B-145261, APRIL 4, 1961, 40 COMP. GEN. 561

B-145261: Apr 4, 1961

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WAS BIDDING WITH FULL KNOWLEDGE OF AN ERROR BY THE GOVERNMENT IN UNDERESTIMATING THE QUANTITY OF ONE OF THE ITEMS IN THE INVITATION. WHICH WAS LOW EVEN IF AN EVALUATION WAS MADE ON THE BASIS OF THE CORRECT QUANTITY. WOULD HAVE BEEN PROPER AND PREFERABLE TO AN AWARD ON THE READVERTISEMENT WHICH RESULTED IN CONSIDERABLY HIGHER PRICES. THE PROVISION IN SECTION 1-10.102-5 OF THE FEDERAL PROCUREMENT REGULATIONS FOR CONSIDERATION OF BIDS ACCOMPANIED BY INSUFFICIENT BID BONDS DOES NOT MEAN THAT SUCH BIDS MUST BE ACCEPTED BUT MERELY THAT THEY ARE NOT REQUIRED TO BE REJECTED. AN ADMINISTRATIVE DETERMINATION NOT TO WAIVE A BID BOND DEFICIENCY UNDER AN INVITATION WHICH PROVIDES THAT THE BID GUARANTEE REQUIREMENT WOULD NOT BE WAIVED IS A PROPER DETERMINATION.

B-145261, APRIL 4, 1961, 40 COMP. GEN. 561

CONTRACTS - SPECIFICATIONS - AMBIGUOUS - READVERTISEMENT - BID BOND DEFICIENCIES WHERE A LOW BIDDER, AS WELL AS ALL OTHER BIDDERS ON A RECLAMATION PROJECT, WAS BIDDING WITH FULL KNOWLEDGE OF AN ERROR BY THE GOVERNMENT IN UNDERESTIMATING THE QUANTITY OF ONE OF THE ITEMS IN THE INVITATION, ACCEPTANCE OF THE LOW BID, WHICH WAS LOW EVEN IF AN EVALUATION WAS MADE ON THE BASIS OF THE CORRECT QUANTITY, WOULD HAVE BEEN PROPER AND PREFERABLE TO AN AWARD ON THE READVERTISEMENT WHICH RESULTED IN CONSIDERABLY HIGHER PRICES; THEREFORE, SINCE THE LOW BIDDER HAS INDICATED A WILLINGNESS TO ACCEPT AN AWARD AT THE UNIT PRICES QUOTED IN THE FIRST BID, NEGOTIATION ON SUCH BASIS WOULD BE JUSTIFIED AND SHOULD BE UNDERTAKEN. THE PROVISION IN SECTION 1-10.102-5 OF THE FEDERAL PROCUREMENT REGULATIONS FOR CONSIDERATION OF BIDS ACCOMPANIED BY INSUFFICIENT BID BONDS DOES NOT MEAN THAT SUCH BIDS MUST BE ACCEPTED BUT MERELY THAT THEY ARE NOT REQUIRED TO BE REJECTED; THEREFORE, AN ADMINISTRATIVE DETERMINATION NOT TO WAIVE A BID BOND DEFICIENCY UNDER AN INVITATION WHICH PROVIDES THAT THE BID GUARANTEE REQUIREMENT WOULD NOT BE WAIVED IS A PROPER DETERMINATION.

TO THE SECRETARY OF THE INTERIOR, APRIL 4, 1961:

WE HAVE A LETTER OF MARCH 7, 1961, WITH ENCLOSURES, FROM THE ADMINISTRATIVE ASSISTANT SECRETARY, REQUESTING OUR DECISION AS TO THE APPROPRIATE ACTION TO BE TAKEN WITH RESPECT TO THE BIDS SUBMITTED IN RESPONSE TO SUPPLEMENTAL NOTICE NO. 2 TO AN INVITATION REFERENCING SPECIFICATIONS NO. 300C-139.

