B-126504, FEBRUARY 14, 1956, 35 COMP. GEN. 456

B-126504: Feb 14, 1956

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1956: REFERENCE IS MADE TO A LETTER FROM THE ADMINISTRATIVE ASSISTANT SECRETARY DATED JANUARY 16. INVITATION 7802 WAS ISSUED OCTOBER 7. INVITATION 7806 WAS ISSUED OCTOBER 14. 000 FIVE-INCH INSULATORS WERE SEPARATED INTO 11 ITEMS OF FROM 250 TO 600 PER ITEM. THE SWITCH INVITATION WAS SCHEDULED FOR OPENING NOVEMBER 7. IT IS STATED IN THE LETTER OF JANUARY 16 THAT INTELLIGENT EVALUATION COULD BE MADE OF THE BIDS FOR FURNISHING SWITCHES BOTH WITH AND WITHOUT INSULATORS UNDER INVITATION 7802 "BASED ON READILY AVAILABLE INSULATOR PRICE INFORMATION" BECAUSE OF THE FACT THAT. - * * * DOMESTIC PRICES QUOTED FOR INSULATOR REQUIREMENTS ARE GENERALLY STANDARDIZED THROUGHOUT THE TRADE. ARE BASED ON PUBLISHED PRICE DATA.

B-126504, FEBRUARY 14, 1956, 35 COMP. GEN. 456

BIDS - ACCEPTANCE OR REJECTION - MODIFICATION AFTER OPENING A BIDDER WHO TOOK ADVANTAGE OF AN INTERRELATIONSHIP BETWEEN TWO INVITATIONS FOR SWITCHES AND INSULATORS BY SUBMITTING A LOW BID FOR INSULATORS CONDITIONED ON THE ACCEPTANCE OF ITS PREVIOUS UNSUCCESSFUL BID FOR SWITCHES WITHOUT INSULATORS HAS MODIFIED HIS BID AFTER OPENING AND ACCEPTANCE OF THE BID WOULD BE UNFAIR TO OTHER BIDDERS WHO DID NOT TAKE ADVANTAGE OF THE RESULTS OF THE OPENING OF THE SWITCH INVITATION.

TO THE SECRETARY OF THE INTERIOR, FEBRUARY 14, 1956:

REFERENCE IS MADE TO A LETTER FROM THE ADMINISTRATIVE ASSISTANT SECRETARY DATED JANUARY 16, 1956, REQUESTING OUR DECISION AS TO THE PROPRIETY OF REFUSING TO CONSIDER THE BID OF THE SCHWAGER-WOOD CORPORATION UNDER INVITATION 7806 ISSUED BY THE BONNEVILLE POWER ADMINISTRATION.

THE CIRCUMSTANCES RELEVANT TO THE MATTER INVOLVE INVITATION 7806 AND ANOTHER INVITATION (7802). INVITATION 7802 WAS ISSUED OCTOBER 7, 1955, CALLING FOR BIDS ON DISCONNECTING SWITCHES, BOTH WITH AND WITHOUT INSULATORS. THE SWITCHES REQUIRED 1620 FIVE-INCH AND 252 SEVEN-INCH BOLT CIRCLE INSULATORS. INVITATION 7806 WAS ISSUED OCTOBER 14, 1955, AND CALLED FOR BIDS ON FURNISHING 5,000 FIVE-INCH, 300 THREE-INCH, AND 252 SEVEN-INCH BOLT CIRCLE INSULATORS. THE 5,000 FIVE-INCH INSULATORS WERE SEPARATED INTO 11 ITEMS OF FROM 250 TO 600 PER ITEM, WITH DELIVERY TO VARIOUS DESTINATIONS. THE SWITCH INVITATION WAS SCHEDULED FOR OPENING NOVEMBER 7, 1955, AND THE INSULATOR INVITATION FOR NOVEMBER 8, 1955.

IT IS STATED IN THE LETTER OF JANUARY 16 THAT INTELLIGENT EVALUATION COULD BE MADE OF THE BIDS FOR FURNISHING SWITCHES BOTH WITH AND WITHOUT INSULATORS UNDER INVITATION 7802 "BASED ON READILY AVAILABLE INSULATOR PRICE INFORMATION" BECAUSE OF THE FACT THAT---

* * * DOMESTIC PRICES QUOTED FOR INSULATOR REQUIREMENTS ARE GENERALLY STANDARDIZED THROUGHOUT THE TRADE, AND ARE BASED ON PUBLISHED PRICE DATA.

