B-145468, APRIL 25, 1961, 40 COMP. GEN. 596

B-145468: Apr 25, 1961

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BIDS - CAPEHART HOUSING PROJECTS - EVALUATION - ALTERNATE ITEMS UNDER A CAPEHART HOUSING INVITATION WHICH SPECIFIES THAT BIDS WILL BE EVALUATED BY ADDING ALTERNATE ITEMS IN SEQUENCE TO ANY AND ALL BIDS. SUCH ADDITIVE WILL NOT BE SELECTED AND THE ITEMS FOLLOWING WILL NOT BE SELECTED AND THE ITEMS FOLLOWING WILL BE ADDED TO ANY AND ALL BIDS. BIDS WERE RECEIVED FROM NINE DIFFERENT BIDDERS. THEY WERE AS FOLLOWS: CHART GREEN MANOR FROUGE BASE BID . A. SPECIFIES THAT BIDS WILL BE EVALUATED AS FOLLOWS: * * * THE DEPARTMENT WILL ADD SUCH ALTERNATES. THE DEPARTMENT WILL NOT SELECT THIS ALTERNATE. WILL CONTINUE TO SELECT ALTERNATES IN THE EXACT ORDER AS SET FORTH IN SECTION B OF THIS PARAGRAPH TO ANY AND ALL BIDS TO THE MAXIMUM EXTENT POSSIBLE WITHIN THE AMOUNT FHA DETERMINES TO BE THE INSURABLE MORTGAGE AMOUNT OR AN AMOUNT EQUAL TO AN AVERAGE OF $16.

B-145468, APRIL 25, 1961, 40 COMP. GEN. 596

BIDS - CAPEHART HOUSING PROJECTS - EVALUATION - ALTERNATE ITEMS UNDER A CAPEHART HOUSING INVITATION WHICH SPECIFIES THAT BIDS WILL BE EVALUATED BY ADDING ALTERNATE ITEMS IN SEQUENCE TO ANY AND ALL BIDS, BUT WHEN THE ADDITION OF ANY ADDITIVE CAUSES THE MAXIMUM PRICE LIMITATION TO BE EXCEEDED, SUCH ADDITIVE WILL NOT BE SELECTED AND THE ITEMS FOLLOWING WILL NOT BE SELECTED AND THE ITEMS FOLLOWING WILL BE ADDED TO ANY AND ALL BIDS, THE EVALUATION METHOD REQUIRES THAT AN ADDITIVE WHICH CAUSES THE LIMITATION TO BE EXCEEDED MUST BE EXCLUDED FROM ALL THE BIDS RATHER THAN FROM ONLY THE BID CONTAINING SUCH ADDITIVE SO THAT AN EXACT COMPARISON OF ALL BIDS IN ACCORDANCE WITH THE METHOD OF EVALUATION IN THE INVITATION MAY BE MADE AND THAT THE LOWEST ELIGIBLE BIDDER RECEIVE THE AWARD PURSUANT TO 42 U.S.C. 1594 (A).

TO THE SECRETARY OF THE AIR FORCE, APRIL 25, 1961:

IN LETTER OF APRIL 3, 1961, THE SPECIAL ASSISTANT FOR INSTALLATIONS REQUESTED A DECISION AS TO THE ACTION THAT SHOULD BE TAKEN IN CONNECTION WITH BIDS SUBMITTED IN RESPONSE TO INVITATION 19-617-61-42, COVERING THE CONSTRUCTION OF 180 FAMILY HOUSING UNITS FOR MILITARY PERSONNEL AT WESTOVER AIR FORCE BASE.

THE INVITATION FOR BIDS REQUIRED BIDDERS TO FURNISH A BASE PRICE TO COMPLETE 180 UNITS OF THREE TYPES OF FAMILY HOUSING PLUS A SEPARATE PRICE FOR EACH OF A NUMBER OF ITEMS TERMED "ADDITIVE ALTERNATES.' BIDS WERE RECEIVED FROM NINE DIFFERENT BIDDERS, BUT ONLY THE BIDS RECEIVED FROM THE TWO LOWEST BIDDERS, GREEN MANOR CONSTRUCTION CO., INC., AND THE FROUGE CORPORATION, NEED BE CONSIDERED. THEY WERE AS FOLLOWS:

