B-136808, AUG. 14, 1959

B-136808: Aug 14, 1959

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO LANGER AND SIMPSON: REFERENCE IS MADE TO YOUR LETTER OF JUNE 30. IT WAS CONSIDERED BY THE DEPARTMENT OF THE ARMY THAT THE DESCRIPTION FOR ITEM 5 WAS UNDULY RESTRICTIVE OF COMPETITION AND THAT THE CONTRACTING OFFICER IMPROPERLY MADE THE AWARD ON THAT ITEM. IT WAS INDICATED THAT THERE WOULD BE NO OBJECTION TO ACCEPTING THE DRYERS AND MAKING PAYMENT THEREFOR AT A PROPER REDUCTION IN PRICE LIMITED TO THE COST WHICH WOULD HAVE BEEN INCURRED IF THE LOW BID ON ITEM 5 HAD BEEN ACCEPTED. THERE WERE FORWARDED TO THE CONTRACTOR A COPY OF THE DECISION AND A CHECK FOR $21. ON WHICH IT WAS STATED "PAID IN ACCORDANCE WITH COMP. DECISION B 136808(COPY ATTACHED.)" THIS PAYMENT WAS $1. 152 LESS THAN THE TOTAL CONTRACT PRICE AND THE ADJUSTMENT WAS BASED UPON THE DIFFERENCE BETWEEN THE ABOVE INDICATED TOTAL BID PRICES OF $7.

B-136808, AUG. 14, 1959

TO LANGER AND SIMPSON:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 30, 1959, EXPRESSING DISAGREEMENT WITH THE CONCLUSION REACHED IN OUR DECISION TO YOU OF JUNE 23, 1959, RELATIVE TO AN ADJUSTMENT EFFECTED IN THE MATTER OF MAKING PAYMENT TO THE AMERICAN LAUNDRY MACHINERY COMPANY, SAN FRANCISCO, CALIFORNIA, UNDER ARMY CONTRACT NO. DA 04-351-AVI-1583, DATED JUNE 25, 1958, WHICH CONSISTED OF AWARDS TO THAT COMPANY ON ITEMS 1, 4 AND 5 OF INVITATION FOR BIDS NO. AVI 04-351-58-246, ISSUED MAY 23, 1958, BY THE PURCHASING AND CONTRACTING OFFICE AT FORT ORD, CALIFORNIA. THE COMPANY'S BIDS ON THE THREE ITEMS TOTALED THE SUM OF $22,433, INCLUDING A BID PRICE OF $8,264 FOR ITEM 5 WHICH REQUESTED QUOTATIONS FOR THE FURNISHING OF EIGHT DRYING TUMBLERS,"LAUNDRY, COMMERCIAL, AND DOOR LOADING, 110 LB. DRY WEIGHT CAPACITY, * * * CYLINDER DIMENSIONS 44 INCHES BY 42 INCHES, SINGLE MOTOR DRIVEN, NON REVERSIBLE TYPE, AC 208/230 VOLTS, 60 CYCLE, 3 PHASE, ZONE AIR OR EQUAL MFG. BY AMERICAN LAUNDRY MACHINERY CO.'

