B-139639, JULY 31, 1959, 39 COMP. GEN. 62

B-139639: Jul 31, 1959

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DID INDICATE THAT THE FINANCING WAS TO BE ARRANGED AFTER BID OPENING AND THE ISSUANCE OF A LETTER OF ACCEPTABILITY. WAS A DEFECT WHICH DID NOT GO TO THE SUBSTANCE OF THE BID BUT WAS A DEFECT WHICH COULD BE WAIVED BY THE CONTRACTING OFFICER BECAUSE THE INFORMATION WAS SOLELY FOR THE BENEFIT OF THE GOVERNMENT IN THE DETERMINATION OF THE RESPONSIBILITY OF BIDDERS. 1959: REFERENCE IS MADE TO YOUR LETTER OF MAY 14. BIDS RECEIVED IN RESPONSE TO THE INVITATION WERE OPENED ON MAY 7. 592 WAS SUBMITTED BY THE D AND L CONSTRUCTION COMPANY AND ASSOCIATES (D AND L) IN THE AMOUNT OF $11. THE NEXT MOST FAVORABLE BID WAS THAT OF J. THE THIRD LOW BID WAS SUBMITTED BY THE T. IT WAS. ANNOUNCED AT THE BID OPENING THAT D AND L WAS THE APPARENT LOW BIDDER.

B-139639, JULY 31, 1959, 39 COMP. GEN. 62

CONTRACTS - FAILURE TO SUBMIT INFORMATION - BIDDER'S RESPONSIBILITY DETERMINATION THE FAILURE OF A BIDDER TO SUBMIT PRELIMINARY FINANCING DATA WITH HIS BID FOR A CAPEHART HOUSING CONSTRUCTION PROJECT UNDER AN INVITATION WHICH DID NOT SPECIFY THAT THE BIDDER OBTAIN ADVANCE FINANCING COMMITMENTS, BUT DID INDICATE THAT THE FINANCING WAS TO BE ARRANGED AFTER BID OPENING AND THE ISSUANCE OF A LETTER OF ACCEPTABILITY, WAS A DEFECT WHICH DID NOT GO TO THE SUBSTANCE OF THE BID BUT WAS A DEFECT WHICH COULD BE WAIVED BY THE CONTRACTING OFFICER BECAUSE THE INFORMATION WAS SOLELY FOR THE BENEFIT OF THE GOVERNMENT IN THE DETERMINATION OF THE RESPONSIBILITY OF BIDDERS, AND SUCH A DETERMINATION MAY BE MADE ON THE BASIS OF INFORMATION ELICITED AFTER BID OPENING AS WELL AS ON THE BASIS OF INFORMATION SUBMITTED WITH THE BID.

TO DILLON AND DILLON, JULY 31, 1959:

REFERENCE IS MADE TO YOUR LETTER OF MAY 14, 1959, AND SUBSEQUENT CORRESPONDENCE, PROTESTING ON BEHALF OF THE J. W. BATESON COMPANY, INC., THE AWARD OF A CONTRACT TO ANY BIDDER OTHER THAN ITSELF UNDER INVITATION FOR BIDS NO. ENG-23-028-59-61, AS AMENDED, ISSUED ON APRIL 23, 1959, FOR THE CONSTRUCTION OF 700 CAPEHART HOUSING UNITS AT FORT LEONARD WOOD, MISSOURI.

BIDS RECEIVED IN RESPONSE TO THE INVITATION WERE OPENED ON MAY 7, 1959. THE BID WHICH PROVIDED THE MAXIMUM USABLE CONSTRUCTION AT A COST NOT TO EXCEED $11,213,592 WAS SUBMITTED BY THE D AND L CONSTRUCTION COMPANY AND ASSOCIATES (D AND L) IN THE AMOUNT OF $11,210,000 WHICH PERMITTED AN AWARD OF THE BASIC BID PLUS CERTAIN ADDITIVES. THE NEXT MOST FAVORABLE BID WAS THAT OF J. W. BATESON COMPANY, INC. ( BATESON), IN THE AMOUNT OF $11,211,000, AND THE THIRD LOW BID WAS SUBMITTED BY THE T. C. BATESON CONSTRUCTION COMPANY, INC. IT WAS, THEREFORE, ANNOUNCED AT THE BID OPENING THAT D AND L WAS THE APPARENT LOW BIDDER. THE U.S. ARMY ENGINEER DISTRICT, KANSAS CITY, MISSOURI, ADVISED D AND L AND BATESON THAT THE THREE LOWEST BIDDERS WOULD RECEIVE TELEGRAMS REQUESTING THAT THEY FURNISH DOCUMENTS AND DATA REQUIRED BY PARAGRAPHS 7 AND 33 OF THE INVITATION AS WELL AS INFORMATION AS TO THE SOURCE OF FINANCING REQUIRED BY PARAGRAPH 4. PARAGRAPHS 7 AND 33 REQUIRED THAT CERTAIN INFORMATION RELATING TO EXPERIENCE, FINANCING, ORGANIZATION, ETC., BE FURNISHED BY EACH OF THE THREE LOWEST BIDDERS. PARAGRAPH 4 PROVIDED, IN PART, THAT:

