B-124860, NOV. 29, 1955

B-124860: Nov 29, 1955

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WE HAVE INQUIRED INTO THE PROCUREMENT OF COAL FOR THE ARMY INSTALLATION AT HANFORD. FROM INVESTIGATION OF THE PERTINENT RECORDS THE FOLLOWING CONCLUSIONS HAVE BEEN REACHED: 1. THE BID OF NORTHWESTERN IMPROVEMENT COMPANY ON THE COAL FOR CAMP HANFORD WAS THE LOWEST EVALUATED BID. IF THE SECTION 22 RATE OF $1.79 WERE APPLICABLE. IT WAS NOT THE LOWEST BID. THE SECTION 22 RATE WAS NOT CONSIDERED AS IT WAS NOT IN EFFECT AT OPENING OF BIDS. 2. ACCEPTANCE OF THIS PROPOSAL WAS ENDORSED BY CAMP HANFORD'S COMMANDING OFFICER BECAUSE HE BELIEVED FINANCIAL SAVINGS AND A MORE PRACTICAL OPERATIONAL PROCEDURE WOULD RESULT THEREFROM. THE BID OF NORTHWESTERN IMPROVEMENT COMPANY FOR COAL REQUIRED FOR MCCHORD AIR FORCE BASE WAS PROPERLY REJECTED AS NOT MEETING SPECIFICATIONS.

B-124860, NOV. 29, 1955

TO MR. EARL R. MCMILLAN:

PURSUANT TO YOUR PROTEST TO US, MADE AT THE SUGGESTION OF CONGRESSMAN HAL HOLMES, WE HAVE INQUIRED INTO THE PROCUREMENT OF COAL FOR THE ARMY INSTALLATION AT HANFORD, WASHINGTON, UNDER INVITATION FOR BIDS NO. IFB-424 -1188-55, DATED MARCH 31, 1955.

FROM INVESTIGATION OF THE PERTINENT RECORDS THE FOLLOWING CONCLUSIONS HAVE BEEN REACHED:

1. THE BID OF NORTHWESTERN IMPROVEMENT COMPANY ON THE COAL FOR CAMP HANFORD WAS THE LOWEST EVALUATED BID, IF THE SECTION 22 RATE OF $1.79 WERE APPLICABLE. OTHERWISE, IT WAS NOT THE LOWEST BID. THE SECTION 22 RATE WAS NOT CONSIDERED AS IT WAS NOT IN EFFECT AT OPENING OF BIDS.

2. AEC OFFERED TO SUPPLY CAMP HANFORD'S COAL REQUIREMENTS FOR THE FISCAL YEAR 1956. ACCEPTANCE OF THIS PROPOSAL WAS ENDORSED BY CAMP HANFORD'S COMMANDING OFFICER BECAUSE HE BELIEVED FINANCIAL SAVINGS AND A MORE PRACTICAL OPERATIONAL PROCEDURE WOULD RESULT THEREFROM. HOWEVER, THE DEPARTMENT OF THE ARMY REJECTED THE PROPOSAL BECAUSE SUCH A PROCUREMENT WOULD BE A DEPARTURE FROM THE POLICY OF PROCURING ALL SOLID FUELS THROUGH THE DEPARTMENT OF THE NAVY.

3. THE BID OF NORTHWESTERN IMPROVEMENT COMPANY FOR COAL REQUIRED FOR MCCHORD AIR FORCE BASE WAS PROPERLY REJECTED AS NOT MEETING SPECIFICATIONS. THE BUREAU OF MINES PRACTICE OF PERMITTING A TOLERANCE OF 1/2 PERCENT IN ASH CONTENT RELATES TO THE ANALYSIS OF COAL IN AN EFFORT TO OBTAIN AS ACCURATE AN ANALYSIS AS POSSIBLE, AND DOES NOT PROVIDE THE BASIS FOR EXCEEDING THE PERCENT SET OUT IN THE CONTRACT SPECIFICATIONS.

4. THE NAVY FUEL SUPPLY OFFICE ADVISED ALL BIDDERS OF THE ACTION TAKEN ON THEIR BIDS WHEN A DECISION WAS REACHED ON ALL ITEMS COVERED IN THE INVITATION, OR JUNE 29, 1955.

5. HAD CAMP HANFORD'S COAL REQUIREMENTS FOR FISCAL YEAR 1956 BEEN PROCURED UNDER THE EXISTING AEC CONTRACT WITH KEMMERER COAL COMPANY, SAVINGS WOULD HAVE AMOUNTED TO OVER $55,000 ON A TONNAGE BASIS AND OVER $13,000 ON A HEAT UNIT BASIS.

