B-166620, JUL. 7, 1969

B-166620, JUL. 7, 1969

TO MR. SECRETARY:

THIS LETTER CONCERNS THE PROTEST FILED WITH THIS OFFICE ON BEHALF OF G.C. DEWEY CORPORATION WHICH WAS THE SUBJECT OF A LETTER DATED APRIL 22, 1969, SER 044-00C, FROM THE NAVAL ELECTRONIC SYSTEMS COMMAND. THE PROTEST WAS AGAINST AWARD TO ANYONE OTHER THAN G.C. DEWEY UNDER INVITATION FOR BIDS NO. N00039-69-B-2015.

THE INVITATION FOR BIDS WAS ISSUED BY THE NAVAL ELECTRONIC SYSTEMS COMMAND FOR THE MANUFACTURE AND DELIVERY OF AN/FRD-10A (V) SERIES, DIRECTION FINDER SETS. BIDS WERE OPENED ON MARCH 24, 1969, AND THE LOW BID FROM SYLVANIA ELECTRIC PRODUCTS, INCORPORATED. THE INVITATION FOR BIDS, AS ISSUED, DID NOT CONTAIN AUTHORIZATION FOR PROGRESS PAYMENTS. HOWEVER, THE INVITATION DID CONTAIN IN SECTION F, SPECIAL PROVISIONS, A CLAUSE FOR LIMITATION OF PROGRESS PAYMENTS AND INCORPORATED CLAUSE 41, PROGRESS PAYMENTS OF ADDITIONAL GENERAL PROVISIONS AND ALTERATIONS CONTRACT, NAVELEX AUG-68. THESE TWO CLAUSES BY THEIR TERMS BECOME APPLICABLE ONLY IF SO PROVIDED ELSEWHERE IN THE RESULTING CONTRACT. SUCH, PROGRESS PAYMENTS IN ANY AMOUNT WERE NOT AUTHORIZED UNDER THE INVITATION AS ORIGINALLY ISSUED. PRIOR TO BID OPENING, BY TELEGRAM OF MARCH 17, 1969, PROGRESS PAYMENTS UNDER THE INVITATION FOR BIDS WERE AUTHORIZED. THAT TELEGRAM, CONFIRMED AFTER BID OPENING BY FORMAL AMENDMENT ON MARCH 25, 1969, PROVIDED IN PART: "2. UNDER SECTION F - SPECIAL PROVISIONS; PAGE 25: THE FOLLOWING IS ADDED: PROGRESS PAYMENTS: THE NEED FOR PROGRESS PAYMENTS CONFORMING TO APPLICABLE REGULATIONS WILL NOT BE CONSIDERED AS A HANDICAP OR ADVERSE FACTOR IN THE AWARD OF CONTRACTS. OFFERORS DESIRING PROGRESS PAYMENTS IN ACCORDANCE WITH THE CLAUSE HEREOF ENTITLED PROGRESS PAYMENT, MODIFIED TO CHANGE THE FIGURE 80 PERCENT, WHEREVER IT APPEARS, TO READ 85 PERCENT, SHALL MAKE A WRITTEN REQUEST THEREFOR WHICH SHOULD BE SUBMITTED WITH OR IN THEIR OFFERS. OFFERS WILL BE EVALUATED ON AN EQUAL BASIS WITHOUT REGARD FOR ANY SUCH REQUESTS.'AN OFFEROR REQUIRING PROGRESS PAYMENTS SHALL SUBMIT THEIR REQUEST AND ONLY TWO BIDS WERE RECEIVED: THAT OF G.C. DEWEY CORPORATION IN WRITING PRIOR TO BID OPENING.'IF THE OFFEROR HAS REQUESTED PROGRESS PAYMENTS AS SPECIFIED ABOVE, CLAUSE 41 OF THE GENERAL PROVISIONS ENTITLED PROGRESS PAYMENT, AS MODIFIED ABOVE, SHALL CONSTITUTE A PART OF THE RESULTING CONTRACT.'CONFIRMING AMENDMENT 0005 WILL FOLLOW.' SYLVANIA ACCOMPANIED ITS BID WITH A LETTER DATED MARCH 21, 1969, WHICH REQUESTED PROGRESS PAYMENTS AT THE RATE OF 85 PERCENT. INASMUCH AS ARMED SERVICES PROCUREMENT REGULATION, APPENDIX E-504.1 LIMITS PROGRESS PAYMENTS AT THE RATE OF 85 PERCENT TO SMALL BUSINESS CONCERNS, A PROTEST WAS FILED BY ATTORNEYS FOR G. C. DEWEY AGAINST AWARD TO SYLVANIA, A LARGE BUSINESS, AT THAT RATE.

