B-160698, FEB. 28, 1967

B-160698: Feb 28, 1967

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TO SHAFFER AND BUTT: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 16. THE WORK WAS REQUIRED TO BE COMPLETED WITHIN 150 DAYS AFTER THE DATE OF RECEIPT BY THE SUCCESSFUL BIDDER OF NOTICE TO PROCEED. WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN THIS CONTRACT. WHETHER OR NOT THE CONTRACTOR'S RIGHT TO PROCEED WITH THE WORK IS TERMINATED. HE AND HIS SURETIES SHALL BE LIABLE FOR ANY DAMAGE TO THE GOVERNMENT RESULTING FROM HIS REFUSAL OR FAILURE TO COMPLETE THE WORK WITHIN THE SPECIFIED TIME. "/B) IF FIXED AND AGREED LIQUIDATED DAMAGES ARE PROVIDED IN THE CONTRACT AND IF THE GOVERNMENT SO TERMINATES THE CONTRACTOR'S RIGHT TO PROCEED. THE RESULTING DAMAGE WILL CONSIST OF SUCH LIQUIDATED DAMAGES UNTIL SUCH REASONABLE TIME AS MAY BE REQUIRED FOR FINAL COMPLETION OF THE WORK TOGETHER WITH ANY INCREASED COSTS OCCASIONED THE GOVERNMENT IN COMPLETING THE WORK. "/C) IF FIXED AND AGREED LIQUIDATED DAMAGES ARE PROVIDED IN THE CONTRACT AND IF THE GOVERNMENT DOES NOT SO TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED.

B-160698, FEB. 28, 1967

TO SHAFFER AND BUTT:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 16, 1967, WITH ENCLOSURES, PROTESTING ON BEHALF OF GARDNER-ZEMKE COMPANY AGAINST THE REJECTION OF ITS BID UNDER AN INVITATION FOR BIDS (IFB) SPEC. NO. H51 7-1000-65-7, ISSUED BY THE BUREAU OF INDIAN AFFAIRS, AREA OFFICE, PHOENIX, ARIZONA.

THE INVITATION SOLICITED BIDS, TO BE OPENED DECEMBER 14, 1966, FOR THE CONSTRUCTION AND INSTALLATION OF A SUBSTATION AND EQUIPMENT AT COLORADO RIVER AGENCY, PARKER, ARIZONA. THE WORK WAS REQUIRED TO BE COMPLETED WITHIN 150 DAYS AFTER THE DATE OF RECEIPT BY THE SUCCESSFUL BIDDER OF NOTICE TO PROCEED, AND PARAGRAPH GC-27 OF THE GENERAL CONDITIONS OF THE SPECIFICATIONS FOR THE PROJECT PROVIDED THAT THE CONTRACTOR WOULD BE ASSESSED LIQUIDATED DAMAGES AT THE RATE OF $100 PER DAY FOR EACH DAY OF DELAY IN COMPLETION OF THE WORK. HOWEVER, CLAUSE 5 OF THE GENERAL PROVISIONS (STANDARD FORM 23-A, JUNE 1964, ED.) INCORPORATED IN THE INVITATION, PROVIDED, IN PERTINENT PART, AS FOLLOWS:

"5. TERMINATION FOR DEFAULT--- DAMAGES FOR DELAY--- TIME EXTENSIONS

"/A) IF THE CONTRACTOR REFUSES OR FAILS TO PROSECUTE THE WORK, OR ANY SEPARABLE PART THEREOF, WITH SUCH DILIGENCE AS WILL INSURE ITS COMPLETION WITHIN THE TIME SPECIFIED IN THIS CONTRACT, OR ANY EXTENSION THEREOF, OR FAILS TO COMPLETE SAID WORK WITHIN SUCH TIME, THE GOVERNMENT MAY, BY WRITTEN NOTICE TO THE CONTRACTOR, TERMINATE HIS RIGHT TO PROCEED WITH THE WORK OR SUCH PART OF THE WORK AS TO WHICH THERE HAS BEEN DELAY. IN SUCH EVENT THE GOVERNMENT MAY TAKE OVER THE WORK AND PROSECUTE THE SAME TO COMPLETION, BY CONTRACT OR OTHERWISE, AND MAY TAKE POSSESSION OF AND UTILIZE IN COMPLETING THE WORK SUCH MATERIALS, APPLIANCES, AND PLANT AS MAY BE ON THE SITE OF THE WORK AND NECESSARY THEREFOR. WHETHER OR NOT THE CONTRACTOR'S RIGHT TO PROCEED WITH THE WORK IS TERMINATED, HE AND HIS SURETIES SHALL BE LIABLE FOR ANY DAMAGE TO THE GOVERNMENT RESULTING FROM HIS REFUSAL OR FAILURE TO COMPLETE THE WORK WITHIN THE SPECIFIED TIME.