IN OTHER/WORDS, IT APPARENTLY IS CONTENDED THAT A BID ON BARE SWITCHES COULD BE EVALUATED AGAINST A BID ON THE SAME SWITCHES COMPLETE WITH INSULATORS, PRESUMABLY BY ADDING TO THE FORMER THE ASSUMED KNOWN PRICE AT WHICH THE NECESSARY INSULATORS COULD BE PURCHASED. WE DO NOT AGREE THAT BIDS FOR THE BARE SWITCHES COULD BE EVALUATED PROPERLY ON THIS BASIS. REGARDLESS OF THE PUBLISHED PRICE DATA ON DOMESTIC INSULATORS IT CANNOT BE ASSUMED THAT ALL DOMESTIC SUPPLIERS WILL QUOTE THE SAME PRICE TO THE GOVERNMENT, AND IN FACT THEY DID NOT UNDER THE INSULATOR INVITATION. FURTHERMORE, EVALUATION ON THE BASIS OF THE DOMESTIC INSULATOR PRICES OVERLOOKS THE FACT THAT LOWER INSULATOR PRICES ARE OBTAINABLE FROM FOREIGN SUPPLIERS. THUS, DESPITE THE FACT THAT THERE WAS NO LANGUAGE IN EITHER INVITATION INDICATING AN INTERRELATIONSHIP BETWEEN THEM, EITHER IN THE WAY OF INTENDED USE OF THE INSULATORS OR IN CONNECTION WITH THE METHOD OF EVALUATING BIDS, IT IS APPARENT THAT A CLOSE AND NECESSARY RELATIONSHIP DID EXIST. FOR EXAMPLE, BIDDERS ON THE INSULATOR INVITATION WERE WARNED THAT AWARD MIGHT OR MIGHT NOT BE MADE ON THE 252 SEVEN-INCH INSULATORS, DEPENDING ON THE REQUIREMENTS OF THE GOVERNMENT. THE REQUIREMENTS OF THE GOVERNMENT FOR THESE INSULATORS DEPENDED ON WHETHER AWARD WAS MADE UNDER THE SWITCH INVITATION ON A BARE SWITCH BASIS OR COMPLETE WITH INSULATORS. ALSO, IT IS UNDERSTOOD THAT IN THE EVENT OF AWARD ON A BARE SWITCH BASIS, IT WAS INTENDED TO SECURE THE 1,620 FIVE-INCH INSULATORS NECESSARY TO COMPLETE THE SWITCHES PARTLY FROM STOCK AND PARTLY BY EXERCISING THE GOVERNMENT'S OPTION UNDER THE INSULATOR INVITATION TO INCREASE THE CONTRACT QUANTITIES BY 25 PERCENT.

ON THIS STATE OF FACTS, IT SHOULD HAVE BEEN FORESEEN BY THE CONTRACTING OFFICE THAT THE INTERRELATIONSHIP BETWEEN THE TWO INVITATIONS WAS SUCH THAT A BIDDER WELL MIGHT CONSIDER IT PERMISSIBLE TO TREAT BOTH AS PART OF ONE PROCUREMENT, AND TO TAKE ADVANTAGE OF THE RESULTS OF THE SWITCH INVITATION OPENING ON NOVEMBER 7TH IN MAKING A BID UNDER THE INSULATOR INVITATION TO BE OPENED THE NEXT DAY. INDEED, A REPRESENTATIVE OF SCHWAGER-WOOD URGED THAT BOTH OPENINGS BE HELD ON NOVEMBER 8, 1955, FOR THIS VERY REASON. UNFORTUNATELY, THE CONTRACTING OFFICE DID NOT SEE FIT TO GRANT THIS REQUEST.

