[nfbmi-talk] an old case against peckham

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Matter of: Peckham Vocational Industries, Inc. File: B-257100 Date: August 26, 1994

DIGEST

Attorneys

DECISION

We deny the protest.

The solicitation, issued on June 1, 1993, contemplated award of afixed-price contract for two-piece chemical protective underwear for useby the Army. This

underwear is to be fabricated, in part, from Lanx I, amaterial proprietary to the DuPont Champion Die Works. The basicquantity contained in the amended

solicitation was 107,420 undershirtsand 107,420 pairs of drawers, with mandatory options for identicalquantities of each item. Under the solicitation,

award would be made tothe offeror whose offer was most advantageous to the government, price,technical, quality, and other factors considered.

The RFP's section I included a clause entitled "Option for AdditionalQuantity," which informed the offerors that acceptance of the optionprovisions was

mandatory. The clause also stated that offerors couldpropose option prices that differed from the prices for the basicrequirement, and that these option

prices could vary with the quantitiesactually ordered and the dates when ordered. Finally, the clauseinformed offerors that the contracting officer could

exercise the optionat any time by notifying the contractor no later than 60 days before thefinal scheduled delivery, taking into account any written adjustment

tothe basic delivery schedule made by the government. Under the deliveryschedule in the amended solicitation, items could be delivered as late as675 days

after the date of award.

The agency received nine proposals by the November 30 extended closingdate. While all offerors submitted a unit and total price for each lineitem, as well

as a total price for all line items, Peckham's initialoffer also contained pricing contingencies for both the basic and optionquantities. Peckham offered

three separate option-pricing scenarios.[1]The first scenario was contingent on exercise of the option in the lasthalf of 1995 or early 1996 with all material

for the option years to bepurchased in 1996 so the firm could purchase the material from DuPont at1996 prices; the continuance of progress payments; and

the absence ofconflict concerning material manufactured in 1996; and shelf life andsurveillance date requirements produced in the option years. The secondoption-pricing

scenario contained the same contingencies, except that inplace of the first contingency, this option price was based on theexercise of the option too late

to take advantage of all 1996 materialprices (i.e., presumably after early 1996 such that only some materialcould be ordered in 1996 and the remaining

material would be ordered in1997). The third option-pricing scenario was contingent upon obtainingthe material at 1997 prices. Peckham was the lowest-priced

offeror underall of its scenarios, and Daun-Ray was second low; the proposals of bothofferors were rated marginally acceptable overall after the initialtechnical

evaluation.

A competitive range of eight offers was established, and discussionscommenced on March 8, 1994. Amendment No. 0004, issued on March 10,allowed for the possibility

of separate awards for the shirts anddrawers. The agency's March 10 discussion letter to Peckham stated:

"You are requested to review your offered pricefor the basic and option. You are requested . . .to remove all contingencies from your offerregarding DuPont's

quote, [p]rogress [p]ayments,shelf life, and first article submission.Additionally, you are requested to submit specificdates by which the [g]overnment

is required toexercise the option quantity in order to obtainthe various option prices listed."

After discussions, offerors were permitted to submit separate prices foreach award scenario (award of both items or award of each itemseparately). This

time, all offerors submitted a unit and total pricefor each line item, along with total prices for each scenario, andPeckham was again the lowest-priced

offeror under each scenario. However,Peckham's revised offer stated:

"All contingencies . . . regarding DuPont's quote,progress payments, shelf life and first articlesubmission are removed from the revised pricingproposal.

. . . . .

"Option pricing based on DuPont 1996 [m]aterial price. . . and [o]ption being exercised by November 1995 asadd on to base quantity."

The revised technical evaluation did not alter the overall technicalratings of Peckham and Daun-Ray.

