B-173630, SEP 23, 1971, 51 COMP GEN 182

B-173630: Sep 23, 1971

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THE FAILURE OF THE HIGH BIDDER TO FURNISH A BID BOND WITH ITS SEAL BID SUBMITTED TO QUALIFY FOR THE ORAL BIDDING - A FAILURE CORRECTED BEFORE THE ORAL BIDDING BEGAN - WAS A MINOR INFORMALITY. THE HIGH BID WAS PROPERLY INCLUDED IN THE ORAL BIDDING. EVEN IF SECTIONS 1-2.404-2(5)(F) AND 1-10.103-4 OF THE FEDERAL PROCUREMENT REGULATIONS REQUIRING THE REJECTION OF BIDS TO FURNISH GOODS OR SERVICES WHEN A BID BOND IS NOT FURNISHED APPLIED TO TIMBER SALES. 1971: REFERENCE IS MADE TO YOUR LETTER OF JULY 15. THE ADVERTISEMENT ALSO GAVE A MINIMUM ACCEPTABLE BID AND STATED THAT THE REQUIRED BID GUARANTEE WAS $5. THREE SEALED BIDS WERE RECEIVED AND OPENED ON SCHEDULE. WERE FOUND TO BE IN ORDER. WHICH WAS RECEIVED FROM CROWN ZELLERBACH CORPORATION.

B-173630, SEP 23, 1971, 51 COMP GEN 182

TIMBER SALES - BIDS - BID BOND - SEALED BID-AUCTION TIMBER SALE UNDER A COMBINED SEALED BID-AUCTION TIMBER SALE, THE FAILURE OF THE HIGH BIDDER TO FURNISH A BID BOND WITH ITS SEAL BID SUBMITTED TO QUALIFY FOR THE ORAL BIDDING - A FAILURE CORRECTED BEFORE THE ORAL BIDDING BEGAN - WAS A MINOR INFORMALITY, AND THE DEFECT HAVING BEEN REMEDIED, THE HIGH BID WAS PROPERLY INCLUDED IN THE ORAL BIDDING. EVEN IF SECTIONS 1-2.404-2(5)(F) AND 1-10.103-4 OF THE FEDERAL PROCUREMENT REGULATIONS REQUIRING THE REJECTION OF BIDS TO FURNISH GOODS OR SERVICES WHEN A BID BOND IS NOT FURNISHED APPLIED TO TIMBER SALES, 38 COMP. GEN. 532, INCORPORATED IN PROCUREMENT REGULATIONS, SHOULD NOT BE MADE APPLICABLE TO THE TIMBER SALE SINCE THE SEALED BIDS ONLY QUALIFIED BIDDERS TO PARTICIPATE IN THE ORAL BIDDING AND NO COMPETITIVE ADVANTAGE ACCRUED PRIOR TO THE ORAL BIDDING AS NO BIDDER KNEW WHETHER ANY OTHER BIDDER WOULD SUBMIT AN ORAL BID IN EXCESS OF HIS, OR ANY OTHER BIDDER'S SEALED BID PRICE.

TO BODIE, MINTURN & GLANTZ, SEPTEMBER 23, 1971:

REFERENCE IS MADE TO YOUR LETTER OF JULY 15, 1971, WITH ENCLOSURE, PROTESTING ON BEHALF OF THE SAN JUAN LUMBER COMPANY (SAN JUAN) AGAINST THE ACTION OF THE FOREST SERVICE SUPERVISOR OF THE MALHEUR NATIONAL FOREST, JOHN DAY, OREGON, WHICH PERMITTED THE CROWN ZELLERMACH CORPORATION TO PARTICIPATE IN THE ORAL BIDDING PORTION OF A COMBINED SEALED BID-AUCTION TIMBER SALE.

ON MAY 13, 1971, THE FOREST SERVICE SUPERVISOR, PURSUANT TO 36 CFR 221.8(A), ADVERTISED THE SALE IN A JOHN DAY, OREGON, NEWSPAPER. THIS ADVERTISEMENT ADVISED PROSPECTIVE BIDDERS THAT SEALED BIDS WOULD BE ACCEPTED UNTIL 10:00 A.M., JUNE 14, 1971, AND THAT IMMEDIATELY FOLLOWING THE OPENING OF SEALED BIDS THERE WOULD BE ORAL BIDDING FOR AN ESTIMATED 14,500,000 BOARD FEET OF DESIGNATED TIMBER IN AN AREA OF MURPHY CREEK IN MALHEUR NATIONAL FOREST. THE ADVERTISEMENT ALSO GAVE A MINIMUM ACCEPTABLE BID AND STATED THAT THE REQUIRED BID GUARANTEE WAS $5,000.

