B-135393, MAR. 28, 1958

B-135393, MAR. 28, 1958

TO HERRICK L. JOHNSTON, INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 17 AND YOUR TELEGRAM OF FEBRUARY 28, 1958, ACKNOWLEDGED MARCH 5, PROTESTING THE ACTION OF THE DEPARTMENT OF THE AIR FORCE IN AWARDING TO THE CAMBRIDGE CORPORATION, LOWELL, MASSACHUSETTS, A CONTRACT FOR FURNISHING A QUANTITY OF TYPE MD-1 SEMI-TRAILER TANKS TO BE USED FOR THE TRANSPORTATION AND STORAGE OF THE LIQUID OXYGEN OR NITROGEN, WHICH WAS AWARDED UNDER INVITATION FOR BIDS NO. IFB-33-600-58-124, ISSUED DECEMBER 23, 1957, BY THE WRIGHT-PATTERSON AIR FORCE BASE, OHIO. YOU QUESTION THE PROPRIETY OF THE AWARD FOR THE REASON THAT THE CAMBRIDGE CORPORATION HAD ORIGINALLY QUALIFIED ITS BID BY THE INCLUSION OF A CLAUSE TO THE EFFECT THAT ITS QUOTATION ON ITEM 1 WAS TO BE ADJUSTED UPWARD OR DOWNWARD BY NEGOTIATION OF THE COST OF THE PREPRODUCTION TESTING OF THE FIRST ARTICLE (ITEM 1) AND YOU CONTEND THAT SINCE THE INVITATION REQUIRED BIDDERS TO SUBMIT FIRM PRICES, THE CORPORATION SHOULD NOT HAVE BEEN PERMITTED, AFTER THE BID OPENING, TO WITHDRAW SUCH QUALIFICATION FROM ITS BID, WHICH YOU ALLEGE WAS NONRESPONSIVE TO THE INVITATION.

IN RESPONSE TO A REQUEST BY THIS OFFICE, THE DEPARTMENT OF THE AIR FORCE HAS FURNISHED A REPORT SETTING OUT THE FACTS AND ITS VIEWS IN THE MATTER. THE REPORT SHOWS THAT TEN BIDS WERE RECEIVED AND THAT THE THREE LOWEST BIDS RECEIVED WERE AS FOLLOWS:

TABLE

A. CAMBRIDGE CORPORATION $404,194.87*

B. BEECHCRAFT RESEARCH AND

DEVELOPMENT, INC. 448.813.72

C. HERRICK L. JOHNSTON, INC. 478,041.60*

* AFTER 1/2 OF 1 PERCENT CASH DISCOUNT HAD BEEN DEDUCTED.

THE RECORD INDICATES THAT THE BID OF THE SECOND LOW BIDDER, BEECHCRAFT RESEARCH AND DEVELOPMENT, INC., WAS REJECTED AS BEING NONRESPONSIVE BECAUSE IT WAS CONDITIONED UPON RENT-FREE USE OF GOVERNMENT-OWNED FACILITIES AND FURTHER QUALIFIED BY THE STATEMENT THAT IT INCLUDED FEDERAL EXCISE TAX ONLY ON THE RUNNING GEAR ASSEMBLY OF THE TRAILER. ON FEBRUARY 10, 1958, CONTRACT NO. AF 33/600/-36585, CONTAINING A FIRM PRICE OF $406,226, WAS AWARDED TO THE CAMBRIDGE CORPORATION.

WITH RESPECT TO THE BID OF THE CAMBRIDGE CORPORATION, THE FOLLOWING STATEMENTS ARE MADE IN THE ADMINISTRATIVE REPORT:

"THE BID SUBMITTED BY CAMBRIDGE CORPORATION FOR THE FIRST ARTICLE, WHICH INCLUDED FIRST ARTICLE TESTING BY THE CONTRACTOR, WAS STATED AS $54,846 FOLLOWED BY THE HANDWRITTEN NOTATION:

"PLUS ABERDEEN QUOTATION PER ORDBG-DP-TU 15,680.00 TO BE ADJUSTED UP OR DOWN BASED ON FINAL INVOICE FROM ABERDEEN. SEE LETTER ATTACHED.'

