B-155649, FEB. 5, 1965

B-155649: Feb 5, 1965

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INCORPORATED: FURTHER REFERENCE IS MADE TO LETTER DATED NOVEMBER 23. THE REQUIREMENT FOR A BID BOND IS MADE MANDATORY BY 39 U.S.C. 6418/A) WHICH PROVIDES THAT EVERY BID FOR TRANSPORTING THE MAIL SHALL BE ACCOMPANIED BY THE BOND OF THE BIDDER IN THE SUM DESIGNATED BY THE POSTMASTER GENERAL IN THE ADVERTISEMENT. IF A QUALIFIED SURETY COMPANY IS NOT FURNISHED. TWO PERSONAL SURETIES ARE REQUIRED WHICH SURETIES BEFORE APPROVAL OF THEIR BONDS MUST "SUBMIT SIGNED STATEMENTS" THAT THEY ARE OWNERS OF REAL ESTATE WORTH. APPROPRIATE REGULATIONS FOLLOWING THE STATUTORY REQUIREMENTS WERE PROMULGATED AND PUBLISHED IN SUB -CHAPTER 520. INFORMATION CONCERNING THE REQUIREMENTS FOR SURETIES WAS INCLUDED IN PARAGRAPH 8 OF POD FORM 5468 (STAR OR WATER ROUTE BID AND BOND) AND SUCH REQUIREMENTS ARE REFERRED TO IN THE SAME FORM UNDER THE HEADING CERTIFICATE OF POSTAL OFFICIAL AS TO INDIVIDUAL SURETIES REQUIRED TO BE EXECUTED BY THE APPROPRIATE POST OFFICE DEPARTMENT OFFICIAL.

B-155649, FEB. 5, 1965

TO SOUTHERN EXPRESS, INCORPORATED:

FURTHER REFERENCE IS MADE TO LETTER DATED NOVEMBER 23, 1964, AS REVISED, FROM YOUR ATTORNEYS, HENRY J. CAPPELLO AND JOHN P. BRADSHAW PROTESTING THE REJECTIONS OF YOUR BIDS FOR TWO SEPARATE STAR ROUTES UNDER ADVERTISEMENTS FOR MAIL SERVICE FOR CARRYING UNITED STATES MAIL FROM THE R. H. DONNELLEY PLANT, HINSDALE, ILLINOIS, TO VARIOUS CITIES SHOWN ON THE ATTACHMENTS TO EACH INVITATION. ONE ADVERTISEMENT COVERED VARIOUS EASTERN POINTS IN THE UNITED STATES AND THE OTHER COVERED VARIOUS WESTERN POINTS.

EACH ADVERTISEMENT REQUIRED A BID BOND OF $80,000. THE REQUIREMENT FOR A BID BOND IS MADE MANDATORY BY 39 U.S.C. 6418/A) WHICH PROVIDES THAT EVERY BID FOR TRANSPORTING THE MAIL SHALL BE ACCOMPANIED BY THE BOND OF THE BIDDER IN THE SUM DESIGNATED BY THE POSTMASTER GENERAL IN THE ADVERTISEMENT. A BID NOT ACCOMPANIED BY A PROPER BOND MAY NOT BE CONSIDERED. 39 U.S.C. 6418/D). IF A QUALIFIED SURETY COMPANY IS NOT FURNISHED, TWO PERSONAL SURETIES ARE REQUIRED WHICH SURETIES BEFORE APPROVAL OF THEIR BONDS MUST "SUBMIT SIGNED STATEMENTS" THAT THEY ARE OWNERS OF REAL ESTATE WORTH, IN THE AGGREGATE, A SUM DOUBLE THE AMOUNT OF THE BOND OVER AND ABOVE ALL DEBTS DUE AND OWING BY THEM AND ENCUMBRANCES. 39 U.S.C. 6419/B).

IN IMPLEMENTATION OF THE STATUTORY REQUIREMENTS, APPROPRIATE REGULATIONS FOLLOWING THE STATUTORY REQUIREMENTS WERE PROMULGATED AND PUBLISHED IN SUB -CHAPTER 520, REGIONAL MANUAL. INFORMATION CONCERNING THE REQUIREMENTS FOR SURETIES WAS INCLUDED IN PARAGRAPH 8 OF POD FORM 5468 (STAR OR WATER ROUTE BID AND BOND) AND SUCH REQUIREMENTS ARE REFERRED TO IN THE SAME FORM UNDER THE HEADING CERTIFICATE OF POSTAL OFFICIAL AS TO INDIVIDUAL SURETIES REQUIRED TO BE EXECUTED BY THE APPROPRIATE POST OFFICE DEPARTMENT OFFICIAL. ALSO,INFORMATION AS TO THE SPECIFIC REQUIREMENTS FOR SURETIES WAS CONTAINED IN PARAGRAPHS 18 AND 19 OF POD FORM 5435-A (INSTRUCTIONS TO BIDDERS), PARAGRAPHS 18 OF WHICH PROVIDED THAT:

"EVERY PROPOSAL MUST BE ACCOMPANIED BY A BOND EXECUTED BY A QUALIFIED SURETY COMPANY, OR BY TWO OR MORE RESPONSIBLE INDIVIDUAL SURETIES, EACH OF WHICH MUST OWN REAL ESTATE WORTH AT LEAST THE FACE AMOUNT OF THE BOND REQUIRED, OVER AND ABOVE ALL DEBTS, JUDGMENTS, MORTGAGES, EXECUTIONS, AND EXEMPTIONS. PERSONAL PROPERTY OR CASH BONDS ARE NOT ACCEPTABLE. A BIDDER CANNOT BECOME HIS OWN SURETY.'

YOUR COMPANY, WHICH WAS THE LOW BIDDER UNDER BOTH INVITATIONS IN EACH OF ITS TWO BIDS, FURNISHED AS ONE OF THE INDIVIDUAL SURETIES MR. AND MRS. HARVEY HENRY, THE FORMER REPORTED TO BE THE PRESIDENT OF SOUTHERN EXPRESS. IN THE BID FOR THE EASTERN POINTS, MR. AND MRS. HENRY LISTED REAL ESTATE WITH A NET VALUE OF $1,000 AND ON THE BID FOR THE WESTERN POINTS THEY LISTED REAL ESTATE WITH A NET VALUE OF $7,500. IN THE EASTERN POINTS BID, THE OTHER SURETY, HARRIS TRUCK AND TRAILER SALES, LISTED REAL ESTATE WITH A NET VALUE OF $159,000. THE SECOND SURETY IN THE WESTERN POINTS BID, CHARLES HARRIS, LISTED REAL ESTATE HOLDINGS WITH A NET VALUE OF $162,000. THUS, WHILE THE AGGREGATE VALUE OF THE REAL ESTATE IN EACH OF YOUR BIDS MET THE BOND REQUIREMENTS OF $160,000 OF EACH BID, BOTH BIDS WERE NONRESPONSIVE BECAUSE IN EACH CASE ONLY ONE OF THE SURETIES LISTED REAL ESTATE WORTH AT LEAST THE FACE AMOUNT OF THE BOND REQUIRED, NAMELY, $80,000.

FOLLOWING A CONFERENCE BETWEEN YOUR MR. HENRY, YOUR LOCAL ATTORNEY IN WASHINGTON, AND OFFICIALS OF THE DEPARTMENT, MR. HENRY WAS ADVISED THAT SOUTHERN'S BIDS WERE NOT ACCEPTABLE FOR FAILURE TO MEET THE BOND REQUIREMENTS OF THE INVITATION. ALSO, HE WAS ADVISED THAT IN VIEW OF ERRONEOUS ADVICE BY THE DEPARTMENT'S REGIONAL OFFICIALS THAT DOUBLE THE BOND AMOUNT IN THE AGGREGATE WOULD BE ACCEPTABLE, THE DEPARTMENT WOULD REJECT ALL BIDS AND READVERTISE.

THE DEPARTMENT HAS NOW ADVISED THAT FOLLOWING THE CONFERENCE, THE FILES WERE REVIEWED PREPARATORY TO DIRECTING THE REGIONAL OFFICIALS TO TAKE THE ABOVE ACTION; THAT IN SO DOING IT WAS FOUND THAT THE TWO ROUTES OUGHT TO BE RESTATED FOR OPERATIONAL REASONS; THAT, ACCORDINGLY, THE TWO ADVERTISEMENTS OF AUGUST 26, 1964, HAVE NOW BEEN CANCELED AND REPLACED BY FOUR NEW ADVERTISEMENTS; AND THAT EACH OF THE PROPOSED NEW ROUTES, WHILE ORIGINATING AT THE R. H. DONNELLEY CORPORATION LOCATION AT HINSDALE, ILLINOIS, WILL RUN TO EASTERN, WESTERN, NORTHERN, AND SOUTHERN POINTS. THE ADVERTISEMENTS FOR THE NEW ROUTES WERE ISSUED UNDER DATE OF DECEMBER 9, 1964, FOR TWO-YEAR TERMS BEGINNING MARCH 1, 1965.

