B-175597, B-176178, AUG 14, 1972

B-175597,B-176178: Aug 14, 1972

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PROTESTANT WAS PROPERLY ON THIS LIST. THE BIDS WERE PROPERLY REJECTED AS NONRESPONSIVE WHEN PROTESTANT FAILED TO MAKE ITS DEPOSIT BY ONE OF THESE MEANS OF PAYMENT. TO SURPLUS TIRE SALES: FURTHER REFERENCE IS MADE TO YOUR TELEFAX RECEIVED MARCH 31. WHICH WERE OPENED ON MARCH 28 AND APRIL 18. THE QUESTIONS RAISED UNDER EACH OF THE ABOVE INVITATIONS ARE THE SAME AND WILL BE CONSIDERED AND DISPOSED OF IN THIS DECISION WHEREIN SALES INVITATION NO. 44-2119 IS DISCUSSED. THE BIDDER OR PURCHASER TENDERED AN UNCERTIFIED PERSONAL OR BUSINESS CHECK WHICH WAS NOT PAID BY THE DRAWEE FOR ANY REASON AND THE BIDDER. THE DRAWER OF THE CHECK WERE SO NOTIFIED IN WRITING BY THE SELLING AGENCY. UNCERTIFIED PERSONAL OR BUSINESS CHECKS WILL NOT BE AN ACCEPTABLE FORM OF BID DEPOSIT OR PAYMENT.

B-175597, B-176178, AUG 14, 1972

BID PROTEST - DEPOSITS - CERTIFIED CHECK OR CASH REQUIREMENT DECISION DENYING REQUEST OF SURPLUS TIRE SALES FOR REMOVAL FROM THE DEFENSE SUPPLY AGENCY'S "INDEBTEDNESS/DISHONORED CHECK LIST," MADE INCIDENT TO ITS PROTEST AGAINST REJECTION OF ITS BIDS ON TWO SALES INVITATIONS AS NONRESPONSIVE. SINCE THE RECORD INDICATES THAT PROTESTANT HAS BOTH DISHONORED CHECKS AND HAS BEEN INDEBTED TO THE GOVERNMENT INCIDENT TO PAST SALES CONTRACTS, PROTESTANT WAS PROPERLY ON THIS LIST. AS THE GOVERNMENT MAY REQUIRE PAYMENT OF DEPOSITS BY CERTIFIED CHECKS OR CASH FROM FIRMS WITH A BAD PAYMENT RECORD AND AS THE INVITATION SPECIFICALLY REQUIRED SUCH, THE BIDS WERE PROPERLY REJECTED AS NONRESPONSIVE WHEN PROTESTANT FAILED TO MAKE ITS DEPOSIT BY ONE OF THESE MEANS OF PAYMENT.

TO SURPLUS TIRE SALES:

FURTHER REFERENCE IS MADE TO YOUR TELEFAX RECEIVED MARCH 31, 1972, AND YOUR SUBSEQUENT LETTERS WITH ENCLOSURES, PROTESTING THE REJECTION OF YOUR VARIOUS BIDS AS NONRESPONSIVE UNDER DEFENSE SUPPLY AGENCY (DSA) SALES INVITATION NOS. 44-2119 AND 44-2128, WHICH WERE OPENED ON MARCH 28 AND APRIL 18, 1972, RESPECTIVELY. THE QUESTIONS RAISED UNDER EACH OF THE ABOVE INVITATIONS ARE THE SAME AND WILL BE CONSIDERED AND DISPOSED OF IN THIS DECISION WHEREIN SALES INVITATION NO. 44-2119 IS DISCUSSED.

SALES INVITATION NO. 44-2119 INCLUDED AS PART OF THE TERMS AND CONDITIONS THE FOLLOWING PROVISION:

"4. FORMS OF BID DEPOSITS AND PAYMENTS.

