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B-132596, FEBRUARY 27, 1958, 37 COMP. GEN. 550

B-132596 Feb 27, 1958
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CONTRACTS - AWARDS TO OTHER THAN THE LOWEST BIDDER - OTHER EVALUATION FACTORS AWARDS OF GOVERNMENT CONTRACTS ARE REQUIRED TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER WHO IS ABLE TO MEET THE SPECIFICATIONS. OTHER FACTORS WHERE THE LOW BIDDER IS ABLE TO MEET THE SPECIFICATIONS. AN AIR FORCE PROCUREMENT INSTRUCTION WHICH WAS PROMULGATED PURSUANT TO THE FORMAL ADVERTISEMENT FOR BID REQUIREMENTS IN 10 U.S.C. 2305 AND WHICH PROHIBITS A CONTRACTING OFFICER FROM MAKING AWARDS TO OTHER THAN THE LOW BIDDER ON THE BASIS OF FACTORS OTHER THAN PRICE. UNLESS HE FIRST DETERMINES THAT THE LOW BIDDER IS NOT QUALIFIED. IS A PROPER INTERPRETATION OF 10 U.S.C. 2305 (B) WHICH REQUIRES THAT AWARDS BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES.

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B-132596, FEBRUARY 27, 1958, 37 COMP. GEN. 550

CONTRACTS - AWARDS TO OTHER THAN THE LOWEST BIDDER - OTHER EVALUATION FACTORS AWARDS OF GOVERNMENT CONTRACTS ARE REQUIRED TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER WHO IS ABLE TO MEET THE SPECIFICATIONS, AND THE PHRASE "OTHER FACTORS CONSIDERED" IN PROCUREMENT STATUTES MAY NOT BE CONSTRUED TO BROADEN THE SCOPE OF EXISTING ADVERTISING REQUIREMENTS OR TO INTRODUCE NEW BID EVALUATION CRITERIA IN ORDER TO PERMIT AWARDS TO OTHER THAN THE LOWEST BIDDER ON THE BASIS OF EXPERIENCE, SUPERIOR PERFORMANCE, FINANCIAL RESOURCES, AND OTHER FACTORS WHERE THE LOW BIDDER IS ABLE TO MEET THE SPECIFICATIONS. AN AIR FORCE PROCUREMENT INSTRUCTION WHICH WAS PROMULGATED PURSUANT TO THE FORMAL ADVERTISEMENT FOR BID REQUIREMENTS IN 10 U.S.C. 2305 AND WHICH PROHIBITS A CONTRACTING OFFICER FROM MAKING AWARDS TO OTHER THAN THE LOW BIDDER ON THE BASIS OF FACTORS OTHER THAN PRICE, UNLESS HE FIRST DETERMINES THAT THE LOW BIDDER IS NOT QUALIFIED, IS A PROPER INTERPRETATION OF 10 U.S.C. 2305 (B) WHICH REQUIRES THAT AWARDS BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED. AN AWARD TO OTHER THAN THE LOW BIDDER ON THE BASIS OF EXPERIENCE, SUPERIOR PERFORMANCE, FINANCIAL RESOURCES, AND OTHER FACTORS, IN THE ABSENCE OF A DETERMINATION THAT THE LOW BIDDER WAS NOT QUALIFIED TO PERFORM, IS CONTRARY TO 10 U.S.C. 2305 (B), WHICH REQUIRES AWARDS TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER WHO IS ABLE TO MEET THE SPECIFICATIONS, AND MAKES THE RESULTANT CONTRACT ILLEGAL SO THAT NO LIABILITY FOR COSTS OR LOSS OF PROFITS IS IMPOSED ON THE GOVERNMENT.

