B-131528, MAY 3, 1957, 36 COMP. GEN. 759

B-131528: May 3, 1957

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A MINERAL LEASE AWARD WHICH WAS NOT MADE ON THE BASIS OF THE TERMS OF THE OFFER. 1957: REFERENCE IS MADE TO A LETTER DATED APRIL 16. COPIES OF THE NOTICE AND A DETAILED STATEMENT OF THE TERMS AND CONDITIONS OF THE PROPOSED SALE WERE IMMEDIATELY FORWARDED TO PROSPECTIVE BIDDERS WHO. WERE EXPRESSLY NOTIFIED THAT DETAILED STATEMENTS OF THE TERMS OF THE SALE OR LEASE COULD BE OBTAINED IN THE MANAGER'S OFFICE. AUTHORITY FOR THE ABOVE CLAUSE IS CONTAINED IN ADMINISTRATIVE REGULATIONS PUBLISHED IN 43 C.F.R. 196.4. WERE IN EFFECT AT THE TIME OF ISSUANCE OF THE MANAGER'S NOTICE ON OCTOBER 16. THE PHOSPHATE LEASE REGULATIONS WERE AMENDED SO AS TO DELETE THE "MINIMUM EXPENDITURE" REQUIREMENT THERETOFORE REQUIRED IN SUCH LEASES.

B-131528, MAY 3, 1957, 36 COMP. GEN. 759

CONTRACTS - CHANGES IN GOVERNMENT INVITATIONS - NOTICE TO BIDDERS THE PUBLICATION IN THE FEDERAL REGISTER OF A REGULATION WHICH WOULD AFFECT THE NUMBER OF BIDDERS LIKELY TO BE INTERESTED IN A PREVIOUSLY ISSUED INVITATION AND THE ANTICIPATED BID PRICES, WITHOUT FURNISHING PROSPECTIVE BIDDERS INFORMATION CONCERNING THE REGULATION AS AN AMENDED TERM OR CONDITION OF THE INVITATION, MAKES THE GOVERNMENT'S OFFER INVALID AND PRECLUDES AN AWARD ON THE BASIS OF THE ORIGINAL INVITATION AS REVISED BY THE PUBLISHED REGULATION. A MINERAL LEASE AWARD WHICH WAS NOT MADE ON THE BASIS OF THE TERMS OF THE OFFER, DUE TO THE FACT THAT SUBSEQUENT TO THE INVITATION A REGULATION PUBLISHED IN THE FEDERAL REGISTER ELIMINATED THE MINIMUM EXPENDITURE REQUIREMENT FROM MINERAL LEASES, SHOULD BE CANCELED.

TO THE SECRETARY OF THE INTERIOR, MAY 3, 1957:

REFERENCE IS MADE TO A LETTER DATED APRIL 16, 1957, FROM YOUR ADMINISTRATIVE ASSISTANT, REQUESTING AN ADVANCE DECISION AS TO THE LEGALITY OF THE AWARD OF PHOSPHATE LEASE ARIZONA 1013445 PURPORTEDLY MADE ON DECEMBER 11, 1956, BY THE MANAGER OF THE LAND OFFICE, PHOENIX, ARIZONA, IN FAVOR OF THE CALAZONA FERTILIZER COMPANY, PURSUANT TO THE MINERAL LEASING ACT OF FEBRUARY 25, 1920, 41 STAT. 437, AS AMENDED, 30 U.S.C. 181, ET SEQ.

IT APPEARS THAT ON OCTOBER 16, 1956, YOUR PHOENIX LAND OFFICE MANAGER, ACTING PURSUANT TO THE PROVISIONS OF 30 U.S.C. 211, AND THE THEN CURRENT REGULATIONS PROMULGATED BY THE SECRETARY OF THE INTERIOR THEREUNDER, PUBLISHED A LEASE OFFER OF GOVERNMENT-OWNED PHOSPHATE LANDS SCHEDULED TO BE SOLD ON DECEMBER 6, 1956. COPIES OF THE NOTICE AND A DETAILED STATEMENT OF THE TERMS AND CONDITIONS OF THE PROPOSED SALE WERE IMMEDIATELY FORWARDED TO PROSPECTIVE BIDDERS WHO, AT THE SAME TIME, WERE EXPRESSLY NOTIFIED THAT DETAILED STATEMENTS OF THE TERMS OF THE SALE OR LEASE COULD BE OBTAINED IN THE MANAGER'S OFFICE. THE STATEMENT WHICH ACCOMPANIED THE MANAGER'S NOTICE OF SALE READ, IN PERTINENT PART:

MINIMUM EXPENDITURE: A MINIMUM EXPENDITURE OF $25,000 ON OR FOR THE BENEFIT OF THE LEASED LANDS FOR UNIT 1 AND $75,000 FOR UNIT 2, OF WHICH SUM NOT LESS THAN ONE-THIRD SHALL BE EXPENDED DURING EACH OF THE FIRST 3 YEARS OF THE LEASES, UNLESS SOONER EXPENDED.

