B-162984, B-162985, B-163056, JANUARY 26, 1968, 47 COMP. GEN. 401

B-162984,B-162985,B-163056: Jan 26, 1968

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THE REJECTION OF THE BID AS NONRESPONSIVE WAS PROPER. WAS PRECLUDED AND. THE NONRESPONSIVE BID WAS NOT FOR EVALUATION AND COMPARISON. THE AWARD IS CONSIDERED TO HAVE BEEN MADE IN GOOD FAITH AND IN THE BEST INTERESTS OF THE GOVERNMENT. 1968: FURTHER REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 20 AND 24. WHICH WERE OPENED ON NOVEMBER 2. IT WAS NOTED THAT YOU WERE THE HIGHEST BIDDER ON ITEMS 60. YOU WERE ADVISED THAT THE CONDITIONS INCLUDED ON THE PERSONAL CHECK SUBMITTED BY YOU AS A BID DEPOSIT RENDERED IT NON- NEGOTIABLE AND THAT YOUR BID WAS NONRESPONSIVE BECAUSE THE BID DID NOT CONFORM TO THE INVITATION FOR BIDS. 61 AND 93 WERE AWARDED TO THE HIGHEST RESPONSIBLE. YOU HAVE PROTESTED REJECTION OF YOUR BID AS NONRESPONSIVE AND QUESTION WHETHER THE GOVERNMENT RECEIVED A FAIR RETURN FOR ITS PROPERTY IN REJECTING YOUR HIGHER BID FOR THE ITEMS AND ACCEPTING LOWER BIDS.

B-162984, B-162985, B-163056, JANUARY 26, 1968, 47 COMP. GEN. 401

SALES - BIDS - DEPOSITS - UNACCEPTABLE FORM THE NEGOTIATION OF A BID DEPOSIT CHECK ACCOMPANYING THE HIGH BID UNDER A SURPLUS SALES INVITATION HAVING BEEN CONDITIONED ON RECEIVING A CONTRACT AWARD, THE REJECTION OF THE BID AS NONRESPONSIVE WAS PROPER, FOR IN QUALIFYING THE CHECK ITS USE AS EITHER A NEGOTIABLE INSTRUMENT, OR AS A DRAFT, CHECK, OR DEMAND NOTE, AS WELL AS ACCEPTANCE AS A BID BOND, WAS PRECLUDED AND, THEREFORE, THE QUALIFICATION CONSTITUTED A MATERIAL EXCEPTION TO THE INVITATION WHICH CONTEMPLATED THE NEGOTIABILITY OF BID DEPOSITS AND NOT PROMISES TO PAY UNDER CERTAIN CONDITIONS, AND ADEQUATE COMPETITION HAVING BEEN SECURED UNDER THE INVITATION TO ESTABLISH THAT THE FAIR MARKET VALUE OF THE SURPLUS MATERIALS WOULD BE OBTAINED IN MAKING AN AWARD TO THE HIGHEST RESPONSIVE BIDDER, THE NONRESPONSIVE BID WAS NOT FOR EVALUATION AND COMPARISON, AND THE AWARD IS CONSIDERED TO HAVE BEEN MADE IN GOOD FAITH AND IN THE BEST INTERESTS OF THE GOVERNMENT.

TO THE SURPLUS TIRE SALES, JANUARY 26, 1968:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF NOVEMBER 20 AND 24, AND DECEMBER 7 AND 9, 1967, WITH ENCLOSURES, PROTESTING AGAINST THE REJECTION OF YOUR VARIOUS BIDS AS NONRESPONSIVE UNDER DEFENSE SUPPLY AGENCY SALES INVITATIONS NOS. 44-8035; 44-8044; AND 46-8027, WHICH WERE OPENED ON NOVEMBER 2, NOVEMBER 28, AND NOVEMBER 14, 1967, RESPECTIVELY.

