B-143588, JULY 27, 1960, 40 COMP. GEN. 55

B-143588: Jul 27, 1960

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ETC. - OPENING - STATUTES PRECLUDING AWARD THE DELETION OF A RELATIVELY MINOR ITEM FROM THE SPECIFICATIONS AFTER BIDS ARE OPENED DUE TO A SUPERVENING CAUSE. WHICH IS NOT WITHIN THE CONTROL OF THE BIDDERS OR THE CONTRACTING AGENCY AND WHICH WOULD PRECLUDE AN AWARD IN STRICT CONFORMANCE WITH THE ORIGINAL SPECIFICATIONS. AFTER BIDS ARE OPENED. WE ARE ADVISED THAT BIDS WERE SOLICITED IN APRIL 1960 FOR CONSTRUCTION OF THE PROJECT BY AN INVITATION ISSUED IN STRICT CONFORMITY WITH THEN APPLICABLE STATUTES AND REGULATIONS. BIDS WERE OPENED ON MAY 24. AFTER OPENING THERE WAS ENACTED INTO LAW (ON JUNE 8. WHILE THE BIDS SOLICITED ON THE FORT DEVENS PROJECT WERE. AS IS CUSTOMARY FOR SUCH PROCUREMENTS.

B-143588, JULY 27, 1960, 40 COMP. GEN. 55

CONTRACTS - SPECIFICATIONS - CHANGES, ETC. - OPENING - STATUTES PRECLUDING AWARD THE DELETION OF A RELATIVELY MINOR ITEM FROM THE SPECIFICATIONS AFTER BIDS ARE OPENED DUE TO A SUPERVENING CAUSE, WHICH IS NOT WITHIN THE CONTROL OF THE BIDDERS OR THE CONTRACTING AGENCY AND WHICH WOULD PRECLUDE AN AWARD IN STRICT CONFORMANCE WITH THE ORIGINAL SPECIFICATIONS, WOULD NOT BE CHANGE WHICH WOULD VIOLATE THE COMPETITIVE BID SYSTEM. THE DELETION, AFTER BIDS ARE OPENED, OF ONE UNIT FROM THE SPECIFICATIONS FOR THE CONSTRUCTION OF A CAPEHART HOUSING PROJECT BECAUSE SUCH UNIT WOULD BE IN EXCESS OF A UNIT CEILING LIMITATION IMPOSED BY A STATUTE ENACTED SUBSEQUENT TO BID OPENING (SECTION 507 (C) OF THE ACT OF JUNE 8, 1960, WHICH AMENDED SECTION 803 (B) (3) (B) OF THE NATIONAL HOUSING ACT, 12 U.S.C. 1748B (B) (3) (B) (, AND THE REDUCTION FROM EACH LUMP-SUM BID OF AN AMOUNT BASED ON THE ESTIMATED REPLACEMENT COST OF THE OVERCEILING UNIT, WHICH REDUCTION REPRESENTS ONLY A SMALL PORTION OF THE ENTIRE COST AND WOULD NOT CHANGE THE RELATIVE POSITION OF THE BIDDERS, WOULD NOT VIOLATE THE COMPETITIVE BID SYSTEM, AND AN AWARD UNDER THE CHANGED SPECIFICATIONS WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT.

TO THE SECRETARY OF THE ARMY, JULY 27, 1960:

OUR ADVICE HAS BEEN REQUESTED BY LETTER OF JULY 21, 1960, AS TO THE PROPRIETY OF THE PROPOSED ACCEPTANCE OF THE LOW BID FOR THE CONSTRUCTION OF A 1,200 UNIT CAPEHART HOUSING PROJECT FOR FORT DEVENS, MASSACHUSETTS, UNDER THE CIRCUMSTANCES SET OUT BELOW.

