B-132011, JUN. 28, 1957

B-132011, JUN. 28, 1957

TO THE GRAY COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTERS OF JUNE 18 AND 24, 1957, PROTESTING THE ACTION OF THE DEPARTMENT OF THE ARMY IN HAVING CANCELLED THE BIDS (OPENED ON MAY 8, 1957), SUBMITTED IN RESPONSE TO INVITATION NO. DA-ENG-11-184-57- F-612, ISSUED MARCH 25, 1957, BY THE CHICAGO PROCUREMENT OFFICE, CORPS OF ENGINEERS, COVERING THE PROPOSED PROCUREMENT OF 587 POWER OPERATED LUBRICATING UNITS, AS THEREIN SPECIFIED.

IN YOUR LETTER OF JUNE 18, 1957, YOU POINT OUT THAT YOU WERE THE LOWEST RESPONSIVE BIDDER UNDER THE SAID INVITATION, AND ALSO UNDER AN EARLIER INVITATION ISSUED DURING 1956 BY THE CHICAGO PROCUREMENT OFFICE COVERING THE PROPOSED PURCHASE OF 353 UNITS OF SIMILAR EQUIPMENT, IN VIEW OF WHICH YOU FEEL YOU ARE RIGHTFULLY ENTITLED TO THE AWARD UNDER INVITATION NO. DA- ENG-11-184-57-F-612. YOUR LETTER OF JUNE 24 QUESTIONS THE SUFFICIENCY OF THE LOW BIDDER'S (CEMCO INDUSTRIES, INC.) PLANT AND FACILITIES FOR THE MANUFACTURER OF THIS PRODUCT, AS WELL AS ITS FINANCIAL CAPACITY TO SUCCESSFULLY PERFORM A CONTRACT OF THIS SIZE OR MAGNITUDE.

WE HAVE RECEIVED A REPORT FROM THE CHIEF OF ENGINEERS, U.S. ARMY, OUTLINING, IN DETAIL, THE CIRCUMSTANCES UNDER WHICH ALL OF THE BIDS SUBMITTED IN RESPONSE TO THE TWO EARLIER INVITATIONS WERE CANCELLED, AND THE GOVERNMENT'S REQUIREMENTS FOR LUBRICATING UNITS READVERTISED UNDER A SUPERSEDING INVITATION FOR BIDS, OPENED ON JUNE 25, 1957.

CONCERNING THE ORIGINAL INVITATION CALLING FOR 353 UNITS, THE RECORD SHOWS THAT ONLY TWO BIDS WERE RECEIVED IN RESPONSE THERETO:

TABLE

GRAY COMPANY, INC. $4,925.00 EACH, F.O.B. ORIGIN

STEWART-WARNER $3,466.94 EACH, F.O.B. ORIGIN

STEWART-WARNER'S BID WAS QUALIFIED, WHEREAS YOURS WAS NOT. THE ITEM HAD NOT PREVIOUSLY BEEN PROCURED IN QUANTITY, AND IT APPEARS THAT THE SERVICES OF YOUR COMPANY HAD BEEN UTILIZED IN THE DEVELOPMENT OF THE REQUIRED PRODUCT. HOWEVER, UPON CHECKING THE EXCEPTIONS OR DEVIATIONS INDICATED IN THE STEWART-WARNER BID, IT WAS FOUND THAT NOT ONLY WERE THE BASIC SPECIFICATIONS FAULTY, PARTICULARLY THOSE GOVERNING THE STROKE OF THE PUMP, BUT SUBSTANTIAL ECONOMIES COULD BE EFFECTED IF CERTAIN SUGGESTED CHANGES WERE MADE IN THE ORIGINAL SPECIFICATIONS. ACCORDINGLY, ALL BIDS WERE REJECTED AND THE SPECIFICATIONS RESTUDIED BY THE U.S. ARMY RESEARCH AND DEVELOPMENT LABORATORY.

