B-161877, AUGUST 8, 1967, 47 COMP. GEN. 103

B-161877: Aug 8, 1967

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BIDS - DISCARDING ALL BIDS - SAVINGS TO GOVERNMENT - UNCERTAINTY THE DETERMINATION TO REJECT ALL BIDS FOR RIVER DREDGING AND TO READVERTISE THE PROCUREMENT PREMISED ON THE POSSIBILITY OF THE SUBSTANTIAL SAVINGS THAT MIGHT BE EFFECTED BY INDEFINITELY POSTPONING DREDGING THE SHALLOW AREAS OF THE RIVER IS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION. THE REMOTENESS OF THE POSSIBILITY OF SAVINGS IS NOT A REASONABLE GROUND FOR CHARGING THE SPECIFICATIONS AND. WHILE PROTESTS ARE DENIED. THE REJECTION OF ALL BIDS APPEARS TO HAVE BEEN A CONSQUENCE OF AN INADEQUATE INITIAL APPRAISAL AND/OR REVIEW OF DREDGING REQUIREMENTS AND IT IS RECOMMENDED THAT A REVIEW OF ADMINISTRATIVE PROCEDURES IS WARRANTED.

B-161877, AUGUST 8, 1967, 47 COMP. GEN. 103

BIDS - DISCARDING ALL BIDS - SAVINGS TO GOVERNMENT - UNCERTAINTY THE DETERMINATION TO REJECT ALL BIDS FOR RIVER DREDGING AND TO READVERTISE THE PROCUREMENT PREMISED ON THE POSSIBILITY OF THE SUBSTANTIAL SAVINGS THAT MIGHT BE EFFECTED BY INDEFINITELY POSTPONING DREDGING THE SHALLOW AREAS OF THE RIVER IS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION, ABSENT EVIDENCE OF ABUSE, AND NOTWITHSTANDING THE UNCERTAINTY OF EVENTUAL SAVINGS, THE REMOTENESS OF THE POSSIBILITY OF SAVINGS IS NOT A REASONABLE GROUND FOR CHARGING THE SPECIFICATIONS AND, THEREFORE, THE DETERMINATION BY THE CONTRACTING AGENCY OF PRESENT NEEDS MUST BE ACCEPTED. HOWEVER, WHILE PROTESTS ARE DENIED, THE REJECTION OF ALL BIDS APPEARS TO HAVE BEEN A CONSQUENCE OF AN INADEQUATE INITIAL APPRAISAL AND/OR REVIEW OF DREDGING REQUIREMENTS AND IT IS RECOMMENDED THAT A REVIEW OF ADMINISTRATIVE PROCEDURES IS WARRANTED. BIDS - DISCARDING ALL BIDS - NOTICE LOW BIDDERS ORALLY ADVISED OF THE REASON FOR DISCARDING ALL BIDS AND READVERTISING A RIVER DREDGING PROCUREMENT AND FURNISHED A LETTER THAT DID NOT RESTATE THE REASON FOR CANCELING THE INVITATION BUT INFORMED THE BIDDERS THE WORK WOULD BE "READVERTISED UNDER REVISED PLANS AND SPECIFICATIONS WITH SUBSTANTIAL CHANGE IN THE SCOPE OF THE WORK" WERE NOT PREJUDICED, THE STATEMENT IN THE LETTER COMING WITHIN THE CATEGORY OF PARAGRAPH 2-404.1 (B) (II) OF THE ARMED SERVICES PROCUREMENT REGULATION LISTING AS A REASON FOR REJECTING BIDS AND READVERTISING A PROCUREMENT, A DETERMINATION THAT "SPECIFICATIONS HAVE BEEN REVISED," AND THE POSSIBILITY OF SUBSEQUENT CHANGE IN THE POSITION OF THE CONTRACTING AGENCY IS NOT SUFFICIENT TO BE PREJUDICIAL TO THE BIDDERS.

