B-158595, MAY 26, 1966

B-158595: May 26, 1966

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ESQUIRE: REFERENCE IS MADE YOUR LETTER OF FEBRUARY 23. PRESENTING A CLAIM FOR BID PREPARATION COSTS AND LOSS OF ANTICIPATED PROFIT BECAUSE DEPARTMENT OF THE NAVY CONTRACT NBY-57675 FOR THE CONSTRUCTION OF TWO BARRACKS BUILDINGS AND ADDITIONAL CONSTRUCTION WORK OUTSIDE THE BUILDINGS WAS AWARDED TO OBERG CONSTRUCTION CORPORATION INSTEAD OF TO YOUR CLIENT. UNLESS THE SECRETARY OF DEFENSE DETERMINES THAT SUCH LIMITATION IS IMPRACTICAL. THE SPECIAL PROVISIONS OF THE INVITATION PROVIDE: "1A.20.2 THE CAPACITY OF THE BARRACKS IS 502 MEN PER BARRACKS. TOTAL FOR TWO BARRACKS IS 1004 MEN.'. THE TOTAL STATUTORY LIMITS IS $1. BIDDERS ARE ADVISED THAT CURRENT LAWS SET A COST LIMITATION FOR BARRACKS.

B-158595, MAY 26, 1966

TO BENJAMIN D. SHARE, ESQUIRE:

REFERENCE IS MADE YOUR LETTER OF FEBRUARY 23, 1966, PRESENTING A CLAIM FOR BID PREPARATION COSTS AND LOSS OF ANTICIPATED PROFIT BECAUSE DEPARTMENT OF THE NAVY CONTRACT NBY-57675 FOR THE CONSTRUCTION OF TWO BARRACKS BUILDINGS AND ADDITIONAL CONSTRUCTION WORK OUTSIDE THE BUILDINGS WAS AWARDED TO OBERG CONSTRUCTION CORPORATION INSTEAD OF TO YOUR CLIENT, FRED A. ARNOLD, INC.

SECTION 607 OF THE MILITARY CONSTRUCTION AUTHORIZATION ACT OF 1965, 78 STAT. 345, 364, PROVIDES THAT THE COST OF CONSTRUCTION OF PERMANENT BARRACKS SHALL NOT EXCEED $1,850 PER MAN, UNLESS THE SECRETARY OF DEFENSE DETERMINES THAT SUCH LIMITATION IS IMPRACTICAL. WITH RESPECT TO THE CAPACITY OF THE BARRACKS, THE SPECIAL PROVISIONS OF THE INVITATION PROVIDE:

"1A.20.2 THE CAPACITY OF THE BARRACKS IS 502 MEN PER BARRACKS, TOTAL FOR TWO BARRACKS IS 1004 MEN.'

ON THE BASIS OF THE CAPACITY OF THE BARRACKS AND THE STATUTORY DOLLAR LIMIT PER MAN, THE TOTAL STATUTORY LIMITS IS $1,857,400. HOWEVER, WITH REGARD TO THE COST LIMITATION, THE SPECIAL PROVISIONS OF THE INVITATION STATE:

"1A.20 STATUTORY COST LIMITATIONS. BIDDERS ARE ADVISED THAT CURRENT LAWS SET A COST LIMITATION FOR BARRACKS. THE COST LIMIT IS $1,665.00 PER MAN, FOR ALL WORK TO THE FIVE FOOT LINE. THE TERM "TO THE-FIVE-FOOT-LINE" IS DEFINED AS INCLUDING CONSTRUCTION ENCOMPASSED WITHIN A THEORETICAL LINE FIVE FEET FROM THE FACE OF EXTERIOR WALLS, INCLUDING ALL PERMANENTLY BUILT -IN EQUIPMENT ATTACHED TO THE STRUCTURE AS REQUIRED BY THE SPECIFICATION, AND EXCLUDING THE COST OF PILING AS SPECIFIED IN SECTION 7 "PILING" OF THE SPECIFICATION.

"1A.20.1 PRICE BREAKDOWN. BIDDERS ARE REQUIRED TO BREAK DOWN THEIR BID FOR EACH BID ITEM TO INDICATE THE AMOUNT BID FOR CONSTRUCTION SUBJECT TO STATUTORY COST LIMITATIONS. THE BREAKDOWN SHALL BE SUBMITTED WITH THE BID ON APPENDIX "A" ATTACHED TO THE BID (STANDARD FORM 21) FOR THIS PURPOSE.'

THUS, THE COST LIMITATION PROVIDED IN THE INVITATION UP TO THE FIVE FOOT LINE IS $1,671,660 (1,004 TIMES $1,665).

