BNUMBER: B-277735.2
DATE: November 21, 1997
TITLE: Howard W. Pence, Inc., B-277735.2, November 21, 1997
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Matter of:Howard W. Pence, Inc.
File: B-277735.2
Date:November 21, 1997
Lawrence W. Luecking for the protester.
Robert W. Pessolano, Esq., Department of the Army, for the agency.
Christine F. Davis, Esq., and Guy R. Pietrovito, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Agency properly canceled a solicitation after bid opening based upon
the unreasonableness of the bid prices, where the bid in line for
award exceeded the government estimate by 43 percent and there is no
showing that the government estimate was in error or that the decision
to cancel was made in bad faith.
DECISION
Howard W. Pence, Inc. protests the cancellation of invitation for bids
(IFB) No. DACA27-97-B-0025, issued by the United States Army Corps of
Engineers, Louisville District, for renovation of barracks at Fort
Campbell, Kentucky.
We deny the protest.
The IFB provided for the award of an indefinite delivery, indefinite
quantity contract for renovation of up to seven barracks buildings,
i.e., two buildings each in the base and first option year, and three
buildings in the second option year. The contractor will demolish
existing, interior partitions and install new ones; upgrade the
electrical and heating, ventilation and air conditioning systems;
renovate mini-kitchens; replace windows, doors, and roof; and repair,
clean, and seal the building's exterior facade. The IFB bidding
schedule requested unit and extended prices for 57 contract line items
(CLIN), which covered the various work requirements for the buildings
to be renovated in the base and option years.
The agency received five bids on the July 29, 1997, bid opening. A
comparison of the bids and the government estimate for the required
work, including options, follows:
Bidder A $14,454,016
Pence $27,809,919
Bidder C $28,735,460
Bidder D $35,008,666
Bidder E $55,164,000
Government Estimate $19,474,209
The apparent low bid included a defective bid bond and was rejected.
Because the bid prices varied widely and, except for Bidder A's
rejected bid, far exceeded the government estimate, the contracting
officer asked the Corps' Cost Engineering Branch to review the
accuracy of the government estimate.
An architect/engineering firm prepared the government estimate for
each CLIN on the IFB bidding schedule; the firm also generated back-up
documentation showing how it arrived at the unit and extended CLIN
prices. Before the IFB was issued, the Cost Engineering Branch
verified that the estimate was supported by standard estimating
procedures, was generated from standard cost engineering software, was
based upon all cost elements of the required work, and was reasonable.
At the contracting officer's request after bid opening, the Branch
checked for any errors or omissions in the estimate and found none.
Also, the Branch asked four bidders, including Pence, whether there
were any problems in the IFB specifications that may have contributed
to the wide variance in the bids; none of the bidders identified any
solicitation defects. Finally, the Branch obtained statistical
information showing that the average bid price in similar procurements
was within a very narrow range of the government estimate. The Branch
confirmed the estimate's accuracy.
The contracting officer concluded that the prices of all the otherwise
acceptable bids, including Pence's, were unreasonably high and
canceled the IFB. This protest followed.
An IFB may be canceled after bid opening if the prices of all
otherwise acceptable bids are unreasonable. Federal Acquisition
Regulation sec. 14.404-1(c)(6). The determination that prices are
unreasonable is a matter of administrative discretion, which we will
not disturb unless the determination is unsupported or there is a
showing of fraud or bad faith on the part of contracting officials.
G. Marine Diesel Corp., B-238703, B-238704, May 31, 1990, 90-1 CPD para.
515 at 3. A determination that a price is unreasonable may be based
upon a comparison with the government estimate. Hawkins Builders,
Inc., B-237680, Feb. 5, 1990, 90-1 CPD para. 154 at 2. Here, Pence's
apparent next-low bid was 43 percent higher than the government
estimate. Cancellation has been found to be justified where the low
responsive bid exceeded the government estimate by 10 percent. See
Metric Constructors, Inc.; H.B. Zachry Co., B-229947, B-229947.2, Mar.
25, 1988, 88-1 CPD para. 311 at 2-3.
Pence argues that its bid price was not unreasonably high, but that
the government estimate was unreasonably low. Pence asserts that "the
bare costs" to perform the contract, subtracting profit and general
and administrative expenses, is $23,527,191 and that the "required
work cannot be completed for less than this amount." Pence, however,
submitted no bid worksheets or other back-up data to substantiate this
"bare cost" figure. Further, although Pence's copy of the agency
report contained the government estimate, which disclosed the
estimated unit and extended CLIN prices for each item on the IFB
bidding schedule, Pence did not identify a single CLIN where the
government estimate appeared to be understated. Pence instead claimed
that it could not judge whether the estimate was understated, unless
it obtained the back-up documentation supporting the estimate; the
back-up documentation is source selection sensitive information to
which Pence was not entitled, because it was not represented by
counsel admitted to a protective order. See 4 C.F.R. sec. 21.4 (1997).
We find, contrary to the protester's allegation, that Pence had enough
information to judge whether any of the estimated CLIN prices in the
government estimate was understated. Because the protester failed to
do so, we have no basis to question the agency's conclusion that the
estimate was reasonable and that the bids received were not. See
Harrison Western Corp., B-225581, May 1, 1987, 87-1 CPD para. 457 at 4.
In addition, we reviewed in camera the back-up documentation
supporting the government estimate and find that it confirms the
estimate's accuracy. Specifically, the back-up documentation shows
that the estimators accurately described all work to be performed,
accounted for all costs associated with each item of work, localized
labor and material costs to the Ft. Campbell area, and developed
estimated prices for the various CLINs, which match the estimated
prices on the bidding schedule.
Noting that its bid price was in line with the third and fourth low
bid prices, while the government estimate was not, Pence contends that
this establishes that the government estimate is unreasonable. The
mere fact that the prices bid are substantially higher than the
government estimate does not, in and of itself, demonstrate that the
government estimate is unreasonably low. RNJ Interstate Corp.,
B-241946, Feb. 26, 1991, 91-1 CPD para. 219 at 3. Because Pence has
presented no evidence (other than the bids) showing that the
government estimate is unreasonable or that the agency acted in bad
faith, we find that the contracting officer properly determined that
the bidders' prices were unreasonable and that cancellation was
justified. See J. Morris & Assocs., Inc., B-256840, July 27, 1994,
94-2 CPD para. 47 at 2.
The protest is denied.
Comptroller General
of the United States