YOUR ATTORNEY HAS PROTESTED THE REJECTION OF YOUR BIDS UNDER THE INVITATIONS OF AUGUST 26, 1964, AND THE READVERTISEMENT OF DECEMBER 9, 1964, AND HE STATES THAT AS THE RESULT OF SUCH ACTIONS SOUTHERN WILL INCUR A LOSS POSSIBLY AS MUCH AS $250,000, INCIDENT TO EQUIPMENT ORDERED AND PERSONNEL ARRANGED FOR RESULTING FROM SOUTHERN'S BONA FIDE ATTEMPT TO PREPARE AND EXECUTE THE CONTRACT WHICH IT HAD EVERY REASON TO BELIEVE WOULD BE AWARDED TO IT. YOUR ATTORNEY REQUESTS THAT WE DETERMINE WHETHER THE DEPARTMENT MISUSED ITS DISCRETIONARY POWERS AND THAT IF IT IS FOUND THAT THE DEPARTMENT'S ACTION IN REJECTING SOUTHERN'S BIDS OF AUGUST 26, 1964, WAS ARBITRARY AND CAPRICIOUS THE DEPARTMENT SHOULD BE INSTRUCTED TO MAKE APPROPRIATE AWARDS TO SOUTHERN.

IN SUPPORT OF HIS REQUEST YOUR ATTORNEY STATES THAT PRIOR TO SUBMISSION OF SOUTHERN'S BIDS UNDER THE ORIGINAL INVITATIONS MR. HENRY HAD SEVERAL DISCUSSIONS WITH THE DEPARTMENT'S MR. RHINES REGARDING BID FORM AND TECHNICAL REQUIREMENTS; THAT WITH RESPECT TO SURETIES MR. RHINES ADVISED MR. HENRY THAT INDIVIDUAL SURETIES WOULD BE ACCEPTABLE; THAT SUCH INDIVIDUAL SURETIES WOULD HAVE TO OWN REAL PROPERTY IN WHICH THERE WAS AN EQUITY EQUAL TO DOUBLE THE AMOUNT OF EACH BID; THAT MR. HENRY WAS ADVISED THAT THE AGGREGATE AMOUNT OF REAL PROPERTY OWNED BY BOTH SURETIES SHOULD EQUAL DOUBLE THE AMOUNT OF THE BOND IN EACH CASE, OR $160,000; AND THAT AT THAT TIME THE AGGREGATE VALUE OF THE REAL ESTATE STANDING IN THE NAMES OF THE SURETIES EXCEEDED THAT AMOUNT. YOUR ATTORNEY HAS STATED FURTHER THAT SOUTHERN'S BIDS WERE SUBMITTED ON THE BASIS OF THE FOREGOING ASSURANCE; THAT THEREAFTER MR. HENRY WAS ADVISED BY THE DEPARTMENT'S DIRECTOR OF HIGHWAY TRANSPORTATION THAT SOUTERHN'S BIDS WOULD NOT QUALIFY; THAT THEREAFTER FOLLOWING FURTHER CORRESPONDENCE BETWEEN MR. HENRY AND MR. RHINES AND YOUR ATTORNEY AND THE DIRECTOR OF HIGHWAY TRANSPORTATION SOUTHERN WAS ADVISED THAT IF MR. HENRY COULD IMPROVE HIS SECURITY POSITION TO MEET THE TECHNICAL BOND REQUIREMENTS AND PRESENT SATISFACTORY EVIDENCE WITH RESPECT THERETO TO THE DEPARTMENT, IN ALL PROBABILITY THE CONTRACTS WOULD BE AWARDED TO SOUTHERN; AND THAT SUCH REQUIREMENTS WERE MET AND MR. HENRY SUBMITTED AN AFFIDAVIT LISTING THE PROPERTY NOW HELD BY HIM.

IT HAS BEEN HELD THAT THE BID BOND REQUIREMENT OF AN INVITATION IS A MATERIAL PART OF THE INVITATION WHICH CANNOT BE WAIVED BY CONTRACTING OFFICERS AND THAT NONCOMPLIANCE WITH SUCH BID BOND REQUIREMENT WILL REQUIRE REJECTION OF THE BID AS NONRESPONSIVE. 38 COMP. GEN. 532. THE DEPARTMENT HAS CONFIRMED THAT YOU WERE GIVEN ERRONEOUS INFORMATION BY THE REGIONAL OFFICIALS WITH RESPECT TO COMPLIANCE WITH THE BOND REQUIREMENTS. HOWEVER, THE FACT THAT ONE OF THE DEPARTMENT'S REGIONAL OFFICIALS INCORRECTLY ADVISED MR. HENRY WITH RESPECT TO COMPLIANCE WITH THE BOND REQUIREMENTS CONTRARY TO THE SPECIFIC REQUIREMENTS OF THE REGULATIONS AND INSTRUCTIONS TO BIDDERS DOES NOT OPERATE TO BIND THE GOVERNMENT BY SUCH UNAUTHORIZED ACTION. GAY STREET CORPORATION OF BALTIMORE, MARYLAND V. UNITED STATES, 130 CT.CL. 341; GOVERNMENT OF THE VIRGIN ISLANDS V. GORDON, 244 F.2D 818.