THE CENTRAL ISSUE OF THE PROTEST INVOLVES THE INTERPRETATION OF THE TELEGRAM OF MARCH 17, 1969, AND THE EFFECT OF THAT INTERPRETATION UPON THE INVITATION AND BID OF SYLVANIA. A PRESENTATION HAS BEEN MADE TO THIS OFFICE THAT THE LETTER BY SYLVANIA OF MARCH 21, 1969, WAS A MERE REQUEST, PRECATORY IN NATURE. THIS ARGUMENT HAS BEEN CLEARLY REJECTED BY THIS OFFICE IN THE PAST. SEE 46 COMP. GEN. 368, 369. FURTHER, THE LANGUAGE OF THE LETTER STATES THAT SYLVANIA ACCEPTS THE TERMS AND CONDITIONS OF THE INVITATION WHICH THAT COMPANY CONSTRUED AS OFFERING PROGRESS PAYMENTS AT THE RATE OF 85 PERCENT TO ALL BIDDERS. THEREFORE, ANY BID BY SYLVANIA MUST BE VIEWED AS BASED UPON RECEIPT OF PROGRESS PAYMENTS AT THE RATE OF 85 PERCENT.

ADDITIONALLY, WE HAVE PREVIOUSLY REJECTED THE PROPOSITION THAT PAYMENTS IN EXCESS OF THE ORDINARY AMOUNTS MAY BE GRANTED BIDDERS UNDER ASPR, APPENDIX E-505, RESPECTING UNUSUAL PROGRESS PAYMENTS. SEE 47 COMP. GEN. 496. WE HAVE REVIEWED THAT CONCLUSION IN LIGHT OF THE POSITION TAKEN BY ATTORNEYS FOR SYLVANIA THAT BY READING ASPR E-505 IN CONJUNCTION WITH ASPR E-527 OF THE SAME APPENDIX IT BECOMES CLEAR THAT THE TERM "CONTRACTOR" USED IN ASPR E-505 INCLUDES BIDDERS. WHILE THIS OFFICE AGREES THE TWO REGULATIONS SHOULD BE READ TOGETHER, WE DO NOT PERCEIVE HOW THE LAST SENTENCE OF ASPR E-527 AIDS IN DEFINING THE TERM, CONTRACTOR, IN OTHER THAN THE USUAL AND ORDINARY SENSE. THE REFERENCED SENTENCE STATES: "IN CONFORMITY WITH THE STANDARDS AND PROCEDURES OF E 505, UNUSUAL PROGRESS PAYMENTS MAY BE PROVIDED BY AMENDMENT.'

WE BELIEVE THAT STATEMENT MERELY SANCTIONS PROGRESS PAYMENTS TO CONTRACTORS IN UNUSUAL AMOUNTS BY A CONTRACTUAL AMENDMENT. THIS IS ENTIRELY CONSISTENT WITH OUR CONCLUSION THAT UNUSUAL PROGRESS PAYMENTS MAY BE GRANTED TO CONTRACTORS BUT NOT TO BIDDERS.

