FAR 2.101:  Definitions - Offer

Comptroller General - Key Excerpts

Hanel protests that Kardex’s warehouse units do not satisfy a material solicitation requirement. Protest at 6-7. Specifically, citing various depictions and passages from Kardex’s quotation, the protester argues that Kardex’s extractor system is suspended centrally on the sides of its proposed warehouse units, and not suspended on four corners, contrary to the RFQ’s explicit requirement. See Protester’s Comments at 4-5.

The VA concedes that the RFQ “specified precise technical requirements” for the solicited storage units, and does not dispute the protester’s argument that Kardex’s extractor system is not suspended on four corners as required by the RFQ. See AR at 2-3. The agency instead argues (citing, inter alia, Zarc Int’l, Inc., B‑292708, Oct. 3, 2003, 2003 CPD ¶ 172 and Spacesaver, B‑224339, Aug. 22, 1986, 86-2 CPD ¶ 219, aff’d Spacesaver--Recon., B‑224339.2, Sept. 19, 1986, 86-2 CPD ¶ 328, Spacesaver--2nd Recon., B‑224339.3, Oct. 16, 1986, 86-2 CPD ¶ 435) that because quotations are not offers that the agency can accept, the agency may select a quotation that does not comply with the RFQ’s identified requirements, where the agency finds that the quotation will otherwise satisfy the agency’s needs. AR at 2-3. We disagree.

The legal nature of a quotation vis-à-vis “offer” and “acceptance” in the context of a RFQ issued to FSS vendors does not alter the fundamental requirement that the FSS competition be conducted fairly and in a manner that affords vendors an opportunity to compete on an equal basis. In Zarc Int’l, cited by the agency, we specifically explained that where an agency determines that a nonconforming quotation will satisfy its needs, the agency generally should amend the RFQ and reopen the competition to allow all vendors to compete for its actual requirements on an equal basis. See Zarc Int’l, Inc., supra, at 2.

Further, in Spacesaver, also cited by the agency, we explained that agencies must treat all vendors equally and afford them an opportunity to compete on an equal basis. See Spacesaver, supra, at 2. Normally, an agency does not assure equal competition where it identifies a particular model or requirement in a solicitation but does not impose that requirement on an offeror who deviates from the terms of the solicitation. This is so even when only quotations are requested, since it can lead vendors to quote on different bases. Id. In this regard, we have held that clearly stated technical requirements are considered material to the needs of the government, and a quotation that fails to conform to material solicitation requirements is technically unacceptable and cannot form the basis for award. Carahsoft Tech. Corp., B‑401169, B‑401169.2, June 29, 2009, 2009 CPD ¶ 134 at 5.

Although we ultimately denied the protests in Zarc Int’l and Spacesaver, the outcome in these cases turned on the question of competitive prejudice, not the fact that the vendors submitted quotations instead of offers. In Zarc Int’l, the procuring agency issued a purchase order to a FSS vendor that did not quote the particular product number identified in the RFQ after determining, like here, that the vendor’s product met the agency’s needs. Zarc Int’l, supra, at 1-2. We nevertheless denied the protest because the protester failed to establish a reasonable possibility that it was prejudiced by the agency’s actions. Id. at 2. Similarly, in Spacesaver, we denied the protest of an agency’s issuance of purchase order to a FSS vendor that did not quote the product model specified in the RFQ because the protester had not alleged that it would have offered a product other than the specified model had it been on notice that the agency would consider equivalent items. Spacesaver, supra, at 2.

Here, however, Hanel represents that it would have proposed a different, lower‑priced system had it known that the VA would accept a 2-point center suspension extraction system, instead of the specified 4-corner suspension system. Protester’s Comments at 1. We have recognized the possibility of prejudice where a protester that was the only vendor offering the product specified in an RFQ alleges that it would have lowered its price had it been aware of the potential for competition, and where the vendor offering the specified product alleges that it could have offered a different, lower-priced, acceptable product had it been on notice that the agency would consider equivalent items. Zarc Int’l, supra, at 2. Accordingly, we find a reasonable possibility that Hanel was prejudiced by the agency’s failure to evaluate quotations based on the requirements set forth in the solicitation.  (Hanel Storage Systems, L.P. B-409030.2: Sep 15, 2014)  (pdf)

As an initial matter, the agency contends that Sea Box is not an interested party because its quotation had expired. In this regard, the agency notes that Sea Box’s quotation failed to provide that its price would be held firm for 90 days as requested by the RFQ. See Contracting Officer’s Statement at 17.

We do not agree with the agency that the “expiration” of Sea Box’s quotation rendered the quotation unacceptable. We recognize that, in practice, agencies and vendors often treat quotations as if they were offers. Nonetheless, as a matter of law, quotations are different from bids or offers.

