B-163880, B-164149, NOV. 21, 1968

B-163880, B-164149, NOV. 21, 1968

TO MR. SECRETARY:

WE REFER TO LETTER DATED OCTOBER 28, 1968, FROM THE ASSISTANT SECRETARY, COMPTROLLER, REGARDING PROJECT WVA-103, CITY HOSPITAL, MARTINSBURG, WEST VIRGINIA, WHICH IS BEING FINANCED IN PART WITH FEDERAL FUNDS UNDER THE HILL BURTON PROGRAM ADMINISTERED BY YOUR DEPARTMENT.

BY LETTER DATED SEPTEMBER 13, 1968, W. HARLEY MILLER, INC. (MILLER), THE SECOND LOW BIDDER ON THE PROJECT, FILED A PROTEST WITH THE BOARD OF TRUSTEES OF THE HOSPITAL, THE APPLICANT, AGAINST ANY AWARD TO THE LOW BIDDER, NORAIR ENGINEERING CORPORATION (NORAIR), AT AN AMOUNT IN EXCESS OF ITS ORIGINAL BID PRICE. MILLER STATED THAT NORAIR HAD CLAIMED AFTER BID OPENING THAT THERE WAS A MISTAKE IN ITS BID; THAT THE AMOUNT OF THE MISTAKE WOULD MAKE THE NORAIR BID SECOND LOWEST; AND THAT A PROPOSED AWARD BY THE APPLICANT WOULD ALLOW NORAIR AN INCREASE IN ITS BID PRICE. ACCORDINGLY, MILLER ASSERTED THAT EITHER MILLER SHOULD BE PERMITTED TO NEGOTIATE A NEW BID PRICE OR THE PROJECT SHOULD BE READVERTISED.

IN VIEW OF OUR UNDERSTANDING THAT THE MATTER WAS UNDER INVESTIGATION BY THE PUBLIC HEALTH SERVICE AND THAT NO AWARD HAD BEEN MADE, BY LETTER OF OCTOBER 2 WE FORWARDED TO YOU FOR YOUR CONSIDERATION AND APPROPRIATE ACTION CORRESPONDENCE WHICH WE HAD RECEIVED FROM MILLER CONSISTING OF A LETTER DATED SEPTEMBER 18 AND A COPY OF MILLER'S PROTEST TO THE APPLICANT.

THE ASSISTANT SECRETARY'S LETTER OF OCTOBER 28 STATES THAT NORAIR HAS DEMONSTRATED TO THE SATISFACTION OF THE APPLICANT THAT A BONA FIDE ERROR WAS COMMITTED IN ITS BID WHICH WOULD INCREASE THE BID TO AN AMOUNT ABOVE THE NEXT LOW BID OF MILLER AND THAT NORAIR HAS THEREFORE REQUESTED THAT ITS ORIGINAL BID BE WITHDRAWN. THE LETTER FURTHER STATES THAT THE APPLICANT HAS BEEN ADVISED THAT A PROPOSED AWARD TO NORAIR (I.E., AN AWARD AT A PRICE REACHED THROUGH NEGOTIATION WHICH IS HIGHER THAN NORAIR'S ORIGINAL BID BUT LOWER THAN MILLER'S BID) WOULD NOT COMPLY WITH THE APPLICANT'S ASSURANCE AND SPIRIT OF ESTABLISHED COMPETITIVE BIDDING PROCEDURES AND IS THEREFORE DISAPPROVED. THE ASSURANCE INVOLVED IS THAT REQUIRED UNDER 42 CFR 53.128 (C) PERTAINING TO AWARD OF THE CONTRACT TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST ACCEPTABLE BID.

THE PENULTIMATE PARAGRAPH OF THE LETTER OF OCTOBER 28, HOWEVER, GIVES US CONCERN. THE PARAGRAPH LISTS THREE OPTIONS WHICH ARE SAID TO BE AVAILABLE TO THE APPLICANT; I.E. (1) AWARD OF THE CONTRACT TO NORAIR AT ITS ORIGINAL BID PRICE BY DISALLOWING THE CLAIM OF ERROR, (2) AWARD TO MILLER AS THE NEXT LOW RESPONSIBLE BIDDER, OR (3) REJECTION OF ALL BIDS AND READVERTISEMENT. WE SEE NO LEGAL OBJECTION TO EITHER THE SECOND OR THIRD OPTION, BUT IT IS OUR OPINION THE FIRST OPTION WOULD BE CONTRARY TO THE DECISIONS OF OUR OFFICE AND OF THE COURTS IN CASES WHERE AN APPARENT LOW BID IS PROVED NOT TO BE SUCH BEFORE AWARD.

INASMUCH AS NORAIR HAS PROVED THE EXISTENCE OF A BONA FIDE MISTAKE IN ITS BID, A BINDING CONTRACT CANNOT NOW BE MADE BY DISREGARDING THE MISTAKE AND ACCEPTING THE ORIGINAL BID. 17 COMP. GEN. 575, 576. SEE, ALSO, MOFFETT, HODGKINS AND CLARKE COMPANY V ROCHESTER, 178 U.S. 373 (1900). FURTHER, EVEN IF NORAIR WERE NOW WILLING TO FOREGO ITS CLAIM OF MISTAKE, AWARD COULD NOT PROPERLY BE MADE TO NORAIR AT ITS ORIGINAL BID PRICE, SINCE THE EFFECT THEREOF WOULD BE TO PERMIT NORAIR TO ELECT THE COURSE OF ACTION BEST SUITED TO ITS INTERESTS AFTER THE EXPOSURE OF THE BID PRICES OF ITS COMPETITORS, AND WOULD THEREFORE VIOLATE THE PRINCIPLES OF COMPETITIVE BIDDING. 42 COMP. GEN. 723; B-164665, OCTOBER 10, 1968.

ACCORDINGLY, WE SUGGEST THAT CONSIDERATION BE GIVEN TO THE PRINCIPLES SET OUT IN THE FOREGOING CASES BEFORE AN AWARD, BASED UPON OPTION (1) AS OUTLINED ABOVE, IS APPROVED BY YOUR DEPARTMENT.