TITLE:  B&M Cillessen Construction Co., Inc., B-287449.2, June 5, 2001
BNUMBER:  B-287449.2
DATE:  June 5, 2001
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B&M Cillessen Construction Co., Inc., B-287449.2, June 5, 2001

Decision

Matter of: B&M Cillessen Construction Co., Inc.

File: B-287449.2

Date: June 5, 2001

Seth V. Bingham, Esq., Miller Stratvert & Torgerson, for the protester.

David P. Gorman, Esq., Sheehan, Sheehan & Stelzner, for HB Construction of
Albuquerque, Inc., an intervenor.

James L. Weiner, Esq., and Alton E. Woods, Esq., United States Department of
the Interior, for the agency.

Linda S. Lebowitz, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency's decision to allow awardee to upwardly correct its low bid is not
objectionable where the agency reasonably concluded that the awardee
presented clear and convincing evidence of the claimed mistake and the
intended bid price.

DECISION

B&M Cillessen Construction Co., Inc. protests the award of a contract to HB
Construction of Albuquerque, Inc., under invitation for bids (IFB)
No. RMK66010001, issued by the Bureau of Indian Affairs, United States
Department of the Interior, for building construction at the Huerfano
Dormitory-School, Huerfano Community, New Mexico. B&M contends that the
agency improperly allowed HB to make an upward correction of its low bid.

We deny the protest.

The IFB was issued on January 15, 2001, and, as amended, contained a bid
schedule with three line items--a base bid item (construction of a new
dormitory and a new kindergarten classroom) and two additive bid items
(renovation of two different buildings). For each item, bidders were
required to submit a lump sum price; to arrive at the firm's total bid
price, bidders were required to add the three prices together. As relevant
here, the IFB contained the clause at Federal Acquisition Regulation (FAR) sect.
52.229-3, captioned "Federal, State, and Local Taxes," which provides that
"[t]he contract price includes all applicable Federal, State, and local
taxes and duties." FAR sect. 52.229-3(b). In this case, the applicable taxes
include a 5.75-percent New Mexico Gross Receipts Tax (NMGRT) and a 3-percent
Navajo Business Activities Tax (BAT). [1]

Five firms, including B&M and HB, submitted bids by the 2 p.m. bid opening
time on February 27. HB submitted the apparent low bid of $4,579,000, and
B&M submitted the apparent second low bid of $4,855,000. As relevant here,
the breakdown of HB's total bid was as follows: base bid--$4,409,000;
additive 1--$89,000; and additive 2--$81,000. On February 27, after bids
were opened, HB's president notified the agency's administrative contracting
officer that he mistakenly omitted from the firm's bid an amount for the
NMGRT; he requested an opportunity to add an amount to its bid representing
the 5.75-percent NMGRT. The contracting officer informed him that she was
sending the firm a letter requesting bid verification and that he should
submit a response.

In responding, HB's president confirmed the firm's total bid of $4,579,000
with respect to the construction items, but stated that the firm did not
include in the bid an amount for the NMGRT. To support his mistake claim,
HB's president submitted two computer-generated bid worksheets. The first
worksheet, dated "27 Feb 01" at "01:13 PM," showed that HB included in its
price for the base bid item an amount for "gross receipts tax," calculated
by multiplying 5.75 percent by the firm's original base bid subtotal; this
worksheet did not show a 3-percent tax. The second worksheet, dated "27 Feb
01" at "01:48 PM," showed that HB changed the "gross receipts tax"
percentage from 5.75 percent to 3 percent, and recalculated the amount shown
on the worksheet for this tax by multiplying 3 percent by the firm's revised
base bid subtotal. In an affidavit dated March 5, HB's president provided
the following explanation of the claimed mistake:

By law the gross receipts tax percentage for this project is 5.75% or
$263,293 on HB's bid of $4,579,000. The total amount of HB's bid including
NMGRT should have been $4,842,293. Our bid should have included a line item
of 3.0% Tribal Tax + 5.75% NMGRT for a total of 8.75% GRT. At approximately
1:13 PM on bid day I was told to add 3% to Gross Receipt Tax when in fact, I
changed the Gross Receipt Tax to 3%.

