B-145376, AUG. 11, 1961
Highlights
INCORPORATED: REFERENCE IS MADE TO YOUR ATTORNEYS' TELEGRAM OF JUNE 27. WHEREIN IT WAS HELD THAT THERE WAS NO VALID BASIS FOR OBJECTION BY OUR OFFICE TO THE ACTION OF THE WRIGHT-PATTERSON AIR FORCE BASE. THE PERTINENT FACTS WERE SET OUT IN CONSIDERABLE DETAIL IN THE DECISION OF JUNE 21. WERE GIVEN CONSIDERATION IN PREPARING THE DECISION. WE RECOGNIZE "THAT THE AUTHORITY VESTED IN THE CONTRACTING OFFICER TO REJECT ANY OR ALL BIDS AND READVERTISE IS EXTREMELY BROAD AND ORDINARILY SUCH ACTION WILL NOT BE QUESTIONED BY OUR OFFICE.'. THE ACTION OF THE CONTRACTING OFFICER IN CANCELING THE ORIGINAL INVITATION WAS REVERSED FOR THE STATED REASON THAT "THE CONTRACTING OFFICER HAD NO "COGENT REASON" BASED UPON LAW OR REGULATION TO REJECT ALL BIDS.'.
B-145376, AUG. 11, 1961
TO AUDAX, INCORPORATED:
REFERENCE IS MADE TO YOUR ATTORNEYS' TELEGRAM OF JUNE 27, 1961, REQUESTING RECONSIDERATION OF OUR DECISION OF JUNE 21, 1961, WHEREIN IT WAS HELD THAT THERE WAS NO VALID BASIS FOR OBJECTION BY OUR OFFICE TO THE ACTION OF THE WRIGHT-PATTERSON AIR FORCE BASE, DAYTON, OHIO, IN CANCELLING INVITATION FOR BIDS NO. 33-600-61-119 AND SUBSTITUTING THEREFOR INVITATION NO. 33-600-61-164.
THE PERTINENT FACTS WERE SET OUT IN CONSIDERABLE DETAIL IN THE DECISION OF JUNE 21, 1961, AND NEED NOT BE REPEATED HERE. IT MAY BE STATED ALSO THAT ALL OF THE PRECEDENTS AND CONTENTIONS PRESENTED IN YOUR ATTORNEYS' LETTERS OF MARCH 21 AND APRIL 14, 1961, WERE GIVEN CONSIDERATION IN PREPARING THE DECISION.
AS STATED IN 39 COMP. GEN. 396 (REFERRED TO IN YOUR ATTORNEYS' LETTER OF MARCH 21, 1961), WE RECOGNIZE "THAT THE AUTHORITY VESTED IN THE CONTRACTING OFFICER TO REJECT ANY OR ALL BIDS AND READVERTISE IS EXTREMELY BROAD AND ORDINARILY SUCH ACTION WILL NOT BE QUESTIONED BY OUR OFFICE.' IN THAT DECISION, HOWEVER, THE ACTION OF THE CONTRACTING OFFICER IN CANCELING THE ORIGINAL INVITATION WAS REVERSED FOR THE STATED REASON THAT "THE CONTRACTING OFFICER HAD NO "COGENT REASON" BASED UPON LAW OR REGULATION TO REJECT ALL BIDS.' THAT DECISION ILLUSTRATES THE GUIDING PRINCIPLE WHICH IS THE BASIS OF OUR DECISIONS IN ALL SIMILAR CASES AND WHICH WAS STATED AS FOLLOWS BY THE COURT OF CLAIMS IN MASSMAN CONSTRUCTION COMPANY V. UNITED STATES, 102 CT.CL. 699, 719:
"TO HAVE A SET OF BIDS DISCARDED AFTER THEY ARE OPENED AND EACHBIDDER HAS LEARNED HIS COMPETITOR'S PRICE IS A SERIOUS MATTER, AND IT SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS.'
THE SAME PRINCIPLE IS STATED IN ARMED SERVICES PROCUREMENT REGULATION 2- 404.1 IN PART AS FOLLOWS:
"/A) THE PRESERVATION OF THE INTEGRITY OF THE COMPETITIVE BID SYSTEM DICTATES THAT AFTER BIDS HAVE BEEN OPENED, AWARD MUST BE MADE TO THAT RESPONSIBLE BIDDER WHO SUBMITTED THE LOWEST RESPONSIVE BID, UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND CANCEL THE INVITATION. * *
"/B) * * * INVITATIONS FOR BIDS MAY BE CANCELED AFTER OPENING BUT PRIOR TO AWARD WHERE SUCH ACTION IS CONSISTENT WITH (A) ABOVE AND THE CONTRACTING OFFICER DETERMINES IN WRITING THAT---
"/VI) ALL OTHERWISE ACCEPTABLE BIDS RECEIVED ARE AT UNREASONABLE PRICES;
"VIII) FOR OTHER REASONS, CANCELLATION IS CLEARLY IN THE BEST INTEREST OF THE GOVERNMENT.'