WE ARE ADVISED THAT BIDS WERE SOLICITED IN APRIL 1960 FOR CONSTRUCTION OF THE PROJECT BY AN INVITATION ISSUED IN STRICT CONFORMITY WITH THEN APPLICABLE STATUTES AND REGULATIONS, AND BIDS WERE OPENED ON MAY 24, 1960. AFTER OPENING THERE WAS ENACTED INTO LAW (ON JUNE 8, 1960) SECTION 507 (C) OF PUBLIC LAW 86-500, 74 STAT. 186, 12 U.S.C. 1748B (B) (3) (B), WHICH AMENDS SECTION 803 (B) (3) (B) OF THE NATIONAL HOUSING ACT TO PROHIBIT AFTER DATE OF ENACTMENT THE CONTRACTING FOR ANY FAMILY UNIT AT A COST IN EXCESS OF $19,800. WHILE THE BIDS SOLICITED ON THE FORT DEVENS PROJECT WERE, AS IS CUSTOMARY FOR SUCH PROCUREMENTS, EXPRESSED ONLY IN A LUMP-SUM AMOUNT WITHOUT COST BREAKDOWN BY INDIVIDUAL UNIT, A REVIEW OF THE SPECIFICATIONS FOR THE PROJECT INDICATED THE PROBABILITY THAT ONE UNIT WOULD EXCEED THE NEWLY ENACTED COST LIMITATION. THE DIRECTOR, FEDERAL HOUSING ADMINISTRATION, ESTIMATED THE REPLACEMENT COST FOR THE UNIT IN QUESTION AT $28,097.

THE THREE LOW BIDS (INCLUDING ADDITIVES DECIDED UPON BY THE CONTRACTING AGENCY) AND THE FHA ESTIMATE OF REPLACEMENT COST ARE AS FOLLOWS:

CHART

BIDDER PRICE

(INCLUDING ADDITIVES)

BEACON-VOLPE ------------------------------------------ $18,857,830

TERMINAL ----------------------------------------------- 19,073,185

LUCARELLI ---------------------------------------------- 19,545,715

FHA ESTIMATE OF REPLACEMENT COST ----------------------- 20,713,336

AS CAN BE SEEN, THE LOW BID IS APPROXIMATELY $215,000 BELOW THE NEXT BID AND MORE THAN $1,850,000 BELOW THE FHA ESTIMATE OF REPLACEMENT COST. YOUR VIEW, AN AWARD ON THE BASIS OF THE EXISTING LOW BID WOULD BETTER SERVE THE INTERESTS OF THE GOVERNMENT THAN READVERTISING SINCE THE LATTER ALTERNATIVE WOULD DELAY THE START OF WORK UNTIL THE NEXT CONSTRUCTION SEASON (WHICH YOU INDICATE WILL UNDOUBTEDLY RESULT IN HIGHER PRICES) AND WOULD REQUIRE THE GOVERNMENT TO INCUR THE EXPENSE OF READVERTISING (APPROXIMATELY $15,000). FURTHER, AS HAS OFTEN BEEN NOTED, THE REJECTION OF ALL BIDS AFTER THEIR PUBLIC EXPOSURE WORKS A SERIOUS HARDSHIP ON THE LOW BIDDER AND ADVERSELY AFFECTS THE INTEGRITY OF THE COMPETITIVE BID SYSTEM. AS YOU STATE, HOWEVER, SECTION 507 (C) RENDERS AN AWARD ON THE BASIS OF A BID INCLUDING A UNIT COSTING IN EXCESS OF THE $19,800 LIMITATION OF DOUBTFUL VALIDITY. IN VIEW THEREOF AND OF THE ADVANTAGES TO BE OBTAINED BY THE GOVERNMENT IF AWARD IS NOT DELAYED, IT HAS BEEN PROPOSED BY THE CHIEF OF ENGINEERS TO ELIMINATE THE UNIT IN QUESTION FROM THE SPECIFICATIONS, REDUCE EACH BID BY THE ESTIMATED REPLACEMENT COST OF THAT UNIT AND MAKE AN AWARD FOR THE REMAINING 1,199 UNITS ON THE BASIS OF THE EXISTING BIDS AS THUS MODIFIED. YOU NOTE THAT THE CHANGE RECOMMENDED WILL REDUCE THE COST OF THE PROJECT BY ONLY 10.15 OF ONE PERCENT, AN AMOUNT SO MINOR AS NOT TO MAKE ANY MATERIAL EFFECT ON THE CONTRACTOR'S COSTS OF FINANCIAL ARRANGEMENTS.

