BNUMBER: B-277651
DATE: November 7, 1997
TITLE: Beldon Roofing & Remodeling Company, B-277651, November 7,
1997
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Matter of:Beldon Roofing & Remodeling Company
File: B-277651
Date:November 7, 1997
Joseph A. Hackenbracht, Esq., Starfield & Payne, for the protester.
Ronald J. Garber, Esq., Shapiro, Fussell, Wedge, Smotherman & Martin,
for Murton Roofing of South Carolina, Inc., an intervenor.
Col. Nicholas P. Retson, and Maj. Jonathan C. Guden, Department of the
Army, for the agency.
John Van Schaik, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
A solicitation for a requirements contract should be canceled and
resolicited where the contracting agency cannot establish that the
solicitation's quantity estimates are realistic and reflect the
government's actual anticipated requirements.
DECISION
Beldon Roofing & Remodeling Company protests the rejection of its bid
as unbalanced under invitation for bids (IFB) No. DAKF11-97-B-0006,
issued by the Army for roofing repair and replacement. Beldon argues
that its bid is not unbalanced. Alternatively, Beldon argues that the
IFB is flawed since the quantity estimates in the solicitation do not
reasonably reflect the government's needs.
We agree with Beldon that the solicitation is flawed and we sustain
the protest on that basis.
The Army issued this solicitation for all labor, equipment, and
materials necessary to repair and replace roofing on buildings at
Forts McPherson and Gillem. The IFB called for award of a
requirements contract for a base year and 2 option years. Section B
of the solicitation listed 149 contract line items (CLIN) for each
contract period, along with an estimated quantity for each CLIN.[1]
Bidders were to supply a unit price for each CLIN, which was to be
multiplied by the estimated quantity to determine an extended price
for that CLIN. The overall price of each bid was to be calculated by
totaling the extended prices.
The Army received bids from Beldon, Murton Roofing of South Carolina,
Inc., and American Renovation and Construction at the following
overall prices:
Beldon $6,830,466
Murton $7,494,806
American $8,611,950
Agency officials concluded that Beldon's bid was mathematically
unbalanced because it contained understated prices for some CLINs and
overstated prices for others. The agency also concluded that Beldon's
bid was materially unbalanced, because, due to its mathematical
unbalancing, there was a reasonable doubt that the bid would result in
the lowest overall cost to the government. The agency therefore
rejected the bid pursuant to Federal Acquisition Regulation (FAR) sec.
15.814(b) and 52.214-19(d). The contract was awarded to Murton. Work
on the contract has been suspended pending resolution of the protest.
As we explain in detail below, we agree with the Army that Beldon's
bid was mathematically unbalanced. However, we do not reach the issue
of whether Beldon's bid was materially unbalanced. Rather, we agree
with Beldon's alternative contention that the quantity estimates in
the IFB do not reasonably reflect the government's needs.
In determining whether a bid is impermissibly unbalanced, the bid must
first be shown to be mathematically unbalanced, which involves the
assessment of whether the bid is based on understated prices for some
work and overstated prices for other work. See Outer Limb, Inc.,
B-244227, Sept. 16, 1991, 91-2 CPD para. 248 at 2. Next, to be rejected
as unbalanced, the bid must be materially unbalanced, that is, there
must be a reasonable doubt that award to the bidder submitting a
mathematically unbalanced bid will result in the lowest ultimate cost
to the government. USA Pro Co., Inc., B-220976, Feb. 13, 1986, 86-1
CPD para. 159 at 3.
Turning first to the issue of mathematical unbalancing, as the agency
explains, Beldon's bid included unit prices that were substantially
below the government estimate on a significant number of CLINs. For
example, Beldon bid unit prices that were 25 percent of the unit price
in the government estimate for wood board decking, 16 percent of the
unit price in the government estimate for 1" x 6" wood fascia, 30
percent of the unit price in the government estimate for hip and ridge
slate shingles, 30 percent of the unit price in the government
estimate for 16 oz. copper flashing, and 12 percent of the unit price
in the government estimate for various types of copper elbows.
