B-142869, MAY 27, 1960, 39 COMP. GEN. 796

B-142869: May 27, 1960

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BIDS - INSUFFICIENT BID DEPOSIT - ONLY BID - INTEREST OF GOVERNMENT CONSIDERATION WHERE THE ONLY ACCEPTABLE BID FOR AN OIL AND GAS LEASE IS ACCOMPANIED BY AN INSUFFICIENT BID DEPOSIT. REGARDLESS OF WHETHER OR NOT THERE WAS AN OFFER TO CORRECT THE DEFICIENCY. SO THAT THE ONLY FACTOR FOR CONSIDERATION IS THE INTEREST OF THE GOVERNMENT. IF IT IS ADMINISTRATIVELY DETERMINED THAT ACCEPTANCE OF THE BID WILL BEST SERVE THE INTEREST OF THE GOVERNMENT. THE INVITATION OR NOTICE OF SALE WAS DATED DECEMBER 16. THE REQUIREMENTS OF THE NOTICE OF SALE REFERRED TO ABOVE ARE CONSISTENT WITH REQUIREMENTS IMPOSED BY REGULATION (43 C.F.R. 201.22). THE BONUSES OFFERED BY THE COMPANY FOR EACH TRACT WERE $265.

B-142869, MAY 27, 1960, 39 COMP. GEN. 796

BIDS - INSUFFICIENT BID DEPOSIT - ONLY BID - INTEREST OF GOVERNMENT CONSIDERATION WHERE THE ONLY ACCEPTABLE BID FOR AN OIL AND GAS LEASE IS ACCOMPANIED BY AN INSUFFICIENT BID DEPOSIT, ACCEPTANCE WOULD NOT BE DISCRIMINATORY TO OTHER BIDDERS AND WOULD BIND THE BIDDER, REGARDLESS OF WHETHER OR NOT THERE WAS AN OFFER TO CORRECT THE DEFICIENCY, SO THAT THE ONLY FACTOR FOR CONSIDERATION IS THE INTEREST OF THE GOVERNMENT; THEREFORE, IF IT IS ADMINISTRATIVELY DETERMINED THAT ACCEPTANCE OF THE BID WILL BEST SERVE THE INTEREST OF THE GOVERNMENT, THE SECURITY DEFECT MAY BE WAIVED AND THE PRIOR REJECTION OF THE BID REGARDED AS ERRONEOUS.

TO THE SECRETARY OF THE INTERIOR, MAY 27, 1960:

WE REFER TO A LETTER OF MAY 10, 1960, WITH ENCLOSURES, SIGNED BY THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTING OUR OPINION AS TO THE ACCEPTABILITY OF BIDS SUBMITTED BY THE1/BRITISH-1AMERICAN OIL PRODUCING COMPANY FOR OIL AND GAS LEASES ON TRACTS LA-575 AND LA-577 SUBMITTED IN RESPONSE TO AN INVITATION FOR BIDS ISSUED PURSUANT TO SECTION 8 OF THE OUTER CONTINENTAL SHELF LANDS ACT, 67 STAT. 462, 43 U.S.C. 1337 (A), ADVERTISED AT 24 FED. REG. 10411.

THE INVITATION OR NOTICE OF SALE WAS DATED DECEMBER 16, 1959, AND REQUIRED THAT " A SEPARATE BID, IN A SEPARATE SEALED ENVELOPE, MUST BE SUBMITTED FOR EACH TRACT.' IT ALSO REQUIRED THAT THERE BE SUBMITTED WITH EACH BID ONE-FIFTH OF THE AMOUNT OF THE BID IN CASH, CASHIER'S CHECK, BANK DRAFT OR SIMILAR TYPE OF NEGOTIABLE INSTRUMENT. THE REQUIREMENTS OF THE NOTICE OF SALE REFERRED TO ABOVE ARE CONSISTENT WITH REQUIREMENTS IMPOSED BY REGULATION (43 C.F.R. 201.22).

