A-58105, OCTOBER 11, 1934, 14 COMP. GEN. 305

A-58105: Oct 11, 1934

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BIDS - EXPERIENCE OF BIDDERS - NECESSITY FOR BID BOND THE UNITED STATES IS NOT REQUIRED TO ACCEPT THE LOW BID FOR PERFORMANCE UNDER CONTRACT OF IMPORTANT CONSTRUCTION WORK FOR THE GOVERNMENT WHERE SUCH LOW BIDDER HAS HAD NO EXPERIENCE IN CONNECTION WITH SIMILAR WORK. WHERE THERE IS NO STATUTE REQUIRING A BID TO BE ACCOMPANIED BY A BID BOND. THE ADMINISTRATIVE OFFICERS OF THE GOVERNMENT ARE AUTHORIZED IN THE PUBLIC INTEREST. IF THE BIDDER IS OTHERWISE QUALIFIED AND PROMPTLY THEREAFTER FURNISHES THE REQUIRED BID BOND OR CERTIFIED CHECK. AS FOLLOWS: THERE ARE INCLOSED THE THREE LOW BIDS. BIDS FOR WHICH WERE OPENED SEPTEMBER 24. THERE IS ALSO INCLOSED LETTER OF OCTOBER 2D FROM THE DIVISION ENGINEER.

A-58105, OCTOBER 11, 1934, 14 COMP. GEN. 305

BIDS - EXPERIENCE OF BIDDERS - NECESSITY FOR BID BOND THE UNITED STATES IS NOT REQUIRED TO ACCEPT THE LOW BID FOR PERFORMANCE UNDER CONTRACT OF IMPORTANT CONSTRUCTION WORK FOR THE GOVERNMENT WHERE SUCH LOW BIDDER HAS HAD NO EXPERIENCE IN CONNECTION WITH SIMILAR WORK. WHERE THERE IS NO STATUTE REQUIRING A BID TO BE ACCOMPANIED BY A BID BOND, THE ADMINISTRATIVE OFFICERS OF THE GOVERNMENT ARE AUTHORIZED IN THE PUBLIC INTEREST--- A SAVING TO THE GOVERNMENT OF A SUBSTANTIAL AMOUNT BEING IN THE PUBLIC INTEREST--- TO GIVE CONSIDERATION TO A BID UNACCOMPANIED WITH A BID BOND, IF THE BIDDER IS OTHERWISE QUALIFIED AND PROMPTLY THEREAFTER FURNISHES THE REQUIRED BID BOND OR CERTIFIED CHECK. COMPARE 10 COMP. GEN. 528.

COMPTROLLER GENERAL MCCARL TO THE SECRETARY OF WAR, OCTOBER 11, 1934:

THERE HAS BEEN RECEIVED YOUR LETTER OF OCTOBER 8, 1934, WITH INCLOSURES, AS FOLLOWS:

THERE ARE INCLOSED THE THREE LOW BIDS, ABSTRACT OF ALL BIDS RECEIVED, AND PERTINENT PAPERS RELATING TO THE ADVERTISEMENT FOR THE CONSTRUCTION OF THE FORT PECK DAM SPILLWAY, BIDS FOR WHICH WERE OPENED SEPTEMBER 24, 1934. THERE IS ALSO INCLOSED LETTER OF OCTOBER 2D FROM THE DIVISION ENGINEER, MISSOURI RIVER DIVISION, CONTAINING HIS RECOMMENDATION ON AWARD.

THE THREE LOWEST BIDS, WITH THE AMOUNTS OF THEIR BIDS, ARE AS FOLLOWS:

HARDWICK AND MCGLONE, CITY BANK BLDG., KANSAS CITY, MO.,

$7,918,530.00.

CENTRAL BRIDGE AND CONSTRUCTION CO., 737 NEW YORK LIFE BLDG.,

KANSAS CITY, MO., $8,619,473.00.

SIX COMPANIES OF WASHINGTON, INC., 1 MONTGOMERY ST., SAN

FRANCISCO, CALIF., $8,880,924.00.

INASMUCH AS NO BIDS WERE RECEIVED FOR SCHEDULE I, AND ALL BIDS ON SCHEDULE III, WHICH IS EQUAL TO SCHEDULE I PLUS II, ARE PREDICATED ON PERFORMING ALL THE WORK, BIDS ON SCHEDULE II CANNOT BE CONSIDERED.

