B-141670, FEBRUARY 8, 1960, 39 COMP. GEN. 563

B-141670: Feb 8, 1960

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BIDS - DISCARDING ALL BIDS - RESTRICTIVE SPECIFICATIONS - READVERTISEMENT FACTORS FOR CONSIDERATION ALTHOUGH AN INVITATION WHICH REQUIRED THAT THE EQUIPMENT OFFERED BEAR THE SEAL OF A PARTICULAR TESTING ORGANIZATION IS RESTRICTIVE OF COMPETITION AND SHOULD HAVE BEEN CORRECTED PRIOR TO BID OPENING. THE THEORETICAL ELIMINATION OF POTENTIAL BIDDERS MUST BE CONSIDERED AGAINST THE REAL DETRIMENT WHICH WOULD RESULT FROM A READVERTISEMENT AFTER BID PRICES HAVE BEEN REVEALED. - WHO DID NOT HAVE THE SEAL FROM BIDDING AND WHO. WOULD NOT HAVE BEEN ABLE TO OBTAIN APPROVAL AND SINCE THE REMAINING TWO BIDDERS WHO HAD THE SEAL WOULD NOT BE PLACED IN ANY FINANCIAL DISADVANTAGE BECAUSE THE APPROVAL DOES NOT INVOLVE A RECURRING CHARGE.

B-141670, FEBRUARY 8, 1960, 39 COMP. GEN. 563

BIDS - DISCARDING ALL BIDS - RESTRICTIVE SPECIFICATIONS - READVERTISEMENT FACTORS FOR CONSIDERATION ALTHOUGH AN INVITATION WHICH REQUIRED THAT THE EQUIPMENT OFFERED BEAR THE SEAL OF A PARTICULAR TESTING ORGANIZATION IS RESTRICTIVE OF COMPETITION AND SHOULD HAVE BEEN CORRECTED PRIOR TO BID OPENING, THE THEORETICAL ELIMINATION OF POTENTIAL BIDDERS MUST BE CONSIDERED AGAINST THE REAL DETRIMENT WHICH WOULD RESULT FROM A READVERTISEMENT AFTER BID PRICES HAVE BEEN REVEALED; THEREFORE, SINCE THE REQUIREMENT DID NOT PRECLUDE FOUR OF THE SIX BIDDERS--- INCLUDING THE LOW BIDDER--- WHO DID NOT HAVE THE SEAL FROM BIDDING AND WHO, BECAUSE OF THE SHORT INTERVAL BETWEEN ISSUANCE OF THE INVITATION AND DELIVERY, WOULD NOT HAVE BEEN ABLE TO OBTAIN APPROVAL AND SINCE THE REMAINING TWO BIDDERS WHO HAD THE SEAL WOULD NOT BE PLACED IN ANY FINANCIAL DISADVANTAGE BECAUSE THE APPROVAL DOES NOT INVOLVE A RECURRING CHARGE, NONE OF THE BIDDERS WOULD BE PREJUDICED BY AN AWARD TO THE LOW BIDDER UNDER THE FIRST INVITATION ON THE BASIS OF A WAIVER OF THE SEAL REQUIREMENT.

TO THE SECRETARY OF THE NAVY, FEBRUARY 8, 1960:

REFERENCE IS MADE TO LETTER OF FEBRUARY 1, 1960, FROM THE BUREAU OF SUPPLIES AND ACCOUNTS (R11) FORWARDING A REPORT ON THE PROTEST OF ARKOS MANUFACTURING COMPANY, DETROIT, MICHIGAN, AGAINST THE CANCELLATION OF IFB- 197-120-60, WHICH OPENED ON DECEMBER 7, 1959.

