B-157499, OCT. 12, 1965

B-157499: Oct 12, 1965

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

INC.: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 17. THE ACTION TAKEN BY THE CONTRACTING OFFICER IS DIRECTLY OPPOSITE TO THAT REQUIRED BY THE COMPETITIVE BID SYSTEM AS EXPRESSED IN SECTION II OF THE ARMED SERVICES PROCUREMENT REGULATION. IT IS OUR CONTENTION THAT THE AWARD. SHOULD HAVE BEEN MADE TO CUTLER-HAMMER. THE CONTRACTING OFFICER WAS IN ERROR IN ASKING FOR REBIDS ON THE INVITATION AFTER PUBLIC DISCLOSURE OF PRICES. IF IT WERE FELT THAT THE BID ALTERATIONS CHANGED THE SCOPE OF THE WORK REQUIRED AND/OR THE BIDS WERE CONSIDERED NON-RESPONSIVE. THE SUBJECT IFB SHOULD HAVE BEEN CANCELLED AND READVERTISED. BOTH THE GENERAL ELECTRIC COMPANY AND CUTLER-HAMMER WERE KNOWLEDGEABLE OF THE ACTUAL WORK TO BE PERFORMED.

B-157499, OCT. 12, 1965

TO CUTLER-HAMMER, INC.:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 17, 1965, WITH ENCLOSURE, PROTESTING AGAINST THE AWARD OF A NEGOTIATED CONTRACT TO THE GENERAL ELECTRIC COMPANY FOR THE FURNISHING OF 7 SHIPSETS OF CONTROL EQUIPMENT FOR VARIABLE SPEED HIGH PRESSURE BRINE PUMPS FOR NUCLEAR SUBMARINES AFTER REJECTING ALL BIDS FOR THE SAME SUPPLIES UNDER INVITATION FOR BIDS NO. IFB -102-154-65 ISSUED APRIL 23, 1965, BY THE SUPPLY DEPARTMENT OF THE PORTSMOUTH NAVAL SHIPYARD, PORTSMOUTH, NEW HAMPSHIRE.

YOU STATE THE BASIS FOR YOUR PROTEST AS FOLLOWS:

"IN OUR OPINION, THE ACTION TAKEN BY THE CONTRACTING OFFICER IS DIRECTLY OPPOSITE TO THAT REQUIRED BY THE COMPETITIVE BID SYSTEM AS EXPRESSED IN SECTION II OF THE ARMED SERVICES PROCUREMENT REGULATION. IT IS OUR CONTENTION THAT THE AWARD, IF ANY, SHOULD HAVE BEEN MADE TO CUTLER-HAMMER, INC. ON THE INITIAL BID. IN SUPPORT OF THIS CLAIM, WE OFFER THE FOLLOWING COMMENTS.

"1. THE CONTRACTING OFFICER WAS IN ERROR IN ASKING FOR REBIDS ON THE INVITATION AFTER PUBLIC DISCLOSURE OF PRICES. IF IT WERE FELT THAT THE BID ALTERATIONS CHANGED THE SCOPE OF THE WORK REQUIRED AND/OR THE BIDS WERE CONSIDERED NON-RESPONSIVE, THE SUBJECT IFB SHOULD HAVE BEEN CANCELLED AND READVERTISED. THE CONTRACTING OFFICER'S ACTION, IN THIS SITUATION, NOT ONLY PRECLUDED OTHER COMPANIES FROM SUBMITTING BIDS FOR EVALUATION BUT PLACED CUTLER-HAMMER AT AN EXTREME COMPETITIVE DISADVANTAGE.

"2. SINCE THE CONTRACTING OFFICER DID NOT CANCEL THE INVITATION IN ACCORDANCE WITH ASPR, PARA. 2-404.3, AND, BOTH THE GENERAL ELECTRIC COMPANY AND CUTLER-HAMMER WERE KNOWLEDGEABLE OF THE ACTUAL WORK TO BE PERFORMED, HE COULD HAVE CLARIFIED THE SPECIFICATIONS AT THE TIME OF AWARD TO THE LOWEST BIDDER.