CHART

GREEN MANOR FROUGE BASE BID ------------- ------------------- $2,855,120 $2,854,800 PLUS ALTERNATES 1 THROUGH 5 -------------- 2,909,876 2,932,332 PLUS ALTERNATES 1 THROUGH 6 -------------- 2,950,916

2,964,732 PLUS ALTERNATES 1 THROUGH 9,

OMITTING 6 ---------------------------- 2,950,376 2,949,207

PARAGRAPH 10. A. SPECIFIES THAT BIDS WILL BE EVALUATED AS FOLLOWS:

* * * THE DEPARTMENT WILL ADD SUCH ALTERNATES, IN THE EXACT ORDER AS SET FORTH IN SECTION B OF THIS PARAGRAPH, TO ANY AND ALL BIDS TO THE MAXIMUM EXTENT POSSIBLE SO LONG AS THE COST OF ANY INDIVIDUAL UNIT DOES NOT EXCEED A MAXIMUM COST OF $19,600. IN THE EVENT THAT THE SELECTION OF AN ALTERNATE WOULD CAUSE THE COST OF ANY SINGLE UNIT TO EXCEED THE $19,600 PER UNIT MAXIMUM, THE DEPARTMENT WILL NOT SELECT THIS ALTERNATE, BUT WILL CONTINUE TO SELECT ALTERNATES IN THE EXACT ORDER AS SET FORTH IN SECTION B OF THIS PARAGRAPH TO ANY AND ALL BIDS TO THE MAXIMUM EXTENT POSSIBLE WITHIN THE AMOUNT FHA DETERMINES TO BE THE INSURABLE MORTGAGE AMOUNT OR AN AMOUNT EQUAL TO AN AVERAGE OF $16,400 PER DWELLING UNIT, WHICHEVER IS LESSER. DETERMINATION OF THE LOWEST ACCEPTABLE BID WILL THEN BE MADE AFTER SUCH ITEMS HAVE BEEN ADDED AS AFORESAID, AND WILL BE BASED ON THE LOWEST PRICE OFFERED FOR THE MAXIMUM NUMBER OF ITEMS THAT CAN BE ACCEPTED UNDER THE PROCEDURE DESCRIBED ABOVE. IT IS THEREFORE POSSIBLE THAT A BIDDER MAY SUBMIT THE LOWEST BASIC BID, BUT NOT THE LOWEST ACCEPTABLE BID WHEN THE ADDITIVE ALTERNATES HAVE BEEN INCLUDED AS PERMITTED ABOVE. BIDDERS SHOULD NOTE THAT THE DEPARTMENT EXERCISES NO DISCRETION IN INCLUDING OR EXCLUDING ANY OR ALL ADDITIVE ALTERNATES BUT THAT THIS MATTER WILL BE ENTIRELY CONTROLLED BY THE PROCEDURE PROVIDED HEREIN. * * *

PARAGRAPH 10. A. LIMITS THE CONSIDERATION OF ADDITIVE ALTERNATES IN TWO RESPECTS. FIRST, IT PRECLUDES CONSIDERATION OF ANY ADDITIVE THAT WILL CARRY THE COST OF ANY SINGLE HOUSING UNIT OF ANY TYPE OF $19,600. SECOND, IT SETS UP A CUTOFF POINT AFTER WHICH NO ADDITIONAL ADDITIVES SHALL BE CONSIDERED. THIS CUTOFF POINT IS THE LIMITATION ON THE TOTAL CONTRACT PRICE AND IS THE LESSER AMOUNT OF EITHER THE INSURABLE MORTGAGE AMOUNT SET BY FHA OR THE AMOUNT ARRIVED AT BY MULTIPLYING $16,400 BY THE NUMBER OF REQUIRED HOUSING UNITS. THE INSURABLE MORTGAGE AMOUNT SET BY FHA IS $2,955,434. MULTIPLICATION OF $16,400 BY THE 180 HOUSING UNITS REQUIRED UNDER THE INVITATION EQUALS $2,952,000. THE LATTER FIGURE IS THEREFORE THE LIMITATION ON THE TOTAL CONTRACT PRICE.

