A-87549, OCTOBER 6, 1937, 17 COMP. GEN. 312

A-87549: Oct 6, 1937

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ON THE BASIS THAT EXPENSES WERE INCURRED IN PREPARATION FOR PERFORMING THE WORK COVERED BY THE AWARD. ARE NOT AUTHORIZED WHERE CONTRACTING OFFICER'S REJECTION OF THE OFFER OF THE LOWEST RESPONSIBLE BIDDER WAS FOUND UPON ADMINISTRATIVE REVIEW TO HAVE BEEN IMPROPER AND UNAUTHORIZED. PARTICULARLY WHERE NO ACTUAL SERVICES HAVE BEEN RENDERED OR ANYTHING OF VALUE RECEIVED FOR CONSIDERATION IN SETTLEMENT ON A QUANTUM VALEBAT BASIS. - KNOWING THAT IT WAS NOT THE LOWEST BIDDER. - WERE ON NOTICE THAT IT WAS NOT ENTITLED TO THE AWARD IF LATER DECIDED BY COMPETENT AUTHORITY THAT ANY OF THE LOWER BIDDERS WERE RESPONSIBLE. IS IN PERTINENT PART. AS FOLLOWS: THIS WILL ACKNOWLEDGE RECEIPT OF YOUR LETTER DATED AUGUST 9.

A-87549, OCTOBER 6, 1937, 17 COMP. GEN. 312

CONTRACTS - AWARDS - UNAUTHORIZED - GOVERNMENT LIABILITY PAYMENTS UNDER AN AWARD TO ANOTHER THAN THE LOWEST RESPONSIBLE BIDDER, ON THE BASIS THAT EXPENSES WERE INCURRED IN PREPARATION FOR PERFORMING THE WORK COVERED BY THE AWARD, ARE NOT AUTHORIZED WHERE CONTRACTING OFFICER'S REJECTION OF THE OFFER OF THE LOWEST RESPONSIBLE BIDDER WAS FOUND UPON ADMINISTRATIVE REVIEW TO HAVE BEEN IMPROPER AND UNAUTHORIZED, PARTICULARLY WHERE NO ACTUAL SERVICES HAVE BEEN RENDERED OR ANYTHING OF VALUE RECEIVED FOR CONSIDERATION IN SETTLEMENT ON A QUANTUM VALEBAT BASIS, AND THE RESPONSIBLE OFFICIALS OF THE COMPANY--- KNOWING THAT IT WAS NOT THE LOWEST BIDDER--- WERE ON NOTICE THAT IT WAS NOT ENTITLED TO THE AWARD IF LATER DECIDED BY COMPETENT AUTHORITY THAT ANY OF THE LOWER BIDDERS WERE RESPONSIBLE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, OCTOBER 6, 1937:

YOUR LETTER OF AUGUST 19, 1937, REPORTING ADMINISTRATIVE FINDINGS OF FACT AND REQUESTING MY DECISION THEREON, IS IN PERTINENT PART, AS FOLLOWS:

THIS WILL ACKNOWLEDGE RECEIPT OF YOUR LETTER DATED AUGUST 9, 1937, HAVING REFERENCE TO BIDS FOR THE INSTALLATION OF STOKERS AT FORT DES MOINES, IOWA. A CAREFUL REVIEW OF YOUR LETTER LEADS TO THE BELIEF THAT LETTER FROM THIS DEPARTMENT DATED JULY 27, 1937, WAS NOT ALTOGETHER CLEAR IN ITS EXPOSITION OF THE MATTER AND ITS REQUEST FOR THE DECISION DESIRED FROM YOUR OFFICE.

THE SPECIFICATIONS PREPARED BY THE AUTHORITIES AT FORT DES MOINES HAD BEEN REVIEWED BY THE OFFICE OF THE QUARTERMASTER GENERAL AND THESE SPECIFICATIONS ADEQUATELY DESCRIBED REQUIREMENTS FOR THE STOKERS. THE NECESSITY FOR SUCH INSTALLATIONS HAD BEEN PREVIOUSLY DETERMINED, THE PROJECT APPROVED, AND THE FUNDS THEREFOR PROVIDED BY THE OFFICE OF THE QUARTERMASTER GENERAL.

