B-128310, AUGUST 8, 1956, 36 COMP. GEN. 94

B-128310: Aug 8, 1956

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SALES - SURPLUS PROPERTY - ERRONEOUS AWARD - CANCELLATION WHERE THE HIGHEST BID FOR THE PURCHASE OF GOVERNMENT SURPLUS PROPERTY SOLD UNDER COMPETITIVE BIDDING PROCEDURES WAS PROPER AND TIMELY RECEIVED. THROUGH ADMINISTRATIVE ERROR THE AWARD WAS MADE TO THE SECOND HIGHEST BIDDER. 1956: REFERENCE IS MADE TO A LETTER DATED JULY 25. BIDS WERE FORMALLY OPENED AND ABSTRACTED IN THE CONFERENCE ROOM OF THE INTERIOR BUILDING ON THE 8TH FLOOR. TWO EMPLOYEES FROM OUR PROPERTY MANAGEMENT BRANCH WERE PRESENT DURING THE OPENING AND ABSTRACTING OF BIDS. APPROXIMATELY TWENTY BIDDERS WERE IN ATTENDANCE AT THE PUBLIC OPENING WHICH CONTINUED FROM THE HOUR OF OPENING. J. COAN COMPANY OR OF THE PRIESTER MACHINERY COMPANY WERE IN ATTENDANCE AT THE OPENING. 2.

B-128310, AUGUST 8, 1956, 36 COMP. GEN. 94

SALES - SURPLUS PROPERTY - ERRONEOUS AWARD - CANCELLATION WHERE THE HIGHEST BID FOR THE PURCHASE OF GOVERNMENT SURPLUS PROPERTY SOLD UNDER COMPETITIVE BIDDING PROCEDURES WAS PROPER AND TIMELY RECEIVED, BUT THROUGH ADMINISTRATIVE ERROR THE AWARD WAS MADE TO THE SECOND HIGHEST BIDDER, THE INTERESTS OF THE UNITED STATES, AS WELL AS THE DUTY OF THE CONTRACTING OFFICER TO AWARD SUCH CONTRACTS TO THE HIGHEST BIDDER, REQUIRE CANCELLATION OF THE ACTION AND AWARD TO THE HIGHEST BIDDER.

TO THE SECRETARY OF THE INTERIOR, AUGUST 8, 1956:

REFERENCE IS MADE TO A LETTER DATED JULY 25, 1956, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY OF THE INTERIOR, FURNISHING THE REPORT REQUESTED BY OUR OFFICE IN LETTER OF JUNE 25, 1956, TO YOU, RELATIVE TO THE PROTEST OF J. J. COAN COMPANY, INC., SALT LAKE CITY, UTAH, AGAINST THE CANCELLATION OF AN AWARD MADE TO IT BY THE BUREAU OF INDIAN AFFAIRS UNDER SALES INVITATION NO. 500-70S-6-4. THE REPORT ALSO COVERS THE PROTEST OF THE PRIESTER MACHINERY COMPANY, INC., MEMPHIS TENNESSEE, AGAINST THE ACTION OF THE BUREAU OF INDIAN AFFAIRS IN WITHHOLDING THE RELEASE OF ONE UNIVERSAL CRUSHER PLANT PURCHASED BY IT FROM THE BUREAU, PURSUANT TO AWARD ON ITEM 104 OF THE SAME SALES INVITATION.

BY THE REFERRED-TO SALES INVITATION, THE BUREAU OF INDIAN AFFAIRS, PORTLAND, OREGON, REQUESTED BIDS--- TO BE OPENED JUNE 4, 1956--- FOR THE PURCHASE FROM THE GOVERNMENT OF, AMONG OTHER ITEMS OF SURPLUS ROAD CONSTRUCTION EQUIPMENT, ONE UNIVERSAL CRUSHER PLANT WITH MISCELLANEOUS ACCESSORIES, ITEM 104. IN RESPONSE THE J. J. COAN COMPANY, INC., AND THE PRIESTER MACHINERY COMPANY, INC., SUBMITTED BIDS OFFERING TO PURCHASE THE EQUIPMENT COVERED BY ITEM 104 FOR THE SUMS OF $3,877.77 AND $6,125, RESPECTIVELY.

