B-140175, NOVEMBER 25, 1959, 39 COMP. GEN. 396

B-140175: Nov 25, 1959

Additional Materials:

Contact:

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

 

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

FOR STORAGE OF HOUSEHOLD EFFECTS ON THE BASIS THAT MULTIPLE AWARDS WOULD HAVE BEEN IMPRACTICABLE AND THAT THE ESTIMATED QUANTITY OF MATERIAL FOR STORAGE WAS EXCESSIVE. WHEN THE INVITATION CLEARLY DID NOT CONTEMPLATE SEPARATE AWARDS SO THAT IT WAS UNNECESSARY TO SPECIFICALLY LIMIT AWARD ON AN AGGREGATE BASIS AND WHEN THERE WAS NO REASONABLE BASIS FOR CONSIDERING THAT THE ESTIMATE WAS EXCESSIVE. WAS SO GROSSLY ERRONEOUS AS TO CONSTITUTE AN ARBITRARY REJECTION TO THE DETRIMENT OF THE GOVERNMENT'S INTEREST IN MAINTAINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. ALTHOUGH THE AUTHORITY VESTED IN CONTRACTING OFFICERS TO REJECT ANY AND ALL BIDS AND TO READVERTISE A PROCUREMENT IS EXTREMELY BROAD AND ORDINARILY WILL NOT BE QUESTIONED BY THE COMPTROLLER GENERAL.

B-140175, NOVEMBER 25, 1959, 39 COMP. GEN. 396

BIDS - DISCARDING ALL BIDS - JUSTIFICATION - CONTRACTING OFFICERS' AUTHORITY THE REJECTION OF ALL BIDS SUBMITTED IN RESPONSE TO AN INVITATION FOR FURNISHING ALL LABOR, MATERIALS, VANS, ETC., FOR STORAGE OF HOUSEHOLD EFFECTS ON THE BASIS THAT MULTIPLE AWARDS WOULD HAVE BEEN IMPRACTICABLE AND THAT THE ESTIMATED QUANTITY OF MATERIAL FOR STORAGE WAS EXCESSIVE, WHEN THE INVITATION CLEARLY DID NOT CONTEMPLATE SEPARATE AWARDS SO THAT IT WAS UNNECESSARY TO SPECIFICALLY LIMIT AWARD ON AN AGGREGATE BASIS AND WHEN THERE WAS NO REASONABLE BASIS FOR CONSIDERING THAT THE ESTIMATE WAS EXCESSIVE, WAS SO GROSSLY ERRONEOUS AS TO CONSTITUTE AN ARBITRARY REJECTION TO THE DETRIMENT OF THE GOVERNMENT'S INTEREST IN MAINTAINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM; THEREFORE, AWARD UNDER THE SECOND INVITATION SHOULD BE CANCELED AND AWARD TO THE LOWEST RESPONSIBLE BIDDER UNDER THE FIRST INVITATION FOR THE REMAINING PERIOD OF THE YEAR SHOULD BE MADE. ALTHOUGH THE AUTHORITY VESTED IN CONTRACTING OFFICERS TO REJECT ANY AND ALL BIDS AND TO READVERTISE A PROCUREMENT IS EXTREMELY BROAD AND ORDINARILY WILL NOT BE QUESTIONED BY THE COMPTROLLER GENERAL, IN THE EXERCISE OF SUCH AUTHORITY THE CONTRACTING OFFICER MUST NOT ACT ARBITRARILY. A CONTRACTING OFFICER WHO REJECTED A BID FOR HANDLING AND STORAGE OF HOUSEHOLD EFFECTS ON THE BASIS THAT INVITATION DID NOT PERMIT AWARD TO ONLY ONE BIDDER AND THAT THE ESTIMATED QUANTITY OF MATERIAL FOR STORAGE WAS EXCESSIVE WHEN THE INVITATION NOT ONLY CONTEMPLATED AN AWARD TO ONE BIDDER IN THE AGGREGATE BUT WOULD HAVE BEEN NORMAL PROCEDURE AND THE REVISION IN QUANTITY WAS NOT LARGE HAS NOT PRESENTED ANY COGENT REASONS BASED UPON LAW OR REGULATION TO JUSTIFY REJECTION OF ALL BIDS.

TO THE SECRETARY OF THE AIR FORCE, NOVEMBER 25, 1959:

IN RESPONSE TO OUR REQUEST OF JULY 17, 1959, THE ASSISTANT DEPUTY FOR PROCUREMENT AND PRODUCTION BY LETTER DATED AUGUST 31, 1959, FURNISHED A REPORT RELATIVE TO THE PROTEST OF SMYTH HAWAIIAN VAN LINES, INC., AGAINST THE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. 64 605-59-281 COVERING THE DRAYAGE, STORAGE AND HANDLING OF HOUSEHOLD GOODS AT OAHU, HAWAII.