THE PROBLEM PRESENTED RESULTS FROM A CHANGE IMPOSED BY SUPERVENING STATUTE, A FACTOR BEYOND THE CONTROL BOTH OF THE BIDDERS AND OF THE CONTRACTING AGENCY. THE QUESTION IS WHETHER A SOLUTION IN THE BEST INTERESTS OF THE GOVERNMENT CAN BE FOUND WHICH WILL NOT VIOLATE THE PRINCIPLES OF COMPETITIVE BIDDING AND WHICH IS CONSISTENT WITH THE PURPOSE OF THE STATUTE.

UNDER THE INVITATION AS ISSUED ALL BIDDERS COMPETED ON AN EQUAL BASIS. IF THE OVERCEILING ITEM IS DELETED IN THE CONSIDERATION OF ALL BIDS, THE BIDDERS STILL WILL BE ON AN EQUAL BASIS SO FAR AS CONCERNS THE ACTUAL WORK TO BE DONE. HOWEVER, THE AMOUNT INCLUDED BY EACH BIDDER IN HIS AGGREGATE BID AS THE PRICE FOR THAT UNIT UNDOUBTEDLY WAS NOT THE SAME, AND IF A UNIFORM DEDUCTION IS MADE FROM EACH BID IN ANTICIPATION OF DELETION OF THE UNIT, THE RESULT WILL LEAVE BIDDERS ON AN UNEQUAL BASIS AS FAR AS THE AMOUNTS OF THEIR BIDS ARE CONCERNED. IN THE USUAL CASE, WHERE SUCH A CHANGE IN THE SPECIFICATIONS IS SOUGHT TO BE IMPOSED OR AGREED TO AS THE RESULT SOLELY OF ACTION BY ONE OR BOTH OF THE PARTIES, AWARD ON THE BASIS OF THE CHANGED SPECIFICATIONS WOULD CONTRAVENE THE ESTABLISHED PRINCIPLES OF SEALED COMPETITIVE BIDDING. IN THE INSTANT CASE, DELETION OF THE OVERCEILING UNIT IS NECESSITATED BY A SUPERVENING CAUSE NOT WITHIN THE CONTROL OF BIDDERS OR THE CONTRACTING AGENCY. IN ADDITION, THE VALUE OF THE UNIT TO BE DELETED IS SO SMALL IN RELATION TO THE DIFFERENCE BETWEEN THE TWO BIDS AS TO ELIMINATE ANY POSSIBILITY THAT THE RELATIVE POSITION OF THE BIDDERS WOULD HAVE BEEN CHANGED IF THE PROJECT HAD BEEN ADVERTISED WITHOUT THAT UNIT. CONSEQUENTLY, DELETION OF THE OVERCEILING UNIT WOULD NOT, IN OUR VIEW, VIOLATE THE BASIC PRINCIPLES OF COMPETITIVE BIDDING.

UNDER THE UNUSUAL CIRCUMSTANCES PRESENT IN THE INSTANT CASE, INCLUDING THE FACT THAT AN INDEPENDENT SUPERVENING CAUSE PRECLUDES AWARD IN STRICT CONFORMANCE WITH THE ORIGINAL SPECIFICATIONS AND THE RELATIVELY MINOR CHANGE INVOLVED, WE BELIEVE THAT THE INTEGRITY OF THE COMPETITIVE BID SYSTEM WILL BEST BE SERVED BY AWARD ON THE BASIS PROPOSED IN THE LETTER OF JULY 21, 1960, AND WE WILL RAISE NO OBJECTION TO SUCH ACTION.