supplier, of which DPSC was one.  These 
interpretations either impose conditions not stated in the 
solicitation--i.e., that discounts and rebates may only be established 
where there are prior agreements--or fail to consider the full meaning 
of the term in the context of other relevant terms and provisions of 
the solicitations--i.e., directly attributable to sales resulting from 
orders exclusively submitted by DPSC, as opposed to a rebate 
attributable to sales accounts in addition to the sales to DPSC, such 
as the second example advanced by the protesters.  In sum, the 
protesters' various alternative interpretations of the terms of the 
solicitation are not reasonable because they do not give effect to all 
relevant terms of the solicitations.  See Canadian Commercial 
Corp./Ballard Battery Sys., Corp., supra.

Finally, the protesters allege that, because the RFP provides that the 
terms of each offeror's discounts and rebates proposal will be 
incorporated into any resulting contract, offerors will not be 
competing on an equal basis.  We disagree.

Here, the RFPs state that the "rebates and discounts proposal will be 
reviewed and if found acceptable, shall become part of the resulting" 
contract.  The RFPs state what discounts and rebates are required to 
be minimally acceptable.  Thus, proposals failing to satisfy these 
minimum requirements cannot be found technically acceptable under the 
RFP.  The solicitation therefore provides adequate information for 
offerors to compete intelligently and on a relatively equal basis.  
The fact that offerors may individually propose terms more attractive 
than the minimum requirements which the agency may consider in making 
award is fully disclosed in the RFPs.  In contracts such as those 
contemplated here, the price competition is largely dependent on 
variations in the proposed discounts and rebates, and the format of 
this solicitation is sufficiently flexible to allow fair competition 
on a relatively equal basis.  See Pacific Consol. Indus., supra; 
Tucson Mobilephone, Inc., supra.

The protests are denied.

Comptroller General
of the United States

1. The protesters are operating subsidiary companies of Sysco 
Corporation, a national food service distributor.

2. The RFPs state a best value evaluation scheme.  The 
procurement/pricing plan is a subfactor under both the technical and 
price factors.

3. The agency's survey of the industry found the term "earned income" 
to have many different meanings, including the compensation earned for 
performing services for a supplier--a finding which the protesters do 
not dispute.  As noted by the agency, merely labeling something 
"earned income" does not make it other than a rebate or discount, and 
some distributors in fact pass earned income, including compensation 
earned, on to the customer.  In our view, under the RFPs, if a 
contractor in fact passes on "earned income" to other customers--which 
the protesters assert is not their customary commercial practice--such 
payment could be considered a rebate or discount to a "most favored 
customer."  In addition, since the RFPs allow offerors to voluntarily 
propose and commit to terms that are more advantageous to the 
government, a firm could commit to pass on "earned income" to the 
government.  

4. In some cases, Sysco agrees the agency's interpretation is the 
appropriate one, but argues that other vendors may be confused.