B-154598, NOV. 16, 1964

B-154598, NOV. 16, 1964

TO KISCO COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 30, 1964, ADDRESSED TO THE COMMANDING OFFICER, UNITED STATES ARMY PROCUREMENT AND SUPPLY AGENCY, JOLIET, ILLINOIS, IN WHICH YOU PROTEST AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER INVITATION FOR BIDS NO. AMC/A/-11-173-64-121.

THE INVITATION, WHICH WAS ISSUED ON MAY 6, 1964, AND AMENDED ON MAY 19, 1964 SOLICITED BIDS, ON A TOTAL SMALL BUSINESS SET-ASIDE BASIS, TO SUPPLY 94,000 CARTRIDGE CASES TO BE DELIVERED TO THE MILAN ARMY AMMUNITION PLANT, MILAN, TENNESSEE, IN STATED QUANTITIES DURING THE SEVEN-MONTH PERIOD, JANUARY 1966 THROUGH JULY 1966.

THE PROVISIONS OF THE INVITATION REGARDING THE USE OF GOVERNMENT OWNED PROPERTY IN THE BIDDER'S POSSESSION READ, IN PERTINENT PART, AS FOLLOWS:

"IF IN PERFORMING THE WORK BID UPON, THE BIDDER PLANS TO USE ANY ITEMS OF GOVERNMENT PROPERTY (INCLUDING ANY ITEMS OF SPECIAL TOOLING COVERED BY THE SPECIAL TOOLING CLAUSE IN ASPR 13-504) IN THE BIDDER'S POSSESSION UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT WITH THE GOVERNMENT INDEPENDENT OF THIS IFB, THE BIDDER SHALL SO INDICATE BY CHECKING THE BOX BELOW AND BY IDENTIFYING SUCH FACILITIES CONTRACT AND/OR OTHER AGREEMENT AUTHORIZING SUCH USE. *IN ORDER TO BE RESPONSIVE, THE BIDDER MUST, PRIOR TO THE TIME OF BID OPENING, BE IN FACT AUTHORIZED IN WRITING TO USE EACH ITEM OF SUCH GOVERNMENT PROPERTY FOR PERFORMING THE WORK BID UPON. EVIDENCE OF SUCH AUTHORIZATION SHALL BE SUBMITTED UPON REQUEST FROM THE CONTRACTING OFFICER UNDER THIS IFB.

"*WARNING: POSSESSION OF GOVERNMENT-OWNED PROPERTY UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT DOES NOT NECESSARILY MEAN THE BIDDER IS ACTUALLY AUTHORIZED TO USE SUCH GOVERNMENT-OWNED PROPERTY IN THE PERFORMANCE OF ANY CONTRACT AS A RESULT OF THIS IFB.'

FURTHER PROVISIONS REQUIRED BIDDERS TO IDENTIFY EACH SUCH ITEM OF GOVERNMENT PROPERTY AND TO LIST ITS ACQUISITION COST, AND PRESCRIBED THE FOLLOWING EVALUATION FORMULA:

"4. EVALUATION

"A. FOR PURPOSES OF EQUALIZATION OF COMPETITIVE ADVANTAGE, THE USE OF SUCH GOVERNMENT PROPERTY, INCLUDING SPECIAL TOOLING, SHALL BE EVALUATED BY ADDING TO THE PROPOSED PRICE OF THE ITEMS BID UPON, THE FOLLOWING RATES FOR EACH MONTH OF THE PROPOSED PRODUCTION PERIOD. BIDDER SHALL NOT INCLUDE IN THEIR BID PRICES ANY PROVISION FOR PAYMENT OF A USE CHARGE FOR SUCH PROPERTY. NOT WITHSTANDING ANY OTHER CONTRACTUAL ARRANGEMENTS, THE PROVISIONS OF THIS PARAGRAPH WILL APPLY; THEREFORE, BIDDERS ARE ADVISED TO ARRANGE WITH THE CONTRACTING OFFICER HAVING JURISDICTION OVER THE PROPERTY FOR RENT-FREE USE OF SUCH PROPERTY OR FOR A WAIVER OR RENTAL PAYMENT DUE UNDER ANY OTHER ARRANGEMENT, PRIOR TO SUBMISSION OF A BID.

"EQUIPMENT--- 1 PERCENT PER MONTH OF THE ACQUISITION COST.

"SPECIAL TOOLING--- 1 2/3 PERCENT PER MONTH OF THE ACQUISITION COST.

