BNUMBER:  B-277704 
DATE:  November 13, 1997
TITLE: Rotary Furnishing Company, B-277704, November 13, 1997
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Matter of:Rotary Furnishing Company

File:     B-277704

Date:November 13, 1997

Lyle M. Ishida, Esq., Tom & Petrus, for the protester.
Marian E. Sullivan, Esq., Department of the Air Force, for the agency.
Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency's cancellation of solicitation for refurbishing mattresses and 
box springs is permissible where agency no longer has a need for 
refurbishing the items because it has determined that the government's 
interests will be better served by purchasing new mattresses and box 
springs.

DECISION

Rotary Furnishing Company protests the cancellation of request for 
proposals (RFP) No. F6231-97-R-0085, issued by the Department of the 
Air Force, Kadena Air Base, Okinawa, Japan, for refurbishing and 
cleaning mattresses and box springs.
 
We deny the protest.

The RFP, issued January 13, 1997, contemplated the award of a 
fixed-price requirements contract for a 6-month base period with four 
1-year options.  The award was to be made on a best value basis 
considering the following equally weighted criteria:  (1) price, (2) 
technical understanding of the performance work statement, and (3) 
past performance.  The RFP required offerors to submit a detailed 
breakdown of costs.

On the February 7 closing date, the Air Force received proposals from 
Rotary and Aishii Bed Company, the incumbent contractor.  The Air 
Force's preliminary evaluation found that Rotary failed to submit the 
requested cost breakdown.  After Rotary provided more complete cost 
information, the Air Force conducted discussions with that firm and 
Rotary was asked to explain several areas in its proposal that the 
agency considered to reflect excessive costs and to explain why its 
proposal was significantly higher priced than a previous proposal it 
had submitted.  The record indicates that Rotary offered several 
explanations to justify its costs, but did not provide what the agency 
considered to be sufficient evidence to determine that Rotary's costs 
were reasonable.

Following discussions and issuance of an RFP amendment, which, among 
other things, deleted certain requirements for cleaning and 
sterilization, the offerors submitted revised proposals.  Aishii 
submitted the lowest-priced proposal of 269,878,050 yen, and Rotary 
submitted a proposal priced at 480,319,000 yen.  The government 
estimate was 290,883,456 yen.  The Air Force requested best and final 
offers (BAFO) be submitted by April 1; in their BAFOs, neither Aishii 
nor Rotary changed its price.  

On April 17, the Air Force canceled the solicitation because Aishii, 
though it had submitted the lowest price, was found to be 
nonresponsible and because Rotary's price was considered unreasonably 
high--it exceeded the government estimate by an unacceptable margin 
and was above what the Air Force considered to be the maximum 
allowable cost for refurbishment of the items.  Because the price of 
refurbishing the items appeared to be so high, the Air Force decided 
to fulfill its now-urgent requirements by purchasing new mattresses 
from Federal Prison Industries, and the Air Force reports that it is 
thus acquiring new mattresses at a price only slightly higher than 
that proposed by Rotary for refurbishing old ones.

After the Air Force denied its agency-level protest, Rotary filed this 
protest objecting to the cancellation.  Rotary contends that the 
cancellation was improper because the Air Force allegedly conducted 
misleading discussions by not informing Rotary that its overall price 
was unreasonably high.  Further, Rotary contends that the Air Force 
relied upon an erroneous and unreasonably low government cost estimate 
to determine Rotary's price to be unreasonably high, in that the 
estimate assertedly underrepresented the number of employees necessary 
to accomplish the work.  Finally, Rotary maintains that in determining 
the maximum allowable cost of repair, which involved a comparison of 
Rotary's price against the cost of purchasing new mattresses, the Air 
Force did not consider certain costs that would be incurred if new 
mattresses are purchased.

Cancellation of an RFP after receipt of proposals is warranted where 
an agency determines that it is not in the best interest of the 
government to proceed with a particular procurement.  See Federal 
Acquisition Regulation  sec.  15.608(b)(4); Color Dynamics, Inc., 
B-236033.2, Oct. 27, 1989, 89-2 CPD  para.  391 at 2-3, aff'd, B-236033.3, 
Dec. 22, 1989, 89-2 CPD  para.  583 (agency properly determined it was in 
the best interest of the government to cancel and recompete a 
solicitation for the following year in the expectation of receiving 
lower prices and accomplishing the required work at a lower cost to 
the government).  A material change in an agency's minimum needs or a 
reassessment of its minimum needs that results in an agency no longer 
having a requirement for an item can be a proper basis for canceling a 
RFP, even if this reason is not clear at the time of cancellation.  
See Peterson-Nunez Joint Venture, B-258788, Feb. 13, 1995, 95-1  para.  73 
at 4-5.  

Here, the Air Force essentially determined that, in light of the high 
cost of refurbishing mattresses relative to the price of purchasing 
new ones, it no longer has a requirement for refurbishing mattresses.  
The agency reports that Rotary would have needed to reduce its price 
by at least 35 percent in order to offset the benefits associated with 
purchasing new mattresses.  In our view, it is reasonable for the 
agency to conclude that it would prefer to purchase new mattresses, 
unless refurbishing old ones can be done at a much lower price.  To 
the extent that Rotary is correct in arguing that refurbishing 
mattresses necessarily costs substantially more than the agency 
estimated, this argument merely underscores the reasonableness of the 
agency's decision to purchase new mattresses, rather than have old 
ones refurbished.[1]  Since Rotary has not suggested that (even if it 
had understood from the discussions that the agency found its price 
unreasonably high) it would have reduced its price by anything close 
to the amount that the Air Force believes necessary to justify 
refurbishing old mattresses--and, indeed, Rotary's primary contention 
is that its price was reasonable--we find the Air Force's cancellation 
to be unobjectionable.

The protest is denied.

Comptroller General
of the United States                                                                                        

1. Although Rotary complains that the Air Force has not factored in 
certain costs associated with acquiring new mattresses, those costs 
(the amount of which the parties dispute) do not mean that the Air 
Force was unreasonable in determining that purchasing new ones was 
worth the additional cost.  In our view, in light of Rotary's price 
for refurbishing used mattresses, the agency could reasonably conclude 
that it was preferable to acquire new ones.  In fact, the record 
suggests that, had the agency known how much refurbishing old 
mattresses would have cost, it might never have considered any course 
of action except the purchase of new ones.