B-152397, FEB. 20, 1964

B-152397, FEB. 20, 1964

TO JOHN F. BOHMAN, ATTORNEY AT LAW:

BY LETTER DATED DECEMBER 5, 1963, YOU FORWARDED THE CLAIM OF THE DENNEY MANUFACTURING CO., NC., IN THE AMOUNT OF $54,650.36, REPRESENTING DAMAGES ALLEGEDLY SUSTAINED AS A RESULT OF THE CANCELLATION OF CONTRACT NO. GS-00S -47119 BY THE FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION (GSA), WHICH AGENCY DENIED THE CLAIM ON THE BASIS OF OUR DECISIONS REPORTED AT 40 COMP. GEN. 447 AND ID. 679.

INVITATION FOR BIDS NO. FPNFH-V-49128-A-5-14-63 DATED FEBRUARY 25, 1963, AS AMENDED, REQUESTED BIDS FOR A DEFINITE QUANTITY OF LIVING ROOM FURNITURE FOR NAVY FAMILY HOUSING. SPECIAL NOTICE NO. 4 TO THE INVITATION, DATED APRIL 12, 1963, CONTAINED THE FOLLOWING "AGGREGATE AWARD" PROVISIONS:

"AGGREGATE AWARD: IN ORDER TO OBTAIN MATCHING DESIGN, UNIFORM FINISH AND COMBINE SMALL REQUIREMENTS OF UPHOLSTERY FABRICS AWARDS OF LOTS I THROUGH XVI DESCRIBED IN THE SCHEDULE OF THIS INVITATION FOR BIDS WILL BE MADE AS FOLLOWS:

"/A) LOTS I, XII, AND XIV WILL BE AWARDED IN THE AGGREGATE ON A LOT BY LOT BASIS.

"/B) THE REMAINING LOTS WILL BE AWARDED IN THE AGGREGATE ON A GROUP BY GROUP BASIS AS INDICATED BELOW:

GROUP 1 - LOTS II, VIII, XIII AND XVI

GROUP 2 - LOTS III AND V

GROUP 3 - LOTS IV, X AND XI

GROUP 4 - LOTS VI AND VII

GROUP 5 5 - LOTS IX AND XV

"BIDDERS ARE REQUESTED TO STATE UNIT PRICE FOR EACH ITEM UNDER EACH LOT FOR WHICH A BID IS SUBMITTED AS WELL AS THE TOTAL PRICE FOR EACH LOT. ORDER TO BE CONSIDERED FOR AN AWARD UNDER (B) ABOVE, BIDDERS MUST SUBMIT A BID FOR EACH ITEM UNDER EACH LOT IN EACH GROUP FOR WHICH A BID IS SUBMITTED AS WELL AS THE TOTAL PRICE FOR EACH LOT IN THE GROUP OR GROUPS. NO CONSIDERATION WILL BE GIVEN TO AN AWARD BY INDIVIDUAL ITEMS FOR LOTS UNDER (A) AND (B) ABOVE. THE LOW AGGREGATE BIDDER IS DETERMINED BY MULTIPLYING THE UNIT PRICE BY THE QUANTITY SHOWN FOR EACH ITEM AND ADDING THE RESULTANT EXTENSIONS, IN ADDITION, THE LOW AGGREGATE BIDDER UNDER (B) ABOVE WILL BE DETERMINED BY ADDING THE RESULTANT EXTENSIONS OF EACH LOT IN EACH GROUP. PRICE MUST BE QUOTED ON EACH ITEM WITHIN THE AGGREGATE LOTS OR GROUPS TO BE CONSIDERED.

BIDS WERE OPENED ON MAY 14, 1963, AND IT WAS DETERMINED THAT DENNEY'S BID ON LOTS I AND XIV AND GROUPS 2 AND 3 WAS LOW ON THE BASIS OF AN EVALUATION ON A LOT-BY-LOT BASIS AND THE REMAINDER ON A GROUP-BY GROUP BASIS. AWARD WAS MADE TO DEENEY FOR THOSE LOTS AND GROUPS ON JULY 15, 1963, IN THE AMOUNT OF $124,626, LESS A DISCOUNT OF 2 PERCENT FOR PAYMENT WITHIN 20 DAYS, OR FOR A NET CONTRACT AWARD OF $122,133.48.

