B-153613, MAY 6, 1964

B-153613, MAY 6, 1964

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER ENGGC-M OF MARCH 24, 1964, FROM THE OFFICE OF THE CHIEF OF ENGINEERS, REPORTING ON THE PROTEST OF QUILLER CONSTRUCTION COMPANY, INC., AGAINST REJECTION OF THE BID IT SUBMITTED UNDER INVITATION ENG-04-353-64-29.

THE SUBJECT INVITATION COVERS THE CONSTRUCTION OF 65 MILITARY HOUSING UNITS FOR ENLISTED PERSONNEL AT FORT IRWIN, CALIFORNIA. THE PROJECT WAS AUTHORIZED BY SECTION 501 OF THE MILITARY CONSTRUCTION AUTHORIZATION ACT, 1964, 77 STAT. 307. SECTION 502 OF THE ACT LIMITS THE COST OF CONSTRUCTION PER FAMILY HOUSING UNIT, INCLUDING SHADES, SCREENS, RANGES, REFRIGERATORS AND ALL OTHER INSTALLED EQUIPMENT AND FIXTURES, TO $13,200. THE ACT FURTHER PROVIDES THAT NO PROJECTS IN EXCESS OF 50 UNITS SHALL BE CONSTRUCTED AT AN AVERAGE UNIT COST EXCEEDING $17,500, INCLUDING THE COST OF THE FAMILY UNIT AND THE PROPORTIONATE COSTS OF LAND ACQUISITION, SITE PREPARATION AND INSTALLATION OF UTILITIES.

CORPS OF ENGINEERS REGULATIONS PROVIDE THAT THE LIMITATION FIGURES USED IN THE INVITATION FOR BIDS WILL BE THE STATUTORY LIMIT LESS AN ALLOWANCE FOR CONTINGENCIES AND FOR COST OF SUPERVISION, INSPECTION AND ADMINISTRATION. IN THE INSTANT MATTER, $1,034 PER UNIT WAS DEDUCTED FROM THE STATUTORY LIMIT OF $13,200 PER UNIT TO ARRIVE AT A COST LIMITATION OF $12,166 PER UNIT. THE $1,034 DEDUCTION COVERS AN ESTIMATED 5 PERCENT FOR CONSTRUCTION CONTINGENCIES AND AN ESTIMATED 3 PERCENT FOR COST OF SUPERVISION, INSPECTION AND ADMINISTRATION.

THE 65 HOUSING UNITS WHICH ARE TO BE CONSTRUCTED WERE DIVIDED ACCORDING TO FLOOR PLAN INTO FIVE GROUPS. EACH GROUP WAS LISTED AS AN ITEM IN THE INVITATION FOR BIDS AND THE $12,166 COST LIMITATION WAS MULTIPLIED BY THE NUMBER OF UNITS IN EACH GROUP TO ARRIVE AT A CONTRACT COST LIMITATION FOR EACH GROUP. THE MATTER WAS SET FORTH IN THE INVITATION AS FOLLOWS:

CHART.

"ITEM

NO. DESCRIPTION QUANTITY UNIT

1. TYPE "A" - 3 B.R. (*CONTRACT COST LIVING

LIMITATION $36,498.00) 3 UNIT

2. TYPE "B" - 4 B.R. (*CONTRACT COST LIVING

LIMITATION $145,992.00) 12 UNIT

3. TYPE "C" - 3 B.R. (*CONTRACT COST LIVING

LIMITATION $243,320.00) 20 UNIT

4. TYPE "D" - 3 B.R. (*CONTRACT COST LIVING

LIMITATION $291,984.00 24 UNIT

5. TYPE "E" - 3 B.R. (*CONTRACT COST LIVING

LIMITATION $72,996.00) 6 UNIT"

THE ASTERISK BEFORE "CONTRACT COST LIMITATION" REFERRED TO A MARGINAL NOTE WHICH STATED:

"CONTRACT COST LIMITATIONS SHOWN FOR ITEMS NOS. 1 THROUGH 5, INCLUSIVE, IS FOR THE TOTAL NUMBER OF UNITS IN THE ITEM AND INCLUDES THE FURNISHING AND INSTALLATION OF REFRIGERATORS AND RANGES.'

IN ADDITION, THE INSTRUCTIONS TO BIDDERS IN ARTICLE 13,"COST LIMITATION REQUIREMENTS," STATED:

"C. ANY BID WHEREIN THE PRICE BID FOR AN ITEM EXCEEDS THE COST LIMITATION, WHICH IS SET FORTH IN THE ITEM DESCRIPTION GIVEN IN THE UNIT PRICE SCHEDULE, WILL BE CONSIDERED NON-RESPONSIVE AND WILL BE REJECTED.'

INCLUDING THE BID FROM QUILLER CONSTRUCTION COMPANY, FIVE BIDS WERE RECEIVED. ALL OF THE BIDDERS, EXCEPT THE HIGHEST BIDDER, EXCEEDED THE CONTRACT COST LIMITATION WITH RESPECT TO ONE OR MORE OF THE FIVE GROUPS OF HOUSES. THE HIGHEST BIDDER, ALTHOUGH NOT EXCEEDING THE CONTRACT COST LIMITATION, EXCEEDED THE STATUTORY $17,500 LIMITATION.

ALTHOUGH THE BID SUBMITTED BY QUILLER WAS UNDER THE CONTRACT COST LIMITATION ON FOUR ITEMS BY A TOTAL AMOUNT OF $21,995, IT EXCEEDED THE LIMITATION ON ITEM 2 BY $1,020.

