A-54718, APRIL 12, 1934, 13 COMP. GEN. 274

A-54718: Apr 12, 1934

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CONTRACTORS - QUALIFICATIONS A LOW BID MAY NOT BE REJECTED UNLESS THE FACTS ESTABLISH THAT THE CONTRACTOR IS NOT A RESPONSIBLE BIDDER. LACKING IN FINANCIAL RESOURCES SUFFICIENT TO FINANCE SUCH PART OF THE WORK AS IS NOT FINANCED BY THE UNITED STATES THROUGH PARTIAL PAYMENTS. THE FACT THAT A CORPORATION WITH SUFFICIENT FINANCIAL RESOURCES AND WITH EXPERIENCED PERSONNEL MAY NOT HAVE PERFORMED A CONTRACT FOR THE UNITED STATES CONSTITUTES NO BASIS FOR THE REJECTION OF ITS LOW PROPOSAL FOR THE PERFORMANCE OF A CONTRACT. BIDS WERE OPENED IN THE OFFICE OF THE DISTRICT ENGINEER FOR THE FIRST NEW ORLEANS DISTRICT COVERING THE FURNISHING OF ALL PLANT. THREE BIDS WERE RECEIVED. THE GOVERNMENT ESTIMATE OF PERFORMING THE WORK BY HIRED LABOR AND GOVERNMENT PLANT WAS 11.30 CENTS PER CUBIC YARD.

A-54718, APRIL 12, 1934, 13 COMP. GEN. 274

CONTRACTORS - QUALIFICATIONS A LOW BID MAY NOT BE REJECTED UNLESS THE FACTS ESTABLISH THAT THE CONTRACTOR IS NOT A RESPONSIBLE BIDDER; I.E., LACKING IN FINANCIAL RESOURCES SUFFICIENT TO FINANCE SUCH PART OF THE WORK AS IS NOT FINANCED BY THE UNITED STATES THROUGH PARTIAL PAYMENTS, AND/OR LACKING IN EQUIPMENT OR RESOURCES SUFFICIENT TO PURCHASE OR RENT SUCH EQUIPMENT, AND/OR IF A CORPORATION, WITHOUT OFFICERS OR SUPERVISORY EMPLOYEES EXPERIENCED IN THE PARTICULAR CLASS OF CONSTRUCTION WORK. THE FACT THAT A CORPORATION WITH SUFFICIENT FINANCIAL RESOURCES AND WITH EXPERIENCED PERSONNEL MAY NOT HAVE PERFORMED A CONTRACT FOR THE UNITED STATES CONSTITUTES NO BASIS FOR THE REJECTION OF ITS LOW PROPOSAL FOR THE PERFORMANCE OF A CONTRACT.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, APRIL 12, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF APRIL 2, 1934, AS FOLLOWS:

ON FEBRUARY 21, 1934, BIDS WERE OPENED IN THE OFFICE OF THE DISTRICT ENGINEER FOR THE FIRST NEW ORLEANS DISTRICT COVERING THE FURNISHING OF ALL PLANT, LABOR, AND MATERIALS, AND PERFORMING ALL WORK REQUIRED FOR THE DREDGING OF APPROXIMATELY 512,000 CUBIC YARDS OF MATERIAL IN THE MAINTENANCE OF THE LAKE CHARLES DEEP WATER CHANNEL, LOUISIANA. THREE BIDS WERE RECEIVED, AS FOLLOWS:

ORLEANS DREDGING CO., INC.: 11.39 CENTS PER CUBIC YARD; TOTAL, $58,316.80.

JAHNCKE SERVICE, INC.: 11.23 CENTS PER CUBIC YARD; TOTAL, $57,497.60.

LOUISIANA MATERIALS CO., INC.: 10.73 CENTS PER CUBIC YARD; TOTAL, $54,937.60.

THE GOVERNMENT ESTIMATE OF PERFORMING THE WORK BY HIRED LABOR AND GOVERNMENT PLANT WAS 11.30 CENTS PER CUBIC YARD, OR A TOTAL OF $57,856, AND THE TOTAL ESTIMATED COST OF PERFORMING THE WORK, INCLUDING GOVERNMENT COST, ON THE BASIS OF THE LOW BID IS $70,000.

THE ABSTRACT OF BIDS, ALL BIDS RECEIVED, LETTER OF THE DISTRICT ENGINEER DATED MARCH 22, 1934, FIRST INDORSEMENT OF THE DIVISION ENGINEER DATED MARCH 26, 1934, AND ALL PERTINENT CORRESPONDENCE ARE TRANSMITTED HEREWITH.

