A-39095, DECEMBER 10, 1931, 11 COMP. GEN. 220

A-39095: Dec 10, 1931

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THE ACCEPTANCE OF A BID BASED ON PLANS AND SPECIFICATIONS DRAFTED BY A BIDDER IS NOT A COMPLIANCE WITH SECTION 3709. WHERE THE WORK TO BE PERFORMED FOR THE GOVERNMENT IS OF SUCH A TECHNICAL CHARACTER THAT OUTSIDE ASSISTANCE IS DESIRABLE. 1931: THERE WAS RECEIVED IN RESPONSE TO MY LETTER OF OCTOBER 19. TO THE PROTESTING BIDDER WHEREIN IT WAS URGED. THAT THE ACTION TAKEN WAS THE MOST ADVANTAGEOUS TO THE UNITED STATES. SPECIFYING ON PAGE 2 THEREOF THE GENERAL CHARACTERISTICS OF THE VESSELS IT WAS DESIRED TO HAVE CONSTRUCTED. WAS DESIGNATED AS CLASS I. WHILE THE ALTERNATE DESIGNS WHICH BIDDERS WERE REQUESTED TO SUBMIT WERE DESIGNATED CLASS II. THERE WERE RECEIVED A NUMBER OF PROPOSALS UNDER BOTH CLASS I AND CLASS II.

A-39095, DECEMBER 10, 1931, 11 COMP. GEN. 220

CONTRACTS - SPECIFICATIONS - ALTERNATE WHERE THE GOVERNMENT ADVERTISED FOR BIDS BASED ON PLANS AND SPECIFICATIONS DRAFTED BY IT WITH NOTIFICATION TO BIDDERS THAT THEY MAY SUBMIT BIDS BASED ON PLANS AND SPECIFICATIONS DRAFTED BY THEMSELVES, THE ACCEPTANCE OF A BID BASED ON PLANS AND SPECIFICATIONS DRAFTED BY A BIDDER IS NOT A COMPLIANCE WITH SECTION 3709, REVISED STATUTES. WHERE THE WORK TO BE PERFORMED FOR THE GOVERNMENT IS OF SUCH A TECHNICAL CHARACTER THAT OUTSIDE ASSISTANCE IS DESIRABLE, SUCH ASSISTANCE SHOULD BE SECURED IN THE MATTER OF DESIGNS AND SPECIFICATIONS WHICH MAY THEREAFTER BE MODIFIED AND ADOPTED AND ISSUED BY THE GOVERNMENT AS A BASIS OF COMPETITION FOR THE PERFORMANCE OF THE WORK IN QUESTION.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF THE NAVY, DECEMBER 10, 1931:

THERE WAS RECEIVED IN RESPONSE TO MY LETTER OF OCTOBER 19, 1931, FORWARDING FOR YOUR INFORMATION PHOTOSTATIC COPIES OF LETTERS DATED OCTOBER 13 AND 14, 1931, FROM THE UNITED DRY DOCKS (INC.) , PROTESTING AGAINST YOUR ACTION IN REJECTING ITS PROPOSAL FOR THE CONSTRUCTION OF TORPEDO-BOAT DESTROYERS, YOUR LETTER OF OCTOBER 26, 1931, TRANSMITTING A COPY OF YOUR LETTER OF OCTOBER 12, 1931, TO THE PROTESTING BIDDER WHEREIN IT WAS URGED, IN SUBSTANCE, THAT THE ACTION TAKEN WAS THE MOST ADVANTAGEOUS TO THE UNITED STATES.

IT APPEARS THAT ON JULY 15, 1930, THE NAVY DEPARTMENT ADVERTISED FOR PROPOSALS FOR CONSTRUCTING CERTAIN TORPEDO-BOAT DESTROYERS, SPECIFYING ON PAGE 2 THEREOF THE GENERAL CHARACTERISTICS OF THE VESSELS IT WAS DESIRED TO HAVE CONSTRUCTED. UNDER DATES OF JULY 31, 1931, AND AUGUST 6, 1931, THE SECRETARY OF THE NAVY INFORMED THE COMPANIES TO WHICH HAD BEEN SENT THE ORIGINAL SPECIFICATIONS, THAT THE NAVY DEPARTMENT HAD REACHED THE DECISION TO PERMIT ALTERNATE BIDS TO BE SUBMITTED UPON THE BIDDER'S DESIGNS OF HULLS, BOILERS, AND MACHINERY, AND THAT AT AN EARLY DATE THERE WOULD BE FORWARDED A REVISED FORM OF PROPOSAL, A SUPPLEMENT TO THE INVITATION FOR BIDS, AND A STATEMENT OF THE CHANGES TO BE MADE IN THE FORM OF CONTRACT IN THE EVENT OF CONTRACT BEING AWARDED ON THE BASIS OF AN ALTERNATE PROPOSAL.

