B-158025, AUGUST 10, 1966, 46 COMP. GEN. 123.

B-158025: Aug 10, 1966

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A CONTRACTING OFFICER WHO IS SATISIFIED THAT A PROPOSED CONTRACTOR IS QUALIFIED ON THE BASIS THAT ALTHOUGH THE TOOLING NECESSARY TO PERFORM THE CONTRACT HAD NOT BEEN ACQUIRED AT THE TIME OF A PREAWARD SURVEY. ARRANGEMENTS FOR THE TOOLING WILL HAVE BEEN COMPLETED BY THE TIME OF CONTRACT PERFORMANCE. THAT A CHANGE IN PLACE OF PERFORMANCE IS THE RESULT OF A CHANGE IN WORKLOAD AND NOT AN INDICATION OF NONRESPONSIBILITY. THAT THE CONTRACTOR WHO HAD EXPERIENCED PRIOR DIFFICULTIES ON SIMILAR CONTRACT IS PRESENTLY CAPABLE OF PERFORMING. THE CONTRACTING OFFICER'S FINDING THAT THE CONTRACTOR WAS RESPONSIBLE NOT HAVING BEEN ARBITRARY. ANY LATER DETERMINATIONS AS TO THE CONTRACTOR'S ABILITY TO MEET DELIVERY DATES IS FOR DETERMINATION BY THE CONTRACTING OFFICER.

B-158025, AUGUST 10, 1966, 46 COMP. GEN. 123.

BIDS - EVALUATION - DELIVERY PROVISIONS - FREIGHT RATES - ERRONEOUS. ALTHOUGH CORRECTION OF ERRONEOUS FREIGHT RATES USED BY THE CONTRACTING OFFICER DISPLACES THE LOW BIDDER, THE CONTRACTING OFFICER HAVING IN GOOD FAITH RELIED UPON TRANSPORTATION EXPERTS IN HIS EVALUATION, AND THE LOW BIDDER HAVING NO KNOWLEDGE OF THE ERROR, THE CONTRACT VOIDABLE AT THE OPTION OF THE GOVERNMENT NEED NOT BE CANCELED DUE TO THE HIGH PRIORITY RATING ASSIGNED TO THE PROCUREMENT. BIDDERS - QUALIFICATIONS - ADMINISTRATIVE DETERMINATIONS - PROPRIETY. A CONTRACTING OFFICER WHO IS SATISIFIED THAT A PROPOSED CONTRACTOR IS QUALIFIED ON THE BASIS THAT ALTHOUGH THE TOOLING NECESSARY TO PERFORM THE CONTRACT HAD NOT BEEN ACQUIRED AT THE TIME OF A PREAWARD SURVEY, ARRANGEMENTS FOR THE TOOLING WILL HAVE BEEN COMPLETED BY THE TIME OF CONTRACT PERFORMANCE, THAT A CHANGE IN PLACE OF PERFORMANCE IS THE RESULT OF A CHANGE IN WORKLOAD AND NOT AN INDICATION OF NONRESPONSIBILITY, AND THAT THE CONTRACTOR WHO HAD EXPERIENCED PRIOR DIFFICULTIES ON SIMILAR CONTRACT IS PRESENTLY CAPABLE OF PERFORMING, HAS LEGITIMATELY EXERCISED HIS DISCRETIONARY POWERS, AND THE CONTRACTING OFFICER'S FINDING THAT THE CONTRACTOR WAS RESPONSIBLE NOT HAVING BEEN ARBITRARY, CAPRICIOUS OR WITHOUT SUBSTANTIAL BASIS OF FACT, ANY LATER DETERMINATIONS AS TO THE CONTRACTOR'S ABILITY TO MEET DELIVERY DATES IS FOR DETERMINATION BY THE CONTRACTING OFFICER, WHO CAN TERMINATE THE CONTRACT FOR DEFAULT IF NECESSARY. CONTRACTS - SPECIFICATIONS - SAMPLES - PREPRODUCTION SAMPLE REQUIREMENT - ADMINISTRATIVE DETERMINATION. UNDER AN INVITATION REQUIRING THE SUBMISSION OF PREPRODUCTION SAMPLES AND RESERVING THE RIGHT TO WAIVE THE REQUIREMENT IN THE CASE OF PRIOR PRODUCERS WHO FURNISH EVIDENCE THAT PRIOR GOVERNMENT APPROVAL OF THEIR PRODUCTS WAS APPROPRIATE FOR THE CURRENT PROCUREMENT, THE DETERMINATION WHETHER OR NOT TO WAIVE PREPRODUCTION SAMPLES IS ESSENTIALLY AN ADMINISTRATIVE FUNCTION, AND THE DETERMINATION WILL NOT BE DISTURBED UNLESS THE CONTRACTING OFFICER'S DETERMINATION THAT SAMPLES SHOULD NOT BE WAIVED IS SHOWN TO BE ARBITRARY, CAPRICIOUS, OR WITHOUT SUBSTANTIAL BASIS OF FACT. BIDS - EVALUATION - DELIVERY PROVISIONS - CONSOLIDATION OF SHIPMENTS. A CONSOLIDATION OF SHIPMENTS OF GOVERNMENTS-FURNISHED PROPERTY FROM TWO DIVERSE POINTS IN THE UNITED STATES TO A CANADIAN CONTRACTOR NOT REQUIRED BY THE INVITATION NOR PARAGRAPHS 1-1307 AND 1-1308 OF THE ARMED SERVICES PROCUREMENT REGULATION, PRESCRIBING CONSOLIDATION OF SMALL SHIPMENTS INTO CARLOAD OR TRUCKLOAD LOTS AT OR NEAR POINT OF ORIGIN TO PROVIDE FOR DELIVERY IN LARGER QUANTITIES AT LOWER RATE AND NORMAL STORAGE-IN-TRANSIT ARRANGEMENTS, THE CONTRACTING OFFICER PROPERLY DID NOT CONSIDER CONSOLIDATION IN BID EVALUATION, FOR WITH NO GUARANTEE THE TWO SHIPMENTS WOULD ARRIVE AT THE CONSOLIDATION POINT ON OR ABOUT THE SAME TIME, A STORAGE-IN-TRANSIT ARRANGEMENT UNDER WHICH THE CARRIER RETAINED CONTROL OF ONE SHIPMENT AWAITING DELIVERY OF THE SECOND AND STORED THE RETAINED SHIPMENT FREE OF CHARGE FOR AN UNDETERMINED PERIOD OF TIME IS NOT WITHIN THE CONTEMPLATION OF PARAGRAPH 1-1308. BIDS - EVALUATION - DELIVERY PROVISIONS - CURRENCY DIFFERENTIALS. THE 3-PERCENT CURRENCY DIFFERENTIAL SAVINGS ON SHIPMENTS BETWEEN CANADA AND THE UNITED STATES IS NOT FOR CONSIDERATION IN THE EVALUATION OF BIDS WHERE THE INVITATION PROVIDES FOR F.O.B. ORIGIN DELIVERY UNDER A GOVERNMENT BILL OF LADING (GPL) PRESCRIBING PAYMENT AT DESTINATION--- PREPAYMENT OF TRANSPORTATION CHARGES PROHIBITED BY 31 U.S.C. 529---AND CONTAINS NO PROVISION FOR THE PREPAYMENT OF TRANSPORTATION CHARGES BY THE CONTRACTOR OR SUBCONTRACTOR. HOWEVER, THE CURRENCY DIFFERENTIAL IS FOR APPLICATION TO SHIPMENTS OF GOVERNMENT-FURNISHED PROPERTY SHIPPED FROM THE UNITED STATES TO THE PLANT OF A CANADIAN CONTRACTOR UNDER A GBL REQUIRING PAYMENT OF TRANSPORTATION CHARGES AT THE CANADIAN DESTINATION IN CANDIAN FUNDS.