PARTICULAR ATTENTION IS INVITED TO THE FACT THAT, IN EACH INSTANCE, THE ONLY REASON GIVEN FOR THE REJECTION OF THE BID OF THE UNIVERSITY AVENUE COAL COMPANY WAS FAILURE TO FURNISH CERTAIN INFORMATION CALLED FOR BY THE SPECIFICATIONS. SO FAR AS STRUCTURAL DETAILS ARE CONCERNED THE STOKERS OFFERED BY THIS BIDDER CONFORM TO THE REQUIREMENTS OF THE SPECIFICATIONS. THE INFORMATION REQUIRED TO BE FURNISHED BY THE BIDDERS COULD HAVE BEEN OBTAINED FROM THIS BIDDER AFTER THE OPENING AND BEFORE ARRIVING AT A DECISION AS TO MAKING AWARDS. NO EFFORT WAS MADE BY LOCAL AUTHORITIES TO OBTAIN THIS INFORMATION. * * *

IT WAS NOT THE INTENTION OF LETTER OF JULY 27TH FROM THIS DEPARTMENT TO PRESENT FOR YOUR CONSIDERATION THE PROBLEM OF DETERMINING THE ADEQUACY OF THE SPECIFICATIONS OR THE COMPLIANCE OF THE VARIOUS OFFERINGS WITH THOSE SPECIFICATIONS; FOR SUCH DETERMINATIONS THE PERSONNEL OF THE OFFICE OF THE QUARTERMASTER GENERAL IS BOTH ADEQUATE AND COMPETENT. IT WILL BE NOTED THAT NO COMPLAINT HAS BEEN MADE REGARDING THE ADEQUACY OR THE FAIRNESS OF THE SPECIFICATIONS. CAREFUL REVIEW OF THE BIDS BY THE OFFICE OF THE QUARTERMASTER GENERAL INDICATES THAT AWARD UNDER CIRCULAR NO. 251-37-86 SHOULD HAVE BEEN MADE TO THE UNIVERSITY AVENUE COAL COMPANY AND UNDER CIRCULAR NO. 251 37-87 TO EITHER THE STEEL PRODUCTS ENGINEERING COMPANY OR TO THE VORSE STOKER COMPANY, OFFERING BIDS IDENTICAL AS TO PRICE.

* * * THE PARTICULAR QUESTION, THEREFORE, ON WHICH DECISION OF YOUR OFFICE IS DESIRED IS WHETHER APPROPRIATED FUNDS CAN BE EXPENDED IN CONNECTION WITH THE AWARD OF CONTRACT TO THE FRED KEATING COAL COMPANY UNDER THE CIRCUMSTANCES HEREIN DESCRIBED.

THE ABSTRACT OF BIDS SUBMITTED UNDER CIRCULAR NO. 251-37-86 SHOWS THAT SIX ALTERNATE BIDS WERE RECEIVED FOR THE INSTALLATION OF 16 AUTOMATIC STOKERS RANGING FROM THE $4,710.55 BID OF THE UNIVERSITY AVENUE COAL CO.-- - WHICH THE SECRETARY OF WAR HAS FOUND AND REPORTED TO BE THE LOWEST RESPONSIBLE BIDDER TO WHOM THE AWARD ON THIS INVITATION SHOULD HAVE BEEN MADE--- TO $6,623.28, THE HIGHEST BID RECEIVED. THE FRED KEATING COAL CO., OF DES MOINES, WHICH HAS CLAIMED IT HAS A VALID CONTRACT ON ITS ALTERNATE BID FOR THE INSTALLATION OF THE STOKERS COVERED BY THIS INVITATION, BID $5,060, OR $349.45 MORE THAN THE LOWEST BIDDER FOUND RESPONSIBLE.

