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B-152053, SEP. 17, 1963, 43 COMP. GEN. 268

B-152053 Sep 17, 1963
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- WHICH WAS NOT DUE TO DELAY IN THE MAILS AND. IS NOT AN EXCEPTION UNDER PAR. 10-102.5 OF THE ARMED SERVICES PROCUREMENT REGULATION TO THE STRICT ENFORCEMENT OF THE BID GUARANTEE PROVISIONS OF AN ADVERTISEMENT FOR BIDS MAY NOT BE WAIVED ON THE BASIS THAT THE GOVERNMENT WOULD EFFECT A SAVINGS. THAT A BID GUARANTEE REQUIREMENT IN AN INVITATION FOR BIDS IS A MATERIAL PART OF THE INVITATION. IS ARBITRARY AND SHOULD BE WAIVED WHEN BENEFICIAL TO THE GOVERNMENT. IS NOT PREFERENTIAL TREATMENT REQUIRING THE REJECTION OF HIS BID. THAT THE SET WAS LOANED ONLY FOR THE DURATION OF A WEEKEND. 1963: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JULY 16. THE INVITATION FOR BIDS PROVIDES THAT EACH BID MUST BE ACCOMPANIED BY EITHER A BID BOND IN THE PENAL SUM OF 20 PERCENT OF THE BID PRICE OR BY ANOTHER TYPE OF BID GUARANTEE IN THE SAME AMOUNT TO SECURE THE FURNISHING OF PERFORMANCE AND PAYMENT BONDS WHICH WERE REQUIRED TO BE IN AMOUNTS EQUAL TO 100 PERCENT OF THE CONTRACT PRICE.

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B-152053, SEP. 17, 1963, 43 COMP. GEN. 268

BIDS - LATE - BID BOND. CONTRACTS - SPECIFICATIONS - DEVIATIONS - BIDDERS EXAMINATION OF DRAWINGS THE LATE RECEIPT OF THE BID BOND SUBMITTED BY A LOW BIDDER--- A JOINT VENTURE--- WHICH WAS NOT DUE TO DELAY IN THE MAILS AND, THEREFORE, IS NOT AN EXCEPTION UNDER PAR. 10-102.5 OF THE ARMED SERVICES PROCUREMENT REGULATION TO THE STRICT ENFORCEMENT OF THE BID GUARANTEE PROVISIONS OF AN ADVERTISEMENT FOR BIDS MAY NOT BE WAIVED ON THE BASIS THAT THE GOVERNMENT WOULD EFFECT A SAVINGS, THE PUBLIC INTEREST REQUIRING THE MAINTENANCE OF THE COMPETITIVE SYSTEM OF PROCUREMENT, OR THAT THE RULE IN 38 COMP. GEN. 532, THAT A BID GUARANTEE REQUIREMENT IN AN INVITATION FOR BIDS IS A MATERIAL PART OF THE INVITATION, IS ARBITRARY AND SHOULD BE WAIVED WHEN BENEFICIAL TO THE GOVERNMENT, THE PURPOSE OF THE RULE BEING TO LESSEN THE ADMINISTRATIVE BURDEN OF CONSIDERING THE MERIT OF EXCUSES FOR DEFECTIVE OR OMITTED BID BONDS, AND TO PROVIDE A COMMON BASIS FOR BIDDING BY PRECLUDING BIDDERS FROM HAVING THE OPTION TO PERFECT A NONRESPONSIVE BID, OR TO PERMIT AN IMPROVIDENT BID TO BE REJECTED; HOWEVER, THE CONSIDERABLE DIFFERENCES BETWEEN THE LOW BID OF THE JOINT VENTURE AND THE OTHER BIDS RECEIVED MAY WARRANT CANCELLATION OF THE INVITATION AND READVERTISING THE PROCUREMENT. THE LOAN TO A BIDDER OF A SET MICROFILM OF MANUFACTURING DRAWINGS FOR EXAMINATION, ALTHOUGH THE INVITATION LISTED THE GOVERNMENT OFFICES WHERE BIDDERS COULD EXAMINE THE SET OF MICROFILM, IS NOT PREFERENTIAL TREATMENT REQUIRING THE REJECTION OF HIS BID, THE LOAN HAVING CAUSED THE OTHER BIDDERS NO INCONVENIENCE, AND THE ADMINISTRATIVE OFFICE HAVING THE DISCRETION TO MAKE THE LOAN IN VIEW OF THE FACT THAT NO OTHER FIRMS IN THE AREA REQUESTED AN OPPORTUNITY TO EXAMINE THE MICROFILM SET, AND THAT THE SET WAS LOANED ONLY FOR THE DURATION OF A WEEKEND.

