BNUMBER:  B-278075 
DATE:  December 19, 1997
TITLE: Navistar Marine Instrument Corp., B-278075, December 19, 1997
**********************************************************************

Matter of:Navistar Marine Instrument Corp.

File:     B-278075

Date:December 19, 1997

Steven J. Nadel for the protester.
Neil Hirsh, Esq., Naval Supply System Command, for the agency.
Sylvia Schatz, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Acquisition of compass repair services was micro-purchase not subject 
to competition requirements, and unpriced purchase order therefore 
properly was awarded on sole-source basis, where contracting officer's 
estimate for the work was $600 (below the $2,500 micro-purchase 
threshhold), and finalized price was $1,180; fact that estimated price 
in purchase order was $3,200 does not establish that acquisition value 
was above micro-purchase threshhold where record shows that this 
amount did not reflect expected price.

DECISION

Navistar Marine Instrument Corporation protests the Department of the 
Navy's issuance of purchase order No. N00104-97-M-N037 to John E. Hand 
& Sons Co., for the evaluation and repair of four magnetic compasses.  
Navistar primarily protests that the agency improperly issued the 
purchase order on a sole-source basis, precluding Navistar from 
competing. 

We deny the protest.

On August 31, 1996, the contracting officer at the Naval Inventory 
Control Point (NAVICP) received from the NAVICP inventory manager a 
purchase order for the evaluation and repair of four magnetic 
compasses.  Since the compasses originally had been supplied by Hand, 
the manufacturer, the inventory manager recommended that the repairs 
be performed by Hand.  On December 12, the contracting officer orally 
solicited and received from Hand quotations of $600 for evaluation and 
repair of the compasses and $3,200 for their replacement.  On December 
18, the contracting officer issued an unpriced purchase order to Hand 
for the evaluation and repair of the compasses, having determined that 
the need for inspection and evaluation made it impractical to 
establish a fixed price in advance.  Although, based on Hand's quote, 
the contracting officer estimated the price of the work at $600, in 
light of the uncertainty as to the final price, she set forth the 
price of $3,200 in the purchase order as the total estimated price.  

On February 27, Hand shipped the repaired compasses to the Navy and, 
on the following day, submitted to the Defense Contract Management 
Command (DCMC) a detailed price proposal of $1,180 for the work.  The 
DCMC contracting officer determined Hand's price to be reasonable, and 
on May 21 the Navy executed a contract modification finalizing the 
price of the purchase order at $1,180. 

The simplified acquisition procedures under Federal Acquisition 
Regulation (FAR) part 13 covers acquisitions under $100,000.  Where 
the aggregate amount of a purchase is between $2,500 and $100,000, 
agencies are required to obtain competition to the maximum extent 
practicable, FAR  sec.  2.101, 13.106-2(a).  Acquisitions that do not 
exceed $2,500--defined as micro-purchases in FAR  sec.  2.101--may be 
awarded without competition where the contracting officer has 
determined that the price is reasonable.  FAR  sec.  13.106-1(a)(2).  

The principal issue to be decided is whether the acquisition value of 
this requirement was above or below the micro-purchase threshhold.  If 
it was below the threshhold, it is a micro-purchase and the agency 
properly proceeded on a sole-source basis.  If the value was above the 
threshhold, award without seeking maximum practicable competition was 
improper.[1]  

We find that the acquisition value was below $2,500, and that the 
award to Hand was proper.  The dispute between Navistar and the Navy 
turns on whether $600 or $3,200 should have been deemed the 
acquisition value at the time the purchase order was issued.  We think 
the record is clear on this point--the contracting officer received a 
quote of $600 for the repair work, and determined that this was the 
estimated value.  As such, it was the most accurate available measure 
of the acquisition value.  While the contracting officer inserted 
$3,200 as the estimated price of the purchase order, the agency 
explains that this essentially was only a ceiling price, and was set 
forth solely to give the contracting officer the option of continuing 
with performance in the event Hand's evaluation revealed that more 
extensive repairs than anticipated would be required.  In this regard, 
by the terms of the purchase order, the agency was only obligated to 
pay for, and the contractor was only authorized to perform, work 
costing up to the estimated amount.  We do not think providing for an 
unexpected contingency in this manner can be viewed as altering the 
contracting officer's otherwise rationally founded expectation as to 
the cost of the repair work.  We conclude that the acquisition was a 
micro-purchase. 

Navistar also contends that Hand's price of $1,180 for the services 
was unreasonable--since Navistar allegedly could have performed the 
services for only $600--and that award without competition therefore 
was improper.  See FAR  sec.  13.106-1(a)(2).  This argument is without 
merit.  First, the DCMC contracting officer specifically determined 
that the final price was reasonable, and the mere fact that Navistar 
states--in support of its award challenge--that it could have 
performed the work at a lower price does not show that this 
determination was incorrect.  Moreover, under the circumstances of 
this case, the agency was not even required to verify price 
reasonableness before proceeding on a micro-purchase basis.  In this 
regard, the FAR--recognizing that the administrative cost of verifying 
price reasonableness ordinarily could more than offset savings from 
detecting instances of overpricing--provides that reasonableness need 
not be verified, except in specified circumstances not present here.  
FAR  sec.  13.106-1(a)(3).

The protest is denied.

Comptroller General
of the United States

1. There is no statutory or regulatory guidance as to the manner in 
which the value of an acquisition is to be determined for purposes of 
deciding whether the acquisition qualifies as a micro-purchase.