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B-133808, OCTOBER 16, 1957, 37 COMP. GEN. 251

B-133808 Oct 16, 1957
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IS IMPROPER AND THE FACT THAT THE SPECIFICATIONS REQUIRED BIDDERS TO FURNISH A COMPLETION DATE IS NOT SUFFICIENT TO JUSTIFY AN EVALUATION ON ANY BASIS OTHER THAN PRICE. PROJECT SPONSORS ARE REQUIRED TO COMPLY WITH THE FEDERAL COMPETITIVE BIDDING SYSTEM AS INTERPRETED BY THE FEDERAL COURTS AND THE ACCOUNTING OFFICERS. 1957: FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 16. 000 HAVE BEEN COMMITTED FOR THE PROJECT UNDER TITLE VI OF THE PUBLIC HEALTH SERVICE ACT. SECTION 53.127 (C) OF THE PUBLIC HEALTH SERVICE REGULATIONS REQUIRES THAT THE PROJECT SPONSOR TO BE ELIGIBLE FOR A GRANT UNDER THE ACT PROVIDE THE FOLLOWING ASSURANCE TO THE STATE AGENCY: (1) THAT ACTUAL CONSTRUCTION WORK WILL BE PERFORMED BY THE LUMP SUM (FIXED PRICE) CONTRACT METHOD.

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B-133808, OCTOBER 16, 1957, 37 COMP. GEN. 251

CONTRACTS - FEDERAL AID FUNDS - COMPETITIVE PROCUREMENT - AWARD ON BASIS NOT IN INVITATION THE AWARD OF A CONSTRUCTION CONTRACT TO OTHER THAN THE LOW BIDDER ON THE BASIS OF AN EARLIER COMPLETION DATE UNDER AN INVITATION, WHICH DID NOT INCLUDE ANY STATEMENT REGARDING COMPLETION TIME OR THAT TIME WOULD BE CONSIDERED AS AN EVALUATION FACTOR, IS IMPROPER AND THE FACT THAT THE SPECIFICATIONS REQUIRED BIDDERS TO FURNISH A COMPLETION DATE IS NOT SUFFICIENT TO JUSTIFY AN EVALUATION ON ANY BASIS OTHER THAN PRICE. THE ACCEPTANCE OF AN OFFER MADE BY THE LOW BIDDER, AFTER OPENING OF THE BIDS, TO REDUCE THE TIME OF PERFORMANCE STATED IN HIS ORIGINAL BID DOES NOT RESULT IN ANY UNFAIRNESS OR DISADVANTAGE TO OTHER BIDDERS SO AS TO COME WITHIN THE RULE WHICH PRECLUDES AMENDMENTS TO BIDS AFTER OPENING. DISCRETIONARY ACTION BY THE SURGEON GENERAL IN NOT WITHHOLDING HILL BURTON ACT FUNDS FROM A SPONSOR WHO FAILED TO COMPLY WITH THE COMPETITIVE BIDDING REQUIREMENTS OF THE REGULATIONS BY AN AWARD TO OTHER THAN THE LOWEST BIDDER ON THE BASIS OF A COMPLETION TIME FACTOR NOT PROVIDED IN THE INVITATION COULD NOT BE GIVEN ANY SEMBLANCE OF APPROVAL BY THE GENERAL ACCOUNTING OFFICE WHICH HAS A PRIMARY DUTY IN THE PROCUREMENT FIELD TO MAINTAIN THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. ALTHOUGH THE HILL-BURTON ACT, 42 U.S.C. 291, WHICH AUTHORIZES THE GRANT OF FEDERAL FUNDS TO PROJECT SPONSORS FOR REHABILITATION CENTERS, DOES NOT PRESCRIBE THE METHOD BY WHICH CONSTRUCTION CONTRACTS SHOULD BE AWARDED, THE REGULATIONS PROMULGATED PURSUANT THERETO REQUIRE "COMPETITIVE BIDDING" AND "AWARD TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID," THEREFORE, PROJECT SPONSORS ARE REQUIRED TO COMPLY WITH THE FEDERAL COMPETITIVE BIDDING SYSTEM AS INTERPRETED BY THE FEDERAL COURTS AND THE ACCOUNTING OFFICERS.

