B-160083, NOV. 4, 1966

B-160083: Nov 4, 1966

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CRESSMAN AND CABLE: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 14. THE PROJECT WAS ORIGINALLY ADVERTISED UNDER INVITATION FOR BIDS (IFB) NO. WAS READVERTISED UNDER IFB NO. FIVE BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 1. THE BIDS WERE AS FOLLOWS: TABLE "CHRIS BERG. 830.00" THE ORIGINAL GOVERNMENT ESTIMATE FOR THE PROJECT WAS $3. A DETERMINATION WAS MADE BY THE CONTRACTING OFFICER AND OTHER CORPS OF ENGINEERS OFFICIALS THAT WITHDRAWAL OF THE BID SHOULD BE PERMITTED. SINCE THE VARIANCE BETWEEN THE GOVERNMENT ESTIMATE AND THE REMAINING FOUR BIDS WAS IN EXCESS OF 43 PERCENT. THE GOVERNMENT ESTIMATE WAS REVIEWED. NO ERROR OR MISJUDGMENT OF MAGNITUDE APPROACHING SUCH VARIANCE WAS FOUND.

B-160083, NOV. 4, 1966

TO SHORT, CRESSMAN AND CABLE:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 14, 1966, AND SUPPLEMENTARY CORRESPONDENCE, PROTESTING ON BEHALF OF S. S. MULLEN, INC. (MULLEN), AGAINST THE AWARD OF A CONTRACT BY THE DEPARTMENT OF THE ARMY TO ANY OTHER BIDDER FOR THE CONSTRUCTION OF THE PROJECT "PASSAGE SHOULDER PIPELINE TUNNEL, MULTIPRODUCT PIPELINE SYSTEM, WHITTIER TO ANCHORAGE, ALASKA.' THE PROJECT WAS ORIGINALLY ADVERTISED UNDER INVITATION FOR BIDS (IFB) NO. DACA 85-67-B-0018, DATED JULY 30, 1966, AND WAS READVERTISED UNDER IFB NO. DACA 85-67-B-0029, DATED SEPTEMBER 9, 1966, BOTH SOLICITATIONS BEING ISSUED BY THE DISTRICT ENGINEER, UNITED STATES ARMY ENGINEER DISTRICT, ANCHORAGE.

UNDER THE ORIGINAL IFB, FIVE BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 1, 1966, AS SCHEDULED. THE BIDS WERE AS FOLLOWS:

TABLE

"CHRIS BERG, INC. $3,472,665.00

S. S. MULLEN, INC. -

COLORADO CONSTRUCTORS 4,749,725.00

M-B CONTRACTING CO., INC. 4,886,955.00

S AND M CONSTRUCTORS, INC. AND

FRANK COLUCCIO CONSTRUCTION CO., INC. 6,177,177.50

WILLIAM A. SMITH CONTRACTING CO., INC. 6,232,830.00"

THE ORIGINAL GOVERNMENT ESTIMATE FOR THE PROJECT WAS $3,318,065.00.

ON SEPTEMBER 2, CHRIS BERG, INC. (BERG), THE LOW BIDDER, ALLEGED A SUBSTANTIAL MISTAKE IN ITS BID, AND AFTER EVALUATION OF THE EVIDENCE SUBMITTED BY THE BIDDER, A DETERMINATION WAS MADE BY THE CONTRACTING OFFICER AND OTHER CORPS OF ENGINEERS OFFICIALS THAT WITHDRAWAL OF THE BID SHOULD BE PERMITTED. IN ADDITION, SINCE THE VARIANCE BETWEEN THE GOVERNMENT ESTIMATE AND THE REMAINING FOUR BIDS WAS IN EXCESS OF 43 PERCENT, THE GOVERNMENT ESTIMATE WAS REVIEWED, BUT NO ERROR OR MISJUDGMENT OF MAGNITUDE APPROACHING SUCH VARIANCE WAS FOUND. ACCORDINGLY, THE CONTRACTING OFFICER DETERMINED THAT ALL SUCH BIDS WERE UNREASONABLE AS TO PRICE, AND THE IFB WAS CANCELLED AS AUTHORIZED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-404.1.

