B-155133, DEC. 4, 1964

B-155133, DEC. 4, 1964

TO HARVELL-KILGORE CORPORATION:

WE REFER TO YOUR LETTER OF OCTOBER 23, 1964, REQUESTING RECONSIDERATION OF OUR DECISION OF OCTOBER 9, 1964, B-155133, TO THE SECRETARY OF THE ARMY WHEREIN WE CONCURRED IN A DEPARTMENT OF THE ARMY RECOMMENDATION THAT THE AWARD NOT BE DISTURBED AS INADVERTENTLY MADE UNDER INVITATION FOR BIDS NO. AMC (A/-18-035-64-814 TO ORDNANCE PRODUCTS, INC.

BRIEFLY, THE FACTS ADMINISTRATIVELY REPORTED AND SET FORTH IN OUR DECISION OF OCTOBER 9 SHOWED THAT ON THE BASIS OF A CORRECTED COMPUTATION OF FREIGHT CHARGES TO THE DESTINATIONS SPECIFIED IN THE INVITATION HARVELL -KILGORE'S BID SHOULD HAVE BEEN EVALUATED AS THE LOWEST AT $74,474.32 AND ORDNANCE PRODUCTS' BID SHOULD HAVE BEEN EVALUATED AS THE SECOND LOWEST AT $74,583.21, A DIFFERENCE OF $108.89. WE POINTED OUT, HOWEVER, THAT THE CASE PRESENTED A PECULIAR FACTUAL SITUATION IN THAT BY REASON OF A NEW FREIGHT RATE THE ACTUAL COST TO THE GOVERNMENT UNDER THE AWARD WILL IN FACT BE LESS THAN IF THE BIDS HAD BEEN PROPERLY EVALUATED AND AWARD MADE TO HARVELL-KILGORE IN THE FIRST INSTANCE. IN THE FACE OF SUCH CIRCUMSTANCES, WE STATED THAT WE DID NOT FEEL CANCELLATION OF THE AWARD TO ORDNANCE PRODUCTS AND AWARD TO HARVELL-KILGORE AT AN INCREASE IN COST COULD BE JUSTIFIED AS IN THE INTEREST OF THE GOVERNMENT. IT WAS ALSO NOTED THAT ORDNANCE PRODUCTS WAS REPORTED TO HAVE INCURRED SUBSTANTIAL EXPENSES BEFORE IT WAS ADVISED OF THE PROTEST.

ESSENTIALLY, YOU CONTEND THAT APPLICABLE REGULATIONS REQUIRE AWARD BE MADE TO THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER AT TIME OF BID OPENING AND WE ERRED IN CONSIDERING OCCURRENCES AFTER BID OPENING IN DETERMINING WHETHER THE AWARD SHOULD BE CANCELLED; THAT IF ORDNANCE PRODUCTS' STATED INCURRED COSTS OF $10,000 FORMED A PART OF OUR DECISION NOT TO CANCEL THEN SUCH COSTS SHOULD HAVE BEEN VERIFIED INASMUCH AS THAT FIRM WAS NOTIFIED OF THE PROTEST 17 DAYS AFTER AWARD; AND THAT IF WE FEEL IT IS PROPER TO CONSIDER FACTS OCCURRING AFTER BID OPENING WE SHOULD CONSIDER YOUR FIRM'S OFFER OF A NEW LOWER PRICE FOR THE ITEM UNDER BOTH THE SUBJECT INVITATION AND A SUBSEQUENT ONE AWARDED YOUR FIRM WHICH WOULD RESULT IN A TOTAL SAVING TO THE GOVERNMENT OF $5,193.20. BASED ON SUCH CONTENTIONS, YOU REQUEST CANCELLATION OF THE AWARD TO ORDNANCE PRODUCTS AND EITHER AWARD TO YOUR FIRM ON ITS ORIGINAL BID, OR READVERTISING OF THE PROCUREMENT, OR NEGOTIATION OF A CONTRACT WITH HARVELL-KILGORE FOR BOTH PROCUREMENTS AT THE OFFERED NEW LOW PRICE.