THE BID OF GREEN MANOR ON THE BASIC WORK PLUS THE FIRST SIX ADDITIVES TOTALS $2,950,916 AND IS WITHIN THE $2,952,000 CUTOFF, BUT EXCEEDS THE $19,600 UNIT LIMITATION BY $1. IF ADDITIVE SIX IS PASSED OVER THE EVALUATION OF ITS BID, GREEN MANOR DOES NOT EXCEED THE $2,952,000 LIMITATION UNTIL THE ADDITIVE AFTER NINE IS ADDED TO THE BASE BID AND PREVIOUS ADDITIVES. THE BID OF FROUGE ON THE BASIC WORK PLUS THE FIRST SIX ADDITIVES TOTALS $2,964,732 AND EXCEEDS THE $2,952,000 CUTOFF. HOWEVER, IF ADDITIVE SIX PASSED OVER IN THE EVALUATION OF FROUGE'S BID, AS IT IS IN THE GREEN MANOR BID, IT DOES NOT EXCEED THE $2,952,000 LIMITATION UNTIL THE ADDITIVE AFTER NINE IS ADDED TO THE BASE BID AND PREVIOUS ADDITIVES, AND ON THIS BASIS IT IS ABOUT $1,150 LESS THAN GREEN MANOR.

FROUGE POINTS TO THE SENTENCE IN PARAGRAPH 10. A. THAT STATES,"1IN THE EVENT THAT THE SELECTION OF AN ALTERNATE WOULD CAUSE THE COST OF ANY SINGLE UNIT TO EXCEED THE $19,600 PER UNIT MAXIMUM, THE DEPARTMENT WILL NOT SELECT THIS ALTERNATE, BUT WILL CONTINUE TO SELECT ALTERNATES IN THE EXACT ORDER AS SET FORTH IN SECTION B OF THIS PARAGRAPH TO ANY AND ALL BIDS TO THE MAXIMUM EXTENT POSSIBLE" WITHIN THE $2,952,000 LIMITATION. CONTENDS THAT THIS LANGUAGE REQUIRES THAT, IF ANY BIDDER EXCEEDS THE $19,600 LIMITATION BY THE ADDITION OF AN ADDITIVE ITEM, THE ITEM BE DELETED NOT ONLY FROM THE BID OF THE BIDDER WHO EXCEEDS THE LIMITATION BUT FROM THE BIDS OF ALL THE OTHER BIDDERS AS WELL, AND THAT THE REMAINING ADDITIONAL ADDITIVES BE ADDED CONSECUTIVELY TO THE MAXIMUM EXTENT POSSIBLE WITHIN THE CUTOFF LIMITATION.

GREEN MANOR TAKES A DIFFERENT POSITION. IT CONTENDS THAT EACH BIDDER'S BID MUST BE EVALUATED IN THE MANNER PRESCRIBED BY PARAGRAPH 10. INDEPENDENT OF THE BIDS OF ALL THE OTHER BIDDERS AND, AFTER ALL SUCH INDEPENDENT EVALUATIONS ARE COMPLETED, THE BIDDER WHO OFFERS THE MAXIMUM NUMBER OF ITEMS FOR THE LOWEST PRICE IS REQUIRED TO BE SELECTED FOR AWARD. IT SUGGESTS THAT THE LANGUAGE TO ,SELECT * * * TO ANY AND ALL BIDS" IN PARAGRAPH 10. A. IS USED IN A SENSE NOT INTENDED TO BE AS ALL INCLUSIVE AS FROUGE CONTENDS. THE QUOTED TERMINOLOGY, IT SAYS, REQUIRES ONLY THAT THE SAME METHOD OF EVALUATION APPLY TO THE BID OF EVERY BIDDER AND DOES NOT REQUIRE THAT THE ACTION TAKEN BY ANY ONE BIDDER IN BIDDING UPON AN ADDITIVE SHOULD CONTROL THE BID OF ANOTHER BIDDER; AND THAT EACH BIDDER'S BID MUST STAND OR FALL ON ITS OWN MERITS. THAT IS TO SAY, WHENEVER ANY BIDDER EXCEEDS THE $19,600 LIMITATION ON ANY ADDITIVE, THAT ADDITIVE WILL NOT BE INCLUDED IN THE EVALUATION OF ITS BID. IT POINTS OUT THAT ACCEPTING FROUGE'S VIEW WOULD BE ENDORSING A PROCEDURE WHICH PERMITS ONE BIDDER TO CONTROL THE BIDS OF ALL AND MIGHT, IN A GIVEN CASE, DEPRIVE THE GOVERNMENT OF MANY OTHERWISE ACCEPTABLE ADDITIVES IN THE EVENT ANY BIDDER CHOSE TO BID ADDITIVES AT PRICES THAT WOULD CARRY THE COST OF ANY SINGLE HOUSING UNIT OVER THE $19,600 LIMITATION.

