B-154353, JUN. 24, 1964

B-154353: Jun 24, 1964

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TO THE POSTMASTER GENERAL: REFERENCE IS MADE TO LETTER DATED JUNE 10. SUCH CONSTRUCTION IS TO BE IN ACCORDANCE WITH WORKING DRAWINGS AND SPECIFICATIONS PREPARED BY ARCHITECT-ENGINEERS RETAINED BY THE DEPARTMENT. BIDDERS WERE REQUIRED TO QUOTE A STATED ANNUAL RENTAL FOR A BASIC 30-YEAR LEASE TERM AND FOR EIGHT CONSECUTIVE RENEWAL TERM OPTIONS OF FIVE YEARS EACH. BIDDERS WERE ALSO REQUIRED TO QUOTE ON OPTIONS GRANTING THE GOVERNMENT THE RIGHT TO PURCHASE THE FEE SIMPLE TITLE TO THE LEASE PREMISES. HARTE IS A FINANCIER AND IN BIDDING HE OBTAINS A PRICE FROM A CONSTRUCTION CONTRACTOR FOR THE ACTUAL CONSTRUCTION OF THE PROJECT. DURING THE CONVERSATION THE FIRM ADVISED IT APPEARED THAT THE CONSTRUCTION COSTS WERE GOING TO BE SOMEWHAT HIGHER THAN ORIGINALLY ESTIMATED AND THAT THEY MIGHT EXCEED $3.

B-154353, JUN. 24, 1964

TO THE POSTMASTER GENERAL:

REFERENCE IS MADE TO LETTER DATED JUNE 10, 1964, WITH ENCLOSURES, FROM THE DEPUTY ASSISTANT POSTMASTER GENERAL, BUREAU OF FACILITIES, FURNISHING A REPORT ON THE REQUEST OF AUDUBON APARTMENTS, INC., FOR RELIEF BASED ON A MISTAKE IN ITS BID FOR CONSTRUCTION LEASE-BACK OF THE COLUMBIA, SOUTH CAROLINA, POSTAL FACILITY.

THE BUREAU OF FACILITIES, POST OFFICE DEPARTMENT, REQUESTED BIDS TO BE OPENED AT 2:00 P.M. ON APRIL 28, 1964, FOR NEW CONSTRUCTION LEASE SPACE TO HOUSE THE COLUMBIA, SOUTH CAROLINA, POSTAL FACILITY ON A SITE HELD BY THE DEPARTMENT UNDER AN ASSIGNABLE OPTION TO PURCHASE. SUCH CONSTRUCTION IS TO BE IN ACCORDANCE WITH WORKING DRAWINGS AND SPECIFICATIONS PREPARED BY ARCHITECT-ENGINEERS RETAINED BY THE DEPARTMENT. BIDDERS WERE REQUIRED TO QUOTE A STATED ANNUAL RENTAL FOR A BASIC 30-YEAR LEASE TERM AND FOR EIGHT CONSECUTIVE RENEWAL TERM OPTIONS OF FIVE YEARS EACH. BIDDERS WERE ALSO REQUIRED TO QUOTE ON OPTIONS GRANTING THE GOVERNMENT THE RIGHT TO PURCHASE THE FEE SIMPLE TITLE TO THE LEASE PREMISES, INCLUDING LAND, AT THE END OF THE BASIC 30-YEAR LEASE TERM AND AT THE END OF EACH RENEWAL TERM.