TO THE CANADIAN COMMERCIAL CORPORATION, AUGUST 10, 1966:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED MARCH 16, 1966, PROTESTING AWARD OF A CONTRACT TO SPECIALTY ELECTRONICS DEVELOPMENT CORPORATION UNDER INVITATION FOR BIDS NO. AMC/E/-36-039-66-307-5. A PROTEST WAS ALSO MADE IN THIS CASE BY RADIO ENGINEERING PRODCTS (REP), THE PROPOSED SUBCONTRACTOR OF YOUR CORPORATION.

THE SUBJECT INVITATION WAS FOR TA-312/PT TELEPHONE SETS AND PROVIDED THAT AWARD WOULD BE MADE ON THE BASIS OF THE LOWEST EVALUATED BID AFTER CONSIDERATION OF TRANSPORTATION CHARGES, DISCOUNT AND MILITARY PACKAGING AND PACKING CHARGES. THE INVITATION ALSO REQUIRED THE SUBMISSION OF PREPRODUCTION SAMPLES, BUT RESERVED THE RIGHT TO WAIVE THE REQUIREMENT IN THE CASE OF PRIOR PRODUCERS WHO FURNISHED EVIDENCE THAT PRIOR GOVERNMENT APPROVAL OF THEIR PRODUCT WAS APPROPRIATE FOR THE CURRENT PROCUREMENT. BIDDERS WERE INSTRUCTED TO PROVIDE FOR A REDUCTION IN PRICE FOR PREPRODUCTION SAMPLE WAIVER. FIVE RESPONSIVE BIDS WERE RECEIVED. THE BID OF CANADIAN COMMERCIAL CORPORATION (CCC), BEFORE EVALUATION OF TRANSPORTATION CHARGES, WAS $3,310,485.52 WITH PREPRODUCTION SAMPLES AND $3,307,431.30 WITHOUT SAMPLES, AND WAS THE LOW UNEVALUATED BID. SPECIALTY'S BID BEFORE EVALUATION OF TRANSPORTATION CHARGES WAS $3,317,474.50 WITH PREPRODUCTION SAMPLES AND $3,311,369.12 WITHOUT SAMPLES, AND WAS SECOND LOW. SAMPLES WERE NOT WAIVED FOR EITHER BIDDER, AND AFTER ADDITION OF TRANSPORTATION CHARGES, SPECIALTY'S BID WAS $3,334,978.87 AND THE BID OF CCC WAS $3,335,001.93, A DIFFERENCE OF $23.06 IN FAVOR OF SPECIALTY.