TO THE AMERICAN HYDROTHERM CORPORATION, FEBRUARY 27, 1958:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 23, 1957, AND TO THE BRIEF SUBMITTED BY COUNSEL IN YOUR BEHALF ON DECEMBER 30, 1957, PROTESTING AGAINST OUR ACTION OF JULY 23, 1957, IN ADVISING THE DEPARTMENT OF THE AIR FORCE THAT CONTRACT NOS. AF 21 (602/-296 AND 297, SHOULD BE CANCELED, AND CLAIMING DAMAGES FOR BREACH OF CONTRACT IN THE AMOUNT OF $22,650.88 ALLEGEDLY RESULTING FROM SUCH CANCELLATIONS.

THE CONTRACTS IN QUESTION WERE AWARDED TO YOUR COMPANY ON A POINT SCORE BASIS WHICH PROVIDED FOR EVALUATION OF VARIOUS FACTORS, DESCRIBED AS TECHNICAL PROVISIONS, WHICH THE CONTRACTING OFFICER CONSIDERED INDICATIVE OF THE BIDDER'S ABILITY TO PERFORM THE CONTRACT. A MAXIMUM OF 70 POINTS WAS ESTABLISHED FOR SUCH EVALUATION. ADDITIONALLY, BID PRICES WERE EVALUATED ON A WEIGHTED POINT BASIS WITH A MAXIMUM OF 30 POINTS BEING AWARDED TO THE LOW BIDDER. UNDER THIS PROCEDURE THE LOW BIDDER RECEIVED A SCORE OF 39.4 POINTS ON THE TECHNICAL PROVISIONS, PLUS 30 POINTS AS LOW BIDDER, FOR A TOTAL OF 69.4 POINTS. YOUR COMPANY RECEIVED A POINT SCORE OF 62.6 ON THE TECHNICAL PROVISIONS, PLUS 29.7 POINTS AS SECOND LOW BIDDER, FOR A TOTAL OF 92.5 POINTS.

OUR DECISION OF JULY 23, 1957 (37 COMP. GEN. 51), HELD THAT THE CONTRACTING OFFICER WAS REQUIRED TO MAKE AWARDS TO THE LOWEST RESPONSIBLE BIDDER AND IN THE ABSENCE OF A DETERMINATION THAT THE LOW BIDDER WAS NOT RESPONSIBLE, NO AUTHORITY EXISTED TO SUPPORT HIS ACTION IN AWARDING THESE CONTRACTS TO YOUR COMPANY.

YOUR REQUEST FOR RECONSIDERATION OF THE DECISION IS BASED PRIMARILY UPON THE FACT THAT BOTH THE INVITATIONS FOR BIDS AND THE STATUTE UNDER WHICH THE CONTRACTS WERE EXECUTED (10 U.S.C. 2305) PROVIDE THAT A CONTRACT SHALL BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS YOUR OPINION THAT INCLUSION OF THE PHRASE "OTHER FACTORS CONSIDERED" IN THE STATUTE IS TO BE REGARDED AS A CLEAR EXPRESSION OF LEGISLATIVE INTENT THAT A CONTRACT NEED NOT BE AWARDED TO A LOW BIDDER WHERE, UPON A COMPARATIVE EVALUATION OF FACTORS SUCH AS EXPERIENCE, SKILL AND EQUIPMENT OF THE BIDDERS, IT IS DETERMINED THAT A HIGHER BIDDER WILL BE ABLE TO PERFORM THE CONTRACT IN SUCH AN EFFICIENT MANNER THAT THE GOVERNMENT MAY ULTIMATELY BE EXPECTED TO RECEIVE BENEFITS IN EXCESS OF ANY MONETARY ADVANTAGE IT MIGHT REALIZE INITIALLY IN ACCEPTING A LOWER BID. UNDER SUCH INTERPRETATION, YOU CONTEND THAT THE INVITATION WAS IN COMPLETE HARMONY WITH THE STATUTE AND WITH THE AIR FORCE REGULATIONS ISSUED THEREUNDER; THAT THE AWARDS TO YOUR COMPANY, BASED UPON THE CONTRACTING OFFICER'S DETERMINATION THAT YOU WERE THE MOST QUALIFIED BIDDER AND THAT THE DIFFERENCE BETWEEN YOUR BIDS AND THE LOW BIDS WAS INSUFFICIENT TO OVERCOME SUCH ADDITIONAL QUALIFICATIONS, WERE WITHIN THE SCOPE OF THE CONTRACTING OFFICER'S AUTHORITY; THAT BINDING CONTRACTS WERE FORMED WHEN THE CONTRACTING OFFICER ACCEPTED YOUR BIDS; AND THAT YOUR COMPANY, HAVING PROCEEDED IN GOOD FAITH IN RELIANCE ON SUCH CONTRACTS, IS ENTITLED TO BE REIMBURSED FOR DAMAGES, INCLUDING LOSS OF ANTICIPATED PROFITS, RESULTING FROM THEIR CANCELLATION.

