B-159663, AUG. 15, 1966

B-159663: Aug 15, 1966

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ESQUIRE: FURTHER REFERENCE IS MADE TO YOUR LETTER OF JULY 8. RECEIPT IS ALSO ACKNOWLEDGED OF YOUR LETTER OF JULY 14. BIDS WERE REQUESTED FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS. PROSPECTIVE BIDDERS WERE ADVISED THAT THE ESTIMATED TOTAL COST OF THE TURNBUCKLES WAS $477. 586 AND THAT BIDS ON ITEM 54 WERE ACCEPTABLE IN INCREMENTS OF 500 EACH. BIDDERS WERE ADVISED THAT "ALL OR NONE" BIDS WERE ACCEPTABLE. TWELVE OTHER BIDS WERE RECEIVED WITH OFFERS OF PRICES RANGING FROM $1.65 TO $0.15 EACH FOR VARYING INCREMENTS. IT IS REPORTED THAT PRIOR TO THE BID OPENING. A FAIR RETURN APPRAISAL OF $1.20 EACH WAS ESTABLISHED BY THE SALES CONTRACTING OFFICER FOR THE TURNBUCKLES COVERED BY ITEM 54.

B-159663, AUG. 15, 1966

TO BENJAMIN HELD, ESQUIRE:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JULY 8, 1966, PROTESTING, ON BEHALF OF THE WEST COAST WIRE ROPE AND RIGGING, INC., HEREINAFTER REFERRED TO AS WEST COAST, THE ACTION OF THE DEFENSE SUPPLY AGENCY IN REJECTING THAT CORPORATION'S "ALL OR NONE" BID ON ITEM 54 OF SALES INVITATION FOR BIDS NO. 44-6109, ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, NAVAL SUPPLY CENTER, OAKLAND, CALIFORNIA. RECEIPT IS ALSO ACKNOWLEDGED OF YOUR LETTER OF JULY 14, 1966, WITH ENCLOSURES.

BY THE REFERRED-TO INVITATION, BIDS WERE REQUESTED FOR THE PURCHASE FROM THE GOVERNMENT OF VARIOUS ITEMS, INCLUDING ITEM 54 DESCRIBED AS 77,030 TURNBUCKLES IN APPARENT GOOD CONDITION. PROSPECTIVE BIDDERS WERE ADVISED THAT THE ESTIMATED TOTAL COST OF THE TURNBUCKLES WAS $477,586 AND THAT BIDS ON ITEM 54 WERE ACCEPTABLE IN INCREMENTS OF 500 EACH. ALSO, BIDDERS WERE ADVISED THAT "ALL OR NONE" BIDS WERE ACCEPTABLE. IN RESPONSE WEST COAST SUBMITTED AN "ALL OR NONE" BID FOR THE ENTIRE QUANTITY OF ITEM 54 AT A UNIT PRICE BID OF $0.612 FOR A TOTAL PRICE OF $47,142.36. TWELVE OTHER BIDS WERE RECEIVED WITH OFFERS OF PRICES RANGING FROM $1.65 TO $0.15 EACH FOR VARYING INCREMENTS.

