B-148333, APR. 9, 1962

B-148333: Apr 9, 1962

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

A REPORT WAS OBTAINED FROM THE COAST GUARD AND. WAS FURNISHED TO YOU BY AIRMAIL LETTER OF MARCH 23. WAS SET OUT SO THAT ITEM 1 SOLICITED A LUMP SUM BASE BID FOR THE CONSTRUCTION. PARAGRAPH 11 (C) PROVIDED THAT THE GOVERNMENT RESERVED THE RIGHT TO MAKE AN AWARD TO THE BIDDER WHOSE AGGREGATE BID ON "ANY COMBINATION" OF BID ITEMS WAS LOW. BID EVALUATION WILL BE BASED ON THOSE ITEMS ACCEPTED AT THE TIME OF AWARD.'. EIGHTEEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. 472 WAS LOW AND THE ESSENTIAL-HIMOUNT JOINT VENTURE BID TOTALING $1. 344 WAS SECOND LOW. THE AWARD WAS MADE TO THE F. THE JOINT VENTURE STATED THAT NEITHER THE INVITATION NOR THE BID DOCUMENTS INDICATED THE BASIS UPON WHICH THE AWARD WOULD BE MADE AND IT ASSUMED THAT AWARD WOULD BE MADE TO THE LOWEST BIDDER ON THE BASIS OF THE LOWEST BASE BID CALLED FOR ON ITEM 1 AND THAT IF ADDITIONAL WORK WAS REQUIRED THAT THOSE ITEMS COMMENCING WITH ALTERNATE 1 WOULD BE AWARDED IN CHRONOLOGICAL ORDER.

B-148333, APR. 9, 1962

TO MR. WM. WALTER FRANKEL:

FOLLOWING RECEIPT OF A PROTEST BY THE JOINT VENTURE OF ESSENTIAL CONSTRUCTION COMPANY, INC., AND HIMOUNT CONSTRUCTORS, LTD., AGAINST AN AWARD TO THE F.W. BROWN COMPANY UNDER INVITATION 60-1097, A REPORT WAS OBTAINED FROM THE COAST GUARD AND, AS YOU HAD REQUESTED, WAS FURNISHED TO YOU BY AIRMAIL LETTER OF MARCH 23, 1962, FOR YOUR COMMENT WITH AN OPPORTUNITY TO DISCUSS THE MATTER INFORMALLY WITHIN 10 DAYS FROM DATE OF THE AIRMAIL LETTER. THEREAFTER, BY LETTER OF MARCH 28, 1962, YOU FURNISHED YOUR COMMENTS UPON THE ADMINISTRATIVE REPORT AND INDICATED THAT SINCE OUR OFFICE OPERATES UPON THE BASIS OF THE WRITTEN RECORD THAT YOU WOULD NOT REQUIRE A CONFERENCE ON THE PROTEST.

THE SUBJECT INVITATION, SOLICITING BIDS FOR THE CONSTRUCTION OF AN ENLISTED MEN'S BARRACKS AT THE UNITED STATES COAST GUARD ACADEMY IN NEW LONDON, CONNECTICUT, WAS SET OUT SO THAT ITEM 1 SOLICITED A LUMP SUM BASE BID FOR THE CONSTRUCTION, ALTERNATES 1 THROUGH 4 SOLICITED PRICES FOR DIFFERENT MATERIALS THAT MIGHT BE CHOSEN IN LIEU OF THOSE STATED IN THE SPECIFICATIONS, ADDITIVES 1 THROUGH 8 SOLICITED BIDS FOR ADDITIONAL ITEMS OF WORK, AND ADJUSTMENTS I THROUGH V SOLICITED UNIT PRICES THAT WOULD DETERMINE THE CREDITS OR DEBITS TO BE APPLIED IN THE EVENT THE FIELD CONDITIONS VARIED FROM THOSE SPECIFIED IN THE INVITATION. IN THE INSTRUCTIONS TO BIDDERS, PARAGRAPH 11 (C) PROVIDED THAT THE GOVERNMENT RESERVED THE RIGHT TO MAKE AN AWARD TO THE BIDDER WHOSE AGGREGATE BID ON "ANY COMBINATION" OF BID ITEMS WAS LOW. ALSO THE INVITATION STATED THAT ,BID EVALUATION WILL BE BASED ON THOSE ITEMS ACCEPTED AT THE TIME OF AWARD.'

EIGHTEEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE ESSENTIAL -HIMOUNT JOINT VENTURE SUBMITTED THE LOWEST BID FOR ITEM 1. HOWEVER, THE COAST GUARD DECIDED TO EVALUATE BIDS AND TO MAKE AN AWARD ON THE BASIS OF ITEM 1 PLUS ADDITIVES 1 AND 2. ON THE COMBINATION OF ITEMS SELECTED BY THE COAST GUARD, THE F.W. BROWN COMPANY BID TOTALING $1,014,472 WAS LOW AND THE ESSENTIAL-HIMOUNT JOINT VENTURE BID TOTALING $1,019,344 WAS SECOND LOW. AS A RESULT, THE AWARD WAS MADE TO THE F. W. BROWN COMPANY.

IN THE TELEGRAM PROTEST AGAINST THE AWARD MADE TO THE F. W. BROWN COMPANY, THE JOINT VENTURE STATED THAT NEITHER THE INVITATION NOR THE BID DOCUMENTS INDICATED THE BASIS UPON WHICH THE AWARD WOULD BE MADE AND IT ASSUMED THAT AWARD WOULD BE MADE TO THE LOWEST BIDDER ON THE BASIS OF THE LOWEST BASE BID CALLED FOR ON ITEM 1 AND THAT IF ADDITIONAL WORK WAS REQUIRED THAT THOSE ITEMS COMMENCING WITH ALTERNATE 1 WOULD BE AWARDED IN CHRONOLOGICAL ORDER. IN YOUR LETTER OF MARCH 9, 1962, SUPPLEMENTING THE PROTEST, AND IN THE LETTER OF MARCH 28, 1962, YOU POINT OUT THAT THE PRINCIPAL OBJECTION IS TO THE MANNER IN WHICH BIDS WERE EVALUATED PRIMARILY BECAUSE THE SELECTION OF THE LOW BIDDER CAN BE CONTROLLED BY MANIPULATING THE SELECTION OF ALTERNATES OR ADDITIVES AFTER THE OPENING OF BIDS.

IN RESPONSE TO THE PROTEST MADE AGAINST THE ADMINISTRATIVE AWARD, THE COAST GUARD, IN ITS REPORT OF MARCH 22, 1962, REPLIED AS FOLLOWS:

"IT IS QUITE TRUE THAT THE ESSENTIAL CONSTRUCTION COMPANY, INC.) HIMOUNT CONSTRUCTORS LTD. JOINT VENTURE WOULD HAVE BEEN THE LOW BIDDER ON VARIOUS OTHER COMBINATIONS OF ITEMS WITH THE BASIC ITEM. HOWEVER, SINCE THE INVITATION DID NOT SPELL OUT ANY PRIORITY IN WHICH THE ALTERNATE AND ADDITIVE ITEMS WOULD BE CONSIDERED, IT IS FELT THAT THE PROTESTING BIDDER SHOULD NOT BE ALLOWED TO COME IN NOW AND DICTATE A PRIORITY WHICH WOULD MAKE HIM THE LOW BIDDER. IT SEEMS CLEAR THAT THE PRIORITY IN WHICH THE EXTRA ITEMS WOULD BE CONSIDERED IS AN ADMINISTRATIVE DETERMINATION WHICH THE GOVERNMENT RIGHTLY RESERVED TO ITSELF TO MAKE. THE GOVERNMENT MADE THAT DETERMINATION--- THAT THE ITEMS WHICH WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT WITHIN THE FUNDS AVAILABLE WERE BASIC ITEM 1 AND ADDITIVE ITEMS 1 AND 2. UNDER THIS DETERMINATION THE F. W. BROWN COMPANY WAS CLEARLY THE LOW BIDDER.

