B-154356, JUL. 22, 1964

B-154356, JUL. 22, 1964

TO VICE ADMIRAL JOSEPH M. LYLE, DIRECTOR, DEFENSE SUPPLY AGENCY:

BY CORRESPONDENCE DATED JUNE 26, 1964, FROM YOUR ASSISTANT COUNSEL, WE HAVE BEEN FURNISHED A REPORT CONCERNING POSSIBLE CANCELLATION OF CONTRACT NO. DSA-5-16723, COVERING A SPECIFIED QUANTITY OF HASPS, AND A SUBSEQUENT EMERGENCY NEGOTIATED AWARD FOR A LESSER NUMBER OF THESE SAME ITEMS ON MAY 26, 1964.

ON FEBRUARY 11, 1964, THE DEFENSE INDUSTRIAL SUPPLY CENTER, PHILADELPHIA, PENNSYLVANIA, ISSUED INVITATION NO. DSA-5-64-2710 REQUESTING BIDS FOR 54,300 HINGED STEEL HASPS IN ACCORDANCE WITH STANDARD MILITARY SPECIFICATION MS 27969-2 DATED FEBRUARY 24, 1961. THE INVITATION SPECIFICALLY PROVIDED THAT BIDS, PROPOSALS, OR QUOTATIONS WERE BEING SOLICITED EXCLUSIVELY FROM SMALL BUSINESSES AND THAT AWARD WOULD ONLY BE MADE TO ONE OR MORE QUALIFIED SMALL BUSINESS CONCERNS. EXAMINATION OF THE BID ABSTRACT SHOWS THE FOLLOWING COMPANIES CHOSE TO SUBMIT BIDS EACH REPRESENTING THAT IT WAS QUALIFIED FOR THE SUBJECT PROCUREMENT.

TABLE

BIDDER UNIT PRICE

MALLIN LOCK MFG. CO., INC. $ .144

AMERICAN INDUSTRIES, INC. .19

ATLANTIC HARDWARE AND SUPPLY CORP. .21

ORBIT INDUSTRIES, INC. .30

S. WEINSTEIN SUPPLY CO. .19998

ON FEBRUARY 28, 1964, THE SECOND LOW BIDDER (AMERICAN INDUSTRIES, INCORPORATED) DISPATCHED A WRITTEN PROTEST TO THE DEFENSE INDUSTRIAL SUPPLY CENTER QUESTIONING WHETHER THE LOW BIDDER (MALLIN LOCK MANUFACTURING COMPANY, INCORPORATED) WAS IN FACT QUALIFIED FOR AWARD. THEIR LETTER IN PART STATES:

"WE HEREBY CHALLENGE THE BID SUBMITTED BY MALLIN LOCK DUE TO THE FACT THAT THEIR SUPPLIER, LAWRENCE BROTHERS, IS NOT SMALL BUSINESS. TO THE BEST OF OUR KNOWLEDGE, LAWRENCE BROTHERS EMPLOYS MORE THAN 500 PEOPLE AND, THEREFORE, IS NOT SMALL BUSINESS.'

RATHER THAN FOLLOW ESTABLISHED PROCEDURES THE GOVERNMENT PROCUREMENT AGENT INFORMALLY DISCUSSED THE PROTEST WITH OTHER GOVERNMENT PERSONNEL WHO HAD PREVIOUSLY DEALT WITH BOTH MALLIN AND LAWRENCE BROTHERS. THE CONCLUSION WAS THAT MALLIN COULD NOT BE CONSIDERED FOR AWARD SINCE IT WAS BELIEVED THAT LAWRENCE BROTHERS (MALLIN'S PRINCIPAL SUPPLIER) EMPLOYED MORE THAN 500 PEOPLE. AS A RESULT, MALLIN'S BID WAS FORMALLY REJECTED AND AWARD WAS MADE TO AMERICAN INDUSTRIES ON APRIL 1, 1964.

ON OR ABOUT MAY 13, 1964, THE CONTRACTING OFFICER CONDUCTED A POST AWARD REVIEW AT WHICH TIME HE REALIZED THAT THE AWARD MIGHT HAVE BEEN ERRONEOUSLY LET. AFTER LEARNING OF THIS POSSIBILITY THE CONTRACTOR ISSUED A "STOP ORDER" TO ITS SUPPLIER ON MAY 14, 1964. WE UNDERSTAND HOWEVER, THAT AS OF THE ABOVE DATE THE REQUIRED ITEMS HAD BEEN COMPLETED IN ALL RESPECTS EXCEPT FOR FINISHING AND PACKAGING. WE HAVE ALSO BEEN INFORMED THAT THE SMALL BUSINESS ADMINISTRATION HAS SINCE DETERMINED THAT LAWRENCE BROTHERS DOES QUALIFY AS A SMALL BUSINESS CONCERN UNDER EXISTING REGULATIONS.

THE CONTRACTING OFFICER, IN THE REPORT TO THIS OFFICE, RECOMMENDS THAT THE AWARD BE ALLOWED TO STAND AND THAT AMERICAN INDUSTRIES BE ALLOWED TO REDUCE ITS UNIT PRICE TO THAT OFFERED BY MALLIN. IN SUPPORT THEREOF HE STATES:

"* * * THIS RECOMMENDATION IS MADE DUE TO THE FACT THAT THE MATERIAL IS ALMOST COMPLETELY MANUFACTURED; CAN BE PREPARED FOR SHIPMENT WITHIN A FEW DAYS SO AS TO MEET THE USAGE DEMANDS OF THE MILITARY, AND WOULD THEREFORE BE IN THE BEST INTERESTS OF THE GOVERNMENT. THIS ACTION WOULD AT THE SAME TIME, PREVENT A SUBSTANTIAL LOSS TO THE CONTRACTOR.'

