TITLE:  Contractors Northwest, Inc., B-293050, December 19, 2003
BNUMBER:  B-293050
DATE:  December 19, 2003
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Contractors Northwest, Inc., B-293050, December 19, 2003

   Decision
    
    
Matter of:   Contractors Northwest, Inc.
    
File:            B-293050
    
Date:              December 19, 2003
    
John C. Black, Esq., Dunn & Black, for the protester.
Richard L. Lambe, Esq., Lambe Law Firm, for Ohno Construction Co., an
intervenor.
Ronald S. Marsh, Esq., U.S. Army Corps of Engineers, for the agency.
Sharon L. Larkin, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Agency properly awarded contract based on evaluation of base and optional
items, where invitation for bids (IFB) informed bidders that optional
items would be evaluated and agency had a reasonable expectation that
funding would be received in time to exercise the options in accordance
with the IFB provisions.
DECISION
    

   Contractors Northwest, Inc. (CNI) protests the award of a contract to Ohno
Construction Co. by the Army Corps of Engineers under invitation for bids
(IFB) No. DACW67-03-B-0011 for the construction and modernization of the
Riley Creek Campground in Idaho.
    

   We deny the protest.
    
The IFB, issued on June 6, 2003, anticipated award of a fixed-price
contract for labor, materials, and equipment to renovate campsites and
related facilities.  Work was apportioned among contract line item numbers
(CLIN) for *base items* (CLINs 001 through 005) and *optional items*
(CLINs 006 through 0016).  Bidders were instructed to *quote on all items
in this [IFB]* and were advised that the evaluation of bids would be based
*upon the total price quoted for all items.*  The IFB also stated that
award would be made on an *all or none* basis.  IFB S: 00100 at 16. 
However, the IFB also provided that optional items could be exercised *at
any time, or not at all, but no later than 180 calendar days after receipt
by the Contractor of notice to proceed.*  IFB, Special Clause 1.1(a).  The
IFB also contained two clauses concerning the evaluation of optional items
that are pertinent here:
    
52.217-4  EVALUATION OF OPTIONS EXERCISED AT TIME OF CONTRACT AWARD (JUN
1988)
Except when it is determined in accordance with [Federal Acquisition
Regulation (FAR)] [S:] 17.206(b) not to be in the Government*s best
interests, the Government will evaluate the total price for the basic
requirement together with any option(s) exercised at the time of award.
52.217-5  EVALUATON OF OPTIONS (JUL 1990)
(a)  Except when it is determined in accordance with FAR [S:] 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).
IFB S: 00100 at 16.  In advance of issuing the IFB the contracting officer
did not make a written determination that it was reasonably likely that
options would be exercised.
    
The agency anticipated that the cost of the project would be approximately
$3.1 million.  At a pre-bid site visit, however, CNI and other bidders
were informed that the total funding available for the project was
approximately $2.4 million.  The agency concedes that it did not have
sufficient funds in the current fiscal year to cover the entire project,
but asserts that this is why it included some work as optional items in
the IFB; it had requested additional funds from Congress and anticipated
receiving funds sufficient to cover these optional items within 180 days
of contract award. 
    
CNI and Ohno submitted bids in response to the IFB.  Bids were opened on
July 17 and revealed the following prices:
    

   +------------------------------------------------------------------------+
|                |CNI                        |Ohno                       |
|----------------+---------------------------+---------------------------|
|Base            |$2,077,375                 |$2,139,790                 |
|----------------+---------------------------+---------------------------|
|Options         |$1,562,626                 |$1,263,550                 |
|----------------+---------------------------+---------------------------|
|Total           |$3,640,001                 |$3,403,340                 |
+------------------------------------------------------------------------+

    
Contracting Officer*s Statement P: 9.  One day after bid opening (on July
18), a Senate staff person notified the agency that *it looks as if we
succeeded in securing* an additional $2.2  million for the project.  AR,
Tab 7, E-mail from Senate to agency (July 18, 2003).  This amount,
together with the funds already programmed for the project (which were now
$1.6 million due to reductions for costs incurred to support the project),
exceeded the total anticipated cost to the government.  As a result, the
contracting officer asserts that she had *every reason to believe that all
options will be exercised within 180 day[s],* as contemplated under the
IFB.  Agency Report (AR), Tab 15, Memorandum for Record (Sept. 8, 2003). 
The agency thus considered all base and optional items in determining the
low bidder.     
    
On August 6, award was made to Ohno for the base items.  CNI filed a
timely agency-level protest, contending that award should have been made
based solely on the evaluation of the base bids because the agency did not
award the optional items, did not have sufficient funds for all of the
optional items, and did not make a written determination as to the
likelihood of whether the optional items would be exercised.  The agency
denied the protest on October 6, and CNI protested to our Office. 
    