THE TROY LAUNDRY MACHINERY DIVISION OF AMERICAN MACHINE AND METALS, INC., EAST MOLINE, ILLINOIS, PROTESTED THE AWARD ON ITEM 5. THAT COMPANY HAD QUOTED A UNIT PRICE OF $889, OR A TOTAL PRICE OF $7,112, FOR ITEM 5, BASED UPON THE FURNISHING OF ITS LARGEST SIZE TROY "MINUTE MAN, JR., " OPEN-END TUMBLER, EQUIPPED WITH A 42 INCH BY 42 INCH CYLINDER AND HAVING A DRY- WEIGHT CAPACITY OF 100 POUNDS. IT WAS CONSIDERED BY THE DEPARTMENT OF THE ARMY THAT THE DESCRIPTION FOR ITEM 5 WAS UNDULY RESTRICTIVE OF COMPETITION AND THAT THE CONTRACTING OFFICER IMPROPERLY MADE THE AWARD ON THAT ITEM. WE CONCLUDED IN A DECISION OF OCTOBER 6, 1958, TO THE SECRETARY OF THE ARMY, THAT THE AWARD SHOULD BE CANCELED AND THAT THE MACHINES, WHICH HAD ALREADY BEEN DELIVERED, SHOULD BE RETURNED TO THE CONTRACTOR. HOWEVER, IN A SUBSEQUENT DECISION TO THE SECRETARY OF THE ARMY, DATED JANUARY 6, 1959, IT WAS INDICATED THAT THERE WOULD BE NO OBJECTION TO ACCEPTING THE DRYERS AND MAKING PAYMENT THEREFOR AT A PROPER REDUCTION IN PRICE LIMITED TO THE COST WHICH WOULD HAVE BEEN INCURRED IF THE LOW BID ON ITEM 5 HAD BEEN ACCEPTED, PROVIDED THAT THE CONTRACTOR WOULD AGREE TO ACCEPT SUCH PAYMENT IN FULL SETTLEMENT.

THE RECORD INDICATES THAT ON JANUARY 28, 1959, THERE WERE FORWARDED TO THE CONTRACTOR A COPY OF THE DECISION AND A CHECK FOR $21,281, ON WHICH IT WAS STATED "PAID IN ACCORDANCE WITH COMP. GEN. DECISION B 136808(COPY ATTACHED.)" THIS PAYMENT WAS $1,152 LESS THAN THE TOTAL CONTRACT PRICE AND THE ADJUSTMENT WAS BASED UPON THE DIFFERENCE BETWEEN THE ABOVE INDICATED TOTAL BID PRICES OF $7,112 AND $8,264 FOR ITEM 5 OF THE GOVERNMENT'S INVITATION FOR BIDS. THE CONTRACTOR NEGOTIATED THE CHECK BUT APPEARS TO HAVE CONSIDERED THAT THE SUM OF $1,152 WAS NEVERTHELESS IMPROPERLY WITHHELD FROM PAYMENT.

YOU HAVE PREVIOUSLY CONTENDED THAT THE ACCEPTANCE OF LESS THAN THE CONTRACT PRICE WAS NOT BINDING UPON THE CONTRACTOR BECAUSE THE GOVERNMENT'S SETTLEMENT OFFER WAS DISPROPORTIONATE TO THE AMOUNT IN DISPUTE; THAT THE CONTRACT IS VALID IN ALL RESPECTS; AND THAT OUR STATEMENT IN THE DECISION OF JANUARY 6, 1959, TO THE SECRETARY OF THE ARMY, THAT THE ACTION TAKEN BY THE CONTRACTING OFFICER DID NOT APPEAR TO HAVE BEEN AN ATTEMPT TO RESTRICT THE AWARD TO A PREFERRED SOURCE BUT "RESULTED FROM HIS FAILURE TO RECEIVE THE RECOMMENDATIONS MADE BY HIGHER AUTHORITY" IS INCONSISTENT WITH THE IMPOSITION OF A PENALTY AGAINST THE CONTRACTOR.

