A-89791, DECEMBER 8, 1937, 17 COMP. GEN. 476

A-89791: Dec 8, 1937

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SHIPPING POINT WERE NOT STATED. BIDS WERE SUBMITTED BY ALL BIDDERS QUOTING DESTINATION PRICES ONLY. ALL OF WHICH WERE IDENTICAL. WAS NOT APPROVED BY HIS SUPERIOR OFFICER AND NO CONTRACT APPEARS TO HAVE BEEN ENTERED INTO AS PROVIDED IN SECTION 3744. " THERE IS NO LIABILITY FOR FAILURE TO CONTRACT WITH THE PROTESTING BIDDER INVOLVED. AS FOLLOWS: FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 26. UNDER PARAGRAPH 3 OF THE SPECIFICATIONS BIDDERS WERE INVITED TO QUOTE THE PRICE FOR WHICH THEY WOULD FURNISH THE CEMENT F.O.B. THE GOVERNMENT SHOULD HAVE THE RIGHT TO DETERMINE THE F.O.B. TWELVE BIDS WERE RECEIVED. WHICHEVER IS THE LOWEST.'. IT WAS CONCLUDED THAT THE BID OF THE VOLUNTEER PORTLAND CEMENT COMPANY CONTAINED NO DEFINITE OR CERTAIN ADVANTAGE TO THE UNITED STATES AND THAT AWARD SHOULD BE MADE STRICTLY ON THE BASIS PROVIDED IN THE INVITATION.

A-89791, DECEMBER 8, 1937, 17 COMP. GEN. 476

ADVERTISING - BIDDERS - COMBINATIONS - AWARD PROCEDURE AND REPORTING OF COLLUSIVE BIDS - GOVERNMENT LIABILITY UNDER AWARD NOT APPROVED BY SUPERIOR OFFICER WHERE ADVERTISED SPECIFICATIONS REQUIRED BIDS F.O.B. BIDDER'S SHIPPING POINT AND F.O.B. DESTINATION, WITH A PROVISION THAT IF PRICES F.O.B. SHIPPING POINT WERE NOT STATED, THEY WOULD BE DETERMINED BY DEDUCTION FROM DESTINATION BID PRICE, OF THE COST OF TRANSPORTATION AT COMMERCIAL FREIGHT RATES FROM BIDDER'S SHIPPING POINT TO POINT OF DESTINATION, AND BIDS WERE SUBMITTED BY ALL BIDDERS QUOTING DESTINATION PRICES ONLY, ALL OF WHICH WERE IDENTICAL, AND ALL PROVIDING FOR DETERMINATION OF THE F.O.B. SHIPPING POINT PRICES BY AN IDENTICAL METHOD DIFFERENT FROM THAT REQUIRED BY THE SPECIFICATIONS, AND LESS ADVANTAGEOUS TO THE GOVERNMENT, THE BIDS, ALTHOUGH OBJECTIONABLE, MAY BE CONSIDERED WHERE THE INTEREST OF THE GOVERNMENT SO REQUIRES, BUT AWARD SHOULD BE MADE ON THE BASIS OF THE BIDDER OFFERING TO ACCEPT THE LOWEST PAYMENT FOR THE SUPPLIES TO BE DELIVERED, DETERMINED BY THE BID WHICH, ALTHOUGH IDENTICAL WITH THE OTHER BIDS AS TO FREIGHT COST DEDUCTION PROVISION, INVOLVES THE HIGHEST GOVERNMENT FREIGHT RATE TO THE F.O.B. GOVERNMENT DELIVERY POINT, BUT SUCH COLLUSIVE BIDDING SHOULD BE BROUGHT TO THE ATTENTION OF THE DEPARTMENT OF JUSTICE AND THE FEDERAL TRADE COMMISSION. WHERE AN AWARD MADE BY A SUBORDINATE WAR DEPARTMENT OFFICER, ON THE BASIS OF A BID STIPULATION FOREIGN TO THE ADVERTISED SPECIFICATION REQUIREMENTS, WAS NOT APPROVED BY HIS SUPERIOR OFFICER AND NO CONTRACT APPEARS TO HAVE BEEN ENTERED INTO AS PROVIDED IN SECTION 3744, REVISED STATUTES, REQUIRING THAT WAR DEPARTMENT CONTRACTS "BE REDUCED TO WRITING, AND SIGNED BY THE CONTRACTING PARTIES WITH THEIR NAMES AT THE END THEREOF," THERE IS NO LIABILITY FOR FAILURE TO CONTRACT WITH THE PROTESTING BIDDER INVOLVED, EVEN IF HIS BID HAD BEEN ACCEPTABLE.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, DECEMBER 8, 1937:

THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 29, 1937, AS FOLLOWS:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 26, 1937, WHEREIN YOU QUOTE A TELEGRAM WHICH YOU RECEIVED FROM THE VOLUNTEER PORTLAND CEMENT COMPANY, KNOXVILLE, TENNESSEE, DATED OCTOBER 21, 1937, PROTESTING THE AWARD OF CONTRACT TO THE CONSOLIDATED CEMENT CORPORATION, FREDONIA, KANSAS, FOR FURNISHING APPROXIMATELY 22,500 BARRELS OF PORTLAND CEMENT PURSUANT TO BIDS RECEIVED OCTOBER 1, 1937, BY THE UNITED STATES DISTRICT ENGINEER, VICKSBURG, MISSISSIPPI.

UNDER PARAGRAPH 3 OF THE SPECIFICATIONS BIDDERS WERE INVITED TO QUOTE THE PRICE FOR WHICH THEY WOULD FURNISH THE CEMENT F.O.B. RAILROAD CARS OR BARGE AT THE CONTRACTOR'S SHIPPING POINT, TO ENABLE A DETERMINATION OF WHETHER A SAVING WOULD ACCRUE TO THE GOVERNMENT BY EFFECTING SHIPMENT ON A GOVERNMENT BILL OF LADING, AND THE PRICE FOR WHICH THEY WOULD FURNISH THE CEMENT F.O.B. DESTINATION.

PARAGRAPH 6 OF THE SPECIFICATIONS PROVIDED THAT AWARD WOULD BE MADE ON THE BASIS OF THE LOWEST DELIVERED COST TO THE GOVERNMENT AND THAT, IN THE EVENT A BIDDER FAILED TO QUOTE A PRICE F.O.B. MILL, THE GOVERNMENT SHOULD HAVE THE RIGHT TO DETERMINE THE F.O.B. MILL PRICE BY DEDUCTING FROM HIS F.O.B. DESTINATION PRICE THE COST OF TRANSPORTATION AT COMMERCIAL FREIGHT RATES AND TO MAKE AWARD AT THE BIDDER'S PRICE F.O.B. MILL SO DETERMINED.

TWELVE BIDS WERE RECEIVED, EACH DECLINING TO QUOTE A PRICE F.O.B. MILL, EACH QUOTING AN IDENTICAL NET PRICE FOR DELIVERY F.O.B. DESTINATION, AND EACH CONTAINING A QUALIFICATION CLAUSE IN SUBSTANTIALLY IDENTICAL WORDING TO THE EFFECT THAT "THE U.S. GOVERNMENT SHALL DETERMINE ITS CONTRACT PRICE F.O.B. CARS--- (CONTRACTOR'S SHIPPING POINT) ON SHIPMENTS MOVING ON U.S. GOVERNMENT BILLS OF LADING TO THE ABOVE NAMED DESTINATION ONLY, BY SUBTRACTING FROM THE ABOVE MENTIONED DESTINATION COST TO THE U.S. GOVERNMENT THE LAND GRANT RATE AS DETERMINED BY THE U.S. GOVERNMENT AS BEING APPLICABLE FROM--- (CONTRACTOR'S SHIPPING POINT) TO SAID DESTINATION OR THE ACTUAL COMMERCIAL RATE OR SPECIAL U.S. GOVERNMENT RATE APPLICABLE FROM--- (CONTRACTOR'S SHIPPING POINT) TO SAID DESTINATION, WHICHEVER IS THE LOWEST.'

THE VOLUNTEER PORTLAND CEMENT COMPANY ADDED A FURTHER QUALIFICATION TO THE EFFECT THAT,"THE GOVERNMENT SHALL NEVER BE REQUIRED TO PAY, WITH RESPECT TO ANY SHIPMENT OF CEMENT HEREUNDER, A PRICE IN EXCESS OF A PRICE AT WHICH THE SELLER, AT THE TIME OF SUCH SHIPMENT, OFFERS TO MAKE CURRENT SALES OF CEMENT AT THE PLACE OF DELIVERY HEREIN SPECIFIED.'

