B-147837, FEB. 23, 1962

B-147837: Feb 23, 1962

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KROLL AND SIMONDS: FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 20. WAS AT THE QUOTED PRICE LESS A REFINING CHARGE OF ?01360 PER OUNCE OR A TOTAL OF ?90015 PER OUNCE. IT IS ADMINISTRATIVELY REPORTED THAT ON NOVEMBER 28. THAT THE CLOSING MARKET PRICE FOR SILVER ON THE FOLLOWING DAY WAS 100 3/4 CENTS. THAT MORE RECENTLY PRICES QUOTED FOR SILVER HAVE BEEN 104 3/4 CENTS. IT IS STATED THAT WHILE IT IS RECOGNIZED THAT GENERALLY THE GOVERNMENT HAS THE RIGHT TO REJECT ALL BIDS YOU BELIEVE THAT THE REJECTION OF YOUR CLIENT'S BID WAS ARBITRARY. ALSO IT IS STATED THAT TO SUGGEST THAT THE GOVERNMENT MAY REJECT THE BID UNDER THE INVOLVED CIRCUMSTANCES IS TANTAMOUNT TO ENDORSING THE HIGHLY UNDESIRABLE BUSINESS PRACTICE OF ALLOWING A PARTY TO TAKE ADVANTAGE OF HIS OWN MISCONDUCT TO THE PREJUDICE OF ANOTHER PARTY.

B-147837, FEB. 23, 1962

TO FREEDMAN, LEVY, KROLL AND SIMONDS:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 20, 1961, AND YOUR LETTER OF JANUARY 4, 1962, PROTESTING ON BEHALF OF METAL TRADERS, INCORPORATED, AGAINST THE REJECTION OF ITS BID ON ITEM 1 OF INVITATION FOR BIDS NO. 05-110-S-62-27, ISSUED NOVEMBER 7, 1961, BY THE CONSOLIDATED SURPLUS SALES OFFICE, PUEBLO ORDNANCE DEPOT, PUEBLO, COLORADO.

UNDER ITEM NO. 1, PAGE 3 OF THE INVITATION THE SURPLUS SALES OFFICE REQUESTED BIDS TO BE OPENED ON NOVEMBER 28, 1961, FOR THE PURCHASE OF APPROXIMATELY 82,000 TROY OUNCES OF UNREFINED SILVER. ARTICLE "E" OF THE SPECIAL CONDITIONS STIPULATED THAT THE PRICES WOULD BE BASED ON 0.999 FINE SILVER AS QUOTED IN THE "AMERICAN METAL MARKET" PUBLICATION ON DAY OF BID OPENING, LESS REFINING CHARGE, IF ANY. THE "AMERICAN METAL MARKET" DATED NOVEMBER 28, 1961, QUOTED A PRICE OF 91 3/8 CENTS PER POUND FOR .999 FINE SILVER. YOUR CLIENT'S BID, THE HIGHEST RECEIVED, WAS AT THE QUOTED PRICE LESS A REFINING CHARGE OF ?01360 PER OUNCE OR A TOTAL OF ?90015 PER OUNCE.

IT IS ADMINISTRATIVELY REPORTED THAT ON NOVEMBER 28, 1961, THE WHITE HOUSE ANNOUNCED THAT THE TREASURY DEPARTMENT HAD BEEN DIRECTED TO SUSPEND IMMEDIATELY ANY FURTHER SALES OF GOVERNMENT FREE SILVER; THAT THE CLOSING MARKET PRICE FOR SILVER ON THE FOLLOWING DAY WAS 100 3/4 CENTS, REPRESENTING A PRICE ADVANCE OF MORE THAN 10 PERCENT IN ONE DAY OR AN INCREASE OF $7,687.50 FOR THE QUANTITY INVOLVED IN THE INVITATION FOR BIDS; AND THAT MORE RECENTLY PRICES QUOTED FOR SILVER HAVE BEEN 104 3/4 CENTS.