TO JAMES E. MARKHAM, SEPTEMBER 17, 1963:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JULY 16, 1963, AND SUBSEQUENT CORRESPONDENCE, ON BEHALF OF THE JOINT VENTURE, COSMOS INDUSTRIES, INC., AND VOLT TECHNICAL CORPORATION, PROTESTING THE REJECTION OF ITS BID AND THE MAKING OF A CONTRACT AWARD TO ANY OTHER BIDDER UNDER DEPARTMENT OF THE NAVY INVITATION FOR BIDS NO. 600-915-63 S, ISSUED MAY 17, 1963, IN CONNECTION WITH A PROPOSED PROCUREMENT OF A QUANTITY OF AN/WRT RADIO TRANSMITTING EQUIPMENTS RANGING FROM 172 TO 327 UNITS.

THE DEPARTMENT OF THE NAVY HAS TENTATIVELY DECIDED TO PURCHASE 280 UNITS AND THE BID EVALUATIONS FOR SUCH QUANTITY SHOW THE THREE LOWEST OF THE FIVE BIDS RECEIVED TO BE AS FOLLOWS: COSMOS INDUSTRIES, INC., AND VOLT TECHNICAL CORPORATION, JOINT VENTURE--- $4,007,348.96; NORTRONICS, A DIVISION OF THE NORTHROP CORPORATION--- $4,445,888.36; AND HOFFMAN ELECTRONICS CORPORATION--- $4,450,460.40.

THE INVITATION FOR BIDS PROVIDES THAT EACH BID MUST BE ACCOMPANIED BY EITHER A BID BOND IN THE PENAL SUM OF 20 PERCENT OF THE BID PRICE OR BY ANOTHER TYPE OF BID GUARANTEE IN THE SAME AMOUNT TO SECURE THE FURNISHING OF PERFORMANCE AND PAYMENT BONDS WHICH WERE REQUIRED TO BE IN AMOUNTS EQUAL TO 100 PERCENT OF THE CONTRACT PRICE. THE INVITATION ALSO PROVIDES THAT BIDS NOT ACCOMPANIED BY SUCH BID BOND OR OTHER ACCEPTABLE BID GUARANTEE IN THE REQUIRED AMOUNT SHALL BE REJECTED WITHOUT FURTHER CONSIDERATION, EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION 10-102.5 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

THREE OF THE FOUR EXCEPTIONS TO THE REQUIREMENT FOR A STRICT ENFORCEMENT OF THE BID GUARANTEE PROVISIONS OF AN ADVERTISEMENT FOR BIDS, AS SET FORTH IN 10-102.5, ASPR, HAVE REFERENCE TO DEFICIENCIES IN THE AMOUNTS OF GUARANTEES SUBMITTED WITH BIDS AND TO SITUATIONS WHERE ONLY A SINGLE BID IS RECEIVED. THE REMAINING EXCEPTION WOULD PERMIT THE CONSIDERATION OF A BID NOT ACCOMPANIED BY A BID BOND OR OTHER ACCEPTABLE GUARANTEE WHEN THE GUARANTEE IS RECEIVED AFTER THE SCHEDULED TIME FOR OPENING OF BIDS AND BEFORE AWARD, IF IT IS ADMINISTRATIVELY DETERMINED THAT THE LATE RECEIPT OF THE BID GUARANTEE WAS DUE TO A DELAY IN THE MAILS OR MISHANDLING ON THE PART OF THE GOVERNMENT AFTER DELIVERY TO THE INSTALLATION WHERE THE PROCUREMENT OFFICE IS LOCATED.