AWARD WAS MADE TO SPECIALTY ON FEBRUARY 28, 1966, AND PROTESTS WERE RECEIVED IN THIS OFFICE ON MARCH 3, 1966, FROM REP AND ON MARCH 7, 1966, FROM CCC. BOTH PROTESTS ALLEGE THAT ERRORS WERE MADE IN THE TRANSPORTATION EVALUATION IN THAT THE CONTRACTING OFFICER FAILED TO CONSIDER A CONSOLIDATION OF SHIPMENTS AT MONTREAL OF GOVERNMENT- FURNISHED PROPERTY SHIPPED FROM TWO DIFFERENT LOCATIONS IN THE UNITED STATES TO THE REP PLANT IN CAMPBELLTON, NEW BRUNSWICK, CANADA, IN ACCORDANCE WITH PARAGRAPHS 1-1307 AND 1-1308 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), AND IN THAT THE CONTRACTING OFFICER FAILED TO CONSIDER AN APPROXIMATE 3-PERCENT CURRENCY DIFFERENTIAL SAVINGS ON SHIPMENTS OF FINISHED PRODUCTS FROM THE REP PLANT TO DESTINATIONS IN THE UNITED STATES. THE PROTESTS ALSO ALLEGE THAT THE CONTRACTING OFFICER ERRED IN NOT GRANTING A PREPRODUCTION SAMPLE WAIVER TO CCC AS A PRIOR PRODUCER. THE PROTEST OF REP FURTHER ALLEGES THAT SPECIALTY WAS NOT A RESPONSIBLE BIDDER BECAUSE IT WAS NOT IN POSSESSION OF THE TOOLING NECESSARY FOR PRODUCTION OF THE TA-312/PT TELEPHONE SETS WHEN THE AWARD WAS MADE; BECAUSE THE PLACE OF PERFORMANCE WAS CHANGED FROM LOWELL, MASSACHUSETTS, TO SOUTHBRIDGE, MASSACHUSETTS; AND BECAUSE OF SPECIALTY'S DIFFICULTIES IN COMPLETING A PRIOR CONTRACT FOR TELEPHONE SETS.

THE REPORT SUBMITTED TO THIS OFFICE BY THE UNITED STATES ARMY ELECTRONICS COMMAND REVEALS THAT A PREAWARD SURVEY WAS PERFORMED TO DETERMINE SPECIALTY'S RESPONSIBILITY, THAT THE SURVEY CONSIDERED ACTUAL AND PROPOSED PLANT CAPACITIES, INCLUDING THE SOUTHBRIDGE LOCATION, AND THAT THE SURVEY WAS AFFIRMATIVE. THE DETERMINATION OF RESPONSIBILITY IS A FUNCTION OF THE CONTRACTING AGENCY IN WHICH THERE IS A WIDE RANGE OF DISCRETION. THIS OFFICE WILL NOT INTERFERE WITH A CONTRACTING OFFICER'S DETERMINATION THAT A PARTICULAR CONTRACTOR IS OR IS NOT RESPONSIBLE UNLESS IT IS SHOWN THAT HIS ACTIONS ARE ARBITRARY, CAPRICIOUS OR WITHOUT SUBSTANTIAL BASIS IN FACT. THE FACT THAT A PROPOSED CONTRACTOR HAS NOT ACQUIRED THE TOOLING NECESSARY TO PERFORM THE CONTRACT AT THE TIME THE SURVEY IS PERFORMED DOES NOT RENDER HIM NONRESPONSIBLE SO LONG AS THE CONTRACTING OFFICER IS SATISFIED THAT ARRANGEMENTS HAVE BEEN MADE TO ACQUIRE THE TOOLING IN TIME TO PERFORM UNDER THE CONTRACT. IN FACT WE HAVE BEEN INFORMALLY ADVISED THAT THE NECESSARY TOOLING HAS NOW BEEN ACQUIRED BY THE CONTRACTOR. SIMILARLY, THE CHANGE IN THE PLACE OF PERFORMANCE FROM LOWELL TO SOUTHBRIDGE IS NOT AN INDICATION OF NONRESPONSIBLILITY. THE ADMINISTRATIVE REPORT STATES THAT THE CHANGE CAME ABOUT AS A RESULT OF A CHANGE IN SPECIALTY'S WORKLOAD MAKING THE SOUTHBRIDGE LOCATION AVAILABLE FOR WORK UNDER THE SUBJECT CONTRACT, NOT BECAUSE THERE WAS ANY QUESTION OF SPECIALTY'S ABILITY TO PERFORM AT LOWELL, AND WE THEREFORE FAIL TO SEE HOW THIS CHANGE REFLECTS ON SPECIALTY'S RESPONSIBILITY. FINALLY, SPECIALTY'S PRIOR DIFFICULTIES ON A SIMILAR CONTRACT ARE NOT FOR CONSIDERATION IN VIEW OF THE CONTRACTING OFFICER'S DETERMINATION THAT IT IS PRESENTLY CAPABLE OF PERFORMING. WE THEREFORE CONCLUDE THAT THE CONTRACTING OFFICER'S DETERMINATION THAT SPECIALTY WAS RESPONSIBLE WAS A LEGITIMATE EXERCISE OF HIS DISCRETIONARY POWER WHICH CANNOT BE CHALLENGED BY THIS OFFICE.

