B-130504, JULY 10, 1957, 37 COMP. GEN. 16

B-130504, JULY 10, 1957, 37 COMP. GEN. 16

CONTRACTS - SOLICITATION FROM COMMERCIAL SOURCES AND AWARD TO ANOTHER GOVERNMENT AGENCY - PROPRIETY OF PROCUREMENT PROCEDURE THE AUTHORITY IN 31 U.S.C. 686 FOR THE PROCUREMENT OF SERVICES AND SUPPLIES FROM OTHER GOVERNMENT AGENCIES RATHER THAN FROM COMMERCIAL SOURCES ON THE BASIS OF LOWER COST IS PERMISSIVE RATHER THAN MANDATORY; AND, ALTHOUGH THE PRACTICE OF A MILITARY DEPARTMENT OF SOLICITING BIDS FOR LAUNDRY SERVICES FROM COMMERCIAL SOURCES AND AWARDING THE CONTRACT TO ANOTHER GOVERNMENT AGENCY ON THE BASIS OF LOWER PRICES THAN THOSE RECEIVED IN RESPONSE TO THE ADVERTISEMENT IS WITHIN THE ADMINISTRATIVE DISCRETION OF THE PROCUREMENT OFFICERS, THE DEPARTMENT HAS, ON THE BASIS OF THE NEGLIGIBLE SAVINGS AND IN LINE WITH A DIRECTIVE REQUIRING THE USE OF COMMERCIAL FACILITIES WHERE THE COMMERCIAL PRICES ARE REASONABLE, DISCONTINUED PROCUREMENT OF LAUNDRY SERVICES FROM OTHER THAN COMMERCIAL SOURCES.

TO THE SEATTLE LAUNDRY AND DRY CLEANING INSTITUTE, JULY 10, 1957:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JANUARY 25, 1957, CONCERNING CERTAIN ALLEGED IRREGULARITIES IN CONNECTION WITH THE PROCUREMENT OF LAUNDRY SERVICE BY THE MILITARY ESTABLISHMENTS IN THE SEATTLE AREA. YOU REFER SPECIFICALLY TO ORDERS PLACED WITH THE SHIP'S SERVICE LAUNDRY LOCATED AT THE SEATTLE NAVAL STATION FOR LAUNDRY WORK DESCRIBED IN TWO INVITATIONS FOR BIDS ISSUED BY THE CONTRACTING OFFICER AT PAINE AIR FORCE BASE, WASHINGTON, AND IN AN INVITATION FOR BIDS ISSUED BY THE THIRTEENTH NAVAL DISTRICT.

IT IS ALLEGED THAT, APPROXIMATELY FOUR YEARS AGO, THE CONTRACTING OFFICER AT PAINE AIR FORCE BASE ISSUED AN INVITATION FOR BIDS FOR LAUNDRY WORK, THAT THE NEW RICHMOND LAUNDRY OF SEATTLE WAS THE LOWEST BIDDER AND WAS AWARDED A CONTRACT BUT THAT, WHEN THE CONTRACTOR MADE INQUIRIES AS TO WHY NO LAUNDRY SERVICE HAD BEEN ORDERED UNDER THE CONTRACT, IT WAS INFORMED THAT THE WORK WAS BEING PERFORMED AT THE SHIP'S SERVICE LAUNDRY IN SEATTLE.

