B-148507, APRIL 27, 1962, 41 COMP. GEN. 709

B-148507: Apr 27, 1962

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BIDS - EVALUATION - OPTIONS - ADDITIONAL AMOUNTS - APPROPRIATION AVAILABILITY EXTENT AN INVITATION FOR THE CONSTRUCTION OF CERTAIN BASIC ITEMS AND OPTIONAL ITEMS WHICH PROVIDED FOR DETERMINATION OF THE LOWEST RESPONSIVE BID FOR THE BASE BID WITHOUT CONSIDERATION OF THE OPTIONAL WORK THAT WAS NEEDED AND THAT WOULD BE INCLUDED IN THE AWARD TO THE EXTENT THAT APPROPRIATIONS WERE AVAILABLE AT THAT TIME IS AN INVITATION THAT IS NOT ONLY LEGALLY DEFECTIVE BECAUSE OF THE GOVERNMENT'S INTENT TO MAKE AN AWARD ON MORE THAN THE BASE BID BUT. AN ADMINISTRATIVE DETERMINATION TO REJECT ALL BIDS AND TO CORRECT THE DEFICIENT INVITATION WAS PROPER. 1962: REFERENCE IS MADE TO THE MATTER OF YOUR BID PROTEST UNDER ARMY CORPS OF ENGINEERS' INVITATION NO.

B-148507, APRIL 27, 1962, 41 COMP. GEN. 709

BIDS - EVALUATION - OPTIONS - ADDITIONAL AMOUNTS - APPROPRIATION AVAILABILITY EXTENT AN INVITATION FOR THE CONSTRUCTION OF CERTAIN BASIC ITEMS AND OPTIONAL ITEMS WHICH PROVIDED FOR DETERMINATION OF THE LOWEST RESPONSIVE BID FOR THE BASE BID WITHOUT CONSIDERATION OF THE OPTIONAL WORK THAT WAS NEEDED AND THAT WOULD BE INCLUDED IN THE AWARD TO THE EXTENT THAT APPROPRIATIONS WERE AVAILABLE AT THAT TIME IS AN INVITATION THAT IS NOT ONLY LEGALLY DEFECTIVE BECAUSE OF THE GOVERNMENT'S INTENT TO MAKE AN AWARD ON MORE THAN THE BASE BID BUT, ALSO, BECAUSE EXCEPTING THE OPTIONAL ITEMS FROM BID EVALUATION WOULD BE CONTRARY TO THE PRINCIPLE OF FULL AND FREE COMPETITION FOR SUCH ITEMS; THEREFORE, AN ADMINISTRATIVE DETERMINATION TO REJECT ALL BIDS AND TO CORRECT THE DEFICIENT INVITATION WAS PROPER.

TO THE ARDEN ENGINEERING COMPANY, INC., APRIL 27, 1962:

REFERENCE IS MADE TO THE MATTER OF YOUR BID PROTEST UNDER ARMY CORPS OF ENGINEERS' INVITATION NO. ENG-30-347-62-12.