TO ALAN JOHNSTONE, OCTOBER 16, 1957:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 16, 1957, WITH ENCLOSURES, AND YOUR LETTER OF SEPTEMBER 21, 1957, PROTESTING ON BEHALF OF YOUR CLIENT, SKINKER AND GARRETT, INC., AGAINST THE AWARD OF A CONTRACT FOR CONSTRUCTION OF THE DAVIS MEMORIAL GOODWILL INDUSTRIES PROJECT TO ANOTHER BIDDER.

THE PROJECT INVOLVES THE CONSTRUCTION OF A REHABILITATION CENTER AT AN ESTIMATED COST OF $1,390,555. FEDERAL FUNDS IN THE AMOUNT OF $150,000 HAVE BEEN COMMITTED FOR THE PROJECT UNDER TITLE VI OF THE PUBLIC HEALTH SERVICE ACT, AS AMENDED (POPULARLY KNOWN AS THE HILL BURTON ACT), 42 U.S.C. 291. PURSUANT TO 42 U.S.C. 291E, SECTION 53.127 (C) OF THE PUBLIC HEALTH SERVICE REGULATIONS REQUIRES THAT THE PROJECT SPONSOR TO BE ELIGIBLE FOR A GRANT UNDER THE ACT PROVIDE THE FOLLOWING ASSURANCE TO THE STATE AGENCY:

(1) THAT ACTUAL CONSTRUCTION WORK WILL BE PERFORMED BY THE LUMP SUM (FIXED PRICE) CONTRACT METHOD, THAT ADEQUATE METHODS OF OBTAINING COMPETITIVE BIDDING WILL BE OR HAVE BEEN EMPLOYED PRIOR TO AWARDING THE CONSTRUCTION CONTRACT, EITHER BY PUBLIC ADVERTISING OR CIRCULARIZING THREE OR MORE BIDDERS, AND THAT THE AWARD OF A CONTRACT WILL BE OR HAS BEEN MADE TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID. * * *

THE PROJECT SPONSOR DID NOT INCLUDE IN THE INVITATION OR RELATED DOCUMENTS ANY STATEMENT REGARDING THE TIME WITHIN WHICH COMPLETION OF THE PROJECT WAS REQUIRED. THE SPECIFICATIONS, HOWEVER, STATED:

CONTRACTOR SHALL STATE IN HIS PROPOSAL THE NUMBER OF CALENDAR DAYS FROM DATE OF SIGNING CONTRACT OR DATE OF ISSUANCE OF BUILDING PERMIT, WHICHEVER IS LATER, IN WHICH HE WILL GUARANTEE TO COMPLETE THE WORK.

BIDS WERE OPENED ON JUNE 17, 1957. W. M. CHAPPELL, INC., SUBMITTED THE LOW BID OF $1,017,000 AND SPECIFIED 500 DAYS FOR COMPLETION OF THE PROJECT. THE NEXT LOW BID AT $1,028,000 WHICH WAS SUBMITTED BY SKINKER AND GARRETT, INC., SPECIFIED 365 DAYS FOR COMPLETION OF THE PROJECT. AFTER OPENING, THE LOW BIDDER OFFERED TO COMPLETE THE CONTRACT WITHIN 380 DAYS.