THE NAVY DEPARTMENT'S OWN DESIGN OF THE VESSELS COVERED BY THE ADVERTISEMENT OF JULY 15, 1931, WAS DESIGNATED AS CLASS I, WHILE THE ALTERNATE DESIGNS WHICH BIDDERS WERE REQUESTED TO SUBMIT WERE DESIGNATED CLASS II. THERE WERE RECEIVED A NUMBER OF PROPOSALS UNDER BOTH CLASS I AND CLASS II, THE BID OF THE BATH IRON WORKS UNDER CLASS I BEING $2,626,000; THAT OF THE UNITED DRY DOCKS (INC.), $2,645,000; AND THAT OF THE BETHLEHEM SHIPBUILDING CORPORATION $2,928,500. THESE THREE COMPANIES AND A NUMBER OF OTHERS ALSO SUBMITTED BIDS UNDER CLASS II, BASED ON THEIR OWN DESIGNS; THAT OF THE BATH IRON WORKS BEING $3,166,000; THAT OF THE BETHLEHEM SHIPBUILDING CORPORATION, $3,070,000; AND THAT OF THE UNITED DRY DOCKS, $3,720,000. AS STATED IN YOUR LETTER OF OCTOBER 12, 1931, THE ADVERTISED SPECIFICATIONS PROVIDED THAT: INVITATION FOR BIDS:

PAGE 2. SPECIFICATIONS, PLANS, ETC.--- UNDER CLASS II ALL BIDS MUST BE ACCOMPANIED BY DETAIL PLANS AND SPECIFICATIONS COVERING FULLY THE DESIGN OF HULL, BOILERS, AND MACHINERY SUBMITTED, WITH FULL DESCRIPTION OF ALL AUXILIARY MACHINERY, FITTINGS, APPURTENANCES, AND SPECIAL FEATURES, IN ORDER THAT THE DEPARTMENT MAY HAVE BEFORE IT DEFINITE INFORMATION UPON WHICH TO BASE ITS DECISION AS TO THE RELATIVE MERITS OF THE VARIOUS DESIGNS OF TORPEDO-BOAT DESTROYERS PROPOSED, AND TO DETERMINE WHETHER THEY PROVIDE THE TYPE OF VESSELS CONTEMPLATED BY THE DEPARTMENT AND FULFILL THE CHARACTERISTICS HEREINAFTER MENTIONED.

PAGE 3. EVALUATION OF BIDS.--- IN COMPARING BIDS FOR THE PURPOSE OF MAKING THE AWARD, THE BIDS WILL BE EVALUATED ON THE BASIS OF THE PENALTIES AND PREMIUMS PROVIDED IN THE FORM OF CONTRACT, BUT THIS DOES NOT AFFECT THE RIGHT OF THE DEPARTMENT TO REJECT ANY BID NOT CONSIDERED ADVANTAGEOUS TO THE GOVERNMENT.

PAGE 4. THE RIGHT IS RESERVED, AS THE INTEREST OF THE GOVERNMENT MAY REQUIRE, TO REJECT ANY AND ALL BIDS, TO WAIVE ANY INFORMALITY IN BIDS RECEIVED, AND TO ACCEPT OR REJECT ANY ITEMS OF ANY BID, UNLESS SUCH BID IS QUALIFIED BY SPECIFIC LIMITATION. INSTRUCTIONS TO BIDDERS:

PAGE 3, PARAGRAPH 16. AWARD OR REJECTION OF BIDS.--- THE CONTRACT WILL BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER COMPLYING WITH CONDITIONS OF THE INVITATION FOR BIDS, PROVIDED HIS BID IS REASONABLE AND IT IS TO THE INTEREST OF THE UNITED STATES TO ACCEPT IT. THE BIDDER TO WHOM THE AWARD IS MADE WILL BE NOTIFIED AT THE EARLIEST POSSIBLE DATE. THE UNITED STATES, HOWEVER, RESERVES THE RIGHT TO REJECT ANY AND ALL BIDS AND TO WAIVE ANY INFORMALITY IN BIDS RECEIVED WHENEVER SUCH REJECTION OR WAIVER IS IN THE INTEREST OF THE UNITED STATES. IT ALSO RESERVES THE RIGHT TO REJECT THE BID OF A BIDDER WHO HAS PREVIOUSLY FAILED TO PERFORM PROPERLY OR COMPLETE ON TIME CONTRACTS OF A SIMILAR NATURE, OR A BID OF A BIDDER WHO IS NOT IN A POSITION TO PERFORM THE CONTRACT.

IT IS REPORTED THE DESIGN SUBMITTED BY THE BETHLEHEM SHIPBUILDING CORPORATION UNDER CLASS II WAS SO SUPERIOR TO THE NAVY DEPARTMENT'S OWN DESIGN UNDER CLASS I AND THE DESIGNS SUBMITTED BY THE OTHER BIDDERS THAT IT WAS CONCLUDED TO ACCEPT THE ALTERNATE BID OF THE BETHLEHEM SHIPBUILDING CORPORATION UNDER CLASS II FOR CONSTRUCTION OF ONE OF THE VESSELS, TO HAVE TWO VESSELS CONSTRUCTED IN ACCORDANCE WITH SAID DESIGN AT TWO OF THE NAVY YARDS, AND TO AWARD A CONTRACT UNDER THE NAVY DEPARTMENT'S OWN DESIGN TO THE BATH CO. FOR THE FOURTH VESSEL. THIS ACTION HAS LED TO A PROTEST BY THE UNITED DRY DOCKS (INC.), WHICH WAS BROUGHT TO YOUR ATTENTION IN MY LETTER OF OCTOBER 19, 1931, AND WHICH HAD THERETOFORE BEEN SUBMITTED TO THE NAVY DEPARTMENT AND DISCUSSED IN YOUR LETTER OF OCTOBER 12, 1931.

THE BASIS OF THE PROTEST HAS BEEN SUMMARIZED BY THE UNITED DRY DOCKS (INC.), IN ITS LETTER OF OCTOBER 14, 1931, AS FOLLOWS:

(1) CAN THE NAVY DEPARTMENT CALL FOR "COMPETITIVE BIDS" WHERE DIFFERENT BIDDERS ARE NOT BIDDING ON THE SAME THING AND WHERE THE FINAL AWARD OF CONTRACT IS NOT UPON A DEFINITE MONEY VALUE BUT IS DEPENDENT ON THE JUDGMENT OF OFFICERS IN THE DEPARTMENT AS TO THE RELATIVE MERITS OF MORE OR LESS INTANGIBLE PROPERTIES IN DIFFERENT DESIGNS; AND

(2) IF SUCH BIDDING IS PERMISSIBLE AND IF THE DEPARTMENT INSTRUCTS BIDDERS AS TO THE METHOD OF EVALUATING THEIR BIDS ON A MONEY BASIS, CAN IT THEREAFTER DEPART FROM THE PRINCIPLES THAT IT ESTABLISHES FOR SUCH EVALUATION AND AWARD A CONTRACT ON THE BASIS OF OTHER INTANGIBLE BENEFITS ACCRUING FROM ONE DESIGN AS AGAINST ANOTHER?

