B-152981, JAN. 22, 1964

B-152981: Jan 22, 1964

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TO STANFORD PAPER SALES CORPORATION: FURTHER REFERENCE IS MADE TO YOUR LETTERS DATED NOVEMBER 27 AND DECEMBER 3. YOUR ALL OR NONE BID FOR THOSE ITEMS WAS $14. SUCH BID WAS THE LOWEST RECEIVED WITHOUT CONSIDERATION OF A DISCOUNT OF 2 PERCENT OFFERED IN THE BID OF THE CENTRAL STATES PAPER COMPANY FOR PAYMENT WITHIN 10 DAYS AFTER RECEIPT OF INVOICES OR DELIVERY DATES. WHICHEVER WERE LATER. THE FIRM'S TOTAL BID PRICE WAS $14. THE CENTRAL STATES PAPER COMPANY'S BID COULD NOT HAVE BEEN ACCEPTED BECAUSE THAT COMPANY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN. THE CENTRAL STATES PAPER COMPANY HAD BEEN A PRINCIPAL SUPPLIER OF THE PARTICULAR COMMODITY TO THE VETERANS ADMINISTRATION AND ITS CLASSIFICATION AS LARGE BUSINESS REPORTEDLY WAS UNKNOWN TO THE PROCUREMENT OFFICE BEFORE THE RECEIPT OF ITS BID UNDER INVITATION NO.

B-152981, JAN. 22, 1964

TO STANFORD PAPER SALES CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR LETTERS DATED NOVEMBER 27 AND DECEMBER 3, 1963, RELATIVE TO YOUR PROTEST AGAINST A READVERTISEMENT FOR BIDS BY THE VETERANS ADMINISTRATION SUPPLY DEPOT AT HINES, ILLINOIS, FOR ITEMS NOS. 43 THROUGH 50 OF INVITATION NO. M7-27-64, ISSUED ON OCTOBER 4, 1963.

THE INVITATION FOR BIDS LISTED 70 ITEMS OF MISCELLANEOUS PAPER PRODUCTS AND DESIGNATED SEVERAL ITEMS, INCLUDING ITEMS NOS. 43 THROUGH 50, AS HAVING BEEN SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS PARTICIPATION. ONLY THREE BIDDERS QUOTED PRICES ON ITEMS NOS. 43 THROUGH 50, WHICH CALLED FOR DELIVERIES OF VARIOUS QUANTITIES OF ROLLS OF PAPER SHEETING FOR EXAMINING TABLE SURFACE COVERS DURING THE MONTHS OF DECEMBER 1963 AND JANUARY 1964 TO VETERANS ADMINISTRATION FACILITIES IN SOMERVILLE, NEW JERSEY, HINES, ILLINOIS, AND WILMINGTON, CALIFORNIA. YOUR ALL OR NONE BID FOR THOSE ITEMS WAS $14,749.20, AND SUCH BID WAS THE LOWEST RECEIVED WITHOUT CONSIDERATION OF A DISCOUNT OF 2 PERCENT OFFERED IN THE BID OF THE CENTRAL STATES PAPER COMPANY FOR PAYMENT WITHIN 10 DAYS AFTER RECEIPT OF INVOICES OR DELIVERY DATES, WHICHEVER WERE LATER. THE FIRM'S TOTAL BID PRICE WAS $14,750.84 ON ITEMS NOS. 43 THROUGH 50 AND A. G. VERDOLYACK, INC., QUOTED PRICES AGGREGATING THE SUM OF $15,308, WITH AN OFFER TO ALLOW A DISCOUNT OF 2 PERCENT FOR PAYMENT WITHIN 30 DAYS.