* * *. BIDDERS ARE PARTICULARLY CAUTIONED AS TO THE COMPLEX NATURE OF THE PROJECT FINANCING. FEDERAL NATIONAL MORTGAGE ASSOCIATION FUNDS ARE NOT AVAILABLE, AND PRIVATE FINANCING MUST BE OBTAINED BY THE BIDDER FOR BOTH INTERIM AND LONG TERM LOANS. EACH BIDDER SHALL INDICATE IN WRITING, WITH THE BID, THE SOURCE OF HIS FINANCING FOR BOTH INTERIM AND LONG TERM LOANS AND SHOW EVIDENCE OF HIS ABILITY TO COMPLETE ALL ADMINISTRATIVE AND FINANCIAL ARRANGEMENTS FOR A CONTRACT CLOSING WITHIN 28 DAYS AFTER ISSUANCE OF THE LETTER OF ACCEPTABILITY. * * *

THAT PARAGRAPH FURTHER PROVIDED THAT ISSUANCE OF THE LETTER OF ACCEPTABILITY IS NOT AN ACCEPTANCE OF THE BID, BUT RATHER, OBLIGATES THE SELECTED BIDDER TO TAKE NECESSARY STEPS FOR CLOSING WITHIN 28 DAYS, AND IF HE DOES SO, THE BID WILL BE ACCEPTED AT CLOSING.

BY TELEGRAM DATED MAY 8, 1959, J. MAXWELL PRINGLE AND COMPANY, INC., ADVISED THE DISTRICT ENGINEERS THAT IT WAS PREPARED TO PROVIDE D AND L INTERIM AND LONG TERM FINANCING ON THIS PROJECT. SINCE D AND L DID NOT SUBMIT IN WRITING WITH ITS BID A STATEMENT OF THE SOURCE OF ITS FINANCING, THE DISTRICT ENGINEER ON MAY 8, 1959, DETERMINED THAT THE BID OF D AND L WAS NONRESPONSIVE. THE DISTRICT ENGINEER FURTHER DETERMINED THAT THE LETTER FROM BATESON INDICATING THE SOURCE OF FINANCING AND ATTACHING A LIST OF CAPEHART PROJECTS AWARDED TO IT MET THE REQUIREMENTS OF PARAGRAPH 4. THEREUPON, D AND L PROTESTED AGAINST ANY AWARD TO BATESON.

IT IS REPORTED THAT THE INSTANT INVITATION WAS THE SECOND INVITATION COVERING THE FORT LEONARD WOOD PROJECT. THE FIRST INVITATION, OPENED ON APRIL 1, 1959, CONTAINED THE IDENTICAL PARAGRAPH 4. OF THE FIVE BIDS RECEIVED ONE QUOTED A BASE BID PRICE ABOVE THE STATUTORY MAXIMUM, AND NONE OF THE OTHER FOUR BIDDERS, INCLUDING D AND L AND BATESON, FURNISHED WITH THEIR BIDS ANY INDICATION OF ITS SOURCE OF FINANCING. A DISPUTE AROSE AS TO THE METHOD OF DETERMINING WHICH BIDDER, D AND L OR BATESON, OFFERED THE MAXIMUM USABLE CONSTRUCTION. EACH OF THE THREE LOW BIDDERS WAS REQUESTED TO FURNISH THE SOURCE OF ITS FINANCING BUT IT IS REPORTED THAT NO BIDDER WAS ADVISED, OR ANY IMPLICATION MADE, THAT ITS BID WAS UNACCEPTABLE BECAUSE OF ITS FAILURE TO FURNISH WITH ITS BID THE INFORMATION REQUIRED BY PARAGRAPH 4 OF THE INVITATION. D AND L FURNISHED THE NAME OF THE PRINGLE COMPANY AS ITS SOURCE OF FINANCING, WHICH COMPANY ALTHOUGH NOT THE ACTUAL SOURCE OF FUNDS, AGREED TO OBTAIN THE FUNDS FOR D AND L. THIS INFORMATION WAS SATISFACTORY TO THE DISTRICT ENGINEER AS BEING IN COMPLIANCE WITH PARAGRAPH 4. WHILE BATESON WAS RELUCTANT TO INDICATE ITS SOURCE OF FINANCING PRIOR TO RECEIPT OF A LETTER OF ACCEPTABILITY, THE DISTRICT ENGINEER REQUIRED THAT SUCH INFORMATION BE FURNISHED AS A PREREQUISITE TO CONSIDERATION OF ITS BID.