PARAGRAPH III (C) OF THE BIDDING SCHEDULE STATED,"NO BID OR QUOTATION WILL BE CONSIDERED OR ACCEPTED UNLESS IT INCLUDES OR IS ACCOMPANIED BY THE FOLLOWING CERTIFICATE DULY EXECUTED BY THE BIDDER.' THERE FOLLOWED THE CERTIFICATE REQUIRED BY PRESIDENTIAL EXECUTIVE ORDER THAT THE BIDDER WAS COMPLYING AND WOULD CONTINUE TO COMPLY WITH THE PROPER CODES OF FAIR COMPETITION. THE LOW BIDDER FAILED TO FURNISH SUCH CERTIFICATE WITH THE BID. AT A HEARING MR. HARDWICK STATED HE DID NOT THINK IT WAS NECESSARY TO SUBMIT THE REQUIRED CERTIFICATE.

INVITATION FOR BIDS STATED,"BID SECURITY IN THE FORM OF 5 PERCENT OF THE AMOUNT OF BID WILL BE REQUIRED.' THE GUARANTEE SO REQUIRED FOR THE LOWEST BID WOULD BE $395,926.50. HARDWICK AND MCGLONE SUBMITTED A CASHIER'S CHECK FOR $25,000 WITH THE BID, AND SUBSEQUENT TO THE OPENING, SUBMITTED ADDITIONAL SECURITY, CASHIER'S CHECK FOR $75,000. ON OCTOBER 1ST, SEVEN DAYS AFTER BIDS WERE OPENED, MR. MCGLONE SUBMITTED A LETTER STATING THAT IT WAS IMPRACTICABLE TO FURNISH BOND TO ACCOMPANY THEIR BID AND THAT IT WAS THEIR DESIRE TO WITHDRAW THE BID OF HARDWICK AND MCGLONE. LATER, THE SAME DATE, MR. MCGLONE IN LETTER TO DIVISION ENGINEER STATED THAT HIS PARTNER, MR. HARDWICK, HAD REPUDIATED THE LETTER WITHDRAWING THE BID. COPIES OF THESE LETTERS ARE ATTACHED TO THE BID. IT IS KNOWN THAT, AFTER THE OPENING OF THE BIDS, THE LOW BIDDER HAS BEEN ATTEMPTING TO SECURE ASSOCIATES WITH RESOURCES SUFFICIENT TO AFFORD THE MEANS FOR THE EXECUTION OF THE WORK.

THE LOWEST BIDDER IS NOT EXPERIENCED IN WORK OF THE CHARACTER COVERED BY THE BID. THE PREVIOUS EXPERIENCE OF MR. HARDWICK HAS BEEN LARGELY ON LEVEE CONSTRUCTION; THAT OF MR. MCGLONE, ROAD WORK. IT IS THE BELIEF OF THE CHIEF OF ENGINEERS THAT, IRRESPECTIVE OF HIS FAILURE TO FURNISH A COMPLIANCE CERTIFICATE, THE LOW BIDDER DOES NOT HAVE THE PROPER TECHNICAL EXPERIENCE TO SUCCESSFULLY COMPLETE THE WORK. THE PLANT LISTED IN THE BID OF THE LOW BIDDER IS INADEQUATE FOR THE WORK.

THE SECOND LOW BIDDER, THE CENTRAL BRIDGE AND CONSTRUCTION COMPANY, SUBMITTED THE PROPER CERTIFICATE OF N.R.A. COMPLIANCE. THIS BIDDER DID NOT SUBMIT ANY SECURITY WITH HIS BID. HE ACCOMPANIED HIS BID WITH A LETTER STATING THAT DUE TO LACK OF TIME HE HAD BEEN UNABLE TO PROCURE A BID BOND, BUT THAT, IF AWARDED THE CONTRACT, HE PROPOSED TO FURNISH A PERFORMANCE BOND IN ACCORDANCE WITH THE SPECIFICATIONS. ON OCTOBER 5TH, ELEVEN DAYS AFTER BIDS WERE OPENED, THIS BIDDER PRESENTED TO THE CHIEF OF ENGINEERS A BID BOND IN THE AMOUNT OF $430,000, WHICH BID BOND WAS FOUND TO BE IN PROPER FORM. THE THREE COMPANIES COMPOSING THE CENTRAL BRIDGE AND CONSTRUCTION COMPANY HAVE DONE A LARGE AMOUNT OF DIKE AND REVETMENT WORK FOR THIS DEPARTMENT, AND OTHER TYPES OF CONSTRUCTION WORK OUTSIDE OF THIS DEPARTMENT. THE CHIEF OF ENGINEERS IS OF THE OPINION THAT THEY HAVE SUFFICIENT FINANCIAL BACKING, TECHNICAL EXPERIENCE, AND PLANT TO SUCCESSFULLY CARRY OUT THE WORK.

