B-134050, NOVEMBER 1, 1957, 37 COMP. GEN. 293

B-134050: Nov 1, 1957

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SALES - BIDS - DEPOSITS - TIMBER SALES - ACCEPTANCE OR REJECTION A PROPOSED PROVISION IN TIMBER SALES INVITATIONS TO THE EFFECT THAT AN AWARD WILL BE WITHHELD FROM A HIGH BIDDER WHO FAILS TO SUBMIT THE REQUIRED BID DEPOSIT UNTIL IT IS DETERMINED WHETHER ANY OF THE OTHER BIDDERS. WOULD BE WILLING TO ACCEPT THE AWARD AT THE HIGH BID PRICE IS A CONDITIONAL REJECTION DEPENDING ON THE ACTIONS OF OTHER BIDDERS AND IS LEGALLY INVALID UNDER THE COMPETITIVE BID PROCEDURES. WHETHER THE FAILURE OF A BIDDER TO FURNISH A BID DEPOSIT REQUIRES REJECTION OF THE BID OR IS AN INFORMALITY WHICH MAY BE WAIVED DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR SITUATION SO THAT NO HARD AND FAST RULE CAN BE APPLIED.

B-134050, NOVEMBER 1, 1957, 37 COMP. GEN. 293

SALES - BIDS - DEPOSITS - TIMBER SALES - ACCEPTANCE OR REJECTION A PROPOSED PROVISION IN TIMBER SALES INVITATIONS TO THE EFFECT THAT AN AWARD WILL BE WITHHELD FROM A HIGH BIDDER WHO FAILS TO SUBMIT THE REQUIRED BID DEPOSIT UNTIL IT IS DETERMINED WHETHER ANY OF THE OTHER BIDDERS, WHO MEET THE DEPOSIT REQUIREMENT, WOULD BE WILLING TO ACCEPT THE AWARD AT THE HIGH BID PRICE IS A CONDITIONAL REJECTION DEPENDING ON THE ACTIONS OF OTHER BIDDERS AND IS LEGALLY INVALID UNDER THE COMPETITIVE BID PROCEDURES, WHICH REQUIRE ACCEPTANCE OR REJECTION BASED ON THE BID SUBMISSION AND ON THE RELATIVE STANDING AS TO PRICE AT THE TIME OF OPENING. WHETHER THE FAILURE OF A BIDDER TO FURNISH A BID DEPOSIT REQUIRES REJECTION OF THE BID OR IS AN INFORMALITY WHICH MAY BE WAIVED DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR SITUATION SO THAT NO HARD AND FAST RULE CAN BE APPLIED; HOWEVER, GENERALLY, SUCH DEVIATION MAY BE WAIVED WHEN IT IS IN THE INTEREST OF THE GOVERNMENT, AND THE BIDDER'S FAILURE TO PROVIDE THE BID GUARANTEE DOES NOT INVOLVE A LACK OF FINANCIAL ABILITY.

TO THE SECRETARY OF AGRICULTURE, NOVEMBER 1, 1957:

A LETTER OF OCTOBER 8, 1957, FROM THE ASSISTANT SECRETARY REQUESTS OUR DECISION AS TO THE LEGALITY OF INCLUDING IN ADVERTISEMENTS FOR BIDS FOR THE SALE OF NATIONAL FOREST TIMBER A PROVISION WITH REGARD TO THE CONSIDERATION OF A HIGH BID OTHERWISE ACCEPTABLE EXCEPT FOR THE FAILURE TO PROVIDE A BID GUARANTEE IN THE AMOUNT OR MANNER OR AT THE TIME PRESCRIBED BY THE TERMS OF THE INVITATION.

IT IS STATED IN THE LETTER THAT A POLICY OF THE DEPARTMENT REQUIRES EACH BIDDER TO SUBMIT A DEPOSIT WITH HIS BID IN THE FORM OF A REMITTANCE WHICH CANNOT BE INVALIDATED BY ACTION OF THE BIDDER ALONE. THE DEPOSITS ARE CONSIDERED TO SERVE THE INTERESTS OF THE GOVERNMENT IN TWO WAYS: THE REQUIREMENT TENDS TO ELIMINATE BIDDERS WHO ARE NOT FINANCIALLY RESPONSIBLE AND HAVE INSUFFICIENT ASSETS TO UNDERTAKE AND CARRY OUT THE CONTRACT; AND THE DEPOSIT EVIDENCES THE BIDDER'S SINCERITY AND IS AVAILABLE FOR SET-OFF BY THE GOVERNMENT AGENCY ANY COSTS INCURRED BY THE GOVERNMENT SHOULD THE BIDDER NOT UNDERTAKE THE CONTRACT AFTER AWARD.

