B-166817, JUN. 2, 1969

B-166817, JUN. 2, 1969

TO MR. SECRETARY:

WE REFER TO LETTER DATED MAY 14, 1969, FROM THE UNDER SECRETARY OF AGRICULTURE FORWARDING A REPORT AND FILE ON A PROTEST PRESENTED TO OUR OFFICE BY CAROLINA PACIFIC PLYWOOD, INC. (CAROLINA PACIFIC) AGAINST THE ACTION OF THE FOREST SERVICE IN REJECTING CAROLINA PACIFIC'S HIGH AUCTION BID ON THE HUMMINGBIRD TIMBER SALE AT KLAMATH NATIONAL FOREST AND READVERTISEMENT OF THE SALE UNDER SEALED BID PROCEDURES.

ON JANUARY 24, 1969, THE FOREST SUPERVISOR, YREKA, CALIFORNIA, ADVERTISED THE SALE IN THE SISKIYOU DAILY NEWS, YREKA, STATING THE APPRAISED VALUE OF THE TIMBER AS $693,625. SEALED BIDS AT NOT LESS THAN THE APPRAISED VALUE WERE REQUIRED IN ORDER TO PARTICIPATE IN THE ORAL BIDDING WHICH WAS TO FOLLOW THE OPENING OF THE SEALED BIDS. THE FOLLOWING PERTINENT PROVISIONS WERE PRINTED ON THE BID FORM:

"6. ORAL AUCTION BIDDING. IF THE ADVERTISEMENT PROVIDES FOR ORAL AND SEALED BIDS, EACH BIDDER TO PARTICIPATE IN THE ORAL AUCTION MUST SUBMIT A SEALED BID IN ACCORDANCE TO THE PRECEDING INSTRUCTIONS. ALL PARTIES WHO SUBMIT A SATISFACTORY SEALED BID WILL BE PERMITTED TO CONTINUE BIDDING ORALLY IMMEDIATELY FOLLOWING OPENING AND POSTING OF THE SEALED BIDS. THE HIGH BIDDER MUST CONFIRM HIS BID IN WRITING IMMEDIATELY UPON BEING DECLARED THE HIGH BIDDER.

"9. AWARD OF CONTRACT. (A) AWARD OF CONTRACT WILL BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, IS MOST ADVANTAGEOUS ON THE BASIS OF THE TOTAL RETURN TO THE UNITED STATES. (B) THE GOVERNMENT MAY, WHEN IN ITS INTEREST, REJECT ANY OR ALL BIDS OR WAIVE ANY INFORMALITY IN BIDS RECEIVED. (C) A WRITTEN AWARD MAILED (OR OTHERWISE FURNISHED) TO THE SUCCESSFUL BIDDER SHALL BE DEEMED TO RESULT IN A BINDING CONTRACT WITHOUT FURTHER ACTION BY EITHER PARTY. * * *

"10. DAMAGES. FAILURE TO EXECUTE A TIMBER SALE CONTRACT OR TO FURNISH A SATISFACTORY PERFORMANCE BOND WITHIN THE TIME ALLOWED MAY BE TREATED AS A REPUDIATION OF THE CONTRACT, AND ANY OR ALL OF THE BID GUARANTEE MAY BE RETAINED BY THE FOREST SERVICE AND APPLIED TOWARD SATISFACTION OF ACTUAL DAMAGES RESULTING FROM THE BIDDER'S FAILURE TO FULLY PERFORM THE CONTRACT, WITHOUT PREJUDICE TO ANY OTHER RIGHTS AND REMEDIES OF THE UNITED STATES.'

ON FEBRUARY 25, 1969, THE PRESIDING FOREST OFFICER, ACTING PURSUANT TO SECTION 2431.59, ITEM 2.A., FOREST SERVICE MANUAL, MADE AN ORAL ANNOUNCEMENT OF THE TERMS UNDER WHICH THE SALE WOULD BE CONDUCTED. AMONG OTHER THINGS, BIDDERS WERE INSTRUCTED THAT AFTER THE OPENING OF THE SEALED BIDS EACH BIDDER WOULD BE CALLED IN TURN TO BID, PASS OR WITHDRAW; THAT BIDDING WOULD CONTINUE UNTIL ALL BIDDERS EXCEPT THE CURRENT HIGH BIDDER HAD WITHDRAWN; THAT IF ALL BIDDERS PASSED BUT SOME WOULD NOT WITHDRAW FIVE MINUTES WOULD BE ALLOWED FOR FURTHER BIDS; AND THAT IF NO FURTHER BIDS WERE RECEIVED THE AUCTION WOULD BE CLOSED.

AT THREE DIFFERENT TIMES DURING THE COURSE OF THE ORAL BIDDING THERE WAS A HALT TO THE BIDDING, AND EACH TIME THE PRESIDING FOREST OFFICER ANNOUNCED THAT HE WOULD FIRST POLL THE BIDDERS REGARDING CONTINUATION OR WITHDRAWAL; THAT IF ONE OR MORE BIDDERS INDICATED A DESIRE TO CONTINUE BIDDING A TIMER WOULD BE SET FOR FIVE MINUTES; AND THAT ABSENT ANY BIDDING WITHIN THE FIVE-MINUTE PERIOD THE INACTIVITY OF THE BIDDERS WOULD BE CONSIDERED AS INDICATIVE OF WITHDRAWAL AND THE AUCTION WOULD BE DECLARED CLOSED. THE FIRST TWO TIMES THE BIDDING WAS RESUMED AFTER THE ANNOUNCEMENT WITHOUT THE USE OF THE TIMER. IN THE THIRD INSTANCE, HOWEVER, AT WHICH TIME CAROLINA PACIFIC WAS THE LAST AND HIGHEST BIDDER AT $1,112,810, THE TIMER WAS SET FOR FIVE MINUTES. WHILE THE TIMER WAS RUNNING, ONE BIDDER COMPLAINED THAT HE COULD NOT SEE IT, AND THE FOREST OFFICER MOVED THE TIMER TO ANOTHER LOCATION WHERE MOST BIDDERS COULD SEE IT. IMMEDIATELY BEFORE THE FIVE MINUTES EXPIRED, STILL ANOTHER BIDDER, OLSON-LAWYER TIMBER COMPANY (OLSON LAWYER), INQUIRED WHETHER IT SHOULD WAIT FOR EXPIRATION OF THE FIVE MINUTE INTERVAL BEFORE BIDDING, AND THE FOREST OFFICER ANSWERED IN THE NEGATIVE; HOWEVER, THE TIMER RANG BEFORE OLSON-LAWYER COULD SUBMIT A BID. OLSON-LAWYER THEN STATED THAT IT HAD INTENDED TO BID BUT THOUGHT IT SHOULD WAIT UNTIL THE TIMER RANG, AND ANOTHER BIDDER ALSO INDICATED ITS INTENT TO BID.

