B-134074, NOVEMBER 15, 1957, 37 COMP. GEN. 330

B-134074: Nov 15, 1957

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CONTRACTS - AWARDS - TO OTHER THAN LOW BIDDER - ERRONEOUS FREIGHT RATE COMPUTATION - TIE BIDS AN AWARD OF A CONTRACT BY THE DEPARTMENT OF THE ARMY TO A BIDDER DETERMINED TO BE LOW ON THE BASIS OF AN ERRONEOUS FREIGHT RATE COMPUTATION IS INVALID UNDER 10 U.S.C. 2305 (B) WHICH REQUIRES AN AWARD TO BE MADE TO THE LOW BIDDER. THIS PROCEDURE IS NOT REQUIRED BY LAW AND NEED NOT BE USED WHEN IT SHOULD BE TO THE ADVANTAGE OF THE GOVERNMENT TO DO OTHERWISE. WHERE AN ILLEGAL AWARD WAS MADE TO ONE OF TWO BIDDERS AS THE RESULT OF AN ERRONEOUS FREIGHT RATE COMPUTATION AND A PROPER EVALUATION OF THE ALTERNATE BIDS WOULD HAVE INDICATED THAT BOTH LOW BIDS WERE EQUAL. IT WAS CONCLUDED BY THE CONTRACTING OFFICER THAT ON AN F.O.B.

B-134074, NOVEMBER 15, 1957, 37 COMP. GEN. 330

CONTRACTS - AWARDS - TO OTHER THAN LOW BIDDER - ERRONEOUS FREIGHT RATE COMPUTATION - TIE BIDS AN AWARD OF A CONTRACT BY THE DEPARTMENT OF THE ARMY TO A BIDDER DETERMINED TO BE LOW ON THE BASIS OF AN ERRONEOUS FREIGHT RATE COMPUTATION IS INVALID UNDER 10 U.S.C. 2305 (B) WHICH REQUIRES AN AWARD TO BE MADE TO THE LOW BIDDER; HOWEVER, WITH RESPECT TO ANY DELIVERIES ALREADY MADE AND ACCEPTED, PAYMENT MAY BE MADE ON A QUANTUM MERUIT BASIS FOR THE REASONABLE VALUE, NOT TO EXCEED THE COST TO THE GOVERNMENT UNDER THE LOW ACCEPTABLE BID. ALTHOUGH, IN THE CASE OF TIE LOW BIDS, AWARD SHOULD BE MADE BY DRAWING LOTS, THIS PROCEDURE IS NOT REQUIRED BY LAW AND NEED NOT BE USED WHEN IT SHOULD BE TO THE ADVANTAGE OF THE GOVERNMENT TO DO OTHERWISE; FOR EXAMPLE, WHERE AN ILLEGAL AWARD WAS MADE TO ONE OF TWO BIDDERS AS THE RESULT OF AN ERRONEOUS FREIGHT RATE COMPUTATION AND A PROPER EVALUATION OF THE ALTERNATE BIDS WOULD HAVE INDICATED THAT BOTH LOW BIDS WERE EQUAL, IT WOULD BE ADMINISTRATIVELY ADVANTAGEOUS TO THE GOVERNMENT TO RETAIN THE CONTRACTOR WITH WHOM THE INVALID PROCUREMENT HAD BEEN UNDERTAKEN AND AWARD THE PROPER CONTRACT TO HIM.

TO THE SECRETARY OF THE ARMY, NOVEMBER 15, 1957:

A LETTER OF OCTOBER 11, 1957, FROM THE DEPUTY ASSISTANT SECRETARY OF THE ARMY ( LOGISTICS) REQUESTS OUR DECISION AS TO THE APPROPRIATE ACTION TO BE TAKEN BY THE DEPARTMENT OF THE ARMY WITH REGARD TO A CONTRACT AWARDED TO THE SHELL CHEMICAL CORPORATION FOR ETHYL ALCOHOL BY THE REDSTONE ARSENAL, HUNTSVILLE, ALABAMA, PURSUANT TO INVITATION FOR BIDS NO. ORD-01-021-57- 849.

