B-152484, JAN. 22, 1964

B-152484, JAN. 22, 1964

REFERENCE IS MADE TO LETTER OF SEPTEMBER 9, 1963, FROM YOUR ATTORNEYS PROTESTING THE AWARD OF A CONTRACT TO W. W. AUTO PARTS PURSUANT TO INVITATION NO. 41-608-64-40, ISSUED JULY 29, 1963, BY KELLY AIR FORCE BASE, TEXAS.

THE INVITATION FOR BIDS REQUESTED BIDS IN THE FORM OF COMPOSITE DISCOUNT PERCENTAGES OFFERED ON PARTS AND SUPPLIES ORDERED FOR GENERAL PURPOSE VEHICLES AND FOR SPECIAL PURPOSE VEHICLES, CONSTRUCTIONS AND MATERIAL HANDLING EQUIPMENT IN CONNECTION WITH THE ESTABLISHMENT AND MAINTENANCE OF A PARTS STORE BY THE SUCCESSFUL BIDDER AT KELLY AIR FORCE BASE, TEXAS, FOR THE PURPOSE OF SELLING TO THE GOVERNMENT LOCAL PURCHASE REPAIR PARTS AND SUPPLIES NEEDED FOR OVERHAUL AND REPAIR OF EQUIPMENT IN USE AT THAT BASE. THE BARGAINING FACTOR IN THE SETTING UP OF THE STORE IN GOVERNMENT- FURNISHED FACILITIES WAS THE DISCOUNT OFFERED AS DEDUCTIONS FROM THE VEHICLE OR EQUIPMENT MANUFACTURERS ITEM LIST PRICES IN EFFECT AT THE TIME OF SALE, BASED ON ESTIMATED ANNUAL COST OF PARTS AND SUPPLIES REQUIRED TO MAINTAIN ALL GOVERNMENT-OWNED EQUIPMENT TO BE SERVICED WITH PARTS PURCHASED FROM THE CONTRACTOR.

THE INVITATION FOR BIDS WAS DISTRIBUTED TO 30 PROSPECTIVE SOURCES AND AT A PRE-BID MEETING HELD ON AUGUST 8, 1963, TWELVE FIRMS WERE REPRESENTED. AS A RESULT OF THIS MEETING, CERTAIN AMENDMENTS OF THE INVITATION WERE MADE AND THE OPENING OF BIDS WAS EXTENDED TO 10:30 A.M. CST, AUGUST 27, 1963. AT THE APPOINTED TIME THE FOUR BIDS RECEIVED WERE FORMALLY OPENED AND EVALUATED AS FOLLOWS: "BIDDER NO. 1 W. W. AUTO PARTS ITEMS 1-21 $37,300.00 ITEMS 22-85

$119,525.00 LESS 16 PERCENT 5,968.00 LESS 4 PERCENT 4,781.00

$31,332.00 $114,744.00 LESS LESS 1 PERCENT CASH LESS 1 PERCENT CASH

DISC. 313.32 DISC. 1,147.44

$31,018.68 $113,596.56 AGGREGATE TOTAL

$144,615.24 BIDDER NO. 2 - ADAMS CHEVROLET ITEM 1-21 $37,300.00 ITEMS 22- 85

$119,525.00 LESS 6 PERCENT 2,238.00 LESS 1 PERCENT 1,195.25

$35,062.00 $118,329.75 LESS 2 PERCENT CASH

LESS 2 PERCENT CASH

DISC. 701.24 2,366.60

34,360.76 115,963.15 AGGREGATE TOTAL

$150,323.91 BIDDER NO. 3 - WASKOM AUTO SUPPLY ITEMS 1-21 $37,300.00 ITEMS 22-85 $119,525.00 LESS 15 PERCENT 5,595.00 LESS 2 PERCENT 2,390.50

$31,705.00 $117,134.50 LESS 2 PERCENT CASH

LESS 2 PERCENT CASH

DISC. 634.10 2,342.69

$31,070.90 $114,791.81 AGGREGATE TOTAL

$145,862.71 BIDDER NO. 4 - INDUSTRIAL AUTOMOTIVE ITEMS 1-21 $37,300.00 ITEMS 22-85 $119,525.00 LESS 15 PERCENT 5,595.00 LESS 3 PERCENT 3,585.75

$31,705.00 $115,939.25 LESS 2 PERCENT CASH

LESS 2 PERCENT CASH

DISC. 634.10 DISC. 2,318.79

$31,070.90 $113,620.46 AGGREGATE TOTAL

$144,691.36"

YOU WERE THE ONLY BIDDER ATTENDING THE OPENING.