FOLLOWING THE ABOVE EPISODE THE FOREST OFFICER ACCEPTED A BID FROM OLSON- LAWYER, WHEREUPON CAROLINA PACIFIC PROTESTED THAT ACCORDING TO THE RULES OF THE AUCTION STATED BY THE FOREST OFFICER THE AUCTION WAS OVER AND CAROLINA PACIFIC WAS ENTITLED TO AWARD BASED ON ITS BID OF $1,112,810. THE FOREST OFFICER EXPRESSED HIS DISAGREEMENT WITH CAROLINA PACIFIC; HOWEVER, THERE WAS A DIVERSITY OF OPINION AMONG THE OTHER BIDDERS, SOME OF WHOM SIDED WITH CAROLINA PACIFIC WHILE OTHERS APPEARED TO CONCUR WITH THE FOREST OFFICER. ACCORDINGLY, THE FOREST OFFICER DECLARED A RECESS AND COMMUNICATED WITH THE OFFICE OF THE REGIONAL FORESTER, FROM WHICH HE RECEIVED A SUGGESTION TO CONTINUE THE BIDDING AND TO INFORM THE BIDDERS "THAT THEY COULD OBJECT IF THEY WISHED TO.' THE BIDDING WAS THEREAFTER CONTINUED, OVER THE PROTEST OF CAROLINA PACIFIC, WITH FIVE OF THE BIDDERS (INCLUDING OLSON-LAWYER AND CAROLINA PACIFIC) PARTICIPATING UNTIL THE BIDDING STOPPED AFTER A HIGH BID OF ,1,643,470 FROM CAROLINA PACIFIC.

AFTER THE CLOSE OF THE AUCTION, CAROLINA PACIFIC'S REPRESENTATIVE SIGNED A WRITTEN CONFIRMATION OF THE HIGH BID, AS REQUIRED BY SECTION 2431.59.2 OF THE FOREST SERVICE HANDBOOK AND THE INVITATION FOR BIDS. HOWEVER, THE WORDS "SUBJECT TO APPEAL" WERE INSERTED ABOVE THE SIGNATURE OF THE REPRESENTATIVE. FURTHER, IN A HANDWRITTEN STATEMENT DATED FEBRUARY 25, 1969, ADDRESSED TO THE KLAMATH NATIONAL FOREST, THE SAME REPRESENTATIVE STATED HIS BELIEF THAT CAROLINA PACIFIC SHOULD HAVE BEEN AWARDED THE SALE AT ITS BID OF $1,112,810, NO BIDS HAVING BEEN RECEIVED WITHIN THE FIVE- MINUTE PERIOD AFTER THE THIRD LAPSE IN BIDDING. THE STATEMENT INCLUDED THIS SENTENCE, ,CAROLINA PACIFIC WAS TO BE ALLOWED TO PROTEST THE CONTINUATION, WHICH WE DO.'

IN A MEMORANDUM DATED FEBRUARY 26, 1969, THE FOREST SUPERVISOR REFERRED THE MATTER TO THE REGIONAL FORESTER AT SAN FRANCISCO WITH A RECOMMENDATION THAT AWARD OF THE SALE BE MADE TO CAROLINA PACIFIC AT THE HIGHEST BID RECEIVED. THE MEMORANDUM WAS ACCOMPANIED BY STATEMENTS DATED FEBRUARY 25 FROM VARIOUS WITNESSES TO THE AUCTION VERIFYING THE FACTS AS SET FORTH ABOVE, BY THE ORDER OF BIDDING LIST AND WRITTEN NOTES OF THE AUCTION PROCEDURE, AND BY A COPY OF CAROLINA PACIFIC'S CONFIRMED HIGH BID, WHICH THE FOREST SUPERVISOR REFERRED TO AS "AN ACCEPTED COPY OF THE CONFIRMATION COPY OF THE ORAL BID SIGNED UNDER PROTEST BY MR. BOOTH OF CAROLINA PACIFIC PLYWOOD.'

CAROLINA PACIFIC, IN PURSUING ITS CLAIM WITH THE REGIONAL FORESTER ON THE BASIS THAT THE AUCTION WAS CLOSED WHEN THE TIMER RANG WITHOUT RECEIPT OF ANY BID HIGHER THAN THE BID OF $1,112,810 BY CAROLINA PACIFIC, REASSERTED IN A LETTER DATED MARCH 7 THAT THE SALE BY AUCTION WAS CONDUCTED IN ACCORDANCE WITH THE TERMS ANNOUNCED AT THE SALE AND URGED THAT BUYERS HAVE A RIGHT TO RELY ON SUCH TERMS. THE RINGING OF THE TIMER WAS LIKENED BY CAROLINA PACIFIC'S ATTORNEY TO AN AUCTIONEER'S HAMMER SIGNIFYING ACCEPTANCE OF THE HIGH BID. IN ADDITION, CAROLINA PACIFIC FURNISHED STATEMENTS FROM OTHER PARTICIPATING BIDDERS EXPRESSING THE VIEW THAT AWARD SHOULD HAVE BEEN MADE TO CAROLINA PACIFIC AT ITS BID OF $1,112,810 ABSENT ANY HIGHER BID AT THE TIME TIMER SOUNDED.

