B-146650, OCT. 23, 1961

B-146650: Oct 23, 1961

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TO HOUSTON READY-CUT HOUSE COMPANY: FURTHER REFERENCE IS MADE TO YOUR LETTERS OF AUGUST 10. BIDS WERE REQUESTED FOR THE MANUFACTURE. BIDS WERE OPENED ON MAY 16. WAS ABOUT $26. GRIFFITH'S BID WAS ADMINISTRATIVELY DETERMINED TO BE NONRESPONSIVE TO THE INVITATION FOR BIDS. SINCE YOUR BID WAS SUBSTANTIALLY IN EXCESS OF THE GOVERNMENT'S ESTIMATE OF AN AVERAGE UNIT COST OF $20. ALL BIDDERS WERE ADVISED BY TELEGRAMS DATED JUNE 23. OF THE REJECTION OF THE BIDS AND THE CANCELLATION OF THE INVITATION BASED ON A DETERMINATION THAT THE LOWEST ACCEPTABLE BID WAS TOO HIGH. YOU AND THE OTHER EIGHT FIRMS WHICH SUBMITTED BIDS IN RESPONSE TO THE INVITATION WERE ADVISED THAT THE INTERNATIONAL COOPERATION ADMINISTRATION WOULD NEGOTIATE FOR AN ACCEPTABLE BID AND WERE INVITED TO SUBMIT NEW PROPOSALS.

B-146650, OCT. 23, 1961

TO HOUSTON READY-CUT HOUSE COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF AUGUST 10, SEPTEMBER 1, AND OCTOBER 13, 1961, WITH ENCLOSURES, PROTESTING THE ACTION OF THE INTERNATIONAL COOPERATION ADMINISTRATION IN AWARDING A CONTRACT TO THE JOINT VENTURE OF GRIFFITH CONSTRUCTION COMPANY, INC.,--- GOLD STAR HOMES, INC., FOR THE FURNISHING OF PREFABRICATED HOUSES IN WEST AFRICA.

THE RECORD FURNISHED IN THIS MATTER BY THE INTERNATIONAL COOPERATION ADMINISTRATION SHOWS THAT UNDER INVITATION FOR BIDS C-1018, ISSUED APRIL 12, 1961, BIDS WERE REQUESTED FOR THE MANUFACTURE, DELIVERY AND ERECTION, IN ACCORDANCE WITH PRESCRIBED SPECIFICATIONS, OF AN ESTIMATED QUANTITY OF BETWEEN 60 AND 100 UNITS OF 2, 3 AND 4 BEDROOM PREFABRICATED HOUSES FOR USE BY THAT AGENCY'S STAFF MEMBERS IN THE VICINITY OF THE PORT OF MONROVIA, LIBERIA. BIDS WERE OPENED ON MAY 16, 1961, WITH NINE FIRMS SUBMITTING BIDS RANGING FROM GRIFFITH'S LOW AVERAGE UNIT PRICE OF ABOUT $15,115 TO A HIGH AVERAGE UNIT PRICE OF ABOUT $51,955. THE AVERAGE UNIT PRICE QUOTED BY YOUR FIRM, THE SECOND LOW BIDDER, WAS ABOUT $26,833. GRIFFITH'S BID WAS ADMINISTRATIVELY DETERMINED TO BE NONRESPONSIVE TO THE INVITATION FOR BIDS. SINCE YOUR BID WAS SUBSTANTIALLY IN EXCESS OF THE GOVERNMENT'S ESTIMATE OF AN AVERAGE UNIT COST OF $20,000 FOR THE HOUSES, ALL BIDDERS WERE ADVISED BY TELEGRAMS DATED JUNE 23, 1961, OF THE REJECTION OF THE BIDS AND THE CANCELLATION OF THE INVITATION BASED ON A DETERMINATION THAT THE LOWEST ACCEPTABLE BID WAS TOO HIGH. ON THE SAME DATE, YOU AND THE OTHER EIGHT FIRMS WHICH SUBMITTED BIDS IN RESPONSE TO THE INVITATION WERE ADVISED THAT THE INTERNATIONAL COOPERATION ADMINISTRATION WOULD NEGOTIATE FOR AN ACCEPTABLE BID AND WERE INVITED TO SUBMIT NEW PROPOSALS. IN RESPONSE THERETO, FOUR PROPOSALS WERE RECEIVED INCLUDING YOUR OFFER IN THE AVERAGE AMOUNT OF APPROXIMATELY $25,627 PER UNIT AND GRIFFITH'S AVERAGE UNIT PRICE OF $19,300. SINCE GRIFFITH WAS ADMINISTRATIVELY DETERMINED TO BE A RESPONSIBLE BIDDER AND ITS OFFER WAS THE LOWEST RECEIVED, IT WAS AWARDED THE CONTRACT.