Beldon's bid also included unit prices substantially above the unit
prices in the government's estimate on a significant number of other
CLINs. For example, Beldon's unit price for roof flashing was 5 times
the unit price in the government's estimate for that item, its unit
price for gutters/downspouts was 10 times the unit price in the
government's estimate, its unit price for ventilators, warehouse-76' x
2' was 3 times the unit price in the government's estimate, its unit
price for roll roofing-1 ply asphalt smooth surface was 3 times the
unit price in the government's estimate, and its unit price for vent
warehouse-aluminum 76' x 2' was 6 times the unit price in the
government's estimate.
The Army explains that it derived the unit prices in the government's
estimate from the R.S. Means Building Construction Cost Data, a trade
publication which provides cost information on various construction
projects. Beldon has not argued that the unit prices used in the
government estimate were in error or that the publication relied upon
by the agency is not a reliable source of information on construction
costs. Under the circumstances, we conclude that the government
estimate includes reasonable, good faith estimates of the actual unit
cost to perform the work under each CLIN. In light of the sharp
disparity between Beldon's prices and the government's estimated
prices, we agree with the Army that Beldon's bid included numerous
understated unit prices and numerous overstated unit prices and, as a
result, that the bid was mathematically unbalanced.
As explained above, the Army considered Beldon's bid materially
unbalanced also. The determination that Beldon'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 estimated quantities in the IFB. The
Army contends that, while the quantity estimates in the IFB are the
agency's best estimates, the actual quantities ordered will depend on
a number of unpredictable variables, including funding, potential
storm damage, and the impossibility of determining the exact roofing
needs of a given building until the exterior of the roof is removed.
The Army further contends that, due to the unpredictability of actual
roofing needs, and the mathematical unbalance of Beldon's bid, the
fact that Beldon's bid was low based upon the estimated quantities in
the IFB did not mean that an award to Beldon would actually result in
the lowest cost performance.
In order to determine whether Beldon's bid (rather than another bid)
would result in the lowest cost of performance, the agency applied the
competing bids' prices to recent past work and to future planned work.
In reviewing recent work the agency examined the roofing work
performed under two requirements contracts over the 3 previous years
for Forts McPherson and Gillem and concluded that, had that work been
done under the prices in Beldon's bid, the cost would have exceeded
the government's estimate by $1,607,781. The agency also calculated
that the cost of that work under Murton's bid would have exceeded the
government's estimate by only $99,857. Concerning likely future work,
the agency determined that performance of 11 known requirements under
the prices in Beldon's bid would exceed the government's estimate for
that work by $719,439, and performance of those requirements under
Murton's prices would exceed the government's estimate by only
$130,674.[2] On the basis of this analysis, the agency concluded that
there was a reasonable doubt that Beldon's bid would result in the
lowest overall cost to the government and that, consequently, the bid
was materially unbalanced.
Beldon argues that the agency's own analysis, although used to explain
how Beldon's bid was determined to be materially unbalanced, actually
demonstrates that the estimated quantities in the IFB were not
prepared based on the best available information. We agree.
The Army is correct in pointing out that in previous decisions
concerning unbalanced bidding on solicitations for roofing work, we
have recognized the inherent uncertainty of roofing estimates. See,
e.g., Alice Roofing & Sheet Metal Works, Inc., B-275477, Feb. 24,
1997, 97-1 CPD para. 86 at 5, and Beldon Roofing & Remodeling Co.,
B-253199, B-253199.2, Aug. 18, 1993, 93-2 CPD para. 103 at 7. The Army
argues that due to that uncertainty, there should be no requirement to
apply mathematically unbalanced bid prices to any type of actual
requirements--either historical or prospective--in order to show that
a mathematically unbalanced bid is materially unbalanced. In other
words, according to the Army, "for material unbalancing analysis in
roofing cases . . . [there] is almost a 'per se' finding of material
unbalance when a bid is found to be mathematically unbalanced."
While we have recognized the problems inherent in creating reliable
quantity estimates for solicitations for roofing work, our prior
decisions to not establish that a bid for a requirements contract for
roofing work--or any other kind of work--may be found unbalanced
simply based on a showing of mathematical unbalancing. On the
contrary, to be rejected, a mathematically unbalanced bid must be
materially unbalanced, that is, there must be a reasonable doubt that
award to the bidder submitting a mathematically unbalanced bid will
result in the lowest ultimate cost to the government. In fact, we
specifically recognized this principle in the two decisions cited by
the Army. See Alice Roofing, supra, at 3, and Beldon Roofing, supra,
at 3.