WHILE THE WORK IN QUESTION IS NOT OF GREAT MAGNITUDE AS TO COST, IT INVOLVES DREDGING OVER AN EXTENSIVE CHANNEL OF BOTTOM WIDTH OF 125 FEET AND A MINIMUM DEPTH OF 32 FEET BELOW WATER, AND UNDER THE CONDITIONS OF WEATHER AND WATER TO BE EXPECTED, INVOLVES PROBLEMS OF MORE THAN USUAL DIFFICULTY, REQUIRING THE SERVICES OF AN EXPERIENCED CONTRACTOR IN THE TYPE OF WORK INVOLVED. THE LOW BIDDER, THE LOUISIANA MATERIALS CO., INC., IS BASICALLY A DEALER IN MATERIALS, PARTICULARLY SAND, GRAVEL, AND SHELL, AND IS NOT AN ENGINEERING OR CONSTRUCTION ORGANIZATION. IT HAS APPARENTLY PERFORMED NO WORK OF THIS NATURE, AND ITS CONTRACTS WITH THE GOVERNMENT HAVE BEEN CHIEFLY FOR THE RENTAL OF PLANT AND FOR MINOR DREDGING SERVICES. ATTENTION IS RESPECTFULLY INVITED TO LETTER OF THE DISTRICT ENGINEER DATED MARCH 22, 1934, IN WHICH THE FACTS AS TO THE EXPERIENCE OF THIS BIDDER AND AS TO THE PLANT PROPOSED TO BE USED BY IT IN THE PERFORMANCE OF THIS WORK ARE FULLY SET FORTH IN DETAIL. THE PLANT LISTED IN THE BID IS ENTIRELY INADEQUATE FOR THE WORK. BASED ON THE FACTS AND CIRCUMSTANCES SET FORTH IN THE DISTRICT ENGINEER'S LETTER, IT IS THE CONVICTION OF THE ENGINEER OFFICERS THAT THIS BIDDER HAS NOT HAD SUFFICIENT EXPERIENCE AND DOES NOT POSSESS ADEQUATE PLANT FOR THE SUCCESSFUL PERFORMANCE OF THE WORK.

THE DEPARTMENT HAS RECENTLY EXPERIENCED MUCH DIFFICULTY WITH SIMILAR CONTRACTS, WHERE AWARDS WERE MADE TO LOW BIDDERS WITH DOUBTFUL EXPERIENCE AND INADEQUATE PLANT AND EQUIPMENT. A CONCRETE EXAMPLE, ALMOST IDENTICAL IN POINT, IS THAT OF THE CONSTRUCTION MATERIALS CORPORATION. THIS CORPORATION HAD BEEN CHIEFLY ENGAGED IN THE DEALING OF SAND, GRAVEL, AND OTHER MATERIALS, BUT SUBMITTED BIDS ON DREDGING OPERATIONS FOR THREE PROJECTS: THE CAPE COD CANAL, CONTRACT W-175-ENG 219; MONROE HARBOR, CONTRACT W-272-ENG-193; AND BALLARDS REEF, CONTRACT W-272-ENG-187. ALTHOUGH THE ENGINEER OFFICERS WERE IN DOUBT AS TO THE BIDDER'S EXPERIENCE AND ABILITY TO PERFORM, AWARDS WERE MADE ON THE BASIS OF ITS BEING THE LOWEST BIDDER. AFTER PERFORMING A VERY SMALL PERCENTAGE OF THE WORK UNDER EACH OF THESE CONTRACTS OVER AN EXCESSIVE PERIOD OF TIME, INVOLVING EXCESSIVE INSPECTION AND SUPERVISORY COSTS TO THE GOVERNMENT, THE CONTRACTOR'S RIGHT TO PROCEED WAS TERMINATED, AND THE WORK AT CAPE COD CANAL, INVOLVING AN ESTIMATED TOTAL COST OF $267,441.63, HAS BEEN READVERTISED AND RELET AT A TOTAL ESTIMATED COST OF $336,413.83, OR AN INCREASED COST OF $68,972.20. THE WORK AT MONROE HARBOR, INVOLVING AN ESTIMATED COST OF $397,000, WAS TERMINATED AFTER THE WORK WAS 3 PERCENT COMPLETE AND THE GOVERNMENT HAD INCURRED COSTS OF $8,869.50. THIS WORK IS BEING READVERTISED AND WILL BE AWARDED AT A MATERIALLY INCREASED COST. THE SECOND LOW BID FOR THIS WORK, THAT OF THE GREAT LAKES DREDGE AND DOCK COMPANY, AN EXPERIENCED CONTRACTOR, WAS IN THE AMOUNT OF $428,200. THE WORK AT BALLARDS REEF, INVOLVING AN ESTIMATED COST OF $1,083,750, WAS TERMINATED AFTER 13.5 PERCENT COMPLETION AND COSTS HAD BEEN INCURRED BY THE GOVERNMENT OF $140,727.19. THIS WORK HAS BEEN ASSUMED BY THE SURETY, AND IT IS POSSIBLE THAT THE INCREASED COSTS OF EACH OF THESE PROJECTS WILL EXCEED THE PENAL SUMS OF THE BONDS. WHILE PERFORMANCE BONDS WILL PROBABLY COVER THE FINAL COST OF THE THREE CONTRACTS, THE DELAY AND INCONVENIENCE TO SHIPPERS AND USERS OF THE CHANNELS INVOLVED EVALUATED IN MONEY WILL FAR EXCEED THE INCREASED COST IF THE SECOND LOW BIDS HAD BEEN ACCEPTED.