THE ATTACHED LETTER REFERRED TO, A COPY OF WHICH IS INCLOSED AS TAB D, WAS A LETTER TO CAMBRIDGE CORPORATION FROM THE ABERDEEN PROVING GROUND STATING THAT THE ESTIMATED COST OF PERFORMING THE REQUIRED ROAD ENDURANCE TEST WAS $15,680 BUT THAT THIS FIGURE SHOULD NOT BE CONSTRUED AS A FIRM BID FOR PERFORMING THE WORK FOR CAMBRIDGE CORPORATION. AT THE BID OPENING, THE CONTRACTING OFFICER REMARKED THAT THE HANDWRITTEN NOTATION APPEARING ON CAMBRIDGE CORPORATION'S BID COULD RESULT IN THE BID BEING CONSIDERED NONRESPONSIVE SINCE THE PRICE QUOTED FOR THE FIRST ARTICLE APPEARED TO BE OTHER THAN A FIXED PRICE. THE REPRESENTATIVE OF CAMBRIDGE CORPORATION AT THE BID OPENING IMMEDIATELY CHALLENGED THIS INTERPRETATION BY THE CONTRACTING OFFICER; AND SEVERAL HOURS AFTER THE BID OPENING, THE CONTRACTING OFFICER RECEIVED A LETTER FROM CAMBRIDGE CORPORATION, DATED 9 JANUARY 1958, A COPY OF WHICH IS INCLOSED AS TAB 3, STATING THAT CAMBRIDGE CORPORATION'S BID FOR THE FIRST ARTICLE WAS INTENDED TO BE A FIRM FIXED PRICE OF $70,526, THE TOTAL OF $54,846 PLUS THE $15,680 QUOTED BY ABERDEEN, AND THAT THE COMMENTS ADJACENT TO THE QUOTATION FOR THE ABERDEEN PROVING GROUND TEST WERE MADE ONLY TO POINT OUT THAT THE ABERDEEN PROVING GROUND WOULD QUOTE ONLY A COST-REIMBURSEMENT BASIS WHEREAS CAMBRIDGE CORPORATION WAS ASKED TO BID A FIXED PRICE.

"PRIOR TO MAKING AN AWARD, THE PROCURING ACTIVITY FULLY CONSIDERED THE EFFECT OF THE NOTATION CONTAINED IN CAMBRIDGE CORPORATION'S BID. IT WAS DETERMINED THAT EVEN THOUGH PRIOR TO RECEIPT OF CAMBRIDGE CORPORATION'S LETTER OF CLARIFICATION ON 9 JANUARY 1958 THIS NOTATION WAS CAPABLE OF THE CONSTRUCTION THAT CAMBRIDGE CORPORATION'S BID FOR THE FIRST ARTICLE WOULD BE SUBJECT TO REVISION UPWARD OR DOWNWARD BASED UPON THE INVOICE OF THE ABERDEEN PROVING GROUND FOR THE ROAD ENDURANCE TEST, THE BID OF CAMBRIDGE CORPORATION COULD NEVERTHELESS BE ACCEPTED WITHOUT PREJUDICE TO ANY OF THE OTHER BIDDERS SINCE THE POSSIBILITY THAT THE ABERDEEN PROVING GROUND INVOICE WOULD VARY FROM ITS ESTIMATE TO SUCH AN EXTENT THAT THE CAMBRIDGE CORPORATION'S BID WOULD BECOME HIGHER THAN THAT OF THE NEXT LOW BIDDER WAS CONSIDERED SO REMOTE AS TO BE NEGLIGIBLE. CAMBRIDGE CORPORATION'S BID, ON THE BASIS OF $15,680 FOR THE ROAD TEST, WAS $44,618.85 LOWER THAN THAT OF THE SECOND LOW BIDDER AND $73,846.73 LOWER THAN THAT OF THE THIRD LOW BIDDER. THE ABERDEEN PROVING GROUND INVOICE WOULD, THUS, HAVE TO BE ALMOST FOUR TIMES ITS ESTIMATE, AN INCREASE OF ALMOST 300 PERCENT, TO BRING CAMBRIDGE CORPORATION'S BID UP TO THAT OF THE SECOND LOWEST BIDDER AND WOULD HAVE TO BE ALMOST SIX TIMES ITS ESTIMATE, AN INCREASE OF 500 PERCENT, IN ORDER TO BRING CAMBRIDGE CORPORATION'S BID UP TO THAT OF THE THIRD LOW BIDDER.'