WE NOW DIRECT OUR ATTENTION TO THE MODIFICATION BY TELEGRAM OF MARCH 17, 1969. TWO INTERPRETATIONS OF THAT MODIFICATION HAVE BEEN URGED UPON THIS OFFICE. THE ATTORNEYS FOR DEWEY HAVE CONTENDED THE TELEGRAM SHOULD BE CONSTRUED AS AUTHORIZING PROGRESS PAYMENTS IN ACCORDANCE WITH THE ASPR LIMITATIONS, NAMELY, THAT ONLY SMALL BUSINESS CONCERNS WERE ENTITLED TO REQUEST PROGRESS PAYMENTS AT THE RATE OF 85 PERCENT. SYLVANIA, ON THE OTHER HAND, CONSTRUES THE TELEGRAM TO AUTHORIZE ALL BIDDERS TO REQUEST IN WRITING PROGRESS PAYMENTS AT THE RATE OF 85 PERCENT. IN SUPPORT OF THEIR INTERPRETATION AS THE REASONABLE ONE, ATTORNEYS FOR DEWEY HAVE POINTED OUT THAT THE "RULES OF CONSTRUCTION" DICTATE AGAINST AN INTERPRETATION WHICH RESULTS IN THE ILLEGALITY OF A DOCUMENT. CLEARLY, THE ADOPTION OF SYLVANIA'S INTERPRETATION RENDERS THE EFFECT OF THE TELEGRAM CONTRARY TO ASPR WHICH IN CERTAIN INSTANCES MAY HAVE THE FORCE AND EFFECT OF LAW. G.L. CHRISTIAN AND ASSOCIATES V UNITED STATES, 160 CT. CL. 1. WE DO NOT BELIEVE THE RESOLUTION OF THIS PROTEST REQUIRES RESORT TO THOSE RULES OF CONSTRUCTION.

INITIAL SCRUTINY OF THE TELEGRAM OF MARCH 17, 1969, TENDS TO SUPPORT SYLVANIA'S INTERPRETATION OF WHAT WAS INTENDED TO BE OFFERED BIDDERS. CONCEDE, HOWEVER, THAT DEWEY'S INTERPRETATION, IF LESS PLAUSIBLE, IS NOT BEYOND REASON. IN ANY CASE, AN AWARD STILL COULD BE MADE UNDER THIS INVITATION IF COMPETITION WAS NOT ADVERSELY AFFECTED. SEE 40 COMP. GEN. 561, AND 39 ID. 834.

IN THIS INSTANCE, AWARD MAY BE MADE TO THE LOW BIDDER ONLY ON A BASIS CONTRARY TO REGULATION AT AN 85 PERCENT RATE OF PROGRESS PAYMENTS. AWARD TO SYLVANIA ON ANOTHER BASIS WOULD AFFORD THAT COMPANY THE PROSCRIBED OPTION OF ACCEPTING OR REJECTING THE CONTRACT OFFERED. AWARD TO SYLVANIA AT AN 85 PERCENT RATE OF PROGRESS PAYMENTS IS NOT, FOR REASONS SET OUT ABOVE, AUTHORIZED AS UNUSUAL PROGRESS PAYMENTS. COUNSEL FOR SYLVANIA HAS CONTENDED THAT SUCH AWARD MAY BE SANCTIONED EITHER ON THE BASIS OF RATIFICATION OF THE CONTRACTING OFFICER'S ACT OR AS A DEVIATION FROM THE REGULATIONS UNDER ASPR 1-109.2.

WE CANNOT AGREE. DEVIATIONS, AS PROVIDED FOR IN ASPR 1-109, WHETHER FOR ONE CONTRACT OR MORE THAN ONE CONTRACT, ARE PROSPECTIVE IN CHARACTER AND SHOULD NOT BE USED TO RECTIFY IMPROPER ACTIONS RETROACTIVELY. TO PERMIT SUCH RETROACTIVE DEVIATION WOULD OPEN THE DOOR TO CHARGES OF FRAUD OR FAVORITISM WHICH THE ADVERTISING STATUTES WERE, IN SUBSTANTIAL MEASURE, DESIGNED TO ELIMINATE. WE BELIEVE THIS POSITION IS IMPLICIT IN THE REQUIREMENT FOR APPROVAL BY A HIGHER AUTHORITY TO SO DEVIATE. SEE ASPR 1- 109.5. THIS REQUIREMENT WAS EXPLICITLY SET OUT IN REVISION 13, DATED MARCH 5, 1956, AMENDING ASPR BY DEFINING DEVIATIONS, WHERE IN THE EXPLANATION IT WAS STATED NOTICE OF DEVIATION SHOULD BE GIVEN IN ADVANCE EXCEPT WHERE EXIGENCY PREVENTED.

