B-126973, MAY 1, 1956, 35 COMP. GEN. 603

B-126973, MAY 1, 1956, 35 COMP. GEN. 603

BIDS - EVALUATION - FREIGHT RATE UNCERTAINTY UNDER AN INVITATION TO BID WHICH PROVIDED FOR A PRICE ADJUSTMENT FOR SUBSEQUENT FLUCTUATIONS OF FREIGHT RATES, AN ADMINISTRATIVE DETERMINATION TO MAKE AN AWARD TO THE LOW BIDDER ON THE BASIS OF RATES IN EFFECT AT THE TIME OF THE EVALUATION, RATHER THAN TO DEFER THE AWARD AT THE REQUEST OF THE NEXT LOW BIDDER WHOSE BID WOULD BE THE LOWEST IN THE EVENT OF THE ADOPTION OF CERTAIN PROPOSED REDUCED FREIGHT RATES, WAS NOT IMPROPER.

TO GOSLIN-1BIRMINGHAM MANUFACTURING COMPANY, INC., MAY 1, 1956:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 13, 1956, SUPPLEMENTING YOUR TELEGRAM OF FEBRUARY 11, 1956, PROTESTING THE AWARD OF A CONTRACT BY THE DEPARTMENT OF THE ARMY FOR FURNISHING WIRE ROPE FENDERS PURSUANT TO INVITATION NO. CIVENG 30-023-56-27 ISSUED BY THE CORPS OF ENGINEERS, U. S. ARMY, BUFFALO DISTRICT, BUFFALO, NEW YORK.

THE INVITATION REQUESTED BIDS FOR FURNISHING CERTAIN WIRE ROPE FENDERS AND AUXILIARY WIRE ROPE FENDERS, COMPLETE WITH OPERATING MACHINERY AND ACCESSORIES. DELIVERY WAS TO BE MADE F.O.B. RAILROAD CARS AT MASSENA, NEW YORK, BUT BIDDERS WERE ADVISED IN SECTION SC-15 ON PAGE SC-9 OF THE SPECIFICATIONS, PART III, SPECIAL CONDITIONS, AS FOLLOWS,*

SC-15. ADJUSTMENT OF CONTRACT PRICE AS A RESULT OF FLUCTUATIONS OF FREIGHT RATES.--- IF, AFTER THE DATE AND HOUR OF OPENING OF BIDS AND CONTINUING THROUGHOUT THE COURSE OF THE CONTRACT, THERE IS A CHANGE IN THE OFFICIAL RAILROAD FREIGHT RATES EXISTING AND PUBLISHED AT THE TIME OF OPENING BIDS, AFFECTING DELIVERIES UNDER THIS CONTRACT, ANY INCREASE IN COST RESULTING FROM AN INCREASE IN FREIGHT RATES WILL BE BORNE BY THE GOVERNMENT AND ANY DECREASE IN FREIGHT RATES WILL BE DEDUCTED FROM PAYMENTS TO THE CONTRACTOR.

PARAGRAPH 16 OF THE CONTINUATION OF THE BID SCHEDULE PROVIDED THAT, SUBJECT TO THE PROVISIONS OF THE BUY AMERICAN ACT, 41 U.S.C. 10B, AWARD WOULD BE MADE TO THE LOWEST RESPONSIBLE BIDDER IN THE AMOUNT OF THE BID SUBMITTED. THAT PROVISION MUST, OF COURSE, BE SO CONSTRUED AND APPLIED AS NOT TO CONFLICT WITH THE REQUIREMENT OF SECTION 3 (B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 22, 41 U.S.C. 152.

THE RECORD SHOWS THAT TWO BIDS WERE RECEIVED AND THAT THEY WERE OPENED ON FEBRUARY 1, 1956, AS SCHEDULED. THE APPARENT LOW BID WAS IN THE AMOUNT OF $834,340, AND YOURS WAS $834,956. THE CONTRACT WAS AWARDED TO THE LOWER BIDDER ON FEBRUARY 10, 1956, NOTWITHSTANDING VERBAL REPRESENTATIONS SAID TO HAVE BEEN MADE ON YOUR BEHALF TO THE ADMINISTRATIVE OFFICIALS A DAY OR TWO BEFORE THAT, ON THE BASIS STATED IN YOUR TELEGRAM OF FEBRUARY 11.