IT IS FURTHER STATED THAT THE PRACTICE OF REQUIRING CERTIFIED CHECKS OR SIMILAR REMITTANCES WITH BIDS IS DESIRABLE AND SHOULD BE CONTINUED. HOWEVER, IF THE FAILURE TO SUBMIT SUCH REMITTANCE IS WAIVED AS AN INFORMALITY PURSUANT TO OUR DECISIONS, IT IS STATED THAT THE REQUIREMENT SOON BECOMES USELESS AND BIDDERS CAN SUBMIT PERSONAL CHECKS WITHOUT ANY PENALTY. ONE INSTANCE IS NOTED WHERE A BIDDER DID NOT SUBMIT A CERTIFIED CHECK OR SIMILAR REMITTANCE UPON ADVICE OF COUNSEL THAT THE DECISIONS OF OUR OFFICE HOLD THAT THE SUBMISSION OF AN UNCERTIFIED DEPOSIT CHECK CONTRARY TO THE TERMS OF THE INVITATION WOULD NOT BAR CONSIDERATION OF THE BID. IT IS FURTHER STATED:

WHEN WE DO RECEIVE A BID CONTAINING A DEPOSIT NOT IN THE REQUIRED FORM OR NO DEPOSIT AND WAIVE THE IRREGULARITY AS AN INFORMALITY, BIDDERS WHO HAVE COMPLIED STRICTLY WITH THE TERMS OF THE INVITATION PROTEST THE AWARD ON THE BASIS THAT THE HIGH BIDDER WHO WAS AWARDED THE CONTRACT DID NOT COMPLY WITH THE TERMS OF THE ADVERTISEMENT.

THE LETTER INDICATES THAT SINCE THE AUTOMATIC REJECTION OF OTHERWISE ACCEPTABLE BIDS FOR FAILURE TO SUBMIT BID DEPOSITS IN THE FORM REQUIRED UNDER THE TERMS OF THE INVITATION WOULD BE INCONSISTENT WITH OUR DECISIONS IT IS PROPOSED TO INCLUDE THE FOLLOWING STIPULATION IN INVITATIONS FOR BIDS:

IN THE EVENT THE HIGH BIDDER FAILS TO SUBMIT WITH HIS BID A DEPOSIT IN THE REQUIRED FORM, AND ONE OR MORE OTHER BIDDERS SUBMIT DEPOSITS IN ACCORDANCE WITH REQUIREMENTS, AWARD TO THE HIGH BIDDER WILL BE WITHHELD UNTIL IT IS DETERMINED WHETHER ANY OF THE BIDDERS WHOSE DEPOSITS MEET REQUIREMENTS AND ARE OTHERWISE QUALIFIED WOULD BE WILLING TO ACCEPT THE AWARD AT THE HIGH BID PRICE. IF ONLY ONE SUCH BIDDER IS WILLING, THE CONTRACT WILL BE AWARDED TO HIM AT THE HIGH BID PRICE. IF MORE THAN ONE OF SUCH BIDDERS ARE WILLING THE AWARD WILL BE MADE AT THE HIGH BID PRICE TO THAT BIDDER AMONG THEM WHO RANKS HIGHEST ON THE BASIS OF THE BIDS ORIGINALLY SUBMITTED. IF NO SUCH BIDDER IS WILLING, THE CONTRACT MAY BE AWARDED TO THE HIGH BIDDER IF OTHERWISE QUALIFIED.

IT IS STATED, FINALLY, THAT ADOPTION OF THE PROPOSED PROVISION AND THE PROCEDURE DESCRIBED THEREIN WOULD PROTECT THE INTERESTS OF THE GOVERNMENT BY PREVENTING ANY LOSS IN SALE PRICE, WOULD PROVIDE FOR THE FAIR TREATMENT OF ALL BIDDERS AND WOULD ENCOURAGE BIDDERS TO SUBMIT DEPOSITS WITH THEIR BIDS AS REQUIRED BY THE TERMS OF THE INVITATION.