ATTENTION IN THIS CONNECTION IS INVITED TO HANNAN V. BOARD OF EDUCATION, 30 L.R.A., N.S. 214, 231, WHERE THE COURT DECLARED INVALID A CONTRACT WHICH HAD BEEN LET ON THE BASIS OF THE PRINCIPAL DESIGNS BEING SUBMITTED BY THE BIDDERS. THE COURT IN THE COURSE OF ITS OPINION REFERRED TO A NUMBER OF CASES AND THERE HAS BEEN COLLECTED IN A NOTE TO THE DECISION A NUMBER OF OTHER CASES WHICH ARE GENERALLY TO THE EFFECT THAT UNDER A LAW REQUIRING ADVERTISEMENT FOR BIDS AND THE LETTING OF CONTRACTS TO THE LOWEST RESPONSIBLE BIDDERS, THERE MUST BE OFFERED TO ALL BIDDERS A DEFINITE BASIS FOR COMPETITION. THE COURT REFERRED TO A CITED WISCONSIN CASE WHERE THE SUPREME COURT OF THAT STATE HAD HELD THAT SUCH SPECIFICATIONS REQUIRED "A PLUNGE IN THE DARK" AND IT WAS STATED IN THE HANNAN CASE THAT PUBLIC CONTRACTING MUST BE ON THE BASIS OF DEFINITE SPECIFICATIONS OFFERED TO ALL BIDDERS, THE CONTRACT AWARDED TO THE LOWEST RESPONSIBLE BIDDER, AND THAT:

* * * THE BOARDS AND PUBLIC AGENCIES INTRUSTED WITH THE IMPORTANT AND RESPONSIBLE DUTIES OF SELECTING THE MATERIALS, DECIDING UPON THE CHARACTER OF THE WORK, LETTING THE CONTRACTS, AND SPENDING THIS MONEY, SHOULD BE SURROUNDED BY EVERY REASONABLE SAFEGUARD POSSIBLE. THIS SHOULD BE DONE NOT ONLY FOR THE SAFETY OF THE FUNDS AND THE PUBLIC WELFARE, BUT FOR THEIR OWN PROTECTION. THEY ARE SELDOM ENGAGED BECAUSE OF ANY PECULIAR TRAINING OR FITNESS THEY POSSESS OVER THAT COMMON TO ALL, AND THEIR COMPENSATION IS FREQUENTLY WHOLLY INADEQUATE TO COVER THE TIME AND ENERGY THEY ARE REQUIRED TO BRING TO THEIR LABOR. UNDER THESE CIRCUMSTANCES A REQUIREMENT THAT SHALL FIX IN ADVANCE UPON CERTAIN DEFINITE PLANS AND SPECIFICATIONS OR PROPOSITIONS TO BE CONSIDERED, AND THEN SUBMIT THESE FOR OPEN COMPETITION UPON SEALED PROPOSALS, THE CONTRACT THEN TO BE AWARDED IN AN IMPARTIAL WAY TO THE LOWEST RESPONSIBLE BIDDER, WILL TEND TO REMOVE THEM FROM TEMPTATION AND OPPORTUNITY FOR FRAUD OR FAVORITISM. IT WILL DO MORE; IT WILL MATERIALLY ASSIST IN REMOVING SUSPICION OF UNFAIRNESS AND FAVORITISM, AND RELIEVE HONEST MEN UPON WHOM THESE DUTIES DEVOLVE OF UNJUST CHARGES.

A CAREFUL STUDY OF THE SPECIFICATIONS IN THIS CASE, THE APPLICABLE DECISIONS OF THE COURTS, AS WELL AS THE PURPOSES TO BE SERVED BY SECTION 3709, REVISED STATUTES, REQUIRING ADVERTISING PRELIMINARY TO THE LETTING OF CONTRACTS ON BEHALF OF THE UNITED STATES, AND TO THE LOWEST RESPONSIBLE BIDDER MEETING THE SPECIFICATIONS, JUSTIFIES THE CONCLUSION THAT THE ALTERNATE BID SPECIFICATIONS IN THIS CASE ARE OPEN TO QUESTION, TESTED BY THE PRINCIPLES STATED IN THE DECISIONS WITH RESPECT TO ADVERTISEMENTS PRELIMINARY TO CONTRACTING ON BEHALF OF THE PUBLIC AS WELL AS THE PURPOSES WHICH LED TO THE REQUIREMENT THAT CONTRACTS ON BEHALF OF THE UNITED STATES MUST BE LET AS THE RESULT OF ADVERTISING, TO THE LOWEST RESPONSIBLE BIDDER.

