B-155842, JAN. 25, 1965

B-155842, JAN. 25, 1965

TO THE HONORABLE LAWSON B. KNOTT, JR., ACTING ADMINISTRATOR, GENERAL SERVICES ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 24, 1964, IN REGARD TO THE ELIMINATION OF A 60-DAY TERMINATION CLAUSE IN A LEASE AWARDED TO THE LOW BIDDER UNDER INVITATION FOR BIDS NO. R7-12-65 ISSUED ON AUGUST 20, 1964.

THE INVITATION SOLICITED BIDS--- TO BE OPENED ON SEPTEMBER 23, 1964- - FOR FURNISHING APPROXIMATELY 6,600 SQUARE FEET OF SPECIAL PURPOSE OFFICE AND LABORATORY SPACE TO BE LOCATED WITHIN THE CITY LIMITS OF DALLAS, TEXAS. THE SPACE WAS TO BE AVAILABLE BY JULY 23, 1965. BIDS WERE INVITED ON A FIRM TERM OF NOT TO EXCEED 10 YEARS AND ANNUAL RENEWAL OPTIONS WERE DESIRED BUT NOT REQUIRED. PARAGRAPH A6 OF REQUIREMENTS STATED THAT REASONABLE TERMINATION RIGHTS DURING INITIAL TERM OF LEASE AND/OR DURING RENEWAL PERIODS WOULD BE GIVEN ADDED CONSIDERATION. ALSO, BIDS WERE INVITED ON FOUR ALTERNATE BASES. PARAGRAPH 6A OF THE GENERAL SPECIFICATIONS PROVIDED AS FOLLOWS:

"A. THE BIDDER MUST STATE IN ITEM 3 OF GSA FORM 1364 THE DATE THE PREMISES WILL BE AVAILABLE FOR OCCUPANCY BY THE GOVERNMENT. IN ITEM 4.A. THE BIDDER WILL STATE THE INITIAL TERM OF THE LEASE WHICH CANNOT EXCEED A FIRM TERM OF TEN (10) YEARS, AND IN ITEMS 4.B. THE DATE THE LEASE WILL BEGIN AND MUST BE INDICATED. IF THE GOVERNMENT IS TO BE GIVEN THE RIGHT TO TERMINATE THE LEASE DURING THE INITIAL TERM OF THE LEASE, THE NUMBER OF DAYS' NOTICE REQUIRED WILL BE INSERTED IN ITEM 6.A. IF THE LEASE CAN BE TERMINATED ONLY DURING A RENEWAL PERIOD, SUCH INFORMATION MUST BE STATED IN ITEM 6.B. (OTHER REQUIREMENTS). IF THE GOVERNMENT IS NOT TO BE GRANTED THE RIGHT OF TERMINATION, ITEM 6.A. MUST BE COMPLETED TO SHOW "NO TERMINATION RIGHTS OFFERED.'"

TWO BIDS WERE RECEIVED. THE PIONEER MORTGAGE AND REAL ESTATE COMPANY WAS THE LOW BIDDER ON EACH OF THE FOUR ALTERNATE PROPOSITIONS. ITS BID ON PROPOSITION "B" FOR A TOTAL CONTRACT RENT OF $18,450 PER ANNUM WAS ACCEPTED AS BEING MOST ADVANTAGEOUS TO THE GOVERNMENT. BY LETTER OF NOVEMBER 6, 1964, PIONEER WAS NOTIFIED OF THE AWARD AND THERE WAS TRANSMITTED THEREWITH THE PROPOSED LEASE SIGNED BY THE CONTRACTING OFFICER. IN ITS LETTER OF NOVEMBER 10, 1964, RETURNING THE EXECUTED LEASE IT ALLEGED THAT IT HAD MADE A SERIOUS ERROR IN INSERTING THE 60-DAY CANCELLATION IN ITEM 6A OF THE BIDDING FORM (FORM 1364) WHICH HAD BEEN INTENDED AS ASKING FOR A 60-DAY NOTICE AT THE END OF THE 10-YEAR PERIOD IF NO RENEWAL WAS TO BE EXERCISED INSTEAD OF OFFERING A 60-DAY NOTICE FOR TERMINATION DURING THE INITIAL TERM OF THE LEASE. ALSO, IT ALLEGES THAT IT HAS FOUND IT IMPOSSIBLE TO SECURE FINANCING FOR CONSTRUCTION WHERE, AS HERE, THE LEASE WOULD PERMIT TERMINATION ON 60-DAY NOTICE DURING THE FINAL TERM.