UNDER THE SECOND IFB, ONLY FOUR BIDS WERE RECEIVED, ONE EACH FROM THREE OF THE ORIGINAL BIDDERS, INCLUDING MULLEN, AND ONE FROM A JOINT VENTURE COMPRISED OF BERG AND PETER KIEWIT SONS' CO. THE BIDS, WHICH WERE OPENED ON SEPTEMBER 19, READ AS FOLLOWS:

"PETER KIEWIT SONS' CO. AND

CHRIS BERG, INC. $4,466,000.00

M-B CONTRACTING CO., INC. 4,540,505.00

S. S. MULLEN, INC. AND

COLORADO CONSTRUCTORS, INC. 4,749,725.00

S AND M CONSTRUCTORS, INC. AND

FRANK COLUCCIO CONSTRUCTION CO. 5,676,292.00"

THE GOVERNMENT ESTIMATE ON THE READVERTISED PROJECT, WHICH TOOK INTO CONSIDERATION THE FACT THAT THE SHORTER PERIOD OF SUITABLE WEATHER FOR THE CONSTRUCTION WORK WOULD NECESSITATE A LARGER WORK FORCE AND MORE EQUIPMENT, WAS $3,797,100.00.

YOU CONTEND THAT SINCE THE READVERTISED PROJECT IS THE SAME AS THE ORIGINALLY ADVERTISED PROJECT, CANCELLATION OF THE ORIGINAL IFB VIOLATES THE PROVISIONS OF THE FEDERAL PROCUREMENT REGULATIONS (FPR) AND ASPR GOVERNING IFB CANCELLATIONS AFTER OPENING OF BIDS. YOU STATE THAT THE BIDS RECEIVED UNDER THE ORIGINAL IFB WERE, IN FACT, REASONABLE AND THAT THE WIDE VARIANCE BETWEEN THE BIDS AND THE ORIGINAL GOVERNMENT ESTIMATE DOES NOT ESTABLISH THAT SUCH BIDS WERE UNREASONABLE. FURTHER YOU QUESTION WHY, IF SUCH ESTIMATE WAS ACCURATE, WITHDRAWAL OF THE LOW BID WAS PERMITTED, AND YOU CONCLUDE THAT SUCH ACTION INDICATES THAT THE GOVERNMENT ESTIMATE WAS IN ERROR AND THAT MULLEN'S BID, THE AMOUNT OF WHICH WAS THE SAME UNDER THE SECOND IFB, WAS AN ACCURATE REPRESENTATION OF THE COST OF THE PROJECT.

AS TO THE BIDS WHICH WERE RECEIVED UNDER THE SECOND IFB, YOU ASSERT THAT ACCEPTANCE OF THE LOW BID, WHICH IS ONLY $283,725.00 BELOW THE MULLEN BID, AND EQUIVALENT TO OVER 94 PERCENT OF SUCH BID, WHICH THE CONTRACTING AGENCY REGARDS AS UNREASONABLE, VIOLATES THE SPIRIT AND LANGUAGE OF BOTH THE APPLICABLE FPR AND ASPR.

CONCERNING THE GOVERNMENT'S EXPLANATION THAT ITS HIGHER ESTIMATE IN CONNECTION WITH THE READVERTISEMENT OF THE PROJECT WAS OCCASIONED BY CONSIDERATION OF ADDITIONAL COSTS ATTENDANT UPON A DECREASE IN CONSTRUCTION TIME, YOU COMMENT ON THE FACT THAT ALL BIDDERS (ONLY TWO) BUT MULLEN LOWERED THEIR PRICES UNDER THE SECOND IFB AND YOU THEREFORE INFER THAT SUCH ACTION INDICATES THAT THE ELEMENT OF CONSTRUCTION TIME MUST NOT HAVE BEEN A MAJOR CONSIDERATION IN THE BIDDING.

