B-163878, MAY 27, 1968

B-163878: May 27, 1968

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

JR.: REFERENCE IS MADE TO YOUR LETTER OF MARCH 25. BIDS WILL BE CONSIDERED ONLY FROM DOMESTIC INSURANCE COMPANIES AND ASSOCIATIONS ENGAGED IN UNDERWRITING THE FORM OF INSURANCE COVERED BY THIS INVITATION WHICH HAVE A POLICYHOLDERS' RATING OF -A- OR BETTER IN BEST'S INSURANCE REPORTS. WHICH HAVE EXPERIENCED CLAIMS ORGANIZATIONS IN THE UNITED STATES WITH CORRESPONDENTS IN FOREIGN COUNTRIES. STOCK COMPANIES MUST HAVE A COMBINED CAPITAL AND SURPLUS OF NOT LESS THAN $2. MUTUAL ASSOCIATIONS OR COMPANIES MUST HAVE A RESERVE OF NOT LESS THAN $1. ALTHOUGH NATIONAL INDEMNITY COMPANY WAS THE LOW BIDDER FOR FURNISHING MARINE PROTECTION AND INDEMNITY INSURANCE FOR THE 1-YEAR TERM COMMENCING MIDNIGHT MARCH 31.

B-163878, MAY 27, 1968

TO MR. JOHN B. RICKER, JR.:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 25, 1968, PROTESTING THE AWARD OF A CONTRACT BY THE NATIONAL SHIPPING AUTHORITY OF THE MARITIME ADMINISTRATION TO THE NATIONAL INDEMNITY COMPANY UNDER INVITATION FOR BIDS 16 FOR MARINE PROTECTION AND INDEMNITY INSURANCE.

SECTION 7 OF THE INVITATION FOR BIDS PROVIDED:

"QUALIFICATIONS OF BIDDERS. BIDS WILL BE CONSIDERED ONLY FROM DOMESTIC INSURANCE COMPANIES AND ASSOCIATIONS ENGAGED IN UNDERWRITING THE FORM OF INSURANCE COVERED BY THIS INVITATION WHICH HAVE A POLICYHOLDERS' RATING OF -A- OR BETTER IN BEST'S INSURANCE REPORTS, OR THE EQUIVALENT OF SUCH RATING, AND WHICH HAVE EXPERIENCED CLAIMS ORGANIZATIONS IN THE UNITED STATES WITH CORRESPONDENTS IN FOREIGN COUNTRIES. STOCK COMPANIES MUST HAVE A COMBINED CAPITAL AND SURPLUS OF NOT LESS THAN $2,000,000., AND MUTUAL ASSOCIATIONS OR COMPANIES MUST HAVE A RESERVE OF NOT LESS THAN $1,000,000. BIDDERS SHALL SUBMIT SATISFACTORY EVIDENCE OF THEIR QUALIFICATIONS IF AND WHEN REQUESTED BY THE AUTHORITY.'

ALTHOUGH NATIONAL INDEMNITY COMPANY WAS THE LOW BIDDER FOR FURNISHING MARINE PROTECTION AND INDEMNITY INSURANCE FOR THE 1-YEAR TERM COMMENCING MIDNIGHT MARCH 31, 1968, YOU HAVE PROTESTED THE AWARD TO IT ON THE BASIS THAT IT IS NOT AND HAS NOT BEEN ENGAGED IN UNDERWRITING THE FORM OF INSURANCE COVERED BY THE INVITATION AND THAT IT DOES NOT HAVE A CLAIMS ORGANIZATION EXPERIENCED IN THAT CLASS OF BUSINESS. FURTHER, YOU HAVE STATED THAT THE COMPANY WILL REINSURE HEAVILY, IF NOT ENTIRELY, IN THE LONDON MARKET AND THAT THIS WILL ADVERSELY AFFECT THE UNITED STATES BALANCE OF PAYMENTS.

