A-94917, JULY 1, 1938, 18 COMP. GEN. 1

A-94917: Jul 1, 1938

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THE SPECIFICATIONS ARE SO CHANGED AS TO ELIMINATE FROM CONSIDERATION THE BID OF THE FORMER SUCCESSFUL BIDDER WHOSE PRODUCT IS ADMITTED TO BE SATISFACTORY UNDER THE OLD SPECIFICATIONS AND WILL BE USED TO INCLUDE THE DAY PRIOR TO THE BEGINNING OF DELIVERIES UNDER THE CHANGED SPECIFICATIONS. IS UNAUTHORIZED. WOULD HAVE BEEN ENABLED TO MAKE DELIVERIES MEETING THE NEW SPECIFICATIONS PRIOR TO THE NEW CONTRACT PERIOD. IS AS FOLLOWS: REFERENCE IS MADE TO YOUR LETTER OF MAY 19. WHICH WERE OPENED ON APRIL 29. OF THE ITEMS CALLED FOR IN THE ABOVE INVITATION THOSE IN CONTROVERSY ARE 1 AND 2 CALLING FOR GRADE A PASTEURIZED MILK AND 7 CALLING FOR BUTTERMILK. WILL BE LIMITED TO: (1) BIDDERS WHOSE ESTABLISHMENTS OPERATE DIRECTLY UNDER THE SUPERVISION OF THE BUREAU OF ANIMAL INDUSTRY.

A-94917, JULY 1, 1938, 18 COMP. GEN. 1

CONTRACTS - SPECIFICATIONS - CHANGES RESTRICTING COMPETITION WITHOUT REASONABLE NOTICE GIVEN OR GOOD REASON SHOWN WHERE, AFTER THE CONTINUED USE OF A PARTICULAR GRADE OF MILK FOR APPROXIMATELY 15 YEARS, THE SPECIFICATIONS ARE SO CHANGED AS TO ELIMINATE FROM CONSIDERATION THE BID OF THE FORMER SUCCESSFUL BIDDER WHOSE PRODUCT IS ADMITTED TO BE SATISFACTORY UNDER THE OLD SPECIFICATIONS AND WILL BE USED TO INCLUDE THE DAY PRIOR TO THE BEGINNING OF DELIVERIES UNDER THE CHANGED SPECIFICATIONS, PAYMENT UNDER THE CONTRACT AWARDED UNDER THE CHANGED SPECIFICATIONS TO OTHER THAN THE LOWEST AND FORMER SUCCESSFUL BIDDER, AT AN INCREASED COST TO THE UNITED STATES OF MANY THOUSANDS OF DOLLARS, IS UNAUTHORIZED, THE CHANGE IN SPECIFICATIONS, WITHOUT GOOD REASON SHOWN AND REASONABLE NOTICE GIVEN, NOT BEING A COMPLIANCE WITH SECTION 3709, REVISED STATUTES, REQUIRING FULL AND FREE COMPETITION IN GOVERNMENT PURCHASES, PARTICULARLY WHERE IT APPEARS THE LOW BIDDER, THROUGH MODERNIZATION OF ITS PLANT, ETC., WOULD HAVE BEEN ENABLED TO MAKE DELIVERIES MEETING THE NEW SPECIFICATIONS PRIOR TO THE NEW CONTRACT PERIOD.

ACTING COMPTROLLER GENERAL ELLIOTT TO THE SECRETARY OF WAR, JULY 1, 1938:

YOUR LETTER OF JUNE 18, 1938, IS AS FOLLOWS:

REFERENCE IS MADE TO YOUR LETTER OF MAY 19, 1938 (A-94917), IN WHICH YOU REQUEST A REPORT ON THE ACTION TAKEN BY THE WAR DEPARTMENT IN RESPECT OF BIDS FOR MILK AND CREAM FOR FITZSIMONS GENERAL HOSPITAL, DENVER, COLORADO, WHICH WERE OPENED ON APRIL 29, 1938.

