B-144218, DEC. 22, 1960

B-144218, DEC. 22, 1960

TO CATERPILLAR TRACTOR COMPANY:

REFERENCE IS MADE TO YOUR TELEGRAMS OF OCTOBER 11 AND 14, 1960, CONCERNING YOUR PROTEST AGAINST THE REJECTION OF ALL BIDS UNDER INVITATION NO. ENG-36-019-61-1, DATED AUGUST 26, 1960, AS AMENDED ON SEPTEMBER 9, 1960, COVERING A PROPOSED PROCUREMENT BY THE DEPARTMENT OF THE ARMY OF ONE HUNDRED AND SIXTEEN 150-KW. GENERATOR SETS AND RELATED SERVICES, MAINTENANCE LISTS, ETC.

THE INVITATION WAS ISSUED BY THE U.S. ARMY ENGINEER DISTRICT, PHILADELPHIA, PENNSYLVANIA, AND AFTER OPENING OF BIDS ON SEPTEMBER 29, 1960, IT WAS DETERMINED THAT ALL BIDS SHOULD BE REJECTED AND THAT THERE SHOULD BE A READVERTISEMENT ON THE PROPOSED PROCUREMENT. BY TELEGRAPHIC INVITATION NO. ENG-36-109-61-6, SENT TO PROSPECTIVE BIDDERS ON OCTOBER 11, 1960, IT WAS PROVIDED THAT ALL TERMS OF THE ORIGINAL INVITATION WOULD REMAIN UNCHANGED EXCEPT AS SPECIFIED. AMONG THE THE EXCEPTIONS, THE TELEGRAPHIC INVITATION DELETED THAT PART OF AMENDMENT NO. 1 TO THE ORIGINAL INVITATION WHICH PROVIDED THAT BIDS WOULD BE EVALUATED ON THE BASIS OF ITEMS NOS. 1-1 THROUGH 1-39 AND ITEM NO. 2. IN ITS PLACE THERE WAS SUBSTITUTED THE PROVISION THAT "BIDS WILL BE EVALUATED ON THE BASIS OF OVERALL LOW BID FOR ALL ITEMS 1 THRU 6.'

THE NEW INVITATION WAS MODIFIED IN CERTAIN RESPECTS BY TELEGRAPHIC NOTICES ISSUED ON OCTOBER 12 AND 14, 1960, AND BIDS WERE OPENED ON OCTOBER 20, 1960. THE WAUKESHA MOTOR COMPANY, WAUKESHA, WISCONSIN, WAS THE LOW BIDDER AND THE SECRETARY OF THE ARMY APPROVED AWARD OF THE CONTRACT TO THAT COMPANY. FIVE BIDS WERE RECEIVED IN TOTAL AMOUNTS RANGING BETWEEN $1,564,643 AND $1,752,361. AS COMPARED WITH THE LOW BID OF THE WAUKESHA MOTOR COMPANY IN THE AMOUNT OF $1,564,643, YOU SUBMITTED THE SECOND LOWEST BID OF $1,656,235.51, AND THE ALLIS CHALMERS MANUFACTURING COMPANY, MILWAUKEE, WISCONSIN, SUBMITTED THE FOURTH LOWEST BID OF $1,680,553.92.

THE TWO LOWEST BIDS RECEIVED UNDER THE ORIGINAL INVITATION WERE SUBMITTED BY YOUR COMPANY AND THE ALLIS-CHALMERS MANUFACTURING COMPANY. YOUR PRICES ON ITEMS NOS. 1 AND 2 TOTALED THE SUM OF $1,614,012.41 AND YOUR PRICES ON ALL SIX ITEMS TOTALED THE SUM OF $1,746,854.41. THE CORRESPONDING PRICES OF THE ALLIS-CHALMERS MANUFACTURING COMPANY WERE $1,687,911.37 AND $1,743,994.37. YOU PROTESTED ANY READVERTISEMENT, CONTENDING THAT YOU WERE ENTITLED TO AN AWARD UNDER THE ORIGINAL INVITATION AS THE LOWEST BIDDER ON ITEMS NOS. 1 AND 2. THE ALLIS-CHALMERS MANUFACTURING COMPANY ALSO PROTESTED ANY READVERTISEMENT, CONTENDING THAT IT WAS ENTITLED TO AN AWARD AS THE LOWEST BIDDER UNDER ALL SIX ITEMS OF THE ORIGINAL INVITATION.

