B-176493, OCT 12, 1972

B-176493, OCT 12, 1972

BID PROTEST - SUBMITTAL OF TWO BIDS BY A CONTRACTOR - UNAUTHORIZED BIDS DECISION ALLOWING THE PROTEST OF LIBERTY MAINTENANCE COMPANY, AND DENYING THE PROTEST OF C. C. SKINNER UNDER AN IFB ISSUED BY HOLLOMAN AFB, N. M. WHERE TWO BIDS ARE SUBMITTED ON BEHALF OF THE SAME CONTRACTOR, AND ONE WAS UNAUTHORIZED, THE CONTRACTING AGENCY CAN ACCEPT BOTH BIDS AND APPROPRIATELY MAKE AWARD ON THE BASIS OF THE AUTHORIZED BID IF THE CONTRACTING OFFICER WAS NOTIFIED PRIOR TO BID OPENING THAT A BID SUBMITTED BY A PERSON OTHER THAN THOSE SPECIFIED BY THE CONTRACTOR WOULD BE UNAUTHORIZED, THERE WAS NO COLLUSION INVOLVED, AND BOTH BIDS WERE BELOW ALL OTHER BIDS. EVIDENCE THAT ONE OF THE BIDS IS UNAUTHORIZED CAN BE RECEIVED AFTER BID OPENING.

TO MR. SECRETARY:

REFERENCE IS MADE TO A REPORT DATED AUGUST 2, 1972, FROM THE CHIEF, CONTRACT MANAGEMENT DIVISION, DIR/PROCUREMENT POLICY, DCS/S&L, CONCERNING THE PROTESTS OF LIBERTY MAINTENANCE COMPANY (LIBERTY) AND C. C. SKINNER (SKINNER) UNDER INVITATION FOR BIDS F29651-72-B-0229, ISSUED MAY 8, 1972, BY THE PROCUREMENT DIVISION, HOLLOMAN AIR FORCE BASE, NEW MEXICO.

THE SUBJECT SOLICITATION REQUIRED THE PROSPECTIVE CONTRACTOR TO FURNISH SPECIFIED SUPPLIES AND SERVICES FOR FISCAL YEAR 1973 MAINTENANCE OF THE TEST TRACK RAIN EROSION SYSTEM, MAINTENANCE AND REPAIR OF TELEMETRY CABLES, FABRICATION AND ERECTION OF TARGETS AND ASSISTANCE TO THE 6585TH TEST GROUP/TK CUSTOMERS FOR PROJECT RELATED REQUIREMENTS.

AT 3:00 P.M., JUNE 8, 1972, BIDS WERE OPENED REVEALING THE SUBMISSION OF 5 BIDS, INCLUDING THE TWO LOWEST FROM LIBERTY MAINTENANCE COMPANY (LIBERTY). THE LOWER OF THE TWO LIBERTY BIDS WAS SUBMITTED BY ERNIE ALEXANDER, AND WAS EVALUATED AT $269,263.50. MR. ALEXANDER'S BID INDICATED THAT HE WAS THE PRESIDENT OF LIBERTY. THE SECOND LOW BID, WHICH WAS EVALUATED AT $282,239.50, WAS SUBMITTED BY ALMA ALEXANDER, AND INDICATED HER CAPACITY AS VICE PRESIDENT OF LIBERTY. EREL CORPORATION'S BID WAS EVALUATED AT $313,569.55, AND SKINNER'S AT $313,842.30, (PRESUMABLY EXCLUSIVE OF THE DISCOUNT OFFERED).