"UNLESS OTHERWISE PROVIDED IN THE INVITATION, BID DEPOSITS (WHEN REQUIRED BY THE INVITATION) AND PAYMENTS SHALL BE IN U.S. CURRENCY OR ANY FORM OF CREDIT INSTRUMENT OTHER THAN PROMISSORY NOTE, MADE PAYABLE ON DEMAND IN U.S. CURRENCY: PROVIDED, THAT UNCERTIFIED PERSONAL OR BUSINESS CHECKS MUST BE FIRST PARTY INSTRUMENTS: PROVIDED FURTHER, THAT IF IN CONNECTION WITH ANY PRIOR SALE, THE BIDDER OR PURCHASER TENDERED AN UNCERTIFIED PERSONAL OR BUSINESS CHECK WHICH WAS NOT PAID BY THE DRAWEE FOR ANY REASON AND THE BIDDER, PURCHASER, AND THE DRAWER OF THE CHECK WERE SO NOTIFIED IN WRITING BY THE SELLING AGENCY, UNCERTIFIED PERSONAL OR BUSINESS CHECKS WILL NOT BE AN ACCEPTABLE FORM OF BID DEPOSIT OR PAYMENT. BIDS SUBMITTED AFTER THE EFFECTIVE DATE SPECIFIED IN THE WRITTEN NOTIFICATION REFERRED TO WHICH ARE NOT ACCOMPANIED BY THE PROPER BID DEPOSIT (OTHER THAN AN UNCERTIFIED PERSONAL OR BUSINESS CHECK) WILL BE SUMMARILY REJECTED."

IN EVALUATING THE BIDS RECEIVED, THE CONTRACTING OFFICER NOTED THAT SURPLUS TIRE SALES' (SURPLUS) BID DID NOT CONTAIN THE NUMBERS OF THE ITEMS BID ON. FURTHER, UPON CHECKING THE DEPOSIT, IT WAS FOUND THAT THE DEPOSIT CHECK CONTAINED THE NUMBERS BUT THAT IT WAS IN THE FORM OF AN UNCERTIFIED BUSINESS CHECK. IN ADDITION, THE CONTRACTING OFFICER FOUND SURPLUS LISTED ON THE INDEBTEDNESS/DISHONORED CHECK LIST NO. 22 72 BECAUSE A PREVIOUS DEPOSIT CHECK HAD BEEN RETURNED BY THE DRAWEE BANK MARKED "INSUFFICIENT FUNDS." IN THIS REGARD, BY A LETTER DATED MARCH 13, 1972, SURPLUS WAS ADVISED FOR A SECOND TIME THAT UNCERTIFIED CHECKS WERE NO LONGER AN ACCEPTABLE FORM OF BID DEPOSIT FOR THAT FIRM, AND THAT ALL FUTURE SURPLUS BIDS WHICH WERE OPENED ON OR AFTER MARCH 21, 1972, WHICH WERE NOT ACCOMPANIED BY A BID DEPOSIT IN THE REQUIRED FORM WOULD BE SUMMARILY REJECTED. ACCORDINGLY, SURPLUS BIDS OF MARCH 28 AND APRIL 18 WERE REJECTED AS NONRESPONSIVE SINCE THE BID DEPOSITS WERE IN THE FORM OF UNCERTIFIED CHECKS.

YOU CONTEND THAT THE DEFENSE LOGISTICS SERVICE CENTER'S (DLSC) ORIGINAL PLACEMENT OF SURPLUS ON THE INDEBTEDNESS/DISHONORED CHECK LIST WAS IMPROPER BECAUSE SURPLUS WAS NEVER "DISHONORED" A CHECK. IN ADDITION, YOU STATE THAT THE SUBSEQUENT REPLACEMENT OF SURPLUS ON THE LIST (AFTER HAVING BEEN REMOVED THEREFROM) FOR AN ALLEGED INDEBTEDNESS TO THE GOVERNMENT WAS AN ARBITRARY AND CAPRICIOUS ACTION AND THAT EVEN IF SURPLUS IS INDEBTED TO THE GOVERNMENT UNDER THE SALES PROGRAM, THIS IS NOT A VALID REASON TO RETAIN SURPLUS ON THE LIST. ACCORDINGLY, YOU CONTEND THAT THE GOVERNMENT HAS DEPRIVED SURPLUS OF THE RIGHT TO EQUAL TREATMENT IN DEALING WITH THE GOVERNMENT AND YOU, THEREFORE, DEMAND THAT SURPLUS BE REMOVED FROM THE INDEBTEDNESS/DISHONORED CHECK LIST.

