B-135865, MAY 14, 1958, 37 COMP. GEN. 760

B-135865: May 14, 1958

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THE READVERTISEMENT OF THE PROCUREMENT UNDER AN INVITATION WHICH SPECIFICALLY AUTHORIZED BIDDERS TO REQUEST PROGRESS PAYMENTS AND WHICH RESULTED IN INCREASING COMPETITION MAY BE CONSIDERED A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY UNDER 10 U.S.C. 2305 (B) WHICH PERMITS REJECTION IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST. 1958: REFERENCE IS MADE TO YOUR TELEGRAMS OF APRIL 16 AND APRIL 28. THE INVITATION WAS ISSUED ON NOVEMBER 20. BIDS WERE OPENED ON DECEMBER 27. HAD INCLUDED WITH ITS BID A LETTER SPECIFICALLY MADE A PART THEREOF IN WHICH IT WAS TATED: WE THEREFORE REQUEST PROGRESS PAYMENTS OF COST INCURRED TYPE ON THIS PROCUREMENT. THE SPEN BID WAS CONSIDERED NONRESPONSIVE.

B-135865, MAY 14, 1958, 37 COMP. GEN. 760

BIDS - DISCARDING ALL BIDS - PROGRESS PAYMENT EXCLUSION THE REJECTION OF ALL BIDS, THREE OF WHICH CONTAINED REQUESTS FOR PROGRESS PAYMENTS, AND THE READVERTISEMENT OF THE PROCUREMENT UNDER AN INVITATION WHICH SPECIFICALLY AUTHORIZED BIDDERS TO REQUEST PROGRESS PAYMENTS AND WHICH RESULTED IN INCREASING COMPETITION MAY BE CONSIDERED A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY UNDER 10 U.S.C. 2305 (B) WHICH PERMITS REJECTION IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST.

TO BEIGEL AND MAHRT, MAY 14, 1958:

REFERENCE IS MADE TO YOUR TELEGRAMS OF APRIL 16 AND APRIL 28, 1958, AND LETTERS OF APRIL 17 AND APRIL 28, 1958, WITH ENCLOSURE, PROTESTING THE CANCELLATION BY THE DEPARTMENT OF THE AIR FORCE OF INVITATION FOR BIDS NO. 14-604-58-393, PURSUANT TO WHICH YOUR CLIENT, HENRY SPEN AND CO., SUBMITTED THE LOW BID.

THE INVITATION WAS ISSUED ON NOVEMBER 20, 1957, BY THE TOPEKA AIR FORCE DEPOT FOR THE PROCUREMENT OF "SPRAY OUTFITS.' BIDS WERE OPENED ON DECEMBER 27, 1957. THE LOW BIDDER, THE SPEN COMPANY, HAD INCLUDED WITH ITS BID A LETTER SPECIFICALLY MADE A PART THEREOF IN WHICH IT WAS TATED:

WE THEREFORE REQUEST PROGRESS PAYMENTS OF COST INCURRED TYPE ON THIS PROCUREMENT.

SINCE THE INVITATION CONTAINED NO PROVISION WITH REGARD TO PROGRESS PAYMENTS, THE SPEN BID WAS CONSIDERED NONRESPONSIVE. SUBSEQUENTLY, IT WAS DETERMINED BY THE DEPARTMENT OF THE AIR FORCE TO REJECT ALL BIDS, WITHDRAW THE INVITATION AND TO READVERTISE THE PROCUREMENT UNDER A NEW INVITATION FOR BIDS, NO. 14-604-58-789, ISSUED MARCH 31, 1958. BIDS WERE OPENED ON APRIL 15, 1958, AND AWARD WAS MADE TO THE GREER HYDRAULIC AND ENGINEERING COMPANY, THE LOW BIDDER.

IN A BRIEF ENCLOSED WITH THE LETTER OF APRIL 28, YOU CONTEND, ON BEHALF OF THE SPEN COMPANY, THAT THE REQUEST FOR PROGRESS PAYMENTS APPENDED TO THE BID DID NOT CONSTITUTE A MATERIAL QUALIFICATION WHICH WOULD REQUIRE OR PERMIT ITS REJECTION BECAUSE (1) INSTANCES OF SIMILAR LANGUAGE EMPLOYED WITH REGARD TO OTHER INVITATIONS NOT PROVIDING FOR PROGRESS PAYMENTS HAVE BEEN CONSIDERED MINOR IRREGULARITIES ONLY AND HAVE BEEN WAIVED BY THE CONTRACTING OFFICERS CONCERNED; (2) THE STATEMENT IN THE SPEN BID IS A MERE PRECATORY EXPRESSION WHICH SHOULD NOT BE REGARDED AS CONDITIONING THE BID; (3) THE REQUEST FOR PROGRESS PAYMENTS DID NOT GO TO THE PRICE, QUANTITY OR QUALITY OF THE CONTRACT AND THEREFORE COULD BE WAIVED BY THE AIR FORCE.

