B-143416, SEP. 7, 1960

B-143416: Sep 7, 1960

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YOU HAVE. IT WAS FOUND THAT THE LOW BID IN THE AMOUNT OF $199. 648.32 WAS SUBMITTED BY DONALD J. THE SECOND LOW BID WAS THAT OF CONSOLIDATED CONSTRUCTORS. ALTHOUGH SOME QUESTION WAS RAISED WITH RESPECT TO THE TIMELY DISPATCH OF ACKNOWLEDGMENT OF ADDENDA. IT WAS ULTIMATELY CONCLUDED THAT THE LOW BID WAS PROPER EXCEPT THAT QUESTIONS WERE RAISED AS TO THE AUTHORITY OF THE INDIVIDUAL SIGNING THE BID TO BIND THE CORPORATION BY SUCH SIGNATURE AND THE FAILURE TO COMPLETE THE CERTIFICATE ON THE BACK OF THE BID BOND WHEREBY AN OFFICER OF THE CORPORATE PRINCIPAL CERTIFIES THAT THE INDIVIDUAL SIGNING THE BOND ON BEHALF OF THE CORPORATION IS AUTHORIZED TO PERFORM THAT ACT. IT WAS FOUND THAT THE INDIVIDUAL WHO SIGNED THE BID AND THE BID BOND ON BEHALF OF THE CORPORATION COULD BE AUTHORIZED TO BIND THE CORPORATION BY SUCH ACT ONLY BY A RESOLUTION OF THE BOARD OF DIRECTORS AND NO SUCH RESOLUTION HAD BEEN ADOPTED AT THE TIME OF BID OPENING ALTHOUGH THE ACT OF THE SIGNING INDIVIDUAL WAS RATIFIED BY THE BOARD OF DIRECTORS SOMETIME AFTER BID OPENING.

B-143416, SEP. 7, 1960

TO SOLMAN AND SOLMAN:

ON BEHALF OF DONALD J. GUY, INC., YOU HAVE, BY LETTER OF JULY 1, 1960, WITH ENCLOSURE, PROTESTED THE REJECTION OF THAT FIRM'S LOW BID SUBMITTED IN RESPONSE TO INVITATION NO. ENG-19-016-60-82, ISSUED MAY 5, 1960, BY THE AREA ENGINEER, PORTLAND, MAINE, FOR THE CONSTRUCTION OF AN UNMANNED GAP FILLER FACILITY, DEPOT MOUNTAIN, MAINE.

UPON BID OPENING ON MAY 26, 1960, IT WAS FOUND THAT THE LOW BID IN THE AMOUNT OF $199,648.32 WAS SUBMITTED BY DONALD J. GUY, INC. THE SECOND LOW BID WAS THAT OF CONSOLIDATED CONSTRUCTORS, INC., AT $207,294.

ALTHOUGH SOME QUESTION WAS RAISED WITH RESPECT TO THE TIMELY DISPATCH OF ACKNOWLEDGMENT OF ADDENDA, IT WAS ULTIMATELY CONCLUDED THAT THE LOW BID WAS PROPER EXCEPT THAT QUESTIONS WERE RAISED AS TO THE AUTHORITY OF THE INDIVIDUAL SIGNING THE BID TO BIND THE CORPORATION BY SUCH SIGNATURE AND THE FAILURE TO COMPLETE THE CERTIFICATE ON THE BACK OF THE BID BOND WHEREBY AN OFFICER OF THE CORPORATE PRINCIPAL CERTIFIES THAT THE INDIVIDUAL SIGNING THE BOND ON BEHALF OF THE CORPORATION IS AUTHORIZED TO PERFORM THAT ACT. AFTER DISCUSSION AND CORRESPONDENCE BETWEEN YOU, AS REPRESENTATIVES OF THE LOW BIDDER, AND VARIOUS COMPONENTS OF THE CORPS OF ENGINEERS, IT WAS FOUND THAT THE INDIVIDUAL WHO SIGNED THE BID AND THE BID BOND ON BEHALF OF THE CORPORATION COULD BE AUTHORIZED TO BIND THE CORPORATION BY SUCH ACT ONLY BY A RESOLUTION OF THE BOARD OF DIRECTORS AND NO SUCH RESOLUTION HAD BEEN ADOPTED AT THE TIME OF BID OPENING ALTHOUGH THE ACT OF THE SIGNING INDIVIDUAL WAS RATIFIED BY THE BOARD OF DIRECTORS SOMETIME AFTER BID OPENING. BECAUSE OF THE LACK OF AUTHORITY IN THE INDIVIDUAL WHO SIGNED THE BID AND THE BID BOND TO BIND THE CORPORATION IT WAS DETERMINED THAT THE LOW BID COULD NOT BE CONSIDERED FOR AWARD. THE CONTRACT WAS AWARDED TO THE SECOND LOW BIDDER ON JUNE 28, 1960, AND NOTICE TO PROCEED WAS ISSUED TO THE CONTRACTOR ON JULY 7, 1960. SINCE, UNDER THE TERMS OF THE INVITATION AND THE CONTRACT, THE WORK MUST BE COMPLETED NOT LATER THAN 240 CALENDAR DAYS AFTER RECEIPT OF NOTICE TO PROCEED, WE ASSUME THAT A SUBSTANTIAL START HAS BEEN MADE ON THE OPERATION BY THE CONTRACTOR.

