B-172266, MAY 10, 1971, 50 COMP GEN 769

B-172266: May 10, 1971

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CONTRACTS - PERFORMANCE - GEOGRAPHICAL AREA RESTRICTION BREACHED - PRICE REDUCTION A REQUIREMENT IN AN INVITATION FOR BIDS THAT THE CONTRACT BE PERFORMED IN A RESTRICTED GEOGRAPHICAL AREA IS A REASONABLE LIMITATION ON COMPETITION WHEN A CONTRACTING AGENCY NEEDS PROMPT SERVICE AND PLANT ACCESSIBILITY. SINCE PERFORMANCE IN THE SAN ANTONIO AREA WILL NOT DEPRIVE THE GOVERNMENT OF CONTEMPLATED RIGHTS. THE CONTRACTS IN QUESTION ARE IDENTIFIED AS PROGRAM 1712-M FOR TECHNICAL PUBLICATIONS FOR THE DEPARTMENT OF THE AIR FORCE COVERING THE PERIOD JULY 1. THE MATTER WAS THEREFORE SUBMITTED TO YOUR COMPTROLLER. WHICH IS SOME 250 MILES DISTANT FROM DALLAS AND FORT WORTH. ATTORNEYS FOR THE CONTRACTOR HAVE PROTESTED ENFORCEMENT OF THE PERFORMANCE LOCATION RESTRICTION ON THE BASIS THAT SUCH A PROVISION RELATES TO THE RESPONSIBILITY OF THE CONTRACTOR AND THAT IN THIS CASE THE CONTRACTOR IS MEETING ALL OF THE CONTRACT REQUIREMENTS OTHER THAN THE REQUIREMENT AS TO PLACE OF PERFORMANCE.

B-172266, MAY 10, 1971, 50 COMP GEN 769

CONTRACTS - PERFORMANCE - GEOGRAPHICAL AREA RESTRICTION BREACHED - PRICE REDUCTION A REQUIREMENT IN AN INVITATION FOR BIDS THAT THE CONTRACT BE PERFORMED IN A RESTRICTED GEOGRAPHICAL AREA IS A REASONABLE LIMITATION ON COMPETITION WHEN A CONTRACTING AGENCY NEEDS PROMPT SERVICE AND PLANT ACCESSIBILITY, AND THE RESTRICTION RELATING TO BIDDER RESPONSIBILITY, COMPLIANCE WITH THE REQUIREMENT RESULTS IN A VALID CONTRACT. THEREFORE, ALTHOUGH A CONTRACTOR'S UNAUTHORIZED ACTION SUBSEQUENT TO CONTRACT AWARDS TO EFFECT PERFORMANCE OF THE PRINTING OF TECHNICAL PUBLICATIONS RESTRICTED TO THE DALLAS-FORT WORTH AREA IN SAN ANTONIO CONSTITUTES A BREACH OF CONTRACT AND THE GOVERNMENT HAS A VESTED RIGHT TO INSIST ON PERFORMANCE IN THE RESTRICTED AREA, SINCE PERFORMANCE IN THE SAN ANTONIO AREA WILL NOT DEPRIVE THE GOVERNMENT OF CONTEMPLATED RIGHTS, THE CONTRACTS MAY BE MODIFIED TO DELETE THE RESTRICTION WITH ADEQUATE PRICE ADJUSTMENT, HOWEVER, FUTURE PROCUREMENTS SHOULD BROADEN COMPETITION BY ENLARGING THE PERFORMANCE AREA.

TO THE PUBLIC PRINTER, UNITED STATES GOVERNMENT PRINTING OFFICE, MAY 10, 1971:

WE REFER TO YOUR LETTER OF MARCH 19, 1971, AND ENCLOSURES, REQUESTING THE VIEWS OF OUR OFFICE AS TO THE LEGALITY OF PERMITTING CONTINUED PERFORMANCE BY LITHO PRESS, INC., SAN ANTONIO, TEXAS, OF TWO MULTIPLE AWARD, REQUIREMENTS TYPE, CONTRACTS UNDER THE CIRCUMSTANCES DISCUSSED BELOW. THE CONTRACTS IN QUESTION ARE IDENTIFIED AS PROGRAM 1712-M FOR TECHNICAL PUBLICATIONS FOR THE DEPARTMENT OF THE AIR FORCE COVERING THE PERIOD JULY 1, 1970, THROUGH JUNE 30, 1971, AND PROGRAM 1711-M FOR NAVY TECHNICAL MANUALS COVERING THE PERIOD OCTOBER 1, 1970, THROUGH SEPTEMBER 30, 1971.

