B-169589, NOV. 25, 1970

B-169589: Nov 25, 1970

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THE INCLUSION OF AN AGENCY ACCESS TO RECORDS CLAUSE IN ADVERTISED REQUIREMENTS TYPE CONTRACTS SO THAT THE PROCURING AGENCY (GSA) CAN ASCERTAIN COMPLIANCE WITH OTHER CONTRACT CONDITIONS NECESSARY IN DETERMINING THE COST TO THE GOVERNMENT IS PROPER IN THE ABSENCE OF ANY INDICATION IN THE LEGISLATIVE HISTORY OF PUBLIC LAW 82-245. LOW BIDDER WHO TOOK EXCEPTION TO LANGUAGE OF AN AGENCY ACCESS TO RECORDS CLAUSE BY LIMITING IT TO "DIRECTLY PERTINENT" RECORDS AND OMITTING "OR COMPLIANCE WITH ANY CLAUSES THEREUNDER" MUST HAVE THE DEVIATIONS REGARDED AS SUBSTANTIVE AND A LIMITATION ON THE BIDDER'S LIABILITY THEREFORE. REJECTION OF THE BID WAS PROPER. TO INTERNATIONAL BUSINESS MACHINES CORPORATION: FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST REJECTION OF YOUR BIDS FOR REPAIR AND MAINTENANCE OF ELECTRIC TYPEWRITERS UNDER SOLICITATIONS ISSUED BY GENERAL SERVICES ADMINISTRATION REGIONS 2.

B-169589, NOV. 25, 1970

BID PROTEST - DEVIATIONS - ACCESS TO RECORDS CLAUSE - ADVERTISED PROCUREMENTS DECISION CONCLUDING THAT LOW BIDDER FOR ADVERTISED REQUIREMENTS TYPE CONTRACT FOR REPAIR AND MAINTENANCE OF ELECTRIC TYPEWRITERS FOR GSA WHO TOOK EXCEPTION TO ACCESS TO RECORDS CLAUSE HAD BID PROPERLY REJECTED. THE INCLUSION OF AN AGENCY ACCESS TO RECORDS CLAUSE IN ADVERTISED REQUIREMENTS TYPE CONTRACTS SO THAT THE PROCURING AGENCY (GSA) CAN ASCERTAIN COMPLIANCE WITH OTHER CONTRACT CONDITIONS NECESSARY IN DETERMINING THE COST TO THE GOVERNMENT IS PROPER IN THE ABSENCE OF ANY INDICATION IN THE LEGISLATIVE HISTORY OF PUBLIC LAW 82-245, 65 STAT. 700, THAT WOULD INDICATE A CONGRESSIONAL INTENT TO PRECLUDE SUCH CLAUSE IN ADVERTISED PROCUREMENTS. LOW BIDDER WHO TOOK EXCEPTION TO LANGUAGE OF AN AGENCY ACCESS TO RECORDS CLAUSE BY LIMITING IT TO "DIRECTLY PERTINENT" RECORDS AND OMITTING "OR COMPLIANCE WITH ANY CLAUSES THEREUNDER" MUST HAVE THE DEVIATIONS REGARDED AS SUBSTANTIVE AND A LIMITATION ON THE BIDDER'S LIABILITY THEREFORE, REJECTION OF THE BID WAS PROPER.

TO INTERNATIONAL BUSINESS MACHINES CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST REJECTION OF YOUR BIDS FOR REPAIR AND MAINTENANCE OF ELECTRIC TYPEWRITERS UNDER SOLICITATIONS ISSUED BY GENERAL SERVICES ADMINISTRATION REGIONS 2, 3, 4, 8 AND 9.