WITH RESPECT TO A STATEMENT BY THE CONTRACTING OFFICER IN A REPORT ON YOUR PROTEST THAT AWARD SHOULD NOT BE DELAYED PENDING ISSUANCE OF OUR DECISION DUE TO THE URGENT NEED FOR THE PROJECT, YOU QUESTION WHY, IF THE PROJECT IS URGENT, THE NEGOTIATION AUTHORITY IN ASPR 3-102 AND 3-202 WAS NOT EMPLOYED IN THE FIRST INSTANCE, AND YOU ASSERT THAT THE FAILURE TO NEGOTIATE IS AN ADMISSION THAT AN EMERGENCY DOES NOT EXIST. IN THIS CONNECTION, YOU ARE ADVISED THAT IT IS OUR INFORMATION THAT AWARD WAS MADE ON OCTOBER 18 TO THE LOW BIDDER UNDER THE SECOND IFB PURSUANT TO A WRITTEN DETERMINATION BY APPROPRIATE AUTHORITY WITHIN THE DEPARTMENT OF THE ARMY THAT THE URGENCY OF THE PROJECT DOES NOT PERMIT OF FURTHER DELAY PENDING THE DECISION OF OUR OFFICE ON YOUR PROTEST.

UNDER 10 U.S.C. 2303, DEPARTMENT OF THE ARMY PROCUREMENTS ARE SUBJECT TO THE PROVISIONS OF CHAPTER 137, 10 U.S.C. FURTHER, THE REGULATIONS WHICH GOVERN THE CONDUCT OF SUCH PROCUREMENTS ARE THE ARMED SERVICES PROCUREMENT REGULATION, ISSUED PURSUANT TO 10 U.S.C. 2202, AND IMPLEMENTING REGULATIONS ISSUED BY THE DEPARTMENT OF DEFENSE AND THE DEPARTMENT OF THE ARMY. CONCERNING THE APPLICABILITY OF THE FEDERAL PROCUREMENT REGULATIONS TO SUCH PROCUREMENTS, THE FOLLOWING PERTINENT LANGUAGE APPEARS IN THE INTRODUCTION TO THE FPR:

"2. RELATIONSHIP TO THE DEPARTMENT OF DEFENSE.

WHILE THE FEDERAL PROCUREMENT REGULATIONS ARE APPLICABLE TO ALL EXECUTIVE AGENCIES, THEY ARE NOT MADE MANDATORY ON THE DEPARTMENT OF DEFENSE, EXCEPT WITH RESPECT TO MATTERS CONCERNING STANDARD GOVERNMENT FORMS AND CLAUSES, FEDERAL SPECIFICATIONS AND STANDARDS, AND EXCEPT AS DIRECTED BY THE PRESIDENT, CONGRESS, OR OTHER AUTHORITY. THEREFORE, EXCEPT AS ABOVE DESCRIBED, THE EXTENT OF IMPLEMENTATION OF THE FEDERAL PROCUREMENT REGULATIONS BY THE DEPARTMENT OF DEFENSE AND ITS PARTICIPATION IN THE SYSTEM IS DETERMINED BY THAT DEPARTMENT. HOWEVER, THERE IS COORDINATION WITH THE DEPARTMENT OF DEFENSE IN THE DEVELOPMENT AND ISSUANCE OF THE FEDERAL PROCUREMENT REGULATIONS AND THE ARMED SERVICES PROCUREMENT REGULATION.'

