TITLE:  TNT Industrial Contractors, Inc., B-288331, September 25, 2001
BNUMBER:  B-288331
DATE:  September 25, 2001
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TNT Industrial Contractors, Inc., B-288331, September 25, 2001

Decision

Matter of: TNT Industrial Contractors, Inc.

File: B-288331

Date: September 25, 2001

Scott W. Goodall for the protester.

Daniel J. Dykstra, Jr., Esq., U.S. Army Corps of Engineers, for the agency.

Paula A. Williams, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Since the evaluation of bids must be based on the actual likely cost to the
government for the project, agency properly did not consider "deductive
items" as part of the total price where funds were available for the entire
project.

DECISION

TNT Industrial Contractors, Inc. protests the intended award of a
construction contract to All Cities Enterprises by the Army Corps of
Engineers under invitation for bids (IFB) No. DACA05-01-B-0001 for a water
treatment plant at Beale Air Force Base in California. TNT contends that the
agency failed to evaluate all the line items listed on the IFB pricing
schedule as contemplated by the solicitation, and that TNT submitted the
lowest aggregate bid, and therefore it should have received the award.

We deny the protest.

The IFB was issued on April 10, 2001 as a competitive set-aside for eligible
firms under the Small Business Administration's (SBA) section 8(a) program.
[1] As amended, the IFB required bidders to complete a pricing schedule by
entering lump-sum prices for the basic requirements and for each of the four
option items of work, at contract line item numbers (CLIN) 0001, 0002, 0003,
0004, and 0005, respectively. CLIN 0001, the base bid, covered the
construction of a new water treatment plant. Two of the optional CLINs are
uncontroversial in this protest: CLIN 0002 covered landscaping extension
work and CLIN 0005 covered steel panel fencing work.

The remaining two CLINs are at issue here: CLIN 0003 covered the cost of
paving the project, while CLIN 0004 covered the cost of a new storage tank,
rather than salvaging one from the existing facility. Referred to in the
record as "deductive options," CLIN 0003 and CLIN 0004 were intended to be
exercised to scale back the project in the event that funds were not
available for the project. [2]

The IFB included the standard Evaluation of Options clause, Federal
Acquisition Regulation (FAR) sect. 52.217-5, which provides:

Except when it is determined in accordance with FAR sect. 17.206(b) not to be in
the Government's best interests, the Government will evaluate offers for
award purposes by adding the total price for all options to the total price
for the basic requirement. Evaluation of options will not obligate the
Government to exercise the option(s). [3]

IFB at 15-16. The IFB also included the Contract Award--Sealed
Bidding-Construction clause of FAR sect. 52.214-19, which provides that the
agency will award a contract for any line item or combination of line items
to the conforming bid found to be the most advantageous to the government,
considering only price and price-related factors specified in the IFB. IFB
at 15.

By bid opening, the Corps had received ten bids, including those of TNT and
All Cities, which were the apparent two lowest-priced bids. The breakdown of
these bids is as follows:

                        TNT           All Cities

 Base Bid (CLIN 0001)   $3,553,636    $3,482,600

 CLIN 0002              20,000        69,100

 CLIN 0003              -28,500       33,200
 (deductive)

 CLIN 0004              -42,000       0
 (deductive)

 CLIN 0005              9,000         9,000

Agency Report (AR), Tab 3. Funding in the amount of $3,800,000 was available
for the entire project. Following bid opening, the contracting officer
determined that because sufficient funds were available for the complete
water treatment facility, in accordance with FAR sect. 17.206(b), it was in the
government's best interests to exclude deductive options 0003 and 0004 to
determine the low bidder. In this determination, the contracting officer
stated:

The option items CLIN 0003 and 0004 are deductive options. If funds were not
available for the full basic requirement of the complete water treatment
plant, the paving and automatic salt feed system could be replaced by less
costly options of no paving and use of the salvaged water storage tank for
the demolished plant.

After opening of the bids I have determined that funds are available to
award the full project to include paving of all surfaces and use of the
newly designed automatic salt feed water storage tank as part of the water
treatment plant. While savings could be utilized by exercising the deductive
option CLINs 0003 (no paving-only base course) and 0004 (substitution of new
tank with salvaged manual-feed tank from existing water treatment plant), it
is clearly not in the best interest of the Government to do so when funds
are available for a fully modern water treatment plant.

