B-151327, JUN. 18, 1963

B-151327, JUN. 18, 1963

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED APRIL 17, 1963, FROM THE GENERAL COUNSEL, OFFICE OF THE CHIEF OF ENGINEERS, REQUESTING A DECISION CONCERNING THE PROTEST OF L. H. LACY COMPANY, DALLAS, TEXAS, AGAINST THE AWARD (CONTRACT NO. DA-41-443-ENG-7026) OF SCHEDULE II MADE TO IT ON THE BASIS OF ITS BID ON INVITATION FOR BIDS NO. ENG-41-443-63-41, ISSUED BY THE U.S. ARMY ENGINEER DISTRICT, FORT WORTH, TEXAS.

THE QUESTION PRESENTED IS WHETHER UNDER THE TERMS OF THE INVITATION AWARD COULD PROPERLY BE MADE ON SCHEDULE II ALONE, AND IF SO, WHETHER THE LACY COMPANY MAY NEVERTHELESS BE RELIEVED OF THE AWARD MADE TO IT THEREON.

THE INVITATION WAS ISSUED ON JANUARY 4, 1963, LIMITED TO SMALL BUSINESS CONCERNS. BID OPENING WAS SET FOR FEBRUARY 5, 1963, BUT WAS DEFERRED TO FEBRUARY 12, 1963, BY AMENDMENT NO. 1. THE WORK COVERED BY THE INVITATION WAS DESCRIBED AS "ACCESS TAXIWAYS AND HAZARDOUS STORAGE BUILDING, DAVIS FIELD, MUSKOGEE, OKLAHOMA.' THE SPECIFICATIONS ACCOMPANYING THE INVITATION CONSISTED OF TWO VOLUMES, VOLUME I COVERING THE TAXIWAYS AND VOLUME II THE STORAGE BUILDING. PARAGRAPH 6, PAGE 2 OF THE INVITATION PROVIDED AS FOLLOWS:

"THE GOVERNMENT FURTHER RESERVES THE RIGHT TO MAKE AWARD ON ANY OR ALL SCHEDULES OF ANY BID, UNLESS THE BIDDER QUALIFIES SUCH BID BY SPECIFIC LIMITATION; ALSO TO MAKE AWARD TO THE BIDDER WHOSE AGGREGATE BID ON ANY COMBINATION OF BID SCHEDULES IS LOW. FOR THE PURPOSE OF THIS INVITATION FOR BIDS, THE WORD "ITEM," AS USED IN PARAGRAPH 10 (C) OF STANDARD FORM 22, SHALL BE CONSIDERED TO MEAN "SCHEDULE.'"

PARAGRAPH 10 (C) OF STANDARD FORM 22 PROVIDES THAT "THE GOVERNMENT MAY ACCEPT ANY ITEM OR COMBINATION OF ITEMS OF A BID, UNLESS PRECLUDED BY THE INVITATION FOR BIDS OR THE BIDDER INCLUDES IN HIS BID A RESTRICTIVE LIMITATION.'

UNDER THE INVITATION AS ORIGINALLY ISSUED, THE WORK FOR BOTH PROJECTS, ACCESS TAXIWAYS AND HAZARDOUS STORAGE BUILDING, WAS LISTED UNDER ONE UNIT PRICE SCHEDULE CONSISTING OF 46 ITEMS OF WORK ON WHICH BIDDERS WERE TO QUOTE LUMP SUM OR UNIT PRICES AS REQUIRED BY THE VARIOUS ITEMS. AWARD WAS TO BE MADE ON THE BASIS OF THE LOWEST TOTAL AMOUNT FOR ALL ITEMS. THE HAZARDOUS STORAGE BUILDING AND RELATED SITE WORK WAS LISTED AS ITEM 3 OF THE SCHEDULE AND REQUIRED A LUMP SUM BID.

