B-142931, OCTOBER 21, 1964, 44 COMP. GEN. 221

B-142931, OCTOBER 21, 1964, 44 COMP. GEN. 221

CONTRACTS - AWARDS - CANCELLATION - ERRONEOUS AWARDS A CLAIM FOR THE COST OF REVISING DRAWINGS PRIOR TO THE CANCELLATION OF A CONTRACT MADE PURSUANT TO B-142931, MAY 24, 1960, HOLDING THE REJECTION OF THE LOW BID WAS ERRONEOUS, MAY NOT BE ALLOWED ON A QUANTUM MERUIT BASIS ABSENT EVIDENCE OF A BENEFIT TO THE GOVERNMENT, AND NEITHER ARE THE PRINCIPLES OF JOHN REINER AND COMPANY V. UNITED STATES, 325 F.2D 438, AND BROWN AND SON ELECTRICAL COMPANY V. UNITED STATES, 325 F.2D 446, FOR APPLICATION TO ESTABLISH A VALID AWARD, THE REASONABLE INTERPRETATION OF AN AMBIGUOUS INVITATION PROVISION OF THE BROWN CASE NOT BEING INVOLVED, AND TESTED BY THE STANDARD OF THE REINER CASE, THE ILLEGALITY OF THE AWARD IS PLAIN; THEREFORE, THE INVITATION AFFORDING NO BASIS TO SUPPORT AN AWARD TO OTHER THAN THE LOW BIDDER, THE CONTRACTING OFFICER EXCEEDED HIS STATUTORY AUTHORITY IN AWARDING THE CONTRACT TO THE CLAIMANT, AND THE AWARD BEING ILLEGAL, THE CANCELLATION OF THE CONTRACT CREATED NO ENTITLEMENT TO COMPENSATION ON THE BASIS OF A CONTRACT TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT, OR OTHERWISE.

TO RICHARD A. MEHLER, OCTOBER 21, 1964:

WE HAVE YOUR CORRESPONDENCE CLAIMING COMPENSATION FOR LABOR AND MATERIAL COSTS ALLEGEDLY INCURRED BY MODEL ENGINEERING AND MANUFACTURING CORPORATION UNDER NAVY CONTRACT NO. N600/17/54972 FOR TACTICAL DISPLAY PLOTTING BOARDS. THIS CONTRACT, WHICH WAS AWARDED TO YOUR CLIENT ON APRIL 20, 1960, WAS CANCELED PURSUANT TO OUR DECISION DATED MAY 24, 1960, BECAUSE THE CONTRACTING OFFICER HAD ERRONEOUSLY CONSIDERED THE BID SUBMITTED BY A LOWER BIDDER, GLOBE INDUSTRIES, INC., NONRESPONSIVE TO A PROVISION IN THE INVITATION REQUIRING DELIVERY OF A PREPRODUCTION SAMPLE WITHIN 45 DAYS AFTER THE DATE OF THE CONTRACT.

THE ADMINISTRATIVE RECORD INDICATES THAT WHILE MODEL, AT ITS OWN DISCRETION AND BEFORE THE CONTRACT WAS CANCELED, MAY HAVE REVISED THE SOLE SET OF GOVERNMENT-FURNISHED DRAWINGS AND HAVE PREPARED NEW DRAWINGS IN THE COURSE OF ATTEMPTING TO PRODUCE THE SPECIFIED PLOTTING BOARD, IT IS THE NAVY'S POSITION THAT NO TANGIBLE BENEFIT CAN BE PROVEN TO HAVE ACCRUED TO THE GOVERNMENT AS A RESULT OF SUCH ACTIONS. IN THE ABSENCE OF EVIDENCE INDICATING THAT A BENEFIT WAS CONFERRED UPON THE GOVERNMENT BY YOUR CLIENT'S REVISIONS IT MUST THEREFORE BE CONCLUDED THAT NO PORTION OF THE AMOUNT CLAIMED IS ALLOWABLE ON A QUANTUM MERUIT BASIS.

HOWEVER, IN YOUR MOST RECENT LETTER, DATED JULY 7, 1964, YOU CONTEND THAT IN ACCORDANCE WITH THE PRINCIPLES SET FORTH BY THE U.S. COURT OF CLAIMS IN JOHN REINER AND COMPANY V. UNITED STATES, CT.CL. NO. 431-57, 325 F.2D 438, AND BROWN AND SON ELECTRICAL COMPANY V. UNITED STATES, CT.CL. NO. 76-61, 325 F.2D 446, BOTH DECIDED DECEMBER 13, 1963, OUR OFFICE MUST CONCLUDE THAT THE CONTRACT WHICH WAS THE SUBJECT OF OUR DECISION OF MAY 24, 1960, WAS NOT AN ILLEGAL ONE, AND THAT ITS CANCELLATION ENTITLES YOUR CLIENT TO PAYMENT OF MONEY TO WHICH MODEL WOULD HAVE BEEN ENTITLED ON A TERMINATION OF THE CONTRACT FOR THE GOVERNMENT'S CONVENIENCE.

