TITLE:  Beldon Roofing Company, B-283970, January 28, 2000
BNUMBER:  B-283970
DATE:  January 28, 2000
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Beldon Roofing Company, B-283970, January 28, 2000

Decision

Matter of: Beldon Roofing Company

File: B-283970

Date: January 28, 2000

James D. Rosenblatt, Esq., for the protester.

J. Hatcher Graham, Esq., for R.L. Campbell Roofing Company, an intervenor.

Marilyn W. Johnson, Esq., and Richard G. Welsh, Esq., Department of the
Navy, for the agency.

Linda C. Glass, Esq., and Paul I. Lieberman, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency conclusion that award to bidder that proposed relatively high prices
for removal of old roofs and relatively low prices for installation of new
roofing systems did not represent a risk to the government is
unobjectionable where the reasonableness of the estimated quantities is not
in question, the agency expects to order removal and installation together,
and the awardee's evaluated price is significantly lower than the
protester's.

DECISION

Beldon Roofing Company protests the award of a contract to R.L. Campbell
Roofing Company (Campbell) under invitation for bids (IFB) No.
N62467-99-B-3149, issued by the Department of the Navy for the repair and
replacement of roofs at the Pensacola Naval Region, Pensacola, Florida and
Naval facilities in Mobile, Alabama. Beldon contends that Campbell's bid is
unbalanced and cannot properly form the basis for contract award.

We deny the protest.

The IFB, issued on July 9, 1999, contemplated the award of a fixed-price,
indefinite-delivery/indefinite-quantity (IDIQ) contract for a base period
with four 1-year options. IFB sect. 01200. Contract line item number (CLIN) 0004
and related sub-CLINs of the IFB required contractors to remove modified
bitumen roofing and to install new modified bitumen roofing. CLIN 0007 and
related sub-CLINs required the removal of existing aluminum standing seam
roofing and the installation of new aluminum standing seam roofing. Award
was to be made to the responsive, responsible bidder offering the lowest
total price for all CLINs. IFB sect. 00200, para. 1.19. Five bids were received by
the August 16, 1999 bid opening date. Campbell submitted the apparent low
bid of $14,972,210. Agency Report, Tab 3. Beldon submitted the second low
bid of $18,591,822. Id.

By letter dated August 17, the agency informed Campbell that its bid was
significantly below the other bids received, inquired whether Campbell had
considered inflation in its price for the option years, and requested that
Campbell verify its bid price. Agency Report, Tab 6. Campbell verified its
bid by letter dated August 18 and advised the agency that it had considered
inflation and had learned from past experience that being well established
during the base year, with a well established, experienced crew, would
result in cost savings during the life of the contract sufficient to cover
inflation. Agency Report, Tab 7.

By letter dated September 8, the agency advised Campbell that its bid
appeared to be unbalanced and specifically noted that Campbell's CLIN prices
with respect to roof installation appeared underpriced, while its CLIN
prices for roof removal, flashing and downspouts appeared to be overpriced.
Agency Report, Tab 8. The agency also noted that Campbell's bond prices
appeared to be excessive. In its response, Campbell stated that it had
reviewed its prices and no price was below cost and, while conceding that
some of its item prices may seem high, pointed out that, assuming the
validity of the government estimates, the bid was not materially unbalanced.
Agency Report, Tab 9. Campbell did, however, state that there was a decimal
placement error in its bond cost and that the price of $220 per thousand
should have been $22 per thousand.

After reviewing Campbell's verification, the contract specialist noted that
the current contract, unlike the prior contract, requires the entire roofing
systems to be ordered, with the exception of sheet metal flashing and
insulation, and does not call for individual piece part sub-line items in
addition to the installation. Agency Report, Tab 10. To ensure that Campbell
understood the scope of the CLIN requirement, the agency sent Campbell a
third bid verification letter noting the CLIN requirements and requesting
that it review the prices associated with the removal of old roofs and the
installation of new roofing systems, and provide a revised bid sheet which
accurately reflected bond costs. Agency Report, Tab 11. Campbell again
verified its bid price except for the bonding costs which it stated should
have been $22 per thousand.

The agency accepted the correction to Campbell's bonding costs as well as
another correction involving prices for option years 1 thru 4 of the Mobile
facility line items. Award was made to Campbell on October 13 in the
corrected, lowered amount of $14,842,497.50. Agency Report, Tab 14. Beldon
challenges the agency's award to Campbell on the grounds that Campbell's bid
is unbalanced primarily because it has nominal prices for the installation
of new roofs and enhanced prices for the removal of old roofs. [1]

Federal Acquisition Regulation (FAR) sect. 15.404-1(g) provides that unbalanced
pricing exists where the price of one or more contract line items is
significantly over- or understated as indicated by the application of cost
or price analysis techniques. FAR sect. 15.404-1(g)(2) requires that offers with
separately priced line items or sub-line items be analyzed, using cost or
price analysis techniques, to determine if the prices are unbalanced and, if
an offer is found to be unbalanced, the contracting officer shall consider
the risk that award of the contract will result in paying unreasonably high
prices for contract performance. An offer may be rejected if the contracting
officer determines that the lack of balance poses an unacceptable risk to
the government. FAR sect.15.404-1(g)(3). Here, the agency concluded that
Campbell's pricing strategy did not pose an unacceptable risk because
removal and installation would be ordered together as a package.