SINCE THE BASIS FOR REJECTION OF YOUR BIDS WAS THE SAME UNDER EACH OF THE SOLICITATIONS OF THE RESPECTIVE REGIONS NAMED ABOVE, OUR DISCUSSION HEREIN REFERS ONLY TO FORMALLY ADVERTISED SOLICITATION NO. WA-A6-R 2163, ISSUED BY REGION 3, WASHINGTON, D. C. HOWEVER, WHAT IS SAID IS EQUALLY APPLICABLE TO THE OTHER SOLICITATIONS AND YOUR BIDS THEREUNDER. THE SOLICITATION WAS ISSUED ON FEBRUARY 27, 1970, FOR A REQUIREMENTS TYPE CONTRACT FOR THE PERIOD JULY 1, 1970, OR DATE OF AWARD IF LATER, THROUGH JUNE 30, 1971. BIDS WERE OPENED ON MARCH 20, 1970, AND IBM WAS THE LOW BIDDER. HOWEVER, YOUR BID WAS REJECTED AS NONRESPONSIVE BECAUSE OF THE FOLLOWING LANGUAGE IN THE LETTER TRANSMITTING THE BID:

"WE AGREE TO ALL THE TERMS AND CONDITIONS OF THE SOLICITATION EXCEPT ARTICLE 10 (B) OF GSA FORM 1424, SEPTEMBER, 1969 - 'EXAMINATION OF RECORDS BY GSA.'

"WE AGREE, HOWEVER, THAT ALL OF THE RIGHTS GRANTED TO THE COMPTROLLER GENERAL OF THE UNITED STATES, OR ANY OF HIS DULY AUTHORIZED REPRESENTATIVES, UNDER ARTICLE 10 (A) OF GSA FORM 1424, SEPTEMBER, 1969, SHALL ALSO EXTEND TO THE ADMINISTRATOR OF GENERAL SERVICES OR ANY OF HIS DULY AUTHORIZED REPRESENTATIVES.

"IN AS MUCH AS WE AGREE TO GRANT TO THE ADMINISTRATOR OF GENERAL SERVICES THE RIGHTS UNDER ARTICLE 10 (A) WE TAKE EXCEPTION TO THE FOLLOWING SENTENCE IN PARAGRAPH 13 PAGE 14 OF THE SOLICITATION.

"'THE RIGHT IS SPECIFICALLY RESERVED TO THE GOVERNMENT TO INSPECT WITHOUT FURTHER NOTICE SUCH RECORDS OF THE CONTRACTOR AS PERTAIN TO SALES UNDER ANY CONTRACT RESULTING FROM THIS SOLICITATION.'"

THE PERTINENT PROVISIONS OF ARTICLE 10 OF GSA FORM 1424, 1969 EDITION, REFERRED TO ARE AS FOLLOWS:

"(A) AMENDMENT OF SF-32.

"PARAGRAPHS (A) AND (B) OF ARTICLE 10, STANDARD FORM 32, ARE DELETED AND THE FOLLOWING SUBSTITUTED:

"(A) THE CONTRACTOR AGREES THAT THE COMPTROLLER GENERAL OF THE UNITED STATES OR ANY OF HIS DULY AUTHORIZED REPRESENTATIVES SHALL, UNTIL EXPIRATION OF 3 YEARS AFTER FINAL PAYMENT UNDER THIS CONTRACT, OR OF THE TIME PERIODS FOR THE PARTICULAR RECORDS SPECIFIED IN PART 1-20 OF THE FEDERAL PROCUREMENT REGULATIONS (41 CFR PART 1-20), WHICHEVER EXPIRES EARLIER, HAVE ACCESS TO AND THE RIGHT TO EXAMINE ANY DIRECTLY PERTINENT BOOKS, DOCUMENTS, PAPERS, AND RECORDS OF THE CONTRACTOR INVOLVING TRANSACTIONS RELATED TO THIS CONTRACT.

"(B) EXAMINATION OF RECORDS BY GSA.

"(APPLICABLE TO REQUIREMENTS AND INDEFINITE QUANTITY CONTRACTS AND FOR OTHER CONTRACTS WHERE EXPRESSLY MADE APPLICABLE BY THE SOLICITATION.)

