B-155640, FEB. 5, 1965, 44 COMP. GEN. 461

B-155640: Feb 5, 1965

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ITEM - INDEMNITY CLAUSE EXCEPTION THE EXCEPTION TAKEN BY A LOW BIDDER TO THE PATENT INDEMNITY CLAUSE OF THE INVITATION EVIDENCING THE CLAUSE WAS UNACCEPTABLE TO THE BIDDER IS NOT MERELY A "REQUEST" TO DELETE THE CLAUSE FROM THE CONTRACT TO BE AWARDED BUT IS A CONDITION TO THE ACCEPTANCE OF THE CONTRACT THAT QUALIFIED THE BID. THE REJECTION OF THE NONRESPONSIVE BID WAS JUSTIFIED. " WHICH IN ITS ORDINARY SENSE IS PRECATORY AND NOT MANDATORY. HAVING BEEN STATED AS PART OF THE BID IT IS TANTAMOUNT TO A REQUIREMENT THE BIDDER COULD EXACT UNDER ANY RESULTING CONTRACT. THE EXCEPTION IS NOT AN EXPRESSION OF PREFERENCE. IS A BID QUALIFICATION AFFECTING THE PRICE OF THE BID AND GIVING THE LOW BIDDER AN AVERAGE OVER OTHER BIDDERS.

B-155640, FEB. 5, 1965, 44 COMP. GEN. 461

BIDS - PATENTS, ETC., ITEM - INDEMNITY CLAUSE EXCEPTION THE EXCEPTION TAKEN BY A LOW BIDDER TO THE PATENT INDEMNITY CLAUSE OF THE INVITATION EVIDENCING THE CLAUSE WAS UNACCEPTABLE TO THE BIDDER IS NOT MERELY A "REQUEST" TO DELETE THE CLAUSE FROM THE CONTRACT TO BE AWARDED BUT IS A CONDITION TO THE ACCEPTANCE OF THE CONTRACT THAT QUALIFIED THE BID, AND THE REJECTION OF THE NONRESPONSIVE BID WAS JUSTIFIED, THE PRECISE MEANING OF THE WORD EQUEST," WHICH IN ITS ORDINARY SENSE IS PRECATORY AND NOT MANDATORY, DEPENDING ON THE CIRCUMSTANCES IN WHICH USED, HAVING BEEN STATED AS PART OF THE BID IT IS TANTAMOUNT TO A REQUIREMENT THE BIDDER COULD EXACT UNDER ANY RESULTING CONTRACT; THEREFORE, IN THE ABSENCE OF A CLEARLY EXPRESSED INTENT TO ACCEPT A CONTRACT SUBJECT TO THE PATENT INDEMNITY CLAUSE, THE EXCEPTION IS NOT AN EXPRESSION OF PREFERENCE, BUT IS A BID QUALIFICATION AFFECTING THE PRICE OF THE BID AND GIVING THE LOW BIDDER AN AVERAGE OVER OTHER BIDDERS, AND THE CONTRACTING OFFICER IS NOT AUTHORIZED TO WAIVE AS A MINOR DEVIATION THE DELETION OF THE PATENT INDEMNITY CLAUSE INTENDED TO PROTECT THE GOVERNMENT FROM THE RISK OF PATENT INFRINGEMENT.

TO THE ACF ELECTRONICS DIVISION, ACF INDUSTRIES, INCORPORATED, FEBRUARY 5, 1965:

REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 20, 1964, WITH ENCLOSURES, PROTESTING THE AWARD OF A CONTRACT TO ANY FIRM OTHER THAN YOUR CORPORATION UNDER INVITATION FOR BIDS NO. 123-51750A-65 ISSUED BY THE DEPARTMENT OF THE NAVY, NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA.

THE INVITATION REQUESTED BIDS TO BE OPENED OCTOBER 8, 1964, FOR FURNISHING 30 EACH (AMENDED TO 31) "TRANSPONDER, RADAR BEACON, C BAND," TEMCO ELECTRONICS MODEL HRT-4 "OR EQUAL" AND IN ACCORDANCE WITH PACIFIC MISSILE RANGE SPECIFICATION RAN-RTD-DPN 12160, DATED DECEMBER 22, 1960, AS AMENDED. THE NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA, ON SEPTEMBER 15, 1964, FORWARDED A SYNOPSIS OF THIS PROPOSED PROCUREMENT FOR PUBLICATION IN THE COMMERCE BUSINESS DAILY AND ON SEPTEMBER 18, 1964, THE INVITATION WAS ISSUED TO 42 SOURCES, ALL OF WHOM WERE MANUFACTURERS OF ELECTRONIC EQUIPMENT OF THE TYPE HERE INVOLVED.

