A-83675, A-86053, MAY 8, 1937, 16 COMP. GEN. 986

A-83675,A-86053: May 8, 1937

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OF ITS FINANCIAL RESOURCES AND THERE IS NO OBJECTION THERETO BY THE BIDDER. WHERE THE DIFFERENCE BETWEEN THE BID DISREGARDED AND THE NEXT HIGHER BID IS CONSIDERABLE. ASK TO BE RELEASED FROM THEIR BID FOR THE REASON THAT THEY NOW HAVE TWO CONTRACTS WITH THE GOVERNMENT. WHICH THEY DID NOT EXPECT WOULD BE AWARDED TO THEM SINCE THEY WERE NOT THE LOW BIDDERS. DO NOT HAVE SUFFICIENT FINANCIAL RESOURCES TO HANDLE THE BIRMINGHAM PROJECT IN ADDITION THERETO. WERE OPENED JANUARY 21. WAS SUBMITTED BY TEXAS NURSERY COMPANY AND THE SECOND LOWEST BID. WAS SUBMITTED BY BIRMINGHAM NURSERIES. ON ACCOUNT OF AN OBVIOUS ERROR THE BID OF TEXAS NURSERY COMPANY WAS DISREGARDED AND THE BID OF BIRMINGHAM NURSERIES WAS ACCEPTED FOLLOWING CONCURRENCE IN SUCH ACTION BY YOU IN YOUR LETTER OF FEBRUARY 13.

A-83675, A-86053, MAY 8, 1937, 16 COMP. GEN. 986

CONTRACTS - AWARDS - EXHAUSTION OF LOW BIDDER'S FINANCIAL RESOURCES BECAUSE OF PREVIOUS GOVERNMENT AWARDS AN OTHERWISE ACCEPTABLE LOW BID MAY BE DISREGARDED IN MAKING AWARD WHERE THE BIDDER PREVIOUSLY HAS BEEN AWARDED GOVERNMENT CONTRACTS REQUIRING ALL, OR PRACTICALLY ALL, OF ITS FINANCIAL RESOURCES AND THERE IS NO OBJECTION THERETO BY THE BIDDER, BUT WHERE THE DIFFERENCE BETWEEN THE BID DISREGARDED AND THE NEXT HIGHER BID IS CONSIDERABLE, THERE SHOULD BE ADMINISTRATIVELY CONSIDERED WHETHER, IN THE INTEREST OF THE UNITED STATES, THERE SHOULD BE REJECTION OF ALL BIDS AND READVERTISEMENT, OR AWARD TO THE NEXT HIGHER BIDDER.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE ADMINISTRATOR, FEDERAL EMERGENCY ADMINISTRATION OF PUBLIC WORKS, MAY 8, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF MAY 7, 1937, AS FOLLOWS:

THIS HAS REFERENCE TO H. C. WOOD AND JOHN GRECO, PARTNERS COMPOSING THE FIRM OF BIRMINGHAM NURSERIES, 300 AVENUE F, WEST, BIRMINGHAM, ALABAMA, WHO SUBMITTED THE LOWEST BID ON LANDSCAPE WORK FOR THE SMITHFIELD COURT HOUSING PROJECT, NO. H-2902, IN BIRMINGHAM, ALABAMA, AND ASK TO BE RELEASED FROM THEIR BID FOR THE REASON THAT THEY NOW HAVE TWO CONTRACTS WITH THE GOVERNMENT, ONE FOR THE DIXIE HOMES PROJECT, NO. H-3401, IN MEMPHIS, TENNESSEE, IN THE AMOUNT OF $57,298, WHICH THEY DID NOT EXPECT WOULD BE AWARDED TO THEM SINCE THEY WERE NOT THE LOW BIDDERS, THE OTHER FOR THE LAUDERDALE COURTS PROJECT, NO. H-3403, IN MEMPHIS, TENNESSEE, IN THE AMOUNT OF $47,850, AND DO NOT HAVE SUFFICIENT FINANCIAL RESOURCES TO HANDLE THE BIRMINGHAM PROJECT IN ADDITION THERETO.

THE BIDS ON THE DIXIE HOMES PROJECT, NO. H-3401, IN MEMPHIS, TENNESSEE, WERE OPENED JANUARY 21. THE LOWEST BID, IN THE AMOUNT OF $25,000, WAS SUBMITTED BY TEXAS NURSERY COMPANY AND THE SECOND LOWEST BID, IN THE AMOUNT OF $57,298, WAS SUBMITTED BY BIRMINGHAM NURSERIES. ON ACCOUNT OF AN OBVIOUS ERROR THE BID OF TEXAS NURSERY COMPANY WAS DISREGARDED AND THE BID OF BIRMINGHAM NURSERIES WAS ACCEPTED FOLLOWING CONCURRENCE IN SUCH ACTION BY YOU IN YOUR LETTER OF FEBRUARY 13. THE LETTER OF ACCEPTANCE, DATED MARCH 1, AND CONTRACT DOCUMENTS WERE DISPATCHED TO BIRMINGHAM NURSERIES ON MARCH 3 AND RECEIVED BY THEM ON MARCH 6. BIRMINGHAM NURSERIES EXPERIENCED CONSIDERABLE DIFFICULTY IN OBTAINING PERFORMANCE AND PAYMENT BONDS FROM THE COMMERCIAL CASUALTY INSURANCE COMPANY, THE SURETY ON THEIR BID BOND. ALTHOUGH THE EXECUTED CONTRACTS WERE RECEIVED BY THE HOUSING DIVISION MARCH 18, SATISFACTORY BONDS WERE NOT RECEIVED UNTIL APRIL 5. THE CONTRACT WAS CONSUMMATED APRIL 10.

