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B-156461, AUG. 11, 1965

B-156461 Aug 11, 1965
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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED JUNE 20. A COPY OF THIS LETTER WAS FORWARDED HERE BY THE STEVENS COMPANY. THE CIRCUMSTANCES GIVING RISE TO THE PRESENT STEVENS COMPANY LETTER ARE SET FORTH IN OUR DECISION OF JUNE 14. ARE BRIEFLY STATED HERE. THE SUBJECT INVITATION WAS ISSUED BY THE ARMY TANK- AUTOMOTIVE CENTER (ATAC). UNDER THE TERMS OF THE INVITATION BIDDERS WERE INVITED TO SUBMIT BIDS FOR THE PRODUCTION OF 5. 219 TRAILERS WAS SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS. CALIFORNIA ELECTRICAL MANUFACTURING AND SERVICE COMPANY (DIVISION OF THE ETS-HOKIN CORPORATION) (CEMSCO) WAS LOW BIDDER ON THE NON-SET ASIDE PORTION OF THE INVITATION BUT DID NOT QUALIFY AS A LABOR SURPLUS CONCERN FOR THE SET-ASIDE PORTION.

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B-156461, AUG. 11, 1965

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED JUNE 20, 1965, ADDRESSED TO THE PROCUREMENT AND PRODUCTION DIRECTORATE, UNITED STATES ARMY TANK AUTOMOTIVE CENTER, WARREN, MICHIGAN, BY THE STEVENS MANUFACTURING COMPANY, CONCERNING INVITATION FOR BIDS NO. AMC-20-113-65-1553 (T) AND CONTRACT NO. DA-20-113- AMC-05716 (T). A COPY OF THIS LETTER WAS FORWARDED HERE BY THE STEVENS COMPANY.

THE CIRCUMSTANCES GIVING RISE TO THE PRESENT STEVENS COMPANY LETTER ARE SET FORTH IN OUR DECISION OF JUNE 14, 1965, B-156461, AND ARE BRIEFLY STATED HERE. THE SUBJECT INVITATION WAS ISSUED BY THE ARMY TANK- AUTOMOTIVE CENTER (ATAC). UNDER THE TERMS OF THE INVITATION BIDDERS WERE INVITED TO SUBMIT BIDS FOR THE PRODUCTION OF 5,220TWO WHEEL, ONE-QUARTER TON, M416 TRAILERS. AN ADDITIONAL QUANTITY OF 5,219 TRAILERS WAS SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS. CALIFORNIA ELECTRICAL MANUFACTURING AND SERVICE COMPANY (DIVISION OF THE ETS-HOKIN CORPORATION) (CEMSCO) WAS LOW BIDDER ON THE NON-SET ASIDE PORTION OF THE INVITATION BUT DID NOT QUALIFY AS A LABOR SURPLUS CONCERN FOR THE SET-ASIDE PORTION. THE STEVENS COMPANY WAS SECOND LOW ON THE NON-SET-ASIDE PORTION AND QUALIFIED AS A LABOR SURPLUS CONCERN FOR THE SET-ASIDE PORTION. AFTER AN EXCHANGE OF CORRESPONDENCE AND DISCUSSION, ATAC DETERMINED THAT CEMSCO'S BID WAS NON-RESPONSIVE AND COULD NOT BE CONSIDERED FOR AWARD. ATAC THEN MADE AWARD TO STEVENS FOR THE NON-SET-ASIDE AND THE SET-ASIDE PORTIONS AND ENTERED INTO THE ABOVE-CITED CONTRACT. CEMSCO PROTESTED THE AWARD OF A CONTRACT TO STEVENS, AND IN OUR DECISION OF JUNE 14, 1965, B-156461, WE SUSTAINED THE PROTEST AND DETERMINED THAT THE AWARD OF THE NON-SET-ASIDE PROCUREMENT SHOULD HAVE BEEN MADE TO CEMSCO. UPON BEING ADVISED OF OUR DECISION STEVENS PROTESTED THE DETERMINATION. IT NOW APPEARS THAT THE ARMY INQUIRED OF THE STEVENS COMPANY IF IT WOULD REDUCE ITS BID PRICE ON THE SET-ASIDE PORTION OF THE PROCUREMENT TO EQUAL THAT OF CEMSCO ON THE NON-SET-ASIDE PORTION. IN REPLY THERETO (LETTER DATED JUNE 29, 1965), STEVENS STATED AS FOLLOWS:

"IN THE BEST INTERESTS OF THE GOVERNMENT, AND IN ALL FAIRNESS TO ALL PARTIES CONCERNED, TO FULFILL THE MORAL OBLIGATIONS AND DEFINITIVE COMMITMENTS ALREADY MADE; THE FOLLOWING ACTION IS PROPOSED BY STEVENS MFG. COMPANY.

