B-159925, OCT. 24, 1966

B-159925: Oct 24, 1966

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TO WULFE AIR PARTS CORPORATION: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 15. ITEM 85 WAS DESCRIBED AS SCRAP CAST IRON CONSISTING OF PISTON RINGS. WAS ESTABLISHED FOR THE PROPERTY UNDER ITEM 85. WHEN THE BIDS WERE OPENED ON JULY 7. THE OTHER FOUR BIDS WERE IN THE AMOUNTS OF $4. IT WAS DETERMINED THEREFORE THAT YOUR BID WOULD NOT PROVIDE THE GOVERNMENT WITH A REASONABLE RETURN AND THAT ALL BIDS ON ITEM 85 WOULD BE REJECTED AND THE ITEM WITHDRAWN FOR SALE AT A LATER DATE. YOU STATE THAT THE REAL REASON FOR REJECTION OF YOUR BID WAS THAT IT WAS TOO HIGH. THAT YOU FEEL CERTAIN YOUR OFFER WOULD HAVE BEEN ACCEPTED WITHOUT HESITATION IF YOUR HIGH BID HAD BEEN $50 OR $60 A TON. THAT YOU UNDERSTAND THE REPORT TO HIGHER HEADQUARTERS WOULD NOT HAVE LOOKED GOOD TO SHOW SUCH A HIGH RATE OF RETURN FOR MATERIAL WHICH HAD BEEN ADVERTISED AS SCRAP.

B-159925, OCT. 24, 1966

TO WULFE AIR PARTS CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 15, 1966, PROTESTING THE ACTION OF THE FORT WORTH DEFENSE SURPLUS SALES OFFICE, DEFENSE SUPPLY AGENCY, IN REJECTING YOUR HIGH BID AND WITHDRAWING ITEM 85 OF SALES INVITATION NO. 37-7002, WHICH INVITATION COVERED VARIOUS ITEMS OF SURPLUS GOVERNMENT SCRAP, ITEMS 1 THROUGH 27 BEING LOCATED AT THE RED RIVER ARMY DEPOT, TEXARKANA, TEXAS, AND ITEMS 28 THROUGH 101 AT KELLY AIR FORCE BASE, SAN ANTONIO, TEXAS.

ITEM 85 WAS DESCRIBED AS SCRAP CAST IRON CONSISTING OF PISTON RINGS, WITH AN ESTIMATED TOTAL NET WEIGHT OF 20,000 POUNDS AND A TOTAL WEIGHT OF 12 GROSS TONS INCLUDING CONTAINERS. WHILE THE DESCRIPTION IN THE INVITATION DOES NOT SO INDICATE, THE ADMINISTRATIVE REPORT SHOWS THAT ITEM 85, IN ADDITION TO THE PISTON RINGS, INCLUDED APPROXIMATELY 500 POUNDS OF OTHER MISCELLANEOUS ITEMS, SUCH AS RETAINING RINGS, OIL PUMPS, SHAFTS, LINERS AND COUPLINGS. PRIOR TO BID OPENING A MARKET APPRAISAL OF $216, REPRESENTING THE BASIC MATERIAL VALUE OF SCRAP CAST IRON, WAS ESTABLISHED FOR THE PROPERTY UNDER ITEM 85. HOWEVER, WHEN THE BIDS WERE OPENED ON JULY 7, 1966, THE SIX OFFERS FOR THIS ITEM RANGED FROM YOUR HIGH BID OF $6,719.89 TO A LOW BID OF $300. THE OTHER FOUR BIDS WERE IN THE AMOUNTS OF $4,020, $2,847.96, $2,640 AND $528. SINCE ALL OF THE BIDS EXCEEDED THE APPRAISAL AND FOUR OF THEM EXCEEDED IT BY SUBSTANTIAL AMOUNTS, THE SALES CONTRACTING OFFICER INITIATED A REEVALUATION OF ITEM 85 WHICH REVEALED THAT A MISTAKE HAD BEEN MADE IN OFFERING IT FOR SALE AS SCRAP, AND THAT MOST OF IT CONSISTED OF USABLE PROPERTY IN GOOD TO EXCELLENT CONDITION HAVING A MARKET APPRAISAL OF $19,501.98. IT WAS DETERMINED THEREFORE THAT YOUR BID WOULD NOT PROVIDE THE GOVERNMENT WITH A REASONABLE RETURN AND THAT ALL BIDS ON ITEM 85 WOULD BE REJECTED AND THE ITEM WITHDRAWN FOR SALE AT A LATER DATE.