THE INVITATION, ISSUED BY THE BUREAU OF RECLAMATION, CALLED FOR THE CONSTRUCTION OF A CONCRETE LINED DRAINAGE CHANNEL NEAR YUMA, ARIZONA. BIDS WERE REQUIRED TO BE SUBMITTED ON A UNIT PRICE BASIS FOR EACH OF THE 19 ITEMS OF WORK CALLED FOR BY THE INVITATION. THE INVITATION LISTED QUANTITIES FOR EACH ITEM, BUT BIDDERS WERE TOLD BY PARAGRAPH 4 OF THE GENERAL CONDITIONS THAT:

4. QUANTITIES AND UNIT PRICES. THE QUANTITIES NOTED IN THE SCHEDULE ARE APPROXIMATIONS FOR COMPARING BIDS, AND NO CLAIM SHALL BE MADE AGAINST THE GOVERNMENT FOR EXCESS OR DEFICIENCY THEREIN, ACTUAL OR RELATIVE. PAYMENT AT THE PRICES AGREED UPON WILL BE IN FULL FOR THE COMPLETED WORK AND WILL COVER MATERIALS, SUPPLIES, LABOR, TOOLS, MACHINERY, AND ALL OTHER EXPENDITURES INCIDENT TO SATISFACTORY COMPLIANCE WITH THE CONTRACT, UNLESS OTHERWISE SPECIFICALLY PROVIDED.

THE ENGINEER'S ESTIMATE OF TOTAL COST FOR THE WORK WAS $114,923, AND THE MOST SIGNIFICANT ITEMS OF THAT ESTIMATE WERE AS FOLLOWS:

CHART ------------------------------------------------------------- ----- ------- ITEM WORK OR MATERIAL QUANTITY AND UNIT AMOUNT

UNIT PRICE ------- ------------------------------------------------------ ------------ 1 EXCAVATION FOR CHANNEL ----- 46,000 CU. YDS ----- $0.50 $23,000 2 COMPACTING EMBANKMENTS -----22,800 CU. YDS ----- 10.50 11,400 3 OVERHAUL ------------------- 40,290 MILE CU. YDS. 10.60 24,174 7 TRIMMING EARTH FOUNDATION

FOR CONCRETE LINING --------- 2,255 SQ. YDS. ---- 0.40 902 9 UNREINFORCED CONCRETE IN

CHANNEL LINING -------------- 1,300 CU. YDS. ---- 20.00 26,000 10 FURNISHING AND HANDLING

CEMENT ---------------------- 1,700 BBLS. ------- 6.00 10,200 ----------

AT OR ABOUT THE TIME OF BID OPENING ON DECEMBER 20, 1960, IT WAS DISCOVERED THAT THE ESTIMATED QUANTITY OF ITEM 7 HAD BEEN ERRONEOUSLY STATED IN THE INVITATION AS 2,255 SQUARE YARDS INSTEAD OF 22,550 SQUARE YARDS. IT SHOULD BE NOTED THAT THE CONCRETE LINING CALLED FOR UNDER ITEM 9 WAS TO BE APPROXIMATELY TWO INCHES THICK, SO THAT EACH CUBIC YARD OF CONCRETE WOULD COVER ABOUT EIGHTEEN SQUARE YARDS OF EARTH FOUNDATION. THIS BASIS, IT IS APPARENT THAT THE QUANTITY OF 1,300 CUBIC YARDS OF CONCRETE ESTIMATED TO BE REQUIRED UNDER ITEM 9 WOULD COVER APPROXIMATELY 23,400 SQUARE YARDS OF EARTH RATHER THAN 2,255 SQUARE YARDS AS LISTED FOR ITEM 7.

FOUR BIDS WERE RECEIVED, AND A REPRESENTATIVE OF EACH BIDDER WAS PRESENT AT BID OPENING. THE LOW BIDDER WAS ARROW CONSTRUCTION COMPANY AT $114,931.55. THE OTHER BIDS WERE: MARSHALL AND HAAS, $161,121.50; VINNELL AND SHRIVER, $174,590.10; AND KORSHOJ CONSTRUCTION COMPANY, $206,450.00. IT IS REPORTED TO US THAT A REPRESENTATIVE OF ARROW WAS PRESENT AT BID OPENING AND INFORMED BUREAU OF RECLAMATION PERSONNEL HIS COMPANY WAS AWARE OF THE ERROR IN ESTIMATED QUANTITY OF ITEM THAT SIMILAR STATEMENTS WERE MADE BY REPRESENTATIVES OF OTHER BIDDERS AT BID OPENING.

