B-173630, JAN 26, 1972

B-173630, JAN 26, 1972

BID PROTEST - UNFAIR ADVANTAGE - "TWO BITES AT THE APPLE" AFFIRMING DECISION B-173630, SEPTEMBER 23, 1971, IN WHICH THE ACTION OF THE FOREST SUPERVISOR OF MALHEUR NATIONAL FOREST WAS UPHELD IN PERMITTING THE CROWN ZELLERBACH CORPORATION TO PARTICIPATE IN THE ORAL BIDDING PORTION OF A COMBINED SEALED BID-AUCTION TIMBER SALE. IT IS ALLEGED BY PROTESTANT THAT CROWN ZELLERBACH, WHO FAILED TO INCLUDE A BID BOND IN ITS SEALED BID, COULD HAVE REFUSED TO SUPPLY THE BOND AND THEREBY INSURED THE REJECTION OF ITS BID. PROTESTANT ALSO CONTENDS THAT THE FAILURE TO INCLUDE BOND PLACED CROWN ZELLERBACH IN AN ADVANTAGEOUS POSITION BY GIVING IT "TWO BITES AT THE APPLE." THE "TWO BITES AT THE APPLE" DOCTRINE APPLIES ONLY WHERE THE BID PRICES REVEALED ARE FINAL, NOT WHERE SEALED BID PRICES ARE MERELY USED TO DETERMINE WHO WILL BE ELIGIBLE FOR ORAL BIDDING. THE FACT THAT THE BOND WAS NOT ENCLOSED DOES NOT PLACE CROWN ZELLERBACH IN AN ADVANTAGEOUS POSITION TO WITHDRAWAL SINCE, AT THE TIME, IT DID NOT KNOW WHAT THE FINAL BID PRICE WOULD BE. THEREFORE, THE PROTEST IS AGAIN DENIED.

TO BODIE & MINTURN:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 14, 1971, ON BEHALF OF SAN JUAN LUMBER COMPANY (SAN JUAN) REQUESTING THAT WE RECONSIDER OUR DECISION B-173630, SEPTEMBER 23, 1971, IN WHICH WE UPHELD THE ACTION OF THE FOREST SUPERVISOR OF MALHEUR NATIONAL FOREST IN PERMITTING THE CROWN ZELLERBACH CORPORATION TO PARTICIPATE IN THE ORAL BIDDING PORTION OF A COMBINED SEALED BID-AUCTION TIMBER SALE.

IN YOUR LETTER OF DECEMBER 14 YOU QUESTION OUR REFUSAL TO FOLLOW OUR DECISION REPORTED AT 38 COMP. GEN. 532 (1959). IN THAT DECISION, QUOTED IN PART IN YOUR DECEMBER 14 LETTER, WE HELD THAT A BID GUARANTEE REQUIREMENT IN AN IFB IS MATERIAL AND THE PROCURING ACTIVITY CANNOT WAIVE A FAILURE TO COMPLY WITH THE REQUIREMENT BUT MUST REJECT THE BID AS NONRESPONSIVE, EVEN THOUGH THE FAILURE IS INADVERTENT AND NOT DUE TO THE BIDDERS INABILITY TO OBTAIN A BOND. THE RATIONALE FOR THE ABOVE RULE WAS STATED TO BE AS FOLLOWS:

" *** ADHERENCE TO THE RULE PERMITTING WAIVER OF A BID BOND REQUIREMENT STATED IN AN INVITATION FOR BIDS WOULD HAVE A TENDENCY TO COMPROMISE THE INTEGRITY OF THE COMPETITIVE BID SYSTEM BY (1) MAKING IT POSSIBLE FOR A BIDDER TO DECIDE AFTER OPENING WHETHER OR NOT TO TRY TO HAVE HIS BID REJECTED, (2) CAUSING UNDUE DELAY IN EFFECTING PROCUREMENTS, AND (3) CREATING, BY THE NECESSARY SUBJECTIVE DETERMINATIONS BY DIFFERENT CONTRACTING OFFICERS, INCONSISTENCIES IN THE TREATMENT OF BIDDERS. THE NET EFFECT OF THE FOREGOING WOULD BE DETRIMENTAL TO FULLY RESPONSIVE AND RESPONSIBLE BIDDERS, AND COULD TEND TO DRIVE THEM OUT OF COMPETITION IN THOSE AREAS WHERE THE PRACTICES DESCRIBED OCCUR. THIS RESULT COULD HARDLY BE SAID TO SERVE THE BEST INTERESTS OF THE UNITED STATES. *** "