THE PRINCIPLE ABOVE SET OUT WAS APPLIED IN ALL OF THE DECISIONS CITED BY YOUR ATTORNEYS, INCLUDING B-145867, JUNE 7, 1961, REFERRED TO BY MR. FISCHMAN IN HIS RECENT TELEPHONE CONVERSATION WITH A REPRESENTATIVE OF OUR OFFICE. IT WAS HELD IN 39 COMP. GEN. 563 THAT THE INITIAL INVITATION SHOULD NOT HAVE BEEN CANCELED, THERE BEING NO SUFFICIENT REASON FOR ITS CANCELLATION. ON THE OTHER HAND, WE OFTEN DIRECT OR APPROVE CANCELLATION OF INVITATIONS IN CASES INVOLVING ,COGENT REASONS" FOR CANCELLATION, SUCH AS B-143711, DECEMBER 22, 1960, AND B-144080, OCTOBER 26, 1960, ALSO REFERRED TO IN YOUR ATTORNEYS' LETTERS.
IN 37 COMP. GEN. 147, IT WAS HELD (QUOTING SYLLABUS):
"THE READVERTISEMENT OF A PROCUREMENT AND WITHDRAWAL OF A SMALL BUSINESS SET-ASIDE AFTER A PLANNED PRODUCER NO LONGER QUALIFIED AS A SMALL BUSINESS AND AN EVALUATION OF BIDS REVEALED A PRICE DIFFERENTIAL OF APPROXIMATELY 10 PERCENT BETWEEN THE LOW SMALL BUSINESS BID AND THE PRICE PAID FOR THE MATERIAL IN PRIOR PROCUREMENTS PLUS ADJUSTMENT FOR CHANGES IN THE MARKET WERE PROPER ACTIONS AND THE FACT THAT THE PRICES IN THE COURTESY BID OF THE FORMER SMALL BUSINESS FIRM WERE NOT REVEALED TO THE BIDDERS UNDER THE FIRST INVITATION DOES NOT AFFORD A BASIS TO VOID AN AWARD UNDER THE READVERTISEMENT.'
IN THAT DECISION IT WAS STATED:
"ONE OF THE FACTORS TO BE CONSIDERED UNDER APP 30-702N (3) IN DETERMINING INITIALLY THAT A SMALL BUSINESS SET-ASIDE SHOULD BE EFFECTED IS WHETHER A SMALL BUSINESS CAN PRODUCE OR FURNISH THE MATERIAL AT COMPETITIVE PRICES. IT IS APPARENT THAT ONE OF THE FACTORS LEADING TO THE CONCLUSION THAT COMPETITIVE PRICES COULD BE OBTAINED WAS THE ASSUMPTION THAT J. S. THORN CONTINUED TO BE A SMALL BUSINESS. SINCE IT WAS SUBSEQUENTLY FOUND THAT THORN WAS NO LONGER A SMALL BUSINESS, THE INITIAL DETERMINATION THAT COMPETITIVE PRICES COULD BE PROCURED CLEARLY APPEARS TO HAVE BEEN BASED ON AN ERRONEOUS ASSUMPTION. WE DEEM THIS TO BE SUFFICIENT TO WARRANT A DETERMINATION, UPON AGREEMENT BETWEEN THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE, THAT THE SET-ASIDE SHOULD BE WITHDRAWN.
"YOU CONTEND THAT THE APP PROVIDES THAT INFORMATION OBTAINED FROM BIDS RECEIVED FROM FIRMS NOT QUALIFIED AS SMALL BUSINESS SHOULD BE USED ONLY IN REGARD TO FUTURE PROCUREMENTS. APP 30-714B PROVIDES IN PART:
" "WHERE BIDS ARE RECEIVED FROM LARGE BUSINESS AT PRICES LOWER THAN THOSE QUOTED BY SMALL BUSINESS, IT MAY BE AN INDICATION THAT SCREENING FOR SUSCEPTIBILITY OF THE PROCUREMENT FROM SMALL BUSINESS WAS NOT AS COMPLETE AS IT SHOULD HAVE BEEN. SUCH BIDS BY LARGE FIRMS WILL BE REGARDED AS COURTESY BIDS AND WILL BE CONSIDERED NONRESPONSIVE. RECORDS OF SUCH LOWER BIDS FROM LARGE BUSINESS SHOULD BE MAINTAINED AT THE PURCHASING OFFICE FOR USE IN DETERMINING THE PROPRIETY OF EXECUTING DETERMINATIONS IN CONNECTION WITH FUTURE PROCUREMENTS OF THE SAME OR SIMILAR ITEMS. ALTHOUGH APP 30- 714A PERMITS WITHDRAWAL OF A DETERMINATION DUE TO UNREASONABLE PRICE, ALL PURCHASING OFFICES SHOULD ONLY ENTER INTO 100-PERCENT DETERMINATION AFTER CAREFUL CONSIDERATION OF ALL THE FACTORS INVOLVED, INCLUDING THE POSSIBILITY OF A BID OR PROPOSAL FROM A LARGE FIRM SUBSTANTIALLY LOWER THAN ANY WHICH COULD BE RECEIVED FROM A SMALL BUSINESS.'
