B-154217, JUN. 30, 1964

B-154217: Jun 30, 1964

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WHICH WAS ISSUED BY AVIATION SUPPLY OFFICE (ASO). THREE BIDS WERE SUBMITTED IN THE AMOUNTS OF $598. OF WHICH RODALE'S WAS THE LOWEST. YOU SAY THE IFB WAS WITHDRAWN AFTER BID OPENING BECAUSE OF AN APPARENT. THAT AWARD SHOULD HAVE BEEN MADE TO RODALE. BIDS ON WHICH WERE OPENED ON MARCH 25. SUBJECT TO A DAILY EXTENSION FOR EACH DAY THAT AWARD WAS DELAYED BEYOND 30 DAYS AFTER BID OPENING. THE SUCCESSFUL CONTRACTOR WOULD HAVE HAD ROUGHLY BETWEEN 160 AND 190 DAYS TO DELIVER THE FIRST 62 COMPONENTS (INCLUDING FOUR EACH OF ITEMS 1 AND 2). WOULD HAVE SUFFERED LIQUIDATED DAMAGES OF 1/4 OF 1 PERCENT OF THE CONTRACT PRICE FOR SUCH COMPONENTS FOR EACH DAY OF DELAY. AFTER THE SUBMISSION OF THE REPORTS THE GOVERNMENT WOULD HAVE 30 DAYS TO ADVISE THE CONTRACTOR EITHER THAT THE SAMPLE WAS APPROVED OR DISAPPROVED.

B-154217, JUN. 30, 1964

TO MAYER, KLINE AND RIGBY:

IN YOUR TELEGRAM OF MAY 18 AND LETTER OF JUNE 8, 1964, YOU PROTEST ON BEHALF OF YOUR CLIENT, RODALE ELECTRONICS, INC., THE REJECTION OF ALL BIDS OPENED ON MARCH 25, 1964, IN ACCORDANCE WITH INVITATION FOR BIDS (IFB) 383 -784-64, WHICH WAS ISSUED BY AVIATION SUPPLY OFFICE (ASO), U.S. NAVY, PHILADELPHIA, PENNSYLVANIA, ON FEBRUARY 17, 1964, FOR THE PROCUREMENT OF NUMEROUS ITEMS, AND DATA RELATED THERETO, REPRESENTING VARYING QUANTITIES OF ANY ONE OF SEVEN INDICATOR GROUP COMPONENTS. THREE BIDS WERE SUBMITTED IN THE AMOUNTS OF $598,613.40, $695,531.46, AND $733,348.62, OF WHICH RODALE'S WAS THE LOWEST. YOU SAY THE IFB WAS WITHDRAWN AFTER BID OPENING BECAUSE OF AN APPARENT, BUT IN FACT NON-EXISTENT, AMBIGUITY BETWEEN PREPRODUCTION AND PRODUCTION DELIVERY SCHEDULES, AND THAT AWARD SHOULD HAVE BEEN MADE TO RODALE.

THE IFB, BIDS ON WHICH WERE OPENED ON MARCH 25, 1964, CONTAINED AN F.O.B. ORIGIN DELIVERY SCHEDULE WHICH REQUIRED PARTIAL DELIVERY OF THE VARIOUS ITEMS IN SUCCESSIVE MONTHS, BEGINNING IN OCTOBER OF 1964 AND ENDING IN NOVEMBER OF 1965, SUBJECT TO A DAILY EXTENSION FOR EACH DAY THAT AWARD WAS DELAYED BEYOND 30 DAYS AFTER BID OPENING. IT ALSO CONTAINED A LIQUIDATED DAMAGES CLAUSE AND THE ADVICE THAT A BID OFFERING A NONCONFORMING DELIVERY SCHEDULE WOULD BE REJECTED AS NONRESPONSIVE. IT THUS APPEARS THAT UPON ACCEPTANCE OF A RESPONSIVE BID, THE SUCCESSFUL CONTRACTOR WOULD HAVE HAD ROUGHLY BETWEEN 160 AND 190 DAYS TO DELIVER THE FIRST 62 COMPONENTS (INCLUDING FOUR EACH OF ITEMS 1 AND 2), AND WOULD HAVE SUFFERED LIQUIDATED DAMAGES OF 1/4 OF 1 PERCENT OF THE CONTRACT PRICE FOR SUCH COMPONENTS FOR EACH DAY OF DELAY.

