B-144721, MAY 9, 1961

B-144721, MAY 9, 1961

TO OCEANSIDE LAUNDRY AND DRY CLEANERS, INC.:

REFERENCE IS MADE TO YOUR TELEGRAM OF DECEMBER 29, 1960, AND YOUR ATTORNEY'S BRIEF SUPPLEMENTING THE TELEGRAM, PROTESTING THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER INVITATION NO. IFB-123-142-61, ISSUED BY THE NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA.

THE INVITATION WAS ISSUED NOVEMBER 8, 1960, REQUESTING BIDS--- TO BE OPENED DECEMBER 6, 1960--- FOR FURNISHING LAUNDRY SERVICES FOR THE U.S. NAVAL HOSPITAL, CAMP PENDLETON, CALIFORNIA, DURING THE CALENDAR YEAR 1961, IN AN ESTIMATED AMOUNT OF 900,000 POUNDS. WITH RESPECT TO DISCOUNTS, PARAGRAPH 7 OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, AS AMENDED, PROVIDED:

"7. DISCOUNTS.--- (A) PROMPT-PAYMENT DISCOUNTS WILL BE INCLUDED IN THE EVALUATION OF BIDS, PROVIDED THE PERIOD OF THE OFFERED DISCOUNT IS SUFFICIENT TO PERMIT PAYMENT WITHIN SUCH PERIOD IN THE REGULAR COURSE OF BUSINESS UNDER THE DELIVERY, INSPECTION, AND PAYMENT PROVISIONS OF THE INVITATION AND BID.

"/B) IN CONNECTION WITH ANY DISCOUNT OFFERED, TIME WILL BE COMPUTED FROM DATE OF DELIVERY OF THE SUPPLIES TO CARRIER WHEN DELIVERY AND ACCEPTANCE ARE AT POINT OF ORIGIN, OR FROM DATE OF DELIVERY AT DESTINATION OR PORT OF EMBARKATION WHEN DELIVERY AND ACCEPTANCE ARE AT EITHER OF THOSE POINTS, OR FROM DATE CORRECT INVOICE OR VOUCHER IS RECEIVED IN THE OFFICE SPECIFIED BY THE GOVERNMENT IF THE LATTER DATE IS LATER THAN THE DATE OF DELIVERY. PAYMENT IS DEEMED TO BE MADE, FOR THE PURPOSE OF EARNING THE DISCOUNT, ON THE DATE OF MAILING OF THE GOVERNMENT CHECK.

"/C) IN ACCORDANCE WITH SUBPARAGRAPH (A), IN CONNECTION WITH THIS INVITATION FOR BIDS, PROMPT PAYMENT DISCOUNTS WILL BE CONSIDERED IN THE EVALUATION OF BIDS, PROVIDED THE MINIMUM PERIOD FOR THE OFFERED DISCOUNT IS 20 DAYS. THE OFFERED DISCOUNT OF A SUCCESSFUL BIDDER WILL FORM A PART OF THE AWARD WHETHER OR NOT SUCH DISCOUNT WAS CONSIDERED IN THE EVALUATION OF HIS BID, AND SUCH DISCOUNT WILL BE TAKEN IF PAYMENT IS MADE WITHIN THE DISCOUNT PERIOD.'

IN RESPONSE TO THE INVITATION, TWO BIDS WERE RECEIVED. MORRISSON'S OFSAN DIEGO, INC., DBA CALIFORNIA LAUNDRY (HEREINAFTER REFERRED TO AS CALIFORNIA LAUNDRY), SUBMITTED A BID OF $0.07 PER POUND IN A TOTAL ESTIMATED AMOUNT OF $63,000 LESS DISCOUNT OF "15 PERCENT, 10 CALENDAR DAYS: 15 PERCENT, 20 CALENDAR DAYS: 5 PERCENT, 30 CALENDAR DAYS.' YOU SUBMITTED A BID OF $0.06 PER POUND IN A TOTAL ESTIMATED AMOUNT OF $54,000 LESS DISCOUNT OF "5 PERCENT, 20 CALENDAR DAYS: EOM.' ON DECEMBER 20, 1960, AWARD WAS MADE TO CALIFORNIA LAUNDRY IN THE ESTIMATED AMOUNT OF $53,550 (CONTRACT NO. N123- /60285/26804A). IN EVALUATING THE BIDS, EFFECT WAS GIVEN TO THE DISCOUNT OFFERED BY CALIFORNIA LAUNDRY BUT EFFECT WAS NOT GIVEN TO THE DISCOUNT OFFERED BY YOU ON THE GROUND THAT YOUR OFFER OF DISCOUNT WAS AMBIGUOUS AND DID NOT DEFINITELY OFFER A MINIMUM DISCOUNT PERIOD OF 20 DAYS AS REQUIRED BY THE INVITATION. IF EFFECT HAD BEEN GIVEN TO THE DISCOUNT OFFERED BY YOU, YOUR BID IN THE NET AMOUNT OF $51,300 WOULD HAVE BEEN THE LOW BID.