ON APPENDIX "A" OBERG CONSTRUCTION CORPORATION BID AS FOLLOWS:

CHART

"ALL COSTS OF THE BARRACKS IN THE BID ITEM 1

FIVE FOOT LINE (DETERMINED AS OUTLINED

IN SECTION 1A OF THE SPECIFICATION),

EXCLUDING SPECIAL FOUNDATIONS (PILINGS) ......... $1,739,000

"ALL OTHER WORK ................................ $ 204,810

"TOTAL AMOUNT $1,943,810

"CERTIFICATION

"THE UNDERSIGNED BIDDER HEREBY CERTIFIES THAT EACH PRICE STATED ABOVE INCLUDES AN APPROXIMATE APPORTIONMENT OF ALL ESTIMATED APPLICABLE COSTS, DIRECT AND INDIRECT, AS WELL AS OVERHEAD AND PROFIT.'

ON THE BASIS OF THE TOTAL BID, OBERG WAS THE LOWEST BIDDER. YOUR CLIENT WAS THE SECOND LOW BIDDER WITH A TOTAL BID OF $1,956,200 MADE UP OF $1,669,000 FOR THE FIRST LINE ITEM ABOVE AND $287,200 FOR THE SECOND LINE ITEM. THE THIRD LOW BIDDER BID A TOTAL PRICE OF $2,026,919 MADE UP OF $1,640,660 FOR THE FIRST LINE ITEM AND $386,259 FOR THE SECOND LINE ITEM. THE ADMINISTRATIVE OFFICE HAS ADVISED THAT BECAUSE THE COST BREAKDOWNS SUBMITTED BY YOUR CLIENT AND THE THIRD LOW BIDDER WERE WITHIN A RANGE OF 5 PERCENT FROM THE LOW BID AND THE GOVERNMENT ESTIMATE OF $1,693,000, MADE UP OF $1,463,958 FOR BARRACKS AND $229,042 FOR OTHER WORK, THE BREAKDOWN SUBMITTED BY OBERG WAS CONSIDERED TO BE IN ERROR. FURTHER, THE DISTRIBUTION OF COSTS BETWEEN THE AMOUNTS SHOWN FOR CONSTRUCTION OF THE BARRACKS AND THE OTHER WORK WAS CONSIDERED AN INTERNAL BREAKDOWN WHICH DOES NOT AFFECT THE LUMP SUM BID PRICE. THEREFORE, THE INFORMATION FURNISHED BY APPENDIX "A" WAS NOT CONSIDERED A PART OF THE BID. OBERG WAS THEREFORE PERMITTED TO ADJUST THE FIGURES ON THE BREAKDOWN. IT SUBMITTED A NEW BREAKDOWN SHOWING THE BARRACKS COST OF $1,665,510 AND THE OTHER WORK AT $278,300 AND AN AWARD WAS MADE TO IT FOR THE WORK ON JUNE 30, 1965. IS OUR UNDERSTANDING THAT AS OF MARCH 31, 1966, OBERG HAD COMPLETED MORE THAN 60 PERCENT OF THE WORK.

AT THE OUTSET IT WILL BE NOTED THAT THE INVITATION FOR BIDS REQUIRED BIDDERS TO QUOTE UNDER ITEM NO. 1 A LUMP-SUM PRICE FOR THE ENTIRE WORK. ALSO, THERE WAS NO PROVISION UNDER ITEM NO. 1, OR ELSEWHERE, INDICATING THAT THE BREAKDOWN INFORMATION PERTAINING TO COSTS LIMITATION WOULD AFFECT THE EVALUATION OF THE BID. NEITHER DO WE FEEL THAT THE INVITATION TERMS, READ AS A WHOLE, CAN REASONABLY BE CONSTRUED TO REQUIRE A BIDDER TO STRICTLY ADHERE, IN ITS COST BREAKDOWN, TO THE COST LIMITATION STIPULATED IN PARAGRAPH 1A 20 OF THE SPECIAL PROVISIONS OF THE INVITATION, IN ORDER TO BE ELIGIBLE FOR CONSIDERATION FOR AWARD. THE DEPARTMENTS STATES, AND WE SEE NO REASON TO DISAGREE, THAT THE PURPOSE OF THE BREAKDOWN OF COSTS WAS FOR THE CONVENIENCE OF THE CONTRACTING OFFICE IN DETERMINING WHETHER THE COSTS OF THE ENTIRE PROJECT WERE PROPERLY ALLOCATED. AS INDICATED BY THE CERTIFICATION ON APPENDIX "A," EACH OF THE PRICES SHOWN ON THE COST BREAKDOWN INCLUDED AN APPROXIMATE APPORTIONMENT OF ALL ESTIMATED APPLICABLE COSTS, DIRECT AND INDIRECT, AS WELL AS OVERHEAD AND PROFIT. SINCE THE PRICES SHOWN IN OBERG'S COST BREAKDOWN WERE APPROXIMATE, WE ARE OF THE OPINION THAT THEY WERE SUBJECT TO ADJUSTMENT IN CIRCUMSTANCES WHICH INDICATE THAT THE COSTS WERE NOT PROPERLY ALLOCATED.

