B-125437, NOVEMBER 14, 1955, 35 COMP. GEN. 282

B-125437: Nov 14, 1955

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THE COSTS OF ADDITIONAL ADMINISTRATIVE EXPENSES AND INTEREST INCIDENT TO PROGRESS PAYMENTS ARE TOO INDEFINITE AND SPECULATIVE TO BE CONSIDERED. 1955: FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF THE CONTRACT MADE BY THE BONNEVILLE POWER ADMINISTRATION TO THE GENERAL ELECTRIC COMPANY UNDER INVITATION FOR BIDS NO. 7754 DATED AUGUST 1. INSOFAR AS IS HERE MATERIAL. INVITATION NO. 7754 IS MERELY A READVERTISEMENT. THE PROVISIONS OF INVITATION NO. 7754 ARE SIMILAR TO THE PRIOR INVITATION WHICH WAS CANCELED DUE TO INADEQUATE " BUY AMERICAN" PROVISIONS. THE BIDS RECEIVED IN RESPONSE TO INVITATION NO. 7754 WERE OPENED ON AUGUST 30. THE THREE LOWEST BIDS WERE AS FOLLOWS: TABLE GENERAL ELECTRIC COMPANY .

B-125437, NOVEMBER 14, 1955, 35 COMP. GEN. 282

BIDS - EVALUATION - PROGRESS PAYMENTS V. LUMP-SUM FOR COMPLETE DELIVERY IN THE EVALUATION OF A BID SUBMITTED IN RESPONSE TO AN INVITATION WHICH PERMITS THE BIDDER TO MAKE AN ELECTION TO RECEIVE PROGRESS PAYMENTS OR TO BE PAID A LUMP SUM ON COMPLETE DELIVERY BUT DOES NOT PROVIDE THAT THE PAYMENT BASIS ELECTED WOULD BE AN EVALUATION FACTOR, THE COSTS OF ADDITIONAL ADMINISTRATIVE EXPENSES AND INTEREST INCIDENT TO PROGRESS PAYMENTS ARE TOO INDEFINITE AND SPECULATIVE TO BE CONSIDERED.

TO FEDERAL PACIFIC ELECTRIC COMPANY, NOVEMBER 14, 1955:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF THE CONTRACT MADE BY THE BONNEVILLE POWER ADMINISTRATION TO THE GENERAL ELECTRIC COMPANY UNDER INVITATION FOR BIDS NO. 7754 DATED AUGUST 1, 1955.

THE RECORD SHOWS THAT THE INVITATION INVOLVED REQUESTED BIDS FOR FURNISHING ELEVEN LARGE POWER CIRCUIT BREAKERS. THE INVITATION, INSOFAR AS IS HERE MATERIAL, REQUIRED BIDDERS TO QUOTE UNIT PRICES PER CIRCUIT BREAKER, A PER DIEM RATE FOR AN INSTALLATION ENGINEER AND A LUMP SUM FOR TRAVEL EXPENSES OF THE ENGINEER. REGARDING NINE OF THE CIRCUIT BREAKERS, INVITATION NO. 7754 IS MERELY A READVERTISEMENT, TWO ADDITIONAL BREAKERS HAVING BEEN ADDED AS A NEED FOR THEM DEVELOPED SUBSEQUENT TO THE ORIGINAL INVITATION (INVITATION NO. 7561). THE PROVISIONS OF INVITATION NO. 7754 ARE SIMILAR TO THE PRIOR INVITATION WHICH WAS CANCELED DUE TO INADEQUATE " BUY AMERICAN" PROVISIONS.