AT THE SWITCH OPENING ON NOVEMBER 7TH, THE LOW BID FOR SWITCHES COMPLETE WITH INSULATORS WAS $210,000, SUBMITTED BY GENERAL ELECTRIC COMPANY, WHICH DID NOT BID ON A BARE SWITCH BASIS. THE NEXT-LOW BID FOR SWITCHES WITH INSULATORS WAS $215,000, SUBMITTED BY SCHWAGER-WOOD, WHICH ALSO SUBMITTED A BID OF $162,000 FOR BARE SWITCHES. THERE WAS, HOWEVER, A LOWER BID OF $158,551 FOR BARE SWITCHES SUBMITTED BY DELTA STAR ELECTRIC DIVISION. AFTER THE OPENING, AN OFFICER OF SCHWAGER-WOOD ASKED WHETHER A CONDITIONAL BID ON THE INSULATOR INVITATION WOULD BE CONSIDERED. HE WAS TOLD THAT ANY BID WOULD HAVE TO CONFORM TO THE TERMS OF THE INVITATION, BUT APPARENTLY WAS NOT TOLD, THAT A CONDITIONAL BID WOULD BE REJECTED.

SCHWAGER-WOOD, WHICH IS NOT A MANUFACTURER OF INSULATORS, DID SUBMIT A BID ON PART OF THE INSULATOR INVITATION, WHICH WAS PERMISSIBLE. IT DID NOT BID ON THE ENTIRE QUANTITY, BUT ONLY ON A QUANTITY SUFFICIENT TO COMPLETE THE BARE SWITCHES UPON WHICH IT HAD BID $162,000 THE DAY BEFORE. IT BID A LUMP SUM OF $45,000 FOR 1,650 FIVE-INCH AND 252 SEVEN INCH INSULATORS, AND ATTACHED THE FOLLOWING CONDITION TO ITS BID:

WE OFFER 1620 OF THE 5 INCH B.C. INSULATORS AND 252 OF THE 7 INCH B.C. INSULATORS ONLY IF USED ON SCHWAGER-WOOD SWITCHES BID UNDER SCHWAGER- WOOD'S ALTERNATE BID ON BONNEVILLE POWER ADMINISTRATION BID INVITATION 7802.

IT MAY BE NOTED THAT THE DIFFERENCE BETWEEN THE NOVEMBER 7TH BIDS OF SCHWAGER-WOOD FOR SWITCHES WITH AND WITHOUT INSULATORS WAS $53,000, AS COMPARED TO ITS BID OF $45,000 FOR EQUIVALENT INSULATORS ALONE. IT IS NOTED, ALSO, THAT THAT COMPANY'S BARE SWITCH BID OF $162,000 AND ITS BID FOR INSULATORS FOR THOSE SWITCHES TOTAL $207,000, WHICH IS $8,000 LESS THAN ITS PREVIOUS BID FOR COMPLETE SWITCHES AND $3,000 LESS THAN THE LOWEST BID OF $210,000 FOR COMPLETE SWITCHES. IT PROPOSED TO FURNISH INSULATORS TO BE SUPPLIED FROM THE LOCKE DIVISION OF GENERAL ELECTRIC AND FROM JAPANESE FIRM. ANOTHER BIDDER PROPOSING TO FURNISH THE SAME INSULATORS FROM LOCKE BID $73,766.76, AND A BIDDER PROPOSING TO FURNISH THEM FROM THE JAPANESE FIRM BID $61,275.

THE CONCLUSION IS INESCAPABLE THAT SCHWAGER-WOOD, UPON DISCOVERING ON NOVEMBER 7TH THAT IT HAD FAILED TO SUBMIT THE LOW BID ON COMPLETE SWITCHES BY $5,000, SUBMITTED, IN EFFECT, ANOTHER BID ON COMPLETE SWITCHES WHICH WAS LOW ENOUGH TO COME UNDER THE LOWEST BID PREVIOUSLY SUBMITTED ON COMPLETE SWITCHES. THE NET EFFECT OF THE MANNER IN WHICH THE PROCUREMENT WAS HANDLED WAS TO AFFORD BIDDERS WHO WERE ALERT ENOUGH TO SEE THE POSSIBILITY AN OPPORTUNITY TO MAKE A SECOND BID ON COMPLETE SWITCHES AFTER THE RESULTS OF THE FIRST BIDS THEREON WERE KNOWN. NEEDLESS TO SAY, SUCH A RESULT DOES NOT COMPLY WITH THE SPIRIT AND PURPOSE OF ADVERTISED COMPETITIVE BIDDING.

