B-168006, JANUARY 19, 1970, 49 COMP. GEN. 431

B-168006: Jan 19, 1970

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ACCEPTANCE OF THE BIDDER'S DOCUMENTS WAS SUBJECT TO THE OUTCOME OF AN APPEAL BY THE SUCCESSFUL BIDDER. 600 THOUSAND BOARD FEET WAS ADVERTISED ON MAY 22. AN AUCTION SALE WAS HELD ON JUNE 23. WERE RECEIVED. THESE BIDS WERE SUBMITTED BY FUGII AND COMPANY. THIS BID WAS CONFIRMED IN WRITING BY ANNETTE ON JUNE 23. THE PERIOD FOR FURNISHING A PERFORMANCE BOND WAS EXTENDED BY LETTER OF JULY 23. ADVISED THAT: WHEN ALL THE ABOVE REQUIREMENTS ARE SATISFIED. THE FOREST SERVICE WILL EXECUTE THE CONTRACT AND RETURN YOUR COPY TO YOU. ADVISING THAT THE BID DEPOSIT AND PERFORMANCE BOND WERE BEING DELIVERED TO THE FISCAL AGENT IN JUNEAU. THE BID DEPOSIT AND PERFORMANCE BOND WERE ACCEPTED BY THE ACTING REGIONAL FORESTER ON SEPTEMBER 17.

B-168006, JANUARY 19, 1970, 49 COMP. GEN. 431

TIMBER SALES -- BIDS -- CONTRACT CONSUMMATION UPON THE FAILURE OF THE BIDDER AWARDED A TIMBER SALES CONTRACT TO TIMELY FURNISH A PERFORMANCE BOND, THE OFFER TO SELL THE TIMBER TO THE SECOND HIGH BIDDER AND THE BIDDER'S RESPONSE BY SIGNING THE BID FORM AND CONTRACT, AND FURNISHING A BID DEPOSIT AND PERFORMANCE BOND, DID NOT CONSUMMATE A CONTRACT, AS THE APPROVAL AND SIGNATURE OF THE REQUIRED CONTRACTING AUTHORITY HAD NOT BEEN SECURED, AND ACCEPTANCE OF THE BIDDER'S DOCUMENTS WAS SUBJECT TO THE OUTCOME OF AN APPEAL BY THE SUCCESSFUL BIDDER, WITH WHOM A BINDING CONTRACTUAL RELATIONSHIP HAD BEEN CREATED BY THE ACCEPTANCE OF ITS BID AND NOTIFICATION OF THE ACCEPTANCE, EVEN THOUGH A PERFORMANCE BOND HAD NOT BEEN FURNISHED, IN VIEW OF THE FACT THE INVITATION PROVIDED FOR THE EXECUTION OF FORMAL CONTRACT DOCUMENTS AND THE FUNISHING OF A PERFORMANCE BOND AT A LATER DATE, AND PRESCRIBED A PENALTY FOR FAILURE TO DO SO.

TO OSERAN AND HAHN, JANUARY 19, 1970:

THIS LETTER CONCERNS YOUR PROTEST BY LETTERS DATED SEPTEMBER 26 AND OCTOBER 22, 1969, ON BEHALF OF FUJII AND COMPANY, INCORPORATED, AGAINST THE AWARD OF THE DEVILS CLUB #2 TIMBER CONTRACT NO. 05-103 BY THE FOREST SERVICE, DEPARTMENT OF AGRICULTURE, TO ANYONE OTHER THAN YOUR CLIENT.