ON AUGUST 28, 1963, AFTER THE OPENING OF BIDS, A LETTER WAS RECEIVED BY THE CONTRACTING OFFICER FROM YOU ADVISING THAT YOUR DISCOUNT OF 2 PERCENT FOR 20 DAYS WAS TO APPLY TO THE MANUFACTURERS LIST ITEM PRICE ON THE ASSUMPTION THAT PAYMENT WOULD BE MADE IN 20 DAYS, THEREFORE THE NET RESULT WOULD BE A DISCOUNT OF 17 PERCENT AND 5 PERCENT FROM THE MANUFACTURERS ITEM PRICE LIST. BY LETTER DATED SEPTEMBER 6, 1963, THE CONTRACTING OFFICER EXPLAINED HOW THE BIDS HAD BEEN EVALUATED UNDER THE TERMS OF THE INVITATION FOR BIDS AND FURNISHED YOU AN ACTUAL COMPUTATION OF YOUR BID AND THAT OF W. W. AUTO PARTS WHICH HAD RESULTED IN A BID THAT WAS $76,12 LOWER THAN YOURS. THE AWARD TO W. W. AUTO PARTS WAS MADE AND APPROVED BY THE DIRECTORATE OF PROCUREMENT AND PRODUCTION ON SEPTEMBER 5, 1963.

IN THE LETTER OF SEPTEMBER 9, 1963, YOUR ATTORNEYS REPEATED YOUR CONTENTION THAT THE PROMPT PAYMENT DISCOUNT OF 2 PERCENT WAS INTENDED TO APPLY TO THE MANUFACTURERS LIST PRICE IN ADDITION TO THE COMPOSITE DISCOUNT PERCENTAGES AND ARGUED THAT BASED ON THE LANGUAGE OF CERTAIN QUOTED PROVISIONS OF THE INVITATION FOR BIDS, YOU FURNISHED A BID EQUAL TO THAT OF W. W. AUTO PARTS AND THUS THE CONTRACT SHOULD BE, OR SHOULD HAVE BEEN, AWARDED UPON THE DRAWING OF LOTS.

STANDARD FORM 30, INVITATION AND BID, PROVIDES IN PART AS FOLLOWS:

"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 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.

"8. AWARD OF CONTRACT.--- (A) THE CONTRACT WILL BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.'

BLANK SPACES WERE PROVIDED ON PAGE 1 OF THE SCHEDULE OF THE INVITATION FOR BIDS FOR COMPLETION OF THE PROMPT PAYMENT DISCOUNT ERMS AND IT WAS PROVIDED IN PART V, PAGE 16, OF THE SCHEDULE, THAT DISCOUNTS FOR PROMPT PAYMENT OF LESS THAN 20 DAYS WOULD NOT BE CONSIDERED IN THE EVALUATION OF BIDS.

OTHER PERTINENT PROVISIONS OF THE SCHEDULE OF THE INVITATION ARE AS FOLLOWS:

"PART I PARTS AND SUPPLIES TO BE FURNISHED:

(B) BIDDERS SHALL ENTER IN THE SPACES PROVIDED, HIS COMPOSITE DISCOUNT PERCENTAGE OFFERED ON PARTS AND SUPPLIES ORDERED FOR GENERAL PURPOSE VEHICLES AND ANOTHER FOR SPECIAL PURPOSE VEHICLES, CONSTRUCTION AND MATERIEL HANDLING EQUIPMENT. THE DISCOUNTS OFFERED SHALL BE DEDUCTED FROM THE VEHICLE OR EQUIPMENT MANUFACTURERS ITEM LIST PRICE IN EFFECT AT TIME OF SALE, AND DISCOUNTS SHALL APPLY THROUGHOUT THE LIFE OF THE RESULTANT CONTRACT. ITEMS FOR WHICH NO VEHICLE OR EQUIPMENT PRICE LISTS ARE AVAILABLE WILL BE PAID FOR BY THE GOVERNMENT AT THE PRICE NEGOTIATED BETWEEN THE CONTRACTOR AND THE CONTRACTING OFFICER AT THE TIME A NEED ARISES FOR SUCH ITEM OR ITEMS. THIS INCLUDES ITEMS WHICH ARE NOT AVAILABLE FROM STOCK AND MUST BE MANUFACTURED FOR FABRICATED.'

