B-150563, FEB. 28, 1963

B-150563: Feb 28, 1963

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THE INVITATION WAS AMENDED FIVE TIMES PRIOR TO BID OPENING. BIDDERS WERE WARNED THAT A BID COULD BE REJECTED UNLESS ACKNOWLEDGMENT OF THE AMENDMENT WAS RECEIVED AT THE ISSUING OFFICE PRIOR TO THE TIME SET FOR BID OPENING. BIDS WERE OPENED IN ACCORDANCE WITH THE TERMS OF THE INVITATION AS AMENDED ON NOVEMBER 19. THE LOW BID AS PROPERLY EVALUATED WAS SUBMITTED BY VARO IN THE AMOUNT OF $765. IT WAS NOTED AFTER OPENING THAT THE LOW BIDDER HAD FAILED TO ACKNOWLEDGE RECEIPT OF AMENDMENT NO. 5. VARO THEN IMMEDIATELY SENT A TELEGRAM INDICATING THAT THE FAILURE TO ACKNOWLEDGE AMENDMENT NO. 5 WAS DUE SOLELY TO AN ADMINISTRATIVE OVERSIGHT. IN SUPPORT THEREOF IT IS STATED THAT ALL OF THE MATERIAL CHANGES IN AMENDMENT NO. 5 ARE IDENTICAL TO THOSE CHANGES MADE AT ITS INSTANCE IN THE SPECIFICATIONS OF CONTRACT NO.

B-150563, FEB. 28, 1963

TO THE SECRETARY OF THE ARMY:

BY LETTER OF JANUARY 31, 1963, WITH ENCLOSURES, FROM THE OFFICE OF THE ASSISTANT SECRETARY, WE RECEIVED A REPORT ON A PROTEST AGAINST THE PROPOSED REJECTION OF THE LOW BID SUBMITTED BY VARO, INCORPORATED, UNDER INVITATION FOR BIDS NO. ENG-11-184-63-BE-27, ISSUED JULY 19, 1962, BY THE U.S. ARMY ENGINEER PROCUREMENT OFFICE, CHICAGO, FOR THE PURCHASE OF A QUANTITY OF METASCOPE ASSEMBLIES WITH PARTS AND DATA.

THE INVITATION WAS AMENDED FIVE TIMES PRIOR TO BID OPENING. AMENDMENT NO. 5, THE ONLY ONE AT ISSUE, DIRECTED A NUMBER OF CHANGES IN THE SPECIFICATIONS AND PROVIDED, AS DID THE OTHER AMENDMENTS, THAT THE BIDDER HAD TO ACKNOWLEDGE ITS RECEIPT PRIOR TO BID OPENING, EITHER BY SIGNING AND RETURNING THREE COPIES, BY A WRITTEN ACKNOWLEDGMENT ON THE BID, OR BY SEPARATE LETTER OR TELEGRAM. BIDDERS WERE WARNED THAT A BID COULD BE REJECTED UNLESS ACKNOWLEDGMENT OF THE AMENDMENT WAS RECEIVED AT THE ISSUING OFFICE PRIOR TO THE TIME SET FOR BID OPENING. BIDS WERE OPENED IN ACCORDANCE WITH THE TERMS OF THE INVITATION AS AMENDED ON NOVEMBER 19, 1962.

THE LOW BID AS PROPERLY EVALUATED WAS SUBMITTED BY VARO IN THE AMOUNT OF $765,310, SOME $70,000 BELOW THE NEXT ACCEPTABLE BID. HOWEVER, IT WAS NOTED AFTER OPENING THAT THE LOW BIDDER HAD FAILED TO ACKNOWLEDGE RECEIPT OF AMENDMENT NO. 5. ON THE DAY OF BID OPENING THE CONTRACTING OFFICER BROUGHT THIS FAILURE TO THE ATTENTION OF A REPRESENTATIVE OF THE LOW BIDDER. VARO THEN IMMEDIATELY SENT A TELEGRAM INDICATING THAT THE FAILURE TO ACKNOWLEDGE AMENDMENT NO. 5 WAS DUE SOLELY TO AN ADMINISTRATIVE OVERSIGHT. ON THE SAME DAY VARO ALSO FURNISHED A SIGNED COPY OF THE AMENDMENT AND A LETTER EXPLAINING IN DETAIL THE FAILURE TO SUBMIT THE ACKNOWLEDGMENT IN THE TIME AND MANNER PRESCRIBED BY THE TERMS OF THE AMENDMENT.