AS YOU CONTEND, THE REGULATIONS PROVIDE FOR THE CONTRACTING OFFICER TO AWARD THE CONTRACT TO THAT RESPONSIBLE BIDDER MAKING THE LOWEST RESPONSIVE BID AT TIME OF BID OPENING. HERE, THE TRANSPORTATION OFFICER SHOULD HAVE FURNISHED AN ACCURATE COMPUTATION OF FREIGHT COSTS TO THE CORRECT DESTINATIONS IN THE FIRST INSTANCE SO THAT THE CONTRACTING OFFICER WOULD HAVE HAD THE PROPER INFORMATION FOR EVALUATION AND COMPARISON OF THE BIDS PRIOR TO AWARD. WE REGRET SUCH ADMINISTRATIVE ERRORS; HOWEVER, SINCE THE AWARD BY THE CONTRACTING OFFICER WAS MADE IN GOOD FAITH AND ON THE BASIS OF INFORMATION UPON WHICH HE WAS ENTITLED TO RELY, AND SINCE THERE APPEARS TO BE NO BASIS FOR CHARGING THE CONTRACTOR TO WHOM AWARD WAS MADE WITH NOTICE OF THE ERRONEOUS BASIS OF AWARD, WE ARE UNABLE TO CONCLUDE THAT THE CONTRACT EFFECTED THEREBY WAS VOID AB INITIO. IF IT BE CONSIDERED AS VOIDABLE AT THE OPTION OF THE GOVERNMENT, WE BELIEVE THAT THE OPTION SHOULD NOT BE EXERCISED UNLESS SUCH ACTION APPEARS TO BE IN THE INTEREST OF THE GOVERNMENT, AND IN DETERMINING THAT MATTER WE BELIEVE IT IS PROPER TO CONSIDER THE EFFECT OF THE DELAY WHICH COULD REASONABLY BE EXPECTED BY CANCELLATION; THE EXTENT OF THE CONTRACTOR'S PERFORMANCE; AND THE PROBABLE COST TO THE GOVERNMENT, INCLUDING THE RESULTING LOSS TO THE BLAMELESS CONTRACTOR WHICH MIGHT INVOLVE THE POSSIBILITY OF SUBSTANTIAL DAMAGES AGAINST THE GOVERNMENT. SEE JOHN R. REINER AND CO. V. UNITED STATES, CT.CL. NO. 431-57, 325 F.2D 438, AND BROWN AND SON ELECTRICAL COMPANY V. UNITED STATES, CT.CL. NO. 76-61, 325 F.2D 446, BOTH DECIDED DECEMBER 13, 1963.

WHILE WE OBSERVED IN OUR DECISION THAT ORDNANCE PRODUCTS WAS REPORTED TO HAVE INCURRED SUBSTANTIAL EXPENSES BEFORE IT WAS ADVISED OF THE PROTEST, THIS WAS ONLY ONE OF SEVERAL FACTORS CONSIDERED, AND HENCE NO AUDIT TO DETERMINE THE PRECISE AMOUNT OF THE ALLEGED EXPENSES WAS MADE, IT BEING REASONABLE TO ASSUME THAT DURING THE INTERVENING PERIOD SOME EXPENDITURES TOWARD COMPLETION OF ITS CONTRACT WERE MADE BY THAT COMPANY. THE PRIMARY CIRCUMSTANCES FOR OUR CONCLUSION WAS THAT WE DID NOT FEEL THAT CANCELLATION COULD BE JUSTIFIED AS BEING EITHER IN THE INTEREST OF THE GOVERNMENT OR NECESSARILY TO YOUR ADVANTAGE SINCE WE DID NOT CONSIDER THAT IT WOULD HAVE BEEN PROPER TO DIRECT AWARD OF A CONTRACT TO YOU ON YOUR ORIGINAL BID.

THE REJECTION OF ALL BIDS AND READVERTISEMENT OF THE GOVERNMENT'S NEEDS, EVEN IF THAT ACTION WERE NOW POSSIBLE IN THIS CASE, IS PRIMARILY A MATTER FOR CONSIDERATION BY THE CONTRACTING AGENCY. WHILE IT IS WELL ESTABLISHED THAT SUCH ACTION MAY BE REQUIRED WHEN IT IS IN THE PUBLIC INTEREST, WE HAVE RECOGNIZED THAT, CONTRARY TO THE PURPOSES FOR WHICH THE PUBLIC PROCUREMENT STATUTES WERE ENACTED, THE REJECTION OF ALL BIDS--- WITHOUT ABANDONMENT OF THE PROPOSED PROCUREMENT--- IS A SERIOUS MATTER AND TENDS TO DISCOURAGE COMPETITION BECAUSE IT RESULTS IN MAKING ALL BIDS PUBLIC WITHOUT AWARD. THEREFORE, THE AUTHORITY TO REJECT ALL BIDS MUST BE EXERCISED WITH CARE AND ONLY UPON A BONA FIDE SHOWING THAT THE PUBLIC INTEREST WOULD THEREBY BE SERVED. WE DO NOT FIND SUCH A SHOWING IN THE CIRCUMSTANCES HERE PRESENTED. SEE 37 COMP. GEN. 12; ID. 760; 39 ID. 563; 41 ID. 536.

REGARDING YOUR REQUEST FOR CANCELLATION AND NEGOTIATION OF A CONTRACT WITH HARVELL-KILGORE FOR BOTH PROCUREMENTS AT THE OFFERED NEW LOW PRICE, THE VARIOUS PROCUREMENT LAWS AND REGULATIONS REQUIRE THAT GOVERNMENT PROCUREMENTS SHALL BE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICABLE EXTENT. THERE ARE, OF COURSE, INSTANCES WHEN IT IS IMPOSSIBLE TO OBTAIN COMPETITION ON A PARTICULAR ITEM; AND IN SUCH CASES IT IS NECESSARY TO PURCHASE WITHOUT THE BENEFIT OF COMPETITION. HOWEVER, WE DO NOT VIEW THE PROCUREMENT LAWS AS BEING DESIGNED TO PERMIT THE NEGOTIATED ACTION YOU SUGGEST EVEN THOUGH THE OFFER MAY CONSTITUTE AN EXCEPTIONALLY GOOD PRICE FOR THE ITEM AND ACTUALLY RESULT IN SAVINGS TO THE GOVERNMENT.