WHILE THE REINER AND BROWN CASES DEALT WITH ADMINISTRATIVE TERMINATION OR CANCELLATION OF CONTRACTS AS THE RESULT OF DECISIONS BY THIS OFFICE HOLDING THEM TO HAVE BEEN IMPROPERLY AWARDED, ONLY THE BROWN CASE CONSIDERED THE INITIAL ISSUE PRESENTED IN OUR DECISIONS OF MAY 24, 1960; .E., WHETHER THE BID WAS RESPONSIVE TO AN UNOBJECTIONABLE PROVISION OF AN INVITATION. THE REINER CASE WAS CONCERNED WITH THE LEGAL EFFECT OF THE GOVERNMENT'S HAVING ACCEPTED A BID ADMITTEDLY RESPONSIVE TO AN IFB WHICH OUR OFFICE PREVIOUSLY HAD CONSIDERED DEFECTIVE. SEE B-128405, DATED AUGUST 3, 1956. THE BROWN CASE IS ALSO CLEARLY UNRELATED TO THE INSTANT CASE INSOFAR AS IT RULED UPON THE VALIDITY OF AN IFB PROVISION WHICH PURPORTED TO PERMIT AN AWARD TO A BIDDER WHO WAS NOT LOW BIDDER FOR ALL THE ITEMS AWARDED.

THE FACTS WHICH SUPPORT THE RATIONALE OF THE BROWN HOLDING REGARDING BID RESPONSIVENESS ARE NOT PRESENT IN THE MATTER NOW BEFORE US. THE BROWN DECISION HELD THAT SINCE THE CONTRACTING OFFICER REASONABLY INTERPRETED AN AMBIGUOUS INVITATION PROVISION, WHICH REQUIRED A BID BOND OF 20 PERCENT OF THE "BID PRICE," HIS DETERMINATION THAT THE LOW BID WAS NONRESPONSIVE SHOULD NOT BE OVERTURNED, AND THEREFORE THE CONTRACT HE HAD AWARDED WOULD NOT BE CANCELED. HOWEVER, THE COURT OBSERVED, AND WE HAD RECOGNIZED IN OUR DECISION ON THE SAME MATTER, THAT THE INVITATION REQUIREMENT WAS CAPABLE OF BEING REASONABLY CONSTRUED TO MEAN 20 PERCENT OF THE "BID PRICE" EITHER FOR THE BASE ITEM OR FOR SUCH ITEM PLUS THE "ADDITIONAL ALTERNATES.' SEE B-143404, DATED SEPTEMBER 15, 1960.

IN CONTRAST TO THE BROWN CASE, THE SUBJECT INVITATION REQUIREMENT WAS STATED WITH UNQUESTIONED CLARITY, AND IT AFFORDED NO BASIS TO SUPPORT AN AWARD TO OTHER THAN THE LOW BIDDER. THE INTERPRETATION OF GLOBE'S BID, NOT OF AN IFB REQUIREMENT, WAS CLEARLY ERRONEOUS AND SO RECOGNIZED UPON REVIEW BY THE CONTRACTING OFFICER HIMSELF. READVERTISEMENT WAS UNNECESSARY SINCE THE IFB NEEDED NO CORRECTIONS, AND THEREFORE, COULD SUPPORT AN AWARD TO THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER. TESTED BY THE STANDARD STATED BY THE COURT IN THE REINER CASE, SUPRA, THE ILLEGALITY OF THE AWARD IN THE PRESENT CASE WAS PLAIN, AND THE CONTRACTING OFFICER'S ACTION CANNOT BE REGARDED AS REASONABLE UNDER THE PERTINENT LEGISLATION AND REGULATIONS.

IT FOLLOWS FROM THE FOREGOING THAT THE HOLDINGS OF THE REINER AND BROWN CASES CANNOT BE APPLIED TO THE FACTS OF THIS CASE TO ESTABLISH THAT THE AWARD HERE WAS VALID.

AS TO THE COURT'S SUGGESTION IN THE REINER CASE THAT, IN VIEW OF THE COMPTROLLER GENERAL'S ,CONCERN WITH THE PROPER OPERATION OF COMPETITIVE BIDDING IN GOVERNMENT PROCUREMENT," HE CAN ,SPONSOR AND ENCOURAGE THE OBSERVANCE OF HIGHER STANDARDS BY THE PROCURING AGENCIES" THROUGH THE CANCELLATION OF CONTRACTS WHICH "WOULD NOT BE HELD INVALID IN COURT," OUR DECISION IN THIS CASE WAS NOT BASED UPON ANY SUCH THEORY, NOR DO WE FEEL THAT AN ASSERTION OF SUCH AUTHORITY COULD BE SUPPORTED.