EACH OF THE CONTRACTS INCLUDES A CLAUSE, ENTITLED "RESTRICTION ON LOCATION OF PRODUCTION FACILITIES," WHICH PROVIDES THAT ALL OF THE WORK PRODUCED BY THE CONTRACTOR UNDER THE PROGRAMS MUST BE PERFORMED WITHIN THE DALLAS-FORT WORTH, TEXAS, AREA BECAUSE OF THE NECESSITY OF CLOSE LIAISON WITH THE CONTRACTOR. THE CLAUSE IN THE PROGRAM 1712-M CONTRACT ALSO CITES A SHORT PRODUCTION SCHEDULE AS JUSTIFICATION FOR THE RESTRICTION ON LOCATION OF CONTRACTOR PRODUCTION FACILITIES.

THE RECORD INDICATES THAT SUBSEQUENT TO AWARD OF THE CONTRACTS QUESTION AROSE AS TO THE PROPRIETY OF PERFORMANCE BY THE CONTRACTOR OF THE WORK IN QUESTION AT ITS FACILITIES IN SAN ANTONIO, TEXAS, IN LIEU OF ITS FACILITIES IN DALLAS. THE CONTRACTOR, IN A DISCUSSION OF THE MATTER WITH REPRESENTATIVES OF YOUR OFFICE ON DECEMBER 4, 1970, URGED THAT IT INTERPRETED THE WORDS "DALLAS-FORT WORTH, TEXAS AREA" IN THE ABOVE CLAUSES AS INCLUDING SAN ANTONIO. THE MATTER WAS THEREFORE SUBMITTED TO YOUR COMPTROLLER, WHO ISSUED A DECISION TO THE EFFECT THAT SAN ANTONIO, WHICH IS SOME 250 MILES DISTANT FROM DALLAS AND FORT WORTH, MAY NOT BE CONSIDERED AS BEING WITHIN THE PRESCRIBED DALLAS-FORT WORTH AREA FOR THE PURPOSE OF THE CONTRACTS INVOLVED. BY LETTER DATED DECEMBER 23, 1970, THE CONTRACTING OFFICER NOTIFIED THE CONTRACTOR OF THE COMPTROLLER'S DECISION AND STATED THAT THE MANAGER OF THE GOVERNMENT PRINTING OFFICE REGIONAL PRINTING PROCUREMENT OFFICE IN DALLAS HAD BEEN ADVISED TO PLACE ORDERS WITH THE CONTRACTOR ONLY AFTER ASSURANCE THAT THE WORK WOULD BE PRODUCED IN THE CONTRACTOR'S DALLAS PLANT.

ATTORNEYS FOR THE CONTRACTOR HAVE PROTESTED ENFORCEMENT OF THE PERFORMANCE LOCATION RESTRICTION ON THE BASIS THAT SUCH A PROVISION RELATES TO THE RESPONSIBILITY OF THE CONTRACTOR AND THAT IN THIS CASE THE CONTRACTOR IS MEETING ALL OF THE CONTRACT REQUIREMENTS OTHER THAN THE REQUIREMENT AS TO PLACE OF PERFORMANCE. IN THIS CONNECTION, THE ATTORNEYS ADVISE THAT AN EARLIER SIMILAR CONTRACT, PROGRAM 826-M, WAS PERFORMED BY THE CONTRACTOR OUT OF DALLAS AND SAN ANTONIO WITH FULL KNOWLEDGE ON THE PART OF YOUR OFFICIALS REGARDING THE USE OF THE SAN ANTONIO FACILITIES. FURTHER, THE ATTORNEYS STATE THAT IN A 1969 TOUR OF THE CONTRACTOR'S FACILITY AT DALLAS YOUR DIRECTOR OF PURCHASES APPROVED THE USE BY THE CONTRACTOR OF THE SAN ANTONIO PLANT "SO LONG AS THE CONTRACTOR MET THE SHORT PRODUCTION DELIVERY SCHEDULES AND PROVIDED CLOSE LIAISON SERVICES AND PROVIDED ALL OF THE OTHER SERVICES REQUIRED."

