BNUMBER: B-275332
DATE: February 10, 1997
TITLE: Assets Recovery Systems, Inc.
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Matter of:Assets Recovery Systems, Inc.
File: B-275332
Date:February 10, 1997
James S. Green, Esq., and Richard S. Cobb, Esq., Duane, Morris &
Heckscher, for the protester.
Jeffrey I. Kessler, Esq., and Tony K. Vollers, Esq., Department of the
Army, for the agency.
Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq.,
Office of the General Counsel, GAO, participated in the preparation of
the decision.
DIGEST
1. General Accounting Office is authorized to exercise jurisdiction
over protest against award under solicitation providing for exchange
of property since an exchange necessarily involves acquisition of
property by the government.
2. Where, under solicitation providing for exchange or sale of
government-owned aircraft and parts for newer aircraft and/or cash,
protester offered one new plane and possibility of others, contingent
upon sufficient proceeds being generated via auctioning of the
government-owned aircraft and parts, agency properly did not consider
the value of the contingently offered planes in determining the
overall value of the protester's offer.
DECISION
Assets Recovery Systems, Inc. (ARSI) protests the award of a contract
to K & K Aircraft under request for proposals (RFP) No.
DAAJ09-96-R-0681, issued by the Department of the Army Aviation and
Troop Command for the exchange and/or sale of 124 government-owned
U-21 aircraft for one or more Beechcraft 1900D aircraft and/or cash.
The protester contends that it was entitled to award because its
proposal represented the best value to the government.
We deny the protest.
BACKGROUND
In conducting this procurement, the agency sought to achieve two
goals: ridding itself of an inventory of aged aircraft and components
no longer suitable for the agency's mission and acquiring one or more
newer aircraft. To this end, the solicitation provided for the
exchange[1] or sale of 124 U-21 aircraft and associated components for
one or more Beechcraft 1900D series aircraft and/or cash. Offerors
were instructed that any combination of aircraft and/or cash would be
acceptable, and that award would be made to the offeror whose proposal
(taking into account the value of any aircraft offered) represented
the best value to the government.[2] To enable the Army to determine
the value of the particular aircraft offered, offerors were instructed
to describe in detail how the planes would be equipped and to identify
the "time between overhaul" status of the major components.
Five offerors submitted proposals by the September 13, 1996 closing
date. Of the three offerors other than the awardee and the protester,
one offered a new aircraft, which the agency valued at $4.4 to $4.6
million; another offered a new aircraft (valued at $4.4 to $4.6
million) plus flight training for two pilots and maintenance training
for one mechanic;[3] and a third offered a used aircraft which it
valued at $4,947,000, plus $33,274 in cash, for a total offer value of
$4,980,274. K & K offered a new aircraft that the agency valued at
$5.4 million[4] and a cash payment of $782,000, giving its offer an
overall value of $6,182,000.
ARSI's offer consisted of a four-page "Proposal for Absolute Auction,"
accompanied by the following two-sentence entry in Block 18a[5] of the
solicitation cover page (Standard Form 1449):
"Gauranty One Beech 1900D aircraft NEW
or more . . . Outfitted Per. Army Request
See Enclosed." (sic)
In its "Proposal for Absolute Auction," ARSI offered to sell via
auction the U-21 aircraft and components and use the proceeds, less
expenses and a commission of
7 percent, to purchase up to four new, standard Beechcraft 1900D
aircraft for the seller. In an addendum to the proposal, the
protester's president opined that his company might "be able to
retrieve between 15 Million to 35 Million dollars on a worldwide
scale" for the inventory. The proposal failed to specify what would
happen in the event that the auction proceeds were in excess of the
amount required to purchase one plane, but not enough to purchase two
(or more than enough to purchase two, but not enough to purchase
three, etc.). In other words, the proposal did not provide for the
payment of any such proceeds to the agency.
Since ARSI's proposal, read as a whole, guaranteed only one
aircraft--the purchase of others being contingent upon the proceeds of
the auction--the Army valued it at $4.4-$4.6 million. On September
19, the Army awarded a contract to K & K.[6]
JURISDICTION
As a preliminary matter, both parties have requested that our Office
exercise jurisdiction over this protest, and we see no legal
impediment to doing so. To the extent that the solicitation provides
for an exchange of property, property is necessarily being acquired by
the government, and our Office is authorized by statute to exercise
jurisdiction over protests concerning the acquisition of property by
the government. Competition in Contracting Act, 31 U.S.C. sec.
3551(1)(a) (1994), as amended by Pub. L. No. 104-106, sec. 4321(d)(1),
110 Stat. 186, 674 (1996); 31 U.S.C. sec. 3552, as amended by Pub. L. No.
104-106, sec. 5603, 110 Stat. 186, 700; Crystal Cruises, Inc.--Request
for Recon., B-238347.2, June 14, 1990, 90-1 CPD para. 560. To the extent
that the solicitation provides for a sale, we will consider protests
concerning sales by federal agencies where, as here, the agency has
agreed to our review. Bid Protest Regulations sec. 21.13(a), 61 Fed.
