B-128449, JULY 23, 1956, 36 COMP. GEN. 62

B-128449: Jul 23, 1956

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

IS NOT SUBJECT TO LEGAL OBJECTION. 1956: REFERENCE IS MADE TO YOUR TELEGRAM OF JUNE 29. THE BASIC ISSUES RAISED IN YOUR COMPLAINT ARE (1) THAT RATHER THAN INVITE NEW BIDS ON THE V-710 METERS. THE GENERAL SERVICES ADMINISTRATION SHOULD HAVE EXERCISED THE GOVERNMENT'S OPTIONS UNDER EXISTING CONTRACTS WITH YOUR COMPANY. (3) THAT THE GENERAL SERVICES ADMINISTRATION WAS WITHOUT AUTHORITY TO AWARD A CONTRACT FOR THE 27. THE SUBJECT TELEGRAPHIC INVITATION WAS SENT TO OVER 20 PROSPECTIVE BIDDERS FOR TELEGRAPHIC BIDS COVERING 27. THE INVITATION OF JUNE 19 WAS ISSUED FOR THE REASON THAT THE CONTRACTING OFFICE OF THE GENERAL SERVICES ADMINISTRATION BELIEVED THAT LOWER PRICES MIGHT BE OBTAINED BY ADVERTISING COMPETITIVELY FOR ANY ADDITIONAL REQUIREMENTS FOR THE RADIOLOGICAL SURVEY METER.

B-128449, JULY 23, 1956, 36 COMP. GEN. 62

BIDS - INVALID REJECTION - OPTIONS - AWARD AN ADMINISTRATIVE DENIAL OF A REQUEST FOR A TEN-DAY EXTENSION OF TIME IN WHICH TO SUBMIT A BID FOR AN ITEM PRESENTLY BEING MANUFACTURED BY THE BIDDER UNDER EXISTING GOVERNMENT CONTRACTS DOES NOT AFFORD THE BIDDER A BASIS FOR A VALID OBJECTION. A DETERMINATION OF A CONTRACTING OFFICER TO INVITE NEW BIDS RATHER THAN TO EXERCISE A CONTRACT OPTION, WHICH RESERVES TO THE GOVERNMENT THE RIGHT TO INCREASE A PROCUREMENT, IS NOT SUBJECT TO LEGAL OBJECTION. THE REJECTION OF ALL BIDS BASED ON THE POSSIBILITY OF A MINOR ADDITIONAL PRICE CONCESSION ON A SMALL INCREASE IN QUANTITY MUST BE REGARDED AS AN INVALIDITY WHICH DOES NOT PRECLUDE AN AWARD TO ONE OF THE REJECTED BIDDERS.

TO THE VICTOREEN INSTRUMENT COMPANY, JULY 23, 1956:

REFERENCE IS MADE TO YOUR TELEGRAM OF JUNE 29, 1956, AND A SUBSEQUENT LETTER DATED JULY 10, 1956, FROM YOUR ATTORNEY, PRESENTING CERTAIN COMMENTS IN THE NATURE OF A PROTEST RELATIVE TO AN AWARD OF A CONTRACT ON JUNE 28, 1956, BY THE GENERAL SERVICES ADMINISTRATION ON A BID OTHER THAN THAT SUBMITTED BY YOUR COMPANY IN RESPONSE TO INVITATION NO. FNW-2N-1426-D -A-6-25-56, DATED JUNE 19, 1956, COVERING 27,000 RADIOLOGICAL SURVEY METERS. IN SUBSTANCE, THE BASIC ISSUES RAISED IN YOUR COMPLAINT ARE (1) THAT RATHER THAN INVITE NEW BIDS ON THE V-710 METERS, THE GENERAL SERVICES ADMINISTRATION SHOULD HAVE EXERCISED THE GOVERNMENT'S OPTIONS UNDER EXISTING CONTRACTS WITH YOUR COMPANY, (2) THAT INSUFFICIENT TIME HAD BEEN ALLOWED IN WHICH TO PREPARE BIDS ON THE 27,000 UNITS, AND (3) THAT THE GENERAL SERVICES ADMINISTRATION WAS WITHOUT AUTHORITY TO AWARD A CONTRACT FOR THE 27,000 UNITS AFTER HAVING ADVISED THE BIDDERS THAT ALL BIDS RECEIVED HAD BEEN REJECTED.