The fact that funds are available for the complete water treatment plant
makes the alternative of CLIN 0003 and 0004 unnecessary; therefore they
should not be used to determine the low bidder.

AR , Tab 5, Contracting Officer's Memorandum at 1-2. This determination was
approved at a level above the contracting officer. Since All Cities' total
evaluated bid of $3,560,700 for the base item plus the two additive options
(CLINs 0002 and 0005) was low when compared to TNT's 3-item total of
$3,582,636, the contracting officer selected All Cities for award.

TNT protests that the agency's decision to exclude the prices for deductive
CLINs 0003 and 0004 in determining the low bidder was inconsistent with the
IFB terms, which required the agency to add the total price for all options
to the total price for the base bid to determine the low bidder, and TNT
contends that it was entitled to the award based on its low aggregate bid
for all five line items.

We find that the agency acted properly. We recognize that the agency's
inclusion of additive and deductive options in the solicitation could be
viewed as confusing; any confusion, however, was apparent on the face of the
solicitation, and therefore had to be protested before bid opening. 4 C.F.R.
sect. 21.2(a)(1) (2001). Effectively, the deductive options deleted work
included within the base bid (CLIN 0001). The result was that calculating
the bidders' prices for the maximum amount of work required setting aside
the deductive options (CLINs 0003 and 0004), which is what the agency did.
There are, in brief, two questions presented by the protest: whether the
agency was permitted to award a contract for the maximum amount of work, and
whether, in selecting the contractor for such an award, the agency should
have considered the CLIN 0003 and 0004 prices. As for the first question, we
see no basis in the solicitation, and the protester offers no basis, for
prohibiting the agency from awarding a contract for the maximum amount of
work (that is, CLINs 0001, 0002, and 0005). To the extent that the protester
believes that the agency was required to follow the steps in FAR sect. 17.206(b)
to do that (because it was not considering CLIN 0003 and 0004 prices in its
evaluation for award), it followed those steps: it made a "best interests"
determination and obtained approval at a level above the contracting
officer. Once the agency thus reasonably decided to award a contract for the
maximum amount of work, it was required to evaluate prices for that scope of
work, which meant that it was prohibited from considering CLIN 0003 and 0004
prices. [4]

See Ahern & Assocs., B-254907.4, Mar. 31, 1994, 94-1 CPD para. 236.

The protest is denied.

Anthony H. Gamboa
General Counsel

Notes

1. Section 8(a) of the Small Business Act, 15 U.S.C.sect. 637(a) (1994),
authorizes the SBA to contract with government agencies and to arrange for
the performance of such contracts by awarding subcontracts to socially and
economically disadvantaged small businesses.

2. The purpose of these CLINs was set out in a soliciation amendment as
follows:

b. OPTION 0003; Paving. This refers to not paving all the project . . . The
contractor would be expected to adjust grading, for the 2-inch loss in paved
surfacing. This is essentially a deductive OPTION, from what is shown in the
current design, and would involve a credit and be considered a straight
substitution in the design, if exercised.

c. OPTION 0004; Automatic Salt Feed System. This actually refers to
substituting the designed new Brine Storage Tank, with one salvaged from the
existing [water treatment plant]. . . . This OPTION is also considered a
deductive OPTION, and may involve a credit and be considered a straight
substitution in design, if exercised.

IFB amend. No. 3, at 1.

3. FAR sect. 17.206(b) provides in part that:

The contracting officer need not evaluate offers for any option quantities
when it is determined that evaluation would not be in the best interests of
the Government and this determination is approved at a level above the
contracting officer.

4. Because the agency properly decided not to consider the prices for the
deductive options, we find without merit TNT's complaint that the pricing
schedule was defective or otherwise ambiguous because (as is evident from
the pricing table set out above) some bidders entered an affirmative dollar
amount for those deductive options, while others entered a negative dollar
amount. While that might have mattered if the agency were required to
consider those CLINs, once the agency reasonably decided not to consider
them, their pricing became irrelevant, and could not have prejudiced the
protester.