B-139583, JUL. 2, 1959

B-139583: Jul 2, 1959

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MATHEWS: REFERENCE IS MADE TO YOUR LETTER OF MAY 9. SEVENTEEN BIDS WERE RECEIVED AND PUBLICLY OPENED ON MARCH 5. THE BID PRICES OF THE EIGHT LOWEST BIDDERS ON THE NON-SET-ASIDE PORTION WERE AS FOLLOWS: TABLE LEE 2. IT WAS DETERMINED THAT THE BIDS RECEIVED PURSUANT TO THE SUBJECT INVITATION WERE OUT OF PROPORTION TO COST INCREASES OCCURRING SINCE THE DATE OF THE LAST PROCUREMENT OF THESE TIRES. THE ANALYSIS OF BID PRICES WAS BASED ON A COMPARISON OF THE BIDS RECEIVED UNDER INVITATION NO. 59-850 WITH THOSE PREVIOUSLY SUBMITTED UNDER INVITATION NO. 58-848 OPENED ON MAY 19. IT WAS REVEALED BY SUCH ANALYSIS THAT AN OVER-ALL PRICE INCREASE OF ABOUT 30 PERCENT WAS REFLECTED IN THE EIGHT LOWEST BIDS.

B-139583, JUL. 2, 1959

TO MR. F. R. MATHEWS:

REFERENCE IS MADE TO YOUR LETTER OF MAY 9, 1959, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE REJECTION OF BIDS SUBMITTED IN RESPONSE TO INVITATION FOR BIDS NO. ORD-20-113-59-850 ISSUED ON FEBRUARY 13, 1959, BY THE ORDNANCE TANK AUTOMOTIVE COMMAND FOR 21,399 EACH 11.00 TIMES 20 TIRES AND FOR A SET-ASIDE QUANTITY OF 21,400 EACH FOR SUBSEQUENT NEGOTIATION WITH ELIGIBLE BIDDERS IN LABOR SURPLUS AREAS.

SEVENTEEN BIDS WERE RECEIVED AND PUBLICLY OPENED ON MARCH 5, 1959, AND THE BID PRICES OF THE EIGHT LOWEST BIDDERS ON THE NON-SET-ASIDE PORTION WERE AS FOLLOWS:

TABLE

LEE 2,000 EACH AT $69.57

DUNLOP 500 EACH AT 75.33

COOPER 2,880 EACH AT 75.42

MANSFIELD 5,400EACH AT 75.68

PACIFIC 3,234 EACH AT 76.03

MOHAWK 2,000 EACH AT 78.15

GATES 1,000 EACH AT 78.79

DAYTON 5,600 EACH AT 79.16

UPON ANALYSIS OF THE BID PRICES IN RELATION TO THE PRICES UNDER PREVIOUS PROCUREMENTS, IT WAS DETERMINED THAT THE BIDS RECEIVED PURSUANT TO THE SUBJECT INVITATION WERE OUT OF PROPORTION TO COST INCREASES OCCURRING SINCE THE DATE OF THE LAST PROCUREMENT OF THESE TIRES. THE ANALYSIS OF BID PRICES WAS BASED ON A COMPARISON OF THE BIDS RECEIVED UNDER INVITATION NO. 59-850 WITH THOSE PREVIOUSLY SUBMITTED UNDER INVITATION NO. 58-848 OPENED ON MAY 19, 1958, AND AWARDED TO GOODYEAR TIRE COMPANY AT A PRICE OF $53.39 EACH FOR 21,544 TIRES. IT WAS REVEALED BY SUCH ANALYSIS THAT AN OVER-ALL PRICE INCREASE OF ABOUT 30 PERCENT WAS REFLECTED IN THE EIGHT LOWEST BIDS, AS WELL AS IN THE BIDS OF THE OTHER NINE BIDDERS, WHICH INCREASE IS GREATER THAN THAT JUSTIFIED BY PRODUCTION COST INCREASES SINCE MAY 1958. IN VIEW THEREOF, ALL BIDS WERE REJECTED AS BEING UNREASONABLE AS TO PRICE, AND YOUR COMPANY WAS SO ADVISED. ON APRIL 20, 1959, THE IDENTICAL REQUIREMENT WAS READVERTISED AND BIDS SUBMITTED IN RESPONSE THERETO WERE SCHEDULED FOR OPENING ON MAY 4, 1959. THAT OPENING DATE WAS EXTENDED TO JUNE 15, 1959. HOWEVER, AWARD UNDER THE NEW INVITATION, NO. 59-1242, IS BEING HELD IN ABEYANCE PENDING OUR CONSIDERATION OF YOUR PROTEST.

