B-154639, SEP. 30, 1964

B-154639, SEP. 30, 1964

TO LYCETTE, DIAMOND AND SYLVESTER:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 26, 1964, PROTESTING ON BEHALF OF ASSOCIATED ENGINEERS AND CONTRACTORS, INC., AND STOEN CONSTRUCTION COMPANY, JOINT VENTURERS, AGAINST THE ACTION OF THE BUREAU OF INDIAN AFFAIRS IN REJECTING ALL BIDS FOR CERTAIN CONSTRUCTION WORK, DESIGNATED AS PROJECT NO. AIR-2 (1), ON ANNETTE ISLAND, ALASKA.

THE INVITATION FOR BIDS IN THIS CASE REQUESTED BIDS FOR THE CONSTRUCTION OF A ROAD AT THE ANNETTE AIRPORT. FOUR BIDS WERE RECEIVED IN RESPONSE THERETO AND OPENED ON JUNE 24, 1964, IN JUNEAU, ALASKA. THE FOUR BIDS AND THE GOVERNMENT ESTIMATE ARE AS FOLLOWS:

TABLE

ASSOCIATED ENGINEERS AND CONTRACTORS AND

STOEN CONSTRUCTION COMPANY $1,244,408

S. S. MULLEN, INC. $1,274,654

NORTHERN STATES CONTRACTING COMPANY $1,380,730

NORCOAST CONTRACTORS, INC. $1,418,140

GOVERNMENT ESTIMATE $ 882,830

EACH BIDDER WAS NOTIFIED ON JUNE 26, 1964, BY THE BUREAU'S JUNEAU, ALASKA, OFFICE THAT ALL BIDS WERE REJECTED SINCE THE LOW BID WAS 41 PERCENT MORE THAN THE GOVERNMENT ESTIMATE.

YOU NOW PROTEST THIS ACTION ON BEHALF OF YOUR CLIENTS AND URGE THAT AWARD OF A CONTRACT FOR THIS JOB BE MADE TO THEM AS LOW BIDDER. IN EFFECT, YOUR LETTER OF JUNE 26 CHARGES THAT IN THIS CASE, AS WELL AS ON ANOTHER RECENT ROAD CONSTRUCTION JOB ON ANNETTE ISLAND, THE INVITATION FOR BIDS WAS A SHAM, USED ONLY TO JUSTIFY THE GOVERNMENT DOING THE WORK BY FORCE ACCOUNT AFTER REJECTING THE BIDS; THAT YOUR CLIENTS WERE INDUCED TO SPEND MONEY PREPARING A BID ON THE FALSE REPRESENTATION THAT THEIR BID WOULD BE HONESTLY CONSIDERED; AND THAT THE "SO-CALLED" GOVERNMENT ESTIMATE IS NOT A REALISTIC APPRAISAL MADE BY "COMPETENT ENGINEERS OR CONSTRUCTION PEOPLE," AND IS BASED ON A LABOR COST LESS THAN REQUIRED BY THE DAVIS-BACON ACT. CERTAINLY, THESE ALLEGATIONS, IF TRUE, ARE OF SUCH A SERIOUS NATURE AS TO UNDERMINE THE FOUNDATIONS OF THE COMPETITIVE BIDDING SYSTEM UPON WHICH GOVERNMENT PROCUREMENT PRIMARILY DEPENDS, AND NEITHER THIS OFFICE NOR ANY OTHER BRANCH OF THE GOVERNMENT MAY CONDONE SUCH A PRACTICE.

THE GOVERNMENT ESTIMATE IN THIS CASE WAS PREPARED BY THE BUREAU OF PUBLIC ROADS, DEPARTMENT OF COMMERCE, WHICH HAS REVIEWED THE ESTIMATE IN THE LIGHT OF YOUR PROTEST AND HAS DETERMINED THAT ADJUSTMENT OF ONLY ONE ITEM IS JUSTIFIED. THIS IS ITEM 102 (11), WHICH INVOLVES 58,000 TONS OF SELECT BORROW TOPPING, ORIGINALLY ESTIMATED AT ONE DOLLAR PER TON, WHICH AGENCY ENGINEERS NOW CONCEDE MIGHT JUSTIFIABLY BE INCREASED TO TWO DOLLARS. EVEN WITH THIS ADJUSTMENT THE LOW BIDDER'S PRICE ON THIS ITEM WOULD STILL BE APPROXIMATELY 35 PERCENT HIGHER THAN THE GOVERNMENT ESTIMATE. REVIEWING THE ABSTRACT OF BIDS AND COMPARING THE GOVERNMENT ESTIMATE ITEM BY ITEM, SEVERAL SIGNIFICANT MATTERS ARE POINTED OUT BY THE AGENCY ENGINEERS AS TENDING TO SUPPORT THE ADMINISTRATIVE DETERMINATION THAT THE ESTIMATE IS REALISTIC AND CONSTITUTES AN ADEQUATE AND ACCEPTABLE BASIS TO DETERMINE THE REASONABLENESS OF THE LOW BID. CONSIDERING THE FOUR ITEMS WHICH MAKE UP APPROXIMATELY 83 PERCENT OF THE GOVERNMENT ESTIMATE, THE ABSTRACT SHOWS THE FOLLOWING UNIT AND AGGREGATE PRICES:

TABLE ITEM BIDDER NO. 1 BIDDER NO. 2 BIDDER NO. 3 BIDDER NO. 4 102 (1) $3.90-$312,000 $4.80-$384,000 $6.00-$480,000$ 5.10-$408,000 102 (4) 3.90- 175,500 4.80- 216,000 7.00- 315,000 5.10- 229,500 102 (11) 4.20- 243,600 4.00- 232,000 3.00- 174,000 2.00- 116,000 200 (4) 7.80- 296,400 6.50- 247,000 5.00- 190,000 10.00- 380,000

------------------------------------------------------------- - TOTAL $1,027,500

$1,079,000 $1,159,000 $1,133,500

GOVERNMENT

ESTIMATE

$3.75-$300,000

3.75- 168,750

1.00- 58,000

5.50- 209,000

TOTAL $735,750

WHILE THIS SUMMARY SHOWS THAT THE AGGREGATE PRICES BID ON THESE ITEMS BY ALL FOUR BIDDERS ARE IN THE AREA OF 50 PERCENT HIGHER THAN THE GOVERNMENT ESTIMATE, IT ALSO SHOWS THAT ON EACH OF THE FOUR ITEMS AT LEAST ONE BID WAS SO CLOSE TO THE GOVERNMENT ESTIMATE AS TO INDICATE EITHER THAT THE ESTIMATES WERE CLEARLY REASONABLE (WITH THE POSSIBLE EXCEPTION OF ITEM 102 (11) WHICH, AS MENTIONED ABOVE, THE ENGINEERS ARE WILLING TO CONSIDER AS $58,000 TOO LOW) OR THAT EVERYONE OF THE FOUR BIDDERS QUOTED AN UNREASONABLY LOW PRICE ON AT LEAST ONE OF THESE MAJOR ITEMS. TAKING THE LOW BID ON EACH OF THE FOUR ITEMS, WE REACH AN AGGREGATE TOTAL OF $793,500, WHICH IS ONLY $57,750 MORE THAN THE ESTIMATE, AND $250 LESS THAN THE ESTIMATE AS REVISED BY ACCEPTANCE OF TWO DOLLARS PER TON AS A REASONABLE COST FOR ITEM 102 (11). IN ALL, THERE WERE FIFTEEN ITEMS IN THE BID SCHEDULE AND ON ONLY FOUR ITEMS DID ALL BIDS EXCEED THE GOVERNMENT ESTIMATE, WHILE AT LEAST ONE LOWER BID WAS RECEIVED ON EIGHT ITEMS.

WHILE WE ARE AWARE OF THE FACT THAT IT IS COMMON PRACTICE FOR BIDDERS ON CONSTRUCTION WORK TO MAKE ARBITRARY ALLOCATIONS OF ESTIMATED INDIRECT COST ITEMS SUCH AS OVERHEAD AND CONTINGENCY ALLOWANCES, AND RECOGNIZE THAT THE ABOVE COMPARISONS DO NOT NECESSARILY PROVE THE REASONABLENESS OR UNREASONABLENESS OF ANY OF THE TOTAL BIDS OR OF THE GOVERNMENT ESTIMATE, WE ARE SATISFIED THEY DO DEMONSTRATE THAT THE GOVERNMENT ESTIMATE PROVIDES A SOUND BASIS FOR DETERMINING THE RANGE WITHIN WHICH THE COST OF THIS JOB SHOULD FALL, AND THAT SUCH ESTIMATE THEREFORE CANNOT REASONABLY BE CONSIDERED UNREALISTIC. WE THEREFORE FIND NO BASIS FOR DISAGREEMENT WITH THE ADMINISTRATIVE CONCLUSION THAT A LOW BID SOME 41 PERCENT HIGHER IS EXCESSIVE.

THE STATUTORY AUTHORITY UNDER WHICH BIDS MAY BE REJECTED IS FOUND IN 41 U.S.C. 253 (B), WHICH PROVIDES, IN PERTINENT PART:

"PROVIDED, THAT ALL BIDS MAY BE REJECTED WHEN THE AGENCY HEAD DETERMINES IT IS IN THE PUBLIC INTEREST SO TO DO.'