IN OBJECTING TO THIS ACTION, YOU STATE THAT THE REAL REASON FOR REJECTION OF YOUR BID WAS THAT IT WAS TOO HIGH, THAT YOU FEEL CERTAIN YOUR OFFER WOULD HAVE BEEN ACCEPTED WITHOUT HESITATION IF YOUR HIGH BID HAD BEEN $50 OR $60 A TON, OR EVEN $80, AND THAT YOU UNDERSTAND THE REPORT TO HIGHER HEADQUARTERS WOULD NOT HAVE LOOKED GOOD TO SHOW SUCH A HIGH RATE OF RETURN FOR MATERIAL WHICH HAD BEEN ADVERTISED AS SCRAP. YOU STATE FURTHER THAT IT APPEARS TO YOU THE SALES AGENCIES ARE MORE CONCERNED WITH HOW THEIR REPORTS LOOK THAN WITH THE ACTUAL DOLLAR RETURN. IN THIS CONNECTION, YOU REFER TO THE FACT THAT SALES INVITATIONS WHICH ARE ISSUED ON A DETAIL BASIS, AS DISTINGUISHED FROM SCRAP SALES, MUST SHOW THE ACQUISITION COST OF THE ITEMS BEING SOLD, AND YOU ALLEGE THAT IN MANY INSTANCES THE OFFERS RECEIVED ON DETAIL SALES FOR VARIOUS ITEMS, INCLUDING AIRCRAFT PARTS, ARE REJECTED FOR INSUFFICIENT RETURN, DUE TO OBSOLESCENCE, POOR CONDITION, ETC., THAT THE ITEMS ARE READVERTISED AS SCRAP, AND THAT THE ACTUAL DOLLAR RETURN IS ONLY A FRACTION OF THE ORIGINAL PRICE OFFERED ON THE DETAIL SALE. YOU SUGGEST THAT THIS ACTION IS TAKEN BECAUSE THE ELIMINATION OF THE LOW-RETURN DETAIL ITEM RESULTS IN A BETTER PICTURE OF THE OVERALL RETURN AS COMPARED TO THE ACQUISITION COST. ADDITIONALLY, YOU POINT OUT THAT ITEM 85 HAS BEEN STORED IN THE OPEN FOR OVER A YEAR AND MAY CONTAIN A LARGE QUANTITY OF RUSTY RINGS THAT HAVE NO VALUE, AND YOU CONTEND THAT YOU HAVE OFFERED A VERY FAIR PRICE FOR THE MATERIAL AND THAT, IN VIEW OF THE QUESTIONABLE RETURN UPON READVERTISEMENT, IT IS NOT THE FUNCTION OF THE DEFENSE SUPPLY AGENCY TO SECOND-GUESS AND, IN EFFECT, GAMBLE WITH GOVERNMENT FUNDS, NOR IS IT FAIR TO THE BIDDER.

