B-141719, JUN. 9, 1960

B-141719, JUN. 9, 1960

TO MR. C. J. HARING:

WE HAVE RECEIVED A REPORT FROM THE INTERNATIONAL COOPERATION ADMINISTRATION ON THE PROTEST MADE IN YOUR LETTER OF FEBRUARY 8, 1960, ON BEHALF OF THE GALION IRON WORKS AND MANUFACTURING COMPANY, GALION, OHIO, AGAINST AN AWARD OF A CONTRACT BY THE CENTRAL PURCHASING AUTHORITY OF THE GOVERNMENT OF VIETNAM FOR THE PROCUREMENT OF 40 MOTOR GRADERS ON WHICH BIDS WERE REQUESTED UNDER ITEM NO. 1 OF ITS INVITATION NO. 736-24069. ALSO, RECEIPT IS ACKNOWLEDGED OF YOUR LETTER DATED MAY 17, 1960, RELATIVE TO THE MATTER.

SEVERAL BIDS WERE RECEIVED ON ITEM NO. 1 OF INVITATION FOR BIDS FROM MANUFACTURERS AND THEIR REPRESENTATIVES IN VARIOUS COUNTRIES. THE LOWEST BID WAS REJECTED BECAUSE IT WAS NOT BELIEVED THAT THE BIDDER'S OFFERED EQUIPMENT WOULD MEET THE REQUIREMENTS OF THE ADVERTISED SPECIFICATIONS. TWO OF THE NEXT LOWEST BIDDERS OFFERED EQUIPMENT MANUFACTURED BY THE GALION IRON WORKS AND MANUFACTURING COMPANY AND BY THE HUBER-WARCO COMPANY OF MARION, OHIO. IT WAS DETERMINED THAT EACH OF THESE BIDDERS HAD OFFERED ACCEPTABLE EQUIPMENT AND THE AWARD WAS MADE TO THE FIRM WHICH OFFERED TO DELIVER HUBER-WARCO GRADERS, DELIVERED TO SAIGON, VIETNAM, AT A PRICE OF $535,840. APPARENTLY, THE BIDDER HAD AGREED AFTER OPENING OF THE BIDS TO REDUCE ITS BID PRICE TO $532,840, SINCE IT IS REPORTED THAT THE CONTRACT WAS AWARDED IN THAT AMOUNT. THERE FOLLOWS A COMPARISON OF THE BID PRICES ON THE HUBER WARCO AND THE GALION GRADERS.

TABLE

HUBER-WARCO GALION

GRADERS GRADERS

UNIT COST, F.O.B., F.A.S. $ 12,021 $ 11,799

40 UNITS 480,840 471,960

UNIT OCEAN FREIGHT 1,375 1,961

TOTAL OCEAN FREIGHT 55,000 78,440

TOTAL COST AND FREIGHT 535,840 550,400

CLAUSE 1 OF THE CONDITIONS OF THE INVITATION FOR BIDS INCORPORATES IN THE CONTRACT THE CONTRACT STIPULATIONS ENTITLED "GENERAL CONDITIONS FOR VIETNAMESE GOVERNMENT PROCUREMENT CONTRACTS FINANCED BY THE UNITED STATES OF AMERICA, INTERNATIONAL COOPERATION ADMINISTRATION," DATED FEBRUARY 15, 1956. PARAGRAPH 32 OF SUCH GENERAL CONDITIONS PROVIDES THAT:

"AT LEAST 50 PERCENT OF THE LINER TONNAGE, AT LEAST 50 PERCENT OF THE TRAMP TONNAGE, AND AT LEAST 50 PERCENT OF THE TANKER TONNAGE, FINANCED BY ICA HEREUNDER, MUST BE SHIPPED ON U.S. FLAG VESSEL. WAIVER OF THIS REQUIREMENT MAY BE REQUESTED OF THE CONTRACTING OFFICER IF U.S. FLAG VESSELS ARE NOT AVAILABLE, AND SHALL BE SUBJECT TO ICA/WASHINGTON'S FINAL APPROVAL.'

CLAUSE 3 OF THE BID CONDITIONS PROVIDES, IN PART, THAT "AT THE OPTION OF THE AGENT THIS CONTRACT MAY BE ON AN FOB, FAS OCEAN VESSEL, PORT OF SHIPMENT, OR C AND F BASIS.'