YOUR PROTEST AGAINST BOTH THE CANCELLATION OF THE INVITATION AND THE SUBSEQUENT NEGOTIATED AWARD IS BASED UPON YOUR CONTENTIONS, IN EFFECT, THAT (1) HAVING SUBMITTED THE LOWEST RESPONSIVE BID IN RESPONSE TO THE ORIGINAL INVITATION, YOU WERE ENTITLED TO, AND HAD BEEN INFORMED THAT YOU WOULD BE RECOMMENDED FOR, THE AWARD; (2) THE NEGOTIATION FOR REBID DID NOT PROVIDE FOR ANY CHANGE FROM THE SPECIFICATIONS OR CONDITIONS CONTAINED IN THE ORIGINAL INVITATION; AND (3) ALTHOUGH, BY THE STATEMENT OF CANCELLATION, THE LOW BIDDER WAS DISQUALIFIED, IT HAS BEEN UNFAIRLY ALLOWED TO REBID, WITHOUT A BID BOND, AND TO RAISE ITS ORIGINAL BID PRICE.

SECTION 303 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT, AS AMENDED, 41 U.S.C. 253, PROVIDES THAT ALL BIDS MAY BE REJECTED IF IT IS DETERMINED THAT SUCH ACTION IS IN THE PUBLIC INTEREST. SECTION 302 (C) (14) OF THE SAME ACT, 41 U.S.C. 252 (C) (14), PROVIDES, IN EFFECT, THAT IF IT IS DETERMINED AFTER ADVERTISING FOR PROPERTY OR SERVICES THAT THE BIDS RECEIVED ARE NOT REASONABLE ALL BIDS MAY BE REJECTED AND NEGOTIATIONS UNDERTAKEN. SEE, ALSO, PARAGRAPH 1-2.404-1 (B) (5) OF THE FEDERAL PROCUREMENT REGULATIONS. IN ADDITION, PARAGRAPH 11 OF THE INSTRUCTIONS TO BIDDERS, WHICH ACCOMPANIED THE INVITATION FOR BIDS, SPECIFICALLY RESERVED TO THE GOVERNMENT THE RIGHT TO REJECT ANY AND ALL BIDS WHEN SUCH REJECTION IS IN THE INTEREST OF THE GOVERNMENT.

IN VIEW OF THE ABOVE STATUTORY AUTHORITY, THE IMPLEMENTING REGULATIONS AND THE EXPRESS RESERVATION IN THE INVITATION FOR BIDS OF THE RIGHT TO REJECT ANY AND ALL BIDS, THERE DOES NOT APPEAR ANY SOUND BASIS FOR YOUR CONTENTION THAT THE INTERNATIONAL COOPERATION ADMINISTRATION COULD NOT UNDER THE CIRCUMSTANCES REJECT ALL BIDS RECEIVED UNDER THE INVITATION, BUT WAS BOUND TO AWARD THE CONTRACT TO YOU AS THE LOWEST RESPONSIBLE BIDDER MEETING THE ADVERTISED SPECIFICATIONS. WHILE IT IS ADMINISTRATIVELY REPORTED THAT INVESTIGATION HAS FAILED TO REVEAL ANY PERSON WHO INFORMED YOU THAT YOU WOULD BE RECOMMENDED FOR THE AWARD, SUCH FACT, EVEN IF ESTABLISHED, WOULD NOT AFFECT THE AUTHORITY VESTED IN THE CONTRACTING OFFICER TO REJECT ALL BIDS IF HE DETERMINED THAT SUCH ACTION WAS IN THE PUBLIC INTEREST, INCLUDING REJECTION BECAUSE THE ACCEPTABLE BIDS RECEIVED WERE UNREASONABLE. SEE 17 COMP. GEN. 554; 36 ID. 364. THE COURTS HAVE CONSISTENTLY HELD THAT A REQUEST BY THE GOVERNMENT FOR BIDS DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED, INCLUDING THE LOWEST CORRECT BID. O-BRIEN V. CARNEY, 6 F.SUPP. 761 AND COLORADO PAVING COMPANY V. MURPHY, 78 F. 28. CERTAINLY, IT CANNOT BE CONCEDED THAT A PUBLIC OFFICER, ACTING FOR THE GENERAL WELFARE, IS BOUND TO ACCEPT A BID WHERE HE DETERMINES THAT THE AMOUNT WHICH THE GOVERNMENT WOULD BE REQUIRED TO PAY THEREUNDER IS EXCESSIVE.