IN A LETTER DATED DECEMBER 21, 1960, TO THE CONTRACTING OFFICE, YOUR ATTORNEYS PROTESTED THE AWARD, CONTENDING THAT "THE DISCOUNT AS BID DOES NOT DETRACT FROM THE DISCOUNT BUT COULD ONLY ADD TIME IN WHICH THE DISCOUNT WOULD BE AVAILABLE TO THE NAVY DEPARTMENT" AND CITED AUTHORITIES IN SUPPORT OF THAT CONTENTION.

WITH RESPECT TO PAYMENT TERMS, IT IS STATED IN PURCHASING HANDBOOK BY ALJIAN, 1958 EDITION (PAGES 9-11):

"2 PERCENT 10 DAYS: EOM. IF PAYMENT IS MADE BY THE 10TH OF THE MONTH FOLLOWING THE MONTH THE INVOICE IS ISSUED, THE AMOUNT MAY BE DISCOUNTED BY 2 PERCENT.'

ON PAGE 26-11 OF THE SAME TREATISE, IT IS STATED:

"NET EOM DUE ON OR BEFORE THE END OF THE MONTH, NET EOM 10, NET EOM OR NET 10TH PROXIMATE, DUE ON OR BEFORE THE 10TH OF THE MONTH FOLLOWING.'

IN CREDITS AND COLLECTIONS IN THEORY AND PRACTICE BY BECKMAN AND BARTELS, 5TH EDITION, 1949, AT PAGE 320, IN COMPARING THE TERM "EOM" WITH PROXIMO TERMS, IT IS STATED:

"THEY DIFFER FROM EOM TERMS IN THAT THE LATTER MAY BE STATED AS 2/10, ETC., EOM UNDER WHICH CIRCUMSTANCES THE 2/10 DOES NOT BEGIN TO APPLY UNTIL AFTER THE FIRST OF THE MONTH FOLLOWING, WHEREAS, WHEN PROXIMO TERMS ARE STATED, A DEFINITE DATE FOR PAYMENT IS USUALLY SPECIFIED, SUCH AS THE TENTH, FIFTEENTH, TWENTIETH, OR TWENTY-FIFTH.'

ALSO, IN ACCOUNTING PRINCIPLES, 6TH EDITION, 1953, BY NOBEL AND NISWONGER, THE FOLLOWING STATEMENT APPEARS:

"IF THE TERMS OF SALE CALL FOR PAYMENT IN THE FOLLOWING MONTH, INCENTIVE FOR EARLY PAYMENT MAY BE EXPRESSED "2/10 EOM.' THIS MEANS THAT IF THE BILL IS PAID DURING THE FIRST TEN DAYS FOLLOWING THE END OF THE MONTH (EOM), THE PURCHASER IS ENTITLED TO A 2 PERCENT CASH DISCOUNT.'