TURNING FIRST TO YOUR STATEMENT THAT IF, AS THE CONTRACTING OFFICER REPORTS, THE PROJECT IS URGENT, NEGOTIATION SHOULD HAVE BEEN USED IN THE INITIAL PROCUREMENT, YOUR ATTENTION IS INVITED TO THE REQUIREMENT IN ASPR 2-102.1 (A) THAT PROCUREMENT BE MADE BY FORMAL ADVERTISING PURSUANT TO 10 U.S.C. 2304 (A) WHENEVER FEASIBLE AND PRACTICABLE UNDER EXISTING CONDITIONS AND CIRCUMSTANCES, EVEN THOUGH SUCH CONDITIONS AND CIRCUMSTANCES WOULD OTHERWISE SATISFY THE REQUIREMENTS SET FORTH IN SECTION 2, PART 2, ASPR, FOR THE USE OF NEGOTIATION. FURTHER, THE FACT THAT THE 33-DAY BIDDING TIME (JULY 30 TO SEPTEMBER 1) ALLOWED UNDER THE ORIGINAL IFB EXCEEDED THE MINIMUM 15-DAY OR 30-DAY PERIODS GENERALLY MADE APPLICABLE TO MILITARY PROCUREMENTS BY ASPR 2-202.1 WOULD SEEM TO INDICATE THAT ADVERTISING WAS FEASIBLE AND PRACTICABLE, AT LEAST AT THE TIME SUCH IFB WAS ISSUED, AND THE USE OF NEGOTIATION IN THE INITIAL PROCUREMENT WOULD THEREFORE HAVE BEEN SUBJECT TO QUESTION. SEE 39 COMP. GEN. 94.

REGARDING THE FACT THAT ONLY 10 DAYS' BIDDING TIME WAS ALLOWED UNDER THE SECOND IFB, YOU ARE ADVISED THAT ASPR 2-202.1 FURTHER PROVIDES THAT IN SPECIAL CIRCUMSTANCES OR WHERE THE URGENCY OF THE PROCUREMENT DOES NOT PERMIT SUCH DELAY, THE USUAL MINIMUM BIDDING PERIODS NEED NOT BE OBSERVED. IN THIS CASE, THE CONTRACTING AGENCY REPORTS THAT THE POSTPONEMENT OF THE AWARD BEYOND THE TIME ANTICIPATED WHEN THE ORIGINAL IFB WAS ISSUED RESULTED IN A REDUCTION IN THE NUMBER OF DAYS IN WHICH SUITABLE WEATHER WOULD BE AVAILABLE FOR CONSTRUCTION. ACCORDINGLY, IT IS OUR VIEW THAT SUCH CIRCUMSTANCES ALONE JUSTIFIED THE USE OF A SHORTER THAN NORMAL BIDDING PERIOD. FURTHER, AS YOU HAVE NOTED, THE PROJECT WAS SUBSTANTIALLY THE SAME UNDER BOTH IFB-S; THEREFORE, IT WOULD APPEAR THAT SUCH ACTION DID NOT OPERATE TO THE PREJUDICE OF ANY BIDDER, NO MATERIAL BID REVISION OTHER THAN PRICE BEING INVOLVED, AND THAT IN THE DISCRETION OF THE BIDDER.