UNDER PARAGRAPH 30 OF THE INSTRUCTIONS TO BIDDERS, THE DIRECTOR, TRANSPORTATION DIVISION, RESERVED THE RIGHT TO REJECT ALL BIDS WHEN IN HIS JUDGMENT THE INTEREST OF THE SERVICE REQUIRED. SEE IN THIS REGARD 41 U.S.C. 253/B).

AS TO YOUR ATTORNEY'S PROTEST WITH RESPECT TO THE REJECTION OF ALL BIDS AND THE READVERTISEMENT IT CONSISTENTLY HAS BEEN HELD BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT AND BY THE COURTS THAT AN INVITATION FOR BIDS DOES NOT IMPART ANY OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CORRECT BID, AND THAT NO BIDDER ACQUIRES ENFORCEABLE RIGHTS UNTIL THE VALID ACCEPTANCE OF HIS BID BY A PROPERLY AUTHORIZED REPRESENTATIVE OF THE GOVERNMENT. 17 COMP. GEN. 554. 26 ID. 49; PERKINS V. LUKENS STEEL CO., 310 U.S. 113; O-BRIEN V. CARNEY, 6 F.SUPP. 761; COLORADO PAVING CO. V. MURPHY, 78 F. 28. UNITED STATES EX REL., BROOKFIELD CONSTRUCTION CO., C., AND BAYLOR CONSTRUCTION CORPORATION V. J. GEORGE STEWART ET AL. 234 F.SUPP. 94 (1964). FURTHER, IT HAS BEEN HELD BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT AND BY THE COURTS THAT THE QUESTION OF REJECTION OF ALL BIDS AND READVERTISING IS PRIMARILY WITHIN ADMINISTRATIVE DISCRETION. WHERE, AS HERE, IT IS SHOWN THAT THE PURPOSE OF SUCH ACTION WAS TO INCREASE THE ROUTES FROM TWO TO FOUR FOR OPERATIONAL REASONS WE PERCEIVE NO OBJECTION TO SUCH ACTION.

AS TO THE REPORTED EXPENDITURES MADE BY YOUR CONCERN IN CONTEMPLATION OF AN AWARD UNDER THE ORIGINAL ADVERTISEMENT, ANY SUCH EXPENDITURES WERE CLEARLY AT YOUR OWN RISK. IN THE CIRCUMSTANCES, AND SINCE THE RESPONSIBILITY FOR MAKING A DETERMINATION TO REJECT ALL BIDS AND TO READVERTISE LIES WITH THE ADMINISTRATIVE OFFICERS OF THE CONTRACTING AGENCY, IN THE ABSENCE OF CLEAR PROOF OF ABUSE OF THEIR DISCRETIONARY POWERS IN THAT REGARD, THIS OFFICE WILL NOT OBJECT TO SUCH ACTION. COURSE, WE ARE FULLY AWARE THAT THE REJECTION OF BIDS AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITORS' PRICES OR RATES IS A SERIOUS MATTER AND SUCH ACTION SHOULD NOT BE TAKEN EXCEPT FOR COGENT REASONS. AS INDICATED ABOVE THE DEPARTMENT IN REVIEWING THE MATTER FOUND THAT THE TWO ROUTES OUGHT TO BE RESTATED FOR OPERATIONAL REASONS. IN THIS REGARD, WE HAVE RECOGNIZED THAT SINCE CONTRACTING OFFICERS ARE AGENTS OF AND ARE REQUIRED TO WORK IN THE BEST INTERESTS OF THE GOVERNMENT, THEIR ACTIONS IN REJECTING BIDS AND READVERTISING MAY NOT BE CONSIDERED IMPROPER WHEN BASED UPON SUBSTANTIAL REASONS LEADING TO A BONA FIDE BELIEF THAT THE INTERESTS OF THE GOVERNMENT WILL BE BEST SERVED THEREBY. COMPARE 38 COMP. GEN. 235 AND 39 ID. 86.

FROM THE FOREGOING, IT IS CLEAR THAT EVEN IF YOUR ORIGINAL BIDS, AS SUBMITTED, WERE OTHERWISE PROPER FOR ACCEPTANCE, THERE WAS NO OBLIGATION ON THE DEPARTMENT TO ACCEPT SUCH BIDS. ACCORDINGLY, WE FIND NO BASIS TO QUESTION THE LEGALITY OF THE ACTION TAKEN BY THE POST OFFICE DEPARTMENT AND THE PROTEST OF YOUR ATTORNEY IS DENIED.