"ANOTHER POINT WORTHY OF MENTION IS ONE WHICH WAS RAISED BY MR. HOCHBERGER OF ESSENTIAL CONSTRUCTION COMPANY, INC., AND HIMOUNT CONSTRUCTORS LTD. IN HIS ORAL PROTEST, BUT WHICH DOES NOT APPEAR IN THE WRITTEN PROTEST. THIS CONCERNED THE "ADJUSTMENT" ITEMS 1 THROUGH V. THESE APPEAR ON PAGE 4 OF THE BID SCHEDULE AND PROVIDE FOR AN UPWARD OR DOWNWARD ADJUSTMENT OF THE CONTRACT PRICE (BASED ON THE UNIT PRICE SUBMITTED BY THE BIDDER FOR THE PARTICULAR ITEM) DEPENDING ON THE VARIANCE BETWEEN ACTUAL FIELD CONDITIONS ENCOUNTERED DURING THE COMPLETION OF THE CONTRACT AND THOSE STATED OR INDICATED IN THE SPECIFICATIONS AND DRAWINGS. IT WAS CONTEMPLATED THAT EACH BIDDER WOULD BID ONE UNIT PRICE WHICH WOULD BE APPLICABLE TO BOTH UPWARD AND DOWNWARD ADJUSTMENTS. ALL BUT THREE OF THE BIDDERS BID THIS WAY. HOWEVER, MR. HOCHBERGER'S COMPANY BID A SEPARATE PRICE FOR UPWARD AND DOWNWARD ADJUSTMENTS AND HIS UPWARD ADJUSTMENT PRICES AVERAGED APPROXIMATELY 1700 PERCENT OF HIS DOWNWARD ADJUSTMENT PRICES.

"MR. HOCHBERGER STATED THAT HIS PURPOSE IN RAISING THIS POINT WAS TO INFORM US THAT IF WE CONSIDERED HIS UPWARD ADJUSTMENT PRICES EXCESSIVE, WE SHOULD NOT CONCERN OURSELVES WITH THEM DURING THE BID EVALUATION SINCE HE WOULD BE WILLING TO NEGOTIATE THOSE PRICES DOWNWARD AFTER HE HAD BEEN AWARDED THE CONTRACT.

"THE DIFFICULTY THIS CAUSED IN EVALUATING THE BID CAN READILY BE SEEN. IF THE ESTIMATES FOR EXCAVATION AND CONCRETE WORK IN THE SPECIFICATIONS AND DRAWINGS PROVED ACCURATE, THESE PRICES WOULD HAVE NO SIGNIFICANCE, SINCE NO ADJUSTMENTS WOULD BE NECESSARY. IF, HOWEVER, IT DEVELOPED THAT THE ESTIMATES WERE SUBSTANTIALLY LOWER THAN THEY SHOULD HAVE BEEN IT IS APPARENT THAT THE PRICES QUOTED BY ESSENTIAL CONSTRUCTION COMPANY, INC. FOR UPWARD ADJUSTMENT MIGHT WELL, AND PROBABLY WOULD, RAISE THE CONTRACT PRICE ABOVE THAT OFFERED BY SOME IF NOT ALL, OF THE OTHER BIDDERS.'

HOWEVER, IT IS NOT NECESSARY TO CONSIDER THE LAST POINT RAISED IN THE ADMINISTRATIVE REPORT, SINCE THE PROTEST CAN BE DISPOSED OF ON THE BASIS OF WHETHER THE CONTRACTING AGENCY ACTED IMPROPERLY IN EVALUATING BIDS IN THE MANNER IT DID.

ALTHOUGH THE JOINT VENTURE MAY HAVE ASSUMED THAT BIDS WOULD BE EVALUATED ACCORDING TO THE CONSECUTIVE ORDER IN WHICH PRICES WERE REQUESTED FOR ITEMS IN THE INVITATION FOR BIDS, BOTH THE INVITATION AND THE INSTRUCTIONS TO BIDDERS PRECLUDE THAT FROM BEING THE ONLY POSSIBILITY. THE INSTRUCTIONS TO BIDDERS, AS NOTED ABOVE, PROVIDED THAT AWARD WOULD BE MADE ON ITEMS IN "ANY COMBINATION," AND THAT EVALUATION WOULD BE BASED ON "THOSE ITEMS ACCEPTED.' IN VIEW OF THE QUOTED TERMINOLOGY, IT IS BELIEVED THAT THE ADMINISTRATIVE AGENCY CLEARLY RESERVED AN OPTION TO MAKE THE AWARD FOR SUCH ITEMS AS IT MIGHT CHOOSE AFTER THE OPENING OF BIDS. SUCH AN ELECTION BY THE CONTRACTING AGENCY IS NOT IMPROPER. REQUIREMENTS THAT CONTRACTS FOR PUBLIC WORK BE LET TO THE LOWEST BIDDER ARE NOT VIOLATED WHEN SPECIFICATIONS ARE DRAWN FOR DIFFERENT WORK, BIDS ARE SOUGHT ON DIFFERENT BASES, AND A CHOICE IS NOT MADE BY THE CONTRACTING OFFICIALS UNTIL AFTER ALL THE BIDS ARE OPENED. 43 AM.JUR., PUBLIC WORKS AND CONTRACTS, SEC. 37; 10 MCQUILLIN, MUNICIPAL CORPORATIONS, SEC. 29.55 (3RD ED.); COHEN, PUBLIC CONSTRUCTION CONTRACTS AND THE LAW, SEC. 2.14.

