B-150529, FEB. 25, 1963

B-150529: Feb 25, 1963

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TO THE SECRETARY OF THE ARMY: WE HAVE RECEIVED A REPORT DATED JANUARY 11. ARE AS FOLLOWS: TABLE SHARPS JEN-MAR GOVERNMENT ESTIMATE TOTAL BASIC BID $664. 590 IT WILL BE OBSERVED THAT ON THE BASIC ITEM AND ON THE BASIC ITEM PLUS ANY COMBINATION OF THE FIRST THREE ADDITIVES THE SHARPS' BID IS LOW. WHILE THE JEN-MAR BID IS LOW ON THE BASIC BID PLUS ADDITIVES THROUGH 4 OR 5. THE STATEMENT QUOTED BELOW WAS READ TO THE BIDDERS PRESENT AT BID OPENING: "THE NET AMOUNT OF MONEY PRESENTLY AVAILABLE FOR AWARD OF THE PROPOSED CONTRACT IS $705. THE DETERMINATION OF THE LOW BIDDER WILL BE ON THE BASIS OF THE AGGREGATE OF THE BASE BID PLUS THOSE ADDITIVES IN THE PRIORITY STATED IN THE BID DOCUMENTS THAT MAY BE AWARDED WITHIN THIS FUND LIMITATION.'.

B-150529, FEB. 25, 1963

TO THE SECRETARY OF THE ARMY:

WE HAVE RECEIVED A REPORT DATED JANUARY 11, 1963, FROM THE OFFICE OF THE CHIEF OF ENGINEERS, CONCERNING A PROTEST AGAINST THE AWARD OF CONTRACT NO. ENG-63-33, FOR THE CONSTRUCTION OF A STUDENT DORMITORY AND APPURTENANT FACILITIES, TO THE SHARPS CONSTRUCTION COMPANY, HEREINAFTER REFERRED TO AS SHARPS.

THE RECORD ESTABLISHES THAT INVITATION FOR BIDS NO. ENG-04-167-63 33, OPENED AT THE UNITED STATES ARMY ENGINEER DISTRICT, SACRAMENTO, CALIFORNIA, ON NOVEMBER 27, 1962, PROVIDED FOR THE SUBMISSION OF A BASIC BID ON A DORMITORY AND ADDITIONAL BIDS ON FIVE ADDITIVE ITEMS COVERING CERTAIN APPURTENANT FACILITIES. THE 2 LOWEST OF THE 11 BIDS RECEIVED, ONE FROM SHARPS AND THE OTHER FROM JEN-MAR CONSTRUCTION COMPANY, AND THE GOVERNMENT ESTIMATE FOR THE WORK, ARE AS FOLLOWS:

TABLE

SHARPS JEN-MAR GOVERNMENT ESTIMATE

TOTAL

BASIC BID $664,243 $676,000 $793,450

ADDITIVE 1 82,754 88,000 113,210

ADDITIVE 2 66,648 65,000 71,340

ADDITIVE 3 3,711 3,000 2,780

ADDITIVE 4 24,065 7,200 2,460

ADDITIVE 5 2,086 1,350 1,350

TOTAL $843,507 $840,550 $984,590

IT WILL BE OBSERVED THAT ON THE BASIC ITEM AND ON THE BASIC ITEM PLUS ANY COMBINATION OF THE FIRST THREE ADDITIVES THE SHARPS' BID IS LOW, WHILE THE JEN-MAR BID IS LOW ON THE BASIC BID PLUS ADDITIVES THROUGH 4 OR 5.

IMMEDIATELY PRIOR TO THE OPENING OF BIDS, THE STATEMENT QUOTED BELOW WAS READ TO THE BIDDERS PRESENT AT BID OPENING:

"THE NET AMOUNT OF MONEY PRESENTLY AVAILABLE FOR AWARD OF THE PROPOSED CONTRACT IS $705,000.00. THE DETERMINATION OF THE LOW BIDDER WILL BE ON THE BASIS OF THE AGGREGATE OF THE BASE BID PLUS THOSE ADDITIVES IN THE PRIORITY STATED IN THE BID DOCUMENTS THAT MAY BE AWARDED WITHIN THIS FUND LIMITATION.'