Agency Report (AR), Tab 6A, Affidavit of HB's President (Mar. 5, 2001).

After doing its own calculations, the agency concluded that, as submitted at
bid opening, HB's bid did not include an amount for the 5.75-percent NMGRT;
HB's bid only included an amount for the 3-percent Navajo BAT. The agency
further concluded that HB clearly intended to include in its bid an amount
for the 5.75-percent NMGRT, although it was not clear why the percentage was
changed from 5.75 percent to 3 percent (in the second worksheet) in lieu of
adding 3 percent to the NMGRT, as explained in the above-referenced
affidavit, since HB would have remained the low bidder. AR, Tab 9,
Contracting Officer's Memorandum (Mar. 22, 2001). The contracting officer
determined that the upward correction of HB's low bid to include the
5.75-percent NMGRT was appropriate because the addition of this amount would
not displace other bidders. Specifically, HB's uncorrected bid, which
included a 3-percent tax amount, was $4,579,000; adding 5.75
percent--$263,293 ($4,579,000 X .0575)--to the uncorrected bid yielded a
total corrected bid of $4,842,293, [2] which was $12,707 lower than B&M's
second low bid. The contracting officer determined that HB would be allowed
to correct its mistake, as requested, since the firm's corrected bid would
remain low. On April 20, the agency awarded the contract to HB for
$4,842,293.

As an initial matter, B&M complains that since HB omitted the NMGRT from its
bid, HB's bid was nonresponsive and should have been rejected.

A responsive bid is one that provides an unequivocal offer to tender the
exact thing called for in the IFB such that acceptance of the bid will bind
the contractor in accordance with the solicitation's material terms and
conditions. Oregon Iron Works, Inc., B-247845, May 27, 1992, 92-1 CPD para. 474
at 6. Only where a bidder provides information with its bid that reduces,
limits, or modifies a solicitation requirement may the bid be rejected as
nonresponsive. Id.

Here, HB did not take any exception on the face of its bid to the NMGRT
requirement; rather, HB failed to properly calculate this tax and thereby
did not include the cost of this tax in its bid. Notwithstanding this
omission, HB unequivocally committed to perform the IFB requirements and its
bid is therefore responsive. [3]

The thrust of B&M's protest is that HB did not provide clear and convincing
evidence of its mistake and, accordingly, the agency improperly allowed HB
to make an upward correction of its low bid.

A bidder who seeks upward correction of its bid prior to award must submit
clear and convincing evidence that a mistake was made, the manner in which
the mistake occurred, and the intended bid price. FAR sect. 14.407-3(a); C
Constr. Co., Inc., B-253198.2, Sept. 30, 1993, 93-2 CPD para. 198 at 2. The
exact amount of the intended bid need not be established, provided that
there is clear and convincing evidence that the amount of the intended bid
would fall within a narrow range of uncertainty and would remain low after
correction. Id. For an upward adjustment of a bid, workpapers, including
hard copy printouts of computer-generated software spreadsheets/worksheets,
may constitute part of that clear and convincing evidence if they are in
good order and indicate the intended bid price, and there is no contravening
evidence. Id. at 2-3. Whether evidence of the intended bid amount meets the
clear and convincing evidence standard is a question of fact, and we will
not question an agency's decision in this regard unless it lacks a
reasonable basis. Id. at 3.