"/B) IF FIXED AND AGREED LIQUIDATED DAMAGES ARE PROVIDED IN THE CONTRACT AND IF THE GOVERNMENT SO TERMINATES THE CONTRACTOR'S RIGHT TO PROCEED, THE RESULTING DAMAGE WILL CONSIST OF SUCH LIQUIDATED DAMAGES UNTIL SUCH REASONABLE TIME AS MAY BE REQUIRED FOR FINAL COMPLETION OF THE WORK TOGETHER WITH ANY INCREASED COSTS OCCASIONED THE GOVERNMENT IN COMPLETING THE WORK.

"/C) IF FIXED AND AGREED LIQUIDATED DAMAGES ARE PROVIDED IN THE CONTRACT AND IF THE GOVERNMENT DOES NOT SO TERMINATE THE CONTRACTOR'S RIGHT TO PROCEED, THE RESULTING DAMAGE WILL CONSIST OF SUCH LIQUIDATED DAMAGES UNTIL THE WORK IS COMPLETED OR ACCEPTED.

"/D) THE CONTRACTOR'S RIGHT TO PROCEED SHALL NOT BE SO TERMINATED NOR THE CONTRACTOR CHARGED WITH RESULTING DAMAGE IF:

"/1) THE DELAY IN THE COMPLETION OF THE WORK ARISES FROM UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE CONTRACTOR, INCLUDING BUT NOT RESTRICTED TO, ACTS OF GOD, ACTS OF THE PUBLIC ENEMY, ACTS OF THE GOVERNMENT IN EITHER ITS SOVEREIGN OR CONTRACTUAL CAPACITY, ACTS OF ANOTHER CONTRACTOR IN THE PERFORMANCE OF A CONTRACT WITH THE GOVERNMENT, FIRES, FLOODS, EPIDEMICS, QUARANTINE RESTRICTIONS, STRIKES, FREIGHT EMBARGOES, UNUSUALLY SEVERE WEATHER, OR DELAYS OF SUBCONTRACTORS OR SUPPLIERS ARISING FROM UNFORESEEABLE CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF BOTH THE CONTRACTOR AND SUCH SUBCONTRACTORS, OR SUPPLIERS; AND

"/2) THE CONTRACTOR, WITHIN 10 DAYS FROM THE BEGINNING OF ANY SUCH DELAY (UNLESS THE CONTRACTING OFFICER GRANTS A FURTHER PERIOD OF TIME BEFORE THE DATE OF FINAL PAYMENT UNDER THE CONTRACT), NOTIFIES THE CONTRACTING OFFICER IN WRITING OF THE CAUSES OF DELAY.

"THE CONTRACTING OFFICER SHALL ASCERTAIN THE FACTS AND THE EXTENT OF THE DELAY AND EXTEND THE TIME FOR COMPLETING THE WORK WHEN, IN HIS JUDGMENT, THE FINDINGS OF FACT JUSTIFY SUCH AN EXTENSION, AND HIS FINDINGS OF FACT SHALL BE FINAL AND CONCLUSIVE ON THE PARTIES, SUBJECT ONLY TO APPEAL AS PROVIDED IN CLAUSE 6OF THESE GENERAL PROVISIONS.'

OF THE FIVE BIDS RECEIVED IN RESPONSE TO THE INVITATION THAT SUBMITTED BY GARDNER-ZEMKE COMPANY, IN THE TOTAL AMOUNT OF $138,236 (AFTER ALLOWING FOR A $5,000 REDUCTION IN BID PRICE AUTHORIZED BY GARDNER-ZEMKE'S TELEGRAM OF DECEMBER 14, 1966), WAS THE LOW BID. THE NEXT LOWEST BID WAS THAT SUBMITTED BY KINETIC ENGINEERING AND CONSTRUCTION, INC., AND B AND A ELECTRIC COMPANY, AS JOINT VENTURERS, IN THE TOTAL AMOUNT OF $143,750.

GARDNER-ZEMKE'S BID WAS TRANSMITTED TO THE AREA DIRECTOR OF THE BUREAU OF INDIAN AFFAIRS AT PHOENIX BY LETTER OF DECEMBER 12, 1966, WHICH STATED:

"WE ARE ATTACHING HERETO OUR UNQUALIFIED BID ON THE SUBJECT BID. WE HAVE RECEIVED A LIMITED NUMBER OF QUOTATIONS ON THE INSULATORS FOR THE JOB, AND THE INDICATION FROM THESE IS THAT THE DELIVERY OF THE INSULATORS IS BEYOND THE COMPLETION DATE OF THE PROJECT.

