B-160013, OCTOBER 27, 1966, 46 COMP. GEN. 368

B-160013: Oct 27, 1966

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

A LOW BID CONDITIONED IN THE TRANSMITTAL LETTER BY A REQUEST FOR PROGRESS PAYMENTS WAS PROPERLY REJECTED AS NONRESPONSIVE. IN VIEW OF THE MANDATORY REQUIREMENT IN PARAGRAPH E-504.1 OF THE ARMED SERVICES PROCUREMENT REGULATION FOR PROGRESS PAYMENTS IF CONTRACT PERFORMANCE TIME EXCEEDS 6 MONTHS OR A MATERIAL IMPACT IS MADE ON THE WORKING FUNDS OF A CONTRACTOR. EXCLUDING THE PROGRESS PAYMENT PROVISION FROM THE INVITATION ON THE BASIS NO BIDS WERE EXPECTED FROM SMALL BUSINESS CONCERNS AND THAT THERE WOULD BE NO MATERIAL IMPACT ON THE WORKING CAPITAL OF A LARGE BUSINESS CONCERN PREVENTED FULL AND FREE COMPETITION TO THE DISADVANTAGE OF THE GOVERNMENT AND THE PROCUREMENT SHOULD BE READVERTISED. 1966: REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 2.

B-160013, OCTOBER 27, 1966, 46 COMP. GEN. 368

CONTRACTS - PAYMENTS - PROGRESS - REQUEST. UNDER AN INVITATION FOR BIDS THAT DID NOT PROVIDE FOR PROGRESS PAYMENTS ALTHOUGH CONTRACT PERFORMANCE TIME WOULD EXCEED 6 MONTHS, A LOW BID CONDITIONED IN THE TRANSMITTAL LETTER BY A REQUEST FOR PROGRESS PAYMENTS WAS PROPERLY REJECTED AS NONRESPONSIVE. HOWEVER, IN VIEW OF THE MANDATORY REQUIREMENT IN PARAGRAPH E-504.1 OF THE ARMED SERVICES PROCUREMENT REGULATION FOR PROGRESS PAYMENTS IF CONTRACT PERFORMANCE TIME EXCEEDS 6 MONTHS OR A MATERIAL IMPACT IS MADE ON THE WORKING FUNDS OF A CONTRACTOR, EXCLUDING THE PROGRESS PAYMENT PROVISION FROM THE INVITATION ON THE BASIS NO BIDS WERE EXPECTED FROM SMALL BUSINESS CONCERNS AND THAT THERE WOULD BE NO MATERIAL IMPACT ON THE WORKING CAPITAL OF A LARGE BUSINESS CONCERN PREVENTED FULL AND FREE COMPETITION TO THE DISADVANTAGE OF THE GOVERNMENT AND THE PROCUREMENT SHOULD BE READVERTISED.

TO THE SECRETARY OF THE NAVY, OCTOBER 27, 1966:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 2, 1966, AND ENCLOSURES, FROM THE DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND, TRANSMITTING FOR OUR DECISION THE LOCKHEED ELECTRONICS COMPANY'S PROTEST AGAINST REJECTION OF ITS BID UNDER INVITATION FOR BIDS (IFB) NO. 189-457- 66. AWARD IS BEIGN HELD IN ABEYANCE PENDING OUR DECISION.

ALTHOUGH LOCKHEED'S BID IS SUBSTANTIALLY LOWER THAN THE ONLY OTHER BID RECEIVED, IT IS THE ADMINISTRATIVE RECOMMENDATION THAT IT BE REJECTED AS NONRESPONSIVE BECAUSE IT WAS CONDITIONED UPON RECEIVING PROGRESS PAYMENTS CONTRARY TO THE TERMS OF THE INVITATION WHICH PROVIDES FOR PAYMENT ONLY UPON DELIVERY AND ACCEPTANCE OF THE ITEMS BEING PROCURED IN ACCORDANCE WITH THE "PAYMENTS" CLAUSE OF THE GENERAL PROVISIONS, STANDARD FORM 32, JUNE 1964 EDITION, GENERAL SERVICES ADMINISTRATION, INCORPORATED THEREIN BY REFERENCE. THE BASIS FOR CONCLUDING THAT THE LOCKHEED BID IS CONDITIONED UPON RECEIVING PROGRESS PAYMENTS IS THE FOLLOWING LANGUAGE FROM THE COVER LETTER TRANSMITTING ITS BID:

IN THE EVENT LOCKHEED ELECTRONICS COMPANY IS AWARDED A CONTRACT RESULTING FROM THE SUBJECT IFB, IT IS REQUESTED THAT A SUITABLE CLAUSE FOR PROGRESS PAYMENTS BE INCLUDED THEREIN.

LOCKHEED CONTENDS THAT THE LANGUAGE WAS NOT INTENDED AS AND IS NOT A CONDITION OR QUALIFICATION OF ITS BID,"BUT WAS MERELY A REQUEST FOR CONSIDERATION OF THAT SUBJECT IN VIEW OF THE GREATER THAN SIX- MONTHS' PERFORMANCE SPAN OF THIS CONTRACT;, IT IS ALSO POINTED OUT THAT THIS LANGUAGE WAS INCLUDED IN THE COVER LETTER AND NOT IN THE BID ITSELF, WHICH IT IS SAID DISTINGUISHES THE INSTANT CASE FROM CITED DECISIONS OF OUR OFFICE HOLDING THAT BIDDERS MAY NOT "REQUEST" THE INCLUSION OF PROGRESS PAYMENT PROVISIONS IN CONTRACTS TO BE AWARDED TO THEM UNLESS THE INVITATION EXPRESSLY SO PROVIDES. THE ONE DECISION CITED BY LOCKHEED WHERE THE "REQUEST" WAS IN A COVER LETTER AND WE HELD IT QUALIFIED THE BID IS ALLEGED BY LOCKHEED TO BE DISTINGUISHABLE FROM THE INSTANT CASE BECAUSE THE TRANSMITTAL LETTER WAS EXPRESSLY MADE A PART OF THE BID. IT IS LOCKHEED'S FURTHER CONTENTION THAT EVEN IF ITS BID IS FOUND TO BE CONDITIONED UPON RECEIVING PROGRESS PAYMENTS, THIS IS NOT CAUSE FOR REJECTION BECAUSE ARMED SERVICES PROCUREMENT REGULATION (ASPR) 504.1 REQUIRED A PROGRESS PAYMENTS CLAUSE TO BE INCLUDED IN THE IFB.

THE QUESTION OF THE EFFECT OF A BID CONDITIONED UPON RECEIVING PROGRESS PAYMENTS WHERE THE INVITATION CONTAINS NO PROVISION FOR SUCH PAYMENTS AND SPECIFIES A PARTICULAR METHOD OF PAYMENT HAS BEEN BEFORE OUR OFFICE ON SEVERAL OCCASIONS. WE HAVE CONSISTENTLY HELD THAT A BID SO QUALIFIED IS NONRESPONSIVE IN A MATERIAL RESPECT AND SUCH DEVIATION CANNOT BE WAIVED. 38 COMP. GEN. 131. WITH REGARD TO WHETHER THE COVER LETTER AND THE LANGUAGE THEREIN OPERATES TO QUALIFY LOCKHEED'S BID, WE HAVE HELD THAT A COVER LETTER "REQUESTING" PROGRESS PAYMENTS MUST BE CONSTRUED AS CONDITIONING THE BID. IN B-154755, SEPTEMBER 23, 1964, WE SAID:

WHILE WE WOULD AGREE THAT IN THE ORDINARY SENSE THE WORD "REQUEST" IS PRECATORY IN NATURE, ITS PRECISE MEANING MUST DEPEND UPON THE EXISTING CIRCUMSTANCES. AS STATED BY JUDGE LEARNED HAND IN CENTRAL HANOVER BANK AND TRUST COMPANY V. COMMISSIONER OF INTERNAL REVENUE, 159 F. 2D 167, 169. ,THERE IS NO MORE LIKELY WAY TO MISAPPREHEND THE MEANING OF LANGUAGE ---BE IT IN A CONSTITUTION, A STATUTE, A WILL OR A CONTRACT---THAN TO READ WORDS LITERALLY, FORGETTING THE OBJECT WHICH THE DOCUMENT AS A WHOLE IS MEANT TO SECURE;, SINCE THE INVITATION PROVIDED FOR A METHOD OF PAYMENT WE THINK IT NOT UNREASONABLE TO VIEW YOUR REQUEST AS SOMETHING MORE THAN A MERE WISH OR DESIRE. HAD YOUR BID BEEN ACCEPTED IT COULD HAVE BEEN ARGUED THAT THE GOVERNMENT ACCEPTED YOUR REQUEST FOR PROGRESS PAYMENTS AND WAS BOUND TO MAKE PAYMENT IN ACCORDANCE THEREWITH. IF, AS SUGGESTED, YOUR REQUEST WAS IN THE NATURE OF MERE HOPE OR WISH AND YOU INTENDED TO ACCEPT A CONTRACT SUBJECT TO THE "PAYMENTS" ARTICLE, IT WAS INCUMBENT UPON YOU TO CLEARLY EXPRESS SUCH INTENTION. SEE B-124572, JANUARY 11, 1956, AND B 150313, DECEMBER 5, 1962. IT IS A RULE OF LONG STANDING THAT WHERE TWO POSSIBLE MEANINGS CAN BE REACHED FROM THE TERMS OF A BID A BIDDER MAY NOT BE PERMITTED TO EXPLAIN WHAT HE INTENDED SINCE HE WOULD THEN BE IN A POSITION TO AFFECT THE RESPONSIVENESS OF HIS BID. 36 COMP. GEN. 705., 40 ID. 393.

ALTHOUGH LOCKHEED HAS ATTEMPTED TO DISTINGUISH THE INSTANT CASE FROM THE CITED DECISION BECAUSE THE LANGUAGE USED THEREIN INDICATED THE COVER LETTER WAS EXPRESSLY MADE A PART OF THE BID, THAT WAS NOT THE SITUATION. THE LETTER IN THAT DECISION, AS IN THE INSTANT CASE, WAS ENCLOSED WITH AND REFERRED TO THE BID FORM AND WAS THEREFORE CONSIDERED TO BE MADE A PART OF THE BID.

THE CASES ARE, IN OUR OPINION, NOT DISTINGUISHABLE. IN VIEW THEREOF, THE LOCKHEED BID WAS NONRESPONSIVE AND MUST BE REJECTED. CF. 45 COMP. GEN. 809. ASPR E-504.1 PROVIDES, PURSUANT TO 10 U.S.C. 2307, IN PERTINENT PART, AS FOLLOWS:

WHEN PROGRESS PAYMENTS ARE CONTEMPLATED, THE INVITATIONS FOR BIDS SHALL STATE THAT UPON WRITTEN REQUESTS BY THE PROSPECTIVE CONTRACTOR A PROGRESS PAYMENT CLAUSE * * * WILL BE INCLUDED IN THE CONTRACT AT THE TIME OF AWARD

PROVISION FOR PROGRESS PAYMENTS SHALL BE MADE IN INVITATIONS FORBIDS WHENEVER THE CONTRACTING OFFICER CONSIDER (1) THAT THE PERIOD BETWEEN THE BEGINNING OF WORK AND THE REQUIRED FIRST PRODUCTION DELIVERY WILL EXCEED SIX MONTHS, OR (2) THAT PROGRESS PAYMENTS WILL BE USEFUL OR NECESSARY BY REASON OF CIRCUMSTANCES THAT WILL INVOLVE SUBSTANTIAL ACCUMULATION OF PREDELIVERY COSTS THAT MAY HAVE A MATERIAL IMPACT ON A CONTRACTOR'S WORKING FUNDS * * *.

