B-138216, JANUARY 28, 1959, 38 COMP. GEN. 508

B-138216: Jan 28, 1959

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SUBMITTED WITH HIS BID A LETTER IN WHICH REQUEST FOR THE USE OF RENT-FREE GOVERNMENT FACILITIES WAS MADE FOR WHICH THE BIDDER SUGGESTED AN EQUALIZATION FACTOR TO BE ADDED TO THE BID PRICE FOR COMPARISON PURPOSES HAS SUBMITTED AN OFFER WHICH CONTAINS A MATERIAL DEVIATION WHICH GOES TO THE SUBSTANCE OF THE BID AFFECTING THE COST OF THE ARTICLE TO BE FURNISHED AND. THE BID WAS PROPERLY REJECTED AS PREJUDICIAL TO THE OTHER BIDDERS. 1959: REFERENCE IS MADE TO YOUR LETTERS OF DECEMBER 16. SEVENTEEN BIDS WERE RECEIVED. THE LOW BID WAS REJECTED ON THE BASIS THAT THE BIDDER WAS NOT RESPONSIBLE. YOU INCLUDED THE FOLLOWING STATEMENT: THE CONTRACT WHICH MAY RESULT FROM THIS QUOTATION WILL REQUIRE FOR PERFORMANCE CERTAIN FACILITIES COVERED BY THE DEPARTMENT OF THE NAVY.

B-138216, JANUARY 28, 1959, 38 COMP. GEN. 508

BIDS - QUALIFIED - LETTERS CONTAINING CONDITION NOT IN INVITATION A BIDDER WHO, IN RESPONSE TO AN INVITATION WHICH DID NOT CONTAIN ANY PROVISION FOR THE USE OF GOVERNMENT-FURNISHED FACILITIES IN PERFORMANCE OF THE CONTRACT, SUBMITTED WITH HIS BID A LETTER IN WHICH REQUEST FOR THE USE OF RENT-FREE GOVERNMENT FACILITIES WAS MADE FOR WHICH THE BIDDER SUGGESTED AN EQUALIZATION FACTOR TO BE ADDED TO THE BID PRICE FOR COMPARISON PURPOSES HAS SUBMITTED AN OFFER WHICH CONTAINS A MATERIAL DEVIATION WHICH GOES TO THE SUBSTANCE OF THE BID AFFECTING THE COST OF THE ARTICLE TO BE FURNISHED AND, THEREFORE, THE BID WAS PROPERLY REJECTED AS PREJUDICIAL TO THE OTHER BIDDERS, NOTWITHSTANDING THAT CIRCUMSTANCES SUBSEQUENTLY RENDERED THE CONDITION IN THE LETTER MEANINGLESS.

TO GREER HYDRAULICS, INC., JANUARY 28, 1959:

REFERENCE IS MADE TO YOUR LETTERS OF DECEMBER 16, 1958, AND JANUARY 12, 1959, PROTESTING AGAINST THE REJECTION OF YOUR BID SUBMITTED IN RESPONSE TO INVITATION FOR BIDS NO. 109-603-59-538, ISSUED BY THE WARNER ROBINS AIR MATERIEL AREA ON OCTOBER 3, 1958.

THE INVITATION, AS AMENDED, OPENED ON NOVEMBER 10, 1958, REQUESTED BIDS FOR THE FURNISHING OF 144 AIRCRAFT HYDRAULIC SYSTEM TEST STANDS, TOGETHER WITH SPARE PARTS AND RELATED ENGINEERING AND TECHNICAL DATA. SEVENTEEN BIDS WERE RECEIVED, INCLUDING YOUR SECOND LOW BID IN THE TOTAL AMOUNT OF $1,278,510, LESS A DISCOUNT OF 1 PERCENT FOR 10 DAYS PROMPT PAYMENT, AND THE NEXT LOW BID OF CONSOLIDATED DIESEL ELECTRIC CORPORATION IN THE TOTAL AMOUNT OF $1,290,750, LESS 1/8 OF 1 PERCENT FOR 20 DAYS PROMPT PAYMENT. THE LOW BID WAS REJECTED ON THE BASIS THAT THE BIDDER WAS NOT RESPONSIBLE. IN A LETTER ACCOMPANYING YOUR BID, YOU INCLUDED THE FOLLOWING STATEMENT:

THE CONTRACT WHICH MAY RESULT FROM THIS QUOTATION WILL REQUIRE FOR PERFORMANCE CERTAIN FACILITIES COVERED BY THE DEPARTMENT OF THE NAVY, BUREAU OF AERONAUTICS CONTRACT NOA 5851 AND RENT-FREE USE OF SUCH FACILITIES IS HEREBY REQUESTED OF THE APPROPRIATE DEPARTMENT OF DEFENSE REPRESENTATIVE. IN ADDITION, SINCE OUR BID IS SUBMITTED WITH OTHERS ON A PRICE COMPETITION BASIS IT IS TO BE ADJUSTED BY THE ADDITION OF 10.7 PERCENT (SEVEN-TENTHS OF 1 PERCENT) REPRESENTING THE EQUALIZATION FACTOR NEGOTIATED WITH THE BUREAU OF AERONAUTICS' CONTRACTING OFFICER. ( ITALICS SUPPLIED.)

THE INVITATION CONTAINED STANDARD CONDITION NO. 5 PROVIDING THAT: " NO MATERIAL, LABOR OR FACILITIES WILL BE FURNISHED BY THE GOVERNMENT UNLESS OTHERWISE PROVIDED FOR IN THE INVITATION.' NOTHING WAS PROVIDED THEREIN WHICH WOULD PERMIT THE SUCCESSFUL BIDDER TO USE GOVERNMENT FURNISHED FACILITIES IN PERFORMING THE RESULTING CONTRACT.

THE FACILITIES REFERRED TO IN YOUR STATEMENT ARE THOSE COVERED BY CONTRACT NO. NOA-5851, DATED APRIL 3, 1957, WITH THE BUREAU OF AERONAUTICS, DEPARTMENT OF THE NAVY, AND CONSTITUTE THE BUREAU'S PORTION OF NAVY PLANT ACCOUNT NO. 91642. PERTINENT PROVISIONS OF THE FACILITIES AGREEMENT ARE AS FOLLOWS:

SECTION 2--- USE OF FACILITIES

(A) THE FACILITIES MAY BE USED ON A RENT-FREE BASIS FOR THE PERFORMANCE OF THE FOLLOWING GOVERNMENT PRIME AND SUBCONTRACTS:

(I) ANY PRIME CONTRACT WITH THE BUREAU OF AERONAUTICS WHICH EXPRESSLY AUTHORIZES THE USE OF THE FACILITIES WITHOUT THE PAYMENT OF RENT;

(II) ANY PRIME CONTRACT WITH ANY AGENCY (OTHER THAN THE BUREAU OF AERONAUTICS) OF THE DEPARTMENT OF DEFENSE, PROVIDED SUCH PRIME CONTRACT EXPRESSLY AUTHORIZES THE RENT-FREE USE OF THE FACILITIES FOR THE PERFORMANCE OF SUCH PRIME CONTRACT AND A DULY AUTHORIZED REPRESENTATIVE OF THE PROCURING AGENCY DETERMINES IN WRITING THAT SUCH RENT-FREE USE MEETS THE REQUIREMENTS OF THE ARMED SERVICES PROCUREMENT REGULATION.

(B) THE CONTRACTOR MAY USE THE FACILITIES FOR PURPOSES OTHER THAN THOSE AUTHORIZED BY PARAGRAPH (A) OF THIS SECTION 2 UPON THE PRIOR WRITTEN APPROVAL OF THE CONTRACTING OFFICER OF THE BUREAU OF AERONAUTICS.

SECTION 3--- CONSIDERATION FOR USE

(A) THE CONTRACTOR AGREES THAT IT WILL NOT INCLUDE IN THE COST OR PRICE OF ANY ARTICLES OR SERVICES FURNISHED UNDER GOVERNMENT PRIME CONTRACTS OR SUBCONTRACTS ANY PROVISION, ALLOWANCE OR CHARGE FOR (I) THE COST OF ACQUISITION OF THE FACILITIES; (II) THE AMORTIZATION OR DEPRECIATION OF THE FACILITES; OR (III) ANY AMOUNT WHICH REPRESENTS RENTAL FOR THE USE OF ANY FACILITIES WHICH THE CONTRACTOR IS AUTHORIZED TO USE ON A RENT-FREE BASIS.