THE BIDS OF BOTH D AND L AND BATESON WERE ADMINISTRATIVELY CONSIDERED AS RESPONSIVE EVEN THOUGH THE SOURCE OF FINANCING WAS NOT SUBMITTED INITIALLY WITH THEIR BIDS. HENCE, THE ONLY MATTER REMAINING FOR DETERMINATION WAS WHICH BIDDER WAS ENTITLED TO AWARD, AND SUCH DETERMINATION DID NOT RELATE TO THE SOURCE OF FINANCING. THE CHIEF OF ENGINEERS DETERMINED THAT THE INVITATION DID NOT CLEARLY EXPRESS THE BASIS FOR DETERMINING THE LOWEST BIDDER AND, THEREFORE DIRECTED THAT ALL BIDS BE REJECTED AND THE PROJECT READVERTISED.

THE PROJECT WAS READVERTISED BY ADDENDUM NO. 4 BUT NO CHANGE WAS MADE IN PARAGRAPH 4 OTHER THAN TO CHANGE THE NUMBER OF DAYS ALLOWED FOR CLOSING.

IT IS YOUR CONTENTION THAT THE FAILURE OF D AND L TO FURNISH THE INFORMATION UNDER PARAGRAPH 4 WAS A SUBSTANTIAL DEVIATION PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS; THAT CONSEQUENTLY ITS LOW BID WAS NOT RESPONSIVE; AND THAT AWARD SHOULD BE MADE TO THE LOWEST RESPONSIBLE BIDDER, THE BATESON COMPANY. IN THAT CONNECTION, IT IS POINTED OUT THAT THE INFORMATION REQUIRED BY PARAGRAPH 4 AFFECTED THE PRICE WHICH PROSPECTIVE BIDDERS COULD SUBMIT UNDER THE INVITATION; THAT IT REQUIRED BIDDERS TO MAKE ARRANGEMENTS FOR FINANCING PRIOR TO SUBMITTING BIDS; AND THAT A BIDDER WHO IGNORES THE REQUIREMENT IS FREE AFTER BID OPENING TO SHOP FOR FINANCING THEREBY GAINING A MONETARY ADVANTAGE OVER OTHER BIDDERS. YOU FURTHER POINT OUT THAT, IN COMPLYING WITH PARAGRAPH 4, BATESON WAS FORCED TO INCREASE ITS BID PRICE BY ABOUT $28,000 WHICH REPRESENTED THE GOING RATE OF BROKERS' COMMISSIONS FOR ARRANGING FINANCING.

THE TERM "ELIGIBLE BIDDER" AS USED IN 42 U.S.C. 1594 (A) IS DEFINED IN SUBSECTION (B) AS MEANING "A PERSON, PARTNERSHIP, FIRM, OR CORPORATION DETERMINED BY THE SECRETARY AFTER CONSULTATION WITH THE COMMISSIONER (1) TO BE QUALIFIED BY EXPERIENCE AND FINANCIAL RESPONSIBILITY TO CONSTRUCT HOUSING OF THE TYPE DESCRIBED IN SUBSECTION (A) OF THIS SECTION, AND (2) TO HAVE SUBMITTED THE LOWEST ACCEPTABLE BID.'

THE QUESTION FOR CONSIDERATION HERE IS WHETHER, UNDER THE TERMS OF THE INVITATION, THE FAILURE OF A BIDDER TO SUBMIT WITH ITS BID INFORMATION REGARDING THE SOURCE OF ITS FINANCING MAY BE WAIVED BY THE GOVERNMENT AS AN INFORMALITY AND THE BID EVALUATED ON THE BASIS OF SUCH INFORMATION SUBMITTED AFTER THE OPENING OF BIDS. THE INVITATION FOR BIDS READ AS A WHOLE IMPOSES ADDITIONAL REQUIREMENTS AFTER THE SUBMISSION AND OPENING OF BIDS ON THE THREE LOWEST BIDDERS TO FURNISH INFORMATION AND DATA RESPECTING ITS ORGANIZATION, EXPERIENCE IN CONSTRUCTING HOUSING OF THE TYPE CALLED FOR, EVIDENCE OF FINANCIAL RESPONSIBILITY, EVIDENCE THAT BONDS CAN BE OBTAINED, AND AFFIDAVITS OF PARTICIPATION WITH RESPECT TO ITSELF OR A GENERAL CONTRACTOR. MOREOVER, THE INVITATION CONTEMPLATES AN "AWARD" TO THE ELIGIBLE BUILDER PROVIDED IT MEETS THE REQUISITES OF THE LETTER OF ACCEPTABILITY, INCLUDING ARRANGEMENTS FOR THE FINANCING OF THE TOTAL COST OF THE PROJECT. THE INVITATION ENVISAGES A MOST COMPLEX AND UNIQUE PROCEDURE BEFORE AN ELIGIBLE BUILDER IS FINALLY AWARDED THE CONTRACT. THE ELIGIBLE BUILDER TO WHOM A LETTER OF ACCEPTABILITY IS ISSUED MUST TAKE THE FOLLOWING ACTIONS--- ACCEPTABLE TO THE GOVERNMENT- - BEFORE THE HOUSING CONTRACT IS EXECUTED.