HOWEVER, THE IFB ALSO INCLUDED A CLAUSE WHICH REQUIRED SUBMISSION WITHIN 240 DAYS OF REPORTS ON DEMONSTRATION TESTS, TO BE PERFORMED UNDER GOVERNMENT OBSERVATION, ON PREPRODUCTION SAMPLES OF ITEMS 1 AND 2. AFTER THE SUBMISSION OF THE REPORTS THE GOVERNMENT WOULD HAVE 30 DAYS TO ADVISE THE CONTRACTOR EITHER THAT THE SAMPLE WAS APPROVED OR DISAPPROVED, OR THAT MORE TESTS WERE REQUIRED. ALTHOUGH IT IS REPORTED THAT FURTHER TESTS ARE NOT GENERALLY REQUIRED FOR THESE ITEMS, THE IFB PROVIDED THAT WHEN SUCH TESTS WERE NECESSARY, THE CONTRACTOR WOULD HAVE 15 DAYS TO SUBMIT THE SAMPLE TO THE GOVERNMENT, AFTER WHICH THE GOVERNMENT WOULD HAVE 60 DAYS TO PERFORM ITS OWN TESTS AND TELL THE CONTRACTOR WHETHER HIS SAMPLE HAD BEEN APPROVED OR DISAPPROVED. THE PREPRODUCTION TEST CLAUSE ALSO PROVIDED THAT IN NO EVENT WAS THE CONTRACTOR TO BEGIN PRODUCTION OF THE ITEMS UNTIL RECEIPT OF APPROVAL OF THE PREPRODUCTION SAMPLE.

FROM THE FOREGOING, IT APPEARS THAT ALTHOUGH THE IFB REQUIRED DELIVERY OF PRODUCTION UNITS WITHIN APPROXIMATELY 180 DAYS AFTER AWARD, AND ALTHOUGH PRODUCTION WAS NOT TO BEGIN UNTIL PREPRODUCTION SAMPLES HAD BEEN APPROVED, THE IFB PROVIDED THAT THE PROCESS OF APPROVING THE PREPRODUCTION SAMPLE COULD CONSUME UP TO 345 DAYS, AT LEAST 90 DAYS OF WHICH COULD HAVE BEEN CONSUMED BY THE GOVERNMENT WITHOUT ANY CONTROL BY THE CONTRACTOR. YOU CONTEND IN YOUR LETTER OF JUNE 8 THAT NONE OF THE THREE BIDDERS WAS MISLED OR CONFUSED BY THE APPARENTLY ERRONEOUS INSERTION OF "240 DAYS" IN THE PREPRODUCTION TEST CLAUSE, SINCE ALL MUST BE ASSUMED TO HAVE KNOWN OF ITS EXISTENCE AND NONE EITHER PROTESTED OR REQUESTED CLARIFICATION. YOU CONTEND THAT ALL BIDDERS MUST HAVE UNDERSTOOD THAT PREPRODUCTION TEST APPROVAL WOULD BE REQUIRED IN SUFFICIENT TIME TO MEET THE OCTOBER DELIVERY DATES FOR THE 62 COMPONENTS, AND THAT IN ANY EVENT, RODALE AGREED TO MEET THE REQUIRED DELIVERY SCHEDULE WITH FULL AWARENESS THAT IT COULD NOT BEGIN PRODUCTION UNTIL PREPRODUCTION SAMPLES HAD BEEN APPROVED.

WHILE THE 240 DAY ALLOWANCE FOR PRODUCTION AND TESTING OF SAMPLES IS A MAXIMUM LIMITATION, AND RODALE INSISTS THAT IT CAN COMPLETE THE SAMPLING WITHIN SUFFICIENTLY LESS TIME TO PERMIT THE DELIVERY SCHEDULE TO BE MET, ASO REPORTS THAT THE PREPRODUCTION TEST CLAUSE WAS INTENDED AND IS CONSIDERED TO BE A REALISTIC PROVISION, AND THAT THE MONTHLY PRODUCTION DELIVERY SCHEDULE WAS IN ERROR IN THAT IT SHOULD HAVE BEEN EXTENDED TO ACCOMMODATE THE TESTING REQUIREMENTS. ASO ALSO ADVISES THAT THE MONTHS SPECIFIED BY THE USING ACTIVITY AND INSERTED IN THE DELIVERY SCHEDULE WOULD HAVE BEEN CONSISTENT WITH THE TIME PERMITTED FOR SUBMISSION OF THE TEST REPORTS IF THE INVITATION HAD BEEN ISSUED PROMPTLY AFTER RECEIPT OF THE REQUISITION, BUT ADMINISTRATIVE DELAYS WITHIN ASO CAUSED A LATE ISSUANCE OF THE IFB, WITHOUT NOTICE HAVING BEEN TAKEN OF THE INCONSISTENT REQUIREMENTS. MOREOVER, THE CONTRACTING OFFICER STATES THAT IN ADDITION TO CONTAINING THE APPARENT INCONSISTENCY, THE IFB ALSO FAILED TO EXPRESS THE GOVERNMENT'S INTENT IN THAT IT DID NOT INCLUDE REQUIREMENTS EITHER FOR PREPRODUCTION TESTING FOR ITEMS 3 THROUGH 7 AND 30, OR FOR AN AGREEMENT BY THE CONTRACTOR TO AN EXCULPATORY CLAUSE REGARDING GOVERNMENT FURNISHED DRAWINGS.