THE CENTRAL STATES PAPER COMPANY'S BID COULD NOT HAVE BEEN ACCEPTED BECAUSE THAT COMPANY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN. HOWEVER, THE CENTRAL STATES PAPER COMPANY HAD BEEN A PRINCIPAL SUPPLIER OF THE PARTICULAR COMMODITY TO THE VETERANS ADMINISTRATION AND ITS CLASSIFICATION AS LARGE BUSINESS REPORTEDLY WAS UNKNOWN TO THE PROCUREMENT OFFICE BEFORE THE RECEIPT OF ITS BID UNDER INVITATION NO. M7-27-64. WAS EXPECTED AT THE TIME OF ISSUING THE INVITATION THAT THIS FIRM WOULD SUBMIT A BID AND THE RECORD INDICATES THAT THE CONTRACTING OFFICER'S UNILATERAL DETERMINATION TO SET ASIDE ITEMS 43 THROUGH 50 FOR EXCLUSIVE PARTICIPATION BY SMALL BUSINESS CONCERNS WOULD NOT HAVE BEEN MADE IF HE HAD KNOWN THAT THE CENTRAL STATES PAPER COMPANY WAS NOT A SMALL BUSINESS CONCERN.

THE CONTRACTING OFFICER ELECTED TO WITHDRAW THE UNILATERAL SMALL BUSINESS SET-ASIDE DETERMINATION AS RELATED TO ITEMS NOS. 43 THROUGH 50, AND TO READVERTISE FOR BIDS ON AN UNRESTRICTED BASIS. SUCH ACTION IS AUTHORIZED UNDER THE PROVISIONS OF SECTION 1-706-3, PARAGRAPH (B), OF THE FEDERAL PROCUREMENT REGULATIONS, WHEN A CONTRACTING OFFICER CONSIDERS THAT PROCUREMENT OF THE SET-ASIDE PORTION OF AN ADVERTISEMENT FOR BIDS FROM A SMALL BUSINESS CONCERN WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST. THE CONTRACTING OFFICER BELIEVED THAT THE DIFFERENCE OF $293.38 BETWEEN YOUR BID AND THAT OF THE CENTRAL STATES PAPER COMPANY, EVALUATED AT $14,455.82 WITH CONSIDERATION OF THAT FIRM'S PROMPT PAYMENT DISCOUNT OFFER, WAS SUFFICIENT TO JUSTIFY READVERTISEMENT ON AN UNRESTRICTED BASIS, SINCE THE AMOUNT OF $293.38 WAS CONSIDERABLY IN EXCESS OF THE COST OF READVERTISING.

UPON READVERTISEMENT UNDER INVITATION FOR BIDS NO. M7-31-64, ISSUED NOVEMBER 12, 1963, A CONTRACT FOR THE ITEMS INVOLVED WAS AWARDED TO A NEW BIDDER, THE SANITOR MANUFACTURING COMPANY, STURGIS, MICHIGAN, FOR A TOTAL PRICE OF $13,280.38, SUBJECT TO DISCOUNT TERMS OF 2 PERCENT, 30 DAYS. THUS THE READVERTISEMENT WILL RESULT IN AN APPARENT SAVING TO THE GOVERNMENT OF $1,734.43, REPRESENTING THE DIFFERENCE BETWEEN YOUR ORIGINAL TOTAL PRICE OF $14,749.20 AND THE NET CONTRACT PRICE OF $13,014.77 ($13,280.38 LESS 2 PERCENT).

IT IS YOUR POSITION THAT THERE WAS NO JUSTIFICATION FOR ANY CONCLUSION THAT YOUR BID PRICES UNDER THE ORIGINAL INVITATION WERE UNREASONABLE, AND THAT THE CENTRAL STATES PAPER COMPANY'S PROMPT PAYMENT DISCOUNT OFFER SHOULD NOT HAVE BEEN CONSIDERED IN THE EVALUATION OF BIDS BECAUSE OF YOUR BELIEF THAT NO AGENCY OF THE GOVERNMENT IS CAPABLE OF PAYING INVOICES FOR GENERAL SUPPLIES WITHIN 10 CALENDAR DAYS.