IT WAS ADMITTED IN YOUR TELEGRAM THAT THE OTHER BID WAS $616 LOWER THAN YOURS, BUT YOU CLAIMED THAT "THIS AMOUNT PLUS APPROXIMATELY $1800 MORE" WOULD DISAPPEAR ON FEBRUARY 25, 1956, WHEN CERTAIN PROPOSED NEW FREIGHT RATES WERE SCHEDULED TO GO INTO EFFECT IN THE ABSENCE OF AFFIRMATIVE ACTION BY THE INTERSTATE COMMERCE COMMISSION. IT WAS YOUR CONTENTION ALSO THAT, SINCE YOUR BID WOULD BE LOW ON THE BASIS OF THE PROPOSED NEW RATES, THE AWARD OF A CONTRACT SHOULD BE DEFERRED UNTIL THE NEW RATES BECAME EFFECTIVE. IN YOUR LETTER OF MARCH 13, 1956, YOU STATE THAT ON OR ABOUT FEBRUARY 23, 1956, THE RAILROADS AGREED TO A CHANGE IN THEIR TARIFFS MAKING THE INCREASE IN RATES EFFECTIVE MARCH 7, 1956, AND THAT DESPITE YOUR REQUEST THAT AWARD ACTION BE DEFERRED UNTIL YOU COULD DISCUSS THE MATTER WITH OUR OFFICE "THE DISTRICT ENGINEER PROCEEDED TO MAKE AN AWARD TO THE NEXT LOW DER.'

THE QUESTION AS TO WHETHER AN AWARD SHOULD BE DEFERRED PENDING CONSIDERATION BY OUR OFFICE OF A PROTEST IS ESSENTIALLY A PROCEDURAL ONE. THE LEGALITY OF AN AWARD DEPENDS UPON ITS CONFORMANCE OR LACK OF CONFORMANCE WITH APPLICABLE PROVISIONS OF LAW AND NOT UPON THE PROCEDURE FOLLOWED WITH RESPECT TO THE PROTEST.

FOR MANY YEARS IT WAS THE NORMAL PRACTICE IN GOVERNMENT PROCUREMENT TO SOLICIT BIDS, WHEREVER SUBSTANTIAL TRANSPORTATION COSTS MIGHT BE INVOLVED, ON AN F.O.B. ORIGIN BASIS OR SOME EQUIVALENT THEREOF, IN ORDER THAT THE GOVERNMENT MIGHT THEREBY TAKE ADVANTAGE OF LOWER LAND GRANT RATES OR LAND GRANT EQUALIZATION RATES TO WHICH IT WAS ENTITLED ON VIRTUALLY ALL OF THE MAJOR RAIL CARRIERS. EVALUATION OF BIDS WAS THEN CUSTOMARILY MADE ON THE BASIS OF COST TO THE GOVERNMENT AT DESTINATION, USING THE MOST FAVORABLE TRANSPORTATION RATES. UPON THE ABOLITION OF LAND-GRANT RATES, THE REASON FOR THAT PRACTICE NO LONGER EXISTED, AND SOLICITATION OF BIDS ON A DELIVERED-PRICE BASIS, WHICH RELIEVED THE PROCUREMENT OFFICIALS OF THE FREQUENTLY ONEROUS DUTY OF DETERMINING FREIGHT RATES AND CHARGES, BECAME MORE COMMON. THIS WAS RECOGNIZED IN OUR DECISION OF OCTOBER 6, 1955, B- 125656, IN WHICH WE HELD THAT AN INVITATION FOR BIDS WHICH FAILED DEFINITELY TO SPECIFY WHETHER PRICES SHOULD BE QUOTED F.O.B. ORIGIN OR F.O.B. DESTINATION, AND FAILED TO STATE A BASIS FOR EVALUATION OF BIDS OFFERING DELIVERY F.O.B. ORIGIN, WAS LEGALLY DEFECTIVE AND THAT NO AWARD SHOULD BE MADE THEREUNDER. IN THAT DECISION, WE REMARKED," WHERE PREFERENTIAL RATES TO THE GOVERNMENT ARE NOT AVAILABLE AND WHERE THE DESTINATION IS KNOWN, THERE WOULD APPEAR TO BE NO ADVANTAGE TO THE GOVERNMENT IN REQUESTING BIDS ON AN F.O.B. ORIGIN BASIS.'