IT IS THE CONTENTION OF YOUR COMPANY THAT THE BIDS RECEIVED UNDER INVITATION NO. 59-850 WERE NOT UNREASONABLE AS TO PRICE BECAUSE (1) THE BIDS WERE COMPARABLE IN PRICE WITH FEDERAL SUPPLY SCHEDULE PRICES AND (2) THE REJECTION OF BIDS BASED UPON COMPARISON WITH THOSE RECEIVED UNDER INVITATION NO. 58-848 IS WITHOUT SUPPORT IN FACT AND CAN ONLY RESULT IN ABUSE OF ADVERTISED COMPETITIVE BIDDING. YOU ALSO ARGUE, IN EFFECT, THAT A COMPARISON OF BIDS TO A PRIOR LOW BID, WHICH RESULTED IN A LOSS TO THE BIDDER, IS CONTRARY TO THE INTERESTS OF THE GOVERNMENT SINCE SUCH LOSS COULD BE USED TO OFFSET PROFITS TO BE DETERMINED UNDER THE RENEGOTIATION ACT WITH RESPECT TO SUCH BIDDER'S OVER-ALL GOVERNMENT BUSINESS. IN THE PRESENT POSTURE OF THIS CASE, WE ARE NOT PERSUADED THAT THE RENEGOTIATION ACT IMPLICATION, STANDING ALONE, HAS ANY RELEVANT BEARING ON THE MATTER OF DETERMINING THE REASONABLENESS OF BID PRICES PER SE. TURNING THEN TO YOUR PRINCIPAL CONTENTION THAT THE BID PRICES SUBMITTED UNDER INVITATION NO. 59 -850 WERE NOT UNREASONABLE, IT APPEARS THAT YOU ATTACK THE BASES OF THE DETERMINATION ON THE GROUND THAT IT IS NOT SUPPORTED BY THE PAST PROCUREMENT HISTORY OF THE SAME OR SIMILAR TIRES. WE HAVE CAREFULLY REVIEWED THE DATA SUBMITTED BY YOU IN THE LIGHT OF THE ADMINISTRATIVE REPORT AND WE ARE NOT CONVINCED AT THIS TIME THAT THE REJECTION ACTION CONSTITUTED AN ABUSE OF DISCRETION OR A VIOLATION OF THE COMPETITIVE BIDDING STATURE.

10 U.S.C. 2305 (B) PROVIDES THAT "ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST.' THAT AUTHORITY HAS BEEN DELEGATED, PURSUANT TO 10 U.S.C. 2311, TO THE CONTRACTING OFFICER BY THE TERMS OF PARAGRAPH 2-403 (E) OF THE ARMY PROCUREMENT PROCEDURE. THE AUTHORITY TO REJECT ALL BIDS IS EXTREMELY BROAD AND WE HAVE CONSISTENTLY HELD THAT A DETERMINATION PURSUANT TO SUCH AUTHORITY IS NOT ORDINARILY SUBJECT TO REVIEW. SEE B 118013, MARCH 31, 1954; B-128422, AUGUST 30, 1956; B-131028, APRIL 29, 1957; HARNEY V. DUNKEE, 237 P.2D 561; 31 ALR 2D 469; CHAMPION COATED PAPER COMPANY V. JOINT COMMITTEE, 47 APP.D.C. 141.

ARTICLE 8 OF THE TERMS AND CONDITIONS OF THE INVITATION PROVIDES THAT "THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY AND ALL BIDS.' IT HAS BEEN HELD THAT, IRRESPECTIVE OF SUCH RESERVATION, A REQUEST FOR BIDS DOES NOT IMPART AN OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED, INCLUDING THE LOWEST CORRECT BID. O-BRIEN V. CARNEY, 6 F.SUPP. 761; SCOTT V. UNITED STATES, 44 C.CLS. 524; COLORADO PAVING COMPANY V. MURPHY, 78 F. 28.

A SIMILAR MATTER WAS THE SUBJECT OF OUR DECISION REPORTED AT 36 COMP. GEN. 364, AND IT WAS POINTED OUT THEREIN THAT WHEN IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO PROCURE THE PARTICULAR SUPPLIES, A REJECTION OF ALL BIDS AND A READVERTISEMENT FOR NEW BIDS WAS CONSIDERED AS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION. ALSO, SEE, 17 COMP. GEN. 554.

IN VIEW OF THE FOREGOING, WE FIND NO LEGAL JUSTIFICATION ON THE BASIS OF THE PRESENT RECORD FOR DISTURBING THE ACTION TAKEN BY THE PROCUREMENT AGENCY IN THE MATTER. ACCORDINGLY, BY LETTER OF TODAY TO THE SECRETARY OF THE ARMY, COPY ENCLOSED, HE IS BEING ADVISED THAT WE WOULD HAVE NO OBJECTION IF THE BIDS RECEIVED IN RESPONSE TO INVITATION NO. 59-1242 BE EVALUATED FOR THE PURPOSE OF MAKING AN AWARD TO THE LOWEST RESPONSIBLE BIDDER.