B-134535, DECEMBER 17, 1957, 37 COMP. GEN. 410

B-134535, DECEMBER 17, 1957, 37 COMP. GEN. 410

BIDS - QUALIFIED - MATERIAL DEVIATIONS - VESSEL CONSTRUCTION BIDS A LOW BID FOR THE CONSTRUCTION OF FOUR VESSELS ACCOMPANIED BY THE BIDDER'S INTERPRETATION OF CERTAIN PROVISIONS WHICH WOULD HAVE THE EFFECT OF INCREASING THE PRICE, LIMITING THE CONTRACTOR'S LIABILITY FOR SUBCONTRACTORS' DELAYS, ADDING AN ESCALATION PROVISION AND OTHER CHANGES MUST BE REGARDED AS A NONRESPONSIVE BID CONTAINING MATERIAL DEVIATIONS WHICH MAY NOT BE WAIVED AND WHICH PRECLUDE AWARD UNDER SECTIONS 504 AND 505 OF THE MERCHANT MARINE ACT, 1936, WHICH REQUIRE THAT THE PROCUREMENT OF COMPETITIVE BIDS BE CONDUCTED UPON AN EQUAL BASIS AND THAT AWARD BE MADE TO THE LOWEST RESPONSIBLE BIDDER.

TO THE ADMINISTRATOR, MARITIME ADMINISTRATION, DECEMBER 17, 1957:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 27, 1957, RELATIVE TO A BID SUBMITTED ON OCTOBER 30, 1957, BY THE BETHLEHEM-1SPARROWS POINT SHIPYARD, INC., IN RESPONSE TO AN INVITATION FOR BIDS OF AMERICAN EXPORT LINES, INC., DATED OCTOBER 12, 1957. YOU ADVISE THAT WHILE BETHLEHEM IS THE LOWEST BIDDER FOR THE CONSTRUCTION OF FOUR CARGO VESSELS ITS BID IS IRREGULAR IN CERTAIN RESPECTS SO AS TO RAISE A QUESTION AS TO WHETHER THE BID CAN BE CONSIDERED RESPONSIBLE. IN ITS BID, BETHLEHEM TATED:

4. AS PREVIOUSLY STATED IN THIS PROPOSAL THE ABOVE PRICES ARE BASED UPON THE PRO FORMA CONTRACT. HOWEVER, SINCE CERTAIN PROVISIONS OF THE PRO FORMA CONTRACT APPEAR TO REQUIRE CLARIFICATION OR CORRECTION, THE UNDERSIGNED OFFERS THE FOLLOWING INTERPRETATIONS:

(A) THE COST OF INSURANCE COVERAGE AS CONTAINED IN ARTICLE IX OF THE SPECIAL PROVISIONS HAS BEEN INCLUDED IN THE ABOVE PRICES. HOWEVER, THE COVERAGE FOR WAR RISK BUILDER'S RISK INSURANCE IS ONLY TO THE EXTENT THAT SUCH INSURANCE IS NOW COMMERCIALLY AVAILABLE AND IS SUBJECT TO CHANGE IN RATES OR CANCELLATION IN THE EVENT OF CHANGES IN WORLD CONDITIONS. SUCH CHANGE IN RATES SHALL BE HANDLED PURSUANT TO ARTICLE 4 OF THE GENERAL PROVISIONS AND IN THE EVENT OF CANCELLATION OF INSURANCE BY THE UNDERWRITERS, THE UNDERSIGNED WOULD HAVE TO BE RELIEVED OF ALL LIABILITY COVERED IN SUCH POLICIES.

(B) IN CONNECTION WITH ARTICLE 7 OF THE GENERAL PROVISIONS THE UNDERSIGNED BELIEVES THAT WITH RESPECT TO ANY ITEM OF MATERIAL FURNISHED BY THE OWNER OR THE BOARD, THE OWNER AND/OR THE BOARD SHOULD BE EXCUSED ONLY FOR THOSE DELAYS WHICH ARE BEYOND THEIR CONTROL OR THE CONTROL OF ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES.