WITH RESPECT TO THE FORCE AND EFFECT OF THE PHRASE "OTHER FACTORS CONSIDERED" AS USED IN 10 U.S.C. 2305, IT SHOULD BE NOTED THAT THIS STATUTORY PROVISION FIRST APPEARED IN SECTION 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 41 U.S.C. 152 (B), AND THE LEGISLATIVE HISTORY OF THAT STATUTE INDICATES CLEARLY THAT IT WAS NOT INTENDED TO BROADEN THE SCOPE OF EXISTING AUTHORITY OR TO INTRODUCE NEW FACTORS INTO THE EVALUATION OF BIDS SUBMITTED IN RESPONSE TO ADVERTISED PROCUREMENTS. THUS THE ANALYSIS OF PROVISIONS ACCOMPANYING THE SUBMISSION OF DRAFT LEGISLATION TO THE HOUSE OF REPRESENTATIVES BY THE SECRETARY OF WAR (SEE PAGE 431, HEARINGS ON H.R. 1366, 80TH CONGRESS, BEFORE SUBCOMMITTEE NO. 6 OF THE COMMITTEE ON ARMED SERVICES, HOUSE OF REPRESENTATIVES) STATED AS FOLLOWS:

BY SECTION 3 (B) THE PRINCIPLES THAT CONTRACTS SHALL BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER AND THAT THE GOVERNMENT MAY REJECT ALL BIDS WHEN SUCH ACTION IS DEEMED ADVISABLE ARE REITERATED. THE QUESTION AS TO WHETHER A PARTICULAR BIDDER IS A "RESPONSIBLE BIDDER" IS ONE OF SOUND BUSINESS JUDGMENT, DEPENDING UPON AN EVALUATION OF THE BIDDER'S EXPERIENCE, REPUTATION, FINANCIAL RESOURCES, AND OTHER FACTORS. * * *

IN DISCUSSION OF THE INTENT OF SECTION 3 (B), THE FOLLOWING APPEARS AT PAGE 575 OF THE HOUSE HEARINGS ON H.R. 1366:

MR. VINSON. IS THERE ANY DEPARTURE FROM THE LAW TODAY WITH REFERENCE TO ADVERTISEMENTS AS SET OUT IN SECTION 3? ARE YOU FOLLOWING THE SAME PRINCIPLES?

MR. HILL. YES, SIR.

MR. ANDERSON. THE SAME PRINCIPLES THAT HAVE BEEN ADHERED TO HERETOFORE?

MR. HILL. THAT IS RIGHT.

MR. VINSON. THERE ARE NO NEW STANDARDS IN SECTION 3 OTHER THAN WHAT HAS BEEN IN THE LAW TO DATE?

MR. HILL. THAT IS RIGHT.

MR. COLE. WHY, THEN, IS IT NECESSARY TO RELEGISLATE?

MR. ANDERSON. BECAUSE THIS PARTICULAR BILL CUTS ACROSS A LOT OF PREVIOUS LEGISLATION WHICH IS REPEALED IN ONE OF THE LATE SECTIONS OF THE ACT.

AND THE FOLLOWING APPEARS AT PAGE 445 OF THE SAME HEARINGS:

MR. BATES. THE THOUGHT ENTERED MY MIND, AND THE REASON FOR MY INQUIRY WAS THAT WHILE THE PROVISIONS OF SECTION 1 STATE THAT PURCHASES SHALL BE MADE BY ADVERTISING, CAN IT BE CONSTRUED THAT THE LOW BID MUST BE ACCEPTED?

