B-167617, DEC. 1, 1969

B-167617: Dec 1, 1969

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SINCE CONTRACTING OFFICER'S DETERMINATION THAT BIDDER WAS RESPONSIBLE WAS JUSTIFIED FROM COPIES OF OPERATING CERTIFICATE OF COMPANY'S AUTHORITY TO TRANSPORT GENERAL COMMODITIES AND LETTER FROM REGISTERED ICC PRACTITIONER INTERPRETING SAME AS PERMITTING PERFORMANCE OF REQUIRED SERVICE. WAS WITHIN GENERAL RULE CONTRACTS SHOULD BE UPHELD IF CONTRACTING OFFICER ACTS REASONABLY AND IN GOOD FAITH AND CONTRACT SHOULD NOT BE CANCELED UNLESS ITS ILLEGALITY IS CLEAR. TO KANE TRANSFER COMPANY: REFERENCE IS MADE TO YOUR LETTER OF JULY 31. WHEREIN THE AUTHORITY OF THE COMPANY TO TRANSPORT GENERAL COMMODITIES OF THE TYPE REQUIRED TO BE SHIPPED UNDER THE CONTRACT WAS SET FORTH AS FOLLOWS: GENERAL COMMODITIES.

B-167617, DEC. 1, 1969

BIDDERS--QUALIFICATIONS--LICENSE REQUIREMENT--OPERATING AUTHORITY ACCEPTABILITY ALLEGATION THAT SUCCESSFUL BIDDER DID NOT POSSESS REQUIRED OPERATING AUTHORITY FROM INTERSTATE COMMERCE COMMISSION (ICC) DOES NOT JUSTIFY CANCELLATION OF CARTAGE AND DRAYAGE CONTRACT, NOTWITHSTANDING ADJUDICATION BY COURT OF CLAIMS RELIED ON BY PROTESTANT, SINCE CONTRACTING OFFICER'S DETERMINATION THAT BIDDER WAS RESPONSIBLE WAS JUSTIFIED FROM COPIES OF OPERATING CERTIFICATE OF COMPANY'S AUTHORITY TO TRANSPORT GENERAL COMMODITIES AND LETTER FROM REGISTERED ICC PRACTITIONER INTERPRETING SAME AS PERMITTING PERFORMANCE OF REQUIRED SERVICE, AND WAS WITHIN GENERAL RULE CONTRACTS SHOULD BE UPHELD IF CONTRACTING OFFICER ACTS REASONABLY AND IN GOOD FAITH AND CONTRACT SHOULD NOT BE CANCELED UNLESS ITS ILLEGALITY IS CLEAR.

TO KANE TRANSFER COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF JULY 31, 1969, AND SUBSEQUENT CORRESPONDENCE PROTESTING AGAINST THE AWARD OF A CONTRACT TO THE J. H. HOFFMAN COMPANY (NOW KNOWN AS E.I. KANE, INC.) UNDER REQUEST FOR PROPOSAL (RFP) NO. DAAB03-70-R-0005, ISSUED BY THE DEPARTMENT OF THE ARMY ON JUNE 2, 1969, FOR THE PROCUREMENT OF CARTAGE AND DRAYAGE SERVICES WITHIN AND BETWEEN THE COMMERCIAL ZONES OF THE DISTRICT OF COLUMBIA AND BALTIMORE, MARYLAND, FOR THE PERIOD FROM JULY 1, 1969, THROUGH JUNE 30, 1970. THE RFP CONTAINED THE FOLLOWING PERTINENT PROVISIONS:

"ARTICLE I - SCOPE OF WORK D. THE CONTRACTOR CERTIFIES THAT HE POSSESSES THE FOLLOWING SERVICE CAPABILITIES:

"2. VALID OPERATING RIGHTS GRANTED TO HIM BY THE INTERSTATE COMMERCE COMMISSION AND OTHER COMPETENT REGULATIVE AUTHORITIES AS MAY BE REQUIRED TO LEGALLY ENGAGE IN MOTOR CARRIER OPERATIONS WITHIN AND BETWEEN THE COMMERCIAL ZONES OF THE DISTRICT OF COLUMBIA AND BALTIMORE, MARYLAND.