YOUR PROTESTS HAD THEIR INCEPTION WITH THE OPENING OF BIDS NOVEMBER 2, 1967, ON INVITATION NO. 44-8035, ISSUED BY THE DEFENSE SURPLUS SALES OFFICE, OAKLAND, CALIFORNIA. IN RESPONSE TO THIS INVITATION, YOU SUBMITTED A BID ALONG WITH 152 OTHER BIDDERS. IN EVALUATING THE HIGH BIDS, IT WAS NOTED THAT YOU WERE THE HIGHEST BIDDER ON ITEMS 60, 61 AND 93, BUT HAD ANNOTATED CERTAIN RESTRICTIONS ON YOUR BID DEPOSIT CHECK CONCERNING ITS NEGOTIATION. ON ADVICE OF COUNSEL OF DEFENSE LOGISTICS SERVICES CENTER, YOU WERE ADVISED THAT THE CONDITIONS INCLUDED ON THE PERSONAL CHECK SUBMITTED BY YOU AS A BID DEPOSIT RENDERED IT NON- NEGOTIABLE AND THAT YOUR BID WAS NONRESPONSIVE BECAUSE THE BID DID NOT CONFORM TO THE INVITATION FOR BIDS. THEREFORE, ITEMS 60, 61 AND 93 WERE AWARDED TO THE HIGHEST RESPONSIBLE, RESPONSIVE BIDDERS. YOU HAVE PROTESTED REJECTION OF YOUR BID AS NONRESPONSIVE AND QUESTION WHETHER THE GOVERNMENT RECEIVED A FAIR RETURN FOR ITS PROPERTY IN REJECTING YOUR HIGHER BID FOR THE ITEMS AND ACCEPTING LOWER BIDS. THE QUESTIONS RAISED BY YOU UNDER EACH OF THE ABOVE INVITATIONS ARE THE SAME, AND WILL BE CONSIDERED AND DISPOSED OF IN THIS DECISION WHEREIN SALES INVITATION NO. 44-8035 IS DISCUSSED.

YOU SUBMITTED SURPLUS TIRE SALES COMPANY CHECK NO. 5161, DATED NOVEMBER 1, 1967, PAYABLE TO THE TREASURER OF THE UNITED STATES, IN THE AMOUNT OF $500.50 AS A BID DEPOSIT TO THE DEFENSE SURPLUS SALES OFFICE, OAKLAND, CALIFORNIA, UNDER ITS SALES INVITATION NO. 44-8035. ON THE FACE OF YOUR CHECK YOU HANDPRINTED THE FOLLOWING: BID DEPOSIT: DSSO OAKLAND. SALE 44- 8035--- NOTICE: DO NOT DEPOSIT, CASH OR NEGOTIATE THIS CHECK UNLESS AN AWARD AND CONTRACT IS MADE PURSUANT TO BID SUBMITTED. OTHERWISE THIS CHECK WILL BE DISHONORED.

ON THE REVERSE SIDE OF THIS CHECK, THERE WAS HANDPRINTED THE FOLLOWING SIMILAR NOTATION: NOTICE TO GOVERNMENT: DO NOT DEPOSIT, CASH OR NEGOTIATE THIS CHECK UNLESS A VALID AWARD AND CONTRACT RESULTS FROM THE SUBMISSION OF THE BID ACCOMPANYING THIS BID DEPOSIT CHECK, OTHERWISE THIS CHECK WILL BE DISHONORED BY PAYOR. FRED SCHWARTZ.

THE INVITATION FOR BIDS CONTAINS SPECIAL CONDITION AA ENTITLED "BID DEPOSITS" WHICH PROVIDES AS FOLLOWS:

ALL BIDS MUST BE ACCOMPANIED BY A BID DEPOSIT OF 20 PERCENT OF THE TOTAL AMOUNT BID WHICH MUST BE IN THE POSSESSION OF THE SALES CONTRACTING OFFICER BY THE TIME SET FOR BID OPENING. DEPOSIT BOND INDIVIDUAL INVITATION, SALE OF GOVERNMENT PERSONAL PROPERTY (STANDARD FORM 150) PROPERLY EXECUTED, OR REFERENCE TO AN APPROVED DEPOSIT BOND ANNUAL, SALE OF GOVERNMENT PERSONAL PROPERTY (STANDARD FORM 151) IS ACCEPTABLE IN LIEU OF THE ABOVE. ANY BID WHICH IS NOT TIMELY SUPPORTED BY AN ACCEPTABLE BOND OR BID DEPOSIT MAY BE REJECTED AS NON RESPONSIVE. ANY BOND OR BID DEPOSIT RECEIVED AFTER BID OPENING WILL BE CONSIDERED IN THE SAME MANNER AS LATE BIDS.

THE REQUIRED FORM OF THE BID DEPOSIT IS CLEARLY DEFINED IN ARTICLE D OF THE SPECIAL CONDITIONS ENTITLED "PAYMENT" WHICH PROVIDES, IN PERTINENT PART, AS FOLLOWS:

* * * BID DEPOSITS AND PAYMENTS MUST BE MADE IN U.S. CURRENCY OR ANY OTHER FORM OF CREDIT INSTRUMENT, MADE PAYABLE, IN U.S. DOLLARS, TO THE TREASURER OF THE UNITED STATES ON DEMAND, INCLUDING FIRST PARTY PERSONAL CHECKS BYT EXCLUDING PROMISSORY NOTES * * *.