THE UNIT PRICES QUOTED BY THE BIDDERS ON ITEM 7 ARE AS FOLLOWS: ARROW QUOTED $0.90 PER SQUARE YARD; VINNELL $0.72, WHILE MARSHALL AND HAAS AND KORSHOJ EACH QUOTED $2.00. THE UNDERESTIMATE ON THAT ITEM AMOUNTED TO 20,295 SQUARE YARDS. A COMPARISON OF BIDS EVALUATED ON 2,255 SQUARE YARDS AND ON 22,550 SQUARE YARDS FOR ITEM 7 AT THE UNIT PRICES QUOTED IS AS FOLLOWS:

CHART

2,255 SQUARE YARDS:

ARROW --------------------------------------------$114,931.55

MARSHALL AND HAAS ------------------------------ 161,121.50

VINNELL ------------------------------------------ 174,590.10

KORSJOH ------------------------------------------ 206,450.00

22,550 SQUARE YARDS:

ARROW --------------------------------------------$133,197.05

VINNELL ------------------------------------------ 189,202.50

MARSHALL AND HAAS ------------------------------- 201,711.50

KORSHOJ ------------------------------------------ 247,040.00

THUS, ARROW'S BID WAS THE LOWEST WHETHER EVALUATED ON THE ERRONEOUS QUANTITY OR THE CORRECT QUANTITY. A BOARD OF ENGINEERS AT THE YUMA PROJECTS OFFICE RECOMMENDED THAT AWARD BE MADE TO ARROW DESPITE THE ERROR ON ITEM 7, AND STATED THE OPINION THAT NEW BIDS WOULD RUN CONSIDERABLY HIGHER IF THE WORK WERE TO BE READVERTISTED. BY LETTER DATED DECEMBER 30, 1960, ARROW WAS ADVISED THAT IT APPEARED TO BE THE SUCCESSFUL BIDDER, AND WAS REQUESTED TO EXECUTE A CONTRACT AND PERFORMANCE AND PAYMENT BONDS. ARROW RETURNED THESE EXECUTED DOCUMENTS BY ITS LETTER OF JANUARY 5, 1961, IN WHICH IT ALSO ADVISED THAT IT WOULD PERFORM THE INCREASED QUANTITY OF WORK UNDER ITEM 7 AT THE UNIT PRICE IT HAD QUOTED.

IN VIEW OF THE CIRCUMSTANCES OUTLINED ABOVE, IT IS OUR OPINION THAT THE DECISION TO MAKE THE AWARD TO ARROW WAS COMPLETELY PROPER. AS PREVIOUSLY INDICATED IT HAS BEEN REPORTED THAT ALL BIDDERS WERE BIDDING WITH FULL KNOWLEDGE OF THE UNDERESTIMATE ON ITEM 7, AND THEREFORE IT WOULD SEEM THAT ALL WERE BIDDING ON THE SAME BASIS. IT HAD ALSO BEEN DEMONSTRATED THAT THE LOW BIDDER WOULD HAVE REMAINED THE LOW BIDDER EVEN IF BIDS HAD BEEN EVALUATED ON THE CORRECT QUANTITY ESTIMATE OF ITEM 7. THUS, NO CLAIM COULD BE MADE THAT ANY BIDDER WAS PREJUDICED BECAUSE OF THE ERROR. FURTHERMORE, IT DOES NOT APPEAR THAT THE GOVERNMENT WOULD HAVE BEEN PREJUDICED BY ACCEPTANCE OF ARROW'S BID WHICH DID NOT SEEM TO TAKE ADVANTAGE OF THE ERROR, PARTICULARLY IN VIEW OF THE SUBSTANTIAL DIFFERENCE BETWEEN ITS BID AND THAT OF THE NEXT LOWEST BIDDER, AND THE OPINION OF THE BOARD OF ENGINEERS THAT READVERTISEMENT WOULD RESULT IN CONSIDERABLY HIGHER PRICES.

DESPITE THIS, IT WAS ADMINISTRATIVELY DETERMINED, FOR REASONS NOT STATED, THAT IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO REJECT ALL BIDS AND READVERTISE. THIS WAS DONE BY SUPPLEMENTAL NOTICE NO. 2, DATED JANUARY 17, 1961, WHICH CORRECTED THE ESTIMATED QUANTITY OF WORK UNDER ITEM 7, AND MADE A MINOR DOWNWARD ADJUSTMENT IN QUANTITY ON ITEM 3. THREE BIDS ON THE READVERTISEMENT WERE RECEIVED AND OPENED JANUARY 31, 1961, AS FOLLOWS:

CHART

MARSHALL AND HAAS ------------------------------- $146,061.00

ARROW ------------------------------------------- 152,491.00

VINNELL ----------------------------------------- 164,590.50

IT MAY BE NOTED THAT THE JUDGMENT OF THE BOARD OF ENGINEERS AS TO HIGHER PRICES UPON READVERTISEMENT WAS CONFIRMED, THE BID OF ARROW BEING $19,293.95 HIGHER THAN THAT OF MARSHALL AND HAAS BEING $12,818.95 HIGHER THAN THE ORIGINAL ARROW BID EVALUATED ON THE CORRECT QUANTITY FOR ITEM 7. IT MAY ALSO BE NOTED THAT MARSHALL AND HAAS REDUCED ITS UNIT PRICE ON THE WORK UNDER ITEM 7 FROM $2.00 TO $0.60 PER SQUARE YARD IN ITS SECOND BID.

MARSHALL AND HAAS SUBMITTED A BID BOND ON BOTH ITS FIRST AND SECOND BIDS IN THE AMOUNT OF ONLY 10 PERCENT OF ITS BID NOTWITHSTANDING THE SPECIFIC REQUIREMENT OF THE INVITATION ON BOTH OCCASIONS THAT A 20 PERCENT BID BOND BE FURNISHED. THE INVITATION FURTHER PROVIDED THAT " THIS REQUIREMENT FOR BID GUARANTEE WILL NOT BE WAIVED.' THERE IS THUS NO QUESTION THAT A LITERAL READING OF THE TERMS OF THE INVITATION REQUIRES REJECTION OF THE MARSHALL AND HAAS BID. THE ONLY FACTOR WHICH MIGHT BE CONSIDERED TO LEAD TO A CONTRARY CONCLUSION IS SECTION 1 10.102-5 OF THE FEDERAL PROCUREMENT REGULATIONS, EFFECTIVE DECEMBER 1, 1960. THAT SECTION PROVIDES, IN PERTINENT PART, AS FOLLOWS:

WHERE AN INVITATION FOR BIDS REQUIRES THAT BIDS BE SUPPORTED BY A BID GUARANTEE, NONCOMPLIANCE WITH SUCH REQUIREMENT WILL REQUIRE REJECTION OF THE BID. HOWEVER, PURSUANT TO THE BID GUARANTEE PROVISION OF THE INVITATION FOR BIDS (SEE SEC. 1-10.102-4 (A) (2) ( REJECTION OF THE BID IS NOT REQUIRED IN THESE SITUATIONS:

(B) WHERE THE AMOUNT OF THE BID GUARANTEE SUBMITTED, THOUGH LESS THAN THE AMOUNT REQUIRED BY THE INVITATION FOR BIDS, IS EQUAL TO OR GREATER THAN THE DIFFERENCE BETWEEN THE PRICE STATED IN THE BID AND THE PRICE STATED IN THE NEXT HIGHER ACCEPTABLE BID.

IT WILL BE NOTED THAT THE QUOTED LANGUAGE FPR 1-10.102-5 DOES NOT STATE THAT A BID WITH A DEFICIENT BID BOND MUST BE ACCEPTED IF THE AMOUNT OF THE BOND MEETS THE CONDITION OUTLINED. IT STATES THAT IN SUCH CASE THE BID IS NOT REQUIRED TO BE REJECTED. IN THE PRESENT CASE IT HAS BEEN ADMINISTRATIVELY DETERMINED NOT TO WAIVE THE BID BOND DEFICIENCY IN THE MARSHALL AND HAAS BID. IN THE LIGHT OF ALL THE CIRCUMSTANCES OUTLINED ABOVE, WE FIND NO REASON TO DISAGREE WITH THIS DETERMINATION.

THIS IS NOT TO SAY THAT THE SECOND BID OF ARROW SHOULD NECESSARILY BE ACCEPTED AS MADE. WE BELIEVE, AS HEREINBEFORE STATED, THAT AWARD MIGHT WELL HAVE BEEN MADE TO ARROW ON ITS FIRST BID. IT IS OUR UNDERSTANDING THAT ARROW HAS RECENTLY INDICATED ITS WILLINGNESS TO ACCEPT AWARD AT THE UNIT PRICES QUOTED IN ITS FIRST BID. IT IS OUR VIEW THAT IN THE CIRCUMSTANCES OF THIS PARTICULAR CASE NEGOTIATION WITH ARROW LOOKING TOWARD AN AWARD ON THIS BASIS WOULD BE JUSTIFIED AND SHOULD BE UNDERTAKEN.