IN ADDITION, THE CONTRACTOR'S ATTORNEYS URGE THAT THE GEOGRAPHIC AREA LIMITATION IS FOR THE BENEFIT OF THE GOVERNMENT; THAT THE INTERPRETATION OF THE LIMITATION IS WITHIN THE DISCRETION OF THE CONTRACTING OFFICER; AND THAT THE CONTRACT AWARDS WHICH WERE MADE TO LITHO PRESS, INC., PURSUANT TO THE EXERCISE OF ADMINISTRATIVE DISCRETION SHOULD NOT BE DISTURBED ABSENT EVIDENCE OF ERROR, FRAUD, OR FAVORITISM.

IN YOUR LETTER OF MARCH 19 YOU STATE THAT THE GEOGRAPHIC LIMITATIONS WHICH WERE IMPOSED BY EACH PROCUREMENT SOLICITATION AND CONTRACT WERE REPORTED BY THE REQUIRING AGENCIES, THE DEPARTMENTS OF THE AIR FORCE AND NAVY, TO BE ESSENTIAL TO THEIR NEEDS. YOU CONCUR WITH THE VIEW OF THE CONTRACTOR'S ATTORNEYS THAT THE LIMITATIONS ARE FOR THE BENEFIT OF THE GOVERNMENT AND THAT THEY RELATE TO THE RESPONSIBILITY OF THE CONTRACTOR AT THE TIME OF AWARD, NOT TO THE RESPONSIVENESS OF ITS BID.

FOR THE PROPOSITION THAT THE BID SOLICITATIONS WERE NOT AMBIGUOUS OR THAT LITHO PRESS, INC., WAS NOT MISLED AS TO THE MEANING OF THE GEOGRAPHIC RESTRICTIONS IN THE SOLICITATIONS, YOU REFER TO A LETTER DATED JULY 6, 1970, IN WHICH LITHO PRESS, INC., ASSURED YOUR DALLAS PROCUREMENT OFFICE THAT IT WOULD PRODUCE THE WORK IN THE DALLAS-FORT WORTH AREA AND WOULD OTHERWISE COMPLY WITH ALL CONTRACT SPECIFICATIONS IN THE SAME MANNER AS PERFORMANCE WAS THEN BEING MADE UNDER THE PROGRAM 826-M CONTRACT.

AS TO THE EFFECT OF PERFORMANCE OF THE CONTRACT BY LITHO PRESS, INC., IN SAN ANTONIO IN LIEU OF DALLAS, YOU STATE THAT THE NECESSARY LIAISON HAS BEEN MAINTAINED AND THAT THE CONTRACTS HAVE BEEN PERFORMED IN ACCORDANCE WITH THE SPECIFIED REQUIREMENTS WITHOUT EXCEPTION. FURTHER, INFORMAL ADVICE FURNISHED TO OUR OFFICE BY YOUR ASSOCIATE GENERAL COUNSEL IS TO THE EFFECT THAT NEITHER THE DEPARTMENT OF THE AIR FORCE NOR THE DEPARTMENT OF THE NAVY HAS MADE ANY COMPLAINT CONCERNING PERFORMANCE OF THE CONTRACT AT SAN ANTONIO AND THAT THERE IS NO INDICATION THAT ANY MONETARY SAVING HAS INURED TO THE CONTRACTOR INCIDENT THERETO.