THE RECORD INDICATES THAT ON JUNE 6, 1972, THE PROCUREMENT OFFICE ACKNOWLEDGED RECEIPT OF A SF 129 SUBMITTED BY GEORGE E. SOPER, SECRETARY- TREASURER OF LIBERTY, WHICH INDICATED THAT THE ONLY PERSONS AUTHORIZED TO SIGN BIDS, OFFERS, AND CONTRACTS IN LIBERTY'S NAME WERE HE AND ALMA ALEXANDER. APPARENTLY AS A RESULT OF THE SF 129, PROCUREMENT OFFICIALS SCHEDULED MEETINGS WITH LIBERTY PERSONNEL. A MEMORANDUM IN THE RECORD FROM THE CHIEF, SERVICES BRANCH, RELATES THAT AT 8:00 A.M. ON JUNE 8, 1972 (BID OPENING SET FOR 3:00 P.M.), ERNIE ALEXANDER MET WITH OFFICIALS OF THE ACTIVITY TO DISCUSS THE PROBLEM OF WHO WAS AUTHORIZED TO BID IN LIBERTY'S NAME. HE CONTENDED THAT TO HIS KNOWLEDGE, NO MEETINGS LIMITING HIS AUTHORITY AS PRESIDENT OF THE FIRM HAD TRANSPIRED. AT APPROXIMATELY 10:00 A.M., IT IS RECOUNTED THAT ALMA ALEXANDER AND MR. SOPER MET WITH THE PROCUREMENT OFFICE AND INSISTED THAT THEY HAD DONE EVERYTHING REQUIRED BY THEIR BY-LAWS TO REMOVE MR. ALEXANDER'S AUTHORITY. THEY DID NOT PRODUCE THE MINUTES OF ANY MEETING AT THAT TIME.

ON JUNE 9, 1972, THE CHIEF, SERVICES BRANCH, REQUESTED ERNIE ALEXANDER, ALMA ALEXANDER AND GEORGE SOPER TO PROVIDE SWORN AFFIDAVITS AS TO THE OCCURRENCE OF ANY BOARD OF DIRECTOR MEETINGS ATTENDED, BY WHICH MR. ALEXANDER WAS PROHIBITED FROM ACTING ON BEHALF OF LIBERTY; AND IF SUCH A MEETING DID TRANSPIRE, PRODUCTION WAS REQUESTED OF A COPY OF THE DULY RECORDED MINUTES.

BY LETTER OF JUNE 13, 1972, MR. SOPER ENCLOSED THE REQUESTED AFFIDAVITS, COPIES OF LIBERTY'S ARTICLES OF INCORPORATION AND BY-LAWS, AND A COPY OF THE MINUTES OF A REGULARLY SCHEDULED BOARD OF DIRECTORS MEETING HELD JUNE 6, 1972, AT ALAMOGORDO, NEW MEXICO. THE LETTER ADVISED THAT ERNIE ALEXANDER WAS EN ROUTE FROM TENNESSEE AT THE TIME OF THE REGULAR MEETING ON JUNE 6 AND, DUE TO PROBLEMS OF COMMUNICATION, COULD NOT BE REACHED. THE LETTER EXPLAINED THAT MR. ALEXANDER'S SUBMISSION OF A BID WAS DUE TO THE FACT THAT UNTIL HE RECEIVED FORMAL NOTICE OF HIS DIVESTITURE, THE LATTER FELT COMPELLED TO ACT ON LIBERTY'S BEHALF.

THE AFFIDAVIT OF ALMA ALEXANDER, SIGNED AND SWORN TO ON JUNE 13, 1972, STATES THAT SHE IS THE MAJORITY STOCKHOLDER OF LIBERTY, THAT THE BOARD OF DIRECTORS HOLDS REGULAR MEETINGS ON THE FIRST TUESDAY IN JUNE, SEPTEMBER AND DECEMBER, AND THESE MEETINGS ARE HELD WITHOUT NOTICE TO ANY OF THE DIRECTORS. SHE STIPULATES THAT ON JUNE 6, 1972, SUCH A MEETING WAS HELD AT WHICH SHE AND MR. SOPER WERE PRESENT, CONSTITUTING TWO-THIRDS OF THE BOARD AND THEREFORE A QUORUM. AT THAT MEETING, A RESOLUTION WAS ADOPTED BY WHICH MR. ALEXANDER WAS IMMEDIATELY DISMISSED AS PRESIDENT, AND UNAUTHORIZED TO TAKE FURTHER ACTION ON BEHALF OF THE CORPORATION, WITH SPECIAL REFERENCE TO BIDDING ON GOVERNMENT CONTRACTS AT THE HOLLOMAN AIR FORCE BASE. MR. SOPER'S AFFIDAVIT, ALSO EXECUTED ON JUNE 13, 1972, CORROBORATES THAT OF ALMA ALEXANDER.

