B-161801, NOV. 27, 1967

B-161801, NOV. 27, 1967

CONTRACTS - AWARDS - ERRONEOUS REQUEST BY NATIONAL INDUSTRIES, INC., THAT UNDELIVERED PORTION OF DSA CONTRACT WHICH WAS ERRONEOUSLY AWARDED TO ORTHOPEDIC EQUIPMENT CO. ON BASIS OF NONRESPONSIVE BID SHOULD BE AWARDED TO IMPROPERLY DENIED BIDDER OR THAT SUCH BIDDER SHOULD BE REIMBURSED FOR LOSS. ALTHOUGH AWARD WAS MADE ON BASIS OF AN ERRONEOUS INTERPRETATION OF THE GUARANTEED SHIPPING DATA CLAUSE, THERE IS NOTHING TO INDICATE THAT CONTRACTING OFFICER ACTED OTHER THAN IN GOOD FAITH, THEREFORE, ALTHOUGH NO DELIVERIES HAVE BEEN MADE, THE CONTRACTOR HAS INCURRED SUBSTANTIAL COSTS TOWARDS PERFORMANCE CONSEQUENTLY UNSUCCESSFUL BIDDER'S CLAIM FOR LOSS MUST BE DENIED. SEE DEC. OF SEPT. 6, 1967.

TO MR. KARL W. FLOCKS:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 11, 1967, REQUESTING ON BEHALF OF NATIONAL INDUSTRIES, INC. RECONSIDERATION OF OUR DECISION OF SEPTEMBER 6, 1967, B-161801, TO THE DIRECTOR, DEFENSE SUPPLY AGENCY. THE DECISION RESULTED FROM THE PROTEST OF NATIONAL INDUSTRIES AGAINST THE ACTION OF THE DIRECTORATE OF PROCUREMENT AND PRODUCTION, DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA, IN AWARDING A CONTRACT TO ORTHOPEDIC EQUIPMENT COMPANY, INC., UNDER INVITATION FOR BIDS NO. DSA- 400-67-B-6040.

IN THE DECISION OF SEPTEMBER 6, 1967, WE HELD THAT THE BID OF ORTHOPEDIC EQUIPMENT COMPANY, INC. WAS NONRESPONSIVE TO THE TERMS OF THE INVITATION FOR BIDS AND, THEREFORE, A CONTRACT SHOULD NOT HAVE BEEN AWARDED TO THAT CORPORATION. WE STATED THEREIN, HOWEVER, THAT HAVING REGARD FOR THE ADVANCED STAGE OF THE DELIVERY SCHEDULE, IT DID NOT APPEAR TO BE IN THE GOVERNMENT'S INTEREST TO CANCEL THE CONTRACT AT THIS TIME. THE FOREGOING STATEMENT WAS BASED ON THE DELIVERY SCHEDULE SPECIFIED IN THE INVITATION FOR BIDS.

ON SEPTEMBER 15, 1967, A CONFERENCE WAS HELD BY OFFICIALS OF OUR OFFICE WITH MR. ALVIN BROWDY OF YOUR OFFICE AND MR. PADEN, MANUFACTURER'S REPRESENTATIVE FOR NATIONAL INDUSTRIES, INC. AT THE CONFERENCE MR. BROWDY INFORMED US THAT IT WAS HIS UNDERSTANDING THAT AS OF THAT DATE ORTHOPEDIC EQUIPMENT COMPANY, INC. HAD NOT MADE ANY DELIVERIES UNDER THE CONTRACT. MR. BROWDY STATED THAT IN VIEW OF OUR STATEMENT THAT THE CONTRACT SHOULD NOT HAVE BEEN AWARDED TO ORTHOPEDIC AND THE ACTUAL STATUS OF DELIVERIES UNDER THE CONTRACT, OUR OFFICE SHOULD NOW DIRECT CANCELLATION OF THE UNDELIVERED PORTION OF THE CONTRACT. IN YOUR LETTER OF SEPTEMBER 11, 1967, YOU REQUESTED THAT THE UNSHIPPED PORTION OF THE CONTRACT, PARTICULARLY ITEM 34, BE CANCELED AND THAT SUCH ITEM BE AWARDED TO NATIONAL INDUSTRIES, INC.