OLSON-LAWYER, WHOSE HANDWRITTEN STATEMENT OF FEBRUARY 25 REGARDING THE AUCTION PROCEDURES INDICATED THAT ITS FAILURE TO SUBMIT A BID BEFORE THE TIMER SOUNDED WAS DUE TO ITS INABILITY TO SEE THE TIMER, SUBMITTED TO THE FOREST SUPERVISOR AT YREKA A FURTHER STATEMENT BY LETTER DATED MARCH 3. THE LETTER STATED THAT IN ORDER TO OBTAIN RETURN OF ITS BID DEPOSIT OLSON- LAWYER HAD SIGNED A STATEMENT AT THE CLOSE OF THE AUCTION INDICATING IT WOULD NOT PROTEST THE FINAL DISPOSITION OF THE SALE AND THAT NO FORMAL PROTEST WAS INTENDED AGAINST THE HUMMINGBIRD TIMBER SALE. HOWEVER, OLSON- LAWYER COMPLAINED THAT AT OTHER TIMBER SALES, WHERE A CERTAIN TIME LIMIT IS ALLOWED FORBIDDING BEFORE CLOSING OF THE AUCTION, WARNING IS GIVEN BEFORE THE EXPIRATION OF SUCH TIME OF THE NUMBER OF MINUTES OR SECONDS REMAINING FOR BID SUBMISSION. FURTHER, OLSON-LAWYER STATED, THE "FOREST SERVICE DOES ITSELF, AND THE PUBLIC, A DISSERVICE BY USING AN AUCTION PROCEDURE THAT IS SUBJECT TO PROTEST AND APPEAL ON A POINT OF SPLIT SECOND TIMING. AS LONG AS THERE IS A WILLING BIDDER AT ANY ORAL AUCTION, BIDDING SHOULD REMAIN OPEN.' IN ADDITION, AND PRESUMABLY BECAUSE A PROTEST BY CAROLINA PACIFIC WOULD HAVE OPERATED TO DELAY AN AWARD TO ANY OTHER HIGH BIDDER, OLSON-LAWYER STATED THAT HAD THERE BEEN NO THREAT OF PROTEST, ITS HIGH BID WOULD HAVE BEEN $200,000 OVER THE HIGH BID BY CAROLINA PACIFIC.

COUNSEL FOR THE REGIONAL OFFICE ADVISED THE REGIONAL FORESTER IN A MEMORANDUM DATED MARCH 7 THAT THE ANALOGY DRAWN BY CAROLINA PACIFIC BETWEEN THE SOUND OF THE TIMER AND THE FALL OF THE AUCTIONEER'S HAMMER WAS INCORRECT. THE MEMORANDUM QUOTES THE FOLLOWING EXCERPT FROM 7 AM. JUR. 2D, AUCTIONS AND AUCTIONEERS, SEC. 20:

"A SALE AT AUCTION, LIKE EVERY OTHER SALE, MUST HAVE THE ASSENT, EXPRESS OR IMPLIED, OF BOTH SELLER AND BUYER. AN ANNOUNCEMENT OF AN AUCTION OR THE ACT OF PUTTING PROPERTY UP FOR SALE THEREAT DOES NOT CONSTITUTE AN OFFER TO SELL CAPABLE OF ACCEPTANCE BY THE MAKING OF A BID. ADVERTISEMENT OF AN AUCTION IS NOT AN OFFER TO SELL WHICH BECOMES BINDING, EVEN CONDITIONALLY, ON THE OWNER WHEN A BID IS MADE. RATHER, AN ANNOUNCEMENT THAT A PERSON WILL SELL HIS PROPERTY AT PUBLIC AUCTION TO THE HIGHEST BIDDER IS A MERE DECLARATION OF INTENTION TO HOLD AN AUCTION AT WHICH BIDS WILL BE RECEIVED. IT IS A MERE INVITATION TO THOSE ATTENDING THE SALE TO MAKE OFFERS BY BIDS. THE CONTRACT BECOMES COMPLETE ONLY WHEN THE BID IS ACCEPTED, THIS BEING ORDINARILY DENOTED BY THE FALL OF THE HAMMER. THESE COMMON-LAW PRINCIPLES ARE ADOPTED BY BOTH THE UNIFORM SALES ACT AND THE UNIFORM COMMERCIAL CODE.

"WHERE THE SELLER RESERVES THE RIGHT TO REFUSE TO ACCEPT ANY BID MADE, A BINDING SALE IS NOT CONSUMMATED BETWEEN THE SELLER AND THE BIDDER UNTIL THE SELLER ACCEPTS THE BID. FURTHERMORE, WHERE A RIGHT IS RESERVED IN THE SELLER TO REJECT ANY AND ALL BIDS RECEIVED, THE RIGHT MAY BE EXERCISED BY THE OWNER EVEN AFTER THE AUCTIONEER HAS ACCEPTED A BID, AND THIS APPLIES TO THE AUCTION OF PUBLIC AS WELL AS PRIVATE PROPERTY.

"ONCE A BID HAS BEEN ACCEPTED, THE PARTIES OCCUPY THE SAME RELATION TOWARD EACH OTHER AS EXISTS BETWEEN PROMISOR AND PROMISEE IN AN EXECUTORY CONTRACT OF SALE CONVENTIONALLY MADE. THEREAFTER, AS A RULE, THE SELLER HAS NO RIGHT TO ACCEPT A HIGHER BID, NOR MAY THE BUYER WITHDRAW HIS BID.'