THE ABSTRACT OF BIDS SUBMITTED UNDER CIRCULAR NO. 251-37-87 SHOWS THAT 10 BIDS WERE RECEIVED FOR THE INSTALLATION OF 13 AUTOMATIC STOKERS, RANGING FROM $3,500 TO $9,425. YOU HAVE FOUND AND REPORTED THAT THE STEEL PRODUCTS ENGINEERING CO. AND THE VORSE STOKER CO., WHOSE BIDS OF $6,990 ARE IDENTICAL, ARE THE LOWEST RESPONSIBLE BIDDERS UPON THIS INVITATION. THE FRED KEATING COAL O., WHICH HAS CLAIMED IT HAS A VALID CONTRACT FOR THE INSTALLATION OF THE STOKERS COVERED BY THIS INVITATION, BID $7,862, OR $872 MORE THAN THE LOWEST BID FROM A BIDDER YOU HAVE FOUND RESPONSIBLE.

THE LOCAL QUARTERMASTER AT FORT DES MOINES IS REPORTED TO HAVE MADE AWARDS UNDER BOTH INVITATIONS TO THE FRED KEATING COAL CO. ON THE BASIS OF ITS HIGHER BIDS. THAT COMPANY CLAIMS THAT IT HAS INCURRED CERTAIN COSTS IN PREPARATION FOR CARRYING OUT ITS ALLEGED CONTRACTS ON THE BASIS OF THESE AWARDS, BUT IT IS UNDERSTOOD THAT THERE HAS BEEN NO DELIVERY OF ANYTHING OF VALUE TO THE WAR DEPARTMENT AND THERE HAS BEEN NO INSTALLATION OF THE AUTOMATIC STOKERS AT FORT DES MOINES.

IN 36 OP.ATTY.GEN. 33, 37, IT WAS SAID:

THE REAL QUESTION IN THE CASE IS WHETHER THE CONTRACT IS VOID. * * * THE PURPOSE OF CONGRESS IN REQUIRING THAT CONTRACTS SHALL BE LET AFTER PUBLIC ADVERTISEMENT IS TO PROCURE OPEN COMPETITION. ANY COURSE OF ACTION WHICH HAS THE EFFECT OF DEFEATING THAT PURPOSE WOULD BE CONTRARY TO LAW. * * *

IN 33 OP.ATTY.GEN. 453, THE ATTORNEY GENERAL STATED HIS OPINION AS FOLLOWS:

THE THEORY OF THE BIDDING FOR THIS, AS WELL AS OTHER GOVERNMENT WORK, IS THAT THE GOVERNMENT SHOULD HAVE ALL THE BENEFITS INCIDENT TO COMPETITION AND THAT THE CONTRACT SHOULD BE AWARDED TO THE LOWEST RESPONSIBLE BIDDER.

IN AN OPINION TO YOU OF JANUARY 12, 1935, CONCERNING AIRCRAFT PROCUREMENT, AT PAGE 9, THE ATTORNEY GENERAL SAID:

* * * WHERE NO TRUE EMERGENCY IS INVOLVED, THE LAW CONTEMPLATES COMPETITION, NOT NECESSARILY WIDE PUBLICITY, BUT ALL ACTUAL COMPETITION THE INDUSTRY AFFORDS--- TO THE END THAT ALL IN A POSITION TO SUPPLY THE NEED MAY BE GIVEN OPPORTUNITY TO BID, AND THAT THE GOVERNMENT MAY HAVE THE ADVANTAGE OF THE LOWEST OFFER * * *

IN SCOTT V. UNITED STATES, 44 CT.CLS. 524, 527, THE UNITED STATES COURT OF CLAIMS HELD:

THE AGENTS OF THE GOVERNMENT STAND UPON A DIFFERENT FOOTING FROM PRIVATE INDIVIDUALS IN THE MATTER OF ADVERTISING FOR THE LETTING OF CONTRACTS IN BEHALF OF THE UNITED STATES. THEY HAVE NO DISCRETION. THEY MUST ACCEPT THE LOWEST OR (IN CASE OF SALES) THE HIGHEST RESPONSIBLE BID, OR REJECT ALL AND READVERTISE. PRIVATE INDIVIDUALS ARE NOT REQUIRED THUS TO ACT. HENCE IT IS APPARENT THAT GOVERNMENT AGENTS SHOULD BE ALLOWED A REASONABLE TIME AFTER THE OPENING OF BIDS BEFORE THEY ARE ALLOWED TO BE WITHDRAWN, *

CONTRACTS MADE IN VIOLATION OF SUCH RULE HAVE BEEN HELD VOID. SCHNEIDER V. UNITED STATES, 19 CT.CLS. 547, CITING CLARK V. UNITED STATES, 95 U.S. 539; UNITED STATES V. SPEED, 8 WALL. 77.