THE THIRD LOW BIDDER, THE SIX COMPANIES OF WASHINGTON, INC., COMPLIED WITH ALL THE REQUIREMENTS OF THE ADVERTISEMENT.

THE THREE BIDDERS WERE AFFORDED A HEARING BY THE ACTING CHIEF OF ENGINEERS AT WASHINGTON ON OCTOBER 6TH. A COPY OF THE STATEMENTS MADE AT THE HEARING IS ATTACHED.

IT IS THE VIEW OF THIS DEPARTMENT THAT, WHILE INFORMALITIES IN THE GUARANTEES ACCOMPANYING A BID MAY BE WAIVED IN THE INTEREST OF THE UNITED STATES, A BID WHOLLY UNGUARANTEED IS IRRESPONSIVE TO THE ADVERTISEMENT AND SHOULD NOT BE CONSIDERED. A GUARANTEE FROM EACH BIDDER ON PUBLIC WORK THAT HE WILL ENTER INTO CONTRACT WITH THE REQUISITE PERFORMANCE BOND IF THE WORK IS AWARDED HIM HAS BEEN ESTABLISHED BY LONG EXPERIENCE AS NECESSARY TO PREVENT THE SUBMISSION OF BIDS BY IRRESPONSIBLE PERSONS, TO THE CONFUSION OF THE EXECUTION OF PUBLIC WORK. THE MERE PROMISE WITH THE BID TO FURNISH SUCH A GUARANTEE IS CLEARLY INADEQUATE FOR THE PURPOSE, SINCE THE FULFILLMENT OF THIS PROMISE IS DEPENDENT UPON THE WILLINGNESS OF THE BONDING COMPANIES TO EXECUTE A PERFORMANCE BOND AFTER THE SUFFICIENCY OF THE BID HAS BEEN DISCLOSED BY A COMPARISON WITH BIDS SUBMITTED BY RESPONSIBLE BIDDERS.

YOUR OPINION IS REQUESTED AS TO WHETHER AWARD MAY BE LAWFULLY MADE TO THE SIX COMPANIES OF WASHINGTON, INC., WHO SUBMITTED THE LOWEST GUARANTEED BID. IF THIS OPINION IS IN THE NEGATIVE, YOUR OPINION IS THEREUPON REQUESTED AS TO WHETHER THE AWARD MAY LAWFULLY BE MADE TO THE CENTRAL BRIDGE AND CONSTRUCTION COMPANY, WHOSE BID IS THE LOWEST ACCOMPANIED BY THE REQUIRED CERTIFICATE OF CODE COMPLIANCE RECEIVED FROM A FIRM HAVING THE EXPERIENCE, PLANT, AND FINANCIAL RESOURCES ADEQUATE TO CARRY OUT THE WORK.

SINCE THE PROMPT UNDERTAKING OF THE WORK TO BE DONE UNDER THE PROPOSED CONTRACT IS ESSENTIAL IN THE PUBLIC INTEREST, AN EARLY OPINION IS ESPECIALLY REQUESTED. IT IS REQUESTED THAT ALL PAPERS TRANSMITTED HEREWITH BE RETURNED WITH YOUR REPLY.

IT APPEARS THAT THE GOVERNMENT'S ESTIMATE AS TO COST OF THE PROJECT- - EXCLUSIVE OF COSTS OF SUPERINTENDENCE, ETC.--- WAS $8,454,939.84.