SINCE THE FUNDS ANNOUNCED AT THIS TIME WERE SUFFICIENT ONLY TO COVER THE BASIC BID, SHARPS WAS DETERMINED TO BE THE LOW BIDDER.

THE DAY FOLLOWING THE BID OPENING, SHARPS ALLEGED THAT IT HAD MADE AN ERROR IN ADDITIVE NO. 4. MR. SHARPS STATED THAT HE HAD TELEPHONED HIS COMPANY'S INTENDED BID PRICES TO HIS REPRESENTATIVE PRIOR TO THE BID OPENING, BUT THAT HIS REPRESENTATIVE HAD ERRONEOUSLY USED AS THE BID PRICE FOR ADDITIVE NO. 4 THE AMOUNT OF $24,065 INSTEAD OF $2,465. THE CONTRACTING OFFICER CONSIDERED THIS TO BE AN OBVIOUS ERROR AND ALLOWED CORRECTION. THIS MADE SHARPS LOW BIDDER ON ANY AND ALL COMBINATIONS OF THE BASIC BID AND ADDITIVES.

AFTER OPENING OF BIDS, AWARD OF CONTRACT WAS WITHHELD UNTIL ADVICE WAS RECEIVED AS TO WHETHER ADDITIONAL FUNDS WOULD BE MADE AVAILABLE FOR AWARD OF ANY ADDITIVES. BASED ON THE CORRECTED LOW BID, A DETERMINATION WAS MADE THAT IT WAS IN THE BEST INTEREST OF THE GOVERNMENT TO CONTRACT FOR THE ENTIRE PROCUREMENT. THEREFORE, THE PROCURING ACTIVITY WAS ADVISED BY MESSAGE DATED DECEMBER 19, 1962, THAT SUFFICIENT FUNDS WERE MADE AVAILABLE TO AWARD A CONTRACT FOR THE BASIC ITEM AND ALL ADDITIVES, AND A CONTRACT FOR THE ENTIRE PROCUREMENT WAS PROMPTLY ISSUED TO SHARPS ON DECEMBER 21, 1962.

PROTEST IS MADE AGAINST THE CORRECTION OF AN ERROR WHICH ALLEGEDLY RESULTED IN A BID NOT THE LOWEST SUBMITTED BECOMING LOWEST. WE HAVE HELD THAT WHERE CORRECTION PREJUDICES ANOTHER BIDDER IN THE MANNER ALLEGED, THE CORRECTION MAY BE ALLOWED ONLY IN THOSE INSTANCES WHERE NOT ONLY THE ERROR BUT THE AMOUNT OF THE INTENDED BID IS ASCERTAINABLE FROM THE INVITATION AND THE BID ITSELF. 37 COMP. GEN. 210, 212. ALTHOUGH SHARPS' BID ON ADDITIVE NO. 4 MAY BE ENOUGH OUT OF LINE WITH OTHER BIDS AND WITH THE GOVERNMENT ESTIMATE TO INDICATE ERROR, NOTHING IN THE INVITATION OR BID INDICATES WHAT SHARPS WOULD HAVE BID BUT FOR THE ERROR.

HOWEVER, IT IS CONTENDED BY REPRESENTATIVES OF THE CORPS OF ENGINEERS THAT UNDER THE METHOD OF EVALUATION CONTAINED IN CLAUSE 12 OF THE INVITATION, OTHER BIDDERS WERE IN NO WAY PREJUDICED BY THE CORRECTION. CLAUSE 12 OF THE INVITATION FOR BIDS PROVIDES:

"AWARD: THE GOVERNMENT FURTHER RESERVES THE RIGHT TO MAKE AWARD ON ANY OR ALL SCHEDULES OF ANY BID, UNLESS THE BIDDER QUALIFIES SUCH BID BY SPECIFIC LIMITATION; ALSO, TO MAKE AWARD TO THE BIDDER WHOSE AGGREGATE BID ON ANY COMBINATION OF BID SCHEDULES IS LOW. FOR THE PURPOSE OF THIS INVITATION FOR BIDS, THE WORD "ITEM," AS USED IN PARAGRAPH 10/C) OF STANDARD FORM 22 SHALL BE CONSIDERED TO MEAN "SCHEDULE.' THE BIDS WILL BE EVALUATED ON THE BASIS OF THE AGGREGATE COST OF THE BASE SCHEDULE AND ALL OF THE ADDITIVES IN THE ORDER OF STATED PRIORITY TO BE AWARDED UNDER THE INVITATION AND WITHIN THE FUNDS LIMITATION, PROVIDED, HOWEVER, THAT AFTER THE RELATIVE ORDER OF BIDDERS HAS BEEN DETERMINED AS PROVIDED ABOVE, THE GOVERNMENT RESERVES THE RIGHT TO SUBSTITUTE AND AWARD ANOTHER OR OTHER ADDITIVE ITEMS AT PRICES QUOTED IN LIEU OF ANY ONE OR MORE ADDITIVE ITEMS OF HIGHER STATED PRIORITY, IF SUCH SUBSTITUTION WILL HAVE NO EFFECT ON THE PREVIOUS DETERMINATION OF THE LOW OR ULTIMATELY SUCCESSFUL BIDDER. THE GOVERNMENT FURTHER RESERVES THE RIGHT TO ADD, IF NECESSARY, TO THE ANNOUNCED AVAILABLE FUNDS FOR AWARD OF THE CONTRACT TO THE EXTENT THAT AWARD MAY BE MADE ON THE BASIS OF THE LOW ACCEPTABLE BASE SCHEDULE BID.'

YOUR REPRESENTATIVES ARGUE THAT UNDER THIS CLAUSE THEY WERE REQUIRED TO DETERMINE THE ULTIMATELY SUCCESSFUL BIDDER ON THE BASIS OF FUNDS ANNOUNCED TO BE AVAILABLE AT BID OPENING. SINCE UNDER THIS PRESCRIPTION SHARPS WAS ESTABLISHED TO BE THE ULTIMATE LOW BIDDER FOR PURPOSES OF AWARDING THE CONTRACT, THEY SAY NO OTHER BIDDER WAS ELIGIBLE FOR AWARD EVEN IF MORE FUNDS WERE MADE AVAILABLE. HOWEVER, THE PROTEST SUGGESTS THAT SUCH A SYSTEM OF EVALUATION MUST BE CONTRARY TO PUBLIC POLICY BECAUSE, EVEN IN THE ABSENCE OF AN ALLEGEDLY IMPROPER CORRECTION, IT PERMITS AN AWARD OF AN ENTIRE PROCUREMENT TO A BIDDER WHO IS IN FACT LOW BIDDER ONLY ON A PORTION OF THE PROCUREMENT. YOUR REPRESENTATIVES AGREE THAT SUCH AN EVALUATION WOULD BE IMPROPER, BUT CONTEND THAT THE INVITATION FOR BIDS NO MORE SANCTIONS THIS UNDESIRED RESULT THAN IT PERMITS CORRECTION OF ONE BID TO THE PREJUDICE OF ANOTHER.

SINCE CLAUSE 12 SPECIFICALLY STATES THAT THE GOVERNMENT MAY SUBSTITUTE ADDITIVES ONLY WHERE THE SUBSTITUTION HAS NO EFFECT ON THE PREVIOUS DETERMINATION OF THE LOW BIDDER, IT SEEMS CLEAR THAT THE CORPS OF ENGINEERS COULD NOT PRESUME AND DID NOT INTEND TO ADD ITEMS WHICH WOULD EFFECT THE PREVIOUS DETERMINATION OF THE LOW BIDDER, ESPECIALLY IN VIEW OF THE FACT THAT WE HAVE HELD THIS PRACTICE TO BE IMPROPER. B 143404, DATED SEPTEMBER 15, 1960. THEREFORE, WHILE WEMAY AGREE THAT THE INVITATION DID NOT PERMIT AN AWARD TO SHARPS OF ADDITIONAL ADDITIVES BEYOND THE POINT WHERE JEN-MAR'S PRICE WAS LOWER FOR THE SAME SUCCESSIVE ADDITIVES, IT SEEMS CLEAR THAT SHARPS HAS RECEIVED JUST SUCH AN AWARD, UNLESS SHARPS' BID MAY BE CONSIDERED TO HAVE BEEN CORRECTED WITHOUT PREJUDICE TO JEN- MAR.