The submission of a bid or proposal constitutes, by its very nature, an offer by a contractor that, if accepted, creates a binding legal obligation on both parties. Computer Assocs. Int’l, Inc.–Recon., B-292077.6, May 5, 2004, 2004 CPD ¶ 110 at 3. Because of the binding nature of bids and offers, they are held open for acceptance within a specified or reasonable period of time, and our case law has necessarily developed rules regarding the government’s acceptance of “expired” bids or proposals. See, e.g., Consultants Ltd., B-286688.2, May 16, 2001, 2001 CPD ¶ 92.

A quotation, on the other hand, is not a submission for acceptance by the government to form a binding contract; rather, vendor quotations are purely informational. Zarc Int’l, Inc., B-292708, Oct. 3, 2003, 2003 CPD ¶ 172 at 2. In the RFQ context, it is the government that makes the offer, albeit generally based on the information provided by the vendor in its quotation, and no binding agreement is created until the vendor accepts the offer. FAR § 13.004(a). A vendor submitting a price quotation therefore could, the next moment, reject an offer from the government at its quoted price. Because vendors in the RFQ context hold the power of acceptance and their submissions are purely informational, there is nothing for vendors to hold open. Thus, we have not applied the acceptance period concept or the attendant rules regarding expiration of bids or offers to RFQs. See Computer Assocs. Int’l, Inc.–Recon., supra.  (Sea Box, Inc., B-405711.2, Mar 19, 2012)  (pdf)

Uncertainty as to the identity of an offering entity renders an offer technically unacceptable, since ambiguity as to an offeror’s identity could result in there being no party bound to perform the obligations of the contract. See Dick Enterprises, Inc., B-259686.2, June 21, 1995, 95-1 CPD ¶ 286 at 2. The information readily available, such as records for incorporation and DUNS numbers, must reasonably establish that the differently-identified entities are in fact the same concern. Id.; see also Trandes Corp., B-271662, Aug. 2, 1996, 96-2 CPD ¶ 57 at 2. Moreover, as a general matter, the entity awarded the contract should be the entity that submitted the initial proposal. Townsend & Co., B-211762, Mar. 27, 1984, 84-1 CPD ¶ 352 at 4; Pedestrian Bus Stop Shelters, Ltd., B-212570, Mar. 20, 1984, 84-1 CPD ¶ 331 at 3.

It is undisputed that DQSI, LLC was the offering entity. Its name is the only name that appears anywhere in the proposal. It is also undisputed that the contracting officer made award to DQSI, Corporation, the name that appears on the award document.

The contracting officer reasonably turned to the CAGE code and DUNS number in DQSI, LLC’s proposal to ascertain the firm’s eligibility for award. CAGE codes are assigned to discrete business entities by the Defense Logistics Agency and are used to dispositively establish the identity of a legal entity for contractual purposes. URS Group, Inc., B-402820, July 30, 2010, 2010 CPD ¶ 175 at 4. Similarly, the DUNS numbering system is established by Dunn & Bradstreet Information Services, which assigns discrete 9-digit numbers for purposes of establishing the precise identification of an offeror or contractor. Id.; FAR §§ 2.101, 4.605(b). These numbers are used to identify the entity that is the offeror for a given procurement.

However, the Army’s searches of various databases using this identifying information, as well as the information it received from SBA, revealed a discrepancy between the identity of the offering entity and the identity of the entity to whom those numbers were assigned. Although this discrepancy introduced uncertainty as to the identity of the offering entity, the contracting officer appears to have made no effort to ensure that the two entities were the same concern. She did not seek clarification from SBA, and there is no evidence that she sought additional information from DQSI. Instead, she appears to have simply assumed that the two entities were the same because the same person was the vice president and chief executive officer of both entities. While this fact may show that there is a relationship between the two concerns, it does not show that they are the same legal entity, particularly given the differing legal structures denoted by their respective names.

W.B. Construction has provided copies of documents, certified by the Secretary of State of Louisiana, concerning DQSI, LLC. Comments, Exhibit D. These documents show that DQSI, Corporation converted from the organizational form of a corporation to the organizational form of a limited liability company, DQSI, LLC, in 2009. As a result, it appears that the entity called DQSI, Corporation no longer exists. According to the protester, under Louisiana law, a limited liability company and a corporation are different and distinct legal entities formed under different statutes--the distinction between the two legal structures is not a mere formality or name change.

The record demonstrates that the Army failed to resolve the uncertainty as to the identity of the offering entity and its eligibility for award of this 8(a) contract, and awarded the contract to an entity that was not an original participant in this procurement, and does not appear to be a successor in interest to the offering entity. We therefore find that the Army improperly found the firm’s proposal technically acceptable and sustain the protest.  (W. B. Construction and Sons, Inc., B-405874; B-405874.2, December 16, 2011)  (pdf)

On the other hand, while challenges to the legal sufficiency of a solicitation are not often raised in this forum, we have considered, and will consider, a protester's timely claim that a solicitation anticipates award of a contractual instrument that is legally insufficient in some way. For example, we will sustain a protest against the terms of a cancellation clause where it purports to deny a contractor under an indefinite quantity contract the benefit of the minimum guarantee. Southwest Lab. of Okla., Inc., B-251778, May 5, 1993, 93-1 CPD para. 368 at 4 (protest sustained where cancellation clause converted agency failure to meet the minimum guarantee into a termination for convenience to avoid liability for the minimum guarantee).