HOWEVER, IT APPEARED THAT IN EVALUATING THE BID OF DALLAS, INC., FOR PROPOSED AWARD OF THE REMAINING ITEMS, AN ADDITIONAL 2 PERCENT PROMPT PAYMENT DISCOUNT OFFERED BY DALLAS FOR AWARD OF THE ENTIRE PROCUREMENT WAS OVERLOOKED IN MAKING THE AWARD TO DENNEY. UPON REEVALUATION OF THE TWO BIDS, IT WAS EVIDENT TO GSA THAT, TAKING INTO CONSIDERATION THE ADDITIONAL 2 PERCENT DISCOUNT, THE BID OF DALLAS ON LOTS I, XII, AND XIV, AND GROUPS 1 THROUGH 5 IN THE AGGREGATE AMOUNT OF $226,205.94, WOULD BE $853.35 LOWER THAN SPLIT AWARDS TO DENNEY AND DALLAS. THERE FOLLOWS THE GSA TABULATION OF THE AWARD MADE TO DENNEY AND THE PROPOSED AWARD OF THE REMAINING ITEMS TO DALLAS, AND THE REEVALUATION OF THE BIDS IN THE LIGHT OF THE ADDITIONAL 2 PERCENT DISCOUNT OFFERED BY DALLAS.

"/A) AWARD MADE TO DENNEY MFG. CO., INC.

LOT I $ 5,940.00

LOT XIV 22,297.00

GROUP 2 71,065.00

GROUP 3 25,324.00

TOTAL $124,626.00

"/B) PROPOSED AWARD TO DALLAS, INC.

LOT XII $ 1,745.00

GROUP 1 51,808.85

GROUP 4 16,250.30

GROUP 5 37,263.00

TOTAL $107,067.15

TOTAL OF A AND B

ABOVE (GROSS) $231,693.15

TOTAL W/2 PERCENT

PROMPT PAYMENT

DISCOUNT $227,059.29

"/C) EVALUATION CONSIDERING DALLAS, INC.-S. ADDITIONAL 2 PERCENT DISCOUNT IF AWARDED ALL ITEMS.

LOT I $ 6,169.50

LOT XII 1,745.00

LOT XIV 22,902.05

GROUP 1 51,808.85

GROUP 2 72,406.90

GROUP 3 26,987.45

GROUP 4 16,250.30

GROUP 5 37,263.00

TOTAL (GROSS $235,533.05

TOTAL W/2 PERCENT

PROMPT PAYMENT

DISCOUNT $230,822.39

TOTAL W/ADDITIONAL

2 PERCENT DISCOUNT $226,205.94

"/D) COMPARISON OF THE TWO METHODS OF EVALUATION

SPLIT AWARD TO DENNEY AND DALLAS $227,059.29

ALL ITEMS TO DALLAS 226,205.94

DIFFERENCE $ 853.35"

IN VIEW OF THE FOREGOING, IT WAS ADMINISTRATIVELY DETERMINED THAT THE AWARD MADE TO DENNEY WAS ERRONEOUS. ACCORDINGLY, THE CONTRACT AWARDED TO DENNEY ON JULY 15, 1963, WAS CANCELED BY GAS BY TELEGRAPHIC ADVICE DATED AUGUST 16, 1963.

IT IS APPARENT THAT THE AWARD WAS MADE TO OTHER THAN THE LOWEST BIDDER BECAUSE OF A FAILURE TO CONSIDER ALL OF THE ELEMENTS OF THE PRICES OFFERED IN EVALUATING THE BIDS. IN A SIMILAR SITUATION CONSIDERED AT 37 COMP. GEN. 330, 331, WE STATED:

"IT IS PROVIDED AT 10 U.S.C. 2305 (B) (41 U.S.C. 253 (B) WITH RESPECT TO PROCUREMENTS BY THE CIVILIAN AGENCIES OF THE GOVERNMENT) THAT "AWARDS SHALL BE MADE * * * TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED.' WE HAVE HELD THAT THE QUOTED PROVISION REQUIRES THAT AWARD, IF ANY, BE MADE TO THE LOW BIDDER WITH CERTAIN EXCEPTIONS NOT APPLICABLE HERE. 28 COMP. GEN. 662, 664. AWARD OF A CONTRACT BY A GOVERNMENT AGENCY CONTRARY TO THE PROVISIONS OF STATUTE IS A NULLITY AND CONFERS NO RIGHTS ON THE CONTRACTOR AGAINST THE UNITED STATES. UNITED STATES V. NEW YORK AND PORTO RICO STEAMSHIP CO., 239 U.S. 88, 92; CLARK V. UNITED STATES, 95 U.S. 539; G. G. LOEHLER V. UNITED STATES, 90 C.CLS. 158; 36 COMP. GEN. 94; * * * B-120632, SEPTEMBER 10, 1954; B-29602, OCTOBER 23, 1942. IN THE LAST DECISION CITED, WE STATED IN RELATION TO A STATUTORY PROVISION WHICH, LIKE THAT IN QUESTION, HAS BEEN CONSTRUED TO REQUIRE AWARD TO THE LOW BIDDER, THAT:

" "THE QUESTION AS TO WHETHER THE UNITED STATES SHOULD CANCEL A CONTRACT WHICH WAS AWARDED ERRONEOUSLY BECAUSE OF A MISTAKE OF FACT ORDINARILY ARISES UNDER CIRCUMSTANCES WHEREIN AWARD IS REQUIRED TO BE MADE TO THE LOWEST RESPONSIBLE BIDDER AFTER ADVERTISING, PURSUANT TO THE PROVISIONS OF SECTION 3709, REVISED STATUTES, AND IT SUBSEQUENTLY IS DETERMINED THAT THE BID OF THE SUCCESSFUL CONTRACTOR WAS NOT THE LOWEST RESPONSIBLE BID RECEIVED. SINCE, IN SUCH A CASE, THERE HAS BEEN A FAILURE TO COMPLY WITH SECTION 3709, REVISED STATUTES, WHICH STATUTE HAS BEEN CONSTRUED BY THE COURTS TO BE MANDATORY IN NATURE, ADMINISTRATIVE OFFICERS USUALLY ARE REQUIRED TO CANCEL THE CONTRACT, PARTICULARLY IF SUCH MAY BE DONE WITHOUT JEOPARDIZING THE INTEREST OF THE UNITED STATES. SEE 17 COMP. GEN. 312 AND CASES CITED THEREIN. * * *"

"SINCE AWARD RESULTED FROM A MISTAKE OF FACT, WE THINK THAT THE RULE IS APPLICABLE TO THIS CASE AND THAT THE CONTRACT SHOULD BE CANCELED.

"THE FOREGOING APPLIES TO AWARDS MADE DUE TO ERRORS OF EXISTING FACT WHERE THE CONTRACTING AGENCY MAY BE CHARGED WITH KNOWLEDGE OF THE TRUE STATE OF THE FACTS; IT DOES NOT APPLY TO AWARDS BASED UPON THE REASONABLE EXERCISE OF HONEST JUDGMENT, SUCH AS THE PROPER CLASSIFICATION FOR FREIGHT RATE PURPOSES OF A COMMODITY TO BE TRANSPORTED, EVEN THOUGH A LATER DETERMINATION OF A COURT OR OTHER AUTHORITATIVE TRIBUNAL WOULD REQUIRE A DIFFERENT CONCLUSION. SEE B 127917, JULY 17, 1956.'

SEE, ALSO, TO THE SAME EFFECT, 38 COMP. GEN. 368.

PARAGRAPH 8 OF THE TERMS AND CONDITIONS OF THE INVITATION, ENTITLED "AWARD OF CONTRACT," READS, IN PERTINENT PART, THAT:

"/A) THE CONTRACT WILL BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

"/C) THE GOVERNMENT MAY ACCEPT ANY ITEM OR GROUP OF ITEMS OF ANY BID, UNLESS THE BIDDER QUALIFIES HIS BID BY SPECIFIC LIMITATIONS. * * *"

