B-145948, SEP. 21, 1961

B-145948, SEP. 21, 1961

TO M. A. GARLAND CONSTRUCTION:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 14, 1961, RELATIVE TO OUR DECISION TO YOU OF AUGUST 2, 1961, WHICH DENIED YOUR PROTEST AGAINST THE AWARD OF A CONTRACT ON APRIL 20, 1961, TO THE NOR-PAC CORPORATION, CONTRACT NO. DA-25-066-ENG-6839, AS THE LOW BIDDER UNDER INVITATION FOR BIDS NO. ENG-25-066-61-138, ISSUED MARCH 15, 1961, BY THE OMAHA DISTRICT, CORPS OF ENGINEERS, DEPARTMENT OF THE ARMY, COVERING A REQUIREMENT FOR THE CONSTRUCTION OF SAC MISSILE FACILITIES AT ELLSWORTH AIR FORCE BASE, RAPID CITY, SOUTH DAKOTA.

THE INVITATION RESTRICTED BIDDING TO SMALL BUSINESS CONCERNS AND YOUR COMPANY SUBMITTED THE SECOND LOWEST OF THE FIVE BIDS WHICH WERE RECEIVED. ON THE BID OPENING DATE, APRIL 13, 1961, YOU RAISED A QUESTION AS TO WHETHER THE LOW BIDDER QUALIFIED AS A SMALL BUSINESS CONCERN. THE CONTRACTING OFFICE CONTACTED THE OMAHA BRANCH OF THE SMALL BUSINESS ADMINISTRATION AND WAS ADVISED BY LETTER DATED APRIL 14, 1961, THAT THE NOR-PAC CORPORATION HAD BEEN DETERMINED TO BE "SMALL BUSINESS" FOR GOVERNMENT PROCUREMENT PURPOSES. AFTER AWARD YOU WERE UNSUCCESSFUL IN EFFORTS TO OBTAIN A REVIEW OF THE MATTER BY THE CONTRACTING OFFICE. HOWEVER, YOU WERE INFORMED BY THE SMALL BUSINESS ADMINISTRATION THAT IT WAS CONDUCTING AN INVESTIGATION AND THAT, IF YOU FILED A PROTEST WITH OUR OFFICE AND WE REQUESTED A SIZE DETERMINATION, THE SMALL BUSINESS ADMINISTRATION WOULD ACT ON SUCH A REQUEST. WE REQUESTED A SIZE DETERMINATION AFTER RECEIPT OF YOUR PROTEST. THE SMALL BUSINESS ADMINISTRATION DETERMINED ON JUNE 29, 1961, THAT THE NOR-PAC CORPORATION IS AFFILIATED WITH H. HALVORSON, INC., A LARGE BUSINESS CONCERN; THAT THE NOR-PAC CORPORATION WAS NOT, THEREFORE, ON APRIL 20, 1961, A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT PROCUREMENT, AND THAT IT WAS NOT AS OF JUNE 29, 1961, A SMALL BUSINESS CONCERN FOR SUCH PURPOSE.

OUR DECISION OF AUGUST 2, 1961, IMPLIES THAT WE MIGHT HAVE REQUESTED THE DEPARTMENT OF THE ARMY TO CANCEL THE CONTRACT EXCEPT FOR THE FACT THAT THE AIR FORCE HAD RECOMMENDED AGAINST CANCELLATION.

YOU STATE THAT IT IS DIFFICULT TO TAKE EXCEPTION TO A DECISION RELATIVE TO OUR DEFENSE PROGRAM. HOWEVER, IT IS ARGUED THAT YOU GAVE SUFFICIENT INFORMATION ON THE AFFILIATION OF THE TWO COMPANIES TO PROVE BEYOND A DOUBT THAT THE NOR-PAC CORPORATION MUST HAVE FALSIFIED ITS BID FORM IN ORDER TO EVEN BE CONSIDERED FOR AWARD; ALSO, THAT A DELAY OF 111 DAYS IN MAKING A FINAL DETERMINATION THAT THE CORPORATION DID NOT QUALIFY AS A SMALL BUSINESS CONCERN CAN ONLY BE BLAMED ON THE FACT THAT ALL CONCERNED HESITATED TO ADMIT THAT THE AWARD WAS MADE TO AN UNRESPONSIVE BIDDER. YOU SUGGEST THAT THE PENALTY FOR THE NOR-PAC CORPORATION COULD FEASIBLY BE THE COST OF OVERTIME NECESSARY FOR YOUR FIRM TO COMPLETE THE PROJECT AS ORIGINALLY SCHEDULED AND THAT IT WOULD BE UNFAIR TO PERMIT THE CORPORATION TO REALIZE A PROFIT ON THE CONTRACT SINCE YOUR COMPANY IS NOT IN A POSITION TO REALIZE ANY OF ITS FIGURED OR ANTICIPATED PROFIT. IT IS INDICATED IN YOUR LETTER THAT, IF SO DESIRED BY THE GOVERNMENT, YOUR FORCES WOULD BE MADE AVAILABLE TO COMPLETE THE PROJECT ON TIME.