THE AFFIDAVIT OF ERNIE ALEXANDER, EXECUTED JUNE 16, 1972, STATES THAT HE DOES NOT CONTEST THE ACTION TAKEN BY THE OTHER OFFICERS OF THE CORPORATION IN SUBMITTING THE OTHER BID IN LIBERTY'S BEHALF, NOR DOES HE CONTEST THEIR AUTHORITY TO SUBMIT THE BID.

THE MINUTES OF THE MEETING AT ISSUE STATE THAT ALMA ALEXANDER AND GEORGE SOPER WERE PRESENT, CONSTITUTING A QUORUM, AND THAT ERNIE ALEXANDER WAS ABSENT. IT IS STATED THAT THE BOARD REGISTERED ITS DISSATISFACTION WITH THE MANNER IN WHICH ERNIE ALEXANDER WAS PERFORMING HIS DUTIES, AND IT WAS CONCLUDED THAT IT WOULD BE IN THE INTERESTS OF THE CORPORATION IF HE WERE DIVESTED OF HIS PRESIDENCY. IT WAS DECIDED THAT HE SHOULD BE TERMINATED IMMEDIATELY DUE TO IMMINENT BIDDING ON THE SUBJECT IFB. A MOTION WAS MADE AND CARRIED TO REMOVE ERNIE ALEXANDER, AND TO SPECICICALLY DEPRIVE HIM OF AUTHORITY TO REPRESENT LIBERTY BEFORE THE PROCURING ACTIVITY. IT WAS FURTHER RESOLVED THAT EITHER ALMA ALEXANDER OR GEORGE SOPER, OR BOTH, WERE AUTHORIZED TO BID ON BEHALF OF LIBERTY AND TO EXECUTE CONTRACTS. THE MOTION WAS SECONDED AND CARRIED UNANIMOUSLY.

BY LETTER DATED JUNE 28, 1972, ALMA ALEXANDER AND GEORGE SOPER PROTESTED TO OUR OFFICE AGAINST THE POSSIBLE REJECTION OF THEIR BID. THEY ALLEGE THAT WHEN THEY WERE RENDERED COGNIZANT, PRIOR TO BID OPENING, THAT ERNIE ALEXANDER WAS SUBMITTING A BID WHICH WAS UNAUTHORIZED, THEY ASSUMED THE INITIATIVE OF SO ADVISING THE PROCURING ACTIVITY. THEY REFUTE ANY INFERENCE OF COLLUSION, STATING THAT THE PROCURING ACTIVITY'S DECISION TO RECEIVE BOTH LIBERTY BIDS WAS MADE AFTER THE PROCURING ACTIVITY WAS ADVISED OF THE ACTION OF THE BOARD MEETING OF JUNE 6, 1972. IT IS CONTENDED THAT BY ACCEPTING TWO BIDS UNDER LIBERTY'S NAME, THE PROCURING ACTIVITY IGNORED AN ACTION OF THE BOARD TAKEN IN LEGAL ACCORD WITH THE BY- LAWS OF THE CORPORATION.

BY LETTER OF JULY 7, 1972, SKINNER PROTESTED THE AWARD OF A CONTRACT TO ANYONE OTHER THAN HIMSELF. HE HAS CONTENDED THAT HE IS THE LOWEST BIDDER WHO IS RESPONSIVE AND RESPONSIBLE, AND AN AWARD TO LIBERTY WOULD PREJUDICE HIS RIGHTS AS A BIDDER AND UNDERMINE THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM.

THE ESSENCE OF THE SKINNER PROTEST IS THAT THE CIRCUMSTANCES AT HAND PRESENT LIBERTY WITH THE OPTION, UPON REVIEWING THE STANDING OF THE BIDDERS AFTER BID OPENING, TO EITHER AFFIRM OR DISAVOW THE LEGALITY OF THE ACTION TAKEN BY THE BOARD OF DIRECTORS, DEPENDING UPON THE ABSENCE OR PRESENCE OF ANOTHER BID BETWEEN THE TWO LIBERTY BIDS. IT IS SUGGESTED THAT JUST SUCH AN OPTION HAS BEEN EXERCISED BY ERNIE ALEXANDER IN HIS AFFIDAVIT, SUBMITTED AFTER BID OPENING, IN WHICH HE STIPULATES THAT HE DOES NOT CONTEST THE POSITION THAT ALMA ALEXANDER AND GEORGE SOPER WERE THE ONES PROPERLY AUTHORIZED TO SUBMIT THE BID. IT IS IMPLIED THAT NOTWITHSTANDING THE INTERNAL DISCORD BETWEEN ERNIE ALEXANDER AND THE OTHER TWO DIRECTORS, THE AWARD WOULD NEVERTHELESS INURE TO ERNIE ALEXANDER'S PECUNIARY BENEFIT SINCE HE IS STILL A SUBSTANTIAL STOCKHOLDER.

