B-132120, JULY 8, 1957, 37 COMP. GEN. 12

B-132120: Jul 8, 1957

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BIDS - DISCARDING ALL BIDS - READVERTISEMENT - STENOGRAPHIC REPORTING SERVICE INVITATION - BASIS FOR REJECTION THE REJECTION OF ALL BIDS FOR STENOGRAPHIC REPORTING SERVICES BY A REGULATORY AGENCY ON THE BASIS THAT THE INCREASED BONUS OFFERED TO THE GOVERNMENT WAS INCOMPATIBLE WITH PUBLIC INTEREST AND THAT THE MAXIMUM PRICES FOR SALE OF COPIES TO THE PUBLIC WERE EXCESSIVE. - FACTORS WHICH COULD HAVE BEEN DETERMINED FROM PAST EXPERIENCE PRIOR TO THE ISSUANCE OF THE INVITATION. 1957: FURTHER REFERENCE IS MADE TO YOUR LETTERS OF JUNE 5. THE REPORT RECEIVED FROM THE FEDERAL POWER COMMISSION IN RESPONSE TO OUR REQUEST INDICATES THAT AN INVITATION FOR BIDS COVERING STENOGRAPHIC REPORTING SERVICES FOR FISCAL YEAR 1958 WAS ISSUED MAY 10.

B-132120, JULY 8, 1957, 37 COMP. GEN. 12

BIDS - DISCARDING ALL BIDS - READVERTISEMENT - STENOGRAPHIC REPORTING SERVICE INVITATION - BASIS FOR REJECTION THE REJECTION OF ALL BIDS FOR STENOGRAPHIC REPORTING SERVICES BY A REGULATORY AGENCY ON THE BASIS THAT THE INCREASED BONUS OFFERED TO THE GOVERNMENT WAS INCOMPATIBLE WITH PUBLIC INTEREST AND THAT THE MAXIMUM PRICES FOR SALE OF COPIES TO THE PUBLIC WERE EXCESSIVE--- FACTORS WHICH COULD HAVE BEEN DETERMINED FROM PAST EXPERIENCE PRIOR TO THE ISSUANCE OF THE INVITATION--- WOULD NOT BE A BONA FIDE DETERMINATION THAT PUBLIC INTEREST WOULD BE SERVED BY REJECTION OF BID; HOWEVER, FURTHER EVIDENCE OF AN EXPRESS DETERMINATION THAT THE HIGH COST TO THE PUBLIC FOR COPIES WOULD NOT SERVE THE PURPOSE OF THE STATUTE UNDER WHICH THE AGENCY OPERATED, THAT THE ELIMINATION OF THE BONUS WOULD RESULT IN LOWER PRICES, AND THAT THE REASONABLENESS OF THE PRICES COULD NOT BE DETERMINED IN ADVANCE PRECLUDES OBJECTION TO THE READVERTISEMENT ON A NEW BASIS.

TO E. M. SCIULLO, JULY 8, 1957:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF JUNE 5, 13, AND 20, 1957, PROTESTING ON BEHALF OF YOUR CLIENTS, P. J. SULLIVAN AND ASSOCIATES, THE REJECTION OF ALL BIDS IN CONNECTION WITH THE ABOVE CAPTIONED MATTER.

