B-158683, APR. 28, 1966

B-158683, APR. 28, 1966

TO DIRECTOR, DEFENSE SUPPLY AGENCY:

REFERENCE IS MADE TO THE LETTER DATED MARCH 17, 1966, YOUR REFERENCE DSAH -G, FROM THE ASSISTANT COUNSEL, DEFENSE SUPPLY AGENCY, IN CONNECTION WITH THE PROTEST FROM EACH GREENWICH DAIRY COMPANY AGAINST THE PROPOSED AWARDS OF CONTRACTS UNDER INVITATIONS FOR BIDS NOS. DSA-136-66-58 AND DSA-136-66- 50. THESE INVITATIONS WERE ISSUED BY THE DEFENSE SUPPLY AGENCY FOR THE FURNISHING OF MILK AND MILK PRODUCTS UNDER REQUIREMENTS CONTRACTS TO THE UNITED STATES NAVAL AIR STATION, QUONSET POINT, RHODE ISLAND AND THE UNITED STATES NAVAL SUPPLY DEPOT, NEWPORT, RHODE ISLAND.

INVITATION FOR BIDS NO. DSA-136-66-50 WAS OPENED ON FEBRUARY 28, 1966, AT THE SUBSISTENCE REGIONAL HEADQUARTERS IN NEW YORK AND INVITATION FOR BIDS NO. DSA-136-66-58 WAS OPENED ON MARCH 1, 1966, AT THE SAME PLACE. EACH OF THE CONTRACTS WILL BE FOR A SIX-MONTH PERIOD BEGINNING APRIL 1, 1966. PURSUANT TO THE EVALUATION OF BIDS, EAST GREENWICH WAS FOUND TO BE THE LAW BIDDER UNDER EACH OF THE INVITATIONS.

THE REPORT FROM THE CONTRACTING OFFICER AND THE MEMORANDUM FROM THE SUBSISTENCE REGIONAL HEADQUARTERS IN NEW YORK INDICATE THAT LATE IN THE EVENING OF MARCH 1 OR ON MARCH 2, EAST GREENWICH DAIRY WAS ADVISED BY THE FEDERAL MARKET ADMINISTRATOR, BOSTON, MASSACHUSETTS, THAT THE UNITED STATES DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C., HAD SUSPENDED PART OF THE CLASS I PRICING PROVISIONS OF THE MASSACHUSETTS RHODE ISLAND ORDER AS WELL AS OTHER AREAS. SUBSEQUENTLY, THIS SUSPENSION ORDER WAS PARTIALLY REVISED SO THAT PRICES WERE REDUCED SOMEWHAT FOR MAY AND JUNE. THE CONTRACTING OFFICER'S REPORT STATES THAT THE SUSPENSION ORDER HAD THE FOLLOWING EFFECT ON CLASS I MILK PRICES:

"THE EFFECT OF THIS SUSPENSION ORDER WAS THAT NORMAL SEASONAL DECREASES IN CLASS I PRICES WHICH WERE EXPECTED AND WHICH PROBABLY WOULD HAVE OCCURRED ABSENT SUSPENSION, WILL NOT OCCUR. THE MASSACHUSETTS AND RHODE ISLAND ORDER BEING FEDERAL ORDER NO. 1, OPERATES UNDER A FORMULA WHICH, IF THERE HAD BEEN NO SUSPENSION, WOULD PROBABLY HAVE RESULTED IN A CLASS I PRICE OF $5.74 FOR APRIL, MAY AND JUNE. BASED ON THE FORMULA AND CONSIDERING PAST EXPERIENCE, FORECASTS (EXH 11) AND THE LIKE, THE BIDDER PROJECTED A CLASS I PRICE FOR JULY OF $6.18 PER CWT; AUGUST, $6.40 PER CWT; AND SEPTEMBER, $6.62 PER CWT.

"5. WHILE THE EXACT PRICE AS SET BY THE FORMULA IS SUBJECT TO VARIOUS FACTORS, A BIDDER CAN USUALLY MAKE A REASONABLE ESTIMATE OF WHAT THE CLASS I PRICES WOULD BE FOR THE NEXT 6 MONTHS. FOR PURPOSES OF DISCUSSION THEN, EVEN THOUGH THE EXACT AMOUNT OF WHAT THE CLASS I PRICES WOULD HAVE BEEN FOR THE 6-MONTH PERIOD CANNOT BE DEFINITELY PREDICTED, WHAT THE BIDDER ALLEGES IN HIS LETTER OF 2 MARCH 1966 AS THE CLASS I PRICES USED IN HIS BID CAN BE ASSUMED TO BE TRUE. * * *"