IT IS REALIZED, OF COURSE, THAT THE UNITED STATES SHOULD OBTAIN THE BEST POSSIBLE VESSELS FOR THE MONEY EXPENDED, AND THAT IN CONNECTION WITH CONSTRUCTION WORK OF THIS CHARACTER THE NAVY DEPARTMENT HAS ITS PROBLEMS AND WOULD FIND IT ADVANTAGEOUS TO UTILIZE THE BEST SKILL OF THE COUNTRY IN DESIGNING HULL, MACHINERY, ETC. THE RESULTS REPORTED AS OBTAINED IN THE INSTANT MATTER SUGGEST THE BENEFITS POSSIBLE THROUGH OBTAINING THE VIEWS AND SUGGESTIONS OF EXPERTS NOT IN THE GOVERNMENT SERVICE, BUT THE PROCEDURE FOLLOWED NOT ONLY FAILS IN FULLY MEETING THE REQUIREMENTS OF SECTION 3709, REVISED STATUTES, BUT WILL INVARIABLY BREED DISSATISFACTION AMONG BIDDERS. EACH BIDDER SUBMITTING AN ALTERNATE DESIGN WILL DOUBTLESS BELIEVE, AND HONESTLY, THAT HIS IS SUPERIOR TO ALL OTHER DESIGNS SUBMITTED, AND IT WOULD SEEM MOST DIFFICULT IF NOT QUITE IMPOSSIBLE TO WORK OUT IN ADVANCE AND WITHOUT INTIMATE KNOWLEDGE OF THE DETAILS OF DESIGNS TO BE SUBMITTED, AN EVALUATING FORMULA THAT WOULD BE CONSIDERED FAIR BY ANY BIDDER WHOSE DESIGN WAS NOT ACCEPTED AND CHARGES OR FAVORITISM AND EVEN FRAUD MAY TOO FREQUENTLY FOLLOW, WITH PROTESTS RAISING QUESTIONS GOING TO THE AVAILABILITY OF THE APPROPRIATION PROPOSED TO BE CHARGED.

THE LAW REQUIRES THAT SPECIFICATIONS STATE THE ACTUAL NEED OF THE GOVERNMENT AND THAT AWARD BE MADE TO THE LOW RESPONSIBLE BIDDER PROPOSING TO SUPPLY SUCH NEED. CONSIDERING THE ADMINISTRATIVE PROBLEM TO BE AS STATED IN MATTERS OF THIS CHARACTER, THERE IS SUGGESTED FOR YOUR CONSIDERATION AND AS A MEANS TO ENABLE THE NAVY DEPARTMENT TO LAWFULLY OBTAIN THE ASSISTANCE OF THE SKILL IN PRIVATE INDUSTRY WHEN NEW VESSELS ARE TO BE DESIGNED AND CONSTRUCTED, THE ADVISABILITY OF ACQUAINTING THE CONGRESS WITH THE SITUATION AND NEED WITH A VIEW TO SECURITY AUTHORITY TO EMPLOY A REASONABLE AMOUNT OF THE APPROPRIATION TO SECURE FROM COMPETENT SOURCES OUTSIDE OF THE GOVERNMENT A LIMITED NUMBER OF DESIGNS OF HULLS, MACHINERY, ETC., TO SUPPLEMENT OR FOR PURPOSES OF COMPARISON WITH PLANS AND SPECIFICATIONS DRAFTED BY THE ENGINEERS OF THE NAVY DEPARTMENT, TO THE END THAT THERE MAY BE WORKED OUT IN EVERY DETAIL THE BEST POSSIBLE DESIGN AND THE FINAL RESULT SUBMITTED FOR COMPETITIVE BIDS AND CONSTRUCTIONS BY THE LOWEST RESPONSIBLE BIDDER.

IT IS UNDERSTOOD THAT ON THE ASSUMPTION THE PROCEDURE FOLLOWED WAS SUFFICIENT COMPLIANCE WITH THE APPLICABLE LAW THERE HAS BEEN ADOPTED FOR BUILDING IN TWO NAVY YARDS THE DESIGN SUBMITTED BY THE BETHLEHEM SHIPBUILDING CORPORATION, AND AWARD MADE TO SAID CORPORATION FOR THE CONSTRUCTION OF A VESSEL OF SUCH DESIGN. IN SUCH CIRCUMSTANCES AND IN VIEW OF THE APPARENT GOOD FAITH OF THE NAVY DEPARTMENT IN FOLLOWING THE PROCEDURE HEREIN DISCUSSED AND WHICH SHOULD HEREAFTER BE OTHERWISE, THIS OFFICE WILL MAKE NO FURTHER OBJECTION THERETO.