THE DISTRICT ENGINEER CONSIDERED THE BID OF THE VOLUNTEER PORTLAND CEMENT COMPANY ADVANTAGEOUS TO THE GOVERNMENT AND MADE AWARD ACCORDINGLY. UPON REVIEW OF HIS ACTION BY THE OFFICE OF THE CHIEF OF ENGINEERS, IT WAS CONCLUDED THAT THE BID OF THE VOLUNTEER PORTLAND CEMENT COMPANY CONTAINED NO DEFINITE OR CERTAIN ADVANTAGE TO THE UNITED STATES AND THAT AWARD SHOULD BE MADE STRICTLY ON THE BASIS PROVIDED IN THE INVITATION. ON THE BASIS OF SUCH EVALUATION THE DISTRICT ENGINEER WAS INSTRUCTED TO CANCEL THE AWARD TO THE VOLUNTEER PORTLAND CEMENT COMPANY AND TO MAKE AWARD TO THE CONSOLIDATED CEMENT CORPORATION, THE LOWEST EVALUATED BID.

IT IS QUITE APPARENT THAT ALL BIDS RECEIVED WERE COLLUSIVE, THAT THE BIDDERS ASSUMED TO DICTATE THE TERMS AND CONDITIONS UPON WHICH DELIVERY WOULD BE MADE, AND THAT AWARD AS FINALLY MADE WAS IN STRICT ACCORDANCE WITH THE REGULATIONS PERTAINING TO EVALUATING BIDS. IN THIS CASE DELIVERED COSTS TO THE UNITED STATES WERE IDENTICAL AND APPARENTLY BECAME IDENTICAL BY AGREEMENT BETWEEN THE BIDDERS TO DEPRIVE THE GOVERNMENT OF ITS RIGHT TO OBTAIN THE ADVANTAGE OF GOVERNMENT FREIGHT RATES AND RESERVE THIS ADVANTAGE TO THE BENEFIT OF THE SUCCESSFUL BIDDER. IT WAS THEREFORE CONSIDERED TO THE ADVANTAGE OF THE GOVERNMENT TO AWARD THE CONTRACT TO THE BIDDER OFFERING TO ACCEPT THE LOWEST PAYMENT FROM THE GOVERNMENT IN RETURN FOR THE SUPPLIES FURNISHED.

THE FACTS SET FORTH IN THE ABOVE-QUOTED LETTER WOULD INDICATE THAT THIS CASE PRESENTS A SITUATION SIMILAR TO THAT CONSIDERED IN AN OPINION DATED AUGUST 10, 1937, BY THE ATTORNEY GENERAL OF THE UNITED STATES, TO THE EFFECT THAT THE DEPARTMENT OF JUSTICE WOULD EXAMINE SUCH IDENTICAL BIDS TO SEE WHETHER THERE HAD BEEN ANY VIOLATION OF THE ANTITRUST LAWS IN EVENT SUCH BIDS WERE ADMINISTRATIVELY REFERRED TO SAID DEPARTMENT. OF COURSE, IDENTICAL OR COLLUSIVE BIDS LIKEWISE MAY BE REFERRED TO THE FEDERAL TRADE COMMISSION FOR INVESTIGATION AS TO WHETHER THERE HAS BEEN ANY COMBINATION IN RESTRAINT OF COMPETITION OR OTHER UNFAIR TRADE PRACTICES.