THE LOW BID IN THIS CASE WAS NOT ACCOMPANIED BY A BID GUARANTEE AS OF THE TIME SCHEDULED FOR OPENING OF BIDS, 10:30 A.M., E.D.T., JUNE 17, 1963. BID BOND IN THE REQUIRED AMOUNT REPORTEDLY WAS RECEIVED FROM THE BIDDER SOMETIME AFTER JUNE 25, 1963, THE DATE ON WHICH IT IS ALLEGED TO HAVE BEEN MAILED TO THE GOVERNMENT. THE LATE RECEIPT OF THE BID BOND CANNOT BE WAIVED UNDER ANY OF THE FOUR EXCEPTIONS PROVIDED UNDER 10-102.5, ASPR, TO THE BID GUARANTEE RULE WHICH WAS ESTABLISHED ON THE BASIS OF DECISIONS RENDERED BY THIS OFFICE.

BEGINNING WITH A DECISION RENDERED TO THE SECRETARY OF THE ARMY ON FEBRUARY 5, 1959, 38 COMP. GEN. 532, THE DECISIONS OF OUR OFFICE CONCERNING REQUIRED BID GUARANTEES ARE TO THE EFFECT THAT A BID GUARANTEE REQUIREMENT IN AN INVITATION FOR BIDS IS A MATERIAL PART OF THE INVITATION; AND THAT A CONTRACTING OFFICER THEREFORE CANNOT, AS A GENERAL RULE, WAIVE A FAILURE TO COMPLY WITH THE REQUIREMENT BUT MUST REJECT AS NONRESPONSIVE A BID NOT ACCOMPANIED BY A BID GUARANTEE OR ONE WHICH IS ACCOMPANIED BY AN INSUFFICIENT BID GUARANTEE. IT REMAINS OUR OPINION THAT THE BID GUARANTEE PROVISIONS OF AN INVITATION FOR BIDS SHOULD BE STRICTLY ENFORCED UNLESS IT CLEARLY APPEARS THAT A WAIVER OF THE PROVISIONS IN FAVOR OF ONE BIDDER WILL NOT BE PREJUDICIAL TO THE RIGHTS OF THE OTHER BIDDERS WHO HAVE SUBMITTED FULLY RESPONSIVE BIDS.

IN EXPLANATION OF THE LATE FILING OF THE BID BOND OF THE JOINT VENTURE, IT IS STATED IN YOUR LETTER OF JULY 16, 1963, THAT THE BID SET WAS RECEIVED ABOUT MAY 21, 1963, GIVING THE JOINT VENTURE ONLY 17 WORKING DAYS FOR CONSIDERATION OF A COMPLEX, MULTIMILLION DOLLAR CONTRACT AND PROCUREMENT OF A BID BOND. IT IS ALLEGED THAT ON JUNE 13 THE JOINT VENTURE REQUESTED A TIME EXTENSION IN ORDER TO GIVE THE BONDING COMPANY A FEW DAYS TO COMPLETE ITS PROCEDURES AND ON THE SAME DATE THE BONDING COMPANY AUTHORIZED THE ISSUANCE OF A BOND UPON THE PERSONAL GUARANTEES OF SEVERAL PERSONS CONNECTED WITH THE JOINT VENTURE. IT WAS UNDERSTOOD THAT ALL SIGNATURES WOULD BE PROCURED ON THE FOLLOWING DAY BUT ONE OF THE GUARANTORS, ALTHOUGH EXPECTED TO BE IN NEW YORK, WAS ACTUALLY IN CALIFORNIA AND HIS SIGNATURE WAS EVENTUALLY OBTAINED IN THE OFFICE OF THE BONDING COMPANY AT LOS ANGELES ON JUNE 17. IT IS ALSO ALLEGED THAT A POWER OF ATTORNEY FROM THIS PROPOSED GUARANTOR WAS IN EXISTENCE, THAT THE AGENT WISHED TO SEE THE INSTRUMENT BEFORE SIGNING, THAT A SEARCH WAS MADE IN THE OFFICE (APPARENTLY THE NEW YORK OFFICE OF THE VOLT TECHNICAL CORPORATION), AND IT WAS AFTERWARDS DETERMINED THAT THE INSTRUMENT WAS AT A BANK WHICH WAS CLOSED UNTIL MONDAY, JUNE 17.

