TITLE:  Burney & Burney Construction Company, Inc., B-292458.2, March 19, 2004
BNUMBER:  B-292458.2
DATE:  March 19, 2004
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Burney & Burney Construction Company, Inc., B-292458.2, March 19, 2004

   Decision
    
    
Matter of:   Burney & Burney Construction Company, Inc.
    
File:            B-292458.2
    
Date:              March 19, 2004
    
Michael P. Byrne, Esq., Lane & Waterman, for the protester.
Kateni T. Leakehe, Esq., Department of the Army, for the agency.
Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Protest that agency improperly rejected protester*s bid as unbalanced is
denied where bid included overstated prices for some line items, and
agency determined that, due to uncertainty in estimated quantities for
those items, bid posed risk that government would pay an unreasonable
price for contract performance.
DECISION
    
Burney & Burney Construction Company, Inc. protests the rejection of its
bid as unbalanced under invitation for bids (IFB) No. DAKB13-013-B-0003,
issued by the Department of the Army for painting and related services.
    

   We deny the protest.
    
The solicitation called for the award of a requirements contract for a
base year, with 4 option years.  It listed 18 line items (per year), each
describing a painting service to be performed, and each setting forth a
quantity estimate.  Bidders were required to supply unit and extended
prices for each line item, with the overall price to be determined by
multiplying the unit prices by the corresponding estimated quantities, and
then totaling the resulting extended unit prices.  Burney*s bid, at
$2,463,354.50, was the lowest of the five bids received; the next low bid
was $2,523,133.00.  The contracting officer determined that Burney*s bid
was unbalanced because some line item prices were overstated, and further
that, due to the uncertainty inherent in the estimates for those
overpriced items, an award based on Burney*s apparent low bid might result
in the government*s paying an unreasonably high price for contract
performance.  The contracting officer therefore rejected Burney*s bid. 
Burney protests the rejection.
    
Unbalanced pricing exists when, despite an acceptable total evaluated
price, the price of one or more contract line items is significantly
overstated (typically one or more other line items are underpriced). 
Where an unbalanced bid is received, the contracting officer is required
to conduct a risk analysis to determine whether award to the firm will
result in the government*s paying an unreasonably high price for contract
performance.  Federal Acquisition Regulation (FAR) S: 15.404-1(g)(2). 
A bid properly may be rejected if the contracting officer determines that
the lack of balance poses an unacceptable risk to the government. [1]  FAR
S: 14.404-2(g);
L. W. Matteson, Inc., B-290224, May 28, 2002, 2002 CPD P: 89 at 3.
    
With respect to the risk that the agency would pay an unreasonable price
for performance, where, as here, the issue of unbalancing arises in the
context of a requirements contract, the accuracy of the solicitation
estimates is critical, since the unbalanced bid will become less
advantageous than it appears if the government ultimately requires a
greater quantity of the overpriced items.  Alice Roofing & Sheet Metal
Works, Inc., B-275477, Feb. 24, 1997, 97-1 CPD P: 86 at 4.  Accordingly,
where an agency has reason to believe that its actual needs may vary
significantly during performance from the solicitation estimates, it may
reasonably view an unbalanced bid as not representing the lowest cost to
the government.  Id. 
    
The contracting officer here explains that, while the agency prepared the
estimates for each line item based on historical data and made a good
faith effort to make them accurate, the work under the IFB is subject to
many variables, so the work actually ordered under any line item could
deviate substantially from the estimates.  In this regard, the agency
explains, painting is not directly funded but, rather, is funded under the
maintenance budget, and is given low priority because many other
maintenance projects, such as mechanical repairs, cannot be delayed. 
Thus, if a large quantity of priority work arises, less painting than
estimated may be ordered, while, if less priority work is required, more
painting may be ordered.  Due to the uncertainty resulting from these
variables, the contracting officer was concerned that Burney*s bid, with
its overstated prices for some line items, could result in other than the
lowest total cost to the government if the actual quantities for those
items exceeded the estimates.  In order to verify her position, the
contracting officer calculated the effect if the ordered quantities under
the current contract ultimately were the same as the quantities actually
ordered under the fiscal year 2003 contract.  She determined that, for
several line items, including those overpriced in Burney*s bid, the amount
of work ordered by the Army was significantly higher than the amount of
work estimated, and that the total cost to the government would be greater
than the next low bid if the same quantities were ordered at Burney*s bid
prices for those items.  It was on this basis that the contracting officer
concluded that Burney*s bid should be rejected.
    