HOWEVER, THIS OPPORTUNITY WAS AVAILABLE ONLY TO THOSE BIDDERS WHO SUBMITTED A BID ON BARE SWITCHES, AND EVEN THEN, EXCEPT FOR THE LOW BIDDER, ONLY THROUGH THE SUBMISSION OF A CONDITIONAL BID ON THE INSULATORS. THE VICE INHERENT IN THE TIMING OF THE TWO BID OPENINGS IS APPARENT IF WE CONSIDER THE OPPORTUNITY THEREBY AFFORDED THE LOW BIDDER ON BARE SWITCHES. DELTA-STAR SUBMITTED A BID OF $158,551 ON BARE SWITCHES, WHICH WAS THE BID ON THAT BASIS. AFTER THE SWITCH OPENING, IT KNEW THAT ITS BARE SWITCH BID WOULD NOT BE ACCEPTED UNLESS THE PRICE QUOTED THE NEXT DAY FOR THE NECESSARY INSULATORS WAS LESS THAN THE DIFFERENCE BETWEEN THE LOWEST BID OF $210,000 FOR COMPLETE SWITCHES AND ITS BID OF $158,551. THIS DIFFERENCE IS $51,449. DELTA-STAR COULD HAVE SUBMITTED A PARTIAL BUT UNCONDITIONAL BID THE NEXT DAY ON THE NECESSARY INSULATORS AT A BELOW-COST PRICE OF $50,000. THE LOWEST PRICE TO THE GOVERNMENT FOR COMPLETE SWITCHES THEN WOULD HAVE BEEN DELTA-STAR'S TWO BIDS TOTALLING $208,551. WHILE WE DO NOT HAVE THIS QUESTION BEFORE US, IT WOULD BE DIFFICULT TO FIND ANY VALID REASON FOR NOT ACCEPTING SUCH A COMBINATION OF BIDS. YET IT IS OBVIOUS THAT THE NET RESULT WOULD BE TO PERMIT DELTA-STAR TO REDUCE ITS PREVIOUS BID OF $158,551 ON BARE SWITCHES TO THE EXTENT THAT ITS INSULATOR BID WAS BELOW COST.

THE SITUATION IS QUITE DIFFERENT, HOWEVER, IN THE CASE OF SCHWAGER WOOD OR ANY OTHER FIRM WHOSE BID ON BARE SWITCHES WAS NOT LOW. THE ONLY WAY SUCH A BIDDER COULD TAKE ADVANTAGE OF THE RESULTS OF THE SWITCH OPENING WAS TO SUBMIT A BID ON INSULATORS CONDITIONED UPON ACCEPTANCE OF ITS PREVIOUS UNSUCCESSFUL BARE SWITCH BID. IT IS CONTENDED IN THE LETTER OF JANUARY 16, 1956, THAT THE SCHWAGER-WOOD BID SHOULD BE REJECTED AS UNRESPONSIVE BECAUSE IT IS CONDITIONAL. A CONDITIONAL BID IS NOT NECESSARILY UNRESPONSIVE. FOR EXAMPLE, WHERE BIDS ARE SOLICITED FOR A NUMBER OF ITEMS WITH THE RIGHT RESERVED TO THE GOVERNMENT TO MAKE AWARD BY INDIVIDUAL ITEMS, IT IS PERMISSIBLE FOR A BIDDER TO BID ON CERTAIN ITEMS UNCONDITIONALLY AND TO CONDITION ITS BID ON OTHER ITEMS UPON ACCEPTANCE OF ITS UNCONDITIONAL BIDS. SO LONG AS AWARD IS TO BE MADE ON ALL ITEMS INCLUDED IN THE CONDITIONAL AND UNCONDITIONAL PARTS OF THE BID, THE BID IS NOT UNRESPONSIVE AND MUST BE CONSIDERED AND EVALUATED ON ITS TOTAL AMOUNT. THIS WOULD HAVE BEEN THE SITUATION IF BOTH INVITATIONS IN THE PRESENT CASE HAD BEEN OPENED AT THE SAME TIME. NO OPPORTUNITY THEN WOULD HAVE BEEN PRESENT FOR BIDDERS TO MODIFY THEIR BIDS ON THE BASIS OF KNOWLEDGE OF OTHER BIDS. WHEN BIDS ARE CONDITIONED TO ACCOMPLISH THIS RESULT, THEY SHOULD BE REJECTED, NOT SO MUCH ON THE GROUND THAT THEY ARE UNRESPONSIVE AS THAT THEY CONSTITUTE A MODIFICATION OF BIDS AFTER OPENING.