"REAL PROPERTY--- 5 PERCENT PER YEAR OF LAND ACQUISITION COST AND 8 PERCENT PER YEAR OF ACQUISITION COSTS OF IMPROVEMENTS THEREON COMPUTED FOR THE PROPOSED PRODUCTION PERIOD.'

ON JUNE 3, 1964, THE DATE OF BID OPENING, ONLY 2 OF THE 30 PROSPECTIVE SUPPLIERS SOLICITED HAD SUBMITTED BIDS--- YOUR COMPANY AND GRAND MACHINING COMPANY OF DETROIT, MICHIGAN. YOUR BID, WHICH INDICATED THAT IT WAS BASED ON RENT-FREE USE OF GOVERNMENT-OWNED PROPERTY IN YOUR POSSESSION UNDER FACILITIES CONTRACT NO. DA 23-072 AMC-141/A), AND WHICH INCLUDED AN EVALUATION FACTOR TO COVER SUCH USE, WAS LOW. ACCORDINGLY, THE ST. LOUIS PROCUREMENT DISTRICT WAS REQUESTED TO PERFORM A PREAWARD SURVEY ON YOUR COMPANY AND TO VERIFY THAT YOU HAD WRITTEN AUTHORITY TO USE GOVERNMENT PROPERTY IN THE PERFORMANCE OF ANY CONTRACT THAT MIGHT BE AWARDED UNDER THE INVITATION.

THE PREAWARD SURVEY REPORT WAS FAVORABLE, BUT WAS NOT RESPONSIVE TO THE QUESTION OF AUTHORIZATION TO USE THE FACILITIES. FURTHER INQUIRY DISCLOSED THAT WHILE ON MAY 27 1964, YOU HAD ORALLY DISCUSSED SUCH AUTHORIZATION WITH A REPRESENTATIVE OF THE ST. LOUIS DISTRICT, WHICH HAD COGNIZANCE OF YOUR FACILITIES CONTRACT, AND RECEIVED HIS VERBAL ASSURANCE THAT YOU COULD USE THE PROPERTY, NO WRITTEN AUTHORIZATION WAS ISSUED UNTIL JUNE 23, 1964, OR 20 DAYS AFTER BID OPENING, WHEN THE CONTRACTING OFFICER ISSUED A STATEMENT PURPORTING TO RATIFY THE EARLIER VERBAL AUTHORIZATION GIVEN BY THE DISTRICT REPRESENTATIVE. IT WAS DISCLOSED FURTHER THAT THE FACILITIES CONTRACT UNDER WHICH YOU HELD THE GOVERNMENT PROPERTY THAT YOU PROPOSED TO USE PROVIDED, IN PERTINENT PART, AS FOLLOWS:

"CONTRACTOR SHALL REQUEST AND RECEIVE AUTHORITY IN WRITING FROM CONTRACTING OFFICER FOR USE OF THE PROPERTY UNDER THIS CONTRACT PRIOR TO BIDDING ON ANY INVITATION FOR BID UNDER WHICH CONTRACTOR INTENDS TO USE SAID PROPERTY.'

ACCORDINGLY, ON JUNE 29, 1964, YOUR BID WAS REJECTED AS NONRESPONSIVE BECAUSE OF YOUR FAILURE TO SUBMIT SATISFACTORY EVIDENCE OF WRITTEN AUTHORITY, GIVEN PRIOR TO THE OPENING OF BIDS, TO USE THE GOVERNMENT PROPERTY IN QUESTION, AND AWARD WAS MADE TO GRAND MACHINING COMPANY.

YOUR POSITION IS THAT THE REJECTION OF YOUR BID WAS ERRONEOUS. FOLLOWING IS A DISCUSSION OF THE VARIOUS QUESTIONS YOU RAISE:

1. YOU RELIED ON THE VERBAL APPROVAL BY THE ACTING CONTRACT ADMINISTRATOR, GIVEN PRIOR TO THE OPENING OF BIDS, NOT REALIZING THAT WRITTEN APPROVAL OF A CONTRACTING OFFICER WAS REQUIRED RATHER THAN APPROVAL OF A CONTRACT ADMINISTRATOR.

IN THIS CONNECTION, THE CONTRACTING AGENCY REPORTS THAT THE EMPLOYEE WITH WHOM YOU DISCUSSED THE AUTHORIZATION TO USE THE GOVERNMENT PROPERTY BEFORE THE DATE OF BID OPENING HAS NEVER BEEN DESIGNATED AS EITHER CONTRACT ADMINISTRATOR OR ACTING CONTRACT ADMINISTRATOR, AND HAD NO AUTHORITY TO AUTHORIZE THE PROPOSED USE OF THE PROPERTY.