"THE CONTRACTOR AGREES THAT THE ADMINISTRATOR OF GENERAL SERVICES OR ANY OF HIS DULY AUTHORIZED REPRESENTATIVES SHALL, UNTIL THE EXPIRATION OF THREE YEARS AFTER FINAL PAYMENT UNDER THIS CONTRACT, OR OF THE TIME PERIODS FOR THE PARTICULAR RECORDS SPECIFIED IN PART 1-20 OF THE FEDERAL PROCUREMENT REGULATIONS (41 CFR PART 1-20), WHICHEVER EXPIRES EARLIER, HAVE ACCESS TO AND THE RIGHT TO EXAMINE ANY BOOKS, DOCUMENTS, PAPERS, AND RECORDS OF THE CONTRACTOR INVOLVING TRANSACTIONS RELATED TO THIS CONTRACT OR COMPLIANCE WITH ANY CLAUSES THEREUNDER."

BASICALLY, IT IS YOUR CONTENTION THAT ALTHOUGH GSA LACKS AUTHORITY TO INCLUDE AN EXAMINATION OF RECORDS PROVISION IN A FORMALLY ADVERTISED PROCUREMENT, YOU NEVERTHELESS AGREED TO GIVE GSA SUCH RIGHT IN THIS PROCUREMENT PROVIDED IT WAS LIMITED TO "DIRECTLY PERTINENT" BOOKS, DOCUMENTS, PAPERS, AND RECORDS, AS IN ARTICLE 10(A), GRANTING SUCH RIGHT TO THE COMPTROLLER GENERAL. IN THIS CONNECTION, YOU POINT OUT THAT THE RIGHT TO EXAMINE A CONTRACTOR'S RECORDS DERIVED FROM STATUTE, 41 U.S.C. 254(C), AND SUCH AUTHORITY IS GRANTED ONLY TO THE COMPTROLLER GENERAL AND IS LIMITED TO NEGOTIATED PROCUREMENTS. IN ADDITION, YOU CITE THE HISTORY OF THE LEGISLATION AS INDICATING A CONGRESSIONAL INTENT TO LIMIT SUCH AUTHORITY TO NEGOTIATED PROCUREMENTS. FURTHER, YOU CONTEND THAT SINCE ARTICLE 10 (A) OF FORM 1424 INCLUDED THE STATUTORY LANGUAGE "DIRECTLY PERTINENT" AND DID NOT INCLUDE THE LANGUAGE OF SF 32 LIMITING ITS APPLICABILITY TO NEGOTIATED PROCUREMENTS, THE CLEAR INTENT AND EFFECT OF YOUR OFFER WAS TO GRANT SUCH RIGHT TO GSA UNDER THE SUBJECT SOLICITATION. FINALLY, IT IS YOUR CONTENTION THAT THE EXCEPTION TO OMISSION OF THE WORDS "DIRECTLY PERTINENT" IS NOT MATERIAL SINCE THERE IS NO MEANINGFUL DISTINCTION IN THE EFFECT OF THE RESPECTIVE CLAUSES.

IT IS GSA'S POSITION THAT WHILE THE APPLICABLE STATUTE REQUIRES THE INCLUSION OF SUCH PROVISION WITH RESPECT TO THE RIGHT OF THE COMPTROLLER GENERAL IN NEGOTIATED CONTRACTS, THERE IS NOTHING IN THE STATUTE OR ITS LEGISLATIVE HISTORY INDICATING A CONGRESSIONAL INTENTION TO PROHIBIT THE INCLUSION OF SUCH PROVISION IN FORMALLY ADVERTISED CONTRACTS. FURTHERMORE, PURSUANT TO THE AUTHORITY OF SECTION 1-1.008 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR), THE ADMINISTRATOR OF GSA HAS PROMULGATED GENERAL SERVICES ADMINISTRATION PROCUREMENT REGULATIONS (GSPR) PRESCRIBING PROCUREMENT POLICIES AND PROCEDURES. SECTION 5 53.304 OF THE GSPR PRESCRIBES THE CLAUSE SET FORTH IN ARTICLE 10(B) OF GSA FORM 1424, AND GSPR 5-53.303(A) DIRECTS THAT IT BE INCLUDED IN REQUIREMENTS AND INDEFINITE QUANTITY CONTRACTS IN EXCESS OF $2,500. IN ADDITION, PERKINS V LUKENS STEEL CO., 310 U.S. 113 (1940), AND KERN LIMERICK, INC. V SCURLOCK, 347 U.S. 110, 116 (1954), ARE CITED AS AUTHORITY FOR GSA TO FIX THE TERMS AND CONDITIONS, NOT INCONSISTENT WITH LEGISLATION, UNDER WHICH IT WILL CONTRACT.