THE RATIONALE SUPPORTING THE VIEW THAT THE CORRECTION WAS WITHOUT PREJUDICE IS ENTIRELY DEPENDENT UPON THE PROPOSITION THAT THE INVITATION FOR BIDS PROPERLY REQUIRED THAT THE SUCCESSFUL BIDDER BE UNEQUIVOCALLY DETERMINED AT BID OPENING UPON THE BASIS OF FUNDS AVAILABLE AT THAT TIME. IF, ON THE CONTRARY, THE INVITATION SHOULD BE CONSIDERED TO HAVE PRESCRIBED AN EVALUATION BASED UPON THE TOTAL AMOUNT OF FUNDS FINALLY MADE AVAILABLE, JEN-MAR DID NOT BECOME INELIGIBLE FOR AWARD SIMPLY BECAUSE ITS PRICE WAS NOT LOW WITHIN THE FUNDS ANNOUNCED AT BID OPENING, AND THEREFORE, CORRECTION OF A COMPETITOR'S PRICE WOULD CLEARLY BE PREJUDICIAL.

WE ARE TOLD THAT IN ORDER TO AVOID PAST CRITICISM OF ALLEGEDLY DETERMINING AFTER BID OPENING THE ULTIMATE LOW BIDDER BY DETERMINING THE AMOUNT OF FUNDS WHICH SHOULD ULTIMATELY BE MADE AVAILABLE FOR CONTRACTING, THE CORPS OF ENGINEERS ADOPTED AND FOR SEVERAL YEARS HAS EMPLOYED WITHOUT COMPLAINT REGULATIONS WHICH REQUIRE BIDS TO BE EVALUATED WITHIN THE FUNDS ANNOUNCED BY THE CONTRACTING OFFICER JUST PRIOR TO THE OPENING OF BIDS. THE PERTINENT REGULATIONS PROVIDE THAT WHEN BID EVALUATION IS TO BE CONDUCTED AS OUTLINED IN CLAUSE 12, THE CONTRACTING OFFICER'S REPRESENTATIVE WILL:

"* * * ANNOUNCE AT THE BID OPENING, AND PRIOR TO THE OPENING OF ANY BID, THE NET AMOUNT OF MONEY AVAILABLE FOR THE AWARD OF THE PROPOSED CONTRACT. THIS NET AMOUNT WILL BE THE MAXIMUM AVAILABLE AFTER DEDUCTION OF ENGINEERING AND DESIGN SUPERVISION, INSPECTION, DIVISION AND DISTRICT OVERHEAD COST ALLOWANCES AND CONTINGENCIES. THE CONTRACTING OFFICER'S REPRESENTATIVE WILL STATE THAT THE DETERMINATION OF THE LOW BIDDER WILL BE ON THE BASIS OF THE AGGREGATE OF THE BASE BID PLUS THOSE ADDITIVES IN THE PRIORITY STATED IN THE BID DOCUMENTS THAT MAY BE AWARDED WITHIN THE FUNDS LIMITATION WHICH HE HAS ANNOUNCED. A STATEMENT OF THE FUNDS AVAILABLE FOR AWARD WILL NOT BE INCLUDED IN THE INVITATION FOR BIDS OR OTHER FORMAL BID DOCUMENTS.'