ASIDE FROM THE FAILURE OF HARDWICK AND MCGLONE TO FURNISH THE REQUIRED CERTIFICATE OF COMPLIANCE WITH THE APPLICABLE APPROVED CODE OF FAIR COMPETITION, AS REQUIRED BY EXECUTIVE ORDER NO. 6646 OF MARCH 14, 1934, AND THE FAILURE TO FURNISH EITHER A BID BOND OR CERTIFIED CHECK IN LIEU THEREOF, IT HAS BEEN REPORTED THAT HARDWICK AND MCGLONE DO NOT HAVE THE PROPER TECHNICAL EXPERIENCE TO SUCCESSFULLY COMPLETE THE WORK AND THAT THE PLANT LISTED BY THEM IS INADEQUATE THEREFOR. ALSO, THERE APPEARS DOUBT THAT THEY ARE FINANCIALLY QUALIFIED FOR THE PERFORMANCE OF THE WORK. VIEW OF ALL THESE MATTERS, THIS OFFICE WILL MAKE NO OBJECTION TO DISREGARDING THE BID SUBMITTED BY HARDWICK AND MCGLONE. SEE DECISION OF SEPTEMBER 2, 1931, A-38262, WHERE IT WAS HELD THAT THE UNITED STATES IS NOT REQUIRED TO ACCEPT THE LOW BID FOR THE PERFORMANCE OF IMPORTANT CONSTRUCTION WORK WHERE SUCH LOW BIDDER HAS HAD NO EXPERIENCE IN CONNECTION WITH SIMILAR WORK.

IT HAS BEEN REPORTED BY THE DIVISION ENGINEER IN HIS LETTER OF OCTOBER 2, 1934, THAT THE SECOND LOW BIDDER, THE CENTRAL BRIDGE AND CONSTRUCTION CO., CONSISTS OF THE KANSAS CITY BRIDGE CO., THE MASSMAN CONSTRUCTION CO., THE W. A. ROSS CONSTRUCTION CO., AND LEE METCALFE AS AN INDIVIDUAL, TRADING AS THE CENTRAL BRIDGE AND CONSTRUCTION CO.; THAT THE PERSONNEL OF THE CENTRAL BRIDGE CONSTRUCTION CO. POSSESSES THE NECESSARY EXPERIENCE TO PERFORM THE WORK PRESCRIBED IN THE TIME SPECIFIED AND IN A MANNER SATISFACTORY TO THE UNITED STATES; THAT SAID COMPANY POSSESSES THE NECESSARY RESOURCES AND IS QUALIFIED FINANCIALLY FOR THE PERFORMANCE OF THE WORK; AND THAT IT IS THE RECOMMENDATION OF THE DIVISION ENGINEER THAT THERE BE ACCEPTED THE BID SUBMITTED BY THE CENTRAL BRIDGE CONSTRUCTION CO. WHICH IS SOME $261,551 BELOW THE BID SUBMITTED BY THE SIX COMPANIES OF WASHINGTON, INC., THE NEXT LOW BIDDER FOR THE PERFORMANCE OF THE WORK. THE SIX COMPANIES OF WASHINGTON, INC., APPEAR TO HAVE PROTESTED TO THE WAR DEPARTMENT AGAINST SUCH RECOMMENDATION, AND HAVE SUBMITTED A WRITTEN PROTEST DATED OCTOBER 8, 1934, TO THIS OFFICE, IN THE MATTER. THE SUBSTANCE OF SUCH PROTEST IS THAT FAILURE OF THE GOVERNMENT TO ENFORCE THE REQUIREMENT THAT BID BONDS OR CERTIFIED CHECKS BE SUBMITTED WITH THE BIDS IN ACCORDANCE WITH THE ADVERTISED SPECIFICATIONS WOULD MAKE POSSIBLE THE BROKERING OR SELLING OF CONTRACTS; THAT IT WOULD NOT MAINTAIN THE CARDINAL PRINCIPLES OF FAIR AND EQUAL RIGHTS TO ALL; THAT IT WOULD NOT ACCORD WITH THE SPIRIT OF THE CODES OF FAIR COMPETITION; AND THAT IT WOULD NOT MAINTAIN THE PRINCIPLE OF COMPETITIVE BIDDING.