INVITATION FOR BIDS NO. 64-605-59-232 WAS ISSUED ON MAY 15, 1959, REQUESTING BIDS FOR FURNISHING ALL LABOR, MATERIALS, VANS AND EQUIPMENT, WAREHOUSE AND STORAGE FACILITIES, FOR STORAGE OF HOUSEHOLD EFFECTS OF AIR FORCE PERSONNEL IN ACCORDANCE WITH SPECIFICATIONS FOR THE PERIOD JULY 1, 1959, THROUGH JUNE 30, 1960. THE SERVICES CALLED FOR WERE AS FOLLOWS:

ITEM 1. DRAYAGE FROM RESIDENCE AND/OR PLACE OF STORAGE TO CONTRACTOR'S WAREHOUSE FOR NONTEMPORARY STORAGE (6,000 CWT ESTIMATED QUANTITY).

ITEM 2. STORAGE OF HOUSEHOLD GOODS AT CONTRACTOR'S WAREHOUSE, PER MONTH (72,000 CWT ESTIMATED QUANTITY).

ITEM 3. HANDLING (IN AND OUT) OF HOUSEHOLD GOODS AT CONTRACTOR'S WAREHOUSE (6,000 CWT ESTIMATED QUANTITY).

CLAUSE 28 OF THE GENERAL PROVISIONS OF THE INVITATION PROVIDED:

ESTIMATED REQUIREMENTS

(A) THE QUANTITIES OF SUPPLIES AND SERVICES WHICH THE GOVERNMENT ESTABLISHMENT ISSUING THIS CONTRACT ESTIMATES IT WILL REQUIRE DURING THE PERIOD COVERED BY THIS CONTRACT ARE SET FORTH IN THE SCHEDULE. THESE QUANTITIES ARE ESTIMATES ONLY AND ARE NOT PURCHASES HEREBY.

(B) THE CONTRACTOR AGREES TO FURNISH SUCH SUPPLIES AND SERVICES, WHEN CALLED BY THE GOVERNMENT. THE GOVERNMENT, IN TURN, AGREES TO CALL ON THE CONTRACTOR FOR ALL THE REQUIREMENTS FOR THE SUPPLIES AND SERVICES OF THE GOVERNMENT ACTIVITY ISSUING THIS CONTRACT OR FOR SUCH ACTIVITIES AS ARE SET FORTH IN THE SCHEDULE.

(C) IN THE EVENT THAT THE REQUIREMENTS OF THE GOVERNMENT ESTABLISHMENT ISSUING THIS CONTRACT FOR THE SUPPLIES AND SERVICES DESCRIBED HEREIN DO NOT MATERIALIZE IN THE QUANTITIES SPECIFIED AS EITHER "ESTIMATED" OR "MAXIMUM" IN THE SCHEDULE, SUCH FAILURE SHALL NOT CONSTITUTE GROUNDS FOR EQUITABLE ADJUSTMENT UNDER THIS CONTRACT, EXCEPT AS MAY BE SPECIFICALLY PROVIDED IN THE SCHEDULE.

BIDS WERE OPENED ON JUNE 4, 1959, AND IT APPEARS FROM THE ABSTRACT OF BIDS THAT SMYTH SUBMITTED THE LOWEST AGGREGATE BID IN THE AMOUNT OF $39,600 OF THE SEVEN BIDS RECEIVED AND OPENED. BY LETTER OF JUNE 5, 1959, THE CONTRACTING OFFICER NOTIFIED SMYTH THAT ALL BIDS HAD BEEN REJECTED DUE TO ,OMISSIONS IN THE SPECIFICATIONS AND THE GOVERNMENT'S INABILITY TO MAKE MULTIPLE AWARD.' THEREAFTER, THE REQUIREMENT WAS READVERTISED UNDER INVITATION NO. 64-605-59-281 DATED JUNE 5, 1959, WHICH REDUCED THE ESTIMATED QUANTITY OF ITEM 2 FROM 72,000 CWT TO 53,000 CWT AND SPECIFICALLY PROVIDED THAT ITEMS 1, 2 AND 3 WOULD BE AWARDED TO ONE BIDDER. BIDS UNDER THAT INVITATION WERE OPENED ON JUNE 19, 1959, AND AWARD WAS MADE ON THAT DATE TO Y. HIGA ENTERPRISES, LTD., WHICH HAD SUBMITTED THE LOWEST AGGREGATE BID IN THE ESTIMATED AMOUNT OF $21,190. SMYTH SUBMITTED THE THIRD LOWEST BID OF THE SIX BIDS RECEIVED IN RESPONSE TO THIS INVITATION.