BEFORE THE DECISION TO READVERTISE WAS MADE, THE ENGINEER MAINTENANCE CENTER, COLUMBUS, OHIO, QUESTIONED THE REASONABLENESS OF YOUR PRICES ON ITEMS NOS. 3 AND 4 FOR PROVISIONING LIST AND MANUALS, STATING THAT ITS ESTIMATES OF REASONABLE PRICES WERE $15,000 FOR PROVISIONING LIST AND $20,000 FOR MANUALS, AS COMPARED WITH YOUR BID PRICES OF $54,500 AND $60,282 FOR THOSE ITEMS. IT APPEARS THAT WHEN THIS MATTER WAS BROUGHT TO YOUR ATTENTION YOU OFFERED TO REDUCE YOUR TOTAL BID PRICE FOR ALL SIX ITEMS OF THE INVITATION BY $17,000. THE PHILADELPHIA ENGINEER DISTRICT FOUND IT NECESSARY TO OBTAIN INSTRUCTIONS FROM THE OFFICE OF THE CHIEF OF ENGINEERS AND IT WAS DIRECTED BY TELEGRAM OF OCTOBER 10, 1960, TO REJECT ALL BIDS AND READVERTISE.

THE DEPARTMENT OF THE ARMY HAS TAKEN THE POSITION THAT THE EVALUATION METHOD PRESCRIBED IN THE SEPTEMBER 9, 1960, AMENDMENT TO INVITATION NO. ENG-36-109-61-1 WAS IN VIOLATION OF SECTION 2305 OF TITLE 10, U.S.C. AS IMPLEMENTED IN THE ARMED SERVICES PROCUREMENT REGULATION AND ARMY PROCUREMENT PROCEDURES; ALSO, THAT YOUR GRATUITOUS OFFER TO REDUCE YOUR TOTAL BID PRICE BY $17,000 AFTER OPENING OF BIDS COULD NOT HAVE REMEDIED THE IMPROPRIETY OF ANY AWARD, SINCE COMPETITION WAS NOT OBTAINED FOR ITEMS NOS. 3, 4, 5 AND 6.

THE CITED ADVERTISING STATUTE CLEARLY SHOWS A CONGRESSIONAL INTENT TO MAKE IT NECESSARY TO SECURE FREE AND OPEN COMPETITION FOR GOVERNMENT CONTRACTS TO BE AWARDED UNDER FORMAL ADVERTISING PROCEDURES. FURTHER, IN RECOGNITION OF THE ESTABLISHED RULE THAT A BIDDER DOES NOT HAVE A VESTED RIGHT TO AN AWARD UNDER AN ADVERTISED PROCUREMENT, IT PROVIDES THAT "ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST.'

IN THE CONTROVERSY WHICH DEVELOPED IN THE MATTERS, VARIOUS PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION AND SECTION 2 407 OF THE ARMY PROCUREMENT PROCEDURES HAVE BEEN CITED. CERTAIN OF THE CITED MATERIAL EMPHASIZES THE GENERAL REQUIREMENT OF THE STATUTE THAT AWARDS SHALL BE MADE TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. ASPR 2-103 (IV), AND ASPR 2 404.1. OTHER CITED MATERIAL FROM THE ARMED SERVICES PROCUREMENT REGULATION RELATES TO ,STATEMENT AND CERTIFICATE OF AWARD" TO BE PREPARED BY THE CONTRACTING OFFICER, ASPR 2- 407.7; AND A REQUIREMENT THAT, IF AN AWARD IS TO BE MADE BY SPECIFIED GROUPS OF ITEMS IN THE AGGREGATE, THE INVITATION SHOULD INCLUDE A STATEMENT TO THAT EFFECT, ASPR 2-201 (B) (IX).