For unbalancing in requirements contracts such as this one, the
accuracy of the solicitation estimates--and in particular the accuracy
of the relative quantity mix among CLINs--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.
Alice Roofing, supra, at 4.
While there is no requirement that IFB estimates be absolutely
correct, FAR sec. 16.503(a)(1) requires that a solicitation for a
requirements contract state realistic estimated total quantities and
that these estimates be based on the most current information
available. Duramed Homecare, 71 Comp. Gen. 193, 198 (1992) 92-1 CPD para.
126 at 6. Although we recognize, as we stated in Alice Roofing,
supra, at 5, that the actual quantities ordered under a roofing
contract, in particular, are dependent upon unpredictable and unique
variables, the solicitation must nonetheless contain a reasonably
accurate statement of the agency's anticipated requirements. Here,
our review of the record in this case leads us to agree with Beldon
that the IFB quantity estimates do not meet that standard.
The reason that the agency concluded that Beldon's bid was materially
unbalanced was that, under the mix of CLINs in both the agency's
actual past and likely future requirements, Beldon's bid would not be
low--yet under the mix of CLINs set out in the IFB, Beldon's bid was
low. We agree with Beldon that, if the quantity estimates in the IFB
reflected neither past nor future requirements, there is doubt as to
their reasonableness.
Our review reveals substantial disparities between the historical
information to which Beldon's bid was compared and the quantity
estimates in the IFB. For instance, of the 149 CLINs in the IFB, most
(86 of the 149) were not used at all under the two earlier contracts
to which Beldon's bid was compared in the agency's material
unbalancing analysis.
Concerning anticipated future requirements, as Beldon notes, the
quantities of 17 of the CLINs in the 11 known requirements were at
least twice the estimated annual quantities of those items in the IFB.
In addition, as Beldon notes, 106 of the items in the IFB (out of a
total of 149) are not required at all in the 11 known requirements.
Moreover, although the agency notes that the cost of those known
requirements was $719,431 higher based on Beldon's prices than based
on the prices in the government's estimate, Beldon points out that
most of that difference is accounted for by only two CLINs. The
quantities of those two CLINs in the agency's known requirements are
89 and 77 times the estimated annual quantities for those CLINs in the
IFB.
Because of the disparity between the IFB quantity estimates and the
agency's actual past and anticipated future needs, our Office sought
more detailed information from the agency as to how the IFB quantity
estimates were derived. In response to that request, the Army
explained that when the government estimate was developed in early
1997 there were 32 roofs known to need work that could be ordered
under this contract, and referenced an attachment, Enclosure 4. That
enclosure, which was described by the Army as "Field Estimates used to
derive original quantities," included, for each of the 32 buildings, a
breakdown of required line items, a description of each line item, the
required quantity of each line item, unit prices, extended prices (for
each line item, the required quantity multiplied by unit price), and
total prices for each of the 32 buildings.
The contracting officer explained that the quantities for each of the
various line items were totaled and those totals were transferred to
another working paper. That working paper, "Enclosure 1," included a
list of all of the line items covered by the IFB and two columns of
handwritten quantities for the line items. The cover page to
Enclosure 1 stated, "Numbers on the left are quantities based upon the
total of all field estimates in Enclosure 4."
As the contracting officer explained, the estimated cost of the 32
roofing projects in Enclosure 4 was approximately $25 million.
Divided into 3 years--the base and 2 option years covered by the
contract--each year's estimated requirement was approximately $8.2
million. The Army reports that agency officials knew from experience
that the agency would not receive funding at that level. As a result,
the agency reduced the estimated quantities to bring the contract in
line with historical funding levels; the overall government estimate
for the 3 years was reduced to approximately $7.3 million and each
contract year to about $2.5 million. The contracting officer explains
that these reductions in the estimated quantities were done both on an
"across the board" basis and based on the judgment of an experienced
estimator of the type of work that was likely to be funded during the
contract period. The agency stated that the result of this process
was the estimated quantities in the IFB.
In response to this explanation, Beldon noted that there were
substantial discrepancies between the quantities in Enclosure 4 and
the total quantities listed in the left hand column in Enclosure 1.