YOUR BID DATED OCTOBER 7, 1964, OFFERED TO FURNISH THE EQUIPMENT AT $3,800 PER UNIT FOR A TOTAL PRICE OF $117,800. THE NEXT LOWEST BID WAS $5,570 PER UNIT FOR A TOTAL OF $172,670. IN YOUR TRANSMITTAL LETTER OF THE SAME DATE, WHICH BECAME PART OF YOUR BID, IT WAS STATED:

WE HAVE REVIEWED THE ASSOCIATED TERMS AND CONDITIONS AND REQUEST THAT ASPR CLAUSES 9-103.1 AND 9-103.2, PATENT INDEMNITY, WHICH ARE INCORPORATED INTO THIS IFB BY REFERENCE (SEE SECTION 6.2) BE DELETED. THE ITEMS TO BE DELIVERED HEREUNDER ARE INTENDED FOR END USE IN GOVERNMENTAL APPLICATIONS. DESIGN AND DEVELOPMENT FOR OPTIMUM PERFORMANCE AND RELIABILITY HAS BEEN/WILL BE PERFORMED WITHOUT PRIOR ART SEARCH AND WITHOUT LIMITING DESIGN RESTRICTIONS FOR CONFLICTING PATENT RIGHTS PURSUANT TO THE GOVERNMENT'S AUTHORIZATION AND CONSENT. OTHERWISE, ALL TERMS AND CONDITIONS ARE ACCEPTABLE.

FURTHERMORE, YOUR BID FAILED TO INCLUDE ANY DESCRIPTIVE LITERATURE IN ACCORDANCE WITH THE PROVISIONS OF THE "BRAND NAME OR EQUAL" CLAUSE OF THE ARMED SERVICES PROCUREMENT REGULATION, PARAGRAPH 1-1206.3 (B) INCLUDED BY REFERENCE IN SECTION 6.0 OF THE INVITATION FOR BIDS WHICH READS IN PART AS FOLLOWS:

* * * THE BIDDER MUST FURNISH AS A PART OF HIS BID ALL DESCRIPTIVE MATERIAL (SUCH AS CUTS, ILLUSTRATIONS, DRAWINGS, OR OTHER INFORMATION) NECESSARY FOR THE PURCHASING ACTIVITY TO (I) DETERMINE WHETHER THE PRODUCT OFFERED MEETS THE REQUIREMENT OF THE INVITATION FOR BIDS AND (II) ESTABLISH EXACTLY WHAT THE BIDDER PROPOSES TO FURNISH AND WHAT THE GOVERNMENT WOULD BE BINDING ITSELF TO PURCHASE BY MAKING AN AWARD.

ALTHOUGH YOUR BID WAS THE LOWEST RECEIVED AS TO PRICE, IT WAS REJECTED BY THE CONTRACTING OFFICER AS BEING NONRESPONSIVE IN THAT IT TOOK EXCEPTION TO THE PATENT INDEMNITY CLAUSE AND YOU FAILED TO FURNISH ANY DESCRIPTIVE MATERIAL AS REQUIRED UNDER THE INVITATION.