IT IS REPORTED THAT PRIOR TO THE BID OPENING, A FAIR RETURN APPRAISAL OF $1.20 EACH WAS ESTABLISHED BY THE SALES CONTRACTING OFFICER FOR THE TURNBUCKLES COVERED BY ITEM 54; THAT THE PRICES RECEIVED ON PRIOR SALES OF THE SAME TYPE OF PROPERTY RANGED FROM $2.33 TO $1.417 EACH FOR A QUANTITY OF 4,991; AND THAT SUBSEQUENT TO THE BID OPENING, THE SALES CONTRACTING OFFICER LOWERED HIS FAIR RETURN APPRAISAL BUT DETERMINED THAT A BID PRICE OF LESS THAN $0.75 EACH DID NOT REPRESENT A FAIR RETURN TO THE GOVERNMENT. THEREFORE, ALL BIDS WHICH WERE LESS THAN THIS AMOUNT WERE REJECTED. IN ADDITION TO THE BID OF YOUR CLIENT, THREE OTHER BIDS IN THE AMOUNTS OF $0.70, $0.68 AND $0.6231, ALL OF WHICH WERE HIGHER THAN THAT OF YOUR CLIENT, WERE ALSO REJECTED. AWARDS IN QUANTITIES TOTALING 30,000 UNITS WERE THEN MADE TO VARIOUS BIDDERS. THE AGGREGATE TOTAL OF THE VARIOUS AWARDS WAS $31,250. IT ALSO WAS DETERMINED THAT THE REMAINING QUANTITY OF 47,030 SHOULD BE READVERTISED IN A FUTURE INVITATION.

YOU CONTEND THAT THE ACTION OF THE SALES CONTRACTING OFFICER IN REJECTING THE "ALL OR NONE" BID OF WEST COAST WAS ARBITRARY, CAPRICIOUS AND WILLFUL AND THAT IT WOULD HAVE BEEN IN THE BEST INTEREST OF THE GOVERNMENT TO AWARD THE ENTIRE QUANTITY TO WEST COAST AT ITS UNIT BID PRICE OF $0.612, RATHER THAN TO AWARD ONLY A PORTION OF THE ITEM TO OTHER BIDDERS AT HIGHER PRICES AND THEN TO READVERTISE THE UNAWARDED QUANTITY. YOU STATE THAT THE FAILURE OF THE CONTRACTING OFFICER TO AWARD THE ENTIRE QUANTITY TO WEST COAST DEPRIVED THE GOVERNMENT OF THE PRESENT USE OF APPROXIMATELY $15,000 AND THE USE OF THE STORAGE SPACE OCCUPIED BY THE REMAINING QUANTITY. YOU REQUEST THAT THE AWARDS MADE TO THE OTHER BIDDERS BE SET ASIDE OR, IN THE ALTERNATIVE, IN THE EVENT SUCH BIDDERS HAVE ALREADY ACCEPTED DELIVERY OF THE TURNBUCKLES, THAT THE UNAWARDED QUANTITY OF 47,030 BE AWARDED TO WEST COAST AT THE UNIT PRICE BID BY THAT FIRM, OR UNDER SUCH TERMS AND CONDITIONS AS WOULD BE EQUITABLE FOR BOTH THE GOVERNMENT AND YOUR CLIENT.

UNDER PARAGRAPH 3 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE SALES INVITATION THE GOVERNMENT RESERVED THE RIGHT TO REJECT ANY OR ALL BIDS. EVEN IN THE ABSENCE OF SUCH RESERVATION, IT HAS BEEN HELD THAT NO BIDDER ACQUIRES AN ABSOLUTE RIGHT TO AN AWARD SIMPLY BECAUSE HE HAS SUBMITTED THE HIGHEST OR LOWEST BID AS THE CASE MAY BE. RATHER, THE PUBLIC INTEREST IS FIRST FOR CONSIDERATION. SEE O-BRIEN V. CARNEY, 6 F.SUPP. 761; 26 COMP. GEN. 49; 17 ID. 554, 559. WE HAVE HELD THAT A CONTRACTING OFFICER HAS THE RIGHT AND THE DUTY TO REJECT ANY BID WHICH IS NOT CONSISTENT WITH THE GOVERNMENT'S INTEREST. SEE B 147837 DATED FEBRUARY 23, 1962.