CONCERNING YOUR ASSERTION THAT THE NEGOTIATION PROCEEDINGS DID NOT PROVIDE FOR ANY CHANGE IN SPECIFICATIONS OR CONDITIONS FROM THOSE CONTAINED IN THE ORIGINAL INVITATION, UNDER THE STATUTORY AUTHORITIES AND DECISIONS REFERRED TO ABOVE IT IS NOT NECESSARY THAT THERE BE SUCH A CHANGE TO JUSTIFY THE REJECTION OF ALL BIDS. RATHER, THE REJECTION OF BIDS IS AUTHORIZED AND FURTHER PROCUREMENT ACTION MAY BE UNDERTAKEN IN ANY CASE IN WHICH IT IS DETERMINED THAT SUCH ACTION IS IN THE PUBLIC INTEREST. OBVIOUSLY, IT IS NOT IN THE PUBLIC INTEREST TO ACCEPT A BID WHICH IS DEEMED TO BE EXCESSIVE.

IT FURTHER APPEARS TO BE YOUR VIEW THAT GRIFFITH, THE LOW BIDDER ON THE ORIGINAL INVITATION, WAS BY THE NOTICE OF CANCELLATION OF BIDS A "DISQUALIFIED BIDDER" AND THEREFORE SHOULD NOT HAVE BEEN PERMITTED TO COMPETE FOR THE AWARD IN THE SUBSEQUENT NEGOTIATION PROCEEDINGS. THE FACT THAT A BID IS RULED "NONRESPONSIVE" TO AN INVITATION FOR BIDS, IN THAT IT FAILS TO COMPLY IN SOME MATERIAL ASPECT WITH THE ADVERTISED REQUIREMENTS, DOES NOT, AS CONTENDED BY YOU, RENDER THE BIDDER, UPON REJECTION OF ALL BIDS, INELIGIBLE FOR PARTICIPATION IN ANY SUBSEQUENT PROCUREMENT PROCEEDINGS. WHILE GRIFFITH'S ORIGINAL BID WAS DETERMINED TO BE NON- RESPONSIVE TO THE INVITATION FOR BIDS AND, AS SUCH, COULD NOT BE CONSIDERED FOR AWARD THEREUNDER, THERE WAS NO ADMINISTRATIVE DETERMINATION, NOR DO YOU CONTEND, THAT GRIFFITH WAS NOT A RESPONSIBLE BIDDER. 41 U.S.C. 252 (C) (14), AS IMPLEMENTED BY PARAGRAPH 1-3.214 OF THE FEDERAL PROCUREMENT REGULATIONS, SETS FORTH THE MANDATORY REQUIREMENTS THAT IN NEGOTIATION PROCEEDINGS, FOLLOWING REJECTION OF ADVERTISED BIDS AS BEING TOO HIGH "NO CONTRACT SHALL BE NEGOTIATED * * * UNLESS:

"/1) NOTIFICATION OF INTENTION TO NEGOTIATE AND REASONABLE OPPORTUNITY TO NEGOTIATE HAVE BEEN GIVEN TO EACH RESPONSIBLE BIDDER WHICH SUBMITTED A BID IN RESPONSE TO THE INVITATION FOR BIDS; AND

"/2) THE NEGOTIATED PRICE IS THE LOWEST NEGOTIATED PRICE OFFERED BY ANY RESPONSIBLE SUPPLIER.'

