BNUMBER:  B-275692
DATE:  March 14, 1997
TITLE:  Coyle's Pest Control, Inc.

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Matter of:Coyle's Pest Control, Inc.

File:     B-275692

Date:March 14, 1997

Charles G. Coyle for the protester.
Mary C. Merchant, Esq., Department of Housing and Urban Development, 
for the agency.
Wm. David Hasfurther, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Provision which imposes liability for termite damage after spot or 
partial treatment is unobjectionable where it reasonably relates to 
agency's need to ensure treatment is effective and where potential 
risk of liability can be addressed by bidders in their prices.

DECISION

Coyle's Pest Control, Inc. protests the terms of  invitation for bids 
(IFB) 
No. H06S96051100000, issued by the Department of Housing and Urban 
Development (HUD) for subterranean termite protection of single family 
homes owned by HUD within the jurisdiction of its Houston office.  We 
deny the protest.

HUD issued this IFB on October 21, 1996, with a bid opening of 
December 10.  Bidders were required to submit prices for a base year 
and for two 1-year options  for spot (25-39 linear feet), partial 
(40-199 linear feet), and full (200 or greater linear feet) 
treatments.  Under the contract, a HUD government technical 
representative (GTR) initially would review the termite inspection 
report furnished by the future or current homeowner and decide what 
type of treatment would be required.  The contractor would be provided 
with the inspection report and the GTR's treatment instructions.  If 
spot or partial treatment were ordered by the GTR, the contractor 
would be allowed to inspect the property to confirm the degree of 
infestation and the treatment required.  Based on the findings of the 
contractor's inspection, the GTR would decide whether to modify the 
original treatment requested.  Also, under the contract, the 
contractor is liable for a maximum of $5,000 for the cost of repairs 
should any subterranean termite damage occur during the first year 
after any treatment.  Thirteen bids were received and opened.  Award 
has been withheld  pending resolution of the protest.

Coyle contends that, while the liability provision is reasonable where 
the contractor performs a full treatment, it is unreasonable to impose 
the same maximum amount of liability for spot or partial treatments 
since termites can avoid the spot or partial treatment area or their 
colonies can be located in areas not near or adjacent to the treatment 
area, and any damage occurring after a spot or partial treatment may 
not be the contractor's fault.  Further, the protester asserts that it 
is not industry practice to provide such a warranty and that this 
provision only increases the cost to HUD of obtaining termite 
protection.  Coyle also objects to permitting the GTR--absent a 
showing that the person in the position will always have appropriate 
qualifications for making the necessary decisions--to determine the 
extent of termite damage and the type of treatment necessary.

An agency is responsible for drafting proper specifications to meet 
the government's minimum needs.  In preparing for a procurement, the 
agency must develop specifications in such a manner as is necessary to 
achieve full and open competition in accordance with the nature of the 
property or services to be acquired.  41 U.S.C.  sec.  253a(a)(1)(A) 
(1994); Sunbelt Properties, Inc., B-249469 et al., Nov. 17, 1992, 92-2 
CPD  para.  353, at 4.  Nonetheless, there is no legal requirement that the 
government entirely eliminate risk from those specifications, and 
bidders are simply expected to exercise business judgment in preparing 
their bids in such cases.  Sunbelt Properties, Inc., supra.

Coyle protests the imposition of contractor liability for termite 
damage which occurs after a spot or partial treatment and argues this 
liability should apply to full treatments only.  However, the agency 
has determined that a full treatment is not needed in every case, and 
that the imposition of liability during the first year after 
contractor treatment is a reasonable approach to ensure that the 
treatment is effective by exposing the contractor to liability for the 
damage which could result from ineffective treatment.  HUD states that 
it is possible that it could "incur $5,000 in damages due to defective 
partial or spot treatment."   

We have no basis to question the reasonableness of this requirement on 
this record. The $5,000 liability is intended to effectively provide 
the agency with a 1-year warranty on the treatment.  As the agency 
points out, the $5,000 is the maximum amount the contractor is liable 
for and bidders can calculate their bids based on providing this 
warranty.  The protester speculates that HUD intends to claim the 
$5,000 for damages from termite infestation whether of not the damage 
results from termite infestation in an area treated by the contractor.  
However, as we understand HUD's position, as articulated in the agency 
report, HUD intends to hold the contractor liable for damage which 
results from the failure of the contractor's treatment.   As 
previously stated, there is no legal requirement that in developing 
specifications the government eliminate all risk to the contractor.  
Further, all bidders are on notice of this liability and are free to 
include the potential cost of repairs if their treatment should prove 
defective into their prices.  

Coyle also questions whether the GTR is properly qualified to decide 
which type of treatment is required.  Coyle is concerned that it will 
be held liable for an erroneous judgment by the GTR as to the 
treatment necessary.  In response, the agency advises that the current 
GTR has extensive experience in the real estate and construction 
industry and 15 years experience with termite treatments.  In any 
event, as stated above, the contractor has the right under the 
contract to review the initial inspection report and the GTR's 
proposed approach to treatment, to inspect the premises to be treated 
prior to performing the work, and to seek modification of the GTR's 
proposed treatment if the contractor, for example, believes a larger 
area needs to be treated.  Further, if a dispute should arise during 
performance of the contract concerning whether Coyle properly can be 
held liable for termite damage, the mater can be resolved under the 
Disputes Clause, Federal Acquisition Regulation  sec.  52.233-1, included 
in the contract.

The protest is denied.

Comptroller General
of the United States