AUTHORITY FOR THE SALE OF NATIONAL FOREST TIMBER IS PROVIDED UNDER THE ACT OF JUNE 4, 1897, AS AMENDED, 16 U.S.C. 476, WHICH PROVIDES IN PERTINENT PART:

FOR THE PURPOSE OF PRESERVING THE LIVING AND GROWING TIMBER AND PROMOTING THE YOUNGER GROWTH ON NATIONAL FORESTS, THE SECRETARY OF AGRICULTURE, UNDER SUCH RULES AND REGULATIONS AS HE SHALL PRESCRIBE, MAY CAUSE TO BE DESIGNATED AND APPRAISED SO MUCH OF THE DEAD, MATURED, OR LARGE GROWTH OF TREES FOUND UPON SUCH NATIONAL FORESTS AS MAY BE COMPATIBLE WITH THE UTILIZATION OF THE FORESTS THEREON, AND MAY SELL THE SAME FOR NOT LESS THAN THE APPRAISED VALUE IN SUCH QUANTITIES TO EACH PURCHASER AS HE SHALL PRESCRIBE, TO BE USED IN THE STATE OR TERRITORY IN WHICH SUCH TIMBER RESERVATION MAY BE SITUATED, RESPECTIVE BUT NOT FOR EXPORT THEREFROM. BEFORE SUCH SALE SHALL TAKE PLACE NOTICE THEREOF SHALL BE GIVEN BY THE SAID SECRETARY OF AGRICULTURE FOR NOT LESS THAN THIRTY DAYS, BY PUBLICATION IN ONE OR MORE NEWSPAPERS OF GENERAL CIRCULATION, AS HE MAY DEEM NECESSARY, IN THE STATE OR TERRITORY WHERE SUCH RESERVATION EXISTS. IN CASES OF UNUSUAL EMERGENCY THE SECRETARY OF AGRICULTURE MAY, IN THE EXERCISE OF HIS DISCRETION, PERMIT THE PURCHASE OF TIMBER AND CORD WOOD IN ADVANCE OF ADVERTISEMENT OF SALE AT RATES OF VALUE APPROVED BY HIM AND SUBJECT TO PAYMENT OF THE FULL AMOUNT OF THE HIGHEST BID RESULTING FROM THE USUAL ADVERTISEMENT OF SALE. HE MAY, IN HIS DISCRETION, SELL WITHOUT ADVERTISEMENT, IN QUANTITIES TO SUIT APPLICANTS, AT A FAIR APPRAISEMENT, TIMBER AND CORD WOOD AND OTHER FOREST PRODUCTS NOT EXCEEDING $2,000 IN APPRAISED VALUE. * * *

THE USE OF THE TERM "ADVERTISEMENT" IN THE QUOTED PROVISION APPEARS TO REQUIRE THE USE OF COMPETITIVE BID PROCEDURES EXCEPT FOR THOSE INSTANCES, NOT HERE RELEVANT, INDICATED THEREIN. SEE, ALSO, IN THIS REGARD, HOUSE REPORT NO. 1852, 82D CONGRESS, WHICH CLEARLY CONTEMPLATES THAT COMPETITIVE BID PROCEDURES WILL BE FOLLOWED IN SALES IN EXCESS OF $2,000. NOTE ALSO THE SIMILARITY IN LANGUAGE BETWEEN 16 U.S.C. 476 AND SECTION 3709 OF THE REVISED STATUTES, AS AMENDED 41 U.S.C. 5. THEREFORE, WE CONCLUDE THAT NATIONAL FOREST TIMBER MUST BE SOLD PURSUANT TO THE USUAL COMPETITIVE BID PROCEDURES, I.E., AWARD MAY BE MADE ONLY TO THE RESPONSIBLE BIDDER SUBMITTING THE HIGHEST RESPONSIVE BID. THEREFORE, THERE IS NO AUTHORITY TO MAKE AN AWARD TO OTHER THAN THE HIGH BIDDER UNLESS HE IS NOT RESPONSIBLE OR HIS BID IS NOT RESPONSIVE.