GSA VIEWS YOUR EXCEPTIONS AS GOING TO MATERIAL AND ESSENTIAL REQUIREMENTS, WHICH AFFECT PRICE AND PROPER CONTRACT ADMINISTRATION NECESSARY TO SAFEGUARD THE INTERESTS OF THE GOVERNMENT AND, THEREFORE, REQUIRING REJECTION OF YOUR BID UNDER FEDERAL PROCUREMENT REGULATIONS 1 2.301(A) AND 1-2.404-2(B)(5).

IT IS STATED THAT THE EXAMINATION OF RECORDS PROVISION WAS INCLUDED BECAUSE THE SOLICITATION CONTAINS OTHER PROVISIONS WHICH REQUIRE VERIFICATION BY AUDIT TO ASSURE CONTRACTOR COMPLIANCE THEREWITH. PARAGRAPHS 7 AND 12 ARE CITED AS EXAMPLES OF THESE PROVISIONS. THEY PROVIDE FOR PAYMENT BASED ON AN HOURLY RATE FOR SERVICES AND THE COST OF REPAIR PARTS. ALSO CITED IS PARAGRAPH 9, WHICH IMPOSES CERTAIN RESPONSIBILITIES ON THE CONTRACTOR FOR THE LOSS OF OR DAMAGE TO GOVERNMENT PROPERTY WHILE IN THE CUSTODY OF THE CONTRACTOR; PARAGRAPH 14, WHICH REQUIRES THAT REPLACEMENT PARTS BE NEW AND EQUAL TO THE ORIGINAL MANUFACTURER'S PARTS, AND PRICED AT SUCH MANUFACTURER'S CURRENT RETAIL PRICE; AND ITEM 1 OF PARAGRAPH 18, WHICH PROVIDES DETAILS AS TO HOW CHARGES ARE TO BE COMPUTED. IT IS CONTENDED THAT WITHOUT THE RIGHT TO EXAMINE THE CONTRACTOR'S RECORDS, GSA WOULD HAVE NO EFFECTIVE WAY OF VERIFYING COMPLIANCE WITH OR THE CHARGES UNDER THESE PROVISIONS.

FINALLY, IT IS GSA'S VIEW THAT IBM'S EXCEPTIONS ARE NOT REMEDIED BY ITS AGREEMENT TO EXTEND TO GSA THE SAME RIGHTS GRANTED TO THE COMPTROLLER GENERAL UNDER ARTICLE 10(A), SINCE THE COMPTROLLER GENERAL'S RIGHT TO EXAMINE RECORDS IS APPLICABLE ONLY TO NEGOTIATED PROCUREMENTS AND THE SUBJECT PROCUREMENT IS FORMALLY ADVERTISED.

WE HAVE STATED THAT, AS A GENERAL RULE, THE INCLUSION IN ANY CONTRACT OF TERMS AND CONDITIONS, NOT AUTHORIZED BY STATUTE, WHICH MAY TEND TO LESSEN COMPETITION OR INCREASE THE PROBABLE COST TO THE GOVERNMENT, IS IMPROPER. 42 COMP. GEN. 1 (1962). HOWEVER, WE HAVE HELD THAT THE GENERAL RULE IS NOT APPLICABLE TO TERMS OR CONDITIONS WHICH REASONABLY IMPLEMENT A PUBLIC POLICY EMBODIED IN PERTINENT STATUTES, EVEN THOUGH NOT SPECIFICALLY AUTHORIZED OR REQUIRED THEREBY. B-169168, APRIL 10, 1970. IN THIS CONNECTION, SEE 41 CFR SUBPART 1-1.5 AND 32 CFR CHAPTER 1, SUBPART E, WHICH REQUIRE THE INCLUSION OF A COVENANT AGAINST THE PAYMENT OF CONTINGENT FEES IN ALL GOVERNMENT CONTRACTS, EVEN THOUGH THE GOVERNING STATUTORY PROVISIONS (41 U.S.C. 254(A) AND 10 U.S.C. 2306(B)) RELATE ONLY TO NEGOTIATED PROCUREMENTS.