IT WAS ARGUED THAT IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO WAIVE THE LATE FILING OF THE BID BOND BECAUSE THE GOVERNMENT WOULD THEREBY EFFECT A SAVING OF A LARGE AMOUNT OF MONEY; THAT THE BID GUARANTEE REQUIREMENT IN THIS CASE IS ARBITRARY AND SERVES NO NATIONAL PURPOSE; AND THAT THE GOVERNMENT HAS AN INHERENT RIGHT TO WAIVE ANY REGULATION WHEN, BY SO DOING, THE GOVERNMENT IS BENEFITED.

SUBSEQUENTLY, YOU CONTENDED THAT THE DECISION RENDERED ON FEBRUARY 5, 1959, SHOULD APPLY ONLY THE SO-CALLED "FRINGE BIDDERS" AND THAT THE DECISION WAS BASED UPON INAPPLICABLE PREMISES, NAMELY (1) TO MAINTAIN THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM AND (2) TO PREVENT "TWO BITES AT THE APPLE.' YOU ALSO CONTEND THAT THE PRESENT RULE FAVORS LARGE BUSINESS CONCERNS SINCE THEY WOULD EXPERIENCE NO PARTICULAR DIFFICULTY IN OBTAINING A BID BOND, AND THAT THE ABUSES REFERRED TO IN THE DECISION COULD BE CORRECTED BY OTHER METHODS SUCH AS PLACING ON DEBARRED BIDDERS' LISTS THE NAMES OF BIDDERS WHO HAVE NOT ACTED IN GOOD FAITH. FINALLY, BY LETTER DATED SEPTEMBER 10, 1963, YOU CONTENDED THAT THE FOUR BIDS SUBMITTED BY BIDDERS OTHER THAN THE JOINT VENTURE SHOULD BE REJECTED BECAUSE THREE OF THOSE BIDS CONTAINED CERTAIN ALLEGEDLY IMPROPER STIPULATIONS OF REQUESTS, AND BECAUSE THE SECOND LOWEST BIDDER (NORTRONICS) WAS GIVEN PREFERENTIAL TREATMENT IN THE MATTER OF A LOAN OF A SET OF MICROFILM OF MANUFACTURING DRAWINGS FOR THE AN/WRT-2 RADIO TRANSMITTING SET.

AS STATED IN 39 COMP. GEN. 827 AT PAGE 829, THE RULE ANNOUNCED IN 38 COMP. GEN. 532 WAS ADOPTED ONLY AFTER THOROUGH AND CAREFUL CONSIDERATION, AND GAVE EFFECT TO LONG-ACCUMULATED AND REPEATED REPRESENTATIONS BY THE PROCURING AGENCIES THAT THE PREVIOUSLY REQUIRED CONSIDERATION OF THE MERITS OF EXCUSES OFFERED FOR DEFECTIVE OR OMITTED BID BONDS PRESENTED INTOLERABLE ADMINISTRATIVE BURDENS. FURTHERMORE, THE FACT MAY NOT BE OVERLOOKED THAT WAIVER OF THE BID BOND REQUIREMENT IN THE INSTANT CASE WOULD BE IN DIRECT VIOLATION OF THE APPLICABLE REGULATIONS, WHICH HAVE THE FORCE AND EFFECT OF LAW. PUBLIC UTILITIES COMMISSION V. UNITED STATES, 355 U.S. 534, 542; PAUL V. UNITED STATES, 371 U.S. 245, 255.

THE NEW RULE DOES NOT, IN OUR JUDGMENT, FAVOR LARGE BUSINESS CONCERNS ANY MORE THAN NECESSARY TO INSURE THAT UNDER FORMALLY ADVERTISED PROCUREMENTS ALL BIDDERS WILL BE COMPETING ON A COMMON BASIS AND THAT THE CONTRACT WILL IN EACH CASE BE AWARDED WITH REASONABLE PROMPTNESS, AS REQUIRED BY LAW, TO THE LOWEST RESPONSIBLE AND RESPONSIVE BIDDER. SEE 10 U.S.C. 2305 (C) AND 41 U.S.C. 253 (B).