VARO CONTENDS ITS BID SHOULD BE ACCEPTED. IN SUPPORT THEREOF IT IS STATED THAT ALL OF THE MATERIAL CHANGES IN AMENDMENT NO. 5 ARE IDENTICAL TO THOSE CHANGES MADE AT ITS INSTANCE IN THE SPECIFICATIONS OF CONTRACT NO. DA-11-184-ENG-18621 AWARDED EARLIER TO THAT FIRM FOR IDENTICAL EQUIPMENT. THE CHANGES IN THE SPECIFICATIONS RESULTED FROM THE DISCOVERY THAT THE TEST STANDARDS PRESCRIBED THEREIN COULD NOT BE MET WITHOUT CHANGES IN THE DETAILED SPECIFICATIONS.

THE REPORT FROM THE CONTRACTING OFFICER ENCLOSED WITH THE LETTER OF JANUARY 31 CONFIRMS VARO'S POSITION THAT IT IS NOT POSSIBLE TO MEET THE PERFORMANCE STANDARDS OF THE SPECIFICATIONS FOR REQUIREMENTS SUCH AS WATERTIGHT QUALITY AND RESISTANCE TO VIBRATION IF THE DETAILED SPECIFICATIONS AND DRAWINGS ARE ADHERED TO LITERALLY. THE REPORT CONFIRMS ALSO THAT AMENDMENT NO. 5 CONTAINED CHANGES ORIGINALLY SUGGESTED BY VARO AS A RESULT OF ITS EXPERIENCE UNDER THE EXISTING CONTRACT SO THAT CONFORMITY TO THE DETAILED SPECIFICATIONS WOULD RESULT ALSO IN MEETING THE TEST REQUIREMENTS. THE REPORT INDICATES THAT OTHER CHANGES INCORPORATED IN THE AMENDMENT WOULD NOT HAVE ANY MATERIAL EFFECT ON PRICE, QUANTITY OR QUALITY.

WE ARE ADVISED FURTHER THAT THE COST TO VARO OF PERFORMANCE UNDER THE SPECIFICATIONS AS AMENDED COULD BE LESS THAN THAT WITHOUT AMENDMENT NO. 5 IN VIEW OF THE CHANGES ALREADY INCORPORATED IN ITS PRODUCTION PROCESS UNDER THE EXISTING CONTRACT. AS TO ALL OTHER INTERESTED PARTIES, HOWEVER, THE COST OF THE CHANGES INCORPORATED IN THE SAID AMENDMENT WOULD BE SIGNIFICANT. THEREFORE, THE CHANGES OF THE TYPE DESCRIBED WHICH WERE INCLUDED IN AMENDMENT NO. 5 MUST BE REGARDED AS MATERIAL.

THE QUESTION PRESENTED IS WHETHER UNDER THE CIRCUMSTANCES THE OTHERWISE ACCEPTABLE LOW BID SUBMITTED BY VARO SHOULD BE REJECTED FOR FAILURE TO ACKNOWLEDGE RECEIPT OF AMENDMENT NO. 5 PRIOR TO BID OPENING.

THE REQUIREMENT FOR AMENDMENT ACKNOWLEDGMENT IS NOT DISSIMILAR TO THAT NORMALLY EMPLOYED IN THE GREAT MAJORITY OF INVITATIONS ISSUED BY GOVERNMENT AGENCIES. PROVISIONS OF THIS TYPE HAVE BEEN CONSIDERED BY OUR OFFICE A NUMBER OF TIMES. THESE CONSIDERATIONS HAVE RESULTED IN THE GENERAL RULE THAT WHERE SUCH AN AMENDMENT COULD AFFECT PRICE, QUANTITY OR QUALITY THE FAILURE OF THE BIDDER TO ACKNOWLEDGE RECEIPT OF THE AMENDMENT PRIOR TO BID OPENING IS MATERIAL AND RENDERS HIS BID NONRESPONSIVE. COMP. GEN. 785. THE REASON FOR THE RULE IS THAT A BID SUBMITTED IN RESPONSE TO AN INVITATION ISSUED BY AN AGENCY OF THE GOVERNMENT CONSTITUTES AN OFFER; THE AWARD IS AN ACCEPTANCE WHICH EFFECTS A BINDING AGREEMENT BETWEEN THE TWO PARTIES. IT IS WELL RECOGNIZED THAT AN OFFER IS TO BE INTERPRETED IN ACCORDANCE WITH ITS CLEAR LANGUAGE. THE ACCEPTANCE OF A BID WHICH OFFERS TO PERFORM ON ABASIS OTHER THAN THE TERMS OF THE INVITATION INCLUDING ANY AMENDMENTS WOULD BE CONTRARY TO THE STATUTES GOVERNING ADVERTISED PROCUREMENTS. UNITED STATES V. ELLICOTT, 223 U.S. 524 (1911). ON THE OTHER HAND, TO PERMIT THE BIDDER TO AMEND HIS BID AFTER OPENING IN ORDER TO CONFORM TO THE ADVERTISED SPECIFICATIONS WOULD ALSO CONTRAVENE THE COMPETITIVE BIDDING STATUTES. 63 C.J.S. MUNICIPAL CORPORATIONS, SEC. 1003; 40 COMP. GEN. 447, 448.