THE CONTRACTING OFFICER RECOMMENDS ACCEPTANCE OF THE BID SUBMITTED BY QUILLER ON THE GROUNDS THAT IT DOES NOT EXCEED THE $13,200 STATUTORY LIMITATION; THAT THE AMOUNT WHICH THE BID IS OVER THE COST LIMITATION ON ITEM 2 IS MORE THAN MADE UP BY THE AMOUNT WHICH THE BID IS UNDER THE LIMITATION ON THE REMAINING FOUR ITEMS; THAT THE COST LIMITATION FIGURES ARE AT BEST AN ESTIMATE OF THE AMOUNT AT WHICH THE CONTRACT MAY BE LET SAFELY; THAT IT WOULD COST $5,000 TO READVERTISE; AND THAT THE COST LIMITATION IS FOR THE BENEFIT OF THE GOVERNMENT ONLY.

THE OFFICE OF THE DIVISION ENGINEER RECOMMENDS THAT THE BID BE REJECTED. THE BASIS FOR ITS RECOMMENDATION IS THAT THE INVITATION IS CLEAR AS TO THE DISPOSITION THAT IS TO BE MADE OF ANY BID WHICH EXCEEDS THE CONTRACT COST LIMITATION AND THAT SUCH LIMITATION WAS ARRIVED AT ONLY AFTER DUE CONSIDERATION OF THE APPLICABLE REGULATIONS.

THE OFFICE OF THE CHIEF OF ENGINEERS RECOMMENDS ACCEPTANCE OF THE BID ON THE BASIS THAT IT WOULD SERVE THE GOVERNMENT'S INTERESTS SINCE READVERTISING WILL DELAY THE START OF THE WORK AND WILL REQUIRE THE GOVERNMENT TO BEAR ADDITIONAL ADVERTISING COSTS. FURTHER, THE OPINION IS EXPRESSED THAT THE REJECTION OF ALL BIDS AFTER PUBLIC EXPOSURE WILL WORK A HARDSHIP ON THE LOW BIDDER AND ADVERSELY AFFECT THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM WHEREAS IT IS NOT BELIEVED THAT ANY OTHER BIDDER WOULD BE PREJUDICED BY AN AWARD TO QUILLER.

QUILLER CONTENDS THAT ITS BID SHOULD NOT BE REJECTED FOR AN INADVERTENT DISCREPANCY OF $1,020 ON A $1 MILLION PROJECT. IN THAT CONNECTION, IT STATES THAT THE WORD "NON-RESPONSIVE" USED IN ARTICLE 13C IS IN ERROR BECAUSE THAT WORD IS USUALLY USED WITH REFERENCE TO THE PERFORMANCE SPECIFICATIONS AND ITS BID IS NOT QUALIFIED IN THAT AREA. SECOND, IT STATES THAT THE COST LIMITATION IS, AT BEST, AN ESTIMATE SUBJECT TO REEVALUATION AND REAPPRAISAL AT ANY TIME. THIRD, IT STATES THAT EVEN IF THE LIMITATION IS NOT SUBJECT TO REEVALUATION OR REAPPRAISAL, IT SHOULD BE WAIVED WHERE IT IS IN THE GOVERNMENT'S INTEREST TO DO SO AND WHERE IT DOES NOT EXCEED THE STATUTORY LIMIT AND WHERE THE COST LIMITATIONS ON THE REMAINING ITEMS ARE MORE THAN OFFSETTING.

THE CONTRACT COST LIMITATION IS, AT BEST, AN ESTIMATED LIMITATION WHICH IS THE RESULT IN PART OF A DEDUCTION FROM THE STATUTORY LIMITATION OF AN ESTIMATED AMOUNT TO COVER CONSTRUCTION CONTINGENCIES WHICH MAY OR MAY NOT OCCUR. THE CONTRACT COST LIMITATION THEREFORE COULD POSSIBLY HAVE BEEN HIGHER ABSENT THE PROVISION FOR SUCH A LARGE CONSTRUCTION CONTINGENCY. THAT SENSE THE CONTRACT COST LIMITATION IN THE INVITATION IS NOT DEFINITE NOR THE FURTHEST LIMITATION POSSIBLE ON THE PROJECT. ALSO THE AMOUNT QUILLER'S BID IS OVER THE CONTRACT COST LIMITATION ON THE ONE ITEM DOES NO MORE THAN REDUCE THE AMOUNT WHICH IS AVAILABLE FOR CONSTRUCTION CONTINGENCIES AND THE BID, OF COURSE, IS STILL WELL WITHIN THE STATUTORY LIMITATION.

IN OUR OPINION IT IS EQUALLY IMPORTANT THAT ALL OF THE OTHER HIGHER BIDS RECEIVED EXCEEDED THE COST LIMITATION SPECIFIED IN THE INVITATION OR THE APPLICABLE STATUTE AND IT, THEREFORE, CANNOT BE SAID THAT ACCEPTANCE OF QUILLER'S LOW BID WOULD PREJUDICE THE RIGHTS OF ANY OF THE OTHER BIDDERS. UNDER SUCH UNUSUAL CIRCUMSTANCES WE BELIEVE A TECHNICAL CONCLUSION TO PENALIZE QUILLER BECAUSE ITS BID ON ONE ITEM EXCEEDS THE CONTRACT COST LIMITATION BY A NEGLIGIBLE AMOUNT WOULD NOT BE WARRANTED.

ACCORDINGLY, OUR OFFICE WOULD HAVE NO OBJECTION IF THE BID OF QUILLER CONSTRUCTION COMPANY WAS ACCEPTED FOR AWARD.