THE REPORT RECEIVED FROM THE FEDERAL POWER COMMISSION IN RESPONSE TO OUR REQUEST INDICATES THAT AN INVITATION FOR BIDS COVERING STENOGRAPHIC REPORTING SERVICES FOR FISCAL YEAR 1958 WAS ISSUED MAY 10, 1957. THE INVITATION DID NOT PROHIBIT BONUS OFFERS TO THE GOVERNMENT, REQUESTED PRICES FOR COPY TO BE FURNISHED TO THE COMMISSION AND OTHER FEDERAL AGENCIES, AND ALSO REQUESTED PRICES FOR COPY TO BE FURNISHED TO STATE REGULATORY BODIES AND OTHER INTERESTED PARTIES. MAXIMUM RATES OF CHARGE WERE SPECIFIED IN THE INVITATION FOR EACH CLASS OF COPY TO ALL PARTIES EXCEPT THE COMMISSION AND OTHER FEDERAL AGENCIES. THREE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION, ALL OFFERING COPY TO THE COMMISSION AND OTHER FEDERAL AGENCIES WITHOUT CHARGE, TO OTHER PURCHASERS AT THE SPECIFIED MAXIMUM RATES, AND OFFERING TO PAY FOR THE AWARD OF THE CONTRACT THE FOLLOWING CASH BONUSES:

CHART

BIDDER BONUS OFFERED

P. J. SULLIVAN AND ASSOCIATES --------------- $173,300

ACME REPORTING COMPANY --------------------- 168,000

ALDERSON STENOGRAPHIC SERVICES ------------- 26,500

ON MAY 31, 1957, THE COMMISSION ISSUED A NOTICE ADVISING THE BIDDERS THAT ALL BIDS RECEIVED IN RESPONSE TO THE INVITATIONS WERE REJECTED. THE NOTICE CONTINUED:

IT HAS BEEN DETERMINED BY THE COMMISSION THAT THE INCREASE IN THE AMOUNT OF THE BONUS OFFERED FOR AWARD OF THE CONTRACT HAS DEVELOPED A SITUATION WHICH IS NOT COMPATIBLE WITH THE PUBLIC INTEREST AND MAY NOT RESULT IN THE LOWEST POSSIBLE COST TO THE PUBLIC FOR COPIES OF THE TRANSCRIPTS. ACCORDINGLY, NEW INVITATIONS TO BID ARE BEING ISSUED WHICH PROVIDE THAT THE ACCEPTANCE OF BIDS WILL BE RESTRICTED TO THOSE WHICH DO NOT PROVIDE A BONUS PAYMENT AND THAT COPIES OF TRANSCRIPTS WILL BE PROVIDED THE FEDERAL POWER COMMISSION AND OTHER GOVERNMENT AGENCIES WITHOUT COST. THE AWARD WILL BE BASED UPON THE LOWEST PRICE PER PAGE FOR ORDINARY COPY TO THE PUBLIC, AND OTHER USUAL FACTORS.

A SECOND INVITATION FOR BIDS IN ACCORDANCE WITH THE LANGUAGE OF THE NOTICE WAS ISSUED ON MAY 31, 1957. THE BIDS RECEIVED IN RESPONSE TO THE INVITATION OFFERED PRICES ON ORDINARY COPY TO THE PUBLIC RANGING FROM A LOW OF 3.49 CENTS PER PAGE TO A HIGH OF 7.5 CENTS AS CONTRASTED TO THE MAXIMUM PERMISSIBLE PRICE OF 15 CENTS PER PAGE UNDER THE FIRST INVITATION.

THE REASON FOR THE REJECTION OF ALL BIDS UNDER THE FIRST INVITATION AND THE SUBSEQUENT READVERTISEMENT WAS STATED IN THE COMMISSION'S LETTER OF JUNE 11, AS FOLLOWS:

THE THREE BIDS RECEIVED IN RESPONSE TO THE INVITATION DATED MAY 10,

1957, WERE REJECTED BY THE COMMISSION FOR THE REASON THAT THE INCREASE IN THE AMOUNT OF THE BONUS OFFERED FOR AWARD OF THE CONTRACT WAS CONSIDERED TO HAVE CREATED A SITUATION WHICH WAS NOT COMPATIBLE WITH THE PUBLIC INTEREST. THIS WAS EVIDENCED BY THE FACT THAT UNDER ALL THREE BIDS THE PRICE PER PAGE CHARGED THE PUBLIC FOR COPIES OF TRANSCRIPTS WOULD HAVE REMAINED AT THE SAME LEVEL IT HAD BEEN SINCE 1953, NOTWITHSTANDING THE FACT THAT DURING THIS PERIOD THE NUMBER OF PAGES OF TRANSCRIPT AND THE VOLUME OF SALES HAD RISEN SO SHARPLY AS TO PERMIT A SUBSTANTIAL REDUCTION IN THE PRICE PER PAGE TO BE CHARGED THE PUBLIC. * * *

