B-146182, JUN. 30, 1961

B-146182: Jun 30, 1961

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO A LETTER DATED JUNE 20. REQUESTING ON YOUR BEHALF A DECISION ON TWO PROTESTS WHICH HAVE BEEN SUBMITTED BY BIDDERS UNDER INVITATION FOR BIDS NO. FOUR AMENDMENTS TO THE INVITATION WERE ISSUED. FIVE GROUPS OF ITEMS WERE SPECIFIED. THE FIRST OF WHICH WAS THE LARGEST IN TERMS OF ESTIMATED QUANTITIES OF MILK TO BE DELIVERED. IT IS STATED IN PART THAT: "AWARD WILL BE MADE BY GROUP. BIDS WERE SUBMITTED BY 10 DAIRY COMPANIES AND THEY WERE OPENED AND READ AT THE APPOINTED TIME. SIX BIDS CONTAINED QUALIFICATIONS INTENDED TO PRECLUDE AN AWARD ON ONE OR MORE OF THE FIVE GROUPS OF ITEMS IF THE BIDDERS DID NOT RECEIVE AN AWARD ON THE GROUP OR GROUPS OF ITEMS IN WHICH THEY WERE ESPECIALLY INTERESTED.

B-146182, JUN. 30, 1961

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED JUNE 20, 1961, FROM THE CHIEF, CONTRACTS DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, REQUESTING ON YOUR BEHALF A DECISION ON TWO PROTESTS WHICH HAVE BEEN SUBMITTED BY BIDDERS UNDER INVITATION FOR BIDS NO. AI-28-013-61-65, ISSUED MARCH 27, 1961, BY THE POST PURCHASING AND CONTRACTING OFFICE, FORT DIX, NEW JERSEY, FOR THE FURNISHING DURING THE PERIOD JULY 1, 1961, THROUGH JUNE 30, 1962, OF MILK AND MILK BY-PRODUCTS FOR CONSUMPTION AT FORT DIX AND AT OTHER INSTALLATIONS WITHIN THE STATE OF NEW JERSEY.

FOUR AMENDMENTS TO THE INVITATION WERE ISSUED, THE LAST OF WHICH ESTABLISHED 2 P.M., E.D.S.T., MAY 12, 1961, TO BE THE HOUR AND DATE AT WHICH BIDS WOULD BE OPENED. FIVE GROUPS OF ITEMS WERE SPECIFIED, THE FIRST OF WHICH WAS THE LARGEST IN TERMS OF ESTIMATED QUANTITIES OF MILK TO BE DELIVERED. THE INVITATION PROVIDES IN PARAGRAPH 8 OF ITS TERMS AND CONDITIONS THAT THE GOVERNMENT MAY ACCEPT ANY ITEM OR GROUP OF ITEMS IN ANY BID, UNLESS THE BIDDER QUALIFIES HIS BID BY SPECIFIC LIMITATION. PARAGRAPH 3 OF THE SPECIAL PROVISIONS OF THE INVITATION, AS AMENDED ON MAY 6, 1961,IT IS STATED IN PART THAT: "AWARD WILL BE MADE BY GROUP. THE GOVERNMENT RESERVES THE RIGHT TO MAKE AWARD ON A LOW AGGREGATE BID BASIS FOR GROUP I (ITEM 1A OR 1B OR 1C, ITEMS 2 THROUGH 4), GROUP II (ITEMS 4 THROUGH 14), GROUP III (ITEMS 15 THROUGH 21), GROUP IV (ITEMS (ITEMS 22A OR 22B OR 22C), AND GROUP V (ITEMS 4 THROUGH 14), GROUP III 22A OR 22B OR 22C), AND GROUP V (ITEMS 23A OR 23B OR 23C). THE GOVERNMENT FURTHER RESERVES THE RIGHT TO MAKE AWARD TO THAT BIDDER WHOSE LOW AGGREGATE BID FOR ALL OR PART OF THE GROUPS OFFERED WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT.'

BIDS WERE SUBMITTED BY 10 DAIRY COMPANIES AND THEY WERE OPENED AND READ AT THE APPOINTED TIME. SIX BIDS CONTAINED QUALIFICATIONS INTENDED TO PRECLUDE AN AWARD ON ONE OR MORE OF THE FIVE GROUPS OF ITEMS IF THE BIDDERS DID NOT RECEIVE AN AWARD ON THE GROUP OR GROUPS OF ITEMS IN WHICH THEY WERE ESPECIALLY INTERESTED. BY A PROCESS OF ELIMINATION AFTER EVALUATING THE 10 BIDS RECEIVED, THE CONTRACTING OFFICER DETERMINED THAT ONLY 3 OF THE BIDS REQUIRED FURTHER CONSIDERATION. THOSE BIDS HAD BEEN SUBMITTED BY THE PURITAN DAIRY, PERTH AMBOY, NEW JERSEY, CUMBERLAND FARMS DAIRY, C., WOONSOCKET, RHODE ISLAND, AND THE JOINT VENTURE OF STERLING DAVIS DAIRY, WRIGHTSTOWN, NEW JERSEY, AND RAINIER'S DAIRIES, BRIDGETON, NEW JERSEY.