For example, Beldon noted that Enclosure 1 listed 33,000 square feet
as the total amount of perlite 1" insulation, while in Enclosure 4 the
field estimates included a total of 2,116,360 square feet of Perlite
1" insulation. Beldon's calculations show that there were
discrepancies between the Enclosure 4 field estimates and the
Enclosure 1 totals for all of the listed line items.
Our review of the record confirmed that there were substantial
discrepancies between the quantities in Enclosure 4 and the total
quantities listed in the left hand column in Enclosure 1.[3] When
asked to explain these discrepancies, the Army conceded that, although
it previously had explained that the line items in the field estimates
in Enclosure 4 were totaled to obtain the total quantities in
Enclosure 1, that explanation was erroneous. The Army now explains:
The file submitted as [Enclosure] 4 represents the working file
as it existed on 22 September 1997. Field estimates have been
added to and deleted from the working file since the field
estimates were used to develop the government estimate in early
1997. Field estimates are not generally dated. It is,
therefore, impossible to tell exactly which field estimates were
used to develop the government estimate.
The agency's position is now that the "Army can't identify the
documents that it used to develop the numbers in the left-hand column
of [Enclosure] 1." The agency thus admits that the field estimates
used to create the estimated quantities in the IFB cannot be
identified. Moreover, the agency's material unbalancing analysis
demonstrated that the IFB quantity estimates were inconsistent with
both the agency's historical requirements and its anticipated future
needs. Given the discrepancies between the historical information and
the anticipated orders, on the one hand, and the estimates in the IFB,
on the other hand, and given the Army's inability to document the
development of those estimates, we conclude that the IFB's quantity
estimates were not realistic estimates and thus did not meet the
standard of FAR sec. 16.503(a)(1).
The Army argues that, notwithstanding the problems with the quantity
estimates in the IFB, there is no compelling reason to cancel and
resolicit this requirement because Beldon was not prejudiced, since it
bid on the same basis as the other bidders. According to the Army,
due to the inherent uncertainty in roofing estimates, nothing would be
accomplished by canceling and resoliciting. In this regard, the Army
notes that FAR sec. 14.404 requires a "compelling reason" to cancel an
invitation for bids after bids have been opened and prices exposed,
and argues that there is no compelling reason to cancel the
solicitation.
Without reasonably reliable quantity estimates in a solicitation for a
requirements contract, firms have no reasonable basis to prepare their
bids and the government cannot determine which bid will actually
result in the low overall cost of performance. See Duramed Homecare,
71 Comp. Gen. 193, 198-99 (1992), 92-1 CPD para. 126 at 7; Edward B.
Friel, Inc., 55 Comp. Gen. 231, 238-240 (1975), 75-2 CPD para. 164 at
9-10. It is for this reason that our decisions in this area,
including decisions involving roofing work, state that the accuracy of
the solicitation's quantity estimates is critical. See, e.g., Alice
Roofing, supra, at 4. Because the quantity estimates in the IFB at
issue here are questionable to the point that they do not inform
bidders of the government's actual anticipated needs and it is not
possible to determine which bid represents the lowest cost of
performance, we conclude that cancellation is the only appropriate
course of action here.
We recommend that the Army cancel the IFB, review its estimates based
upon the most current information available, and resolicit its
requirements under a solicitation that sets forth realistic estimated
quantities. In addition, we recommend that the protester be
reimbursed its costs of filing and pursuing the protest, including
reasonable attorneys' fees. 4 C.F.R. sec. 21.8(d)(1) (1997). The
protester should submit its certified claim for costs 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. The solicitation's CLINs were grouped according to the tasks
associated with repairing and replacing different types of roofing
systems. Thus, for example, for each contract period, the IFB
contained 9 CLINs for demolition, 6 CLINs for carpentry, 13 CLINs for
insulation, 9 CLINs for shingles, 6 CLINs for gutters, 8 CLINs for
metal roofing, and 9 CLINs for built up roofing. There was also an
additional line item for each contract period for bonds.
2. The Army reports that these 11 unfunded requirements were
considered by the agency's project engineer to be the most likely
projects to be funded in the coming months.
3. As noted above, the Army represented that the left hand column was
a total of the quantities of each line item from all 32 of the
projects listed in Enclosure 4.