ON MARCH 25, 1957, THE CHICAGO PROCUREMENT OFFICE ISSUED THE INVITATION HERE IN QUESTION, NO. DA-ENG-11-184-57-F-612, WHICH, AS AMENDED BY FOUR ADDENDA, CALLED FOR 587 LUBRICATING AND SERVICING UNITS. UPON OPENING ON MAY 8, 1957, FOUR BIDS WERE RECEIVED, THE THREE LOWEST OF WHICH WERE:

TABLE

CEMCO INDUSTRIES, INC. $1,580,399.51 F.O.B. DESTINATION

GRAY COMPANY, INC. $2,134,266.48 F.O.B. DESTINATION

STEWART-WARNER CORP. $2,179,948.43 F.O.B. DESTINATION

SINCE CEMCO'S BID WAS SO FAR OUT OF LINE WITH THE AMOUNTS OF THE OTHER BIDS RECEIVED, THE CONTRACTING OFFICER REQUESTED THE COMPANY TO VERIFY ITS PROPOSAL. IN A LETTER DATED MAY 18, 1957, THE LOW BIDDER ALLEGED THAT DUE TO THE INABILITY OF ITS SUB-BIDDER (ARO EQUIPMENT CORPORATION) TO SECURE COPIES OF CERTAIN PERTINENT SPECIFICATIONS PRIOR TO THE BID OPENING DATE, IT HAD QUOTED ON THE WRONG TYPE OF HOSE, AND THEREFORE HAD MADE AN ERROR IN ITS BID. IN VIEW THEREOF, CEMCO REQUESTED, EITHER THAT ITS BID PRICE BE INCREASED BY $378.60 PER UNIT, MAKING ITS TOTAL REVISED BID PRICE $1,812,637.71, F.O.B. DESTINATION, OR THAT ALL BIDS SUBMITTED UNDER THE SAID INVITATION BE REJECTED AND THE PROCUREMENT READVERTISED. IN THIS CONNECTION, THE RECORD INDICATES THAT THE PROCUREMENT OFFICE WAS DILATORY IN PROVIDING THE SUB-BIDDER WITH THE REQUIRED SPECIFICATIONS WHICH HAD BEEN REQUESTED IN SEVERAL COMMUNICATIONS DIRECTED TO THAT OFFICE PRIOR TO THE BID OPENING DATE (MAY 8), AND FURTHER, THAT SUCH SPECIFICATIONS WERE NOT FURNISHED THE LOW BIDDER'S REPRESENTATIVE UNTIL MAY 14, 1957. THIS, OF COURSE, WAS DUE TO NO FAULT OR NEGLECT UPON THE PART OF THE LOW BIDDER, OR ITS AUTHORIZED REPRESENTATIVE.

AS STATED, CEMCO'S ALLEGATION OF ERROR WAS MADE BY LETTER DATED MAY 18, 1957, OR FOUR DAYS AFTER ITS SUB-BIDDER, ARO, FIRST RECEIVED THE MILITARY SPECIFICATIONS ON THE HOSE. THEREAFTER, THE MATTER WAS REFERRED TO THE CHIEF OF ENGINEERS FOR RESOLUTION, BUT SINCE IT WAS CONSIDERED THAT CEMCO HAD NOT ESTABLISHED BY CLEAR AND CONVINCING EVIDENCE ITS INTENDED BID PRICE, AND FURTHER, THAT A SUBSTANTIAL SAVINGS--- POSSIBLY $321,629 ON A TOTAL ESTIMATED PROCUREMENT OF $2,000,000--- WOULD RESULT FROM A READVERTISEMENT OF THE GOVERNMENT'S NEEDS IN THIS INSTANCE, THE LATTER COURSE OF ACTION WAS DECIDED UPON BY THE CONTRACTING AUTHORITIES.

IT APPEARS THAT YOU THEREUPON PROTESTED THE CORPS OF ENGINEERS' DECISION FOR THE REASON ABOVE OUTLINED, CONTENDING, IN SUBSTANCE, THAT TO PERMIT THE READVERTISEMENT OF THE GOVERNMENT'S REQUIREMENT FOR LUBRICATING EQUIPMENT OF THIS CHARACTER, AFTER YOUR COMPANY HAD SUBMITTED THE LOWEST RESPONSIVE PROPOSALS UNDER TWO EARLIER INVITATIONS, WOULD BE DESTRUCTIVE OF THE COMPETITIVE BIDDING SYSTEM. FURTHER, YOU CHALLENGED THE FINANCIAL AND INDUSTRIAL CAPACITY OF THE LOW BIDDER, CEMCO, UNDER THE CANCELLED INVITATION, TO SATISFACTORILY PERFORM.

