BNUMBER: B-277315.2
DATE: October 15, 1997
TITLE: Tri-State Government Services, Inc., B-277315.2, October 15,
1997
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DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Matter of:Tri-State Government Services, Inc.
File: B-277315.2
Date:October 15, 1997
Nicholas A. Della Volpe, Esq., Wagner, Myers & Sanger, for the
protester.
Fred T. Hanzelik, Esq., Hanzelik & Associates, for Associated
Environmental Services, Inc., an intervenor.
Robin Walters, Esq., Defense Logistics Agency, for the agency.
Jacqueline Maeder, Esq., and Paul Lieberman, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Where solicitation price schedule required offerors to submit
single unit prices for estimated line item quantities, a proposal
which split many of the agency's estimated line item quantities and
separately priced these quantities in a manner economically
advantageous to the offeror was improperly selected for award.
Awardee's noncompliant pricing scheme obtains excessive early payments
and limits offeror's economic risks in the event the agency does not
purchase its full estimated item quantities, thus affording the
awardee an unfair pricing advantage over offerors using the required
price schedule.
2. Agency improperly conducted discussions with awardee after the
submission of best and final offers to allow awardee to explain and
provide prices for required quantities beyond the estimated quantities
set forth in the solicitation.
DECISION
Tri-State Government Services, Inc. protests the award of a contract
to Associated Environmental Services, Inc. under request for proposals
(RFP) No. SP4400-96-R-0023, issued by the Defense Reutilization and
Marketing Service (DRMS), Defense Logistics Agency (DLA) for the
removal, transportation, and disposal of hazardous and nonhazardous
waste items located at various DRMS sites. Tri-State argues that the
awardee's offer did not comply with the RFP terms for submission of
offers and that the agency improperly engaged in discussions with the
awardee.
We sustain the protest.
The RFP, issued as a small business set-aside on September 27, 1996,
contemplated the award of a firm, fixed-price requirements contract
for an 18-month base period with 2 option years. The RFP called for
firms to provide hazardous waste management and disposal services for
specifically identified generators and various pickup points.
The RFP, which required the submission of separate technical, price,
and past performance proposals, cautioned offerors that proposals
which did not provide the required information in the prescribed
format could be excluded from consideration. The RFP provided that
award would be made to the offeror whose proposal, conforming to the
solicitation, was determined to be most advantageous to the government
and identified, as evaluation factors, price, past performance,
socioeconomic plan, and Mentoring Business Agreement participation.
Price and past performance were of equal importance and significantly
more important than the value of the other two factors combined.
The solicitation price schedule divided the work to be performed into
94 contract line items (CLIN) in each contract period, specifying the
agency's estimated quantities for each CLIN. The line items were
grouped into "special requirements" and the removal of different waste
types, including, for example, "ignitable wastes," "corrosive wastes,"
"reactive wastes," "toxicity characteristic wastes," and "spent
solvent wastes." Offerors were required to insert a single unit price
in the space provided for each CLIN, multiply the unit price by the
agency's estimated quantity to arrive at an extended price for each
CLIN, and then add together the amounts for each CLIN to arrive at a
total line item amount. The RFP provided that an offeror's total
price for both options would be added to its total price for the basic
requirement to calculate the total contract price.
Eleven offerors submitted initial proposals by the October 31, 1996,
closing date. The proposals were reviewed by contracting personnel
and, based on this review,
five proposals, including Tri-State's and Associated's, were included
in the competitive range. DLA held discussions with these five
offerors and requested best and final offers (BAFOs) by April 7, 1997.
DLA requested second BAFOs from the competitive range offerors by May
16. DLA evaluated 4 of the 5 offerors' BAFOs, including Tri-State's
and Associated's, as "good" under past performance evaluations and
"good" under their best value composite ratings and price essentially
became determinative. Associated offered the low price of $3,296,500;
Tri-State's price was second low at $3,443,189.30.
In its second BAFO, Associated for the first time used a pricing
methodology different from that called for by the RFP. Instead of
submitting single unit prices for each CLIN as requested by the RFP
price schedule, for 18 CLINs in the base period and 14 CLINs in each
of the option periods, Associated split the agency's estimated
quantities listed on the price schedule and submitted one price for a
number that it designated the "first" quantities ordered and a
different price for what it designated the "next" quantities ordered.
Associated did this by lining through the estimated quantity figure
for the particular CLIN and printing in its own quantities and prices
for both the "first" and "next" quantities in lieu of the single
existing pricing block for that particular CLIN in the solicitation
price schedule form. In effect, Associated created an extra line item
for each of the affected CLINs. For example, under CLIN 6613AC,
Cleaning/Service Charge for Oil Water Separators, instead of one CLIN
price for the estimated quantity of 22, Associated offered a unit
price of $600 for the "first 12" and a unit price of $50 for the "next
10." Under CLIN 6615BB, Providing Storage Containers, 20 Cubic Yard
Rolloff, the awardee offered a unit price of $800 for the "first 2"
and a unit price of $50 for the "next 4." Under CLIN 6615CC, Provide
Storage Containers, 30 Cubic Yard Rolloff, Associated offered a unit
price of $800 for the "first 2" and a unit price of $30 for the "next
28."[1] DLA treated Associated's pricing strategy as a minor
irregularity and awarded the contract to Associated on June 12. This
contract contains a "note of understanding" which reads as follows:
Incremental pricing as indicated in the bid schedule, is
understood between parties, that in any instance where the
quantity exceeds the government estimate, the last price of the
incremental priced CLIN in any performance period, will be the
price used for the balance of performance.