IN JUSTIFICATION OF THE CONTENTION THAT PREPRODUCTION SAMPLES SHOULD HAVE BEEN WAIVED FOR CCC AS A PRIOR PRODUCER, IT IS POINTED OUT THAT REP, CCC'S FIRST-TIER SUBCONTRACTOR, HAS BEEN IN CONTINUOUS PRODUCTION OF THE TA- 312/PT TELEPHONE SETS SINCE THE LAST PREPRODUCTION SAMPLE EVALUATION WAS PERFORMED IN 1961, WITH NO CHANGES IN DESIGN, TOOLING, PRODUCTION EQUIPMENT, SUPERVISORY ENGINEERING, PRODUCTION AND ENGINEERING PERSONNEL, OR LOWER-TIER SUBCONTRACTOR. IN ADDITION, A LIST OF CONTRACTS AND SUBCONTRACTS IN WHICH CCC AND REP HAVE DELIVERED AND ARE CURRENTLY DELIVERING TELEPHONE SETS WAS SUBMITTED. THE CONTRACTING AGENCY, ON THE OTHER HAND, ADVISES THAT DELIVERIES OF THE COMPLETE TELEPHONE SET UNDER CURRENT CONTRACTS CONTAINED IN THE ABOVE LIST "ARE FOR SMALL QUANTITIES RANGING FROM TWO (2) UNITS TO TWENTY SEVEN (27) UNITS AND WOULD NOT HAVE ANY PREPRODUCTION TESTS PERFORMED ON THEM SINCE THEY WERE BEING FURNISHED BY THE PRIME CONTRACTOR AS A SMALL PART OF A LARGE SYSTEM;, THE AGENCY ALSO STATES THAT CERTAIN TESTS, SUCH AS SHOCK, BOUNCE, VIBRATION, HUMIDITY AND OTHER NONELECTRICAL TESTS, ARE PERFORMED ON PREPRODUCTION SAMPLES WHICH ARE NOT PERFORMED ON PRODUCTION UNITS, AND THAT THESE TESTS CAN BE REQUIRED IN INSTANCES WHERE A CONTRACTOR HAS NOT HAD THEM PERFORMED FOR A PERIOD OF TIME. FINALLY, THE AGENCY STATES THAT CHANGES IN SOURCES OF COMPONENTS AND MATERIALS HAVE BEEN MADE SINCE THE 1961 SAMPLE EVALUATION. AGAIN, THE DECISION AS TO WHETHER OR NOT TO WAIVE PREPRODUCTION SAMPLES IS ESSENTIALLY AN ADMINISTRATIVE FUNCTION, AND UNLESS THE CONTRACTING OFFICER'S DETERMINATION THAT SAMPLES SHOULD NOT BE WAIVED IS SHOWN TO BE ARBITRARY, CAPRICIOUS, OR WITHOUT SUBSTANTIAL BASIS IN FACT, IT WILL NOT BE DISTURBED BY THIS OFFICE. THE WAIVER CLAUSE CONTAINED IN THE INVITATION RESERVED THE RIGHT IN THE GOVERNMENT TO WAIVE SAMPLES OR NOT TO WAIVE THEM AND SPECIFIED THAT, IN ADDITION TO SHOWING PRIOR PRODUCTION, BIDDERS WERE REQUIRED TO ,FURNISH EVIDENCE WITH THE BID/OFFER THAT PRIOR GOVERNMENT APPROVAL IS PRESENTLY APPROPRIATE FOR THE PRODUCTS TO BE FURNISHED HEREUNDER;, WHILE WE DO NOT NECESSARILY AGREE THAT SAMPLES SHOULD HAVE BEEN REQUIRED OF REP IN THIS CASE IN VIEW OF ITS PRIOR AND CONTINUING PRODUCTION OF TA-312/PT TELEPHONE SETS, WE ARE UNABLE TO CONCLUDE THAT THE CONTRACTING OFFICER'S FINDING THAT FOR THE REASONS LISTED ABOVE REP SHOULD SUBMIT SAMPLES WAS SUCH AN IMPROPER USE OF HIS DISCRETION THAT IT COULD BE TERMED ARBITRARY, CAPRICIOUS OR WITHOUT SUBSTANTIAL BASIS IN FACT.

