B-146677, JUN. 20, 1962

B-146677: Jun 20, 1962

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TO KUPFERMAN AND PRICE: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 28. THE RECORD SHOWS THAT THE MATERIAL INVOLVED WAS A PORTION OF A STOCK OF QUININE ACQUIRED BY THE GOVERNMENT UNDER AUTHORITY OF THE STRATEGIC AND CRITICAL MATERIALS STOCK PILING ACT. BASED UPON AN OFFICIAL DETERMINATION THAT THERE WAS NO LONGER ANY NEED FOR STOCKPILING QUININE. NOTICE WAS ISSUED OF THE PROPOSED DISPOSITION THEREOF PURSUANT TO SECTION 3 (E) OF THE CITED ACT. WAS SUBMITTED TO AND APPROVED BY THIS OFFICE ON THE TERMS INDICATED IN OUR DECISION OF OCTOBER 10. IT IS ADMINISTRATIVELY REPORTED THAT. WAS DIVIDED INTO APPROXIMATELY TWO EQUAL QUANTITIES AND THAT THE NON-SET-ASIDE PORTION. WAS SOLD TO THE HIGH BIDDER UNDER INVITATION NO.

B-146677, JUN. 20, 1962

TO KUPFERMAN AND PRICE:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 28, 1962, ENCLOSING A COPY OF YOUR LETTER OF THE SAME DATE TO THE ADMINISTRATOR OF GENERAL SERVICES PROTESTING, ON BEHALF OF HEXAGON LABORATORIES, INC., THE ADMINISTRATIVE ACTION TAKEN ON THAT FIRM'S BID UNDER INVITATION NO. MPAR- /S/-43, DATED FEBRUARY 23, 1962, COVERING THE SALE BY THE GENERAL SERVICES ADMINISTRATION OF A QUANTITY OF QUININE SULPHATE POWDER.

THE RECORD SHOWS THAT THE MATERIAL INVOLVED WAS A PORTION OF A STOCK OF QUININE ACQUIRED BY THE GOVERNMENT UNDER AUTHORITY OF THE STRATEGIC AND CRITICAL MATERIALS STOCK PILING ACT, 53 STAT. 811, AS AMENDED, 50 U.S.C. 98-98H. BASED UPON AN OFFICIAL DETERMINATION THAT THERE WAS NO LONGER ANY NEED FOR STOCKPILING QUININE, NOTICE WAS ISSUED OF THE PROPOSED DISPOSITION THEREOF PURSUANT TO SECTION 3 (E) OF THE CITED ACT, 50 U.S.C. 98B (E). THE PROPRIETY OF SETTING ASIDE FIFTY PERCENT OF THE QUANTITY OF ABOUT 9,524,000 OUNCES OF QUININE ON HAND FOR OFFERING EXCLUSIVELY TO SMALL BUSINESS FIRMS, UNDER THE PROVISIONS OF SECTION 15 OF THE SMALL BUSINESS ACT, 15 U.S.C. 644, WAS SUBMITTED TO AND APPROVED BY THIS OFFICE ON THE TERMS INDICATED IN OUR DECISION OF OCTOBER 10, 1961, 41 COMP. GEN. 230, TO THE ADMINISTRATOR OF GENERAL SERVICES. WE SUGGESTED THEREIN THAT IN VIEW OF THE STATUTORY REQUIREMENT APPLICABLE TO THE SALE OF STOCKPILE MATERIAL, THAT "THE PLAN * * * OF DISPOSITION SHALL BE FIXED WITH DUE REGARD TO THE PROTECTION OF THE UNITED STATES AGAINST AVOIDABLE LOSS ON THE SALE * * *," AND OF THE PROVISIONS OF SECTION 127.15-2 (D) OF THE SMALL BUSINESS ADMINISTRATION REGULATIONS AUTHORIZING WITHDRAWAL OF A SET ASIDE IF THE CONTRACTING OFFICER CONSIDERS THAT A SMALL BUSINESS AWARD "WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G., BECAUSE OF UNREASONABLE PRICE) * * *," ADMINISTRATIVE CONSIDERATION MIGHT APPROPRIATELY BE GIVEN TO FIRST ADVERTISING THE NON-SET-ASIDE PORTION OF THE QUININE STOCK AND USING THE PRICE REALIZED ON THAT SALE AS A BASIS FOR DETERMINING WHETHER, ON THE SUBSEQUENT ADVERTISING OF THE SET-ASIDE PORTION, ACCEPTANCE OF THE BEST BID THEREON "WOULD RESULT IN "AVOIDABLE LOSS," OR FOR ESTABLISHING AN UPSET PRICE FOR THE SET ASIDE.' IT IS ADMINISTRATIVELY REPORTED THAT, IN ACCORDANCE WITH OUR SUGGESTION, THE QUININE STOCK ACQUIRED BY THE GOVERNMENT AT AN AVERAGE COST OF 63.2 CENTS AN OUNCE, WAS DIVIDED INTO APPROXIMATELY TWO EQUAL QUANTITIES AND THAT THE NON-SET-ASIDE PORTION, COMPRISING APPROXIMATELY 4,761,725 OUNCES OF QUININE, WAS SOLD TO THE HIGH BIDDER UNDER INVITATION NO. MPAR-/S/-38, DATED DECEMBER 11, 1961, AT AN AVERAGE PRICE OF ABOUT 20.55 CENTS AN OUNCE.