THE PURITAN DAIRY QUOTED ONLY ON GROUP IV AND ITS LOWEST ALTERNATIVE BID PRICE WAS $12,540 FOR THAT GROUP. CUMBERLAND FARMS DAIRY, INC., QUOTED PRICES ONLY ON GROUPS I, II AND III, AND QUALIFIED ITS BID BY LETTER DATED MAY 12, 1961, IN WHICH IT IS STATED: "IF ANY AWARD TO OUR COMPANY DOES NOT INCLUDE BOTH GROUP I AND GROUP III, WE WILL NOT SUPPLY ANY OF THE ITEMS BID ON.' ITS TOTAL BID PRICE ON THE THREE GROUPS OF ITEMS WAS CONSIDERED AS HAVING AMOUNTED TO THE SUM OF $2,896,353.97, INCLUDING A TOTAL APPROXIMATE BID PRICE OF $2,510,600 FOR GROUP I. THE JOINT VENTURE OF STERLING DAVIS DAIRY AND RAINIER'S DAIRIES QUOTED PRICES ON ALL FIVE GROUPS BUT QUALIFIED ITS BID BY STATING THAT: "WE RESERVE THE RIGHT TO REFUSE AN AWARD ON GROUP IV OR GROUP V, OR BOTH OF THEM IF WE ARE NOT AWARDED GROUP I, ON INVITATION NO. AI-28-013-61-65.' ITS OFFERED PRICE ON GROUP I WAS EVALUATED AS BEING LOWER THAN ANY OTHER BID PRICE FOR THAT GROUP. HOWEVER, ITS BID PRICES ON THE NEXT TWO GROUPS WERE HIGHER THAN THOSE OF CUMBERLAND FARMS DAIRY, INC., WHICH RESULTED IN A SITUATION WHERE THE LATTER FIRM'S TOTAL EVALUATED PRICE FOR THE FIRST THREE GROUPS OF ITEMS WAS ABOUT $4,700 LESS THAN THE EVALUATED TOTAL BID OF THE JOINT VENTURE ON GROUPS I, II AND III. FOR GROUPS IV AND V THE JOINT VENTURE'S LOWEST ALTERNATE BID PRICES WERE EVALUATED AS BEING IN THE APPROXIMATE SUMS OF $10,785 AND $32,355.

CONSIDERATION WAS GIVEN TO THE POSSIBILITY OF MAKING AN AWARD ON THE FIRST THREE GROUPS TO CUMBERLAND FARMS DAIRY, INC., AWARDING GROUP IV TO THE PURITAN DAIRY AND THEN READVERTISING FOR BIDS ON GROUP V. FOR THAT GROUP THE JOINT VENTURE HAD QUOTED A PRICE OF $0.719 PER GALLON OF MILK DELIVERED IN 3- OR 5-GALLON CONTAINERS AND THE CONTRACTING OFFICER BELIEVED THAT IT MIGHT BE IN THE BEST INTEREST OF THE GOVERNMENT TO READVERTISE GROUP V BECAUSE THE PRICE DID NOT SEEM TO HIM TO BE COMPETITIVE INASMUCH AS ONLY ONE UNQUALIFIED BID ON THAT GROUP WAS RECEIVED AND SUCH BID WAS EXTREMELY HIGH AND HAD BEEN SUBMITTED BY RAINIER'S DAIRY AS A SEPARATE UNDERTAKING ALTHOUGH IT HAS JOINED WITH THE STERLING DAVIS DAIRY IN SUBMITTING THE BID ON ALL FIVE GROUPS OF ITEMS.

