TITLE:  South Atlantic Construction Company, LLC, B-286592.2, April 13, 2001
BNUMBER:  B-286592.2
DATE:  April 13, 2001
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South Atlantic Construction Company, LLC, B-286592.2, April 13, 2001

Decision

Matter of: South Atlantic Construction Company, LLC

File: B-286592.2

Date: April 13, 2001

Joel S. Rubinstein, Esq., Bell, Boyd & Lloyd, for the protester.

Gilbert J. Ginsburg, Esq., for Phoenix Contracting Services, Inc., an
intervenor.

Joshua A. Kranzberg, Esq., and David H. Scott, Esq., U.S. Army Materiel
Command, for the agency.

Christina Sklarew, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1. Protest that agency was required to reject bid for failure to satisfy bid
guarantee requirement is denied where the amount of the contested bid
guarantee was greater than the difference between that firm's bid and next
low bid and agency properly decided to waive the requirement; fact that
contested bid included inconsistent language regarding the amount of the bid
guarantee did not require rejection.

2. Agency conclusion that award to bidder that proposed relatively high
prices for 3 items and relatively low prices for 3 other items listed among
166 items in a solicitation for roofing repair work did not represent an
unacceptable risk to the government is unobjectionable where the
reasonableness of the estimated quantities to be ordered under the contract
is not in question, all bidders (including the protester) had similarly
inconsistent prices for some items, and the awardee's price is lower for the
base year, for 2 of the 4 option years, and for the potential 5-year
contract.

DECISION

South Atlantic Construction Company, LLC protests an award by the Army
Materiel Command to Phoenix Contracting Services, Inc. under invitation for
bids (IFB) No. DAAD05-00-B-7005 for roofing replacement and repairs. South
Atlantic asserts that Phoenix's bid should have been rejected as
nonresponsive, alleging that Phoenix submitted a defective bid bond and that
its pricing was unbalanced.

We deny the protest.

The IFB, issued as a small business set aside, contemplated the award of a
fixed-price requirements contract for roof repairs or replacement for any of
the 2,272 buildings located at Aberdeen Proving Ground, Maryland during a
1-year base period with 4 option years. The work that might be required
included replacement of existing roofs, either with the existing type of
roof or a new type, as well as replacement of shingles or other types of
repair work. The IFB included a government estimate of the quantities for
the various types of work that would be needed.

The IFB required bidders to provide unit prices for 166 separate contract
line item numbers (CLIN) for each year, resulting in a total of 830 CLINs
for the potential
5-year life of the contract. Each CLIN contained estimated quantities.
Bidders were to insert a unit price for each CLIN, which when multiplied by
the estimated quantity, resulted in an extended price for each CLIN. The sum
of the extended prices comprised the total bid price. Bidders were
instructed to guarantee their bids with a bid bond equaling the lesser of
either 20 percent of the bid amount or $3,000,000.

The agency received five timely bids, of which two were rejected as
nonresponsive for failure to acknowledge amendments. Among the three
remaining bids, Phoenix's price of $11,893,133.47 was the apparent low bid,
while South Atlantic's $12,185,607.02 bid was the second lowest. While
reviewing Phoenix's bid, the contracting officer discovered several
mathematical errors and pricing inconsistencies. When these were brought to
Phoenix's attention, Phoenix declined to make any changes, verifying its bid
as submitted. The contracting officer therefore corrected only certain
obvious clerical (multiplication) errors in Phoenix's bid that are not at
issue here. After these corrections were made, Phoenix's bid price was
increased to $11,972,424.75 but remained low.

After South Atlantic challenged Phoenix's bid as unbalanced, [1] the agency
analyzed Phoenix's pricing to determine whether an award to Phoenix would
likely result in paying unreasonably high prices. The agency applied
Phoenix's unit prices to 15 actual delivery orders that had been placed
under the previous contract and compared the resulting prices to the amounts
that had been paid to the previous contractor. Although the engineer's
report states that there were too many variables involved, and too little
data, to produce a clear result, Agency Report, Tab I, Engineering Review of
Phoenix's Prices, at 5, the contracting officer noted that the prices bid by
Phoenix were in most cases very similar to the amounts actually paid under
the previous contract. Agency Report, Tab J, Contracting Officer's Summary
of Award, at 3. In addition, each bidder's unit prices were compared with
the prices submitted by the other bidders. In comparing the 830 separate
unit prices in each bid, the contracting officer noted that each bidder has
some unit prices that could be considered unbalanced when viewed in relation
to all the other prices bid for that particular item. The contracting
officer concluded that Phoenix's pricing did not pose an unacceptable risk
to the government and therefore should not be rejected. This protest
followed.