UNDER DATE OF APRIL 14, 1938, THE QUARTERMASTER, FITZSIMONS GENERAL HOSPITAL, ISSUED INVITATION FOR BIDS NO. 308-38-66 CALLING FOR BIDS ON MILK AND CREAM TO BE SUPPLIED DURING THE FISCAL YEAR 1939. OF THE ITEMS CALLED FOR IN THE ABOVE INVITATION THOSE IN CONTROVERSY ARE 1 AND 2 CALLING FOR GRADE A PASTEURIZED MILK AND 7 CALLING FOR BUTTERMILK. THE INVITATION PROVIDED THAT ITEMS 1 AND 2 WOULD BE FURNISHED IN ACCORDANCE WITH FEDERAL SPECIFICATION C-M-381B AND ITEM 7 IN ACCORDANCE WITH FEDERAL SPECIFICATION C-B-816. THE INVITATION ALSO CONTAINED A CLAUSE READING AS FOLLOWS:

"AWARD OF CONTRACT FOR MEAT, MEAT FOOD PRODUCTS, POULTRY; OR MILK, FRESH, AS CALLED FOR HEREIN, WILL BE LIMITED TO: (1) BIDDERS WHOSE ESTABLISHMENTS OPERATE DIRECTLY UNDER THE SUPERVISION OF THE BUREAU OF ANIMAL INDUSTRY, UNITED STATES DEPARTMENT OF AGRICULTURE. ALL MEAT AND MEAT FOOD PRODUCTS PURCHASED WITHIN THE CONTINENTAL LIMITS OF THE UNITED STATES MUST ORIGINATE IN SUCH ESTABLISHMENTS. (2) BIDDERS, OTHER THAN THE ABOVE, WHOSE ESTABLISHMENTS HAVE PASSED AN ARMY SANITARY INSPECTION WITHIN THE CALENDAR MONTH PRECEDING THE OPENING DATE OF THIS BID AND LISTED AS APPROVED SOURCES OF SUPPLY. NOTE: BIDDERS WHO PROPOSE TO SUPPLY SUCH FOODS (OTHER THAN IN HERMETICALLY SEALED CONTAINERS) MAY OBTAIN A SANITARY INSPECTION OF THEIR PLANT BY APPLYING IN WRITING TO THE PURCHASING AND CONTRACTING OFFICER NAMED HEREIN.

"MEAT AND MEAT FOOD PRODUCTS WHICH DO NOT BEAR THE STAMP OF THE BUREAU OF ANIMAL INDUSTRY, DEPARTMENT OF AGRICULTURE, ARE ACCEPTABLE UNDER THIS INVITATION FOR BIDS PROVIDED IT IS SHOWN TO THE SATISFACTION OF THE CONTRACTING OFFICER THAT SUCH MEAT AND MEAT FOOD PRODUCTS ORIGINATED IN AN ESTABLISHMENT OPERATING DIRECTLY UNDER THE SUPERVISION OF THE BUREAU OF ANIMAL INDUSTRY, UNITED STATES DEPARTMENT OF AGRICULTURE, AND THAT THE PLANT FROM WHICH DELIVERY IS MADE HAS PASSED THE REQUIRED ARMY SANITARY INSPECTION AND IS LOCATED WITHIN SUCH DISTANCE OF THE CONTRACTING OFFICER'S INSPECTING AGENCIES AS WILL PERMIT THE CONTRACTING OFFICER TO EXERCISE THE INSPECTION CONTROL NECESSARY TO INSURE ONLY B.A.I. INSPECTED MEATS AND MEAT FOOD PRODUCTS BEING DELIVERED. (LET. 8 C.A. 2/21/38).'

IN RESPONSE TO THE ABOVE INVITATION, BIDS WERE RECEIVED FROM THE FOLLOWING:

BROOKRIDGE FARM, INC., LITTLETON, COLORADO.

THE CITY PARK DAIRY COMPANY, DENVER, COLORADO.

THE CARLSON FRINK COMPANY, DENVER, COLORADO.