THE ARGUMENTS PRESENTED IN THE BRIEF PRESUPPOSE THE ISSUE TO BE WHETHER, BECAUSE OF THE PROGRESS PAYMENT REQUEST, THE SPEN COMPANY BID COULD HAVE BEEN REJECTED AND THE AWARD MADE TO ANOTHER BIDDER UNDER THE SAME INVITATION. HOWEVER, SINCE THE INVITATION WAS CANCELED, WHICH IN EFFECT MEANS THAT ALL BIDS WERE REJECTED, IT APPEARS THAT THE REAL ISSUE FOR RESOLUTION IS WHETHER, UNDER THE FACTS AND CIRCUMSTANCES, THE DEPARTMENT OF THE AIR FORCE HAD THE AUTHORITY TO WITHDRAW THE INVITATION AND READVERTISE THE PROCUREMENT.

TITLE 10 OF THE U.S.C. PROVIDES AT SECTION 2305 (B) THAT "ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST.' FURTHER, IT HAS CONSISTENTLY BEEN HELD THAT AN INVITATION FOR BIDS DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED AND ALL BIDS MAY BE REJECTED WHERE IT IS DETERMINED TO BE IN THE PUBLIC INTEREST TO DO SO. SEE O-BRIEN V. CARNEY, 6 F.1SUPP. 761; SCOTT V. UNITED STATES, 44 C.1CLS. 524; COLORADO PAVING COMPANY V. MURPHY, 78 F. 28. NOTWITHSTANDING THIS BROAD AUTHORITY, IT HAS BEEN RECOGNIZED THAT THE REJECTION OF ALL BIDS WITHOUT ABANDONMENT OF THE PROCUREMENT TENDS TO DISCOURAGE COMPETITION AND SINCE THIS RESULT IS CONTRARY TO ONE OF THE CHIEF PURPOSES FOR WHICH THE STATUTES GOVERNING PUBLIC PROCUREMENT WERE ENACTED--- OBTAINING FOR THE GOVERNMENT THE BENEFITS FLOWING FROM FREE AND UNRESTRICTED COMPETITION- - WE HAVE HELD THAT 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. 37 COMP. GEN. 12 AND 34 COMP. GEN. 535.

THE ONLY PROVISION WITH REGARD TO PAYMENTS CONTAINED IN THE INITIAL INVITATION IS FOUND IN SECTION 7 OF THE GENERAL PROVISIONS WHICH STATES:

THE CONTRACTOR SHALL BE PAID, UPON THE SUBMISSION OF PROPERLY CERTIFIED INVOICES OR VOUCHERS, THE PRICES STIPULATED HEREIN FOR SUPPLIES DELIVERED AND ACCEPTED OR SERVICES RENDERED AND ACCEPTED, LESS DEDUCTIONS IF ANY, AS HEREIN PROVIDED. UNLESS OTHERWISE SPECIFIED, PAYMENT WILL BE MADE ON PARTIAL DELIVERIES ACCEPTED BY THE GOVERNMENT WHEN THE AMOUNT DUE ON SUCH DELIVERIES SO WARRANTS; OR, WHEN REQUESTED BY THE CONTRACTOR, PAYMENT FOR ACCEPTED PARTIAL DELIVERIES SHALL BE MADE WHENEVER SUCH PAYMENT WOULD EQUAL OR EXCEED EITHER $1,000 OR 50 PERCENT OF THE TOTAL AMOUNT OF THIS CONTRACT.

THE QUOTED PROVISION DOES NOT PROVIDE FOR PROGRESS PAYMENTS.

DEPARTMENT OF DEFENSE DIRECTIVE NO. 7800.4, NOVEMBER 16, 1956, PROVIDES:

III C. REQUESTS FOR PROPOSALS AND INVITATIONS FOR BIDS SHALL SPECIFY THAT THE NEED FOR ADVANCE OR PROGRESS PAYMENTS CONFORMING TO REGULATIONS WILL NOT BE CONSIDERED A HANDICAP OR ADVERSE FACTOR IN THE AWARD OF CONTRACTS *