THE PROBLEM THEN ARISES AS TO WHEN THE FAILURE TO PROVIDE A BID DEPOSIT IN ACCORDANCE WITH THE TERMS OF THE INVITATION SHOULD BE WAIVED AS AN INFORMALITY AND WHEN SUCH FAILURE MAY BE REGARDED AS SUFFICIENT BASIS FOR THE REJECTION OF A BID AS NONRESPONSIVE. THE CIRCUMSTANCES UNDER WHICH DEVIATIONS MAY BE WAIVED AS INFORMALITIES ARE STATED IN 30 COMP. GEN. 179, 181, AS FOLLOWS:

THE QUESTION AS TO WHETHER DEVIATIONS FROM THE REQUIREMENTS OF ADVERTISED SPECIFICATIONS MIGHT BE WAIVED AFTER THE OPENING DATE HAS BEEN BEFORE THIS OFFICE MANY TIMES; AND IT HAS BEEN CONSISTENTLY HELD THAT SUCH DEVIATIONS MAY BE WAIVED PROVIDED THEY DO NOT GO TO THE SUBSTANCE OF THE BID OR WORK AN INJUSTICE TO OTHER BIDDERS. IN OTHER WORDS, THE PRIMARY QUESTION FOR DETERMINATION IN THIS AND SIMILAR CASES IS WHETHER THE DEVIATION PROPOSED TO BE WAIVED GOES TO THE SUBSTANCE OF THE BID SO AS TO AFFECT EITHER THE PRICE, QUANTITY, OR QUALITY OF THE ARTICLES OFFERED AND THEREFORE IS PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS OR IS MERELY A MATTER OF FORM OR SOME IMMATERIAL VARIATION FROM THE EXACT REQUIREMENTS OF THE SPECIFICATIONS SUCH AS WOULD NOT AFFECT EITHER THE PRICE, QUALITY, OR QUANTITY OF THE ARTICLES OFFERED.

WITH REGARD TO BID GUARANTEES REQUIRED BY THE TERMS OF THE INVITATION TO ACCOMPANY BIDS, WE HAVE STATED THAT THE FAILURE TO PROVIDE SUCH GUARANTEE IN THE FORM OR AMOUNT OR AT THE TIME REQUIRED SHOULD BE WAIVED AS AN INFORMALITY WHEN IT IS IN THE INTEREST OF THE UNITED STATES TO DO SO. WHETHER SUCH ACTION IS IN THE PUBLIC INTEREST DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR CASE AND NO HARD AND FAST RULE CAN BE APPLIED. B-8273, FEBRUARY 14, 1940. GENERALLY, SUCH DEVIATION MAY AND SHOULD BE WAIVED AS AN INFORMALITY WHERE THE BIDDER IS UNABLE TO PROVIDE THE BID GUARANTEE AS REQUIRED DUE TO LACK OF TIME OR OTHER REASON NOT INVOLVING THE LACK OF FINANCIAL STANDING. 16 COMP. GEN. 493. SEE, ALSO, 26 COMP. GEN. 49; 14 ID. 305; 7 ID. 568; B-132631, AUGUST 8, 1957, AND B- 113595, APRIL 17, 1953. WE HAVE FELT THAT THE APPLICATION OF THE RULE WOULD NOT ENCOURAGE THE SUBMISSION OF BIDS LACKING IN GOOD FAITH SINCE THE BID GUARANTEE DOES NOT AFFECT THE LEGAL OBLIGATION TO PERFORM OR TO RESPOND IN DAMAGES AND SUCH OBLIGATION IS CONSIDERED SUFFICIENT TO DETER THE SUBMISSION OF BIDS MADE IN OTHER THAN GOOD FAITH. B-57536, DECEMBER 2, 1949.

CONSISTENT WITH THE RULE, A BID SUBMITTED WITHOUT THE REQUIRED BOND OR GUARANTEE BECAUSE THE BIDDER COULD NOT QUALIFY FINANCIALLY FOR SUCH BOND IS SUFFICIENT BASIS FOR THE REJECTION OF THE BID. 31 COMP. GEN. 20, B- 8273, FEBRUARY 14, 1940.

WE HAVE HELD THAT THE POSSIBILITY OF A SIGNIFICANT MONETARY SAVING TO THE GOVERNMENT REQUIRES THE WAIVER AS AN INFORMALITY OF THE FAILURE TO SUBMIT THE BID GUARANTEE AT THE TIME REQUIRED BY THE INVITATION EVEN THOUGH THE BIDDER (WHOSE FINANCIAL RESPONSIBILITY APPEARED TO HAVE BEEN ESTABLISHED) HAD ON PREVIOUS OCCASIONS ALSO FAILED TO SUBMIT THE REQUIRED GUARANTEE. 14 COMP. GEN. 559. HOWEVER, THE CONTINUED AND WILFUL FAILURE TO SUBMIT THE BID GUARANTEE AS REQUIRED IS A PROPER REASON FOR THE REJECTION OF AN OTHERWISE ACCEPTABLE BID. 16 COMP. GEN. 493.