IN THE PRESENT CASE, WHILE THE INVITATION DEFINITELY CALLED FOR BIDS F.O.B. DESTINATION AND APPARENTLY CONTEMPLATED THAT EVALUATION AND AWARD WOULD BE MADE SOLELY ON THE BASIS OF THE PRICES QUOTED, THE INCLUSION OF THE FREIGHT ADJUSTMENT PROVISIONS OF SECTION SC-15 IN EFFECT REINTRODUCED THE ELEMENT OF TRANSPORTATION COSTS AS A FACTOR AFFECTING THE ULTIMATE COST TO THE GOVERNMENT OF THE ARTICLES SOUGHT. TO THE EXTENT THAT THIS FACTOR COULD BE DEFINITELY EVALUATED PRIOR TO AWARD, WE BELIEVE THAT IT WOULD PROPERLY BE AN ELEMENT FOR CONSIDERATION UNDER THE STATUTORY MANDATE THAT AWARD SHOULD BE MADE ON THE BID "MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED"--- SECTION 3 (B) ARMED SERVICES PROCUREMENT ACT, SUPRA. SEE, IN ADDITION TO THE DECISION CITED ABOVE, 8 COMP. GEN. 649, WHERE IT WAS HELD THAT NO AWARD SHOULD BE MADE UNDER AN INVITATION WHICH FAILED TO PROVIDE FOR EVALUATION OF NECESSARY INCIDENTAL COSTS THE EFFECT OF WHICH WOULD BE TO MAKE THE OVERALL COST, UNDER AN AWARD TO THE LOW BIDDER, GREATER THAN IT WOULD BE UNDER AWARD TO A HIGHER ONE.

WE DO NOT FEEL, HOWEVER, THAT THE PRINCIPLES REFERRED TO NECESSARILY REQUIRE THE CONCLUSION THAT THE ACTION TAKEN BY THE ADMINISTRATIVE OFFICE IN THIS CASE WAS ERRONEOUS. EVEN IF THE INVITATION HAD EXPRESSLY REQUESTED BIDS FOR DELIVERY F.O.B. ORIGIN, AND HAD STIPULATED THAT EVALUATION WOULD BE MADE ON THE BASIS OF LOWEST DELIVERED COST AS DETERMINED FROM APPLICABLE FREIGHT RATES, WE WOULD BE RELUCTANT TO SAY THAT THE USE OF RATES ACTUALLY IN EFFECT AT THE TIME OF EVALUATION WOULD BE IMPROPER, UNLESS THE APPLICABILITY OF DIFFERENT RATES AT THE TIME OF SHIPMENT WAS AN ABSOLUTE CERTAINTY. IT IS POSSIBLE, AT LEAST, THAT THE APPLICABLE FREIGHT RATES MIGHT CHANGE SEVERAL TIMES EITHER UPWARD OR DOWNWARD PRIOR TO COMPLETION OF DELIVERY UNDER THE CONTRACT. AS WAS SAID IN B-108531, APRIL 8, 1952, WHERE A QUESTION AROSE AS TO WHAT RATE CLASSIFICATION WAS PROPERLY APPLICABLE:

WHILE THE FUNCTION OF MAKING AWARDS UPON BIDS IS PRIMARILY AN ADMINISTRATIVE RESPONSIBILITY, IT DOES NOT APPEAR THAT IN DETERMINING THE COMPARATIVE DELIVERED COSTS UNDER THE RESPECTIVE BIDS THE ADMINISTRATIVE OFFICERS ARE REQUIRED TO DO MORE THAN EXERCISE THE BEST JUDGMENT OF WHICH THEY ARE CAPABLE IN DETERMINING THE RATINGS APPLICABLE IN SUCH INDEFINITE RATING SITUATIONS AS EXIST IN THE PRESENT MATTER.

WHETHER IN THIS INSTANCE IT WAS IN THE BEST INTEREST OF THE GOVERNMENT TO DEFER AWARD UNTIL THE PROPOSED EFFECTIVE DATE OF THE NEW RATES, OR SOME OTHER DATE, WAS ALSO A MATTER INVOLVING THE EXERCISE OF ADMINISTRATIVE DISCRETION. WHILE THE REPORT FURNISHED BY THE ADMINISTRATIVE OFFICE IS SILENT AS TO THE URGENCY OF THE NEED FOR THE ARTICLES INVOLVED, WE OBSERVE THAT THE SPECIFICATIONS CALLED FOR DELIVERY OF THE FIRST ITEMS UNDER THE CONTRACT BY MARCH 1, AND NOTHING IN THE RECORD BEFORE US INDICATES THAT THE MAKING OF THE AWARD ON FEBRUARY 10 WAS SO HASTY OR PRECIPITATE AS TO CONSTITUTE AN IMPROPER EXERCISE OF DISCRETION.

FOR THE REASONS STATE, WE CONCLUDE THAT WE WOULD NOT BE JUSTIFIED IN TAKING ANY ACTION IN THE MATTER.