IT IS STATED AS YOUR UNDERSTANDING THAT "THE COMPETITIVE BID ACCEPTED WAS ON A MODEL 4DG-115 WITH SLIDING GEAR TRANSMISSION, WHICH IS NOT THEIR "LATEST MODEL" AS SPECIFIED IN THE INVITATION.' FURTHER, IT IS CONTENDED IN YOUR LETTER THAT THE CONTRACT SHOULD HAVE BEEN AWARDED ON THE BASIS OF THE LOWEST TOTAL BID PRICE, F.O.B., F.A.S., PORT OF SHIPMENT, IT BEING ASSUMED THAT THE STATED OCEAN FREIGHT UNIT COST OF $1,375 IN THE BID OF GALION'S COMPETITOR REPRESENTED A FREIGHT RATE ON SHIPMENTS ABOARD FOREIGN FLAG VESSELS AND THAT SUCH FREIGHT RATE WOULD ALSO HAVE BEEN AVAILABLE TO THE GOVERNMENT OF VIETNAM IF IT HAD ACCEPTED THE BID ON THE GALION GRADERS.

AT THE OUTSET, IT SHOULD BE NOTED THAT ICA'S PRIMARY FUNCTION IN TRANSACTIONS OF THIS TYPE IS THAT OF A FINANCING AGENCY. UNDER NORMAL PROCEDURES, THE GOVERNMENT OF THE COOPERATING COUNTRY IS FULLY RESPONSIBLE FOR CARRYING OUT THE PROCUREMENT AND IT IS NOT ICA'S POLICY TO INTERVENE DIRECTLY IN THE PROCUREMENT ACTIVITIES OF ANOTHER SOVEREIGN GOVERNMENT.

IN REGARD TO YOUR SUGGESTION THAT THE OFFERED HUBER-WARCO MODEL OF EQUIPMENT WAS NOT ITS LATEST MODEL AS SPECIFIED IN THE INVITATION, IT IS REPORTED THAT THE OFFERED MODEL IS ONE OF THE HUBER-WARCO COMPANY'S STANDARD MODELS, IN CURRENT PRODUCTION; AND THAT, WHILE THIS FIRM HAS IN PRODUCTION A UNIT WITH POWER TRANSMISSION, THIS TYPE OF TRANSMISSION WAS NOT REQUIRED BY THE INVITATION. IN VIEW THEREOF, IT IS APPARENT THAT THE MODEL 4DG-115 WAS PROPERLY CONSIDERED TO HAVE BEEN OF A SATISFACTORY TYPE IF IT OTHERWISE MET THE REQUIREMENTS OF THE INVITATION.

IN CONNECTION WITH YOUR CONTENTION THAT THE AWARD SHOULD HAVE BEEN MADE ON AN F.O.B., F.A.S., BASIS, YOU REFER TO THE QUOTED $1,961 FREIGHT RATE IN THE UNSUCCESSFUL BID ON THE FURNISHING OF GALION GRADERS AS REPRESENTING A QUOTATION RECEIVED PRIOR TO BIDDING FOR THE UNIT COST OF SHIPMENT BY U.S. FLAG VESSEL, AND STATE THAT A NEW U.S. FLAG RATE OF $1,575 WAS SECURED AND WAS NOT CONSIDERED BECAUSE IT WAS RECEIVED AFTER THE BID OPENING. YOU FURTHER STATE THAT AN OFFER WAS MADE TO BILL THE OCEAN FREIGHT AT ACTUAL COST, WHICH WOULD HAVE PERMITTED THE USE OF THE $1,375 RATE PER UNIT, INDICATING THAT SUCH RATE, WHILE COVERING SHIPMENT ABOARD A FOREIGN FLAG VESSEL, WOULD ALSO HAVE BEEN AVAILABLE TO THE BIDDER ON THE GALION GRADERS.