WHERE A BID ACCEPTANCE IS PROPOSED BUT NOT YET CONSUMMATED BY A PROCURING AGENCY, AND OUR OFFICE CONSIDERS SUCH ACCEPTANCE UNDESIRABLE, WE MAY RECOMMEND OR DIRECT SUCH ACTION AS WE BELIEVE IS REQUIRED BY THE PUBLIC POLICY EXPRESSED IN APPLICABLE STATUTORY ENACTMENTS TO PRESERVE THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. HOWEVER, THE SANCTION FOR ANY DECISION BY THIS OFFICE HOLDING THAT AN ACCEPTED BID DID NOT RESULT IN A VALID CONTRACT IS OUR AUTHORITY UNDER THE BUDGET AND ACCOUNTING ACT, 1921, 31 U.S.C. 1, ET. SEQ., TO DISALLOW CREDIT IN THE ACCOUNTS OF THE GOVERNMENT'S FISCAL OFFICERS FOR ANY PAYMENTS OUT OF APPROPRIATED FUNDS MADE PURSUANT TO AN ILLEGAL CONTRACT. WE DO NOT EMPLOY THAT SANCTION IF WE THINK A RESULTING CLAIM WOULD BE LEGALLY JUSTIFIED AND PAYMENT COULD BE OBTAINED BY INSTITUTING JUDICIAL PROCEEDINGS. ON THE CONTRARY, WE WILL ADVISE THE CONTRACTING AGENCY AND ITS FISCAL OFFICERS THAT CREDIT WILL NOT BE ALLOWED ONLY WHEN WE ARE CONVINCED THAT THE AGENCY HAS AWARDED A CONTRACT UNDER PROCUREMENT STANDARDS WHICH A COURT WOULD FIND SO INCOMPATIBLE WITH GOVERNING STATUTES AND REGULATIONS AS TO RENDER SUCH CONTRACT A NULLITY. SEE 41 COMP. GEN. 788, 790. WE THEREFORE BELIEVE THAT ANY VARIATIONS IN THE STANDARDS WHICH MAY BE APPLIED BY OUR OFFICE AND BY THE COURT OF CLAIMS IN DETERMINING THE ENFORCEABILITY OF A CONTRACT ALREADY AWARDED RESULT FROM OCCASIONALLY DIFFERING INTERPRETATIONS OF GOVERNING STATUTES AND REGULATIONS, OR DIFFERENT FACTUAL CONCLUSIONS, RATHER THAN FROM ANY DIFFERENCES IN THE SCOPE OF OUR RESPECTIVE OBJECTIVES. SEE B-153717, JUNE 4, 1964, 43 COMP. GEN. 761; B-154530, JULY 15, 1964.

THE RECORD ON WHICH OUR DECISION OF MAY 24, 1960, WAS BASED SHOWED THAT THE CONTRACTING OFFICER EXCEEDED HIS ACTUAL AUTHORITY IN AWARDING THE SUBJECT CONTRACT TO YOUR CLIENT, WHO WAS NOT THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER AS CONTEMPLATED BY 10 U.S.C. 2305 (B). THE GOVERNMENT IS NOT ESTOPPED TO DENY THE LIMITATIONS TO SUCH ACTUAL AUTHORITY, EVEN WHERE A PRIVATE CONTRACTOR HAS RELIED ON THE CONTRACTING OFFICER'S APPARENT AUTHORITY TO HIS DETRIMENT, FOR THE CONTRACTOR IS CHARGED WITH NOTICE OF ALL STATUTORY AND REGULATORY LIMITATIONS. PRESTEX, INC. V. THE UNITED STATES, CT.CL. NO. 415-61, 320 F.2D 367, DECIDED JULY 12, 1963. THE CITED CASE THE COURT RULED THAT SINCE THE CONTRACT WAS INVALID BECAUSE IT WAS AWARDED ON OTHER THAN THE ADVERTISED SPECIFICATIONS, AND THAT SINCE THE CONTRACT REMAINED EXECUTORY UPON TERMINATION, THE PURPORTED CONTRACTOR HAD NO BASIS FOR RECOVERY AGAINST THE UNITED STATES. SINCE THE PURPORTED CONTRACT WITH YOUR CLIENT ALSO REMAINED EXECUTORY, AND WAS AWARDED IN CLEAR CONTRAVENTION OF THE CONTRACTING OFFICER'S STATUTORY AUTHORITY, WE CONCLUDE THAT THE APPLICATION OF THE STATUTORY AND REGULATORY STANDARDS EMPLOYED BY BOTH THE COURT OF CLAIMS AND OUR OFFICE SHOULD RESULT IN ITS BEING REGARDED AS A LEGAL NULLITY. THEREFORE, WE FEEL THAT WE ARE REQUIRED TO DISALLOW YOUR CLAIM, AND THAT WE COULD NOT CONSIDER AS ALLOWABLE FOR CREDIT PAYMENT BY THE ADMINISTRATIVE AGENCY, BASED UPON THE PURPORTED CONTRACT WITH YOUR CLIENT, AS A TERMINATION SETTLEMENT OR OTHERWISE.