IN YOUR LETTER OF DECEMBER 20, 1961, IT IS STATED THAT WHILE IT IS RECOGNIZED THAT GENERALLY THE GOVERNMENT HAS THE RIGHT TO REJECT ALL BIDS YOU BELIEVE THAT THE REJECTION OF YOUR CLIENT'S BID WAS ARBITRARY, INCONSISTENT WITH ESTABLISHED GOVERNMENT PRACTICE AND UNLAWFUL. ALSO IT IS STATED THAT TO SUGGEST THAT THE GOVERNMENT MAY REJECT THE BID UNDER THE INVOLVED CIRCUMSTANCES IS TANTAMOUNT TO ENDORSING THE HIGHLY UNDESIRABLE BUSINESS PRACTICE OF ALLOWING A PARTY TO TAKE ADVANTAGE OF HIS OWN MISCONDUCT TO THE PREJUDICE OF ANOTHER PARTY. YOU URGE THAT SINCE ARTICLES ,E" AND "O" OF THE SPECIAL CONDITIONS STIPULATING THAT PRICES FOR SILVER AND FOR RESIDUE FROM THE REFINING, RESPECTIVELY, WOULD BE DETERMINED AS OF THE MARKET PRICE ON THE DAY OF BID OPENING THIS INDICATES UNMISTAKABLY THAT THE RIGHTS OF THE PARTIES BECAME FIXED AS OF THE CONDITIONS EXISTING WHEN THE BIDS WERE OPENED AT 11 A.M. ON NOVEMBER 28, 1961; THAT THE GOVERNMENT IS BOUND BY THE PARTIES DETERMINED ON SUCH BASIS; AND THAT IT MAY NOT TAKE INTO ACCOUNT SUBSEQUENT EVENTS, PARTICULARLY WHEN SUCH EVENTS ARE OF ITS OWN MAKING. YOU STATE THAT IF THE CONTRACTING OFFICER HAD BEEN DILIGENT AND HAD MADE THE AWARD PROMPTLY AFTER BID OPENING HE WOULD HAVE ACCEPTED YOUR CLIENT'S BID AND THAT YOUR CLIENT IS BEING PENALIZED BECAUSE OF THE CONTRACTING OFFICER'S LACK OF DILIGENCE AND TARDINESS IN MAKING AN AWARD.

WHILE IT IS TRUE THAT THE "PRICE DETERMINATION" FORMULA SET FORTH IN ARTICLE "E" OF THE SPECIAL CONDITIONS WAS TO BE USED IN DETERMINING THE PRICE IN THE EVENT OF AN AWARD OF A CONTRACT, THERE IS NOTHING IN ARTICLE "E" OR ANY OTHER PROVISION OF THE SPECIAL CONDITONS OR GENERAL SALE TERMS AND CONDITIONS TO INDICATE THAT UNTIL AN EFFECTIVE AWARD WAS ACTUALLY MADE THE RIGHTS OF THE PARTIES "CRYSTALLIZED AS OF THE CONDITIONS EXISTING WHEN THE BID WAS OPENED, I.E., 11 A.M. ON NOVEMBER 28, 1961" OR THAT A VALID AND BINDING CONTRACT AUTOMATICALLY CAME INTO BEING AT THAT TIME.

YOUR BID WAS SUBMITTED SUBJECT TO THE ACCEPTANCE THEREOF WITHIN 60 DAYS AND UNDER PARAGRAPH 3 OF THE GENERAL SALE TERMS AND CONDITIONS THE GOVERNMENT RESERVED THE RIGHT TO REJECT ANY OR ALL BIDS. EVEN IN THE ABSENCE OF SUCH RESERVATION, IT HAS BEEN HELD THAT NO BIDDER ACQUIRES AN ABSOLUTE RIGHT TO AN AWARD SIMPLY BECAUSE HE HAS SUBMITTED THE HIGHEST OR LOWEST BID AS THE CASE MAY BE. RATHER, THE PUBLIC INTEREST IS FIRST FOR CONSIDERATION IN MAKING AN AWARD. SEE O-BRIEN V. CARNEY, 6 F.SUPP. 761; 26 COMP. GEN. 49. 17 ID. 554, 559.

MANIFESTLY, IT WAS IN THE PUBLIC INTEREST THAT THE SILVER BRING AS HIGH A PRICE AS POSSIBLE CONSISTENT WITH FAIR DEALING. BASED UPON THE AMERICAN METAL MARKET PRICE OF 91 3/8 CENTS ON DATE OF BID OPENING THE TOTAL AMOUNT OF YOUR BID WAS $73,812.30. BECAUSE OF THE AMOUNT OF THE SALE IT WAS INCUMBENT UPON THE CONTRACTING OFFICER TO REFER THE MATTER TO THE REVIEWING AUTHORITY BEFORE ACTING ON YOUR CLIENT'S PROPOSAL. SUCH ACTION WAS REQUIRED BY REGULATIONS ISSUED BY THE ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION PURSUANT TO SECTION 203 (E) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 63 STAT. 385, AS AMENDED, 40 U.S.C. 484, PROVIDING AS FOLLOWS:

"PART 55 - PERSONAL PROPERTY DISPOSAL

SEC. 55.50 REVIEWING AUTHORITY.

