BNUMBER: B-275477
DATE: February 24, 1997
TITLE: Alice Roofing & Sheet Metal Works, Inc.
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Matter of:Alice Roofing & Sheet Metal Works, Inc.
File: B-275477
Date:February 24, 1997
Ronald J. Shaw, Esq., for the protester.
Joan K. Fiorino, Esq., and Donald E. Barnhill, Esq., East & Barnhill,
for Port Enterprises, Inc., an intervenor.
Maj. Michael J. O'Farrell, Jr., and Col. Nicholas P. Retson,
Department of the Army, for the agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
In a solicitation for a requirements contract, the agency reasonably
rejected the apparent low bid as materially unbalanced where the bid
included nominal prices for numerous line items and enhanced prices
for other line items, and where uncertainty concerning the reliability
of the solicitation's estimated quantities gave rise to a reasonable
doubt that the unbalanced bid would actually represent the lowest
price to the government.
DECISION
Alice Roofing & Sheet Metal Works, Inc. protests as improper the
rejection of its bid as mathematically and materially unbalanced under
invitation for bids (IFB) No. DADA18-96-D-0021, issued by the
Department of the Army for roofing repair and replacement.
We deny the protest.
The Army issued this solicitation on August 8, 1996, to furnish all
plant, labor, equipment, and materials necessary to repair and replace
roofing on miscellanous-type buildings at Fort Sam Houston, Camp
Bullis, and Army Reserve Centers in San Antonio, Texas. The bidder
whose bid was most advantageous to the government, considering only
price, would be awarded a fixed-price requirements contract for 1 base
year and 1 option year. Section B of the solicitation listed 105
contract line items (CLIN) for each contract period, along with the
agency's estimated quantities for each item. Bidders were to supply a
unit and extended price for each CLIN and a total price for each
contract period. Each bidder's overall price would be determined by
multiplying the bid prices by the estimated quantities for each of the
210 CLINs in the solicitation.
The solicitation's CLINs were broken down by the types of tasks
associated with repairing and replacing several different types of
roofing systems. Thus, for each contract period, the solicitation
contained 16 CLINs for roof decking, sheathing, and framing systems; 9
CLINs for removing and installing various roof insulation systems; 33
CLINs for removing, repairing, and replacing various types of roofing
systems; 26 CLINs for removing and replacing roof flashing systems; 20
CLINs for miscellaneous roof accessories and items of work; and 1 CLIN
for bonding.
The Army received six bids at the following evaluated prices:
Alice: $3,588,340
Cram Roofing: 3,750,514
Port: 4,546,310
Beldon Roofing: 4,960,822
Rain King: 5,045,155
A.D. Willis: 6,047,630
The contracting officer's review of the bids showed that Alice had
submitted a unit price of 1 cent for each of 56 line items, raising
the concern that the firm's bid might be unbalanced.[1] However, the
contracting officer's review of the firm's pricing led her to conclude
otherwise, and she awarded the contract to Alice. This action
prompted Port to file a protest in our Office in which it argued that
Alice's bid was unbalanced. In preparing her response to that
protest, the contracting officer reviewed Alice's bid again and
concluded that it was indeed unbalanced, for the reasons discussed
below. The Army terminated Alice's contract on November 5 and awarded
the contract to Port on November 7. Port withdrew its protest.
Alice filed the instant protest on November 15 challenging the
decision that its bid was mathematically and materially unbalanced.
The firm supplemented its protest with supporting information on
November 18.[2]
An examination of bid unbalancing has two aspects. Westbrook Indus.,
Inc., 71 Comp. Gen. 139 (1992), 92-1 CPD para. 30. First, the bid must be
evaluated mathematically to determine whether each item carries its
share of the cost of the work plus overhead and profit, or whether the
bid is based on nominal prices for some work and enhanced prices for
other work. Id. Unbalancing typically arises either between base
period prices and option period prices or, in a requirements-contract
solicitation such as this one, between line items for different goods
or services. Custom Envtl. Serv., Inc., B-252538, July 7, 1993, 93-2
CPD para. 7.
If a bid is found to be mathematically unbalanced, it must be
evaluated to determine the cost impact of the price skewing. Where
there is reasonable doubt that award to the bidder submitting the
mathematically unbalanced bid would result in the lowest ultimate cost
to the government, the bid is materially unbalanced and may not be
accepted. Federal Acquisition Regulation (FAR) sec. 14.404-2(g);
15.814; Westbrook Indus., Inc., supra.