NOTING THAT THE GOVERNMENT HAD RESERVED THE RIGHT TO REJECT ALL BIDS AND THAT THE APPLICABLE REGULATIONS REQUIRE DETERMINATIONS RELATING TO THE RESPONSIBILITY OF THE HIGH BIDDER BEFORE AWARD, COUNSEL CONCLUDED THAT THE SOUNDING OF THE TIMER DID NOT BIND THE GOVERNMENT TO ACCEPT CAROLINA PACIFIC'S BID OF $1,112,810. IN THIS CONNECTION, COUNSEL CITES OUR DECISION PUBLISHED AT 37 COMP. GEN. 520 RELATING TO AN AUCTION SALE OF LAND IN WHICH THE SIGNAL OF A BIDDER WHO WANTED TO SUBMIT ANOTHER BID WAS OVERLOOKED BY THE AUCTIONEER AND THE BIDDING WAS MISTAKENLY CLOSED. SUCH CIRCUMSTANCES, WE HELD, THE BIDDING WAS PROPERLY REOPENED, AND THE HIGH BIDDER AT THE TIME OF THE IMPROPER CLOSING BY CONTINUING TO BID WITHOUT PROTEST HAD THEREBY WAIVED ANY RIGHT TO ACQUIRE THE PROPERTY FOR HIS ORIGINAL BID PRICE.

THE REGIONAL COUNSEL ALSO QUESTIONED WHETHER CAROLINA PACIFIC COULD BE HELD TO ITS HIGH BID OF $1,643,470 ABSENT WRITTEN CONFIRMATION OF THAT BID IN THE PROPER PLACE ON THE BID FORM, AND WHETHER THE WORDS "SUBJECT TO APPEAL" ON THE CONFIRMATION WHICH WAS SUBMITTED MIGHT RENDER IT CONDITIONAL AND THEREFORE NOT ACCEPTABLE. ACCORDINGLY, COUNSEL SUGGESTED EITHER REJECTION OF ALL BIDS AND READVERTISEMENT OF THE SALE OR AWARD TO CAROLINA PACIFIC AT ITS HIGH BID UPON EXECUTION OF AN UNCONDITIONAL WRITTEN CONFIRMATION OF SUCH BID. THE REFERENCE TO THE ABSENCE OF WRITTEN CONFIRMATION OF THE BID IN THE PROPER PLACE ON THE BID FORM RESULTED FROM THE FACT THAT THE FORM USED FOR CONFIRMATION OF THE HIGH ORAL BID IS THE SAME BID FORM USED FOR SUBMISSION OF SEALED BIDS, AND PROVIDES SPACE FOR THE BIDDER'S SIGNATURE AT THE END OF THE SECOND PAGE. CAROLINA PACIFIC'S SIGNATURE, INSTEAD OF BEING PLACED IN THAT SPACE, WAS INSERTED IN A SPACE AT THE TOP OF THE FIRST PAGE WHICH READS:

"ACCEPTED ---------- (DATE)

BY -------------------------

TITLE" THIS SPACE PRESUMABLY IS INTENDED FOR ACCEPTANCE OF THE BID ON BEHALF OF THE GOVERNMENT, AND ITS USE BY THE BIDDER MUST HAVE BEEN DUE TO MISUNDERSTANDING EITHER BY CAROLINA PACIFIC OR BY THE GOVERNMENT'S REPRESENTATIVE. WHATEVER THE REASON, HOWEVER, WE BELIEVE THAT THE USE OF THE WRONG SPACE WAS AN IMMATERIAL TECHNICAL DEFECT, AND THAT IN THE CIRCUMSTANCES THERE COULD BE NO SERIOUS QUESTION BUT THAT THE SIGNATURE EFFECTIVELY BOUND THE BIDDER AS A WRITTEN CONFIRMATION OF ITS BID SUBJECT TO ITS RIGHT TO HAVE ITS OBJECTION TO THE REOPENING OF THE AUCTION CONSIDERED. THE REGIONAL FORESTER, IN A MEMORANDUM DATED MARCH 18 PRESENTING THE MATTER TO THE DIRECTOR, DIVISION OF TIMBER MANAGEMENT, WASHINGTON OFFICE, RECOMMENDED THAT ALL BIDS BE REJECTED AND THE SALE READVERTISED UNDER SEALED BID PROCEDURE. WHILE THE MEMORANDUM STATED THAT CAROLINA PACIFIC'S BID CONFIRMATION WAS NOT VALID " BECAUSE IT WAS CONDITIONED SUBJECT TO APPEAL- AND THE REVERSE SIDE OF THE BID FORM WAS NOT COMPLETED AND PROPERLY EXECUTED," THE BASIS FOR THE RECOMMENDATION TO READVERTISE THE SALE WAS THAT THE ORAL AUCTION WAS NOT CONDUCTED IN ACCORDANCE WITH THE REQUIREMENT OF SECTION 2431.59 OF THE FOREST SERVICE MANUAL THAT THE AUCTION BE HELD OPEN AS LONG AS NECESSARY TO ESTABLISH THE VALUE OF THE OFFERING AND TO GIVE EACH BIDDER AN OPPORTUNITY TO SUBMIT THE HIGHEST BID HE DESIRES TO MAKE. ADDITIONALLY, REFERENCE WAS MADE TO OLSON -LAWYER'S EXPLANATION FOR NOT OUTBIDDING CAROLINA PACIFIC'S BID OF $1,643,470. FURTHER, THE REGIONAL FORESTER STATED THAT IT IS DESIRABLE TO MAKE AWARD PROMPTLY IN ORDER TO HAVE THE ROADS CONSTRUCTED AND THE TIMBER CUT DURING THIS LOGGING SEASON, ENDS WHICH COULD BE ACHIEVED BY REJECTING THE BIDS AND READVERTISING WHEREAS CONSIDERATION OF AN APPEAL (CAROLINA PACIFIC-S) COULD DELAY CUTTING UNTIL NEXT YEAR OR LATER. ANOTHER REASON ADVANCED FOR PROMPT READVERTISEMENT WAS THE ANTICIPATED RECEIPT OF HIGH BIDS ON THE CURRENT MARKET. IN ADDITION, IT WAS STATED THAT THE SALE PROVIDES FOR STUMPAGE RATE ADJUSTMENT, AND DELAY IN AWARD COULD RESULT IN LESS STUMPAGE RETURN TO THE GOVERNMENT BY POSTPONING TIMBER CUTTING TO A PERIOD OF LOWER MARKET PRICES.