IN ESSENCE, ITS ARGUMENT IS THAT WHENEVER ANY BIDDER EXCEEDS THE $19,600 LIMITATION BY THE ADDITION OF ANY ADDITIVE, THIS DOES NOT REQUIRE THE DELETION OF THE ADDITIVE IN THE BIDS OF ALL THE OTHER BIDDERS, AND SINCE PARAGRAPH 10. A. PRECLUDES ANY DEPARTURE FROM CONSIDERING ADDITIVES OUTSIDE THE LISTED SEQUENCE IN ANY SITUATION, OTHER THAN WHERE THE $19,600 LIMITATION HAS BEEN EXCEEDED, THERE MUST BE REACHED THE CONCLUSION THAT THE PRICES BID BY FROUGE ON ADDITIVES 7, 8 AND 9 CANNOT BE CONSIDERED AS FROUGE EXCEEDED THE LIMITATION ON THE TOTAL CONTRACT PRICE WHEN ADDITIVE 6 WAS ADDED TO ITS BASE BID PLUS PREVIOUS ADDITIVES AND WAS BY THAT ACTION CUT OFF FROM HAVING THE PRICES ON ANY OF ITS LATER ADDITIVES CONSIDERED.

AS WE INTERPRET PARAGRAPH 10. A. OF THE INVITATION, WHENEVER ANY BIDDER EXCEEDS THE $19,600 LIMITATION BY THE ADDITION OF ANY ADDITIVE, THE AIR FORCE IS REQUIRED TO DISREGARD THAT ITEM IN THE BID SUBMITTED BY EACH BIDDER. THE PARAGRAPH STATES THAT BIDS WILL BE EVALUATED BY ADDING ALTERNATES IN SEQUENCE "TO ANY AND ALL BIDS," BUT THAT IF THE ADDITION OF ANY ADDITIVE CAUSES THE $19,600 LIMITATION TO BE EXCEEDED "THE DEPARTMENT WILL NOT SELECT THIS ALTERNATE, BUT WILL CONTINUE TO SELECT ALTERNATES IN THE EXACT ORDER * * * TO ANY AND ALL BIDS.' SINCE THE FIRST SENTENCE OF THE PARAGRAPH SPELLS OUT THE EVALUATION METHOD AS ONE REQUIRING THE ADDITION OF ALTERNATES "TO ANY AND ALL BIDS," WHEN IT STATES THAT AN ADDITIVE THAT CAUSES THE $19,600 LIMITATION TO BE EXCEEDED WILL NOT BE SELECTED, IT MUST LOGICALLY FOLLOW THAT THE ADDITIVE WILL BE PASSED OVER IN THE CONSIDERATION OF "ANY AND ALL BIDS," AND THAT IS MADE CLEAR BY THE SUBSEQUENT STATEMENT INDICATING THAT AFTER THE PARTICULAR ITEM IS OMITTED FROM CONSIDERATION, THE ITEMS FOLLOWING WILL BE ADDED "TO ANY AND ALL BIDS.' WE BELIEVE THAT THE TERMS "TO ANY AND ALL BIDS" MUST BE CONSTRUED IN ACCORDANCE WITH THEIR LITERAL MEANING, NAMELY, THAT THEY SPELL OUT THE FORMULA TO APPLY TO EACH AND EVERY BID. IT IS TRUE THAT THE RESULT OF SUCH A CONCLUSION IS THAT ONE BIDDER WHO EXCEEDS THE $19,600 LIMITATION ON A PARTICULAR ITEM CAN PRECLUDE THE GOVERNMENT, IN A PARTICULAR CASE, FROM CONSIDERING THE BIDS OF OTHER BIDDERS WHOSE PRICES MAY BE WITHIN THE LIMITATION ON THE SAME ITEM OR, AS IN THIS CASE, MAY PERMIT CONSIDERATION OF ADDITIVE ITEMS IN THE BID OF ANOTHER BIDDER WHO OTHERWISE COULD NOT HAVE HAD THOSE ITEMS CONSIDERED. THIS GENERALLY WOULD NOT BE A SATISFACTORY PROCEDURE FROM THE STANDPOINT THAT IT PERMITS ONE BIDDER TO CONTROL THE MANNER IN WHICH OTHER BIDDERS ARE TO HAVE THEIR BIDS CONSIDERED. HOWEVER, IN A CASE SUCH AS HERE INVOLVED, IF AN ITEM IN ONE BID IS TO BE DISREGARDED THE ONLY MANNER IN WHICH OTHER BIDS CAN BE EVALUATED ON AN EQUAL BASIS IS TO ELIMINATE THE SAME ITEM FROM THEM ALSO. THAT THIS IS TRUE WOULD SEEM TO PRECLUDE OTHER THAN A LITERAL INTERPRETATION OF THE PHRASE "TO ANY AND ALL BIDS.' ALSO, WE UNDERSTAND THAT THE DEPARTMENT HAS REVISED THE STANDARD FORM OF INVITATION IN A WAY THAT WILL PREVENT ANY RECURRENCE OF THIS SITUATION. IN ANY EVENT, THE INVITATION PUT ALL THE BIDDERS ON NOTICE OF THE MANNER IN WHICH BIDS WOULD BE EVALUATED SO THAT NO BIDDER CAN FAIRLY SAY THAT IT WAS TAKEN BY SURPRISE IN THE SITUATION OR DID NOT HAVE THE SAME OPPORTUNITY TO EMPLOY THE SPECIFIED METHOD. ANY BIDDER COULD HAVE PREPARED ITS BID IN SUCH A WAY AS TO TAKE ADVANTAGE OF THE $19,600 LIMITATION OR, NOT DESIRING TO DO SO, ASSUME THE RISK THAT SOME OTHER BIDDER MIGHT AND THEREBY AFFECT ITS BIDS ON THE ADDITIVES. FURTHERMORE, THE IMPORTANT FACT REMAINS, THAT THE ELIMINATION OF ANY ADDITIVE FROM THE BID OF ONE BIDDER WITHOUT ELIMINATING THAT ADDITIVE FROM THE BID OF ALL THE OTHER BIDDERS WOULD PRECLUDE AN EXACT COMPARISON OF BIDS.