TO DANN AND HILLS, AUGUST 8, 1967:

REFERENCE IS MADE TO YOUR LETTERS DATED JUNE 23, 1967, AND SUBSEQUENT COMMUNICATIONS, AS ATTORNEYS FOR CARTER CONSTRUCTION COMPANY, INC., AND FOR THE JOINT VENTURE OF PINE BLUFF SAND AND GRAVEL COMPANY AND EUGENE LUHR AND COMPANY, PROTESTING THE REJECTION OF ALL BIDS SUBMITTED FOR DREDGING AND RELATED WORK IN RESPONSE TO INVITATION FOR BIDS NO. DACW03-67 -B-0068 ISSUED BY THE ARMY CORPS OF ENGINEERS, LITTLE ROCK, ARKANSAS, ON APRIL 12, 1967.

THE INVITATION CALLED FOR THE DREDGING OF APPROXIMATELY 4 MILES OF THE ARKANSAS RIVER IN JEFFERSON COUNTY, ARKANSAS, UNDER SCHEDULE A - POOL 4, AND THE DREDGING OF APPROXIMATELY 7 MILES OF THE RIVER AND OTHER WORK IN JEFFERSON, LINCOLN AND DESHA COUNTIES UNDER SCHEDULE B - POOL 2. BIDS WERE OPENED ON MAY 17, 1967. THE LOW BID ON SCHEDULE A WAS SUBMITTED BY CARTER CONSTRUCTION COMPANY IN THE AMOUNT OF $201,401, WHICH EXCEEDED THE GOVERNMENT ESTIMATE OF $173,445 BY 16.1 PERCENT, AND THE LOW BID ON SCHEDULE B WAS SUBMITTED BY THE PINE BLUFF-LUHR JOINT VENTURE IN THE AMOUNT OF $1,211,500, WHICH EXCEEDED THE GOVERNMENT ESTIMATE OF $816,200 BY 48.4 PERCENT. IN RESPONSE TO A PROTEST AS TO THE REASONABLENESS OF THE GOVERNMENT ESTIMATE ON SCHEDULE B, THE DISTRICT ENGINEER (CONTRACTING OFFICER) MADE A REVIEW OF THE ESTIMATE, AND INITIATED A REQUEST DATED MAY 22, 1967, FOR AN UPWARD REVISION OF THE ESTIMATE ON EACH SCHEDULE. IT WAS ALSO POINTED OUT IN SUCH REQUEST THAT WAGE RATES ON THE DREDGING PORTION OF THE WORK WOULD EXPIRE ON MAY 31, 1967. UPON REVIEW OF THE SCOPE OF WORK BY THE DIVISION ENGINEER, THE QUESTION WAS RAISED AS TO THE NECESSITY FOR REMOVAL OF THE MATERIAL IN THE LONG REACHES OF SHALLOW DREDGING. RECOMMENDING TO THE CHIEF OF ENGINEERS ON MAY 26, 1967, THAT THE BIDS BE REJECTED AND THE WORK READVERTISED WITH A SUBSTANTIAL CHANGE IN SCOPE, THE DIVISION ENGINEER CONCLUDED THAT THE SHALLOW DREDGING

" * * * CAN BE DELAYED INDEFINITELY, IN FACT, IT IS POSSIBLE THAT A CONSIDERABLE AMOUNT OF THIS SHALLOW DREDGING MAY NOT BE NECESSARY AT ALL, DEPENDING ON THE ACTION OF STREAM FLOWS BETWEEN NOW AND THE TIME NAVIGATION DEVELOPS. THIS OFFICE CONSIDERS THAT IF THE SHALLOW MATERIAL SHOULD REMAIN AS IT NOW IS, IT WOULD NOT IMPEDE THE DEVELOPMENT OF NAVIGATION AND THAT SUCH WORK AS APPEARS NECESSARY NOW, IF NOT REMOVED BY FLOW CONDITIONS IN THE INTERIM, COULD BE MERGED WITH THE EARLY MAINTENANCE DREDGING WHICH WILL UNDOUBTEDLY BE NECESSARY. WHILE IT IS POSSIBLE THAT THE SHALLOW AREAS COULD BECOME WORSE DURING THE INTERVENING PERIOD, THIS DOES NOT APPEAR LIKELY INASMUCH AS THE SHALLOW WORK OCCURS IN REACHES WHERE DIKES AND REVETMENTS HAVE ALREADY BEEN INSTALLED AND WHERE THE CHANNEL IS APPARENTLY IMPROVING THROUGH THE CONTINUATION OF NORMAL FLOWS. ACCORDINGLY, WE HAVE NO PLANS FOR READVERTISING THIS PORTION OF THE WORK WITHIN THE FORESEEABLE FUTURE.'

