B-149551, AUG. 16, 1962

B-149551: Aug 16, 1962

Additional Materials:

Contact:

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

 

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

NESTEL: REFERENCE IS MADE TO YOUR LETTER DATED JULY 25. YOUR COMPLAINT APPEARS TO BE PREMISED UPON YOUR BELIEF THAT THE BID OF GENERAL ELECTRIC IS FAR BELOW ITS COST IN MANUFACTURING THE ITEM. THAT THE BID WAS SUBMITTED NOT IN GOOD FAITH BUT FOR THE PURPOSE OF DRIVING OUT COMPETITION AND MAKING GENERAL ELECTRIC A SOLE SOURCE FOR PROCUREMENTS OF EXHAUST GAS TEMPERATURE INDICATORS. THAT YOU HAVE "NO INSIDE INFORMATION AS TO THE MOTIVATION OF GENERAL ELECTRIC IN THIS INSTANCE.'. YOU HAVE NOT SUBMITTED ANY SUBSTANTIATING EVIDENCE TO ESTABLISH THE CORRECTNESS OF YOUR ALLEGATION THAT GENERAL ELECTRIC'S BID WAS BELOW COST AND WAS NOT SUBMITTED IN GOOD FAITH. THE VARIATION OF APPROXIMATELY TEN PERCENT BETWEEN GENERAL ELECTRIC'S LOW BID AND THE OTHER TWO BIDS RECEIVED ON THIS PROCUREMENT OF ITSELF IS NOT SO UNUSUAL AS TO WARRANT SUCH A CONCLUSION.

B-149551, AUG. 16, 1962

TO MR. JOHN I. NESTEL:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 25, 1962, PROTESTING AGAINST POSSIBLE AWARD ON THE PART OF THE AVIATION SUPPLY OFFICE, BUREAU OF NAVAL WEAPONS, PHILADELPHIA, PENNSYLVANIA, UNDER IFB-383 1273-62, TO THE GENERAL ELECTRIC CORPORATION.

YOUR COMPLAINT APPEARS TO BE PREMISED UPON YOUR BELIEF THAT THE BID OF GENERAL ELECTRIC IS FAR BELOW ITS COST IN MANUFACTURING THE ITEM; THAT THE BID WAS SUBMITTED NOT IN GOOD FAITH BUT FOR THE PURPOSE OF DRIVING OUT COMPETITION AND MAKING GENERAL ELECTRIC A SOLE SOURCE FOR PROCUREMENTS OF EXHAUST GAS TEMPERATURE INDICATORS. YOU STATE, HOWEVER, THAT YOU HAVE "NO INSIDE INFORMATION AS TO THE MOTIVATION OF GENERAL ELECTRIC IN THIS INSTANCE.'

IN OUR OPINION, YOUR PROTEST DOES NOT CONTAIN A SUFFICIENT BASIS TO WARRANT ANY OFFICIAL ACTION ON THE PART OF OUR OFFICE. YOU HAVE NOT SUBMITTED ANY SUBSTANTIATING EVIDENCE TO ESTABLISH THE CORRECTNESS OF YOUR ALLEGATION THAT GENERAL ELECTRIC'S BID WAS BELOW COST AND WAS NOT SUBMITTED IN GOOD FAITH. THE VARIATION OF APPROXIMATELY TEN PERCENT BETWEEN GENERAL ELECTRIC'S LOW BID AND THE OTHER TWO BIDS RECEIVED ON THIS PROCUREMENT OF ITSELF IS NOT SO UNUSUAL AS TO WARRANT SUCH A CONCLUSION. THE FACT THAT GENERAL ELECTRIC MAY HAVE QUOTED MUCH HIGHER PRICES ON PREVIOUS PROCUREMENTS FOR THE SAME ITEM IS ALSO INSUFFICIENT TO ESTABLISH DEFINITELY THAT THE PRICE CURRENTLY QUOTED BY THAT COMPANY IS OUT OF LINE. IT SEEMS SIGNIFICANT IN THIS REGARD THAT APPARENTLY THE OTHER BIDDERS ON THE SAME PROCUREMENTS, INCLUDING YOUR COMPANY ON CERTAIN OF THE PROCUREMENTS, QUOTED PRICES CONSIDERABLY HIGHER THAN THOSE NOW BEING QUOTED.

IN ADDITION TO THE FACT THAT YOU HAVE FAILED TO SUPPORT YOUR PROTEST WITH SUBSTANTIATING EVIDENCE, IF SUCH EVIDENCE EXISTS IT WOULD NOT BE AVAILABLE TO US CONSIDERING THIS IS A FORMALLY ADVERTISED PROCUREMENT UNDER WHICH OUR OFFICE WOULD HAVE NO RIGHT TO EXAMINE THE CONTRACTOR'S RECORDS.

WITH REGARD TO THE CONTENTION THAT THE PROCUREMENT LAWS DO NOT REQUIRE AWARD ON THE BASIS OF A LOW BID SUBMITTED IN BAD FAITH, IT IS OUR VIEW THAT NEITHER DO SUCH LAWS PROHIBIT SUBMISSION OF BIDS BELOW COST. WE ARE AWARE OF NO LEGAL PRINCIPLE ON THE BASIS OF WHICH AN AWARD MAY BE PRECLUDED OR DISTURBED MERELY BECAUSE THE LOW BIDDER SUBMITTED AN UNPROFITABLE PRICE. ALSO, WE CANNOT AGREE THAT THE SUBMISSION OF A BELOW- COST BID NECESSARILY CONSTITUTES BAD FAITH. THE FACT THAT A CONTRACT MAY PROVE TO BE UNPROFITABLE FURNISHES NO PROPER BASIS FOR OUR OFFICE TO CONSIDER THE CONTRACT WAS ENTERED INTO IN BAD FAITH.

ALSO, WE WISH TO POINT OUT THAT THE QUESTION WHETHER BIDS HAVE BEEN SUBMITTED IN VIOLATION OF THE ANTITRUST LAWS RELATING TO CONSPIRACIES, MONOPOLIES, AND MONOPOLISTIC PRACTICES JUSTIFYING RESORT TO JUDICIAL PROCEEDINGS, IS ONE FOR THE DETERMINATION OF THE FEDERAL TRADE COMMISSION AND/OR THE DEPARTMENT OF JUSTICE. SEE 13 COMP. GEN. 233.