IT HAS LONG BEEN RECOGNIZED IN CONNECTION WITH THE AWARD OF GOVERNMENT CONTRACTS THAT NO BIDDER HAS AN ABSOLUTE RIGHT TO PUBLIC BUSINESS, BUT RATHER, THAT THE PUBLIC INTEREST IS FOR PRIMARY CONSIDERATION IN MAKING AN AWARD. FURTHER, IT HAS CONSISTENTLY BEEN HELD THAT AN INVITATION FOR BIDS DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED AND, CONSEQUENTLY, A PUBLIC OFFICER ACTING FOR THE GENERAL WELFARE IS NOT BOUND TO ACCEPT A BID WHERE HE DETERMINES THAT THE PUBLIC INTEREST WOULD BEST BE SERVED BY A REJECTION OF ALL BIDS AND A READVERTISEMENT OF THE NEEDS OF THE GOVERNMENT. SEE O-BRIEN V. CARNEY, 6 F.1SUPP. 761; SCOTT V. UNITED STATES, 44 C.1CLS. 524; COLORADO PAVING CO. V. MURPHY, 78 F. 28; 17 COMP. GEN. 554; 26 COMP. GEN. 49. THUS, WE HAVE DETERMINED THAT ALL BIDS MAY BE REJECTED WHERE THE SPECIFICATIONS ARE RESTRICTIVE (33 COMP. GEN. 524), WHERE THE INVITATION IS DEFECTIVE (35 COMP. GEN. 7), OR WHERE SOME SUBSTANTIAL BENEFIT WOULD THEREBY INURE TO THE UNITED STATES (33 COMP. GEN. 441). HOWEVER, IT MUST BE RECOGNIZED THAT, CONTRARY TO THE PURPOSES FOR WHICH THE PUBLIC PROCUREMENT STATUTES WERE ENACTED, THE REJECTION OF ALL BIDS -- WITHOUT ABANDONMENT OF THE PROPOSED PROCUREMENT--- TENDS TO DISCOURAGE COMPLETION BECAUSE IT RESULTS IN MAKING ALL BIDS PUBLIC WITHOUT AWARD, WHICH IS CONTRARY TO THE INTERESTS OF THE LOW BIDDER AND BECAUSE REJECTION OF ALL BIDS MEANS THAT BIDDERS HAVE EXPENDED MANPOWER AND MONEY ON THE PREPARATION OF THEIR BIDS WITHOUT ANY POSSIBILITY OF ACCEPTANCE. THEREFORE, THE AUTHORITY TO REJECT ALL BIDS MUST BE EXERCISED WITH CARE AND ONLY UPON A BONA FIDE DETERMINATION THAT THE PUBLIC INTEREST WOULD THEREBY BE SERVED. CF. 34 COMP. GEN. 535. IN THE PRESENT INSTANCE, IT APPEARS THAT THE SAME GENERAL TYPE OF INVITATION AND THE SAME MAXIMUM PRICES HAVE BEEN USED FOR SOME YEARS. THE TREND ON THE AMOUNT OF BONUS OFFERED HAS RISEN STEADILY AND SINCE, OBVIOUSLY, THE NEED FOR THE AWARD WAS KNOWN WELL IN ADVANCE, THE GENERAL MAGNITUDE OF THE BONUS COULD EASILY HAVE BEEN ANTICIPATED ON THE BASIS OF PAST EXPERIENCE. IT APPEARS THAT ANY DETERMINATION THAT THE PRESCRIBED MAXIMUM RATES WERE EXCESSIVE OR THAT A CONTRACT SHOULD HAVE BEEN LET ON A BASIS DIFFERENT FROM THAT USED IN THE PAST SHOULD HAVE BEEN MADE PRIOR TO THE TIME THE FIRST INVITATION WAS ISSUED.

