B-144487, NOV. 28, 1960

B-144487: Nov 28, 1960

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED NOVEMBER 18. ALLEGES THAT A MISTAKE WAS MADE IN THE PRICES QUOTED FOR DETENTION AND STANDBY TIME UNDER SCHEDULES II (C) 2 AND II (C) 6. THE AMOUNT OF ITS BID REPRESENTS THE LOWEST COST FOR WHICH THE SERVICES CAN BE RENDERED AND THAT ANY LOWER PRICE IS UNREALISTIC AND IS BELOW COST AND. WILL RESULT IN A CONTRACT WHICH WILL BE CANCELED UNDER THE 60 DAY CANCELLATION CLAUSE IN THE CONTRACT. BIDDERS WERE PERMITTED TO BID ON THE BASIS OF EITHER OR BOTH SCHEDULE I AND SCHEDULE II. THE BIDS ARE TO BE EVALUATED FOR PURPOSES OF AWARD ON THE BASIS OF UNIT PRICES. A PRE-AWARD SURVEY MAY BE MADE BY THE CONTRACTING OFFICER WHICH WILL INQUIRE INTO ALL PHASES AND INCIDENTS OF THE BIDDER'S BUSINESS AND OPERATIONS TO DETERMINE THAT THE BIDDER HAS THE TECHNICAL.

B-144487, NOV. 28, 1960

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED NOVEMBER 18, 1960, FROM THE CHIEF, CONTRACTS DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, REQUESTING A DECISION AS TO THE ACTION THAT SHOULD BE TAKEN WITH RESPECT TO THE BID OF ATLANTIC AND GULF STEVEDORES, INC., SUBMITTED IN RESPONSE TO INVITATION FOR BIDS NO. TC-16-143-61-21 FOR STEVEDORING SERVICES TO BE PERFORMED AT NEW ORLEANS, LOUISIANA, DURING THE PERIOD BEGINNING NOVEMBER 30, 1960, AND ENDING SEPTEMBER 30, 1962.

ATLANTIC AND GULF STEVEDORES, INC., THE LOW BIDDER, ALLEGES THAT A MISTAKE WAS MADE IN THE PRICES QUOTED FOR DETENTION AND STANDBY TIME UNDER SCHEDULES II (C) 2 AND II (C) 6. THE BIDDER REQUESTS CORRECTION OF SUCH PRICES.

THE NEW ORLEANS STEVEDORING COMPANY PROTESTS AN AWARD TO THE LOW BIDDER IN SUBSTANCE ON THE BASIS THAT, FROM YEARS OF EXPERIENCE GAINED IN PERFORMING THE SERVICES INVOLVED, THE AMOUNT OF ITS BID REPRESENTS THE LOWEST COST FOR WHICH THE SERVICES CAN BE RENDERED AND THAT ANY LOWER PRICE IS UNREALISTIC AND IS BELOW COST AND, IF ACCEPTED, WILL RESULT IN A CONTRACT WHICH WILL BE CANCELED UNDER THE 60 DAY CANCELLATION CLAUSE IN THE CONTRACT, AFTER A SHORT TERM OF OPERATION AT A LOSS.

THE INVITATION REQUIRED BIDDERS TO QUOTE PRICES FOR PERFORMING VARIOUS SERVICES ON A COMMODITY (TONNAGE) AND TIME (HOURLY) BASIS TOGETHER WITH A LUMP SUM AMOUNT FOR FIXED CHARGES. BIDDERS WERE PERMITTED TO BID ON THE BASIS OF EITHER OR BOTH SCHEDULE I AND SCHEDULE II. THE BIDS ARE TO BE EVALUATED FOR PURPOSES OF AWARD ON THE BASIS OF UNIT PRICES, UNIT DOLLAR AMOUNTS AND OVER ALL GROSS DOLLAR AMOUNT OF EITHER SCHEDULE I OR SCHEDULE II, ON ESTIMATED TONNAGE AND HOURS FOR A ONE YEAR PERIOD.