Reg. 39039, 39047 (1996) (to be codified at 4 C.F.R. sec. 21.13(a));
Resource Recovery Int'l Group, Inc., B-265880, Dec. 19, 1995, 95-2 CPD para.
277.
ANALYSIS
The protester contends that its proposal represented the best value to
the government and that it was therefore entitled to award. As
discussed below, we disagree.
ARSI's proposal guaranteed delivery of only one plane, which the
agency valued at $4.4 to $4.6 million. Although the protester asserts
that its offer was worth far more than that, it offered additional
planes contingent upon sufficient proceeds being generated by the
auction. Since these planes were offered on a conditional, as opposed
to firm, basis, the agency could not properly consider them in
determining the value of ARSI's offer. In this regard, where a
solicitation requests offers for a firm, fixed amount, an offer that
is not firm cannot be considered for award. Burroughs Corp., 56 Comp.
Gen. 142, 150 (1976), 76-2 CPD para. 472 at 11, aff'd, Honeywell
Information Sys., Inc., 56 Comp. Gen. 505 (1977), 77-1 CPD para. 256.
In any event, it is not apparent from the record in this case that it
can reasonably be anticipated that proceeds sufficient to fund the
purchase of more than one plane will be generated by the auction. Not
only is the protester's estimate of the inventory's value as between
$15 and $35 million at variance with the agency's estimate--the most
recent estimate of the Army's Product Manager for Fixed Wing Aircraft
being $4 million[7]--but it is also out of line with the amounts that
other offerors offered in exchange for the assets. Furthermore, the
agency has demonstrated that the methodology used by the protester to
prepare its estimate was faulty. In this regard, the protester relied
upon blue book values for the Beech King Air 90, which is the
commercial version of the U-21, in preparing its estimate. The agency
explains that resale values for the Beech King Air 90 and the U-21 are
not equivalent, however, due to significant differences between the
two aircraft--differences which result in the military planes not
meeting Federal Aviation Administration standards for certification,
which means that, unless they are reconfigured, the military planes
cannot be used for commercial purposes in this country.[8]
The protester also complains that the agency engaged in improper
post-award discussions with K & K. The agency explains in response
that post-award conversations held with K & K concerned taking a part
of the cash portion of K & K's offer and using it to acquire
additional modifications to the Beech 1900D. Discussions occur when
an offeror is given an opportunity to revise or modify its proposal,
or to provide information essential to determining the acceptability
of its proposal. Federal Acquisition Regulation sec. 15.601; Aquidneck
Sys. Int'l, Inc., B-257170.2, Sept. 30, 1994, 94-2 CPD para. 122. Since
the negotiations between the agency and K & K here did not affect the
acceptability of the proposal and neither increased nor decreased the
overall value of K & K's offer, they did not constitute discussions.
The protest is denied.
Comptroller General
of the United States
1. The exchange was conducted under a one-time regulatory deviation
authorized by the General Services Administration. The deviation was
because the regulatory authority governing the exchange of
government-owned personal property excludes certain classes of
property, including aircraft, from its coverage and requires, with
certain exceptions not applicable here, one-for-one exchanges. 41
C.F.R. sec. 101-46.202(a) and (b)(3) (1996).
2. The solicitation further provided that in the event that an offeror
proposing cash only were evaluated as providing the government the
best value, two contracts would be awarded: the first for the sale of
the U-21 planes and components, and the second for the purchase of one
or more Beech 1900D aircraft.
3. The contracting officer did not assign a particular value to the
training, but concluded that it did not significantly increase the
value of the offer.
4. The new plane offered by K & K included much of the equipment
identified by the agency in the solicitation as "desired," whereas the
new planes offered by the first two offerors included only the
required equipment; this resulted in K & K's plane receiving a higher
valuation than the others.
5. This is the block in which, under an ordinary RFP, the agency would
identify the office making payment.
6. The RFP provided for award without discussions.
7. We recognize that this estimate is at variance with earlier
estimates prepared by the same office. The Product Manager explains
that the change was attributable to a more accurate assessment of the
state of the inventory, an explanation that we find reasonable.
8. The protester offers other evidence in support of its valuation,
but we find it unconvincing. For example, the protester cites an
advertisement in a trade magazine offering for sale two U-21 engines,
one for $100,000 and the other for $125,000. At these prices, the
protester argues, the inventory's engines alone would be worth $34 to
$42.5 million. The protester omits to mention that the advertisement
also indicates that the engines offered have been flown 1,464 and 26
hours respectively, i.e., substantially less than the average of
11,500 hours that the planes in the inventory have been flown. Since
the value of the engines can be expected to decrease as the number of
hours that the planes have been flown increases, we do not think that
this advertisement offers a realistic comparison for purposes of
valuing the inventory.
The protester also offers as evidence of the value of the inventory a
letter from the president of one of its competitors, Turbines, Inc.,
to his Congressman. In the letter, the president of Turbines opines
that the U-21 inventory is worth $20.5 million. We are not inclined
to give this opinion a great deal of weight given that when Turbines
had the opportunity to value the assets for purposes of submitting its
own offer under this solicitation, it offered only a single standard
Beechcraft 1900D (valued by the agency at $4.4 to $4.6 million) in
exchange for them.