EVEN IF YOU MIGHT HAVE BEEN JUSTIFIED IN ASSUMING IN GOOD FAITH THAT THE EMPLOYEE INVOLVED HAD AUTHORITY TO PERMIT YOU TO USE THE GOVERNMENT PROPERTY, HIS VERBAL AUTHORIZATION COULD NOT BE CONSIDERED AS A COMPLIANCE WITH THE EXPRESS CONDITION OF YOUR CONTRACT QUOTED ABOVE.

2. THE CONTRACTING OFFICER'S WRITTEN RATIFICATION OF THE EMPLOYEE'S VERBAL AUTHORIZATION SHOULD BE RECOGNIZED AS FULFILLING THE INVITATION REQUIREMENT. (THIS CONTENTION IS CLOSELY ALLIED TO THE CONTENTION THAT YOU RELIED ON THE AUTHORITY OF THE REPRESENTATIVE WHO, YOU THOUGHT, WAS A CONTRACT ADMINISTRATOR.)

THE GENERAL RULE IS THAT RATIFICATION OF A PARTICULAR ACT OR CONTRACT MAY BE MADE BY ONE IN WHOSE BEHALF SUCH ACT OR CONTRACT HAS BEEN DONE OR MADE, ONLY IF HE COULD HAVE GIVEN AUTHORITY TO DO THE ACT OR ENTER INTO THE CONTRACT IN THE FIRST INSTANCE, AND STILL HAS THE POWER TO DO SO AT THE TIME OF RATIFICATION. ALSO, ONE WHO LACKS AUTHORITY TO DELEGATE THE PERFORMANCE OF ACTS WHICH HE HAS POWER TO PERFORM CANNOT RATIFY SUCH ACTS WHEN DONE BY ANOTHER WHO HAS NO SUCH AUTHORITY. SEE 22 COMP. GEN. 1083 AND THE COURT CASES CITED THEREIN.

YOUR FACILITIES CONTRACT REQUIRED THAT AUTHORITY TO USE THE GOVERNMENT PROPERTY COVERED THEREBY IN THE PERFORMANCE OF OTHER GOVERNMENT CONTRACTS BE GRANTED IN WRITING BY THE FACILITIES CONTRACTING OFFICER "PRIOR TO BIDDING ON ANY INVITATION FOR BID UNDER WHICH CONTRACTOR INTENDS TO USE SAID PROPERTY.' UNDER THIS VERY CLEAR AND EXPLICIT LANGUAGE, THERE IS AT LEAST A SERIOUS QUESTION WHETHER THE DOCUMENT SIGNED BY THE FACILITIES CONTRACTING OFFICER ON JUNE 23, 1964, AUTHORIZING YOU TO USE THE GOVERNMENT PROPERTY HELD UNDER THE FACILITIES CONTRACT IN THE PERFORMANCE OF ANY CONTRACT UNDER THE INVITATION, COULD BE GIVEN ANY RETROACTIVE EFFECT EVEN IF HE HAD HIMSELF UNDERTAKEN TO GIVE VERBAL AUTHORIZATION.

3. WHILE THE BID FORM PROVIDES THAT THE POSSESSION AND RIGHT TO USE OF THE GOVERNMENT-OWNED FACILITIES DOES NOT "NECESSARILY" MEAN APPROVAL OF A CONTRACTING OFFICER IN WRITING, IT CERTAINLY IS MISLEADING AS IT IMPLIES THAT THE RIGHT TO USE THE EQUIPMENT MAY BE SUFFICIENT WITHOUT EXPRESS APPROVAL OF A CONTRACTING OFFICER IN WRITING.

THE WARNING LANGUAGE QUOTED PREVIOUSLY FROM THE BID PROVISIONS, TO THE EFFECT THAT POSSESSION OF GOVERNMENT-OWNED PROPERTY UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT DOES NOT NECESSARILY MEAN THAT THE BIDDER HAS THE RIGHT TO USE SUCH PROPERTY, SERVED AS A NOTICE TO BIDDERS TO READ THE PROVISIONS OF THEIR FACILITIES CONTRACTS OR OTHER AGREEMENTS AND THUS PLACED UPON THE BIDDERS THE BURDEN OF SECURING ANY AUTHORIZATION THAT MIGHT BE REQUIRED BY THE TERMS OF THE FACILITIES CONTRACT OR OTHER AGREEMENT. HAD YOU OBSERVED THE WARNING AND COMPLIED WITH THE REQUIREMENT IN YOUR FACILITIES CONTRACT THAT WRITTEN AUTHORIZATION OF THE CONTRACTING OFFICER TO USE THE GOVERNMENT PROPERTY INVOLVED IN THE PERFORMANCE OF ANY OTHER GOVERNMENT CONTRACT MUST BE OBTAINED BEFORE SUBMISSION OF A BID PROPOSING TO USE SUCH PROPERTY, YOU WOULD HAVE MET THE INVITATION REQUIREMENT. THEREFORE, WE CANNOT AGREE WITH YOUR CONTENTION THAT SUCH LANGUAGE WAS MISLEADING AND IMPLIED THAT WRITTEN APPROVAL OF A CONTRACTING OFFICER MIGHT NOT BE NECESSARY.

