B-150744, MAR. 18, 1963

B-150744: Mar 18, 1963

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ESQUIRE: REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 29. THE ESSENCE OF THE PROTEST IS THAT THE CONTRACTING PROCEDURES WERE UNLAWFUL. UNFAIR AND DID NOT RESULT IN A CONTRACT THAT WAS IN THE BEST INTERESTS OF THE GOVERNMENT. IT IS CLEAR THAT THERE WAS AUTHORITY FOR THE NEGOTIATION OF THE CONTRACT FOR THE OPERATION OF THE DUTY-FREE CONCESSION AND FOREIGN CURRENCY EXCHANGE SERVICE. THE AGENCY DECIDED TO INQUIRE OF THE PROPONENTS SUBMITTING OFFERS WHETHER IT WAS FEASIBLE FOR THEM TO PROVIDE A CURRENCY EXCHANGE SERVICE. IT WAS NOT ASKED TO RESTATE ITS INTEREST. EACH OF THE OTHER SEVEN PROPONENTS WHO RESPONDED TO THE INVITATION WAS SENT A WRITTEN INQUIRY. THE AGENCY DID NOT CONSIDER THAT THE RANKING OF PROPONENTS WAS REQUIRED TO BE CHANGED BECAUSE OF ANY OF THE PROPOSALS FOR THE CURRENCY EXCHANGE SERVICE.

B-150744, MAR. 18, 1963

TO EDWARD L. MERRIGAN, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 29, 1963, PROTESTING ON BEHALF OF DEAK AND COMPANY AGAINST THE AWARD BY THE FEDERAL AVIATION AGENCY OF CONTRACT FA-DA-4289 TO AMMEX WAREHOUSE COMPANY, INC., FOR THE OPERATION OF A DUTY-FREE CONCESSION AND FOREIGN CURRENCY EXCHANGE AT DULLES INTERNATIONAL AIRPORT.

THE ESSENCE OF THE PROTEST IS THAT THE CONTRACTING PROCEDURES WERE UNLAWFUL, UNFAIR AND DID NOT RESULT IN A CONTRACT THAT WAS IN THE BEST INTERESTS OF THE GOVERNMENT.

SECTION 6 OF THE SECOND WASHINGTON AIRPORT ACT, 64 STAT. 770, 771, AS AMENDED BY SECTION 1402 (G) OF THE FEDERAL AVIATION ACT OF 1958, 72 STAT. 731, 807, AUTHORIZES THE ADMINISTRATOR OF THE FEDERAL AVIATION AGENCY---

"* * * TO CONTRACT WITH ANY PERSON FOR THE FURNISHING OF SUPPLIES OR PERFORMANCE OF SERVICES AT OR UPON THE AIRPORT NECESSARY OR DESIRABLE FOR THE PROPER OPERATION OF THE AIRPORT, INCLUDING BUT NOT LIMITED TO, CONTRACTS FOR FURNISHING FOOD AND LODGING, SALE OF AVIATION FUELS, FURNISHING OF AIRCRAFT REPAIRS AND OTHER AERONAUTICAL SERVICES, AND SUCH OTHER SERVICES AND SUPPLIES AS MAY BE NECESSARY OR DESIRABLE FOR THE TRAVELING PUBLIC. NO SUCH CONTRACT, NOT INCLUDING CONTRACTS INVOLVING THE CONSTRUCTION OF PERMANENT BUILDINGS OR FACILITIES, SHALL EXTEND FOR A PERIOD OF LONGER THAN FIVE YEARS, EXCEPT THE RESTAURANT. THE PROVISIONS OF SECTION 3709 OF THE REVISED STATUTES SHALL NOT APPLY TO CONTRACTS AUTHORIZED UNDER THIS SECTION * * *.'

AS THE CITED ACT PROVIDES THAT SECTION 3709 OF THE REVISED STATUTES, THE LAW REQUIRING CONTRACTING THROUGH FORMAL ADVERTISING PROCEDURES, SHALL NOT APPLY TO CONTRACTS FOR FURNISHING SERVICES AND SUPPLIES FOR THE TRAVELING PUBLIC, IT IS CLEAR THAT THERE WAS AUTHORITY FOR THE NEGOTIATION OF THE CONTRACT FOR THE OPERATION OF THE DUTY-FREE CONCESSION AND FOREIGN CURRENCY EXCHANGE SERVICE.

IN LINE WITH THAT AUTHORITY, THE FEDERAL AVIATION AGENCY ISSUED AN INVITATION FOR PROPOSALS TO ESTABLISH AND OPERATE A BONDED AND TAX-FREE CONCESSION AT THE DULLES INTERNATIONAL AIRPORT. SECTION IV OF THE INVITATION PROVIDED THAT FOLLOWING THE RECEIPT OF PROPOSALS, THEY WOULD BE EVALUATED AND AN ORDER OF PRIORITY WOULD BE SET UP FOR CONDUCTING NEGOTIATIONS BEGINNING WITH THE MOST DESIRABLE PROPOSAL, AND THAT IF A SATISFACTORY AGREEMENT COULD BE REACHED WITH THE PROPONENT SELECTED FOR FIRST PRIORITY, NEGOTIATIONS WOULD NOT BE CONDUCTED WITH THE OTHER PROPONENTS. SECTION V OF THE INVITATION PROVIDED THAT THE SELECTION OF PROPONENTS FOR NEGOTIATION WOULD BE BASED, AMONG OTHER FACTORS, UPON AN EVALUATION OF EACH OFFEROR'S EXPERIENCE AND QUALIFICATIONS AND THE FINANCIAL RETURN TO THE GOVERNMENT.