THE MATTER OF THE ACCEPTABILITY OF BONUS OFFERS IN CONNECTION WITH AWARDS FOR STENOGRAPHIC REPORTING SERVICES HAS BEEN BEFORE OUR OFFICE MANY TIMES IN THE PAST. IT HAS GENERALLY BEEN HELD THAT THE GOVERNMENT IS CONCERNED WITH PRICES TO BE CHARGED THE PUBLIC FOR TRANSCRIPTS ONLY TO THE EXTENT OF INSURING THAT SUCH PRICES ARE REASONABLE--- FOR WHICH PURPOSE THE CONTRACTING AGENCY MAY SET CEILING PRICES TO BE CHARGED THE PUBLIC--- AND THAT SECTION 3709 OF THE REVISED STATUTES, 41 U.S.C. 5, APPLICABLE IN THIS CASE, REQUIRES CONSIDERATION OF BONUS OFFERS TO THE GOVERNMENT. 18 COMP. GEN. 967; 7 COMP. GEN. 810; A-19040, JUNE 30, 1927. IN OUR DECISION PUBLISHED AT 26 COMP. GEN. 881, WE HELD THAT IT WAS PROPER TO ISSUE AN INVITATION BANNING ANY BONUS AND PROVIDING FOR THE EVALUATION OF BIDS ON THE BASIS OF CHARGES TO THE PUBLIC AND FOR FREE SERVICE TO THE FEDERAL GOVERNMENT. SUCH HOLDING, HOWEVER, WAS PREMISED ON THE EXPRESS DETERMINATION BY THE CONTRACTING AGENCY THAT IN THE PARTICULAR CASE LOWER PRICES TO THE GENERAL PUBLIC, WHICH NECESSARILY WOULD RESULT FROM THE BANNING OF BONUS OFFERS, WOULD BEST SERVE THE INTERESTS OF THE UNITED STATES. B-66979, JUNE 17, 1947. THE PUBLISHED DECISION, 26 COMP. GEN. 881, DID NOT AUTHORIZE A REFUSAL TO CONSIDER BONUS BIDS WHERE THE PRICE TO THE PUBLIC FOR COPIES OF TRANSCRIPTS WAS NOT DEEMED OF CONCERN TO THE UNITED STATES OR WHERE THE REASONABLENESS OF SUCH PRICES COULD BE DETERMINED IN ADVANCE AND A MAXIMUM PRICE STIPULATED IN THE INVITATION. -76521, JULY 30, 1948. IN THAT CASE, WE STATED:

* * * THERE HAS BEEN NO DETERMINATION BY YOUR BOARD THAT THE SALE TO THE GENERAL PUBLIC AT THE LOWEST PRICES OBTAINABLE OF COPIES OF TRANSCRIPTS OF HEARINGS WOULD BEST SERVE THE INTERESTS OF THE UNITED STATES * * * UNDER SUCH CIRCUMSTANCES, THE INCLUSION IN THE PRESENT INVITATION TO BID OF A PROVISION PRECLUDING THE CONSIDERATION OF BIDS OFFERING A BONUS TO THE GOVERNMENT FOR THE AWARD OF A CONTRACT WAS NOT PROPER.