IN RESPONSE TO YOUR CONTENTION THAT SURPLUS HAS NEVER DISHONORED A CHECK AND THEREBY SHOULD NOT HAVE BEEN PLACED ON THE INDEBTEDNESS/DISHONORED CHECK LIST, IT HAS BEEN REPORTED THAT ON CONTRACT NO. 44-2027-186, A SURPLUS CHECK WAS RETURNED BY THE DRAWEE BANK BECAUSE OF INSUFFICIENT FUNDS AND ON CONTRACT 46-2021-010 A SURPLUS CHECK WAS RETURNED BECAUSE OF A STOP-PAYMENT ORDER. SECTION 3 507(1)(A) OF THE UNIFORM COMMERCIAL CODE PROVIDES, IN PERTINENT PART, THAT:

"(1) AN INSTRUMENT IS DISHONORED WHEN

(A) A NECESSARY OR OPTIONAL PRESENTMENT IS DULY MADE AND DUE ACCEPTANCE OR PAYMENT IS REFUSED OR CANNOT BE OBTAINED WITHIN THE PRESCRIBED TIME

SEE LEADERBRAND V. CENTRAL STATE BANK OF WICHITA (1969), 202 KANS. 450, 450 P. 2D 1. THUS, THE ISSUANCE OF THE STOP-PAYMENT ORDER BY SURPLUS, AS WELL AS THE NONPAYMENT OF ITS CHECK BECAUSE OF INSUFFICIENT FUNDS, CONSTITUTE A "DISHONORING" OF THOSE CHECKS. ACCORDINGLY, WE CANNOT AGREE WITH YOUR CONTENTION THAT SURPLUS HAS NEVER DISHONORED A CHECK AND SHOULD NOT HAVE BEEN PLACED ON THE INDEBTEDNESS/DISHONORED CHECK LIST.

IN ADDITION, WE INVITE YOUR ATTENTION TO PARAGRAPH 4 OF THE GENERAL SALES TERMS AND CONDITIONS WHICH STATES "THAT IF IN CONNECTION WITH ANY PRIOR SALE, THE BIDDER OR PURCHASER TENDERED AN UNCERTIFIED PERSONAL OR BUSINESS CHECK WHICH WAS NOT PAID BY THE DRAWEE FOR ANY REASON ***" A BIDDER FOR FUTURE BID DEPOSITS MUST SUBMIT CASH OR A CERTIFIED INSTRUMENT. AS A RESULT, OUR OFFICE IS OF THE VIEW THAT THERE ARE SUFFICIENT REASONS FOR THE ORIGINAL PLACEMENT OF SURPLUS ON THE INDEBTEDNESS/DISHONORED CHECK LIST AND FOR REQUIRING SURPLUS TO USE CASH OR A CERTIFIED CHECK FOR ITS BID DEPOSITS.