BY ADDENDUM NO. 2 ISSUED ON FEBRUARY 1, 1963, A REVISED UNIT PRICE SCHEDULE WAS FURNISHED BIDDERS. THE PRINCIPAL CHANGE EFFECTED BY THIS AMENDMENT WAS TO DIVIDE THE PROCUREMENT INTO TWO SCHEDULES, NAMELY THE ACCESS TAXIWAYS AS SCHEDULE I AND THE HAZARDOUS STORAGE BUILDING AS SCHEDULE II. FOLLOWING THE REVISED SCHEDULES THE ADDENDUM CONTAINED THE FOLLOWING PERTINENT LANGUAGE:

"NOTES:

1. ANY BID EXCEEDING $7,175.00 FOR SCHEDULE II WILL BE CONSIDERED NON- RESPONSIVE ON THAT SCHEDULE. BIDDERS ARE CAUTIONED TO SEE NOTES 5, 6, AND 7 BELOW.

5. ALL WORK UNDER SCHEDULE II IS SUBJECT TO A REGULATORY COST LIMITATION OF $7,175.00. ANY BID RECEIVED ON SCHEDULE II WHICH EXCEEDS $7,175.00 WILL BE CONSIDERED NON-RESPONSIVE ON THAT SCHEDULE.

6. ANY BID MATERIALLY UNBALANCED WITH RESPECT TO THE PRICES BID FOR SCHEDULES SUBJECT TO THE REGULATORY LIMITATION AS CONTRASTED TO THE PRICES BID FOR SCHEDULES NOT SUBJECT TO REGULATORY LIMITATIONS WILL BE REJECTED.

7. EACH BIDDER MUST COMPLETE THE FOLLOWING CERTIFICATION:

"IT IS HEREBY CERTIFIED THAT THE PRICES BID FOR EACH OF THE SCHEDULES INCLUDES AN APPROPRIATE APPORTIONMENT OF ALL ESTIMATED APPLICABLE COSTS, DIRECT AND INDIRECT, AS WELL AS OVERHEAD AND PROFITS.'"

THE FIVE BIDS RECEIVED IN RESPONSE TO THE INVITATION WERE OPENED ON FEBRUARY 12, 1963, AND PARK CONSTRUCTION COMPANY WAS THE LOW BIDDER ON SCHEDULE I. ITS BID ON SCHEDULE II EXCEEDED THE COST LIMITATION FOR THAT SCHEDULE AND WAS FURTHER CONDITIONED ON THE AWARD OF SCHEDULE I. EACH OF THE OTHER FOUR BIDDERS BID ON BOTH SCHEDULES WITHOUT RESTRICTIVE "ALL OR NONE" LIMITATION, AND SIGNED THE CERTIFICATION AS REQUIRED BY NOTE 7 QUOTED ABOVE. THE TOTAL BIDS AND THE GOVERNMENT'S ESTIMATE ON EACH SCHEDULE ARE AS FOLLOWS:

TABLE BIDDER SCHEDULE I SCHEDULE II W. E. STEELMAN, OKLAHOMA CITY, OKLA. $424,978.88 $7,000.00 STRICKLAND CO., TULSA, OKLA. 480,025.27 7,175.00 K-P CONSTRUCTION CO., ALTUS, OKLA. 405,669.60 7,000.00 L. H. LACY CO., DALLAS, TEXAS 418,849.41 6,848.00 PARK CONSTRUCTION CO., MINNEAPOLIS, MINN. 388,991.40 15,600.00 GOVERNMENT'S ESTIMATE 371,964.68 6,340.00

THE FACTS WITH RESPECT TO THE AWARD MADE TO THE L. H. LACY COMPANY ARE SET FORTH IN FINDINGS OF FACT BY THE CONTRACTING OFFICER, IN PART, AS FOLLOWS:

"4. SINCE THE L. H. LACY COMPANY WAS THE APPARENT LOW BIDDER ON SCHEDULE II BUT NOT ON SCHEDULE I, SAID COMPANY WAS NOTIFIED BY TELEPHONE THAT ITS BID WOULD BE CONSIDERED FOR AWARD OF SCHEDULE II ONLY. TWO DAYS LATER, ON THE AFTERNOON OF 14 FEBRUARY 1963, MR. J. H. LACY, PRESIDENT OF THE L. H. LACY COMPANY, VISITED MR. GLEN L. STEWART, CHIEF, PROCUREMENT BRANCH, SUPPLY DIVISION, OF THE FORT WORTH DISTRICT. MR. LACY STATED THAT HIS COMPANY HAD NOT INTENDED TO BID ON THE SCHEDULES SEPARATELY, AND HAD MISUNDERSTOOD THE INVITATION TO IMPLY THAT ONE CONTRACT COVERING BOTH SCHEDULES WOULD BE AWARDED TO A SINGLE BIDDER. MR. LACY WAS REFERRED TO MR. MORRIS S. DENMAN, CHIEF, SUPPLY DIVISION, WHO REVIEWED WITH HIM THE PERTINENT NOTES AND CONDITIONS CONTAINED IN THE INVITATION AND AMENDMENTS THERETO. AT THIS TIME, MR. LACY VERIFIED THAT THE PRICES BID UNDER EACH SCHEDULE INCLUDED AN APPROPRIATE APPORTIONMENT OF ALL APPLICABLE COSTS, OVERHEAD AND PROFIT. AFTER FURTHER DISCUSSION, MR. LACY ADVISED THAT HE WOULD ATTEMPT TO ARRANGE TO SUBCONTRACT THE WORK TO ANOTHER BIDDER OR CONTRACTOR WHO WOULD BE IN A BETTER POSITION TO PERFORM, AND REQUESTED A DECISION FROM THE DISTRICT ENGINEER WHETHER SUCH COURSE OF ACTION WOULD BE PERMISSIBLE. AT THE CONCLUSION OF THE MEETING, THIS QUESTION WAS REFERRED TO THE DISTRICT ENGINEER, WHO DETERMINED THAT A MAXIMUM PERCENTAGE OF SUBCONTRACTING WOULD BE ALLOWED UNDER THE CIRCUMSTANCES. THIS DECISION WAS CONVEYED TO MR. LACY BY TELEPHONE THE FOLLOWING DAY. HE IMMEDIATELY CONTACTED SEVERAL OF THE OTHER BIDDERS ON THE JOB BUT WAS APPARENTLY UNABLE TO FIND ANY WHO WOULD AGREE TO PERFORM THE WORK ON SCHEDULE II FOR THEIR BID PRICE.

"5. THE FOLLOWING MONDAY, 18 FEBRUARY 1963, MR. LACY TELEPHONED MR. STEWART TO ADVISE THAT HE WAS UNABLE TO SUBCONTRACT THE JOB TO THE EXTENT PERMITTED, AND TO INQUIRE WHETHER THERE WERE ANY FURTHER STEPS HE COULD TAKE TO PREVENT AN AWARD ON HIS BID. MR. STEWART ASKED WHETHER A MISTAKE IN BID WAS BEING ALLEGED AND MR. LACY REPLIED,"NO, I WOULD CALL IT A MISINTERPRETATION BY ME OF YOUR INVITATION FOR BIDS.' INASMUCH AS NO ALLEGATION OF MISTAKE WAS PRESENTED, AWARD UNDER SCHEDULE II WAS MADE BY TELEGRAM TO THE L. H. LACY COMPANY THAT AFTERNOON. THE CONTRACTOR PROTESTED THE AWARD BY RETURN TELEGRAM RECEIVED THE FOLLOWING MORNING.'

THE RECORD INDICATES THAT THE FORMAL CONTRACT DOCUMENTS HAVE NOT YET BEEN EXECUTED BY L. H. LACY COMPANY.