THREE SEALED BIDS WERE RECEIVED AND OPENED ON SCHEDULE. BIDS RECEIVED FROM TWO OF THE BIDDERS, SAN JUAN LUMBER, INC. (SAN JUAN), AND EDWARD HINES LUMBER CO. (HINES), WERE FOUND TO BE IN ORDER, QUALIFYING BOTH FIRMS FOR PARTICIPATION IN THE ORAL BIDDING. HOWEVER, THE THIRD BID, WHICH WAS RECEIVED FROM CROWN ZELLERBACH CORPORATION, DID NOT CONTAIN THE BID GUARANTEE. WHEN THIS WAS BROUGHT TO THE ATTENTION OF CROWN ZELLERBACH'S REPRESENTATIVE HE IMMEDIATELY PRODUCED A CHECK WHICH HE GAVE TO THE FOREST SERVICE OFFICER IN CHARGE OF THE ORAL BIDDING. A RECESS WAS CALLED TO DETERMINE THE ACCEPTABILITY OF CROWN ZELLERBACH'S BID. IT WAS DETERMINED THAT CROWN ZELLERBACH'S FAILURE TO INCLUDE ITS BID GUARANTEE WITH ITS BID WAS A MINOR INFORMALITY WHICH COULD BE WAIVED. THERE IS SOME DISPUTE AS TO EXACTLY WHEN SAN JUAN FIRST OBJECTED TO ACCEPTING CROWN ZELLERBACH'S BID GUARANTEE. IN ANY EVENT THE OBJECTION WAS TIMELY AND DULY NOTED BY THE FOREST SERVICE BEFORE THE ORAL BIDDING WAS CONTINUED. THE LAST ORAL BID MADE BY HINES WAS $238,774.00, WHICH WAS FOLLOWED BY CROWN ZELLERBACH'S BID OF $240,614.00. FROM THIS POINT ON UNTIL THE FINAL BID OF $352,834.00, MADE BY SAN JUAN, ONLY SAN JUAN AND CROWN ZELLERBACH PARTICIPATED IN THE BIDDING.

BY ITS LETTER OF JULY 14, 1971, AND YOUR SUPPLEMENTARY LETTER DATED JULY 15, 1971, WITH ENCLOSURES, SAN JUAN PROTESTED THE ACTION OF THE FOREST SERVICE PERMITTING CROWN ZELLERBACH TO PARTICIPATE IN THE ORAL BIDDING, BECAUSE AT THE TIME CROWN ZELLERBACH WAS ALLEGEDLY AN UNQUALIFIED BIDDER. ADDITIONALLY, SAN JUAN REQUESTED THAT THE AMOUNT OF THE CONTRACT TO BE AWARDED BE REDUCED TO $240,634.00, WHICH WAS THE AMOUNT OF SAN JUAN'S FIRST BID AFTER HINES, WHO IS ALLEGED TO BE THE ONLY OTHER QUALIFIED BIDDER, SUBMITTED ITS LAST BID.

THE INSTRUCTIONS TO BIDDERS, WHICH WERE SET FORTH IN THE BID FORM, READ, IN PERTINENT PART, AS FOLLOWS:

4. SUBMISSION OF SEALED BIDS. SEALED BIDS MUST BE SUBMITTED TO THE FOREST OFFICER, DESIGNATED BY THE ADVERTISEMENT AS THE RECEIVING OFFICER, AT OR PRIOR TO THE TIME ESTABLISHED BY THE ADVERTISEMENT. SUCH BIDS SHOULD BE ENCLOSED WITH THE REQUIRED BID GUARANTEE IN A SEALED ENVELOPE ADDRESSED TO THE DESIGNATED RECEIVING OFFICER. *** .

6. ORAL AUCTION BIDDING. IF THE ADVERTISEMENT PROVIDES FOR ORAL AND SEALED BIDS, EACH BIDDER TO PARTICIPATE IN THE ORAL AUCTION MUST SUBMIT A SEALED BID IN ACCORDANCE TO THE PRECEDING INSTRUCTIONS. ALL PARTIES WHO SUBMIT A SATISFACTORY SEALED BID WILL BE PERMITTED TO CONTINUED BIDDING ORALLY IMMEDIATELY FOLLOWING OPENING AND POSTING OF THE SEALED BIDS. THE HIGH BIDDER MUST CONFIRM HIS BID IN WRITING IMMEDIATELY UPON BEING DECLARED THE HIGH BIDDER.