THE PROVISION DOES NOT SPECIFICALLY LIMIT UTILIZATION OF COURTESY BIDS TO FUTURE PROCUREMENTS ONLY, ALTHOUGH IT AFFIRMATIVELY PROVIDES FOR SUCH USE. IN THIS CASE, WHETHER THE THORN BID WAS PROPERLY FOR CONSIDERATION IN DETERMINING TO WITHDRAW THE SET-ASIDE IS MOOT SINCE THERE WERE SUFFICIENT OTHER FACTORS (THE FACT, CONTRARY TO WHAT HAD BEEN SUPPOSED, THAT THORN WAS NOT A SMALL BUSINESS, AND THE DIFFERENCE BETWEEN THE LOW RESPONSIVE BID AND THE PRICE FOR THE MATERIAL IN PRIOR PROCUREMENT PLUS ADJUSTMENT FOR CHANGES IN THE MARKET) TO REASONABLY SUPPORT THE HDRAWAL.'
WE ARE NOT AWARE OF ANY RESTRICTION ON A PROCURING AGENCY AS TO THE FACTORS TO BE CONSIDERED IN DETERMINING WHETHER PRICES QUOTED UNDER A SMALL BUSINESS SET-ASIDE ARE FAIR AND REASONABLE AND WHETHER THE SMALL BUSINESS SET-ASIDE SHOULD BE WITHDRAWN AND THE PROCUREMENT READVERTISED. A ,COURTESY BID" WOULD APPEAR TO BE A FACTOR PROPER FOR CONSIDERATION. CAN HARDLY BE CONTENDED THAT THE PROCURING AGENCY AND THE SMALL BUSINESS ADMINISTRATION ARE WITHOUT AUTHORITY TO REVISE THEIR ORIGINAL DETERMINATION AND WITHDRAW A SMALL BUSINESS SET-ASIDE FOR APPROPRIATE REASONS. NEITHER IS THERE PERCEIVED ANY SOUND BASIS FOR THE VIEW THAT THE CONGRESS INTENDED THAT CONTRACTS BE AWARDED TO SMALL BUSINESS FIRMS REGARDLESS OF THE REASONABLENESS OF THE PRICES OFFERED.
IN THE INSTANT MATTER, AS IN 37 COMP. GEN. 147 ABOVE REFERRED TO, THE SUCCESSFUL BIDDER UNDER THE READVERTISEMENT WAS A SMALL BUSINESS CONCERN. AS STATED IN OUR DECISION OF JUNE 21, 1961, THE LOWEST RESPONSIVE BID (YOUR BID) UNDER THE FIRST INVITATION WAS APPROXIMATELY 47 PERCENT HIGHER THAN THE LOWEST BID UNDER THE NEW INVITATION. THE WITHDRAWAL OF THE SMALL BUSINESS SET-ASIDE WAS MADE BY THE CONTRACTING OFFICER WITH THE CONCURRENCE OF THE SMALL BUSINESS ADMINISTRATION FOR REASONS WHICH APPEAR TO BE AMPLY VINDICATED BY THE RESULTS OF THE READVERTISEMENT, SERVING THE BEST INTEREST OF THE GOVERNMENT.
WITH RESPECT TO THE INSPECTION ALLEGED TO HAVE BEEN MADE AS TO YOUR CAPABILITY TO PERFORM IF AWARD WERE MADE TO YOU, IT MAY BE STATED THAT PROCUREMENT AGENCIES FREQUENTLY CONDUCT SUCH PREAWARD SURVEYS OF ONE OR MORE BIDDERS WHILE BIDS ARE BEING EVALUATED AND CONSIDERED FOR AWARD.
THE RECORD INDICATES THAT THE ACTIONS OF THE ADMINISTRATIVE OFFICE IN THIS MATTER WERE TAKEN IN GOOD FAITH IN ACCORDANCE WITH THE APPLICABLE REGULATIONS AND WERE BENEFICIAL TO THE UNITED STATES. ACCORDINGLY, OUR DECISION OF JUNE 21, 1961, APPEARS CORRECT AND IS HEREBY AFFIRMED.