IN A MEMORANDUM DATED MARCH 28, 1969, THE DIRECTOR OF THE DIVISION OF TIMBER MANAGEMENT INFORMED THE REGIONAL FORESTER OF HIS CONCURRENCE WITH THE RECOMMENDATION OF THE REGIONAL FORESTER THAT THE PROPER ACTION WAS TO REJECT ALL BIDS AND READVERTISE AFTER REAPPRAISAL OF THE OFFERING. ACCORDINGLY, ON APRIL 3, THE REGIONAL FORESTER NOTIFIED ALL BIDDERS THAT BIDS WERE REJECTED AND THAT THE GOVERNMENT'S INTENT WAS TO READVERTISE THE SALE USING ONLY SEALED BID PROCEDURES. THE LETTER TO CAROLINA PACIFIC ALSO RETURNED ITS BID CONFIRMATION AND BID BOND.

ON APRIL 11 THE SALE WAS READVERTISED IN THE SISKIYOU DAILY NEWS. THE ADVERTISEMENT STATED THAT SEALED BIDS WOULD BE RECEIVED UNTIL 2 P.M. ON MAY 13, AND THE REVISED MINIMUM PRICE WAS $1,082,620. NO OTHER CHANGES WERE MADE IN THE OFFERING.

THE PROTEST FILED WITH OUR OFFICE, WHICH ASSERTS THAT CAROLINA PACIFIC IS ENTITLED TO AWARD OF THE SALE AT ITS HIGH BID OF $1,643,470, INCLUDES THESE STATEMENTS BY CAROLINA PACIFIC,"IT IS OUR FIRM OPINION THAT WE HAD AN ENFORCEABLE CONTRACT FOR PURCHASE OF THE TIMBER OF FEBRUARY 25, 1969. WE ALSO HEREBY REMOVE OUR STATED RESERVATION OF RIGHTS IN REGARD TO PROCEDURES USED IN THE EARLIER COURSE OF THE AUCTION.'

IN SUPPORT OF ITS CURRENT POSTURE, CAROLINA PACIFIC CITES OUR DECISION B- 164516, JULY 5, 1968, TO YOU CONCERNING THE EXERCISE BY THE FOREST SERVICE OF THE RIGHT RESERVED PURSUANT TO 36 CFR 221.8 (C) IN PARAGRAPH 9 (B) OF THE SALES INVITATION TO REJECT ANY OR ALL BIDS. IN THAT DECISION WE STATED THAT, NOTWITHSTANDING SUCH RESERVATION, BIDS SHOULD NOT BE REJECTED ARBITRARILY OR WITHOUT SUBSTANTIAL GROUNDS FOR CONSIDERING SUCH ACTION TO BE IN THE BEST INTEREST OF THE GOVERNMENT. CAROLINA PACIFIC URGES THAT THE REMOVAL OF ITS OBJECTION TO THE RESUMPTION OF THE AUCTION AFTER THE TIMER SOUNDED HAS DISPENSED WITH THE ISSUE ON WHICH THE FOREST SERVICE HAS SOUGHT TO JUSTIFY REJECTION OF ALL BIDS AND READVERTISEMENT OF THE SALE; THAT IS, FAILURE TO PROPERLY CONDUCT THE SALE. IN ADDITION, CAROLINA PACIFIC URGES THAT SINCE TIMBER PRICES ARE DROPPING IT IS ALMOST A CERTAINTY THAT A READVERTISED SALE WILL BRING THE GOVERNMENT SUBSTANTIALLY LESS THAN $1,643,470.

AS TO THE NOTATION REGARDING APPEAL WHICH CAROLINA PACIFIC PLACED ON THE CONFIRMATION OF ITS HIGHEST BID, CAROLINA PACIFIC MAINTAINS THAT SUCH NOTATION IS A MATTER OF MERE FORM AND NOT A SUBSTANTIVE BID DEVIATION; THAT IT CONSTITUTES ONLY A NOTE OF A RIGHT POSSESSED BY CAROLINA PACIFIC WITH OR WITHOUT A WRITTEN RESERVATION; THAT A WRITTEN RESERVATION OF RIGHTS CANNOT REASONABLY BE CONSIDERED A RESTRICTION OF THE BID; AND THAT THE GOVERNMENT ITSELF SUGGESTED A PROTEST IN THIS CASE.

THE ADMINISTRATIVE REPORT FORWARDED WITH THE UNDER SECRETARY'S LETTER OF MAY 14 INCLUDES A RECOMMENDATION BY THE FOREST SERVICE THAT THE SEALED BID SALE BE ALLOWED TO RUN ITS COURSE WITH THE EXPECTATION THAT THERE WILL BE ONE OR MORE ACCEPTABLE BIDS RECEIVED AT THE SEALED BID OPENING (WHICH HAS BEEN DEFERRED TO JUNE 3 TO PERMIT OUR OFFICE TO CONSIDER CAROLINA PACIFIC'S PROTEST). THE RECOMMENDATION, IT IS STATED, IS BASED ON THE REJECTION OF ALL OF THE BIDS RECEIVED ON FEBRUARY 25 AND THE FURTHER FACT THAT THE READVERTISEMENT OF THE SALE UNDER SEALED BID PROCEDURES IS IN ACCORDANCE WITH REVISIONS TO THE FOREST SERVICE MANUAL EFFECTED AT THE SUGGESTION OF OUR OFFICE, AS DISCUSSED IN OUR REPORT (B-125053) TO THE CONGRESS IN OCTOBER 1964 ON TIMBER SALES CONTRACTS IN THE CALIFORNIA REGION.