IN REGARD TO THE STATEMENT MADE IN YOUR LETTER OF FEBRUARY 17, 1958, TO THE EFFECT THAT THE GREATER PART OF THE TESTING COSTS INVOLVED IN THE PRODUCTION OF THE FIRST ARTICLE (ITEM 1) WERE LEFT FOR NEGOTIATION BY THE BID OF THE CAMBRIDGE CORPORATION, IT DOES NOT APPEAR THAT SUCH STATEMENT IS CORRECT BECAUSE THE QUALIFYING NOTATION MADE BY THE CORPORATION OPPOSITE ITEM 1 WAS CLEARLY APPLICABLE ONLY TO THE COST OF THE ROAD ENDURANCE TEST TO BE PERFORMED BY THE ABERDEEN PROVING GROUND AND NOT TO THE COST OF ANY OF THE OTHER TESTS THAT WERE TO BE PERFORMED BY THE CONTRACTOR AT HIS OWN EXPENSE.

IN VIEW OF THE SUBSTANTIAL DIFFERENCE OF $73,846.73 BETWEEN YOUR BID AND THE BID OF THE CAMBRIDGE CORPORATION AND THE FACT THAT EVEN HAD THE BID BY THE CAMBRIDGE CORPORATION FOR THE FIRST ARTICLE (ITEM 1) IN FACT BEEN SUBJECT TO REVISION IN LIGHT OF THE ABERDEEN PROVING GROUND FINAL INVOICE FOR THE ROAD ENDURANCE TEST, THE POSSIBILITY OF SUCH REVISION RESULTING IN A PRICE HIGHER THAN THAT OFFERED BY YOU IS SO REMOTE AS TO BE NEGLIGIBLE. WE HAVE HELD THAT A BID CONTAINING AN ESCALATION PROVISION, UNDER WHICH NO MAXIMUM CEILING COULD BE DETERMINED MAY PROPERLY BE CONSIDERED AND EVALUATED WHERE THE LIKELIHOOD THAT THE ULTIMATE COST TO THE GOVERNMENT UNDER THAT BID WOULD EXCEED THE AMOUNT OF THE NEXT ACCEPTABLE BID WAS SO REMOTE AS TO BE NEGLIGIBLE. SEE 35 COMP. GEN. 684 AND 36 ID. 259. BELIEVE THAT ON THE SAME PRINCIPLE THE BID OF THE CAMBRIDGE CORPORATION COULD NOT HAVE BEEN REJECTED EXCEPT UPON AN ADMINISTRATIVE DETERMINATION THAT THERE WAS A REAL AND NOT MERELY AN ABSTRACT THEORETICAL POSSIBILITY THAT THE FINAL COST OF THE ROAD ENDURANCE TEST TO BE PERFORMED BY THE ABERDEEN PROVING GROUND COULD HAVE MADE THE PRICE PAYABLE UNDER THE CAMBRIDGE CORPORATION'S BID HIGHER THAN THAT PAYABLE UNDER THE NEXT ACCEPTABLE BID.

ACCORDINGLY, THE ACTION TAKEN BY THE WRIGHT-PATTERSON CONTRACTING OFFICER IN THE INSTANT MATTER APPEARS TO HAVE BEEN PROPER AND IN ACCORD WITH THE DECISIONS CITED ABOVE.