A THOROUGH REVIEW OF THE RECORD AS PRESENTED TO THIS OFFICE INDICATES THAT ON JUNE 19, 1956, THE SUBJECT TELEGRAPHIC INVITATION WAS SENT TO OVER 20 PROSPECTIVE BIDDERS FOR TELEGRAPHIC BIDS COVERING 27,000 RADIOLOGICAL SURVEY METERS, FEDERAL CIVIL DEFENSE ADMINISTRATION SPECIFICATION V-710, INCORPORATING BY REFERENCE THE TERMS OF AN EARLIER INVITATION NO. FNW-2N- 1426-A-4-9-56, WHICH RESULTED IN AN AWARD OF TWO CONTRACTS DATED APRIL 25 AND JUNE 5, 1956, TO YOUR COMPANY AT $24.97, LESS 1 PERCENT--- 20 DAYS, PER UNIT FOR A TOTAL OF 50,000 UNITS. BOTH CONTRACTS WITH YOUR COMPANY CONTAINED THE FOLLOWING PROVISION:

THE GOVERNMENT RESERVES THE RIGHT TO INCREASE THE ADVERTISED QUANTITY BY NOT TO EXCEED 100 PERCENT TO BE ORDERED AS MAY BE REQUIRED FROM DATE OF CONTRACT TO AUGUST 31, 1956.

THE INVITATION OF JUNE 19 WAS ISSUED FOR THE REASON THAT THE CONTRACTING OFFICE OF THE GENERAL SERVICES ADMINISTRATION BELIEVED THAT LOWER PRICES MIGHT BE OBTAINED BY ADVERTISING COMPETITIVELY FOR ANY ADDITIONAL REQUIREMENTS FOR THE RADIOLOGICAL SURVEY METER; AND SHORTLY THEREAFTER, ON JUNE 18, 1956, FEDERAL CIVIL DEFENSE ADMINISTRATION REQUISITION DATED JUNE 13, 1956, WAS RECEIVED FOR AN ADDITIONAL QUANTITY OF 27,000 UNITS. ACCORDINGLY, IT WAS DETERMINED NOT TO EXERCISE THE OPTION UNDER THE EXISTING CONTRACTS, BUT, INSTEAD, TO GO INTO THE MARKET FOR THE 27,000 UNITS.

BIDS WERE OPENED ON JUNE 25, 1956, WHICH REVEALED JORDON ELECTRONICS, INC., OF ALHAMBRA, CALIFORNIA, TO BE THE LOW BIDDER AT $22.49, AND THE SECOND LOW BIDDER WAS YOUR COMPANY AT $22.90, LESS 1 PERCENT--- 20 DAYS. PRIOR TO BID OPENING, HOWEVER, YOUR COMPANY HAD REQUESTED A TEN-DAY EXTENSION IN THE TIME ALLOWED FOR SUBMITTING BIDS ON THE BASIS THAT YOU HAD NOT BEEN AFFORDED SUFFICIENT TIME TO CONTACT ALL SUPPLIERS IN THE INTEREST OF OBTAINING THE BEST PRICES. THE EXTENSION WAS NOT GRANTED INASMUCH AS IT WAS FELT THAT SINCE YOU ALREADY HELD CURRENT CONTRACTS FOR THE IDENTICAL ITEM YOU SHOULD HAVE BEEN IN A POSITION TO PREPARE YOUR BID PRIOR TO THE BID OPENING DATE.

ON JUNE 26, 1956, ONE DAY FOLLOWING THE FORMAL BID OPENING, YOU FORWARDED A TELEGRAM TO THE CONTRACTING OFFICE QUOTING A PRICE OF $22.50 PER UNIT, LESS 1 PERCENT--- 20 DAYS, AND ON THE SAME DATE NOTICE IS SAID TO HAVE BEEN RECEIVED FROM THE REQUISITIONING AGENCY THAT 8,000 ADDITIONAL UNITS WERE REQUIRED. BECAUSE OF SUCH REQUEST FOR AN INCREASED QUANTITY, TOGETHER WITH THE POSSIBILITY OF LOWER PRICES THEREON, THE CONTRACTING OFFICE DECIDED ON THAT DATE TO REJECT ALL IDS; AND BY THE SAME WIRE A NEW TELEGRAPHIC INVITATION SOLICITED BIDS FOR 35,000 UNITS TO BE OPENED ON JUNE 29, 1956. NOTWITHSTANDING THIS ACTION, HOWEVER, AS A RESULT OF A PROTEST FOR THE LOW BIDDER ON THE 27,000 UNITS, THE MATTER WAS BROUGHT TO THE ATTENTION OF THE ADMINISTRATOR ON JUNE 27 WHO FORTHWITH DETERMINED THAT THE REJECTION OF BIDS RECEIVED ON JUNE 25 AND THE RESOLICITATION WAS ARBITRARY AND CONTRARY TO THE SPIRIT AND PURPOSE OF THE ADVERTISING STATUTES WHICH, IN HIS INION,"DID NOT CONTEMPLATE SUCCESSIVE ADVERTISING FOR THE SAME ITEM BECAUSE OF THE POSSIBILITY OF FURTHER REDUCTIONS IN PRICE BASED UPON DISCLOSED QUOTATIONS OR BECAUSE OF THE POSSIBILITY OF A MINOR ADDITIONAL PRICE CONCESSION BASED UPON AN INCREASE IN QUANTITY.' THE BASIS OF THIS DETERMINATION, THE INVITATION FOR 35,000 UNITS WAS CANCELED ON JUNE 28, 1956, THE REJECTION WAS RESCINDED AND A TELEGRAPHIC AWARD WAS MADE TO JORDON ELECTRONICS, INC., THE LOW BIDDER ON THE 27,000 UNITS UNDER THE ORIGINAL INVITATION. AT THE SAME TIME, A NEW INVITATION WAS ISSUED COVERING THE 8,000 UNITS, TO BE OPENED ON JUNE 29, 1956, BUT ON THE SAME DATE THIS INVITATION WAS CANCELED, FOLLOWING RECEIPT OF NOTICE FROM THE REQUISITIONING AGENCY THAT NO FUNDS WERE AVAILABLE FOR THE ADDITIONAL PROCUREMENT.