MANIFESTLY, IT WAS IN THE PUBLIC INTEREST THAT THE TURNBUCKLES BRING AS HIGH A PRICE AS POSSIBLE CONSISTENT WITH FAIR DEALING. BASED UPON YOUR CLIENT'S UNIT BID PRICE OF $0.612 FOR ITEM 54, THE TOTAL AMOUNT OF ITS BID FOR A QUANTITY OF 77,030 WAS $47,142.36. THE RECORD INDICATES THAT FOR A QUANTITY OF 30,000--- APPROXIMATELY 38 PERCENT OF THE TOTAL QUANTITY OFFERED FOR SALE--- THE GOVERNMENT RECEIVED $31,250 -- APPROXIMATELY 66 PERCENT OF THE AMOUNT YOUR CLIENT OFFERED FOR A QUANTITY OF 77,030 TURNBUCKLES. IT IS EVIDENT FROM THE FOREGOING THAT THE ACTION OF THE CONTRACTING OFFICER IN MAKING MULTIPLE AWARDS ON ITEM 54, INSTEAD OF MAKING ONE AWARD FOR THE TOTAL QUANTITY TO YOUR CLIENT, WAS IN THE INTEREST OF THE GOVERNMENT AND THAT SUCH ACTION WAS NOT ARBITRARY AND CAPRICIOUS, AS ALLEGED BY YOU.

THE NEXT QUESTION FOR CONSIDERATION IS WHETHER IT WOULD BE PROPER TO AWARD THE UNAWARDED PORTION TO YOUR CLIENT ON THE BASIS OF ITS UNIT BID PRICE OF $0.612. THE INVITATION CONTEMPLATED AWARDS AFTER ADVERTISING TO THOSE RESPONSIBLE BIDDERS OFFERING THE HIGHEST PRICE FOR THE ITEMS IN QUESTION. DISPOSAL BY THAT MODE, WITH CERTAIN EXCEPTIONS NOT HERE RELEVANT, IS REQUIRED BY SECTION 203 (E) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 40 U.S.C. 484. UNDER FORMALLY ADVERTISED SALES, AS WELL AS PROCUREMENTS, THE BID CONSTITUTES AN OFFER WHICH, UPON PROPER ACCEPTANCE, RIPENS INTO A CONTRACT. IT IS FUNDAMENTAL THAT AN ACCEPTANCE TO BE VALID MUST CONFORM IN EVERY MATERIAL RESPECT TO THE TERMS OF THE OFFER, OTHERWISE IT AMOUNTS ONLY TO A COUNTEROFFER. YOUR CLIENT'S "ALL OR NONE" OFFER, REASONABLY INTERPRETED, COULD UPON ACCEPTANCE RESULT IN A BINDING CONTRACT ONLY IF THE ENTIRE QUANTITY OF TURNBUCKLES, 77,030, WAS INCLUDED. IN OTHER WORDS, UNDER THE BASIC RULE OF LAW REFERRED TO ABOVE, THE SALES OFFICE COULD REQUIRE YOUR CLIENT TO PERFORM IN ACCORDANCE WITH ITS "ALL OR NONE" OFFER ONLY IF THE ENTIRE QUANTITY OF 77,030 TURNBUCKLES COVERED WITHIN THAT OFFER WAS AWARDED TO IT. SINCE THE AWARD OF 30,000 OF THE 77,030 UNITS TO OTHER BIDDERS MADE SUCH AN AWARD MANIFESTLY IMPOSSIBLE, AN AWARD OF THE REMAINING QUANTITY OF 47,030 UNITS UNDER YOUR CLIENT'S "ALL OR NONE" BID WOULD AMOUNT ONLY TO A COUNTEROFFER WHICH YOUR CLIENT COULD ELECT AT ITS OPTION TO ACCEPT OR DECLINE. SUCH AN OPTION, HOWEVER, IS ENTIRELY INCONSISTENT WITH COMPETITIVE REQUIREMENTS AND CANNOT BE PERMITTED IF THE INTEGRITY OF THE SYSTEM IS TO BE MAINTAINED.