UPON INSPECTING THE PLANTS OF THE THREE BIDDERS THE MEDICAL INSPECTOR, FITZSIMONS GENERAL HOSPITAL, CERTIFIED AS FOLLOWS:

"A. I HAVE INSPECTED THE BROOKRIDGE FARM, INCORPORATED, LOCATED SOUTH OF LITTLETON, COLORADO, ON TWO OCCASIONS DURING THE MONTH OF APRIL 1938. MY OPINION, THIS DAIRY WAS IN A POSITION AT THAT TIME TO SUPPLY GRADE A PASTEURIZED MILK PENDING A FEW MINOR CHANGES IN THEIR MILK PLANT. THESE CHANGES ARE, IN MY OPINION, ONLY NECESSARY TO COMPLY WITH THE LETTER OF THE REQUIREMENTS FOR THE PRODUCTION OF GRADE A PASTEURIZED MILK IN ACCORDANCE WITH THE UNITED STATES PUBLIC HEALTH SERVICE REGULATIONS. PRACTICALLY, I BELIEVE THIS PLANT HAD THE EQUIPMENT AND METHODS WHICH ENABLED THEM TO FAR EXCEED THE MINIMUM REQUIREMENTS FOR GRADE A PASTEURIZED MILK.

"B. I FURTHER CERTIFY THAT I HAVE INSPECTED THE CITY PARK DAIRY, DENVER, COLORADO. IN MY OPINION THIS PLANT WILL HAVE TO BE REBUILT BEFORE IT WILL BE IN A POSITION TO PRODUCE GRADE A PASTEURIZED MILK. THE BUILDINGS ARE IN A POOR STATE OF REPAIR AND IN MY OPINION THEY CANNOT BE REMODELED SO THAT THIS DAIRY FARM AND MILK PLANT CAN MEET THE MINIMUM REQUIREMENTS FOR GRADE A PASTEURIZED MILK.'

THEREUPON THE CONTRACTING OFFICER REJECTED THE LOW BID OF THE CITY PARK DAIRY COMPANY ON ITEMS 1, 2, AND 7, AND MADE AN AWARD ON SAID ITEMS TO THE BROOKRIDGE FARM, INC., AND A FORMAL CONTRACT WAS EXECUTED UNDER DATE OF APRIL 29, 1938.

SINCE AN AWARD WAS MADE TO OTHER THAN THE LOW BIDDER WITH A RESULTANT INCREASED COST TO THE GOVERNMENT OF $17,963.00, THERE IS FOR CONSIDERATION THE QUESTION OF WHETHER THERE EXISTED SUCH LEGAL JUSTIFICATION THEREFOR AS TO MAKE THE RESULTANT CONTRACT A BINDING OBLIGATION UPON THE GOVERNMENT.

FROM THE CERTIFICATE OF THE MEDICAL INSPECTOR AND THE INCLOSED COMMUNICATIONS FROM THE BROOKRIDGE FARM, INC., AND ITS ATTORNEY, MORRISON SHAFROTH, ESQ., IT WOULD APPEAR THAT THE BROOKRIDGE FARM, INC., DID ON THE DATE OF AWARD HAVE THE FACILITIES FOR PRODUCING GRADE A PASTEURIZED MILK, PROVIDED ONE OR TWO MINOR IMPROVEMENTS WERE MADE. ON THE OTHER HAND, IT APPEARS THAT THE CITY PARK DAIRY COMPANY WAS INNO WAY ON THE DATE OF AWARD IN A POSITION TO FURNISH SUCH MILK, AND WOULD HAVE TO CONSTRUCT A NEW PLANT IN ORDER TO MEET THE REQUIREMENTS OF THE UNITED STATES PUBLIC HEALTH SERVICE MILK ORDINANCE AND CODE. IT WOULD THUS SEEM THAT ITEMS 1 AND 2 WERE PROPERLY AWARDED TO OTHER THAN THE LOW BIDDER.

HOWEVER, IN RESPECT OF THE AWARD ON ITEM 7, IT IS THE OPINION OF THE WAR DEPARTMENT THAT SAID AWARD WAS ILLEGAL BY REASON OF THE FACT THAT THE SPECIFICATIONS DID NOT REQUIRE THAT THE BUTTERMILK BE PRODUCED FROM GRADE A PASTEURIZED MILK. HENCE THERE WAS NO JUSTIFICATION FOR MAKING AN AWARD TO THE HIGH BIDDER ON THIS ITEM SIMPLY BECAUSE THAT BIDDER WAS THE ONLY ONE THAT COULD FURNISH THE HIGHER QUALITY OF BUTTERMILK.