THIS TIMBER SALE FOR AN ESTIMATED 43,600 THOUSAND BOARD FEET WAS ADVERTISED ON MAY 22, 1969, FOR A PERIOD OF 30 DAYS. AN AUCTION SALE WAS HELD ON JUNE 23, 1969, AT WHICH TIME TWO SEALED BIDS, A PREREQUISITE TO ORAL BIDDING, WERE RECEIVED. THESE BIDS WERE SUBMITTED BY FUGII AND COMPANY, INCORPORATED (FUGII) AND BY ANNETTE TIMBER CORPORATION, INCORPORATED (ANNETTE). ORAL BIDDING RAISED THE HIGH BID BY ANNETTE, TO $15.60 PER THOUSAND BOARD FEET. THIS BID WAS CONFIRMED IN WRITING BY ANNETTE ON JUNE 23, 1969, AND ACCEPTED BY THE REGIONAL FORESTER BY LETTER OF JUNE 26, 1969, WHICH GAVE ANNETTE 30 DAYS TO FURNISH AN ACCEPTABLE PERFORMANCE BOND. THE PERIOD FOR FURNISHING A PERFORMANCE BOND WAS EXTENDED BY LETTER OF JULY 23, 1969, FOR 30 DAYS AFTER JULY 25, 1969.

THE ACTING FOREST SUPERVISOR ON AUGUST 28, 1969, NOTIFIED ANNETTE THAT THEY HAD FAILED TO MEET THE REQUIREMENTS OF THE TIMBER SALE BY FAILING TO FURNISH PERFORMANCE BOND WITHIN REQUIRED TIME AND THEREFORE COULD BE SUBJECT TO DAMAGES UNDER ITEM 10 OF THE SALE. MR. CHELSTAD OF THE TIMBER STAFF BY LETTER OF SEPTEMBER 10, 1969, OFFERED THE SALE TO FUJII AT THE HIGH BIDDER'S RATE IN ACCORDANCE WITH THE REQUEST MADE BY FUJII ON AUGUST 22, 1969. THE LETTER OF SEPTEMBER 10, 1969, IN ADDITION TO OFFERING THE SALE TO FUJII REQUESTED THAT FUJII COMPLETE AND SIGN THE PROPER BID FORM, EXECUTE THE CONTRACT WITH THE COMPANY SEAL, FURNISH THE NECESSARY BID DEPOSIT AND AN ACCEPTABLE PERFORMANCE BOND, AND ADVISED THAT:

WHEN ALL THE ABOVE REQUIREMENTS ARE SATISFIED, THE FOREST SERVICE WILL EXECUTE THE CONTRACT AND RETURN YOUR COPY TO YOU.

FUJII RESPONDED TO THE ABOVE REQUESTS ON SEPTEMBER 16, 1969, BY FURNISHING THE SIGNED BID FORM AND CONTRACT, AND ADVISING THAT THE BID DEPOSIT AND PERFORMANCE BOND WERE BEING DELIVERED TO THE FISCAL AGENT IN JUNEAU, ALASKA, AS DIRECTED. THE BID DEPOSIT AND PERFORMANCE BOND WERE ACCEPTED BY THE ACTING REGIONAL FORESTER ON SEPTEMBER 17, 1969, SUBJECT TO THE OUTCOME OF AN APPEAL BY ANNETTE WHICH WAS MADE ON SEPTEMBER 16 AND 17, 1969. ON SEPTEMBER 26, 1969, THE REGIONAL FORESTER ADVISED ANNETTE AND FUJII THAT THE SALE WOULD BE CONSUMMATED WITH ANNETTE. THE LETTER TO FUJII ALSO OFFERED TO RETURN THE SECURITIES RECEIVED AS THE BID DEPOSIT AND PERFORMANCE BOND. THIS ACTION WAS PROTESTED TO OUR OFFICE BY YOU ON BEHALF OF FUJII ON THE BASIS THAT FUJII HAD BEEN AWARDED A CONTRACT FOR THE TIMBER SALE AND THAT THE FOREST SERVICE'S AWARD TO ANNETTE CONSTITUTED A BREACH OF FUJII'S CONTRACT.