OF COURSE, THERE IS LAW REQUIRING THAT ALL CONTRACTS NEGOTIATED UNDER EITHER THE ARMED SERVICES PROCUREMENT ACT OF 1947 OR THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949 CONTAIN A CLAUSE GIVING OUR OFFICE THE RIGHT TO EXAMINE THE CONTRACTOR'S BOOKS. AS APPLICABLE TO GSA, THE PROVISION HAS BEEN CODIFIED INTO POSITIVE LAW AT 41 U.S.C. 254(C) TO READ AS FOLLOWS:

"ALL CONTRACTS NEGOTIATED WITHOUT ADVERTISING PURSUANT TO AUTHORITY CONTAINED IN THIS CHAPTER, CHAPTER 11C OF TITLE 5, CHAPTER 10 OF TITLE 40, AND CHAPTER 11 OF TITLE 44 SHALL INCLUDE A CLAUSE TO THE EFFECT THAT THE COMPTROLLER GENERAL OF THE UNITED STATES OR ANY OF HIS DULY AUTHORIZED REPRESENTATIVES SHALL UNTIL THE EXPIRATION OF THREE YEARS AFTER FINAL PAYMENT HAVE ACCESS TO AND THE RIGHT TO EXAMINE ANY DIRECTLY PERTINENT BOOKS, DOCUMENTS, PAPERS, AND RECORDS OF THE CONTRACTOR OR ANY OF HIS SUBCONTRACTORS ENGAGED IN THE PERFORMANCE OF AND INVOLVING TRANSACTIONS RELATED TO SUCH CONTRACTS OR SUBCONTRACTS." WE BELIEVE THAT THE LEGISLATIVE HISTORY OF PUBLIC LAW 245, 82ND CONGRESS, 65 STAT. 700, FROM WHICH THE ABOVE-QUOTED PROVISION DERIVES, CLEARLY ESTABLISHES THAT ITS PURPOSE IS TO REQUIRE THAT ALL NEGOTIATED CONTRACTS INCLUDE A PROVISION AUTHORIZING OUR OFFICE TO CHECK ON CONTRACT TRANSACTIONS WITH RESPECT TO WHETHER THE INTERESTS OF THE UNITED STATES HAVE BEEN PROPERLY REPRESENTED, SINCE THE PROTECTION THEORETICALLY INHERENT IN FORMAL ADVERTISING IS ABSENT UNDER NEGOTIATED PROCEDURES. HOWEVER, WE FIND NOTHING IN THE LEGISLATIVE HISTORY INDICATING A CONGRESSIONAL POLICY TO PRECLUDE A GOVERNMENT AGENCY'S RESERVING TO ITSELF SUCH RIGHT IN A FORMALLY ADVERTISED PROCUREMENT, WHERE, AS HERE, THE CONTRACT INCLUDES PROVISIONS UNDER WHICH RECORDS OF PERFORMANCE ARE IMPORTANT TO A FINAL DETERMINATION OF THE COST TO THE GOVERNMENT. IN SUCH CASE, IT IS OUR OPINION THAT THE CONTRACT MAY PROPERLY INCLUDE A PROVISION GRANTING ACCESS TO RECORDS TO THE PROCURING AGENCY.

FURTHERMORE, IT IS OUR OPINION THAT THE FAIR IMPORT OF YOUR COVER LETTER IS THAT WHILE YOU TOOK EXCEPTION TO ARTICLE 10(B), YOU WERE WILLING TO GRANT GSA THE RIGHT OF ACCESS UNDER THE SUBJECT SOLICITATION, BUT AS EXPRESSED IN ARTICLE 10(A). WE BELIEVE THE FOURTH PARAGRAPH OF THE LETTER CLEARLY INDICATES THIS WAS THE INTENDED MEANING. TO ASCRIBE A DIFFERENT INTERPRETATION TO THE LETTER IS IN OUR OPINION A STRAINED CONSTRUCTION.