REASONABLE DOUBTS SHOULD BE RESOLVED IN FAVOR OF INCLUSION OF PROGRESS PAYMENT PROVISIONS IN INVITATIONS FOR BIDS, IN ORDER TO * * * AVOID THE NECESSITY FOR REJECTING, AS NONRESPONSIVE, BIDS CONDITIONED ON PROGRESS PAYMENTS WHEN THE INVITATIONS FOR BIDS DO NOT PROVIDE FOR PROGRESS PAYMENTS.

IT IS STATED IN THE ADMINISTRATIVE REPORT THAT ALTHOUGH AN AWARD IN EXCESS OF $100,000 WAS ANTICIPATED AND THE PERIOD BETWEEN THE BEGINNING OF WORK AND THE FIRST PRODUCTION DELIVERY WOULD BE IN EXCESS OF 6 MONTHS, NO PROVISION FOR PROGRESS PAYMENTS WAS INCLUDED IN THE INVITATION BECAUSE NO BIDS WERE EXPECTED FROM SMALL BUSINESS CONCERNS AND THERE WOULD NOT BE A MATERIAL IMPACT ON A LARGE BUSINESS CONCERN'S WORKING CAPITAL. THESE REASONS ARE NOT CONSIDERED JUSTIFICATION FOR THE FAILURE TO INCLUDE A PROGRESS PAYMENTS PROVISION. THE CONTRACTING OFFICER'S CONCLUSION THAT THERE WOULD NOT BE A MATERIAL IMPACT ON THE WORKING CAPITAL OF THE CONTRACTOR MIGHT OBVIATE THE NECESSITY OF A PROGRESS PAYMENTS PROVISION IF THIS WAS THE ONLY CIRCUMSTANCE REQUIRING ITS INCLUSION. HOWEVER, THE LANGUAGE OF THE REGULATION CLEARLY REQUIRES A PROGRESS PAYMENTS PROVISION WHEN THE "PERIOD BETWEEN THE BEGINNING OF WORK AND THE REQUIRED FIRST PRODUCTION DELIVERY WILL EXCEED 6 MONTHS, OR" WHEN THERE WILL BE A MATERIAL IMPACT ON A CONTRACTOR'S WORKING FUNDS. (ITALICS SUPPLIED.) SINCE IT IS CONCEDED THAT MORE THAN 6 MONTHS WILL ELAPSE FROM THE BEGINNING OF PRODUCTION UNTIL DELIVERY BEGINS, AND IN VIEW OF THE MANDATORY LANGUAGE OF THE REGULATION, THE INVITATION SHOULD HAVE INCLUDED A PROGRESS PAYMENTS PROVISION.

ALTHOUGH NOT EVERY DEFECT IN AN INVITATION WILL REQUIRE REJECTION OF BIDS AND READVERTISEMENT OF THE REQUIREMENT, WE BELIEVE THE CIRCUMSTANCES OF THIS CASE DICTATE SUCH ACTION. SINCE NO CONTRACT HAS BEEN AWARDED, WE ARE NOT FACED WITH THE QUESTION OF THE LEGALITY OF A CONTRACT. THE PRIMARY QUESTION APPEARS TO BE WHETHER THE GOVERNMENT HAS OBTAINED ADVANTAGE OF THE FULL AND FREE COMPETITION CONTEMPLATED BY FORMAL ADVERTISING PROCEDURES. THE AMOUNT OF THIS PROCUREMENT, THE LENGTH OF TIME BETWEEN PRODUCTION AND DELIVERY, THE RECEIPT OF ONLY TWO BIDS, AND THE SUBSTANTIALLY LOWER BID FROM THE BIDDER ANTICIPATING PROGRESS PAYMENTS, INDICATE THAT THE FAILURE OF THE PROCURING ACTIVITY TO COMPLY WITH THE MANDATORY REQUIREMENTS OF THE APPLICABLE REGULATION PREVENTED FULL AND FREE COMPETITION TO THE GOVERNMENT'S DISADVANTAGE. CF. B-149730, OCTOBER 12, 1962.

THEREFORE, IT IS OUR CONCLUSION THAT THIS REQUIREMENT SHOULD BE READVERTISED IN CONSONANCE WITH APPLICABLE STATUTES AND REGULATIONS.