(C) IN CONNECTION WITH ARTICLE 8 OF THE GENERAL PROVISIONS THE UNDERSIGNED UNDERSTANDS IT IS THE BOARD'S INTENT THAT ALL THE CONTRACT WORK SHALL BE PERFORMED IN COMPLIANCE WITH THE REQUIREMENTS IN EFFECT ONE MONTH PRIOR TO THE DATE OF OPENING OF BIDS OF (1) THE AMERICAN BUREAU OF SHIPPING AND (2) ALL GOVERNMENTAL AND OTHER AGENCIES HAVING JURISDICTION OVER THE CONTRACT WORK AS AND TO THE EXTENT PROVIDED IN THE PLANS AND SPECIFICATIONS.

(D) IN CONNECTION WITH THE LAST SENTENCE OF ARTICLE 35 OF THE GENERAL PROVISIONS THE UNDERSIGNED BELIEVES THAT THE RIGHTS OF ANY PARTY TO DISPUTE ANY CHANGE SETTLEMENT SHOULD NOT APPLY SUBSEQUENT TO ADJUDICATION OF THE CHANGE INVOLVED. ( ITALICS SUPPLIED.)

IN YOUR SUBMISSION, YOU INVITE ATTENTION TO THE STATEMENT IN THE BID THAT THE PRICES "ARE BASED ON THE PRO FORMA CONTRACT," AND SUGGEST THAT THE FURTHER STATEMENT THAT THE BIDDER "OFFERS THE FOLLOWING INTERPRETATIONS" COULD BE CONSTRUED TO MEAN THAT THE BID IS CONDITIONED UPON THE ACCEPTANCE OF THE "INTERPRETATIONS," OR, ON THE OTHER HAND, COULD BE CONSTRUED MERELY AS "SUGGESTED INTERPRETATIONS" WHICH ARE NOT CONDITIONS OF THE BID.

UNQUESTIONABLY, PARAGRAPH (A) OF THE CONDITIONS NOT ONLY WOULD PROVIDE AN ESCALATION COVERING THE POTENTIAL INCREASE IN INSURANCE PREMIUMS, BUT ALSO WOULD LIMIT THE LIABILITY OF THE CONTRACTOR IN THE EVENT OF CANCELLATION OF INSURANCE BY THE UNDERWRITERS. YOU EXPRESS THE OPINION THAT SINCE THIS INTERPRETATION BY THE BIDDER OF ARTICLE IX IS IN CONFLICT WITH THE PROVISIONS OF THAT ARTICLE, IT COULD HAVE THE EFFECT OF INCREASING THE CONTRACT PRICE. WE CONCUR IN THIS OPINION FOR THE REASON, AS STATED BY YOU, THAT ARTICLE IX OF THE SPECIAL PROVISIONS REQUIRES THE CONTRACTOR TO CARRY WAR RISK INSURANCE ON THE VESSEL, AND THE PREMIUM COST OF SUCH INSURANCE IS A COST OF THE CONTRACTOR INCLUDED IN THE CONTRACT PRICE. FURTHERMORE, NO PROVISION IS CONTAINED IN THE CONTRACT FOR AN ADJUSTMENT IN THE CONTRACT PRICE IN THE EVENT THE PREMIUMS ARE INCREASED BY THE UNDERWRITERS.

WE AGREE WITH YOUR VIEW THAT THE BIDDER'S "INTERPRETATION" OF ARTICLE 7 OF THE GENERAL PROVISIONS, AS SET FORTH IN PARAGRAPH (B), LIMITS SUCH EXTENSIONS TO DELAYS BEYOND THE CONTROL OF THE OWNER OR THE BOARD, OR BEYOND THE CONTROL OF ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES, AND THEREBY ELIMINATES FROM THE REFERRED-TO DELAY PROVISIONS OF ARTICLE 5 OF THE GENERAL PROVISIONS OF THE CONTRACT DELAYS CAUSED BY THE OWNER, THE BOARD, OR BY ANY AGENCY OR INSTRUMENTALITY OF THE UNITED STATES, GOVERNMENT PRIORITIES OR INTERVENTION BY OR DELAYS, CIVIL, NAVAL OR MILITARY AUTHORITIES AND ALSO DELAYS OF SUBCONTRACTORS. HENCE, THIS ELIMINATION OF DELAYS OF SUBCONTRACTORS IS NOT IN ACCORD WITH THE CONTRACT PROVISIONS AND, OBVIOUSLY, COULD HAVE THE EFFECT OF INCREASING THE CONTRACT PRICE.