FOLLOWING OUR DECISION IN THAT CASE, ALL BIDS WERE REJECTED AND THE CONTRACT WAS READVERTISED UNDER AN INVITATION BARRING BONUS OFFERS AND PROVIDING FOR THE EVALUATION OF BIDS PRIMARILY ON THE COST OF SERVICE TO THE PARTIES SERVED BY THE CONTRACTING AGENCY. THIS PROCEDURE WAS HELD TO BE VALID UPON AN EXPRESS DETERMINATION BY THE AGENCY THAT A LOWER COST TO THE GENERAL PUBLIC FOR COPIES OF TRANSCRIPTS OF HEARINGS WOULD BEST SERVE THE PURPOSES FOR WHICH THE STATUTE UNDER WHICH THE AGENCY OPERATED WAS ENACTED AND WOULD THUS BE IN THE INTEREST OF THE UNITED STATES. B-76521, OCTOBER 13, 1949.

IN THE INSTANT CASE THE BASIS STATED INITIALLY FOR REJECTING ALL BIDS IS THAT THE INCREASE IN THE AMOUNT OF BONUS HAS CREATED A SITUATION "NOT COMPATIBLE WITH THE PUBLIC INTEREST" AND THAT THE INCREASE IN THE NUMBER OF PAGES OF TRANSCRIPT AND THE SHARP RISE IN THE VOLUME OF SALES WOULD PERMIT A SUBSTANTIAL REDUCTION IN THE PRICES TO BE CHARGED THE PUBLIC. REJECT ALL BIDS FOR THE REASON THAT THE GOVERNMENT WOULD RECEIVE AN EXCESSIVE CONSIDERATION APPEARS TO BE ANOMALOUS SINCE SECTION 3709 OF THE REVISED STATUTES MAKES IT NECESSARY TO ACCEPT THE BID MOST ADVANTAGEOUS TO THE GOVERNMENT AS TO PRICE INCLUDING CONSIDERATION OF BONUSES UNLESS OTHERWISE REQUIRED IN THE INTEREST OF THE GOVERNMENT OR UNLESS THE RESULT WOULD BE AN IMPOSITION OF EXORBITANT OR INEQUITABLE CHARGES FOR THE SERVICES TO OTHER INTERESTED PARTIES. B-51504, SEPTEMBER 6, 1945.

THE COMMISSION BY LETTER OF JUNE 27, 1957, IN EXPLANATION OF THE EARLIER REPORT STATES THAT VERBAL COMPLAINTS HAVE BEEN RECEIVED FROM INTERESTED PARTIES QUESTIONING THE PRICES CHARGED FOR TRANSCRIPTS IN LIGHT OF THE VOLUME SOLD. THE LETTER FURTHER STATES:

ALTHOUGH THE COMMISSION WAS CONCERNED WITH THE CONSISTENT INCREASES IN THE BONUSES OFFERED PRIOR TO THE INVITATION ISSUED MAY 10, 1957, CONVERSATIONS WITH SEVERAL OF THE PREVIOUS YEAR BIDDERS LED IT TO HOPE, AND ALMOST EXPECT, THAT BIDS TO BE SUBMITTED THIS YEAR WOULD SHOW DECREASES IN MAXIMUM PRICES TO BE PAID BY THE PUBLIC SO THAT AN AWARD WOULD NOT HAVE TO BE MADE SOLELY UPON THE BASIS OF THE SIZE OF THE BONUS. FOR THIS REASON IT DID NOT CHANGE THE FORM OF THE INVITATION PREVIOUSLY USED.

THE KNOWLEDGE GAINED FROM THE BIDS WHICH WERE REJECTED CONVINCED THE COMMISSION THAT, AS STATED IN THE NOTICE OF REJECTION,"THE INCREASE IN THE AMOUNT OF THE BONUS FOR AN AWARD OF THE CONTRACT HAS DEVELOPED A SITUATION WHICH IS NOT COMPATIBLE WITH THE PUBLIC INTEREST.

THE COMMISSION, THEREFORE, DETERMINED THAT TO MEET THE SITUATION DESCRIBED ABOVE IT WAS NECESSARY TO REJECT ALL THE BIDS AND ISSUE A NEW INVITATION WHICH WOULD ASSURE LOWER PRICES TO THE PUBLIC AND POSSIBLY BROADEN THE AREA OF COMPETITION.