L. H. LACY COMPANY SUBMITTED WITH A LETTER OF MARCH 7, 1963, COPIES OF LETTERS DATED FEBRUARY 15 AND 16, 1963, FROM THE THREE OTHER BIDDERS WHO SUBMITTED BIDS WITHIN THE LIMITATION SPECIFIED FOR SCHEDULE II. EACH OF SAID LETTERS STATED THAT THE BIDDER WAS NOT INTERESTED AND COULD NOT PERFORM THE WORK REQUIRED BY SCHEDULE II SEPARATELY FOR ITS BID PRICE; THAT ITS BID ON SCHEDULE II WAS BASED ON ALSO OBTAINING AWARD UNDER SCHEDULE I; AND THAT IT WAS NOT AWARE THAT SCHEDULE II COULD BE AWARDED SEPARATELY. THERE WAS ALSO SUBMITTED A COPY OF LETTER DATED FEBRUARY 21, 1963, FROM FRANK NEWELL AND SON, INC., MUSKOGEE, OKLAHOMA, A LOCAL CONTRACTOR WHO WAS NOT ONE OF THE BIDDERS, AS FOLLOWS:

"AFTER A COMPLETE SURVEY AND ESTIMATE OF THE PLANS AND SPECIFICATIONS ON THE ABOVE PROJECT WE FIND THAT WE COULD NOT PERFORM THE WORK FOR THE PRICE INDICATED IN AMENDMENT NO. 2 DATED JANUARY 4, 1963.

WE HAVE CONTACTED OTHER LOCAL BUILDERS AND THEY HAVE EXPRESSED THE SAME OPINION AS OURS SO WE FEEL THAT OUR ESTIMATE OF THIS WORK WOULD BE REASONABLY CORRECT.

IT WOULD BE POSSIBLE TO BUILD THE BUILDING FOR THE INDICATED AMOUNT BUT NOT PERFORM ALL THE SITE WORK.

WE ARE SORRY THAT WE COULD NOT HELP YOU IN THIS MATTER.'

LONG BEFORE THE ISSUANCE OF THE INVITATION HERE INVOLVED, THE CONSTRUCTION OF THE HAZARDOUS STORAGE BUILDING AT DAVIS FIELD HAD BEEN THE SUBJECT OF INVITATION FOR BIDS NO. ENG-41-443-62-76, ISSUED ON APRIL 2, 1962. ALL BIDS RECEIVED WERE REJECTED BECAUSE THEY WERE CONSIDERED EXCESSIVE IN VIEW OF THE $8,052 GOVERNMENT ESTIMATE OF COST, HAVING BEEN IN THE AMOUNTS OF $12,619, $15,950, $16,495 AND $16,752. THE HIGHEST BID WAS SUBMITTED BY THE L. H. LACY COMPANY. IT IS REPORTED THAT DURING THE ENSUING YEAR, THE SPECIFICATIONS WERE SUBSTANTIALLY REVISED TO PERMIT CONSTRUCTION AT A MORE REASONABLE COST, AND AS A RESULT OF THE CHANGES THE GOVERNMENT ESTIMATE OF THE COST WAS REDUCED FROM $8,052 TO $6,340. IT IS FURTHER REPORTED THAT THIS ESTIMATE WAS PREPARED FOR THE BUILDING AS A SEPARATE ITEM AND DID NOT REFLECT ANY SAVINGS WHICH MIGHT ACCRUE TO A CONTRACTOR BY BEING ABLE TO PERFORM BOTH PROJECTS CONCURRENTLY. HOWEVER, ON THE RECORD BEFORE US, WE FAIL TO FIND ANY REASON FOR COMBINING THE HAZARDOUS STORAGE BUILDING AND THE ACCESS TAXIWAYS INTO A SINGLE PROCUREMENT EXCEPT THE POSSIBILITY OF SAVINGS WHICH MIGHT BE REALIZED BY THE PERFORMANCE OF BOTH JOBS SIMULTANEOUSLY--- A POSSIBILITY WHICH NECESSARILY WOULD BE EFFECTIVELY REALIZED ONLY BY HAVING ALL THE WORK DONE BY THE SAME CONTRACTOR.