IN OUR DECISION TO YOU OF JUNE 23, 1959, IT WAS EXPLAINED THAT THE GOVERNMENT DID NOT CONCEDE THAT THE CONTRACT WAS VALID AND IT WAS IMPLIED THAT, HAVING ACCEPTED THE LOW BID PRICE OF $7,112 FOR THE DRYERS, THE CONTRACTOR WAS NOT IN A POSITION TO CLAIM ADDITIONAL PAYMENT UNDER THE CONTRACT. IT IS TRUE THAT THE OFFER OF SETTLEMENT INCLUDED ALL CONTRACT ITEMS BUT WE FEEL CERTAIN THAT, IF THE CONTRACTOR HAD NOT ELECTED TO NEGOTIATE THE CHECK ISSUED BY THE GOVERNMENT AS COMPLETE PAYMENT UNDER THE CONTRACT, ARRANGEMENTS WOULD HAVE BEEN PROMPTLY MADE FOR PAYMENT ON ITEMS NOT IN DISPUTE. WE DO NOT AGREE WITH YOUR SUGGESTION THAT THE GOVERNMENT SOUGHT TO TAKE ADVANTAGE OF THE CONTRACTOR WHEN IT OFFERED PAYMENT OF THE SUM OF $21,281 AS FULL SETTLEMENT FOR THE DELIVERIES MADE UNDER THE CONTRACT.

YOU QUESTION THE ACCURACY OF OUR STATEMENT THAT THE CONTRACTOR WAS NOT THE LOWEST RESPONSIBLE AND RESPONSIVE BIDDER ON ITEM 5 OF THE INVITATION FOR BIDS. ALSO, YOU ALLEGE THAT THE DRYERS FURNISHED BY THE CONTRACTOR WERE NOT STANDARD ITEMS OF COMMERCIAL LAUNDRY EQUIPMENT AND CONTEND THAT ANY CONTRACTOR COULD HAVE BID AND MANUFACTURED A SIMILAR ARTICLE IF IT HAD ELECTED TO DO SO. FURTHER, YOU INVITE ATTENTION TO THE FACT THAT OUR DECISION TO YOU MADE NO REFERENCE TO WHAT EFFECT, IF ANY, THE CONTRACTOR'S FAILURE TO RECEIVE RECOMMENDATIONS FROM HIGHER AUTHORITY WOULD HAVE ON THE CONTRACTOR.

WE AGREE THAT THE LOW BID COULD NOT HAVE BEEN CONSIDERED AS RESPONSIVE TO THE INVITATION, SINCE THE LOW BIDDER DID NOT OFFER EQUIPMENT WHICH WOULD EQUAL OR EXCEED THE SPECIFIED SIZE AND CAPACITY. ALSO, SINCE THE RECORD FAILS TO SHOW THAT ANY REQUEST WAS MADE FOR INSTRUCTIONS AS TO THE METHOD OF ADVERTISING TO BE EMPLOYED, WE AGREE THAT THE CONTRACTING OFFICER'S FAILURE TO RECEIVE THE RECOMMENDATIONS OF HIGHER AUTHORITY CONCERNING THE MANNER IN WHICH THE EIGHT DRYERS SHOULD BE DESCRIBED IN THE INVITATION SHOULD HAVE NO EFFECT ON THE CONTRACTOR.

HOWEVER, THERE APPEARS TO BE NO SUBSTANTIAL BASIS FOR YOUR ALLEGATION THAT THE DRYERS WHICH WERE DELIVERED WERE NOT STANDARD ITEMS OF COMMERCIAL LAUNDRY EQUIPMENT MANUFACTURED BY THE AMERICAN LAUNDRY MACHINERY COMPANY. THE BID SPECIFICATIONS FOR ITEM 5 APPEAR TO HAVE BEEN PREPARED ON THE BASIS OF ACQUIRING THE AMERICAN 44 BY 42 INCH "ZONE-AIR" LAUNDRY DRYING TUMBLER AS DESCRIBED IN LITERATURE ISSUED BY THE COMPANY IN MAY 1956, OR A MACHINE WHICH COULD HAVE BEEN CONSIDERED THE EQUAL OF THAT EQUIPMENT. THERE WAS SUBSEQUENTLY ADDED THE REQUIREMENT THAT THE MACHINES BE IN ACCORDANCE WITH FEDERAL SPECIFICATION OO-L-131D, DATED JANUARY 20, 1955, AND IT IS NOTED THAT THE AMERICAN LAUNDRY MACHINERY COMPANY INCREASED ITS ORIGINAL UNIT PRICE BY $50 ON ACCOUNT OF SUCH CHANGE, BUT IT IS APPARENT THAT THE MODIFICATIONS THAT WERE MADE IN THE STANDARD EQUIPMENT WERE NOT OF A LARGE EXTENT. OF COURSE, ANY COMPETITOR MIGHT HAVE MANUFACTURED A SIMILAR ITEM BUT IT IS OBVIOUS THAT THE BID SPECIFICATIONS TENDED TO RESTRICT COMPETITION AND THAT THE CONTRACTOR WAS IN A BETTER POSITION TO PRODUCE A 44 BY 42 INCH DRYER THAN A COMPETITOR WHOSE LARGEST STANDARD SIZE WAS 42 BY 42 INCHES.