IT IS REPORTED THAT THE FIRST INVITATION WAS CONSIDERED DEFICIENT BY THE CONTRACTING OFFICER IN TWO RESPECTS: (1) THAT MULTIPLE AWARDS WOULD HAVE BEEN IMPRACTICABLE; AND (2) THAT THE ESTIMATED QUANTITY OF 72,000 CWT FOR ITEM 2 WAS EXCESSIVE AND SHOULD BE REVISED.

THE TERMS AND CONDITIONS OF THE EARLIER INVITATION PROVIDED THAT: "THE CONTRACT WILL BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE THE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.' IT WAS FURTHER PROVIDED THAT: THE GOVERNMENT MAY ACCEPT ANY ITEM OR GROUP OF ITEMS OF ANY BID, UNLESS THE BIDDER QUALIFIES HIS BID BY SPECIFIC LIMITATIONS. * * *.' IS ADMITTED, AND WE AGREE, THAT AWARD TO ONE BIDDER IS INHERENT IN THIS TYPE OF SERVICE, ESPECIALLY SINCE THE EARLIER INVITATION AS WELL AS THE LATER INVITATION CLEARLY ENVISAGED AN INTEGRATED OPERATION BY ONLY ONE CONTRACTOR. THE EARLIER INVITATION DID NOT CONTEMPLATE SEPARATE AWARDS AND, FOR ALL INTENTS AND PURPOSES, IT WAS UNNECESSARY TO SPECIFICALLY LIMIT AWARD ON AN AGGREGATE BASIS. IN FACT, SECTION 2-406.3 (D) OF AIR FORCE PROCUREMENT INSTRUCTION PRECLUDES MULTIPLE AWARDS, SUCH AS ITEMS 1, 2 AND 3 SEPARATELY, UNLESS A SPECIFIC PROVISION FOR SUCH AWARD IS INCLUDED IN THE INVITATION. ALL BIDDERS WHO RESPONDED TO THE EARLIER INVITATION WERE ON NOTICE THAT, IN THE ABSENCE OF A SPECIFIC LIMITATION IN THEIR BIDS, THE GOVERNMENT RESERVED THE RIGHT TO AWARD ALL ITEMS TO ONE BIDDER. WE NOTE THAT NO BIDDERS SO LIMITED ITS BID OR FAILED TO BID ON ALL THREE ITEMS.

CONCERNING THE CONTRACTING OFFICER'S LETTER OF REJECTION, IT IS QUITE EVIDENT THAT THE ,OMISSIONS IN THE SPECIFICATIONS" REFERRED ONLY TO THE LACK OF A PROVISION IN THE EARLIER INVITATION TO THE EFFECT THAT AN AGGREGATE AWARD WAS CONTEMPLATED BY THE INVITATION. AS POINTED OUT ABOVE, HOWEVER, NO REASONABLE BASIS EXISTED FOR CONSIDERING THAT SUCH A PROVISION WAS NECESSARY. ALSO, AS WE UNDERSTAND THE FACTS, THERE WAS NO REASONABLE BASIS FOR CONSIDERING THAT THE ESTIMATED QUANTITY OF ITEM 2 WAS EXCESSIVE AND, IN OUR OPINION, THIS WAS NOT RELIED UPON BY THE CONTRACTING OFFICER IN REJECTING ALL BIDS, AS EVIDENCED BY HIS REJECTION LETTER OF JUNE 5, 1959, WHICH REFERRED ONLY TO "OMISSIONS IN THE SPECIFICATIONS AND THE GOVERNMENT'S INABILITY TO MAKE MULTIPLE AWARD.'

WE, THEREFORE, ARE OF THE VIEW THAT THE REJECTION OF ALL BIDS UNDER THE EARLIER INVITATION WAS SO GROSSLY ERRONEOUS AS TO CONSTITUTE AN ARBITRARY REJECTION TO THE DETRIMENT OF THE GOVERNMENT'S INTEREST IN MAINTAINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. AS WAS STATED BY THE COURT OF CLAIMS IN MASSMAN CONSTRUCTION COMPANY V. UNITED STATES, 102 C.1CLS. 699, 719,"TO HAVE A SET OF BIDS DISCARDED AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITOR'S PRICE IS A SERIOUS MATTER, AND IT SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS.'

