B-149421, SEPTEMBER 21, 1962, 42 COMP. GEN. 170

B-149421: Sep 21, 1962

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AN AWARD TO THE BIDDER OFFERING THE LOWEST RENTAL FOR THE BASIC TERM RATHER THAN TO THE BIDDER WHO WAS LOW OVERALL ON THE BASIC TERM WITH THE RENEWAL PERIODS WAS PROPER UNDER THE INVITATION. NEGOTIATION WITH A BIDDER WHO HAS BEEN DETERMINED TO HAVE SUBMITTED THE LOWEST RESPONSIVE BID UNDER AN ADVERTISED PROCUREMENT TO OBTAIN FOR THE GOVERNMENT A DECREASE IN PRICE WOULD NOT COME WITHIN THE RULE THAT BIDDERS MAY NOT VARY BIDS AFTER OPENING NOR WOULD SUCH NEGOTIATIONS BE PREJUDICIAL TO OTHER BIDDERS. ACTION OF THE GOVERNMENT IN ACCEPTING LOWER PRICES FROM THE LOW BIDDER IS NOT SUBJECT TO OBJECTION. 1962: REFERENCE IS MADE TO LETTERS OF JULY 19 AND 25. BIDDERS WERE TO QUOTE PRICES AT WHICH THE GOVERNMENT MIGHT EXERCISE AN OPTION TO PURCHASE THE FEE SIMPLE TITLE AT THE END OF THE BASIC TERM OF 20 YEARS AND EACH RENEWAL OPTION.

B-149421, SEPTEMBER 21, 1962, 42 COMP. GEN. 170

BID - EVALUATION - OPTIONS - BASIC BID WEIGHT. BIDS - EVALUATION - NEGOTIATION - AFTER ADVERTISING ALTHOUGH UNDER AN INVITATION FOR BIDS FOR LEASED SPACE FOR POSTAL PURPOSES FOR A BASIC TERM OF 20 YEARS WITH SEVERAL RENEWAL PERIOD OPTIONS WHICH PROVIDED THAT GREATER WEIGHT WOULD BE ALLOWED IN EVALUATION FOR THE BASIC TERM, AN AWARD TO THE BIDDER OFFERING THE LOWEST RENTAL FOR THE BASIC TERM RATHER THAN TO THE BIDDER WHO WAS LOW OVERALL ON THE BASIC TERM WITH THE RENEWAL PERIODS WAS PROPER UNDER THE INVITATION, IN FUTURE CASES BECAUSE OF THE VAGUENESS OF THE EVALUATION FACTOR "GREATER WEIGHT" IN DETERMINING THE BID PRICES FOR THE BASIC TERM, A MORE EXACT BASIS SHOULD BE STATED SO THAT EACH BIDDER MAY ESTIMATE WITHIN REASONABLE LIMITS THE EFFECT OF THE EVALUATION FACTOR ON HIS BID IN RELATION TO OTHERS. NEGOTIATION WITH A BIDDER WHO HAS BEEN DETERMINED TO HAVE SUBMITTED THE LOWEST RESPONSIVE BID UNDER AN ADVERTISED PROCUREMENT TO OBTAIN FOR THE GOVERNMENT A DECREASE IN PRICE WOULD NOT COME WITHIN THE RULE THAT BIDDERS MAY NOT VARY BIDS AFTER OPENING NOR WOULD SUCH NEGOTIATIONS BE PREJUDICIAL TO OTHER BIDDERS; THEREFORE, ACTION OF THE GOVERNMENT IN ACCEPTING LOWER PRICES FROM THE LOW BIDDER IS NOT SUBJECT TO OBJECTION.

TO THE ARCIERO-LEO COMPANY, SEPTEMBER 21, 1962:

REFERENCE IS MADE TO LETTERS OF JULY 19 AND 25, 1962, FROM YOUR ATTORNEYS, PROTESTING THE AWARD OF A LEASE CONTRACT TO NATHAN F. WALLACH UNDER INVITATION FOR BIDS ISSUED BY THE POST OFFICE DEPARTMENT ON MARCH 19, 1962, FOR THE CONSTRUCTION AND LEASING OF A POSTAL FACILITY IN WHITTIER, CALIFORNIA.

