B-147904, FEB. 8, 1962

B-147904: Feb 8, 1962

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TO SEA LAMP COMPANY: REFERENCE IS MADE TO LETTER OF JANUARY 22. THE ACTION TAKEN BY THE CONTRACTING OFFICER INVOLVED IN CANCELLING THE BALANCE OF THE UNITS FOR WHICH NO CONTRACT WAS AWARDED UNDER THE SUBJECT INVITATION. WAS ARBITRARY AND CONSTITUTED AN ABUSE OF HIS DISCRETIONARY AUTHORITY. IT IS FURTHER CONTENDED THAT SUCH PROCEDURE VIOLATES THE COMPETITIVE BIDDING SYSTEM ESTABLISHED BY LAW AND IMPLEMENTING REGULATIONS AND IS INCOMPATIBLE WITH THE PUBLIC INTEREST. THE RECORD DISCLOSES THAT UNDER THE SAID INVITATION BIDS WERE SOUGHT ON THE FURNISHING OF 14. 109 UNITS WITH OTHERWISE RESPONSIBLE BIDDERS WHOSE BIDS WERE RESPONSIVE AND WHOSE PRICE WAS WITHIN 120 PERCENT OF THE AWARD MADE ON THE NON-SET ASIDE PORTION.

B-147904, FEB. 8, 1962

TO SEA LAMP COMPANY:

REFERENCE IS MADE TO LETTER OF JANUARY 22, 1962, AND TO PRIOR CORRESPONDENCE FROM YOUR ATTORNEY, PROTESTING ON YOUR BEHALF AGAINST THE WITHDRAWAL OF THE SET-ASIDE PORTION OF HAND LANTERNS COVERED BY INVITATION FOR BIDS NO. 104-309-62, ISSUED BY THE DEPARTMENT OF THE NAVY, SHIPS PARTS CONTROL CENTER. YOU CONTEND, IN SUBSTANCE, THAT IN VIEW OF THE MANDATORY LANGUAGE OF THE ARMED SERVICES PROCUREMENT REGULATION (SECTIONS 1-804.2 (D) AND 2-404.16 (A) ( AND CERTAIN AUTHORITIES CITED, THE ACTION TAKEN BY THE CONTRACTING OFFICER INVOLVED IN CANCELLING THE BALANCE OF THE UNITS FOR WHICH NO CONTRACT WAS AWARDED UNDER THE SUBJECT INVITATION, WAS ARBITRARY AND CONSTITUTED AN ABUSE OF HIS DISCRETIONARY AUTHORITY. IT IS FURTHER CONTENDED THAT SUCH PROCEDURE VIOLATES THE COMPETITIVE BIDDING SYSTEM ESTABLISHED BY LAW AND IMPLEMENTING REGULATIONS AND IS INCOMPATIBLE WITH THE PUBLIC INTEREST.

THE RECORD DISCLOSES THAT UNDER THE SAID INVITATION BIDS WERE SOUGHT ON THE FURNISHING OF 14,110 HAND LANTERNS, WITH AN OPTION RESERVED IN THE GOVERNMENT TO NEGOTIATE FOR AN ADDITIONAL QUANTITY OF 14,109 UNITS WITH OTHERWISE RESPONSIBLE BIDDERS WHOSE BIDS WERE RESPONSIVE AND WHOSE PRICE WAS WITHIN 120 PERCENT OF THE AWARD MADE ON THE NON-SET ASIDE PORTION. THE ORDER OF PRIORITY FOR THE NEGOTIATING AND AWARDING OF CONTRACTS TO BIDDING FIRMS LOCATED IN LABOR SURPLUS AREAS AND TO SMALL BUSINESS CONCERNS WAS FIXED BY THE TERMS OF THE INVITATION. BIDS WERE OPENED ON SEPTEMBER 26, 1961, AND AWARD WAS MADE TO THE LOW BIDDER AT A UNIT PRICE OF $7.20 FOR THE OPEN QUANTITY. THE BALANCE RESERVED AS THE SET-ASIDE PORTION THEN BECAME SUBJECT TO NEGOTIATION AT A PRICE OF $7.20 EACH, WITH BIDDERS ELIGIBLE UNDER THE ABOVE-STATED CONDITIONS.