AWARD ACTION ON FOUR GROUPS AND READVERTISEMENT OF GROUP V WOULD BE FAVORABLE TO THE PURITAN DAIRY AND CUMBERLAND FARMS DAIRY, INC., HOWEVER, IF GROUP V WERE NOT TO BE AWARDED THROUGH READVERTISEMENT, ACCEPTANCE OF THE BID OF THE JOINT VENTURE ON ALL FIVE GROUPS WOULD APPEAR TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT. CUMBERLAND FARMS DAIRY, INC., HAS PROTESTED THE POSSIBLE AWARD OF A CONTRACT TO THE JOINT VENTURE AND THE JOINT VENTURE HAS PROTESTED THE POSSIBLE AWARDS TO CUMBERLAND FARMS DAIRY, INC., AND THE PURITAN DAIRY ON GROUPS I, II, III AND IV OF THE BIDDING SCHEDULE.

UPON REVIEW OF THE MATTER IN YOUR DEPARTMENT, IT WAS CONSIDERED THAT THE BID BY THE JOINT VENTURE ON GROUP V IS REASONABLE AS COMPARED WITH THE PRICE CURRENTLY BEING PAID TO RAINIER'S DAIRY FOR MILK BEING DELIVERED TO THE SITES INVOLVED; ALSO THAT THE RESERVATION MADE IN THE BID OF THE JOINT VENTURE DOES NOT CAUSE IT TO BE NON-RESPONSIVE IF IT SHOULD RECEIVE AN AWARD ON GROUP I. ALTHOUGH IT IS REPORTED THAT THE CONTRACTING OFFICER HAS ALREADY READVERTISED GROUP V, IT HAS BEEN INDICATED THAT THE OPENING OF BIDS HAS BEEN HELD UP.

IN COMMENTING ON THE CONTENTION OF CUMBERLAND FARMS DAIRY, INC., THAT THE JOINT VENTURE BID IS NON-RESPONSIVE BECAUSE OF THEIR PHRASING OF THEIR BID QUALIFICATION, IT IS STATED IN A DEPARTMENTAL MEMORANDUM THAT, SINCE BIDDERS WERE ALLOWED BY THE TERMS OF THE INVITATION TO STATE CONDITIONS UNDER WHICH THEY WOULD ACCEPT AWARD ON A CERTAIN GROUP OF ITEMS LISTED IN THE INVITATION, THIS WAS DONE BY SIX OF THE TEN BIDDERS, INCLUDING CUMBERLAND FARMS DAIRY, INC. THE BID QUALIFICATIONS ARE DESCRIBED AS TAKING ON THE STATUS OF "ALL OR NONE" BIDS, WITH ACCEPTANCE OF CERTAIN LESS SOUGHT AFTER GROUPS BEING TIED TO THE MOST DESIRABLE GROUP OR GROUPS OF ITEMS. REGARDING THE QUALIFICATION OF THE JOINT VENTURE, IT IS POINTED OUT THAT THE JOINT VENTURE RESERVED THE RIGHT TO ACCEPT AWARDS ON GROUPS IV AND V CONTINGENT ON RECEIVING THE AWARD ON GROUP I; AND THAT, SINCE THE JOINT VENTURE WAS LOW ON GROUP I, IT IS REQUIRED TO ACCEPT ANY AWARD MADE ON GROUPS IV AND V IF AWARDED GROUP I AND THE RESERVATION THUS BECOMES INOPERATIVE.

WE HAVE RECEIVED FROM THE ATTORNEYS FOR CUMBERLAND FARMS DAIRY, INC., A BRIEF SETTING FORTH THEIR CONTENTIONS IN SUPPORT OF THE PROTEST. IN THE BRIEF THEY REITERATE THEIR CONTENTION THAT THE JOINT VENTURE BID IS NON- RESPONSIVE BECAUSE OF THE PHRASING OF THEIR BID QUALIFICATION AND, IN ADDITION, THEY CONTEND THAT THE BIDS OF THE JOINT VENTURE, AND OF STERLING DAVIS DAIRY, SINGLE BIDDER, AND RAINIER'S DAIRY, SINGLE BIDDER, ARE COLLUSIVE, AND WERE NOT INDEPENDENTLY ARRIVED AT AND SHOULD, THEREFORE, BE REJECTED.

FOR THE REASONS STATED IN THE LETTER OF JUNE 20, WE AGREE WITH YOUR DEPARTMENT'S VIEW THAT THE RESERVATION MADE IN THE BID OF THE JOINT VENTURE DOES NOT MAKE IT NON-RESPONSIVE.

