B-144631, DEC. 22, 1960

B-144631, DEC. 22, 1960

TO MR. WILLIAM L. EWALD, CHIEF, SUPPLY DIVISION, VETERANS ADMINISTRATION HOSPITAL:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 12, 1960, FILE 5104/134, REQUESTING A DECISION AS TO WHETHER AWARD OF A CONTRACT FOR SUPPLYING DAIRY PRODUCTS FOR A SIX-MONTH PERIOD MAY BE MADE IN THE MANNER OUTLINED IN YOUR LETTER.

THE INVITATION FOR BIDS--- TO BE OPENED DECEMBER 7, 1960--- REQUESTED BIDS FOR FURNISHING 12 ITEMS OF DAIRY PRODUCTS TO THE HOSPITAL DURING A PERIOD OF THREE MONTHS BEGINNING WITH JANUARY 1, 1961, AND IN THE QUANTITIES AS LISTED IN THE INVITATION. BIDS WERE REQUESTED ALSO FOR A PERIOD OF SIX MONTHS BEGINNING WITH JANUARY 1, 1961. PARAGRAPH 12 OF THE TERMS AND CONDITIONS OF THE INVITATION PROVIDED THAT ALL ITEMS WOULD BE AWARDED IN THE AGGREGATE BUT THE RIGHT WAS RESERVED TO CANCEL ANY ITEM OR ITEMS AFTER BIDS WERE OPENED AND BEFORE MAKING AWARD. AS TO DELIVERY OF THE DAIRY PRODUCTS FOR THE THREE-MONTH PERIOD, SIX BIDS WERE RECEIVED WHILE ONLY FIVE BIDS WERE RECEIVED ON DELIVERY FOR THE SIX-MONTH PERIOD. ADOHR MILK FARMS, INC., QUOTED FIRM PRICES ON ALL ITEMS EXCEPT ON ITEM 156 WHICH CALLED FOR DELIVERY OF 90 POUNDS OF BUTTER FOR THREE MONTHS AND 180 POUNDS FOR SIX MONTHS AND ON THIS ITEM IT QUOTED "4 CENTS UNDER MARKET.' ADOHR QUALIFIED ITS BID BY INSERTING THE PHRASE "ALL OR NONE.' EXCLUDING ITEM 156 FROM CONSIDERATION, THE AGGREGATE BID OF ADOHR IS STATED TO BE $2,472.49 LESS THAN THE NEXT LOWEST BIDDER IF COMPUTED ON A SIX-MONTH BASIS. THE OTHER BIDS ON ITEM 156 RANGED FROM $0.62 TO $0.70 PER POUND.

YOU STATE THAT IT WOULD BE TO THE BEST INTEREST OF THE GOVERNMENT TO CANCEL ITEM 156 AND MAKE THE AWARD OF THE BALANCE OF THE ITEMS TO ADOHR, LEAVING THE PURCHASE OF BUTTER (ITEM 156) TO BE MADE IN THE OPEN MARKET AS NEEDED. YOU REQUEST A DECISION AS TO WHETHER AN AWARD IN THIS MANNER ,WOULD VIOLATE THE COMPETITIVE BID PROCESSES IN VIEW OF THE FACT THAT ADOHR MILK FARMS, INC. QUALIFIED THEIR BID BY INSERTING THE PHRASE "ALL OR NONE.'" ADOHR HAS ADVISED THAT IT DOES NOT OBJECT TO AN AWARD BY EXCLUDING ITEM 156.

WITH REGARD TO THE MATTER AS TO WHETHER AN AWARD MAY PROPERLY BE MADE TO ADOHR ON A BASIS DIFFERENT FROM THAT ON WHICH IT SUBMITTED ITS BID, IT HAS BEEN HELD BY OUR OFFICE THAT A BIDDER WHO BIDS ON AN ALL OR-NONE BASIS MAY NOT WAIVE THE QUALIFICATION AFTER THE BIDS HAVE BEEN OPENED. SEE 34 COMP. GEN. 82. THE QUALIFICATION BY ADOHR OF ITS BID THAT IT WOULD ACCEPT NOTHING LESS THAN AWARD OF A CONTRACT FOR ALL THE ITEMS CANNOT BE TREATED AS AN INFORMALITY WHICH CAN BE WAIVED BY THE CONTRACTING OFFICER IN MAKING AWARD. SEE 17 COMP. GEN. 554; 30 ID. 179. CONSEQUENTLY, AWARD MAY NOT BE MADE TO ADOHR ON THE BASIS OF ELIMINATING ITEM 156 THEREFROM AND PURCHASING THAT ITEM IN THE OPEN MARKET.

WHILE THE BID OF ADOHR ON ITEM 156 (180 POUNDS OF BUTTER FOR A SIX MONTH PERIOD) IS NOT A FIRM PRICE, IT IS FAIRLY DEFINITE OF ASCERTAINMENT. ITS STATEMENT THAT IT WAS QUOTING FOUR CENTS PER POUND UNDER THE MARKET PRICE OF BUTTER MUST BE REGARDED AS MEANING THAT THE PRICE TO BE CHARGED WOULD BE FOUR CENTS UNDER THE MARKET QUOTATION FOR BUTTER ON THE DAY OF SHIPMENT OR DELIVERY. THIS IS IN THE NATURE OF AN ESCALATION IN PRICE. OUR OFFICE HAS HELD THAT A BID CONTAINING AN ESCALATION PROVISION UNDER WHICH NO MAXIMUM CEILING HAS BEEN FIXED MAY NEVERTHELESS BE CONSIDERED AND EVALUATED WHERE THE LIKELIHOOD THAT THE ULTIMATE COST TO THE GOVERNMENT UNDER THAT BID WOULD EXCEED THE AMOUNT OF THE NEXT LOWEST AND ACCEPTABLE BID IS SO REMOTE AS TO BE NEGLIGIBLE. SEE 35 COMP. GEN. 684 AND 36 ID. 259. THE DIFFERENCE OF ADOHR'S BID AND THE NEXT LOWEST BID, EXCLUDING ITEM 156 AND COMPUTED ON A SIX-MONTH BASIS, IS $2,472.49. ON THIS BASIS, IF AWARD OF ALL ITEMS WERE MADE TO ADOHR, THE MARKET PRICE OF BUTTER WOULD HAVE TO RISE IN EXCESS OF $14 PER POUND BEFORE THE ULTIMATE COST TO THE GOVERNMENT WOULD BE IN EXCESS OF THE AMOUNT BID BY THE NEXT LOWEST BIDDER FOR ALL ITEMS. THEREFORE, OUR OFFICE WOULD HAVE NO OBJECTION IF AWARD OF ALL ITEMS WERE MADE TO ADOHR IN ACCORDANCE WITH ITS BID.