IN PRESENTING THE MATTER TO OUR OFFICE FOR ADVICE YOU STATE THAT YOU DO NOT CONSTRUE THE DECISIONS OF OUR OFFICE RELATING TO THE EFFECT OF GEOGRAPHIC RESTRICTIONS IN PROCUREMENT SOLICITATIONS AS AUTHORITY FOR THE VIEW THAT ONCE A CONTRACT IS AWARDED ON THE BASIS OF COMPLIANCE WITH SUCH RESTRICTIONS IT MAY BE PERFORMED WITHOUT REGARD THERETO. ACCORDINGLY, YOU SOLICIT OUR VIEWS AS TO THE LEGALITY OF PERMITTING CONTINUED PERFORMANCE OF THE CONTRACTS (PRESUMABLY OUT OF SAN ANTONIO) AND MAKING PAYMENTS THEREUNDER.

WE HAVE STATED THAT THE NEED OF A CONTRACTING AGENCY FOR PROMPT SERVICE AND PLANT ACCESSIBILITY AFFORDS A REASONABLE BASIS FOR INCLUDING IN AN INVITATION FOR BIDS A PROVISION REQUIRING BIDDERS TO HAVE FACILITIES LOCATED WITHIN A SPECIFIED GEOGRAPHIC AREA FOR PERFORMANCE OF THE CONTRACT. B-150703, FEBRUARY 15, 1963. WE HAVE ALSO STATED THAT SINCE SUCH A PROVISION RELATES TO THE RESPONSIBILITY OF A BIDDER RATHER THAN TO THE RESPONSIVENESS OF HIS BID PROOF OF COMPLIANCE MAY BE SUBMITTED BY THE BIDDER UP TO THE TIME OF AWARD. B 147728, JANUARY 31, 1962; B-162250, SEPTEMBER 21, 1967.

THE GEOGRAPHIC RESTRICTION CLAUSE IN EACH OF THE INVITATIONS CONSIDERED HEREIN SETS FORTH THE BASIS FOR THE REQUIREMENT, AND EACH OF THE ORDERING AGENCIES HAS STATED THAT THE REQUIREMENT IS ESSENTIAL TO ITS NEEDS. ADDITION, BEFORE THE AWARDS WERE MADE YOUR OFFICE HAD VERIFIED THAT LITHO PRESS, INC., HAD A PLANT IN DALLAS, AND THERE WAS APPARENTLY NO EXCEPTION TAKEN BY LITHO PRESS, INC., IN EITHER OF ITS BIDS TO THE CLAUSES. IN THE CIRCUMSTANCES, IT IS OUR VIEW THAT THE REQUIREMENT IN EACH INVITATION MAY BE REGARDED AS A REASONABLE LIMITATION ON COMPETITION AND THAT LITHO PRESS, INC., WAS PROPERLY CONSIDERED AS EVIDENCING COMPLIANCE WITH SUCH REQUIREMENT. ACCORDINGLY, WE SEE NO LEGAL BASIS TO QUESTION THE VALIDITY OF EITHER CONTRACT.

AS TO THE CONTRACTOR'S ACTION, SUBSEQUENT TO AWARD, TO EFFECT PERFORMANCE OF THE CONTRACT WORK IN SAN ANTONIO RATHER THAN IN THE DALLAS-FORT WORTH AREA, WE BELIEVE THAT THERE CAN BE NO ARGUMENT THAT WITHOUT THE CONSENT OF AN AUTHORIZED GOVERNMENT REPRESENTATIVE SUCH ACTION CONSTITUTED A BREACH OF THE CONTRACT. THE QUESTION TO BE ANSWERED, THEREFORE, IS WHETHER SUCH BREACH PER SE REQUIRES TERMINATION OF THE CONTRACT WITH RESULTANT PENALTY AGAINST THE CONTRACTOR.