"AS INDICATED PREVIOUSLY, THE SPECIFICATION CHANGES HAD ALREADY BEEN NEGOTIATED WITH THE BUREAU OF SHIPS ON PREVIOUSLY DESIGNED CONTROLLERS. THEREFORE, BOTH COMPANIES WERE COMPLETELY KNOWLEDGEABLE OF THE ACTUAL WORK REQUIRED FOR THE PERFORMANCE OF THE CONTRACT. THIS WAS INDICATED IN THE BIDS SUBMITTED AND EXCEPTIONS TAKEN THERETO.

"3. FINALLY, THE EVIDENCE ON HAND INDICATES WITH CERTAINTY THAT THE 20 PERCENT LOWER "REBID" PRICE SUBMITTED BY THE GENERAL ELECTRIC COMPANY WAS MORE INFLUENCED BY THE KNOWLEDGE OF THE CONTENTS OF THE COMPETITIVE BIDS THAN THE NET EFFECT OF THE CHANGES IN THE BID SPECIFICATIONS. THIS ESPECIALLY TRUE IF ONE CONSIDERS THE FACT THAT THE PORTSMOUTH REVISION LETTER OF 23 JUNE 1965 REQUESTED IMPROVED DELIVERIES WHICH WOULD LEAD TO INCREASED COSTS (AND PRICES) RATHER THAN DECREASED ONES, ETC.'

INVITATION FOR BIDS NO. IFB-102-154-65 WAS FURNISHED TO 15 PROSPECTIVE BIDDERS. THE BIDS WERE OPENED ON MAY 24, 1965. GENERAL ELECTRIC COMPANY AND CUTLER-HAMMER, INC., WERE THE ONLY CONCERNS WHICH SUBMITTED BIDS. CUTLER-HAMMER WAS THE LOW BIDDER. HOWEVER, BOTH BIDDERS TOOK EXCEPTION TO THE SPECIFICATIONS. THE TWO BIDS WERE REFERRED TO THE PORTSMOUTH NAVAL SHIPYARD DESIGN DIVISION ON JUNE 1, 1965, FOR TECHNICAL EVALUATION. DESIGN DIVISION REVIEW BOARD WHICH CONVENED JUNE 9, 1965, FOUND THAT BOTH BIDS WERE NONRESPONSIVE TO THE INVITATION IN VIEW OF THEIR EXCEPTIONS. WAS THEN DECIDED TO CANCEL THE INVITATION, REVISE THE SPECIFICATIONS AND NEGOTIATE ON THE BASIS OF THE REVISED SPECIFICATIONS.

ON JUNE 16, 1965, A REQUEST FOR AUTHORITY TO CANCEL THE INVITATION WAS SUBMITTED TO THE SHIPYARD COMMANDER. THE BASIS THEREFOR WAS THAT THE TWO BIDS RECEIVED WERE CONSIDERED NONRESPONSIVE IN THAT NONE OF THE BIDDERS MET THE REQUIREMENTS OF ALL SPECIFICATIONS, INCLUDING NOISE GUARANTEES, AS SET FORTH IN THE INVITATION. THE MEMORANDUM REQUESTING AUTHORITY TO CANCEL ALSO STATED THAT DESIGN DIVISION PURCHASE SPECIFICATIONS WOULD BE REVISED TO RELAX THE REQUIREMENTS IN AREAS WHERE SUCH REVISIONS ARE ACCEPTABLE AND THAT NEGOTIATION UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (2) WOULD BE CONDUCTED WITH THE PREVIOUS BIDDERS, USING THE REVISED PURCHASE SPECIFICATIONS. WITH REGARD TO THE USE OF THE 10 U.S.C. 2304 (A) (2) AUTHORITY, THE RECORD SHOWS THAT AN ADMINISTRATIVE DETERMINATION WAS MADE THAT THE EQUIPMENT IS ESSENTIAL MATERIAL URGENTLY NEEDED TO COMPLY WITH THE OVERHAUL SCHEDULES OF THE NUCLEAR SUBMARINES INVOLVED, AND FAILURE TO RECEIVE THE MATERIAL IN TIME WOULD NECESSITATE COSTLY RESCHEDULING AND HOLDUP OF PRODUCTION WORK, WOULD OCCASION LOST MAN-HOURS, AND COULD RESULT IN FAILURE TO DELIVER SERVICEABLE SHIPS TO THE FLEET AT THE ASSIGNED TIME. THE REQUEST FOR AUTHORITY TO CANCEL THE INVITATION WAS APPROVED JUNE 19, 1965. PURSUANT THERETO INVITATION FOR BIDS NO. IFB-102- 154 65 WAS CANCELLED BY MESSAGE NO. 231802Z (JUNE) WHICH READS AS FOLLOWS:

"GENERAL ELECTRIC COMPANY

31 ST. JAMES AVENUE

BOSTON, MASSACHUSETTS

ATTN: L. A. LOVEJOY

"CUTLER-HAMMER, INC.

315 NORTH 12TH STREET

MILWAUKEE, WISCONSIN

"INVITATION FOR BIDS IFB-102-154-65 OPENED 5-24-65 IS HEREBY CANCELLED. YOU ARE ENCOURAGED TO RESUBMIT QUOTE IN ACCORDANCE REVISED SPECIFICATIONS BEING MAILED 6-23-65. REFERENCE C-1133 APPLIES.'

THE ADMINISTRATIVE OFFICE REPORTS THAT A COPY OF THIS MESSAGE WAS GIVEN TO CUTLER-HAMMER'S BRIGHTON, MASSACHUSETTS, REPRESENTATIVE ON A VISIT TO THE PORTSMOUTH NAVAL SHIPYARD, BUT THE DATE OF SUCH VISIT WAS NOT RECORDED. IN ANY EVENT, FAILURE TO DELIVER A COPY OF SUCH MESSAGE TO CUTLER-HAMMER WOULD NOT HAVE AFFECTED THE CANCELLATION OF THE INVITATION.

AN AIRMAIL LETTER OF JUNE 23, 1965, SENT THE REVISED SPECIFICATIONS TO BOTH FORMER BIDDERS AND REQUESTED QUOTATIONS THEREON WITH A CLOSING DATE OF JUNE 30, 1965. THAT LETTER READ, IN PART, AS FOLLOWS:

"IT IS REQUESTED THAT THE BID SUBMITTED UNDER IFB-102-154-65, OPENED 24 MAY 1965, BE REVISED TO COMPLY WITH THE REQUIREMENTS OF PORTSMOUTH NAVAL SHIPYARD PURCHASE SPECIFICATION 272A-BMR 424-3, REV. A.

"ALL ITEMS WILL BE AWARDED TO A SINGLE BIDDER MEETING THE REQUIREMENTS OF THE SPECIFICATIONS, AS DETERMINED BY THE DESIGN DIVISION OF THIS SHIPYARD.

"YOUR QUOTATION CONTAINING THE FOLLOWING INFORMATION SHALL BE FORWARDED TO THE ATTENTION OF CODE 532B1, PORTSMOUTH NAVAL SHIPYARD, PORTSMOUTH, NEW HAMPSHIRE, NO LATER THAN 30 JUNE 1965 * * "

THE CLOSING DATE FOR QUOTATIONS OF JUNE 30, 1965, WAS SUBSEQUENTLY EXTENDED TO JULY 6, 1965, AT THE REQUEST OF BOTH COMPANIES.