Under the terms of the IFB, bidders were responsible for taxes, including a
5.75-percent NMGRT and a 3-percent Navajo BAT. HB claimed that in arriving
at its total bid price of $4,579,000, it omitted an amount equal to the
5.75-percent NMGRT. To support its mistake claim, the firm submitted two
worksheets--the first one showing the application of a 5.75-percent "gross
receipts tax" and the second one, which was the basis for the calculation of
HB's total bid price, as referenced above, showing the application of a
3-percent "gross receipts tax." Thus, HB's bid as submitted at bid opening
included an amount corresponding to the 3-percent tax, but omitted an amount
corresponding to the 5.75-percent tax. To correct its bid, HB multiplied its
total bid price by the NMGRT percentage ($4,579,000 X .0575) to arrive at a
figure of $263,293. When this figure was added to HB's total bid, as
originally submitted, HB's corrected bid became $4,842,293, which was
$12,707 lower than B&M's bid. On this record, we have no basis to object to
the agency's decision to allow HB to upwardly correct its low bid where the
agency reasonably concluded that HB provided clear and convincing evidence
of its mistake, the manner in which the mistake occurred, and the firm's
intended bid price. [4]

Finally, B&M argues, based on its review of HB's worksheets, that HB
understated various costs it will be required to pay, e.g., the Navajo BAT,
the cost of a payment bond, and the overhead costs associated with
administering and paying additional taxes. B&M maintains that if these costs
were properly accounted for, HB would no longer be the low bidder. [5]
Protester's Comments at 11-14.

This argument, in essence, constitutes a challenge that HB submitted a
below-cost bid which will not allow it to cover its costs. However, the
submission of a below-cost bid is not illegal, and the government cannot
withhold an award merely because a responsive low bid is below cost.
Ambulancias de Emergencias, Inc., B-216936, Nov. 26, 1984, 84-2 CPD para. 562.
Whether a low price is so low that the bidder will not be able to perform
the contract satisfactorily is a question concerning the bidder's
responsibility. Id. A determination that a bidder is capable of performing a
contract is based, in large measure, on subjective judgments which generally
are not susceptible to reasoned review. Thus, an agency's affirmative
determination of a contractor's responsibility will not be reviewed by our
Office absent a showing of possible bad faith on the part of procurement
officials, or that definitive responsibility criteria in the solicitation
may not have been met. Bid Protest Regulations, 4 C.F.R. sect. 21.5(c) (2001).
Neither exception applies here.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. The Navajo BAT is calculated based on "gross receipts," defined by the
Navajo Tax Commission as including "all money received in the performance of
[a] contract on the Navajo Nation. . . . [U]nder the BAT law, gross receipts
from construction activity include[] amounts designated as tax payments in
the construction contract." Jaynes Corp., Navajo Tax Comm'n, No. 91-028,
slip op. at 5 (Dec. 20, 1991). The 3-percent Navajo BAT "applies to the
total contract amount, including any reimbursement for taxes," which would
include the amount calculated for the NMGRT. Letter to the Department of the
Interior from the Office of the Navajo Tax Commission (May 8, 2001).

2. The contracting officer noted that HB did not add an amount representing
the 3-percent Navajo BAT on the NMGRT increase. If this had been done,
$7,899 ($263,293 X .03) also would have been added to HB's bid, for a total
corrected bid of $4,850,192, which would have made HB's bid $4,808 lower
than B&M's bid.

3. For the same reason, we reject B&M's argument that HB's bid was
nonresponsive because while the firm's worksheets contain an amount for a
performance bond, the worksheets do not reflect an amount attributable to a
payment bond. Again, HB did not take any exception on the face of its bid to
the IFB requirement that the awardee furnish payment and performance bonds
for 100 percent of the contract price within 10 calendar days of award. HB
committed to the terms of the IFB and its bid is responsive.

4. We point out that no matter what order the fixed percentages for the
NMGRT and the Navajo BAT are applied to the total price of the base bid and
two additive items (e.g., 3 percent, then 5.75 percent; 5.75 percent, then 3
percent; or even a combined 8.75 percent), HB's bid remains low.

5. HB did not assert a mistake regarding any of these items.