THE QUOTED PORTION OF THE REGULATIONS CLEARLY SHOWS THE INTENTION TO EVALUATE BIDS ON THE BASIS OF THE FUNDS AVAILABLE AT THE TIME OF BID OPENING, AND THE RECORD INDICATES THAT THIS INTENTION WAS FOLLOWED BY THE CONTRACTING OFFICER. HOWEVER, WE HAVE HELD THAT THE INVITATION ITSELF MUST BE CONSIDERED AS CONTROLLING THE BASIS UPON WHICH BIDS WILL BE EVALUATED, NOTWITHSTANDING THAT SOME BIDDERS MAY HAVE HAD REASON TO BELIEVE THAT BIDS WOULD BE EVALUATED IN A MANNER CONTRARY TO THE ONE STATED IN THE INVITATION. 38 COMP. GEN. 550. IF CLAUSE 12 OF THE INVITATION PROVIDED FOR THE SAME SYSTEM OF EVALUATION AS EXPLICITLY STATED IN THE REGULATIONS AND BY THE CONTRACTING OFFICER AT BID OPENING, WE COULD CONSIDER THE PROPRIETY OF AN EVALUATION BASED UPON FUNDS ANNOUNCED AT BID OPENING, AND, IF PROPER, THE CORRECTION OF SHARPS' BID ON ADDITIVE 4. HOWEVER, WE FEEL COMPELLED TO HOLD THAT, CONTRARY TO THE REGULATION, THE LANGUAGE IN CLAUSE 12 WHICH PROVIDED THAT "BIDS WILL BE EVALUATED * * * WITHIN THE FUNDS LIMITATION" MUST BE CONSTRUED TO HAVE ADVISED BIDDERS ONLY THAT EVALUATION AND AWARD WOULD BE LIMITED TO TOTAL AVAILABLE FUNDS, NOT TO A PORTION OF FUNDS AVAILABLE AT SOME UNSPECIFIED TIME.

THE COMMON MEANING OF "FUNDS LIMITATION" IS FUNDS WHICH ARE AVAILABLE FOR OBLIGATION WITHIN A CERTAIN ACCOUNTING PERIOD. TO INDICATE THE MORE RESTRICTED MEANING ACTUALLY INTENDED, WE BELIEVE THE CLAUSE SHOULD HAVE EXPLICITLY PROVIDED THAT BIDS WOULD BE EVALUATED WITHIN THE FUNDS ANNOUNCED TO BE AVAILABLE AT THE TIME OF BID OPENING, OR WITHIN "ANNOUNCED AVAILABLE FUNDS.' INDEED, THE QUOTED LANGUAGE WAS USED ON A PART OF CLAUSE 12 DEALING WITH ANOTHER MATTER. THE LAST SENTENCE THEREIN PROVIDES:

"* * * THE GOVERNMENT FURTHER RESERVES THE RIGHT TO ADD, IF NECESSARY, TO THE ANNOUNCED AVAILABLE FUNDS FOR AWARD OF THE CONTRACT TO THE EXTENT THAT AWARD MAY BE MADE ON THE BASIS OF THE LOW ACCEPTABLE BASE SCHEDULE BID.'

WE THINK BIDDERS COULD REASONABLY HAVE CONCLUDED THAT THE USE IN THE SAME CLAUSE OF TWO PHRASES WITH OSTENSIBLY DIFFERENT MEANINGS INDICATED THAT "FUNDS LIMITATION" AND "ANNOUNCED AVAILABLE FUNDS" DID NOT HAVE IDENTICAL MEANINGS. ALSO, WHILE THE CORPS OF ENGINEERS CLEARLY INTENDED THE QUOTED SENTENCE TO MEAN THAT THE GOVERNMENT RESERVED THE RIGHT TO ADD FUNDS TO THOSE ANNOUNCED AT BID OPENING IN ORDER TO AWARD THE BASIC ITEM, IT SHOULD BE NOTED THAT BY SPECIFICALLY RESERVING THIS RIGHT AS TO THE BASIC ITEM THEY MAY HAVE INDICATED RELINQUISHMENT OF ANY SUCH RIGHT AS TO THE ADDITIVES. IN SUCH A CASE, IF BIDS WERE TO BE EVALUATED WITHIN THE FUNDS ANNOUNCED AT BID OPENING, IT WOULD APPEAR TO FOLLOW THAT AWARD OF ANY ADDITIVES WOULD BE MADE, IF POSSIBLE, ONLY WITHIN THE FUNDS AVAILABLE AT BID OPENING, AND NO FUNDS WOULD LATER BE ADDED FOR PURPOSES OF AWARDING ADDITIVES.