WHILE THE INCLUSION OF THE LETTERS "EOM" IN THE DISCOUNT OFFERED BY YOU MAY BE IN ACCORDANCE WITH USUAL COMMERCIAL PRACTICES, WE FEEL THAT THE INTERPRETATION GIVEN TO YOUR DISCOUNT OFFER BY THE PROCUREMENT AGENCY MUST BE GIVEN GREAT WEIGHT SINCE THE AGENCY IS CHARGED WITH THE STATUTORY DUTY- -- NOT ORDINARILY SUBJECT TO REVIEW--- OF DETERMINING THE LOWEST RESPONSIVE BIDDER UNDER THE TERMS OF AN INVITATION. THE RESPONSIVENESS OF YOUR DISCOUNT OFFER WAS CAREFULLY CONSIDERED BY LEGAL COUNSEL OF THE PROCUREMENT AGENCY AND IT WAS DETERMINED THAT THE OFFERED DISCOUNT DEVIATED FROM THE INVITATION REQUIREMENTS RESPECTING DISCOUNT PERIOD. WAS FURTHER DETERMINED THAT YOUR OFFERED DISCOUNT, WHEN CONSIDERED IN THE LIGHT OF THE INVITATION REQUIREMENTS, WAS AMBIGUOUS AND OPEN TO INTERPRETATION AS TO THE TIME THE PERIOD OF DISCOUNT WOULD COMMENCE TO RUN.

THE INVITATION CLEARLY REQUIRED, IN THE EVALUATION OF BIDS, THAT AN OFFERED DISCOUNT WOULD HAVE TO PROVIDE FOR A MINIMUM PERIOD OF AT LEAST 20 DAYS FROM THE RECEIPT OF A CORRECT INVOICE IF THAT DATE WERE LATER THAN THE DATE OF DELIVERY. INASMUCH AS INVOICES FOR THE LAUNDRY SERVICES HERE INVOLVED WOULD BE BASED UPON THE WEIGHT OF THE ARTICLES LAUNDERED IN THE PERIOD COVERED BY THE INVOICE, THEY WOULD NECESSARILY BE ISSUED AT THE END OF THE PERIOD IN WHICH THE LAUNDRY SERVICES WERE PERFORMED. CONSEQUENTLY, THE INVOICES WOULD NORMALLY BE RECEIVED ON A DATE LATER THAN THE DELIVERY OF THE SERVICES COVERED THEREBY. THUS, FOR EXAMPLE, AN INVOICE COVERING LAUNDRY SERVICES THROUGH SATURDAY, SEPTEMBER 30, 1961, WOULD BE MAILED ON THAT DAY OR LATER AND WOULD NOT ARRIVE IN THE OFFICE TO WHICH IT WAS DESTINED UNTIL MONDAY, OCTOBER 2 AT THE EARLIEST. FOR THE DISCOUNT TO MEET THE MINIMUM REQUIREMENT OF THE INVITATION, THE GOVERNMENT SHOULD HAVE UNTIL OCTOBER 22 TO MAKE PAYMENT IN ORDER TO TAKE ADVANTAGE OF THE DISCOUNT. HOWEVER, YOU, IN EFFECT, OFFERED A 5 PERCENT DISCOUNT IF PAYMENT WERE MADE WITHIN 20 DAYS FROM THE END OF THE MONTH.

IT IS WITHIN THE PROVINCE OF THE CONTRACTING AGENCY TO ASSURE THAT ANY CONTRACT WILL REFLECT THE MUTUAL OBLIGATIONS OF THE PARTIES, FREE FROM DOUBT AS TO ITS INTENDED MEANING AND SUGGESTIONS OF AMBIGUITY. IT IS ENTIRELY WITHIN THE REALM OF POSSIBILITY THAT APPLICATION OF YOUR DISCOUNT TERMS COULD RESULT IN CONFUSION AND DEPARTURES FROM USUAL GOVERNMENT INVOICING AND PAYMENT PROCEDURES TO THE DETRIMENT OF THE AGENCY'S PROCUREMENT ACTIVITIES.

UNDER SUCH CIRCUMSTANCES, WE BELIEVE THAT IT WAS NOT IMPROPER FOR THE GOVERNMENT TO REJECT YOUR BID AS NONRESPONSIVE. SINCE YOU CHOSE TO OFFER DISCOUNT TERMS MATERIALLY DIFFERENT FROM THOSE CONTEMPLATED BY THE INVITATION, THE PROCUREMENT AGENCY, IN ITS CONSIDERED DISCRETION, WAS ENTITLED TO DISREGARD YOUR BID IN THE INTEREST OF MAINTAINING STANDARD GOVERNMENT CONTRACT PROCEDURES GOVERNING DISCOUNTS. CF. 18 COMP. GEN. 743.