IN YOUR LETTER OF DECEMBER 14 YOU STATE THAT BY PERMITTING CROWN ZELLERBACH TO PARTICIPATE IN THE ORAL BIDDING THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM WAS COMPROMISED, IN THAT CROWN ZELLERBACH WAS IN THE POSITION OF BEING ABLE TO DECIDE AFTER OPENING OF THE BIDS WHETHER OR NOT TO TRY TO HAVE ITS BID REJECTED.

WE AGREE THAT SUBSEQUENT TO THE OPENING OF THE SEALED BIDS AND PRIOR TO THE ORAL BIDDING CROWN ZELLERBACH COULD HAVE REFUSED TO SUPPLY A BID BOND AND THUS HAD ITS BID REJECTED. HOWEVER, WE FAIL TO UNDERSTAND HOW SUCH A CHOICE, UNDER THE CIRCUMSTANCES IN THE PRESENT CASE, WOULD BE DETRIMENTAL TO THE COMPETITIVE BID SYSTEM. IT APPEARS TO BE YOUR CONTENTION THAT UNDER A COMBINED SEALED BID-AUCTION SALE A BIDDER WHO HAS NOT SUBMITTED A BID BOND WITH HIS BID WOULD BE IN AN ADVANTAGEOUS POSITION AFTER THE SEALED BIDS ARE OPENED. YOU STATE THAT AT THIS POINT HE WOULD HAVE A CHOICE OF EITHER MAKING A DEAL TO PURCHASE THE TIMBER ON TERMS BENEFICIAL TO HIM OR DECLINING TO DO SO, WHICH YOU APPARENTLY VIEW AS A "TWO BITES AT THE APPLE" SITUATION. HOWEVER, WE MUST POINT OUT THAT THE "TWO BITES AT THE APPLE" SITUATION WHICH OUR 1959 DECISION DISCUSSES, COMES ABOUT IN THOSE CASES WHERE THE BID PRICES REVEALED ARE FINAL, AND THE BIDDER THEREFOR KNOWS HIS STANDING FOR AWARD AT BID OPENING. IN THE PRESENT CASE, THE SEALED BID PRICES ARE MERELY USED TO DETERMINE WHO WILL BE ELIGIBLE FOR THE ORAL BIDDING, AND THE CHOICE TO WHICH YOU REFER THEREFORE WOULD NOT APPEAR TO HAVE THE SAME VALUE TO A BIDDER, SINCE AT BID OPENING TIME HE DOESN'T KNOW WHAT THE FINAL BEST BID PRICE IS, OR WILL BE.

REGARDING THE SITUATION YOU DESCRIBE, IN WHICH A CORPORATION WITH A ZERO NET WORTH SUBMITS A BID UNACCOMPANIED BY A BID BOND AND PURCHASES THE TIMBER BECAUSE THERE ARE "NO OTHER ORAL BIDS", IT WOULD APPEAR THAT THIS COULD ARISE IN TWO SITUATIONS. FIRST, WHERE MORE THAN ONE SEALED BID IS RECEIVED, IN WHICH EVENT EACH BIDDER WOULD BE REQUIRED (AS IN THE INSTANT CASE) TO SUBMIT A BOND BEFORE COMPETING IN THE ORAL BIDDING. SECOND, WHERE ONLY ONE SEALED BID IS RECEIVED, IN WHICH EVENT SECTION 8 OF THE INVITATION SPECIFICALLY PERMITS WAIVER OF THE BID BOND REQUIREMENT. SINCE THE FIRST SITUATION HAS ALREADY BEEN DISCUSSED ABOVE, AND THE SECOND DOES NOT INVOLVE OTHER BIDDERS, AND WAIVER THEREFORE CANNOT BE HELD PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS, WE SEE NO JUSTIFICATION IN THIS PORTION OF YOUR ARGUMENT FOR REVERSING OUR PRIOR CONCLUSIONS.

ACCORDINGLY, OUR DECISION OF SEPTEMBER 23, 1971, IS SUSTAINED.