IT IS PROVIDED IN 10 U.S.C. 2305 (B) THAT "ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST.' UNDER 10 U.S.C. 2311, THE AGENCY HEAD MAY DELEGATE THE AUTHORITY TO MAKE SUCH DETERMINATION TO ANY OTHER OFFICER OR OFFICIAL OF THAT AGENCY. THAT AUTHORITY HAS BEEN DELEGATED TO THE CONTRACTING OFFICER BY PARAGRAPH 2-403 (E), ARMY PROCUREMENT PROCEDURE, WHICH PROVIDES THAT,"ALL BIDS FOR ANY ONE ITEM OR FOR ALL ITEMS MAY BE REJECTED IF THE CONTRACTING OFFICER FINDS THAT SUCH REJECTION IS IN THE INTEREST OF THE ERNMENT.'

THE AUTHORITY VESTED IN THE HEAD OF THE AGENCY, AND DELEGATED TO THE CONTRACTING OFFICER, IS EXTREMELY BROAD AND WE HAVE CONSISTENTLY HELD THAT A DETERMINATION PURSUANT THERETO IS NOT SUBJECT TO REVIEW BY OUR OFFICE EXCEPT POSSIBLY UPON A CLEAR SHOWING OF FRAUD OR BAD FAITH AMOUNTING TO FRAUD. B-118013, MARCH 31, 1954; B-128422, AUGUST 30, 1956.

OF COURSE, WE ARE FULLY AWARE OF THE FACT THAT THE REJECTION OF BIDS AFTER THEY HAVE BEEN OPENED, AND EACH BIDDER HAS LEARNED OF HIS COMPETITOR'S BID PRICE, IS A SERIOUS MATTER AND SHOULD NOT BE DONE EXCEPT FOR COGENT REASONS. NEVERTHELESS, WE HAVE RECOGNIZED THAT CONTRACTING OFFICERS ARE AGENTS OF THE GOVERNMENT AND, AS SUCH, ARE REQUIRED TO OPERATE IN ITS BEST INTEREST. SEE 17 COMP. GEN. 554, 559. CERTAINLY, IT CANNOT BE SAID THAT SUCH AN OFFICER, ACTING FOR THE PUBLIC'S BENEFIT, IS REQUIRED TO ACCEPT A BID WHEN IT APPEARS FROM THE EVIDENCE BEFORE HIM AT THE TIME THAT THE PUBLIC INTEREST MIGHT BEST BE SERVED BY A REJECTION OF ALL BIDS AND A READVERTISEMENT OF THE GOVERNMENT'S NEEDS UNDER SPECIFICATIONS MORE SUITABLY DESIGNED TO REFLECT THE ACTUAL REQUIREMENTS, OR, FOR THAT MATTER, WHEN A READVERTISEMENT MIGHT RESULT IN THE AWARD OF A MORE ADVANTAGEOUS CONTRACT FROM THE GOVERNMENT'S VIEWPOINT. SEE 36 COMP. GEN. 364, 365.

HERE, THE CONTRACTING OFFICER, ACTING PURSUANT TO THE DISCRETIONARY AUTHORITY CONFERRED UNDER THE STATUTE AND REGULATIONS CITED, AND WITH THE APPROVAL OF THE CHIEF OF ENGINEERS, UNITED STATES ARMY, DIRECTED THE CANCELLATION OF ALL THE BIDS SUBMITTED IN RESPONSE TO THE ORIGINAL 1956 INVITATION, AND ALSO, THE CURRENT INVITATION NO. DA-ENG-11-184-57 F-612, IN ORDER TO AFFORD THE PROCURING AGENCY THE OPPORTUNITY (1) TO RESTUDY THE ORIGINAL SPECIFICATIONS GOVERNING LUBRICATING EQUIPMENT OF THIS TYPE, AND THUS IMPROVE UPON THEM AND MAKE THEM MORE ADAPTABLE TO THE GOVERNMENT'S ACTUAL NEEDS, AND (2) TO SECURE, IF POSSIBLE, A MORE ADVANTAGEOUS BID PRICE THAN THE BID PRICES QUOTED BY YOU AND A COMPETITOR, STEWART-WARNER CORPORATION, UNDER THE LATTER INVITATION.