INVITATION NO. MPAR-/S/-43, BEARING BID OPENING DATE OF MARCH 21, 1962, REQUESTED BIDS ON THE REMAINING STOCK OF QUININE, SET-ASIDE FOR DISPOSAL TO SMALL BUSINESS CONCERNS ONLY, COMPRISING APPROXIMATELY 4,762,279 OUNCES OF QUININE POWDER. BASED ON THE STORAGE OF THE QUININE AT FIVE SEPARATE LOCATIONS, IT WAS DIVIDED INTO FIVE LOTS AND BIDS ON EACH LOT WERE REQUESTED UNDER ITEMS NOS. 1 TO 5 OF INVITATION. OF THE FIVE BIDS RECEIVED ON ALL OR A PART OF THE QUININE, HEXAGON WAS THE HIGH BIDDER ON EACH OF THE FIVE ITEMS. ON ITEMS NOS. 1, 2, 4, AND 5, COMPRISING A TOTAL QUANTITY OF 2,240,767 OUNCES OF QUININE, ITS BIDS ON THE FOUR LOTS INVOLVED, RANGING FROM A COMPUTED PRICE OF ABOUT 20.81 TO 21.08 CENTS AN OUNCE, TOTALED $467,400, OR AN AVERAGE PRICE OF ABOUT 20.86 CENTS AN OUNCE. ITS BID PRICE ON ITEM NO. 3, COVERING A TOTAL STATED QUANTITY OF 2,521,512 OUNCES OF QUININE, WAS $493,000, OR A COMPUTED PRICE OF ABOUT 19.55 CENTS PER OUNCE. HEXAGON'S BID CONTAINED THE PROVISO THAT IT WAS LIMITED TO A TOTAL AMOUNT OF $493,000 AND THE FURTHER PROVISO THAT "IF SUCCESSFUL ON ITEM 3 DISREGARD OTHER BIDS.' BY CONTRACT NO. GS-00P (S) 12954 (SCM) DATED MARCH 22, 1962, HEXAGON'S BID ON ITEMS NOS. 1, 2, 4, AND 5 WAS ACCEPTED. NO AWARD WAS MADE ON ITEM NO. 3 OF THE INVITATION.

IT IS YOUR CONTENTION, IN SUBSTANCE, THAT, SINCE HEXAGON WAS THE "SUCCESSFUL" BIDDER ON ALL FIVE ITEMS, IN ACCORDANCE WITH THE ORDER OF CHOICE STATED IN ITS BID IT SHOULD HAVE BEEN AWARDED ITEM NO. 3 INSTEAD OF ITEMS NOS. 1, 2, 4, AND 5.