CAPEHART CONTRACTS ARE REQUIRED TO BE LET TO THE LOWEST ELIGIBLE BIDDER AFTER COMPETITIVE ADVERTISING FOR BIDS. 42 U.S.C. 1594 (A). UNDOUBTEDLY THE PURPOSE OF REQUIRING CONTRACTS TO BE AWARDED AFTER ADVERTISING TO THE LOWEST ELIGIBLE BIDDER IS TO SECURE ECONOMY IN THE CONSTRUCTION TO BE PROCURED. TO ASSURE THAT THIS PURPOSE HAS BEEN EFFECTUATED, AN EXACT COMPARISON OF BIDS MUST BE MADE. SEE HANNAN V. BOARD OF EDUCATION, 107 PAC. 646.

WITH RESPECT TO THE CONTENTION OF THE THIRD LOW BIDDER, JEFFERSON CONSTRUCTION CO., INC., THAT THE CUTOFF POINT ON THE CONSIDERATION OF ADDITIVES SHOULD BE $16,400 PER UNIT LESS THE VALUE OF USABLE ON-SITE UTILITIES PRORATED OVER THE NUMBER OF UNITS TO BE CONSTRUCTED, WHICH WOULD BRING THE CUTOFF LIMITATION TO $2,937,434, NO REFERENCE IS MADE TO THE ON- SITE UTILITIES IN PARAGRAPH 10. A. AND "$16,400 PER DWELLING UNIT" CLEARLY IS SPECIFIED AS A LIMITATION.

SINCE BY THE METHOD OF EVALUATION PRESCRIBED IN THE INVITATION THE FROUGE CORPORATION IS THE LOW BIDDER, WE SEE NO OBJECTION TO AWARD OF THE CONTRACT TO THAT FIRM IN THIS INSTANCE.

ALL OF THE MATERIAL MADE AVAILABLE TO US FOR OUR CONSIDERATION BY YOUR DEPARTMENT IS RETURNED HEREWITH.