Here, however, the solicitation specifically recognizes the government's obligation to honor the minimum guarantee in the event of a cancellation by the government. The protester has shown no other basis to question the GSA's use of the cancellation clause in this RFP issued under the FSS program. 
(Advanced Scientific Applications, Inc., B-400312.2, February 5, 2009)  (pdf)

Since the lease does not contain a termination for convenience clause, we would customarily find that remedial action that may disturb the award is not feasible; in the absence of a termination for convenience clause, we would ordinarily not recommend termination of an awarded lease, even if we sustained the protest and found the award improper. Peter N.G. Schwartz Co. Judiciary Square Ltd. P’ship, B‑239007.3, Oct. 31, 1990, 90-2 CPD para. 353 at 11.  Here, however, Fedcar argues that remedial action is appropriate because no legally binding lease contract between GSA and Duke was formed. Based on our review of the record, we agree with Fedcar that GSA did not form a legally binding lease contract with Duke because it did not unconditionally accept Duke’s offer. In this regard, the record shows that on December 17, 2007, when GSA accepted Duke’s offer and notified Duke of the award, GSA forwarded to Duke a draft lease containing various changes from the terms of the SFO and Duke’s offer, and requested that Duke execute and return the lease. AR, Tab 13, GSA’s Award Letter (Dec. 17, 2007). Fedcar has identified various changes in this draft lease that it regards as material deviations from the terms of the SFO and Duke’s offer. For example, the agency changed a section of the SFO regarding the installation of roof antennas by making the agency’s right to mount an antenna conditional on Duke’s consent and added new provisions addressing the removal of the antennas. The draft lease also limited the lessor’s right to negotiate price and imposed a mandatory procedure involving the use of appraisals to determine the purchase price. Neither GSA nor Duke has asserted that these are not changes from the SFO or Duke’s offer, or explained why these changes are not material. Based on our review of the record, we find these changes are material. Moreover, the record does not include the modified draft lease executed by both GSA and Duke, even though this document (if it is in existence) was requested to be produced.

A purported acceptance of an offer that is conditioned on the offeror’s assent to terms additional to or different from than those offered is not an acceptance but a counteroffer, and does not create a binding contract. 1st Home Liquidating Trust, et al. v. United States, 76 Fed. Cl. 731, 739 (2007) (citing Restatement (Second) of Contracts sect. 59); Romala Corp. v. United States, 20 Cl.Ct. 435, 443 (1990); Climax Molybdenum Co., B-193828, July 3, 1979, 79‑2 CPD para. 2 at 4. On this record, we find that GSA’s conditional acceptance of Duke’s offer did not form a legally binding lease contract.  Because GSA has made material changes to the lease agreement from those contained in the SFO, we recommend that GSA amend the SFO and obtain revised proposals. We also recommend that GSA make a new source selection decision taking into account the correct present value ANSI/BOMA office area per square foot price of the offers. In so doing, the agency should fully document its cost/technical tradeoff, including a comparison of the proposals’ strengths and weaknesses as well as the evaluated price difference. In the event that Fedcar’s proposal is found to be the best value, award should be made to that firm. We also recommend that Fedcar be reimbursed the reasonable costs of filing and pursuing the protests, including reasonable attorneys’ fees. 4 C.F.R. sect. 21.8(d)(1). Fedcar should submit its certified claim for costs, detailing the time expended and costs incurred, directly to the agency within 60 days after the receipt of this decision.  (Fedcar Company, Ltd., B-310980; B-310980.2; B-310980.3, March 25, 2008)  (pdf)

Proposal submitted prior to the issue date of a request for proposals (RFP) is an offer in response to the RFP that the contracting agency must consider where the agency provided the offeror with prior written notice that it would do so.  (STG, Inc., B-285910, September 20, 2000)

Comptroller General - Listing of Decisions

For the Government For the Protester
Advanced Scientific Applications, Inc., B-400312.2, February 5, 2009  (pdf) Hanel Storage Systems, L.P. B-409030.2: Sep 15, 2014  (pdf)
  Sea Box, Inc., B-405711.2, Mar 19, 2012  (pdf)
  W. B. Construction and Sons, Inc., B-405874; B-405874.2, December 16, 2011  (pdf)
  Fedcar Company, Ltd., B-310980; B-310980.2; B-310980.3, March 25, 2008  (pdf)
  STG, Inc., B-285910, September 20, 2000  (pdf)


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