THE ADMINISTRATIVE REPORT FURTHER STATES THAT THE REJECTION OF THE ORAL BIDS WAS PROPER UNDER THE CIRCUMSTANCES OF THIS CASE AND WAS IN ACCORD WITH THE RIGHT RESERVED BY THE FOREST SERVICE TO TAKE SUCH ACTION. THE VIEWS STATED IN THE REGIONAL COUNSEL'S MEMORANDUM OF MARCH 7 ARE CITED IN THIS REGARD. IN ADDITION, THE REPORT STATES THAT THE EXPRESSION BY SEVERAL OF THE BIDDERS WHO PARTICIPATED IN THE ORIGINAL SALE OF OPINIONS TO THE EFFECT THAT CAROLINA PACIFIC SHOULD HAVE RECEIVED THE AWARD AT THE PRICE QUOTED BY CAROLINA PACIFIC AT THE TIME THE TIMER SOUNDED HAS PREJUDICED THE POSITION OF SUCH BIDDERS AS PROSPECTIVE COMPETITORS FOR A REOFFERING OF THE SALE, ESPECIALLY AN ORAL BID SALE, AND MIGHT LEAD TO COLLUSION AMONG THE BIDDERS. FINALLY, IT IS URGED THAT THE OPENING OF THE SEALED BIDS WOULD BE THE MOST EXPEDITIOUS WAY OF MAKING THE BADLY NEEDED TIMBER AVAILABLE PROMPTLY FOR OPERATION IN THE SALE AREA.

SECTION 2431.72A, FOREST SERVICE HANDBOOK, RELATING TO REJECTION OF ALL BIDS, READS IN PART AS FOLLOWS: "REJECTION OF ALL BIDS WITHOUT ABANDONING THE INTENT TO SELL TIMBER TENDS TO DISCOURAGE COMPETITION. THIS IS CONTRARY TO THE INTEREST OF HIGH BIDDERS, AS IT GIVES THEIR COMPETITORS AN UNFAIR ADVANTAGE IN BIDDING ON THE REOFFERING. THE CONTRACTING OFFICER MUST EXERT CARE IN THE DETERMINATION TO REJECT ALL BIDS THAT IT IS NOT AN ARBITRARY ACTION DETRIMENTAL TO THE INTEREST OF THE UNITED STATES AND THE COMPETITIVE BIDDING SYSTEM (COMP. GEN. DEC. B 140175, NOV. 25, 1959). ,THE OFFICER IN CHARGE OF OPENING BIDS, OR OF CONDUCTING AN AUCTION, MUST CONSIDER WHETHER OR NOT REJECTION OF ALL BIDS MIGHT BE IN THE INTEREST OF THE GOVERNMENT. IF HIS DECISION IS IN THE AFFIRMATIVE, HE WILL REFER THE MATTER TO THE NEXT HIGHER AUTHORITY; RANGER TO SUPERVISOR, SUPERVISOR TO REGIONAL FORESTER, OR REGIONAL FORESTER TO CHIEF, AS THE CASE MAY BE; FOR REVIEW AND DECISION. REASONS FOR RECOMMENDING REJECTION OF ALL BIDS WILL BE STATED. THE REVIEWING OFFICER WILL DECIDE THE CASE ON THE BASIS OF WHETHER THE ACTION IS IN THE INTEREST OF THE UNITED STATES. ,IF THE DECISION IS TO REJECT ALL BIDS, THE TIMBER MAY BE OFFERED AGAIN BY READVERTISING FOR NOT LESS THAN 30 DAYS. SEALED-BID PROCEDURE IS REQUIRED IF THE REOFFERING IS FOR SUBSTANTIALLY THE SAME TIMBER UNDER SUBSTANTIALLY THE SAME CONTRACT TERMS. EACH PERSON OR FIRM WHO SUBMITTED A BID ON THE PRIOR OFFERING WILL BE NOTIFIED OF THE REOFFERING.'

SECTION 2431.59-2, FOREST SERVICE MANUAL, RELATING TO AUCTION PROCEDURE, READS IN PART AS FOLLOWS:

"C. THE AUCTION SHOULD BE HELD OPEN AS LONG AS NECESSARY TO GIVE EACH BIDDER AN OPPORTUNITY TO SUBMIT THE HIGHEST BID HE DESIRES, BUT NO ONE WILL BE URGED TO MAKE A HIGHER BID. A BIDDER'S -PASS' OR AN OPPORTUNITY TO BID IN TURN WILL NOT PREVENT HIM FROM FURTHER BIDDING AND SUCH -PASSES' NEED NOT BE RECORDED. AFTER ALL BIDDERS, EXCEPT THE APPARENT HIGH BIDDER, HAVE PASSED THE PRESIDING FOREST OFFICER WILL SEEK FROM EACH A VOLUNTARY ACKNOWLEDGMENT OF DETERMINATION TO CEASE BIDDING. AFTER ALL APPARENTLY UNSUCCESSFUL BIDDERS HAVE STATED THEIR DECISION TO CEASE BIDDING THE PRESIDING OFFICER SHOULD DECLARE THE AUCTION CLOSED. "IN THE EVENT OF NO REPLY OR INDECISIVE RESPONSE FROM A BIDDER, THE PRESIDING OFFICER THEN SHOULD ANNOUNCE THAT BIDDING WILL BE CLOSED WITHIN SO MANY MINUTES (FIVE MINUTES SHOULD BE AMPLE). IF NO FURTHER BIDS ARE RECEIVED WITHIN THE SPECIFIED PERIOD, THE PRESIDING OFFICER WILL CLOSE THE BIDDING.