IN THE EVENT OF A CANCELLATION OF THE CONTRACT WITH THE NOR PACCORPORATION ON THE GROUND THAT IT WAS NOT ENTITLED TO AN AWARD UNDER INVITATION FOR BIDS NO. ENG-25-066-61-138, THERE WOULD APPEAR TO BE NO LEGAL BASIS UPON WHICH THE GOVERNMENT COULD RECOVER DAMAGES FROM THE CORPORATION ON ACCOUNT OF OVERTIME EXPENDED BY YOUR FIRM IN AN ATTEMPT TO COMPLETE THE CONTRACT WORK WITHIN THE TIME ORIGINALLY SCHEDULED.

NOR DOES IT APPEAR THAT, IN THE EVENT OF CONTINUED PERFORMANCE OF THE CONTRACT BY THE NOR-PAC CORPORATION, THE GOVERNMENT WOULD HAVE THE RIGHT TO PREVENT THE CORPORATION FROM REALIZING A PROFIT UNDER THE CONTRACT EVEN IF THE CONTRACT WERE DETERMINED TO BE INVALID. IT IS A GENERAL RULE THAT, WHILE THE GOVERNMENT IS NOT BOUND BY AN INVALID CONTRACT, WHERE GOODS OR SERVICES ARE FURNISHED ON THE REQUEST OR ORDER OF AN OFFICER AUTHORIZED TO CONTRACT ON BEHALF OF THE UNITED STATES, BUT THE CONTRACT IS VOID, THERE IS RECOGNIZED AN OBLIGATION TO PAY THE VALUE OF SUCH GOODS OR SERVICES ACTUALLY FURNISHED AS UPON AN IMPLIED CONTRACT FOR A QUANTUM MERUIT. THUS, IN 38 COMP. GEN. 38, WE DETERMINED THAT PAYMENT UNDER AN INVALID CONTRACT SHOULD COVER THE FAIR AND REASONABLE VALUE OF SERVICES AND SUPPLIES ACCEPTED BY THE GOVERNMENT, INCLUDING SUCH AMOUNT OF PROFIT THEREON AS WOULD CONSTITUTE JUST COMPENSATION UNDER THE CIRCUMSTANCES.

THE RECORD BEFORE OUR OFFICE IS NOT SUFFICIENT TO WARRANT THE CONCLUSION THAT THE NOR-PAC CORPORATION FALSIFIED ITS BID WHEN IT CERTIFIED THAT IT WAS A SMALL BUSINESS CONCERN. THE CORPORATION HAD BEEN INVESTIGATED BY THE SMALL BUSINESS ADMINISTRATION BEFORE THE ISSUANCE OF THE GOVERNMENT'S INVITATION FOR BIDS AND THE CORPORATION WAS THEN DETERMINED TO BE A SMALL BUSINESS CONCERN FOR GOVERNMENT PROCUREMENT PURPOSES.

THE SMALL BUSINESS ADMINISTRATION ADMITTED ITS MISTAKE IN THE MATTER AFTER AWARD OF THE CONTRACT AND WE AGREE THAT THE GOVERNMENT SHOULD HAVE BEEN IN A POSITION TO HAVE RESOLVED THE QUESTION AS TO THE VALIDITY OF YOUR COMPLAINT EARLIER THAN IT DID. WE NEVERTHELESS REMAIN OF THE OPINION THAT A CANCELLATION OF THE CONTRACT WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT, CONSIDERING THE CLOSE IDENTITY OF THE PROJECT WITH THE MILITARY DEFENSE EFFORT AND THE AIR FORCE'S STATEMENT THAT CANCELLATION OF THE CONTRACT WOULD CAUSE SERIOUS AND UNACCEPTABLE DELAY IN THE CONSTRUCTION OF THE PROJECT.