Reece Contracting, Inc., B-285666, August 21, 2000

B-285666 Aug 21, 2000 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights DIGEST Award based on bid that may have included unbalanced pricing is unobjectionable where agency's comparison of bids along with analysis of awardee's contract line item prices provided an appropriate basis for determination that the prices were reasonable and did not present an unacceptable level of risk to the government. Reece alleges that Merrick's bid should have been rejected because it contained unbalanced pricing that presented the likelihood of an advance payment. Reece's protest is directed only at Merrick's prices for CLINs 0001 (mobilization and demobilization). After the apparent low bidder discovered a mistake in its bid and was permitted to withdraw. 398 bid was next low. View Decision Matter of: Reece Contracting, Inc. File: B-285666 Date: August 21, 2000 DIGEST Attorneys DECISION Reece Contracting, Inc. protests the award of a contract to Merrick Construction Co. by the Army Corps of Engineers under invitation for bids (IFB) No. DACW38-00-B-0010 for a levee construction project. Reece alleges that Merrick's bid should have been rejected because it contained unbalanced pricing that presented the likelihood of an advance payment. We deny the protest. The IFB, issued in January 2000, sought fixed-price bids for the construction of levees, drainage structures, closure structures, and levee surfacing as part of a larger project in Catahoula Parish, Louisiana. The IFB listed 18 contract line item numbers (CLIN) for the work to be performed, and required bidders to submit lump-sum prices for certain CLINs and unit prices for others. Reece's protest is directed only at Merrick's prices for CLINs 0001 (mobilization and demobilization), 0002 (clearing and grubbing), 0003 (turfing), and 0008 (compacted fill). The Corps estimated $5,973,246.20 as the cost of performance, without profit, and received twelve bids ranging $4,962,359 to $8,726,490.62. After the apparent low bidder discovered a mistake in its bid and was permitted to withdraw, Merrick's bid of $5,396,557.50 became low, and Reece's $5,428,398 bid was next low. Reece filed an agency-level protest against the possible award to Merrick, alleging that Merrick's bid was impermissibly unbalanced because its acceptance would allow an advance payment. Agency Report, Tab E, Agency-Level Protest, at 3. On June 5, the agency denied Reece's protest because the contracting officer determined that while Merrick's bid appeared to be unbalanced, it did not present an unacceptable risk to the government; award was made to Merrick on June 9. Agency Report, Tab L, Agency Protest Decision, at 13. Reece then filed this protest with our Office. In arguing that Merrick's bid is impermissibly unbalanced, Reece points to the prices below: CLIN Gov't Merrick Reece Estimate 0001 (Mob & Demob) $ 39,610 $300,000 $215,000 0002 (Clearing & Grubbing) $228,500 $550,000 $418,500 0003 (Turfing) $184,760 $ 10,000 $127,200 0008 (Compacted Fill) $399,747 $681,000 $354,120 The thrust of Reece's argument is that Merrick's price for CLIN 0003 (turfing) is significantly underpriced, therefore, the reasonable costs of this work must have been shifted to other CLINs that would be performed earlier, resulting in an advance payment. /1/ The protester argues that while it "cannot be determined with specificity exactly where in its bid Merrick shifted the reasonable costs for turfing," Protest at 5, these costs "appear to have been shifted by the low bidder into either line items 1, 2, or 8, or a combination of these items." Protest at 3. The current provisions of the Federal Acquisition Regulation (FAR) governing unbalanced pricing provide that unbalanced pricing exists where, despite an acceptable total evaluated price, the price of one or more contract line items is significantly overstated or understated. FAR Sec. 15.404-1(g)(1). Although prior FAR Part 15 provisions called for rejection of an unbalanced offer if it was so grossly unbalanced that its acceptance would be tantamount to allowing an "advance payment," FAR Sec. 15.814(b)(2) (June 1997), the recent revisions to FAR Part 15 eliminated any reference to "advance payments," instead requiring a procuring agency to perform a risk analysis to determine whether award on the basis of an apparently unbalanced offer would result in paying unreasonably high prices or would otherwise present an unacceptable level of risk to the government. FAR Sec. 15.404-1(g)(2). /2/ The required risk analysis entails the agency's determination of price reasonableness for the various line items, which we review for reasonableness. /3/ J&D Maintenance and Serv., B-282249, June 18, 1999, 99-2 CPD Para. 28 at 7.