"APPROVAL BY A REVIEWING AUTHORITY OF EACH HOLDING AGENCY SHALL BE REQUIRED FOR EACH PROPOSED AWARD INVOLVING THE TYPE OF SALE AND ACQUISITION COST (ACTUAL OR ESTIMATED) OF PROPERTY AS OLLOWS:

"/A) BY NEGOTIATION - $1,000 OR MORE;

(B)BY COMPETITIVE BID SALE - $10,000 OR MORE"

(15 F.R. 6492, 6494, 44 CFR 55, 55.50 ).

UNDER THIS REGULATION, NOT ONLY WAS THE CONTRACTING OFFICER NOT CHARGEABLE WITH LACK OF DILIGENCE, BUT AN IMMEDIATE AWARD BY HIM WOULD HAVE BEEN INVALID. B-147367, JANUARY 31, 1962.

UPON SUBMISSION OF THE MATTER TO THE CHIEF, PROPERTY DISPOSAL DIVISION, IT WAS CONCLUDED THAT A DETERMINATION THAT THE PRICE BID BY YOUR CLIENT WAS REASONABLE COULD NOT BE SUPPORTED IN VIEW OF THE SUBSTANTIAL PRICE INCREASE THAT FOLLOWED THE WHITE HOUSE DIRECTIVE, AND THE CONTRACTING OFFICER WAS ACCORDINGLY INSTRUCTED TO REJECT ALL BIDS RECEIVED UNDER THE INVITATION WHICH HE DID ON DECEMBER 8, 1961, WELL WITHIN THE 60-DAY PERIOD ALLOWED FOR ACCEPTANCE.

THE REGULATION PUBLISHED IN 15 F.R. 6494, 44 CFR 55, 55.50 WAS BINDING UPON ALL PARTIES TO THE PROPOSED SALE AND IN THE ABSENCE OF THE REQUIRED APPROVAL OF THE REVIEWING AUTHORITY THE CONTRACTING OFFICER WAS NOT AUTHORIZED TO MAKE AN AWARD. WHILE THE REJECTION OF YOUR CLIENT'S BID MAY HAVE OPERATED TO ITS DISADVANTAGE, IN THAT IT WAS DEPRIVED OF AN UNANTICIPATED WINDFALL, THE AUTHORITY OF THE GOVERNMENT TO TAKE SUCH ACTION IN THE PUBLIC INTEREST IS UNQUESTIONED, AND WE DO NOT BELIEVE THAT THE ACTION IN THE PUBLIC INTEREST IS UNQUESTIONED, AND WE DO NOT BELIEVE THAT THE ACTION MAY PROPERLY BE CONSIDERED AS VIOLATIVE OF ANY STANDARD OF FAIR DEALING. HAD THE GOVERNMENT ADVERTISED FOR BIDS FOR SUPPLYING SOME ARTICLE TO IT AND DISCOVERED AFTER BID OPENING THAT THE NEED FOR THE ARTICLE NO LONGER EXISTED, WE BELIEVE NO ONE COULD QUESTION THE CONTRACTING OFFICER'S RIGHT--- IN FACT, DUTY--- TO REJECT ALL BIDS. FIND NO ESSENTIAL DIFFERENCE BETWEEN SUCH A CASE AND THE PRESENT ONE.

WITH RESPECT TO THE STATEMENT IN YOUR LETTER OF DECEMBER 20, 1961, TO THE EFFECT THAT AS OF THAT DATE THE DEPOSIT ACCOMPANYING YOUR CLIENT'S BID HAD NOT BEEN RETURNED, IT IS ASSUMED THAT IT WAS RETAINED BY REASON OF YOUR COMPLAINT. WE ARE BRINGING THIS DECISION TO THE ATTENTION OF THE CONTRACTING OFFICER ADVISING THE DISPOSAL AUTHORITIES OF THIS REJECTION OF YOUR PROTEST AND HAVE NO DOUBT THAT THE DEPOSIT WILL BE PROMPTLY RETURNED.