BECAUSE OF A NEGATIVE RATING ACCORDED YOUR FIRM AS A QUALIFIED BIDDER IN CONNECTION WITH PREVIOUS PROCUREMENTS, THE ADMINISTRATIVE OFFICE DID NOT UNDERTAKE TO NEGOTIATE A CONTRACT WITH YOU. THEREAFTER, BY TELEGRAMS AND LETTERS DATED OCTOBER 5 AND 12, 1961, THE DEPARTMENT OF THE NAVY WAS ADVISED THAT YOUR COMPANY HAD BEEN ACQUIRED BY WORKMAN ELECTRONIC PRODUCTS, INCORPORATED, WHICH RAISED TWO QUESTIONS; THAT IS, WHETHER A NOVATION OF THE PARTIES TO THE SUBMITTED BID, PURSUANT TO YOUR REQUEST, COULD LEGALLY BE ACCEPTED BY THE CONTRACTING OFFICE, AND WHETHER THE NEW CORPORATION WAS A QUALIFIED BIDDER WITHIN THE MEANING OF THE APPLICABLE LAWS AND REGULATIONS. AS TO THE LATTER QUESTION A REQUEST WAS PROMPTLY MADE THROUGH CHANNELS BY THE CONTRACTING OFFICER FOR A PRE-AWARD SURVEY TO BE CONDUCTED BY THE OFFICE OF INSPECTOR OF NAVAL MATERIALS, AND IN DUE COURSE A SATISFACTORY FACILITIES AND CAPABILITY REPORT ON WORKMAN ELECTRONIC PRODUCTS, INCORPORATED, WAS FURNISHED. HOWEVER, BECAUSE OF SUBSEQUENT FACTORS HEREINAFTER DISCUSSED, THE ABOVE QUESTIONS WERE RENDERED ACADEMIC AND, THEREFORE, WERE NOT REVIEWED OR DETERMINED BY THE ADMINISTRATIVE OFFICIALS.

DURING THE TIME THE QUALIFICATIONS OF YOUR SUCCESSOR CORPORATION WERE UNDER EXAMINATION A REQUEST FOR AN ADDITIONAL QUANTITY OF HAND LANTERNS WAS RECEIVED BY THE SHIPS PARTS CONTROL CENTER, PURSUANT TO WHICH INVITATION FOR BIDS NO. 104-1031-62, WAS ISSUED UNDER DATE OF NOVEMBER 14, 1961. THE RIGHT WAS RESERVED IN THE GOVERNMENT TO PURCHASE A QUANTITY OF 13,221 UNITS UNDER THAT INVITATION. A BID OF $6.30 EACH, WAS SUBMITTED BY THE ROFLAN COMPANY, THE SUCCESSFUL BIDDER UNDER THE FORMER PROCUREMENT. THE CURRENT INVITATION FURTHER PROVIDED FOR A MAXIMUM QUANTITY OF 17,628 TO BE SET-ASIDE FOR NEGOTIATION WITH LABOR SURPLUS AREA AND/OR SMALL BUSINESS CONCERNS. IT IS REPORTED THAT THE PROCURABLE QUANTITY OF 17,628 UNDER THIS INVITATION IS SUFFICIENT TO COVER ALL OF THE NEEDS OF THE NAVY HERETOFORE GENERATED, INCLUDING THE UNFILLED BALANCE OF THE PRIOR SOLICITATION.