"F. AT THE CLOSE OF THE AUCTION THE HIGHEST BIDDER WILL BE ANNOUNCED AND REQUESTED TO SIGN A CONFIRMATION OF THIS HIGHEST ORAL BID. IN REGIONAL FORESTER CASES, ANNOUNCEMENT ALSO WILL BE MADE THAT THE CONFIRMED HIGHEST ORAL BID WILL BE SENT TO THE REGIONAL FORESTER FOR ACTION.'

SECTION 2431.55 OF THE FOREST SERVICE HANDBOOK PROVIDES, WITH RESPECT TO SEALED VERSUS AUCTION BIDDING, THAT OTHER THINGS BEING EQUAL THE ESTABLISHED PREVAILING PRACTICES IN THE REGION, SUB-REGION, OR LOCALITY SHOULD BE PREFERRED; HOWEVER, THE SECTION CITES SECTION 2431.72A OF THE FOREST SERVICE MANUAL, ON WHICH SECTION 2431.72A OF THE HANDBOOK IS BASED, FOR AN EXAMPLE OF A CONDITION UNDER WHICH SEALED BIDS ARE REQUIRED.

SECTION 2-328 OF THE UNIFORM COMMERCIAL CODE, RELATING TO SALE BY AUCTION, PROVIDES THAT SUCH A SALE IS COMPLETE WHEN THE AUCTIONEER SO ANNOUNCES BY THE FALL OF THE HAMMER OR IN OTHER CUSTOMARY MANNER, BUT STATES THAT WHERE A BID IS MADE WHILE THE HAMMER IS FALLING IN ACCEPTANCE OF A PRIOR BID THE AUCTIONEER MAY IN HIS DISCRETION REOPEN THE BIDDING OR DECLARE THE GOODS SOLD UNDER THE BID ON WHICH THE HAMMER WAS FALLING.

UNDER SECTION 2431.59-2 (C) OF THE FOREST SERVICE MANUAL, IT WAS INCUMBENT ON THE FOREST OFFICER WHO CONDUCTED THE SALE TO HOLD THE AUCTION OPEN AS LONG AS ANY BIDDER EXPRESSED A DESIRE TO BID. ACCORDINGLY, OLSON- LAWYER HAVING INDICATED AN INTENT TO BID BEFORE THE TIMER SOUNDED, THE CONTINUATION OF THE BIDDING WAS IN ACCORD WITH THE REGULATIONS. SUCH ACTION WAS ALSO COMPATIBLE WITH THE PROVISIONS OF SECTION 2-328 OF THE UNIFORM COMMERCIAL CODE. IN THE CIRCUMSTANCES,NO RIGHT TO AWARD VESTED IN CAROLINA PACIFIC IN CONNECTION WITH ITS BID OF $1,112,810.

TURNING NOW TO THE EVENTS WHICH OCCURRED AFTER THE BIDDING WAS RESUMED OVER THE OBJECTION OF CAROLINA PACIFIC, THE FIRST ISSUE TO BE RESOLVED IS WHETHER THE INSERTION BY CAROLINA PACIFIC ON THE PRINTED BID FORM CONFIRMING ITS HIGH BID OF $1,643,470 OF THE WORDS "SUBJECT TO APPEAL" AFTER THE WORD "ACCEPTED" RENDERED THE BID CONDITIONAL, AS THE FOREST SERVICE HAS CONCLUDED, OR WAS A MERE MATTER OF FORM,AS CAROLINA PACIFIC URGES.

THE TEST OF THE RESPONSIVENESS OF A BID IS WHETHER THE BID AS SUBMITTED EVIDENCES AGREEMENT ON THE PART OF THE BIDDER TO BE BOUND BY THE TERMS OF THE ADVERTISED INVITATION FOR BIDS. WITHIN THIS RULE ALLOWANCE IS MADE FOR WAIVER BY THE PROCURING AGENCIES OF MINOR DEVIATIONS IN BID FROM THE ADVERTISED SPECIFICATIONS, BUT NO ALLOWANCE IS MADE FOR ANY EXCEPTION TO THE PROCUREMENT REQUIREMENTS WHICH GOES TO THE SUBSTANCE OF THE BID SO AS TO AFFECT EITHER THE PRICE, QUANTITY, OR QUALITY OF THE ARTICLES OFFERED, SINCE SUCH ALLOWANCE WOULD BE PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS. 30 COMP. GEN. 179. THE SAME PRINCIPLES HAVE BEEN APPLIED TO ADVERTISED SALES OF GOVERNMENT PROPERTY. 37 COMP. GEN. 190.