IT IS ALSO ALLEGED THAT THE CONTRACTING OFFICER AT PAINE AIR FORCE BASE ISSUED AN INVITATION FOR BIDS SOMETIME IN DECEMBER 1956; THAT THE LOW BIDDER WAS ANNOUNCED TO BE THE INDEPENDENT LAUNDRY AND DRY CLEANERS OF EVERETT, WASHINGTON; THAT THE CONTRACTING OFFICER STATED TO AT LEAST ONE OF THE BIDDERS THAT A CONTRACT WOULD BE AWARDED TO THE FIRM SUBMITTING THE LOWEST FORMAL BID; BUT THAT SEVERAL DAYS LATER THE LOW BIDDER WAS INFORMED THAT THE WORK WOULD BE SENT TO THE SHIP'S SERVICE LAUNDRY IN SEATTLE AS IT HAD SUBMITTED AN INFORMAL TYPEWRITTEN LIST OF PRICES WHICH WERE SOMEWHAT LOWER THAN THOSE QUOTED BY THE INDEPENDENT LAUNDRY. SIMILAR ACTION IS ALLEGED TO HAVE BEEN TAKEN IN THE CASE OF AN INVITATION FOR BIDS ISSUED IN DECEMBER 1956 BY THE THIRTEENTH NAVAL DISTRICT, AS TO WHICH THE ASSOCIATED LAUNDRY OF BELLINGHAM, WASHINGTON, WAS THE LOW BIDDER.

THE DEPARTMENT OF THE AIR FORCE HAS REPORTED THAT, CONTINUOUSLY FOR OVER 3 YEARS, PAINE AIR FORCE BASE HAS UTILIZED THE NAVY EXCHANGE LAUNDRY FOR NECESSARY SERVICE. HOWEVER, DURING 1956, PAINE AIR FORCE BASE WAS REQUESTED TO COMPLETE AND SUBMIT A REPORT OF LAUNDRY SERVICES AND COSTS IN ORDER TO ASSURE THAT SERVICES WERE BEING OBTAINED FROM THE MOST ECONOMICAL SOURCES. AS A RESULT, INVITATIONS FOR BIDS WERE ISSUED TO NINE PROSPECTIVE COMMERCIAL SOURCES ON NOVEMBER 2, 1956. TWO BIDS WERE RECEIVED AND WERE OPENED ON NOVEMBER 29, 1956.

IT IS STATED IN THE AIR FORCE REPORT THAT THE NAVY EXCHANGE DID NOT SUBMIT A FORMAL BID SINCE NAVY DIRECTIVES PROHIBIT EXCHANGE OFFICIALS FROM BIDDING IN OPEN COMPETITION WITH PRIVATE AGENCIES. THE DIRECTIVE PROVIDES, HOWEVER, THAT EXCHANGES (AS INSTRUMENTALITIES OF THE GOVERNMENT) SHOULD MAKE KNOWN TO OTHER DEPARTMENT OF DEFENSE AGENCIES THE AVAILABILITY OF THEIR LAUNDRY FACILITIES AND PRICES CHARGED FOR SERVICE. THE NAVY EXCHANGE PRICE LIST, BASED UPON CURRENT RATES CHARGED TO PAINE AIR FORCE BASE, WAS NOT CONSIDERED AS A FORMAL BID AND WAS NOT RECORDED ON THE ABSTRACT AS A RESPONSE TO THE INVITATION FOR BIDS. IT WAS, HOWEVER, ACCORDED THE SAME TREATMENT IN HANDLING AS IF IT HAD IN FACT BEEN A FORMAL BID FOR PRICE AND TOTAL COST COMPARISONS.

THE AIR FORCE HAS TAKEN THE POSITION THAT THERE WAS NOTHING IMPROPER OR UNETHICAL INVOLVED IN EXERCISING THE GOVERNMENT'S RIGHT TO REJECT ANY OR ALL BIDS UNDER PARAGRAPH 8 OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS. HOWEVER, ON THE BASIS THAT COST EXPERIENCE HAS SHOWN THAT NEGLIGIBLE SAVINGS, ESTIMATED AT $320, WILL ACCRUE ANNUALLY THROUGH CONTINUED USE OF THE NAVY EXCHANGE FACILITIES, AND IN ACCORDANCE WITH DEPARTMENT OF DEFENSE POLICIES TO USE COMMERCIAL FACILITIES TO THE GREATEST PRACTICABLE EXTENT WHERE COMMERCIAL PRICES ARE DETERMINED TO BE REASONABLE, PAINE AIR FORCE BASE HAS BEEN INSTRUCTED TO DISCONTINUE USE OF THE NAVY EXCHANGE LAUNDRY NO LATER THAN JULY 1, 1957.