8. BID GUARANTEE. A BID GUARANTEE IN THE FORM OF CASH, A BID BOND ON FORM 2400-24, OR AN IRREVOCABLE LETTER OF CREDIT, A CERTIFIED CHECK, BANK DRAFT, CASHIER'S CHECK OR MONEY ORDER PAYABLE TO THE FOREST SERVICE, USDA, IN THE AMOUNT SPECIFIED BY THE ADVERTISEMENT AS THE BID GUARANTEE MUST ACCOMPANY EACH BID. *** FAILURE TO SUBMIT AN ACCEPTABLE BID GUARANTEE WILL REQUIRE REJECTION OF THE BID AS UNRESPONSIVE UNLESS THERE IS NO OTHER ACCEPTABLE BID. *** .

IN THE BRIEF ACCOMPANYING YOUR LETTER OF JULY 15 YOU CITE BY REFERENCE SECTION 1-2,404-2(5)(F) OF THE FEDERAL PROCUREMENT REGULATIONS (FPR) WHICH STATES:

WHERE A BID GUARANTEE IS REQUIRED AND A BIDDER FAILS TO FURNISH IT IN ACCORDANCE WITH THE REQUIREMENTS OF THE INVITATION FOR BIDS, THE BIDS SHALL BE REJECTED EXCEPT AS OTHERWISE PROVIDED IN SECTION 1-10.103-4.

FPR 1-10.103-4 RELATES TO THE FAILURE TO SUBMIT A PROPER BID GUARANTEE AND STATES THAT WHERE AN IFB REQUIRES A BID GUARANTEE AND IT IS NOT FURNISHED, THE BID SHALL BE REJECTED, EXCEPT IN CERTAIN SITUATIONS NOT APPLICABLE IN THE PRESENT CASE.

SINCE THESE REGULATIONS ARE APPLICABLE TO FEDERAL AGENCIES IN THE PROCUREMENT OF PROPERTY AND SERVICES, WE QUESTION WHETHER THEY ARE APPLICABLE TO THE SALE OF TIMBER BY THE DEPARTMENT OF AGRICULTURE. HOWEVER, EVEN IF IT IS ASSUMED THAT THE REGULATIONS ARE APPLICABLE IN THE PRESENT CASE, WE MUST POINT OUT THAT THE ABOVE MENTIONED REGULATIONS (FPR 1-2.044-2(5)(F) AND 1-10.103-4) WERE PROMULGATED SUBSEQUENT TO AND IN CONFORMANCE WITH OUR DECISION REPORTED AT 38 COMP. GEN. 532 (1959). SEE 46 COMP. GEN. 11 (1966). IN OUR 1959 DECISION, WHICH YOU ALSO CITE IN THE BRIEF ACCOMPANYING YOUR LETTER OF JULY 15, 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. IN THAT DECISION THE RATIONALE FOR THE ABOVE RULE WAS STATED, IN PERTINENT PART, 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, *** .

WE DO NOT BELIEVE THAT THE RULE SET OUT IN OUR 1959 DECISION AND INCORPORATED INTO THE VARIOUS PROCUREMENT REGULATIONS SHOULD BE APPLICABLE IN THE PRESENT CASE, SINCE THE SEALED BIDS IN THE INSTANT CASE WERE INTENDED ONLY AS A MEANS OF ASCERTAINING WHO SHOULD BE CONSIDERED A QUALIFIED BIDDER TO PARTICIPATE IN THE ORAL BIDDING. UNDER SUCH CIRCUMSTANCES WE FAIL TO SEE HOW THE OPPORTUNITY TO SUPPLY A MISSING BID BOND, FOLLOWING BID OPENING AND PRIOR TO COMMENCEMENT OF THE ORAL BIDDING, COULD RESULT IN A COMPETITIVE ADVANTAGE TO THAT BIDDER, OR IN A COMPETITIVE DISADVANTAGE TO THE OTHER BIDDERS. IN THIS CONNECTION, IT IS APPARENT THAT, PRIOR TO COMMENCEMENT OF THE ORAL BIDDING, NO BIDDER IS IN A POSITION TO KNOW WHETHER ANY OTHER BIDDER WILL, OR WILL NOT, SUBMIT AN ORAL BID WHICH WILL BE IN EXCESS OF HIS, OR ANY OTHER BIDDER'S, SEALED BID PRICE.

UNDER THE CIRCUMSTANCES, IT IS OUR OPINION THAT CROWN ZELLERBACH'S FAILURE TO SUBMIT A BID BOND WITH ITS BID SHOULD BE CONSIDERED A MINOR INFORMALITY, AND SINCE THE DEFECT WAS REMEDIED PRIOR TO COMMENCEMENT OF THE ORAL BIDDING, CROWN ZELLERBACH'S BIDS WERE PROPERLY INCLUDED IN THE ORAL BIDDING.

ACCORDINGLY, YOUR PROTEST IS DENIED, AND WE ARE TODAY ADVISING THE FOREST SERVICE TO AWARD THE SALE CONTRACT AT YOUR HIGH ORAL BID PRICE.

Jan 14, 2021

Jan 13, 2021

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