B-143527, SEP. 20, 1960

B-143527, SEP. 20, 1960

TO D AND L CONSTRUCTION COMPANY:

REFERENCE IS MADE TO YOUR LETTER DATED JULY 15, 1960, WITH ENCLOSURES, PROTESTING THE ACTION OF THE DEPARTMENT OF THE ARMY IN CANCELLING INVITATION NO. ENG-23-028-60-66, AND IN ISSUING A LETTER OF ACCEPTABILITY TO R. S. SILBERBLATT, INC., UNDER INVITATION NO. ENG-23 028-60-84.

THE RECORD SHOWS THAT BIDS FOR FINANCING AND CONSTRUCTING A CAPEHART HOUSING PROJECT AT FORT LEONARD WOOD, MISSOURI, WERE REQUESTED BY INVITATION NO. ENG-23-028-60-66, FOR OPENING ON APRIL 7, 1960. THROUGH INADVERTENCE, AND AN INCORRECT INTERPRETATION OF INSTRUCTIONS, THE INVITATION SPECIFIED THAT THE MORTGAGE PERIOD SHOULD BE 30 YEARS INSTEAD OF 25 YEARS. AFTER BIDS WERE OPENED AND IT WAS DETERMINED THAT YOU WERE THE LOW BIDDER, THE ERROR WAS DISCOVERED.

ALTHOUGH, YOU AGREED TO ACCEPT THE CONTRACT ON THE BASIS OF A 25 YEAR AMORTIZATION, DECISIONS OF OUR OFFICE ARE TO THE EFFECT THAT DEVIATIONS IN A BID FROM THE ADVERTISED SPECIFICATIONS THAT GO TO THE SUBSTANCE OF THE BID BY AFFECTING EITHER THE PRICE, QUANTITY, OR QUALITY OF THE WORK BID UPON MAY NOT BE WAIVED AS MERE BID INFORMALITIES IN CONSIDERING THE BID FOR ACCEPTANCE. SEE 30 COMP. GEN. 179. IT APPEARS THAT THE CHANGE FROM A 30 YEAR TO A 25 YEAR AMORTIZATION WOULD LIKELY AFFECT THE COST OF FINANCING BY A MATERIAL AMOUNT, POSSIBLY IN EXCESS OF $100,000. CERTAINLY THIS MUST BE CONSIDERED A MATERIAL DEVIATION, AND THE ADMINISTRATIVE DETERMINATION NOT TO ACCEPT SUCH A DEVIATION WAS PROPERLY MADE.

THE POSSIBILITY OF AWARDING A CONTRACT STRICTLY IN CONFORMITY WITH THE INVITATION FOR BIDS (BASED ON 30 YEAR FINANCING) WAS CONSIDERED BY OFFICIALS OF THE DEPARTMENT OF DEFENSE. SINCE IT IS AND HAS BEEN THE POLICY OF THE DEPARTMENT OF DEFENSE TO USE 25 YEAR MORTGAGES AND BECAUSE A 30 YEAR MORTGAGE WOULD INCREASE THE ULTIMATE COST OF THE PROJECT TO THE GOVERNMENT BY APPROXIMATELY $2,000,000, IT WAS DETERMINED THAT SUCH AN AWARD WOULD NOT BE TO THE BEST INTEREST OF THE GOVERNMENT.

UNDER SECTION 403 (A) OF THE HOUSING AMENDMENTS OF 1955, 42 U.S.C. 1594 (A), THE SECRETARY OF DEFENSE OR HIS DESIGNEE IS REQUIRED, IN CAPEHART HOUSING PROCUREMENTS, TO INVITE COMPETITIVE ADVERTISED BIDS IN THE MANNER PRESCRIBED IN SECTION 3 OF THE ARMED SERVICES PROCUREMENT ACT OF 1947. SECTION 3 (B) OF THAT ACT, NOW SECTION 2305 (C) OF TITLE 10, U.S.C. PROVIDES THAT ALL BIDS MAY BE REJECTED IF THE HEAD OF THE AGENCY DETERMINES THAT REJECTION IS IN THE PUBLIC INTEREST. THE RIGHT TO REJECT ALL BIDS WAS SPECIFICALLY RESERVED BY THE GOVERNMENT IN THE INSTANT CASE BY PARAGRAPH 3 OF THE INVITATION FOR BIDS. IN THE CIRCUMSTANCES AND IN VIEW OF THE AUTHORITY CITED ABOVE, WE CANNOT CONCLUDE THAT THE REJECTION OF ALL BIDS UNDER THE FIRST INVITATION REPRESENTED AN ABUSE OF THE ADMINISTRATIVE DISCRETION GRANTED BY THE STATUTE AND RESERVED IN THAT INVITATION.

WE ARE KEENLY AWARE THAT THE REJECTION OF BIDS AFTER THEY ARE OPENED AND EACH BIDDER HAS LEARNED HIS COMPETITORS' PRICES IS A SERIOUS MATTER AND SHOULD NOT BE DONE EXCEPT FOR COGENT REASONS. NEVERTHELESS, WE HAVE RECOGNIZED THAT SINCE CONTRACTING OFFICERS ARE AGENTS OF, AND ARE REQUIRED TO WORK IN THE BEST INTEREST OF, THE GOVERNMENT THEIR ACTION IN REJECTING BIDS MAY NOT BE CONSIDERED IMPROPER WHEN BASED UPON SUBSTANTIAL REASONS LEADING TO A BONA FIDE BELIEF THAT THE INTERESTS OF THE GOVERNMENT WILL BE BEST SERVED THEREBY.

IT IS UNFORTUNATE THAT IN THIS INSTANCE THE ORIGINAL INVITATION FAILED TO SET OUT THE CORRECT MORTGAGE PERIOD. HOWEVER, THE ONLY ALTERNATIVE TO THE REJECTION OF ALL BIDS--- THAT IS, ACCEPTANCE OF YOUR BID--- WOULD HAVE RESULTED IN A LARGE INCREASE IN THE COST OF THE PROJECT TO THE GOVERNMENT. IN THESE CIRCUMSTANCES WE BELIEVE THAT THE INTEREST OF THE GOVERNMENT IS PROPERLY TO BE REGARDED AS SUPERIOR TO THE INTEREST OF ANY BIDDER IN NOT HAVING ITS PRICES DISCLOSED.

FOR THESE REASONS WE WOULD NOT FEEL JUSTIFIED IN OBJECTING TO THE ACTION OF THE DEPARTMENT OF THE ARMY IN THIS INSTANCE.