BASED THEREON, A RESPONSIBLE BIDDER, WHO HAS SUBMITTED A BID UNDER AN INVITATION CANCELLED BECAUSE OF QUOTATIONS DEEMED UNREASONABLE, IS NOT ONLY ENTITLED TO, BUT REQUIRED TO BE GIVEN, THE OPPORTUNITY TO PARTICIPATE IN SUBSEQUENT NEGOTIATIONS. MOREOVER, SINCE YOUR PROPOSAL IN THE NEGOTIATION PROCEEDINGS, BASED ON CONSTRUCTION OF 100 HOUSES, WAS STILL APPROXIMATELY $477,000 IN EXCESS OF THE GOVERNMENT'S ESTIMATE OF THE FAIR PRICE THEREFOR, THERE WAS NO ASSURANCE THAT AWARD WOULD HAVE BEEN MADE TO YOU EVEN IF GRIFFITH HAD DECIDED NOT TO PARTICIPATE FURTHER IN THE PROCUREMENT PROCEEDINGS.

WITH RESPECT TO YOUR CONTENTION THAT THE NEGOTIATION PROCEEDINGS WERE IMPROPERLY CONDUCTED BECAUSE GRIFFITH WAS PERMITTED TO REBID, WITHOUT A BID BOND, AND TO RAISE ITS ORIGINAL BID PRICE, YOU EXPRESS THE VIEW THAT THIS SECOND OPPORTUNITY AFFORDED TO GRIFFITH, AFTER YOUR ORIGINAL SEALED BID HAD BEEN MADE PUBLIC, CERTAINLY WAS NOT FAIR NOR WITHIN THE ACCEPTED ETHICS OF EITHER PRIVATE BUSINESS NOR GOVERNMENTAL PROCUREMENT PROCEDURES.

AS TO THE FACT THAT GRIFFITH WAS PERMITTED TO NEGOTIATE FOR THE AWARD WITHOUT A BID BOND, THE RECORD BEFORE THIS OFFICE DOES NOT SHOW THAT IT WAS ACCORDED ANY SPECIAL PRIVILEGE. TO THE CONTRARY, WE HAVE BEEN INFORMALLY ADVISED BY THE PROCURING AGENCY THAT, IN THE NEGOTIATION PROCEEDINGS, NONE OF THE BIDDERS WAS REQUIRED TO FURNISH A BID BOND. SINCE THERE IS NO STATUTORY REQUIREMENT THAT A BID BOND BE FURNISHED, ANY REQUIREMENT FOR SUCH A BOND IN THE NEGOTIATION PROCEEDINGS WAS A MATTER OF ADMINISTRATIVE DISCRETION. FURTHER, WHILE NO BID BOND WAS REQUIRED, THE RECORD SHOWS THAT THE CONTRACT AWARDED UNDER THE NEGOTIATION PROCEEDINGS WAS NOT EXECUTED UNTIL AFTER GRIFFITH FURNISHED A PERFORMANCE BOND IN THE AMOUNT OF $250,000--- THE SAME AMOUNT AS THAT REQUIRED UNDER THE ORIGINAL INVITATION FOR BIDS.

