TITLE:  First American Engineered Solutions, B-289051, December 20, 2001
BNUMBER:  B-289051
DATE:  December 20, 2001
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Decision

Matter of: First American Engineered Solutions

File: B-289051

Date: December 20, 2001

David J. Taylor, Esq., Tighe Patton Armstrong Teasdale, for the protester.

Earl Dickerson, for ITS Imagineering Enterprises, the intervenor.

Gena E. Cadieux, Esq., and Beth A. Kelly, Esq., Department of Energy, for
the agency.

Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Where invitation for bids (IFB) expressly required option period prices to
be determined solely by application of IFB's economic price adjustment
clause, bid was properly rejected as nonresponsive for offering different
option year prices, since the economic price adjustment clause is a material
term of the IFB and any bid taking exception to it materially affects the
legal rights of the bidder and the government.

DECISION

First American Engineered Solutions protests the award of a contract to ITS
Imagineering Enterprises under invitation for bids (IFB) No.
DE-FB-65-01-WC-56963, issued by the Department of Energy, Western Area Power
Administration, for fiber optic overhead ground wire and related hardware.
The protester challenges the rejection of its bid as nonresponsive and
contends that it should receive the award under the IFB.

We deny the protest.

The IFB contemplated the award of an indefinite-delivery/indefinite-quantity
fixed-price contract with economic price adjustment for a base year and four
option periods to the responsible bidder whose bid, conforming to the IFB's
requirements, offered the lowest price. IFB at 34, 36. The IFB provided
technical specifications for the advertised products and required the
submission of descriptive literature with the bid to demonstrate each
offered product's compliance with those specifications. Id. at 35, attach.
A. Multiple bids for alternative products were encouraged; each bid needed
to provide a price for each item offered. Id. at 30, 34.

The IFB contained an economic price adjustment clause providing the formula
to be applied to the contractor's base year prices to determine option
period prices for two identified contract line items, Nos. 0001 and 0011
(for fiber optic overhead ground wire products). Specifically, the IFB, at sect.
LH.0000-0058, provided that option period prices

shall be determined based on the change from the base period Producer Price
Index [at the time of award, as issued by the Department of Labor, Bureau of
Labor Statistics] . . . as compared to the most current Producer Price Index
in effect at the time of exercising the option.

Id. at 22. Bidders were instructed not to provide option prices for these
items; instead, they were to insert asterisks or the phrase "To Be
Determined" in their bid schedules for the option period requirements for
these items. Id. at 23. Bidders were also advised that option period prices
to be paid under the contract would be "based solely on the economic price
adjustment mandated by this clause . . . ." Id. Section LM.0217-0005 of the
IFB again instructed bidders not to insert prices for items 0001 and 0011 in
the option periods, since option period pricing under the contract was to be
determined under the economic price adjustment clause. For evaluation
purposes at bid opening, to determine the low bid, the base year extended
totals of item Nos. 0001 and 0011 were to be used for all option periods.
Id. at 37.

Twenty-two bids were received at bid opening. First American failed to
follow the IFB's economic price adjustment provisions and instead offered
specific prices for each option period for item Nos. 0001 and 0011, at a 2.5
percent escalation rate. The protester's bid also provided descriptive
literature for four fiber optic overhead ground wire products; two products
were assumed by the agency to be in response to the IFB's requirement at
item No. 0001, and two products were assumed to have been submitted to meet
the item No. 0011 requirement. One of the products submitted under each of
those item numbers was considered to be technically unacceptable for failing
to meet certain requirements regarding encasement of the fibers. The
protester's bid provided only one price in its bid schedule for each of
those item numbers.

After bid opening, the contracting officer questioned First American as to
its bid's single line item pricing for the multiple items offered for those
line items. In its attempt to clarify its bid, the protester submitted a
series of letters to the contracting officer, the first of which provided
that, in fact, First American was bidding separate prices for each of the
four products. Shortly, thereafter, however, the protester wrote that the
same line item price applied to each of the multiple products offered under
that line item. The first post-bid opening communication from First American
also confirmed the protester's bid of a 2.5 percent escalation rate for the
option periods.

The agency determined that the bid's descriptive literature showed that only
two of the offered products were technically acceptable, that the bid's
failure to clearly identify that it offered alternate products at the same
price created uncertainty as to which of the products was offered at the
stated price, and that the bid's escalated option year pricing was in
violation of the IFB's mandatory economic price adjustment provisions.
Consequently, the bid was rejected as nonresponsive for failing to comply
with material provisions of the IFB. This protest followed.