NEITHER THE OVERLAPPING TIME ALLOWANCES FOR DELIVERY AND TESTING NOR THE OMISSION OF THE AFOREMENTIONED REQUIREMENTS WERE DISCOVERED UNTIL AFTER BID OPENING. IN THE OPINION OF THE CONTRACTING OFFICER, HE HAD NO ALTERNATIVE BUT TO WITHDRAW THE INVITATION AND READVERTISE THE PROCUREMENT UNDER TERMS WHICH WOULD INCORPORATE THE TWO NEW REQUIREMENTS, PERMIT 240 DAYS FOR INITIAL TESTING OF PREPRODUCTION SAMPLES, AND EXTEND THE TIME FOR FIRST DELIVERIES TO APPROXIMATELY 360 INSTEAD OF 180 DAYS AFTER AWARD. ACCORDINGLY, A NEW IFB WAS ISSUED ON JUNE 10, 1964. WE ARE ADVISED THAT NO AWARD WILL BE MADE THEREUNDER PENDING DECISION ON YOUR PROTEST.

IN PARAGRAPH 8 (B) OF THE TERMS AND CONDITIONS OF THE DEFECTIVE IFB, THE GOVERNMENT RESERVED THE RIGHT TO REJECT ANY AND ALL BIDS. NEVERTHELESS, WE HAVE HELD IN NUMEROUS DECISIONS, TWO OF WHICH YOU HAVE CITED TO US, THAT THE AUTHORITY TO REJECT ALL BIDS AND READVERTISE AFTER BIDS HAVE BEEN EXPOSED MUST BE EXERCISED WITH CARE AND ONLY WHEN COGENT REASONS COMPEL THE CONCLUSION THAT THE PUBLIC INTERESTS WOULD THEREBY BE SERVED. SEE 40 COMP. GEN. 671 AND 41 COMP. GEN. 536. THE ISSUE, THEREFORE, IS WHETHER THE CONTRACTING OFFICER HAD SUBSTANTIAL REASON FOR CONCLUDING THAT THE PUBLIC INTEREST WOULD BE SERVED BY A REJECTION OF ALL BIDS AND A READVERTISEMENT FOR THE CONTRACT ON TERMS MORE ACCURATELY REFLECTING THE NEEDS OF THE GOVERNMENT. 17 COMP. GEN. 554.