WE, OF COURSE, RECOGNIZE THAT THE AUTHORITY VESTED IN THE CONTRACTING OFFICER TO REJECT ANY OR ALL BIDS AND READVERTISE IS EXTREMELY BROAD, AND ORDINARILY SUCH ACTION WILL NOT BE QUESTIONED BY OUR OFFICE. HOWEVER, IN EXERCISING SUCH AUTHORITY, THE CONTRACTING OFFICER MUST NOT ACT ARBITRARILY. SEE BROWN V. CITY OF PHOENIX, 272 P.2D 358, 361, 362. IN 36 COMP. GEN. 62, 66 IT WAS HELD:

WE CANNOT SAY THAT THE FURTHER ACTION ON THE PART OF THE CONTRACTING OFFICE IN REJECTING ALL BIDS AND READVERTISING WAS CORRECT AND PROPER, HOWEVER. WE FREQUENTLY HAVE HELD THAT IN THE MATTER OF GOVERNMENT PROCUREMENT CONTRACTING OFFICERS ARE VESTED WITH A CERTAIN AMOUNT OF DISCRETION AND, IN THE ABSENCE OF A SHOWING OR ARBITRARY OR CAPRICIOUS ACTION, FAVORITISM OR A COMPLETE DISREGARD OF THE LAW OR FACTS, WE WOULD NOT BE WARRANTED IN HOLDING THAT THEIR PROCUREMENT ACTIONS WERE ILLEGAL. BUT IN THIS CASE WE ARE UNABLE TO CONCLUDE THAT THERE WAS AN ABSENCE OF ARBITRARY OR CAPRICIOUS ACTION ON THE PART OF THE CONTRACTING OFFICE. OUR OPINION YOUR BELATED TELEGRAM PROPOSING TO UNDERBID THE SUCCESSFUL BIDDER'S PRICE BY ONLY A FEW CENTS CLEARLY SHOULD NOT HAVE BEEN CONSIDERED A "COGENT REASON" FOR THE REJECTION. NOR DO WE BELIEVE THAT THE REJECTION ACTION BASED UPON THE POSSIBILITY OF A MINOR ADDITIONAL PRICE CONCESSION ON A SMALL INCREASE IN QUANTITY, WHICH BECAUSE OF INSUFFICIENT FUNDS APPARENTLY SHOULD NOT HAVE BEEN ORDERED BY THE REQUISITIONING AGENCY IN ANY EVENT, WAS IN HARMONY WITH THE SPIRIT AND PURPOSE OF THE ADVERTISING STATUTES. IN VIEW THEREOF, WE ARE IN COMPLETE ACCORD WITH THE OPINION OF THE ADMINISTRATOR THAT THE PURPORTED REJECTION WAS NOT FOUNDED UPON A VALID BASIS. * * *

AS IN THAT CASE, WE MUST CONCLUDE HERE THAT THE CONTRACTING OFFICER HAD NO "COGENT REASON" BASED UPON LAW OR REGULATION TO REJECT ALL BIDS. REASON OF THE POSITION HE HELD HE EITHER KNEW OR SHOULD HAVE KNOWN THAT AN AWARD TO ONE BIDDER IN THE AGGREGATE UNDER THE FIRST INVITATION NOT ONLY WAS AUTHORIZED BUT WOULD HAVE BEEN NORMAL PROCEDURE. NEITHER DO WE FEEL THAT THE REJECTION ACTION BASED UPON THE SMALL REVISION OF THE QUANTITY ESTIMATED IN ITEM 2 REPRESENTED A "COGENT REASON" FOR THE REJECTION IN VIEW OF THE PROVISIONS OF CLAUSE 28 OF THE GENERAL PROVISIONS OF THE EARLIER INVITATION. IN THAT CONNECTION, WE NOTE THAT THE ESTIMATE FOR STORAGE UNDER THE PREVIOUS CONTRACT WITH SMYTH ( NO. AF 64 (605/-710) OF 1,400 CWT PER MONTH WAS SUBSTANTIALLY OUT OF LINE WITH THE ULTIMATE QUANTITY OF 10,871 CWT ACTUALLY HANDLED DURING THE TERM OF THAT CONTRACT.

ACCORDINGLY, IT IS THE OPINION OF OUR OFFICE THAT CONTRACT NO. 64 (605/- 1734 WITH Y. HIGA ENTERPRISES, LTD., SHOULD BE CANCELED AND AWARD MADE TO THE LOWEST RESPONSIBLE BIDDER UNDER INVITATION NO. 64-605-59 232 FOR THE REMAINING PERIOD THROUGH JUNE 30, 1960.