ON JUNE 19, 1957, THE EXECUTIVE DIRECTOR OF DAVIS MEMORIAL GOODWILL INDUSTRIES ADDRESSED A LETTER TO SKINKER AND GARRETT ADVISING THEM THAT THEY HAD BEEN DETERMINED TO BE THE LOW BIDDER AND THAT THE CONTRACT WOULD BE AWARDED SUBJECT, AMONG OTHER CONDITIONS, TO "A FIRM COMMITMENT WITH THE HOSPITAL SURVEY AND CONSTRUCTION ACT AS AMENDED BY THE MEDICAL FACILITIES SURVEY AND CONSTRUCTION ACT OF 1954.' WHILE THE BASIS FOR THE DETERMINATION THAT SKINKER AND GARRETT HAD SUBMITTED THE LOW BID IS NOT STATED, IT IS ASSUMED TO HAVE BEEN THAT THE EARLIER GUARANTEED COMPLETION DATE MORE THAN OFFSET THE DIFFERENCE BETWEEN THE SKINKER AND GARRETT BID AND THE CHAPPELL BID. SUBSEQUENTLY, THE CONDITIONAL AWARD WAS WITHDRAWN, APPARENTLY FOLLOWING A DETERMINATION THAT COMPETITIVE BIDDING PROCEDURES REQUIRED BY PUBLIC HEALTH SERVICE REGULATIONS WOULD NOT PERMIT ACCEPTANCE OF OTHER THAN THE LOW BID ON THE BASIS OF AN EARLIER COMPLETION DATE IN THE ABSENCE OF A CLEAR EXPRESSION IN THE INVITATION THAT DATE OF COMPLETION WOULD BE CONSIDERED AND ON WHAT BASIS IT WOULD BE EQUATED WITH BID PRICES. BY LETTER OF AUGUST 6, 1957, THE SPONSOR PROPOSED AWARD TO CHAPPELL AND BY LETTER OF SEPTEMBER 12, 1957, THE SPONSOR WAS ADVISED THROUGH APPROPRIATE CHANNELS, THAT AWARD TO THE LOWEST DOLLAR BIDDER, CHAPPELL, WOULD CONFORM WITH THE REQUIREMENTS OF THE REGULATIONS ADOPTED UNDER TITLE VI OF THE PUBLIC HEALTH SERVICE ACT, AS AMENDED, AND WITH THE ASSURANCE GIVEN BY THE SPONSOR TO THE STATED AGENCY THAT THE CONTRACT WOULD BE AWARDED TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID.

YOU PROTEST ANY AWARD TO CHAPPELL ON SEVERAL BASES CONSIDERED INDIVIDUALLY BELOW. YOU POINT OUT THAT WHILE A BUILDING CONTRACTOR HAS NO DIRECT ACCESS TO FUNDS GRANTED UNDER THE HILL-BURTON ACT, HE HAS A RIGHT TO RECEIVE THEM UNDER A VALID CONTRACT WITH A QUALIFIED GRANTEE OF THE FUNDS TO WHOM THEY HAVE BEEN COMMITTED UNDER A PROPER APPLICATION OF THE LAW AND REGULATIONS CONTROLLING THEIR EXPENDITURE. YOU FURTHER POINT OUT THAT THE AWARD TO SKINKER AND GARRETT IS VALID IF THAT FIRM IN FACT IS THE LOW BIDDER.

WHILE THE ACT ITSELF DOES NOT PRESCRIBE THE METHOD BY WHICH CONSTRUCTION CONTRACTS SHALL BE AWARDED, THE REGULATION QUOTED ABOVE PROMULGATED PURSUANT TO THE STATUTE REQUIRES THE USE OF ,COMPETITIVE BIDDING," AND "AWARD TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID.' THESE TERMS ARE NOT DEFINED IN THE REGULATION. HOWEVER, SINCE THE REGULATION WAS PROMULGATED BY A FEDERAL AGENCY PURSUANT TO FEDERAL STATUTE AND GOVERNS THE OBLIGATION OF FEDERAL FUNDS, IT APPEARS REASONABLE TO CONCLUDE THAT THE TERMS WERE INTENDED TO HAVE THE MEANING GENERALLY ACCORDED THEM BY THE FEDERAL COURTS AND ADMINISTRATIVE AGENCIES.

COMPETITION, AS REQUIRED BY THE REGULATION, CANNOT BE OBTAINED UNLESS THE BIDDERS KNOW IN ADVANCE THE BASIS UPON WHICH THEIR BIDS WILL BE EVALUATED. 36 COMP. GEN. 380, 384. YOU STATE THAT WHILE THE INVITATION DID NOT EXPRESSLY PROVIDE THAT TIME OF COMPLETION WOULD BE CONSIDERED IN EVALUATING THE BIDS, THE BIDDERS WERE PUT ON NOTICE THAT THIS FACTOR WOULD BE FOR CONSIDERATION IN VIEW OF THE REQUIREMENT QUOTED ABOVE THAT BIDDERS STATE A GUARANTEED COMPLETION DATE. YOU FURTHER INDICATE THAT THE COST OF RENTING FACILITIES CURRENTLY BEING USED BY DAVIS MEMORIAL GOODWILL INDUSTRIES DURING THE PERIOD BETWEEN THE GUARANTEED TIME OF COMPLETION OFFERED BY SKINKER AND GARRETT AND THE TIME OF COMPLETION GUARANTEED BY CHAPPELL IN ITS ORIGINAL BID MORE THAN EXCEEDS THE DIFFERENCE IN THE BID PRICES AND, THEREFORE, THAT THE LOW BID WAS SUBMITTED BY SKINKER AND GARRETT.