PROPOSALS WERE RECEIVED FROM BOTH COMPANIES AND WERE OPENED ON JULY 6, 1965. AGAIN BOTH COMPANIES SET FORTH EXCEPTIONS AND OFFERED ALTERNATE PROPOSALS, WHICH WERE REFERRED TO THE DESIGN DIVISION FOR EVALUATION. THE DESIGN DIVISION FOUND THAT BOTH PROPOSALS WERE TECHNICALLY ACCEPTABLE AND RECOMMENDED AWARD TO THE LOW PROPOSER, GENERAL ELECTRIC COMPANY, BASED ON A 120-DAY DELIVERY (WHICH WAS ALSO THE BEST DELIVERY OFFERED BY CUTLER- HAMMER). PURSUANT THERETO GENERAL ELECTRIC COMPANY WAS AWARDED CONTRACT NO. N102-80311 (X) ON JULY 23, 1965.

UNDER THE CIRCUMSTANCES RELATED ABOVE, WE MUST CONCLUDE THAT THERE WAS A PROPER BASIS FOR THE ADMINISTRATIVE DETERMINATION OF THE NONRESPONSIVENESS OF YOUR ORIGINAL BID, AND THAT THERE WAS ADEQUATE JUSTIFICATION TO PROCEED WITH THE PROCUREMENT ON A NEGOTIATED BASIS UNDER 10 U.S.C. 2304 (A) (2) IN VIEW OF THE URGENT NEED FOR THE EQUIPMENT. UNDER THE PROVISIONS OF 10 U.S.C. 2305 (C) ALL BIDS MAY BE REJECTED IF IT IS DETERMINED TO BE IN THE PUBLIC INTEREST. IN ADDITION, IN PARAGRAPH 8 (B) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, BIDDERS WERE ADVISED SPECIFICALLY THAT THE GOVERNMENT RESERVED THE RIGHT TO REJECT ANY AND ALL BIDS. EVEN IN THE ABSENCE OF SUCH RESERVATION, IT HAS BEEN HELD THAT A REQUEST FOR BIDS DOES NOT IMPORT AN OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED. O BRIEN V. CARNEY, ET AL., 6 F.SUPP. 761, AND COLORADO PAVING CO., ET AL. V. MURPHY, 78 F. 28. WE ARE FULLY AWARE THAT THE REJECTION OF BIDS AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITORS' PRICES IS A SERIOUS MATTER AND SUCH ACTION SHOULD NOT BE TAKEN EXCEPT FOR COGENT REASONS. HOWEVER, HAVING REGARD FOR THE FACT THAT YOUR BID WAS NONRESPONSIVE, AND IN VIEW OF THE AUTHORITY CITED ABOVE, WE CANNOT FIND THAT THE REJECTION OF ALL BIDS REPRESENTED AN ABUSE OF THE ADMINISTRATIVE DISCRETION RESERVED IN THE INVITATION AND GRANTED BY THE STATUTE.

WITH RESPECT TO YOUR CONTENTION THAT THE 20 PERCENT LOWER "REBID" PRICE SUBMITTED BY THE GENERAL ELECTRIC COMPANY WAS MORE INFLUENCED BY THE KNOWLEDGE OF THE COMPETITIVE BIDS THAN THE NET EFFECT OF THE CHANGES IN THE BID SPECIFICATIONS, WE CAN ONLY SAY THAT EQUAL OPPORTUNITY TO REDUCE THE ORIGINAL BID PRICES APPEARS TO HAVE BEEN GIVEN BOTH BIDDERS, AND WE ARE AWARE OF NO BASIS FOR IMPOSING ANY GREATER OBLIGATION UPON THE PROCURING AGENCY OR FOR IMPOSING ANY RESTRICTION UPON THE EXTENT THE OFFERORS MAY REDUCE THEIR ORIGINAL BID PRICES.

IN VIEW OF THE FOREGOING, WE MUST CONCLUDE THAT THE ACTION TAKEN BY THE DEPARTMENT OF THE NAVY IN THIS MATTER IS NOT SUBJECT TO LEGAL OBJECTION, AND YOUR PROTEST MUST THEREFORE BE DENIED.