THE WORK IN QUESTION WILL BE FINANCED FROM PUBLIC WORK FUNDS ALLOTTED UNDER THE NATIONAL INDUSTRIAL RECOVERY ACT, AND SECTION 13 OF BULLETIN NO. 51 OF THE FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS IS APPLICABLE. THE CHIEF OF ENGINEERS IS OF THE OPINION THAT THE LOUISIANA MATERIALS COMPANY, INC., DOES NOT MEET THE REQUIREMENTS OF THIS SECTION IN THAT IT DOES NOT POSSESS ADEQUATE PLANT AND HAD NOT APPROPRIATE TECHNICAL EXPERIENCE.

YOUR OPINION IS, THEREFORE, REQUESTED AS TO WHETHER AWARD TO THE NEXT LOW BIDDER IS AUTHORIZED. IT IS REQUESTED THAT YOUR REPLY BE EXPEDITED AND THAT ALL PAPERS TRANSMITTED HEREWITH BE RETURNED.

POSSIBLY THE REPORTED DIFFICULTY WITH THE CONSTRUCTION MATERIALS CORPORATION RESULTED FROM THE FACT THAT ITS FACILITIES WERE OVEREXTENDED IN ATTEMPTING TO PERFORM THREE CONTRACTS WITH THE UNITED STATES MORE OR LESS SIMULTANEOUSLY. THAT SITUATION IS NOT IN POINT HERE WHERE THERE IS ONLY ONE PROJECT INVOLVED FOR A COMPARATIVELY SMALL AMOUNT, AND THERE IS NOT MUCH DIFFERENCE BETWEEN THE AMOUNT OF THE BID SUBMITTED BY THE LOWEST BIDDER AND THE AMOUNT OF THE BIDS SUBMITTED BY THE OTHER TWO BIDDERS. THE CONSTRUCTION MATERIALS CORPORATION CASE SHOULD HAVE BEEN SUBMITTED HERE FOR DECISION BEFORE AWARDING THE COMPANY THREE SUBSTANTIAL CONTRACTS IN EVENT THERE WAS DOUBT WITH RESPECT TO THE EXPERIENCE AND FINANCIAL QUALIFICATIONS OF THE CONTRACTOR TO PERFORM THEM.

IN ANY EVENT, EACH CASE MUST BE CONSIDERED ON THE FACTS APPLICABLE THERETO, AND AS IS APPARENTLY ADMITTED BY THE DISTRICT ENGINEER IN HIS LETTER OF MARCH 22, 1934, THERE IS NO QUESTION INVOLVED OF LACK OF SUFFICIENT FINANCIAL RESOURCES OF THE LOUISIANA MATERIALS COMPANY, INC., TO PERFORM THIS CONTRACT WITH THE AID OF PARTIAL PAYMENTS MADE BY THE UNITED STATES IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AS THE WORK PROGRESSES.