INSOFAR AS THE "TWO BITES AT THE APPLE" THEORY IS CONCERNED, IT IS OBVIOUS THAT, UNDER THE FORMER RULE, BIDDERS WERE NOT BEING AFFORDED AN OPPORTUNITY TO COMPETE ON A COMMON BASIS IN THOSE CASES WHERE A LOW BIDDER WHO HAD NOT FURNISHED A BID GUARANTEE WAS PERMITTED TO FURNISH A BOND AFTER BID OPENING. SUCH A BIDDER WAS BEING PLACED IN THE FAVORABLE POSITION OF HAVING THE OPTION TO MAKE HIS BID FULLY RESPONSIVE BY SECURING THE BID GUARANTEE OR OF SO ACTING AS TO CAUSE HIS BID TO BE REJECTED IF IMPROVIDENTLY MADE. THE BIDDER IN A SITUATION OF THAT NATURE WOULD CLEARLY HAVE AN ADVANTAGE OVER THOSE BIDDERS WHO HAD SUBMITTED FULLY RESPONSIVE BIDS. FOR ALL PRACTICAL PURPOSES, HE WOULD HAVE TWO CHANCES TO BID, ONE BEFORE THE SCHEDULED TIME FOR OPENING OF BIDS, AND ANOTHER WHEN HE ELECTED AFTER LEARNING HIS COMPETITORS' PRICES EITHER TO ALLOW THE BID TO BE REJECTED AS NONRESPONSIVE OR TO FURNISH THE BID GUARANTEE AS REQUIRED BY THE TERMS OF THE INVITATION. THAT IS A TYPE OF SITUATION WHICH CAN ONLY BE PREVENTED BY APPROPRIATE LANGUAGE IN THE INVITATION FOR BIDS AND STRICT ENFORCEMENT OF ITS PROVISIONS.

THE DEPARTMENT OF THE NAVY CONSIDERS, AND WE AGREE, THAT THE CIRCUMSTANCES ATTENDING THE LATE FILING OF A BID BOND IN THIS CASE DO NOT AFFORD A SUFFICIENT BASIS FOR MAKING AN EXCEPTION TO THE RULING IN 38 COMP. GEN. 532. ADMITTEDLY A REQUEST FOR A TIME EXTENSION WAS MADE BUT THE NAVY WAS NOT REQUIRED TO AMEND THE INVITATION TO PROVIDE A NEW OPENING DATE AND IT WAS NOT AUTHORIZED TO GRANT ANY BIDDER THE PRIVILEGE OF SUBMITTING A BID BOND AFTER BID OPENING. ACCORDING TO THE DEPARTMENTAL REPORT IN THE MATTER, THE BIDDER WAS ADVISED THAT THE GRANTING OF A TIME EXTENSION WAS NOT PROBABLE AND THE BIDDER INDICATED THAT THE BID BOND COULD BE FURNISHED ON TIME. THIS WAS CONFIRMED BY LETTER DATED JUNE 14, 1963, ACCOMPANYING THE BID OF THE JOINT VENTURE. THE NAVY WAS INFORMED IN THE LETTER THAT A BOND WOULD BE MAILED IN TIME FOR OPENING OF BIDS ON MONDAY, JUNE 17.

THE FACT THAT THE BID OF THE JOINT VENTURE IS CONSIDERABLY LESS THAN THE PRICES QUOTED BY THE NEXT LOWEST BIDDERS WOULD NOT WARRANT THE MAKING OF AN EXCEPTION TO THE RULE INVOLVED. IT HAS BEEN CONSISTENTLY HELD BY THIS OFFICE THAT IT IS INFINITELY MORE IN THE PUBLIC INTEREST TO MAINTAIN THE ESTABLISHED PRINCIPLES OF FORMAL COMPETITIVE PROCUREMENT BY GOVERNMENT AGENCIES THAN FOR THE GOVERNMENT TO OBTAIN A PECUNIARY ADVANTAGE IN A PARTICULAR CASE BY A VIOLATION OF THE RULES.