THE DEPARTMENT OF THE NAVY HAS REPORTED THAT THE NAVY EXCHANGE LAUNDRY AT THE SEATTLE NAVAL STATION DOES A CONSIDERABLE VOLUME OF GOVERNMENT LAUNDRY BUSINESS AND THAT EXCHANGES ARE PROHIBITED BY REGULATION FROM FORMALLY BIDDING FOR ANY CONTRACTS. HOWEVER, WE ARE ADVISED THAT THE EXCHANGES, UPON REQUEST, FURNISH PRICE LISTS TO ALL MILITARY ACTIVITIES IN THE AREAS SERVED BY THEM, THAT THESE PRICES ARE AT COST (LOWER THAN THE PRICES CHARGED INDIVIDUALS) AND THAT, WHILE THESE PRICE LISTS ARE MODIFIED FROM TIME TO TIME TO REFLECT CHANGES IN COST CONDITIONS, THEY ARE RELATIVELY CONSTANT AND ARE NOT DESIGNED TO MEET BIDS MADE BY COMMERCIAL CONCERNS.

ALTHOUGH THE AIR FORCE REPORT MAKES NO REFERENCE TO THE DEALINGS BETWEEN PAINE AIR FORCE BASE AND THE NEW RICHMOND LAUNDRY, APPROXIMATELY 4 YEARS AGO, THE REPORT FROM THE DEPARTMENT OF THE NAVY SETS FORTH THAT THE DEPARTMENT OF THE AIR FORCE HAS FURNISHED INFORMATION TO THE EFFECT THAT THE NEW RICHMOND LAUNDRY WAS NOT NOTIFIED THAT THEY WOULD BE AWARDED THE CONTRACT.

UNDER SECTION 686, TITLE 31, U.S.C. GOVERNMENT AGENCIES ARE AUTHORIZED BUT ARE NOT REQUIRED TO PLACE ORDERS WITH ANY OTHER DEPARTMENT, ESTABLISHMENT, BUREAU OR OFFICE FOR MATERIALS, SUPPLIES, WORK OR SERVICES OF ANY KIND THAT SUCH FEDERAL AGENCY MAY BE IN A POSITION TO SUPPLY OR EQUIPPED TO RENDER. HOWEVER, IT IS MANDATORY THAT "IF SUCH WORK OR SERVICES CAN BE AS CONVENIENTLY OR MORE CHEAPLY PERFORMED BY PRIVATE AGENCIES SUCH WORK SHALL BE LET BY COMPETITIVE BIDS TO SUCH PRIVATE AGENCIES.'

IT WOULD BE DIFFICULT TO COMPLY WITH SUCH STATUTORY PROVISION WITHOUT FINDING OUT IN SOME MANNER THE TERMS AND CONDITIONS UNDER WHICH THE PARTICULAR WORK OR SERVICE COULD BE OBTAINED FROM PRIVATE SOURCES. THIS CONNECTION, IT IS OUR VIEW THAT IT WOULD BE SOLELY A MATTER OF ADMINISTRATIVE DISCRETION AS TO WHETHER OR NOT TO PROCURE THE WORK OR SERVICE FROM ANOTHER GOVERNMENT AGENCY OR INSTRUMENTALITY WHEN DETERMINED THAT ITS PRICES ARE LOWER THAN ALL BIDS RECEIVED IN RESPONSE TO A FORMAL ADVERTISEMENT.

ACCORDINGLY, YOU ARE ADVISED THAT NO FURTHER ACTION ON YOUR PROTEST APPEARS TO BE REQUIRED BY OUR OFFICE.