B-163140, MARCH 20, 1968, 47 COMP. GEN. 496

B-163140: Mar 20, 1968

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BIDS - QUALIFIED - PROGRESS PAYMENTS THE LOW BID OF A SMALL BUSINESS CONCERN IN WHICH PROGRESS PAYMENTS WERE REQUESTED IN AN ACCOMPANYING LETTER THAT IS CONSIDERED PART OF THE BID. WHICH WAS SUBMITTED IN RESPONSE TO AN INVITATION THAT DID NOT PROVIDE FOR A SMALL BUSINESS SET-ASIDE BUT INCORPORATED BY REFERENCE THE 70 PERCENT PROGRESS PAYMENT CLAUSE IN ASPR APPENDIX E 510.1. IS A QUALIFIED BID AND THE DEVIATION DELIBERATELY TAKEN IS NOT TRIVIAL OR MINIMAL BUT MODIFIES THE LEGAL OBLIGATION OF THE PARTIES CONCERNING PAYMENT. THE BID DEVIATION IS NOT THE MINOR INFORMALITY OR IRREGULARITY THAT MAY BE WAIVED UNDER ASPR 2-405 BY A CONTRACTING OFFICER. DOES NOT HAVE THE EFFECT OF PUTTING A CONTRACTING OFFICER ON NOTICE THAT A REQUEST FOR THE 75 PERCENT OF TOTAL COST PROGRESS PAYMENTS PROVIDED IN ASPR APPENDIX E-503 UNDER AN INVITATION INCLUDING THE 70 PERCENT PROGRESS PAYMENT CLAUSE IS THE POSSIBLE MINOR INFORMALITY OR IRREGULARITY THAT MAY BE WAIVED WITHIN THE MEANING OF ASPR 2-405.

B-163140, MARCH 20, 1968, 47 COMP. GEN. 496

BIDS - QUALIFIED - PROGRESS PAYMENTS THE LOW BID OF A SMALL BUSINESS CONCERN IN WHICH PROGRESS PAYMENTS WERE REQUESTED IN AN ACCOMPANYING LETTER THAT IS CONSIDERED PART OF THE BID, IN THE AMOUNT OF 75 PERCENT OF TOTAL COSTS PRESCRIBED FOR SMALL BUSINESS CONCERNS IN THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) APPENDIX E- 503, WHICH WAS SUBMITTED IN RESPONSE TO AN INVITATION THAT DID NOT PROVIDE FOR A SMALL BUSINESS SET-ASIDE BUT INCORPORATED BY REFERENCE THE 70 PERCENT PROGRESS PAYMENT CLAUSE IN ASPR APPENDIX E 510.1, IS A QUALIFIED BID AND THE DEVIATION DELIBERATELY TAKEN IS NOT TRIVIAL OR MINIMAL BUT MODIFIES THE LEGAL OBLIGATION OF THE PARTIES CONCERNING PAYMENT, NOTWITHSTANDING THE NEGLIGIBLE EFFECT ON PRICE AND THE PRECATORY NATURE OF THE TERM "REQUEST" AND, THEREFORE, THE BID DEVIATION IS NOT THE MINOR INFORMALITY OR IRREGULARITY THAT MAY BE WAIVED UNDER ASPR 2-405 BY A CONTRACTING OFFICER. CONTRACTS - PAYMENTS - PROGRESS - REQUEST THE FACT THAT THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) APPENDIX E -505 CONTEMPLATES THE REQUEST FOR AND THE GRANTING OF "UNUSUAL" PROGRESS PAYMENTS AT PERCENTAGES IN EXCESS OF THE CUSTOMARY 70 PERCENT PROVIDED IN ASPR APPENDIX E-510.1, DOES NOT HAVE THE EFFECT OF PUTTING A CONTRACTING OFFICER ON NOTICE THAT A REQUEST FOR THE 75 PERCENT OF TOTAL COST PROGRESS PAYMENTS PROVIDED IN ASPR APPENDIX E-503 UNDER AN INVITATION INCLUDING THE 70 PERCENT PROGRESS PAYMENT CLAUSE IS THE POSSIBLE MINOR INFORMALITY OR IRREGULARITY THAT MAY BE WAIVED WITHIN THE MEANING OF ASPR 2-405, AS ASPR APPENDIX E-505, WHILE PERMITTING REQUESTS FOR PROGRESS PAYMENTS IN EXCESS OF THE CUSTOMARY 70 PERCENT HAS REFERENCE TO REQUESTS FROM CONTRACTORS AND DOES NOT GRANT SIMILAR RIGHTS TO BIDDERS OR PROSPECTIVE CONTRACTORS. BIDS - QUALIFIED - PROGRESS PAYMENTS A BID ACCOMPANIED BY A LETTER REQUESTING AUTHORIZATION OF LARGER PROGRESS PAYMENTS THAN PROVIDED FOR IN THE INVITATION IS A QUALIFIED BID THAT DOES NOT RESERVE TO THE BIDDER THE OPTION AFTER BID OPENING TO WAIVE THE CONDITION AND ACCEPT A CONTRACT OR REFUSE TO ACCEPT A CONTRACT, NOTWITHSTANDING THE WORD "REQUEST" IS PRECATORY IN NATURE, AS THE WORD IS SUSCEPTIBLE OF TWO POSSIBLE MEANINGS DEPENDING ON THE EXISTING CIRCUMSTANCES, OR THAT THE WORD "AUTHORITY" IS DEEMED PRECATORY IN NATURE RATHER THAN A DEMAND AND, THEREFORE, THE QUALIFIED BID WAS PROPERLY REJECTED.