THE INVITATION, ISSUED NOVEMBER 19, 1959, BY THE NAVAL ORDNANCE PLANT, LOUISVILLE, KENTUCKY, SOLICITED BIDS FOR NINE GAS SPACE HEATERS WITH A RATED OUTPUT CAPACITY OF ONE MILLION BTU PER HOUR. PARAGRAPH 1 OF THE SPECIFICATIONS REQUIRED THE UNITS TO COMPLY WITH THE STANDARDS OF THE NATIONAL ELECTRIC CODE, THE AMERICAN GAS ASSOCIATION, THE TEST CODE OF A.S.H.V.E., AND NAVDOCKS SPECIFICATION NO. 9YG. PARAGRAPH 11 (B) OF THE SPECIFICATIONS REQUIRED ALL UNITS FURNISHED UNDER THE PROCUREMENT TO "BEAR THE SEAL OF THE A.G.A. AND BE UNDERWRITER APPROVED.'

BIDS WERE OPENED ON DECEMBER 7, 1959. THE ARKOS BID WAS LOW AT A UNIT PRICE OF $1,914, LESS PROMPT PAYMENT DISCOUNT. IT APPEARS THAT AFTER BID OPENING ARKOS WAS ADVISED IT WAS LOW BIDDER AND A PREAWARD SURVEY WAS MADE WHICH DETERMINED ARKOS HAD THE CAPACITY TO PERFORM WITHIN THE DESIRED DELIVERY TIME OF 20 DAYS. IN VIEW OF THE SHORT DELIVERY TIME, IT APPEARS THAT ARKOS MADE COMMITMENTS WITH SUPPLIERS ON THE ASSUMPTION THAT IT WOULD RECEIVE AWARD OF THE CONTRACT.

HOWEVER, BY TELEGRAM OF DECEMBER 15, 1959, THE THIRD LOW BIDDER PROTESTED CONSIDERATION OF ARKOS' BID AND THE SECOND LOW BID ON THE BASIS THAT THEIR UNITS DID NOT BEAR THE SEAL OF THE AMERICAN GAS ASSOCIATION. IT IS ALLEGED BY ARKOS THAT ITS UNITS DO, IN FACT, MEET THE STANDARDS OF THE A.G.A., AND IT IS UNDERSTOOD THAT THEY ARE APPROVED BY THE UNDERWRITERS LABORATORIES.

AFTER RECEIPT OF THE PROTEST, THE CONTRACTING OFFICER RECEIVED ADVICE THAT THE REQUIREMENT FOR THE A.G.A. SEAL WAS RESTRICTIVE UNDER THE PRINCIPLE STATED IN 33 COMP. GEN. 573. THE INVITATION WAS WITHDRAWN AND THE PROCUREMENT READVERTISED, BUT THE READVERTISED BIDS HAVE NOT YET BEEN OPENED.

THE STATUTES RELATING TO THE PROCUREMENT OF SUPPLIES BY FEDERAL AGENCIES THROUGH ADVERTISING PROCEDURES HAVE CONSISTENTLY BEEN HELD TO REQUIRE THAT SPECIFICATIONS BE STATED IN SUCH TERMS AS TO PERMIT THE BROADEST FIELD OF COMPETITION WITHIN THE LEGITIMATE NEEDS OF THE AGENCY. 32 COMP. GEN. 384, 387. THE IMPOSITION OF A REQUIREMENT THAT SUPPLIES OFFERED PURSUANT TO AN INVITATION BEAR THE SEAL OR LABEL OF ANY GIVEN PRIVATE TESTING ORGANIZATION HAS NORMALLY BEEN REGARDED AS RESTRICTIVE OF COMPETITION AND, THEREFORE, IN VIOLATION OF THE ADVERTISING STATUTES. SEE 33 COMP. GEN. 573.

ARKOS CONTENDS THAT SINCE ITS PRODUCT DOES MEET THE STANDARDS OF THE A.G.A., AND SINCE FOUR OF THE SIX BIDDERS UNDER THE INITIAL INVITATION WERE NOT ABLE TO COMPLY WITH THE A.G.A. SEAL REQUIREMENT, THE LACK OF THE SEAL SHOULD BE WAIVED AS A MINOR DISCREPANCY. IT IS ALSO URGED BY ARKOS THAT IT SHOULD NOT BE PENALIZED BY HAVING TO BID AGAIN AFTER ITS LOW BID HAS BEEN EXPOSED, WITH THE POSSIBLE CONSEQUENCE OF BEING UNDERBID AT THE SECOND OPENING AND THUS SUFFERING A CONSIDERABLE LOSS ON THE UNITS IT HAS FABRICATED ON THE ASSUMPTION IT WOULD RECEIVE THE AWARD.