IT WAS FURTHER INDICATED THAT IF ACTION OF THE RIVER MADE REMOVAL OF THE SHALLOW DREDGING UNNECESSARY, A SUBSTANTIAL SAVINGS TO THE GOVERNMENT MIGHT BE REALIZED. ON MAY 31, 1967, AFTER CONSIDERING THE MATTER, THE CHIEF OF ENGINEERS APPROVED THE REJECTION OF ALL BIDS AND READVERTISEMENT ON THE BASIS OF A CHANGE IN SCOPE OF WORK.

IN HIS FINDINGS OF FACT DATED JUNE 7, 1967, WHICH SETS OUT THE ABOVE, AND OTHER DETAILS, THE CONTRACTING OFFICER STATES THAT AT A MEETING HELD ON JUNE 2, 1967, REPRESENTATIVES OF THE LOW BIDDERS WERE NOTIFIED THAT ALL BIDS WERE BEING REJECTED, AND THAT THE BIDDERS WERE ADVISED IN DETAIL OF THE BASIS OF SUCH REJECTION. EACH OF THE LOW BIDDERS WAS ALSO HANDED A LETTER BY THE CONTRACTING OFFICER REJECTING ITS BID AND STATING THAT THE WORK WOULD BE READVERTISED UNDER REVISED PLANS AND SPECIFICATIONS WITH SUBSTANTIAL CHANGE IN THE SCOPE OF WORK. IN HIS FINDINGS OF JUNE 7 THE CONTRACTING OFFICER DETERMINED THAT "REJECTION OF ALL BIDS, REVISION OF THE PLANS AND SPECIFICATIONS TO ELIMINATE THE SHALLOW DREDGING, AND READVERTISING THE WORK AS REDESIGNED IS TO THE GOVERNMENT'S BEST INTEREST, AND IS AUTHORIZED BY THE PROVISIONS OF ASPR 2-404.'

A MEETING WAS HELD BY THE DIVISION ENGINEER WITH THE PROTESTANTS ON JUNE 13, 1967, DURING WHICH THEY EXPRESSED THE VIEW THAT ELIMINATION OF THE SHALLOW DREDGING WOULD REQUIRE THE CONTRACTOR TO INCUR EXTRA MOVING COSTS WHICH WOULD OUTWEIGH THE SAVINGS INHERENT IN ELIMINATING THE SHALLOW DREDGING. THE DIVISION ENGINEER REPORTS THAT "DISTRICT AND DIVISION ANALYSIS RESULTS IN THE CONCLUSION THAT EVEN WITH ADVERSE LOW WATER CONDITION, APPROXIMATELY 30,000 CUBIC YARDS OF MATERIAL WOULD HAVE TO BE MOVED TO PERMIT MOVEMENT OF EQUIPMENT. THIS QUANTITY IS RELATIVELY INSIGNIFICANT AS AN ITEM FOR CONSIDERATION. ACCORDINGLY, NO CHANGE IN THE DETERMINATION IS INDICATED.' BY LETTER OF JUNE 19, 1967, THE CONTRACTING OFFICER CONFIRMED HIS STATEMENT MADE IN THE CONFERENCE OF JUNE 2 THAT THE GOVERNMENT ESTIMATE WAS NOT A FACTOR FOR CONSIDERATION AS THE DECISION FOR REJECTION OF ALL BIDS WAS BASED SOLELY ON THE NECESSITY FOR MAKING A SUBSTANTIAL CHANGE IN THE SCOPE OF WORK. THE PROCUREMENT WAS READVERTISED ON JUNE 26, 1967, UNDER INVITATION FOR BIDS NO. DACW03-67-B-0083 WITH THE INDICATED CHANGES IN THE SCOPE OF WORK.