WE AGREE WITH THE POSITION OF GSA THAT THERE WAS NOTHING IN THE INVITATION FROM WHICH IT MIGHT BE INFERRED THAT SEPARATE CONTRACTS NECESSARILY WERE TO BE AWARDED ON A LOT-BY-LOT AND A GROUP-BY-GROUP BASIS. PARAGRAPH 8 OF THE INVITATION EXPRESSLY SANCTIONED THE QUALIFICATION OF BIDS BY BIDDERS TO PRECLUDE ACCEPTANCE OF THEIR LOW BIDS UNLESS AWARDED ALL ITEMS. DALLAS, THEREFORE, WAS ENTITLED TO OFFER AN ADDITIONAL DISCOUNT IF AWARDED ALL ITEMS AND ITS BID ON THAT BASIS MAY NOT BE CONSIDERED AS NONRESPONSIVE. SEE FEDERAL PROCUREMENT REGULATIONS 1- 2.404-5. PARAGRAPH 8, QUOTED ABOVE, MUST BE READ IN CONJUNCTION WITH THE AGGREGATE AWARD PROVISIONS, AND THERE IS NOTHING IN THE LATTER WHICH WOULD PRECLUDE THE SUBMISSION OF A MORE FAVORABLE BID ON AN ,ALL OR NONE" BASIS. SEE B-153158, DATED FEBRUARY 3, 1964. WHILE THAT PROVISION STATED THAT AWARD WOULD BE MADE IN THE AGGREGATE LOT BY LOT AND GROUP BY GROUP, IT MUST BE CONSIDERED AS MODIFIED BY PARAGRAPH 8 WHICH PROVIDED FOR THE ACCEPTANCE OF THE BID "MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.'

IN OUR VIEW THE GOVERNMENT, UNDER THE INVITATION, RESERVED THE RIGHT NOT TO MAKE AWARDS SEPARATELY WHEN IT WOULD BE MORE COSTLY THAN AN AWARD OF ALL ITEMS TO ONE BIDDER. ONE OF THE ,OTHER FACTORS" IMPLICIT IN PARAGRAPH 8 IS THE POSSIBILITY THAT A BIDDER MIGHT SUBMIT A BID ON ALL ITEMS WHICH IS LOWER IN THE AGGREGATE THAN ANY AGGREGATE OF INDIVIDUAL BIDS BY LOT AND GROUP, EVEN THOUGH SUCH BIDDER'S PRICE ON PARTICULAR LOTS AND GROUPS MIGHT BE HIGHER THAN INDIVIDUAL BIDS FOR THOSE LOTS AND GROUPS.

BASED ON THE FOREGOING, THE AWARD TO DENNEY, NOT HAVING BEEN MADE TO THE LOWEST BIDDER AS REQUIRED BY 41 U.S.C. 253 (B) MUST BE REGARDED AS INVALID AND PROPERLY WAS CANCELED.

THERE EXISTS STRONG PRECEDENT FOR HOLDING THAT A CONTRACT WITHIN THE AUTHORITY OF THE PUBLIC BODY, WHICH IS INVALID BECAUSE IT WAS ENTERED INTO CONTRARY TO THE STATUTORY REQUIREMENTS, CREATES NO RIGHT TO PAYMENT FOR BENEFITS NOT RECEIVED BY THE PUBLIC BODY PRIOR TO CONTRACT CANCELLATION. 40 COMP. GEN. 447; 43 AM.JUR., PUBLIC WORKS AND CONTRACTS, SECTION 88; VOL. 10, MCQUILLIN ON MUNICIPAL CORPORATIONS, 3RD ED., SECTION 29.26; PRESTEX INC. V. UNITED STATES, CT.CL. NO. 415 61, DECIDED JULY 12, 1963.

WHILE A RIGHT TO PAYMENT ON A QUANTUM VALEBAT OR QUANTUM MERUIT BASIS IS RECOGNIZED BY THE COURTS AND OUR OFFICE (CROCKER V. UNITED STATES, 240 U.S. 74; 21 COMP. GEN. 800; 33 ID. 533), SUCH RIGHT IS PREDICATED ON THE THEORY THAT IT WOULD BE INEQUITABLE FOR THE GOVERNMENT TO RETAIN THE BENEFITS OF THE OTHER PARTY'S LABOR. SEE NEW YORK MAIL AND NEWSPAPER TRANSPORTATION COMPANY V. UNITED STATES, 139 CT.CL. 751; PRESTEX INC., SUPRA. THE SUPREME COURT IN UNITED STATES V. MISSISSIPPI VALLEY GENERATING CO., 364 U.S. 520, 566 (FOOTNOTE NO. 22), STATED AS FOLLOWS:

"THE RESPONDENT ALSO CONTENDS THAT EVEN IF THE CONTRACT IS NOT ENFORCEABLE, A RECOVERY QUANTUM VALEBAT SHOULD BE DECREED. HOWEVER, SUCH A REMEDY IS APPROPRIATE ONLY WHERE ONE PARTY TO A TRANSACTION HAS RECEIVED AND RETAINED TANGIBLE BENEFITS FROM THE OTHER PARTY. SEE CROCKER V. UNITED STATES, 240 U.S. 74, 81-82. SINCE THE GOVERNMENT HAS RECEIVED NOTHING FROM THE RESPONDENT, NO RECOVERY QUANTUM VALEBAT IS IN ORDER.'