WITH RESPECT TO YOUR FIRST CONTENTION CONCERNING THE FAILURE OF THE CONTRACTING AGENCY TO EXERCISE ITS OPTIONS UNDER THE EXISTING CONTRACTS WITH YOUR COMPANY, IT WOULD APPEAR SUFFICIENT MERELY TO POINT OUT THAT SINCE SUCH OPTIONS WERE PURELY FOR THE INTEREST AND BENEFIT OF THE GOVERNMENT, ANY DETERMINATION THAT THE EXERCISE OF SUCH OPTION WOULD BE CONTRARY TO THE GOVERNMENT'S INTERESTS MANIFESTLY MAY NOT BE SUBJECT TO LEGAL OBJECTION--- EITHER BY THIS OFFICE OR THE COURTS. IN THIS CONNECTION, ATTENTION IS INVITED TO THE CASE OF WESTERN UNION TELEGRAPH COMPANY V. BROWN, EXECUTOR OF LANGE, ET AL., 253 U.S. 101, WHEREIN THE SUPREME COURT OF THE UNITED STATES, IN TREATING OF THIS SUBJECT, EXPLAINED AS FOLLOWS:

AN OPTION IS A PRIVILEGE GIVEN BY THE OWNER OF PROPERTY TO ANOTHER TO BUY THE PROPERTY AT HIS ELECTION. IT SECURES THE PRIVILEGE TO BUY AND IS NOT OF ITSELF A PURCHASE. THE OWNER DOES NOT SELL HIS PROPERTY; HE GIVES TO ANOTHER THE RIGHT TO BUY AT HIS ELECTION. ( ITALICS SUPPLIED.)

AND THIS IS WHOLLY APART FROM THE QUESTION OF WHETHER THE EXERCISE OF AN OPTION SUFFICIENT TO MEET THE NEEDS OF A PROCUREMENT OF THIS MAGNITUDE WOULD NOT HAVE RESULTED IN THE MAKING OF A NEW CONTRACT REQUIRED BY LAW TO BE ENTERED INTO AFTER FORMAL ADVERTISING.

AS TO YOUR SECOND CONTENTION CONCERNING THE INSUFFICIENCY OF TIME AFFORDED FOR THE PREPARATION OF BIDS, IT IS SIGNIFICANT TO OBSERVE THAT THE JUNE 19 INVITATION WAS FORWARDED TO THOSE CONCERNS WHICH HAD SUBMITTED BIDS ON THE SAME INSTRUMENT ONLY TWO AND A HALF MONTHS PREVIOUSLY IN RESPONSE TO INVITATION NO. FNW-2N-1426-A-4-9-56, ON WHICH YOUR COMPANY WAS THE LOW BIDDER. IN THESE CIRCUMSTANCES, THEREFORE, IT WOULD BE REASONABLE TO ASSUME THAT SINCE YOU HAD BEEN AWARDED THE CONTRACTS UNDER THAT INVITATION WHICH YOU ARE CURRENTLY ENGAGED IN PERFORMING, YOUR COMPANY SHOULD HAVE BEEN IN THE BEST POSSIBLE POSITION TO KNOW THE COST OF MANUFACTURING THE V-710 METERS AND TO COMPUTE A PROPER BID ON THE LATER INVITATION. FURTHERMORE, IT APPEARS THAT ALL OTHER BIDDERS WERE REQUIRED TO MEET THE SAME DATE LINE--- WHICH, IN FACT WAS MET WITHOUT ANY APPARENT HARDSHIP. IT IS CONSEQUENTLY OUR OPINION THAT THE ADMINISTRATIVE ACTION IN DECLINING YOUR REQUEST IN THIS REGARD CAN HARDLY FORM THE BASIS FOR A VALID OBJECTION.