WE DO NOT AGREE THAT ASPR 1-1307 AND 1-1308 REQUIRE, OR EVEN PERMIT, THE TYPE OF CONSOLIDATION OF SHIPMENTS PROPOSED BY YOU. THE LANGUAGE OF ASPR 1-1307, IN OUR OPINION, CLEARLY REFERS TO CONSOLIDATION OF SMALL SHIPMENTS INTO CARLOAD OR TRUCKLOAD LOTS AT OR NEAR THE POINT OF ORIGIN AS AUTHORIZED BY TARIFF CONSOLIDATING RULES. THE SECTION MENTIONS THE REVISION OF DELIVERY SCHEDULES IN ORDER TO PROVIDE FOR DELIVERIES IN LARGER QUANTITIES. IMPLICIT IN THIS STATEMENT, WE THINK, IS THE FACT THAT THE CONSOLIDATION OF SMALLER QUANTITIES INTO LARGER ONES TAKES PLACE AT OR NEAR THE ORIGIN POINT IN ORDER TO TAKE ADVANTAGE OF LOWER RATES FROM THAT ORIGIN POINT TO A SINGLE DESTINATION. THE SECTION ALSO MENTIONS CONSOLIDATION OF DELIVERY SCHEDULES FOR SUPPLIES TO BE DELIVERED TO MULTIPLE DESTINATIONS, BUT AGAIN ASSUMES THAT THE CONSOLIDATION WILL TAKE PLACE AT OR NEAR A SINGLE ORIGIN POINT. THE CONSOLIDATION PROPOSED BY YOU, HOWEVER, INVOLVES CONSOLIDATION OF TWO SHIPMENTS FROM DIVERSE ORIGIN POINTS (LEXINGTON AND SACRAMENTO) AT A POINT MORE THAN HALFWAY TO THE ULTIMATE DESTINATION WITHOUT TARIFF AUTHORITY, AND WITH NO GUARANTEE THAT THE TWO SHIPMENTS WILL REACH THE CONSOLIDATION POINT AT OR ABOUT THE SAME TIME. ASPR 1-1308 PROVIDES FOR THE USE OF TRANSIT ARRANGEMENTS WHICH "AFFORD AN OPPORTUNITY TO STOP CARLOAD OR TRUCKLOAD SHIPMENTS AT SPECIFIC INTERMEDIATE POINTS EN ROUTE TO THE FINAL DESTINATION IN ORDER TO STORE, PROCESS, OR FABRICATE, OR FOR OTHER PURPOSES AS SPECIFIED IN CARRIERS' APPLICABLE TARIFFS;, THE SECTION EXPLAINS THAT TRANSIT ARRANGEMENTS PERMIT THE USE OF A THROUGH RATE FROM ORIGIN POINT TO ULTIMATE DESTINATION, PLUS A TRANSIT OR OTHER RELATED CHARGE, RATHER THAN A COMBINATION OF RATES FROM ORIGIN POINT TO TRANSIT POINT AND THEN FROM TRANSIT POINT TO ULTIMATE DESTINATION, IN CASES WHERE THIS ARRANGEMENT WOULD RESULT IN LOWER TRANSPORTATION CHARGES. YOU PROPOSE TO DO THE OPPOSITE, I.E; TO USE A COMBINATION OF A LESS THAN TRUCKLOAD RATE TO MONTREAL AND A TRUCKLOAD RATE FROM MONTREAL TO CAMPBELLTON. ALSO, THE USUAL PROCEDURE IN TRANSIT ARRANGEMENTS CALLS FOR THE RELINQUISHMENT OF CONTROL OVER THE SHIPMENT BY THE INBOUND CARRIER DURING THE STOPPAGE IN TRANSIT, WITH THE OUTBOUND CARRIER NOT REGAINING CONTROL OF THE SHIPMENT UNTIL THE STOPPAGE IN TRANSIT IS COMPLETED. THE PROPOSED CONSOLIDATION, ON THE CONTRARY, WOULD REQUIRE D-ANJOU TRANSPORT, THE CARRIER FROM MONTREAL TO CAMPBELLTON, NOT ONLY TO RETAIN CONTROL OF ONE SHIPMENT WHILE AWAITING DELIVERY OF THE SECOND SHIPMENT, BUT TO STORE IT FREE OF CHARGE FOR AN UNDETERMINED PERIOD OF TIME SO THAT THE TWO SHIPMENTS COULD MOVE FROM MONTREAL TO CAMPBELLTON AT THE MORE FAVORABLE TRUCKLOAD RATE. WHILE D-ANJOU TRANSPORT MIGHT USE THIS ARRANGEMENT FOR ITS OWN PURPOSES, OR EVEN AS A FAVOR FOR A REGULAR CUSTOMER, THERE DOES NOT APPEAR TO BE ANY WAY TO ASSURE ITS COOPERATION, AND WE DO NOT FEEL THAT THIS IS THE TYPE OF "TRANSIT ARRANGEMENT" CONTEMPLATED BY ASPR. FURTHER, NO PROVISION FOR THIS KIND OF AN ARRANGEMENT WAS CONTAINED IN THE INVITATION. WE THEREFORE AGREE WITH THE CONTRACTING OFFICER'S DETERMINATION THAT THE CONSOLIDATION FEATURE WAS NOT FOR CONSIDERATION.

REGARDING THE 3-PERCENT CURRENCY DIFFERENTIAL, YOU POINT OUT THAT CANADIAN TARIFFS PROVIDE FOR AN APPROXIMATE 3-PERCENT CURRENCY DIFFERENTIAL SAVINGS ON SHIPMENTS BETWEEN CANADA AND THE UNITED STATES WHICH WOULD INURE TO THE BENEFIT OF THE UNITED STATES GOVERNMENT IF PAYMENT WAS MADE IN CANADIAN FUNDS IN CANADA. YOU THEREFORE ALLEGE THAT THE CONTRACTING OFFICER SHOULD HAVE ALLOWED FOR THIS 3-PERCENT SAVINGS ON SHIPMENTS OF FINISHED PRODUCTS FROM CANADA TO THE UNITED STATES EITHER BY ARRANGING FOR PREPAYMENT OF FREIGHT CHARGES ON OUTBOUND SHIPMENTS BY REP OR BY ARRANGING FOR GOVERNMENT BILLS OF LADING (GBL-S) TO BE ISSUED TO AND SUBMITTED FOR PAYMENT BY THE ORIGINATING CARRIER, THEREBY INSURING PAYMENT OF FREIGHT CHARGES IN CANADIAN FUNDS.