THE COST LIMITATION IS, AT BEST, AN ESTIMATED LIMITATION WHICH IS THE RESULT IN PART OF A DEDUCTION FROM THE STATUTORY LIMITATION OF AN ESTIMATED AMOUNT TO COVER CONSTRUCTION CONTINGENCIES WHICH MAY OR MAY NOT OCCUR. THE COST LIMITATION IN THIS CASE THEREFORE COULD POSSIBLY HAVE BEEN HIGHER ABSENT THE PROVISION FOR SUCH A LARGE CONSTRUCTION CONTINGENCY (10 PERCENT). IN THAT SENSE THE COST LIMITATION IN THE INVITATION IS NOT DEFINITE NOR THE HIGHEST LIMITATION POSSIBLE ON THE PROJECT.

UNDER THESE CIRCUMSTANCES, WE BELIEVE THAT A TECHNICAL CONCLUSION TO PENALIZE OBERG BECAUSE IT HAD FAILED TO PROPERLY ALLOCATE ITS COSTS IN ITS COST BREAKDOWN WOULD NOT BE WARRANTED. IN THAT CONNECTION, IT IS NOTED FROM THE ABSTRACT THAT, EXCEPT FOR YOUR CLIENT, ALL OF THOSE BIDDERS WHO DID NOT EXCEED THE ADMINISTRATIVE COST LIMITATION FOR THE BARRACKS WITHIN THE FIVE-FOOT LINE LISTED UNREALISTIC AMOUNTS FOR "OTHER WORK," WHICH TENDS TO SHOW THAT EACH OF THESE BIDDERS PURPOSELY RAISED THE AMOUNT FOR "OTHER WORK" SO THAT THE AMOUNT SHOWN FOR THE WORK WITHIN THE FIVE-FOOT LINE WOULD NOT EXCEED THE ADMINISTRATIVE COST LIMITATION.

ACCORDINGLY, WE WOULD NOT BE JUSTIFIED IN CONCLUDING THAT THE AWARD MADE TO THE OBERG CONSTRUCTION CORPORATION WAS IMPROPER.

IN REGARD TO YOUR CLIENT'S CLAIM FOR REIMBURSEMENT OF BIDDING EXPENSES AND LOSS OF ANTICIPATED PROFITS, WE INVITE YOUR ATTENTION TO HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 135 CT.CL. 63, IN WHICH AN UNSUCCESSFUL BIDDER CLAIMED BOTH LOSS OF PROFITS AND COSTS INCURRED IN PREPARING ITS BID. AT PAGE 71, THE COURT HELD:

"RECOVERY CAN BE HAD IN ONLY THOSE CASES WHERE IT CAN BE SHOWN BY CLEAR AND CONVINCING PROOF THAT THERE HAS BEEN A FRAUDULENT INDUCEMENT FOR BIDS, WITH THE INTENTION, BEFORE THE BIDS WERE INVITED OR LATER CONCEIVED, TO DISREGARD THEM ALL EXCEPT THE ONES FROM BIDDERS TO ONE OF WHOM IT WAS INTENDED TO LET THE CONTRACT, WHETHER HE WAS THE LOWEST RESPONSIBLE BIDDER OR NOT. IN OTHER WORDS, IT MUST BE SHOWN THAT BIDS WERE NOT INVITED IN GOOD FAITH, BUT AS A PRETENSE TO CONCEAL THE PURPOSE TO LET THE CONTRACT TO SOME FAVORED BIDDER, OR TO ONE OF A GROUP OF PREFERRED BIDDERS, AND WITH THE INTENT TO WILFULLY, CAPRICIOUSLY, AND ARBITRARILY DISREGARD THE OBLIGATION TO LET THE CONTRACT TO HIM WHOSE BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.'

THE COURT ALSO HELD THAT THE UNSUCCESSFUL BIDDER WAS NOT ENTITLED TO RECOVER ANTICIPATED PROFITS BECAUSE IT HAD NO CONTRACT. SEE, ALSO, ROBERT F. SIMMONS AND ASSOCIATES V. UNITED STATES, NO. 68-64, DECIDED BY THE COURT OF CLAIMS MAY 13, 1966.

IN VIEW OF THE TOTAL LACK OF PROOF SUCH AS IS REQUIRED BY THE HEYER CASE, AND BECAUSE WE ARE AWARE OF NO DECISION, EITHER BY THIS OFFICE OR THE COURTS, TO THE CONTRARY, WE MUST CONCLUDE THAT YOUR CLIENT IS NOT ENTITLED TO BE PAID ANY AMOUNT REPRESENTING BIDDING EXPENSES OR ANTICIPATED PROFITS.

ACCORDINGLY, FOR THE REASONS SET OUT ABOVE, YOUR CLIENT'S PROTEST AND CLAIM ARE DENIED.