(B) IN THE EVENT THE CONTRACTING OFFICER AUTHORIZES THE CONTRACTOR TO USE THE FACILITIES FOR PURPOSES OTHER THAN THOSE AUTHORIZED BY PARAGRAPH (A) OF SECTION 2, THE CONTRACTOR SHALL PAY TO THE GOVERNMENT A USE CHARGE IN SUCH AMOUNTS AND ON SUCH TERMS, OR THE GOVERNMENT SHALL RECEIVE SUCH OTHER CONSIDERATION, AS MAY BE AGREED UPON BY THE CONTRACTING OFFICER AND THE CONTRACTOR.

THE PROCUREMENT ACTIVITY DETERMINED THAT YOUR STATEMENT CONSTITUTED A CONDITION WHICH RENDERED YOUR BID NONRESPONSIVE TO THE INVITATION. YOUR POSITION AS SET FORTH IN THE LETTER OF DECEMBER 16, 1958, IS THAT:

* * * THE CONTRACTOR IS FOLLOWING REQUIREMENTS OF THE CONTRACTING OFFICER, BUREAU OF AERONAUTICS. ADDITIONALLY, IT IS CLEAR THAT A REQUEST FOR RENT-FREE USE IS NOT A REQUIREMENT OF THE CONTRACTOR WHO IS PERFECTLY WILLING TO BEAR SUCH RENTAL OR TO NEGOTIATE WITH THE CONTRACTING OFFICER, BUREAU OF AERONAUTICS. THE CONTRACTOR ALSO FEELS THAT THE CONTRACTING OFFICER, WRAMA, IS CONFUSED BETWEEN A RENTAL OTHERWISE DUE ON THESE FACILITIES AND THE SO-CALLED "EQUALIZATION FACTOR" MENTIONED IN CONTRACTOR'S LETTER, ENCLOSURE "A.' THE EQUALIZATION FACTOR IS THE AMOUNT TO BE ADDED TO THE CONTRACTOR'S BID EXCLUSIVELY TO COMPARE IT WITH COMPETITORS' BIDS IN ORDER TO EXCLUDE AN UNFAIR COMPETITIVE ADVANTAGE. THE CONTRACTOR'S REFERENCE TO REQUEST FOR RENT-FREE USE OF SUBJECT FACILITIES TOGETHER WITH THE APPLICATION OF THE EQUALIZATION FACTOR INSURES THE ELIMINATION OF AN UNFAIR COMPETITIVE ADVANTAGE.

IN THAT REGARD, THE DEPARTMENT OF THE AIR FORCE HAS ADVISED OUR OFFICE AS FOLLOWS:

* * * THE BIDDER'S ARGUMENT OVERLOOKS THE FACT THAT BOTH THE CONTRACT AND PUBLISHED REGULATIONS OF THE MILITARY DEPARTMENTS PRECLUDE THE BIDDER'S USE OF THESE FACILITIES RENT-FREE FOR THE PERFORMANCE OF CONTRACTS SUCH AS THIS WHICH ARE ENTERED INTO BY MEANS OF FORMAL ADVERTISING. THIS DEPARTMENT IS OF THE OPINION THAT UNDER THE CIRCUMSTANCES THE PROPER CONSTRUCTION TO BE PLACED ON THE PROVISION USED BY THE BIDDER WAS THAT ITS PRICE WAS CONDITIONED ON ITS BEING GIVEN THE APPROVAL TO USE THESE GOVERNMENT-OWNED FACILITIES FREE OF CHARGE. IT IS, THEREFORE, OUR BELIEF THAT OUR POSITION IN THIS MATTER IS IN ACCORD WITH YOUR DECISION B-133769, DATED 20 SEPTEMBER 1957.