WHILE THE 3-PERCENT SAVINGS ARE FOR APPLICATION WHERE TRANSPORTATION CHARGES ARE PAID IN CANADIAN FUNDS IN CANADA, AS SUGGESTED BY YOU, IT IS OUR OPINION THAT THERE IS NO WAY TO ARRANGE FOR PAYMENT OF THESE CHARGES TO THE ORIGINATING CARRIER IN CANADA. SINCE THE INVITATION SPECIFIED THAT DELIVERY WAS TO BE F.O.B. ORIGIN, THE GOVERNMENT WOULD TAKE TITLE TO THE FINISHED PRODUCTS AT THE DELIVERY POINT AND TRANSPORTATION TO THE ULTIMATE DESTINATION THEREFORE WOULD BE SOLELY THE RESPONSIBILITY OF THE GOVERNMENT. SHIPMENTS BY THE GOVERNMENT ARE REQUIRED TO BE MADE ON GBL'S AND THE TERMS OF THE STANDARD GBL REQUIRE THAT PAYMENT BE MADE AT DESTINATION, AS PREPAYMENT OF TRANSPORTATION CHARGES IS PROHIBITED BY 31 U.S.C. 529. SIMILARLY, THERE WAS NO PROVISION IN THE INVITATION FOR PREPAYMENT OF TRANSPORTATION CHARGES BY THE CONTRACTOR OR THE SUBCONTRACTOR, AND ANY OFFER TO DO SO DURING EVALUATION WOULD BE A MODIFICATION OF THE CONTRACTOR'S BID AFTER OPENING WHICH WOULD BE DETRIMENTAL TO OTHER BIDDERS.

IN A LETTER DATED APRIL 13, 1966, FROM MR. S. T. FISHER OF REP TO MR. H. E. SWAN OF CCC, COPIES OF WHICH WERE PROVIDED OUR OFFICE, THE ALLEGATION IS MADE THAT THE WORDING OF THE GBL ITSELF PERMITS BILLING BY THE ORIGINATING CARRIER, APPARENTLY AFTER THE SHIPMENT REACHES THE DESTINATION POINT. THIS ALLEGATION IS BASED ON THE FACT THAT THE GBL STATES THAT THE ORIGINAL BILL OF LADING CAN BE SURRENDERED TO THE INITIAL CARRIER INSTEAD OF BEING SENT IMMEDIATELY TO THE CONSIGNEE AND THAT PAYMENT TO OTHER THAN THE LAST CARRIER CAN BE STIPULATED IN THE ROUTING INSTRUCTIONS WHICH ACCOMPANY THE GBL. WHILE THE GBL FORM DOES PROVIDE FOR SURRENDER OF THE ORIGINAL GBL TO THE INITIAL CARRIER, THIS SURRENDER HAS NOTHING TO DO WITH PAYMENT. IT IS MERELY AN ALTERNATE METHOD OF GETTING THE GBL FROM THE CONSIGNOR TO THE CONSIGNEE WHICH IS USED AS A MATTER OF CONVENIENCE TO ASSURE THAT THE GBL IS IN THE HANDS OF THE CONSIGNEE AT THE SAME TIME THAT THE SHIPMENT IS DELIVERED, SO THAT IT CAN BE SURRENDERED BY THE CONSIGNEE TO THE DESTINATION CARRIER WHO THEN SUBMITS IT FOR PAYMENT. SEE 4 CFR 52.9. ALSO, WHILE THE GBL FORM PROVIDES FOR A STIPULATION THAT PAYMENT CAN BE MADE TO OTHER THAN THE LAST CARRIER, THIS STIPULATION ENTAILS SECURING A WAIVER OF THE RIGHT TO PAYMENT FROM THE LAST CARRIER, AS THERE IS NO REQUIREMENT ON A CARRIER TO TRANSPORT A SHIPMENT WITHOUT SOME ASSURANCE OR GUARANTEE THAT FREIGHT CHARGES WILL BE PAID. IN THE INSTANT CASE IT IS DOUBTFUL IF THE DESTINATION CARRIER WOULD HAVE WAIVED ITS RIGHT TO PAYMENT, SINCE THERE WOULD HAVE BEEN NO CORRESPONDING BENEFIT TO IT IN RETURN FOR THE WAIVER, AND WE THEREFORE CONCLUDE THAT THERE WAS NO OBLIGATION ON THE CONTRACTING OFFICER TO SOLICIT A WAIVER.

MR. FISHER'S LETTER ALSO MAINTAINS THAT THE CURRENCY DIFFERENTIAL SHOULD APPLY TO SHIPMENTS OF GOVERNMENT-FURNISHED PROPERTY FROM THE UNITED STATES TO THE REP PLANT SINCE THESE SHIPMENTS MOVE ON GBL'S WHICH WOULD BE PAID AT THE CANADIAN DESTINATION IN CANADIAN FUNDS. A SAVINGS OF APPROXIMATELY $51 WOULD BE EFFECTED BY THE APPLICATION OF THE DISCOUNT TO THE GOVERNMENT -FURNISHED PROPERTY SHIPMENTS. WE AGREE WITH THIS CONTENTION.