IN VIEW OF THE FOREGOING, WHETHER AN OTHERWISE ACCEPTABLE BID MAY BE REJECTED FOR FAILURE TO SUBMIT THE BID GUARANTEE IN THE AMOUNT AND FORM AND AT THE TIME REQUIRED BY THE INVITATION DEPENDS UPON THE APPLICATION OF THE RULE AS INTERPRETED IN THE DECISIONS ABOVE CITED. AS WE STATED PREVIOUSLY, WHETHER THE FAILURE TO PROVIDE THE BID GUARANTEE MAY BE WAIVED AS AN INFORMALITY DEPENDS UPON THE FACTS AND CIRCUMSTANCES OF THE PARTICULAR SITUATION AND NO HARD AND FAST RULE CAN BE APPLIED. SPECIFIC INSTANCE WAS DESCRIBED IN THE LETTER AS TO WHICH WE COULD MAKE A DETERMINATION. HOWEVER, WE TRUST THAT THE FOREGOING WILL PROVIDE A GUIDE FOR DETERMINING THE MATERIALITY OF THE DEVIATION. IF THE APPLICATION OF THE RULE REQUIRES ACCEPTANCE OF THE BID, THEN SUCH BID MAY NOT BE SET ASIDE IF ANOTHER BIDDER IS WILLING TO MEET THE HIGH BID PRICE AS WOULD BE THE CASE IF THE PROPOSED PROCEDURE WERE IMPLEMENTED. IF THE RULE AS APPLIED TO THE INDIVIDUAL CASE PERMITS, THE BID MAY BE REJECTED. HOWEVER, WE ARE NOT AWARE OF ANY STATUTORY OR OTHER PROVISION WHICH WOULD AUTHORIZE THE CONDITIONAL REJECTION OF A HIGH BID DEPENDING UPON THE ACTIONS OF THE OTHER BIDDERS. OUR INTERPRETATION OF THE COMPETITIVE BID PROCEDURES IS THAT A BID MUST BE ACCEPTED OR REJECTED BASED UPON ITS CONTENTS AND ITS RELATIVE STANDING AS TO PRICE AT THE TIME BIDS ARE OPENED.

IT IS FURTHER PROVIDED IN 16 U.S.C. 476 THAT:

IN CASES IN WHICH ADVERTISEMENT IS HAD AND NO SATISFACTORY BID IS RECEIVED, OR IN CASES IN WHICH THE BIDDER FAILS TO COMPLETE THE PURCHASE, THE TIMBER MAY BE SOLD, WITHOUT FURTHER ADVERTISEMENT, AT PRIVATE SALE, IN THE DISCRETION OF THE SECRETARY OF AGRICULTURE, AT NOT LESS THAT THE APPRAISED VALUATION, IN QUANTITIES TO SUIT PURCHASERS. * * *

PURSUANT TO THE ABOVE, 36 C.F.R. 221.10 (C) PROVIDES IN PART:

IF THE HIGHEST BID IS NOT ACCEPTED AND THE SALE IS STILL DEEMED DESIRABLE, ALL BIDS MAY BE REJECTED AND THE TIMBER READVERTISED, OR, IF THE HIGHEST BIDDER CANNOT MEET THE REQUIREMENTS UNDER WHICH THE TIMBER WAS ADVERTISED * * * AWARD AT THE HIGHEST PRICE MAY BE OFFERED TO THE NEXT HIGHEST QUALIFIED BIDDER OR TO THE OTHER QUALIFIED BIDDERS IN ORDER THAT THEIR BIDS UNTIL THE AWARD IS ACCEPTED BY ONE OR REFUSED BY ALL OF THE QUALIFIED BIDDERS.

IF THE HIGH BID IS REJECTED UNDER A PROPER APPLICATION OF THE RULE CONCERNING THE WAIVER AS AN INFORMALITY OF THE FAILURE TO SUBMIT THE REQUIRED BID GUARANTEE, OR FOR ANY OTHER VALID REASON, AWARD MAY BE MADE IN ACCORDANCE WITH THE ABOVE-QUOTED PROVISIONS.

FOR THE REASONS AFORESAID, WE MUST REGARD THE PROPOSED PROVISION AND THE CONCOMITANT PROCEDURE AS LEGALLY INVALID.