1. A CORPORATION CALLED THE "MORTGAGOR-BUILDER" MUST BE ORGANIZED;

2. FINANCING FOR THE TOTAL COST OF THE PROJECT, INCLUDING PROFIT, MUST BE ARRANGED THROUGH A BUILDING LOAN AGREEMENT BETWEEN THE MORTGAGOR-BUILDER AND A MORTGAGEE LENDER;

3. REQUIRE THE MORTGAGEE TO OBTAIN FHA MORTGAGE INSURANCE AND TAKE ALL NECESSARY ACTION TO OBTAIN A FHA COMMITMENT FOR INSURANCE DURING AND AFTER CONSTRUCTION; AND

4. EXECUTE A LEASE OF THE PROJECT SITE TO THE MORTGAGOR-BUILDER.

THEREAFTER, A TRIPARTITE CONTRACT WHIDH DEFINES THE RIGHTS AND OBLIGATIONS OF THE GOVERNMENT, THE ELIGIBLE BUILDER AND THE MORTGAGOR BUILDER IS EXECUTED. HENCE, IT WILL BE SEEN THAT THE FINANCIAL ARRANGEMENTS AND COMMITMENTS ARE CONDITIONS PRECEDENT TO "AWARD" AS DISTINGUISHED FROM THE ISSUANCE OF A LETTER OF ACCEPTABILITY. THE INFORMATION REQUIRED BY PARAGRAPH 4 IS SOLELY FOR THE BENEFIT OF THE GOVERNMENT AND FORMS A BASIS FOR DETERMINING, PRIOR TO THE ISSUANCE OF THE LETTER OF ACCEPTABILITY, THAT AN ELIGIBLE BIDDER WILL BE ABLE TO COMPLETE THE FINANCING ARRANGEMENTS AND EFFECT A CLOSING WITHIN THE TIME SPECIFIED IN THE INVITATION FOR BIDS. THE PARAGRAPH DOES NOT SPECIFY THAT BIDDERS OBTAIN ADVANCE COMMITMENTS FOR THEIR FINANCING. ON THE CONTRARY, PARAGRAPH 1 OF THE INVITATION CLEARLY INDICATES THAT FINANCING WAS TO BE ARRANGED FOR AFTER THE BID OPENING AND THE ISSUANCE OF THE LETTER OF ACCEPTABILITY. BASICALLY THIS PARAGRAPH IS FOR THE PURPOSE OF ENABLING THE GOVERNMENT TO DETERMINE THE BIDDERS' RESPONSIBILITY. IT HAS BEEN RECOGNIZED THAT THE CONTRACTING AGENCY HAS THE DUTY OF DETERMINING WHETHER A PARTICULAR BIDDER IS A RESPONSIBLE BIDDER AND IT IS TO FACILITATE THAT DETERMINATION THAT PROVISIONS SUCH AS THE ONE HERE INVOLVED ARE INCLUDED IN THE INVITATION FOR BIDS. OBVIOUSLY, THE DETERMINATION MAY BE MADE ON THE BASIS OF INFORMATION AND DATA ELICITED AFTER BIDS ARE OPENED AS WELL AS ON THE BASIS OF INFORMATION AND DATA SUBMITTED WITH THE BID. WE DO NOT AGREE THAT, IN THIS PARTICULAR CASE, THE FAILURE TO FURNISH SUCH PRELIMINARY FINANCIAL INFORMATION WENT TO THE SUBSTANCE OF THE BID SO AS TO RENDER IT LEGALLY DEFECTIVE AND SUBJECT TO REJECTION. IN THE CIRCUMSTANCES, WE THINK IT PROPER TO CONCLUDE THAT THE FAILURE SO TO FURNISH WAS AN INFORMALITY WHICH MAY BE WAIVED UNDER PARAGRAPH 3 OF THE INVITATION. THAT THIS IS TRUE IS CLEARLY EVIDENCED BY THE VERY CHARACTER OF THE PROJECT UNDERTAKEN BY ISSUING THE INVITATION AND BY PROVIDING PROCEDURES THEREIN FOR THE DETERMINATION OF THE ELIGIBLE BUILDER.

ACCORDINGLY, NO LEGAL BASIS IS APPARENT TO QUESTION THE ADMINISTRATIVE ACTION TAKEN IN THIS MATTER.