ACCORDING TO YOUR ANALYSIS OF THE THREE HIGHEST BIDS, EACH BIDDER CONDITIONED ITS BID BY STIPULATING THAT CERTAIN GOVERNMENT-OWNED EQUIPMENT IN THEIR POSSESSION WAS INTENDED TO BE USED ON A RENT-FREE BASIS. ONE BIDDER INDICATED THAT, IN THE ALTERNATIVE, A SPECIFIED AMOUNT COULD BE DEDUCTED FROM ITS BID PRICE IN CONSIDERATION OF THE USE OF THE EQUIPMENT DURING CONTRACT PERFORMANCE; ALSO THIS BIDDER HAD REQUESTED PROGRESS PAYMENTS TO BE MADE IN ACCORDANCE WITH A FORMULA WHICH APPEARED TO BE CONTRARY IN SOME RESPECTS TO THE TERMS OF THE INVITATION FOR BIDS CONCERNING THE CONSIDERATION OF REQUESTS FOR PROGRESS PAYMENTS.

OBVIOUSLY IT WOULD BE NECESSARY TO CONSIDER VARIOUS FACTORS RELATED TO EACH OF THOSE BIDS BEFORE DETERMINING WHETHER OR NOT THE BIDS WERE QUALIFIED TO SUCH AN EXTENT AS TO RENDER THEM NONRESPONSIVE TO THE INVITATION. WE DO NOT BELIEVE THAT SUCH A DETERMINATION WOULD BE REQUIRED UNLESS WE DETERMINED IN THE FIRST INSTANCE THAT THE BID OF NORTRONICS SHOULD BE REJECTED BECAUSE OF THE LOAN OF THE MICROFILM OF DRAWINGS TO THAT BIDDER.

WE NOTE THAT AMENDMENT NO. 1 TO THE INVITATION LISTS 11 NAVY OFFICES WHERE BIDDERS COULD EXAMINE A SET OF THE MICROFILM OF MANUFACTURING DRAWINGS. WE UNDERSTAND THAT THE JOINT VENTURE DID NOT NEED TO EXAMINE THE MICROFILM BECAUSE IT WAS CURRENTLY ENGAGED IN PERFORMING ANOTHER NAVY CONTRACT FOR THE SAME ITEM, AND THAT THE OFFICE OF THE INSPECTOR OF NAVAL MATERIAL IN BOSTON, MASSACHUSETTS, ONE OF THE DESIGNATED OFFICES IN AMENDMENT NO. 1, CONSIDERED THAT A LOAN OF THE MICROFILM TO NORTRONICS WOULD NOT BE OBJECTIONABLE SINCE NO OTHER FIRMS IN THE AREA BID REQUESTED AN OPPORTUNITY TO EXAMINE THE MICROFILM SET AND THE SET WAS LOANED ONLY FOR THE DURATION OF A WEEKEND.

APPARENTLY, THE PARTICULAR NAVY OFFICE WAS JUSTIFIED IN EXERCISING A CERTAIN AMOUNT OF DISCRETION IN THE MATTER AND, SINCE IT DOES NOT APPEAR THAT ANY INCONVENIENCE TO OTHER BIDDERS WAS CAUSED BY THE LOAN OF THE MICROFILM TO NORTRONICS, WE DO NOT AGREE THAT ITS BID SHOULD BE REJECTED ON THE BASIS THAT THE BIDDER RECEIVED PREFERENTIAL TREATMENT BY THE GOVERNMENT.

ACCORDINGLY, THE PROTEST MADE ON BEHALF OF THE JOINT VENTURE MUST BE, AND IS, DENIED. HOWEVER, IN VIEW OF THE CONSIDERABLE DIFFERENCES BETWEEN THE LOW BID OF THE JOINT VENTURE AND THE PRICES QUOTED BY THE NEXT TWO LOWEST BIDDERS, WE ARE SUGGESTING TO THE DEPARTMENT OF THE NAVY THAT CAREFUL CONSIDERATION BE GIVEN TO THE QUESTION WHETHER IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO CANCEL THE INVITATION AND READVERTISE THE PROPOSED PROCUREMENT. SEE 10 U.S.C. 2305 (C) AND 2-404.1, ASPR.

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