AUTHORITY FOR THE ABOVE CLAUSE IS CONTAINED IN ADMINISTRATIVE REGULATIONS PUBLISHED IN 43 C.F.R. 196.4, WHICH, INCIDENTALLY, WERE IN EFFECT AT THE TIME OF ISSUANCE OF THE MANAGER'S NOTICE ON OCTOBER 16, 1956.

BY CIRCULAR NO. 1965, ISSUED OCTOBER 19, 1956, BY THE ACTING SECRETARY OF THE INTERIOR, THE PHOSPHATE LEASE REGULATIONS WERE AMENDED SO AS TO DELETE THE "MINIMUM EXPENDITURE" REQUIREMENT THERETOFORE REQUIRED IN SUCH LEASES. THE CONTENTS OF THIS CIRCULAR WERE PUBLISHED IN THE FEDERAL REGISTER (21 F.R. 8217) ON OCTOBER 26, 1956. THE ORIGINAL TERMS OF SALE, HOWEVER, WERE NOT AMENDED TO CONFORM WITH THE NEW REGULATIONS, NOR WERE COPIES OF CIRCULAR NO. 1965 FORWARDED TO THE PROSPECTIVE BIDDERS.

THE SALE WAS CONDUCTED ON DECEMBER 6, 1956, AS SCHEDULED, AND THE BID OF THE CALAZONA FERTILIZER COMPANY WAS THE ONLY ONE RECEIVED. ON DECEMBER 11, 1956, THE LAND OFFICE MANAGER AT PHOENIX DECLARED THE BONUS BID OF CALAZONA, IN THE AMOUNT OF $5,000, TO BE THE HIGH BID, AND THAT THE LEASE WOULD BE OFFERED TO THAT COMPANY UPON THE BASIS OF ITS ACCEPTED PROPOSAL. THE FOLLOWING STATEMENT WAS INCORPORATED INTO THE MANAGER'S DECISION:

THE HIGH BIDDER IS ALSO ADVISED THAT UNDER THE AMENDED PHOSPHATE LEASE REGULATIONS, CIRCULAR 1965, SEC. 196.4, THE MINIMUM EXPENDITURE AS NOTED UNDER THE TERMS OF SALE AND LEASE WILL NOT BE REQUIRED.

ON JANUARY 23, 1957, OR PRIOR TO THE ISSUANCE OF A FORMAL LEASE TO THE CALAZONA FERTILIZER COMPANY, A PROTEST WAS FILED BY THE RANDALL MILLS CORPORATION AGAINST THE AWARD OF A LEASE TO THE FORMER COMPANY, ON THE GROUNDS THAT THE AMENDMENT OF THE PHOSPHATE LEASE REGULATIONS BY CIRCULAR NO. 1965 EFFECTED A MATERIAL OR SUBSTANTIAL CHANGE IN THE PUBLISHED TERMS OF SALE, AND CONSEQUENTLY, THE PHOENIX LAND OFFICE MANAGER SHOULD HAVE ISSUED AND DELIVERED COPIES OF THE AMENDED TERMS OF SALE TO THE PROSPECTIVE BIDDERS, OR OTHERWISE SHOULD HAVE NOTIFIED THEM OF THE ELIMINATION OF THE "MINIMUM EXPENDITURE" REQUIREMENT. THE PROTESTING BIDDER FURTHER ALLEGED THAT HAD IT KNOWN OF THE ELIMINATION OF THE $100,000 MINIMUM EXPENDITURE REQUIREMENT UNDER THE PROPOSED LEASE, IT WOULD HAVE MADE A MONETARY CASH BID FOR THE OFFERED LANDS SUBSTANTIALLY IN EXCESS OF THE CALAZONA BID.

THE ELIMINATED REQUIREMENT IN 43 C.F.R. 196.4, THAT THE PHOSPHATE LEASES TO BE ISSUED BY YOUR DEPARTMENT CONTAIN A "MINIMUM EXPENDITURE" PROVISION UNQUESTIONABLY WAS A BASIC ONE WHICH INEVITABLY WOULD AFFECT THE AMOUNT WHICH PROSPECTIVE BIDDERS MIGHT BE WILLING TO QUOTE ON LANDS OFFERED FOR LEASE UNDER THE STATUTE CITED.