WE THINK IT IS NOT SUFFICIENT TO OVERCOME THE LATENT EVIL IN THE METHOD OF PROCUREMENT USED TO SAY THAT ALL BIDDERS HAD THE SAME OPPORTUNITY TO MODIFY THEIR BIDS. AS WE HAVE STATED, THE INTER RELATIONSHIP BETWEEN THE TWO INVITATIONS WAS NOT MADE PLAIN TO BIDDERS. IT SEEMS UNLIKELY THAT ALL BIDDERS REALIZED THE POSSIBILITY WHICH WAS TAKEN ADVANTAGE OF BY SCHWAGER- WOOD. DELTA-STAR DID NOT BID ON INSULATORS, AND NO OTHER BIDDER SUBMITTED A CONDITIONAL INSULATOR BID. ALL MATERIAL FACTORS RELEVANT TO THE MAKING AND EVALUATION OF BIDS FOR A PARTICULAR PROCUREMENT MUST BE MADE CLEAR TO PROSPECTIVE BIDDERS SO THAT THEY MAY BE IN THE POSITION OF EQUALITY IN BIDDING WHICH THE APPLICABLE STATUTES REQUIRE. UNDER THE CIRCUMSTANCES IN THE INSTANT MATTER, IT IS OUR OPINION THAT IT WOULD BE UNFAIR TO OTHER BIDDERS TO PERMIT ACCEPTANCE OF SCHWAGER-WOOD'S CONDITIONAL BID.

THE QUESTION THEN ARISES WHETHER AWARD MAY BE MADE ON THE BASIS OF THE OTHER BIDS RECEIVED UNDER BOTH INVITATIONS, AS PROPOSED BY YOUR OFFICE. THE ONLY GROUND UPON WHICH OBJECTION COULD BE MADE TO THIS IS ITS POSSIBLE UNFAIRNESS TO SCHWAGER-WOOD. WE DO NOT FEEL THAT IT WOULD IN FACT BE UNFAIR TO SCHWAGER-WOOD TO MAKE THE AWARD ON THIS BASIS. THE IMPROPRIETY IN THE PROCUREMENT PROCEDURE USED WAS THE OPPORTUNITY AFFORDED BIDDERS TO SUBMIT WHAT AMOUNTED TO A MODIFICATION OF THEIR BIDS ON SWITCHES AFTER OPENING. FORTUNATELY THE LOW BIDDER ON BARE SWITCHES DID NOT BID ON INSULATORS, AND FOR THE REASONS STATED ABOVE WE BELIEVE THAT ANY BID ON INSULATORS WHICH WAS CONDITIONED UPON ACCEPTANCE OF OTHER THAN THE LOW BARE SWITCH BID SHOULD BE REJECTED. SCHWAGER-WOOD SUBMITTED ITS BID BOTH ON COMPLETE SWITCHES AND ON BARE SWITCHES FROM A POSITION OF EQUALITY WITH ALL OTHERS WHO MADE SIMILAR BIDS. BOTH ITS BIDS WERE SECOND LOW. ITS CONDITIONAL BID ON THE INSULATOR INVITATION WAS IN EFFECT AN ATTEMPTED REDUCTION OF ITS PREVIOUS BID ON SWITCHES MADE WITH FOREKNOWLEDGE OF THE PRICE IT WOULD HAVE TO QUOTE ON INSULATORS TO BEAT THE PREVIOUS LOW BID ON COMPLETE SWITCHES. WE DO NOT FEEL THAT THE ONLY BIDDER WHO ATTEMPTED TO MODIFY ITS BID AFTER OPENING CAN COMPLAIN IF AWARD IS MADE ON THE BASIS OF BIDS, INCLUDING ITS OWN, WHICH WERE MADE WITHOUT TAKING ADVANTAGE OF THE RESULTS OF THE OPENING ON THE SWITCH INVITATION. AWARD MAY BE MADE ON THAT BASIS.