IN THE INSTANT CASE, ACCORDING TO THE REPORTED FACTS, THE BIDDERS WERE ADVISED BY THE PRESIDING FOREST OFFICER THAT THEY COULD PARTICIPATE IN THE CONTINUED BIDDING AND PROTEST IF THEY SO DESIRED. FIVE OF THE BIDDERS ELECTED TO ENGAGE IN THE CONTINUED BIDDING; HOWEVER, ONLY CAROLINA PACIFIC REGISTERED A PROTEST. (AT THIS POINT IT MAY BE NOTED THAT ONLY CAROLINA PACIFIC STOOD TO BENEFIT FROM PROTESTING THE RESUMPTION OF THE BIDDING IN VIEW OF ITS STANDING AS THE HIGHEST BIDDER, WHICH UNDOUBTEDLY ACCOUNTS FOR THE FAILURE OF ANY OTHER BIDDER TO SO PROTEST.) THERE WAS NO QUESTION, THEREFORE, BUT THAT THE WORDS "SUBJECT TO APPEAL" WHICH CAROLINA PACIFIC ENTERED ON THE PRINTED BID FORM WHEN CONFIRMING ITS FINAL BID MERELY EXPRESSED IN WRITING WHAT CAROLINA PACIFIC HAD ALREADY EXPRESSED IN THE PRESENCE OF ALL OF THE OTHER BIDDERS VERBALLY; I.E., ITS INTENT TO CHALLENGE THE AUCTION PROCEDURES. ACCORDINGLY, THE BID PRICE OF $1,643,470 HAVING BEEN STATED WITH CERTAINTY, NO EXCEPTION HAVING BEEN TAKEN BY CAROLINA PACIFIC TO ANY OF THE PROVISIONS OF THE INVITATION, AND EACH OF THE OTHER BIDDERS HAVING BEEN AFFORDED THE SAME OPPORTUNITY TO BID UNDER PROTEST, WE ARE UNABLE TO CONCLUDE THAT THE WORDS IN QUESTION, REFERRING AS THEY DID TO A RIGHT OF PROTEST WHICH COULD HAVE BEEN EXERCISED WITHOUT A SPECIFIC RESERVATION (EITHER ORAL OR WRITTEN), RENDERED THE BID NONRESPONSIVE. THEREFORE, WE ARE UNABLE TO CONCUR WITH THE VIEW OF THE FOREST SERVICE THAT CAROLINA PACIFIC'S HIGH BID WAS A CONDITIONAL BID WITHIN THE CONTEMPLATION OF THE RULES AND REGULATIONS APPLICABLE TO COMPETITIVE BIDDING. RATHER WE BELIEVE THAT SINCE THE ONLY QUESTION PRESENTED BY THE APPEAL WAS THE AMOUNT WHICH CAROLINA PACIFIC COULD HAVE BEEN REQUIRED TO PAY, AND NO OTHER BIDDER'S INTERESTS WERE INVOLVED, PROPER ACTION WOULD HAVE BEEN TO ACCEPT THE BID SUBJECT TO THE RESOLUTION OF THAT QUESTION. SEE B-140605, SEPTEMBER 30, 1959; 36 COMP. GEN. 582. CONSIDERING NOW THE EXERCISE BY THE GOVERNMENT OF THE RIGHT RESERVED IN THE INVITATION PURSUANT TO 36 CFR 221.8 (C) TO REJECT ANY OR ALL BIDS, WE HAVE HELD THAT BIDS SHOULD NOT BE REJECTED UNDER SUCH PROVISIONS AS APPEAR IN PARAGRAPH 9 (B) OF THE INVITATION EITHER ARBITRARILY OR WITHOUT SUBSTANTIAL GROUNDS FOR CONSIDERING SUCH ACTION TO BE IN THE BEST INTEREST OF THE GOVERNMENT. B-164516, JULY 5, 1968. THE PROVISIONS OF SECTION 2431.72A OF THE FOREST SERVICE HANDBOOK QUOTED ABOVE ARE IN ACCORD WITH THAT DECISION. WHILE CONSIDERATIONS SUCH AS THE AMOUNT OF THE BID PRICES OR THE RIGHTS OF OTHER BIDDERS MAY JUSTIFY REJECTION OF ALL BIDS WHEN THE MOST ADVANTAGEOUS BID CANNOT BE ACCEPTED OR WHEN OTHER BIDDERS HAVE NOT BEEN GIVEN AN OPPORTUNITY TO COMPETE ON AN EQUAL BASIS, WE SEE NO SUFFICIENT BASIS FOR SUCH REJECTION IN THE PRESENT CASE. THUS, ALL BIDDERS WERE GIVEN FULL AND EQUAL OPPORTUNITY TO BID. ALSO THE PROPRIETY OF THE AUCTION PROCEDURES IS NO LONGER IN ISSUE IN VIEW OF THE WITHDRAWAL BY CAROLINA PACIFIC OF ITS OBJECTION TO THE CONTINUATION OF THE AUCTION AFTER THE THIRD LAPSE IN BIDDING, AND OF THE ELECTION BY ALL OF THE OTHER BIDDERS NOT TO PROTEST THE DISPOSITION OF THE TIMBER UNDER THE FIRST ADVERTISEMENT. FURTHER, CAROLINA PACIFIC'S HIGH BID WAS MORE THAN DOUBLE THE APPRAISED VALUE OF THE TIMBER, AND THE EFFECT OF THE CHANGE IN THE TIMBER MARKET DOES NOT APPEAR TO BE A COMPELLING FACTOR IN VIEW OF THE FACT THAT CAROLINA PACIFIC'S BID OF $1,643,470 EXCEEDS BY MORE THAN $500,000 THE AMOUNT OF $1,082,620 FOR WHICH THE TIMBER WAS REAPPRAISED FOR THE PURPOSE OF THE SECOND ADVERTISEMENT ISSUED ON APRIL 11, 1969. FINALLY, WHETHER AN ACCEPTABLE BID IN EXCESS OF THE HIGH BID BY CAROLINA PACIFIC WOULD BE RECEIVED IS PURELY SPECULATIVE.

IN THE CIRCUMSTANCES, IT IS OUR VIEW THAT THE RECORD DOES NOT SUPPORT THE CONCLUSION THAT REJECTION OF THE BIDS UNDER THE FIRST INVITATION AND AWARD UNDER THE READVERTISEMENT UNDER SEALED BID PROCEDURE WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT. ACCORDINGLY, IT IS OUR VIEW THAT THE READVERTISEMENT SHOULD BE CANCELLED AND A CONTRACT SHOULD BE AWARDED TO CAROLINA PACIFIC AT ITS HIGH BID PRICE OF $1,643,470.

IN VIEW OF OUR CONCLUSIONS, DISCUSSION OF WHETHER ORAL AUCTION OR SEALED BID PROCEDURES SHOULD BE EMPLOYED IN CONNECTION WITH THE REOFFERING IS NOT REQUIRED.