IN 37 COMP. GEN. 147 THIS OFFICE CONCLUDED THAT THE WITHDRAWAL OF A SMALL BUSINESS SET-ASIDE DETERMINATION AFTER OPENING OF BIDS WAS NOT IMPROPER, INASMUCH AS THE LOW RESPONSIVE BID WAS APPROXIMATELY 10 PERCENT HIGHER THAN THE PRICE PREVIOUSLY PAID FOR THE SAME SUPPLIES, AND THE SUPPLIER HAD SUBMITTED A LOW BID WHICH COULD NOT HAVE BEEN ACCEPTED BECAUSE IT WAS RECEIVED LATE AND THE SUPPLIER NO LONGER QUALIFIED AS A SMALL BUSINESS CONCERN.

IT APPEARS THAT A RELATIVELY SMALL COST OF READVERTISING SHOULD NOT BE CONSIDERED AS SIGNIFICANT IN DETERMINING WHETHER OR NOT IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO WITHDRAW A SMALL BUSINESS SET-ASIDE AFTER OPENING OF BIDS. HOWEVER, IT IS OUR OPINION THAT THE CONTRACTING OFFICER MIGHT WELL HAVE DETERMINED THAT READVERTISING ON AN UNRESTRICTED BASIS SHOULD BE UNDERTAKEN, SINCE IT WAS UNDERSTOOD AT THE TIME OF MAKING THE SET-ASIDE DETERMINATION THAT THE CENTRAL STATES PAPER COMPANY WOULD BE AN ELIGIBLE BIDDER ON CERTAIN OF THE SET-ASIDE PORTIONS OF THE INVITATION AND ONLY TWO ELIGIBLE SMALL BUSINESS CONCERNS QUOTED PRICES ON ITEMS NOS. 43 THROUGH 50 OF INVITATION NO. M7-27-64, INDICATING, A LACK OF ADEQUATE COMPETITION AMONG SMALL BUSINESS CONCERNS FOR THE FURNISHING OF THE SUPPLIES INVOLVED.

YOU HAVE SUGGESTED THAT IT WAS UNFAIR TO YOUR COMPANY TO READVERTISE FOR BIDS AFTER YOUR PRICES WERE DISCLOSED. WE RECOGNIZE THAT IT IS A SERIOUS MATTER FOR AN ADMINISTRATIVE AGENCY TO REJECT ALL BIDS AND READVERTISE AFTER THE ORIGINAL BID PRICES HAVE BEEN DISCLOSED AT A PUBLIC OPENING OF BIDS. HOWEVER, SUCH ACTION MAY BE TAKEN WHERE THERE EXISTS A REASONABLE BASIS FOR CONCLUDING THAT CANCELLATION OF AN INVITATION FOR BIDS OR A PART THEREOF WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT. CANCELLATION FOR SUCH REASON IS SPECIFICALLY AUTHORIZED BY STATUTE IN THE CASE OF A FORMALLY ADVERTISED PROCUREMENT AND THE SAME RULE SHOULD BE APPLIED IN THE CONSIDERATION OF BIDS WHICH HAVE BEEN SOLICITED UNDER THE SMALL BUSINESS SET-ASIDE PROGRAM. CONSIDERATION OF DISCOUNT OFFERS IS AN ESSENTIAL LEGAL REQUIREMENT IN THE EVALUATION OF BIDS WHEN IT IS DETERMINED THAT THE STATED DISCOUNT TERMS MAY REASONABLY BE COMPLIED WITH. AS A GENERAL RULE, A GOVERNMENT CONTRACTING AGENCY IS IN A POSITION TO MAKE PAYMENT WITHIN 10 CALENDAR DAYS UNDER SUPPLY CONTRACTS, AND IT IS TO BE NOTED THAT THE INVITATION FOR BIDS IN THIS CASE PROVIDED SPACES FOR THE INSERTION OF DISCOUNT OFFERS BASED UPON PAYMENT WITHIN EITHER 10 CALENDAR DAYS, 20 CALENDAR DAYS OR 30 CALENDAR DAYS.

IN THE PARTICULAR CIRCUMSTANCES, IT APPEARS THAT WE WOULD NOT BE WARRANTED IN TAKING EXCEPTION TO THE CONTRACT AWARDED PURSUANT TO THE READVERTISEMENT FOR BIDS. ACCORDINGLY, YOUR PROTEST TO THIS OFFICE IN THE MATTER MUST BE, AND IS, DENIED.