THE INVITATION SOLICITED BIDS--- TO BE OPENED MAY 18, 1962--- TO FURNISH LEASED SPACE SUITABLE FOR POSTAL PURPOSES AND TO FURNISH ALL LABOR, EQUIPMENT AND MATERIAL FOR THE CONSTRUCTION OF A POSTAL FACILITY, AT A STATED ANNUAL RENTAL FOR A BASIC TERM OF 20 YEARS WITH ONE 10-YEAR AND FOUR 5-YEAR RENEWAL OPTIONS. BIDDERS WERE TO QUOTE PRICES AT WHICH THE GOVERNMENT MIGHT EXERCISE AN OPTION TO PURCHASE THE FEE SIMPLE TITLE AT THE END OF THE BASIC TERM OF 20 YEARS AND EACH RENEWAL OPTION. THE INVITATION STATED THAT THE LEASE WOULD BE ENTERED INTO PURSUANT TO THE PROVISIONS OF 39 U.S.C. 2103 AND TO THE PROVISIONS OF 41 U.S.C. 5 AS REQUIRED BY 39 U.S.C. 2112 (COMPETITIVE BIDDING). WITH REGARD TO AWARD, THE INVITATION PROVIDED AS FOLLOWS:

AWARD UNDER THIS ADVERTISEMENT WILL BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMING TO THIS ADVERTISEMENT FOR BIDS IS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IN DETERMINING PRICE, THE DEPARTMENT WILL ALLOW THE GREATER WEIGHT TO THE RENTAL SPECIFIED DURING THE BASIC 20-YEAR LEASE TERM.

THE GOVERNMENT HAD ACQUIRED TITLE TO THE SITE, UPON WHICH THE BUILDING AND IMPROVEMENTS WERE TO BE LOCATED, AT A COST OF $200,579.92 AND THE SUCCESSFUL BIDDER WAS TO REIMBURSE THE GOVERNMENT THIS SUM, IN THE MANNER AND TIME SET FORTH IN THE INVITATION.

THE ABSTRACT OF BIDS SHOWS THAT NINE BIDS WERE RECEIVED. INSOFAR AS THE AMOUNT OF ANNUAL RENTAL ON THE BASIC 20-YEAR TERM IS CONCERNED THE TWO LOW BIDS WERE SUBMITTED BY NATHAN F. WALLACH AND YOUR FIRM. THESE BIDS WERE AS FOLLOWS:

CHART

NATHAN F. WALLACH YOUR FIRM

BASIC TERM---20 YEARS $67,699 $67,889

RENEWAL OPTION---10 YEARS 67,699 66,889

RENEWAL OPTION---5 YEARS 67,49965,889

RENEWAL OPTION---5 YEARS 67,299 64,889

RENEWAL OPTION---5 YEARS 67,209 63,889

RENEWAL OPTION---5 YEARS 67,000 62,889

THE DEPARTMENT REPORTS THAT IN EVALUATING THESE TWO BIDS IT "HAD GIVEN ALMOST ALL THE WEIGHT TO THE ANNUAL RENT QUOTED FOR THE BASIC LEASE TERM SINCE ON THE BASIS OF PRESENT FACTS IT COULD NOT PROJECT OCCUPANCY BEYOND 20-YEARS.' IT THEREFORE DECIDED THAT MR. WALLACH WAS THE LOW BIDDER AND WAS ENTITLED TO THE LEASE. HOWEVER, PRIOR TO ACTUAL AWARD OF CONTRACT THE DEPARTMENT DID SUCCESSFULLY NEGOTIATE WITH THE LOW BIDDER AND OBTAINED LOWER RENTAL OPTIONS AND LOWER PURCHASE OPTIONS.

IT IS CONTENDED IN YOUR BEHALF THAT MR. WALLACH DID NOT BECOME THE OVER- ALL LOW BIDDER UNTIL AFTER THE NEGOTIATIONS WITH HIM FOR LOWER RENTAL OPTIONS AND THAT IF NEGOTIATIONS WITH MR. WALLACH WERE CONSIDERED PROPER, THEN YOU SHOULD HAVE BEEN CONTACTED FOR THE PURPOSE OF NEGOTIATING LOWER PRICES.