IN OUR DECISION 47 COMP. GEN. 401 (1968), WE HELD THAT THE BID DEPOSIT CLAUSE, QUOTED ABOVE, WAS VALID AND PROPER FOR USE IN THE BEST INTEREST OF THE GOVERNMENT. IN THE INSTANT CASE, SURPLUS WAS NOTIFIED THAT EFFECTIVE SEPTEMBER 7, 1971, ITS UNCERTIFIED PERSONAL CHECKS WOULD NO LONGER BE ACCEPTABLE. IN ADDITION, SURPLUS WAS ADVISED THAT THE RESTRICTION WOULD BE SUBJECT TO RECONSIDERATION ONLY IF SURPLUS PLEDGED TO PROMPTLY PAY ALL FUTURE OBLIGATIONS. IN THIS REGARD, OUR OFFICE CANNOT AGREE WITH YOUR CONTENTION THAT SUCH ACTIONS WERE DIRECTED SOLELY AGAINST SURPLUS AND NO OTHER BIDDER UNDER SALES INVITATION NO. 44-2119, SINCE WE ARE ADVISED THAT THERE ARE PRESENTLY SOME 900 NAMES ON DLSC'S "BAD CHECK" LIST, ALL OF WHOM HAVE TO SUBMIT CERTIFIED INSTRUMENTS OR CASH AS BID DEPOSITS. WE BELIEVE THESE PROCEDURES ARE A REASONABLE AND EQUITABLE METHOD TO INSURE THAT THE ORDERLY PROCESSING OF THE SALES IS NOT JEOPARDIZED BY BIDDERS WHO HAVE A HISTORY OF HAVING SUBMITTED UNCERTIFIED CHECKS AS BID DEPOSITS WITHOUT HAVING SUFFICIENT FUNDS IN THE BANK OR BY STOPPING PAYMENT ON CHECKS.

IN REGARD TO YOUR CONTENTION THAT SURPLUS WAS IMPROPERLY REINSTATED ON THE LIST, IT IS REPORTED THAT THE ADVICE FURNISHED SURPLUS ON FEBRUARY 28, 1972, THAT ITS UNCERTIFIED CHECKS WOULD AGAIN BE ACCEPTABLE EFFECTIVE MARCH 7, 1972, WAS IN ERROR SINCE SURPLUS WAS STILL INDEBTED TO THE GOVERNMENT FOR UNPAID STORAGE CHARGES ON CONTRACT NO. 46-2057-402 AND FOR DEFAULT AND STORAGE CHARGES ON CONTRACT NO. 46 2043-052. WE HAVE THE OLDER ENTRIES REMOVED WHERE THE PARTICIPANT HAS NOT UNPAID DEBTS ARISING FROM THE SALES PROGRAM, THE NAME REMAINS ON THE LIST AND IS NOT REMOVED IF THE PARTICIPANT IS INDEBTED UNDER THE PROGRAM. THEREFORE, SURPLUS WAS NOT ENTITLED TO HAVE BEEN REMOVED FROM THE LIST ON MARCH 7 UNDER THE AGENCY'S ESTABLISHED PROCEDURES COVERING SUCH MATTERS SINCE IT HAD NOT FULFILLED THE STATED PREREQUISITE OF PAYING ITS OUTSTANDING DEBTS. AS A RESULT, OUR OFFICE CANNOT AGREE WITH YOUR CONTENTION THAT THE CANCELLATION OF THE REMOVAL, AND THE REINSTATEMENT OF SURPLUS ON THE LIST THEREBY REQUIRING CASH OR CERTIFIED CHECKS FOR BID DEPOSITS, WAS AN ARBITRARY OR CAPRICIOUS ACTION. IN OUR VIEW, THE REINSTATEMENT WAS APPROPRIATE TO RECTIFY THE ERRONEOUS REMOVAL OF SURPLUS FROM THE LIST AND TO PROVIDE UNIFORM TREATMENT, UNDER THE AGENCY'S PROCEDURES, FOR ALL PARTICIPANTS IN THE SALES PROGRAM.

ACCORDINGLY, SINCE WE HAVE NOT BEEN ADVISED THAT THE ABOVE STORAGE CHARGES HAVE NOW BEEN PAID, YOUR PROTEST AND YOUR REQUEST THAT SURPLUS BE REMOVED FROM THE INDEBTEDNESS/DISHONORED CHECK LIST ARE DENIED.