FURTHER, IN OUR DECISION B-146343, NOVEMBER 1, 1961, THERE WERE CONSIDERED CONTENTIONS SIMILAR TO THOSE RAISED BY YOU IN THE IMMEDIATE CASE. IN THAT DECISION, WE SAID:

"YOUR ATTORNEY CONTENDS THAT IT IS IMPROPER FOR THE GOVERNMENT TO RESERVE UNTIL AFTER BID OPENING THE RIGHT TO CHOOSE THE PARTICULAR COMBINATION OF ITEMS ON WHICH BIDS WILL BE EVALUATED, CLAIMING THAT THE CONTRACTING OFFICER MIGHT THEREBY, THROUGH A CAREFUL SELECTION OF ITEMS, CHOOSE ANY CONTRACTOR OTHER THAN THE ONE WHO HAD SUBMITTED THE LOWEST AGGREGATE BID FOR ALL ITEMS. YOU ARE UNDOUBTEDLY AWARE THAT IT IS NOT AT ALL UNUSUAL TO SOLICIT BIDS FOR CERTAIN MINIMUM WORK, PLUS OPTIONAL ADDITIONAL WORK. THE PURPOSE OF ADVERTISING ON THIS BASIS ORDINARILY IS TO ENABLE AWARD TO BE MADE IN ACCORDANCE WITH THE FUNDS AVAILABLE AND THE BEST BARGAIN OFFERED BY BIDDERS. THE NET RESULT THEREOF IS TO REQUIRE BIDDERS TO QUOTE PRICES ON VARIOUS COMBINATIONS OF ITEMS, SUBJECT TO THE GOVERNMENT'S RIGHT TO CHOOSE ANY PARTICULAR COMBINATION IT WISHES AS THE BASIS OF AWARD.

"WHILE IT MAY BE, AS IN THIS CASE, THAT DIFFERENT COMBINATIONS OF ITEMS WILL RESULT IN DIFFERENT LOW BIDDERS, WE CAN SEE NO BASIS FOR CLAIMING THAT THIS IS DISCRIMINATORY AS BETWEEN BIDDERS. EACH BIDDER IS COMPETING AGAINST EACH OTHER BIDDER ON EACH POSSIBLE COMBINATION OF ITEMS, AND THE COMPARATIVE DESIRABILITY OF DIFFERENT ITEMS MAY WELL DEPEND ON THE PRICES QUOTED THEREFOR. IT IS OBVIOUS THAT AWARD COULD NOT BE MADE ON ANY COMBINATION OF ITEMS TO A BIDDER WHOSE AGGREGATE PRICE FOR THOSE ITEMS WAS NOT LOW, MERELY BECAUSE HE HAPPENED TO HAVE OFFERED AN OFFSETTING LOWER PRICE FOR WORK WHICH IS NOT TO BE PERFORMED. WE BELIEVE ALSO THAT IT IS THE EXCEPTION RATHER THAN THE RULE WHEN DIFFERENT COMBINATIONS OF ITEMS WILL RESULT, AS HERE, IN DIFFERENT LOW BIDDERS.'

IT IS OUR VIEW THAT THE DETERMINATION TO AWARD THE CONTRACT UNDER THE INVITATION INVOLVED ACCORDS WITH THE PROVISIONS OF THAT INVITATION. ACCORDINGLY, WE DO NOT FEEL THAT WE WOULD BE JUSTIFIED IN FURTHER QUESTIONING THE AWARD MADE TO THE F. W. BROWN COMPANY.