ADDITIONALLY, IN VERIFYING ALL OF THE FREIGHT RATES USED BY THE CONTRACTING OFFICER, INCLUDING SHIPMENTS TO AND FROM THE REP PLANT AND SHIPMENTS TO AND FROM SPECIALTY'S LOWELL, MASSACHUSETTS, LOCATION, SEVERAL ERRORS WERE FOUND, SOME FAVORING REP AND OTHERS FAVORING SPECIALTY. THESE ERRORS AND THE CORRECT RATES ARE SET OUT BELOW, ALONG WITH THE AMOUNT OF INCREASE OR DECREASE IN THE RESPECTIVE BIDS:

CONTRACTING

ALUMINUM ARTICLES, NOIBN OFFICER'S BASIS U.S. GAO BASIS FROM: LEXINGTON ARMY DEPOT, KENTUCKY 10,868 10,868 AS 14,000 TO: LOWELL, MASSACHUSETTS $4.10/CWT. $3.74/CWT. WEIGHT: 10,868 POUNDS $445.59 $523.60 AUTHORITY: ITEM 5380, UNIFORM CLASSIFICATION NO. 7, CLASS 77 1/2,

MINIMUM WEIGHT 14,000 PER CARLOAD AND TRUNK LINE

TARIFF E/S-1008, ICC A-946 SPECIALTY'S BID INCREASED BY $78.01 FROM: ATLANTA ARMY DEPOT, 772 772

GEORGIA TO: CAMPBELLTON, NEW BRUNSWICK $7.99/CWT. $8.93/CWT. WEIGHT: 772 POUNDS $61.68 $68.94 AUTHORITY: ITEM 5380, UNIFORM CLASSIFICATION NO. 7, CLASS 100, LESS

THAN CARLOAD. RATE TO POTOMAC YARD, VIRGINIA, $3.70

PER TRUNK LINE TARIFF E/S 1008, ICC A-946; RATE TO

CAMPBELLTON, NEW BRUNSWICK, $5.23, PER TRUNK LINE TARIFF

125-A, ICC A-721. THIS COMBINATION OF RATES PRODUCES

LOWEST CHARGE BASIS SINCE IT DOES NOT REQUIRE THE PROTECTION

OF THE MINIMUM WEIGHT OF 8,000 POUNDS. REP'S BID INCREASED BY $7.26 FROM: LEXINGTON ARMY DEPOT, 10,86810,868

KENTUCKY TO: CAMPBELLTON, NEW BRUNSWICK$7.28/CWT. $7.51/CWT. WEIGHT: 10,868 POUNDS $791.19 $816.19 AUTHORITY: ITEM 5380, UNIFORM FREIGHT CLASSIFICATION NO. 7, CLASS 100,

LESS THAN CARLOAD. RATE TO CINCINNATI, OHIO, $1.60 PER

SOUTHERN FREIGHT ASSOCIATION TARIFF S-1011-A, ICC S-100;

RATE BEYOUND TO CAMPBELLTON, NEW BRUNSWICK, PER CENTRAL

FREIGHT ASSOCIATION TARIFF 260-D, ICC 1384, $5.91. REP'S

BID INCREASED BY $25

CONTRACTING

ALUMINUM ARTICLES, NOIBN OFFICER'S BASIS U.S. GAO BASIS FROM: SACRAMENTO ARMY DEPOT,

6,950 6,950

CALIFORNIA TO: CAMPBELLTON, NEW BRUNSWICK $13.08/CWT. $11.631/2/CWT. WEIGHT: 6,950 $909.06 $808.63 AUTHORITY: RATE TO SAULT SAINTE MARIE, MICHIGAN, $7.26, PER ITEM

3200, TRANSCONTINENTAL FREIGHT BUREAU TARIFF 2-D, ICC

1723. RATE TO SAULT SAINTE MARIE, ONTARIO, $0.441/2, PER

SOO LINE TARIFF 25-J, ICC 3. RATE BEYOND TO CAMPBELLTON,

NEW BRUNSWICK, $3.93, PER CANADIAN FREIGHT ASSOCIATION

TARIFF 6-A. REP'S BID DECREASED BY $100.43

TELEPHONE SETS, NOIBN FROM: CAMPBELLTON, NEW BRUNSWICK 75,280 75,280 TO: TOBYHANNA, PENNSYLVANIA $3.37/CWT. $2.80/CWT. WEIGHT: 75,280 POUNDS $2,536.94 $2,107.84 AUTHORITY: TO ST. LEONARD, NEW BRUNSWICK, PER ITEM 30750, CANADIAN

FREIGHT CLASSIFICATION NO. 21 AND CANADIAN NATIONAL

RAILWAYS TARIFF C.M. 370, RATE $0.68, MINIMUM WEIGHT

30,000 POUNDS; BEYOND TO TOBYHANNA, PENNSYLVANIA,

$2.12, MINIMUM WEIGHT 30,000 POUNDS PER ITEM 35290,

UNIFORM FREIGHT CLASSIFICATION NO. 7 AND TRUNK LINE TARIFF

E-1009-A, ICC C-391. REP'S BID DECREASED BY $429.10 NOTE: THE BASIS OF RATES VIA ST. LEONARD MAKES USE OF A COMBINATION

OF RATES OVER A DIFFERENT ROUTE THAN THE ROUTE NAMED IN THE

THROUGH RATE PUBLISHED FOR FREIGHT MOVING FROM CAMPBELLTON

TO TOBYHANNA RATHER THAN A LOWER AGGREGATE OF INTERMEDIATE

RATES OVER THE ROUTE COVERED BY THE THROUGH RATE. THIS

ARRANGEMENT IS PERMISSIBLE BECAUSE THERE ARE NO THROUGH RATES

VIA THE ROUTE THROUGH ST. LEONARD, AND RULE 55/A) OF ICC TARIFF

CIRCULAR NO. 20 SIMPLY PROVIDES THAT A COMBINATION RATE MAY

NOT BE MADE VIA A ROUTE WHERE THERE IS A THROUGH JOINT RATE

IN EFFECT.