THE BIDS RECEIVED IN RESPONSE TO INVITATION NO. 7754 WERE OPENED ON AUGUST 30, 1955. THE ABSTRACT OF BIDS SHOWS THAT, ON THE BASIS OF THE EVALUATION USED BY THE BONNEVILLE POWER ADMINISTRATION, THE THREE LOWEST BIDS WERE AS FOLLOWS:

TABLE GENERAL ELECTRIC COMPANY --------------------------- $822,400.00 FEDERAL PACIFIC ELECTRIC COMPANY ------------------ 822,817.00 WESTINGHOUSE ELECTRIC CORPORATION ------------------ 855,842.56

THE CONTRACT WAS AWARDED TO THE GENERAL ELECTRIC COMPANY ON SEPTEMBER 7, 1955, AS THE LOWEST RESPONSIBLE BIDDER.

IT IS THE CONTENTION OF FEDERAL PACIFIC THAT THE EVALUATION OF THE BIDS WAS IMPROPER DUE TO THE FAILURE TO TAKE INTO CONSIDERATION THE METHOD OF PAYMENT ELECTED BY THE BIDDERS AND, IF THIS HAD BEEN TAKEN INTO CONSIDERATION, AS REQUIRED, THE BID OF FEDERAL PACIFIC WOULD BE THE LOWEST BY AT LEAST $3,000 AND PROBABLY BY AS MUCH AS $10,000.

PARAGRAPH 1 OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, STANDARD FORM 33 ( GSA), WHICH IS A PART OF THE INVITATION, PROVIDES:

* * * THE CONTRACT SHALL BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED * * *.

ALSO, PAGES 5 AND 6 OF THE INVITATION CONTAIN THE FOLLOWING PROVISIONS CONCERNING THE EVALUATION OF BIDS:

AWARD: A. AWARD AS HERE PRESCRIBED WILL BE MADE BY ITEM OR AS A WHOLE TO ONE BIDDER EITHER F.O.B. DESTINATIONS OR F.O.B. BIDDER'S SHIPPING POINT, WHICHEVER PROVES TO BE IN THE BEST INTEREST OF THE GOVERNMENT EXCEPT THAT BIDS PROPOSING TO FURNISH MATERIAL OR EQUIPMENT PRODUCED OR MANUFACTURED OUTSIDE THE CONTINENTAL LIMITS OF THE UNITED STATES WILL BE CONSIDERED ONLY ON AN F.O.B. DESTINATION BASIS. DISCOUNTS OFFERED FOR PAYMENT IN LESS THAN TWENTY DAYS WILL NOT BE CONSIDERED IN MAKING AWARD OF CONTRACT.

B. BIDS WILL BE EVALUATED ON THE BASIS OF ONE POTENTIAL DEVICE FOR EACH CIRCUIT BREAKER. AWARD OF ITEMS COVERING POTENTIAL DEVICES MAY OR MAY NOT BE MADE AS THE GOVERNMENT REQUIRES; THE RIGHT BEING RESERVED TO AWARD PARTIAL QUANTITY OF ANY ITEM FOR POTENTIAL DEVICES. AWARD FOR POTENTIAL DEVICES TO MEET THE GOVERNMENT REQUIREMENTS MAY BE MADE AT ANY TIME PRIOR TO COMPLETION OF THE CONTRACT.

C. SERVICES OF AN INSTALLATION ENGINEER FOR THE ESTIMATED NUMBER OF DAYS STATED ON THE SCHEDULE PLUS BID PRICE FOR TRAVEL WILL BE USED IN EVALUATING BIDS. AWARD WILL BE MADE ON ITEMS FOR INSTALLATION ENGINEER, WHERE APPLICABLE AND AS THE GOVERNMENT MAY REQUIRE.

D. WHENEVER APPLICABLE, ELEMENTS OR FACTORS NOT SPECIFICALLY MENTIONED OR PROVIDED FOR HEREIN, SUCH AS THE COST OF INSPECTION(INCLUDING SALARIES, TRAVEL AND SUBSISTENCE EXPENSES) OR ANY OTHER ELEMENT OR FACTOR IN ADDITION TO THAT OF PRICE WHICH WOULD AFFECT THE FINAL COST TO THE GOVERNMENT, WILL BE TAKEN INTO CONSIDERATION IN MAKING AWARD.