"PURCHASE DESCRIPTION - AREA OF COVERAGE "4.1 THE CONTRACTOR SHALL BE CAPABLE OF PROVIDING ALL VEHICULAR EQUIPMENT, LABOR AND MATERIALS HERETOFORE SPECIFIED IN THIS CONTRACT AS NECESSARY AND REQUIRED TO RENDER PICK-UP, DRAYAGE, RIGGING, CARTAGE AND INTERNAL MOVEMENT SERVICES WITHIN AND BETWEEN VINT HILL FARMS, VIRGINIA; THE DISTRICT OF COLUMBIA LOCAL CARTAGE AREA; THE FORT GEORGE G. MEADE, MARYLAND AREA; THE BALTIMORE, MARYLAND LOCAL CARTAGE AREA; KENT ISLAND, MARYLAND AREA, AND ALL INTERMEDIATE POINTS THERETO.'

THE J.H. HOFFMAN COMPANY SUBMITTED THE LOWEST OVERALL PROPOSAL AND FURNISHED A COPY OF INTERSTATE COMMERCE COMMISSION (ICC) CERTIFICATE NO. MC 34479, DATED APRIL 28, 1955, WHEREIN THE AUTHORITY OF THE COMPANY TO TRANSPORT GENERAL COMMODITIES OF THE TYPE REQUIRED TO BE SHIPPED UNDER THE CONTRACT WAS SET FORTH AS FOLLOWS: GENERAL COMMODITIES, EXCEPT THOSE OF UNUSUAL VALUE, CLASS A AND B EXPLOSIVES, HOUSEHOLD GOODS AS DEFINED BY THE COMMISSION, COMMODITIES IN BULK, COMMODITIES REQUIRING SPECIAL EQUIPMENT, AND THOSE INJURIOUS OR CONTAMINATING TO OTHER LADING, FROM BALTIMORE, MD., OVER U.S. HIGHWAY 1 TO WASHINGTON D.C., THENCE OVER IRREGULAR ROUTES TO POINTS IN CULPEPER COUNTY, VA., AND RETURN WITH NO TRANSPORTATION FOR COMPENSATION EXCEPT AS OTHERWISE AUTHORIZED FROM POINTS IN CULPEPER COUNTY, VA., OVER IRREGULAR ROUTES TO WASHINGTON, D.C., THENCE OVER U.S. HIGHWAY 1 TO BALTIMORE, MD. SERVICE IS AUTHORIZED TO AND FROM THE INTERMEDIATE POINT OF WASHINGTON, D.C. THE COMPANY ALSO SUBMITTED A COPY OF A LETTER DATED JUNE 5, 1969, FROM A FIRM OF ICC PRACTITIONERS WHICH STATED THAT THE COMPANY POSSESSED THE AUTHORITY REQUIRED UNDER THE SPECIFICATIONS QUOTED ABOVE. IN VIEW THEREOF AND AS THE CONTRACTING OFFICER WAS ADVISED THAT THE COMPANY WAS TECHNICALLY CAPABLE OF PERFORMING THE REQUIREMENTS OF THE RFP, AN AWARD WAS MADE TO THE CONCERN ON JUNE 30, 1969.

YOU PROTESTED THIS DECISION BY CLAIMING THAT HOFFMAN DID NOT POSSESS THE OPERATING AUTHORITY REQUIRED UNDER THE CONTRACT AND SUBMITTED TO OUR OFFICE A COPY OF A LETTER, DATED AUGUST 8, 1969, FROM THE ASSOCIATE CHIEF, BUREAU OF OPERATIONS, SECTION OF MOTOR CARRIERS, ICC, WHO STATED THAT THE J.H. HOFFMAN COMPANY WAS NOT PERMITTED TO TRANSPORT GENERAL COMMODITIES FROM WASHINGTON, D.C., TO BALTIMORE, MARYLAND, AS FOLLOWS:

"YOU HAVE CORRECTLY ADVISED THE COMPTROLLER GENERAL THAT THE OPERATING AUTHORITY HELD BY THE PREDECESSOR OF J.H. HOFFMAN COMPANY WAS FOUND FORMALLY NOT TO PERMIT THE TRANSPORTATION OF GENERAL COMMODITIES FROM WASHINGTON, D.C. TO BALTIMORE, MD. THE GENERAL COMMODITY PORTION OF THE CERTIFICATE NOW HELD BY J.H. HOFFMAN COMPANY DIFFERS SLIGHTLY IN WORDING FROM THAT HELD BY ITS PREDECESSOR. HOWEVER, THIS DIFFERENT WORDING IN NO WAY BROADENED OR CHANGED THE SCOPE OF THE GRANT, AND THE FORMAL HOLDING REFERRED TO ABOVE APPLIES TO THE OPERATIONS OF J.H. HOFFMAN COMPANY, IN MY INFORMAL OPINION.' YOU HAVE ALSO FURNISHED US WITH A COPY OF AN ORDER, DATED SEPTEMBER 17, 1969, WHICH WAS ENTERED IN A PROCEEDING, ENTITLED JOSEPH M. DIGNAN AND SON, INC., ET AL., V J.H. HOFFMAN COMPANY, CIVIL ACTION NO. 2414-69, UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA, WHEREIN THE COURT CONCLUDED THAT HOFFMAN WAS NOT AUTHORIZED TO TRANSPORT GENERAL COMMODITIES FROM WASHINGTON TO BALTIMORE BECAUSE THE COMPANY WAS BOUND BY THE FORMAL OPINION ISSUED TO ITS PREDECESSOR BY THE ICC. SINCE THE GOODS TO BE TRANSPORTED UNDER THE CONTRACT ARE GENERAL COMMODITIES AND AS THE INVITATION REQUIRED TWO WAY OPERATING AUTHORITY BETWEEN WASHINGTON AND BALTIMORE, YOU CONTEND THAT THE AWARD TO HOFFMAN WAS ILLEGAL AND SHOULD BE CANCELLED BY OUR OFFICE.

THE DEPARTMENT OF THE ARMY MAINTAINS THAT IT REASONABLY RELIED ON THE EVIDENCE OF HOFFMAN'S OPERATING AUTHORITY IN DETERMINING THAT THE COMPANY COULD LEGALLY FULFILL THE REQUIREMENTS OF THE SUBJECT CONTRACT AND THAT IT WAS NOT REQUIRED TO SEEK THE INFORMAL OPINION OF THE ICC CONCERNING THIS MATTER BEFORE AWARDING THE CONTRACT IN ACCORD WITH THE DECISION OF OUR OFFICE IN 17 COMP. GEN. 72 (1937). ACCORDINGLY, THE DEPARTMENT RECOMMENDS THAT THE AWARD SHOULD NOT BE DISTURBED.

THIS OFFICE HAS HELD THAT THE EXISTENCE OF VALID OPERATING RIGHTS IS AN ESSENTIAL CONDITION TO A VALID AWARD OF A TRANSPORTATION-SERVICES CONTRACT REQUIRING FOREIGN OR INTERSTATE SHIPMENT IN VIEW OF THE STATUTORY REQUIREMENTS SET FORTH IN 49 U.S.C. 301 ET SEQ., WHICH PROHIBIT SUCH ACTIVITIES WITHOUT PROPER AUTHORIZATION FROM THE ICC. 34 COMP. GEN. 175 (1954), 47 COMP. GEN. 539 (1968). IN THIS CONNECTION WE HAVE ALSO STATED THAT THE PRIMARY PURPOSE OF REQUIRING A BIDDER TO CERTIFY HIS OPERATING RIGHTS IS TO DETERMINE HIS "LEGAL AUTHORIZATION TO PERFORM THE CONTRACT, WHICH IS A MATTER OF RESPONSIBILITY AND IS NOT RELATED TO AN EVALUATION OF THE BID.' 46 COMP. GEN. 326, 329 (1966). IN VIEW THEREOF, AND AS ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1 904.1 STATES THAT NO CONTRACT SHALL BE AWARDED TO ANY FIRM UNLESS THE CONTRACTING OFFICER MAKES AN AFFIRMATIVE DETERMINATION THAT THE PROSPECTIVE CONTRACTOR, IS RESPONSIBLE, WE BELIEVE CONTRACTING OFFICERS ARE REQUIRED TO DETERMINE THE AUTHORITY OF ANY PROSPECTIVE CONTRACTOR TO LEGALLY PERFORM THE REQUIREMENTS OF A TRANSPORTATION-SERVICES CONTRACT BASED ON AN EVALUATION OF SUCH DATA AS IS AVAILABLE IN THE MATTER, INCLUDING ANY CERTIFICATION SET FORTH IN THE PROSPECTIVE CONTRACTOR'S BID. ALTHOUGH WE HAVE NOT REQUIRED THAT THE INFORMAL ADVICE OF THE ICC BE OBTAINED PRIOR TO AWARD CONCERNING THE BIDDER'S OPERATING AUTHORITY TO PERFORM THE CONTRACT'S REQUIREMENTS (17 COMP. GEN. 72), OUR OFFICE HAS UPHELD THE REJECTION OF BIDS WHERE THIS ADVICE WAS OBTAINED PRIOR TO AWARD AND IT INDICATED THAT THE BIDDER LACKED SUCH AUTHORITY. B-158634, OCTOBER 6, 1966; B-164244, JUNE 12, 1968.