THE REASON FOR THE RULE, AS ESTABLISHED BY THE DECISIONS OF BOTH FEDERAL AND STATE COURTS, IS SUMMARIZED IN 30 L.R.A. (NS) 214, IN THE SYNOPSIS TO THE CASE OF HANNAN V. BOARD OF EDUCATION, C., 107 PAC. 646, AS FOLLOWS:

THE TRUE INTENT AND PURPOSE OF THE STATUTE REQUIRING CERTAIN CONTRACTS TO BE LET ONLY ON SEALED PROPOSALS TO THE LOWEST RESPONSIBLE BIDDER IS TO SECURE ECONOMY, AND PROTECT THE PUBLIC FROM COLLUSIVE CONTRACTS, FAVORITISM, OR FRAUD, AND TO PROMOTE ACTUAL, HONEST, EFFECTIVE COMPETITION IN THE CONSTRUCTION OF PUBLIC WORK BY REQUIRING OF BOARDS THE PRESENTATION OF A COMMON STANDARD PREVIOUSLY ASCERTAINED, TO THE END THAT EACH PROPOSAL OR BID RECEIVED AND CONSIDERED MAY BE IN COMPETITION WITH ALL OTHERS, AND TO PRECLUDE THE CONSIDERATION AND ACCEPTANCE OF PROPOSALS OR BIDS ON PLANS AND SPECIFICATIONS NOT OPEN TO ALL.

ALL OFFICERS OF THE GOVERNMENT, FROM THE HIGHEST TO THE LOWEST, ARE CREATURES OF THE LAW AND BOUND TO OBEY IT. UNITED STATES V. LEE, 106 U.S. 196, 220.

ACTS OF A PUBLIC OFFICER IN EXCESS OF HIS AUTHORITY ARE VOID AND DO NOT BIND OR ESTOP THE GOVERNMENT. PIERCE V. UNITED STATES (THE FLOYD ACCEPTANCES), 7 WALL. 666; MAMMOTH OIL CO. V. UNITED STATES, 275 U.S. 13; PAN AMERICAN CO. V. UNITED STATES, 273 U.S. 456; UNITED STATES V. AMERICAN SALES CORP., 27 F./2D) 389, AFFIRMED 34 F./2D) 141, CERTIORARI DENIED, 280 U.S. 574.

STATE COURTS FREQUENTLY HAVE REFUSED TO ALLOW ANY PAYMENT FOR GOODS DELIVERED AND SERVICES RENDERED WHERE THE AWARD WAS NOT MADE TO THE LOWEST RESPONSIBLE BIDDER, EVEN WHEN APPARENTLY THERE WAS NO SUSPICION OF COLLUSION, MISREPRESENTATION, OR FRAUD. RICE V. LAKE TWP., 40 PA.SUPER.CT. 337; MILAN V. BOWRON, 193 N.Y. 180, 85 N.E. 1012; BOURGEOIS V. ATLANTIC COUNTY, 82 N.J.L. 82, 81 ATL. 358; ANNOTATION L.R.A. 1915 A, PP. 904-906. THE REASON OF THE RULE IN THESE STATE CASES IS STATED IN BOARD OF COUNTY COMMISSIONERS OF PONTOTOC COUNTY V. CAREY, LOMBARD, YOUNG AND CO., NO. 26461 IN THE OKLAHOMA SUPREME COURT, DECIDED (PER CURIAM) OCTOBER 20, 1936, AS FOLLOWS:

IT SEEMS A HARSH RULE THAT IN ORDER TO PROTECT THE PUBLIC FROM THE ACTS OF ITS AGENTS A COURT MUST HOLD A COUNTY NOT LIABLE EVEN WHERE IT IS ADMITTED, AS IN THIS CASE, THAT THE COUNTY RECEIVED THE LUMBER AND HAD THE USE OF IT FOR THE BENEFIT OF THE PUBLIC AT LARGE, YET AT THE SAME TIME THE STATUTES HEREIN CITED HAVE BEEN PASSED FOR THE BENEFIT OF THE PUBLIC AT LARGE, AND SINCE EVERYONE IS REQUIRED TO TAKE NOTICE OF THOSE STATUTES, IT IS NOT UNREASONABLE TO REQUIRE A PERSON DEALING WITH A PUBLIC AGENT TO FOLLOW THE STATUTES, AND THAT IF IN CONTRACTING ONE GOES BEYOND THE LIMITATIONS IMPOSED * * * HE DOES SO AT HIS OWN PERIL. IN RE TOWN OF AFTON, 43 OKLA. 720, 144 P. 184, L.R.A. 1915 D, 978; CITY OF ENID V. WARNER-QUINLAN ASPHALT CO., 62 OKLA. 139, 161 P. 1092.

AND, LIKEWISE, THE SUPREME COURT OF THE UNITED STATES HAS HELD THAT INDIVIDUALS AS WELL AS COURTS MUST TAKE NOTICE OF THE EXTENT OF THE AUTHORITY CONFERRED BY LAW UPON A PERSON ACTING IN AN OFFICIAL CAPACITY, AS WAS THE LOCAL QUARTERMASTER AT DES MOINES IN THIS PARTICULAR CASE. AMONG OTHER CASES SO HOLDING, SEE HAWKINS V. UNITED STATES, 96 U.S. 689.

DECIDING THE SPECIFIC QUESTION YOU HAVE PRESENTED OF WHETHER APPROPRIATED FUNDS CAN BE EXPENDED IN CONNECTION WITH THE AWARDS TO THE FRED KEATING COAL CO. UPON THE FACTS AS YOU HAVE REPORTED THEM, YOU ARE INFORMED THAT SINCE NO ACTUAL SERVICES HAVE BEEN RENDERED OR ANYTHING OF VALUE RECEIVED FOR DIRECT SETTLEMENT ON A QUANTUM VALEBAT BASIS, AND THE AWARDS NOT HAVING BEEN MADE TO THE LOWEST BIDDER YOU HAVE FOUND RESPONSIBLE SO AS TO CONSTITUTE VALID CONTRACTS, I WOULD NOT BE AUTHORIZED TO APPROVE OR ALLOW FOR CREDIT ANY PAYMENTS FROM APPROPRIATED FUNDS TO THE FRED KEATING COAL CO. UPON THE BASIS OF THE AWARDS MADE BY THE LOCAL QUARTERMASTER AT DES MOINES IN THESE TWO INSTANCES.

IT MAY BE SAID FURTHER--- IN CONNECTION WITH THE SUGGESTION WHICH HAS BEEN MADE THAT THE FRED KEATING COAL CO. HAS INCURRED CERTAIN COSTS IN PREPARATION FOR PERFORMING THE INSTALLATION OF THE AUTOMATIC STOKERS--- THAT THE RESPONSIBLE OFFICIALS OF SAID COMPANY WELL KNEW THAT IT WAS NOT THE LOWEST BIDDER ON EITHER INVITATION AND, ACCORDINGLY, WERE ON NOTICE THAT IT WAS NOT ENTITLED TO THE AWARDS AND DERIVED NO LEGAL RIGHTS THEREUNDER IF IT LATER SHOULD BE FOUND AND DECIDED BY COMPETENT AUTHORITY- -- AS IT HAS BEEN--- THAT ANY OF THE LOWER BIDDERS WERE RESPONSIBLE. ANY COSTS INCURRED BY SAID BIDDER, THEREFORE, WERE VERY DEFINITELY AT ITS OWN PERIL, FOR WHICH NO LEGAL LIABILITY WOULD SEEM TO ATTACH TO THE UNITED STATES--- AND PARTICULARLY SO SINCE THAT COMPANY WAS PROMPTLY PLACED ON NOTICE OF THE QUARTERMASTER GENERAL'S FINDING THAT IT WAS NOT THE LOWEST RESPONSIBLE BIDDER ON EITHER INVITATION.