B-127372, OCTOBER 1, 1956, 36 COMP. GEN. 259

B-127372, OCTOBER 1, 1956, 36 COMP. GEN. 259

BIDS - QUALIFIED - ESCALATION CLAUSE - ADMINISTRATIVE EVALUATION ALTHOUGH A CONDITION IN A LOW BID WHICH STIPULATED THE NUMBER OF CERTAIN ITEMS TO BE FURNISHED AND PROVIDED FOR A PRICE ADJUSTMENT IN THE EVENT THAT A GREATER OR SMALLER NUMBER WERE REQUIRED CONSTITUTED A PRICE QUALIFICATION IN THE NATURE OF AN ESCALATION CLAUSE, SUCH CONDITION SHOULD NOT HAVE BEEN THE BASIS FOR REJECTION OF THE BID UNLESS THERE WAS AN ADMINISTRATIVE DETERMINATION THAT THERE WAS A REAL AND NOT MERELY AN ABSTRACT, THEORETICAL POSSIBILITY THAT THE NUMBER OF EXCESS ITEMS COULD HAVE MADE THE PRICE MORE THAN UNDER THE NEXT ACCEPTABLE BID.

TO COPES-VULCAN DIVISION, BLAW-KNOX COMPANY, OCTOBER 1, 1956:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 21, 1956, ACKNOWLEDGED MARCH 26, PROTESTING THE ACTION OF THE DEPARTMENT OF THE NAVY IN AWARDING TO GIMPEL MACHINE WORKS, INC., A CONTRACT FOR FURNISHING DESUPERHEATERS, REPAIR PARTS, ENGINEERING DRAWINGS, AND TYPE B TECHNICAL MANUALS UNDER INVITATION FOR BIDS NO. 600-719-56-S, ISSUED JANUARY 5, 1956, BY THE BUREAU OF SHIPS. YOU QUESTION THE PROPRIETY OF THE AWARD FOR THE REASON THAT IT WAS MADE TO THE THIRD LOW BIDDER AND YOU URGE THAT YOU, AS LOW BIDDER, SUBMITTED A BID WHICH WAS SUBSTANTIALLY DEFINITE AND RESPONSIVE TO THE INVITATION. IN RESPONSE TO REQUESTS BY THIS OFFICE, THE DEPARTMENT OF THE NAVY HAS FURNISHED A REPORT AND A SUPPLEMENTAL REPORT SETTING OUT THE FACTS AND ITS VIEWS IN THE MATTER. THE REPORT SHOWS THAT BIDS WERE RECEIVED AS FOLLOWS:

TABLE

TOTAL PRICE

HORIZONTAL VERTICAL

BIDDER TYPE TYPE COPES-VULCAN DIVISION, BLAW KNOX CO. $21,232.00 $24,928.00 SCHUTTE AND KOERTING CO. ------- ------ 25,440.99

25,440.00 GIMPEL MACHINE WORKS, INC. ----------- 33,536.00 NO BID SPENCE ENGINEERING CO., INC. -------- 37,812.88 NO BID

ON MARCH 15, 1956, CONTRACT NO. NOBS-68119 WAS AWARDED TO GIMPEL MACHINE WORKS, INC., THE TWO LOWER BIDS BEING REJECTED AS NOT RESPONSIVE AND NOT CONFORMING TO THE ESSENTIAL REQUIREMENTS OF THE INVITATION.

WITH RESPECT TO YOUR BID, THE FOLLOWING STATEMENTS ARE MADE IN THE ADMINISTRATIVE REPORT:

THE SPECIFICATIONS OF INVITATION FOR BIDS NO. IFB-600-719-56'S REQUIRED RADIOGRAPHIC EXAMINATION OF THE CASTINGS BEING SUPPLIED AND THE BID PRICES WERE TO INCLUDE ALL THE NECESSARY RADIOGRAPHS. THE QUANTITY OF RADIOGRAPHS THAT WOULD BE REQUIRED WAS SUBJECT TO THE CONTROL OF THE BIDDER BEING DEPENDENT UPON HIS CASTING DESIGN AND THE NUMBER OF CASTINGS REJECTED DURING MANUFACTURE.

THE COPES-VULCAN BID CONTAINED THE FOLLOWING STATEMENT CONCERNING RADIOGRAPHS: "THE ABOVE PRICE INCLUDES RADIOGRAPHIC AND MAGNETIC PARTICLE INSPECTION OF THE COOLING WATER CONTROL VALVE BODY CASTINGS. OUR ACTUAL COST OF $22.50 PER VALVE CASTING WAS INCLUDED BASED UPON AN ESTIMATE OF 3 PICTURES PER CASTING AT A COST OF $7.50 PER PICTURE. IN THE EVENT FEWER PICTURES ARE REQUIRED, THE COST WILL BE REDUCED ACCORDINGLY. THE SAME PLAN WILL ALSO APPLY IN THE EVENT PICTURES IN EXCESS OF THE ABOVE AMOUNT ARE REQUIRED.' ( ITALICS ADDED.)

