B-116549, SEPTEMBER 3, 1953, 33 COMP. GEN. 108

B-116549: Sep 3, 1953

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1953: REFERENCE IS MADE TO YOUR LETTER. COPY OF WHICH WAS ENCLOSED. IT IS STATED IN YOUR LETTER THAT THE SPECIFICATION REQUIREMENTS CAN ONLY BE MET BY MANUFACTURERS OF LARGER AND MORE EXPENSIVE TYPES OF AUTOMOBILES. THAT YOU CONTEMPLATE USING THE "AS IS" VALUES FOR 1948 CARS AS CONTAINED IN THE NATIONAL AUTOMOBILE DEALERS' ASSOCIATION OFFICIAL USED CAR GUIDE AS A BASIS FOR DETERMINING PROBABLE DEPRECIATION FIVE YEARS HENCE. THAT A REVIEW OF THE "AS IS" VALUES FOR 1948 MODEL CARS COMPARED WITH THE RETAIL PRICES FOR 1953 MODELS INDICATES SUCH A CONSIDERABLE VARIANCE IN DEPRECIATION THAT ACCEPTANCE OF THE LOWEST BID WOULD NOT HAVE RESULTED IN THE LOWEST NET COST TO THE DISTRICT OF COLUMBIA.

B-116549, SEPTEMBER 3, 1953, 33 COMP. GEN. 108

VEHICLES - PURCHASES - BID EVALUATION - CONSIDERATION OF TRADE-IN OR RESALE VALUE FUTURE TRADE-IN OR RESALE VALUE OF AN AUTOMOBILE BASED ON THE ANTICIPATED DEPRECIATION OF THE VEHICLE MAY NOT BE CONSIDERED AS A FACTOR IN EVALUATING BIDS FOR THE PRESENT PURCHASE OF A NEW AUTOMOBILE.

COMPTROLLER GENERAL WARREN TO THE PRESIDENT, BOARD OF COMMISSIONERS OF THE DISTRICT OF COLUMBIA, SEPTEMBER 3, 1953:

REFERENCE IS MADE TO YOUR LETTER, RECEIVED HERE ON AUGUST 7, 1953, REQUESTING A DECISION AS TO WHETHER ANTICIPATED DEPRECIATION PROPERLY MAY BE CONSIDERED IN THE EVALUATION OF BIDS FOR PASSENGER AUTOMOBILES UNDER YOUR INVITATION NO. 16723-S, COPY OF WHICH WAS ENCLOSED.

IT IS STATED IN YOUR LETTER THAT THE SPECIFICATION REQUIREMENTS CAN ONLY BE MET BY MANUFACTURERS OF LARGER AND MORE EXPENSIVE TYPES OF AUTOMOBILES, SUCH AS CADILLAC, PACKARD, LINCOLN, AND HRYSLER; THAT YOU CONTEMPLATE USING THE "AS IS" VALUES FOR 1948 CARS AS CONTAINED IN THE NATIONAL AUTOMOBILE DEALERS' ASSOCIATION OFFICIAL USED CAR GUIDE AS A BASIS FOR DETERMINING PROBABLE DEPRECIATION FIVE YEARS HENCE--- THE ANTICIPATED ECONOMIC USEFUL LIFE OF THE CAR; AND THAT A REVIEW OF THE "AS IS" VALUES FOR 1948 MODEL CARS COMPARED WITH THE RETAIL PRICES FOR 1953 MODELS INDICATES SUCH A CONSIDERABLE VARIANCE IN DEPRECIATION THAT ACCEPTANCE OF THE LOWEST BID WOULD NOT HAVE RESULTED IN THE LOWEST NET COST TO THE DISTRICT OF COLUMBIA.

ALSO, YOU STATE:

WE CANNOT, OF COURSE, GUARANTEE THAT THIS IS AN INFALLIBLE YARD STICK FOR GAUGING THE DEPRECIATION FACTOR. HOWEVER, WE HAVE FOUND THE PATTERN OF DEPRECIATION RATES TO BE CONSISTENT WITH THE EXAMPLE GIVEN ABOVE FOR THE LAST SEVERAL YEARS, AND IN THE ABSENCE OF A BETTER METHOD OF EVALUATING THE DEPRECIATION FACTOR IT SERVES TO PROTECT THE INTERESTS OF THE DISTRICT BETTER THAN IF THE DEPRECIATION FACTOR WERE NOT GIVEN CONSIDERATION.

YOUR SUBMISSION POSES WHAT APPARENTLY IS A QUESTION OF NOVEL IMPRESSION INSOFAR AS THIS OFFICE IS CONCERNED. THE DOUBT ARISES BY REASON OF THE UNCERTAIN AND ALMOST SPECULATIVE FACTORS WHICH NECESSARILY WOULD INFLUENCE THE EVALUATION OF THE BIDS.

WHAT WOULD BE TRUE IN THE CASE OF AUTOMOBILES WOULD ALSO BE TRUE--- TO A GREATER OR LESSER DEGREE--- IN THE CASE OF MANY OTHER TYPES OF EQUIPMENT. AND IT IS ALTOGETHER LIKELY THAT THE AVAILABLE GUIDES TO ANTICIPATED DEPRECIATION AS AMONG DIFFERENT MAKES OF OTHER EQUIPMENT WOULD BE EVEN MORE SPECULATIVE IN NATURE. MOREOVER, IF DEPRECIATION WERE TO BE A FACTOR IN DETERMINING THE LOWEST NET EVENTUAL COST TO THE GOVERNMENT, WHY SHOULD NOT THE EXPENSE OF OPERATION AND EVEN MAINTENANCE ALSO BE CONSIDERED? CONCEIVABLY, FOR EXAMPLE, THE EXPECTED CONSUMPTION OF GASOLINE AND OIL BY DIFFERENT MAKES OF AUTOMOBILES MIGHT BE FORECASTED WITH SOME DEGREE OF ACCURACY. ACCORDINGLY, I FEEL CONSTRAINED TO DISAPPROVE YOUR PROPOSAL ON THE GROUNDS THAT TO INTRODUCE THE ELEMENT OF PROSPECTIVE DEPRECIATION INTO THE PROCUREMENT OF AUTOMOBILES WOULD EVENTUALLY LEAD TO ALL KINDS OF CONFUSION AND UNCERTAINTIES IN THE ADMINISTRATION OF THE ADVERTISING FOR BIDS STATUTES AND IS NOT CONTEMPLATED OR AUTHORIZED UNDER THE LAW.