WE CANNOT ACCEPT THIS PROPOSITION. IN THIS FIRST PLACE, IT APPEARS THAT A CONTRACT ACTUALLY WAS ENTERED INTO FOR THIS TIMBER SALE ON JUNE 26, 1969, WHEN THE REGIONAL FORESTER ADVISED ANNETTE THAT THEIR BID "HAS BEEN ACCEPTED, AND THE CONTRACT ASSIGNED NUMBER 05-103." THIS ACTION IS ENTIRELY CONSISTENT WITH THE LANGUAGE USED IN THE BIDDING FORM WHICH STATES ON THE COVER SHEET:

CONTRACT AND BONDS. THE BIDDER WHOSE BID IS ACCEPTED WILL, WITHIN 30 DAYS OF NOTICE OF AWARD, OR ANY WRITTEN EXTENSION THEREOF BY THE FOREST SERVICE, EXECUTE A TIMBER SALE CONTRACT AND FURNISH A SATISFACTORY PERFORMANCE BOND *** . THE FACT THAT THE GOVERNMENT HAS ACCEPTED THE BID OR OFFER AND SO NOTIFIED THE BIDDER CREATES A BINDING CONTRACTUAL RELATIONSHIP. THIS CONCLUSION IS NOT ALTERED BY THE FACT THAT THE FORMAL CONTRACT DOCUMENTS WILL BE EXECUTED AND THE PERFORMANCE BOND FURNISHED AT A LATER DATE. IT IS WELL ESTABLISHED THAT WHERE THE INVITATION SO PROVIDES THE CONTRACT COMES INTO EXISTENCE UPON ACCEPTANCE OF THE BID EVEN THOUGH FORMAL CONTRACT DOCUMENTS ARE LATER TO BE EXECUTED. SEE PENN-OHIO STEEL CORPORATION V UNITED STATES, 173 CT. CL. 1064 (1965); ESCOTE MANUFACTURING COMPANY V UNITED STATES, 144 CT. CL. 452 (1959); UNITED STATES V SWIFT AND COMPANY, 270 US 124 (1926), AND UNITED STATES V PURCELL ENVELOPE COMPANY, 249 US 313 (1919). SIMILARLY, THIS OFFICE, AS WELL AS THE CONTRACT APPEAL BOARDS AND THE COURTS, HAVE HELD THAT AN AWARD MADE SUBJECT TO THE FURNISHING OF A BOND MAY CREATE A CONTRACT WHERE PARTIES SO INTEND. SEE 38 COMP. GEN. 376 (1958); LINDO ENGINEERING COMPANY. AECBCA #28-6-66,66-2BCA #6044 (1966), AND UNITED STATES V PENNINGTON, 228 F. SUPP. 374 (1964). THE CONCLUSION THAT A CONTRACT WAS ACTUALLY AWARDED ANNETTE IS BOLSTERED FURTHER BY THE MANNER IN WHICH THE PENALTY IS STATED FOR FAILURE TO EXECUTE THE FORMAL CONTRACT OR FURNISH THE PERFORMANCE BOND. ITEM 10 OF THE INSTRUCTIONS TO BIDDERS STATES:

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.