Tri-State protested the award to our Office on July 7.[2]
Tri-State contends that the awardee improperly modified the agency's
price schedule and that, therefore, its offer should not have been
considered for award. Tri-State complains that the awardee used
pricing options which were not made available to all offerors on line
items representing over two-thirds of the contract waste removal
quantities and one-fourth of the special service requirements.[3]
Tri-State contends that this pricing variation gave Associated an
unfair advantage relative to the other offerors and that, if the
methodology was acceptable, all offerors should have been given the
same opportunity to use incremental pricing in their offers.
Tri-State also contends that the agency improperly engaged in
discussions with the awardee after the second round of BAFOs. The
protester argues that DRMS re-opened discussions with Associated to
negotiate prices for any quantities ordered above the estimates given
in the solicitation. The protester argues that it was unclear from
Associated's offer if the firm had agreed to provide quantities
greater than the estimates and, even if Associated had agreed to
provide services beyond the estimated service, the offeror's price for
these services was not clear from its BAFO.
The agency responds that the awardee submitted pricing for each
service required by the RFP and did not deviate from or vary any term
or condition contained in the solicitation. The agency contends that
nothing in the RFP prohibited the awardee's pricing strategy.
Accordingly, the agency views the split pricing methodology as a minor
irregularity, consistent with the RFP. The agency argues that the
protester was not prejudiced by the awardee's pricing strategy because
all proposals were evaluated based on the total estimated quantities
of services, and contends that its acceptance of this pricing strategy
is consistent with our decisions allowing agencies to accept pricing
strategies that vary from the solicitation but offer the lowest cost
to the government. See, e.g., Holmes and Narver, Inc., B-196832, Feb.
14, 1980, 80-1 CPD para. 134 at 7-9; Keco Indus., Inc., 54 Comp. Gen. 967,
969-70 (1975), 75-1 CPD para. 301 at 3-5.
We conclude that the agency improperly accepted the awardee's offer.
A proposal that fails to conform to material terms and conditions of a
solicitation should be considered unacceptable and may not form the
basis for an award and the fact that the awardee may, after award,
agree to be bound to the conditions of the solicitation does not
render the proposal acceptable or the award proper. Multi-Spec Prods.
Group Corp., B-245156.2, Feb. 11, 1992, 92-1 CPD para. 171 at 3-4; Martin
Marietta Corp., 69 Comp. Gen. 214, 219 (1990), 90-1 CPD para. 132 at 7.
Where, as here, an irregularity in an offer results in benefits to an
offeror not extended to all offerors by the solicitation, and is
prejudicial to other offerors, the offer is unacceptable. See Valix
Fed. Partnership I, B-250686, Feb. 1, 1993, 93-1 CPD para. 84 at 4.
Although the RFP contained no separate, specific instructions stating
that only single unit prices could be submitted for each CLIN, it is
clear from the structure of the price schedule which provides a single
space for a unit price next to the estimated quantity, that a single
price is called for. This is reinforced by the RFP warning that
proposals which do not provide the required information in the
prescribed format may be excluded from consideration.[4]
The pricing format substituted by Associated deviated from the RFP
price schedule for 46 line items by splitting the estimated line item
quantity and pricing the designated smaller quantities separately,
effectively converting each affected CLIN into two CLINs. While this
type of pricing structure can yield a total offer for evaluation
purposes, the substantially higher unit prices for "first" quantities
afford Associated the opportunity to realize more revenue and profit
at the earlier stages of contract performance. Associated thereby
capitalized on the possibility that the agency will need less than the
total estimated quantities of services, and front-loaded the payments
associated with the "first" orders. Contrary to the agency's
contention that Associated's pricing offered the lowest cost to the
government, our analysis of Associated's pricing shows that the
awardee's pricing is not low in all circumstances. Specifically, if
the agency requires only the "first" quantities in Associated's offer,
the offer is not low in the base and first option periods and not low
overall. Indeed, using only the "first" quantities on the split
CLINs, Associated's prices for the base period and option periods are
$1,281,563, $862,363, and $822,453, respectively. Tri- State's
prices, based only on Associated's "first" quantities, are $1,192,402,
$815,923, and $823,153, respectively. Tri-State's total price would
thus be only $2,831,478, while Associated's would be $2,966,379.