SUCH AUTHORITY, DELEGATED PURSUANT TO SECTION 257 (A) OF TITLE 41, WAS EMPLOYED IN THIS INSTANCE. IT HAS BEEN CONSISTENTLY HELD BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT AND BY THE COURTS THAT THE NECESSITY FOR REJECTING ALL BIDS IS PRIMARILY A MATTER OF ADMINISTRATIVE DISCRETION AND WHERE, AS HERE, THERE IS SUBSTANTIAL EVIDENCE TO SUPPORT A DETERMINATION THAT THE LOW BID IS IN EXCESS OF THE AMOUNT FOR WHICH THE GOVERNMENT SHOULD BE ABLE TO OBTAIN THE SERVICES SOUGHT, WE BELIEVE THAT THE REJECTION OF ALL BIDS IS A PROPER EXERCISE OF THE ADMINISTRATIVE DISCRETION AND IS IN CONFORMITY WITH THE DUTY OF THE ADMINISTRATIVE OFFICIALS TO ACT IN THE PUBLIC INTEREST. SEE 39 COMP. GEN. 86, 88 AND CASES CITED. IN THIS CONNECTION, WE SAID IN 36 COMP. GEN. 364:

"WE HAVE * * * CONSTANTLY SOUGHT TO PROTECT AND MAINTAIN THE PRINCIPLES OF IMPARTIALITY AND FAIR PLAY UPON WHICH THE COMPETITIVE BIDDING SYSTEM DEPENDS * * *. WE CANNOT, HOWEVER, CONSIDER THE MATTER OF COMPETITIVE BIDDING FOR GOVERNMENT CONTRACTS SOLELY AS A GAME, IN WHICH THE CONTRACT MUST AUTOMATICALLY GO TO THE LOWEST BIDDER WITHOUT REGARD TO THE REASONABLENESS OF HIS PRICE * * *.'

WE ARE ADVISED BY THE ADMINISTRATIVE AGENCY INVOLVED THAT, CONTRARY TO YOUR CHARGE, THE GOVERNMENT ESTIMATE WAS NOT BASED ON UTILIZING INDIAN LABOR AT WAGES LOWER THAN THE PREVAILING RATES REQUIRED BY THE DAVIS-BACON ACT, BUT WAS DERIVED FROM CONSIDERATION OF UNIT PRICES BID FOR RECENT AND CURRENT CONTRACTS FOR SIMILAR WORK, WITH ADJUSTMENTS FOR DIFFERENCES IN SITE AND WEATHER CONDITIONS, WAGE RATES, AND OTHER VARIABLES.

WE ARE ALSO ADVISED THAT NO DECISION HAS BEEN MADE WHETHER TO READVERTISE OR ACCOMPLISH THE WORK BY FORCE ACCOUNT, ALTHOUGH IT IS FELT THAT IN VIEW OF THE GREAT DIFFERENCE BETWEEN THE GOVERNMENT ESTIMATE AND THE LOW BID THE PROSPECT OF RECEIVING AN ACCEPTABLE BID BY READVERTISING IS NOT PROMISING. IN ANY EVENT, IT IS STATED THAT FORCE ACCOUNT WORK WILL NOT BE UNDERTAKEN WITHOUT CAREFUL EVALUATION OF THE TOTAL COSTS INVOLVED.

WITH RESPECT TO YOUR ALLEGATION CONCERNING SIMILAR ACTION IN CONNECTION WITH A ROAD SURFACING PROJECT AT METLAKATLA ON WHICH BIDS WERE OPENED ON DECEMBER 10, 1963, IT IS REPORTED THAT, CONTRARY TO YOUR ALLEGATION, THE LOW BID WAS ACCEPTED, BUT WHEN THE BIDDER WAS UNABLE TO OBTAIN A BOND IT WAS DECIDED TO ADOPT THE FORCE ACCOUNT METHOD RATHER THAN TO AWARD TO THE NEXT LOW BIDDER AT A SUBSTANTIALLY HIGHER PRICE. IT IS FURTHER STATED THAT THE WORK WAS COMPLETED AT A COST ABOUT 40 PERCENT LESS THAN THE NEXT LOW BID.

FOR THE REASONS STATED AND IN VIEW OF YOUR FAILURE TO SUBMIT ANY FACTS IN SUPPORT OF YOUR CONTENTION THAT BIDS WERE NOT SOLICITED IN GOOD FAITH, WE FIND NO VALID REASON FOR OBJECTION BY OUR OFFICE TO REJECTION OF ALL BIDS UNDER THE SUBJECT INVITATION.