MR.. VINSON. THAT IS RIGHT.

MR. ROYALL. OR REJECTED.

MR. BATES. OR REJECTED. IS THAT CLEAR IN THIS LANGUAGE?

MR. VINSON. YES.

MR. ROYALL. I THINK SO, IF YOU READ IT IN CONNECTION WITH SECTION 3.

MR. VINSON. IF YOU READ IT IN CONNECTION WITH SECTION 3709 OF THE REVISED STATUTES.

MR. ROYALL. THAT IS RIGHT, SIR.

WHILE HOUSE REPORT NO. 109, 80TH CONGRESS, STATES THAT SECTION 3 (B) REQUIRES AWARDS TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER, IT SHOULD BE NOTED THAT STATEMENTS SUBMITTED TO THE SENATE COMMITTEE ON ARMED SERVICES BY THE DEPARTMENT OF THE NAVY (SEE PAGES 8 AND 16 OF SENATE HEARINGS ON H.R. 1366 AND H.R. 3394, 80TH CONGRESS, ON JUNE 24, 1947) CONTAIN A REQUEST THAT THE COMMITTEE EXPRESS AN INTERPRETATION OF SECTION 3 (B) WHICH WOULD PERMIT AN AWARD TO OTHER THAN THE LOWEST RESPONSIBLE BIDDER WHERE THERE IS A COMPELLING MILITARY NECESSITY FOR SUCH AWARD. PRESUMABLY IN RESPONSE TO SUCH REQUEST, SENATE REPORT NO. 571, 80TH CONGRESS, STATES AT PAGE 16 THAT SECTION 3 (B) ALSO PROVIDES FOR SITUATIONS WHERE THE PUBLIC INTEREST DICTATES AN AWARD TO SOMEONE OTHER THAN THE LOWEST RESPONSIBLE BIDDER.

BE THAT AS IT MAY, SECTION 2-406.3 OF THE AIR FORCE PROCUREMENT INSTRUCTIONS, WHICH IMPLEMENTS SECTIONS 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, AS AMENDED (10 U.S.C. 2305), PROVIDES AS FOLLOWS:

(A) (1) THE TERM "PRICE AND OTHER FACTORS CONSIDERED" CONTEMPLATES THAT IN MAKING AN AWARD THE GOVERNMENT WILL CONSIDER NOT ONLY THE PRICES OFFERED BUT ALSO THE ABILITY OF THE BIDDER TO PERFORM (SEE ASPR AND AFPI 2.406.1) AND ANY COST FACTORS WHICH WILL AFFECT THE OVERALL COST TO THE GOVERNMENT. HOWEVER, ACCEPTANCE OF OTHER THAN THE LOWEST BID IS NOT AUTHORIZED SIMPLY BECAUSE THE SUPPLIES OR MATERIALS OFFERED ARE OF A BETTER QUALITY THAN THOSE OFFERED BY THE LOWEST BIDDER SO LONG AS THOSE OFFERED BY THE LOWEST BIDDER MEET THE QUALITY REQUIREMENTS, IF ANY, SPECIFIED IN THE FB.

PARAGRAPH 1-102 OF THE ARMED SERVICES PROCUREMENT REGULATIONS MAKES THIS PROVISION EQUALLY APPLICABLE TO CONTRACTS FOR SERVICES AND IT IS THEREFORE OBVIOUS THAT THE CONTRACTING OFFICER WAS SPECIFICALLY PROHIBITED BY THE AIR FORCE PROCUREMENT REGULATIONS FROM MAKING THE AWARDS IN THE INSTANT CASE TO OTHER THAN THE LOW BIDDER UNLESS HE FIRST DETERMINED THAT THE LOW BIDDER WAS NOT QUALIFIED TO PERFORM THE CONTRACT. IN VIEW OF THE LEGISLATIVE HISTORY CITED ABOVE THE CONCLUSION REACHED IN THE REGULATIONS WOULD APPEAR TO BE A PROPER INTERPRETATION OF THE INTENT OF THE STATUTE. WE SEE NO CONFLICT BETWEEN SUCH PROVISION AND THE CASE OF O-BRIEN V. CARNEY, 6 F.1SUPP. 761, UPON WHICH THE BRIEF SUBMITTED IN SUPPORT OF YOUR CLAIM RELIES, SINCE THAT CASE, IN OUR OPINION, ONLY REITERATES THE ESTABLISHED RULE THAT A CONTRACTING OFFICER MAY REJECT A LOW BID IF SUCH BID IS SUBMITTED BY A BIDDER WHO IS NOT RESPONSIBLE.