OUR EXAMINATION OF THE RECORD REVEALS A MEMO SIGNED BY THE CHIEF, SERVICES BRANCH, DATED JUNE 8, 1972, IN WHICH IT IS STATED THAT ON THAT MORNING (I.E. BEFORE BID OPENING), ERNIE ALEXANDER WAS ASKED IF HE HAD BEEN INFORMED HE WAS NO LONGER AUTHORIZED TO SIGN A BID IN BEHALF OF LIBERTY. HE ADMITTED THAT HE HAD BEEN SO INFORMED BY TELEPHONE, BUT CONTENDED THAT THE FORMAL PROCEEDINGS REQUIRED BY THE BY-LAWS HAD NOT TAKEN PLACE. HE CONVEYED HIS IMPRESSION THAT HE WAS STILL THE PRESIDENT OF LIBERTY, AND THE ONLY ONE AUTHORIZED TO SIGN BIDS ON THAT FIRM'S BEHALF. THE CHIEF, SERVICES BRANCH, CONSULTED WITH JAG OFFICIALS WHO ADVISED THAT THE ONLY BID FROM LIBERTY WHICH SHOULD BE ACCEPTED WAS THAT OF WHOEVER WAS PRESIDENT AT THE TIME OF BID OPENING. ERNIE ALEXANDER WAS SO ADVISED.

AN AFFIDAVIT BY ERNIE ALEXANDER, TRANSMITTED TO OUR OFFICE BY LETTER DATED AUGUST 28, 1972, STATES THAT DURING THE MONTH PRIOR TO BID OPENING, THERE HAD BEEN A "FALLING OUT" BETWEEN HIMSELF AND THE OTHER DIRECTORS, AND HE RELATED HIS IMPRESSION THAT THE LATTER INTENDED TO EXPEL HIM FROM THE CORPORATION. HE STATED THAT NO MOVE HAD BEEN ATTEMPTED PRIOR TO JUNE 6, 1972, AT WHICH TIME HE WAS APPRISED BY ALMA ALEXANDER THAT HE WAS NO LONGER PRESIDENT OF LIBERTY AND WAS NOT TO SUBMIT A BID ON JUNE 8. ALLEGES THAT ON THE ADVICE OF COUNSEL, HE FELT HE SHOULD NOT ACCEPT THE ACTION TAKEN AGAINST HIM UNTIL PROVIDED WITH A COPY OF THE MINUTES OF THE BOARD OF DIRECTORS MEETING. HE STATES THAT HIS ATTORNEY WAS NOT PROVIDED WITH A COPY OF THOSE MINUTES UNTIL THE FOLLOWING WEEK, AND ONLY THEN DID HE ACQUIESCE IN THE ACTION TAKEN. IN THE MEANTIME, HE CONTENDS THAT HE WAS COMPELLED TO SUBMIT A BID TO PROTECT HIMSELF AGAINST POSSIBLE ACCUSATIONS BY THE OTHER DIRECTORS THAT HE HAD BEEN DERELICT IN HIS RESPONSIBILITIES AS PRESIDENT BY FAILING TO SUBMIT A BID.