On March 29, the contracting specialist, Thomas Hutchinson, telephonedPeckham's deputy director, Mitchell Tomlinson, to notify him of theissuance of a letter

requesting the submission of BAFOs. Mr. Hutchinsonstates that during that conversation, he went over the contents of theletter, including the paragraph

concerning the qualification on theoption price, and explained the operation of the invocation of optionclause by way of example, that an award on March

31 would allow thegovernment to exercise the option through December 1995. The agency'sMarch 29 request for BAFOs to Peckham stated:

"It is requested that the qualification `Optionpricing based on DuPont 1996 [m]aterial price. . . and Option being exercised by November 95'be removed or

restated. Based on a 31 Mar 94award, the Government could exercise the option aslate as December 1995. The solicitation statesthat the option may be exercised

at any time andfrom time-to-time, up to the maximum amount citedin the Schedule, by mailing notification to thecontractor no later than 60 calendar days

beforethe final scheduled delivery, taking into accountany written adjustment to the basic deliveryschedule made by the Government."

At the conclusion of the letter, a handwritten notation asked Peckham to"please extend the acceptance time of your offer until 08 April 1994."

On March 30, Mr. Hutchinson spoke by telephone with both Mr. Tomlinsonand Peckham's marketing director, Karen Jury. Mr. Hutchinson states thatthey discussed

the deficiencies in the clauses that had been submitted byPeckham, and that he again used his example to explain why any finitedate in the option-pricing

contingency would not be acceptable.

Peckham's BAFO price, including options, for both items was $29,137,675,and Daun-Ray's was $32,548,260.[2] The proposals of both offerors wererated marginally

acceptable overall. However, in its BAFO, Peckhamrestated its option qualification as follows:

"[Peckham's] qualification 'Option pricing onDuPont 1996 material price . . . and option beingexercised by November 1995' is hereby restated.The new qualification

reads -Option pricing basedon DuPont 1996 material price . . . and optionbeing exercised by the end of December 1995."

The agency found this qualification of the option clause was inconsistentwith terms of that clause and the delivery schedule and Peckham'sproposal therefore

could not be considered for award, notwithstanding itslow price. Award was made to Daun-Ray on April 14, and this protestfollowed. Performance of the contract

has been suspended pendingresolution of this protest.

In negotiated procurements, a proposal that fails to conform to thematerial terms and conditions of the solicitation should be consideredunacceptable and

may not form the basis for an award. Martin MariettaCorp., 69 Comp.Gen. 214 (1990), 90-1 CPD Para. 132; Sonshine Enters.,B-246268, Feb. 26, 1992, 92-1

CPD Para. 232; Sea Containers Am., Inc.,B-243228, July 11, 1991, 91-2 CPD Para. 45. Mandatory option provisionsare material terms of a solicitation. See

Environmental Health Research&amp; Testing, Inc., B-246601, Mar. 10, 1992, 92-1 CPD Para. 274; UpSide DownProds., B-243308, July 17, 1991, 91-2 CPD

Para. 66; Areawide Servs.,Inc., B-240134.4, Sept. 4, 1990, 90-2 CPD Para. 182.

Here, the protester's proposal was explicitly contingent on thegovernment's exercising the option by the end of December 1995. TheRFP's basic delivery schedule

provided for final delivery within 675 daysafter award. Since award was made on April 14, 1994, the basic deliveryschedule allowed for exercise of the

option as late as December 20,1995. However, the option clause also provides for the possibility thatthis basic delivery schedule could be revised and,

thus, that the optioncould be exercised after December 1995. As a result, the protester'scontingency concerning its option pricing took exception to a

materialterm, rendering it unacceptable.

Peckham does not dispute the materiality of the option provision, butargues that the agency misled it during discussions into believing thatits last stated

option-pricing contingency was acceptable. Peckhamcontends that while the agency's March 10 discussion letter clearly askedthe firm to remove all contingencies

from its offer regarding DuPont'squote, progress payments, shelf-life and first article submissions--whichit did--the letter did not mention Peckham's

qualifications concerningthe option as a contingency that the government could not accept.Instead, the agency asked Peckham to submit specific dates by

which thegovernment would be required to exercise the option. Peckham asserts thatit complied with this request by submitting a revised proposal thatrequired

the option to be exercised by November 1995. Peckham furthercontends that the March 29 request for BAFOs basically repeated theseinstructions regarding

the option contingency, in asking that the optioncutoff of November 1995 be removed or restated, as, based on a March 31,1994, award, the government could

exercise the option as late as December1995. Peckham asserts that it complied with this request by restatingits option date to the end of December 1995.