WITH RESPECT TO THE ALLEGATION OF COLLUSION MADE BY CUMBERLAND'S ATTORNEYS, WE NOTE THAT NO LEGAL AUTHORITY OR EVIDENCE HAS BEEN SUBMITTED IN SUPPORT THEREOF. WE ARE NOT AWARE OF ANY RULE OF LAW WHICH WOULD PROHIBIT THE SUBMISSION OF SEPARATE BIDS BY A JOINT VENTURE AND MEMBERS THEREOF INDIVIDUALLY, NOR CAN WE CONCLUDE THAT SUCH ACTION IS NECESSARILY EVIDENCE OF COLLUSION, ESPECIALLY WHERE, AS HERE, FULL DISCLOSURE OF THEIR RELATIONSHIP AND THEIR AGREEMENT IS MADE AND THERE IS NO EVIDENCE TO INDICATE THAT THE ARRANGEMENT TENDED TO STIFLE COMPETITION. SEE HYER V. RICHMOND TRACTION COMPANY, 168 U.S. 471, 477.

WE RECOGNIZE THAT THE SUBMISSION OF THE HIGH BIDS BY EACH OF THE JOINT VENTURERS ON GROUPS IV AND V DID RESULT IN MAKING THE AGGREGATE PRICE OF ANY COMBINATION OF BIDS FOR THE FIVE ITEMS HIGHER THAN THE BID OF THE JOINT VENTURERS ON THE FIVE ITEMS. HOWEVER, WE CANNOT CONCLUDE FROM THE RECORD THAT THIS WAS DELIBERATELY AND KNOWINGLY DONE TO ACCOMPLISH THIS PURPOSE. THIS WOULD REQUIRE AN ASSUMPTION--- WHICH IS NOT SUPPORTED BY THE RECORD--- THAT THE JOINT VENTURERS KNEW IN ADVANCE THAT NO OTHER BIDDERS WOULD SUBMIT LOWER BIDS OR THAT NO BIDS AT ALL WOULD BE SUBMITTED FOR THESE ITEMS. BUT, AS A MATTER OF FACT, SEVERAL BIDDERS DID SUBMIT LOWER BIDS THAN STERLING DAVIS ON GROUP IV AND ALSO BIDS WERE SUBMITTED ON GROUP V WHICH WERE LOWER THAN RAINIER'S INDIVIDUAL BID ON THAT GROUP. WHILE IT IS TRUE THAT THOSE LOWER PRICED BIDS, OTHER THAN THE PURITAN BID ON GROUP IV, COULD NOT BE CONSIDERED SINCE THE BIDDERS QUALIFIED THEIR BIDS BY TIEING THE BIDS ON THOSE ITEMS IN WITH THEIR BIDS ON OTHER ITEMS, THERE IS NOTHING TO INDICATE THAT THE INDIVIDUAL MEMBERS OF THE JOINT VENTURE COULD HAVE KNOWN OF OR REASONABLY ANTICIPATED THAT FACT. APPEARS FROM THE BIDS SUBMITTED THAT ALL BIDDERS EXCEPT PURITAN INDICATED BY THE QUALIFICATION OF THEIR BIDS THAT THEY WERE NOT INTERESTED IN RECEIVING AN AWARD OF GROUPS IV AND V ALONE. IT MAY BE INFERRED, THEREFORE, THAT GROUPS IV AND V WERE UNPROFITABLE AND THAT A BID ON THOSE ITEMS SINGLY WOULD NECESSARILY BE CONSIDERABLY HIGHER THAN IT WOULD BE IN A COMBINATION BID ON ALL ITEMS. THEREFORE, WE CANNOT SAY THAT THE APPARENTLY HIGH PRICES SUBMITTED BY THE INDIVIDUAL MEMBERS OF THE JOINT VENTURE ON GROUPS IV AND V WERE UNREASONABLE OR EVIDENCED ANY COLLUSION BETWEEN THEM.

ALTHOUGH THE VARIOUS BID QUALIFICATIONS AND THE FACT THAT SOME BIDDERS DID NOT QUOTE ON ALL FIVE GROUPS OF ITEMS MAKE IT DIFFICULT TO OBTAIN AN EXACT COMPARISON OF BIDS IT IS OBVIOUS THAT ALL BIDDERS HAD THE SAME OPPORTUNITY TO QUOTE ON ALL FIVE GROUPS OF ITEMS IN THE SAME MANNER AS THAT EMPLOYED BY THE JOINT VENTURE. CONSIDERING THAT IT IS NOT NOW BELIEVED BY YOUR DEPARTMENT THAT A READVERTISEMENT ON GROUP V WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT, WE WOULD NOT BE REQUIRED TO OBJECT TO AN AWARD OF A CONTRACT FOR ALL FIVE GROUPS OF ITEMS TO THE JOINT VENTURE OF STERLING DAVIS DAIRY AND RAINIER'S DAIRIES.

WE ARE RETURNING THE DEPARTMENTAL FILE WHICH WAS SUBMITTED WITH THE LETTER DATED JUNE 20, 1961.