WE NOTE THAT ALMA ALEXANDER AND ERNIE ALEXANDER WERE DIVORCED AT THE TIME OF BID SUBMISSION. CONSIDERING THE FACT THAT LIBERTY WAS A FAMILY CONTROLLED, CLOSED CORPORATION AT THE TIME OF ITS LEGAL INCEPTION, AND THE FACT THAT THE MARITAL RELATIONSHIP WAS SUBSEQUENTLY SEVERED, IT IS OUR OPINION THAT THE PROFESSED "FALLING-OUT" AND CONCOMITANT LACK OF COMMUNICATION BETWEEN ERNIE ALEXANDER AND THE OTHERS WAS GENUINE RATHER THAN FABRICATED. ADDITIONALLY, THE ADVICE GIVEN ERNIE ALEXANDER ON THE MORNING OF BID OPENING THAT THE ONLY BID FROM LIBERTY WHICH WOULD BE ACCEPTED WOULD BE THAT OF ITS PRESIDENT WOULD APPEAR SIGNIFICANT IN EXPLAINING THE SUBMISSION OF HIS BID. IN THIS REGARD, IT IS NOTED THAT THE SF 129 SUBMITTED ON JUNE 6, 1972, FAILS TO LIST A REPLACEMENT FOR ERNIE ALEXANDER IN THE OFFICE OF PRESIDENT. ACCORDINGLY, WE ARE ABLE TO ATTRIBUTE SUBSTANTIAL CREDIBILITY TO ERNIE ALEXANDER'S CONTENTION THAT HIS MOTIVATION IN SUBMITTING HIS BID WAS TO ENSURE THAT A BID FROM THE PRESIDENT OF LIBERTY WOULD BE SUBMITTED ON THAT FIRM'S BEHALF.

WITH REGARD TO THE CONTENTION THAT AN OPTION EXISTED, AFTER THE STANDING OF THE BIDDERS WAS DISCLOSED, TO AFFIRM OR DENY THE LEGALITY OF ERNIE ALEXANDER'S DIVESTITURE, IT MUST BE NOTED THAT BOTH THE PROCURING ACTIVITY AND ERNIE ALEXANDER WERE ADVISED PRIOR TO BID OPENING THAT ERNIE HAD BEEN DIVESTED OF HIS AUTHORITY TO SUBMIT A BID ON BEHALF OF LIBERTY. AS SUCH, THIS SITUATION MUST BE DISTINGUISHED FROM THAT IN WHICH THE PROCURING ACTIVITY WOULD BE APPRISED OF THE LACK OF AUTHORITY OF A FIRM'S PRESIDENT ONLY AFTER THE STANDING OF THE BIDDERS HAD BEEN ASCERTAINED.

NOR, UNDER THE CIRCUMSTANCES HEREIN PRESENTED, CAN WE CONCLUDE THAT THE ACCEPTANCE OF TWO BIDS FROM LIBERTY, PENDING A DETERMINATION OF WHETHER EITHER BID IS PROPER, IS DIRECTLY PREJUDICIAL TO ANY OTHER BIDDER. SINCE THE TWO LIBERTY BIDS WERE THE LOW AND SECOND LOW, RESPECTIVELY, A CHOICE OF ONE COULD NOT POSSIBLY AFFECT THE STANDING OF THE BIDDERS. A DIFFERENT SITUATION WOULD BE PRESENTED HAD THERE BEEN BIDS OF OTHER FIRMS BETWEEN THE PRICES OF THE TWO LIBERTY BIDS. ACCORDINGLY, WE DO NOT CONSIDER IT IMPROPER FOR THE PROCURING ACTIVITY TO HAVE ACCEPTED TWO LIBERTY BIDS PENDING A DETERMINATION OF WHICH LIBERTY BID SHOULD BE ACCEPTED.

IN DECIDING THAT QUESTION, WE NOTE THAT ARTICLE II, SECTION 8, OF LIBERTY'S BY-LAWS STATES THAT REGULAR MEETINGS OF THE BOARD OF DIRECTORS SHALL BE HELD AT THE CORPORATE OFFICES, OR SUCH OTHER PLACE AS MAY BE DESIGNATED BY THE BOARD OF DIRECTORS, ON THE FIRST TUESDAY IN JUNE, SEPTEMBER AND DECEMBER, AND NO NOTICE NEED BE GIVEN OF SUCH REGULAR MEETINGS. INASMUCH AS THE MEETING IN WHICH ERNIE ALEXANDER WAS DIVESTED OF HIS AUTHORITY TRANSPIRED ON JUNE 6, 1972, IT SATISFIED THE PREREQUISITE OF A REGULAR MEETING, AND THE FAILURE TO TENDER NOTICE THEREOF TO ERNIE ALEXANDER DID NOT INVALIDATE THAT MEETING.