4. THE FAILURE TO MEET THE WRITTEN AUTHORIZATION REQUIREMENT SHOULD BE WAIVED AS A MINOR IRREGULARITY UNDER THE WAIVER AUTHORITY IN CLAUSE 8/B) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, WHICH READS AS FOLLOWS:

"/B) THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY OR ALL BIDS AND TO WAIVE INFORMALITIES AND MINOR IRREGULARITIES IN BIDS RECEIVED.'

THE APPLICABLE PROCUREMENT STATUTE, 10 U.S.C. 2305, REQUIRES THAT BIDS CONFORM TO THE TERMS OF THE ADVERTISED INVITATION. ASPR 2 404.2/A) REQUIRES REJECTION OF BIDS WHICH FAIL TO CONFORM TO THE ESSENTIAL REQUIREMENTS OF THE INVITATION.

WHILE ASPR 2-405 PERMITS WAIVER OF MINOR INFORMALITIES OR IRREGULARITIES IN BID, SUCH DEVIATIONS ARE LIMITED TO THOSE OF FORM OR SOME IMMATERIAL VARIATION FROM THE EXACT REQUIREMENTS OF THE INVITATION FOR BIDS, HAVING NO EFFECT, OR MERELY A TRIVIAL OR NEGLIGIBLE EFFECT, ON THE PRICE AND NO EFFECT ON QUALITY, QUANTITY OR DELIVERY OF THE SUPPLIES OR PERFORMANCE OF THE SERVICES BEING PROCURED AND THE CORRECTION OR WAIVER OF WHICH WOULD NOT AFFECT THE RELATIVE STANDING OF OR BE OTHERWISE PREJUDICIAL TO BIDDERS.

SINCE THE USE OF GOVERNMENT-OWNED PROPERTY IN THE PERFORMANCE OF A CONTRACT MAY MATERIALLY AFFECT THE CONTRACT PRICE, THE PREEXISTING WRITTEN AUTHORIZATION REQUIREMENT CANNOT BE SAID TO BE WITHOUT REASONABLE JUSTIFICATION, AND WE COULD NOT OBJECT TO THE REFUSAL OF THE CONTRACTING OFFICER TO WAIVE IT. WE HAVE, IN FACT, HELD IN RECENT CASES INVOLVING SIMILAR REQUIREMENTS THAT THE PRIOR WRITTEN APPROVAL AFFORDS SOME SAFEGUARD AGAINST POSSIBLE ABUSES BY BIDDERS HAVING GOVERNMENT PROPERTY. SEE B-154188, JUNE 26, 1964, AND B-154685, NOVEMBER 4, 1964.

5. BECAUSE OF THE SIZEABLE DIFFERENCE IN BID PRICES--- FROM $20,000 TO $30,000--- AND THE FACT THAT DELIVERIES ARE NOT REQUIRED TO COMMENCE UNTIL JANUARY 1966, THE CONTRACTING AGENCY, IN THE EVENT AWARD COULD NOT BE MADE TO YOU BECAUSE OF A "TECHNICAL STUMBLING BLOCK," SHOULD HAVE REJECTED BOTH BIDS IN THE INTEREST OF THE GOVERNMENT.

THE MATTER OF REJECTING ALL BIDS AND READVERTISING A PROCUREMENT WHEN SUCH ACTION IS DETERMINED TO BE IN THE BEST INTEREST OF THE GOVERNMENT IS WITHIN THE DISCRETION OF THE CONTRACTING AGENCY, AND WE CANNOT, ON THE RECORD IN THIS CASE, FIND THAT THERE WAS ANY ABUSE OF THAT DISCRETION. MOREOVER, THE REJECTION OF ALL BIDS AFTER OPENING TENDS TO DISCOURAGE THOSE BIDDERS WHO OFFER FULL COMPLIANCE WITH THE SPECIFICATIONS FROM BIDDING IN LATER PROCUREMENTS, AND TENDS INEVITABLY TO DIMINISH THE EFFECTIVENESS OF THE COMPETITIVE BID SYSTEM.