First American contends that its bid was responsive, since, according to its
supplier, all four products offered in its bid satisfy the technical
requirements of the IFB. The protester also claims that the fact that its
bid provided one price for two different products for each of the two line
items at issue should have put the agency on notice that it could choose
either product, as alternate bids, at the same price. As to the bid's
nonconforming option period pricing, the protester generally argues that the
IFB was defective for failing to better highlight for the protester the
required economic price adjustment provisions; secondly, the protester
contends that it should be allowed to correct its bid after bid opening to
comply with the economic price adjustment terms. [1]

All bidders must compete for sealed bid contracts on a common basis. No
individual bidder can reserve rights or immunities that are not extended to
all bidders by the conditions and specifications in the IFB. Therefore, to
be responsive, a bid must contain an unequivocal offer to provide the
required items or services in total conformance with the material terms of
the solicitation; any bid which imposes conditions that would modify the
material requirements of the solicitation must be rejected as nonresponsive.
Metric Sys. Corp., supra. A material deviation is one which affects, in more
than a trivial way, the price, quality, or quantity of goods or services
offered, or which changes the legal relationship between the parties that is
envisioned by the IFB. Id. A bid that is nonresponsive on its face may not
be converted into a responsive bid by post-bid opening clarifications or
corrections. See Propper Mfg. Co., Inc., B-245366, Dec. 30, 1991, 92-1 CPD
para. 14 at 4.

As discussed below, the agency properly rejected the First American bid as
nonresponsive for taking exception to the mandatory economic price
adjustment provisions. [2] The economic price adjustment clause essentially
provides a system for post-award price adjustments based on particular price
fluctuations. The basic purpose of an economic price adjustment provision is
to protect the government in case of a decrease in the cost of labor or
material, and to protect the contractor in the event of an increase. See
Galaxy Custodial Servs., Inc., et al., B-215738, et al., June 10, 1985, 85-1
CPD para. 658 at 7. We have consistently recognized that a mandatory economic
price adjustment clause is a contract provision that significantly affects
the legal rights of the government and the legal obligations of the
contractor. See Aluminum Co. of Am., B-246003, Feb. 13, 1992, 92-1 CPD para. 184
at 3-4; Galaxy Custodial Servs., Inc., et al., supra, at 10; Aqua-Trol
Corp., B-191648, July 14, 1978, 78-2 CPD para. 41 at 4-5. The IFB's economic
price adjustment provision here provided specific protections for the
agency, and the bidder, and served as a common basis of competition for all
bidders. The provision imposed legal obligations on the bidder (i.e., to
perform the contract during the option periods at adjusted prices determined
under the terms of the clause) to which it would not otherwise be bound, and
provided legal rights on behalf of the agency (limiting option period
pricing to changes in the Producer Price Index). In short, by offering its
own option prices, where the government instead mandated economic price
adjustment for those periods, First American took exception to the economic
price adjustment provisions of the IFB, thereby limiting the legal rights of
the government and its own potential liability to the government; the bid's
exception to this mandatory provision materially affects the legal
relationship of the parties. Our

review of the record therefore provides no basis to question the propriety
of the agency's rejection of the bid as nonresponsive. FAR sect.sect. 14.404-2(d)(1)
and (6), 14.408-4(b)(2).

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. Contrary to the protester's suggestion that the IFB was defective in some
way for not more clearly emphasizing the required economic price adjustment
provisions, our review of the IFB confirms that the option year pricing
terms of the economic price adjustment clause provisions were clear and that
each provision was adequately highlighted for all potential bidders by the
use of straightforward, explanatory titles (e.g., "Economic Price Adjustment
Based on Producer Price Index" and "Evaluation of Options--Economic Price
Adjustment"). IFB at 22, 37. The IFB reasonably should have put First
American, as it did all other bidders, on notice of the mandatory economic
price adjustment requirements. Further, the protester's contention that its
bid's exception to the mandatory economic price adjustment terms should be
considered an apparent administrative error correctable under the
mistake-in-bid procedures of Federal Acquisition Regulation (FAR) sect.14.407 is
without merit. As explained below, the mandatory economic price adjustment
clause of the IFB is a material requirement affecting the legal relationship
of the parties to the contract; the requirements of the clause had to have
been met by the bid at bid opening in order for the bid to be responsive
under the IFB. A bidder cannot make its otherwise nonresponsive bid
responsive through correction or clarification after bid opening;
accordingly, the protester is not entitled to the correction opportunity it
now requests. See Metric Sys. Corp., B-256343, B-256343.2, June 10, 1994,
94-1 CPD para. 360 at 4.

2. Consequently, we need not discuss the merits of the other challenges
raised by First American regarding the rejection of its bid (i.e., regarding
technical acceptability or the perceived uncertainty regarding the bid's
single pricing for multiple products).