WHILE, AS INDICATED, ACKNOWLEDGMENT OF AN AMENDMENT AFFECTING PRICE, QUANTITY OR QUALITY IS REGARDED AS MATERIAL, THE FAILURE TO FOLLOW THE PRESCRIBED PROCEDURE FOR SUCH ACKNOWLEDGMENT NEED NOT RESULT IN REJECTION OF THE BID IF THE BIDDER COULD UPON ACCEPTANCE BE REQUIRED TO PERFORM AT THE BID PRICE IN ACCORDANCE WITH THE TERMS OF THE INVITATION AS AMENDED. SEE 40 COMP. GEN. 48; 34 COMP. GEN. 581; 33 COMP. GEN. 508.

ON THE BASIS OF THE FOREGOING WE CONCLUDE THAT IF UNDER THE CIRCUMSTANCES VARO COULD BE REQUIRED, UPON ACCEPTANCE OF ITS BID AS SUBMITTED, TO PERFORM IN ACCORDANCE WITH THE INVITATION AS AMENDED, WITHOUT ANY OPTION ON ITS PART TO DECLINE, THEN THE FAILURE TO ACKNOWLEDGE RECEIPT OF THE AMENDMENT PRIOR TO THE TIME SET FOR BID OPENING MAY BE WAIVED AND AWARD MADE TO THAT FIRM, ASSUMING ITS BID IS OTHERWISE ACCEPTABLE.

ORDINARILY, WHERE A CONTRACTOR CONFORMS TO THE DETAILED SPECIFICATIONS PRESCRIBED BY THE GOVERNMENT IN THE INVITATION, THE FACT THAT THE END PRODUCT DOES NOT MEET THE GOVERNMENT'S EXPECTATIONS OR PURPOSES DOES NOT RENDER SUCH PERFORMANCE DEFECTIVE BECAUSE IT IS HELD THAT THE GOVERNMENT IMPLIEDLY WARRANTS THAT COMPLIANCE WITH THE DETAILED SPECIFICATIONS WILL RESULT IN A SATISFACTORY PRODUCT. R. M. HOLLINGSHEAD CORPORATION V. UNITED STATES, 124 CT.CL. 681 (1953) AND CASES THEREIN CITED. HOWEVER, THE COURT'S CONCLUSION IN THE HOLLINGSHEAD CASE WAS PREMISED ON THE FACT THAT AT THE TIME THE CONTRACT WAS ENTERED INTO NEITHER PARTY KNEW OR HAD REASON TO KNOW THAT CONFORMITY WITH THE DETAILED SPECIFICATIONS WOULD NOT ACHIEVE THE INTENDED RESULT; OTHERWISE, SAID THE COURT (PAGE 683) "IF THE MANUFACTURER KNOWS, OR, PERHAPS, FROM HIS EXPERIENCE SHOULD KNOW, THAT THE DESIRED ARTICLE CANNOT BE MADE FROM THE SPECIFIED MATERIALS, HE HAS NO RIGHT TO MAKE A USELESS THING AND CHARGE THE CUSTOMER FOR IT.' FURTHER, WHERE THE BIDDER KNOWS OR IS ABLE TO FORESEE THAT IT IS NOT POSSIBLE TO ACHIEVE THE SPECIFIED PERFORMANCE BY CONFORMING TO THE DETAILED REQUIREMENTS OF THE SPECIFICATIONS, SUCH CONFLICT WILL NOT EXCUSE THE BIDDER'S FAILURE TO MEET THE PERFORMANCE REQUIREMENTS. SEE 6 WILLISTON ON CONTRACTS, REVISED EDITION, SECTION 1959.

