B-137199, NOVEMBER 26, 1958, 38 COMP. GEN. 394

B-137199: Nov 26, 1958

Additional Materials:

Contact:

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

 

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

PRELIMINARY INSPECTION IS AT POINT OF ORIGIN BUT DELIVERY. ACCEPTANCE ARE AT MULTIPLE DESTINATIONS. " AN INSPECTION AT DESTINATION IS NECESSARILY CONTEMPLATED AND THE TERMS . PRELIMINARY" AND "FINAL" IN THE DISCOUNT EVALUATION PROVISION ARE REQUIRED TO BE INTERPRETED AS RELATING TO POINTS OF TIME RATHER THAN TO THE RELATIVE IMPORTANCE OF THE INSPECTIONS. ACCEPTANCE AT MULTIPLE POINTS IS APPLICATION UNDER THE DELIVERY PROVISION OF THE INVITATION. 37 COMP. 1958: WE HAVE LETTERS OF SEPTEMBER 8 AND 16. WERE AS FOLLOWS: CHART BIDDER UNIT PRICE TOTAL DISCOUNT AMOUNT L. W. FOSTER IS $557. THE NET PRICE OFFERED BY PLAIKENS IS $586. W. FOSTER COMPANY WAS ADVISED THAT THE DISCOUNT OFFERED BY THAT FIRM COULD NOT BE CONSIDERED IN THE EVALUATION OF ITS BID UNDER THE TERMS OF THE INVITATION.

B-137199, NOVEMBER 26, 1958, 38 COMP. GEN. 394

BIDS - EVALUATION - DISCOUNT PROVISIONS - DELIVERY TERM VARIANCE UNDER AN INVITATION WHICH PROVIDES FOR INSPECTION AT CONTRACTOR'S PLANT AND ACCEPTANCE AT MULTIPLE DESTINATIONS AND WHICH PRESCRIBES A MINIMUM OF 30 DAYS FOR PROMPT PAYMENT DISCOUNTS WHEN ,PRELIMINARY INSPECTION IS AT POINT OF ORIGIN BUT DELIVERY, FINAL INSPECTION, AND ACCEPTANCE ARE AT MULTIPLE DESTINATIONS," AN INSPECTION AT DESTINATION IS NECESSARILY CONTEMPLATED AND THE TERMS ,PRELIMINARY" AND "FINAL" IN THE DISCOUNT EVALUATION PROVISION ARE REQUIRED TO BE INTERPRETED AS RELATING TO POINTS OF TIME RATHER THAN TO THE RELATIVE IMPORTANCE OF THE INSPECTIONS; THEREFORE, THE 30-DAY MINIMUM DISCOUNT PRESCRIBED FOR PRELIMINARY INSPECTION AT ORIGIN, AND DELIVERY, FINAL INSPECTION, AND ACCEPTANCE AT MULTIPLE POINTS IS APPLICATION UNDER THE DELIVERY PROVISION OF THE INVITATION. 37 COMP. GEN. 711, OVERRULED.

TO THE SECRETARY OF THE NAVY, NOVEMBER 26, 1958:

WE HAVE LETTERS OF SEPTEMBER 8 AND 16, 1958, REFERENCE R11.2, L4-1, L4/NT4-12 AND A LETTER OF SEPTEMBER 11, 1958, REFERENCE R11.1, L4-1/7, L4/NT12 SIGNED BY THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, CONCERNING A PROTEST BY THE L. W. FOSTER SPORTSWEAR COMPANY, INC., AGAINST THE PROPOSED REJECTION OF ITS BID SUBMITTED PURSUANT TO INVITATION NO. JD-383-990-58.

THE INVITATION ISSUED JUNE 5, 1958, COVERS THE PROCUREMENT OF CERTAIN ITEMS OF PROTECTIVE CLOTHING WITH DELIVERY TO BE MADE F.O.B. MULTIPLE DESTINATIONS. THE BIDS OPENED ON JUNE 25, 1958, WERE AS FOLLOWS:

CHART

BIDDER UNIT PRICE TOTAL DISCOUNT

AMOUNT L. W. FOSTER SPORTSWEAR CO. ( ALL OR NONE/ -- $55.50 EA. $619,935.00 10 PERCENT/20 DAYS. RUBBER FABRICATORS, INC. ( ALL OR NONE/-- ------ 55.42 EA. 619,041.40 1/10 PERCENT/20 DAYS. PLAIKENS, INC. ( ALL OR NONE/--------------- 56.48 EA. 630,881.60 7 PERCENT/30 DAYS. SARMOUNT, INC.-------- 54.18 EA. 605,190.60 1/20 PERCENT/10 DAYS.

