B-158498, MAR. 31, 1966

B-158498: Mar 31, 1966

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THE ABOVE-REFERENCED INVITATION WAS A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS. FOUR OF WHICH SUBMITTED BIDS ON THE TROOP ISSUE REQUIREMENTS WHICH WERE OPENED ON JANUARY 4. THE LOWEST BID ON THE COMMISSARY STORE RESALE ITEMS WAS SUBMITTED BY A FIFTH BIDDER. WHICH WAS AWARDED A CONTRACT THEREFOR. DETERMINED THAT REGIS' BID WAS UNREASONABLY HIGH AND. WHEN THE SECOND SET OF BIDS WAS OPENED ON FEBRUARY 11. WAS RECEIVED BUT IT WAS HIGHER THAN ANY OF THE ORIGINAL FOUR SMALL BUSINESS BIDS. IT WOULD HAVE BEEN THE LOW BIDDER AT ITS ORIGINAL BID PRICES. WE HAVE NOT BEEN ADVISED OF ANY BELIEF ON THE PART OF THE CONTRACTING OFFICER THAT REGIS OR ANY OF THE OTHER SMALL BUSINESS BIDDERS UNDER THE ORIGINAL INVITATION WOULD REBID AT SIGNIFICANTLY LOWER PRICES.

B-158498, MAR. 31, 1966

TO REGIS MILK COMPANY:

WE REFER TO YOUR LETTER DATED FEBRUARY 11, 1966, WITH ENCLOSURES WHICH PROTESTS AGAINST THE CANCELLATION AFTER OPENING OF THOSE ITEMS COVERING THE TROOP ISSUE MILK REQUIREMENTS FOR FORT GORDON, GEORGIA, FOR THE PERIOD JANUARY 25, 1966, THROUGH JULY 24, 1966, UNDER INVITATION FOR BIDS NO. DSA 131-66-15, ISSUED BY THE DEFENSE PERSONNEL SUPPLY CENTER, DEFENSE SUPPLY AGENCY, COLUMBIA, SOUTH CAROLINA, AND THE READVERTISEMENT UNDER INVITATION FOR BIDS NO. DSA 131-66-25 OF THE UNAWARDED ITEMS.

THE ABOVE-REFERENCED INVITATION WAS A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS, FOUR OF WHICH SUBMITTED BIDS ON THE TROOP ISSUE REQUIREMENTS WHICH WERE OPENED ON JANUARY 4, 1966. THE LOWEST BID ON THE COMMISSARY STORE RESALE ITEMS WAS SUBMITTED BY A FIFTH BIDDER, ROWAN DAIRY, INCORPORATED, SALISBURY, NORTH CAROLINA, WHICH WAS AWARDED A CONTRACT THEREFOR. THE REGIS MILK COMPANY SUBMITTED THE LOWEST BID ON THE TROOP ISSUE ITEMS, BUT THE CONTRACTING OFFICER, AFTER AN ANALYSIS OF THE PRICES BID BY REGIS AS COMPARED TO PRICES PAID UNDER RECENT CONTRACTS FOR OTHER MILITARY INSTALLATIONS IN THE AREA AND PRIOR CONTRACTS FOR FORT GORDON, DETERMINED THAT REGIS' BID WAS UNREASONABLY HIGH AND, THEREFORE, SHOULD BE REJECTED IN ACCORDANCE WITH THE ARMED SERVICES PROCUREMENT REGULATION (ASFR) 2-404.1 (B) (VI). THE CONTRACTING OFFICER THEREAFTER CANCELLED THE INVITATION AS TO THESE ITEMS UNDER ASPR 1-706.3A AND REISSUED INVITATION FOR BIDS NO. DSA 131-66-25, DATED JANUARY 14, 1966, ON AN UNRESTRICTED BASIS. WHEN THE SECOND SET OF BIDS WAS OPENED ON FEBRUARY 11, 1966, ONLY THREE OF THE ORIGINAL BIDDERS REBID, REGIS AND TWO OTHERS. THE TWO OTHERS BID THE SAME PRICES AS IN THEIR ORIGINAL BIDS. ONE OTHER BID, FROM A LARGE BUSINESS, WAS RECEIVED BUT IT WAS HIGHER THAN ANY OF THE ORIGINAL FOUR SMALL BUSINESS BIDS. IN ITS REBID REGIS LOWERED ITS PRICES ABOUT THREE CENTS PER GALLON, ALTHOUGH, AS INDICATED ABOVE, IT WOULD HAVE BEEN THE LOW BIDDER AT ITS ORIGINAL BID PRICES.

WE HAVE NOT BEEN ADVISED OF ANY BELIEF ON THE PART OF THE CONTRACTING OFFICER THAT REGIS OR ANY OF THE OTHER SMALL BUSINESS BIDDERS UNDER THE ORIGINAL INVITATION WOULD REBID AT SIGNIFICANTLY LOWER PRICES, NOR THAT ADDITIONAL SMALL BUSINESS FIRMS COULD BE EXPECTED TO BID ON A SECOND ADVERTISEMENT. IT APPEARS, RATHER, TO HAVE BEEN THE CONTRACTING OFFICER'S EXPECTATION THAT PERMITTING LARGE BUSINESS TO BID ON THE READVERTISEMENT WOULD RESULT IN SIGNIFICANTLY LOWER PRICES THAN THOSE WHICH HAD BEEN QUOTED BY SMALL BUSINESS. REGIS ALLEGED THE PRICES IT BID ON ITEMS 3, 5, AND 6 WERE SUBMITTED BY MISTAKE, BUT INASMUCH AS ADEQUATE EVIDENCE OF MISTAKE COULD NOT BE DEVELOPED, THE CONTRACTING OFFICER DECIDED, IN ACCORDANCE WITH ASPR 2 406.3 (A) (4), THAT THE BID SHOULD BE CONSIDERED FOR AWARD IN THE FORM SUBMITTED. ACCORDINGLY, SINCE FURTHER DELAY IN CONSUMMATING THE PROCUREMENT WOULD UNDULY DELAY PERFORMANCE OF THE CONTRACT, REGIS' BID IN RESPONSE TO IFB NO. DSA 131-66-25 WAS ACCEPTED BY NOTICE OF AWARD MAILED TO REGIS ON FEBRUARY 18, 1966.