IN THE CIRCUMSTANCES, WE CANNOT CONCLUDE THAT THE CONTRACTING OFFICER, IN REJECTING ALL BIDS AND READVERTISING THE GOVERNMENT'S REQUIREMENTS UNDER THE FIRST AND SECOND INVITATIONS, DID NOT ACT IN THE GOVERNMENT'S BEST INTERESTS AND PURSUANT TO THE DISCRETIONARY AUTHORITY CONFERRED UPON HIM BY STATUTE.

CONCERNING YOUR CONTENTION THAT THE LOW BIDDER, CEMCO, IS NOT INDUSTRIALLY OR FINANCIALLY CAPABLE OF COMPLETING A CONTRACT OF THIS SIZE AND CHARACTER, THE AVAILABLE RECORDS SHOW THAT THE CHIEF OF ENGINEERS DIRECTED A FACILITIES SURVEY TO BE MADE FOR THE PURPOSE OF DETERMINING WHETHER THAT FIRM HAD THE FACILITIES, EXPERIENCE AND FINANCIAL CAPACITY TO PERFORM, IF AWARDED THE CONTRACT. THE SURVEY CONDUCTED JUNE 17-18, 1957, UNDER THE DIRECTION OF THE CHICAGO ENGINEER PROCUREMENT OFFICE RESULTED IN A FAVORABLE RECOMMENDATION BY THE SURVEY BOARD, BASED PRINCIPALLY UPON CEMCO'S AFFILIATIONS WITH OTHER QUALIFIED FIRMS WHICH HAD EXPERIENCE IN MANUFACTURING LUBRICATING ITEMS AND WINTERIZATION EQUIPMENT OF THIS KIND, AND THE WILLINGNESS OF AN OHIO BANKING FACILITY TO ADVANCE A SIZEABLE AMOUNT OF CASH FOR THE PURPOSE OF FINANCING THE PROPOSED CONTRACT, IF AWARDED THAT FIRM.

IT LONG HAS BEEN RECOGNIZED BY US, AND ALSO BY THE COURTS, THAT THE DETERMINATION OF THE RESPONSIBILITY AND CAPACITY OF A BIDDER IS ESSENTIALLY THE FUNCTION OF THE ADMINISTRATIVE OFFICIALS EMPOWERED TO AWARD THE CONTRACT. SEE O-BRIEN V. CARNEY, 6 F.SUPP. 761, 762; 15 COMP. GEN. 1023; 33 ID. 549, 551.

IN REPORTING ON THIS PHASE OF THE MATTER, THE CHIEF OF ENGINEERS STATES THAT THE FACILITY OF QUALIFICATIONS SURVEY OF THE CEMCO INDUSTRIES CONDUCTED BY THE PROCUREMENT AGENCY COVERED, FOR ALL PRACTICAL PURPOSES, ALL THE POINTS WHICH NORMALLY WOULD BE COVERED BY A REGULAR PRE-AWARD SURVEY, AND FURTHER, THAT IN THE EVENT CEMCO IS THE LOW BIDDER UNDER THE SUPERSEDING INVITATION FOR BIDS, OPENED ON JUNE 25, 1957, A COMPLETE PRE- AWARD SURVEY WILL BECOME NECESSARY TO ESTABLISH ITS FINANCIAL CONDITION AND CURRENT WORK LOAD AS OF THAT TIME TO DETERMINE WHETHER IT ACTUALLY CAN PERFORM THE PROPOSED CONTRACT.

IN VIEW OF THE FOREGOING, IT IS NOT FELT THAT WE WOULD BE JUSTIFIED IN QUESTIONING THE PROPRIETY OF THE ADMINISTRATIVE ACTION ALREADY TAKEN, OR PROPOSED TO BE TAKEN WITH RESPECT TO THE PENDING AWARD.