WHILE THE SUPREME COURT OF THE UNITED STATES HAS OBSERVED THAT THE PARTY FOR WHOSE PROTECTION A REQUIREMENT IS MADE MAY ALSO WAIVE IT, UNITED STATES V NEW YORK AND PORTO RICO STEAMSHIP COMPANY, 239 U.S. 88 (1915), IN APPLYING THIS RULE TO GOVERNMENT CONTRACTS OUR OFFICE ALSO APPLIES THE RULE THAT AGENTS AND OFFICERS OF THE GOVERNMENT HAVE NO AUTHORITY TO MODIFY EXISTING CONTRACTS, OR TO SURRENDER OR WAIVE CONTRACT RIGHTS WHICH HAVE VESTED IN THE GOVERNMENT, UNLESS THERE IS ALSO A COMPENSATING BENEFIT TO THE GOVERNMENT. 45 COMP. GEN. 24 (1965); 40 ID. 684 (1961) AND CASES THEREIN CITED.

IN THE INSTANT CASE, IT IS OBVIOUS THAT THE REQUIREMENT IN EACH CONTRACT THAT THE WORK BE PERFORMED IN THE DALLAS-FORT WORTH AREA IS FOR THE SOLE BENEFIT OF THE GOVERNMENT, AND THE GOVERNMENT THEREFORE HAS A VESTED RIGHT TO INSIST ON SUCH PERFORMANCE. THE RECORD, HOWEVER, SHOWS THAT THE CONTRACTOR, WHILE ACCOMPLISHING THE WORK IN SAN ANTONIO, HAS MAINTAINED THE CLOSE LIAISON REQUIRED BY THE DEPARTMENTS OF THE AIR FORCE AND NAVY, AND HAS ALSO COMPLIED WITH ALL OTHER CONTRACT REQUIREMENTS. NONCOMPLIANCE WITH THE PLACE OF PERFORMANCE REQUIREMENT THEREFORE HAS NOT DEPRIVED THE GOVERNMENT OF THE BENEFITS CONTEMPLATED BY THAT REQUIREMENT OF THE CONTRACTS. WHILE IT WOULD THEREFORE APPEAR TO BE EXTREMELY QUESTIONABLE AS TO WHETHER IT WAS NECESSARY TO SOLICIT BIDS AND AWARD CONTRACTS BASED UPON PERFORMANCE IN THE DALLAS-FORT WORTH AREA, THE FACT REMAINS THAT THE GOVERNMENT IS ENTITLED TO, AND PRESUMABLY IS PAYING FOR, PERFORMANCE ON THAT BASIS. ACCORDINGLY, IF IT IS YOUR OPINION THAT ENFORCEMENT OF THE RESTRICTION ON PLACE OF PERFORMANCE OF THE CONTRACTS IS NO LONGER ESSENTIAL TO THE GOVERNMENT'S NEEDS, OUR OFFICE WILL INTERPOSE NO OBJECTION, UPON ISSUANCE OF A DETERMINATION BY YOU TO SUCH EFFECT, TO MODIFICATION OF THE CONTRACTS TO DELETE THE RESTRICTION. SUCH MODIFICATIONS SHOULD, OF COURSE, PROVIDE FOR EQUITABLE ADJUSTMENTS OF THE CONTRACT PRICES TO COMPENSATE THE GOVERNMENT FOR ANY ADDITIONAL EXPENSE OF ADMINISTERING THE CONTRACTS, AS WELL AS ANY SAVING WHICH MAY INURE TO THE CONTRACTOR BY REASON OF PERMITTING A CHANGE IN THE PLACE OF PERFORMANCE.

WE SUGGEST THAT, WHERE SIMILAR CIRCUMSTANCES EXIST IN FUTURE PROCUREMENTS, CONSIDERATION BE GIVEN TO BROADENING COMPETITION BY ENLARGING THE AREA OF PERFORMANCE BEYOND THE IMMEDIATE AREA OF A RESPECTIVE FIELD PROCUREMENT OFFICE AND/OR THE SITE OF THE USING AGENCY IF THERE IS A REASONABLE EXPECTATION THAT BIDDERS LOCATED OUTSIDE SUCH IMMEDIATE AREA WILL BE ABLE TO COMPLY WITH THE REQUIREMENT FOR CLOSE LIAISON WITH THE GOVERNMENT AND OTHER REQUIREMENTS OF THE PARTICULAR PROCUREMENT.