IN RESPONSE TO THE INVITATION, WHICH WAS ISSUED ON JANUARY 26, 1962, BY THE U.S. ARMY ENGINEER DISTRICT, EASTERN OCEAN, NEW YORK, YOU SUBMITTED A BASIC BID OFFERING TO PERFORM THE CONSTRUCTION OF MISCELLANEOUS ITEMS (CY- 62/--- INCLUDING ITEM NUMBERS 1 THROUGH 72--- AT THE SONDRESTROM AIR BASE, GREENLAND, FOR AN ESTIMATED TOTAL PRICE OF $494,183. YOU ALSO QUOTED PRICES, AS REQUIRED, FOR ALL OPTIONAL ITEMS A THROUGH P, MADE A PART OF THE INVITATION, FOR WHICH FUNDS AT THAT TIME WERE NOT AVAILABLE, IN THE ESTIMATED TOTAL AMOUNT OF $626,885. SEVEN OTHER BIDS WERE RECEIVED FOR THE BASIC ITEMS WHICH RANGED FROM THE SECOND LOW ESTIMATED BID OF THE DANISH ARCTIC CONTRACTORS OF $517,700 TO AN ESTIMATED HIGH BID OF $1,200,000 AND THE GOVERNMENT'S ESTIMATE FOR THIS PART OF THE WORK WAS $708,124. ALL OTHER BIDDERS ALSO QUOTED ESTIMATED PRICES, AS REQUIRED, ON OPTIONAL ITEMS A THROUGH P. AFTER EXAMINATION AND CONSIDERATION OF ALL BIDS RECEIVED AND OF THE TERMS OF THE INVITATION THE DEPARTMENT OF THE ARMY CONCLUDED THAT ALL BIDS SHOULD BE REJECTED ON THE GROUNDS THAT THE INVITATION IMPROPERLY PROVIDED FOR A DETERMINATION OF THE LOW BIDDER ON THE BASIS OF THE PRICE BID ONLY FOR THE BASE SCHEDULE WHEREAS IT WAS INTENDED TO AWARD ON THE BASIS OF FUNDS AVAILABLE. ALL BIDDERS WERE ADVISED BY TELETYPE DATED MARCH 3, 1962, THAT THE BIDS WERE REJECTED AND ON MARCH 28, 1962, INVITATION NO. ENG-30-347-62-14 WAS ISSUED AS A REPLACEMENT INVITATION. THIS ACTION RESULTED IN YOUR PROTEST.

MATERIAL IN SUPPORT OF YOUR PROTEST, WHICH HAS BEEN BROUGHT TO THE ATTENTION OF OUR OFFICE BY YOUR ATTORNEYS, CONSISTS OF THE MEMORANDUM DATED MARCH 29, 1962, TO THE ARMY DISTRICT ENGINEER, NEW YORK; THE SUPPLEMENTAL MEMORANDUM DELIVERED TO OUR OFFICE ON APRIL 17, 1962; AND YOUR RESUME OF THE CONDITIONS ATTENDING THE TRANSACTION ADDRESSED TO THE HONORABLE JOHN O. PASTORE, UNITED STATES SENATE. WHILE CONSIDERABLE DETAIL IS SET FORTH IN THE MEMORANDA IT APPEARS THAT YOUR PROTEST IS BASED PRINCIPALLY ON THE GROUNDS THAT YOU WERE THE LOWEST RESPONSIBLE BIDDER, THAT YOUR BID CONFORMED TO THE INVITATION, THAT IT WAS THE MOST ADVANTAGEOUS TO THE GOVERNMENT AND, THEREFORE, YOU ARE ENTITLED TO THE AWARD OF CONTRACT ON ITEM NUMBERS 1 THROUGH 72 AS WELL AS ON THE OPTIONAL ITEMS, IN ACCORDANCE WITH THE PROVISIONS OF NOTE 3 ON PAGE UP-15 OF THE INVITATION. IT IS YOUR POSITION THAT UNDER THESE CIRCUMSTANCES THE REJECTION OF ALL BIDS BY THE ARMY ENGINEERS WAS ARBITRARY AND CAPRICIOUS, WAS NOT SUPPORTED BY ANY COMPELLING OR COGENT REASONS, AND WAS IN CLEAR DEROGATION OF THE INTERESTS IN MAINTAINING AND PRESERVING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. IN YOUR ATTORNEYS' SUPPLEMENTAL MEMORANDUM AND IN A CONFERENCE HELD BETWEEN YOUR ATTORNEYS AND REPRESENTATIVES OF OUR OFFICE YOUR ATTORNEYS PLACED MUCH STRESS UPON THE QUESTION AS TO WHETHER FUNDS FOR THE OPTIONAL ITEMS WERE OR WERE NOT AVAILABLE AT THE TIME THE INVITATION FOR BIDS WAS ISSUED IN VIEW OF THE REASON GIVEN IN THE TELEGRAM TO YOU FOR THE REJECTION OF THE BIDS.