IN RESPONSE TO THE INVITATION, AMMEX, A COMPANY PRINCIPALLY ENGAGED IN OPERATING DUTY-FREE SHOPS, OFFERED A BASE PAYMENT OF TEN PERCENT OF ITS ANNUAL GROSS RECEIPTS, PLUS AN ADDITIONAL ONE PERCENT FOR RECEIPTS IN EXCESS OF $100,000, $150,000, $200,000, $250,000 AND $300,000, AND A MINIMUM GUARANTEE OF $75,000 FOR THE FIVE-YEAR TERM OF THE CONTRACT. DEAK, A COMPANY ENGAGED PRIMARILY IN FOREIGN CURRENCY EXCHANGE, OFFERED A BASE PAYMENT OF TWELVE PERCENT OF ITS ANNUAL GROSS RECEIPTS, PLUS AN ADDITIONAL TWO PERCENT FOR RECEIPTS IN EXCESS OF $100,000, $200,000 AND $300,000, AND A MINIMUM GUARANTEE OF $45,300 FOR THE FIVE-YEAR TERM OF THE CONTRACT AND, IN ADDITION, IT INDICATED THAT IT WOULD CONSIDER PAYING AN ADDITIONAL $100 A YEAR IF IT COULD INCLUDE A FOREIGN CURRENCY EXCHANGE SERVICE IN ITS OPERATION. CONSIDERING THE FINANCIAL RETURNS THESE RESPECTIVE PROPONENTS OFFERED TO THE GOVERNMENT AND THE EXPERIENCE OF EACH OF THEM IN THE OPERATION OF DUTY-FREE FACILITIES, THE AGENCY TENTATIVELY RANKED AMMEX AND DEAK FIRST AND SECOND, RESPECTIVELY, IN THE ORDER OF PRIORITY FOR NEGOTIATION.

AFTER THIS INITIAL EVALUATION OF PROPOSALS, THE AGENCY DECIDED TO INQUIRE OF THE PROPONENTS SUBMITTING OFFERS WHETHER IT WAS FEASIBLE FOR THEM TO PROVIDE A CURRENCY EXCHANGE SERVICE. SINCE DEAK'S OFFER SEEMED CLEAR IN THAT REGARD, IT WAS NOT ASKED TO RESTATE ITS INTEREST. EACH OF THE OTHER SEVEN PROPONENTS WHO RESPONDED TO THE INVITATION WAS SENT A WRITTEN INQUIRY. IN RESPONSE TO IT, AMMEX OFFERED TO PERFORM THE ADDITIONAL SERVICE AND TO RAISE ITS BASE PERCENTAGE ON GROSS RECEIPTS FROM TEN TO TWELVE PERCENT. THE AGENCY DID NOT CONSIDER THAT THE RANKING OF PROPONENTS WAS REQUIRED TO BE CHANGED BECAUSE OF ANY OF THE PROPOSALS FOR THE CURRENCY EXCHANGE SERVICE.

AS A MATTER OF FACT IT DID NOT CONSIDER THE PROPOSALS FOR THE ADDITIONAL SERVICE TO BE TOO IMPORTANT, SINCE THE PRINCIPAL BUSINESS WOULD BE THE DUTY-FREE OPERATION AND THE FOREIGN CURRENCY EXCHANGE WOULD NOT PRODUCE ANY SIGNIFICANT INCOME FOR THE GOVERNMENT. FURTHER, AGENCY TRAFFIC FORECASTS INDICATED THAT THE VOLUME OF FLIGHTS CARRYING PEOPLE THAT WOULD BE ABLE TO TAKE ADVANTAGE OF THE SERVICES INVOLVED WOULD BE LOW FOR THE INITIAL YEAR OR YEARS OF THE CONTRACT SO THAT IT SEEMED UNLIKELY THAT THE PERCENTAGE OF GROSS OFFERED BY THE PROPONENTS WOULD BE TOO SIGNIFICANT. THEREFORE, AS AMMEX OFFERED THE HIGHER MINIMUM GUARANTEE AND AS ITS BACKGROUND WAS PRIMARILY IN THE BUSINESS OF DUTY-FREE OPERATIONS, THE AGENCY DECIDED TO NEGOTIATE THE CONTRACT WITH THAT PROPONENT.

WITH REGARD TO YOUR CONTENTION THAT IN ENTERING INTO THE SUBJECT CONTRACT AMMEX EXCEEDED THE EXTENT OF THE LIABILITY PERMITTED BY ITS CORPORATE CHARTER, AMMEX HAS PASSED A RESOLUTION TO WAIVE THE DEBT LIMITATION IN ITS CHARTER AND IT HAS BEEN APPROVED BY THE ARIZONA CORPORATION COMMISSION.

AS OBSERVED AT THE OUTSET, THE SUBJECT CONTRACT WAS AUTHORIZED TO BE NEGOTIATED WITHOUT APPLICATION OF THE RULES OF FORMALLY ADVERTISED COMPETITIVE BIDDING. THIS PLACED THE BASIS UPON WHICH THE CONTRACT WOULD BE AWARDED AND THE MANNER OF SELECTING THE CONTRACTOR ENTIRELY WITHIN THE DISCRETION OF THE AGENCY.

IN THE CIRCUMSTANCES, SINCE THE ACTION TAKEN BY THE AGENCY WAS WITHIN THE WIDE DISCRETION VESTED IN IT, THERE IS NO BASIS UPON WHICH OUR OFFICE COULD REQUIRE IT TO TAKE ANY OTHER ACTION.