WE HAVE NOT BEEN ADVISED BY THE INTERNATIONAL COOPERATION ADMINISTRATION AS TO WHETHER THE $1,375 RATE ACTUALLY REPRESENTED A FOREIGN FLAG RATE, OR WHETHER SHIPMENT OF ALL OF THE GRADERS WOULD HAVE BEEN PERMITTED ON FOREIGN FLAG VESSELS. HOWEVER, IT IS STATED IN THE ADMINISTRATIVE REPORT THAT 38 OF THE HUBER-WARCO GRADERS WERE SHIPPED ABOARD U.S. FLAG VESSELS AND THAT ONLY TWO OF THE GRADERS WERE CARRIED ON FOREIGN FLAG VESSELS. WAS SUGGESTED, THEREFORE, THAT THE QUESTION OF FOREIGN FLAG RATES WOULD NOT APPEAR TO HAVE AFFECTED THE PROTESTING BIDDER'S ABILITY TO OFFER COMPETITIVE C AND F PRICES IN ITS QUOTATION.

THE ADMINISTRATIVE REPORT CONTAINS COMMENTS WITH REFERENCE TO THE QUESTION AS TO WHETHER THE CENTRAL PURCHASING AUTHORITY OF THE GOVERNMENT OF VIETNAM WAS REQUIRED TO MAKE THE AWARD ON AN F.O.B., F.A.S., BASIS, IN THE EVENT THAT THE DELIVERED COST OF THE EQUIPMENT WOULD BE LESS THAN IT WOULD HAVE BEEN IF THE AWARD HAD BEEN MADE ON A C AND F BASIS. IT HAS BEEN POINTED OUT THAT THE INVITATION DID NOT SPECIFY A SINGLE DELIVERY BASIS FOR BIDS BUT PROVIDED FOR BOTH F.O.B., F.A.S., AND C AND F TERMS TO PERMIT THE BUYER, UNDER HIS OPTION, TO SELECT THE PURCHASE TERMS CONSIDERED MOST ADVANTAGEOUS TO THE GOVERNMENT OF VIETNAM; AND THAT THE RESPONSIBILITY FOR MAKING THIS SELECTION WAS RETAINED BY THE CENTRAL AUTHORITY OF THE GOVERNMENT OF VIETNAM, WHICH EXERCISED ITS OPTION BY AWARDING THE CONTRACT TO THE RESPONSIVE BIDDER OFFERING THE LOWEST PRICE FOR MATERIAL DELIVERED TO SAIGON.

AS STATED IN THE REPORT OF THE INTERNATIONAL COOPERATION ADMINISTRATION, IT APPEARS THAT ALL BIDDERS HAD THE SAME OPPORTUNITY TO EXPLORE FREIGHT RATES PRIOR TO BID OPENING DATE IN ORDER TO ASSURE THAT THEIR C AND FPRICES WERE THE MOST ADVANTAGEOUS THAT THEY COULD OFFER, AND THERE WAS NO COMPULSION ON THE BUYER TO PURCHASE ON AN F.O.B., F.A.S., BASIS AND THEN SEEK TO NEGOTIATE A FREIGHT RATE WHICH WOULD ACHIEVE THE SUGGESTED PURPOSE OF LOWERING THE PROTESTING BIDDER'S QUOTED C AND F PRICES BELOW THAT ALREADY OFFERED BY ITS COMPETITOR. ALSO, THE ACTION TAKEN BY THE CENTRAL PURCHASING AUTHORITY OF THE GOVERNMENT OF VIETNAM IN REFUSING TO PERMIT A CHANGE IN BID ON THE PART OF THE FIRM WHICH OFFERED TO DELIVER GALION GRADERS IS BELIEVED TO HAVE BEEN ENTIRELY CONSISTENT WITH THE CONSIDERATION GIVEN TO PROPOSED CHANGES IN BIDS ON CONTRACTS TO BE AWARDED BY AGENCIES OF THE UNITED STATES. THE ESTABLISHED RULE IS THAT A BIDDER CANNOT CHANGE HIS BID AFTER THE SCHEDULED TIME FOR OPENING OF BIDS. HOWEVER, SUCH RULE WOULD NOT PREVENT THE LOWEST RESPONSIVE BIDDER FROM OFFERING A REDUCTION IN HIS BID PRICE, WHICH APPEARS TO HAVE BEEN THE SITUATION WITH RESPECT TO THE $3,000 CREDIT ALLOWED BY THE SUCCESSFUL BIDDER IN THE INSTANT CASE.

ACCORDINGLY, WE PERCEIVE NO OBJECTION TO THE BASIS USED IN AWARDING THE CONTRACT HERE INVOLVED AND YOUR PROTEST MUST BE DENIED.