REGARDING THE FIRST POINT IT APPEARS THAT YOUR BID ON ITEM 10 (COAL FOR CAMP HANFORD) INDICATED A FREIGHT RATE OF $1.79 WHICH WAS THE RATE NEGOTIATED UNDER SECTION 22 OF THE INTERSTATE COMMERCE ACT, 49 U.S.C. 22, FOR SUPPLYING COAL TO THE ATOMIC ENERGY COMMISSION, BUT THAT THE ESTABLISHED TARIFF RATE APPLICABLE TO THE NAVY INVITATION ON THE DATE BIDS WERE OPENED, APRIL 19, WAS $2.62 PER NET TON. YOU PROTEST THAT, EVEN THOUGH YOU OFFERED TO HAVE THE SECTION 22 RATE APPLIED RETROACTIVELY TO APRIL 19, YOUR BID STILL WAS REJECTED.

IT CONSISTENTLY HAS BEEN HELD BY US AND THE COURSE THAT--- EXCEPT IN CERTAIN CASES INVOLVING AN OBVIOUS ERROR WHERE THE INTENDED BID IS CONCLUSIVELY ESTABLISHED--- BIDDERS SHOULD NOT BE PERMITTED TO VARY THEIR PROPOSALS AFTER THE BIDS ARE OPENED, IT BEING CONSIDERED THAT THE PRESERVATION OF THE COMPETITIVE-BID SYSTEM IS INFINITELY MORE IN THE PUBLIC INTEREST THAN OBTAINING AN APPARENT PECUNIARY ADVANTAGE IN A PARTICULAR CASE. 31 COMP. GEN. 660; 17 ID. 554, AND COURT CASES CITED THEREIN. WHILE TRANSPORTATION RATES OF COMMON CARRIERS ARE NOT ORDINARILY SUBJECT TO CONTROL BY BIDDERS, WE HAVE HELD THAT BIDS INVOLVING TRANSPORTATION COSTS ARE PROPERLY FOR EVALUATION ON THE BASIS OF RATES IN EFFECT AT THE TIME BIDS ARE OPENED. B-124259, JULY 5, 1955. THUS, THE SUBSEQUENT OFFER BY THE NORTH PACIFIC RAILWAY COMPANY TO PUBLISH THE SECTION 22 RATE OF $1.79 ON COAL FOR MILITARY USE AT CAMP HANFORD COULD NOT PROPERLY HAVE BEEN CONSIDERED AFTER THE BIDS HAD BEEN OPENED AND PRICES MADE PUBLIC. TO HOLD OTHERWISE WOULD TEND TO PERMIT AWARDS TO BE CONTROLLED BY CARRIERS AND INTRODUCE INTO THE EVALUATION PROCESS A VARIABLE NOT CONTEMPLATED BY THE INVITATION.

EVALUATED ON THE BASIS OF THE FREIGHT RATE OF $2.62, AND YOUR GUARANTEED ANALYSIS, YOUR BID ON ITEM 10 OFFERED 25,667.3 BTU'S PER ONE CENT. YOUR EVALUATION FIGURES ON OTHER BIDS ARE ALSO ERRONEOUS BY REASON OF YOUR FAILURE TO TAKE INTO ACCOUNT SEASONAL DISCOUNTS OFFERED BY CERTAIN BIDDERS AND FAILURE TO OBSERVE THE EVALUATION PROCESS STIPULATED IN THE INVITATION AS FOLLOWS:

"EVALUATION OF BIDS

"/A) * * *

"THE PERCENTAGE ARRIVED AT BY SUBTRACTING THE PERCENT OF MOISTURE FROM 100 PERCENT SHALL BE MULTIPLIED BY THE PRODUCT OF THE DRY B.T.U. PER LB. TIMES 2000; THE PRODUCT OF THIS MULTIPLICATION SHALL BE USED AS A NUMERATOR TO BE DIVIDED BY THE SUM OF THE DELIVERED COST PER TON TO THE GOVERNMENT EXPRESSED IN CENTS PLUS TWICE THE DRY ASH PERCENTAGE EXPRESSED IN CENTS.'

IN APPLYING THE FORMULA THE FOLLOWING IS USED:

"/B) * * * (I) THE BIDDER'S GUARANTEED MOISTURE OR THE AVERAGE MOISTURE AS REPORTED IN THE BUREAU OF MINES RECORDS, WHICHEVER IS THE GREATER; (II) THE DRY B.T.U. PER POUND GUARANTEED BY THE BIDDER OR THE AVERAGE DRY B.T.U. PER POUND AS REPORTED IN THE BUREAU OF MINES RECORDS, WHICHEVER IS THE LESSER; AND (III) THE DRY ASH GUARANTEED BY THE BIDDER OR THE AVERAGE DRY ASH AS REPORTED IN THE BUREAU OF MINES RECORDS, WHICHEVER IS THE GREATER.'