"* * * WHILE THE MILK MARKET ADMINISTRATION DOES NOT GIVE OFFICIAL PROJECTION OF WHAT THE CLASS I PRICES WILL BE IN THE FUTURE, THEY DO FURNISH UNOFFICIAL ADVICE IN THE FORM OF A "FORECAST" TO BIDDERS WHO USE THIS AND OTHER MEANS TO PREDICT THE CLASS I PRICES (EXH 12). THE CLASS I PRICE IS THE PRICE THE HANDLER (BIDDER) MUST PAY TO THE PRODUCER (FARMER) FOR ALL MILK SOLD AS MILK WHETHER TO THE CIVILIAN TRADE OR GOVERNMENT AGENCIES. THE ACTUAL CLASS I PRICES FOR THE NEXT MONTH ARE ANNOUNCED OFFICIALLY ON THE 25TH DAY OF THE PRECEDING MONTH AND IS DONE ON A MONTH- TO-MONTH BASIS. HANDLERS (BIDDERS) HAVE NO DISCRETIONS IN THE MATTER AND THE HANDLER CANNOT CIRCUMVENT THE FEDERAL ORDER BY USE OF LONG TERM CONTRACTS. ONCE THE CLASS I PRICES ARE ESTABLISHED, ALL DEALERS MUST PAY THOSE PRICES.

"THE INCREASE IN PRICES FOR CLASS I MILK AS A RESULT OF THE SUSPENSION ORDER FROM WASHINGTON, D.C., USDA, (DEPARTMENT OF AGRICULTURE) WAS AN UNFORESEEABLE EVENT. NEITHER THE DEALER NOR THE LOCAL MILK MARKET ADMINISTRATOR HAD ADVANCE KNOWLEDGE OF OR REASON TO EXPECT THIS ACTION. THIS HEADQUARTERS IS OF THE OPINION THAT NEGLIGENCE OR FORESEEABILITY IS NOR PRESENT IN THIS CASE.'

THE COMPARISON BETWEEN CLASS I PRICES USED BY EAST GREENWICH IN CALCULATING ITS BID AND THE CLASS I PRICES RESULTING FROM THE SUSPENSION ORDER IS AS FOLLOWS:

TABLE

CLASS I PRICES CLASS I PRICES RESULTING

USED IN BID FROM SUSPENSION ORDER

APRIL $5.74 APRIL $6.18

MAY 5.74 MAY 5.96

JUNE 5.74 JUNE 5.96

JULY 6.18 JULY UNKNOWN FOR 3 MONTHS.

AUGUST 6.40 AUGUST ( HEARING BEING HELD IN

SEPTEMBER 6.62 SEPTEMBER) WASHINGTON, D.C., 10

MARCH 1966, FOR PURPOSES

OF SETTING PRICES.

THE REPORT FROM THE CONTRACTING OFFICER INDICATES THAT THE CHANGE IN THE MILK PRICES WILL AFFECT EAST GREENWICH'S BID BY MANY THOUSANDS OF DOLLARS. THE TOTAL PRICE QUOTED BY GREENWICH UNDER BOTH ITS BIDS AS INDICATED BY THE ABSTRACTS WAS $776,714.18.

PAGE NO. 1 OF EACH OF THE INVITATIONS, STANDARD FROM 33, DECEMBER 1964 EDITION, STATED:

"IN COMPLIANCE WITH THE ABOVE, THE UNDERSIGNED OFFERS AND AGREES, IF THIS BID BE ACCEPTED WITHIN .......... CALENDAR DAYS (60 DAYS UNLESS A DIFFERENT PERIOD IS INSERTED BY THE BIDDER) FROM THE DATE OF OPENING, TO FURNISH ANY OR ALL OF THE ITEMS UPON WHICH PRICES ARE QUOTED, * * *.'

EAST GREENWICH DID NOT INSERT A DIFFERENT ACCEPTANCE PERIOD IN ITS BID.

STANDARD FORM 33-A, DECEMBER 1964 EDITION, ENTITLED "BIDDING INSTRUCTIONS, TERMS AND CONDITIONS (SUPPLY CONTRACT) " WHICH CONTAINED CLAUSE 6 RELATING TO LATE BIDS AND MODIFICATIONS OR WITHDRAWALS, WAS ALSO ATTACHED TO EACH OF THE INVITATIONS.

