B-130168, JAN. 10, 1957

B-130168, JAN. 10, 1957

TO MR. JOHN M. RATHBUN, CONTRACTING OFFICER, BONNEVILLE POWER ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 19, 1956, REQUESTING A DECISION AS TO WHETHER THE BID OF GENERAL ELECTRIC COMPANY, SUBMITTED IN RESPONSE TO INVITATION NO. 8216 OPENED ON DECEMBER 12, 1956, MAY BE CONSIDERED FOR AWARD AND EVALUATED ON THE BASIS OF A MAXIMUM PRICE ESCALATION OF 10 PERCENT.

THE INVITATION REQUESTED BIDS FOR FURNISHING FOUR 20,000 KVA SINGLE PHASE AUTOTRANSFORMERS FOR DELIVERY TO TOLEDO, OREGON. THE INVITATION PROVIDES FOR COMPLETE DELIVERY OF ALL MATERIAL AND EQUIPMENT, F.O.B. DESTINATION, WITHIN A MAXIMUM OF 225 DAYS FROM DATE OF RECEIPT OF NOTICE OF AWARD.

IN RESPONSE TO THE INVITATION, GENERAL ELECTRIC COMPANY SUBMITTED A BID DATED DECEMBER 11, 1956, SIGNED BY ITS MANAGER-USER INDUSTRIES SALES, PORTLAND, OREGON, OFFERING TO FURNISH THE AUTO-TRANSFORMERS FOR THE PRICES SET FORTH THEREIN. IT WAS STATED IN THE BID THAT "AN OPENING IN OUR PRODUCTION SCHEDULE PERMITS US TO SCHEDULE DELIVERY SUBSTANTIALLY EARLIER THAN REQUESTED.' THE BID ALSO PROVIDED THAT:

"THE PRICES STATED HEREIN SHALL BE SUBJECT TO ADJUSTMENT AT THE DATE OF SHIPMENT. ANY SUCH ADJUSTMENT HEREUNDER SHALL BE EQUAL TO ANY PERCENTAGE ADJUSTMENT IN THE COMPANY'S PUBLISHED PRICES AND APPLICABLE DISCOUNTS FROM DATE OF ORDER TO THE DATE OF SHIPMENT, BUT ANY INCREASE HEREUNDER SHALL NOT EXCEED 10 PERCENT INCREASE FOR SHIPMENTS WITHIN 12 MONTHS.

"AT THE OPTION OF THE BONNEVILLE POWER ADMINISTRATION THE PRICE ADJUSTMENT CLAUSE 4 ON ATTACHED FORM AF-5-PP (10-56) REV. (ADJUSTMENT BASED ON LABOR AND MATERIAL INDICES) MAY BE SUBSTITUTED FOR THE ABOVE.'

THE EVALUATION OF THE THREE LOW ACCEPTABLE BIDS RECEIVED SHOWS THAT THE BID OF GENERAL ELECTRIC COMPANY, IF CONSIDERED AS SUBJECT TO A MAXIMUM 10 PERCENT PRICE ESCALATION, IS THE LOWEST BID BY A SUBSTANTIAL MARGIN. IS STATED IN YOUR LETTER THAT A REPRESENTATIVE OF GENERAL ELECTRIC STATED IMMEDIATELY AFTER THE BID OPENING THAT SHIPMENT WOULD BE SCHEDULED IN APRIL 1957.

THE QUESTION PRESENTED IS WHETHER, ALTHOUGH UNDER THE TERMS OF THE BID DELIVERY IS TO BE EFFECTED WELL WITHIN 12 MONTHS AND GENERAL ELECTRIC SPECIFICALLY STATED IN ITS BID THAT DELIVERY WOULD BE MADE SUBSTANTIALLY EARLIER THAN REQUESTED, THE BID MUST BE CONSIDERED AS NOT BEING RESPONSIVE TO THE INVITATION SINCE THERE IS NO LIMITATION ON THE AMOUNT OF ESCALATION FOR DELIVERY AFTER 12 MONTHS. IN THIS CONNECTION, PARAGRAPH 11 OF GENERAL PROVISIONS, STANDARD FORM 32, PROVIDES FOR EXTENSIONS OF TIME FOR CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OF THE CONTRACTOR, SO THAT IT IS CONCEIVABLE THAT A STRIKE OR OTHER EXCUSABLE CAUSE COULD DELAY THE ANTICIPATED SHIPMENT BEYOND 12 MONTHS, WITHOUT A BREACH OF CONTRACT.

IN A LETTER DATED DECEMBER 17, 1956, THE GENERAL ELECTRIC COMPANY, PORTLAND, OREGON, STATES THAT IT WAS DEFINITELY INTENDED THAT ESCALATION BE LIMITED TO A MAXIMUM OF 10 PERCENT. THE LETTER IS IN PART AS FOLLOWS:

"AS STATED IN OUR BID "AN OPENING IN OUR PRODUCTION SCHEDULE PERMITS US TO SCHEDULE DELIVERY SUBSTANTIALLY EARLIER THAN REQUESTED.' THE SHIPMENT WILL BE MADE IN APRIL, 1957 AS YOU WERE INFORMED PRIOR TO THE DISCUSSION RELATING TO ESCALATION.