Turning first to the issue of mathematical unbalancing, Alice's 1-cent
bids for 56 of the 210 CLINs are indisputably below cost and nominal.
The question arises, then, whether Alice's prices for any other CLINs
are enhanced. The contracting officer compared Alice's prices with
those submitted by the other bidders and the government estimate and
determined that Alice had submitted enhanced pricing for five base
period CLINs and their five option period counterparts. The relevant
base period CLINs concerned various types of built-up roofing, roll
roofing, and modified bituminous roofing replacement, and their
pricing was as follows:[3]
Alice Cram Port Beldon Rain Willis IGE
0011A $430 $475 $195 $450 $165 $300 $225
0011B 595 500 220 455 215 700 225
0011C 100 65 55 50 30 125 16
0012 415 450 250 250 165 400 300
0013A 415 500 210 450 205 300 250
Alice argues that its prices are not enhanced because Cram, Willis, or
Beldon submitted higher prices on one or more of these line items.
However, a comparison of a competitor's prices with one's own prices
does not by itself establish that one's prices are not enhanced, see
David Boland, Inc., B-244817, Oct. 29, 1991, 91-2 CPD para. 397,
particularly where, as here, the bid of one competitor (Cram) was
rejected as unbalanced and the bid of another competitor (Willis) was
the highest priced. See Custom Envtl. Serv., Inc., supra. Even if
the third competitor's (Beldon's) pricing is used for the sake of
comparison, Alice still submitted by far the highest prices on 6 of
the 10 line items at issue. More important, Alice does not dispute
the agency's contention that its prices for these CLINs carry far more
than their share of the cost of the work, plus overhead and profits,
and thereby embody the very definition of enhanced pricing. Westbrook
Indus., Inc., supra. Under the circumstances, we agree with the Army
that Alice's bid contains enhanced prices and is, as a result,
mathematically unbalanced.
Having made this determination, we turn to the question whether
Alice's bid is materially unbalanced. For unbalancing in requirements
contracts such as this one, the accuracy of the solicitation estimates
is critical, since the unbalanced bid will become less advantageous
than it appears only if the government ultimately requires a greater
quantity of the overpriced items and/or a lesser quantity of the
underpriced ones. Duramed Homecare, 71 Comp. Gen. 193 (1992), 92-1
CPD para. 126. Where an agency has reason to believe that its actual
needs may deviate significantly during performance from the
solicitation estimates, it may reasonably view a mathematically
unbalanced bid as not clearly representing the lowest cost to the
government and therefore as materially unbalanced. Beldon Roofing &
Remodeling Co., B-253199; B-253199.2, Aug. 18, 1993, 93-2 CPD para. 103.
The contracting officer's determination that Alice's bid was
materially unbalanced was premised upon the Army's belief that, given
the inherent uncertainty of roofing estimates, its actual needs may
deviate significantly from the solicitation's estimated quantities.
The Army explains that it generates its estimates by using the list of
facilities expected to require roofing work; calculating the square
footage of those buildings; and using the square footage, age, and
types of roofs involved to estimate the probable quantities of
materials that will be needed for each building. The agency totals
these quantities and incorporates them into the solicitation as the
estimated quantities. Despite the fact that these are the Army's best
estimates, the actual quantities ordered will depend upon such
unpredictable variables as the availability of funding; the effect of
potential storm damage on repairs to be made; and the impossibility of
determining the exact roofing needs of a given building until the
exterior of the roof is actually removed. The Army states that this
unpredictability is illustrated by the fact that the actual quantities
ordered under the prior contract for roofing at these installations
deviated significantly from the estimated quantities in the prior
solicitation.
Using this illustration to go one step further, the contracting
officer multiplied the unit prices submitted by the three lowest
bidders here by the actual quantities ordered under the prior contract
to determine whether Alice's bid was materially unbalanced. Her
calculations showed that if the actual quantities ordered under the
present contract tracked the actual quantities ordered under the prior
contract, Alice's bid would not represent the lowest price to the
government. In particular, if the Army were to order more of a line
item for which Alice's pricing was enhanced, as it had done in the
past, there was reasonable doubt that the firm's bid would be the
lowest priced.
Alice objects that this calculation is unreasonable because the prior
contract was "significantly larger" than the present contract, thereby
skewing the results. Alice contends that a more reasonable
calculation would be one based upon the percentage by which the actual
quantities ordered varied from the estimated quantities under the
prior contract. Relying on this calculation, Alice argues that its
bid would be the lowest priced.