SINCE THE CURRENT PRICE OF $6.30 HAD BEEN ESTABLISHED UNDER THIS TRANSACTION, THE SET-ASIDE PORTION OF IFB 104-309-62, WAS CANCELLED BY THE CONTRACTING OFFICER PURSUANT TO THE PROVISIONS OF ASPR SECTION 1 804.3, WHICH AUTHORIZES THE CANCELLATION OF ANY CONTEMPLATED SET-ASIDE QUANTITIES OF AN INVITATION IF IT BE IN THE PUBLIC INTEREST. YOUR ATTORNEY CONTENDS, HOWEVER, THAT SUCH ACTION WAS NOT IN THE PUBLIC INTEREST. STATED OTHERWISE, WE ARE URGED TO BELIEVE THAT IT WAS IMPROPER FOR THE ADMINISTRATIVE OFFICE TO REFUSE TO NEGOTIATE A CONTRACT WITH YOU AT A UNIT PRICE OF $7.20 WHEN, AT THE SAME TIME AND UNDER IDENTICAL CONDITIONS, THE LANTERNS COULD BE OBTAINED ELSEWHERE FOR $6.30 EACH. THAT POSITION, IN OUR OPINION, IS COMPLETELY UNTENABLE. THE BASIS FOR HIS ARGUMENT IS THE USE OF THE WORD "SHALL" IN SECTION 1-804.2 (D) OF ASPR, WHICH COVERS THE PROCEDURE FOR NEGOTIATING SET-ASIDE CONTRACTS. BECAUSE OF ITS MANDATORY TERMS IT IS CONTENDED THAT THE CITED SECTION OF THE REGULATION LEAVES NO DISCRETIONARY AUTHORITY IN PROCUREMENT OFFICIALS. IN THE APPLICATION OF THAT PRESUMPTION TO THE INSTANT CASE, IT IS ARGUED THAT REGARDLESS OF ANY OTHER MATERIAL CONSIDERATION THE CONTRACTING OFFICER WAS LEGALLY BOUND TO AWARD YOU A CONTRACT AT A UNIT PRICE OF $7.20. ASIDE FROM THE FACT THAT NO BID AS SUCH WAS SUBMITTED ON THE SET-ASIDE PORTION, SUCH CONTENTION COMPLETELY DISREGARDS THE DECISIONS OF THE COURTS TOO NUMEROUS TO MENTION WHICH HOLD THAT A BIDDER ACQUIRES NO VESTED RIGHTS TO A CONTRACT MERELY BY THE SUBMISSION OF A BID. FURTHERMORE, REGULATIONS ADOPTED TO SUPPLEMENT THE LAW, AS IN THIS CASE, ARE DESIGNED FOR THE USE AND GUIDANCE OF CONTRACTING OFFICERS AND AGENTS OF THE GOVERNMENT, AND LIKEWISE CREATE NO RIGHTS OR BENEFITS IN PARTIES RESPONDING TO AN INVITATION TO BID. SEE FRIEND V. LEE, 221 F.2D 96, AND THE SEVERAL CASES CITED THEREIN. WHILE WE ARE AWARE OF THE STATUTES AND REGULATIONS THAT HAVE BEEN COMPILED TO AID LABOR DISTRESSED AREA AND SMALL BUSINESS CONCERNS, WE KNOW OF NO AUTHORITY, AND NONE HAS BEEN BROUGHT TO OUR ATTENTION, WHICH WOULD COMPEL THE ADMINISTRATIVE OFFICE TO NEGOTIATE A CONTRACT WITH YOU AT AN EXCESS COST OF ?90 PER UNIT, UNDER THE CIRCUMSTANCES OF THIS CASE.

IN ADDITION, FOR THE REASONS STATED ABOVE, WE CONCLUDE THAT THE ACTION TAKEN WAS NEITHER AN ARBITRARY OR ABUSIVE ACT BEYOND THE SCOPE OF AUTHORITY VESTED IN THE PROCUREMENT OFFICIALS, NOR A VIOLATION OF THE LAW AND SPIRIT OF THE COMPETITIVE BIDDING STATUTES. ACCORDINGLY, THE CANCELLATION OF THE SET-ASIDE IN CONNECTION WITH INVITATION FOR BIDS NO. 104-309-62, WILL NOT BE DISTURBED.