"IT WAS THROUGH ERROR OCCURRING IN OUR OFFICE THAT ADDITIONAL WORDS FROM OUR STANDARD ESCALATION POLICY--- CLAUSE NO. 3 OF FORM AF-5-PP WERE INCLUDED AND WE DID NOT ANTICIPATE THAT IT COULD BE CONSTRUED THAT THE ESCALATION POLICY QUOTED IS THEREFORE OPEN ENDED. SUCH AN INTERPRETATION WAS CERTAINLY NOT INTENDED.

"WE WILL ATTEMPT TO BRIEFLY EXPLAIN HOW THIS HAPPENED: OUR FACTORY QUOTED US ORIGINALLY ON NOVEMBER 30, 1956 OFFERING PRICE ESCALATION BASED ON BUREAU OF LABOR, LABOR AND MATERIAL INDICES. IN OUR OPINION, IT APPEARED AT THIS PARTICULAR TIME TO BE IN THE INTEREST OF THE GOVERNMENT TO ACCEPT THIS TYPE OF ESCALATION IN PREFERENCE TO THE STANDARD PERCENTAGE ESCALATION ESPECIALLY ON A SHIPMENT AS SHORT AS FOUR MONTHS. HOWEVER, RECOGNIZING THAT BPA HAD NOT YET DECIDED TO ACCEPT LABOR AND MATERIAL ESCALATION WE REQUESTED OUR FACTORY'S AUTHORITY TO QUOTE OUR STANDARD PERCENTAGE ESCALATION APPLYING TO THE PERIOD OF TIME UNDER CONSIDERATION. THE FACTORY THEN AUTHORIZED US TO QUOTE PERCENTAGE ESCALATION FROM OUR STANDARD POLICY WITH THE 10 PERCENT CEILING. IN PREPARING OUR PROPOSAL THE WORDS "FOR SHIPMENT WITHIN 12 MONTHS" WERE INADVERTENTLY INCLUDED AND SHOULD HAVE BEEN OMITTED SINCE THEY ARE IRRELEVANT TO THE INTENDED ESCALATION STATEMENT.'

THE GENERAL ELECTRIC STANDARD PRICE ADJUSTMENT CLAUSE 3, FORM AF-5 PP, PROVIDES FOR A MAXIMUM ESCALATION OF 10 PERCENT FOR SHIPMENTS IN 12 MONTHS, 20 PERCENT FOR SHIPMENTS 12 TO 24 MONTHS, 30 PERCENT FOR SHIPMENTS 24 TO 36 MONTHS AND NO CEILING ON ESCALATION FOR SHIPMENTS BEYOND 36 MONTHS. THE ABSTRACT OF BIDS SHOWS THAT THREE OF THE OTHER BIDS RECEIVED PROVIDED FOR A MAXIMUM 10 PERCENT ESCALATION AND ONE OF THE OTHERS QUOTED A MAXIMUM OF 10 PERCENT FOR SHIPMENTS WITHIN 12 MONTHS, 20 PERCENT FOR SHIPMENTS WITHIN 12 TO 24 MONTHS AND 30 PERCENT FOR SHIPMENTS WITHIN 24 TO 36 MONTHS.

IN VIEW OF THE FACT THAT THE INVITATION PROVIDES FOR DELIVERY OF THE EQUIPMENT WITHIN A MAXIMUM OF 225 DAYS AND GENERAL ELECTRIC COMPANY SPECIFICALLY STATED IN ITS BID THAT DELIVERY COULD BE MADE "SUBSTANTIALLY EARLIER THAN REQUESTED," IT IS OUR OPINION THAT THE INCLUSION IN THE BID OF THE WORDS "FOR SHIPMENT WITHIN 12 MONTHS" WAS INADVERTENT AND THAT SUCH WORDS WERE NOT INTENDED TO RESERVE ANY RIGHT TO OBTAIN AN ADJUSTMENT IN EXCESS OF 10 PERCENT IN ANY EVENT. THE CLAUSE WITH RESPECT TO ESCALATION APPEARING IN THE BID IS IDENTICAL, SO FAR AS IT GOES, WITH THE COMPANY'S STANDARD PRICE ADJUSTMENT CLAUSE 3, A COPY OF WHICH WAS ENCLOSED WITH THE BID. HAD IT BEEN INTENDED THAT THE BID SHOULD BE SUBJECT TO ADJUSTMENT IN EXCESS OF 10 PERCENT, IT WOULD APPEAR THAT THE COMPANY WOULD HAVE USED THE REMAINDER OF ITS STANDARD PRICE ADJUSTMENT CLAUSE 3, WHICH LIMITS ESCALATION TO 20 PERCENT FOR SHIPMENTS WITHIN 12 TO 24 MONTHS AND 30 PERCENT FOR SHIPMENTS WITHIN 24 TO 36 MONTHS.

YOU ARE ACCORDINGLY ADVISED THAT THE WORDS "FOR SHIPMENT WITHIN 12 MONTHS" MAY BE IGNORED AND THE BID OF GENERAL ELECTRIC COMPANY CONSIDERED FOR AWARD AND EVALUATED ON THE BASIS OF A MAXIMUM PRICE INCREASE OF 10 PERCENT. THE AWARD, IF MADE, SHOULD ALSO BE ON THAT BASIS.