EVEN ASSUMING THAT BOTH THE SAMPLING AND THE DELIVERY REQUIREMENTS CAN BE MET, THE REPORTED OMISSIONS OF INTENDED REQUIREMENTS ARE DEFECTS OF SUCH A SUBSTANTIAL NATURE THAT AN AWARD PURSUANT TO THE TERMS CONTAINED THEREIN WOULD NOT HAVE BEEN IN THE GOVERNMENT'S BEST INTERESTS, SINCE IT WOULD NOT HAVE INCLUDED WHAT WE ARE NOW TOLD SHOULD HAVE BEEN CALLED FOR AND ARE STILL REGARDED AS NECESSARY. YOU MAINTAIN, HOWEVER, THAT THIS FACT ALONE DOES NOT COMPEL REJECTION OF THE LOW BID. THE THRUST OF YOUR ARGUMENT IS THAT IF THE LOW BIDDER AGREES TO WAIVE THE APPARENT INCONSISTENCY AND MEET BOTH THE SAMPLING AND DELIVERY REQUIREMENTS STATED IN THE INVITATION, AND FURTHER AGREES TO COMPLY WITH THE REQUIREMENTS OMITTED FROM THE IFB AT NO ADDITIONAL COST, NO OTHER BIDDER CAN CLAIM TO HAVE BEEN PREJUDICED BY ACCEPTANCE OF THE LOW BID. SEE 37 COMP. GEN. 251, WHERE THE LOW BIDDER'S GRATUITOUS OFFER AFTER BID OPENING TO MAKE HIS DELIVERY SCHEDULE MORE COMPETITIVE DID NOT RESULT IN REJECTION OF HIS BID. ALSO SEE B 144897, DATED FEBRUARY 3, 1961, WHERE THE GOVERNMENT ACCEPTED A LOW BID WHICH OFFERED TO PAY FOR CERTAIN EXPENSES ALLOCATED BY THE IFB TO THE GOVERNMENT. THEREFORE, YOU SUBMIT THAT RODALE IS ENTITLED TO THE AWARD SINCE IT HAS AGREED, WITHOUT AN INCREASE IN ITS BID PRICE AND THEREFORE WITHOUT PREJUDICE TO OTHER BIDDERS, TO ACCEPT THE EXCULPATORY CLAUSE AND TO FURNISH THE REQUIRED PREPRODUCTION SAMPLE TEST NOT ONLY OF ITEMS 1 AND 2 WITHIN 140 DAYS AFTER AWARD, BUT ALSO, AS REQUIRED BY THE READVERTISED IFB, OF ITEMS 3 THROUGH 7 AND 30 WITHIN 240 DAYS AFTER AWARD.

IT SHOULD BE NOTED, HOWEVER, THAT THE GOVERNMENT MUST WEIGH THE EVIL OF READVERTISING FOR ITEMS ON WHICH BIDS HAVE BEEN DISCLOSED AGAINST NOT ONLY THE POSSIBLE PREJUDICE TO OTHER BIDDERS BUT ALSO AGAINST THE SPECULATIVE LOSS OF COMPETITION AND INCREASE IN PRICE TO THE GOVERNMENT WHICH MAY RESULT FROM AN AWARD ON A DEFECTIVE IFB. SEE 39 COMP. GEN. 563. SUCH DISADVANTAGES TO THE GOVERNMENT MAY HAVE RESULTED IN THE INSTANT CASE EVEN IF CERTAIN REQUIREMENTS HAD NOT BEEN OMITTED FROM THE IFB, BECAUSE AN UNNECESSARILY TIGHT DELIVERY SCHEDULE HAD BEEN UNINTENTIONALLY INCLUDED IN THE IFB. IN THIS REGARD, YOU POINT OUT THAT SINCE NONE OF THE FIRMS WHO RECEIVED THE IFB ASKED FOR CLARIFICATION OF THE APPARENT INCONSISTENCY OR TOOK ANY EXCEPTION TO THE REQUIREMENTS, IT WOULD APPEAR THAT THE DELIVERY SCHEDULE DID NOT DISCOURAGE THEM FROM SUBMITTING BIDS. HOWEVER, WE ARE INFORMALLY ADVISED THAT THE IFB WAS SENT TO 38 FIRMS, AND IT DOES NOT SEEM UNREASONABLE TO ASSUME THAT THE FACT THAT ONLY THREE BIDS WERE RECEIVED MAY BE ATTRIBUTABLE IN SOME DEGREE TO THE DELIVERY REQUIREMENTS.