ALTHOUGH YOU AGREED TO GRANT GSA THE RIGHT OF ACCESS, THE QUESTION IS WHETHER YOUR EXCEPTIONS TO THE EXACT WORDING OF ARTICLE 10(B), AND PARAGRAPH 13 ON PAGE 14 OF THE INVITATION HAVE ANY MATERIAL ADVERSE EFFECT ON THE RIGHTS GSA WOULD OTHERWISE OBTAIN UNDER THOSE PROVISIONS. SEE FPR 1-2.404-2(B)(5), WHICH PROVIDES AS FOLLOWS:

"(B) ORDINARILY, A BID SHALL BE REJECTED WHERE THE BIDDER IMPOSES CONDITIONS WHICH WOULD MODIFY REQUIREMENTS OF THE INVITATION FOR BIDS OR LIMIT HIS LIABILITY TO THE GOVERNMENT SO AS TO GIVE HIM AN ADVANTAGE OVER OTHER BIDDERS. FOR EXAMPLE, BIDS SHALL BE REJECTED IN WHICH THE BIDDER:

"(5) LIMITS RIGHTS OF GOVERNMENT UNDER ANY CONTRACT CLAUSE. HOWEVER, A LOW BIDDER MAY BE REQUESTED TO DELETE OBJECTIONABLE CONDITIONS FROM HIS BID IF THESE CONDITIONS DO NOT GO TO THE SUBSTANCE, AS DISTINGUISHED FROM THE FORM OF THE BID. A CONDITION GOES TO THE SUBSTANCE OF A BID WHERE IT AFFECTS PRICE, QUANTITY, QUALITY, OR DELIVERY OF THE ITEMS OFFERED."

AS MODIFIED IN ACCORDANCE WITH THE TERMS OF YOUR TRANSMITTAL LETTER, THE EXAMINATION OF RECORDS CLAUSE WOULD INCLUDE THE WORDS "DIRECTLY PERTINENT" AND OMIT THE PHRASE "OR COMPLIANCE WITH ANY CLAUSES THEREUNDER." ADDITION, THE RIGHT TO INSPECT CERTAIN SALES RECORDS UNDER PARAGRAPH 13 WOULD BE OMITTED. IF YOUR ONLY EXCEPTION TO THE PROVISIONS OF THE INVITATION WAS TO OMISSION OF THE WORDS "DIRECTLY PERTINENT" FROM ARTICLE 10(B), WE WOULD BE INCLINED TO HOLD THAT ANY DIFFERENCE IN MEANING WAS NOT SUBSTANTIAL.

HOWEVER, WE CANNOT SAY THAT THE OTHER EXCEPTIONS, PARTICULARLY OMISSION OF THE CONCLUDING PHRASE OF ARTICLE 10(B), ARE NOT SUBSTANTIAL AND NOT "CONDITIONS WHICH WOULD MODIFY REQUIREMENTS OF THE INVITATION FOR BIDS OR LIMIT *** LIABILITY TO THE GOVERNMENT SO AS TO GIVE *** AN ADVANTAGE OVER OTHER BIDDERS." AT THE VERY LEAST, THE MODIFICATIONS WHICH YOU WOULD IMPOSE, INCLUDING THE "DIRECTLY PERTINENT" QUALIFICATION, ARE SUCH THAT WE DO NOT BELIEVE A GOVERNMENT AGENCY SHOULD BE BURDENED EITHER WITH DECIDING THEIR POSSIBLE SIGNIFICANCE OR THE CONTROVERSY WHICH WOULD LIKELY ENSUE IF THEY WERE INCORPORATED IN A CONTRACT CONTAINING OTHER PROVISIONS SUCH AS HERE CONTEMPLATED.

ACCORDINGLY, THERE IS NO PROPER BASIS FOR OUR OFFICE TO OBJECT TO REJECTION OF YOUR BIDS UNDER THE SUBJECT SOLICITATIONS.