TO WACHTEL AND WIENER, MARCH 20, 1968:

YOUR TELEGRAM OF DECEMBER 20, 1967, AND YOUR LETTER OF JANUARY 3, 1968, ON BEHALF OF CONTROL SCIENCE CORPORATION (CSC), PROTESTED AGAINST THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER INVITATION FOR BIDS N00383-68- 8, ISSUED BY THE AVIATION SUPPLY OFFICE, NAVAL SUPPLY SYSTEMS COMMAND, PHILADELPHIA, PENNSYLVANIA.

THE SUBJECT INVITATION WAS ISSUED ON JULY 5, 1967, AND REQUESTED BIDS ON VARIOUS QUANTITIES OF COMPONENTS FOR AN AIRBORNE RADAR BEACON RECEIVER AND TRANSMITTER. THE INVITATION INCORPORATED BY REFERENCE THE PROGRESS PAYMENTS PROVISION CONTAINED IN THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) APPENDIX E-510.1, WHICH ALLOWS PROGRESS PAYMENTS IN THE AMOUNT OF 70 PERCENT OF THE CONTRACTOR'S TOTAL COSTS. PAGE 45 OF THE INVITATION PROVIDED: THE NEED FOR PROGRESS PAYMENTS CONFORMING TO REGULATIONS (APPENDIX E, ARMED SERVICES PROCUREMENT REGULATION) WILL NOT BE CONSIDERED AS A HANDICAP OR ADVERSE FACTOR IN THE AWARD OF CONTRACTS. BIDDERS DESIRING PROGRESS PAYMENTS IN ACCORDANCE WITH THE PROGRESS PAYMENTS CLAUSE ATTACHED HERETO, SHALL INCLUDE A WRITTEN REQUEST THEREFOR IN THEIR BIDS, AND BIDS INCLUDING REQUESTS FOR PROGRESS PAYMENTS WILL BE EVALUATED ON AN EQUAL BASIS WITH BIDS NOT INCLUDING A REQUEST FOR PROGRESS PAYMENTS. IF A BID DOES NOT CONTAIN A REQUEST FOR PROGRESS PAYMENT PROVISION, THE PROGRESS PAYMENT CLAUSE WILL NOT BE INCLUDED IN THE CONTRACT AS AWARDED.

CSC SUBMITTED THE LOW BID IN THE AMOUNT OF $290,930 AND IN A LETTER ACCOMPANYING ITS BID STATED AS FOLLOWS: IF CONTROL SCIENCE CORPORATION IS AWARDED A CONTRACT AS THE RESULT OF THIS OFFER, IT IS REQUESTED THAT PROGRESS PAYMENTS ON THE BASIS OF 75 PERCENT OF TOTAL COST BE AUTHORIZED PURSUANT TO PARAGRAPH E-503, APPENDIX "E," ASPR.