"PART III EVALUATION OF BIDS:

(1) BIDS WILL BE EVALUATED ON THE BASIS OF THE HIGHEST COMPOSITE DISCOUNT PERCENTAGE OFFERED. THE PERCENTAGES OF DISCOUNT OFFERED IN THIS INVITATION FOR BIDS SHALL APPLY THROUGHOUT THE LIFE OF THE RESULTANT CONTRACT, ALTHOUGH THE PRICE LISTS MAY BE REVISED FROM TIME TO TIME BY CHANGES ISSUED BY THE MANUFACTURER.

(2) AWARD WILL BE MADE TO THAT BIDDER WHO SUBMITS DISCOUNTS RESULTING IN THE LOW AGGREGATE TOTAL COST TO THE GOVERNMENT BASED ON THE TOTAL ESTIMATED ANNUAL COST SET FORTH IN PART I ABOVE. AWARD WILL BE MADE TO ONLY ONE BIDDER. BIDS QUALIFIED TO DELETE FURNISHING PARTS OR SUPPLIES FOR ANY OF THE TYPES OF EQUIPMENT LISTED HEREIN WILL BE CONSIDERED NON- RESPONSIVE.'

"PART VI PAYMENTS:

PAYMENTS SHALL BE MADE UPON APPROVAL OF INVOICES OR VOUCHERS PREPARED BY THE CONTRACTOR AS REQUESTED, BUT NOT LESS OFTEN THAN ONCE A WEEK. INVOICES SHALL BE SUBMITTED TO THE CONTRACTING OFFICER IN QUADRUPLICATE AND SHALL BE ACCOMPANIED BY A COPY OF EACH SALES TICKET. THE INVOICE PRICE SHALL BE COMPUTED FROM THE RESPECTIVE MANUFACTURER'S ITEM LIST PRICE IN EFFECT AT TIME OF SALE, LESS THE DISCOUNT BID IN THE SCHEDULE.'

IN ATTEMPTING TO ESTABLISH THAT THE LANGUAGE USED IN THE INVITATION FOR BIDS CLEARLY SAYS THAT THE DISCOUNTS OFFERED, INCLUDING THE PROMPT PAYMENT DISCOUNT, SHALL BE DEDUCTED FROM THE VEHICLE OR EQUIPMENT MANUFACTURERS ITEMS LIST PRICE, GREAT STRESS IS PLACED BY YOU ON THE USE OF THE WORD "DISCOUNTS" IN PART I (B) OF THE SCHEDULE. HOWEVER, THAT PARAGRAPH REQUIRED BIDDERS TO ENTER A COMPOSITE DISCOUNT PERCENTAGE ON PARTS AND SUPPLIES ORDERED FOR GENERAL PURPOSE VEHICLES (PAGE 5) AND A SEPARATE COMPOSITE DISCOUNT PERCENTAGE ON PARTS AND SUPPLIES ORDERED FOR SPECIAL PURPOSE VEHICLES, CONSTRUCTION AND MATERIALS HANDLING EQUIPMENT (PAGE 14), MAKING TWO "DISCOUNTS.'