FROM A TELEGRAM SENT BY THE DIVISION ENGINEER, SOUTHWEST DIVISION, TO THE DISTRICT ENGINEER, FORT WORTH, SOME TIME AFTER THE ISSUANCE OF THE SUBJECT INVITATION ON JANUARY 4, 1963, IT APPEARS THAT THE AUTHORIZATION FOR THE HAZARDOUS STORAGE BUILDING WAS SEPARATE AND DISTINCT FROM THE AUTHORIZATION FOR THE TAXIWAYS, AND SUBJECT TO DIFFERENT PUBLIC LAW LIMITATIONS. IT ALSO APPEARS FROM THAT TELEGRAM THAT THE MAXIMUM FUND AUTHORIZATION FOR THE STORAGE BUILDING WAS $8,100--- A FACT WHICH MAY CONCEIVABLY HAVE HAD SOME INFLUENCE UPON THE ENGINEERS' COST ESTIMATE. ANY RATE, IT WAS BY REASON OF THOSE FACTS THAT THE DISTRICT ENGINEER WAS DIRECTED BY THE TELEGRAM TO SEGREGATE THE STORAGE BUILDING AS A SEPARATE SCHEDULE ITEM, WITH A SPECIFIED MAXIMUM COST, AND IT WAS PURSUANT TO THAT DIRECTION THAT AMENDMENT NO. 2 WAS ISSUED.

LOOKING TO THE PROVISION OF PARAGRAPH 6, PAGE 2, OF THE INVITATION, RELIED ON BY THE CONTRACTING OFFICER AS JUSTIFICATION FOR THE SEPARATE AWARD OF SCHEDULE II, IT IS TO BE NOTED THAT IT WAS WHOLLY MEANINGLESS IN ITS ORIGINAL CONTEXT, SINCE THE INVITATION AS ORIGINALLY ISSUED CONTAINED ONLY ONE SCHEDULE, AND AWARD COULD HAVE BEEN MADE ONLY ON THE TOTAL PROJECT, WHICH INCLUDED BOTH THE TAXIWAYS AND THE STORAGE BUILDING.

IT IS RECOGNIZED THAT PARAGRAPH 6 WAS NOT DELETED BY AMENDMENT NO. 2, AND THAT IT WOULD BE APPLICABLE IF THE AMENDMENT HAD MERELY SPLIT THE WORK INTO SEVERAL SCHEDULES. HOWEVER, WE VIEW THE ADDITIONAL SPECIFIC PROVISIONS INCLUDED IN THE "NOTES" UNDER THE AMENDED SCHEDULES AS INCONSISTENT WITH SEPARATE AWARD OF SCHEDULE II, SINCE NOTES NOS. 6 AND 7 IN EFFECT REQUIRED BIDDERS TO PROPERLY APPORTION BETWEEN THE TWO SCHEDULES ALL ESTIMATED COSTS, DIRECT AND INDIRECT, INCLUDING OVERHEAD AND PROFIT. THIS IN EFFECT PRECLUDED ANY BID ON A SINGLE SCHEDULE, AND PRACTICALLY DIRECTED BIDDERS TO COMPUTE THEIR BIDS AS ON AN ALL-OR-NONE BASIS. THESE CIRCUMSTANCES, WE CONSTRUE THESE PROVISIONS AS PRECLUDING ACCEPTANCE OF SEPARATE ITEMS, WITHIN THE MEANING OF ARTICLE 10 (C) OF THE STANDARD FORM 22, INSTRUCTIONS TO BIDDERS, INCLUDED IN THE INVITATION.

WHILE PARAGRAPH 6 OF THE INVITATION DID NOT INCLUDE THE SAME LANGUAGE--- "UNLESS PRECLUDED BY THE INVITATION FOR BIDS"--- IT COULD NOT IN ANY EVENT OVERCOME A WHOLLY INCONSISTENT PROVISION OF THE INVITATION SUCH AS PRESENT HERE.