ALTHOUGH AWARD MADE UNDER FORMAL ADVERTISING TO OTHER THAN THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER RENDERS THE AWARD INVALID, WE ARE INCLINED TO AGREE THAT CANCELLATION WOULD NOT SERVE ANY USEFUL PURPOSE.

IN A SIMILAR CASE INVOLVING AN ERRONEOUS AWARD B-137717 DATED MARCH 3, 1959, WE STATED AS FOLLOWS:

"THE RECORD DISCLOSES THAT YOUR OFFER OF $48.98 PER TON WAS NOT THE LOWEST BID RECEIVED, BUT THAT A RESPONSIVE PROPOSAL OF $44 PER TON WAS SUBMITTED BY ANOTHER BIDDER WHICH INADVERTENTLY WAS OVERLOOKED BY THE CONTRACTING OFFICER. AS A RESULT AN ERRONEOUS AWARD OF A CONTRACT WAS MADE TO YOUR COMPANY FOR THIS PROCUREMENT. CASES INVOLVING SOMEWHAT SIMILAR CIRCUMSTANCES HAVE BEEN CONSIDERED BY THE COURTS, AND BY FORMER ACCOUNTING OFFICERS OF THE GOVERNMENT, AND IT HAS BEEN UNIFORMALLY HELD THAT UNAUTHORIZED ACTS OF ITS AGENTS CANNOT OBLIGATE THE UNITED STATES. FILOR V. UNITED STATES, 9 WALL. 45; WHITESIDE, ET AL V. UNITED STATES, 93 U.S. 247, 257. ADMITTEDLY RESPONSIBILITY FOR THE ERROR RESTS SOLELY WITH THE PROCUREMENT OFFICIALS INVOLVED. HOWEVER, SUCH ERROR DOES NOT ESTABLISH THE LEGALITY OF THE TRANSACTION. THE AWARD OF A CONTRACT TO OTHER THAN THE LOWEST RESPONSIVE BIDDER, THROUGH MISTAKE OR OTHERWISE, CONSTITUTES AN ACT IN EXCESS OF THE CONTRACTING OFFICER'S VESTED AUTHORITY, AND FROM A LEGAL STANDPOINT, IS NO LONGER AN ACT OF THE GOVERNMENT. THE UNDERWRITER 6 F.2D 937. THEREFORE, IT NECESSARILY FOLLOWS THAT THE PURCHASING OFFICIAL RESPONSIBLE FOR THE TRANSACTION WAS NOT AUTHORIZED TO OBLIGATE THE GOVERNMENT TO PAY ANY AMOUNT IN EXCESS OF THE LOWEST CORRECT BID WHICH SHOULD HAVE BEEN ACCEPTED. 30 COMP. GEN. 24; CF. 36 ID. 94.'

IN VIEW OF THE FACTS OF THIS CASE WE HAVE NO OBJECTION TO PERMITTING AMERICAN INDUSTRIES TO SUPPLY THE REQUIRED ITEMS UNDER THE CONTRACT, PROVIDED THE CONTRACTOR AGREES TO REDUCE HIS UNIT PRICE AS SUGGESTED.

WE BELIEVE THAT B-152027, DATED DECEMBER 4, 1963, IS CLEARLY DISTINGUISHED FROM THE CASE UNDER DISCUSSION. IN THAT CASE WE WERE CONCERNED WITH A SITUATION WHERE THE PROCURING ACTIVITY REJECTED THE LOW BIDDER, IN EFFECT UPON A FINDING OF NONRESPONSIBILITY, WITHOUT FIRST REFERRING THE MATTER TO THE SMALL BUSINESS ADMINISTRATION FOR POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY. FOR VARIOUS REASONS THE AGENCY SUBSEQUENTLY CANCELLED THE ENTIRE INVITATION AND A CONTRACT WAS NEGOTIATED WITH THE BENDIX CORPORATION UNDER THE AUTHORITY CONTAINED IN SECTION 1- 3.210 OF THE FEDERAL PROCUREMENT REGULATIONS. ALTHOUGH WE POINTED OUT THAT THE MATTER SHOULD HAVE BEEN FIRST REFERRED TO SBA, WE HAD NO BASIS TO THEREAFTER ORDER A REDUCTION IN THE CONTRACT PRICE SINCE SUCH PRICE HAD BEEN ESTABLISHED BY NEGOTIATION BETWEEN THE PARTIES.

IN A LETTER TO THIS OFFICE DATED MAY 28, 1964, AMERICAN INDUSTRIES HAS QUESTIONED WHY THEY WERE NOT GIVEN AN OPPORTUNITY TO QUOTE ON THE EMERGENCY PROCUREMENT PLACED ON MAY 26, 1964. RESPONDING THERETO YOUR OFFICE TAKES THE POSITION THAT NEGOTIATIONS WERE CONDUCTED WITH MALLIN LOCK MANUFACTURING COMPANY, INCORPORATED, ON THE BASIS THAT THEY HAD PREVIOUSLY SUBMITTED THE LOWEST BID. ATLANTIC HARDWARE AND SUPPLY CORPORATION WAS SOLICITED BECAUSE THEY WERE KNOWN TO HAVE TWO POSSIBLE SOURCES OF SUPPLIES. WHILE WE ARE NOT PREPARED TO SAY THAT THIS COURSE OF ACTION WAS WRONG, WE TRUST THAT PRICE QUOTATIONS WILL ALWAYS BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES IN ACCORDANCE WITH SECTION 3- 101 OF THE ARMED SERVICES PROCUREMENT REGULATION.