WE RECOGNIZE THE UNDESIRABILITY OF REJECTING BIDS AFTER OPENING. AS WE HAVE OFTEN STATED SUCH A COURSE OF ACTION IS DETRIMENTAL TO THE SYSTEM OF SEALED BIDDING AND SHOULD BE AVOIDED WHENEVER POSSIBLE. ONE IMPORTANT FACTOR IN DECIDING WHETHER OR NOT TO CANCEL A DEFECTIVE INVITATION AND READVERTISE SHOULD BE, WE THINK, WHETHER BIDDERS HAVE BEEN PREJUDICED BY REASON OF THE DEFECT. IN THE PRESENT CASE, THE SOLE OBJECTION TO THE INITIAL INVITATION IS THE REQUIREMENT FOR THE A.G.A. SEAL. IT IS, OF COURSE, POSSIBLE THAT SOME POTENTIAL SUPPLIERS MAY HAVE FAILED TO BID BECAUSE OF THIS REQUIREMENT, AND IF THE QUESTION HAD BEEN RAISED BEFORE BID OPENING ON DECEMBER 7, THERE WOULD BE NO DOUBT BUT THAT THE INVITATION SHOULD HAVE BEEN CORRECTED. HOWEVER, WE NOW MUST WEIGH THIS THEORETICAL ELIMINATION OF POSSIBLE BIDDERS AGAINST THE VERY REAL DETRIMENT TO ARKOS IN HAVING TO REBID.

WE CAN SEE NO BASIS UPON WHICH PREJUDICE CAN BE CLAIMED BY ANY OF THE SIX BIDDERS WHO DID SUBMIT BIDS. THE INABILITY TO MEET THE SEAL REQUIREMENT DID NOT PREVENT FOUR OF THE SIX FROM BIDDING. THE QUESTION THEN IS WHETHER ANY ADVANTAGE TO THOSE FOUR BIDDERS OR DETRIMENT TO THE OTHER TWO BIDDERS WOULD RESULT FROM DELETION OF THAT REQUIREMENT. WE THINK NOT, FOR THE FOLLOWING REASONS.

AS HAVE BEEN NOTED, THE INVITATION WAS ISSUED NOVEMBER 19, 1959, AND BIDS WERE OPENED 18 DAYS LATER, ON DECEMBER 7, 1959. DELIVERY WAS DESIRED IN 20 DAYS, AND REQUIRED IN 30 DAYS. IN VIEW OF THE SHORT PERIOD OF TIME INVOLVED, IT SEEMS APPARENT THAT NO BIDDER WHO DID NOT ALREADY HAVE A.G.A. APPROVAL COULD HAVE CONTEMPLATED SECURING SUCH APPROVAL AFTER RECEIVING THE INVITATION. THE EXPENSE INVOLVED IN SECURING A.G.A. APPROVAL (WHICH COVERS THE COST OF TESTING ONE UNIT SUBMITTED) IS INCURRED ONLY ONCE, SINCE THERE IS NO RECURRING CHARGE ON UNITS SUBSEQUENTLY PRODUCED. ACCORDINGLY, THE TWO BIDDERS WHO DID HAVE A.G.A. APPROVAL BEFORE THE INVITATION WAS ISSUED CANNOT BE SAID TO HAVE BEEN AT ANY FINANCIAL DISADVANTAGE BY REASON THEREOF.

IN THE CIRCUMSTANCES, IT IS OUR VIEW THAT THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM WOULD BEST BE SERVED IN THE INSTANT PROCUREMENT BY MAKING AWARD TO THE LOWEST RESPONSIBLE BIDDER UNDER THE INITIAL INVITATION. THE REQUIREMENT FOR THE A.G.A. SEAL SHOULD, OF COURSE, BE IGNORED.