Associated was awarded the contract on the basis of its evaluated low
price under a unique and nonconforming price schedule which benefits
the offeror and minimizes the risks associated with estimated
quantities. In these circumstances, we find without merit the
agency's contention that, even if Associated's pricing was improper,
Tri-State was not prejudiced.[5] The agency improperly accepted
Associated's nonconforming offer, and this acceptance of Associated's
offer was prejudicial to the other offerors.
Next, regarding the protester's allegation that the agency improperly
conducted discussions with only Associated after receipt of the second
BAFOs, the agency responds that the contracting officer believed that
it was "reasonably clear" that Associated had offered its "next"
pricing for all quantities exceeding the precise number of "first"
units specified and that the contracting officer sought clarifications
from Associated solely to confirm this reading of the pricing scheme
and "avoid any future disputes or claims based on an alleged
ambiguity."
Discussions occur when the government communicates with an offeror for
the purpose of obtaining information essential to determine the
acceptability of a proposal or provides the offeror with an
opportunity to revise or modify its proposal. Federal Acquisition
Regulation (FAR) sec. 15.601. In contrast, clarifications are merely
inquiries for the purpose of eliminating minor irregularities,
informalities, or apparent clerical mistakes in a proposal and do not
give an offeror the opportunity to revise or modify its proposal. Id.
If a procuring agency holds discussions with one offeror, it must hold
discussions with all offerors whose proposals are in the competitive
range, whereas clarifications may be requested from just one offeror.
Global Assocs. Ltd., B-271693, B-271693.2, Aug. 2, 1996, 96-2 CPD para.
100 at 4.
Here, we agree with the protester that the communications of the
agency and the awardee as to the prices for services beyond the
estimated quantities constituted discussions. Specifically, we do not
concur with the agency's assessment that the price for additional
services beyond the estimates was "reasonably clear" from Associated's
BAFO. Associated's BAFO explicitly states a specific price for a
specified number of "first" quantities and a specific price for a
specified number of "next" quantities. Associated's offer is silent
as to its price for any other quantities, that is, for quantities
above the estimated amounts. This may raise a question as to whether
Associated was obligated to provide additional quantities above the
estimated quantities, as required by the RFP, and raises doubt about
the prices for these additional services. Associated's prices on
these additional quantities could have been its "first" quantity
prices, its "next" quantity prices, or, a third, unknown price.[6]
Under these circumstances, the information sought by the agency, that
is, the offeror's agreement to supply additional waste removal
services above the estimated quantities at a specified price was
essential to determining the acceptability of the proposal. In fact,
this information was used to modify the award to Associated in the
form of the "note of understanding" discussed above. Because the
communications between the agency and Associated involved the exchange
of information necessary to determine the acceptability of
Associated's
proposal, those communications constituted discussions . FAR sec.
15.601, Global Assoc. Ltd., supra.
DLA did not suspend performance of Associated's contract because it
found that urgent and compelling circumstances existed which
significantly affected the interest of the United States. However,
Associated has performed only 4 months of the 18-month base contract.
Given this level of performance and the nature of the services to be
performed, we recommend that the agency terminate the awardee's
contract and award to Tri-State, if otherwise appropriate. Bid
Protest Regulations
4 C.F.R. sec. 21.8(a), (b) (1997). We also recommend that the protester
be reimbursed its costs of filing and pursuing its protest, including
reasonable attorneys' fees. 4 C.F.R. sec. 21.8(d)(1). The protester
should submit its certified claim for such costs, detailing the time
expended and costs incurred, directly to the contracting agency within
60 days of receiving this decision. 4 C.F.R. sec. 21.8(f)(1).
The protest is sustained.
Comptroller General
of the United States
1. In most instances, the awardee's prices on the split CLINs were
higher for "first" quantities and lower for "next" quantities.
However, two CLINs under the base period and one CLIN under each
option period were priced lower for the "first" quantities and higher
for the "next" quantities.
2. Tri-State initially protested this procurement on June 23. On June
25, we dismissed that initial protest, B-277315, as legally
insufficient because the protester alleged improper agency evaluation
based "on information and belief" and did not submit any supporting
explanation or documentation.
3. The protester calculates that 3,143,900 pounds of the total
4,692,828 pounds of waste the agency estimates will be removed are
included in those line items for which Associated offered split
prices.
4. The protester states that, subsequent to the filing of this
protest, DRMS issued amendments to two other solicitations advising
offerors that more than one price, a range of prices, or a "split bid"
with respect to any contract line item will be considered by the
agency as a material deviation from the bid schedule and/or a
nonconforming proposal that will be excluded from further
consideration.
5. Our Office will not sustain a protest unless the protester
demonstrates a reasonable possibility that it was prejudiced by the
agency's actions, that is, unless the protester demonstrates that, but
for the agency's actions, it would have had a substantial chance of
receiving the award. McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1
CPD para. 54 at 3; see Statistica, Inc. v. Christopher, 102 F.3d 1577,
1581 (Fed. Cir. 1996).
6. In contrast, a single unit price, as called for by the
solicitation, leaves no doubt: all quantities--including requirements
greater than the estimates--are offered at the single, stated price.