LIKEWISE, THIS OFFICE DOES NOT AGREE THAT AWARD TO SYLVANIA MAY BE SUSTAINED ON THE THEORY OF RATIFICATION. AS WE STATED IN 22 COMP. GEN. 1083, AT PAGE 1086: "THE GENERAL RULE IS THAT THE RATIFICATION OF A PARTICULAR ACT OR CONTRACT MAY BE MADE BY ANYONE IN WHOSE BEHALF SUCH ACT OR CONTRACT HAS BEEN DONE OR MADE ONLY IF HE COULD HAVE GIVEN AUTHORITY TO DO THE ACT OR ENTER INTO THE CONTRACT IN THE FIRST INSTANCE, AND IF HE STILL HAS POWER TO DO SO AT THE TIME OF THE RATIFICATION.' THIS OFFICE AND THE APPROPRIATE AGENCY HEADS HAVE THE AUTHORITY TO MAKE PAYMENTS OR ENTER INTO CONTRACTS ONLY IN ACCORD WITH THE APPLICABLE STATUTES AND REGULATIONS. THE REGULATIONS LIMIT PROGRESS PAYMENTS TO 80 PERCENT FOR LARGE BUSINESSES.

UNDER EITHER INTERPRETATION, BECAUSE OF THE AMBIGUITY IN THE GOVERNMENT- DRAFTED INVITATION FOR BIDS, THE LOW BID OF SYLVANIA MUST BE REJECTED. WHERE AS A RESULT OF AMBIGUITY IN THE INVITATION HALF OF THE BIDS RECEIVED MUST BE REJECTED COMPETITION HAS CLEARLY BEEN SEVERELY AFFECTED.

FINALLY, THE ATTORNEYS FOR BOTH BIDDERS HAVE URGED AGAINST CANCELLATION OF THIS INVITATION FOR BIDS. THIS OFFICE HAS LONG RECOGNIZED THAT INVITATIONS FOR BIDS SHOULD BE CANCELLED AND BIDS REJECTED, AFTER OPENING, ONLY FOR COGENT AND COMPELLING REASONS. ALSO, WE BELIEVE THAT IN DETERMINING WHETHER CANCELLATION IS WARRANTED A BALANCING SHOULD TAKE PLACE BETWEEN THE PREJUDICE TO THE LOW BIDDER IN HAVING HIS BID EXPOSED, AND THE PREJUDICE TO OTHER BIDDERS AND THE COMPETITIVE ADVANTAGE WHICH MAY HAVE BEEN OBTAINED BY THE LOW BIDDER FROM A DEFECTIVE INVITATION. HOWEVER, IN SO DOING, THE BASIC CONSIDERATION WHICH SHOULD NOT BE LOST SIGHT OF IS THAT THE COMPETITIVE BID SYSTEM IS FOR THE BENEFIT OF THE GOVERNMENT. WHEN, AS HERE, THE BENEFITS OF COMPETITION HAVE BEEN DENIED THE GOVERNMENT, THE GOOD FAITH OF BIDDERS IN SUBMITTING BIDS IS NOT CONTROLLING. 41 COMP. GEN. 76, AND 41 COMP. GEN. 593.

ACCORDINGLY, THIS OFFICE MUST CONCLUDE THAT INVITATION FOR BIDS NO. N00039-69-B-2015 WAS SO AMBIGUOUS OR MISLEADING AS TO MATERIALLY AFFECT COMPETITION AND SHOULD THEREFORE BE CANCELLED BY THE CONTRACTING OFFICER. OBVIOUSLY, IN ANY REPROCUREMENT ACTION BOTH SYLVANIA AND DEWEY SHOULD BE AFFORDED AN OPPORTUNITY TO COMPETE.

IN VIEW OF OUR DECISION IN THIS CASE, THE RESULTING UNDESIRABLE BUT UNAVOIDABLE CONSEQUENCES, AND THE HISTORY OF DIFFICULTY SURROUNDING THIS AREA, WE ARE MAKING SUGGESTIONS FOR REVISION IN THE APPLICABLE REGULATIONS. A COPY OF OUR LETTER TO THE CHAIRMAN OF THE CONTRACT FINANCE COMMITTEE IS ENCLOSED.