SPECIFICALLY, REGIS REQUESTS THIS OFFICE TO REINSTATE AS THE CONTRACT PRICES THE PRICES IT BID UNDER IFB NO. DSA 131-66-15. REGIS AVERS THOSE PRICES WERE NOT IN FACT UNREASONABLE; THAT THE CONTRACTING OFFICER ABUSED HIS DISCRETION IN SO DETERMINING THEM TO BE UNREASONABLE; AND THAT THE CANCELLATION OF IFB NO. DSA 131-66-15 WAS, THEREFORE, IMPROPER.

WE ARE FACED AT THE OUTSET WITH THE QUESTION WHETHER REGIS' REQUEST FOR HIGHER PRICES UNDER THE CONTRACT AWARDED TO IT ON FEBRUARY 18, 1966, COULD BE GRANTED EVEN IF WE SHOULD CONCLUDE THAT THERE WERE NO COGENT OR COMPELLING REASONS FOR CANCELLATION OF THE ORIGINAL ADVERTISEMENT. IT IS A WELL-RECOGNIZED PRINCIPLE IN FEDERAL PROCUREMENT THAT RIGHTS VESTED IN THE UNITED STATES UNDER CONTRACTS MAY NOT BE DIMINISHED WITHOUT THE RECEIPT OF LEGAL CONSIDERATION IN RETURN. IF THE AWARD TO REGIS RESULTED IN A LEGALLY VALID AND BINDING CONTRACT, THE UNITED STATES IS ENTITLED TO MILK AT THE PRICES LISTED THEREIN. THE REJECTION OF REGIS' PRIOR BID, EVEN IF IMPROPER, CAN HARDLY BE HELD TO BE LEGAL CONSIDERATION FOR AN INCREASE IN PRICES UNDER THE EXISTING CONTRACT. ANOTHER PRINCIPLE OF FEDERAL PROCUREMENT IS THAT REJECTION OF A BID GIVES THE REJECTED BIDDER NO LEGALLY ENFORCEABLE RIGHTS. THE FACT REMAINS THAT REGIS WAS UNDER NO OBLIGATION TO SUBMIT A SECOND BID. IT IS INDEED IRONIC THAT REGIS WELL MIGHT HAVE RECEIVED A CONTRACT AT ITS ORIGINAL PRICES IF IT HAD EITHER REFUSED TO REBID OR REBID THE SAME PRICES. REGIS' CONTENTION IS THAT IT FELT COMPELLED TO REDUCE ITS PRICES RATHER THAN LOSE THE CONTRACT. INFORMALLY BUT FORCEFULLY PUT BY ITS PRESIDENT, IT FELT THAT THE SECOND BID OPENING WAS A GUN AT ITS HEAD ALTHOUGH IT DID NOT KNOW THE GUN WAS NOT LOADED. WE READILY APPRECIATE THE POSITION IN WHICH REGIS FELT ITSELF PLACED. IT IS FOR THIS VERY REASON THAT THE COURT OF CLAIMS SAID IN MASSMAN.

"TO HAVE A SET OF BIDS DISCARDED AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITOR'S PRICE IS A SERIOUS MATTER, AND IT SHOULD NOT BE PERMITTED EXCEPT FOR COGENT REASONS.'

HOWEVER, NEITHER MASSMAN NOR ANY OTHER DECISION WE KNOW OF STANDS FOR THE PROPOSITION THAT IMPROPER REJECTION OF A SET OF BIDS CONSTITUTES SUCH ECONOMIC COERCION OR DURESS AS TO AFFECT THE VALIDITY OF A LOWER REBID BY THE ORIGINAL LOW BIDDER. WE FEEL COMPELLED TO HOLD THAT REGIS' SECOND BID WAS A VOLUNTARY AND VALID OFFER, ACCEPTANCE OF WHICH CREATED A VALID AND ENFORCEABLE CONTRACT. WE THEREFORE FIND NO LEGAL BASIS WHICH WOULD JUSTIFY INCREASING THE EXISTING CONTRACT PRICES.

WHILE WE BELIEVE THERE IS CONSIDERABLE DOUBT AS TO THE COGENCY OF THE REASONS FOR REJECTION OF THE FIRST SET OF BIDS, WE ARE INCLINED TO CONCLUDE THAT THE CONTRACTING OFFICER'S ACTION WAS NOT ARBITRARY OR CAPRICIOUS. HOWEVER, IN VIEW OF WHAT HAS BEEN SAID ABOVE, IT IS NOT NECESSARY TO DECIDE THIS ASPECT OF THE CASE.

IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE MUST DENY YOUR PROTEST AND YOUR REQUEST FOR ADJUSTMENTS IN YOUR CONTRACT PRICES TO THE HIGHER PRICES YOU ORIGINALLY BID.