CONTRACTING OFFICERS, IN EXERCISING POWERS CONFERRED UPON THEM BY STATUTE OR REGULATION, ARE BOUND TO FOLLOW PRESCRIBED PROCEDURES, AND ACTS OF SUCH OFFICERS IN EXCESS OF AUTHORITY ARE VOID AND DO NOT BIND OR ESTOP THE GOVERNMENT. 43 AM.JUR., PUBLIC OFFICERS, 249, 256; 54 AM. JUR., UNITED STATES, 92; THE FLOYD ACCEPTANCES, 74 U.S. 666; WISCONSIN CENTRAL RAILROAD CO. V. UNITED STATES, 164 U. S. 190; UTAH POWER AND LIGHT CO. V. UNITED STATES, 243 U.S. 389; UNITED STATES V. CITY AND COUNTY OF SAN FRANCISCO, 310 U.S. 16; UNITED STATES V. AMERICAN SALES CORP; 27 F.2D 389; THE GOVERNMENT OF THE VIRGIN ISLANDS V. GORDON AND OTHERS, 244 F.2D 818; WILLIAM H. LENDER V. UNITED STATES, 7 C.1CLS. 530; SCHNEIDER V. UNITED STATES, 19 C.1CLS. 547; BARNES ET AL. V. DISTRICT OF COLUMBIA, 22 C.1CLS. 366; CONSOLIDATED SUPPLY CO. V. UNITED STATES, 59 C.1CLS. 197.

IN VIEW THEREOF, WE MUST CONCLUDE THAT THE ACTIONS OF THE CONTRACTING OFFICER IN AWARDING CONTRACTS NO. AF 21 (602/-296 AND 297 TO YOUR COMPANY WERE VIOLATIONS OF THE PROVISIONS OF 10 U.S.C. 2305 AND OF THE AIR FORCE REGULATIONS ISSUED IN IMPLEMENTATION OF SUCH STATUTE. UNDER THE CIRCUMSTANCES, WE BELIEVE THAT THE CONTRACTS WERE VOID AB INITIO AND, IN THE ABSENCE OF ACTUAL SERVICES RENDERED BY YOUR COMPANY TO THE UNITED STATES, NO LEGAL OBLIGATION WAS IMPOSED UPON THE GOVERNMENT TO REIMBURSE YOUR COMPANY FOR EXPENDITURES INCURRED IN RELIANCE UPON SUCH AWARDS.

ACCORDINGLY, UPON REVIEW, OUR DECISION OF JULY 23, 1957, ADVISING THE SECRETARY OF THE AIR FORCE THAT THE AWARDS TO YOUR COMPANY WERE ILLEGAL AND THAT COSTS INCURRED BY OUR COMPANY IN RELIANCE UPON SUCH AWARDS COULD NOT BE REIMBURSED, IS AFFIRMED. IT FOLLOWS THAT NO GREATER LIABILITY EXISTS FOR PAYMENT OF THAT PORTION OF YOUR CLAIM WHICH IS BASED UPON LOSS OF PROFITS ARISING OUT OF BREACH OF CONTRACT. WE, THEREFORE, ARE OF THE OPINION THAT NO LEGAL OBLIGATION EXISTS ON THE PART OF THE UNITED STATES UPON WHICH ANY PORTION OF YOUR CLAIM MAY BE PAID BY THIS OFFICE.

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