THE NET PRICE OFFERED BY L. W. FOSTER IS $557,941.50; THE NET PRICE OFFERED BY PLAIKENS IS $586,719.89.

AFTER OPENING AND PRIOR TO AWARD, A REPRESENTATIVE OF THE L. W. FOSTER COMPANY WAS ADVISED THAT THE DISCOUNT OFFERED BY THAT FIRM COULD NOT BE CONSIDERED IN THE EVALUATION OF ITS BID UNDER THE TERMS OF THE INVITATION, WHEREUPON IT WAS ALLEGED THAT AN ERROR HAD BEEN MADE IN THE FIRM'S BID AND THAT THE DISCOUNT OFFERED SHOULD HAVE BEEN BASED ON A 30 DAY PERIOD. ADDITION, IT WAS AVERRED BY THE L. W. FOSTER COMPANY THAT EVEN ASSUMING THAT ITS BID CANNOT NOW BE AMENDED TO PROVIDE FOR A 30-DAY PROMPT PAYMENT DISCOUNT PERIOD, THE DISCOUNT PERIOD ORIGINALLY OFFERED, I.E., 20 DAYS, IS SUFFICIENT TO PERMIT EVALUATION OF THE OFFERED DISCOUNT IN DETERMINING THE LOW BIDDER.

WITH RESPECT TO THE ALLEGATION OF ERROR, THE BRIEF SUBMITTED BY THE L. W. FOSTER COMPANY CLEARLY INDICATES THAT THE FIRM HAD CONSISTENTLY, OVER A PERIOD OF TIME, OFFERED DISCOUNTS FOR PAYMENT WITHIN 20 DAYS AND THAT IT WAS SIMPLY FOLLOWING ITS REGULAR PRACTICE IN OFFERING A 20-DAY PERIOD IN RESPONSE TO THE SUBJECT INVITATION. IT IS DEMONSTRATED THAT THE CLEAR INTENTION OF THE L. W. FOSTER COMPANY WAS TO INCLUDE A PROMPT PAYMENT DISCOUNT OFFER WHICH WOULD BE CONSIDERED IN DETERMINING THE LOW BID. IF, THEN, THE DISCOUNT PERIOD OFFERED IS TOO SHORT TO WARRANT A CONSIDERATION OF THE DISCOUNT IN EVALUATING THE BID, IT IS ARGUED THAT THIS IS CONTRARY TO THE INTENT OF THE BIDDER AND AMOUNTS TO A MISTAKE IN BID.

MISTAKES IN BID WHICH OUR OFFICE HAS PERMITTED TO BE CORRECTED ARE THOSE WHICH HAVE RESULTED FROM AN INADVERTENCE, AS WHERE IT WAS INTENDED TO PUT A FIGURE IN ONE COLUMN BUT BY MISTAKE THAT FIGURE WAS PLACED IN ANOTHER COLUMN, OR WHERE IT WAS INTENDED TO PLACE A DECIMAL POINT IN ONE LOCATION AND BY INADVERTENCE THE DECIMAL POINT WAS PLACED IN ANOTHER LOCATION. THIS CASE, IT APPEARS CLEAR THAT THE DISCOUNT OFFERED WAS EXACTLY WHAT THE BIDDER INTENDED TO OFFER, I.E., 10 PERCENT DISCOUNT FOR PAYMENT WITHIN 20 DAYS. THE FACT THAT SUCH AN OFFER DID NOT HAVE THE DESIRED EFFECT WOULD NOT PLACE IT WITHIN THE CATEGORY OF ERRORS WHICH MAY BE CORRECTED. SEE B- 124297, JULY 11, 1955.

WITH REGARD TO WHETHER THE 20-DAY PERIOD SHOULD BE CONSIDERED ADEQUATE TO PERMIT EVALUATION OF THE DISCOUNT IN DETERMINING THE LOW BIDDER, THERE ARE FOR CONSIDERATION CERTAIN PROVISIONS OF THE INVITATION FOR BID. PARAGRAPH 7 OF THE TERMS AND CONDITIONS PROVIDES, IN PERTINENT PART, AS OLLOWS:

(A) PROMPT-PAYMENT DISCOUNTS WILL BE INCLUDED IN THE EVALUATION OF BIDS, PROVIDED THE PERIOD OF THE OFFERED DISCOUNT IS SUFFICIENT TO PERMIT PAYMENT WITHIN SUCH PERIOD IN THE REGULAR COURSE OF BUSINESS UNDER THE DELIVERY, INSPECTION, AND PAYMENT PROVISIONS OF THE INVITATION AND BID.