THE RECORD SHOWS THE FOLLOWING FACTS CONCERNING THE SUBMISSION AND THE REQUEST FOR WITHDRAWAL FO THE BID OF AUDUBON APARTMENTS, INC., A CORPORATION WHOLLY OWNED BY STANLEY J. HARTE. MR. HARTE, WHO HAS OFFICES IN NEW YORK CITY, HAS SUBMITTED BIDS ON NUMEROUS POSTAL FACILITIES OVER THE PAST YEARS AND PRESENTLY OWNS MORE THAN TEN POST OFFICES THROUGHOUT THE COUNTRY. MR. HARTE IS A FINANCIER AND IN BIDDING HE OBTAINS A PRICE FROM A CONSTRUCTION CONTRACTOR FOR THE ACTUAL CONSTRUCTION OF THE PROJECT. IN THE INSTANT CASE AN ASSOCIATE OF MR. HARTE, ALFERD J. SIDEMAN, OBTAINED PRELIMINARY ESTIMATES OF THE COST OF THE FACILITY OF $3,000,000 TO $3,200,000 ($15 TO $16 PER SQUARE FOOT) FROM TWO NEW YORK CITY GENERAL CONTRACTORS WITH WHOM HE HAD DONE BUSINESS. THEREAFTER MR. SIDEMAN CONTRACTED A CONSTRUCTION FIRM IN CHARLESTON, SOUTH CAROLINA, WHICH HAD GIVEN HIM A FIRM BID IN JULY, 1963, FOR A POSTAL FACILITY IN NORTH CHARLESTON, SOUTH CAROLINA. HOWEVER, ON MARCH 30, 1964, THAT FIRM ADVISED THAT DUE TO PRIOR COMMITMENTS AND A HEAVY WORK SCHEDULE IT WOULD NOT BE ABLE TO SUBMIT A BID ON THE COLUMBIA, SOUTH CAROLINA, PROJECT. DURING THE CONVERSATION THE FIRM ADVISED IT APPEARED THAT THE CONSTRUCTION COSTS WERE GOING TO BE SOMEWHAT HIGHER THAN ORIGINALLY ESTIMATED AND THAT THEY MIGHT EXCEED $3,500,000. IT WAS EXPLAINED THAT A DIFFICULT FOUNDATION PROBLEM EXISTED AND SOME CONTRACTORS WERE RELUCTANT TO SUBMIT BIDS WITHOUT FURTHER INVESTIGATION AND IT WAS BECOMING VERY DIFFICULT TO OBTAIN INFORMATION FROM SUBCONTRACTORS.

MR. SIDEMAN THEN ATTEMPTED TO FIND ANOTHER CONTRACTOR WHO WOULD BE WILLING TO SUBMIT A FIRM BID BUT FOUND THAT MOST OF THE LOCAL CONTRACTORS HAD ALREADY ENTERED INTO AGREEMENTS WITH OTHER POTENTIAL BIDDERS AND THEY WOULD NOT DIVULGE ANY INFORMATION CONCERNING CONSTRUCTION COSTS. THEREUPON, HE CONTRACTED MILAU ASSOCIATES AND GOODRICH ASSOCIATES, THE NEW YORK CITY GENERAL CONTRACTORS FROM WHOM THE PRELIMINARY COST ESTIMATES WERE OBTAINED, AND THE LATTER AGREED TO ATTEMPT TO OBTAIN THE CONSTRUCTION COSTS THROUGH THEIR SOUTHERN BUILDER REPRESENTATIVE, CULPEPPER CONSTRUCTION COMPANY OF ALBANY, GEORGIA.

ON APRIL 27, 1964, THE DAY BEFORE THE BID OPENING, THE MATTER OF CONSTRUCTION COSTS WAS AGAIN DISCUSSED WITH MILAU ASSOCIATES AND GOODRICH ASSOCIATES, TOGETHER WITH OTHERS, AND IT WAS AGREED THAT NO MATTER WHAT TYPE OF FOUNDATION PROBLEM EXISTED IT SHOULD NOT INCREASE THE COST OF CONSTRUCTION BY MORE THAN $700,000 OVER THE AVERAGE COST OF $15 TO $16 PER SQUARE FOOT, OR BEYOND $3,900,000. HOWEVER, TO BE CERTAIN AS TO THE MAXIMUM CONSTRUCTION COSTS GOODRICH ASSOCIATES WAS TO OBTAIN CONFIRMATION OF THE $3,900,000 CONSTRUCTION COST FROM THE CULPEPPER FIRM BY EARLY ON THE MORNING OF APRIL 28 AND WAS TO TELEPHONE THIS INFORMATION TO MR. SIDEMAN WHO, IT WAS PLANNED WOULD FORWARD ANY INFORMATION AS TO INCREASE OR DECREASE FROM THE $3,900,000 ESTIMATE TO MR. HARTE WHO PLANNED TO BE IN WASHINGTON, D.C. TO SUBMIT THE BID IN PERSON.