E. IN THE SPACE PROVIDED BELOW THE BIDDER SHALL INDICATE THE BASIS OF PAYMENT HE DESIRES. (SEE PARAGRAPH 113).

PARAGRAPH 113 PROVIDES THAT PAYMENT WILL BE MADE UNDER EITHER OF TWO BASES, NAMELY: BASIS I, PAYMENT UPON COMPLETE DELIVERY, AND BASIS II, PROGRESS PAYMENTS. THERE IS SET OUT IN CONSIDERABLE DETAIL THE BASIS UPON WHICH PROGRESS OR PARTIAL PAYMENTS WILL BE MADE, AND IT IS PROVIDED THAT PAYMENTS WILL BE MADE UNDER BASIS I UNLESS THE BIDDER SPECIFIES IN THE BID THAT PAYMENT UNDER BASIS II IS DESIRED.

GENERAL ELECTRIC COMPANY ELECTED TO RECEIVE PROGRESS PAYMENTS WHEREAS FEDERAL PACIFIC ELECTED TO RECEIVE PAYMENT UPON COMPLETE DELIVERY.

IT IS WELL ESTABLISHED THAT THE INVITATION FOR BIDS ON A GOVERNMENT CONTRACT MUST BE DRAWN SO AS TO PERMIT FULL AND FREE COMPETITION AND MUST DEFINE THE PRODUCT OR WORK TO BE CONTRACTED FOR IN TERMS SUFFICIENTLY DEFINITE TO ASSURE THAT EVERY BID SUBMITTED IN RESPONSE THERETO WILL BE FOR SUBSTANTIALLY THE SAME PRODUCT OR WORK. AS A GENERAL RULE, TOO, THE INVITATION MUST SET FORTH ANY SPECIAL ELEMENTS WHICH WILL BE FACTORS IN THE EVALUATION OF THE BIDS FOR AWARD AND A REASONABLE BASIS FOR EVALUATION OF ANY SUCH SPECIAL ELEMENTS. THIS IS NECESSARY TO ENABLE ALL BIDDERS TO COMPETE ON A COMMON BASIS AND THE GOVERNMENT TO SECURE THE LOWEST PRICE OBTAINABLE.

IT IS REPORTED THAT THE PAYMENT PROVISION INCORPORATED IN PARAGRAPH 113 OF THE SPECIFICATIONS WAS FIRST USED BY THE BONNEVILLE POWER ADMINISTRATION IN 1951 AND THAT APPARENTLY IT WAS PROMPTED BY A DESIRE TO BROADEN THE BASE OF COMPETITION BY ENABLING BIDDERS TO TAKE ADVANTAGE OF PAYMENT PRIOR TO COMPLETE DELIVERY. THE ELECTION RESTS COMPLETELY WITH THE BIDDERS. SO FAR AS WE KNOW, THE PROVISION FOR SUCH AN ELECTION IS NOVEL. NORMALLY, AN INVITATION EITHER DOES, OR DOES NOT, PROVIDE FOR PARTIAL PAYMENTS AND AN ELECTION IS NOT LEFT TO THE BIDDER'S DISCRETION.

IT WELL MAY BE THAT A CONTRACT PROVIDING FOR PAYMENT UPON COMPLETE DELIVERY IS MORE DESIRABLE FROM THE GOVERNMENT'S STANDPOINT THAN ONE PROVIDING FOR PARTIAL PAYMENTS. THE FACT IS, HOWEVER, THAT NO SPECIFIC BASIS FOR EVALUATION BETWEEN THE TWO METHODS OF PAYMENT WAS PROVIDED IN THIS INVITATION AND APPARENTLY NONE HAS BEEN PROVIDED IN ANY OTHER INVITATION WHERE THE PROVISION WAS USED. IN ANY EVENT, IT IS REPORTED THAT SUCH FACTOR HAS NEVER BEEN TAKEN INTO CONSIDERATION BY THE DEPARTMENT OF THE INTERIOR IN EVALUATING BIDS FOR AWARD UNDER SIMILAR CIRCUMSTANCES.

