B-122465, JANUARY 24, 1955, 34 COMP. GEN. 343

B-122465, JANUARY 24, 1955, 34 COMP. GEN. 343

CONTRACTS - TERMINATION - REINSTATEMENT A CONTRACT FOR THE PROCUREMENT OF DIAMOND DRILLS NEGOTIATED PURSUANT TO SPECIAL AUTHORITY APPLICABLE TO PURCHASES BY THE FOREIGN OPERATIONS ADMINISTRATION AND SUBSEQUENTLY CANCELED THROUGH ADMINISTRATIVE ERROR MAY BE REINSTATED UPON A DETERMINATION THAT SUCH ACTION IS IN THE BEST INTERESTS OF THE GOVERNMENT.

ASSISTANT COMPTROLLER GENERAL WEITZEL TO THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION, JANUARY 24, 1955:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 31, 1954, PRESENTING THE QUESTION AS TO THE PROPRIETY OF REINSTATING A CONTRACT WITH THE JOY MANUFACTURING COMPANY.

IT IS REPORTED THAT, IN RESPONSE TO AN INVITATION REQUESTING BIDS FOR CERTAIN DIAMOND DRILLS AND MISCELLANEOUS SPARE PARTS REQUISITIONED BY THE FOREIGN OPERATIONS ADMINISTRATION FOR DELIVERY TO AND USE IN PAKISTAN, FIVE BIDS WERE RECEIVED AT THE APPOINTED OPENING TIME. THE BID OF JOY MANUFACTURING COMPANY WAS THE LOWEST. THAT BID, HOWEVER, FAILED TO CONTAIN CERTAIN REQUIRED INFORMATION RELATIVE TO WEIGHTS AND MEASUREMENTS OF THE EQUIPMENT WHICH WAS NECESSARY IN ORDER TO DETERMINE THE COST OF TRANSPORTATION. UPON THE CONTRACTING OFFICER'S INQUIRY AS TO THE REASON FOR THE OMISSION, THE COMPANY ADVISED THAT THE INFORMATION WAS INADVERTENTLY OMITTED FROM THE BID AND THE INFORMATION WAS SUBSEQUENTLY FURNISHED IN LETTER DATED SEPTEMBER 28, 1954. THE BID, AFTER CONSIDERING THE COST OF TRANSPORTATION, WAS THE LOWEST NET BID. THE NEXT-LOWEST BID, WHICH WAS SUBMITTED BY E. J. LONG YEAR COMPANY, WAS NOT RESPONSIBLE TO THE INVITATION IN CERTAIN TECHNICAL ASPECTS AND THE REMAINING THREE BIDS WERE CONSIDERED TO BE UNACCEPTABLE BECAUSE OF THEIR SUBSTANTIAL INCREASE IN NET COST TO THE GOVERNMENT.

THE CONTRACTING OFFICER BELIEVED THAT THE REQUIREMENT FOR FURNISHING THE INFORMATION ON WEIGHTS AND MEASUREMENTS WAS A BASIC CONDITION OF THE INVITATION AND ONE WHICH COULD NOT BE WAIVED AFTER THE OPENING OF THE BIDS UNDER FORMAL ADVERTISING PROCEDURES. FOR THIS REASON, IT WAS DETERMINED THAT THE BID OF THE JOY MANUFACTURING COMPANY WAS NONRESPONSIVE TO THE INVITATION AND THEREFORE WAS UNACCEPTABLE AS A BID SUBMITTED IN RESPONSE TO THE FORMAL ADVERTISEMENT. HOWEVER, SINCE THE EQUIPMENT OFFERED BY THE JOY MANUFACTURING COMPANY MET THE SPECIFICATION REQUIREMENTS AND, ON THE BASIS OF THE INFORMATION SUBSEQUENTLY FURNISHED, WAS THE LOWEST NET BID RECEIVED FROM ANY OF THE BIDDERS RESPONDING TO THE INVITATION, IT WAS DETERMINED TO DISREGARD ALL THE BIDS RECEIVED UNDER THE FORMAL INVITATION FOR BIDS AND TO NEGOTIATE A CONTRACT WITH THE JOY MANUFACTURING COMPANY FOR THE EQUIPMENT AT THE PRICE CONTAINED IN ITS ORIGINAL BID, UNDER AUTHORITY OF THE MUTUAL SECURITY ACT OF 1954, 68 STAT. 832, SECTION 302 (C) (14) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 394, AS AMENDED, AND EXECUTIVE ORDER NO. 10519 OF MARCH 10, 1954.

ON OCTOBER 25, 1954, A CONTRACT WAS ENTERED INTO WITH THE JOY MANUFACTURING COMPANY ON A NEGOTIATED BASIS. THEREAFTER, E. J. LONG YEAR COMPANY PROTESTED THE ACTION TAKEN BY THE CONTRACTING OFFICER. AS A RESULT OF THE PROTEST, AND BECAUSE OF THE RELATIVELY SMALL DIFFERENCE IN THE NET PRICES OFFERED BY THE TWO COMPANIES, THE FACT THAT THE REQUIRED INFORMATION RELATING TO WEIGHTS AND MEASUREMENTS HAD BEEN FURNISHED AFTER THE OPENING OF THE BIDS, AND THE FACT THAT THE LONG YEAR COMPANY WAS ALLEGED TO BE A SMALL BUSINESS CONCERN, IT WAS DETERMINED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT TO CANCEL THE CONTRACT AWARDED TO THE JOY MANUFACTURING COMPANY AND TO SOLICIT NEW OFFERINGS FROM ALL INTERESTED SUPPLIERS ON A NEGOTIATED BASIS. THE JOY MANUFACTURING COMPANY WAS NOTIFIED BY TELEGRAM ON NOVEMBER 17, 1954, THAT ITS CONTRACT WAS CANCELED EFFECTIVE AS OF NOVEMBER 2, 1954.