THE ASPR SECTION CITED IN THE CSC LETTER DEFINES CUSTOMARY PROGRESS PAYMENTS TO BE 70 PERCENT OF TOTAL COSTS, EXCEPT FOR CERTAIN INSTANCES INVOLVING CONTRACTS WITH SMALL BUSINESS CONCERNS IN WHICH THE ALLOWABLE PERCENTAGE IS 75 PERCENT. WHILE CSC IS A SMALL BUSINESS CONCERN, THE SUBJECT INVITATION DID NOT INVOLVE A PROCUREMENT UNDER WHICH CSC COULD HAVE QUALIFIED, PURSUANT TO ASPR APPENDIX E-503, FOR PROGRESS PAYMENTS IN THE AMOUNT OF 75 PERCENT OF TOTAL COSTS. THE CONTRACTING OFFICER REJECTED THE CSC BID AS NONRESPONSIVE ON THE GROUND THAT ITS REQUEST FOR PROGRESS PAYMENTS ON THE BASIS OF 75 PERCENT WAS A MATERIAL QUALIFICATION OF ITS BID. THE SECOND LOW BID, IN THE AMOUNT OF $295,005, WAS REJECTED AFTER THE BIDDER WAS DETERMINED TO BE NONRESPONSIBLE, AND ON DECEMBER 19, 1967, AWARD WAS MADE TO THE THIRD LOW BIDDER, UNITED TELECONTROL ELECTRONICS, NC., AT A CONTRACT PRICE OF $320,300.

THE SUBSTANCE OF YOUR PROTEST IS THAT CSC'S REQUEST FOR 75 PERCENT PROGRESS PAYMENTS SHOULD HAVE BEEN TREATED BY THE CONTRACTING OFFICER AS A MINOR INFORMALITY OR IRREGULARITY IN THE BID WHICH THE CONTRACTING OFFICER WAS REQUIRED TO WAIVE OR CORRECT UNDER ASPR 2-405. YOU POINT OUT THAT ASPR 2-405 REQUIRES THE CONTRACTING OFFICER TO WAIVE OR CORRECT ANY DEVIATION "HAVING NO EFFECT OR MERELY A TRIVIAL OR NEGLIGIBLE EFFECT ON PRICE, AND NO EFFECT ON QUALITY, QUANTITY, OR DELIVERY.' IN VIEW THEREOF, YOU MAINTAIN THAT A 70 PERCENT PROGRESS PAYMENTS PROVISION AS OPPOSED TO THE 75 PERCENT REQUESTED WOULD NOT HAVE HAD ANY AFFECT ON THE PRICE BID BY CSC. YOU ARGUE THAT SINCE THE CSC PRICE WOULD NOT HAVE BEEN AFFECTED BY THE INCLUSION OF A 65, 70, OR 75 PERCENT PROVISION,"THE RELATIVE STANDING OF THE OTHER BIDDERS IS NOT AFFECTED AT ALL NOR IS THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM COMPROMISED IN ANY WAY.'

WHILE NOT ABANDONING THE ARGUMENT THAT CSC WAS BOUND TO ITS BID PRICE EVEN IF THE REQUEST FOR 75 PERCENT PROGRESS PAYMENTS WAS NOT GRANTED, YOU HAVE SUBMITTED A LETTER AND ENCLOSURE DATED FEBRUARY 23, 1968, FROM THE TREASURER OF CSC, WHICH SHOWS THAT THE PROJECTED COST TO CSC OF PERFORMANCE WITH 70 PERCENT PROGRESS PAYMENTS WOULD BE APPROXIMATELY $145 MORE THAN PERFORMANCE WITH PROGRESS PAYMENTS OF 75 PERCENT. YOU CONTEND, IN VIEW OF THIS INFORMATION, THAT EVEN IF IT IS ARGUED THAT THE 5 PERCENT DIFFERENCE IN THE PERCENTAGES OF PROGRESS PAYMENTS INVOLVED COULD RESULT IN AN INCREASE IN THE CSC BID PRICE BECAUSE OF ADDITIONAL FINANCING COSTS, SUCH INCREASE WOULD FALL WITHIN THE DE MINIMIS RULE ENUNCIATED IN 34 COMP. GEN. 581 AND 41 COMP. GEN. 550, AND THEREFORE WOULD STILL BE REGARDED AS A MINOR INFORMALITY.

ADDITIONALLY, YOU NOTE THAT ASPR APPENDIX E-505 CONTEMPLATES THE REQUEST FOR, AND THE GRANTING OF, PROGRESS PAYMENTS AT PERCENTAGES IN EXCESS OF THE CUSTOMARY AMOUNTS, AND YOU CONTEND THEREFORE THAT,"THE CONTRACTING OFFICER MUST HAVE BEEN AWARE OF ASPR E-505 AND CSC'S REQUEST TIEING ASPR E -503 AND 75 PERCENT SHOULD HAVE PUT HIM ON NOTICE OF A POSSIBLE MINOR INFORMALITY OR IRREGULARITY WITHIN THE MEANING OF ASPR 2-405.