ARTICLE II, SECTION 13, DEFINES A QUORUM AS A MAJORITY OF THE NUMBER OF DIRECTORS. SINCE TWO OF THE THREE DIRECTORS ENUMERATED IN THE ARTICLES OF INCORPORATION WERE PRESENT, A QUORUM WAS ATTAINED.

ARTICLE III, SECTION 4, PROVIDES THAT ANY OFFICER MAY BE REMOVED, EITHER WITH OR WITHOUT CAUSE, BY A MAJORITY OF THE DIRECTORS AT THE TIME IN OFFICE, AT ANY REGULAR OR SPECIAL MEETING OF THE BOARD.

WHILE IT IS NOTED THAT THE REGULAR BOARD MEETING OF JUNE 6 WAS HELD AT A LOCATION OTHER THAN THE CORPORATE OFFICES, ARTICLE II, SECTION 6, PROVIDES THAT ANY MEETING SHALL BE VALID, WHEREVER HELD, IF HELD BY WRITTEN CONSENT OF ALL MEMBERS OF THE BOARD, GIVEN EITHER BEFORE OR AFTER THE MEETING AND FILED WITH THE SECRETARY OF THE CORPORATION. WHETHER OR NOT THIS HAS BEEN DONE IS NOT ASCERTAINABLE FROM THE RECORD BEFORE US. HOWEVER, IN VIEW OF THE FACT THAT ERNIE ALEXANDER HAS SINCE CONSENTED TO THE ACTION TAKEN, IT WOULD APPEAR THAT ANY ABSENCE OF SUCH WRITTEN CONSENT WOULD BE A MERE PROCEDURAL INFORMALITY WHICH COULD BE READILY CURED BY THE DIRECTORS ANY TIME AFTER THE MEETING. THEREFORE, SUCH DEVIATION, IF ANY, WOULD NOT APPEAR TO AFFECT THE LEGALITY OF THE MEETING IN ANY MATERIAL FASHION. HAVING THEREFORE DETERMINED THAT THE BOARD MEETING WAS CONDUCTED IN ACCORDANCE WITH THE BY-LAWS, AND THAT ONLY THE BID BY ALMA ALEXANDER WAS LEGALLY AUTHORIZED, THERE REMAINS FOR FINAL CONSIDERATION THE ANCILLARY QUESTION OF THE PROPRIETY OF PERMITTING HER TO SUBMIT EVIDENCE OF ERNIE ALEXANDER'S LACK OF BIDDING AUTHORITY AFTER BID OPENING, NOTWITHSTANDING THAT THE PROCURING ACTIVITY WAS NOTIFIED BEFORE BID OPENING THAT HE LACKED SUCH AUTHORITY.

IN THIS REGARD, THE RULE CURRENTLY FOLLOWED BY OUR OFFICE, AND SET FORTH AT 49 COMP. GEN. 527, 529-530 (1970), STATES THAT WHILE SUBMISSION OF PROOF OF BIDDING AUTHORITY (OR LACK THEREOF) BEFORE BID OPENING IS ENCOURAGED TO AVOID CHALLENGES FROM OTHER BIDDERS AND PROBLEMS OF PROOF BEFORE THE CONTRACTING OFFICER, WE DO NOT REGARD THE FURNISHING OF SUCH PROOF AFTER BID OPENING AS LEGALLY PROHIBITED. IN VIEW THEREOF, THE SUBMISSION AFTER BID OPENING OF THE MINUTES OF THE BOARD OF DIRECTORS MEETING OF JUNE 6, 1972, BY WHICH ERNIE ALEXANDER'S AUTHORITY TO SUBMIT BIDS WAS REPLACED BY THAT OF ALMA ALEXANDER OR GEORGE SOPER, IS CONSIDERED ACCEPTABLE BY OUR OFFICE.

ACCORDINGLY, IN THE ABSENCE OF ANY OTHER MATERIAL OBJECTIONS TO THE BID SUBMITTED BY ALMA ALEXANDER, WE CONSIDER THAT BID TO BE APPROPRIATE FOR AWARD.

COPIES OF THIS DECISION HAVE BEEN FORWARDED TO LIBERTY, TO C. C. SKINNER, AND TO EREL CORPORATION.

THE FILE TRANSMITTED WITH THE REPORT OF AUGUST 2, 1972, IS RETURNED.