MR. HARTE MADE AN APPOINTMENT WITH AN OFFICIAL OF THE POST OFFICE DEPARTMENT IN WASHINGTON AT 10:00 A.M. ON APRIL 28 TO DISCUSS ANOTHER POST OFFICE PRESENTLY OWNED BY HIM. IN ORDER TO KEEP THE APPOINTMENT AND TO SUBMIT THE BID ON THE COLUMBIA POST OFFICE, MR. HARTE LEFT NEW YORK CITY BY PLANE AT 8:30 A.M. HOWEVER, DUE TO HEAVY FOG THE PLANE WAS DELAYED AND FINALLY LANDED IN PITTSBURGH, PENNSYLVANIA. AFTER LANDING IN PITTSBURGH, MR. HARTE TELEPHONED THE POST OFFICE DEPARTMENT AND ADVISED THAT HE WOULD BE UNABLE TO KEEP HIS APPOINTMENT. SHORTLY THEREAFTER IT WAS ANNOUNCED THAT A PLANE WOULD TAKE OFF FOR WASHINGTON WHICH MR. HARTE BOARDED AND FINALLY ARRIVING IN WASHINGTON.

IN THE MEANWHILE, HAVING OBTAINED INFORMATION FOR THE CULPEPPER FIRM THROUGH GOODRICH ASSOCIATES THAT, DUE TO INCREASES SUBCONTRACTORS' PRICES, THE CONSTRUCTION COSTS WOULD BE APPROXIMATELY $4,500,000 AND NOT HAVING HEARD FROM MR. HARTE, MR. SIDEMAN TELEPHONED THE POST OFFICE DEPARTMENT OFFICIAL WITH WHOM MR. HARTE HAD AN APPOINTMENT. MR. SIDEMAN WAS ADVISED THAT MR. HARTE HAD CALLED AND STATED THAT HE WAS IN PITTSBURGH AS HIS PLANE HAD BEEN REROUTED IN FLIGHT DUE TO INCLEMENT WEATHER. FROM SUCH INFORMATION MR. SIDEMAN BELIEVED THAT MR. HARTE WOULD NOT GET TO WASHINGTON IN TIME TO SUBMIT THE BID, BUT TO BE ON THE SAFE SIDE, HE LEFT A MESSAGE THAT IF MR. HARTE SHOULD ARRIVE HE SHOULD CONTACT HIM. MR. SIDEMAN THEN ATTEMPTED TO CONTACT MR. HARTE AT THE AIRPORT IN PITTSBURGH BUT WITHOUT SUCCESS. ALSO ON APRIL 28 MR. HARTE'S OFFICES WERE BEING MOVED FROM THE EMPIRE STATE BUILDING TO 230 PARK AVENUE AND MR. SIDEMAN FOUND IT NECESSARY TO DIVIDE HIS TIME BETWEEN THE TWO OFFICES AND IN ADDITION HAD OTHER BUSINESS THAT TOOK HIM OUT OF THE OFFICE DURING THE DAY.

AFTER MR. HARTE ARRIVED AT THE POST OFFICE DEPARTMENT HE WENT TO THE OFFICE OF THE OFFICIAL WITH WHOM HE HAD THE EARLIER APPOINTMENT AND HE WAS ADVISED OF THE MESSAGE TO CONTACT HIS OFFICE. MR. HARTE CALLED HIS OFFICE BUT WAS UNABLE TO GET IN TOUCH WITH MR. SIDEMAN OR ANYONE ELSE WHO HAD INFORMATION CONCERNING THE COLUMBIA POST OFFICE. IN VIEW OF THE SHORT TIME REMAINING BEFORE BID OPENING THERE WAS NO TIME TO CONTACT OTHERS AND MR. HARTE FELT THAT IF THERE WERE ANY SERIOUS PROBLEMS HE WOULD HAVE RECEIVED A MORE URGENT MESSAGE AND, THEREFORE, HE COULD SEE NO REASON NOT TO RELY ON THE ESTIMATE OF $3,900,000 AS THE CONSTRUCTION COSTS.