IN AN ENCLOSURE DATED JUNE 10 TO YOUR LETTER OF JULY 1, 1960, YOU POINT OUT THAT THE LOW BIDDER IS A CLOSED CORPORATION ALMOST ENTIRELY OWNED AND CONTROLLED BY MR. DONALD GUY, WHO SOMETIMES BIDS ON CONSTRUCTION JOBS AS AN INDIVIDUAL AND AT OTHER TIMES IN THE NAME OF THE CORPORATION. YOU FURTHER NOTE THAT THE SUPERINTENDENT WHO SIGNED THE BID IN QUESTION ON BEHALF OF THE CORPORATION HAS OFTEN DONE THE SAME IN THE PAST, INCLUDING BIDS SUBMITTED FOR CONSTRUCTION WORK FOR AIR FORCE INSTALLATIONS, AND THAT NO QUESTION HAS PREVIOUSLY BEEN RAISED WITH RESPECT TO THAT INDIVIDUAL'S AUTHORITY. NEITHER HAS ANYONE QUESTIONED THE VALIDITY OF AN AWARD TO THE CORPORATION ON A BID SIGNED BY THAT INDIVIDUAL. YOU NOTE FURTHER THAT AFTER THE AUTHORITY OF THE INDIVIDUAL WAS QUESTIONED IN THIS MATTER, A POWER OF ATTORNEY TO SIGN CONTRACTS AND BIDS IN A SUM NOT EXCEEDING $300,000 WAS GIVEN TO THE INDIVIDUAL AND THAT INDIVIDUAL WAS EMPOWERED BY RESOLUTION OF THE BOARD OF DIRECTORS TO PERFORM SUCH ACTS.

THE BID SUBMITTED IN RESPONSE TO A GOVERNMENT INVITATION FOR BIDS IS, IN THE USAGE OF COMMERCIAL LAW, AN OFFER WHICH UPON PROPER ACCEPTANCE RIPENS INTO A CONTRACT BINDING UPON THE PARTIES. IT HAS LONG BEEN HELD THAT A BIDDER ON A GOVERNMENT CONTRACT MAY NOT, NOTWITHSTANDING THE GENERAL LAW ON THE SUBJECT, WITHDRAW HIS BID AFTER OPENING FOR THE PERIOD PROVIDED IN THE BID. REFINING ASSOCIATES V. UNITED STATES, 124 CT.CL. 115; SCOTT V. UNITED STATES, 44 CT.CL. 524. ONE OF THE REASONS FOR THIS IS THAT THE COMPETITIVE BID SYSTEM WOULD LOSE MOST OR ALL OF ITS ADVANTAGES IF BIDDERS HAD THE OPPORTUNITY AFTER THE BIDS OF THEIR COMPETITORS HAD BEEN REVEALED TO DECIDE TO WITHDRAW THEIR BIDS. WE THINK THAT THE UNITED STATES WOULD SUFFER THE SAME DISADVANTAGE IF BIDS SUBMITTED ON BEHALF OF A CORPORATION OR INDIVIDUAL BY SOMEONE NOT AUTHORIZED SO TO DO COULD AFTER OPENING BE ADOPTED AS THE ACT OF THE APPARENT BIDDER BY RATIFICATION. ACCORDINGLY, IN OUR VIEW THE BID OF DONALD J. GUY, INC., COULD NOT PROPERLY BE CONSIDERED FOR AWARD UNLESS THE BID, IN THE FORM IT WAS SUBMITTED, CONSTITUTED A VALID OFFER BY THE CORPORATION WHICH UNDER THE LAW PERTAINING TO GOVERNMENT CONTRACTS IT COULD NOT DISAVOW AND WHICH, UPON ACCEPTANCE WITHIN THE PROPER TIME, WOULD RIPEN INTO A CONTRACT BINDING UPON THE CORPORATION NOTWITHSTANDING ANY ACTION OR LACK THEREOF ON THE PART OF THE OFFICERS OR DIRECTORS THEREOF.