REGARDLESS OF WHAT MAY BE THE PROPER BALANCE OF THESE COMPETING EVILS UNDER THE FACTS OF THIS CASE, A QUESTION WE DO NOT DECIDE, YOUR PROTEST CANNOT PREVAIL BECAUSE WHILE YOUR CLIENT HAS AGREED TO FURNISH PREPRODUCTION SAMPLES OF ITEMS 3 THROUGH 7 AND 30, IT DOES NOT AGREE TO MEET THE DELIVERY SCHEDULE ESTABLISHED IN THE ORIGINAL IFB FOR THE FIRST INCREMENT OF THESE ITEMS, BUT WITH RESPECT THERETO WOULD AGREE ONLY TO THE DELIVERY DATES SPECIFIED IN THE READVERTISED IFB, UNDER WHICH DELIVERIES ARE EXPECTED TO COMMENCE IN JULY OF 1965. IN EFFECT, RODALE HAS PROPOSED TO ACCEPT WITHOUT CHARGE THE IMPOSITION OF REQUIREMENTS IT DID NOT CONSIDER IN SUBMITTING ITS BID, IN EXCHANGE FOR A LESS STRINGENT DELIVERY SCHEDULE WHICH IS AGREEABLE TO AND WILL BE USED BY THE GOVERNMENT IF THE IFB IS READVERTISED, BUT WHICH HAS NOT YET BEEN OFFERED TO OTHER BIDDERS. WE MUST REGARD AS CONJECTURAL THE ASSUMPTION THAT IF THE SAME QUID PRO QUO HAD BEEN OFFERED BY AMENDMENT TO THE INITIAL IFB TO ALL BIDDERS, (1) RODALE WOULD NOT HAVE SUBMITTED A BID PRICE LOWER THAN THE ONE IT DID OFFER, AND (2) NO OTHER POTENTIAL BIDDER WOULD HAVE UNDERBID YOUR CLIENT. SEE B-128405, DATED AUGUST 5, 1956. THE PROBLEM HERE, UNLIKE THE ONE RESULTING FROM USE OF AN UNNECESSARILY TIGHT DELIVERY SCHEDULE, STEMS NOT FROM THE POSSIBILITY OF TOO HIGH BIDS FROM TOO FEW BIDDERS, BUT RATHER FROM AN ABSENCE OF ANY COMPETITION WHATEVER ON THE TERMS WHICH YOUR CLIENT PROPOSES. IT FOLLOWS THAT AWARD ON THE BASIS OF RODALE'S MODIFIED OR ALTERNATE BID COULD NOT PROPERLY BE MADE BECAUSE THE PROPOSED TERMS WOULD DIFFER FROM THOSE ESTABLISHED BY THE IFB IN SUCH A MANNER AND TO SUCH AN EXTENT THAT IT IS IMPOSSIBLE TO SAY THAT OTHER BIDDERS, IF OFFERED THE SAME TERMS, MIGHT NOT HAVE SUBMITTED SUBSTANTIALLY LOWER BIDS. SEE 36 COMP. GEN. 181; CF. B-136465, DATED JUNE 26, 1958, WHERE AN OFFER OF ACCELERATED DELIVERY WAS CONSIDERED RESPONSIVE TO THE DELIVERY SCHEDULE IN THE IFB. IN THAT CASE, AS IN OTHERS IN WHICH IT HAS BEEN HELD THAT OFFERS BY A LOW RESPONSIVE BIDDER OF TERMS MORE FAVORABLE TO THE GOVERNMENT MAY BE ACCEPTED, THE BENEFIT WAS SOLELY THAT OF THE GOVERNMENT; IN THE CASE NOW BEFORE US, RODALE'S OFFER ALSO INCLUDES ELEMENTS WHICH INVOLVE SOME BENEFIT TO THE BIDDER, WHICH OTHER BIDDERS WERE NOT OFFERED.

WE MUST THEREFORE CONCLUDE THAT THE DEFECTS OF THE SUBJECT IFB WERE OF SUCH CHARACTER AS TO CONSTITUTE COGENT REASONS FOR NOT MAKING AWARD PURSUANT TO THE TERMS OF THAT IFB. RODALE'S OFFER TO CURE THESE DEFECTS WITHOUT ADDITIONAL COST WAS CONDITIONED ON THE GOVERNMENT'S AGREEING TO WAIVE IN PART THE STATED DELIVERY SCHEDULE WHICH WAS ONE ELEMENT OF THE BASIS ON WHICH ALL OTHER BIDS WERE SUBMITTED. ACCEPTANCE OF SUCH CONDITION IS NOT CONSISTENT WITH COMPETITIVE BIDDING PROCEDURES. SINCE FOR THESE REASONS RODALE'S SUPPLEMENTAL OFFER COULD NOT BE ACCEPTED, THE ONLY WAY IN WHICH THE GOVERNMENT COULD OBTAIN WHAT ARE NOW DETERMINED TO BE ITS ACTUAL REQUIREMENTS WAS BY READVERTISING UNDER AN INVITATION CORRECTLY STATING THOSE REQUIREMENTS. IN THESE CIRCUMSTANCES, REJECTION OF ALL BIDS BY THE CONTRACTING OFFICER CANNOT BE CONSIDERED AS AN ABUSE OF THE DISCRETION GRANTED HIM BY PARAGRAPH 8 (B) OF THE TERMS AND CONDITIONS OF THE IFB.