PARAGRAPHS 14 AND 16 OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS PROVIDE AS FOLLOWS:

"14. PRE AWARD SURVEY. A PRE-AWARD SURVEY MAY BE MADE BY THE CONTRACTING OFFICER WHICH WILL INQUIRE INTO ALL PHASES AND INCIDENTS OF THE BIDDER'S BUSINESS AND OPERATIONS TO DETERMINE THAT THE BIDDER HAS THE TECHNICAL, ADMINISTRATIVE AND FINANCIAL CAPABILITIES TO PERFORM THE CONTRACT. THE SURVEY WILL, INCLUDE EVALUATION OF BIDDERS' STATEMENT TO ITEMS LISTED IN PERFORMANCE RECORD AND A DETERMINATION OF UNSATISFACTORY CAPABILITY WILL BE CAUSE FOR REJECTION OF THE BID.'

"16. DATA TO BE FURNISHED BY SUCCESSFUL BIDDER. THE SUCCESSFUL BIDDER WILL FURNISH THE CONTRACTING OFFICER AN ACCOUNTING ANALYSIS ON THE DAY OF THE AWARD WHICH WILL SET OUT IN COMPLETE DETAIL THE ACCOUNTING DATA AND COMPUTATIONS USED BY THE BIDDER TO DETERMINE HIS ESTIMATED EFFICIENCY RATE IN THE PERFORMANCE OF THIS CONTRACT, TO INCLUDE THE BIDDER'S COMPUTATION OF THE COST APPORTIONED FOR LABOR IN EACH COMMODITY ITEM. CONTRACTOR WILL ALSO FURNISH COPIES OF ALL COLLECTIVE BARGAINING AGREEMENTS USED AS A BASIS FOR COMPUTING THE BID PRICE IN HIS INVITATION. THIS INFORMATION WILL BE CONFIDENTIAL.'

GP 12A. OF SECTION 1 OF THE GENERAL PROVISIONS, PRICE ESCALATION, PROVIDES AS FOLLOWS:

"THE CONTRACTOR WARRANTS THAT THE PRICES SET FORTH IN THIS CONTRACT ARE BASED UPON THE WAGE RATES, ALLOWANCES AND CONDITIONS AS SET FORTH IN THE COLLECTIVE BARGAINING AGREEMENTS BETWEEN IT AND ITS DIRECT LABOR EMPLOYEES WHICH ARE IN EFFECT AS OF THE DATE OF THIS INVITATION AND FURTHER WARRANTS THAT THE PRICES HEREIN DO NOT INCLUDE ANY ALLOWANCE FOR ANY INCREASE OF ITS COSTS TO PERFORM THE CONTRACT THAT MAY RESULT FROM ANY MODIFICATION/S) OF SAID COLLECTIVE BARGAINING AGREEMENTS THEREAFTER MADE EFFECTIVE.'

THE ABSTRACT OF BIDS SHOWS THAT, AS EVALUATED FOR PURPOSES OF AWARD PURSUANT TO THE TERMS OF THE INVITATION, THE BIDS RECEIVED ARE AS FOLLOWS:

TABLE

BIDDER AGGREGATE BID

------ -------------- ATLANTIC AND GULF STEVEDORES, INC. $2,807,573.28 (SCHEDULE II) NEW ORLEANS STEVEDORING CO. $2,883,613.57 NET (SCHEDULE II/* WHITEHALL TERMINAL CORP. $2,907,961.60 (SCHEDULE I) GULF STEVEDORES CORP.

$3,434,146.03 (SCHEDULE II)

(*) ($2,957,552.38 LESS 2 1/2 PERCENT - 10 DAY).

AS REQUIRED BY THE INVITATION. ATLANTIC AND GULF STEVEDORES, INC., STATED IN ITS BID THAT IT IS A SELF-INSURER FOR WORKMEN'S COMPENSATION INSURANCE UP TO $25,000 AND REPRESENTS AND WARRANTS THAT THE RATES AND PRICES SET FORTH IN THE BID ARE BASED UPON WAGE RATES AND WORKING CONDITIONS IN EFFECT ON OCTOBER 1, 1960, AS EVIDENCED IN BARGAINING AGREEMENTS BETWEEN I.L.A. UNIONS AND THE STEAMSHIP ASSOCIATION OF WHICH IT IS A PARTICIPATING MEMBER.