In a negotiated procurement, contracting agencies are required to conductmeaningful discussions, advising offerors whose proposals are in thecompetitive

range of weaknesses, excesses, or deficiencies in theirproposals and affording them an opportunity to satisfy the government'srequirements through the

submission of revised proposals. FederalAcquisition Regulation Sec. 15.610; ITT Federal Servs. Corp., B-250096,Jan. 5, 1993, 93-1 CPD Para. 6; W.M. Schlosser

Co., Inc., B-247579.2,July 8, 1992, 92-2 CPD Para. 8. However, an agency may not inadvertentlymislead an offeror, through the framing of discussion questions,

intoresponding in a manner that does not address the agency's concerns. E.L.Hamm &amp; Assocs., Inc., B-250932, Feb. 19, 1993, 93-1 CPD Para. 156;

Son'sQuality Food Co., B-244528.2, Nov. 4, 1991, 91-2 CPD Para. 424.

We agree that the written discussion letters could have been clearer, butwe do not think Peckham could reasonably believe that its limitation onthe government's

exercise of the option of no later than December 1995was acceptable under the RFP or pursuant to the discussion letters.

First, as to the March 10 letter, the agency states that its request thatPeckham submit "specific dates by which the government would be requiredto exercise

the option" was made in accordance with the option clause. Asdiscussed above, that clause allowed offerors to submit option pricesthat differed from the

prices for the basic requirement, and stated thatthese option prices could depend upon the dates when the options wereordered. Since Peckham's initial

offer did not provide specific datesfor its option-pricing contingencies, but, instead, vague references suchas "early 1996," Peckham was asked to provide

these specific dates in theMarch 10 letter. We agree with the agency that it is simply unreasonablefor Peckham to have assumed, as it assertedly did, that

this request wasintended to elicit a finite date after which the option could not beexercised.

Second, the option clause contained in the solicitation clearly entitlesthe contracting officer to exercise the option by notifying thecontractor no later

than 60 calendar days before the final scheduleddelivery, "taking into account any written adjustment to the basicdelivery schedule made by the government."

Despite the clarity of thislanguage, Peckham's revised proposal, if accepted, foreclosed thegovernment's right to exercise the option past November 1995,

even thoughthe government had otherwise reserved to itself the right to extend thebasic delivery schedule. As a result, the March 29 request for BAFOsasked

Peckham to remove or restate its option-pricing contingencybecause, if award were made on March 31, the day after BAFOs werereceived, the government could

exercise the option as late as December1995; the March 29 letter also quoted the pertinent section of the optionclause, which made it apparent that the

option clause's allowance of anextended delivery schedule left open the possibility that the optionmight be exercised after December 1995. The handwritten

notation at theend of the letter, asking Peckham to extend its acceptance period toApril 8, 1994, also indicates that award might not be made until wellafter

March 31, thereby effectively extending the period during which thegovernment could exercise the option beyond the example of December 1995stated in the

discussion letter. Thus, we think that a reading of all ofthe language in the discussion letter, including the request for anextended proposal acceptance

period, should reasonably have alerted theprotester to the possibility that the option might be exercised inJanuary 1996, or even later if the basic contract

delivery schedule wereextended, such that the contingency that the option pricing was onlyeffective if exercised by December 1995 would be unacceptable.

SeeGeneral Research Corp., B-253866.2, Dec. 17, 1993, 93-2 CPD Para. 325.

While the protester argues that the option clause is not clear, we notethat in testimony given during a hearing before this Office (discussedfurther below),

Ms. Jury, who was responsible for preparing the firm'sproposal, could not be certain whether she had read the clause prior toreceipt of the March 29 letter.