IN RESPONSE TO THE NEW INFORMAL SOLICITATION FOR OFFERS, THE E. J. LONG YEAR COMPANY OFFERED EQUIPMENT COMPLYING WITH THE SPECIFICATION REQUIREMENTS AT A TOTAL DELIVERED NET PRICE OF $33,104.40, WHICH IS $845.80 LESS THAN THE NET DELIVERED PRICE OF THE JOY MANUFACTURING COMPANY UNDER THE CANCELED CONTRACT. THE LATTER COMPANY REFUSED TO SUBMIT A NEW BID BUT REAFFIRMED ITS ORIGINAL CONTRACT PRICE, RENEWING ITS OFFER TO COMPLY WITH ALL TERMS AND CONDITIONS OF THE ORIGINAL CONTRACT. ADDITION, IT VIGOROUSLY PROTESTED THE CANCELLATION OF THE CONTRACT ON THE BASIS THAT SUCH ACTION WAS GROSSLY UNFAIR AND HAD CAUSED THE SUPPLIER TO INCUR PRELIMINARY MANUFACTURING EXPENSES WHICH WOULD HAVE TO BE CHARGE TO THE GOVERNMENT AS CANCELLATION CHARGES.

IT IS STATED THAT, UPON CAREFUL REVIEW OF ALL THESE CIRCUMSTANCES, IT IS YOUR OPINION THAT THE CONTRACT ORIGINALLY ENTERED INTO WITH THE JOY MANUFACTURING COMPANY WAS LEGAL AND BINDING UPON THE PARTIES, THAT AS ADMINISTRATIVE ERROR WAS MADE IN THE CANCELLATION OF THAT CONTRACT, AND THAT IT IS BELIEVED THAT THE BEST INTERESTS OF THE GOVERNMENT WOULD BE SERVED BY A REINSTATEMENT OF THAT CONTRACT.

WHILE THERE APPEARS TO BE NO DOUBT THAT THE STATUTES AND EXECUTIVE ORDER TO WHICH YOU REFER CONSTITUTE SUFFICIENT AUTHORITY TO MAKE F.O.A. PURCHASES BY NEGOTIATION RATHER THAN BY ADVERTISING, YOUR LETTER INDICATES THAT THIS PROCUREMENT ORIGINALLY WAS FORMALLY ADVERTISED UNDER SECTION 303 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 395. IF THAT WAS DONE, IT WOULD BE THE VIEW OF THIS OFFICE THAT THE USUAL REQUIREMENTS APPLICABLE TO PROCUREMENT BY ADVERTISING APPLIED HERE UP TO THE TIME ALL OF THE BIDS WERE REJECTED AS SPECIFICALLY AUTHORIZED BY SECTION 303. ON THE OTHER HAND, SINCE YOU STATE THAT AFTER THE LATTER ACTION WAS TAKEN THE CONTRACT WITH THE JOY MANUFACTURING COMPANY WAS NEGOTIATED PURSUANT TO THE SPECIAL AUTHORITY APPLICABLE TO F.O.A. PURCHASES, THE CONCLUSION APPEARS REQUIRED THAT THE RESULTING AGREEMENT CONSTITUTED A VALID AND BINDING CONTRACT.

OF COURSE, IT ALSO SEEMS APPARENT THAT A PROPER PROTECTION OF THE GOVERNMENT'S INTERESTS AND THE INTERESTS OF THE OTHER BIDDERS INVOLVED SHOULD HAVE BEEN CONSIDERED BY YOUR AGENCY AS REQUIRING THAT THE CONTRACT BE NEGOTIATED IN ACCORDANCE WITH THE USUAL PROCEDURE IN SUCH CASES, AS SET FORTH IN SECTION 302 (C) (13) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 394, BUT SINCE THAT SECTION HAS NO APPLICATION IN THIS PARTICULAR INSTANCE, THE APPARENT FAILURE TO COMPLY WITH ITS REQUIREMENTS DID NOT PRECLUDE THE CONSUMMATION OF A VALID CONTRACT.

YOU ARE THEREFORE ADVISED THAT, IF IT IS DETERMINED THAT THE REINSTATEMENT OF THE CONTRACT WITH THE JOY MANUFACTURING COMPANY IS IN THE BEST INTERESTS OF THE GOVERNMENT, NO OBJECTION TO SUCH ACTION WILL BE INTERPOSED BY THIS OFFICE, THAT BEING A MATTER PRIMARILY FOR ADMINISTRATIVE DECISION. CF. 18 COMP. GEN. 826; 20 COMP. GEN. 358.