AFTER THE OPENING OF BIDS, THE NATIONAL INDEMNITY COMPANY FURNISHED INFORMATION REGARDING ITS QUALIFICATIONS TO THE MARITIME ADMINISTRATION. THE MARITIME ADMINISTRATION HAS SATISFIED ITSELF THAT NATIONAL INDEMNITY IS INCORPORATED IN NEBRASKA AND YOU HAVE ACKNOWLEDGED THAT IT IS LICENSED TO DO BUSINESS IN THE DISTRICT OF COLUMBIA AND IN MOST OF THE STATES. FURTHER, THE MARITIME ADMINISTRATION WAS SATISFIED THAT THE COMBINED CAPITAL AND SURPLUS OF THE COMPANY EXCEEDS THE INVITATION REQUIREMENTS AND THAT BROWN AND HAWLEY, INC.,AND THE LAW OFFICES OF THEODORE F. TURNER, WHO HAVE ACTED TO THE SATISFACTION OF THE MARITIME ADMINISTRATION ON BEHALF OF INTERSTATE FIRE AND CASUALTY COMPANY, THE PREVIOUS CONTRACTOR, WILL SERVE NATIONAL INDEMNITY AS UNDERWRITING AGENTS AND CLAIMS ADJUSTERS, RESPECTIVELY. ALTHOUGH NATIONAL INDEMNITY HAD NOT WRITTEN MARINE PROTECTION AND INDEMNITY INSURANCE PREVIOUSLY, THE MARITIME ADMINISTRATION WAS SATISFIED THAT IT HAS ENGAGED THE SERVICES OF EXPERIENCED AND QUALIFIED UNDERWRITING AND CLAIMS ORGANIZATIONS. IT IS STATED THAT WHAT NATIONAL INDEMNITY HAS DONE IS NO DIFFERENT THAN WHAT THE CONTINENTAL INSURANCE COMPANY AND OTHER COMPANIES DO IN UTILIZING THE MARINE OFFICE OF AMERICA FOR THE ADJUSTMENT OF MARITIME CLAIMS. IN ANY EVENT, ON THE BASIS OF THE FOREGOING, THE MARITIME ADMINISTRATION CONCLUDED THAT NATIONAL INDEMNITY WAS FULLY QUALIFIED TO PERFORM THE CONTRACT.

OUR OFFICE HAS HELD THAT THE AWARD OF A CONTRACT MAY BE LIMITED TO THOSE BIDDERS MEETING SPECIFIED QUALITATIVE AND QUANTITATIVE EXPERIENCE REQUIREMENTS IN A SPECIALIZED FIELD WHERE THE BIDDING CONDITIONS SO PROVIDE AND A DETERMINATION HAS BEEN MADE THAT THE INTERESTS OF THE GOVERNMENT WOULD BE SERVED THEREBY. SEE 37 COMP. GEN. 196 AND ID. 420 AND DECISIONS CITED THEREIN. HOWEVER, IN 39 COMP. GEN. 173, IT WAS INDICATED THAT OUR OFFICE DOES NOT CONDONE THE REJECTION OF BIDS OF RESPONSIBLE BIDDERS BECAUSE AS A TECHNICAL MATTER THEY DO NOT MEET PRESCRIBED EXPERIENCE QUALIFICATIONS. IN THAT CONNECTION, WE HELD IN THAT DECISION AT PAGE 178 THAT "THE STATEMENT OF SUCH QUALIFICATIONS SHOULD NOT BE CONSIDERED AS HAVING THE EFFECT OF TRANSFORMING THE PURELY FACTUAL QUESTION OF RESPONSIBILITY INTO A LEGAL QUESTION OF CONFORMITY TO THE INVITATION.' SEE, ALSO, 45 COMP. GEN. 4.

FURTHER, THERE WAS NO REQUIREMENT IN THE INVITATION PRECLUDING REINSURANCE IN THE LONDON MARKET OR REQUIRING ALL OR ANY PORTION OF THE PREMIUMS BEING RETAINED IN THE UNITED STATES. MOREOVER, THE MARITIME ADMINISTRATION HAS STATED THAT IT HAS BEEN ADVISED THAT ALL DOLLAR PREMIUMS RECEIVED BY THE FOREIGN REINSURER ARE DEPOSITED IN A TRUST FUND IN THE UNITED STATES IN WHICH THE FOREIGN REINSURER HAS ACREDIT IN EXCESS OF $15 MILLION, AND THAT MANY LOSSES ARE PAID BY DIRECT REMITTANCE FROM ABROAD INSTEAD OF OUT OF THE TRUST FUND. IT IS CLAIMED BY THE FOREIGN REINSURERS THAT THIS ARRANGEMENT RESULTS IN A NET PLUS BALANCE IN FAVOR OF THE UNITED STATES. IN ANY EVENT, WE ARE NOT AWARE OF ANY AUTHORITY UNDER WHICH THE LOW BIDDER COULD BE REJECTED SOLELY BECAUSE IT IS REINSURING IN A FOREIGN MARKET. IN THAT CONNECTION, IT SHOULD BE OBSERVED THAT THE BUY AMERICAN ACT, 41 U.S.C. 10A, ET SEQ., WHICH RELATES TO THE PROCUREMENT OF ARTICLES, MATERIALS AND SUPPLIES FOR PUBLIC USE, WAS INAPPLICABLE TO THIS INVITATION.

SINCE THE MARITIME ADMINISTRATION DETERMINED THAT THE NATIONAL INDEMNITY COMPANY WAS A RESPONSIBLE BIDDER, OUR OFFICE SEES NO BASIS FOR OBJECTING TO THE AWARD WHICH WAS MADE TO THAT COMPANY. ACCORDINGLY, THE PROTEST IS DENIED.