ALSO, ARTICLE E OF THE SPECIAL CONDITIONS OF THE SALES INVITATION PROVIDES AS FOLLOWS:

THE BIDDER OR PURCHASER HEREBY AGREES THAT THE DEPARTMENT OF DEFENSE MAY USE ALL OR ANY PORTION OF ANY REFUND DUE HIM TO SATISFY, IN WHOLE OR IN PART, ANY DEBT ARISING OUT OF PRIOR TRANSACTIONS WITH THE DEPARTMENT OF DEFENSE.

THE RECORD REVEALS THAT YOU HAVE SUBMITTED SUCH CHECKS AS BID DEPOSITS AT OTHER DEFENSE SURPLUS SALES OFFICES SALES WHEREIN YOUR BIDS WERE NOT THE HIGHEST RECEIVED. BY LETTER DATED NOVEMBER 1, 1967, FROM THE COUNSEL, DEFENSE LOGISTICS SERVICES CENTER, YOU WERE ADVISED THAT SUCH BIDS ACCOMPANIED BY QUALIFIED PERSONAL CHECKS AS BID BONDS WOULD BE REJECTED AS NONRESPONSIVE SHOULD YOU SUBMIT A HIGH BID UNDER THESE CONDITIONS. HOWEVER, YOU HAVE PERSISTED IN SUBMITTING QUALIFIED BID DEPOSIT CHECKS IN CONNECTION WITH YOUR BIDS FOR SURPLUS MATERIALS, AND EXAMINATION OF THE RECORD REVEALS THAT YOUR PURPOSE IN SO DOING IS TO CIRCUMVENT THE SET-OFF OF YOUR BID DEPOSITS TO SATISFY YOUR INDEBTEDNESS ARISING OUT OF PRIOR SALES TRANSACTIONS WITH THE DEPARTMENT OF DEFENSE.

YOUR TENDER OF THE QUALIFIED PERSONAL CHECKS AS BID DEPOSITS CONSTITUTES A MATERIAL EXCEPTION TO THE APPLICABLE CLAUSES OF THE SALES INVITATION AND THUS RENDERED YOUR BIDS NONRESPONSIVE. WE HAVE FOUND THIS CLAUSE TO BE VALID AND PROPER FOR USE IN THE BEST INTERESTS OF THE GOVERNMENT. CF. 45 COMP. GEN. 504, 505 AND 38 ID. 476.

SPECIAL CONDITION AA, ABOVE, CLEARLY PROVIDES THAT EITHER A BID DEPOSIT OF 20 PERCENT OF THE TOTAL AMOUNT BID MUST ACCOMPANY THE BID OR THAT AN APPROVED BID BOND BE FURNISHED ON STANDARD FORMS 150 OR 151 TO SUPPORT THE BID. WHILE YOU REFER TO YOUR PERSONAL CHECKS AS A "BID BOND" OR A "ONE- TIME" BID BOND, YOU SUBJECTED SUCH BID DEPOSITS TO THE REQUIREMENTS OF THE SALES INVITATIONS. IT IS QUITE EVIDENT THAT BID DEPOSITS CONTEMPLATED BY THE SALES INVITATIONS IN THE FORM OF CREDIT INSTRUMENTS MUST BE NEGOTIABLE AND NOT PROMISES TO PAY UNDER CERTAIN CONDITIONS SUBSEQUENT.

IN THIS REGARD, THE EXPRESSIONS OF LAW CONTAINED IN THE UNIFORM COMMERCIAL CODE (UCC) MAY BE UTILIZED TO DETERMINE THE LEGAL EFFECT OF YOUR QUALIFIED PERSONAL CHECKS. THE UCC PROVIDES, IN PERTINENT PART, AS FOLLOWS: SEC. 3-104---

(1) ANY WRITING TO BE A NEGOTIABLE INSTRUMENT WITHIN THIS ARTICLE MUST

(B) CONTAIN AN UNCONDITIONAL PROMISE OR ORDER TO PAY A SUM CERTAIN IN MONEY AND NO OTHER PROMISE, ORDER OR OBLIGATION OR POWER GIVEN BY THE MAKER OR DRAWER EXCEPT AS AUTHORIZED BY THIS ARTICLE; AND

(C) BE PAYABLE ON DEMAND OR AT A DEFINITE TIME;

(2) A WRITING WHICH COMPLIES WITH THE REQUIREMENTS OF THIS SECTION IS

(B) A "CHECK" IF IT IS A DRAFT DRAWN ON A BANK AND PAYABLE ON DEMAND; SEC. 3-108 PAYABLE ON DEMAND--- INSTRUMENTS PAYABLE ON DEMAND INCLUDE THOSE PAYABLE AT SIGHT OR ON PRESENTATION AND THOSE IN WHICH NO TIME FOR PAYMENT IS STATED. SEC. 3-109 (2) AN INSTRUMENT WHICH BY ITS TERMS IS OTHERWISE PAYABLE ONLY UPON AN ACT OR EVENT UNCERTAIN AS TO TIME OF OCCURRENCE IS NOT PAYABLE AT A DEFINITE TIME EVEN THOUGH THE ACT OR EVENT HAS OCCURRED.