NORMALLY IN SUPPLY CONTRACTS THE ONLY DISCOUNT INVOLVED IS THE PROMPT PAYMENT DISCOUNT WHICH IS APPLICABLE TO THE CONTRACT OR INVOICE PRICE OF THE SUPPLIES FURNISHED PROVIDED PAYMENT CAN BE MADE WITHIN THE TIME SPECIFIED. SUCH DISCOUNTS ARE NOT A PART OF THE BID PRICE BUT MAYBE CONSIDERED IN THE EVALUATION OF THE BIDS. THE PROMPT PAYMENT DISCOUNT IS ALLOWED AS AN INDUCEMENT FOR EARLY SETTLEMENT OF ACCOUNTS IN ORDER TO FORESTALL THE SEEKING OF CREDIT IN BUSINESS TRANSACTIONS WHICH MIGHT INVOLVE PAYMENT OF INTEREST OR THE LOSS OF USE OF FUNDS IN CASE PAYMENTS ARE LONG DELAYED. SUCH REDUCTIONS ARE TAKEN FROM THE INVOICES AS A LAST STEP BEFORE PAYMENT AND TO HAVE TO GO BACK OVER THE WHOLE TRANSACTION AND APPLY THE PROMPT PAYMENT DISCOUNT PERCENTAGE TO THE LIST PRICES FROM WHICH THE INVOICE PRICES WERE DERIVED WOULD BE SUCH AN UNSATISFACTORY AND ABNORMAL PROCESS AS TO BE IMPRACTICABLE IF NOT IMPOSSIBLE IN CASES WHERE A PRECEDING TRADE DISCOUNT WAS APPLICABLE.

IN THIS CASE, THE BID PRICES WERE TO BE DETERMINED BY THE DEDUCTION OF A FIXED COMPOSITE DISCOUNT PERCENTAGE FROM THE MANUFACTURERS LIST PRICE CURRENTLY IN EFFECT AT THE TIM E THE PARTS WERE PURCHASED. THE INVITATION CLEARLY AND SPECIFICALLY CALLED FOR TWO SUCH COMPOSITE DISCOUNT PERCENTAGES TO BE FURNISHED, ONE FOR ITEMS 1 THROUGH 21 FOR GENERAL PURPOSE VEHICLES AND ANOTHER FOR ITEMS 22 THROUGH 85 FOR SPECIAL PURPOSE VEHICLES, CONSTRUCTION AND MATERIALS HANDLING EQUIPMENT. THUS THE ONLY REASONABLE INTERPRETATION OF THE SECOND SENTENCE OF PART I (B) IS THAT THE WORD "DISCOUNTS" REFERRED TO THE COMPOSITE DISCOUNT PERCENTAGES CALLED FOR IN THE FIRST SENTENCE WHICH WERE THE KEYSTONE OF THE PROPOSED CONTRACT. YOUR CONTENTION THAT YOUR OFFERED 2 PERCENT PROMPT PAYMENT DISCOUNT WAS INTENDED TO APPLY TO THE MANUFACTURERS LIST PRICE AND THE STATEMENTS MADE IN SUPPORT OF THIS CONTENTION IN THE LETTER OF SEPTEMBER 9, 1963, FROM YOUR ATTORNEYS, REPRESENTS A STRAINED INTERPRETATION OF THE LANGUAGE OF THE INVITATION AS A WHOLE. THERE IS NOTHING IN THE RECORD TO INDICATE THAT THE OTHER BIDDERS INTENDED THEIR PROMPT PAYMENT DISCOUNT TO APPLY TO THE MANUFACTURERS LIST PRICES RATHER THAN THE BID PRICES AS DETERMINED AT THE TIME OF SALE OF THE PARTS AND SUPPLIES, NOR WAS THERE ANY DIFFERENCE IN THE FORM OF YOUR BID WHICH WOULD HAVE PUT THE CONTRACTING OFFICER ON NOTICE THAT YOU SO INTENDED YOUR CASH DISCOUNT TO BE APPLIED. IF THERE WAS ANY MISUNDERSTANDING, IT WAS YOURS ALONE, AND THERE WAS AMPLE OPPORTUNITY FOR YOU TO HAVE MADE APPROPRIATE CLARIFICATION BEFORE THE OPENING OF THE BIDS AND AWARDING OF THE CONTRACT.

IT IS OUR OPINION THAT THE EVALUATION OF BIDS BY THE CONTRACTING OFFICER WAS MADE UPON THE PROPER BASIS UNDER THE TERMS OF THE INVITATION FOR BIDS. THE CONTRACT HAS BEEN AWARDED TO W. W. AUTO PARTS AND THAT COMPANY APPEARS TO BE QUALIFIED TO COMPLETE PERFORMANCE OF THE CONTRACT.

IN VIEW OF THE ABOVE, THERE IS NO PROPER BASIS FOR CANCELLING THE AWARD OF THE CONTRACT AND YOUR PROTEST MUST BE DENIED.