IF THE MORE COMMON UNDERSTANDING OF THE LANGUAGE "FUNDS LIMITATION" SHOULD BE ACCEPTED AS THE PROPER MEANING, IT FOLLOWS THAT BIDS SHOULD HAVE BEEN EVALUATED ON THE BASIS OF THE FINAL AMOUNT OF FUNDS AVAILABLE FOR AWARD. ON THIS BASIS, CORRECTION OF THE SHARPS' BID OF $843,507 FOR THE BASIC ITEM AND ALL ADDITIVES WOULD HAVE DISPLACED THE OTHERWISE LOW BID OF JEN-MAR FOR THE SAME SCHEDULE, AND THEREFORE SHOULD NOT HAVE BEEN ALLOWED FOR REASONS DISCUSSED ABOVE. FURTHERMORE, CLAUSE 12 RESERVES TO THE GOVERNMENT THE RIGHT TO MAKE AWARD ON ANY OR ALL SCHEDULES ON ANY BID. EXERCISE OF THAT RIGHT, YOUR AGENCY DETERMINED THAT THE CONTRACT AWARDED SHOULD INCLUDE ALL FIVE ADDITIVES. THIS DETERMINATION IS A MATTER SOLELY WITHIN ADMINISTRATIVE DISCRETION. THE MERE FACT THAT CHOOSING FOR AWARD THE BASIC ITEM PLUS THE FIRST THREE ADDITIVES MIGHT HAVE RESULTED IN AN AWARD TO SHARPS IS NOT A BASIS FOR CLAIMING DISCRIMINATION BETWEEN BIDDERS. THEREFORE, UNDER THE DETERMINATION AS IT NOW STANDS, AWARD OF A CONTRACT TO SHARPS OR ANY OTHER BIDDER FOR THE BASIC ITEM AND ANY LESS THAN FIVE ADDITIVES WOULD BE QUESTIONABLE UNLESS SUFFICIENT FUNDS WERE NOT AVAILABLE TO COVER SUCH AN AWARD. ON THE OTHER HAND, WE THINK IT WOULD BE IMPROPER TO DIRECT AWARD TO JEN-MAR OF A CONTRACT FOR THE BASIC ITEM AND THE FIVE ADDITIVES. IN THE FIRST PLACE, THE DETERMINATION OF THE GOVERNMENT'S NEEDS FOR ALL ADDITIVES WAS MADE WITH SPECIFIC REFERENCE TO THE COST THE GOVERNMENT WOULD INCUR UNDER SHARPS' LOWER CORRECTED BID.

MOREOVER, AWARD HAS ALREADY BEEN MADE TO SHARPS AFTER EVALUATING BIDS IN THE SAME MANNER AS IN PAST PROCUREMENTS, AS OUTLINED IN THE REGULATIONS, AND AS ANNOUNCED AT BID OPENING. TO DIRECT THAT AWARD NOW BE MADE TO JEN- MAR WOULD REQUIRE THE PROCURING ACTIVITY TO FURTHER REQUEST FUNDS ADDITIONAL TO THOSE ALREADY ALLOTTED AFTER A REQUEST SUBSEQUENT TO BID OPENING, FOR THE SOLE PURPOSE OF MAKING AN "EVALUATION" OF BIDS WHICH WOULD BE CONTRARY TO PAST PRACTICE AND COULD RESULT IN AN AWARD TO ONLY ONE BIDDER. SUCH A HOLDING WOULD AT BEST BE RATHER DIFFICULT TO RECONCILE WITH THE RULES OF COMPETITIVE ADVERTISING. ALTHOUGH THE INVITATION CAN BE CONSTRUED TO HAVE INFORMED BIDDERS THAT BIDS WOULD BE EVALUATED ON THE BASIS OF THE TOTAL AVAILABLE FUNDS, WE THINK THAT EVEN THOSE BIDDERS WHO IN FACT WERE SO INFORMED MAY HAVE BEEN UNDERSTANDABLY CONFUSED BY REGULATIONS AND STATEMENTS FROM THE PROCURING ACTIVITY TO THE CONTRARY.

FOR THE FOREGOING REASONS, PARTICULARLY THE AMBIGUITY AND POSSIBLE CONTRADICTION INHERENT IN CLAUSE 12 OF THE INVITATION, WE FEEL THAT THE FACTS OF THIS CASE REQUIRE THAT CONTRACT NO. ENG-63-33 BE CANCELED AND PURSUANT TO CLAUSE 10/B) OF THE INSTRUCTIONS TO BIDDERS THAT INVITATION FOR BIDS NO. ENG-04-167-63-33 BE CANCELED, AND THE PROCUREMENT READVERTISED.

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