CONCERNING YOUR QUESTION AS TO WHY, IF THE GOVERNMENT'S ORIGINAL ESTIMATE WAS ACCURATE, THE LOW BIDDER WAS PERMITTED TO WITHDRAW ITS BID UNDER THE ORIGINAL IFB, YOU ARE ADVISED THAT ASPR 2-406.3, RELATING TO MISTAKES (OTHER THAN CLERICAL) IN BIDS, PERMITS WITHDRAWAL OF A BID WHERE THE MISTAKE IS ALLEGED BEFORE AWARD AND PROPERLY SUBSTANTIATED BY EVIDENCE ACCEPTABLE TO THE CONTRACTING AGENCY. SUCH REGULATION IS CONSISTENT WITH DECISIONS OF OUR OFFICE, SUCH AS 17 COMP. GEN. 575 AND 36 ID. 441, WHICH ENUNCIATE THE GENERAL RULE THAT THE ACCEPTANCE OF A BID WITH KNOWLEDGE OF ERROR THEREIN DOES NOT CONSUMMATE A VALID AND BINDING CONTRACT. SEE, ALSO, MASON COAL COMPANY V. UNITED STATES, 64 CT.CL. 526; MOFFETT, HODGKINS, AND CLARKE COMPANY V. ROCHESTER, 178 U.S. 373; KEMP V. UNITED STATES, 38 F.SUPP. 568; ALTA ELECTRIC AND MECHANICAL COMPANY, INC. V. UNITED STATES, 90 CT.CL. 466. IN THE LIGHT OF THE REPORTED FACTS CONCERNING THE LOW BID UNDER THE ORIGINAL IFB IT DOES NOT APPEAR THAT THE BIDDER'S ALLEGATION OF ERROR WAS BASED UPON, OR DECIDED WITH REFERENCE TO, THE AMOUNT OF THE GOVERNMENT'S ESTIMATE. SINCE WITHDRAWAL OF SUCH BID WAS THEREFORE PERMITTED WITHOUT REGARD TO THE ACCURACY OF THE GOVERNMENT ESTIMATE, SUCH ACTION MAY NOT BE CONSTRUED AS AN INDICATION THAT EITHER THE ESTIMATE WAS INACCURATE OR THAT MULLEN'S BID WAS REASONABLE.

WITH RESPECT TO YOUR OBSERVATION THAT NOTWITHSTANDING THE SHORTER CONSTRUCTION PERIOD ATTENDANT UPON THE DELAY FOR READVERTISEMENT OF THE PROJECT, TWO OF THE ORIGINAL BIDDERS SUBMITTED REDUCED BIDS UNDER THE SECOND IFB, THUS INDICATING THAT SUCH FACTOR DID NOT AFFECT THE BIDDING, IT MUST BE BORNE IN MIND THAT THE PURPOSE OF THE READVERTISEMENT WAS TO OBTAIN REASONABLE BID PRICES, SINCE THE CONTRACTING AGENCY REGARDED MULLEN'S BID OF $4,749,000 AS UNREASONABLE. FURTHER, SINCE THE READVERTISEMENT RESULTED IN A LOW BID OF $4,466,000 AND A SECOND LOW BID OF $4,540,505, BOTH OF WHICH WERE MORE THAN A QUARTER OF A MILLION DOLLARS LOWER THAN MULLEN'S BID UNDER THE ORIGINAL IFB, IT WOULD APPEAR THAT THERE WAS AMPLE JUSTIFICATION FOR THE ACTION TAKEN BY THE CONTRACTING AGENCY. IN THE CIRCUMSTANCES, WE ARE UNABLE TO CONCUR WITH YOUR CONCLUSIONS THAT THE ORIGINAL GOVERNMENT ESTIMATE WAS NOT ACCURATE AND THAT THEREFORE MULLEN'S ORIGINAL BID WAS REASONABLE AND SHOULD HAVE BEEN ACCEPTED.

BASED ON THE FOREGOING, WHILE WE AGREE WITH YOUR VIEWS CONCERNING THE DETRIMENTAL EFFECT TO THE COMPETITIVE BIDDING SYSTEM OF CANCELLATION OF AN INVITATION FOR BIDS AFTER BIDS HAVE BEEN PUBLICLY DISCLOSED, NEVERTHELESS, WE ARE UNABLE TO CONCLUDE THAT THE ACTION OF THE CONTRACTING AGENCY IN THIS PROCUREMENT WAS IMPROPER. ACCORDINGLY, WE FIND NO LEGAL BASIS TO QUESTION THE VALIDITY OF THE AWARD WHICH HAS BEEN MADE TO THE LOW BIDDER UNDER THE SECOND IFB, AND YOUR PROTEST IS THEREFORE DENIED.