CONTRACTING

ALUMINUM ARTICLES, NOIBN OFFICER'S BASIS U.S. GAO BASIS FROM: CAMPBELLTON, NEW BRUNSWICK 385,310 385,310 TO: SACRAMENTO, CALIFORNIA $4.11/CWT. $4.20/CWT. WEIGHT: 385,310 POUNDS $15,836.24 $16,183.02 AUTHORITY: RATE AT CLASS 55 PER ITEM 30750, CANADIAN FREIGHT

CLASSIFICATION NO. 21, MINIMUM WEIGHT 30,000 POUNDS PER

CARLOAD TO ST. LEONARD, NEW BRUNSWICK, $0.68 PER CANADIAN

NATIONAL RAILWAYS TARIFF CM-370, CTC E-3907. RATE TO

VAN BUREN, MAINE, $0.09 PER BANGOR AND AROOSTOOK RAILROAD

COMPANY TARIFF 5001-C, ICC 3262. RATE BEYOND TO

SACRAMENTO, CALIFORNIA, $3.43, PER ITEM 9165,

TRANSCONTINENTAL FREIGHT BUREAU TARIFF 1-N, ICC 1720. REP'S BID INCREASED BY $346.78 THE NET INCREASE IN SPECIALTY'S BID IS $78.01, RESULTING IN A CORRECTED BID PRICE OF $3,335,056.88, WHILE THE NET DECREASE IN CCC'S BID, INCLUDING A $51 REDUCTION FOR THE APPROXIMATE 3 PERCENT CURRENCY DIFFERENTIAL ON GOVERNMENT-FURNISHED PROPERTY, IS $201.49, RESULTING IN A CORRECTED BID PRICE OF $3,334,800.44, $256.44 LOWER THAN THAT OF SPECIALTY. WE THEREFORE CONCLUDE THAT CCC, NOT SPECIALTY, WAS THE LOW BIDDER AND SHOULD HAVE RECEIVED THE AWARD.

WE NOTE, HOWEVER, THAT THE ERROR IN THE TRANSPORTATION EVALUATION WAS MADE BY TRANSPORTATION EXPERTS, ON WHOM THE CONTRACTING OFFICER HAD A RIGHT TO RELY AND DID RELY IN GOOD FAITH. ADDITIONALLY, THERE IS NO INDICATION THAT SPECIALTY HAD ANY KNOWLEDGE OF THE ERROR, AND IT THEREFORE IS OUR OPINION THAT THE CONTRACT IS NOT VOID AB INITIO, BUT RATHER VOIDABLE AT THE OPTION OF THE GOVERNMENT, AND THAT CANCELLATION SHOULD ONLY BE DIRECTED IF DETERMINED TO BE IN THE BEST INTERESTS OF THE GOVERNMENT. AN 02 PRIORITY DESIGNATOR HAS BEEN ASSIGNED TO THIS PROCUREMENT DUE TO ITS URGENT NEED IN SOUTHEAST ASIA. IN VIEW OF THE HIGH PRIORITY ASSIGNED TO THIS PROCUREMENT, WE FEEL THAT THE INTERESTS OF THE GOVERNMENT WOULD BEST BE SERVED BY CHOOSING THE COURSE OF ACTION IN WHICH THERE IS THE LEAST CHANCE THAT DELIVERIES UNDER THE CONTRACT WILL BE DELAYED. ALSO, IN VIEW OF OUR DETERMINATION THAT THE CONTRACTING OFFICER'S FINDING THAT SPECIALTY WAS RESPONSIBLE WAS NOT ARBITRARY, CAPRICIOUS OR WITHOUT SUBSTANTIAL BASIS IN FACT, WE THINK THAT ANY LATER DETERMINATIONS WITH REGARD TO SPECIALTY'S ABILITY TO MEET THE DELIVERY DATES SPECIFIED IN THE CONTRACT SHOULD PROPERLY BE MADE BY THE CONTRACTING OFFICER, WHO CAN TERMINATE THE CONTRACT FOR DEFAULT IF NECESSARY, RATHER THAN BY OUR OFFICE, AND THAT ABSENT AN INDICATION FROM HIM THAT SPECIALTY CANNOT DELIVER, WE MUST ASSUME THAT THE WORK UNDER THE CONTRACT IS PROCEEDING ACCORDING TO SCHEDULE. WE THEREFORE CONCLUDE THAT CANCELLATION OF THE CONTRACT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT BECAUSE THE DELAY REQUIRED TO CANCEL THE EXISTING CONTRACT AND MAKE AWARD TO CCC WOULD JEOPARDIZE TIMELY DELIVERY OF THESE URGENTLY NEEDED ITEMS.