IN VIEW OF MR. BROWDY'S STATEMENT AS TO THE STATUS OF DELIVERIES MADE BY ORTHOPEDIC UNDER THE CONTRACT INVOLVED, OUR OFFICE REQUESTED A REPORT FROM THE DEFENSE SUPPLY AGENCY IN REGARD THERETO. IN A LETTER DATED OCTOBER 13, 1967, THE DEFENSE SUPPLY AGENCY ADVISED OUR OFFICE THAT NO DELIVERIES HAVE BEEN MADE BY ORTHOPEDIC UNDER THE CONTRACT INVOLVED. IN A REPORT OF SEPTEMBER 26, 1967, ACCOMPANYING THE OCTOBER 13 LETTER, THE CONTRACTING OFFICER STATES THAT ORTHOPEDIC HAS INCURRED COSTS AND COMMITMENTS OF APPROXIMATELY $1,662,281.88. ORTHOPEDIC HAS SUBMITTED AN ITEMIZED STATEMENT WHICH INDICATES THAT THE AMOUNT OF $1,662,281.88 CONSISTS OF $1,440,629.83 FOR RAW MATERIALS AND $221,652.05 FOR MACHINERY AND TOOLING. IN ITS SUMMARY OF COMMITMENTS AND COSTS INCURRED BY IT, ORTHOPEDIC HAS STATED THAT IN ADDITION TO THE AMOUNT OF $1,662,281.88, IT HAS ESTIMATED THE PROPRODUCTION COSTS ALLOCABLE TO THE SUBJECT CONTRACT TO BE BETWEEN $500,000 AND $600,000.

IN VIEW OF THE SUBSTANTIAL COSTS INCURRED BY ORTHOPEDIC AND THE FACT THAT THERE IS NO INDICATION THAT THE CONTRACTING OFFICER DID NOT ACT IN GOOD FAITH, WE DO NOT BELIEVE THAT IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO CANCEL THE CONTRACT WITH ORTHOPEDIC.

YOU STATE THAT AS A RESULT OF THE FAILURE OF THE GOVERNMENT TO AWARD THIS CONTRACT TO NATIONAL INDUSTRIES, INC. IT HAS SUSTAINED A LOSS IN THE FORM OF UNABSORBED OVERHEAD, EXCESS RENTALS OF THE JOHNSTOWN PLANT, RENTAL OF THE MARTINSVILLE PLANT, INCLUDING INSTALLATION OF CONVEYOR AND START-UP COSTS AND LOSS OF PROFITS AMOUNTING TO OVER $500,000. YOU REQUEST THAT, IF THE UNDELIVERED PORTION OF THE ORTHOPEDIC CONTRACT IS NOT CANCELED AND AWARDED TO NATIONAL INDUSTRIES, INC. IT BE REIMBURSED FOR THE LOSS SUSTAINED AS THE RESULT OF THE IMPROPER AWARD OF THE CONTRACT TO ORTHOPEDIC.

WHILE THE RECORD SHOWS THAT THE CONTRACTING OFFICER ERRONEOUSLY INTERPRETED THE ENTRIES MADE BY ORTHOPEDIC UNDER THE GUARANTEED SHIPPING DATA CLAUSE IN ITS BID, THERE IS NOTHING IN THE RECORD BEFORE US TO INDICATE THAT HE ACTED OTHER THAN IN GOOD FAITH. IN HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 135 CT. CL. 63, WHERE AN UNSUCCESSFUL BIDDER CLAIMED BOTH LOSS OF PROFIT AND COSTS INCURRED IN PREPARING A BID THE COURT HELD:

"NOT EVERY UNSUCCESSFUL BIDDER IS ENTITLED TO RECOVER THE COST OF PUTTING IN HIS BID. RECOVERY CAN BE HAD IN ONLY THESE CASES WHERE IT CAN BE SHOWN BY CLEAR AND CONVINCING PROOF THAT THERE HAS BEEN A FRAUDULENT INDUCEMENT FOR BIDS, WITH THE INTENTION, BEFORE THE BIDS WERE INVITED OR LATER RECEIVED, TO DISREGARD THEM ALL EXCEPT THE ONES FROM BIDDERS TO ONE OF WHOM IT WAS INTENDED TO LET THE CONTRACT, WHETHER HE WAS THE LOWEST RESPONSIBLE BIDDER OR NOT. IT MUST BE SHOWN THAT BIDS WERE NOT INVITED IN GOOD FAITH, BUT AS A PRETENSE TO CONCEAL THE PURPOSE TO LET THE CONTRACT TO SOME FAVORED BIDDER, AND WITH THE INTENT TO WILFULLY, CAPRICIOUSLY, AND ARBITRARILY DISREGARD THE OBLIGATION TO LET THE CONTRACT TO HIM WHOSE BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.' THE COURT HELD FURTHER THAT THE UNSUCCESSFUL BIDDER WAS NOT ENTITLED TO RECOVER ANTICIPATED PROFITS BECAUSE IT HAD NO CONTRACT. ALSO, SEE HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 147 CT. CL. 256; GREEN MANOR CONSTRUCTION CO., INC. V. UNITED STATES, 169 CT. CL. 413; KECO INDUSTRIES, INC. V. UNITED STATES, 149 CT. CL. 837, CERTIORARI DENIED 365 U.S. 815; PERKINS V. LUKENS STEEL COMPANY, 310 U.S. 113; AND ROBERT F. SIMMONS AND ASSOCIATES V. UNITED STATES, 175 CT. CL. 510, 360 F.2D 962.

ACCORDINGLY, IN THE CIRCUMSTANCES, THE CLAIM FOR $500,000 FOR LOSSES MUST BE DENIED.