EQUALLY NECESSARY TO SUSTAIN YOUR PROTEST ARE THE REQUISITE ELEMENTS OF A CONTRACT BETWEEN FUJII AND THE FOREST SERVICE. WE FIND CERTAIN OF THOSE PREREQUISITES ABSENT IN THE PURPORTED CONTRACT WITH FUJII. THE LETTER OF SEPTEMBER 10, 1969, FROM MR. CHELSTAD OF THE TIMBER STAFF TO FUJII STATED THAT FUJII AS SECOND HIGH BIDDER WAS BEING OFFERED THE SALE AT THE HIGHER BIDDER'S RATE ACCORDING TO FUJII'S WISHES AND THAT AFTER SATISFACTION OF FOUR REQUIREMENTS, WHICH WERE SET OUT IN THE LETTER AND WHICH WE HAVE PREVIOUSLY NOTED, THE FOREST SERVICE WOULD EXECUTE THE CONTRACT AND RETURN A COPY TO FUJII. UNLIKE THE CORRESPONDENCE WITH ANNETTE, AT NO TIME DID THE FOREST SERVICE SPECIFICALLY ACCEPT FUJII'S OFFER. RATHER, THE LETTER OF SEPTEMBER 10, 1969, WAS A NOTICE TO FUJII THAT THE HIGH BIDDER HAD FAILED TO COMPLETE THE CONTRACT; THAT FUJII'S PREVIOUS ORAL OFFER TO TAKE THE TIMBER SALE AT THE SAME PRICE WOULD BE SATISFACTORY TO THE FOREST SERVICE; THAT FUJII'S OFFER SHOULD BE MADE IN THE PROPER MANNER BY EXECUTING THE CORRECT BID FORM, CONTRACT DOCUMENT, BID DEPOSIT AND PERFORMANCE BOND, AND "WHEN ALL THE ABOVE REQUIREMENTS ARE SATISFIED, THE FOREST SERVICES WILL EXECUTE THE CONTRACT AND RETURN YOUR COPY TO YOU." WHETHER PARTIES INTEND BY THEIR ACTS TO ENTER INTO CONTRACT IS A QUESTION OF FACT. BYRNE ORGANIZATION, INCORPORATED V UNITED STATES, 152 CT. CL. 578 (1961). ON THE BASIS OF THE SEPTEMBER 10, 1969, LETTER THE INTENT OF THE PARTIES IS AT BEST UNCLEAR. HOWEVER, IN DECIDING WHETHER A CONTRACT CAME INTO BEING UPON COMPLIANCE BY FUJII WITH THE CONDITIONS SET OUT IN THAT LETTER, ALL THE TRANSACTIONS BETWEEN THE PARTIES MUST BE CONSIDERED. THE RECORD BEFORE THIS OFFICE REVEALS THAT ON SEPTEMBER 16, 1969, MR. FUJII CAME TO MR. CHELSTAD'S OFFICE WITH ALL THE NECESSARY COMPLETED DOCUMENTS. AT THAT TIME MR. CHELSTAD COMPLETED THE PROPER PAPER WORK FOR THE DEVILS CLUB #2 TIMBER SALE AWARD TO FUJII AND TRANSMITTED THE SAME WITH A MEMORANDUM RECOMMENDING AWARD TO THE REGIONAL FORESTER. MR. FUJII THEN HAND CARRIED ALL THE MATERIAL REGARDING THIS SALE TO THE REGIONAL FORESTER. WE BELIEVE THIS IS SUFFICIENT TO SHOW THAT ALL PARTIES UNDERSTOOD AND CONTEMPLATED THAT SOMETHING WAS STILL REQUIRED TO CONSUMMATE A CONTRACT BETWEEN FUJII AND THE FOREST SERVICE. THAT ACT, OF COURSE, WAS THE APPROVAL AND SIGNATURE OF THE REGIONAL FORESTER WHO BY REGULATION IS AUTHORIZED TO MAKE THESE TIMBER SALES. SEE 36 CODE OF FEDERAL REGULATIONS 221.6. THE CONTRACT DOCUMENTS EXECUTED BY FUJII WERE NEVER IN FACT SIGNED BY THE REGIONAL FORESTER. NOR DO WE BELIEVE THIS APPROVAL OF A CONTRACT BY THE REGIONAL FORESTER CAN BE IMPUTED BY HIS ACCEPTANCE OF THE SECURITIES DEPOSITED IN LIEU OF A PERFORMANCE BOND. THE RECEIPT FOR THOSE SECURITIES DATED SEPTEMBER 17, 1969, STATED THAT THEY WERE RECEIVED:

*** SUBJECT TO THE OUTCOME OF AN APPEAL MADE BY THE ANNETTE TIMBER COMPANY.

THIS CLEARLY WAS NOT UNEQUIVOCAL ACCEPTANCE NECESSARY TO CONSUMMATE A CONTRACT.

BASED ON THE FOREGOING, WE FIND THAT A CONTRACT WITH ANNETTE WAS IN EXISTENCE PRIOR TO THE CORRESPONDENCE WITH FUJII AND THAT A CONTRACT FOR THE TIMBER SALE WAS NEVER IN FACT AWARDED TO FUJII. ACCORDINGLY, WE MUST DENY YOUR PROTEST.