NONE OF THE OTHER BIDS WERE QUALIFIED IN SUCH A WAY. THE QUALIFICATION WAS, IF EFFECT, A PRICE ESCALATION PROVISION WITHOUT ANY MAXIMUM LIMIT.

TO ALLOW ONE BIDDER A BARGAIN SUBSTANTIALLY DIFFERENT FROM THAT OFFERED TO ALL OTHER BIDDERS WOULD BE A GROSS INJUSTICE. BIDS OFFERING INDEFINITE PRICES MUST BE REJECTED AS NOT CONFORMING TO THE INVITATION REQUIREMENTS. 19 COMP. GEN. 614, 617 (1939). BIDS NOT CONFORMING TO THE ESSENTIAL REQUIREMENTS OF THE INVITATION MAY NOT BE ACCEPTED. 35 COMP. GEN. 98 (1955); 30 COMP. GEN. 179, 181 (1950).

ALTHOUGH COPES-VULCAN, SUBSEQUENT TO THE BID OPENING, CONTENDED THAT IT ADDED THE QUALIFICATION TO ITS BID MERELY AS A POSSIBLE SAVING TO THE GOVERNMENT AND THAT IT WOULD REMOVE THE QUALIFICATION, SUCH AN INTENT COULD NOT BE READ INTO ITS BID. THE MANIFEST INTENT OF THE BIDDER WAS TO ALLOW FOR ESCALATION IN PRICE IN THE EVENT MORE RADIOGRAPHS WERE REQUIRED THAN IT HAD ESTIMATED IN ITS PRICE.

IN YOUR LETTER OF MARCH 21, 1956, YOU EXPRESSED YOUR UNDERSTANDING THAT THE WELDING, CASTINGS AND FABRICATION BRANCH OF THE BUREAU OF SHIPS, CODE 582, HAD CHECKED YOUR DRAWING NO. 24122-L AND DECIDED THAT FOUR RADIOGRAPHIC PICTURES OF EACH BODY CASTING SHOULD BE TAKEN. WITH REFERENCE TO THAT POINT, THE DEPARTMENT OF THE NAVY STATES IN ITS SUPPLEMENTAL REPORT OF AUGUST 31, 1956:

* * * THE INITIAL REQUIREMENT FOR RADIOGRAPHS IS DETERMINED FROM A REVIEW OF THE CONTRACTOR'S ,WORKING" DRAWINGS. THE SCHEDULE OF THE INVITATION PROVIDED FOR DELIVERY OF THE "WORKING" DRAWINGS 30 DAYS AFTER THE CONTRACT AWARD. THE DRAWINGS THAT WERE SUBMITTED BY COPES VULCAN WERE "PRELIMINARY" DRAWINGS AND WERE SUBMITTED PURSUANT TO THE TECHNICAL DATA BEFORE AWARD CLAUSE ON PAGE 7 OF THE INVITATION SCHEDULE. MOREOVER, AN INFORMAL REVIEW ONLY WAS MADE OF THE COPES VULCAN "PRELIMINARY" DRAWINGS BY A BUREAU OF SHIPS ENGINEER WHO WAS NOT AUTHORIZED TO MAKE ANY DECISION FOR THE BUREAU AS TO THE QUANTITY OF RADIOGRAPHS THAT WOULD INITIALLY BE REQUIRED UNDER THE RESULTANT CONTRACT. THE BUREAU ENGINEER INDICATED INFORMALLY TO A COPES-VULCAN REPRESENTATIVE THAT IT WAS THE ENGINEER'S OPINION THAT FOUR RADIOGRAPHS WOULD PROBABLY BE REQUIRED INITIALLY PER CASTING IF COPES VULCAN WERE TO RECEIVE THE AWARD. NO OPINION WAS EXPRESSED AS TO THE NUMBER OF RADIOGRAPHS THAT WOULD BE REQUIRED AS A RESULT OF THE REVIEW OF THE WORKING PLANS, OR THE ADDITIONAL RADIOGRAPHS THAT WOULD BE REQUIRED IN THE EVENT ANY OF THE CASTINGS WERE FOUND TO BE DEFECTIVE, NOR WAS ANY OPINION STATED AS TO THE ADDITIONAL RADIOGRAPHS THAT MIGHT BE REQUIRED BY THE NAVAL INSPECTOR BECAUSE OF SUSPICION OF HARMFUL DEFECTS AT PLACES OTHER THAN THOSE INITIALLY SELECTED FOR RADIOGRAPHY.