WHERE AN INVITATION FOR BIDS ON A CONSTRUCTION CONTRACT DID NOT STATE THAT TIME WAS OF THE ESSENCE AND DID NOT INCLUDE A REQUIRED OR DESIRED COMPLETION DATE BUT DID PROVIDE FOR LIQUIDATED DAMAGES AND INCLUDED A STATEMENT THAT BIDS MIGHT BE EVALUATED ON THE BASIS OF THE LIQUIDATED DAMAGES SPECIFIED, WE HAVE HELD THAT AWARD COULD NOT BE MADE ON THE BASIS OF EARLIER COMPLETION TO OTHER THAN THE LOW BIDDER. B 120741, MARCH 17, 1955. IN THAT DECISION WE STATED THAT TIME OF COMPLETION SHOULD NOT BE CONSIDERED IN EVALUATING BIDS UNLESS THE INVITATION CLEARLY ADVISES BIDDERS THAT TIME WILL BE CONSIDERED IN MAKING AN AWARD AND SETS FORTH THE BASIS FOR EVALUATION OF BIDS. IT FOLLOWS, THEREFORE, THAT THE BIDS SUBMITTED PURSUANT TO THE INVITATION HERE INVOLVED COULD NOT BE EVALUATED ON ANY FACTOR OTHER THAN PRICE.

YOU ALSO CONTEND THAT THE CHAPPELL BID COULD NOT BE AMENDED SUBSEQUENT TO OPENING TO PROVIDE FOR COMPLETION WITHIN A SHORTER TIME THAN GUARANTEED UNDER THE ORIGINAL BID. IT IS TRUE, AS A GENERAL RULE, THAT BIDDERS MAY NOT VARY THEIR PROPOSALS AFTER BIDS ARE OPENED SINCE TO PERMIT THEM TO DO SO WOULD NULLIFY THE PURPOSES FOR LETTING PUBLIC CONTRACTS ON A OPEN COMPETITIVE BASIS. 17 COMP. GEN. 554. THE REASON FOR THE RULE IS TO PUT ALL BIDDERS ON AN EQUAL BASIS AND TO PREVENT ANY BIDDER FROM OBTAINING AN ADVANTAGE BY BEING PERMITTED TO VARY ITS BID AFTER THE OTHER BIDS WERE DISCLOSED. IT IS WELL ESTABLISHED, HOWEVER, THAT WHERE A BIDDER HAS SUBMITTED THE OTHERWISE LOW ACCEPTABLE BID, THERE IS NO REASON WHY HE MAY NOT, AFTER OPENING, VOLUNTARILY DECREASE THE AMOUNT OF HIS BID SINCE THE RULE THAT AMENDMENTS TO BIDS RECEIVED AFTER OPENING SHOULD BE DISREGARDED DOES NOT APPLY WHERE THE BID IS ALREADY THE LOWEST. ALECK LEITMAN V. UNITED STATES, 104 C.1CLS. 324; B-74013, MARCH 9, 1948. IT FOLLOWS FROM THESE DECISIONS THAT THE ACCEPTANCE BY THE CONTRACTING AGENCY OF AN OFFER BY THE LOW BIDDER IN THIS CASE TO REDUCE ITS TIME OF PERFORMANCE RESULTS IN NO UNFAIRNESS OR DISADVANTAGE TO THE OTHER BIDDERS.