AS STATED IN 40 COMP. GEN. 447, 450, SUPRA, SUCH RULE AUTHORIZES PAYMENT ONLY FOR BENEFITS RECEIVED "PRIOR TO THE DETERMINATION OF CONTRACT INVALIDITY.' SEE, ALSO, 40 COMP. GEN. 679.

THERE ARE ENCLOSED COPIES OF OUR DECISIONS REPORTED AT 40 COMP. GEN. 447 AND ID. 679. WHILE THOSE CASES INVOLVED THE CANCELLATION OF CONTRACTS FOR REASONS DIFFERENT THAN THOSE INVOLVED HERE, BOTH CASES DEALT WITH AWARDS MADE CONTRARY TO THE PROCUREMENT STATUTES. WHETHER SIGNED CONTRACTS WERE INVOLVED IN THOSE CASES IS UNIMPORTANT SINCE ORDINARILY THE ACCEPTANCE OF AN OTHERWISE PROPER BID BY THE GOVERNMENT CONSUMMATES A CONTRACT EVEN THOUGH A MORE FORMAL, SIGNED DOCUMENT IS CONTEMPLATED. CONTI V. UNITED STATES, 158 F.2D 581; UNITED STATES V. PURCELL ENVELOPE CO., 249 U.S. 313. IT SHOULD ALSO BE NOTED THAT OUR DECISION AT 40 COMP. GEN. 679 WAS AFFIRMED BY THE COURT OF CLAIMS IN PRESTEX, INC. V. UNITED STATES, SUPRA.

IN ACCORDANCE WITH THE FOREGOING, WE MUST CONCLUDE THAT THERE IS NO LEGAL BASIS UPON WHICH WE MAY GIVE FAVORABLE CONSIDERATION TO THE CLAIM. IT MAY APPEAR UNDULY HARSH TO REQUIRE A CONTRACTOR WHO ACTED IN GOOD FAITH TO ABSORB THE COSTS APPLICABLE TO THOSE ITEMS UNDELIVERED AT THE TIME OF CANCELLATION. HOWEVER, THE UNITED STATES HAS POWER TO ACT ONLY THROUGH ITS AGENTS WHOSE AUTHORITY, AND THE MANNER OF EXERCISE THEREOF, IS PRESCRIBED AND LIMITED BY STATUTE, REGULATION, AND ADMINISTRATIVE AND JUDICIAL DETERMINATION. TO MAKE THE GOVERNMENT LIABLE FOR OTHER THAN BENEFITS RECEIVED WOULD, IN EFFECT, PERMIT AGENTS OF THE GOVERNMENT TO OBLIGATE THE UNITED STATES IN DIRECT CONTRAVENTION OF THOSE LIMITATIONS AND PRESCRIPTIONS. IN EFFECT, THE BASIC PURPOSES OF THE STATUTES, REGULATIONS AND DETERMINATIONS WOULD BE NULLIFIED. SUCH RESULT IS OPPOSED TO THE PUBLIC INTEREST.

IN ADDITION, AND WITHOUT REFERENCE TO ITS MERITS, IT SHOULD ALSO BE NOTED THAT THE CLAIM IS ESSENTIALLY ONE FOR UNLIQUIDATED DAMAGES ARISING OUT OF AN ALLEGED BREACH OF CONTRACT. IT IS THUS OF A CATEGORY WHICH THE ACCOUNTING OFFICERS OF THE GOVERNMENT HAVE TRADITIONALLY DECLINED TO SETTLE, NOT BECAUSE OF LACK OF JURISDICTION, BUT BECAUSE OF THE IMPRACTICABILITY OF REACHING AN ACCURATE MEASURE OF THE MERITS AND QUANTUM OF DAMAGES WITHOUT PROVISION FOR TAKING SWORN TESTIMONY, CROSS- EXAMINATION, AND RELATED EVIDENCE, FOR WHICH OUR OFFICE LACKS THE FACILITIES. 4 COMP. GEN. 404; 19 COMP. DEC. 409. IN SUCH CASES IT HAS BEEN OUR CONSISTENT POLICY TO DISALLOW THE CLAIM AND LEAVE THE CLAIMANT TO SUCH REMEDY AS HE MAY OBTAIN IN THE COURTS.