AS INDICATED PREVIOUSLY, THE INDIVIDUAL IN QUESTION COULD BE GIVEN THE AUTHORITY TO SIGN BIDS AND BID BONDS ON BEHALF OF THE CORPORATION ONLY BY RESOLUTION OF THE BOARD OF DIRECTORS. HOWEVER, IN MANY JURISDICTIONS INCLUDING THE STATE OF MAINE, WHERE STATUTES GOVERNING THE OPERATION OF CORPORATIONS DO NOT PROHIBIT, THE AUTHORITY OF AN AGENT OF A CORPORATION MAY, WITH RESPECT TO THIRD PARTIES, BE INFERRED FROM THE CONDUCT OF ITS OFFICERS OR FROM THEIR KNOWLEDGE OF, AND FAILURE TO OBJECT TO, THE ACTIVITIES OF SUCH AGENT. MCKENZIE V. WEBBER HOSPITAL ASSOCIATION, 76 A. 704. SUCH APPARENT AUTHORITY MAY AS WELL BIND THE CORPORATION WITH RESPECT TO THIRD PARTIES AS THE PROPERLY AUTHORIZED ACTS OF OFFICERS OR AGENTS. THE THIRD PARTY MAY NOT, HOWEVER, RELY ON THE APPARENT AUTHORITY OF THE AGENT WHEN SUCH THIRD PARTY IS AWARE OF THE AGENT'S ACTUAL AUTHORITY. AMERICAN NATIONAL BANK OF SAPULPA V. BARLETT, 40 F.2D 21.

IN THIS INSTANCE IT MAY WELL BE THAT THE LOW BIDDER COULD HAVE BEEN BOUND UPON ITS BID IF THE CONTRACTING AGENCY HAD KNOWN OF AND RELIED UPON THE APPARENT AUTHORITY, INDICATED BY SIMILAR PRIOR ACTS OF THE AGENT, BEFORE BECOMING AWARE OF THE ACTUAL LIMITATIONS ON THE INDIVIDUAL'S AUTHORITY. IN THIS CONNECTION, HOWEVER, IT SHOULD BE NOTED THAT APPARENT AUTHORITY IS A QUESTION OF FACT. ADAMS V. HERALD PUBLISHING COMPANY, 74 A. 755. THUS, A JURY CONSIDERING THE MATTER, SHOULD LITIGATION ARISE, MIGHT WELL ACCEPT A DIFFERENT VERSION OF THE FACTS AND CONCLUDE THAT THE AWARD MADE BY A CONTRACTING OFFICER IN RELIANCE ON AN AGENT'S APPARENT AUTHORITY DID NOT RESULT IN A BINDING CONTRACT. WE THINK, THEREFORE, THAT UNLESS THE APPARENT AUTHORITY IS SO CLEAR AS HARDLY TO ALLOW OF QUESTION THE CONTRACTING OFFICER WOULD BE PLACED IN A MOST UNFAIR POSITION IF HE IS REQUIRED TO ACCEPT BIDS IN RELIANCE UPON AN AGENT'S APPARENT AUTHORITY. SEE 15 COMP. GEN. 566.

IN ANY CASE THAT QUESTION DOES NOT ARISE HERE. NOTWITHSTANDING ANY APPARENT AUTHORITY, THE CONTRACTING OFFICER WAS IN FACT AWARE OF THE LIMITATION UPON THE AGENT'S ACTUAL AUTHORITY. THE LAW IS CLEAR THAT UNDER SUCH CIRCUMSTANCES THE APPARENT BIDDER COULD NOT BE BOUND BY THE BID. CONSIDER THE BID WOULD IN EFFECT GIVE THE CORPORATION AN OPTION TO RATIFY THE BID OR REFUSE THE AWARD. FOR THE REASONS STATED BEFORE SUCH OPTION IS INCOMPATIBLE WITH THE PURPOSES OF THE COMPETITIVE BID SYSTEM. IN THE CIRCUMSTANCES, WE MUST CONCLUDE THAT THE ACTION OF THE CONTRACTING OFFICE IN REJECTING THE LOW BID WAS PROPER. IN VIEW OF OUR CONCLUSION, IT DOES NOT APPEAR NECESSARY TO CONSIDER THE FAILURE OF THE LOW BIDDER TO FURNISH THE CERTIFICATION REQUIRED ON THE BACK OF THE BID BOND FORM EXCEPT TO NOTE THAT NEITHER THE BID BOND NOR ANYTHING ELSE SUBMITTED WITH THE BID COULD BE REGARDED AS CURING THE DEFECT IN THE BID. CF. 17 COMP. GEN. 497.