AS YOU HAVE INDICATED, THE CENTRAL BRIDGE AND CONSTRUCTION CO. ACCOMPANIED ITS BID WITH A LETTER TO THE EFFECT THAT DUE TO LACK OF TIME IT HAD BEEN UNABLE TO PROCURE A BID BOND, BUT THAT IF AWARDED THE CONTRACT THE COMPANY PROPOSED TO FURNISH A PERFORMANCE BOND IN ACCORDANCE WITH THE SPECIFICATIONS. IT APPEARS FROM THE REPORT OF OCTOBER 2, 1934, FROM THE DIVISION ENGINEER, THAT A CONFERENCE WAS HELD ON SEPTEMBER 29, 1934, WITH REPRESENTATIVES OF THE CENTRAL BRIDGE CONSTRUCTION CO., AT WHICH TIME THEY WERE INFORMED THAT NO CONSIDERATION WOULD BE GIVEN TO THE BID UNTIL AFTER CERTIFIED CHECK OR A BID BOND IN THE AMOUNT OF 5 PERCENT OF THE BID WAS SUBMITTED. THE CONFERENCE WAS HELD AT 3 P.M., ON A SATURDAY WHEN THE BANKS WERE CLOSED, AND ON MONDAY, OCTOBER 1, 1934, THE REPRESENTATIVES TENDERED A CERTIFIED CHECK IN THE AMOUNT OF $434,000 IN LIEU OF BID BOND, BUT THEY WERE THEN INFORMED THAT UNDER INSTRUCTIONS OF THE CHIEF OF ENGINEERS OF THE ARMY THE CERTIFIED CHECK COULD NOT BE ACCEPTED AND THAT THE MATTER OF AWARD OF THE CONTRACT WOULD BE CONDUCTED WITH THE CHIEF OF ENGINEERS IN WASHINGTON. IT IS STATED IN YOUR SUBMISSION THAT ON OCTOBER 5 THE CENTRAL BRIDGE AND CONSTRUCTION CO. SUBMITTED A BID BOND IN THE REQUIRED AMOUNT OF $431,000 AND SAID COMPANY REPORTED IN LETTER OF OCTOBER 5, 1934, THAT ARRANGEMENTS HAD BEEN MADE THROUGH THE GLOBE INDEMNITY CO., THE SURETY ON THE BID BOND, TO WRITE THE PERFORMANCE BOND PARTICIPATED IN BY 14 SURETY COMPANIES.

THE UNITED STATES HAS THE RIGHT TO WAIVE INFORMALITIES IN BIDS WHEN SUCH WAIVER IS IN THE PUBLIC INTEREST, AND, OF COURSE, IT IS IN THE PUBLIC INTEREST TO SAVE THE SUM OF $261,551, THE DIFFERENCE BETWEEN THE BID SUBMITTED BY THE CENTRAL BRIDGE AND CONSTRUCTION CO. AND THE BID SUBMITTED BY SIX COMPANIES OF WASHINGTON, INC.

A BID BOND IS MERELY A GUARANTEE THAT IN EVENT THE BID IS ACCEPTED THE BIDDER WILL EXECUTE THE REQUIRED CONTRACT AND FURNISH THE REQUIRED PERFORMANCE BOND, BUT THE FAILURE TO SUBMIT SUCH A BID BOND DOES NOT AFFECT THE LEGAL OBLIGATION THAT WHEN THE BID IS ACCEPTED THERE ARISES A CONTRACT BINDING ON THE CONTRACTOR TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE ACCEPTED BID OR TO PAY THE UNITED STATES ANY DAMAGES RESULTING FROM FAILURE TO DO SO. SEE UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP CO., 239 U.S. 88, AND PURCELL ENVELOPE CO. V. UNITED STATES, 249 U.S. 313. CONSEQUENTLY IT IS NOT CORRECT TO SUGGEST THAT THE WAIVER BY THE GOVERNMENT OF THE FURNISHING OF A BID BOND AT THE TIME THE BIDS ARE OPENED WHEN IT IS IN THE PUBLIC INTEREST TO DO SO WOULD LEAD TO THE BROKERING OR SELLING OF CONTRACTS, ETC., WHEN THE BID IS SUBMITTED AND ACCEPTED, WHETHER ACCOMPANIED OR UNACCOMPANIED BY A BID BOND. THERE IS A LEGAL RESPONSIBILITY ON THE CONTRACTORS TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE CONTRACT OR TO PAY THE UNITED STATES ANY DAMAGES RESULTING FROM FAILURE TO DO SO. THE FACT THAT THERE IS SUCH LEGAL LIABILITY SHOULD BE A SUFFICIENT DETERRENT TO THE SUBMISSION OF BIDS NOT IN GOOD FAITH FOR THE PERFORMANCE OF WORK OF THE MAGNITUDE OF THAT HERE INVOLVED.

THE SECOND LOW BIDDER HAS NOW FURNISHED A BID BOND, AND AS IT APPEARS OTHERWISE QUALIFIED TO PERFORM THE WORK, YOU ARE ADVISED THAT APPROPRIATED MONEYS ARE NOT AVAILABLE FOR MAKING PAYMENT FOR THE PROPOSED WORK IN ANY AMOUNT IN EXCESS OF THE BID SUBMITTED BY THE CENTRAL BRIDGE AND CONSTRUCTION CO., SUCH SECOND LOW BIDDER.