FURTHER, WHILE THE BIDS RECEIVED IN THIS INSTANCE ARE NOT AS OBJECTIONABLE AS THE BIDS CONSIDERED IN DECISION OF MARCH 23, 1935, TO THE SECRETARY OF THE INTERIOR, A-60755, IN THAT THOSE BIDS QUOTED ONLY ONE DESTINATION PRICE WITH A PROVISION TO THE EFFECT THAT IF SHIPMENT BE MADE ON A GOVERNMENT BILL OF LADING THERE COULD BE DEDUCTED FROM SAID DESTINATION PRICE THE COST TO THE GOVERNMENT OF EFFECTING SUCH SHIPMENT, WHEREAS IN THE PRESENT CASE TWO SEPARATE PRICES ARE QUOTED, TO WIT, A DESTINATION PRICE AND A LOWER PRICE TO BE USED IN DETERMINING THE POINT-OF -SHIPMENT PRICE IF SHIPMENT IS TO BE MADE ON GOVERNMENT BILL OF LADING, STILL THESE BIDS DO NOT, AS REQUESTED IN THE INVITATION, QUOTE A BONA FIDE F.O.B. BIDDER'S SHIPPING-POINT PRICE. HENCE, BIDS SUBMITTED ON THE BASIS OF THE BIDS HERE IN QUESTION ARE OBJECTIONABLE IN THAT THEY MAY RESULT IN DEPRIVING THE GOVERNMENT OF THE FULL BENEFIT OF THE LAND-GRANT OR EQUALIZATION AGREEMENT RATES APPLICABLE TO SHIPMENTS ON GOVERNMENT BILLS OF LADING. THAT IS TO SAY, IF THE DIFFERENCE BETWEEN THE TWO PRICES QUOTED BY A BIDDER UNDER BIDS IN THE FORM OF THOSE HERE IN QUESTION IS LESS THAN THE DIFFERENCE BETWEEN THE AMOUNT OF THE COMMERCIAL FREIGHT AND THE AMOUNT OF THE FREIGHT AT THE RATE APPLICABLE TO THE GOVERNMENT ON THE SHIPMENT INVOLVED, THE GOVERNMENT WOULD NOT RECEIVE THE FULL BENEFIT WHICH IT SHOULD RECEIVE AS A RESULT OF BUYING F.O.B. SHIPPING POINT AND MAKING THE SHIPMENT ON GOVERNMENT BILL OF LADING.

HOWEVER, IT IS APPRECIATED THAT IN THIS INSTANCE--- AS IN THE CASES CONSIDERED IN A-83059, DATED JANUARY 28, 1937, AND A-83392, DATED FEBRUARY 5, 1937--- WHERE THE UNITED STATES REQUIRES DELIVERY OF THE CEMENT, THE CONTRACTING AGENCIES MAY HAVE NO CHOICE BUT TO ACCEPT THE LOWEST OR MOST ADVANTAGEOUS BID RECEIVED AFTER PROPER ADVERTISING. BUT SINCE THE ENFORCEMENT OF THE ANTITRUST LAWS AND THE LAWS AGAINST UNFAIR METHODS OF COMPETITION IS COMMITTED TO THE DEPARTMENT OF JUSTICE AND TO THE FEDERAL TRADE COMMISSION, RESPECTIVELY, THE CONTRACTING AGENCIES CONCERNED SHOULD CALL TO THE ATTENTION OF SAID DEPARTMENT AND COMMISSION EACH INSTANCE OF WHAT APPEARS TO BE COLLUSIVE BIDDING.

IN THIS PARTICULAR CASE, THE CHIEF OF ENGINEERS DID NOT APPROVE THE PROPOSED ACTION OF THE DISTRICT ENGINEER IN AWARDING THE CONTRACT TO THE VOLUNTEER PORTLAND CEMENT CO. AND NO CONTRACT APPEARS TO HAVE BEEN ENTERED INTO AS PROVIDED IN SECTION 3744, REVISED STATUTES. SEE 17 COMP. GEN. 312 AND CASES THERE CITED. UNDER THESE CIRCUMSTANCES IT MUST BE CONCLUDED THAT THERE IS NO LIABILITY FOR FAILURE TO CONTRACT WITH THE VOLUNTEER PORTLAND CEMENT CO., EVEN IF THE BID HAD BEEN ACCEPTABLE. THE COMPANY WILL BE ADVISED ACCORDINGLY.

SINCE THE CONTRACT HAS BEEN ENTERED INTO WITH THE BIDDER OFFERING TO ACCEPT THE LOWEST PAYMENT FROM THE GOVERNMENT IN RETURN FOR THE SUPPLIES DELIVERED, THIS OFFICE IS NOT REQUIRED TO WITHHOLD THE USES OF PUBLIC MONEY FOR MAKING PAYMENT THEREUNDER; THAT IS, TO THE BIDDER WHOSE BID INVOLVES THE HIGHEST GOVERNMENT FREIGHT RATE TO THE F.O.B. GOVERNMENT DELIVERY POINT AND THEREBY RESULTS IN THE UNITED STATES SECURING THE LARGEST DEDUCTION BY REASON OF SHIPMENT ON GOVERNMENT BILLS OF LADING.