THE CONTRACTING OFFICER REPORTS THAT AFTER THE OPENING OF THE BIDS ON NOVEMBER 4, 1960, HE IMMEDIATELY BEGAN TO ANALYZE THE VARIOUS BIDS RECEIVED AND, FROM A COMPARISON OF THE VARIOUS TOTALS, IT APPEARED THAT ATLANTIC AND GULF STEVEDORES, INC., WAS THE LOW BIDDER. HE, THEREFORE, CONCENTRATED ON AN ANALYSIS OF THAT COMPANY'S BID AND REQUESTED IT TO FURNISH HIM WITH THE INFORMATION REQUIRED AND TO PERMIT HIM TO MAKE A PRE- AWARD SURVEY. DURING THE ANALYSIS OF THE BID THE CONTRACTING OFFICER NOTED THAT ATLANTIC AND GULF STEVEDORES HAD QUOTED RATES FOR LABOR FOR DETENTION AND STANDBY TIME UNDER SCHEDULES I (C) 2 AND II (C) 6 WHICH WERE BELOW ACTUAL COST FOR THE ITEMS. ON NOVEMBER 5, THE CONTRACTING OFFICER REQUESTED ATLANTIC AND GULF STEVEDORES TO CONFIRM THE RATES QUOTED. NOVEMBER 6 THE BIDDER ADVISED THAT AN ERROR WAS MADE IN THE BID IN THE RATES QUOTED UNDER THE TWO SCHEDULES AND THEREAFTER VARIOUS AFFIDAVITS OF INDIVIDUALS WHO HAD ASSISTED IN PREPARING THE BID AND WORKSHEETS SHOWING VARIOUS COMPUTATIONS WERE SUBMITTED. ATLANTIC AND GULF STEVEDORES REQUESTED CORRECTION OF ITS BID TO REFLECT ITS INTENDED PRICES UNDER THE TWO SCHEDULES.

THE EVIDENCE SUBMITTED DISCLOSES THAT ATLANTIC AND GULF STEVEDORES PREPARED ITS BID ORIGINALLY IN THE CITY OF NEW ORLEANS AND THAT TWO INDIVIDUALS THEN TOOK THE PAPERS TO ITS NEW YORK OFFICE FOR REVIEW. NEW YORK IT WAS DETERMINED THAT A LOWER RATE COULD BE USED FOR WORKMEN'S COMPENSATION INSURANCE FOR DETENTION AND STANDBY TIME, SINCE LONGSHOREMEN ON STANDBY WERE NOT SUBJECT TO THE HIGH INJURY RISK THAT IS APPLICABLE TO LONGSHOREMEN ENGAGED IN PERFORMING THEIR NORMAL DUTIES. THEY ALSO REVIEWED OTHER FACTORS CONNECTED WITH THE LABOR COSTS. HOWEVER, SUCH COSTS WERE BASED ON ACTUAL HOURLY LABOR COSTS, EXCLUSIVE OF FRINGE BENEFITS. THE FRINGE BENEFITS OF $0.52 PER HOUR FOR FOREMEN AND $0.48 PER HOUR FOR THE OTHER CATEGORIES INVOLVED, EXCEPT TIMEKEEPERS, WHILE LABOR COSTS, WERE NOT INVOLVED AS THEY ARE FIXED AND ARE PAID TO THE NEW ORLEANS STEAMSHIP ASSOCIATION RATHER THAN TO THE LONGSHOREMEN PURSUANT TO UNION AGREEMENTS. AFTER ARRIVING AT A PERCENTAGE TO COVER INSURANCE AND TAXES ON THE BASIS OF ACTUAL LABOR COSTS, THE FRINGE BENEFITS COST WAS INADVERTENTLY OMITTED, RESULTING IN AN UNDERSTATEMENT OF HOURLY LABOR COSTS OF $0.52 PER HOUR FOR FOREMEN AND $0.48 PER HOUR FOR THE OTHER CATEGORIES, EXCEPT TIMEKEEPERS.