BY LETTER OF JANUARY 12, 1959, YOU ADVISED THAT, AT A CONFERENCE HELD ON JANUARY 7, 1959, WITH THE CONTRACTING OFFICER UNDER THE FACILITIES CONTRACT, IT WAS DETERMINED TO DECLARE ALL FACILITIES SURPLUS TO YOUR NEEDS AS OF THAT DATE AND THAT SUCH FACILITIES WOULD NOT BE USED FOR ANY WORK. IT WAS FURTHER DETERMINED THAT A FEW ITEMS UNDER THE AGREEMENT COULD BE USED BY YOU AT A MONTHLY RENTAL CHARGE WITHOUT APPROVAL OF THE COGNIZANT DEFENSE REPRESENTATIVE. YOU CONCLUDE THEREFORE, THAT THE STATEMENT ACCOMPANYING YOUR BID NO LONGER HAS ANY SIGNIFICANCE AND THAT NECESSARILY THE ,EQUALIZATION FACTOR" NO LONGER APPLIES.

IT IS CLEAR THAT THE LANGUAGE USED IN YOUR LETTER OF NOVEMBER 7, 1958, ACCOMPANYING YOUR BID, WAS INTENDED TO CONSTITUTE A PART OF YOUR OFFER TO FURNISH THE EQUIPMENT CALLED FOR IN THE INVITATION. HENCE, THE ONLY QUESTION FOR CONSIDERATION HERE IS WHETHER YOUR STATEMENT CONSTITUTED SUCH A CONDITION AS WAS REPUGNANT TO THE INVITATION AND PREJUDICIAL TO OTHER RESPONSIVE BIDDERS. IT IS A CARDINAL RULE THAT A CONTRACT AWARDED TO A SUCCESSFUL BIDDER MUST BE THE CONTRACT OFFERED TO ALL BIDDERS. SEE UNITED STATES V. BROOKRIDGE FARMS, 111 F.2D 461-463. WHERE ONE BIDDER CONDITIONS HIS OFFER WITH RIGHTS OR BENEFITS NOT EXTENDED TO ALL BIDDERS BY THE ADVERTISED CONDITIONS AND SPECIFICATIONS, IT IS CLEAR THAT A CONTRACT AWARDED UPON THE BASIS OF SUCH A BID WOULD NOT BE THE CONTRACT OFFERED TO ALL PROSPECTIVE CONTRACTORS. 36 COMP. GEN. 535, 539.

THE CONDITION EMBODIED IN YOUR BID, IF ACCEPTED, WOULD PERMIT THE USE OF GOVERNMENT FACILITIES RENT-FREE IN THE PERFORMANCE OF THE RESULTING CONTRACT. SUCH RENT-FREE USE CONTEMPLATED THEREBY IS CONTRARY TO THE PROVISIONS OF SECTION 13-407 (A) OF THE ARMED SERVICES PROCUREMENT REGULATION ( ASPR) TO THE EFFECT THAT FACILITIES CONTRACTS AUTHORIZING THE USE OF FACILITIES IN FORMALLY ADVERTISED CONTRACTS SHALL SPECIFY A CASH RENTAL TO BE PAID. SEE B-133769, SEPTEMBER 20, 1957. THE PROVISIONS OF THE FACILITIES CONTRACT QUOTED ABOVE DO NOT AUTHORIZE RENT-FREE USE UNLESS THE PROCURING ACTIVITY DETERMINES IN WRITING THAT SUCH RENT-FREE USE MEETS THE REQUIREMENTS OF THE ASPR. THE AUTHORIZATION FOR RENT-FREE USE IS LIMITED BY THE ASPR (SECTION 13 407 (A) (1) ( TO CONTRACTS ENTERED INTO OTHER THAN BY FORMAL ADVERTISING. THUS, YOUR REQUEST FOR RENT-FREE USE, REGARDLESS OF THE AGENCY TO WHICH THE REQUEST IS DIRECTED, COULD NOT HAVE BEEN COMPLIED WITH BY THE PROCURING ACTIVITY. WHILE IT MAY BE THAT RENT ON FACILITIES CONTEMPLATED TO BE USED WOULD HAVE BEEN PAID TO THE BUREAU OF AERONAUTICS WITH THE RESULT THAT THE PROCURING ACTIVITY WOULD BE PERMITTING USE OF FACILITIES RENT-FREE, WE MAY NOT HOLD THAT THE CONDITION AS WRITTEN CONVEYED THAT INTENT. IN ANY EVENT, THE PROCURING ACTIVITY IS WITHOUT AUTHORITY TO ACCEPT RENT-FREE USE OF FACILITIES IN THE PERFORMANCE OF ANY CONTRACT RESULTING FROM THIS INVITATION.