BY THE TERMS OF PARAGRAPH 31 OF THE ADDITIONAL GENERAL PROVISIONS, THE ABOVE-QUOTED PARAGRAPH IS AMENDED BY THE ADDITION OF THE FOLLOWING:

(C) PROMPT PAYMENT DISCOUNTS WILL BE CONSIDERED IN THE EVALUATION OF BIDS, PROVIDED THE MINIMUM PERIOD OF THE OFFERED DISCOUNT IS 10 DAYS WHEN DELIVERY AND ACCEPTANCE ARE AT POINT OF ORIGIN; 20 DAYS WHEN PRELIMINARY INSPECTION IS AT POINT OF ORIGIN BUT DELIVERY, FINAL INSPECTION AND ACCEPTANCE ARE AT A SINGLE POINT OF DESTINATION; AND 30 DAYS WHEN PRELIMINARY INSPECTION IS AT POINT OF ORIGIN BUT DELIVERY, FINAL INSPECTION AND ACCEPTANCE ARE AT MULTIPLE POINTS OF DESTINATION, OR WHEN COMPLETE INSPECTION, DELIVERY AND ACCEPTANCE ARE AT ONE OR MORE POINTS OF DESTINATION. THE OFFERED DISCOUNT OF A SUCCESSFUL BIDDER WILL FORM A PART OF THE AWARD, WHETHER OR NOT SUCH DISCOUNT WAS CONSIDERED IN THE EVALUATION OF HIS BID, AND SUCH DISCOUNT WILL BE TAKEN IF PAYMENT IS MADE WITHIN THE DISCOUNT PERIOD.

ITEM NO. 105-1.2 ENTITLED " INSPECTION AND ACCEPTANCE" WHICH APPEARS AT PAGE NO. 14 OF THE SCHEDULE PROVIDES:

INSPECTION OF THE PROPERTIES OR SERVICES TO BE FURNISHED HEREUNDER SHALL BE MADE BY REPRESENTATIVES OF THE MATERIAL INSPECTION SERVICE, USN, AT THE CONTRACTOR'S PLANT. ACCEPTANCE OF SUCH SUPPLIES OR PROPERTIES SHALL BE MADE AT DESTINATION BY THE RECEIVING ACTIVITY.

IT SHOULD BE NOTED THAT SUBPARAGRAPH 7 (C) OF THE TERMS AND CONDITIONS, AS AMENDED, REQUIRES THAT PROMPT PAYMENT DISCOUNTS, IN ORDER TO BE CONSIDERED IN THE EVALUATION OF BIDS, MUST OFFER A MINIMUM PERIOD OF 30 DAYS "WHEN PRELIMINARY INSPECTION IS AT POINT OF ORIGIN BUT DELIVERY, FINAL INSPECTION AND ACCEPTANCE ARE AT MULTIPLE POINTS" OR IN THE ALTERNATE "WHEN COMPLETE INSPECTION, DELIVERY AND ACCEPTANCE ARE AT ONE OR MORE POINTS OF DESTINATION.' IT IS CLEAR THAT UNDER ITEM NO. 105-1.2 DELIVERY AND ACCEPTANCE ARE AT MULTIPLE POINTS OF DESTINATION. THE APPLICABILITY OF PARAGRAPH 7 (C) THEREFORE DEPENDS UPON WHETHER PRELIMINARY INSPECTION IS TO BE AT ORIGIN AND FINAL INSPECTION IS TO BE MADE AT MULTIPLE DESTINATIONS. ITEM NO. 105-1.2 PROVIDES FOR INSPECTION AT ORIGIN (CONTRACTOR'S PLANT) BUT DOES NOT DESCRIBE SUCH INSPECTION EITHER AS PRELIMINARY OR FINAL AND NO OTHER INSPECTION IS PROVIDED FOR IN THE ITEM. PARAGRAPH 5 (A) OF THE GENERAL PROVISIONS STATES, IN PERTINENT PART,"ALL SUPPLIES * * * SHALL BE SUBJECT TO INSPECTION AND TEST BY THE GOVERNMENT, TO THE EXTENT PRACTICABLE AT ALL TIMES AND PLACES INCLUDING THE PERIOD OF MANUFACTURE, AND IN ANY EVENT PRIOR TO ACCEPTANCE.'