THIRDLY, YOU CONTEND THAT THE GENERAL SERVICES ADMINISTRATION WAS WITHOUT AUTHORITY TO AWARD A CONTRACT FOR THE 27,000 UNITS AFTER ADVISING BIDDERS THAT ALL BIDS RECEIVED THEREON HAD BEEN REJECTED. IN SUPPORT OF THIS ALLEGATION, YOU REFER TO OUR DECISION OF NOVEMBER 1, 1955, REPORTED IN 35 COMP. GEN. 255, WHEREIN WE HELD THAT AS A MATTER OF LAW THE REJECTION OF BIDS AMOUNTS TO AN ABOLITION OF THOSE BIDS AND THEREFORE FORECLOSES THE SUBSEQUENT CONSIDERATION OF SUCH BIDS, EVEN THE BID FROM THE LOWEST ORIGINAL BIDDER. WITH THIS FUNDAMENTAL RULE WE ARE IN UNQUALIFIED AGREEMENT. THIS VIEW, HOWEVER, IS PREDICATED UPON THE PREMISE OF A VALID REJECTION, BECAUSE WE ALSO ARE OF THE OPINION THAT AN ARBITRARY OR PATENTLY ERRONEOUS REJECTION AND RESOLICITATION OF BIDS CAN BE IN DEROGATION OF THE GOVERNMENT'S INTEREST IN MAINTAINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM AND IN OBSERVING ETHICAL STANDARDS OF BUSINESS CONDUCT WHICH SHOULD AT ALL TIMES BE PRESERVED. IN CONSONANCE WITH THIS LATTER VIEW, WE CONSISTENTLY HAVE ADHERED TO THE RULE ESTABLISHED BY THE COURT OF CLAIMS IN THE CASE OF MASSMAN CONSTRUCTION COMPANY, V. UNITED STATES, 102 C.1CLS. 699, THAT " TO HAVE A SET OF BIDS DISCARDED AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITOR'S PRICE IS A SERIOUS MATTER, AND IT SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS.'

THUS, IN THE INSTANT CASE THERE IS NOT SO MUCH INVOLVED THE QUESTION OF ACCEPTING THE OFFER OF A REJECTED BIDDER AS THERE IS THE MATTER OF RESCINDING A PURPORTED REJECTION WHICH, IN THE LIGHT OF PREVAILING FACTS AND CIRCUMSTANCES, NEVER SHOULD HAVE BEEN MADE. AGAIN, REVIEWING THE FACTS AS PRESENTED HERE, THE TELEGRAM OF JUNE 26, PURPORTING TO REJECT ALL BIDS, WAS BASED UPON THE PREMISE THAT THE GOVERNMENT'S REQUIREMENTS HAD BEEN INCREASED BY 8,000 UNITS AND THE POSSIBILITY OF LOWER PRICES ON THE INCREASED QUANTITY. HOWEVER, ON THE DAY FOLLOWING THE ADMINISTRATOR'S ACTION IN RESCINDING THE REJECTION IT DEVELOPED THAT SUFFICIENT FUNDS WERE NOT AND HAD NOT BEEN AVAILABLE FOR THE INCREASED PROCUREMENT AND, THEREFORE, THE INVITATION FOR BIDS ON THE ADDITIONAL 8,000 UNITS WAS CANCELED. IN THIS REGARD, TOO, IT SEEMS SIGNIFICANT THAT, IN ISSUING THE INVITATION ON JUNE 19 FOR BIDS ON THE 27,000 UNITS, THE CONTRACTING OFFICE, APPARENTLY IN COLLABORATION WITH THE REQUISITIONING AGENCY, HAD CONSIDERED THE MATTER OF A POSSIBLE INCREASE IN REQUIREMENTS AND CONTRARY TO PRIOR PRACTICE HAD NEGATED THAT POSSIBILITY BY EXPRESSLY EXCLUDING A GOVERNMENT OPTION TO INCREASE SUCH QUANTITIES.