IN A LETTER OF AUGUST 12, 1957, TO THE DISTRICT OF COLUMBIA DEPARTMENT OF PUBLIC HEALTH, YOU CITE A NUMBER OF OUR DECISIONS IN SUPPORT OF THE GENERAL PROPOSITION THAT UNDER THE CIRCUMSTANCES TIME OF COMPLETION COULD BE CONSIDERED IN EVALUATING BIDS NOTWITHSTANDING THAT THE INVITATION CONTAINED NO PROVISION THEREFOR AND THAT THE BASIS FOR EVALUATION OF THE ADDITIONAL FACTOR WAS NOT STATED. YOU FIRST CITE 5 COMP. GEN. 546. THAT CASE, HOWEVER, WE SAID THAT IF TIME IS TO BE A CONTROLLING ELEMENT,"IT SHOULD BE SO STATED.' IT WAS NOT SO STATED IN THIS CASE. AGAIN, IN 14 COMP. GEN. 268, WHICH YOU ALSO CITE, IT WAS SPECIFICALLY STATED THAT BIDS MAY BE EVALUATED ON FACTORS IN ADDITION TO PRICE PROVIDED SUCH BASIS IS STATED IN THE SPECIFICATIONS. THE SAME PROPOSITION IS TRUE OF 35 COMP. GEN. 174 ALSO CITED BY YOU. IN OUR DECISION, 35 COMP. GEN. 291, ALTERNATE BIDS WERE SPECIFICALLY REQUESTED AND, IN ADDITION, AN EXCEPTION TO THE GENERAL RULE WAS MADE BECAUSE, AS THE BIDDERS HAD BEEN ADVISED, THE GOVERNMENT INTENDED THROUGH THE INVITATION TO PROCURE A DEVELOPMENT MODEL OF A PARTICULAR MACHINE. IN SUPPORT OF YOUR GENERAL PROPOSITION, YOU CITE IN ADDITION 23 COMP. GEN. 717. HOWEVER, WE DO NOT CONSIDER THAT DECISION AS GOVERNING THIS CASE BECAUSE THE QUESTION THERE FOR CONSIDERATION WAS THE ASSESSMENT OF ACTUAL DAMAGES AND NOT THE AWARD OF A CONTRACT ON THE BASIS OF A FACTOR NOT SPECIFICALLY PROVIDED FOR IN THE INVITATION.

IN ACCORDANCE WITH THE FOREGOING, WE MUST CONCLUDE THAT CHAPPELL SUBMITTED THE LOWEST ACCEPTABLE BID AND, THEREFORE, THAT AWARD TO THAT FIRM WAS PROPER.

UNDER 42 U.S.C. 291J THE SURGEON GENERAL MAY DIRECT THAT THE FUNDS REPRESENTING THE FEDERAL GRANT BE WITHHELD IF THE REGULATIONS PROMULGATED PURSUANT TO THE ACT ARE NOT COMPLIED WITH. SINCE HE HAS DISCRETION IN THIS AREA, YOU SUGGEST, IN A LETTER OF OCTOBER 15, 1957, THAT EVEN THOUGH THERE HAS NOT BEEN STRICT COMPLIANCE WITH THE REGULATIONS AS THEY HAVE BEEN INTERPRETED (THAT BIDS MAY BE EVALUATED ON THE BASIS OF PRICE ONLY UNLESS AN ADDITIONAL FACTOR SUCH AS TIME IS EXPRESSLY PROVIDED FOR IN THE INVITATION AND THE BASIS UPON WHICH THE SECOND FACTOR IS TO BE EVALUATED IS SPECIFICALLY SET FORTH) THE SURGEON GENERAL MAY PROPERLY EXERCISE HIS DISCRETION AND NOT REQUIRE THE WITHHOLDING OF FEDERAL FUNDS IN SUCH CASE IF THE AWARD WAS MADE IN GOOD FAITH AND RESULTS IN A PRUDENT COMPETITIVE PRICE. YOU FURTHER SUGGEST THAT WE WOULD NOT BE REQUIRED TO OBJECT TO SUCH EXERCISE OF DISCRETION BY THE SURGEON GENERAL. ONE OF OUR PRIMARY PURPOSES IN THE FIELD OF PROCUREMENT IS TO MAINTAIN THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. WE CANNOT LOOK WITH FAVOR UPON ANY CONTRAVENTION OF THE SYSTEM EVEN IN THOSE INSTANCES WHERE A MERITORIOUS AWARD WOULD THEREBY BE ACCOMPLISHED. CF. 17 COMP. GEN. 554. THEREFORE, EVEN SHOULD THE SURGEON GENERAL ELECT IN A PARTICULAR INSTANCE TO EXERCISE HIS DISCRETION IN THE MANNER YOU SUGGEST, WE COULD NOT IN THE PROPER EXERCISE OF THE DUTIES IMPOSED UPON US BY LAW, LEND ANY SEMBLANCE OF APPROVAL TO SUCH ACTION.

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