THE PURPOSES OF ANY STATUTORY REQUIREMENT FOR ADVERTISING AND COMPETITIVE BIDDING, SUCH AS THAT RECITED IN 30 U.S.C. 211, IS TO AFFORD PROSPECTIVE BIDDERS THE OPPORTUNITY OF COMPETING UPON A FAIR AND EQUAL BASIS, AND, ALSO, TO ASSURE TO THE GOVERNMENT THE FULL BENEFITS WHICH REASONABLY MAY BE EXPECTED TO BE DERIVED FROM FREE AND OPEN COMPETITION. SEE UNITED STATES V. BROOKRIDGE FARM, 111 F.2D 461; 18 COMP. GEN. 641, 643; ID. 117, 118; 13 ID. 284, 286. OBVIOUSLY, THIS OBJECTIVE COULD NOT BE ACCOMPLISHED IF, AFTER ADVERTISING FOR PROPOSALS UNDER CERTAIN WELL DEFINED TERMS AND CONDITIONS, THE GOVERNMENT'S AGENTS COULD WAIVE, TO ITS PREJUDICE, A MATERIAL REQUIREMENT OF THE ORIGINAL TERMS, AND MAKE AN AWARD UPON CONDITIONS ESSENTIALLY DIFFERENT FROM THOSE ADVERTISED. SEE 17 COMP. GEN. 554, 558-559.

WHILE THERE MAY BE INSTANCES WHEREIN SLIGHT DEVIATIONS MAY BE PERMITTED, OR RELATIVELY UNIMPORTANT REQUIREMENTS OF GOVERNMENT INVITATIONS MAY BE WAIVED, WE CONSISTENTLY HAVE ADHERED TO THE RULE THAT ADVERTISED REQUIREMENTS OF THE GOVERNMENT MAY BE WAIVED ONLY WHEN THEY DO NOT AFFECT THE SUBSTANCE OF A BID, OR WORK A MANIFEST INJUSTICE UPON THE OTHER BIDDERS. SEE 30 COMP. GEN. 179, 181-182. NOT ONLY WOULD THE BASIC REQUIREMENT IN THE INVITATION THAT A MINIMUM EXPENDITURE OF AT LEAST $100,000 BE MADE DURING THE FIRST THREE YEARS OF THE PROPOSED PHOSPHATE LEASE TEND TO DECREASE THE AMOUNT OF ANY PROPOSAL SUBMITTED IN RESPONSE TO THE GOVERNMENT'S ORIGINAL LEASE OFFER, BUT IT ALSO WOULD TEND TO ELIMINATE THOSE BIDDERS WHO MIGHT BE UNWILLING TO OBLIGATE THEMSELVES TO INVEST THE SPECIFIED AMOUNT OF CAPITAL FOR THE DEVELOPMENT OR IMPROVEMENT OF THE LANDS.

THEREFORE, CONSIDERING THE IMPORTANCE OF CIRCULAR NO. 1965, AND ITS IMPACT NOT ONLY UPON THE NUMBER OF BIDDERS LIKELY TO BE INTERESTED, BUT ALSO UPON THE BID PRICES REASONABLY TO BE ANTICIPATED, TI WOULD SEEM THAT ITS IMMEDIATE PUBLICATION AND RELEASE TO THE PROSPECTIVE BIDDERS AS AN AMENDED TERM OR CONDITION OF THE PROPOSED LEASE WAS A PREREQUISITE TO ANY VALID OFFERING OF GOVERNMENT-OWNED PHOSPHATE LANDS FOR LEASE UNDER THE TERMS OF THE REVISED REGULATIONS.

IT IS FULLY REALIZED, OF COURSE, THAT UNDER THE PROVISIONS OF 49 STAT. 502, 44 U.S.C. 307, THE PUBLICATION OF REGULATIONS IN THE FEDERAL REGISTER ORDINARILY CONSTITUTES JUDICIAL NOTICE OF THEIR CONTENTS. SEE FEDERAL CROP INSURANCE CORP. V. MERRILL, 332 U.S. 380, 384-385. HOWEVER, SINCE THE REVISED REGULATION IS SILENT AS TO ITS EFFECT ON OUTSTANDING OFFERS OF LEASES, AND DOES NOT APPEAR NECESSARILY TO CONSTITUTE A PROHIBITION AGAINST THE INCLUSION OF THE PREVIOUS REQUIREMENTS IN LEASES THEREAFTER TO BE AWARDED UNDER OUTSTANDING OFFERS, WE DO NOT FEEL THAT ITS PUBLICATION CONSTITUTED AN AUTOMATIC AMENDMENT OF THE TERMS OF THE OFFER OF OCTOBER 16. WE EXPRESS NO OPINION AS TO WHETHER A VALID ACCEPTANCE MIGHT HAVE BEEN MADE ON THE STATED TERMS OF THE OFFER, AS NO SUCH ACCEPTANCE WAS ATTEMPTED, AND ONE COULD NOT BE IMPLIED FROM THE TERMS OF THE ACCEPTANCE AS WRITTEN.

ACCORDINGLY, AND SINCE THE AWARD PURPORTEDLY MADE ON DECEMBER 11, 1956, IN FAVOR OF THE CALAZONA FERTILIZER COMPANY, WAS NOT MADE IN ACCORDANCE WITH THE STATED TERMS OF THE OFFER, THE SAID AWARD SHOULD BE CANCELED FORTHWITH AS UNAUTHORIZED.