IT IS STATED IN YOUR LETTER THAT WHEN THE INSTRUCTIONS IN PARAGRAPH 6A OF GENERAL SPECIFICATIONS ARE READ IN CONNECTION WITH THE BID FORM THEY ARE CLEAR, AND IT APPEARS THAT SUCH IS THE CASE. HOWEVER, WE ALSO AGREE THAT THE CLOSE PROXIMITY OF THE "TERMINATION" BLOCK ON THE BID FORM TO THE "RENEWAL OPTION OFFERED" BLOCK COULD HAVE CONTRIBUTED TO THE ERROR.

WITH REGARD TO WHETHER THE CONTRACTING OFFICER SHOULD HAVE SUSPECTED AN ERROR IN PIONEER'S BID BEFORE IT WAS ACCEPTED, THERE IS NOTHING IN THE RECORD TO CHARGE THE CONTRACTING OFFICER WITH NOTICE OF POSSIBLE ERROR. IN ACT HE STATES THAT IT IS NOT UNUSUAL IN THE DALLAS AREA FOR SUBSTANTIAL NEW CONSTRUCTION TO BE UNDERTAKEN BY BUILDERS ON AN OUT-OF POCKET BASIS WITHOUT THE USE OF FINANCING. IN AN ATTEMPT TO RESOLVE THE CASE THE LESSOR HAS PROPOSED TO SUPPLEMENT THE EXISTING LEASE CONTRACT TO AMEND THE LEASE TERM BY ELIMINATING THE 60-DAY TERMINATION CLAUSE AND TO REDUCE THE RENTAL IN A TOTAL AMOUNT OF $1,500 OVER THE 10-YEAR FIRM TERM AND BY AN ADDITIONAL $750 IF THE RENEWAL OPTION TO COVER FIVE YEARS IS EXERCISED THEREAFTER.

THE ONLY OTHER BIDDER IN THIS CASE WAS THE PARTY WHO HAS HAD A LEASE FOR THE PAST FIVE YEARS FOR THE PURPOSE PRESENTLY DESIRED AND THE BIDDER COULD REASONABLY HAVE BEEN EXPECTED TO SUBMIT A BID SUFFICIENTLY LOW TO ASSURE THAT THE SPECIAL PURPOSE USE OF ITS SPACE WOULD CONTINUE. IT IS NOTED THAT THE PRESENT LESSOR DID NOT OFFER ANY TERMINATION PRIVILEGES AND IT IS STATED THAT THERE IS NO REASON WHY AWARD TO PIONEER WOULD NOT HAVE BEEN MADE REGARDLESS OF THE CANCELLATION RIGHT. YOU, THEREFORE, AGREE WITH THE REGIONAL OFFICE'S RECOMMENDATION THAT THE LEASE BE AMENDED ACCORDINGLY.

SINCE THE PROPOSED ACTION IS CLEARLY WITHOUT PREJUDICE TO THE RIGHTS OF THE HIGHER BIDDER AND SINCE THE GOVERNMENT WILL RECEIVE A CONSIDERATION, BY WAY OF PAYING LESS RENTAL, WHICH, IT IS ASSUMED, YOU HAVE DETERMINED TO BE ADEQUATE, WE FIND NO OBJECTION TO THE PROPOSED AMENDMENT.