IN AN UNDATED REPORT THE PORTLAND AREA DIRECTOR, BUREAU OF INDIAN AFFAIRS, STATES AS FOLLOWS:

1. BIDS WERE FORMALLY OPENED AND ABSTRACTED IN THE CONFERENCE ROOM OF THE INTERIOR BUILDING ON THE 8TH FLOOR, ON APPROXIMATELY 127 ITEMS WITH 104 BIDDERS PARTICIPATING. TWO EMPLOYEES FROM OUR PROPERTY MANAGEMENT BRANCH WERE PRESENT DURING THE OPENING AND ABSTRACTING OF BIDS. APPROXIMATELY TWENTY BIDDERS WERE IN ATTENDANCE AT THE PUBLIC OPENING WHICH CONTINUED FROM THE HOUR OF OPENING, 2:30 P.M., UNTIL ABOUT 6:00 P.M. IN THE EVENING. SO FAR AS WE KNOW NEITHER A REPRESENTATIVE OF THE J. J. COAN COMPANY OR OF THE PRIESTER MACHINERY COMPANY WERE IN ATTENDANCE AT THE OPENING.

2. THE NEXT DAY A COMPARISON OF BIDS WAS MADE FROM THE ABSTRACT ( EXHIBIT 1) BY THREE MEMBERS OF THE PROPERTY MANAGEMENT BRANCH AND THE APPARENT HIGH BIDDERS INDICATED BY THE CIRCLING THE ITEM AS SHOWN ON THE ABSTRACT. THE BID OF THE PRIESTER MACHINERY COMPANY, NO. 57, OF $6,125.00 WAS OVERLOOKED IN THE EVALUATION OF BIDS AND THE BID OF J. J. COAN COMPANY, NEXT HIGHEST, WAS CIRCLED ERRONEOUSLY TO INDICATE THE APPARENT HIGH BIDDER. NOTICES OF AWARD WERE ACCORDINGLY MAILED TO APPARENT SUCCESSFUL BIDDERS.

3. CONTRACTS WERE PREPARED AND SIGNED AND MAILED TO SUCCESSFUL BIDDERS, INCLUDING CONTRACT NO. 14-20-500-486, DATED JUNE 8, 1956 ( EXHIBIT 5) WITH THE J. J. COAN COMPANY OF SALT LAKE CITY.

4. AS IS THE PRACTICE OF THIS OFFICE, WE FURNISHED TO ALL BIDDERS A SUMMARY OF THE HIGH BIDS ON EACH OF THE ITEMS ( EXHIBIT 2). ON JUNE 12, 1956, THE PRIESTER MACHINERY COMPANY NOTIFIED THIS OFFICE BY TELEGRAM ( EXHIBIT 3) ADVISING OF THE ERRONEOUS AWARD TO THE J. J. COAN COMPANY.

5. MR. SCHOENHUT, THE PROPERTY AND SUPPLY OFFICER, ACCORDINGLY CALLED THE J. J. COAN COMPANY OF SALT LAKE CITY AND EXPLAINED THE SITUATION TO THE MANAGER, MR. C. G. COAN, WHO SIGNED THE BID, AND REQUESTING THEIR CONCURRENCE IN THE CANCELLATION OF THE ERRONEOUS CONTRACT AND MAKING AWARD TO THE HIGH BIDDER, THE PRIESTER MACHINERY COMPANY. MR. COAN WAS VERY AGREEABLE AND INDICATED THAT HE UNDERSTOOD THAT SUCH MISTAKES COULD HAPPEN AND THAT THEY WOULD OFFER NO OBJECTION TO THE CANCELLATION.

6. THE CONTRACT, NO. 14-20-500-449 ( EXHIBIT 4) WAS THEN PREPARED ON JUNE 12, 1956 FOR THE PRIESTER MACHINERY COMPANY AND FORWARDED WITH A COLLECTION BILL FOR THE AMOUNT DUE ON THE ROCK CRUSHER. THE BID BOND OF THE J. J. COAN COMPANY WAS ALSO RETURNED FOLLOWING THE USUAL PROCEDURE FOR REJECTED BIDS.

7. MR. T. L. COAN, THE VICE PRESIDENT OF THE FIRM OF J. J. COAN COMPANY, CALLED AT THIS OFFICE AND ENTERED A VERBAL PROTEST ON THE CANCELLATION OF THEIR CONTRACT. MR. COAN HAS TAKEN THE MATTER UP WITH AN ATTORNEY IN PORTLAND AND IT IS UNDERSTOOD THE FIRM IS SUBMITTING A FORMAL PROTEST TO THE COMPTROLLER GENERAL TO HOLD THE GOVERNMENT TO THE ORIGINAL CONTRACT IN MAKING AWARD TO THEM. THEIR ALLEGATION INCLUDES THE FOLLOWING:

A. SINCE THIS OFFICE DID NOT HAVE THE ENVELOPE IN WHICH THE BID WAS RECEIVED, THEY QUESTION THAT THE PRIESTER MACHINERY COMPANY'S BID WAS ON HAND AT THE TIME OF THE OPENING OF BIDS.