THE CITED SECTION 2-407 OF THE ARMY PROCUREMENT PROCEDURES APPEARS TO HAVE BEEN CONSIDERED TO BE ESPECIALLY APPLICABLE TO THE SITUATION HERE INVOLVED IN THAT SUBSECTION 2-407.5 REQUIRES THAT, IN EVALUATING BIDS, CONTRACTING OFFICERS "WILL INSURE THAT THE PRICES TO BE ACCEPTED ARE FAIR AND REASONABLE ON THE BASIS OF VALID CRITERIA, SUCH AS, BUT NOT LIMITED TO: PRICES PAID ON PAST PROCUREMENTS; PRICE TREND INFORMATION FROM THE DAILY PRESS, TRADE, OR GOVERNMENT PUBLICATIONS; CURRENT MARKET PRICES FOR COMPARABLE QUANTITIES; EXTENT OF COMPETITIVE PRICING; COST ANALYSIS OF SIMILAR PROCUREMENTS; AND CURRENT PRICES BEING PAID BY OTHER PURCHASING OFFICES FOR THE SAME OR SIMILAR ITEMS.'

IN FURTHER REFERENCE TO THE POSSIBILITY THAT AN INVITATION FOR BIDS MIGHT BE CANCELED AFTER OPENING OF BIDS, SUBSECTION 2-404.1 OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES, IN PERTINENT PART, THAT "THE PRESERVATION OF THE INTEGRITY OF THE COMPETITIVE BID SYSTEM DICTATES THAT AFTER BIDS HAVE BEEN OPENED, AWARD MUST BE MADE TO THAT RESPONSIBLE BIDDER WHO SUBMITTED THE LOWEST RESPONSIVE BID, UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND CANCEL THE INVITATION.'

THE RECORD INDICATES THAT THE SPECIFIED METHOD FOR EVALUATING BIDS UNDER INVITATION NO. ENG-36-109-61-1 WAS DECIDED UPON AT A CONFERENCE PAID BY THE CORPS OF ENGINEERS ON SEPTEMBER 7, 1960, ATTENDED BY REPRESENTATIVES OF INTERESTED SUPPLIERS. IT HAS BEEN SUGGESTED ON YOUR BEHALF THAT, SINCE THE ARMY HAD DETERMINED THE SPECIFIED EVALUATION METHOD TO BE IN THE BEST INTEREST OF THE GOVERNMENT IT COULD NOT CHANGE THE EVALUATION METHOD AFTER THE BID OPENING. IT HAS ALSO BEEN SUGGESTED THAT THE SPECIFIED EVALUATION METHOD WAS NOT IMPROPER BECAUSE THE INVITATION DID NOT STATE THAT AN AWARD WOULD BE MADE IN THE AGGREGATE BUT ONLY THAT THE AWARD WOULD BE MADE TO ONE BIDDER; AND THE GOVERNMENT COULD, THEREFORE, HAVE NEGOTIATED PRICES ON ITEMS NOS. 3, 4, 5 AND 6 IN THE SAME MANNER THAT PRICES COULD HAVE BEEN NEGOTIATED ON ORDERS FOR SPARE PARTS ISSUED AFTER THE RECEIPT OF A PROVISIONING LIST.

THE INVITATION PROVIDED THAT THE AWARD WOULD BE MADE TO A SINGLE BIDDER AND THAT MULTIPLE AWARDS WOULD NOT BE MADE. SUCH PROVISIONS WERE, IN OUR OPINION, SUFFICIENT TO SHOW THAT AN AWARD WOULD BE MADE FOR THE SPECIFIED GROUP OF ITEMS OR, IN OTHER WORDS, THAT THE GOVERNMENT WAS INTERESTED IN CONTRACTING WITH ONLY ONE FIRM FOR PROCUREMENT OF ALL SIX ITEMS AT FIRM PRICES. THE FACT THAT THE INVITATION ALSO CALLED FOR THE NEGOTIATION OF A SUPPLEMENTAL AGREEMENT COVERING REPAIR PARTS AFTER AWARD OF THE CONTRACT WOULD NOT HAVE GIVEN THE GOVERNMENT, AS CONTENDED ON YOUR BEHALF, THE RIGHT TO REQUIRE THE SUCCESSFUL BIDDER TO RENEGOTIATE PRICES ON ANY OF THE SIX BASIC ITEMS OF THE INVITATION.