WE THINK THERE CAN BE LITTLE DOUBT THAT AN INSPECTION AT DESTINATION, AT LEAST AS TO QUANTITY RECEIVED IN PROPER CONDITION, IS PERMITTED UNDER PARAGRAPH 5 (A) AND FURTHER THAT SUCH INSPECTION WAS INTENDED BY THE DEPARTMENT AND MUST BE CONTEMPLATED BY ANY POSSIBLE CONTRACTOR. THE QUESTION THEN ARISES AS TO WHETHER THIS AMOUNTS TO A FINAL INSPECTION AND WHETHER THE INSPECTION SPECIFIED IN ITEM NO. 105 1.2 CAN PROPERLY BE CONSIDERED A PRELIMINARY INSPECTION.

IT APPEARS CLEAR THAT THE FIRST INSPECTION IS INTENDED TO BE THE MORE IMPORTANT AND COMPLETE. ,PRELIMINARY" MAY MEAN PREPARATORY IN THE SENSE OF A PRECEDENT ACTION LEADING TO SOMETHING MORE SIGNIFICANT, OR IT MAY DENOTE SIMPLY AN ACTION WHICH IS PRIOR OR ANTECEDENT IN TIME. SIMILARLY ,FINAL" MAY MEAN CONCLUSIVE OR DECISIVE, OR MERELY LAST IN TIME. WEBSTER'S NEW INTERNATIONAL DICTIONARY, SECOND EDITION.

IF WE INTERPRET THE QUALIFYING ADJECTIVES AS RELATING TO THE RELATIVE IMPORTANCE OF THE INSPECTIONS, IT MIGHT BE ARGUED THAT PARAGRAPH 7 (C) IS NOT APPLICABLE SINCE THE INSPECTION AT THE CONTRACTOR'S PLANT PRESCRIBED BY ITEM NO. 105-1.2 IS UNDOUBTEDLY INTENDED TO BE THE MORE SIGNIFICANT. HOWEVER, IT WE INTERPRET THE WORDS "PRELIMINARY" AND "FINAL" TO APPLY ONLY TO TIME, PARAGRAPH 7 (C) CLEARLY IS APPLICABLE. WE THINK THE LATTER INTERPRETATION MUST BE ACCEPTED AS CORRECT SINCE, AS INDICATED BY THE INCLUSION OF THE PROVISION IN THE INVITATION, THE NAVY INTENDED THAT IT SHOULD APPLY; ON THE OTHER HAND, TO GIVE IT THE FORMER INTERPRETATION WOULD RENDER PARAGRAPH 7 (C) MEANINGLESS AND WITHOUT PURPOSE CONTRARY TO THE GENERAL RULE THAT CONTRACTS SHOULD BE INTERPRETED TO GIVE MEANING TO EVERY PROVISION. SEE RESTATEMENT OF CONTRACTS, SECTION 236 (A). WE THINK THE PRINCIPLE APPLIES EQUALLY TO THE PROVISIONS OF INVITATIONS FOR BIDS.

ACCORDINGLY, WE CONCLUDE THAT PARAGRAPH 7 (C) IS APPLICABLE; THAT PRELIMINARY INSPECTION AT ORIGIN, AND DELIVERY, FINAL INSPECTION AND ACCEPTANCE AT MULTIPLE POINTS OF DESTINATION ARE CALLED FOR UNDER THE TERMS OF THE INVITATION, AND, THEREFORE, THAT OFFERS OF DISCOUNTS FOR PROMPT PAYMENT WITHIN LESS THAN 30 DAYS MAY NOT BE CONSIDERED IN EVALUATING THE BIDS. WE RECOGNIZE THAT THIS IS CONTRARY TO THE STATEMENTS IN THE FOURTH PARAGRAPH OF DECISION IN 37 COMP. GEN. 711; HOWEVER, FOR THE REASONS STATED ABOVE, THAT PART OF THE DECISION WILL NO LONGER BE FOLLOWED. CF. B-131248, APRIL 24, 1957.

IN A LETTER OF JULY 2, 1956 (B-127594), WE ADVISED THE SECRETARY OF THE AIR FORCE THAT AS TO OFFERS OF PROMPT PAYMENT DISCOUNTS, WHERE THE MINIMUM ACCEPTABLE PAYMENT PERIOD IS KNOWN IN ADVANCE, THE BIDDERS SHOULD BE SPECIFICALLY AND CLEARLY INFORMED THAT OFFERS FOR LESSER PERIODS WILL NOT BE CONSIDERED IN THE EVALUATION OF BIDS. WE RECOMMEND THAT TO ELIMINATE THE CONFUSION WHICH MAY EXIST UNDER PARAGRAPH 7 (C), A MINIMUM ACCEPTABLE PAYMENT DISCOUNT PERIOD BE ESTABLISHED FOR EACH PROCUREMENT.