YOUR BID WAS THE LOWEST RECEIVED IF THE RENTAL SPECIFIED FOR THE BASIC 20 -YEAR TERM AND FOR THE FIVE RENEWAL PERIODS IS CONSIDERED ON AN OVER-ALL BASIS WITH ALL PERIODS GIVEN EQUAL WEIGHT. HOWEVER, THIS SUPPOSITION IS NOT IN ACCORDANCE WITH THE TERMS OF THE INVITATION. AS STATED ABOVE, IT WAS PROVIDED THAT IN DETERMINING PRICE, THE DEPARTMENT WOULD ALLOW THE GREATER WEIGHT TO THE RENTAL SPECIFIED DURING THE BASIC 20-YEAR LEASE TERM. IN THIS REGARD YOUR ATTORNEYS WERE ADVISED BY THE DEPARTMENT ON JULY 24, 1962, THAT THE LOW BIDDER WAS DETERMINED ON THE BASIS OF THE RENTAL OFFERED DURING THE BASIC LEASE TERM SINCE "THE FIRM OBLIGATION OF THE GOVERNMENT IS ONLY FOR THE BASIC LEASE TERM.'

TO THE SAME EFFECT IS THE REPORT OF THE DEPARTMENT TO OUR OFFICE WHEREIN IT IS STATED THAT IN EVALUATING MR. WALLACH'S BID AND YOUR BID IT WAS NOT POSSIBLE TO PROJECT OCCUPANCY BEYOND 20 YEARS AND THEREFORE IT HAD GIVEN ALMOST ALL THE WEIGHT TO THE ANNUAL RENT QUOTED FOR THE BASIC LEASE TERM OF 20 YEARS.

THERE IS, OF COURSE, NO OBJECTION TO EVALUATION OF BIDS ON THE BASIS OF RENTAL OFFERED FOR THE BASIC LEASE TERM OF 20 YEARS. WE HAVE HELD,HOWEVER, THAT IN COMPETITIVE BIDDING THE BASIS OF EVALUATION SHOULD BE MADE KNOWN IN ADVANCE TO BIDDERS AND SHOULD BE AS CLEAR, PRECISE AND EXACT AS POSSIBLE. SEE 36 COMP. GEN. 380. IT HAS BEEN ASCERTAINED THAT IN OTHER CASES THE DEPARTMENT HAS BEEN USING SIMILAR GENERAL LANGUAGE TO THE EFFECT THAT IN DETERMINING PRICE "GREATER WEIGHT" WILL BE ALLOWED TO THE RENTAL SPECIFIED DURING THE BASIC 20 YEAR LEASE TERM. IN VIEW OF THE VAGUENESS OF SUCH LANGUAGE WE ARE ADVISING THE DEPARTMENT TO TAKE STEPS IN FUTURE CASES TO SET OUT, IF POSSIBLE, THE EXACT BASIS ON WHICH BIDS WILL BE EVALUATED SO THAT EACH BIDDER MAY ESTIMATE WITHIN REASONABLE LIMITS THE EFFECT OF THE APPLICATION OF SUCH EVALUATION FACTOR ON HIS BID IN RELATION TO OTHER BIDS.

WITH REGARD TO THE CONTENTION THAT THE DEPARTMENT SHOULD HAVE NEGOTIATED WITH YOU, IT APPEARS THAT ON THE BASIS OF EVALUATING BIDS ON THE AMOUNTS QUOTED FOR THE BASIC 20-YEAR TERM THERE IS NO DOUBT THAT WALLACH WAS THE LOW BIDDER AND WAS ENTITLED TO AWARD AT HIS BID PRICES, UNLESS ALL BIDS WERE TO BE REJECTED. ORDINARILY, BIDDERS MAY NOT VARY THEIR BIDS AFTER THE BIDS ARE OPENED ON A COMPETITIVE BASIS. 17 COMP. GEN. 554. ONCE A BIDDER HAS BEEN DETERMINED TO HAVE SUBMITTED THE LOWEST RESPONSIVE BID, HOWEVER, WE KNOW OF NO REASON WHY IT WOULD BE DETRIMENTAL TO OTHER BIDDERS TO PERMIT THE LOW BIDDER TO GIVE THE GOVERNMENT THE BENEFIT OF A DECREASE IN PRICE. AS WAS STATED IN THE CASE OF ALECK LEITMAN V. UNITED STATES, 104 CT.CL. 324 (1945),"THERE CAN BE NO POSSIBLE REASON WHY A LOW BIDDER CANNOT VOLUNTARILY DECREASE THE AMOUNT OF HIS BID.' CONSEQUENTLY, WE FIND NO BASIS FOR OBJECTING TO THE ACTION OF THE GOVERNMENT IN ACCEPTING LOWER PRICES FROM MR. WALLACH WHO HAD BEEN DETERMINED TO HAVE BEEN THE LOW BIDDER ON THE BASIS OF HIS ORIGINAL BID.