IT IS OUR OPINION THAT THE PRESCRIBED BID EVALUATION METHOD WAS ERRONEOUS SINCE IT WAS CONTRARY TO THE PRINCIPLE THAT FREE AND OPEN COMPETITION MUST BE SECURED ON ALL FORMALLY ADVERTISED GOVERNMENT PROCUREMENTS. HERE, THE PRIMARY CONSIDERATION SHOULD HAVE BEEN THE PROCUREMENT OF THE EQUIPMENT, MATERIALS AND SERVICES AT THE LOWEST TOTAL PRICE FROM A RESPONSIBLE FIRM. EXACT QUANTITIES OF EQUIPMENT AND MATERIAL WERE SPECIFIED UNDER ITEMS NOS. 1, 3 AND 4 AND THE QUANTITIES OF SERVICES SPECIFIED UNDER ITEMS NOS. 2, 5 AND 6 EVIDENTLY WERE BASED UPON REALISTIC ESTIMATES. ALSO, REPRESENTATIVES OF THE DEPARTMENT OF THE ARMY HAVE ADVISED US THAT THE ARMY FULLY INTENDED TO OBTAIN ALL OF THE LISTED MATERIAL AND SERVICES UNDER ITEMS NOS. 3, 4, 5 AND 6 FROM THE SUCCESSFUL BIDDER. SINCE THE PRESCRIBED METHOD FOR EVALUATING BIDS WAS ERRONEOUS, ANY VOLUNTARY REDUCTION IN YOUR TOTAL BID PRICE WOULD NOT HAVE BEEN FOR CONSIDERATION.

UNDER PARAGRAPH 8 OF THE TERMS AND CONDITIONS OF THE INVITATION THE GOVERNMENT EXPRESSLY RESERVED THE RIGHT TO REJECT ANY AND ALL BIDS UNDER THE INVITATION. IN ADDITION TO SUCH RESERVATION, IT CONSISTENTLY HAS BEEN HELD BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT AND BY THE COURTS THAT THE QUESTION OF REJECTING ALL BIDS AND READVERTISING IS PRIMARILY A MATTER OF ADMINISTRATIVE DISCRETION. ALSO, IT HAS BEEN HELD THAT A REQUEST FOR BIDS DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE BIDS RECEIVED, INCLUDING THE LOWEST CORRECT BID. 17 COMP. GEN. 554, 26 ID. 49; PERKINS V. LUKENS STEEL CO., 310 U.S. 113; O-BRIEN V. CARNEY, 6 F.SUPP. 761; COLORADO PAVING CO. V. MURPHY, 78 F. 28.

SINCE THE DUTY OF MAKING A DETERMINATION TO REJECT ALL BIDS LIES WITH THE ADMINISTRATIVE OFFICERS OF THE PURCHASING AGENCY, IN THE ABSENCE OF CLEAR PROOF OF ABUSE OF THEIR DISCRETIONARY POWERS IN THAT REGARD, THIS OFFICE WILL NOT OBJECT TO SUCH ACTION PARTICULARLY WHERE, AS HERE, THE PURPOSE THEREOF IS TO CORRECT DEFICIENCIES IN THE INVITATION. OF COURSE, WE ARE FULLY AWARE THAT THE REJECTION OF BIDS AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITOR'S PRICE IS A SERIOUS MATTER AND SHOULD NOT BE DONE EXCEPT FOR COGENT REASONS. HOWEVER, WE THINK THERE WAS A PROPER BASIS FOR ADMINISTRATIVE DETERMINATIONS THAT NO COMPETITION WAS SECURED FOR ITEMS NOS. 3, 4, 5 AND 6, AND OF THE INSUFFICIENCY OF THE ORIGINAL INVITATION AND, SUCH BEING THE CASE, WE WOULD NOT BE JUSTIFIED IN OBJECTING TO THE ADMINISTRATIVE ACTION TAKEN IN THIS CASE.