The protester generally disagrees with the agency's conclusion that
Campbell's unbalanced pricing does not represent a risk to the government.
Beldon further maintains that, since the removal has to be performed prior
to installation, award to Campbell would result in an improper advance
payment.

Prior FAR provisions called for the rejection of a mathematically unbalanced
offer if it was so grossly unbalanced that its acceptance would be
tantamount to allowing an advance payment, even if the offer appeared to
represent the lowest cost to the government. FAR sect.15.814(b)(2) (June 1997);
Jasper Painting Serv., Inc., B-251092, Mar. 4, 1993, 93-1 CPD para. 204 at 4. In
this regard, we have found prices to be impermissibly front-loaded only in
limited situations where the front-loaded item prices were many multiples
higher than the value of the work to be performed or the remaining contract
prices. See ACC Constr. Co., Inc., B-250688, Feb. 16, 1993, 93-1 CPD para. 142
(line item price of $4.7 million versus government estimate of $1.8
million); Islip Transformer & Metal Co., Inc. B-225257, Mar. 23, 1987, 87-1
CPD para. 327 (first article unit prices were $15,000 and the production unit
prices were $408.90); Edgewater Mach. & Fabricators, Inc., B-219828, Dec. 5,
1985, 85-2 CPD para. 630 (first article prices were $125,000 and the production
unit prices were $301). In each of these cases, the grossly overpriced items
would have resulted in substantial funds--which significantly exceeded the
value received by the government--being paid to the contractor early in
contract performance. Here, Campbell's bid cannot result in such an advance
payment. The solicitation specifically requires vendors to sequence the work
to minimize building exposure between demolition and installation of new
roof. IFB sect. 02220, para. 3.1.2. It further requires vendors to remove only as
much roofing as can be recovered by the end of the workday. IFB sect. 02220, para.
3.1.2.1. Moreover, vendors are to be paid through the submission of monthly
invoices detailing the work actually performed. IFB sect. 01200, para. 2.6.1.b.
Thus, there is simply no way that Campbell can receive the kinds of
excessive payments at a sufficiently early date to fall within the ambit of
what our Office has viewed as impermissible advance payments arising from
unbalancing. Moreover, under the current FAR provision involving unbalanced
bidding, neither the term "advance payment" nor the concept is any longer
used in discussing unacceptable unbalanced pricing. We therefore question
whether this kind of front loaded pricing can be rejected under the extant
unbalancing criteria, absent an associated risk assessment, even though we
recognize that the prohibition on advance payments is still contained in 31
U.S.C. sect. 3324 (1994).

Beldon also contends that the agency's evaluation of Campbell's unbalanced
bid failed to take into consideration that the combination of the tear off
and installation of the roofing membrane prices was clearly nominal compared
to the inflated price charged for the other items that complete a roofing
system. In fact, the agency specifically recognized this apparent
unbalancing, and it precipitated the correspondence with the protester,
outlined above. However, there did not appear to be any basis to question
the estimated quantities for each IFB CLIN, and the protester specifically
declines to question the accuracy or reasonableness of these estimates.
Protester's Comments at 2, 5. While Beldon does not challenge the accuracy
of the estimates, it argues that actual quantities ordered depend on
unpredictable variables and that it is only appropriate to evaluate the bids
by comparing prior delivery orders. Since, as explained above, the items
here are not being ordered in the same manner as under the prior contract in
that the complete tasks of removal and installation are to be performed in
close proximity and will be included in one delivery order, we do not agree
that a comparison with prior delivery orders would be more accurate or
appropriate.

More important, the IFB did not call for the price evaluation to be
conducted in that manner; rather, it called for the use of the specified
estimates, as was done by the agency, and the protester did not protest the
IFB's terms--and even now has not provided any basis to question the
accuracy of those estimates. The evaluation of bid prices based on the
estimated quantities results in the awardee's bid being almost $4,000,000
lower than the protester's. Under these circumstances, we see no basis to
question the reasonableness of the agency's conclusion that, whatever
unbalancing

may exist in Campbell's bid, it does not pose an unacceptable risk. Kellie
W. Tipton Constr., Co., B-281331.3, Mar. 22, 1999, 99-1 CPD para. 73 at 6. [2]

The protest is denied.

Comptroller General

of the United States

Notes

1. Beldon, in its initial protest, also argued that it was improper for the
agency to allow Campbell to correct certain pricing errors in its bid. In
its report, the Navy maintained that it properly allowed Campbell to correct
based on clear and convincing evidence of the mistakes and the intended
prices. The protester does not mention this contention in its comments and
we see no basis to question the agency's analysis.

2. The protester also argues that the agency ignored the fact that
Campbell's prices on the work to be performed at the Mobile facility is a
further indication that Campbell's bid is unbalanced because there are
enormous discrepancies between pricing of CLINs for work at the Mobile
location compared to those at Pensacola. Again, the protester does not
contend that the estimates for the work are inaccurate, and we fail to see
how this by itself suggests that Campbell's pricing strategy reflects
impermissible unbalancing, particularly since business judgment and
differing site conditions may contribute to different pricing for different
locations, without creating so great a risk to the government that it would
be improper to accept the bid.