IT IS YOUR CONTENTION THAT YOU MERELY "REQUESTED" THAT THE PATENT INDEMNITY PROVISION BE DELETED FROM THE CONTRACT TERMS AND THAT THIS DID NOT CONSTITUTE A CONDITION TO YOUR ACCEPTANCE OF AN AWARD OF A CONTRACT. HOWEVER, IN OUR VIEW YOUR COMMENTS IMPLIED MORE THAN JUST A REQUEST. WHILE IN ITS ORDINARY SENSE THE WORD "REQUEST" IS PRECATORY, NOT MANDATORY, ITS PRECISE MEANING MUST DEPEND UPON THE CIRCUMSTANCES IN WHICH IT IS EMPLOYED. IT IS REASONABLE TO CONSTRUE THE LANGUAGE IN THE LETTER TRANSMITTING YOUR OFFER IN THE LIGHT OF YOUR PURPOSE TO BID ON THE ADVERTISED REQUIREMENTS OF THE INVITATION AND TO CONSIDER THE "REQUEST" STATED IN CONNECTION WITH THE OFFER AS A PART OF IT, TANTAMOUNT TO A REQUIREMENT, ESPECIALLY SINCE YOU WERE IN A POSITION TO EXACT COMPLIANCE WITH THE OBJECT OF THE REQUEST AS A PROVISION OF ANY RESULTING CONTRACT. IF, AS NOW CONTENDED, THE INTENT OF THE REQUEST WAS MERELY TO EXPRESS A PREFERENCE AND YOU WOULD HAVE ACCEPTED THE CONTRACT SUBJECT TO THE PROVISIONS OF THE PATENT INDEMNITY CLAUSE AS CONTAINED IN THE INVITATION TO BID, SUCH INTENT SHOULD HAVE BEEN CLEARLY EXPRESSED. IN THE ABSENCE OF SUCH A CLARIFICATION, WE ARE OF THE OPINION THAT YOUR REQUEST CONSTITUTED A BID QUALIFICATION. SEE B 124572, JANUARY 11, 1956. MOREOVER, IN VIEW OF THE FACT THAT YOU STATED YOU HAD NOT PERFORMED A SEARCH OF THE PRIOR ART WITH RESPECT TO ANY EXISTING PATENTS AND YOUR COMMENT,"OTHERWISE, ALL TERMS AND CONDITIONS ARE ACCEPTABLE," WE CAN ONLY CONCLUDE THAT THE PATENT INDEMNITY CLAUSE WAS NOT ACCEPTABLE.

ALL BIDDERS MUST BE GIVEN AN EQUAL OPPORTUNITY TO BID ON THE SAME BASIS AND OFFERS THAT ARE NOT IN SUBSTANTIAL COMPLIANCE WITH THE SPECIFICATIONS MUST BE CONSIDERED NONRESPONSIVE. THUS, WHILE THE CONTRACTING OFFICER COULD CONSIDER BIDS WHICH DEVIATED FROM THE ADVERTISED SPECIFICATIONS ONLY IN MINOR ASPECTS, HE WAS REQUIRED TO REJECT ANY BID UNDER WHICH THE BIDDER PROPOSED PERFORMANCE DIFFERING IN ANY MATERIAL MANNER FROM THAT SET OUT IN THE INVITATION AND OFFERED TO ALL BIDDERS. THE DECISIONS OF THIS OFFICE HAVE CONSISTENTLY HELD THAT ANY DEVIATION FROM THE REQUIREMENTS OF THE INVITATION WHICH AFFECTS THE PRICE, QUANTITY OR EQUALITY OF THE MATERIALS TO BE FURNISHED ARE MATERIAL DEVIATIONS AND RENDER THE BID NONRESPONSIVE. 30 COMP. GEN. 179. YOUR INTENTION TO DELETE THE PATENT INDEMNITY CLAUSE WOULD AFFECT THE PRICE, AND THUS GIVE YOU AN ADVANTAGE OVER OTHER BIDDERS.

REGARDING YOUR ARGUMENT THAT THE RADAR BEACONS DO NOT HAVE ANY SIGNIFICANT COMMERCIAL APPLICATION, WE HAVE BEEN ADVISED BY THE DEPARTMENT OF THE NAVY THAT THIS BEACON IS A COMMERCIAL ARTICLE WHICH MEETS GOVERNMENT REQUIREMENTS BUT CAN VERY WELL BE USED BY ANYONE HAVING THE NEED, SUCH AS COMMERCIAL AIRLINES AND SURFACE SHIPPING, AND THEREFORE ARE NOT FOR EXCLUSIVE GOVERNMENT APPLICATION. THIS INDICATES THAT THE PATENT INDEMNITY CLAUSE WAS PROPERLY INCORPORATED INTO THE INVITATION FOR THE PROTECTION OF THE GOVERNMENT AT THE RISK OF A PATENT INFRINGEMENT ACTION.

IN VIEW OF THE FOREGOING, WHICH CLEARLY SHOWS THAT THE ADMINISTRATIVE OFFICE WAS JUSTIFIED IN REJECTING YOUR BID AS NONRESPONSIVE ON THE BASIS OF THE EXCEPTION TAKEN TO THE PATENT INDEMNITY CLAUSE, WE DO NOT FEEL THAT ANY USEFUL PURPOSE WOULD BE SERVED IN DISCUSSING THE QUESTION OF YOUR FAILURE TO COMPLY WITH THE "BRAND NAME OR EQUAL" CLAUSE.