IN THE SUBJECT CASE WE CANNOT CONCLUDE THAT THE INFORMATION OBTAINED BY THE PROCURING ACTIVITY PRIOR TO AWARD WAS SO DEFICIENT AS TO PRECLUDE A FINDING THAT HOFFMAN WAS AUTHORIZED TO PERFORM THE SUBJECT CONTRACT'S REQUIREMENTS. AS NOTED ABOVE, THE PROCURING ACTIVITY OBTAINED A COPY OF HOFFMAN'S OPERATING CERTIFICATE WHICH SHOWS THAT THE COMPANY IS AUTHORIZED TO TRANSPORT GENERAL COMMODITIES,"TO AND FROM THE INTERMEDIATE POINT OF WASHINGTON, D.C.' THE ACTIVITY WAS ALSO FURNISHED A COPY OF A LETTER FROM A REGISTERED ICC PRACTITIONER WHO INTERPRETED THIS PROVISION AS PERMITTING HOFFMAN TO ENGAGE IN THE TRANSPORTATION SERVICES REQUIRED UNDER THE CONTRACT.

THE COURT OF CLAIMS HAS HELD THAT THE AWARD OF A CONTRACT SHOULD BE UPHELD IF THE CONTRACTING OFFICER HAS ACTED IN GOOD FAITH AND IF SUCH ACTION IS REASONABLE UNDER THE LAW AND REGULATIONS; AND THAT A CONTRACT SHOULD BE CANCELLED AS VOID AB INITIO ONLY IF ITS ILLEGALITY IS CLEAR AND PALPABLE. SEE JOHN REINER AND COMPANY V U.S., 163 CT. CL. 381; 325 F.2D 438 (1963), CERT. DENIED, 377 U.S. 931 (1964), BROWN AND SON ELECTRICAL COMPANY V U.S., 163 CT. CL. 465; 325 F.2D 466 (1963). FOR THE REASONS STATED ABOVE WE CANNOT CONCLUDE THAT THE CONTRACTING OFFICER ACTED IN BAD FAITH IN MAKING AN AWARD TO HOFFMAN OR THAT HIS DECISION WAS UNREASONABLE UNDER LEGAL PRECEDENT EXISTING AT THE TIME OF AWARD. IT SHOULD BE NOTED, MOREOVER, THAT THE CONTRACTING OFFICER HAS NOT REQUIRED HOFFMAN TO TRANSPORT MATERIALS OR EQUIPMENT FROM WASHINGTON TO BALTIMORE. IN THIS CONNECTION OUR OFFICE HAS HELD THAT THE CRITICAL TIME FOR DETERMINING THE CONTRACTOR'S AUTHORITY TO PERFORM THE SERVICES REQUIRED UNDER THE CONTRACT IS THE "TIME FOR PERFORMANCE; PLUS ANY LEAD-TIME WHICH MIGHT BE NECESSARY IN THE PARTICULAR CASE.' B 160540, MARCH 24, 1967; B-161211, JULY 11, 1967. ADDITIONALLY, IT IS OUR UNDERSTANDING THAT THE COURT'S ORDER OF SEPTEMBER 17, 1969, IN CIVIL ACTION NO. 2414-69 WAS NOT A FINAL ADJUDICATION THAT HOFFMAN IS BOUND BY THE FORMAL HOLDING ISSUED TO ITS PREDECESSOR COMPANY BY THE ICC INVOLVING ITS AUTHORITY TO TRANSPORT GENERAL COMMODITIES FROM WASHINGTON TO BALTIMORE, OR THAT THE OPERATING CERTIFICATE PRESENTLY HELD BY HOFFMAN DOES NOT PERMIT SUCH CARRIAGE. VIEW THEREOF, WE CANNOT OBJECT TO THE ANNOUNCED INTENTION OF THE DEPARTMENT TO REQUIRE THE CONTRACTOR'S FURTHER PERFORMANCE WITHIN AND BETWEEN ANY OF THE AREAS SPECIFIED IN THE CONTRACT.