Hearing Transcript (Tr.) at 93,108-111. Further, when asked how the March 29 letter's reference toDecember 1995 could be reconciled with the language in

the option clause,she stated that she "did not even look at that option clause or evenconsider that clause or that information," because both she and Mr.Tomlinson

were "zeroing in" on whether they should remove theoption-pricing contingency or restate it. Tr. at 98-99. Offerors arerequired to read and be familiar

with the terms of solicitations forfederal government contracts. See Peak Inc., 71 Comp.Gen. 190 (1992),92-1 CPD Para. 124.

Peckham also asserts that during the above-discussed telephoneconversations with the contracting specialist, its representatives weretold that the option-pricing

contingency contained in the firm's BAFO wasacceptable. As a result, Peckham argues that it was misled intosubmitting such a contingency. The contracting

specialist denies that hemade any such statements.

The conflict concerning what was said in these telephone conversationswas a subject of the hearing, at which there was conflicting testimony asto whether

Mr. Hutchinson told Peckham's representatives that itsoption-pricing contingency would be acceptable. Mr. Hutchinson testifiedthat Peckham's representatives

never asked him if December 1995 would beacceptable, and that he never told them that it would be acceptable. Tr.at 29-33, 52. Peckham's representatives

testified that they didspecifically ask him this question, and that he did tell them that theoption-pricing contingency would be acceptable. Tr. at 95,

113, 117-118,128.

The record shows that Mr. Hutchinson, in both discussion letters and inhis telephone conversations, led Peckham into the deficient areas of itsproposal,

and specifically referred the firm to the relevant passage fromthe option clause. His testimony at the hearing--that he did not advisePeckham's representatives

that its option contingency was acceptable--wascredible. On the other hand, while we have no basis to doubt Peckham'srepresentatives' testimony that their

impression of the telephoneconversations was that Mr. Hutchinson indicated that the contingencywould be acceptable, both Mr. Tomlinson's and Ms. Jury's

testimonyclearly showed a lack of understanding of the option clause and of thefederal procurement process generally. As a result, we think it likelythat

their understanding of Mr. Hutchinson's comments during thetelephone conversations at issue was impaired by their failure to fullyunderstand the terms

of the option clause. Based on the record, weconclude that DLA did not mislead Peckham during these discussions.

Moreover, even if DLA had advised Peckham that its option-pricingcontingency would be acceptable, we find that Peckham's reliance on suchadvice would have

been misplaced and unreasonable. 12th &amp; L Sts. Ltd.Partnership, B-247941.3, Oct. 9, 1992, 92-2 CPD Para. 233; see generallyMarine Animal Prods.

Int'l, Inc., B-247150.2, July 13, 1992, 92-2 CPDPara. 16; Capstone Corp., B-247902, July 9, 1992, 92-2 CPD Para. 12. Thisis so because, as discussed above,

the RFP's option clause clearly putofferors on notice of the possibility that option items could be orderedbeyond December 1995, and the alleged DLA advice

would constitute amaterial deviation from the clause without an appropriate amendment tothe RFP.

While the protester argues that DLA had a duty to expressly advisePeckham that it could not propose a finite date after which thegovernment could not exercise

the option, we think that the agencyimparted enough information to the offeror to afford it a fair andreasonable opportunity to identify and correct this

deficiency in itsproposal, particularly given that a fair reading of the option clause andthe delivery schedule would have made apparent that the contingenciesproposed

by Peckham were unacceptable. See Satellite Transmission Sys.,Inc., 70 Comp.Gen. 624 (1991), 91-2 CPD Para. 60; Docusort, Inc.,B-254852, Jan. 25, 1994,

94-1 CPD Para. 38.

The protest is denied.

1. The contingencies Peckham placed on the basic quantities are not atissue here, as they were not present in the firm's best and final offer(BAFO).

2. The separate prices were as follows:

Shirts Drawers Total

Peckham $16,350,398 $16,088,293 $32,438,691Daun-Ray 17,831,720 16,757,520 34,589,240

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