WITH RESPECT TO PARAGRAPH (C), WE CONCUR IN YOUR CONCLUSIONS THAT AN ATTEMPT TO PLACE A THIRTY-DAY LIMITATION UPON THE REQUIREMENTS OF ALL GOVERNMENT AND OTHER AGENCIES HAVING JURISDICTION OVER THE CONTRACT WORK, SUCH AS POTENTIAL ADDITIONAL REQUIREMENTS OF THE UNITED STATES COAST GUARD, PUBLIC HEALTH SERVICE AND FEDERAL COMMUNICATIONS COMMISSION, IS IN DIRECT CONFLICT WITH ARTICLE 8 (A) OF THE GENERAL PROVISIONS AND, ACCORDINGLY, SHOULD BE REGARDED IN NO OTHER LIGHT THAN AN ATTEMPTED ESCALATION PROVISION COVERING SUCH REQUIREMENTS, SHOULD THEY BE DETERMINED WITHIN LESS THAN THIRTY DAYS PRIOR TO OR AFTER THE OPENING OF BIDS.

WHILE, AS SUGGESTED BY YOU, THE BIDDER'S PARAGRAPH (D) PROBABLY WOULD NOT AFFECT THE CONTRACT PRICE, IT NEVERTHELESS IS NOT IN ACCORD WITH ARTICLE 35 OF THE GENERAL PROVISIONS, COMPLIANCE WITH WHICH WAS REQUIRED BY ALL BIDDERS WITHOUT DEVIATION. HENCE, IN THIS REGARD, WE CONSIDER THE OFFER AT VARIANCE WITH THE INVITATION.

THE BIDDER'S STATEMENT IN PARAGRAPH 4 OF ITS BID THAT CERTAIN PROVISIONS OF THE PRO FORMA CONTRACT REQUIRE "CLARIFICATION" OR "CORRECTION" CAN ONLY MEAN, IN OUR OPINION, THAT IT IS PROPOSING CHANGES OR MODIFICATIONS IN THOSE PROVISIONS AND THAT ITS SO-CALLED "INTERPRETATIONS" REPRESENT ITS PROPOSED CHANGES OR DEVIATIONS FROM THE ADVERTISED SPECIFICATION. WE HAVE HELD THAT A DEVIATION FROM ADVERTISED REQUIREMENTS IS MATERIAL IF IT GOES TO THE SUBSTANCE OF THE BID SO AS TO AFFECT EITHER THE PRICE, QUANTITY, OR QUALITY OF THE ARTICLES OFFERED, AND, THEREFORE, IS PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS. 30 COMP. GEN. 179; 31 ID. 660; 33 ID. 421. CLEARLY APPEARS THAT THE CHANGES IN THE CONTRACT TERMS PROPOSED BY THE BIDDER IN THE PRESENT MATTER ARE, AS HERETOFORE INDICATED, OF SUCH SUBSTANCE AS TO AFFECT THE CONTRACT PRICE. TO ACCEPT THE BIDDER'S PROPOSAL UNDER THE CIRCUMSTANCES MANIFESTLY WOULD BE UNFAIR TO THOSE BIDDERS WHO HAVE NOT SIMILARLY QUALIFIED THEIR BIDS, AND WOULD RESULT IN A FRUSTRATION OF THE APPARENT INTENT OF SECTIONS 504 OR 505 OF THE MERCHANT MARINE ACT, 1936, AS AMENDED, 46 U.S.C. 1154 AND 1155, THAT THE PROCUREMENT OF COMPETITIVE BIDS BE CONDUCTED UPON AN EQUAL BASIS AND THAT AWARD BE MADE TO THE LOWEST RESPONSIVE BIDDER.

WE, THEREFORE, CONCLUDE THAT THE BID SUBMITTED BY BETHLEHEM 1SPARROWS POINT SHIPYARD, INC., IS NOT RESPONSIVE TO THE INVITATION. SINCE IN OUR VIEW, THE CHANGES PROPOSED BY THE COMPANY ARE MATERIAL, THEY MAY NOT BE WAIVED.