South Atlantic alleges that the bid bond that was submitted with Phoenix's
bid was deficient because it lists "conflicting penal sums." Protest at 2.
The protester contends that although the bid bond indicates in one area that
the penal sum is 20 percent of the bid amount (which would be $2,378,626.69
or $2,394,484.95, depending whether the initial or corrected amount is
used), in another area it is expressed as "not to exceed $600,000," which is
clearly less than the 20 percent required by the IFB.

When required, a bid bond is a material part of the bid and by its terms
must clearly establish the requisite liability of the surety or the bid must
be rejected as nonresponsive. See Tom Mistick & Sons Inc., B-222326, Apr. 3,
1986, 86-1 CPD para. 323. The question presented where a bond contains any
defect is whether the government materially obtains the same protection
under the bond actually submitted as it would if the bond complied with the
solicitation in all respects. Id. In this regard, the Federal Acquisition
Regulation (FAR), sect. 28.101-4(c)(2), provides that noncompliance with a
solicitation requirement for a bid quarantee generally shall be waived when
the amount of the bid guarantee, while less than required, is equal to or
greater than the difference between the affected bid and the next low
acceptable bid.

Here, South Atlantic argues that the bond was not valid in any amount
because of the inconsistency within the bid regarding the amount of the bid
guarantee. We disagree. The bond provided a penal sum of 20 percent of the
bid amount, limited to a $600,000 maximum, and we see no reason that even an
inconsistency within the bid (concerning whether the bid guarantee was even
higher than that maximum) would lead to a conclusion that the bond was not
valid for the $600,000 amount. In addition, the contracting officer properly
determined that Phoenix's bid was acceptable, even though its bid guarantee
was limited to $600,000, because that amount was greater than the
$213,182.27 difference between Phoenix's bid and South Atlantic's bid.
Centex-Great Southwest Corp., B-258578, Jan. 17, 1995, 95-1 CPD para. 19 at 2.

Next, South Atlantic protests that Phoenix's bid should be rejected as
nonresponsive because its pricing is unbalanced. The protester identifies
six CLINs for which it alleges Phoenix's prices are significantly overstated
or understated.

Section 15.404-1(g) of the FAR 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 subline 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 must consider whether the
contract award 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 analyzed Phoenix's bid and concluded that the firm's
pricing did not pose an unacceptable risk. Under an evaluation of bid prices
based on the estimated quantities, Phoenix's bid offers the lowest price for
the base year and 2 of the 4 option years, as well as offering the lowest
overall price. Because the agency expects to order the repair and
replacement requirements in the amounts estimated in the IFB, and Phoenix
has offered the lowest price for the performance of that work, it was
reasonable for the agency to conclude that, notwithstanding individual
prices that may have been inflated or understated in some instances,
Phoenix's bid did not present an unacceptable risk to the government. [2]

The agency points out that the six CLINs at issue represent a relatively
small fraction of the 166 items listed for each year of the contract, and
that the impact of any over- or underpricing among them would be unlikely to
result in an unacceptable level of risk in the total bid. Further, of the
six CLINs at issue, three are alleged to be overpriced and three
underpriced. The agency notes that one of the apparently overpriced CLINs is
for a type of roofing membrane that is among the least frequently utilized,
[3] and the other two allegedly overpriced CLINs are also listed in the IFB
in relatively low estimated quantities. In short, the contracting officer
reasonably determined that the impact of Phoenix's understated and
overstated pricing was likely to be minimal.

In addition, a review of the other submitted bids--including South
Atlantic's own bid--shows that each bidder submitted some individual prices
that were far removed from the amounts bid by the others, i.e., were
apparently unbalanced in some way. In the circumstances presented here, we
see no basis to conclude that the protester's pricing structure presented
any lower risk than the awardee's, and we see no basis to question the
contracting officer's conclusion that Phoenix's prices did not pose an
unacceptable risk to the government.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. South Atlantic's initial protest challenging Phoenix's bid as unbalanced,
filed before the agency had made the award, was dismissed by our Office as
premature.

2. Although South Atlantic disagrees with a statement in the agency report
that characterizes certain CLINs as infrequently ordered, and describes some
hypothetical repair scenarios under which Phoenix's price would be higher,
each of these scenarios includes unsupported quantities that exceed the
annual quantity estimated in the IFB, and thus these scenarios provide no
valid basis for evaluating the awardee's bid. South Atlantic did not raise
any timely challenge to the quantities listed in the IFB prior to bid
opening. Under our Regulations, protests based upon alleged improprieties in
a solicitation which are apparent prior to bid opening shall be filed prior
to bid opening. Bid Protest Regulations, 4 C.F.R. sect. 21.2(a)(1).

3. The IFB includes an estimated quantity for this CLIN of only 1,000 square
feet per year.