THE CERTIFICATION UNDER NOTE 7 REQUIRED THAT EACH OF THE SCHEDULES INCLUDE AN "APPROPRIATE APPORTIONMENT" OF APPLICABLE COSTS. THE WORD "APPORTION" MEANS TO DIVIDE OR ASSIGN IN JUST PROPORTION. A DIVISION OR ASSIGNMENT CAN ONLY BE IN RELATION TO TWO THINGS, IN THIS CASE SCHEDULE I AND SCHEDULE II. SOME OF THE WORK COVERED BY SCHEDULE II, PARTICULARLY THE SITE WORK, APPARENTLY IS SIMILAR TO WORK COVERED BY SCHEDULE I AND SOME OF THE EQUIPMENT BROUGHT IN FOR THAT WORK COULD BE UTILIZED TO PERFORM THE WORK UNDER SCHEDULE II. ALSO THERE WOULD BE CERTAIN COMMON INDIRECT COSTS AND SUPERVISION. THUS, IT CAN REASONABLY BE ARGUED THAT THE PRICE CERTIFICATION REQUIRED FOR SCHEDULE II COULD PROBABLY NOT BE TRUTHFULLY MADE IF ALL COSTS NECESSARY TO PERFORM THE WORK SEPARATELY WERE INCLUDED IN THE PRICE QUOTED THEREFOR. THIS IS SUPPORTED BY THE FACT THAT NO PROVISION WAS MADE IN THE INVITATION FOR BIDDERS TO QUOTE A COMBINATION PRICE, IF AWARDED BOTH SCHEDULES. IN ANY EVENT, ALL THE BIDDERS HAVE STATED, OR OTHERWISE INDICATED IN THEIR BIDS, THAT THEY WERE OF THE OPINION THAT SCHEDULE II COULD ONLY BE AWARDED IN CONJUNCTION WITH SCHEDULE I AND THAT THEY COULD NOT PERFORM SCHEDULE II ALONE FOR THE PRICE QUOTED. IN THE CIRCUMSTANCES AND ASIDE FROM THE QUESTION OF ERROR AND WHETHER, BECAUSE THE LANGUAGE OF THE INVITATION, ANY BID ON SCHEDULE II TECHNICALLY COULD HAVE BEEN PROPERLY ACCEPTED, AS TO WHICH WE HAVE SERIOUS DOUBT, IT WOULD BE INEQUITABLE TO ATTEMPT TO REQUIRE PERFORMANCE UNDER SCHEDULE II SEPARATELY. ACCORDINGLY, THE AWARD MADE TO L. H. LACY COMPANY SHOULD BE CANCELLED AND THE COMPANY RELIEVED FROM ALL LIABILITY THEREUNDER.

IT IS UNNECESSARY TO DECIDE WHETHER THE AWARD OF SCHEDULE I ALONE WAS PROPER UNDER THE TERMS STATED, SINCE NO OBJECTION HAS BEEN MADE THERETO AND THE WORK PRESUMABLY HAS ADVANCED TOO FAR TO PERMIT ANY INTERFERENCE WITH IT AS A PRACTICAL MATTER. WITH REFERENCE TO THE LOW BID ON SCHEDULE I, HOWEVER, IT IS NOTED THAT THE PRICE BID BY THE SAME BIDDER FOR SCHEDULE II WAS NOT ONLY MORE THAN TWICE THE STIPULATED COST LIMITATION ON THAT ITEM, AND THE AMOUNT QUOTED BY ANY OTHER BIDDER, BUT REPRESENTED 3.85 PERCENT OF THE BIDDER'S AGGREGATE BID FOR BOTH ITEMS, WHEREAS IN ALL OTHER BIDS, AND THE GOVERNMENT ESTIMATE, THE SCHEDULE II PRICE WAS ONLY APPROXIMATELY 1.7 PERCENT OF THE AGGREGATE. THESE FACTS STRONGLY SUGGEST THAT EITHER THE LOW BID ON ITEM I OR EVERY OTHER BID WAS UNBALANCED AND SUBJECT TO REJECTION UNDER NOTE 6.

THE PAPERS SUBMITTED WITH THE LETTERS OF APRIL 17, 1963, ARE RETURNED, EXCEPT FOR THE FINDINGS OF FACT BY THE CONTRACTING OFFICER AND THE STATEMENTS DATED MARCH 12, 1963, BY GLEN L. STEWART AND MORRIS S. DENMAN, WHICH ARE BEING RETAINED HERE.