YOU CONTEND THAT THE CONTRACTING OFFICER'S LETTERS NOTIFYING THE LOW BIDDERS OF THE REJECTION OF ALL BIDS GAVE NO "REASON" FOR SUCH ACTION AS CONTEMPLATED BY PARAGRAPHS 2-404.1/A) AND (B) OF THE ARMED SERVICES PROCUREMENT REGULATION, QUOTED IN YOUR LETTER OF JULY 20, 1967, AND THAT THE LOW BIDDERS "WERE PREJUDICED BY THE LEGAL INADEQUACY OF THE FORMAL NOTICES TO THEM OF REJECTION, SINCE THEY WERE FORCED TO RELY UPON ORAL EXPLANATIONS BY THE CONTRACTING OFFICER WHICH COULD BE MODIFIED LATER BY THE AGENCY, SHOULD DEVELOPMENTS DURING THE COURSE OF THEIR PROTESTS DICTATE A TACTICAL CHANGE IN THE GOVERNMENT'S POSITION.' WE FIND NO MERIT TO SUCH CONTENTIONS. CLEARLY, THE CONTRACTING OFFICER'S DETERMINATION, AS STATED IN THE LETTERS, THAT THE WORK WOULD BE ,READVERTISED UNDER REVISED PLANS AND SPECIFICATIONS WITH SUBSTANTIAL CHANGE IN THE SCOPE OF WORK" COMES WITHIN THE CATEGORY OF ASPR 2-404.1/B) (II) LISTING, AS ONE OF THE REASONS FOR WHICH ALL BIDS MAY BE REJECTED, A DETERMINATION THAT "SPECIFICATIONS HAVE BEEN REVISED.' FURTHER, SINCE THROUGHOUT THE PROCESSING OF THE PROTESTS SUCH REASON, AS ORIGINALLY EXPLAINED TO THE PROTESTANTS, HAS REMAINED THE BASIC ADMINISTRATIVE GROUND FOR REJECTION OF ALL BIDS, WE CANNOT AGREE WITH YOUR CONTENTION THAT THE LOW BIDDERS WERE, IN FACT, PREJUDICED MERELY BY THE POSSIBILITY THAT THE CONTRACTING OFFICER'S ORAL EXPLANATION OF THE DETAILS ON WHICH THAT REASON WAS PREMISED MIGHT HAVE BEEN SUBSEQUENTLY MODIFIED BY THE DEPARTMENT OF THE ARMY. YOU REFER TO VARIOUS DECISIONS OF THIS OFFICE, PARTICULARLY 39 COMP. GEN. 396, WITH WHICH YOU COMPARE THE PERCENTAGE OF WORK REDUCTION IN THE READVERTISEMENT, AND SUGGEST SUCH CASE IS SUFFICIENTLY SIMILAR TO THE CIRCUMSTANCES HERE INVOLVED AS TO CONSTITUTE CONTROLLING AUTHORITY FOR HOLDING, AS IN THAT DECISION, THAT THE REJECTION OF ALL BIDS CONSTITUTED AN ARBITRARY REJECTION, TO THE DETRIMENT OF THE GOVERNMENT'S INTEREST IN MAINTAINING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM, AND THAT A "COGENT" OR COMPELLING REASON DID NOT EXIST FOR THE REJECTION.

WE CONSIDER THE TWO CASES TO BE READILY DISTINGUISHABLE. IN 39 COMP. GEN. 396 THE SOLICITATION INVOLVED (IN PERTINENT PART) A REVISION IN AN ESTIMATE AS TO THE QUANTITY OF STORAGE NEEDED, WHEREAS THE PRESENT CASE CONCERNS AN ELIMINATION OF SPECIFIC WORK (SHALLOW DREDGING) SET FORTH IN THE DRAWINGS AND SPECIFICATIONS. FURTHER, THE PRIMARY BASIS FOR THE CONCLUSION IN 39 COMP. GEN. 396 THAT THE REJECTION OF ALL BIDS CONSTITUTED AN ARBITRARY ACTION, WAS NOT THE PERCENTAGE OF THE REVISION BUT WAS, INSTEAD, OUR VIEW THAT THERE WAS NO REASONABLE BASIS FOR CONSIDERING THE ORIGINAL ESTIMATE TO BE EXCESSIVE, AND THAT THE CONTRACTING OFFICER DID NOT ACTUALLY RELY ON SUCH BELIEF FOR HIS ACTION.