IN ACCORDANCE WITH THE FOREGOING, ANY AWARD TO YOUR CLIENT ON THE BASIS YOU URGE WOULD BE INVALID AND IN CONTRAVENTION OF THE STATUTORY PROVISION REQUIRING THE EMPLOYMENT OF COMPETITIVE BID PROCEDURES. SEE 31 COMP. GEN. 660; 38 ID. 612; 40 ID. 668.

IN YOUR LETTER OF JULY 14, 1966, YOU STATE THAT AN ABSTRACT OF THE BIDS RECEIVED ON ITEM 54, WHICH YOUR CLIENT OBTAINED FROM THE SALES OFFICE, INDICATES THAT 19,000 OF THE UNITS COVERED BY THAT ITEM HAD BEEN AWARDED TO THE BIDDERS LISTED THEREON AND THAT AN AWARD FOR A PARTIAL QUANTITY WAS PENDING. YOU STATE FURTHER THAT YOU HAVE BEEN INFORMED THAT THIS PENDING AWARD INVOLVED 11 INCREMENT BIDS OF THE D. W. SALES COMPANY ON 11,000 OF THE UNITS COVERED BY ITEM 54; THAT THE TOTAL AMOUNT OF THE PROPOSED AWARD IS $13,240; AND THAT IT IS YOUR OPINION THERE WAS AN IRREGULARITY IN THE BID OF D. W. SALES COMPANY WHICH, YOU STATE, THE DEFENSE SURPLUS SALES OFFICE INTENDS TO ACCEPT AS A PROPER BID. IN THAT CONNECTION, THE DEFENSE SUPPLY AGENCY REPORTS THAT THE D. W. SALES COMPANY ALLEGED THAT AN ERROR HAD BEEN MADE IN ITS BID ON ITEM 54 WITH RESPECT TO 11 INCREMENT BIDS; THAT THE COMPANY SUBMITTED UNIT PRICES ON VARIOUS INCREMENTS OFFERED VARYING FROM $1.29 EACH TO $1.11 EACH IN WHICH THE EXTENDED PRICE SHOWED AN OBVIOUS CLERICAL ERROR. THE AGENCY STATES FURTHER THAT SINCE THE COMPANY VERIFIED ITS UNIT PRICES AND REQUESTED CORRECTION OF THE EXTENDED TOTALS, AND SINCE THE NATURE OF THE ERROR WAS REASONABLY APPARENT FROM THE BID ITSELF, CORRECTION WAS AUTHORIZED.

WE BELIEVE THAT THE ACTION OF THE CONTRACTING OFFICER IN CORRECTING THE BID OF THE D. W. SALES COMPANY WAS PROPER ON THE BASIS OF THE RECORD BEFORE OUR OFFICE. THIS IS A SITUATION CONTEMPLATED BY PARAGRAPH 2-406.2 OF THE ARMED SERVICES PROCUREMENT REGULATION AND PARAGRAPH 1-2.406-2 OF THE FEDERAL PROCUREMENT REGULATIONS, WHEREIN CORRECTION OF CLERICAL MISTAKES APPARENT ON THE FACE OF THE BID IS AUTHORIZED UPON VERIFICATION BY THE BIDDER OF THE BID ACTUALLY INTENDED. THE ACTION OF THE CONTRACTING OFFICER IN CORRECTING THE BID OF D. W. SALES COMPANY IS ALSO IN ACCORD WITH A PROVISION OF THE INVITATION WHICH STATES THAT "IN CASE OF ERROR IN EXTENSION OF PRICES, UNIT PRICES WILL GOVERN.' HERE, THE BID OF D. W. SALES COMPANY REASONABLY ESTABLISHES ITS INTENDED UNIT INCREMENT BID PRICES FOR ITEM 54. IT ALSO IS REPORTED THAT NO ACCEPTABLE LOWER BIDS WERE DISPLACED BY THIS CORRECTION SINCE ALL BIDDERS OFFERING LOWER UNIT PRICES WITHIN THE PRICE ..END :