The agency*s actions were unobjectionable.  Viewing just two of the
overpriced items in Burney*s bid against the actual fiscal year 2003
requirements, Burney*s total bid increases such that it is no longer low. 
Specifically, for line item No. 6 (coverage of wood trim), Burney*s bid
was $7.25, while the government estimate was $1.91 and the average price
of the other bids was $4.19; multiplying Burney*s item price by the
solicitation estimate of 20,000 square yards yielded an extended price of
$145,000.  In fiscal year 2003, the agency actually ordered 39,815 square
yards; if the agency ultimately ordered the same quantity under the
current contract, at Burney*s $7.25 bid price the government*s cost for
the line item would increase by $143,658.75, to $288,658.75.  For line
item No. 10 (coverage of metal surfaces), Burney bid $7.25, compared to
the government estimate of $1.59 and the average bid price of $4.70.  The
IFB estimate was 3,500 square yards, which yielded an extended bid price
of $25,375 for Burney.  However, in fiscal year 2003 the agency ordered
70,307 square yards of work under line item No. 10; if the same quantity
were ordered from Burney under the current contract, the cost to the
government would increase by $484,350.75, to $509,725.75.  Thus, based on
the fiscal year 2003 actual requirements for just these two items,
Burney*s bid would increase by $628,009.50, far in excess of Burney*s
evaluated price advantage--$59,778.50--over the second low bidder.  The
risk that this would occur provided a reasonable basis for the agency to
reject Burney*s bid.
    
Burney argues that the agency*s reliance on the fiscal year 2003
quantities to reject its bid is improper, because doing so, in effect,
improperly changes the estimates in the solicitation that were to be the
basis for evaluating bids; Burney*s bid was low based on those estimates. 
In any case, Burney asserts, there is no reason to believe that the actual
fiscal year 2003 requirements, rather than the solicitation estimates,
reflect the amount of painting that the agency will order under the
current contract.  In this regard, Burney reasons that the fact that an
agency ordered more of a line item under the prior contract does not mean
that it will do the same under the current contract; in fact, Burney
asserts, the fact that the Army ordered more painting than estimated under
certain line items in fiscal year 2003 could indicate that it will order
less painting under those line items this year.
    
These arguments are without merit.  In light of the agency*s experience
under the fiscal year 2003 contract, there is no basis on this record for
us to disagree with the agency that the quantities ordered may
substantially deviate from the estimated quantities.  In this regard,
contrary to Burney*s suggestion, the agency is not using the actual fiscal
year 2003 quantities to change the estimates in the solicitation, or the
evaluated bid prices.  Rather, the agency is using them in its separate
unbalancing analysis to demonstrate that it cannot predict with accuracy
the amount of painting that will be required, and to assess the potential
risk posed by Burney*s unbalanced bid if larger quantities of the high
price items ultimately are ordered.  Further, while Burney is correct that
the Army could order less painting under the line items where larger
quantities were ordered under the prior contract, this possibility does
not preclude possibility--and does not establish that the agency
unreasonably determined--that larger quantities again could be ordered
under the current contract.
    
Accordingly, we conclude that the agency reasonably determined that
Burney*s bid posed an unacceptable risk, due to its overstated prices for
certain line items and the possibility that the quantities ordered under
those items will be substantially greater than the IFB estimates, that the
bid might not represent a reasonable price for the contract.  The agency
therefore properly rejected the bid as unbalanced.
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    

   ------------------------

   [1] The agency also determined that Burney*s bid was unbalanced because
some line item prices were understated, creating a performance risk. 
However, low prices (even below-cost prices) are not improper and do not
themselves establish (or create the risk inherent in) unbalanced pricing. 
See Island Landscaping, Inc., B‑293018, Dec. 24, 2003, 2004 CPD P: 9
at __.