THERE CAN BE NO QUESTION THAT THE CONDITION INSERTED IN YOUR BID AS TO THE NUMBER OF RADIOGRAPHS TO BE FURNISHED AND THE ADJUSTMENT OF PRICE TO BE MADE IN THE EVENT A GREATER OR LESSER NUMBER SHOULD BE REQUIRED CONSTITUTED A PRICE QUALIFICATION IN THE NATURE OF AN ESCALATION CLAUSE. THIS IN ITSELF WOULD NOT BE SUFFICIENT TO PREVENT CONSIDERATION OF THE BID IF IT WERE POSSIBLE TO DETERMINE A DEFINITE NUMBER OF RADIOGRAPHS AS THE MAXIMUM WHICH COULD IN ANY EVENT BE REQUIRED. IN THAT EVENT THE BID WOULD BE FOR EVALUATION ON THE BASIS OF THE MAXIMUM ESCALATED PRICE. WE HAVE HELD, HOWEVER, THAT A BID OFFERING A PRICE SUBJECT TO ESCALATION COULD NOT BE EVALUATED AND CONSIDERED WHERE NO MAXIMUM LIMIT WAS STIPULATED AND A MAXIMUM COULD NOT BE DETERMINED. IT WAS THE CONCLUSION OF THE ADMINISTRATIVE OFFICIALS IN THIS INSTANCE THAT YOUR BID HAD TO BE REJECTED ON THAT GROUND, BECAUSE THEY WERE UNABLE TO FIX ANY MAXIMUM NUMBER OF RADIOGRAPHS THAT MIGHT BE REQUIRED.

WE FIND OURSELVES UNABLE TO AGREE WITH THE ADMINISTRATIVE INTERPRETATION OF YOUR CONDITION, THAT PAYMENT WOULD HAVE TO BE MADE FOR RADIOGRAPHS TAKEN, IN EXCESS OF THREE, OF REJECTED CASTINGS. THERE SEEMS TO BE NO MORE BASIS FOR THAT INTERPRETATION THAN THERE WOULD BE FOR CONCLUDING THAT PAYMENT WOULD HAVE TO BE MADE FOR REJECTED CASTINGS, SINCE THE CONDITION IS STATED IN TERMS OF THE COST OF RADIOGRAPHS INCLUDED IN THE COST OF THE CASTINGS.

CONSIDERING THE DIFFERENCE OF $4,208 BETWEEN YOUR BID AND THAT OF THE NEXT HIGHER BIDDER, IT IS APPARENT THAT THE MAXIMUM PRICE TO THE GOVERNMENT UNDER YOURS WOULD BE LOWER, EVEN WITH THE ESCALATION CONDITION, UNLESS MORE THAN 560 RADIOGRAPHS, OR 35 PER UNIT IN EXCESS OF THE THREE ALLOWED, WERE REQUIRED. UPON REJECTION OF THE SECOND LOW BID, THE COMPARISON WITH THE NEXT BID, ON WHICH AWARD WAS MADE, WOULD COVER AN EXCESS OF 1,640 RADIOGRAPHS, OR MORE THAN ONE HUNDRED PER UNIT.

WE HAVE RECENTLY HELD THAT AN ESCALATION PROVISION UNDER WHICH NO MAXIMUM CEILING COULD BE DETERMINED IN A CERTAIN SITUATION, THE LIKELIHOOD OF WHICH WAS SO REMOTE AS TO BE NEGLIGIBLE, WOULD NOT PREVENT EVALUATION AND CONSIDERATION OF THE BID. 35 COMP. GEN. 684. WE BELIEVE THAT ON THE SAME PRINCIPLE YOUR BID SHOULD NOT HAVE BEEN REJECTED EXCEPT UPON AN ADMINISTRATIVE DETERMINATION THAT THERE WAS A REAL AND NOT MERELY AN ABSTRACT THEORETICAL POSSIBILITY THAT THE NUMBER OF EXCESS RADIOGRAPHS AT $2.50 EACH COULD HAVE MADE THE PRICE PAYABLE UNDER YOUR BID HIGHER THAN THAT PAYABLE UNDER THE NEXT ACCEPTABLE BID.

HOWEVER, IN VIEW OF THE LENGTH OF TIME WHICH HAS ELAPSED SINCE THE CONTRACT WAS AWARDED AND SINCE IT IS ADMINISTRATIVELY REPORTED THAT "THE MAJOR COMPONENTS OF THE CONTRACT ARE SCHEDULED FOR DELIVERY DURING SEPTEMBER AND OCTOBER OF THIS YEAR," WE DO NOT FEEL THAT WE WOULD BE JUSTIFIED IN HAVING THE CONTRACT VOIDED AT THIS LATE DATE.

NO ACTION WILL THEREFORE BE TAKEN IN THE MATTER EXCEPT TO BRING OUR VIEWS TO THE ATTENTION OF THE DEPARTMENT OF THE NAVY.