IN CONCLUSION, YOU ALLEGE THAT THE AWARD MADE TO THE THIRD LOW BIDDER WAS ILLEGAL AND YOU REQUEST THAT IT BE CANCELED AND AWARD MADE TO CSC.

THE REPORT SUBMITTED TO OUR OFFICE BY THE DEPARTMENT OF THE NAVY STATES THAT THE CSC BID WAS REJECTED BECAUSE IT WAS CONCLUDED THAT THE 70 PERCENT PROGRESS PAYMENTS CLAUSE WAS A MATERIAL TERM OF THE INVITATION AND THAT CSC'S BID WAS "CONDITIONED SO THAT ANY AWARD THEREON WOULD INCLUDE PROVISION FOR PROGRESS PAYMENTS COMPUTED AT 75 PERCENT OF CERTAIN COSTS RATHER THAN 70 PERCENT OF SUCH COSTS AS SPECIFIED BY THE IFB.' THE REPORT ALSO STATES THAT THE REQUEST FOR 75 PERCENT PROGRESS PAYMENTS WAS NOT CONSIDERED TO BE "A MINOR INFORMALITY OR IRREGULARITY WHICH THE CONTRACTING OFFICER MAY WAIVE UNDER AUTHORITY SET FORTH AT ASPR 2-405.' THE REPORT CITES 46 COMP. GEN. 368 AS AUTHORITY FOR THE CONCLUSION THAT A COVER LETTER ENCLOSED WITH AND REFERRING TO A BID WILL BE CONSIDERED TO BE A PART OF THE BID AND THAT A REQUEST IN SUCH A LETTER FOR PAYMENT PROVISIONS DIFFERING FROM THOSE SET OUT IN THE INVITATION MUST BE CONSTRUED AS CONDITIONING THE BID, NOTWITHSTANDING THE USUAL PRECATORY NATURE OF THE TERM "REQUEST.' AS EVIDENCE THAT CSC INTENDED ITS 75 PERCENT REQUEST TO CONDITION ITS BID, THE REPORT POINTS OUT THAT CSC, IN A LETTER SUBMITTED AFTER BID OPENING, AGREED TO ACCEPT PROGRESS PAYMENTS AT 70 PERCENT OF TOTAL COST.

IN SUBSTANTIATION OF ITS POSITION THAT A BID CONDITIONED ON PAYMENT PROVISIONS DIFFERING FROM THOSE CONTAINED IN THE INVITATION IS NONRESPONSIVE, THE ADMINISTRATIVE REPORT CITIES 38 COMP. GEN. 131, IN WHICH A BID REQUESTING PARTIAL PAYMENTS NOT CONTEMPLATED BY THE INVITATION WAS REJECTED. ALSO CITED ARE B-155827, FEBRUARY 25, 1965, AND B-159725, DECEMBER 23, 1966, FOR THE PROPOSITION THAT,"NO EXCEPTION DELIBERATELY TAKEN * * * CAN BE CONSTRUED TRIVIAL OR MINIMAL.' WE FIND NO REASONABLE BASES TO DISAGREE WITH THESE OBSERVATIONS AS SUPPORTING THE REJECTION ACTION TAKEN.

WE ARE OF THE OPINION THAT A BID ACTUALLY CONDITIONED ON THE RECEIPT OF 75 PERCENT PROGRESS PAYMENTS SUBMITTED IN RESPONSE TO AN INVITATION PROVIDING FOR 70 PERCENT IS NONRESPONSIVE SINCE IT DEVIATED FROM A MATERIAL TERM OF THE INVITATION, AND THAT SUCH A DEVIATION CANNOT BE WAIVED AS A MINOR INFORMALITY BECAUSE IT MODIFIES THE LEGAL OBLIGATIONS OF THE PARTIES CONCERNING PAYMENT UNDER THE CONTRACT CONTRARY TO THE EXPRESS TERMS OF THE INVITATION. 38 COMP. GEN. 131, 133. IN OTHER WORDS, WHETHER OR NOT THE 5 PERCENT DIFFERENCE IN PROGRESS PAYMENTS WOULD HAVE HAD A SIGNIFICANT EFFECT ON THE BID PRICE IS NOT FOR CONSIDERATION BECAUSE THE BIDDER HAS, IN EFFECT, SERVED NOTICE THAT HE WILL NOT ACCEPT A CONTRACT AT HIS QUOTED PRICE ON THE SAME PAYMENT TERMS PROPOUNDED TO OTHER BIDDERS, BUT RATHER, THAT HE WILL ACCEPT A CONTRACT AT HIS QUOTED PRICE ONLY IF HIS PAYMENT REQUIREMENTS ARE MET. IT IS WELL SETTLED THAT IF A BIDDER IMPOSES CONDITIONS AT VARIANCE WITH THOSE EXTENDED BY THE INVITATION TO ALL BIDDERS, HIS BID MUST BE REJECTED AS NONRESPONSIVE. SEE B-146039, JULY 20, 1961.