FEDERAL PACIFIC URGES THAT PROGRESS PAYMENTS CAUSE MORE ADMINISTRATIVE WORK THAN ONE FINAL PAYMENT UPON COMPLETION AND THAT A PROGRESS-PAYMENT PROVISION THE GOVERNMENT WILL INCUR ADDITIONAL COST BY WAY OF INTEREST AS A RESULT OF BEING REQUIRED TO PAY A SUM OF MONEY SOONER THAN IT WOULD OTHERWISE BE REQUIRED TO PAY.

THE COMPANY THEORIZES THAT ADDITIONAL INTEREST COST CAN BE COMPUTED IN THIS CASE, SINCE IT CAN BE DETERMINED WITH REASONABLE CERTAINTY THE TIME WHEN THE GOVERNMENT WILL BE REQUIRED TO MAKE THE PROGRESS PAYMENTS; THAT THE INTEREST ALONE ON SUCH PAYMENTS AT THE RATE OF INTEREST THAT THE GOVERNMENT PAYS ON ITS BORROWED MONEY, WOULD FAR EXCEED THE DIFFERENCE OF $417 BETWEEN ITS AND GENERAL ELECTRIC'S BIDS; AND THAT THE GOVERNMENT IS REQUIRED TO TAKE SUCH COST INTO CONSIDERATION IN EVALUATING THE BIDS UNDER THE PHRASE "OTHER FACTORS" CONTAINED IN THE INVITATION.

THE PROVISIONS ON PAGES 5 AND 6 OF THE INVITATION CONTAIN DEFINITE CRITERIA FOR EVALUATION OF BIDS. THESE INCLUDE DISCOUNTS, POTENTIAL DEVICES, ENGINEER'S TRAVEL EXPENSES AND A DAILY CHARGE FOR THE ENGINEER FOR A DEFINITE NUMBER OF DAYS. THERE IS NO SPECIFIC PROVISION IN THE INVITATION TO THE EFFECT THAT THE BASIS OF PAYMENT ELECTED BY THE BIDDERS WOULD BE A FACTOR IN EVALUATION.

IT IS OUR OPINION THAT, IN THE ABSENCE OF EXPRESS PROVISION AND SPECIFIC CRITERIA SET FORTH IN THE APPLICABLE INVITATION OR REGULATIONS, THE COST OF ADDITIONAL ADMINISTRATIVE EXPENSE AND INTEREST WHICH MIGHT BE INVOLVED IN MAKING PROGRESS PAYMENTS AS AGAINST A LUMP SUM PAYMENT UPON FINAL DELIVERY, IS TOO INDEFINITE AND SPECULATIVE TO BE MADE AN EVALUATION FACTOR AND THAT FOR THE ADMINISTRATIVE OFFICE, IN THIS INSTANCE, TO HAVE EVALUATED THE BIDS ON THE BASIS OF THE BIDDERS' ELECTION TO TAKE PROGRESS PAYMENTS WOULD NOT HAVE BEEN JUSTIFIED. AS WE HELD IN 33 COMP. GEN. 108 WITH REGARD TO THE ELEMENT OF PROSPECTIVE DEPRECIATION ON AUTOMOTIVE EQUIPMENT, TO INTRODUCE SUCH INDEFINITIVE AND SPECULATIVE FACTORS IN BID EVALUATIONS "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.'

IN THE CIRCUMSTANCES, WE WOULD NOT BE WARRANTED IN CONCLUDING THAT THE AWARD MADE IN THIS CASE WAS WITHOUT AUTHORITY OR IN VIOLATION OF LAW.