Citing FAR S: 52.217-4, included in the IFB, CNI first argues that the
agency could not evaluate optional items because they were not awarded
with the contract.  This argument has no merit, given that the IFB
expressly provides in a special clause that optional items may be
exercised within 180 days of contract award and includes FAR S: 52.217-5
informing bidders that evaluation would include both base and optional
items and that the options need not be exercised at the time of award.[1]
    
CNI next argues that optional items cannot be considered under FAR S:
52.217-5 because the contracting officer did not make a written
determination prior to the issuance of the IFB that there is a reasonable
likelihood that the options will be exercised, as required by FAR
S: 17.202(a).[2]   See also FAR S: 17.208(c) .  Although it is true that a
written determination is required prior to the issuance of the IFB, we do
not find the lack of a contemporaneous writing to be fatal to the
application of this clause in the evaluation.[3]  See Federal Contracting,
Inc., B-250304.2, June 23, 1993, 93-1 CPD P: 484 at 4 (post-protest
affidavit sufficient to establish that determination had been made). 
    
Here, the contracting officer did make a determination that there was a
reasonable likelihood that options would be exercised after award.  As she
stated in a post‑award memorandum for the record:
    
Use of option items was necessary since there would not be sufficient
funds to award the whole project at once but I expected that the Base
Items and at least part of the Option Items could be awarded initially,
and that more funds would be received in [Fiscal Year 2004] to allow award
of most if not all of the remaining option items.  I truly believed that
there was more than a *reasonable likelihood* that the option items would
be exercised and that I was acting in the best interest of the Government.
AR, Tab 19, Memorandum for Record (Nov. 11, 2003); see AR, Tab 15,
Memorandum for Record (Sept. 8, 2003).  The protester has not shown that
the contracting officer*s determination to evaluate all options was
unreasonable. 
    
Where, as here, the IFB properly includes a provision requiring the
evaluation of options, such options must be evaluated *[e]xcept when it is
determined  in accordance with [FAR S:] 17.206(b) not to be in the
Government*s best interests* to exercise the options.  FAR S: 52.217-5. 
As noted above, the agency received confirmation the day after bid opening
that an additional $2.2 million would likely be appropriated, which would
cover the cost of the entire project.  Given this expectation of
additional funding, the agency determination to make award based on
evaluation of base and optional items was reasonable.  The agency need not
have all funds currently available for optional items in order to evaluate
them for award.  See Charles J. Merlo, Inc., B-277384, July 31, 1997, 97-2
CPD P: 39 at 3-4; Federal Contracting, Inc., supra, at 5-6.  Although CNI
points to a series of pre‑award communications between agency
personnel discussing the fact that only $1.6 million was currently
available to fund the project (which is less than even the base bid),
these communications reflect only the agency*s discussion about how the
basic
contract could be funded and do not demonstrate that future funding was
not going to be available, as anticipated.[4]  
    
We deny the protest.
    
Anthony H. Gamboa
General Counsel
    
    
    
    
     
    
    
       
    

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

   [1] CNI*s assertion that it interpreted the IFB to mean that evaluation
would be based on base bids only if optional items were not awarded with
the contract is belied by the fact that it knew from the pre-bid site
visit that this would not occur because sufficient funding was not
immediately available for optional items to make award of these items at
the same time.  To the extent that it was confused by the assertedly
ambiguous IFB, it was required to protest the terms of the IFB prior to
bid opening in order to be considered timely under our Bid Protest
Regulations.  4 C.F.R. S: 21.2(a)(1) (2003).
[2] While FAR Subpart 17.2 by its terms does not apply to construction
contracts, we conclude that the agency is bound to follow the procedures
of FAR S: 17.208 once, as here, it incorporates either clause (FAR S:S:
52.217-4 or 52.217-5) providing for evaluation of options.  See Foley Co.,
B-245536, Jan. 9, 1992, 92-1 CPD P: 47 at 4 n.2.   
[3] CNI is incorrect in its belief that absent a written determination in
advance of the IFB, the agency must utilize the *fall back* provision of
FAR S: 52.217-4.  As stated above, both clauses require a determination in
advance of the IFB whether options will be exercised.  See FAR S:
17.208(b) and (c).  In this case, the contracting officer determined
options would not be awarded with the contract, but would be exercised
after award, thus invoking the provision of FAR S: 52.217-5.   
[4] As discussed in these communications, the agency anticipated invoking
a *continuing contracts* clause as authorized by Section 10 of the River
and Harbor Act of September 22, 1992, 33 U.S.C. S: 621 (2000).  This
clause, which was included in Ohno*s contract, provides that *payment of
some portion of the contract price is dependent upon reservations of funds
from future appropriations.*  The clause further affirms that *[i]t is
expected that Congress will make appropriations for future fiscal years
from which additional funds together with funds provided by one or more
non-federal project sponsors will be reserved for this contract.*  AR, Tab
10, Contract, at 2.