ALSO, WE CANNOT AGREE THAT THE PROVISIONS OF ASPR APPENDIX E-505 RESPECTING "UNUSUAL" PROGRESS PAYMENTS SHOULD HAVE PUT THE CONTRACTING OFFICER ON NOTICE OF A POSSIBLE MINOR INFORMALITY, AS CONTENDED BY CSC, BECAUSE THAT SECTION, WHILE PERMITTING REQUESTS FOR PROGRESS PAYMENTS IN EXCESS OF THE CUSTOMARY AMOUNTS (70 PERCENT), HAS REFERENCE TO REQUESTS FROM CONTRACTORS AND DOES NOT, IN OUR OPINION, GRANT SIMILAR RIGHTS TO BIDDERS OR PROSPECTIVE CONTRACTORS.

ACCORDINGLY, THE QUESTION FOR CONSIDERATION IS WHETHER THE STATEMENT CONTAINED IN CSC'S COVER LETTER SHOULD BE INTERPRETED AS A CONDITION RESERVING TO CSC THE OPTION, AFTER BID OPENING, OF WAIVING THE CONDITION AND ACCEPTING A CONTRACT AT 70 PERCENT PROGRESS PAYMENTS OR OF REFUSING TO ACCEPT A CONTRACT PROVIDING FOR LESS THAN 75 PERCENT PROGRESS PAYMENTS. 46 COMP. GEN. 368, AS WELL AS OTHER DECISIONS OF OUR OFFICE, RECOGNIZES THAT WHILE "IN THE ORDINARY SENSE THE WORD REQUEST- IS PRECATORY IN NATURE, ITS PRECISE MEANING MUST DEPEND UPON THE EXISTING RCUMSTANCES.' WE HAVE ALSO OBSERVED THAT IF A BIDDER'S REQUEST IS IN THE NATURE OF A MERE HOPE OR WISH COUPLED WITH AN INTENTION TO ACCEPT A CONTRACT SUBJECT TO THE INVITATION PAYMENT PROVISIONS, IT WAS INCUMBENT ON THE BIDDER TO CLEARLY EXPRESS SUCH INTENTION BECAUSE "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.

WHILE IT MAY BE ARGUED THAT THE USE OF THE TERM "AUTHORIZED" IN THE REQUEST OF CSC FOR 75 PERCENT PROGRESS PAYMENTS WAS IN RECOGNITION OF THE AUTHORITY OF THE CONTRACTING OFFICER UNDER ASPR APPENDIX "E" TO EITHER GRANT OR DENY THE REQUEST AND THUS THE REQUEST WAS PRECATORY IN TERMS RATHER THAN A DEMAND, WE BELIEVE THAT THE ACTION OF THE CONTRACTING OFFICER WAS REASONABLE UNDER THE CIRCUMSTANCES. THAT IS TO SAY, THE EXACT MEANING OF CSC'S REQUEST WAS SUBJECT TO INTERPRETATION OR EXPLANATION AFTER THE FACT. SINCE THE LANGUAGE USED WAS THE DELIBERATE CHOICE OF CSC AND ITS EFFECT WAS AT LEAST TO TENDER A CONDITION TO THE PAYMENT TERMS ADVERTISED TO OTHER BIDDERS, WE MUST CONCLUDE THAT THE BID--- THOUGH REASONABLY SUBJECT TO MORE THAN ONE INTELLIGENT MEANING--- WAS NONRESPONSIVE AND PROPERLY REJECTED. CF. 45 COMP. GEN. 809.