INCLOSED ARE COPIES OF THE BIDS, THE ABSTRACT, CONTRACT, CERTIFICATES, AND OTHER PAPERS REQUIRED IN MAKING A DECISION. IT IS REQUESTED THAT ALL INCLOSURES BE RETURNED AS SOON AS THEY HAVE SERVED THEIR PURPOSE.

SINCE IT IS ESSENTIAL THAT A SUPPLY OF MILK BE AVAILABLE BY JULY 1, IT IS REQUESTED THAT A DECISION ON THIS MATTER BE EXPEDITED.

THERE WAS QUOTED IN MY LETTER OF MAY 19, 1938, A LETTER OF MAY 12, 1938, FROM THE CITY PARK DAIRY COMPANY TO THE EFFECT THAT IT HAD BEEN SUPPLYING MILK FOR AT LEAST FIFTEEN YEARS, THROUGH ITS WINDSOR PARK DAIRY PLANT, TO THE FITZSIMONS GENERAL HOSPITAL AND THAT THE COMPANY HAD AWARDED A CONTRACT FOR REBUILDING ITS CITY PARK DAIRY PLANT TO BE COMPLETED BY JUNE 27, 1938, FOR THE DELIVERY OF GRADE A PASTEURIZED MILK AND AS THE ABOVE REPORT OF JUNE 18, 1938, DID NOT REPLY TO SAID ALLEGATIONS, YOUR FURTHER REPORT WAS REQUESTED IN MY LETTER OF JUNE 23, 1938. YOU HAVE REPLIED IN LETTER OF JUNE 28, 1938, AS FOLLOWS:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 23, 1938 (A-94917), REQUESTING FURTHER INFORMATION IN CONNECTION WITH THE AWARD OF A CONTRACT FOR SUPPLYING MILK AND CREAM TO THE FITZSIMONS GENERAL HOSPITAL.

THE ALLEGATION OF THE CITY PARK DAIRY COMPANY, DENVER, COLORADO, TO THE EFFECT THAT IT HAS SUPPLIED MILK TO THE FITZSIMONS GENERAL HOSPITAL IN THE PAST IS CORRECT. HOWEVER, THE MILK WHICH HAS BEEN SUPPLIED IS NOT GRADE A PASTEURIZED MILK, AS IS CALLED FOR UNDER THE CONTRACT IN CONTROVERSY. THE FACT THAT THE CITY PARK DAIRY COMPANY IS IN A POSITION TO FURNISH MILK MEETING THE REQUIREMENTS WHICH HAVE BEEN IN EFFECT IN THE PAST IS NOT TO BE QUESTIONED. HOWEVER, THE INVITATION FOR BIDS MADE THE BASIS OF THE CONTRACT AWARDED TO THE BROOKRIDGE FARM, INCORPORATED, COVERING THE REQUIREMENTS FOR THE FITZSIMONS GENERAL HOSPITAL FROM JULY 1, 1938, TO JUNE 30, 1939, SPECIFIED THAT GRADE A PASTEURIZED MILK WOULD BE FURNISHED, AND PROVIDED THAT THE PLANT OF THE SUCCESSFUL BIDDER BE CERTIFIED AS MEETING THE REQUIREMENTS OF THE UNITED STATES PUBLIC HEALTH SERVICE MILK ORDINANCE AND CODE FOR FURNISHING GRADE A PASTEURIZED MILK. THERE WAS NO AUTHORITY FOR WAIVING THESE REQUIREMENTS, AND SAID REQUIREMENTS WERE NOT WAIVED.

APPARENTLY, THERE IS SOME CONFUSION AS TO THE REQUIREMENTS WHICH ARE TO BE IN EFFECT AFTER JULY 1, 1938, AND THOSE WHICH HAVE BEEN, AND ARE CURRENTLY, IN EFFECT. THE FACT THAT THE CITY PARK DAIRY COMPANY HAS BEEN DELIVERING A QUALITY OF MILK WHICH MET EXISTING REQUIREMENTS, THROUGH THE WINDSOR FARM DAIRY PLANT, AND HAS AUTHORITY TO CONTINUE TO DO SO UNTIL JULY 1, 1938, ON WHICH DATE THE NEW REQUIREMENTS BECOME EFFECTIVE, HAS NO RELATION TO THE QUESTION OF WHETHER OR NOT SAID DAIRY COMPLIED WITH TERMS OF THE INVITATION FOR BIDS WHICH WAS OPENED ON APRIL 29, 1938. AS WAS STATED PREVIOUSLY BY THIS DEPARTMENT, THE PLANT OF THE CITY PARK DAIRY COMPANY DID NOT PASS THE REQUIRED SANITARY INSPECTION, AND THEREFORE ITS BID WAS NOT PROPERLY FOR CONSIDERATION.