THE EVIDENCE SHOWS THAT THE FRINGE BENEFITS COSTS WERE INCLUDED IN THE WORK SHEETS FOR LABOR COSTS UNDER OTHER SCHEDULES AND WERE INCLUDED ORIGINALLY IN THE NEW ORLEANS WORK SHEETS UNDER SCHEDULES II (C) 2 AND II (C) 6. OBVIOUSLY THE RATES INTENDED TO BE QUOTED UNDER THE TWO SCHEDULES WERE TO SUBSTANTIALLY ALL ACTUAL DIRECT LABOR COSTS, WHEREAS THE RATES QUOTED ARE BELOW THE COST OF LABOR UNDER UNION AGREEMENTS. THUS, THERE APPEARS NO DOUBT THAT AN ERROR WAS MADE IN THE RATES QUOTED BY ATLANTIC AND GULF STEVEDORES UNDER THE TWO SCHEDULES. FURTHERMORE, THE FACTS AND CIRCUMSTANCES INVOLVED SHOW CLEARLY WHAT RATES WOULD HAVE BEEN QUOTED BUT FOR THE ERROR.

YOU ARE ADVISED, THEREFORE, THAT HOURLY RATES QUOTED BY ATLANTIC AND GULF STEVEDORES, INC., IN ITS BID UNDER SCHEDULE II (C) 2 FOR FOREMEN (LONGSHORE) MAY BE INCREASED BY $0.52 PER HOUR, AND THE RATES FOR THE OTHER CATEGORIES BY $0.48 PER HOUR, EXCEPT THE RATE FOR TIMEKEEPERS, WHICH WILL REMAIN AT $2.69 PER HOUR. UNDER SCHEDULE II (C) 6, THE RATE FOR FOREMEN (CARPENTER) MAY BE INCREASED BY $0.52 PER HOUR AND THE OTHER CATEGORIES BY $0.48 PER HOUR. THE TOTAL INCREASE AMOUNTS TO $17,087.36 AND THE BID, AS CORRECTED, IS STILL LOW BY ALMOST $59,000 (YEARLY).

IT WAS DETERMINED THAT THE SERVICES HERE INVOLVED SHOULD BE FORMALLY ADVERTISED FOR BIDS IN ORDER TO INVITE AND ENCOURAGE COMPETITION AND TO AFFORD ALL RESPONSIBLE BIDDERS AN OPPORTUNITY TO BID FOR PERFORMING THE SERVICES. IT IS REPORTED THAT ATLANTIC AND GULF STEVEDORES, INC., IS A RESPONSIBLE BIDDER AND THAT ITS BID IS CONSIDERED TO BE A REALISTIC BID FOR PERFORMING THE SERVICES. IN VIEW OF SUCH DETERMINATIONS, WE CAN SEE NO MERIT TO THE PROTEST OF NEW ORLEANS STEVEDORING COMPANY. THE FACT THAT ATLANTIC AND GULF STEVEDORES TERMINATED A CONTRACT FOR PERFORMING THE SAME SERVICE AFTER SEVERAL MONTHS OF OPERATION, WHICH UNDER THE TERMS OF THE CONTRACT IT HAD THE LEGAL RIGHT TO DO, CANNOT BE HELD AGAINST IT. THE GOVERNMENT IS UNDER NO OBLIGATION TO PROVE THE EFFICIENCY OF VARIOUS BIDDERS OR THE COSTS FOR WHICH THE SERVICES CAN BE PERFORMED, THESE BEING FACTORS WHICH ARE PRIMARILY UP TO THE BIDDER. THIS DOES NOT MEAN, HOWEVER, THAT THE GOVERNMENT MAY NOT PROPERLY CONSIDER WHETHER THERE IS A REASONABLE EXPECTANCY THAT A BIDDER, EVEN THOUGH OTHERWISE RESPONSIBLE, WILL BE ABLE TO PERFORM THE CONTRACT FOR THE WHOLE PERIOD WITHOUT CANCELLATION.

IN THE CIRCUMSTANCES OF THIS CASE, WE SEE NO BASIS TO OBJECT TO AN AWARD TO ATLANTIC AND GULF STEVEDORES, INC., AS RECOMMENDED, ON THE BASIS OF ITS CORRECTED BID.