THE LEGAL QUESTION PRESENTED IS WHETHER THE INVITATION FOR BIDS AS ISSUED WAS IN ACCORD WITH THE APPLICABLE LAW AND REGULATIONS. THE PERTINENT TERMS OF THE INVITATION PROVIDED:

2. DETERMINATION OF LOWEST RESPONSIVE BID WILL BE BASED ON THE TOTAL BASIC BID.

3. OPTIONAL ITEM: ITEMS NOS. A THRU P ARE OPTIONAL ITEMS FOR THE REASON THAT FUNDS THEREFOR ARE NOT PRESENTLY AVAILABLE. WITH RESPECT TO SAID ITEMS, THE GOVERNMENT WILL HAVE OPTIONS TO MAKE AWARDS TO THE CONTRACTOR TO WHOM AN AWARD IS MADE OF THE TOTAL BASIC BID. THE OPTIONS MAY BE EXERCISED BY THE CONTRACTING OFFICER NOT LATER THAN 31 MAY 1962 * * *.

AT THE TIME INVITATION NO. ENG-30-347-62-12 WAS ISSUED IT WAS STATED THEREIN THAT THE OPTIONAL ITEMS WERE BEING SET FORTH IN THE INVITATION "FOR THE REASON THAT FUNDS THEREFOR ARE NOT PRESENTLY AVAILABLE.' WHERE A CURRENT NONAVAILABILITY OF FUNDS IS GIVEN AS THE SOLE REASON FOR THE INCLUSION OF OPTIONAL WORK AND WHERE, AS HERE, THERE CAN BE NO QUESTION THAT THE REQUIREMENT COVERED BY THE OPTIONS WOULD FULFILL AN EXISTING NEED OF THE GOVERNMENT, WE BELIEVE THAT THESE FACTS INDICATE A CLEAR INTENT OF THE GOVERNMENT TO MAKE AN AWARD OF THE OPTIONAL WORK TO THE EXTENT FUNDS ACTUALLY ARE AVAILABLE AT THE TIME OF AWARD OF THE BASIC ITEMS. THEREFORE, SINCE IT APPEARS THAT THE GOVERNMENT'S INTENT IN THAT REGARD WAS SUFFICIENTLY ESTABLISHED, IT MUST BE CONCLUDED THAT THE PROVISION OF THE INVITATION FOR DETERMINATION OF THE LOWEST RESPONSIVE BID ON THE BASIS OF THE TOTAL BASIC BID, WAS LEGALLY DEFECTIVE. THE ARMY ENGINEERS HAVE ADVISED THAT AT THE TIME OF THE BID OPENING FUNDS IN THE APPROXIMATE AMOUNT OF $940,000 WERE AVAILABLE FOR AWARD OF THE BASE BID, PLUS 12 OF THE 17 OPTIONAL ITEMS. THEY HAVE ADVISED FURTHER THAT AN AWARD TO YOU OF THE BASE BID, TOGETHER WITH THE OPTIONAL ITEMS WITHIN THE FUNDS AVAILABLE, WOULD NOT RESULT IN THE ACCEPTANCE OF THE LOWEST AGGREGATE BID FOR THE WORK TO BE PERFORMED. SUCH AN AWARD WOULD BE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 2305 OF TITLE 10, U.S.C. WHICH REQUIRE AWARD TO THE MOST ADVANTAGEOUS BIDDER, PRICE AND OTHER FACTORS CONSIDERED.