MR. HARTE THEN PROCEEDED TO THE BID OPENING ROOM AND HANDED IN HIS BID. THE BID WAS LAST RECEIVED, THE FIFTEENTH. AFTER THE FIRST BID WAS OPENED AND BID FIGURE OF $397,376 ANNUAL RENT FOR THE BASIC TERM WAS READ MR. HARTE APPARENTLY REALIZED THAT SOMETHING MUST HAVE HAPPENED AND HE IMMEDIATELY REQUESTED PERMISSION FROM THE POST OFFICE OFFICIAL OPENING THE BID TO WITHDRAW HIS BID. SINCE A BID HAD ALREADY BEEN OPENED AND READ THE REQUEST WAS NATURALLY DENIED AND THE OPENING OF THE BIDS PROCEEDED.

THE BID OF AUDUBON APARTMENTS, INC., IS LOW WITH AN ANNUAL RENTAL OF $321,900 FOR THE BASIC TERM OF 30 YEARS. THE THREE NEXT LOWEST BIDS FOR THE BASIC 30-YEAR TERM ARE IN THE AMOUNTS OF $359,000, $373,000 AND $380,758. THE SECOND LOW BID OF $359,000 IS FROM C. H. LEAVELL AND COMPANY OF EL PASO, TEXAS, A GENERAL CONTRACTOR.

BY LETTER DATED APRIL 29, 1964, MR. HARTE NOTIFIED THE POST OFFICE DEPARTMENT THAT UPON HIS RETURN TO NEW YORK CITY HE LEARNED THAT TWO SERIOUS DEVELOPMENTS HAD OCCURRED THE DAY BEFORE, AFTER HE LEFT NEW YORK TO GO TO WASHINGTON TO SUBMIT HIS BID, NAMELY (1) CERTAIN PERMANENT FINANCING WHICH WAS RELIED UPON HAD BEEN WITHDRAWN, AND (2) THE BIDS FOR THE CONSTRUCTION OF THE FACILITIES WERE INCREASED SUBSTANTIALLY, AND THAT DUE TO THE CIRCUMSTANCES HEREINBEFORE SET FORTH HIS OFFICE WAS UNABLE TO ADVISE HIM THEREOF PRIOR TO THE SUBMISSION OF THE BID. IT WAS FURTHER STATED THAT NOTWITHSTANDING SUCH MISTAKES IN THE BID HE WOULD DO HIS BEST TO MEET HIS OBLIGATIONS. MR. HARTE THEN CONTRACTED VARIOUS CONTRACTORS AND SUBCONTRACTORS AND APPARENTLY THE BEST PRICE HE COULD OBTAIN FOR THE CONSTRUCTION IS $4,550,000. THEREAFTER, MR. HARTE, THROUGH HIS ATTORNEY, REQUESTED RELIEF FROM BID ON ACCOUNT OF MISTAKE.

OBVIOUSLY, THERE IS NO BASIS WHATSOEVER TO PERMIT ANY CORRECTION OF THE BID. 17 COMP. GEN. 575. HOWEVER, IN VIEW OF THE CIRCUMSTANCES AND SINCE THE PURPORTED "MISTAKE" IS SUBSTANTIAL WE BELIEVE THAT THERE IS EXTREME DOUBT THAT THE BID COULD NOW BE ACCEPTED IN GOOD FAITH. FURTHERMORE, IT APPEARS HIGHLY QUESTIONABLE WHETHER AN ATTEMPTED ACCEPTANCE OF THE BID WOULD ACTUALLY BE IN THE BEST INTERESTS OF THE GOVERNMENT. ACCORDINGLY, YOU ARE ADVISED THAT THE BID OF AUDUBON APARTMENTS, INC., SHOULD BE DISREGARDED AND THE BIDDER RELIEVED FROM LIABILITY THEREUNDER.

THERE IS ENCLOSED A COPY OF OUR LETTER OF TODAY TO E. J. MCCORMACK, JR., ATTORNEY FOR AUDUBON APARTMENTS, INC. ADVISING HIM OF THE DECISION.