THE INVITATION ISSUED JUNE 10, 1957, REQUESTED BIDS ON AN ESTIMATED REQUIREMENT OF 400,000 GALLONS OF THE ALCOHOL EXPRESSED AS A PRICE PER GALLON F.O.B. REDSTONE ARSENAL AND ALTERNATELY F.O.B. CONTRACTOR'S PLANT. THE TWO BIDDERS SUBMITTED BIDS AS FOLLOWS:

F.O.B.

F.O.B. CONTRACTOR'S

BIDDER REDSTONE PLANT

PUBLISHER INDUSTRIES, INC.------------- $0.47 $0.4135 SHELL CHEMICAL CORP.-------------------- .47 .396

UPON THE BASIS OF FREIGHT RATES FURNISHED BY THE MILITARY TRAFFIC MANAGEMENT AGENCY, OF $0.0510 PER GALLON FOR PUBLICKER AND $0.067 FOR SHELL, IT WAS CONCLUDED BY THE CONTRACTING OFFICER THAT ON AN F.O.B. PLANT BASIS COST TO THE GOVERNMENT, INCLUDING DELIVERY, WOULD BE $0.4645 PER GALLON FROM PUBLICKER AND $0.4630 PER GALLON FROM SHELL. BASED ON THE FOREGOING, IT WAS DETERMINED THAT THE LOWEST COST TO THE GOVERNMENT WOULD BE ACHIEVED BY AWARD OF THE CONTRACT TO SHELL ON AN F.O.B. ORIGIN BASIS. AWARD TO SHELL WAS THEREFORE MADE, EFFECTIVE AUGUST 7, 1957.

THE OTHER BIDDER, PUBLICKER, BY TELEGRAM OF AUGUST 21, 1957, PROTESTED THAT THE FREIGHT RATES USED IN DETERMINING THE LOW BIDDER WERE ERRONEOUS, AND THAT ON THE BASIS OF THE CORRECT RATES ITS BID F.O.B. GRETNA, LOUISIANA, WAS THE LOWEST. WE HAVE DETERMINED THAT THE CORRECT FREIGHT RATES WERE $0.06528 PER GALLON FROM PUBLICKER'S PLANT AND $0.10404 PER GALLON FROM SHELL'S PLANT. ASSUMING THESE LATTER FREIGHT RATES TO BE CORRECT AND APPLYING THEM, THE TOTAL COST TO THE GOVERNMENT PER GALLON ON AN F.O.B. PLANT BASIS WOULD BE $0.47878 FOR PUBLICKER AND $0.50004 FOR SHELL. IT IS APPARENT, THEREFORE, THAT THE EQUAL BIDS OF $0.47 PER GALLON SUBMITTED BY THE BIDDERS ON AN F.O.B. REDSTONE BASIS WERE LOW AND THAT THE AWARD ACTUALLY MADE WAS NOT MADE UPON THE BASIS OF THE LOWEST ACCEPTABLE BID.

IT IS PROVIDED AT 10 U.S.C. 2305 (B) THAT "AWARDS SHALL BE MADE * * * TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED.' WE HAVE HELD THAT THE QUOTED PROVISION REQUIRES THAT AWARD, IF ANY, BE MADE TO THE LOW BIDDER WITH CERTAIN EXCEPTIONS NOT APPLICABLE HERE. 28 COMP. GEN. 662, 664. AWARD OF A CONTRACT BY A GOVERNMENT AGENCY CONTRARY TO THE PROVISIONS OF STATUTE IS A NULLITY AND CONFERS NO RIGHTS ON THE CONTRACTOR AGAINST THE UNITED STATES. UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP CO., 239 U.S. 88, 92; CLARK V. UNITED STATES, 95 U.S. 539; G. G. LOEHLER V. UNITED STATES, 90 C.1CLS. 158; 36 COMP. GEN. 94; 34 COMP. GEN. 115; B-120632, SEPTEMBER 10, 1954; B-29602, OCTOBER 23, 1942. IN THE LAST DECISION CITED, WE STATED IN RELATION TO A STATUTORY PROVISION WHICH, LIKE THAT IN QUESTION, HAS BEEN CONSTRUED TO REQUIRE AWARD TO THE LOW BIDDER, THAT:

THE QUESTION AS TO WHETHER THE UNITED STATES SHOULD CANCEL A CONTRACT WHICH WAS AWARDED ERRONEOUSLY BECAUSE OF A MISTAKE OF FACT ORDINARILY ARISES UNDER CIRCUMSTANCES WHEREIN AWARD IS REQUIRED TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER AFTER ADVERTISING, PURSUANT TO THE PROVISIONS OF SECTION 3709, REVISED STATUTES, AND IT SUBSEQUENTLY IS DETERMINED THAT THE BID OF THE SUCCESSFUL CONTRACTOR WAS NOT THE LOWEST RESPONSIBLE BID RECEIVED. SINCE, IN SUCH A CASE, THERE HAS BEEN A FAILURE TO COMPLY WITH SECTION 3709, REVISED STATUTES, WHICH STATUTE HAS BEEN CONSTRUED BY THE COURTS TO BE MANDATORY IN NATURE, ADMINISTRATIVE OFFICERS USUALLY ARE REQUIRED TO CANCEL THE CONTRACT, PARTICULARLY IF SUCH MAY BE DONE WITHOUT JEOPARDIZING THE INTEREST OF THE UNITED STATES. SEE 17 COMP. GEN. 312 AND CASES CITED THEREIN. * * *

SINCE AWARD RESULTED FROM A MISTAKE OF FACT, WE THINK THAT THE RULE IS APPLICABLE TO THIS CASE AND THAT THE CONTRACT SHOULD BE CANCELED.

THE FOREGOING APPLIES TO AWARDS MADE DUE TO ERRORS OF EXISTING FACT WHERE THE CONTRACTING AGENCY MAY BE CHARGED WITH KNOWLEDGE OF THE TRUE STATE OF THE FACTS; IT DOES NOT APPLY TO AWARDS BASED UPON THE REASONABLE EXERCISE OF HONEST JUDGMENT, SUCH AS THE PROPER CLASSIFICATION FOR FREIGHT RATE PURPOSES OF A COMMODITY TO BE TRANSPORTED, EVEN THOUGH A LATER DETERMINATION OF A COURT OR OTHER AUTHORITATIVE TRIBUNAL WOULD REQUIRE A DIFFERENT CONCLUSION. SEE B 127917, JULY 17, 1956.

SINCE, AS PROPERLY EVALUATED, TIE LOW BIDS WERE SUBMITTED (F.O.B. REDSTONE BASIS), THE ORDINARY PROCEDURE WOULD HAVE REQUIRED THE AWARD TO BE MADE BY A DRAWING OF LOTS. 13 COMP. GEN. 233. AWARD BY LOT IN THE EVENT OF TIE LOW BIDS, HOWEVER, IS NOT REQUIRED BY LAW AND THE PROCEDURE NEED NOT BE APPLIED WHERE IT IS TO THE ADVANTAGE OF THE GOVERNMENT TO DO OTHERWISE. 34 COMP. GEN. 451, AND 15 COMP. GEN. 766. IN THIS CASE FROM AN ADMINISTRATIVE STANDPOINT, AT LEAST, IT IS APPARENT THAT IT WOULD BE ADVANTAGEOUS TO THE UNITED STATES TO RETAIN THE CONTRACTOR WITH WHOM THE PROCUREMENT HAS ALREADY BEEN UNDERTAKEN. THEREFORE, WE PERCEIVE NO OBJECTION TO MAKING A CONTRACT WITH SHELL AT $0.47 PER GALLON F.O.B. REDSTONE.

AS TO ANY DELIVERIES ALREADY MADE, IN ACCORDANCE WITH WHAT WE HAVE STATED ABOVE, NO CONTRACT EXISTS AND NO PAYMENT MAY BE MADE UNDER THE PURPORTED CONTRACTS ENTERED INTO ON AUGUST 7, 1957. AS TO ANY DELIVERIES MADE AND ACCEPTED, PAYMENT MAY BE MADE ON A QUANTUM MERUIT BASIS FOR THE REASONABLE VALUE THEREOF NOT TO EXCEED THE COST TO THE GOVERNMENT UNDER THE LOW ACCEPTABLE BID. SEE 21 COMP. GEN. 800.

SHOULD SHELL REFUSE TO ENTER INTO A CONTRACT ON THE $0.47 PER GALLON F.O.B. REDSTONE BASIS, THE CONTRACT MAY THEN BE AWARDED TO THE OTHER BIDDER, PUBLICKER, ON ITS EQUAL LOW BID IF SUCH ACTION IS AGREEABLE TO THAT BIDDER.