"WHEREAS, THERE EXISTS A CONTRACT REFERENCE "/B)" ABOVE (UNDER WHICH WE HAVE INCURRED COSTS), AND A PROTEST HAS BEEN MADE WHICH PLACED STEVENS MFG. COMPANY IN THE POSITION OF THE INNOCENT VICTIM; WE WOULD ACCEPT AS AGREEABLE TO STEVENS MFG. COMPANY APPROPRIATE ACTION TO DELETE FROM THE REFERENCED CONTRACT THE NON-SET-ASIDE PORTION OF THE INVITATION FOR BID REFERENCED "/A)" ABOVE.

"THIS WOULD REDUCE THE CONTRACT PRICE FROM $2,835,865.08 TO $1,415,809.92.

"FURTHER, IF THE PROTESTANT REFUSES THE NON-SET-ASIDE PORTION, WE WOULD CONSIDER THIS PORTION AS ACCEPTABLE ALSO.

"THIS ACTION, IF ACCEPTABLE TO THE GOVERNMENT, WOULD CANCEL OUR INTENT AS STATED IN STEVENS MFG. COMPANY TELEGRAM REFERENCE "/C)" ABOVE.'

IT APPEARS FROM OUR FILES THAT STEVENS ASSERTS THAT IT HAS ALREADY EXPENDED BETWEEN $150,000 AND $200,000 IN COSTS UNDER THE CONTRACT WHICH IT HAD BEEN AWARDED AND LATER CANCELLED PURSUANT TO OUR DECISION.

THE SOLE QUESTION CONSIDERED HERE IS WHETHER STEVENS IS REQUIRED TO REDUCE ITS BID PRICE PER UNIT ON THE SET-ASIDE TO EQUAL THAT OF CEMSCO ON THE NON-SET-ASIDE IN ORDER TO RETAIN THE RIGHT TO PERFORM.

AT THE TIME THAT AWARD WAS MADE TO STEVENS AND ON EXECUTION OF THE CONTRACT, STEVENS HAD NO REASON TO BELIEVE THAT IT DID NOT HAVE A VALID AND SUBSISTING CONTRACT AS TO BOTH PORTIONS, NOR DID THE CONTRACTING OFFICER BELIEVE OTHERWISE THAN THAT STEVENS WAS THE LOW RESPONSIBLE BIDDER.

SINCE THE BID OF THE STEVENS COMPANY CONFORMED TO THE INVITATION AND WAS OTHERWISE PROPER IN ALL RESPECTS, IT SEEMS BEYOND QUESTION THAT THE AWARD OF THE SET-ASIDE PORTION, WHICH WAS MADE UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (1) BROUGHT INTO EXISTENCE A VALID OBLIGATION BINDING ON THE PARTIES. CANCELLATION OF THE SET-ASIDE PORTION OF THE CONTRACT WOULD MAKE THE GOVERNMENT LIABLE FOR AT LEAST REIMBURSEMENT OF THE CONTRACTOR'S OUT- OF-POCKET EXPENDITURES. STEVENS' OFFER TO WITHDRAW ITS PROTEST AGAINST AWARD OF THE NON-SET-ASIDE PORTION TO CEMSCO, UPON BEING PERMITTED TO CONTINUE UNDER ITS APPARENTLY VALID CONTRACT FOR THE THE MONETARY ADVANTAGE OF THE GOVERNMENT. UPON CONSIDERATION OF ALL SET-ASIDE, APPEARS TO BE AN EQUITABLE SOLUTION TO THE MATTER, AND TO THE FACTS AND CIRCUMSTANCES IN THIS CASE, WE BELIEVE THAT IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO ALLOW THE CONTRACT FOR THE SET-ASIDE WITH THE STEVENS COMPANY TO STAND.

WE ARE NOT UNMINDFUL OF THE PROVISO IN SECTION 523 OF PUBLIC LAW 88 446 AGAINST PAYMENT OF PRICE DIFFERENTIAL, WHERE CONTRACTS ARE MADE FOR THE PURPOSE OF RELIEVING ECONOMIC DISLOCATIONS. HOWEVER, WE DO NOT BELIEVE THE SET-ASIDE CONTRACT WITH STEVENS CAN BE SAID TO HAVE BEEN MADE "FOR THE PURPOSE" OF RELIEVING ECONOMIC DISLOCATION. AT THE TIME OF AWARD STEVENS WAS THE APPARENT LOW BIDDER AND THERE THUS WAS NO PRICE DIFFERENTIAL INVOLVED. THE CONTRACT FOR THE SET-ASIDE WAS AND IS LEGALLY ENFORCEABLE BY STEVENS AT THE PRICES STATED THEREIN. THE FACT THAT SUBSEQUENT CONSIDERATION BY OUR OFFICE RESULTED IN CANCELLATION OF THE NON-SET-ASIDE PORTION OF THE CONTRACT AND ITS AWARD AT PRICES LOWER THAN STEVENS' PRICES SHOULD NOT, IN OUR OPINION, OPERATE RETROACTIVELY TO MAKE IMPROPER AN ACTION WHICH WAS CLEARLY NOT IMPROPER WHEN TAKEN. WE THEREFORE SEE NO NECESSITY FOR REDUCING STEVENS' CONTRACT PRICES ON THE SET-ASIDE.

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