THE EQUALIZATION FACTOR OF 10.7 PERCENT MENTIONED IN YOUR STATEMENT FOR ADDITION TO YOUR BID FOR PRICE COMPARISON PURPOSES MAY NOT BE REGARDED AS ELIMINATING THE COMPETITIVE ADVANTAGE WHICH WOULD OTHERWISE RESULT FROM CONSIDERATION OF YOUR BID. NOT ONLY ARE WE UNABLE TO CONCLUDE THAT APPLICATION OF THE EQUALIZATION FACTOR WOULD ELIMINATE UNFAIR COMPETITIVE ADVANTAGE, BUT ALSO THAT THE FACTOR ITSELF REPRESENTS A REASONABLE BASIS FOR BID EVALUATIONS. IT APPEARS, BASED ON INFORMAL DISCUSSIONS WITH REPRESENTATIVES OF YOUR FIRM AND OFFICIALS OF THE BUREAU OF AERONAUTICS, THAT THE EQUALIZATION FACTOR WAS DERIVED FROM THE USE RATES PRESCRIBED IN SECTION 13-601 OF THE ASPR. HOWEVER, NEITHER THE APPLICABILITY OF SUCH FACTOR AS AN AID IN BID EVALUATION IS ESTABLISHED NOR THE BASIS UPON WHICH THE CONTRACTING OFFICER COULD REASONABLY APPLY SUCH A FACTOR TO MAINTAIN THE COMPETITIVE CHARACTER OF YOUR BID. MOREOVER, A BIDDER UNDER AN ADVERTISED PROCUREMENT MAY NOT IMPOSE ON A CONTRACTING OFFICER AN ELEMENT OF BID EVALUATION NOT SPECIFICALLY PROVIDED FOR IN THE INVITATION.

WE ARE OF THE VIEW THAT YOUR STATEMENT CONSTITUTED A MATERIAL DEVIATION FROM THE INVITATION TERMS IN THAT IT WENT TO THE SUBSTANCE OF YOUR BID AFFECTING THE COST OF THE ARTICLE TO BE FURNISHED, AND, THEREFORE, IS PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS NOT HAVING SUCH ADVANTAGE. SEE 30 COMP. GEN. 179.

WE ARE NOT UNMINDFUL OF THE FACT THAT, SUBSEQUENT TO BID OPENING, THE FACILITIES IN YOUR POSSESSION WERE DECLARED SURPLUS AND THAT AN INSIGNIFICANT AMOUNT OF GOVERNMENT FACILITIES WOULD NOW BE USED IN PERFORMANCE OF THE RESULTING CONTRACT. WHILE IT MAY BE THAT THE MEETING HELD ON JANUARY 7, 1959, WITH REPRESENTATIVES OF THE BUREAU OF AERONAUTICS, RENDERED YOUR QUALIFICATION MEANINGLESS, YET TO PERMIT CONSIDERATION OF YOUR BID IN SUCH CIRCUMSTANCES WOULD BE CONTRARY TO A LONG LINE OF DECISIONS OF OUR OFFICE PRECLUDING THE MODIFICATION OR DELETION OF A BID PROVISION AFTER OPENING WHERE, AS HERE, THE PROVISION IS MATERIAL AND IN ANY WAY AFFECTS THE PRICE OF THE ARTICLES OFFERED. SEE 31 COMP. GEN. 660; 34 ID. 24.

ACCORDINGLY, WE MUST CONCLUDE THAT THE REJECTION OF YOUR BID WAS PROPER IN THE CIRCUMSTANCES.