It may be appropriate in some cases to use the actual quantities
ordered under a prior contract to gauge whether a bid under a future
contract is materially unbalanced. See Sanford Cooling, B-242423,
Apr. 15, 1991, 91-1 CPD para. 376. This is not such a case. The Army has
made a persuasive showing, unrebutted by Alice, that the actual
quantities ordered under a roofing contract are dependent upon wholly
unpredictable and unique variables--the ability to issue delivery
orders is affected by the availability of funding, and the need for
and extent of roof repair and/or replacement is affected by potential
storm damage and dictated by the latent condition of individual roofs.
Given the very nature of these variables, the actual quantities
ordered under the prior contract have no specific predictive value
with respect to determining the actual quantities that will be ordered
under the present solicitation.
However, this conclusion does not invalidate the premise underlying
the Army's actions--that the divergence between the actual quantities
ordered and the estimated quantities under the prior contract is
evidence that this same divergence will occur under the present
contract. According to the Army, since the actual quantities ordered
under a roofing contract bear no predictable or consistent
relationship to the estimated quantities, its acceptance of Alice's
mathematically unbalanced bid would require the Army to assume an
unreasonable degree of risk that the mix of CLINs actually ordered
will not exactly track the estimated quantities, thus resulting in the
agency's paying more than if it had awarded the contract to a bidder
submitting a bid in which each CLIN represented a fair share of the
cost.
The critical question in the determination of material unbalancing
here is whether the actual mix of line items ordered will involve a
mix different from that set forth in the IFB's estimates, which could
lead to the agency ordering proportionately more of those CLINs for
which Alice bid an enhanced price, and proportionately less of the
CLINs for which Alice bid nominal prices. If the mix of those CLINs
is subject to significant variation, that variation creates reasonable
doubt that Alice's bid will ultimately represent the lowest overall
cost to the government.
In our view, the inherent uncertainty of roofing estimates means that
the actual orders could vary significantly from the IFB's estimates,
both with respect to the mix of CLINs and the quantities ordered. As
a result, the agency had a reasonable basis for doubting that Alice's
mathematically unbalanced bid would ultimately represent the lowest
cost to the agency. Beldon Roofing & Remodeling Co., supra; Custom
Envtl Serv., Inc., supra; Outer Limb, Inc., B-244227, Sept. 16, 1991,
91-2 CPD para. 248. Alice's arguments to the contrary are either centered
around comparisons drawn between its bid and the actual ordered
quantities under the prior contract, a methodology which makes no
sense in this case, or purely speculative, and provide us no basis to
object to the Army's determination.[4]
The protest is denied.
Comptroller General
of the United States
1. This same concern arose in connection with Cram's bid, which was
eventually rejected as unbalanced.
2. We do not agree with Port's assertion that Alice's November 15
protest should have been dismissed as lacking a valid basis, pursuant
to Science Applications Int'l Corp., B-265607, Sept. 1, 1995, 95-2 CPD para.
99. The allegations in that case were dismissed because they were
either purely speculative or baseless on their face, circumstances not
present here. While Port objects to our advising Alice that it could
supplement its protest on November 18, such advice was entirely
consistent with our long-standing position that we will consider
later-raised contentions that merely provide additional support for an
earlier, timely raised objection. Prospect Assocs., Inc., B-260696,
July 7, 1995, 95-2 CPD para. 53. We also do not share Port's view that
Alice was put on notice of the specific support for its allegations
when the Army terminated its contract on November 5. Port's prior
protest notwithstanding, there is no evidence that Alice knew the
precise basis for the agency's determination until November 7 at the
earliest. As a result, the firm's November 18 filing, filed 10 days
later, would have been timely even if we had considered it to be a new
and separate protest. See Bid Protest Regulations, section
21.2(a)(2), 61 Fed. Reg. 39039, 39043 (1996) (to be codified at 4
C.F.R. sec. 21.2(a)(2)).
3. Pricing for the option period line items differed only slightly, if
at all, from the pricing for the base period line items.
4. Alice also seizes on the agency's specific use of the quantities
actually ordered under the prior contract to argue that the present
solicitation's estimated quantities are inaccurate. The firm
essentially contends that if the Army believed the actual quantities
ordered under the prior contract would track those ordered under the
present contract, the estimates do not reflect this belief. The
record is clear that the Army held no such belief, but made the
calculations that it did in an effort to show that the estimates were
inherently uncertain.