THE BIDS ON THE LAUDERDALE COURTS PROJECT, NO. H-3403, IN MEMPHIS, TENNESSEE, WERE OPENED MARCH 2. (IT IS TO BE NOTED THAT THESE BIDS WERE OPENED FOUR DAYS PRIOR TO THE TIME BIRMINGHAM NURSERIES HAD KNOWLEDGE THAT THEIR BID ON THE DIXIE HOMES PROJECT HAD BEEN ACCEPTED.) THE LOWEST BID, IN THE AMOUNT OF $47,850, SUBMITTED BY BIRMINGHAM NURSERIES, WAS ACCEPTED. THE LETTER OF ACCEPTANCE, DATED MARCH 19, AND CONTRACT DOCUMENTS WERE DISPATCHED TO BIRMINGHAM NURSERIES ON MARCH 22, AND RECEIVED BY THEM ON MARCH 25. BIRMINGHAM NURSERIES AGAIN EXPERIENCED CONSIDERABLE DIFFICULTY IN OBTAINING PERFORMANCE AND PAYMENT BONDS FROM THE COMMERCIAL CASUALTY INSURANCE COMPANY, THE SURETY ON THEIR BID BONDS. ALTHOUGH THE EXECUTED CONTRACTS WERE RECEIVED BY THE HOUSING DIVISION APRIL 1, SATISFACTORY BONDS WERE NOT RECEIVED UNTIL APRIL 24. THE CONTRACT WAS CONSUMMATED MAY 1.

BIDS ON THE SMITHFIELD COURT PROJECT, NO. H-2902, IN BIRMINGHAM, ALABAMA, WERE OPENED MARCH 11, THE ORIGINAL OPENING DATE OF FEBRUARY 25 HAVING BEEN POSTPONED. BIRMINGHAM NURSERIES SUBMITTED THE LOWEST BID IN THE AMOUNT OF $27,080. THE NEXT LOWEST BID, IN THE AMOUNT OF $39,978, WAS SUBMITTED BY ASHFORD PARK NURSERIES, OF ATLANTA, GEORGIA. (IT IS TO BE NOTED THAT THE BID OF BIRMINGHAM NURSERIES IS DATED FEBRUARY 23 AND THAT IT WAS RECEIVED FEBRUARY 24 PRIOR TO THE TIME THEY HAD KNOWLEDGE THAT THEIR BID ON THE DIXIE HOMES PROJECT HAD BEEN ACCEPTED.) ACTION ON THE AWARD OF THIS CONTRACT WAS DEFERRED PENDING AN INVESTIGATION OF THE FINANCIAL RESOURCES OF BIRMINGHAM NURSERIES AND THE CONSUMMATION OF THE CONTRACTS FOR THE TWO MEMPHIS PROJECTS.

A REPORT SUBMITTED BY MR. ALVIN M. FROMHERZ, PROJECT MANAGER, IN BIRMINGHAM, ALABAMA, INDICATES THAT BIRMINGHAM NURSERIES HAVE NOT SUFFICIENT FINANCIAL RESOURCES TO HANDLE THE LANDSCAPE WORK FOR THE SMITHFIELD COURT PROJECT IN ADDITION TO THE TWO MEMPHIS PROJECTS.

IN VIEW OF THE FACT THAT BIRMINGHAM NURSERIES HAVE ENTERED INTO TWO CONTRACTS WITH THE GOVERNMENT IN VERY SATISFACTORY AMOUNTS AGGREGATING $105,148, THE APPARENT LIMIT OF THEIR RESOURCES AND $17,545 LESS THAN THE AGGREGATE OF THE NEXT LOWEST BIDS, AND THAT THEY HAD REASON TO BELIEVE THEIR BID ON THE DIXIE HOMES PROJECT WOULD NOT BE ACCEPTED WHEN THEIR BIDS ON LAUDERDALE COURTS AND SMITHFIELD COURT WERE SUBMITTED, IT IS MY OPINION THAT THEY SHOULD BE RELEASED FROM THEIR BID WITHOUT PREJUDICE AND THAT THE CONTRACT SHOULD BE AWARDED TO ASHFORD PARK NURSERIES, THE SECOND LOW BIDDER, IN THE AMOUNT OF $39,978. BEFORE TAKING SUCH ACTION, I SHALL AWAIT YOUR ADVICE AS TO WHETHER OR NOT IT WILL MEET WITH THE APPROVAL OF YOUR OFFICE.