B. THAT THE GOVERNMENT IS OBLIGATED TO LIVE UP TO CONTRACT NO. 14-20 500486 AND TO MAKE THE EQUIPMENT AVAILABLE TO THEM.

THE ENVELOPES OF REJECTED BIDDERS WERE DESTROYED AS IS THE USUAL PRACTICE, AND THE PRIESTER MACHINERY COMPANY'S ENVELOPE WAS AMONG THOSE DISPOSED OF BY REASON OF THE ERROR IN DETERMINING SUCCESSFUL BIDDERS. ARE ENCLOSING STATEMENTS OF MRS. YVONNE LYLE AND MR. SAM HOFFMAN, MEMBERS OF THE PROPERTY MANAGEMENT BRANCH, WHO WERE IN ATTENDANCE AT THE OPENING, CERTIFYING TO THE FACT THAT THE BID WAS DULY OPENED AND CONSIDERED ALONG WITH OTHERS AT THE TIME OF OPENING; AND, IF NECESSARY, WE WILL OBTAIN STATEMENTS FROM BIDDERS WHO WERE IN ATTENDANCE. THE BID BOND OF THE PRIESTER COMPANY WAS FURNISHED SEPARATELY FROM THE BID AND WAS ALSO ON HAND IN THIS OFFICE AT THE TIME OF OPENING OF BIDS.

PRIOR TO OPENING, BIDS WERE ASSIGNED NUMBERS AND WERE LISTED IN NUMERICAL ORDER ON THE ABSTRACT. THE BID OF PRIESTER MACHINERY COMPANY WAS SHOWN AS NO. 57 ( EXHIBIT 1). THIS IS FURTHER EVIDENCE THAT THE BID WAS ON HAND SINCE THE ABSTRACT HEADINGS WERE PREPARED FOR THE ABSTRACTING OF BIDS FROM THE ENVELOPES ON HAND PRIOR TO THE OPENING HOUR.

THE BASIC STATUTORY AUTHORITY FOR THE SALE IS TO BE FOUND IN SECTION 203 OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 385, 40 U.S.C. 484 (B). PARAGRAPH (B) OF THAT SECTION PROVIDES THAT THE CARE AND HANDLING OF SURPLUS PROPERTY, PENDING ITS DISPOSITION, AND THE DISPOSAL OF SURPLUS PROPERTY, MAY BE PERFORMED BY THE GENERAL SERVICES ADMINISTRATION OR, WHEN SO DETERMINED BY THE ADMINISTRATOR, BY THE EXECUTIVE AGENCY IN POSSESSION OF THE PROPERTY OR BY ANY OTHER EXECUTIVE AGENCY WILLING TO TAKE SUCH ACTION. PARAGRAPH (C), 40 U.S.C. 484 (C), PROVIDES THAT ANY EXECUTIVE AGENCY DESIGNATED OR AUTHORIZED BY THE ADMINISTRATOR TO DISPOSE OF SURPLUS PROPERTY MAY DO SO BY SALE, EXCHANGE, LEASE, PERMIT, OR TRANSFER, FOR CASH, CREDIT, OR OTHER PROPERTY, WITH OR WITHOUT WARRANTY, AND UPON SUCH OTHER TERMS AND CONDITIONS AS THE ADMINISTRATOR DEEMS PROPER, AND THAT IT MAY EXECUTE SUCH DOCUMENTS FOR THE TRANSFER OF TITLE OR INTEREST IN PROPERTY AND TAKE SUCH OTHER ACTION AS IT DEEMS NECESSARY OR PROPER TO DISPOSE OF THE PROPERTY UNDER THE PROVISIONS OF THE ACT.

PURSUANT TO THIS AUTHORITY GENERAL SERVICES ADMINISTRATION REGULATIONS 1- IV, DATED MARCH 1, 1955, WERE ISSUED. SECTION 302 OF THAT REGULATION, PURSUANT TO WHICH IT IS UNDERSTOOD THE REQUEST FOR BIDS WAS ISSUED, PROVIDES THAT HOLDING AGENCIES SHALL, EXCEPT AS OTHERWISE PROVIDED BY THE SECTION, SELL SURPLUS PROPERTY BY COMPETITIVE BID SALE, AFTER ADVERTISING, IN ACCORDANCE WITH THE PROVISIONS OF THE SECTION. COMPETITIVE BID SALES ARE DEFINED IN THIS SECTION AS INCLUDING SEALED BID SALES, SPOT BID SALES AND AUCTION SALES. THE SECTION ALSO PROVIDES THAT AGENCIES MAY SELL SURPLUS PERSONAL PROPERTY BY NEGOTIATED SALE IN CERTAIN CIRCUMSTANCES, NONE OF WHICH APPEAR PRESENT IN THE SUBJECT CASE.