III D. WHENEVER, INCIDENT TO FORMAL ADVERTISING, THE CONTRACTING OFFICER CONSIDERS (1) THAT THE PERIOD BETWEEN THE BEGINNING OF WORK AND THE REQUIRED FIRST PRODUCTION DELIVERY WILL EXCEED SIX MONTHS, OR (2) THAT PROGRESS PAYMENTS WILL BE USEFUL OR NECESSARY BY REASON OF UNUSUAL CIRCUMSTANCES THAT WILL INVOLVE SUBSTANTIAL ACCUMULATION OF PREDELIVERY COSTS THAT MAY HAVE A MATERIAL IMPACT ON A CONTRACTOR'S WORKING FUNDS (INCLUDING BUT NOT LIMITED TO SUBSTANTIAL SMALL BUSINESS SET-ASIDES EXPECTED TO INVOLVE A RELATIVELY LARGE PREDELIVERY ACCUMULATION OF MATERIALS, PURCHASED PARTS OR COMPONENTS) THE INVITATIONS FOR BIDS SHALL STATE THAT UPON WRITTEN REQUEST BY THE PROSPECTIVE CONTRACTOR A PROGRESS PAYMENT CLAUSE TO BE INCLUDED IN THE INVITATIONS FOR BIDS OR IDENTIFIED BY APPROPRIATE REFERENCE THEREIN, * * * WILL BE INCLUDED IN THE CONTRACT AT THE TIME OF AWARD. THESE INVITATIONS FOR BIDS PROVIDING FOR PROGRESS PAYMENTS WILL BE EVALUATED ON AN EQUAL BASIS WITH THOSE NOT INCLUDING REQUESTS FOR PROGRESS PAYMENTS. ( ITALICS SUPPLIED.)

SUBSTANTIALLY SIMILAR LANGUAGE IS CONTAINED IN AFR. 173-133.

IT IS APPARENT FROM THE FOREGOING QUOTATION THAT PROGRESS PAYMENTS ARE TO BE PROVIDED FOR IN A CONTRACT AWARDED PURSUANT TO FORMAL ADVERTISING WHEN CERTAIN DETERMINATIONS ARE MADE BY THE CONTRACTING OFFICER AND IN SUCH CASES THE INVITATION SHALL SPECIFY THAT PROGRESS PAYMENTS MAY BE OBTAINED BY THE SUCCESSFUL BIDDER AND REQUESTED BY ANY BIDDER WITHOUT AFFECTING THE EVALUATION OF HIS BID.

OF THE TEN BIDS RECEIVED IN RESPONSE TO THE FIRST INVITATION, THREE, INCLUDING THAT OF THE SPEN COMPANY, CONTAINED A REQUEST FOR PROGRESS PAYMENTS. IN VIEW OF THIS, IT IS REASONABLE TO ASSUME THAT HAD PROVISION FOR PROGRESS PAYMENTS BEEN INCLUDED IN THE INVITATION FOR BIDS PURSUANT TO DEPARTMENT OF DEFENSE DIRECTIVE NO. 7800.4, MORE BIDS MIGHT HAVE BEEN RECEIVED AND THE POSSIBILITY OF AVOIDING ANY NECESSITY FOR BORROWING WORKING FUNDS COULD HAVE ENCOURAGED THE SUBMISSION OF LOWER PRICES. INDEED, THE RELATIVELY SMALL AMOUNT OF THE LOW BID RECEIVED PURSUANT TO THE SECOND INVITATION WOULD TEND TO ESTABLISH THE ACCURACY OF THE LATTER STATEMENT. SINCE THE WITHDRAWAL OF THE FIRST INVITATION AND THE READVERTISEMENT OF THE PROCUREMENT UNDER AN INVITATION SPECIFICALLY AUTHORIZING BIDDERS TO REQUEST PROGRESS PAYMENTS APPEAR TO HAVE BEEN A MEANS OF INCREASING COMPETITION WE CANNOT SAY THAT SUCH ACTION WAS NOT A PROPER EXERCISE OF AUTHORITY UNDER 10 U.S.C. 2305 (B). SEE B-132730, AUGUST 14, 1957.

YOUR CONTENTION THAT OTHER REQUESTS FOR PROGRESS PAYMENTS HAVE NOT RESULTED IN THE REJECTION OF BIDS SUBMITTED PURSUANT TO INVITATIONS WHICH DID NOT CONTAIN ANY PROVISION WITH REGARD TO SUCH PAYMENTS NEED NOT BE CONSIDERED AT THIS TIME SINCE, EVEN ASSUMING THAT THE FACTUAL SITUATIONS ARE ANALOGOUS, THEY APPEAR TO CONCERN NOT THE AUTHORITY TO REJECT AND READVERTISE, BUT WHETHER UNDER THE CIRCUMSTANCES SUCH BIDS MAY BE CONSIDERED FOR AWARD, A MATTER NOT HERE AT ISSUE.

IN ACCORDANCE WITH THE FOREGOING, WE PERCEIVE NO LEGAL OBJECTION TO THE ACTION TAKEN BY THE DEPARTMENT OF THE AIR FORCE.