UNDER PARAGRAPH NO. 10/B) OF THE INVITATION'S INSTRUCTIONS TO BIDDERS (STANDARD FORM 22, JUNE 1964 EDITION) THE GOVERNMENT EXPRESSLY RESERVED THE RIGHT TO REJECT ANY OR ALL BIDS WHEN IN ITS INTEREST TO DO SO. AS STATED IN 39 COMP. GEN. 396, WE HAVE CONSISTENTLY RECOGNIZED SUCH AUTHORITY TO BE EXTREMELY BROAD, AND IN B-160626, MARCH 6, 1967, CITED IN YOUR PROTEST, WE OBSERVED THAT THE QUESTION OF REJECTING ALL BIDS IS PRIMARILY A MATTER OF ADMINISTRATIVE DISCRETION, AND SINCE THE RESPONSIBILITY FOR MAKING A DETERMINATION TO REJECT ALL BIDS RESTS WITH THE ADMINISTRATIVE OFFICERS OF THE PURCHASING AGENCY,"IN THE ABSENCE OF CLEAR PROOF OF ABUSE OF THEIR DISCRETIONARY POWERS IN THIS REGARD, THIS OFFICE WILL NOT OBJECT TO SUCH ACTION.' YOU CONTEND THAT THE ADMINISTRATIVE OFFICERS ABUSED THEIR DISCRETIONARY POWERS IN THAT THE PROJECTED SAVINGS CONSIDERED IN THE REJECTION OF ALL BIDS WERE BASED UPON UNCERTAIN ACTIONS OF THE RIVER, AND THUS CONSTITUTED PURE SPECULATION, NOT ADEQUATE TO BE CONSIDERED AS ESTABLISHING A COMPELLING OR "COGENT" REASON FOR THE REJECTION. WE AGREE THAT THERE IS A HIGH DEGREE OF UNCERTAINTY AS TO WHETHER ANY SAVINGS WILL EVENTUALLY BE ACCOMPLISHED BY REASON OF THE READVERTISEMENT, IT APPEARING, AS YOU CONTEND, THAT ANY SUCH SAVINGS ARE DEPENDENT MAINLY UPON FUTURE STREAM FLOWS. WE ALSO NOTE THAT THE JUDGMENT OF THE CORPS OF ENGINEERS PERSONNEL REGARDING SUCH RIVER ACTIONS, AS REFLECTED IN THE ADMINISTRATIVE REPORT, IS IN TERMS OF POSSIBILITIES RATHER THAN PROBABILITIES. WE BELIEVE, HOWEVER, THAT IN VIEW OF SUCH UNCERTAINTIES, WHICH CAN BE ACCURATELY RESOLVED ONLY THROUGH THE PASSAGE OF TIME, THE PRINCIPAL POINT FOR RESOLUTION AT THIS TIME IS WHETHER THERE IS SUCH A PRESENT OR IMMINENT NEED FOR THE SHALLOW DREDGING AS NECESSARILY TO REQUIRE THE CURRENT EXPENDITURE OF SUBSTANTIAL ADDITIONAL FUNDS. THE CONCLUSIONS OF THE DIVISION ENGINEER QUOTED ABOVE IT IS STATED THAT THE REMOVAL OF THE MATERIAL IN THE SHALLOW REACHES CAN BE DELAYED INDEFINITELY; THAT IF THE SHALLOW MATERIAL SHOULD REMAIN AS IT NOW IS, IT WOULD NOT IMPEDE THE DEVELOPMENT OF NAVIGATION; AND THAT THERE ARE NO PLANS FOR READVERTISING THAT PORTION OF THE WORK WITHIN THE FORESEEABLE FUTURE. WE FIND NOTHING IN THE RECORD WHICH REFUTES SUCH CONCLUSIONS. THUS, TO SUSTAIN THE PROTESTS AND REQUIRE THE PERFORMANCE OF THE SHALLOW DREDGING UNDER INVITATION NO. DACW03-67-B-0068, WHICH THE PROCURING AGENCY HAS DETERMINED TO BE UNNECESSARY AT THIS TIME WOULD, IN EFFECT, PLACE THIS OFFICE IN THE POSITION OF IMPOSING UPON THE ARMY YOUR JUDGMENT AS TO ITS PRESENT NEEDS, AS SUPERIOR TO ITS OWN. THIS WE PROPERLY MAY NOT DO, SINCE WE ARE UNABLE TO CONCLUDE THAT THE POSSIBILITY THAT THE DREDGING OF SHALLOW AREAS MAY BECOME UNNECESSARY OR LESS COSTLY IS TOO REMOTE TO FURNISH A REASONABLE GROUND FOR THE CHANGE OF THE SPECIFICATIONS.