THE CONDITIONS AFFIXED TO YOUR PERSONAL CHECKS PRECLUDED THEIR USE AS EITHER NEGOTIABLE INSTRUMENTS, OR AS DRAFTS, OR CHECKS, OR DEMAND NOTES. NOR CAN THEY BE VIEWED OR ACCEPTED AS BID BONDS EITHER IN FORM OR EFFECT IN VIEW OF THE QUALIFIED NOTATIONS PLACED THEREON AS CONDITIONS TO THEIR NEGOTIABILITY. IN THE CIRCUMSTANCES, YOU FAILED TO SUBMIT ACCEPTABLE BID DEPOSITS WHICH COULD HAVE SERVED THE PURPOSES INTENDED BY THE SALES INVITATIONS. SINCE YOU WERE NOT RESPONSIVE TO THE BID GUARANTEE REQUIREMENTS, WHICH CONSTITUTE A MATERIAL PART OF THE SALES INVITATIONS, WE MUST CONCLUDE THAT THE ACTION TAKEN BY DSA IN REJECTING YOUR BIDS WAS PROPER.

YOU HAVE RAISED FURTHER QUESTIONS CONCERNING THE PROPRIETY OF AWARDING ITEMS 60, 61 AND 93 AT A TOTAL PRICE OF $870.04 AS OPPOSED TO YOUR PURPORTED BID OF $1,606.18 FOR THE ITEMS. GENERALLY, A NONRESPONSIVE BID IS NOT FOR CONSIDERATION IN ARRIVING AT A FAIR MARKET PRICE UNLESS SPECIAL FACTORS ARE PRESENT, WHICH IS NOT THE CASE HERE, INDICATING THAT THE BID OF THE NONRESPONSIVE BIDDER IS MORE REPRESENTATIVE OF THE MARKET VALUE. SINCE YOU HAD SUBMITTED A NONRESPONSIVE BID YOUR RELATIVELY HIGH BID PRICE WAS NOT FOR EVALUATION OR COMPARISON. THE ONLY QUESTION, THEREFORE, IS WHETHER THE HIGHEST RESPONSIVE BIDS REPRESENTED A FAIR RETURN TO THE GOVERNMENT. IT IS WELL ESTABLISHED THAT IN THE SALE OF SURPLUS PERSONAL PROPERTY, THE FAIR MARKET VALUE OF A COMMODITY IS ESTABLISHED THROUGH THE COMPETITIVE BIDDING SYSTEM. PRIOR TO MAKING AN AWARD OF THE ITEMS IN QUESTION, THE SALES CONTRACTING OFFICER COMPARED THE HIGHEST RESPONSIVE BIDS WITH THE CURRENT MARKET APPRAISALS FURNISHED BY THE MERCHANDISING DIVISION. BIDS ON ITEMS 60 AND 93 EXCEEDED THE APPRAISAL BY ALMOST ONE HUNDRED PERCENT. BIDS ON ITEM 61 PROVED TO BE ONLY A LITTLE OVER 50 PERCENT OF THE APPRAISAL. HOWEVER, THE FEDERAL STOCK NUMBER OF THE HOSE CONTAINED IN ITEM 61 WAS THEN CHECKED AGAINST DEFENSE LOGISTICS SERVICES CENTER'S SALES PERFORMANCE HISTORY FOR PAST SALES INFORMATION AND IT WAS FOUND THAT THE AVERAGE RETURN FOR THIS CATEGORY OF SURPLUS MATERIAL WAS 5.9 PERCENT OF THE ACQUISITION COST. IT WAS FOUND FURTHER THAT THE AWARD OF ITEMS 60, 61, AND 93 TO THE HIGHEST RESPONSIVE BIDDERS WOULD RESULT IN A RETURN OF 6.4 PERCENT OF THE ACQUISITION COST FOR USED AND UNUSED MATERIAL OF THIS CATEGORY. BASED ON THE FOREGOING AND THE FACT THAT THERE WERE NINE RESPONSIVE BIDDERS ON ITEM 60 AND EIGHT RESPONSIVE BIDDERS ON ITEMS 61 AND 93, RESPECTIVELY, WHICH IS CONSIDERED ADEQUATE COMPETITION, WE MUST CONCLUDE THAT THE AWARD WAS MADE IN GOOD FAITH AND IN THE BEST INTERESTS OF THE GOVERNMENT.