INASMUCH AS THE OPTIONAL ITEMS WERE NOT TO BE EVALUATED IT SEEMS OBVIOUS THAT COMPETITION WAS NOT SECURED FOR THOSE ITEMS. THE PRESCRIBED BID EVALUATION METHOD WAS THEREFORE CONTRARY TO THE PRINCIPLE THAT FULL AND FREE COMPETITION MUST BE SECURED ON ALL FORMALLY ADVERTISED GOVERNMENT PROCUREMENTS. UNDER THE APPLICABLE STATUTORY PROVISIONS REFERRED TO ABOVE THE PRIMARY CONSIDERATION SHOULD HAVE BEEN THE PROCUREMENT OF THE BASIC AS WELL AS THE OPTIONAL WORK TO BE AWARDED AT THE LOWEST TOTAL PRICE QUOTED FOR SUCH WORK.

FURTHERMORE, UNDER PARAGRAPH 10 (B) OF THE INSTRUCTIONS TO BIDDERS MADE A PART OF THE INVITATION THE GOVERNMENT EXPRESSLY RESERVED THE RIGHT TO REJECT ANY AND ALL BIDS UNDER THE INVITATION. THIS WAS IN ACCORDANCE WITH THE PROVISION IN 10 U.S.C. 2305 WHICH AUTHORIZES THE REJECTION OF ALL BIDS IF THE HEAD OF THE AGENCY DETERMINES SUCH ACTION TO BE IN THE PUBLIC INTEREST. IT CONSISTENTLY HAS BEEN HELD BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT AND BY THE COURTS THAT THE QUESTION OF REJECTING ALL BIDS AND READVERTISING IS PRIMARILY A MATTER OF ADMINISTRATIVE DISCRETION. ALSO, IT HAS BEEN HELD THAT A REQUEST FOR BIDS DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CORRECT BID. COMP. GEN. 554; 26 ID 49; PERKINS V. LUKENS STEEL CO., 310 U.S. 113; O- BRIEN V. CARNEY, 6 F.1SUPP. 761; COLORADO PAVING CO. V. MURPHY, 78 F. 28.

SINCE THE RESPONSIBILITY FOR MAKING A DETERMINATION TO REJECT ALL BIDS LIES WITH THE ADMINISTRATIVE OFFICERS OF THE PURCHASING AGENCY, IN THE ABSENCE OF CLEAR PROOF OF ABUSE OF THEIR DISCRETIONARY POWERS IN THAT REGARD, THIS OFFICE WILL NOT OBJECT TO SUCH ACTION. THIS IS ESPECIALLY TRUE WHERE, AS HERE, THE PURPOSE IS TO CORRECT A LEGAL DEFICIENCY IN THE INVITATION. OF COURSE, WE ARE FULLY AWARE THAT THE REJECTION OF BIDS AFTER THEY ARE OPENED AND EACH BIDDER OR SUBSEQUENT PROSPECTIVE BIDDER HAS LEARNED HIS COMPETITORS' PRICES IS A SERIOUS MATTER AND SUCH ACTION SHOULD NOT BE TAKEN EXCEPT FOR COGENT REASONS. HOWEVER, FOR THE REASONS EXPLAINED ABOVE, WE THINK THERE WAS A PROPER BASIS FOR THE ADMINISTRATIVE DETERMINATION OF THE INSUFFICIENCY OF THE ORIGINAL INVITATION AND, THAT BEING THE CASE, WE WOULD NOT BE JUSTIFIED IN OBJECTING TO THE ADMINISTRATIVE ACTION TAKEN IN THE MATTER.

INSOFAR AS CONCERNS YOUR ATTORNEYS' CONTENTION REGARDING THE QUESTION WHETHER FUNDS WERE OR WERE NOT AVAILABLE FOR THE OPTIONAL ITEMS AT THE TIME BIDS WERE REQUESTED, IT IS OUR OPINION THAT THE CONTRACTING AGENCY PROPERLY SHOULD HAVE PROVIDED FOR EVALUATION OF BIDS ON THE BASIS OF THE TOTAL WORK TO BE AWARDED, INCLUDING THE WORK SPECIFIED IN THE OPTIONS, IF ACCEPTED, IRRESPECTIVE OF WHEN AND TO WHAT EXTENT FUNDS MIGHT BECOME AVAILABLE.