WE FULLY APPRECIATE YOUR VIEWS WITH RESPECT TO THE CONSEQUENCES RESULTING FROM THE REJECTION OF ALL BIDS AFTER BID OPENING AND REALIZE THAT IT MAY OPERATE TO THE DISADVANTAGE OF SOME OR ALL OF THE BIDDERS WHOSE BIDS HAVE BEEN EXPOSED. IT IS FOR EXACTLY THAT REASON THAT THIS OFFICE HAS CONSISTENTLY EXPRESSED SERIOUS CONCERN IN ALL CASES INVOLVING THE REJECTION OF BIDS AFTER OPENING AND HAVE REFUSED TO APPROVE SUCH ACTION EXCEPT FOR THE MOST COGENT REASONS. SEE 39 COMP. GEN. 396. WE HAVE CONSTANTLY SOUGHT TO PROTECT AND MAINTAIN THE PRINCIPLES OF IMPARTIALITY AND FAIR PLAY UPON WHICH THE COMPETITIVE BIDDING SYSTEM DEPENDS, AND HAVE NEVER COUNTENANCED THE REJECTION OF BIDS MERELY FOR THE PURPOSE OF AFFORDING THE BIDDERS AN OPPORTUNITY TO BETTER THE PRICES OF THEIR COMPETITORS. WE CANNOT, HOWEVER, CONSIDER THE MATTER OF COMPETITIVE BIDDING FOR GOVERNMENT CONTRACTS SOLELY AS A GAME, IN WHICH THE CONTRACT MUST AUTOMATICALLY GO TO THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER WITHOUT REGARD TO THE REASONABLENESS OF HIS PRICE. WHEN IN THE LIGHT OF ALL THE FACTS, INCLUDING THOSE DISCLOSED BY THE BIDDING, IT IS ADMINISTRATIVELY DETERMINED THAT THE LOWEST ACCEPTABLE BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE PROPERTY OR SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS AND THE NEGOTIATION OF A CONTRACT IS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION, IN CONFORMITY WITH THE DUTY OF ADMINISTRATIVE OFFICIALS TO ACT IN THE BEST INTEREST OF THE GOVERNMENT. UPON SUCH REJECTION AND NEGOTIATION THE ORIGINAL BIDS ARE NO LONGER MATERIAL OR EFFECTIVE FOR ANY PURPOSE WHATSOEVER. WHILE IT IS REGRETTABLE THAT ALL BIDDERS ARE AWARE OF THE AMOUNTS ORIGINALLY QUOTED BY THEIR COMPETITORS, THEY ALSO ARE BETTER ADVISED AS TO WHAT PRICE RANGE IS CONSIDERED REASONABLE BY THE GOVERNMENT'S REPRESENTATIVES, AND ALL HAVE EQUAL OPPORTUNITIES TO SUBMIT SUCH NEW PROPOSALS AS THEY MAY DESIRE. MUST BE OBVIOUS THAT THE IMPOSITION OF ANY RESTRICTION ON BIDDERS WHICH WOULD REQUIRE THEM TO SUBMIT A PROPOSAL BEARING ANY PARTICULAR RELATIONSHIP TO A PREVIOUSLY REJECTED BID WOULD DEFEAT THE VERY PURPOSE INTENDED BY THE PROCUREMENT STATUTES. IN THE INSTANT CASE ALL BIDDERS UNDER THE ORIGINAL INVITATION HAD EQUAL OPPORTUNITY TO BE APPRISED OF THE BIDS SUBMITTED BY THEIR COMPETITORS, AND ALL BIDDERS UNDER THE NEGOTIATION PROCEEDING HAD EQUAL AND UNRESTRICTED OPPORTUNITY TO SUBMIT COMPETITIVE PROPOSALS WITHOUT REGARD TO THE ORIGINAL BID PRICES. THAT THE BIDDERS, GENERALLY, TOOK ADVANTAGE OF THIS OPPORTUNITY IN THE NEGOTIATION PROCEEDINGS IS SHOWN BY THE FACT THAT, WHILE GRIFFITH INCREASED ITS BID PROPOSAL BY AN AVERAGE UNIT PRICE OF ABOUT $4,185 OVER THAT QUOTED IN RESPONSE TO THE INVITATION FOR BIDS, YOU DECREASED YOUR PREVIOUS PROPOSAL BY APPROXIMATELY $1,206 PER UNIT AND ANOTHER BIDDER DECREASED ITS BID BY ABOUT $4,920 PER UNIT.

THE RECORD SHOWS THAT THE CONTRACT HAS BEEN AWARDED TO THE LOWEST RESPONSIBLE BIDDER AT A PRICE WHICH IS SUBSTANTIALLY LOWER THAN THE ADMINISTRATIVE AGENCY'S ESTIMATE AND AT A POTENTIAL COST--- BASED ON PROCUREMENT OF 100 PREFABRICATED HOUSES--- OF APPROXIMATELY $800,000 LESS THAN THE LOWEST BID PRICE, QUOTED BY YOUR FIRM, WHICH COULD HAVE BEEN ACCEPTED UNDER THE ORIGINAL INVITATION. IT WOULD THEREFORE APPEAR THAT THE DECISION OF THE INTERNATIONAL COOPERATION ADMINISTRATION TO REJECT ALL BIDS UNDER THE ORIGINAL INVITATION AS BEING EXCESSIVE AND TO NEGOTIATE THE AWARD WAS IN THE BEST INTEREST OF THE GOVERNMENT.

UNDER THE REPORTED FACTS AND CIRCUMSTANCES, THERE IS NO LEGAL BASIS ON WHICH THIS OFFICE MAY QUESTION THE ADMINISTRATIVE ACTION TAKEN IN THIS MATTER.