WITH REFERENCE TO THE APPARENT ILLEGAL AWARD ON ITEM 7, BUTTERMILK, IT IS RECOMMENDED THAT SAID AWARD BE CANCELLED, AND SUCH ACTION IS CONTEMPLATED IN THE EVENT YOUR OFFICE HOLDS THE CONTRACT TO BE OTHERWISE LEGAL.

IT IS FUNDAMENTAL THAT UNDER SECTION 3709, REVISED STATUTES, ADVERTISED SPECIFICATIONS MUST BE IN SUCH TERMS AS TO PERMIT OF FULL AND FREE COMPETITION, AND IT IS ADMITTED IN YOUR LETTERS OF JUNE 18 AND 28, 1938, THAT THE SPECIFICATIONS AND AWARD OF THAT PART OF THE CONTRACT FOR BUTTERMILK ARE NOT IN ACCORDANCE WITH LAW. IT IS THE CONCLUSION OF THIS OFFICE THAT THE SPECIFICATIONS AND AWARD OF THAT PART OF THE CONTRACT FOR THE GRADE A PASTEURIZED MILK ARE LIKEWISE NOT IN ACCORDANCE WITH LAW. THE FIRST PLACE, THE FITZSIMONS GENERAL HOSPITAL HAD BEEN PURCHASING AND USING FOR MANY YEARS MILK OTHER THAN GRADE A PASTEURIZED MILK, AND THE ADVERTISED SPECIFICATIONS FOR BIDS TO BE OPENED APRIL 29, 1938, REQUIRED THE SUCCESSFUL BIDDER THEN TO BE PREPARED TO DELIVER GRADE A PASTEURIZED MILK ON JULY 1, 1938, OR SOME TWO MONTHS THEREAFTER. IF IT HAD BEEN THE INTENTION TO CHANGE TO A REQUIREMENT FOR GRADE A PASTEURIZED MILK EFFECTIVE JULY 1, 1938, REASONABLE NOTICE SHOULD HAVE BEEN GIVEN TO PROSPECTIVE BIDDERS TO THAT EFFECT SO THAT THEY COULD HAVE MODERNIZED THEIR PLANTS TO CONFORM THEREWITH AND, IN FACT, THE CITY PARK DAIRY COMPANY HAS ALLEGED THAT PURSUANT TO CONTRACT IT WOULD HAVE ITS PLANT SO MODERNIZED BY JUNE 27, 1938, OR BEFORE THE COMMENCEMENT DATE FOR DELIVERIES UNDER THE CONTRACT.

IN THE SECOND PLACE, THE CITY PARK DAIRY COMPANY HAS ALLEGED THAT IT HAD ARRANGEMENTS TO MAKE INITIAL DELIVERIES OF GRADE A PASTEURIZED MILK THROUGH ITS WINDSOR FARM DAIRY PLANT PENDING THE COMPLETION OF ITS NEW PLANT AT APPROXIMATELY $18,000 LESS FOR THE FISCAL YEAR 1939 THAN QUOTED BY THE BROOKRIDGE DAIRY COMPANY, AND OBVIOUSLY IT IS DESIRABLE, IF POSSIBLE, TO SAVE THE ADDITIONAL EXPENDITURE OF $18,000 FOR MILK.

THE RECORD IS SUCH THAT THIS OFFICE WOULD NOT BE JUSTIFIED IN APPROVING PAYMENTS UNDER ANY CONTRACT WITH THE BROOKRIDGE DAIRY COMPANY FOR THE DELIVERY OF GRADE A PASTEURIZED MILK AND BUTTERMILK AT A COST OF $18,000 OR MORE IN EXCESS OF THE LOW BID OFFERING TO DELIVER THE MILK MEETING THE SPECIFICATIONS.