ADMITTEDLY, THE FACT THAT FOUR OF THE BIDS RECEIVED ON ITEM 85 WERE MORE THAN TEN TIMES THE AMOUNT OF THE ORIGINAL APPRAISAL ALERTED THE SALES CONTRACTING OFFICER TO THE FACT THAT THIS MATERIAL WAS USABLE AND SHOULD NOT BE SOLD AS SCRAP. HOWEVER, THE FACT THAT A REEVALUATION WAS IMMEDIATELY UNDERTAKEN AND THE ITEM WITHDRAWN WHEN THE NEW APPRAISAL SHOWED A PROBABLE MARKET VALUE OF ALMOST $20,000 WOULD INDICATE, CONTRARY TO YOUR SUGGESTION, THAT THE CONTRACTING OFFICER WAS VERY MUCH INTERESTED IN THE DOLLAR RETURN TO THE GOVERNMENT. WITH REFERENCE TO YOUR STATEMENT THAT YOU OFFERED A FAIR PRICE, IT MAY BE THAT THE READVERTISEMENT WILL NOT RESULT IN AN INCREASED PRICE, BUT ON THE PRESENT RECORD, PARTICULARLY IN VIEW OF THE HIGH REAPPRAISAL, IT SEEMS CLEAR THAT THE CONTRACTING OFFICER'S ACTION WAS FULLY JUSTIFIED AND WAS TAKEN IN GOOD FAITH, AND THAT IT COULD NOT REASONABLY BE CONSIDERED AS ARBITRARY OR CAPRICIOUS. AS TO WHETHER THE GOVERNMENT'S ACTION WAS FAIR TO YOU, IT WOULD APPEAR THAT SAID ACTION MAY ONLY BE QUESTIONED IF IT IS ESTABLISHED THAT YOU WERE THE HIGH RESPONSIVE, RESPONSIBLE BIDDER AND, AS SUCH, ARE ENTITLED TO THE AWARD AS A MATTER OF RIGHT.

UNDER PARAGRAPH 3 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE INVITATION THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY OR ALL BIDS, AS MAY BE IN THE BEST INTEREST OF THE GOVERNMENT. ALSO, IT IS PROVIDED IN 40 U.S.C. 484 (E) (2), WITH REFERENCE TO PUBLICLY ADVERTISED SALES OF SURPLUS PROPERTY, THAT THE ADVERTISEMENT FOR BIDS SHALL BE MADE ON SUCH TERMS AND CONDITIONS AS SHALL PERMIT THAT FULL AND FREE COMPETITION WHICH IS CONSISTENT WITH THE VALUE AND NATURE OF THE PROPERTY INVOLVED, AND THAT:

"/C) AWARD SHALL BE MADE WITH REASONABLE PROMPTNESS BY NOTICE TO THE RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED: PROVIDED, THAT ALL BIDS MAY BE REJECTED WHEN IT IS IN THE PUBLIC INTEREST TO DO SO.'

ADVERTISING ITEM 85 AS SCRAP, WHEN IT WAS COMPRISED MAINLY OF USABLE PARTS, CLEARLY WAS NOT CONSISTENT WITH EITHER THE VALUE AND NATURE OF THE PROPERTY INVOLVED OR THE GUARANTEED DESCRIPTIONS CLAUSE, NOR DID SUCH MISDESCRIPTION PERMIT THE FULLEST COMPETITION FOR THOSE VALUABLE PARTS. THE PRESENT RECORD, IN OUR OPINION, FIRMLY SUPPORTS THE DETERMINATION OF THE CONTRACTING OFFICER THAT THE REJECTION OF ALL BIDS ON ITEM 85 WAS "IN THE PUBLIC INTEREST.' IN LINE WITH THE ABOVE, AND, AS STATED IN 26 COMP. GEN. 49, AT PAGE 50,"IT LONG HAS BEEN RECOGNIZED THAT IN CONNECTION WITH THE AWARDING OF PUBLIC CONTRACTS NO BIDDER ACQUIRES AN ABSOLUTE RIGHT TO AN AWARD OF PUBLIC BUSINESS BUT, RATHER, THE PUBLIC INTEREST IS FIRST FOR CONSIDERATION IN THE MAKING OF SUCH AWARD.' SEE, ALSO, O-BRIEN V. CARNEY, 6 F.SUPP. 761; 17 COMP. GEN. 554, 559; B-159663, AUGUST 15, 1966.

FOR THE REASONS STATED, WE FIND NO LEGAL BASIS FOR OBJECTING TO THE REJECTION OF ALL BIDS ON ITEM 85, AND YOUR PROTEST IS THEREFORE DENIED.