VARO WAS WELL AWARE OF THE CONFLICT BETWEEN THE PERFORMANCE REQUIREMENTS AND THE ORIGINAL DETAILED SPECIFICATIONS. IT WAS ALSO WELL AWARE, ON THE BASIS OF THE CHANGES MADE IN THE EXISTING CONTRACT, THAT THE GOVERNMENT'S PRIMARY CONCERN WAS TO ACHIEVE THE STATED PERFORMANCE RATHER THAN TO CONFORM TO THE DETAILED SPECIFICATIONS, AND IT KNEW, WITHOUT BENEFIT OF AMENDMENT NO. 5, WHAT WAS NECESSARY TO DO SO. THEREFORE, WE BELIEVE THAT UNDER THE AUTHORITY CITED ABOVE VARO COULD BE REQUIRED TO MEET THE PERFORMANCE REQUIREMENTS, AND THUS IN EFFECT TO PERFORM IN ACCORDANCE WITH THE SPECIFICATIONS AS AMENDED, WITHOUT REGARD TO ITS FAILURE TO ACKNOWLEDGE THE AMENDMENT--- AND THIS RULE WOULD APPLY EVEN IF THE ACKNOWLEDGMENT HAD NEVER BEEN FURNISHED RATHER THAN RECEIVED LATE. THE SITUATION IS NOT IN ITS ESSENTIAL LEGAL ASPECTS SUBSTANTIALLY DIFFERENT FROM THAT CONSIDERED IN STEES V. LEONARD, 20 MINNESOTA 494 (1894). THAT CASE THE DEFENDANT HAD UNDERTAKEN TO CONSTRUCT A BUILDING ACCORDING TO SPECIFICATIONS PREPARED BY AN ARCHITECT AND FURNISHED BY THE PLAINTIFF. THE STRUCTURE WAS TWICE BEGUN AND IN BOTH CASES COLLAPSED BEFORE COMPLETION. UPON THE DEFENDANT'S REFUSAL TO MAKE A THIRD ATTEMPT, THE PLAINTIFF BROUGHT AN ACTION FOR FAILURE TO PERFORM. THE COURT HELD FOR THE PLAINTIFF. IN REPLY TO DEFENDANT'S CONTENTION THAT IT HAD COMPLIED STRICTLY WITH THE DETAILED SPECIFICATIONS SET OUT IN THE ARCHITECT'S PLANS, THE COURT STATED:

"IT IS NO DEFENSE TO THE ACTION, THAT THE SPECIFICATIONS DIRECTED THAT "FOOTINGS" SHOULD BE USED AS THE FOUNDATION OF THE BUILDING, AND THAT THE DEFENDANTS, IN THE CONSTRUCTION OF THESE FOOTINGS, AS WELL AS IN ALL OTHER PARTICULARS, CONFORMED TO THE SPECIFICATIONS. THE DEFENDANTS CONTRACTED TO "ERECT AND COMPLETE THE BUILDING.' WHATEVER WAS NECESSARY TO BE DONE IN ORDER TO COMPLETE THE BUILDING, THEY WERE BOUND BY THE CONTRACT TO DO. IF THE BUILDING COULD NOT BE COMPLETED WITHOUT OTHER OR STRONGER FOUNDATIONS THAN THE FOOTINGS SPECIFIED, THEY WERE BOUND TO FURNISH SUCH OTHER FOUNDATIONS. IF THE BUILDING COULD NOT BE ERECTED WITHOUT DRAINING THE LAND, THEN THEY MUST DRAIN THE LAND,"BECAUSE THEY HAVE AGREED TO DO EVERYTHING NECESSARY TO ERECT AND COMPLETE THE BUILDING.' * * *.'

IN ACCORDANCE WITH THE FOREGOING WE CONCLUDE THAT AWARD MAY BE MADE TO VARO, IF ITS BID IS OTHERWISE ACCEPTABLE, WITHOUT REGARD TO ITS FAILURE TO ACKNOWLEDGE RECEIPT OF AMENDMENT NO. 5 PRIOR TO BID OPENING.