THE DRAFTING OF SPECIFICATIONS AND THE DETERMINATION AS TO WHETHER BIDS ARE RESPONSIVE THERETO IS PRIMARILY A RESPONSIBILITY OF THE ADMINISTRATIVE OFFICE REQUIRING THE MATERIALS OR EQUIPMENT. 21 COMP. GEN. 1132, 1136; 17 ID. 554. IT IS ONLY WHERE A REJECTED BID HAS OFFERED MATERIAL OR EQUIPMENT IN STRICT ACCORDANCE WITH PROPER SPECIFICATIONS THAT WE ARE LEGALLY JUSTIFIED IN OBJECTING TO AN AWARD TO A HIGHER BIDDER. 20 COMP. GEN. 903. IN THIS CASE IT APPEARS THAT THE SPECIFICATIONS AND EVALUATION FORMULA PRESCRIBED BY THE INVITATION WERE STRICTLY FOLLOWED AND AWARDS MADE IN ACCORDANCE THEREWITH.

IN VIEW OF THE FOREGOING, THERE IS NO LEGAL BASIS UPON WHICH WE MAY OBJECT TO THE AWARDS MADE BY THE DEPARTMENT OF THE NAVY. IN REJECTING YOUR BID ON ITEM 1 THE CONTRACTING OFFICER PROPERLY FOLLOWED THE PROVISIONS OF PARAGRAPH (C),"REJECTION OF BIDS," OF THE "SCHEDULE FOR COAL --- CONTINUATION SHEET," ATTACHED TO THE INVITATION, WHICH STATES:

"/C) COAL FROM ANY MINE WILL BE REJECTED AS NOT RESPONSIVE AND NOT MEETING THE SPECIFICATIONS * * * (III) IF THE AVERAGE BUREAU OF MINES ANALYSIS OF COAL OF THE SIZE OR NEAREST SIZE SPECIFIED UNDER THE ITEM AND PRODUCED FROM SUCH MINE INDICATES THAT SUCH COAL WILL NOT MEET ALL OF THE SPECIFICATIONS FOR THE ITEM. * * *"

CONCERNING THE PROCUREMENT OF THE ARMY'S COAL REQUIREMENTS THROUGH THE AEC CONTRACT, IT APPEARS THAT IF THE EXISTING CONTRACT OBLIGATED THE CONTRACTOR TO FURNISH COAL IN A DEFINITE QUANTITY--- REGARDLESS OF THE RECIPIENT AGENCY--- AND IF THE SECTION 22 FREIGHT RATE APPLICABLE THERETO HAD NOT BEEN RESTRICTED TO DELIVERIES TO AEC, OR THE OPERATING CONTRACTOR, GENERAL ELECTRIC COMPANY, IT WOULD HAVE BEEN TO THE GOVERNMENT'S FINANCIAL ADVANTAGE TO ACCEPT THE AEC OFFER OF PROCUREMENT ON THE BASIS OF BTU CONTENT; HOWEVER, THE SAVING WOULD HAVE BEEN APPROXIMATELY $13,000, RATHER THAN THE AMOUNT ALLEGED BY YOU. THE DEPARTMENT OF THE ARMY WAS CONSTRAINED TO REJECT THE OFFER BECAUSE OF PARAGRAPH 3B OF SPECIAL REGULATION 420-450-1, WHICH PROVIDES, IN PERTINENT PART, THAT---

"PURSUANT TO ASSIGNMENTS BY THE OFFICE OF THE SECRETARY OF DEFENSE, THE DEPARTMENT OF THE NAVY IS THE PURCHASING AGENCY FOR SOLID FUELS REQUIREMENTS OF THE DEPARTMENT OF DEFENSE. INFORMATION WITH RESPECT TO SOLID FUELS PURCHASING POLICY IS AUTHORIZED FOR RELEASE ONLY BY THE DEPARTMENT OF THE NAVY. * * *"

IT IS NOT APPARENT THAT THE DEPARTMENT OF THE NAVY WAS AWARE OF THE ALLEGED SAVING AVAILABLE TO THE GOVERNMENT THROUGH USE OF THE AEC CONTRACT, WHICH WAS DETERMINABLE ONLY AFTER RECEIPT OF THE BIDS. IN ANY EVENT, THE ADMINISTRATIVE ACTION IN USING COMPETITIVE BIDDING TO ACQUIRE THE NEEDED MATERIAL DOES NOT PRECLUDE THE CONTRACT AWARDED THEREUNDER FROM BECOMING A BINDING OBLIGATION UPON THE GOVERNMENT NOR AFFORD ANY LEGAL BASIS UPON WHICH WE COULD REQUIRE ITS CANCELLATION.

ACCORDINGLY, THERE IS NO LEGAL BASIS UPON WHICH WE CAN OBJECT TO THE PROCUREMENT PROCEDURES FOLLOWED.