"IF WE ARE SUCCESSFUL IN OUR BID, WE WILL CONTACT OTHER MANUFACTURERS OF THE INSULATORS IN ORDER TO OBTAIN DELIVERY AS REQUIRED. IF ON CHECKING FURTHER IT IS FOUND THAT THESE INSULATORS HAVE AN EXTENDED DELIVERY, IT IS ASSUMED THAT THE CONTRACT TIME WILL BE EXTENDED IN ACCORDANCE WITH ARTICLE 5 OF THE CONTRACT. NO PENALTY COST HAS BEEN INCLUDED FOR THIS.'

BY LETTER OF DECEMBER 23, 1966, THE CONTRACTING OFFICER ADVISED GARDNER- ZEMKE THAT ITS BID WAS CONSIDERED TO HAVE BEEN QUALIFIED BY THE ABOVE- QUOTED LETTER TO THE EXTENT THAT IT WAS REQUIRED TO BE CONSIDERED NONRESPONSIVE TO THE INVITATION. ALSO, IN A LETTER DATED JANUARY 4, 1967, THE CONTRACTING OFFICER ADVISED YOU, AS ATTORNEYS FOR GARDNER-ZEMKE, THAT HIS POSITION, AS STATED IN HIS LETTER OF DECEMBER 23, REMAINED UNCHANGED. FOLLOWING GARDNER-ZEMKE'S APPEAL FROM THE CONTRACTING OFFICER'S DETERMINATION, THE COMMISSIONER OF INDIAN AFFAIRS INFORMED YOU BY TELEGRAM OF JANUARY 12, 1967, THAT THE CONTRACTING OFFICER'S DECISION WAS CONSIDERED TO BE CORRECT. ON JANUARY 20, 1967, THE CONTRACT WAS AWARDED TO THE JOINT VENTURERS REFERRED TO ABOVE AT THE PRICE OF $143,750.

YOUR CONTENTION TO THE CONTRARY NOTWITHSTANDING, IT SEEMS CLEAR TO US THAT GARDNER-ZEMKE'S LETTER OF DECEMBER 12, 1966, MUST BE CONSTRUED AS A QUALIFICATION OF ITS BID. THE WHOLE LETTER, WITH THE EXCEPTION OF THE FIRST SENTENCE, WHICH MUST BE HELD TO "BEG" THE QUESTION AT ISSUE, CONSTITUTED NOTICE TO THE GOVERNMENT THAT GARDNER-ZEMKE MIGHT NOT BE ABLE TO PERFORM THE CONTRACT WITHIN THE TIME REQUIRED BECAUSE OF POSSIBLE, OR PROBABLE, INABILITY TO OBTAIN TIMELY DELIVERY OF THE "INSULATORS" REFERRED TO THEREIN, AND IN THE EVENT OF SUCH INABILITY EXPECTED TO BE GRANTED AN EXTENSION OF TIME OR WAIVER OF LIQUIDATED DAMAGES. HOWEVER, BIDS HAD BEEN SOLICITED ON THE BASIS OF A FIRM DELIVERY DATE, AND THERE WAS NO PROVISION FOR RELIEF OF THE CONTRACTOR FROM LIABILITY TO THE GOVERNMENT FOR ANY DELAY ENCOUNTERED UNLESS IT WAS DETERMINED BY THE CONTRACTING OFFICER TO HAVE BEEN DUE TO "UNFORESEEABLE CAUSES.' MANIFESTLY, A DELAY WHICH WAS PREDICTABLE AND HAD BEEN PROVIDED AGAINST BEFORE THE CONTRACT WAS ENTERED INTO COULD NOT BE CONSIDERED UNFORESEEABLE WITHIN THE MEANING OF CLAUSE 5 OF THE GENERAL PROVISIONS OF THE INVITATION, SUPRA. YET, IF THE GOVERNMENT HAD ACCEPTED GARDNER-ZEMKE'S BID, WHICH MAY NOT BE DISASSOCIATED FROM THE ACCOMPANYING LETTER, IT WOULD HAVE BEEN PLACED IN THE POSITION OF HAVING TACITLY AGREED IN ADVANCE THAT ANY DELAY IN DELIVERY ATTRIBUTABLE TO THE CAUSE MENTIONED WOULD BE EXCUSED. THE GOVERNMENT CLEARLY WOULD NOT HAVE BEEN IN A POSITION TO ENFORCE ITS RIGHTS UNDER CLAUSE 5 OF THE GENERAL CONDITIONS TO THE SAME EXTENT AS WOULD HAVE PREVAILED HAD THE BID NOT BEEN QUALIFIED BY THE LETTER. SINCE THE CONTRACT AWARDED IN SUCH CASE WOULD NOT HAVE BEEN THE SAME CONTRACT OFFERED TO OTHER BIDDERS, THE CONTRACTING OFFICER WAS PROHIBITED FROM MAKING THE AWARD BY SECTIONS 1-2.301 AND 1- 2.404-2 OF THE FEDERAL PROCUREMENT REGULATIONS, 41 CFR 1-2.301 AND 1-2.404 -2 (REVISED AS OF JANUARY 1, 1966), WHICH PROVIDE, IN PERTINENT PART, AS FOLLOWS:

"SEC. 1-2.301 RESPONSIVENESS OF BIDS.

"/A) TO BE CONSIDERED FOR AWARD, A BID MUST COMPLY IN ALL MATERIAL RESPECTS WITH THE INVITATION FOR BIDS SO THAT, BOTH AS TO THE METHOD AND TIMELINESS OF SUBMISSION AND AS TO THE SUBSTANCE OF ANY RESULTING CONTRACT, ALL BIDDERS MAY STAND ON AN EQUAL FOOTING AND THE INTEGRITY OF THE FORMAL ADVERTISING SYSTEM MAY BE MAINTAINED.

"SEC. 1-2.404-2 REJECTION OF INDIVIDUAL BIDS.

"/A) ANY BID WHICH FAILS TO CONFORM TO THE ESSENTIAL REQUIREMENTS OF THE INVITATION FOR BIDS, SUCH AS SPECIFICATIONS, DELIVERY SCHEDULE, OR PERMISSIBLE ALTERNATES THERETO, SHALL BE REJECTED AS NONRESPONSIVE.

"/B) ORDINARILY, A BID SHALL BE REJECTED WHERE THE BIDDER IMPOSES CONDITIONS WHICH WOULD MODIFY REQUIREMENTS OF THE INVITATION FOR BIDS OR LIMIT HIS LIABILITY TO THE GOVERNMENT SO AS TO GIVE HIM AN ADVANTAGE OVER OTHER BIDDERS. FOR EXAMPLE, BIDS SHALL BE REJECTED IN WHICH THE BIDDER:

"/5)LIMITS RIGHTS OF GOVERNMENT UNDER ANY CONTRACT CLAUSE. HOWEVER, A LOW BIDDER MAY BE REQUESTED TO DELETE OBJECTIONABLE CONDITIONS FROM HIS BID IF THESE CONDITIONS DO NOT GO TO THE SUBSTANCE, AS DISTINGUISHED FROM THE FORM OF THE BID. A CONDITION GOES TO THE SUBSTANCE OF A BID WHERE IT AFFECTS PRICE, QUANTITY,QUALITY, OR DELIVERY OF THE ITEMS OFFERED.'

THE ABOVE REGULATIONS, WHICH WERE PROMULGATED BY THE ADMINISTRATOR OF GENERAL SERVICES PURSUANT TO THE AUTHORITY CONTAINED IN SECTION 302 (A) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 (63 STATS. 377), AS AMENDED BY SECTION 1 OF PUBLIC LAW 89-343, 79 STAT. 1303, 41 U.S.C. 252 (A), HAVE THE FORCE AND EFFECT OF LAW. THE CRITERIA SET FORTH THEREIN FOR DETERMINING WHETHER A BID IS ELIGIBLE FOR ACCEPTANCE HAVE LONG BEEN RECOGNIZED AS ESSENTIAL UNDER THE GENERAL PRINCIPLES OF LAW RELATING TO THE LETTING OF PUBLIC CONTRACTS. SEE PRESTEX INC. V. UNITED STATES (1963), 162 CT.CLS. 620, 320 F.2D 367; 43 AM.JUR., PUBLIC WORK AND CONTRACTS, SECTION 40; 44 COMP. GEN. 193; 42 ID. 96; 40 ID. 447; 38 ID. 508; 36 ID. 535.

THE DEFECT IN THE BID WAS NOT, AS YOU SEEM TO BELIEVE, THAT IT CREATED DOUBT AS TO THE BIDDERS INTENTION OR ABILITY TO COMPLY WITH THE INVITATION REQUIREMENTS, BUT THAT IT ATTEMPTED TO RESTRICT THE GOVERNMENT'S RIGHTS OR LIMIT THE BIDDERS LIABILITY IN THE EVENT OF DELAY DUE TO THE CAUSE MENTIONED.