THUS, THE ORDINARY MANNER IN WHICH SALES OF SURPLUS PERSONAL PROPERTY ARE TO BE MADE BY THE DEPARTMENT OF THE INTERIOR, A HOLDING AGENCY, IS EXPRESSLY PROVIDED BY THE GENERAL SERVICES ADMINISTRATION REGULATION, THAT IS, BY SPOT BID SALES, AUCTION SALES OR AFTER ADVERTISING FOR SEALED BIDS, AND SINCE THAT REGULATION WAS ISSUED PURSUANT TO LAW, THERE IS NO AUTHORITY IN THE ADMINISTRATIVE OFFICERS OF THE GOVERNMENT TO DEPART FROM THE PROCEDURE PRESCRIBED THEREIN OR TO EXERCISE DISCRETION IN THAT REGARD.

THAT THE REQUIREMENT THAT A SALE BY PUBLIC AUCTION OR AFTER ADVERTISING FOR COMPETITIVE BIDS CONTEMPLATES ACCEPTANCE OF THE HIGHEST BID WOULD NOT APPEAR TO BE OPEN TO QUESTION. IN THIS CONNECTION, THE REQUIREMENT OF SECTION 3709, REVISED STATUTES, (41 U.S.C. 5), THAT THERE BE ADVERTISING FOR BIDS IN CONNECTION WITH PURCHASES AND SALES BY THE GOVERNMENT HAS BEEN CONSTRUED CONSISTENTLY AS REQUIRING ACCEPTANCE OF THE MOST ADVANTAGEOUS BID. SEE, FOR EXAMPLE, SCOTT V. UNITED STATES, 44 C.1CLS. 524, 527, IN WHICH THE PRINCIPLE IS STATED THAT:

THE AGENTS OF THE GOVERNMENT STAND UPON A DIFFERENT FOOTING FROM PRIVATE INDIVIDUALS IN THE MATTER OF ADVERTISING FOR THE LETTING OF CONTRACTS IN BEHALF OF THE UNITED STATES. THEY HAVE NO DISCRETION. THEY MUST ACCEPT THE LOWEST OR THE HIGHEST RESPONSIBLE BID, OR REJECT ALL AND READVERTISE.

IN FOLLOWING THIS PRINCIPLE IN O-BRIEN V. CARNEY, 6 F.1SUPP. 761, 762, THE COURT SAID THAT SECTION 3709, REVISED STATUTES,"REQUIRES THAT PURCHASES AND CONTRACTS FOR SUPPLIES IN ANY DEPARTMENT OF GOVERNMENT SHALL BE MADE BY DUE ADVERTISING FOR PROPOSALS EXCEPT WHEN THE PUBLIC EXIGENCIES REQUIRE IMMEDIATE DELIVERY. IT MUST FOLLOW AS A NECESSARY COROLLARY THAT THIS ACT IMPOSES A DUTY UPON THE DEPARTMENT TO ACCEPT THE PROPOSAL MOST ADVANTAGEOUS TO THE GOVERNMENT; OTHERWISE THE STATUTE WOULD BE MEANINGLESS.'