BY TELEGRAM OF MARCH 8, 1966, EAST GREENWICH ADVISED OUR OFFICE THAT AN AWARD ON THE BASIS OF THE PRICES IN ITS BID WOULD CAUSE A GREAT FINANCIAL HARDSHIP. EAST GREENWICH SUGGESTED THAT THE INSTANT INVITATION TO BE CANCELLED AND THE PROCUREMENT READVERTISED WITH THE NEW INVITATIONS CONTAINING AN ESCALATION CLAUSE ALLOWING FOR INCREASES OR DECREASES IN PRICES IN DIRECT RELATION TO CLASS I PRICES RESULTING FROM THE SUSPENSION ORDER. THE RECORD ALSO INDICATES THAT EAST GREENWICH REQUESTED OF YOUR AGENCY THAT ITS AWARD INCLUDE PRICE RELIEF BASED ON THE DIFFERENCE BETWEEN FORECAST CLASS I PRICES USED BY EAST GREENWICH IN DETERMINING ITS BID PRICES AND REVISED PRICES RESULTING FROM THE SUSPENSION ORDER. IN EFFECT, EAST GREENWICH IS REQUESTING THAT ITS CONTRACT CONTAIN AN ESCALATION CLAUSE WHICH WAS NOT INCLUDED IN THE INVITATION. YOUR AGENCY ALSO TREATED EAST GREENWICH'S REQUEST AS AN APPLICATION TO WITHDRAW ITS BID.

HOWEVER, PENDING DETERMINATION OF ITS PROTEST, EAST GREENWICH COMMENCED PERFORMANCE UNDER BOTH CONTRACTS AS OF APRIL 1, 1966, AND IS CONTINUING TO PERFORM AS OF THIS DATE.

THE FIRST QUESTION WE WILL CONSIDER IS WHETHER AN AWARD CAN BE MADE TO EAST GREENWICH ON THE BASIS OF THE REVISED PRICES RESULTING FROM THE SUSPENSION ORDER INSTEAD OF THE PRICES USED IN EASTGREENWICH'S BID. THE ANSWER TO THIS QUESTION MUST BE IN THE NEGATIVE BECAUSE AN AWARD ON THIS BASIS WOULD BE PERMITTING EAST GREENWICH TO CHANGE ITS BID AFTER OPENING. WE HAVE CONSISTENTLY HELD THAT THE SUBMISSION OF A SECOND BID AFTER OPENING IS CONTRARY TO THE ESTABLISHED RULE GOVERNING COMPETITIVE BIDDING. SEE 34 COMP. GEN. 82; 35 ID. 33; 41 ID. 203.

IN VIEW OF THE FACT EAST GREENWICH HAS COMMENCED PERFORMANCE UNDER THE AWARDS, IT BECOMES UNNECESSARY TO RULE ON THEIR TWO OTHER CLAIMS FOR RELIEF SINCE THEY ARE NOW MOOT POINTS. THAT IS, THE SUGGESTIONS BY EAST GREENWICH THAT THE INVITATIONS BE CANCELLED AND READVERTISED OR, THAT THEY BE ALLOWED TO WITHDRAW THEIR BIDS, NOW HAVE NO APPLICABILITY TO THE DISPOSITION OF THIS CASE.

AT THE TIME THE SUSPENSION ORDER WAS PROMULGATED, EAST GREENWICH HAD THE OPPORTUNITY EITHER TO WITHDRAW ITS BIDS AND ASSUME THE RESPONSIBILITY IF IT WAS LATER DETERMINED THEY HAD NO SUCH RIGHT, OR THEY COULD HAVE COMMENCED PERFORMANCE UNDER THE AWARDS AND URGED THE INCLUSION IN THE CONTRACTS OF SOME KIND OF PRICE RELIEF, PREFERABLY IN THE FORM OF AN ESCALATION CLAUSE. EAST GREENWICH CHOSE THE LATTER. THUS, THE ONLY ISSUE THAT REMAINS TO BE SETTLED IS THE AMOUNT OF PAYMENT DUE EAST GREENWICH FOR ITS PERFORMANCE UNDER THE CONTRACTS.

WE HAVE ALREADY NOTED THE INSERTION OF AN ESCALATION CLAUSE IN THE CONTRACTS WOULD NOT BE PROPER. THE AVENUES OF WITHDRAWAL OF BIDS AND CANCELLATION OF INVITATIONS HAVE BEEN CLOSED. WE ARE, THEREFORE, LED TO THE CONCLUSION THAT EAST GREENWICH IS BOUND BY THE TERMS OF ITS BID WHICH, OF COURSE, HAVE BECOME A PART OF THE CONTRACTS AWARDED TO IT.

IT IS THE OPINION OF THIS OFFICE THAT EAST GREENWICH IS ENTITLED TO NO RELIEF AS A RESULT OF THE SUSPENSION ORDER.