WITH REFERENCE TO YOUR ADVICE THAT CONGRESS, IN APPROVING THE ARKANSAS RIVER PROJECT, CONTEMPLATED THAT THE CHANNEL SHOULD BE 250 FEET WIDE, AND THAT SUCH A CHANNEL WILL NOT RESULT UNDER THE REVISED SPECIFICATION, OUR REVIEW OF THE HISTORY OF P. L. 79-525 FAILS TO INDICATE THAT THIS OBJECTIVE WAS TO BE ACCOMPLISHED IN ANY SPECIFIC MANNER OR AT ANY SPECIFIC DATE. IN VIEW THEREOF, AND SINCE IT IS THE EXPRESSED INTENTION OF THE CORPS OF ENGINEERS TO DO THE SHALLOW DREDGING AT SOME LATER DATE IF IT SHOULD BE FOUND THAT THE ACTION OF THE RIVER DOES NOT OPERATE TO RENDER SHALLOW DREDGING UNNECESSARY, WE SEE NO VALID BASIS ON WHICH IT COULD BE CONCLUDED THAT FAILURE TO INCLUDE THE SHALLOW DREDGING IN THE CURRENT CONTRACT WOULD BE IN CONFLICT WITH THE CONGRESSIONAL INTENT.

ACCORDINGLY, INASMUCH AS IT HAS BEEN ADMINISTRATIVELY DETERMINED THAT THE SUBJECT SHALLOW DREDGING, WHICH CONSTITUTES A SUBSTANTIAL PORTION OF THE WORK, IS NOT ESSENTIAL AT THIS TIME OR IN THE FORESEEABLE FUTURE, WE BELIEVE, CONTRARY TO YOUR CONTENTIONS, THAT "COGENT" REASONS EXIST FOR REJECTING ALL BIDS AND READVERTISING THE WORK MINUS SUCH DREDGING, AND THE SUBJECT PROTESTS AGAINST SUCH ACTION MUST BE DENIED.

IN VIEW OF THE FOREGOING THE ISSUES RELATING TO THE GOVERNMENT'S ESTIMATES FOR THE WORK, AND THE EFFECT OF THE EXPIRATIONS OF DEPARTMENT OF LABOR WAGE DETERMINATION DECISIONS NOS. AG-8189 AND AG-11375 UPON ANY CONTEMPLATED AWARDS UNDER INVITATION NO. DACW03-67-B-0068 ARE NOW ACADEMIC.

WHILE THE PROTESTS ARE DENIED, THE REJECTION OF ALL BIDS APPEARS TO HAVE BEEN A CONSEQUENCE OF AN INADEQUATE INITIAL APPRAISAL AND/OR REVIEW OF ARMY'S DREDGING REQUIREMENTS. WE ARE THEREFORE CALLING THIS MATTER TO THE ATTENTION OF THE SECRETARY OF THE ARMY FOR SUCH REVIEW OF ADMINISTRATIVE PROCEDURES IN THIS AREA AS IS DEEMED TO BE WARRANTED.