I ENCLOSE FOR YOUR INFORMATION A COPY OF EACH OF THE BIDS OF BIRMINGHAM NURSERIES AND ASHFORD PARK NURSERIES, THE REPORT ON BIRMINGHAM NURSERIES SUBMITTED BY MR. ALVIN N. FROMHERZ, PROJECT MANAGER, WITH ENCLOSURES ATTACHED, A COPY OF A LETTER DATED APRIL 9 FROM THE HOUSING DIVISION TO BIRMINGHAM NURSERIES, A LETTER DATED MAY 1 FROM BIRMINGHAM NURSERIES, AND A TABULATION OF BIDS, ALL IN CONNECTION WITH THE SMITHFIELD COURT PROJECT, IN BIRMINGHAM, ALABAMA; ALSO A MEMORANDUM, DATED MARCH 1, WITH REFERENCE TO THE DIXIE HOMES PROJECT, WITH TABULATION OF BIDS ATTACHED, AND A MEMORANDUM, DATED MARCH 19, WITH REFERENCE TO THE LAUDERDALE COURTS PROJECT, WITH A TABULATION OF BIDS ATTACHED. PLEASE RETURN THESE DOCUMENTS WHEN THEY HAVE SERVED YOUR PURPOSE.

IT IS, OF COURSE, CONTRARY TO THE PUBLIC INTEREST TO AWARD CONTRACTS TO A CONTRACTOR WHO HAS IN COURSE OF PERFORMANCE CONTRACTS WITH THE UNITED STATES REQUIRING THE USE OF ALL OR SUBSTANTIALLY ALL OF HIS FINANCIAL RESOURCES AND LEAVING LITTLE OR NOTHING THEREFROM TO BE USED IN THE PERFORMANCE OF CONTRACTS WITH THE GOVERNMENT WHICH ARE TO BE AWARDED. ANY OTHER COURSE OF PROCEDURE MIGHT LEAD TO SERIOUS DEFAULTS IN THE PERFORMANCE OF ALL OF THE CONTRACTS WITH RESULTING EXPENSE AND DELAY TO THE UNITED STATES.

THIS SITUATION SEEMS TO HAVE BEEN REALIZED BY BOTH OF THE PARTNERS COMPOSING THE FIRM OF BIRMINGHAM NURSERIES AND BY THE REPRESENTATIVES OF THE UNITED STATES. WHILE THERE IS CONSIDERABLE DIFFERENCE BETWEEN THE LOW BID OF $27,080 SUBMITTED BY THE BIRMINGHAM NURSERIES AND THE NEXT LOW BID OF $39,978--- A DIFFERENCE OF $12,898--- SUCH DIFFERENCE SHOULD NOT BE CONTROLLING AS TO WHETHER THERE SHOULD BE DISREGARDED THE BID OF THE BIRMINGHAM NURSERIES BY REASON OF THE OTHER TWO CONTRACTS AWARDED BY THE GOVERNMENT TO SAID COMPANY AND REQUIRING ALL OR PRACTICALLY ALL OF THE FINANCIAL RESOURCES OF SAID COMPANY FOR THEIR PERFORMANCE. HOWEVER, THE DIFFERENCE BETWEEN THE TWO BIDS RAISES A SERIOUS QUESTION WHETHER THE NEXT TO THE LOW BID PROPOSED TO BE ACCEPTED IS NOT EXCESSIVE AND WHETHER ALL BIDS SHOULD NOT BE REJECTED WITH READVERTISEMENT IN AN EFFORT TO REDUCE THE DIFFERENCE OF $12,898 TO A MUCH SMALLER SUM. THERE IS NO LEGAL REQUIREMENT THAT THIS BE DONE, BUT CAREFUL ADMINISTRATIVE CONSIDERATION SHOULD BE GIVEN TO THE QUESTION WHETHER A LOWER BID THAN $39,978 MIGHT NOW BE RECEIVED FROM AN ACCEPTABLE BIDDER.

ANSWERING YOUR QUESTION SPECIFICALLY, YOU ARE ADVISED THAT IN VIEW OF THE FACTS SUMMARIZED IN THE ABOVE QUOTED LETTER OF MAY 7, 1937, THIS OFFICE IS NOT REQUIRED TO OBJECT IF IT IS ADMINISTRATIVELY DETERMINED AS IN THE INTEREST OF THE UNITED STATES AND NOT OBJECTED TO BY THE BIDDER, NOT TO AWARD THE CONTRACT TO THE BIRMINGHAM NURSERIES UPON ITS BID FOR THE LANDSCAPE WORK AT THE SMITHFIELD COURT HOUSING PROJECT IN BIRMINGHAM, ALA.