WE AGREE THAT UNDER THE TERMS OF HEXAGON'S BID IT INDICATED A FIRST CHOICE FOR THE MATERIAL COVERED BY ITEM NO. 3, AND THAT THE HIGHER PRICES QUOTED ON ITEMS NOS. 1, 2, 4, AND 5 WERE NOT INTENDED TO BE EVALUATED AGAINST ITS BID ON ITEM NO. 3 SO AS TO JUSTIFY DISREGARDING ITS INDICATED ORDER OF CHOICE FOR THE SOLE PURPOSE OF REALIZING A GREATER MONETARY RETURN TO THE GOVERNMENT. HOWEVER, CONTRARY TO YOUR CONTENTION, WE CONSTRUE THE WORD "SUCCESSFUL" AS CONTEMPLATING AN ACTUAL AWARD RATHER THAN MERELY BEING THE HIGH BIDDER. IT COULD ONLY BECOME THE "SUCCESSFUL" BIDDER ON ITEM NO. 3, IF AWARD HAD BEEN MADE THEREON, AND IT WOULD SEEM TO BE UNREASONABLE TO READ THE BID AS MEANING THAT HEXAGON DID NOT WANT AN AWARD ON OTHER ITEMS IF NO AWARD AT ALL WAS MADE ON ITEM NO. 3. NECESSARILY FOLLOWS THAT, SINCE IT DID NOT RECEIVE THE AWARD AND THUS WAS NOT "SUCCESSFUL" ON THAT ITEM, THE CONTRACTING OFFICER WAS AUTHORIZED TO CONSIDER HEXAGON'S ALTERNATIVE BID ON ITEMS NOS. 1, 2, 4, AND 5 AND TO MAKE AN AWARD THEREON.

THE RECORD SHOWS THAT HEXAGON'S BID ON ITEM NO. 3, BASED ON THE QUANTITY OF QUININE INVOLVED, WAS OVER $25,000 LESS THAN THE AVERAGE PRICE REALIZED ON THE PRIOR SALE OF THE NON-SET-ASIDE PORTION OF QUININE. FOR THIS REASON THE CONTRACTING OFFICER DETERMINED THAT, IN KEEPING WITH THE STATUTORY REQUIREMENT THAT THE GOVERNMENT BE PROTECTED AGAINST "AVOIDABLE LOSS" ON THE SALE OF STOCKPILE MATERIAL, NO AWARD SHOULD BE MADE ON ITEM NO. 3 OF THE INVITATION. IN VIEW OF THE RIGHT RESERVED TO THE GOVERNMENT, UNDER PARAGRAPH 3 OF THE GENERAL SALE TERMS AND CONDITIONS OF THE INVITATION, TO REJECT ANY OR ALL BIDS AND, UNLESS OTHERWISE SPECIFIED BY THE GOVERNMENT OR BY THE BIDDER, TO ACCEPT ANY ONE ITEM OR GROUP OF ITEMS IN THE BID, AS MIGHT BE IN THE BEST INTEREST OF THE GOVERNMENT, WE PERCEIVE NO PROPER LEGAL BASIS FOR QUESTIONING THE CONTRACTING OFFICER'S ACTION IN THE MATTER, SO LONG AS HIS DETERMINATION TO REJECT ALL BIDS ON ITEMS NO. 3 WAS NOT BASED MERELY UPON EVALUATION OF HEXAGON'S BIDS ON THE OTHER ITEMS AGAINST ITS BID ON ITEM NO. 3.

WHILE, FOR THE REASONS ABOVE STATED, OUR OFFICE WOULD NOT BE JUSTIFIED IN DISTRIBUTING THE AWARD AS MADE, THE RECORD FURTHER SHOWS THAT, AS INDICATED BY HEXAGON'S LETTERS OF APRIL 10, 1962, TO THE GENERAL SERVICES ADMINISTRATION AND TO ITS TRUCKING AGENT, JONES MOTOR COMPANY, MECHANICSVILLE, PENNSYLVANIA, HEXAGON HAS WITHDRAWN APPROXIMATELY 100,000 OUNCES OF QUININE COVERED BY THE CONTRACT AS AWARDED. SINCE SUCH ACTION MUST BE REGARDED AS CONSTITUTING AN ACQUIESCENCE IN AWARD AS MADE, HEXAGON COULD NOT, IN ANY EVENT, NOW BE HEARD TO COMPLAIN THAT A DIFFERENT CONTRACT SHOULD HAVE BEEN AWARDED BY THE GOVERNMENT.

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