THE FEDERAL ADVERTISING STATUTES CONSISTENTLY HAVE BEEN HELD TO REQUIRE THAT EVERY EFFORT SHOULD BE MADE BY THE PROCUREMENT AGENCIES OF THE GOVERNMENT TO STATE ADVERTISED SPECIFICATIONS IN TERMS THAT WILL PERMIT THE BROADEST FIELD OF COMPETITION WITHIN THE MINIMUM NEEDS OF THE GOVERNMENT, NOT THE MAXIMUM DESIRED. IN SOME CASES IT MIGHT BE DIFFICULT TO DETERMINE THE GOVERNMENT'S MINIMUM REQUIREMENTS BUT IT HAS BEEN REPORTED IN THE PRESENT CASE THAT THE CONTRACTING OFFICER DISREGARDED OR WAS UNAWARE OF AN ARMY REGULATION WHICH RESTRICTS THE USE OF ADVERTISEMENTS REQUESTING BIDS ON THE BASIS OF FURNISHING PROPRIETARY PRODUCTS, OR EQUAL, AND WHICH SPECIFICALLY MAKES MANDATORY THE USE OF APPLICABLE CURRENT FEDERAL SPECIFICATIONS WHEN REQUESTING BIDS ON ITEMS PROPOSED TO BE PURCHASED.

THE DEPARTMENT OF THE ARMY INDICATED THAT FEDERAL SPECIFICATION 00 L- 131E, DATED OCTOBER 8, 1957, SHOULD HAVE BEEN USED IN SPECIFYING THE TYPE OF DRYER REQUIRED IN THE INSTANT PROCUREMENT AND IT WAS ASCERTAINED THAT THIS SPECIFICATION LISTS FOUR SIZES OF END-DOOR LOADING TUMBLERS, ONE OF WHICH CALLS FOR APPROXIMATE DIAMETER AND LENGTH OF CYLINDER INTERIOR OF 42 BY 42 INCHES (PLUS OR MINUS 2 INCHES) AND A MINIMUM DRY-WEIGHT CAPACITY OF 100 POUNDS. WE BELIEVE THAT THERE IS A SUFFICIENT BASIS FOR CONCLUDING THAT THE CONTRACTING OFFICER EXCEEDED HIS AUTHORITY IN THE MATTER AND THAT THE AWARD MADE ON ITEM 5 OF THE INVITATION WAS, THEREFORE, NOT BINDING ON THE GOVERNMENT.

IN THE CIRCUMSTANCES, IT IS OUR OPINION THAT THE GOVERNMENT WAS NOT REQUIRED TO PAY THE CONTRACT PRICE FOR THE DRYERS BUT REASONABLY COULD HAVE OFFERED PAYMENT ON A QUANTUM VALEBANT BASIS, LIMITED TO THE AMOUNT OF THE LOW BID WHICH WOULD IN ALL PROBABILITY HAVE BEEN ACCEPTED IF THE DESCRIPTION FOR ITEM 5 HAD BEEN IN ACCORDANCE WITH THE APPLICABLE PORTIONS OF FEDERAL SPECIFICATION NO. 00-L-131E.