THE BRITISH-AMERICAN OIL PRODUCING COMPANY SUBMITTED BIDS ON FOUR TRACTS: LA-575, LA-577, LA-578, AND LA-590. THE BONUSES OFFERED BY THE COMPANY FOR EACH TRACT WERE $265,000, $265,500, $2,620,000, AND $755,500, RESPECTIVELY. THE BIDS FOR THE LAST TWO ITEMS SUBMITTED BY BRITISH- AMERICAN WERE CORRECT IN EVERY RESPECT BUT WERE REJECTED BECAUSE HIGHER ACCEPTABLE BIDS WERE RECEIVED. THE BRITISH-AMERICAN BIDS WERE THE ONLY ACCEPTABLE BIDS SUBMITTED FOR THE FIRST TWO TRACTS BUT IN EACH CASE THE BID DEPOSIT SUBMITTED WAS LESS THAN THE 20 PERCENT REQUIRED. THE DEPOSIT OFFERED WITH THE BID FOR TRACT LA-575 WAS $51,100 OR $1,900 LESS THAN THE 20 PERCENT REQUIRED; THAT ACCOMPANYING THE BID ON TRACT LA-577 WAS ALSO $51,100 OR $2,000 LESS THAN THE AMOUNT REQUIRED. IT IS NOTED IN THE LETTER OF MAY 10 THAT IN EACH INSTANCE THE BRITISH-AMERICAN BID WAS ACCEPTABLE AND PROPER IN EVERY OTHER RESPECT AND INDEED WAS THE ONLY ACCEPTABLE BID RECEIVED FOR EACH OF THE TWO TRACTS.

BRITISH-AMERICAN OFFERED CASHIER'S CHECKS TO COVER THE DEFICIENCIES IN DEPOSITS PROMPTLY AFTER SUCH DEFICIENCIES WERE BROUGHT TO THEIR ATTENTION BUT THE TENDER WAS REFUSED, APPARENTLY ON THE BASIS OF OUR DECISION AT 38 COMP. GEN. 532, HOLDING THAT BID DEPOSIT REQUIREMENTS IN INVITATIONS FOR BIDS IN QUESTION, BRITISH-AMERICAN TENDERED CASHIER'S CHECKS IN THE FULL AMOUNT OF THE BONUS BIDS ON THE TWO TRACTS AND WE ARE ADVISED THAT THOSE CHECKS ARE BEING HELD BY THE BUREAU OF LAND MANAGEMENT, THE LEASING AGENCY, PENDING OUR DETERMINATION WITH RESPECT TO THE ACCEPTABILITY OF THE BRITISH-AMERICAN BIDS ON TRACTS LA-575, AND LA-577.

THE PRIMARY PURPOSE OF A BID BOND OR SECURITY DEPOSIT IS TO PROTECT THE GOVERNMENT AGAINST IRRESPONSIBLE OR IMPROVIDENT BIDDERS. THE BASIC OBJECTIVES OF THE REQUIREMENT FOR REJECTION OF A BID SUBMITTED WITHOUT THE EXACT SECURITY REQUIRED BY THE INVITATION ARE TO AVOID ANY POSSIBILITY OF DISCRIMINATION BETWEEN BIDDERS, TO PREVENT THE POSSIBILITY OF ATTEMPTS BY BIDDERS TO LEAVE THEMSELVES AN OPTION TO CORRECT THE DEFECTIVE SECURITIES, AND TO ELIMINATE THE ADMINISTRATIVE BURDEN OF DETERMINING AND EVALUATING THE FACTS INVOLVED IN EXCUSES ALLEGED BY NONCONFORMING BIDDERS. WHERE, AS IN THIS INSTANCE, THERE IS NO OTHER ACCEPTABLE BID, THERE IS NO QUESTION OF DISCRIMINATION; IF IT IS IN THE INTEREST OF THE GOVERNMENT TO WAIVE THE DEFICIENCY, THE ACCEPTANCE OF THE BID WILL BIND THE BIDDER WHETHER OR NOT HE OFFERS TO CORRECT THE DEFICIENCY OF SECURITY; AND THE REASONS FOR THE DEFICIENCY ARE OF NO MATERIALITY. THE INTEREST OF THE GOVERNMENT IS THE ONLY FACTOR LEFT FOR CONSIDERATION, AND IF IT BE ADMINISTRATIVELY CONSIDERED THAT ACCEPTANCE OF THE BID WILL BEST SERVE THAT INTEREST THE DEFECT IN THE SECURITY OFFERED MAY PROPERLY BE WAIVED.

IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE BIDS OF BRITISH AMERICAN OF TRACTS LA-575 AND LA-577 SHOULD NOT HAVE BEEN REJECTED BECAUSE OF THE DEFICIENCIES IN THE BID DEPOSITS AND THAT THE REJECTION MAY BE REGARDED AS HAVING BEEN ERRONEOUS.