THE OBJECTIONS OF THE DISTRICT ENGINEER APPEAR TO BE ON THE BASIS OF LACK OF SUFFICIENT EQUIPMENT AND LACK OF EXPERIENCE, THOUGH IT IS APPARENTLY ADMITTED BY HIM THAT THE LOUISIANA MATERIALS CO., INC., AS A CORPORATION COULD NEVER ACQUIRE ANY EXPERIENCE IN THE PERFORMANCE OF THE DREDGING CONTRACTS. THE LOW BIDDER HAS TENDERED CERTAIN PLANT, WITH THE STATEMENT THAT IF SUCH PLANT WAS NOT DEEMED SUFFICIENT TWO OTHER DREDGES WOULD BE MADE IMMEDIATELY AVAILABLE FOR THE JOB, THOUGH IT IS SUGGESTED BY THE DISTRICT ENGINEER THAT THE ONLY PLANT CERTIFIED AS OWNED ON THE DATE BIDS WERE OPENED AND WHICH WAS LISTED IN THE BID SHOULD BE CONSIDERED IN MAKING THE AWARD. THE PRIME OBJECT IS TO SECURE THE SATISFACTORY PERFORMANCE OF THE JOB AT THE LEAST POSSIBLE COST TO THE UNITED STATES AS REFLECTED IN THE BIDS. IT IS NOT TO BE EXPECTED THAT DREDGE BOATS WHICH HAVE BEEN IDLE FOR LACK OF WORK WILL NOT REQUIRE SOME ALTERATIONS AND REPAIRS BEFORE BEING PLACED AT WORK, AND THERE APPEARS NO REASON WHY SUCH NECESSARY REPAIRS AND ALTERATIONS MAY NOT BE MADE.

THERE APPEARS NOTHING SO EXCEEDINGLY COMPLEX CONCERNING THE DOING OF THE PROPOSED DREDGING WORK IN THE LAKE CHARLES DEEP WATER CHANNEL, LA., WHICH COULD NOT BE PERFORMED BY MEN EXPERIENCED IN THE OPERATION OF DREDGE BOATS, AND IT APPEARS THAT THE LOW BIDDER HAS AT PRESENT IN ITS EMPLOY AN INDIVIDUAL WHO HAD BEEN EMPLOYED FOR 12 YEARS IN THE CONSTRUCTION AND DREDGING BUSINESS--- ENGAGED FOR A PART OF THE TIME IN THE HYDRAULIC DREDGING OF SHELLS. ALSO, THE VICE PRESIDENT OF THE CONCERN IS REPORTED TO HAVE SUPERVISED HANDLING THE DREDGING OF MILLIONS OF TONS OF SAND AND GRAVEL AND THE FACT THAT SUCH SAND AND GRAVEL MAY HAVE BEEN SOLD INSTEAD OF BEING DUMPED SHOULD NOT MILITATE AGAINST THE QUALIFICATIONS OF SUCH INDIVIDUAL IN CONNECTION WITH THE DREDGING PROJECT. ALSO, IT HAS BEEN STATED THAT THE COMPANY INTENDED TO SECURE AS MASTER OF ONE OF THE DREDGES A MAN WHO WAS EMPLOYED FOR A NUMBER OF YEARS BY THE GOVERNMENT AS A MASTER OF A SNAG BOAT, WHICH IS AT LEAST SOME EVIDENCE OF HIS ABILITY TO NAVIGATE AND DIRECT WATER BORNE CRAFT.

THERE IS INVOLVED NOT ONLY THE MATTER OF INCREASED CHARGES AGAINST PUBLIC MONEYS BY REJECTING THE LOW BID BUT THAT OF FAIR DEALING BETWEEN CONTESTING BIDDERS. WHILE THERE IS APPRECIATED THAT ANXIETY MAY BE FELT WHERE WORK IS INTRUSTED TO AN UNTRIED CONTRACTOR, WITH POSSIBLE NEED FOR CLOSER SUPERVISION, IF CONTRACTS WERE AWARDED ONLY TO THE FEW WHO HAVE NOT ONLY AMPLE PLANT AND RESOURCES BUT HAVE THROUGH CARRYING OUT OTHER GOVERNMENT CONTRACTS ESTABLISHED A SATISFACTORY RECORD FOR PERFORMANCE, THERE WOULD BE GRAVE DANGER OF SO LIMITING COMPETITION, AND QUICKLY, AS TO DEFEAT THE APPLICABLE LAW AND PROVIDE BASIS FOR JUSTIFIED CRITICISM. THE LOW BIDDER DOES NOT APPEAR TO HAVE FAILED IN OTHER UNDERTAKINGS OR TO BE WITHOUT MEANS TO SECURE SUCH ADDITIONAL PLANT AND COMPETENT PERSONNEL AS MAY BE NECESSARY TO PERFORMANCE OF THE WORK.

ON THE PRESENT RECORD NO CLEAR REASON APPEARS FOR REJECTION OF LOW BID WITH RESULTING INCREASED COSTS TO THE GOVERNMENT AND IT MUST BE CONCLUDED THAT APPROPRIATED MONEYS ARE NOT AVAILABLE TO MAKE PAYMENTS IN EXCESS OF THE AMOUNT OF THE LOW BID OR TO OTHER THAN THE LOW BIDDER FOR PERFORMANCE OF THE WORK IN QUESTION. YOU ARE ADVISED ACCORDINGLY.