THE J. J. COAN COMPANY, INC., CONTENDS THAT THE SALE WAS COMPLETE AND TITLE TO THE EQUIPMENT COVERED BY ITEM 104 VESTED IN THE CORPORATION ON JUNE 8, 1956--- THE DATE OF THE AWARD--- BY VIRTUE OF THE ISSUANCE OF A CERTIFICATE OF AWARD AND THE ACCEPTANCE OF THE FULL AND FINAL PAYMENT BY THE GOVERNMENT ON THAT DATE. PARAGRAPH 6 OF THE GENERAL TERMS AND CONDITIONS OF THE SALES INVITATION PROVIDED THAT " TITLE TO THE ITEMS OR PROPERTY SOLD HEREUNDER SHALL VEST IN THE PURCHASER AS AND WHEN FULL AND FINAL PAYMENT IS MADE, UNLESS OTHERWISE SPECIFIED BY THE GOVERNMENT * * *.' THE AWARD LETTER OF JUNE 8 ADVISES THAT ONLY ITEM 104 WAS AWARDED TO THE CORPORATION; THAT THE BID DEPOSIT SUBMITTED BY THE CORPORATION WAS SUFFICIENT TO COVER THE PURCHASE OF THAT ITEM; AND THAT THE BALANCE OF THE DEPOSIT WOULD BE REFUNDED IN THE NEAR FUTURE. IT DOES NOT APPLY THE BID DEPOSIT TO THE PURCHASE PRICE, BUT INDICATES AN INTENTION TO DO SO IN THE FUTURE. MOREOVER, IT IS EVIDENT THAT SUCH PARAGRAPH CONTEMPLATES THAT A PROPER AWARD HAD BEEN MADE TO THE PURCHASER. ON THE STATEMENT AND CERTIFICATE OF AWARD DATED JUNE 8, 1956, ISSUED TO J. J. COAN COMPANY, INC., APPEARS THE STATEMENT THAT AWARD WAS MADE AFTER ADVERTISING," TO HIGHEST BIDDER AS TO PRICE ( RECEIPTS).' SINCE J. J. COAN COMPANY, INC., WAS NOT THE HIGHEST BIDDER ON ITEM 104, IT IS APPARENT THAT THE CORPORATION WAS NOT ENTITLED TO SUCH AWARD.

IN SUPPORT OF ITS CONTENTION THAT IT IS ENTITLED TO RECEIVE THE EQUIPMENT COVERED BY ITEM 104 OF THE SALES INVITATION, J. J. COAN COMPANY, INC., CITES THE COURT CASE OF UNITED STATES V. JONES, 176 F.2D 278. THAT CASE, HOWEVER, IS DISTINGUISHABLE FROM THE PRESENT SITUATION. IN THE JONES CASE NO BIDS WERE RECEIVED IN RESPONSE TO AN INVITATION AND THE SURPLUS MATERIALS WERE SOLD BY MEANS OF NEGOTIATION AND, THEREFORE, INVOLVED A MUCH WIDER FIELD OF ADMINISTRATIVE DISCRETION THAN IS PERMISSIBLE UNDER COMPETITIVE BIDDING PROCEDURES. ALSO, IN THAT CASE, WHILE THE CIRCUIT COURT OF APPEALS FOUND THAT RESCISSION OF THE CONTRACT COULD HAVE BEEN ALLOWED UNDER NORMAL CIRCUMSTANCES, IT CONCLUDED THAT THE PECULIAR WORDING OF SECTION 25 OF THE WAR SURPLUS ACT OF 1944, 58 STAT. 780, 50 U.S.C. APP. 1634 (1946 USED.), VESTED FULL TITLE IN JONES. SUCH WORDING IS ABSENT HERE.

THE REPORTED FACTS IN THIS CASE SHOW THAT THE PRIESTER MACHINERY COMPANY, INC., SUBMITTED A TIMELY AND PROPER BID AND WAS THE HIGHEST BIDDER ON ITEM 104. THROUGH ADMINISTRATIVE ERROR AWARD WAS MADE TO J. J. COAN COMPANY, INC., AND UPON DISCOVERY OF THE ERROR, AND WITH THE REPORTED ACQUIESCENCE, APPARENTLY BY TELEPHONE, OF THAT CONCERN, THE AWARD WAS CANCELED AND GIVEN TO THE PRIESTER MACHINERY COMPANY, INC., WHICH UNQUESTIONABLY SHOULD HAVE RECEIVED THE AWARD UNDER THE COMPETITIVE BIDDING PROCEDURE FOLLOWED IN THIS INVITATION. THE ADMINISTRATIVE ERROR FROM WHICH THIS DIFFICULTY RESULTED IS REGRETTABLE. NEVERTHELESS, IN THE PRESENT CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE INTERESTS OF THE UNITED STATES AS WELL AS THE DUTY TO AWARD TO THE HIGHEST BIDDER REQUIRE THAT AWARD TO PRIESTER MACHINERY COMPANY, INC., BE SUSTAINED.

IF, AS WE UNDERSTAND, THE BID DEPOSIT OF J. J. COAN COMPANY, INC., FROM WHICH THE PURCHASE PRICE WAS TO HAVE BEEN DEDUCTED, HAS NOW BEEN REFUNDED TO IT, THEN SUCH ACTION WOULD APPEAR IN ANY EVENT TO SATISFY THE FULL RESPONSIBILITY OF THE GOVERNMENT TO THAT COMPANY UNDER THE EXPRESS LANGUAGE OF PARAGRAPH 11 OF THE GENERAL SALE TERMS AND CONDITIONS.