WITH RESPECT TO THE POSSIBILITY OF LOWER PRICES ON THE INCREASED QUANTITY, YOUR BELATED BID QUOTED A PRICE OF $22.50, LESS 1 PERCENT--- 20 DAYS, WHICH WAS ONLY A FEW CENTS LOWER THAN THE PREVIOUS LOW BIDDER, NOTWITHSTANDING THE FACT THAT YOUR BID WHICH WAS OPENED ONLY ONE DAY PREVIOUSLY QUOTED A PRICE OF $22.90 LESS 1 PERCENT--- 20 DAYS. THE CONTRACTING OFFICIAL THEN REJECTED ALL BIDS "GIVING AS A REASON THAT THEIR REQUIREMENTS HAD BEEN INCREASED AND REQUESTED THE VICTOREEN INSTRUMENT COMPANY TO BID ON 35,000 MODEL V-710 INSTRUMENTS.'

NOTWITHSTANDING THIS ACTION, HOWEVER, YOU WERE TELEGRAPHICALLY INFORMED THAT YOUR LOWER PRICE QUOTATION COULD NOT BE CONSIDERED WITH RESPECT TO THE 27,000 UNITS. NEEDLESS TO SAY, SUCH ACTION ON THE PART OF THE CONTRACTING OFFICE WAS CORRECT--- SINCE THE QUOTATION HAD BEEN RECEIVED AFTER THE BID OPENING--- AND WAS IN STRICT CONFORMANCE WITH NUMEROUS DECISIONS OF OUR OFFICE WHEREIN WE HAVE HELD THAT TO PERMIT BIDDERS TO VARY THEIR PROPOSALS AFTER THE BIDS ARE OPENED WOULD SOON REDUCE TO A FARCE THE WHOLE PROCEDURE OF LETTING PUBLIC CONTRACTS ON AN OPEN COMPETITIVE BASIS. IN SUPPORT OF THIS POSITION, ATTENTION IS INVITED TO THE CASE OF CITY OF CHICAGO V. MOHR, 216 ILL. 20; 74 N.E. 1056, WHEREIN THE COURT STATED AS FOLLOWS:

* * * WHERE A BID IS PERMITTED TO BE CHANGED (AFTER THE OPENING) IT IS NO LONGER THE SEALED BID SUBMITTED IN THE FIRST INSTANCE, AND, TO SAY THE LEAST, IS FAVORITISM, IF NOT FRAUD--- A DIRECT VIOLATION OF LAW -- AND CANNOT BE TOO STRONGLY CONDEMNED.

WE CANNOT SAY THAT THE FURTHER ACTION ON THE PART OF THE CONTRACTING OFFICE IN REJECTING ALL BIDS AND READVERTISING WAS CORRECT AND PROPER, HOWEVER. WE FREQUENTLY HAVE HELD THAT IN THE MATTER OF GOVERNMENT PROCUREMENT CONTRACTING OFFICERS ARE VESTED WITH A CERTAIN AMOUNT OF DISCRETION AND, IN THE ABSENCE OF A SHOWING OF ARBITRARY OR CAPRICIOUS ACTION, FAVORITISM OR A COMPLETE DISREGARD OF THE LAW OR FACTS, WE WOULD NOT BE WARRANTED IN HOLDING THAT THEIR PROCUREMENT ACTIONS WERE ILLEGAL. BUT IN THIS CASE WE ARE UNABLE TO CONCLUDE THAT THERE WAS AN ABSENCE OF ARBITRARY OR CAPRICIOUS ACTION ON THE PART OF THE CONTRACTING OFFICE. OUR OPINION YOUR BELATED TELEGRAM PROPOSING TO UNDERBID THE SUCCESSFUL BIDDER'S PRICE BY ONLY A FEW CENTS CLEARLY SHOULD NOT HAVE BEEN CONSIDERED A "COGENT REASON" FOR THE REJECTION. NOR DO WE BELIEVE THAT THE REJECTION ACTION BASED UPON THE POSSIBILITY OF A MINOR ADDITIONAL PRICE CONCESSION ON A SMALL INCREASE IN QUANTITY, WHICH BECAUSE OF INSUFFICIENT FUNDS APPARENTLY SHOULD NOT HAVE BEEN ORDERED BY THE REQUISITIONING AGENCY IN ANY EVENT, WAS IN HARMONY WITH THE SPIRIT AND PURPOSE OF THE ADVERTISING STATUTES. IN VIEW THEREOF, WE ARE IN COMPLETE ACCORD WITH THE OPINION OF THE ADMINISTRATOR THAT THE PURPORTED REJECTION WAS NOT FOUNDED UPON A VALID BASIS AND, ACCORDINGLY, ARE IMPELLED TO THE CONCLUSION THAT HIS PROMPT CORRECTIVE ACTION IN THE MATTER WAS LEGAL AND PROPER.