THE FEDERAL POWER COMMISSION (LIKE THE FEDERAL COMMUNICATIONS COMMISSION IN 26 COMP. GEN. 881) IS A REGULATORY AGENCY ESTABLISHED BY THE CONGRESS TO PROTECT THE PUBLIC INTEREST IN THE ELECTRIC POWER AND THE NATURAL GAS INDUSTRIES, PURSUANT TO THE FEDERAL POWER AND NATURAL GAS ACTS. THE BONUSES PAID FOR AWARD OF THE CONTRACT ARE DEPOSITED INTO MISCELLANEOUS RECEIPTS OF THE TREASURY AND COME PRIMARILY FROM THE SALES OF TRANSCRIPTS TO THE PARTIES TO PROCEEDINGS. THE NUMBER OF INTERVENORS IN THE COMMISSION'S HEARINGS HAVE INCREASED GREATLY AND MANY PARTIES WHO NOW DESIRE COPIES ARE THE SMALL CITIES, TOWNS AND VILLAGES WHICH FIND IT NECESSARY TO ENTER APPEARANCES IN NATURAL GAS CERTIFICATE AND RATE CASES IN ORDER TO PROTECT THE INTEREST OF THEIR INHABITANTS. OTHER PARTIES ARE, OF COURSE, THE NATURAL GAS AND ELECTRIC POWER COMPANY AND THE PAYMENTS THEY MAKE FOR COPIES OF TRANSCRIPTS BECOME A COST WHICH IS INCLUDED IN THE RATE BASE. THIS COST IS IN TURN PASSED ON TO THE CONSUMER OF THE NATURAL GAS OR ELECTRIC POWER.

IN VIEW OF THE PROBABILITY THAT THE OFFERED BONUSES WOULD CONTINUE TO INCREASE IT WAS CONCLUDED THAT IT WOULD BE INEQUITABLE FOR THE CONSUMERS OF GAS AND ELECTRICITY TO CONTINUE TO BEAR THE COST OF THE BONUS WHICH INURES TO THE BENEFIT OF ALL TAXPAYERS.

IN VIEW OF THE FOREGOING AND IN THE LIGHT OF 26 COMP. GEN. 881 AND B 76521, OCTOBER 13, 1949, THERE APPEARS TO BE NO LEGAL BASIS UPON WHICH WE COULD QUESTION THE ACTION OF THE COMMISSION IN THIS MATTER.

IN YOUR LETTER OF JUNE 20, 1957, YOU ALSO POINT OUT THAT CIRCULARS AND ORDER BLANKS HAVE BEEN DISTRIBUTED BY A NATIONAL ORGANIZATION, PRESUMABLY WITH THE CONSENT OF THE SUCCESSFUL BIDDER, UNDER THE SECOND INVITATION, PROVIDING FOR DAILY TRANSCRIPT COPIES ON AN ANNUAL SUBSCRIPTION BASIS. YOU POINT OUT THAT THE CONTRACT PROVIDES FOR SALES ON A PER PAGE BASIS AND THE FLAT FEE INDICATED IN THE CIRCULARS IS CONTRARY THERETO. WE HAVE BEEN INFORMALLY ADVISED THAT THE COMMISSION AND THE CONTRACTOR HAVE AGREED THAT NEW ORDER BLANKS AND CIRCULARS WILL BE DISTRIBUTED SHOWING THE PER PAGE PRICES AT WHICH COPY OF VARIOUS KINDS IS AVAILABLE TO INTERESTED PARTIES UNDER THE TERMS OF THE CONTRACT. FURTHER, IT WILL BE CLEARLY POINTED OUT TO THE PUBLIC THAT THE ANNUAL SUBSCRIPTION FEE IS A MAXIMUM AND THAT THE ACTUAL CHARGE WILL NOT EXCEED THE COST OF DAILY TRANSCRIPT AT THE CONTRACT RATE.